PETALING JAYA: The Littoral Combat Ships (LCS) project has run behind schedule again, as the Auditor-General has found weaknesses in the progress of the vessels.
According to the Auditor-General Report Series 2/2026 as of June 25, the LCS Project was 7.55% behind schedule.
All five LCS vessels experienced completion delays ranging from 30 to 108 days.
“The delay poses a risk to the earliest physical handover (PHO) of LCS 1, which was scheduled for Aug 26, 2026, or the revised target date of Dec 26, 2026,” said the audit report.
If the PHO takes place on either date, LCS 1 will be handed over without achieving full operational capability, as training and the weapons systems will not be completed yet, it said.
Full operational readiness of the LCS vessels depends on the complementary contract, which can only be completed in December 2035, beyond the expiry of the main contract on Apr 25, 2030, it added.
The audit report said the LCS 1 PHO delay will affect the handovers of the remaining vessels.
“The procurement was carried out through direct negotiation with Company 199302-K (the Contractor) for the construction of six LCS vessels, with an original contract value of RM9.128bil and a contract period of 10 years, from Oct 3, 2013, to Oct 2, 2023,” it said.
During its implementation, eight supplementary contracts to the main contract were signed to amend and align the contractual terms with the requirements of the project’s implementation, it said.
“Following these supplementary contracts, the construction scope now involves five LCS vessels, with a contract value of RM11.227bil and the contract period extended until Apr 25, 2030.”
The payment mechanism has also been restructured from being milestone-based to progress-based.
Cumulative payments under the main contract amounted to RM8.557bil, or 76.22% of the RM11.227bil contract value, leaving a balance of RM2.670bil.
In response to the audit findings, the Defence Ministry (Mindef) said the technical committee had instructed the contractor to take appropriate action to ensure that work progress remains in line with the stipulated targets.
“The contractor submitted an application to the ministry on April 27, 2026, to amend the project handover date.
“The proposal is still under review before it can be finalised to ensure that the government’s interests are safeguarded.”
However, the progress of the project indicates that several critical activities remain to be completed and coordinated, including construction work, system integration, and testing and commissioning activities, adding that the current status of LCS 1, including outstanding works and unresolved project issues, has been reviewed.
“The ministry wishes to inform that one of the outstanding matters concerns the scope for the Naval Strike Missile Launcher System. This matter has been delayed following the permanent cancellation of the export permit by the Norwegian government.”
It said that as the SSM is part of the LCS’s main weapons systems and the handing over of the LCS1 without it meant that the vessel is not considered to be fully operational.
“Therefore, Mindef may consider accepting LCS 1 on a conditional basis. If this decision is taken, it will not absolve the contractor of its contractual obligations relating to the installation and integration of the SSM.
“All other outstanding obligations must be completed by the contractor in accordance with the terms of the contract,” it said.
The Auditor-General recommended that the ministry establish a realistic recovery action plan to ensure that all critical activities under the Main Contract and Complementary Contract are coordinated with the scheduled PHO of the LCS vessels.
