PETALING JAYA: The design contract for the littoral combat ships (LCS) with DCNS was poorly negotiated with “common sense lapses”, according to the recently declassified forensic audit report.
The report also raised suspicion on the role of the French naval shipbuilder.
On March 20, 2012, Boustead Naval Shipyard (BNS) issued a letter of award (LOA) to DCNS, which is now known as Naval Group, for the provision of the Gowind class vessel and the support services, based on the evaluation conducted by LCS programme director Anuar Murad, a former navy captain, and his team.
However, the original LOA was amended within nine months and the value was revised to €62.8mil (RM244.92mil). The revised LOA was issued on Dec 17, 2012, with the scope of the original LOA completely changed.
According to the report, this fact reflected the fact that the initial scope was vague and weak.
Former member of the LCS steering committee Tan Sri Ramlan Mohamed Ali had said that Anuar, who was then the programme director, had inadequate expertise in designing a warship, its related costs and associated risks.
“The design contract was poorly negotiated with common sense lapses. DCNS then took advantage of these lapses and capitalised on the resulting situation,” said the report.
Three LOAs and Variation Orders (VO) were issued to DCNS on March 20, 2012 and Dec 17, 2012.
The first was for the design and related services, including a VO of €3.9mil (RM15.2mil) for a total value of RM252.5mil.
Two more LOAs were issued on Dec 17, 2012, with the first being for the RM150mil Project Management Assistance and RM475.6mil for Complementary Services for Detailed Design and Support.
“We noted that DCNS was paid a mobilisation of about RM90mil (10%) for above-mentioned LOAs without furnishing advance payment guarantee or performance guarantee.
“Based on documents provided to us, we noted that the kick-off meeting was not held between the representatives of DCNS and BNS,” the report said.
The audit committee said it could not find any supporting evidence of milestones achieved for which the payments were released on the recommendation of Anuar and then BNS managing director Tan Sri Ahmad Ramli Mohd Nor.
It added that a letter written by a former member of the technical and commercial team, Khalid Mohd, to Ahmad Ramli that was copied to Anuar and the commercial team members, raised red flags, but it did not result in any corrective action being taken.
“This letter clearly conveyed that the presence of the team during commercial negotiations seemed redundant and was frustrating, annoying and insulting.
“It is important to note that the fundamental purpose of having a commercial team was to have proper control and transparency during the procurement process,” it said.
The report also said that DCNS’ offer to design, engineer and support the project was technical in nature and without proper understanding and detailed discussion between DCNS and the technical and commercial team, it was not possible to understand the various components of the project, its relative cost and appropriate milestones.
However, the report found that DCNS did not provide the technical and commercial team with the necessary exposure for them to make the necessary evaluation.
The commercial team was also not privy to DCNS’ commercial offer made in December 2010 and March 2012 and was not given any opportunity to thoroughly understand the offer.
Former Royal Malaysian Navy LCS project director-general and current BNS CEO Azhar Jumaat had also made it clear in his letter to the BNS board dated May 20, 2019 that DCNS’ original contract to design, engineer and support was accepted despite being very “vague” and “weak” in terms of scope.
“Similarly, the procurement team was also misled due to vague scoping and during the meeting, DCNS was arrogant because they were not transparent in terms of their scope of work, technical specifications, various components and deliverables.
“This resulted in numerous VOs issued till FY2018 (financial year 2018) amounting to €67mil as referred in said letter by Azhar,” the report said.
The report also drew attention to investigations into the French submarine maker’s Scorpene submarine scandal that took place when Datuk Seri Najib Razak was defence minister.
However, the audit committee said any comments on DCNS’ scope of work, deliverables, extension and issuance of numerous VOs would need expert opinions as they were technical, adding that it was not an expert in technical areas.
The committee restricted its findings and comments unless a review was done on all the deliverables and payments, and if it is able to understand the reason for the exceptional delay and could interview officials concerned.
“Furthermore, the involvement of DCNS actively continued to beyond 2014 and conclusion drawn based on observations made till 2014 would not be appropriate.
“This review needs to be done in totality and not in partiality to remain objective and independent,” said the report.
