[UPDATED] Govt to end ‘middlemen’ companies’ role in LCS project: Hisham

KUALA LUMPUR – The services of two companies controversially involved as middlemen in the procurement of six littoral combat ships (LCS) for the Malaysian navy will be terminated, as part of mobilisation works to improve the project’s implementation.

Defence Minister Datuk Seri Hishammuddin Hussein said the process to cease the services of the firms – Contraves Advanced Devices Sdn Bhd (CAD) and its associate company Contraves Electrodynamics Sdn Bhd (CED) – is actively ongoing. 

“This will allow Boustead Naval Shipyard Sdn Bhd (BNS) to negotiate directly with original equipment manufacturers (OEM) and vendors, without the need to go through CAD and CED. 

“The move will reduce the cost of procuring ship equipment, since there will no longer be middlemen,” he said in a statement today.

The mobilisation phase of the LCS project, which began in June and will end in December, aims to ensure the remainder of the project is carried out according to plan, the minister said.

This follows controversy over the project to build six vessels, for which RM9 billion has been spent with no ship delivered to date.

CAD and CED were revealed by PKR deputy president Rafizi Ramli to be subcontractors appointed by BNS, and had overcharged the government by three times for two work packages.

Citing documents, Rafizi alleged that the two firms had invoiced the government for RM1.185 billion, despite them only being charged RM397 million by French naval vessel maker Naval Group for the works. 

Hishammuddin also said BNS is currently in active negotiations with nine financial institutions to restructure its debts, and this should be completed by the end of the year. 

The company has also completed negotiations with 145 local vendors and 42 OEMs, including those involved in supplying key equipment and defence systems, to obtain their commitment to continue supporting the project. 

“Separately, BNS is negotiating the detailed design (of the ships) with Naval Group. This is vital to ensure that whatever is decided later fulfils the navy’s needs as the end user. 

“Naval Group has also decided to send its technical team over to conduct an audit on the detailed design this month,” he said. 

Hishammuddin also recently met with representatives of the French government, whom he said had given their written commitment that the completion of the LCS project is their priority. 

“On questions over when the LCS construction will resume, it will be done as soon as all negotiations are completed and the agreements are finalised as part of the mobilisation phase.”

Hishammuddin also reiterated his previous statement that the first of the combat vessels will be delivered within the next two years, calling this a realistic timeframe. 

“This is considering that after the mobilisation phase ends in December, all quarters involved will have 14 months to ensure the ship is completed and will be (in the) water before beginning trials. This timeline must be adhered to by all stakeholders.” 

Updates on negotiations for the LCS’ mobilisation phase will be presented to the cabinet periodically, he added.

While waiting for the project’s completion, he also said the navy had filed a request to the government for the procurement of the second batch of littoral mission ships, which are equipped with more sophisticated weapons. 

“The Defence Ministry has made an application to the Economic Planning Unit under the Prime Minister’s Department, to implement it.” – The Vibes, October 2, 2022