‘Naval Group received RM90 mil for incomplete work in LCS project’

KUALA LUMPUR – Controversial French shipbuilder formerly known as DCNS (now the Naval Group) had claimed about RM90 million from troubled Boustead Naval Shipyard Sdn Bhd (BNS) for incomplete works in the contentious littoral combat ships (LCS) project. 

According to the declassified forensic audit report by Boustead Heavy Industries Corporation (BHIC), the payment had been made despite the French firm appearing to not have reached any targets outlined in three award letters (LOA).

The report added that the transactions had been instructed by then LCS programme director Anuar Murad and was approved by former BNS managing director Tan Sri Ahmad Ramli Mohd Nor. 

During our review of the payment milestones, we did not find any supporting evidence to confirm that a milestone was achieved by which the payment is being released,” it said. 

BHIC is an associate company to BNS, the firm that received the Defence Ministry’s contract to build six LCS – none of which have been delivered to date, despite the government forking out more than RM6 billion.

The audit report, prepared by Alliance IFA (M) Sdn Bhd, was declassified on Monday and lays bare the rampant abuse of power as well as funds mismanagement plaguing the LCS project. 

Previously, PKR deputy president Rafizi Ramli had said that despite Naval Group being no stranger to scandals in Malaysia, it was still involved in LCS negotiations.   

In 2002, the Defence Ministry had agreed to purchase two Scorpene submarines from Naval Group and Spanish company Navantia for more than RM4 billion, a deal which has since seen international corruption investigations. 

Based on the BHIC audit report, the RM90 million figure is only a small portion (10%) of three contracts BNS had awarded to Naval Group valued at RM878 million in total. 

The contracts’ components cover design and related services (RM252 million) as well as programme management assistance (RM150 million) and complimentary services for detailed design and support (RM475.6 million). 

The audit said, despite Anuar and Ramli lacking essential knowledge of vessel construction, the LOA for the third component had been issued without necessary approval from the LCS steering committee. 

(The LOA) was done in a hurry without requisite experience and detailed study (on the) terms and conditions for obtaining such services,” it said. 

It also recorded that Anuar had ordered payment for the component to be made to Naval Group even though he had earlier stated in his recommendation letter that there were “technical problems and glitches” in the activities conducted by DCNS under the LOA. 

Additionally, BNS had issued a separate LOA to Naval Group worth RM262.8 million for the provision of Gowind designs and support service for the LCS on March 20, 2012.   

Barely nine months later, on December 17, the LOA’s value was increased by a staggering RM17 million to RM280.2 million, and the contract scope was completely altered. 

During discussions with former BHIC chairman Tan Sri Ramlan Mohamed Ali, the report said that he had mentioned Anuar’s “inadequate experience of designing a warship, its related costs and associated risks”.

“The design contract with DCNS was poorly negotiated with common sense lapses,” the report concluded, claiming that Naval Group had reacted by “taking advantage” and “capitalising on Anuar’s blunders”. 

The auditor also said Naval Group was heavily entangled with the LCS project as it was tasked to carry out crucial works on the ships. 

“When Contraves Advanced Devices Sdn Bhd (CAD) was given an LOA for combat management systems, CAD had placed all responsibility for Combat System Engineering and Integration on DCNS for the first two LCS.”  

CAD is the company that was appointed by BNS on April 9, 2012 to undertake two LCS work packages worth RM1.185 billion, and has BHIC Defence Technologies Sdn Bhd as its majority shareholder. 

Later on the same day, the firm commissioned its fully owned subsidiary CED – which was set up a mere 45 days prior – to undertake the packages.

Ramli, who was charged with three counts of criminal breach of trust, pleaded not guilty to accusations of fraudulently approving payments amounting to a total of RM21.08 million to three different firms without the approval of the BNS board while he helmed the company. – The Vibes, August 25, 2022