KUALA LUMPUR – Putrajaya could very well be forking out an eye-watering RM11.145 billion in total for the six controversial littoral combat ships (LCS), a substantial increase from the RM9 billion agreed upon years ago.
Based on the declassified Investigating Committee on Procurement, Governance and Finance report on LCS, main contractor Boustead Naval Shipyard Sdn Bhd claimed in a letter on July 16, 2019 that it would need an additional RM1.416 billion to complete all six ships.
The government, through the Defence Ministry, had originally settled on an RM9 billion contract with BNS after several rounds of negotiations.
According to the report, the additional figure is an estimate of direct and indirect costs of RM58 million and RM1.358 billion respectively, following changes in equipment and implementation schedule.
Another RM600 million is charged to the procurement of an integrated logistic support (ILS) system through direct negotiation, which was approved by the Finance Ministry on November 1, 2018.
This comes amid an uproar over how Putrajaya paid RM6.08 billion to BNS for the LCS, but has yet to receive a single ship, allegedly due to financial instability and project mismanagement.
The Public Accounts Committee released a report on August 4 highlighting various discrepancies and apparent misconduct plaguing the project over the years.
The report detailed that the implementation schedule saw some changes due to a switch of its model brand from surface-to-surface missile (SSM) – which was favoured by the Royal Malaysian Navy – to MBDA Exocet from DCNS.
The change was applied for by the Defence Ministry in October 2014 while the Finance Ministry approved the request in January of the following year.
Subsequently, BNS had advanced claims worth RM38 million to the government for the change, an act the report deemed “inappropriate” since an additional contract on it was signed on November 24, 2017.
Besides noting that the negotiation process for the contract cost had taken up to nine months due to difficulties between the Defence Ministry and BNS, the report said the ILS system valued at RM121.6 million was temporarily removed from the contract scope to adhere to the RM9 billion ceiling.
While the Finance Ministry had later approved the ILS system’s procurement, the report said the documentation and training elements of the system worth RM50.66 million and RM 132.85 million respectively should not have been included in the RM600 million deal.
This, it said, would be in line with a decision made by the Defence Ministry’s procurement agency on August 30, 2013.
The committee proposed two options for the government: either to continue or abandon the LCS project.
It said the former would require the government to closely examine before considering any of BNS’ applications for additional costs to complete the project, urging for a cost benefit analysis to be done if the project cost is expected to exceed RM9.128 billion.
It added that to avoid ballooning costs, the government should contemplate whether to continue with the building of all six ships or reduce the number of vessels. – The Vibes, August 18, 2022
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