LCS project in deep water

ALMOST RM1.4bil of government allocations meant for the multibillion-ringgit littoral combat ship (LCS) project was diverted for other uses.

On top of that, not even one of the ships has been completed although five should have been delivered by this month, the Parliament’s Public Accounts Committee (PAC) said.

Another RM255mil worth of LCS equipment, or 15% of the RM1.7bil worth kept in store for the project, is now obsolete.

These were among the findings contained in the bipartisan committee’s 250-page report that was tabled in the Dewan Rakyat yesterday.

“Payments made by the government to Boustead Naval Shipyard Sdn Bhd (BNS) were not fully used for the LCS project,” PAC chairman Wong Kah Woh told reporters in Parliament.

He said a witness, Kapt (Rtd) Azhar Jumaat, had testified that RM400mil was used to repay previous debts incurred under the New Generation Patrol Vessel (NGPV) project.

“Another RM305mil was used for an integration facility in Cyberjaya while RM700mil was cost overrun, which was above the ceiling agreed under the LCS contract,” he added.

The two-year investigation also revealed that the RM9bil project was done through direct negotiations with BNS and inked in 2014.

“The government paid out RM6.083bil for the project but not even one ship has been completed,” said Wong.

“Based on the original schedule, five ships should have been completed and delivered by August 2022.”

In other findings, the PAC said 63.8% was paid for completed work for the first ship although only 42.7% of the work was done.

The PAC probe also showed that BNS’ financial standing was critical and weak.

“As at 2018, BNS debts to original equipment manufacturers (OEMs) amounted to RM801mil while the company owes RM956mil to financial institutions,” added Wong.

He called on the prosecuting authorities to charge those involved with corruption.

“We can’t wait any longer anymore,” he said, referring to recent reports that the Malaysian Anti-Corruption Commission (MACC) had wrapped up investigations into the LCS scandal.

The Star reported on July 19 that MACC had enough evidence to charge several people over the scandal.

It said a “considerable amount of money” had been transferred out without the knowledge of the company’s board of directors.

On July 27, Deputy Defence Minister Datuk Seri Ikmal Hisham Abdul Aziz told the Dewan Rakyat that the MACC had wrapped up investigations into the scandal and submitted recommendations to the Attorney General’s Chambers.

Wong, meanwhile, said the Defence Ministry would have to report back to the PAC in the next two months on its recommendations.

“This is the largest single procurement by the Defence Ministry in history. As such, for the first time, the PAC will require the ministry to report back on the work progress every three months until the LCS is finally completed,” he added.

Under the project, a total of six ships were to have been built by BNS with the first delivery due in 2019.

So far, none have been built although the government has paid RM6bil to the company.

The PAC began its probe into the procurement in late 2020 after the issue was first raised in the Auditor-General’s Report 2019 Series.

The PAC called former defence minister Datuk Seri Dr Ahmad Zahid Hamidi and several former seniors officials to testify.

In November 2020, BNS’ parent company Boustead Heavy Industries Corporation Bhd (BHIC) lodged a report with the MACC on the possibility of irregularities concerning the project.

Several individuals have since been arrested by the MACC in connection with the case, including a former top BHIC official.