KUALA LUMPUR: The additional 83 months needed for the completion of the Littoral Combat Ships (LCS) is among the reasons for the cost of the embattled project ballooning by about RM2bil, Adly Zahari tells the Dewan Rakyat.
The Deputy Defence Minister said this additional period is among the terms included in the sixth supplemental agreement (SA6) inked between contractor Boustead Naval Shipyard (BNS) and the Ministry on May 26.
The cost of the project has since ballooned to RM11.2bil from RM9bil while the number of vessels has been cut down from six to five.
According to the original agreement, the first vessel should have been delivered in 2019.
“If we look at it, the additional 83 months will add to the cost,” Adly told the Dewan Rakyat during the oral question and answer time on Thursday (June 8).
Apart from that, he said the variation orders and the additional specifications included based on the defence needs of the Royal Malaysian Navy (RMN) such as the surface-to-surface missile and Decoy Launching System was another factor leading to the additional cost.
“When we drafted the SA6, we included a term that the government can pay the original euipment manufacturer (OEM) directly through the Finance Ministry. These are the improvements we have made to the terms of the agreement,” he said while adding that there has been concerns on leakages to middlemen.
He said the Finance Ministry’s takeover of BNS via a special purpose vehicle (SPV) will also ensure that there are no irregularities in terms of payments related to the project.
On the international settlement agreement to third-party subcontractor Contraves Advanced Devices Sdn Bhd (CAD), which was removed, Adly said the transaction does not involve the government.
The progress of the project will also be monitored by four committees including the Public Accounts Committee, where the ministry will table the quarterly progress of the project to the parliamentary select committees.
He said the construction of the first vessel is expected to be completed in November 2024 and the vessel will be commissioned for use by the RMN in 2026.
“The LCS project involves 400 vendors and if we continue this, it will spur the economy but the most important thing is we must be transparent to ensure that the project is successful and the construction is completed and the ship can be used for national security,” he said.
He was responding to a question by Datuk Seri Ikmal Hisham Abdul Aziz (PN-Tanah Merah) who asked for a timeframe on the completion and commissioning of the first LCS vessel.
Ikmal had also questioned the bloated cost in a supplementary question where he said with an additional RM2bil in cost and the number of vessels reduced to five, the cost per unit has increased from RM1.5bil to RM2.4bil.
“These are the most expensive ships built in the world. Hopefully, it is completed in 2026 and it has stretched to ten years to complete. Egypt spent RM1.9bil on their ships but it was completed in three years,” he said.
"We cannot close our eyes. Will the SA6 be the last and is there a guarantee that it will be completed?” he asked.
Meanwhile, Lim Lip Eng (PH-Kepong) asked in a supplementary question if the government would incur any losses by the continuation of the project. He also questioned the lack of legal action on those implicated.
Adly said the Finance Ministry will be able to regulate the financial aspect of the project via the SPV.
“It is inaccurate to say there are no (court) charges. There are charges but we are not satisfied that we have spent so much and have yet to see the results,” he added.
He said the ministry is always open to cooperate with investigations, adding that the interest of the Navy and national security is the utmost priority.
On May 26, Boustead Heavy Industries Corp told Bursa Malaysia, in a filing, that the duration of the contract will be extended with the first vessel to be delivered, fully tested and trialed in Aug 2026 and the fifth vessel in April 2029.
The total contract price has been revised to RM11.2bil from RM9bil following, amongst others, the approved change of specifications and extension of time.
“The terms of payment are varied from milestone activity to progress of works reflecting the various elements in the Contract based on weightage to the design, equipment, construction and trials & commissioning,” the stock exchange filing on the SA6 read.
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