Mindef to remove middlemen of LCS project

KUALA LUMPUR: The Defence Ministry (Mindef) is in the midst of removing middlemen involved in the Littoral Combat Ships (LCS) project to reduce the cost of the vessels.

Senior Defence Minister Datuk Seri Hishammuddin Hussein said the termination would enable Boustead Naval Shipyard Sdn Bhd (BNSSB) to negotiate directly with local vendors and original equipment manufacturers (OEM).

"The process of terminating the middlemen - Contraves Advanced Devices (CAD) and Contraves Electrodynamics Sdn Bhd (CED) - is being carried out actively.

"The termination will also reduce the cost of shipping equipment that would need to be paid to vendors," he said.

Following this, he said the BNSSB had completed the negotiations with 145 local vendors and 42 foreign OEMs. Those involved in the equipment and primary system of the LCS had agreed to support the collaboration to continue the project.

Hishammuddin also said that the project would take at least another two years for it to be completed. The parties involved have been given 14 months for the construction of the ship after the mobilisation phase ends in December.

"The duration is realistic considering that the ship needs to undergo the Harbour Acceptance Test and Sea Acceptance Trial.

"BNSSB is also actively negotiating with nine banking institutions for debt restructuring and the result is expected to be completed during the mobilisation phase.

"Meanwhile, as instructed by the Cabinet, the negotiation process on the mobilisation phase will be presented to the Cabinet Members in phases," he said.

Hishammuddin mentioned that from a monitoring structure perspective, every mobilisation phase would be carried out meticulously by the Project Monitoring committee (PMC), which is co-chaired by the Finance Ministry treasury chief secretary and Mindef chief secretary.

At the same time, he said matters related to the detailed design of the ship was also being negotiated by BNSSB with the French Naval Group to ensure that any decision made in the future would benefit the Royal Malaysian Navy (RMN) as the end-user.

"From a government-to-government perspective, a French government representative has visited me and handed a written commitment that the continuation of the project is a priority to them.

"This is an important and a very helpful development considering that most of the Naval Group is owned by the French government," he said.

Hishammuddin said the RMN has applied the procurement for the second batch of the Littoral Mission Ship (LMS) which is equipped with more complete and comprehensive machinery.

He said Mindef had also applied to the Prime Minister's Department of Economic Planning Unit to implement the procurement.

In August, the Parliamentary Public Accounts Committee findings revealed that there were discrepancies and delays in the RM9 billion LCS project since 2017.

The contract was awarded to BNNS via direct negotiation, with the government paying RM6.083 billion, but not one LCS has been delivered.

According to the declassified report by the governance, procurement, and finance investigation committee, the cost of completing the six LCS may balloon to RM11.145 billion.

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