PAC: LCS construction hits roadblock, requires extension and cost surge

KUALA LUMPUR: Progress on the Littoral Combat Ship (LCS) construction has come to a standstill since Dec 11, 2021, necessitating an extension of the construction period and resulting in a significant increase in the overall construction cost.

The Public Accounts Committee (PAC) in a declassified report posted on its website today said the LCS construction periods would be extended to 83 more months and all five LCS would only be handed over to the Malaysian Navy in 2029.

"The LCS construction period has been extended to 83 months and it is expected that the Malaysian Navy will only be able to obtain all five LCSs in 2029 compared to the original contract where LCS 5 was supposed to be delivered in 2022," the report said.

The report said that although the number of LCS was reduced to five from the initial six ships, the construction cost increased from RM9.128 billion to RM11.22 billion.

"Although the number of LCS was reduced to five, the cost of LCS construction increased from RM9.128 billion to RM11.22 billion with an increase of RM2.098 billion resulting from the cost of design (RM0.211 billion), the price of equipment (RM1.214 billion), insurance and risk (RM0.466 billion), financial costs (RM0.143 billion), and project management costs (RM0.066 billion)," the report said, adding that delays and increased construction time also contributed to the ballooning price.

In December 2011, the defence ministry awarded a RM9 billion contract to Boustead Naval Shipyard Sdn Bhd for six ships as part of the Royal Malaysian Navy's fleet renewal plan.

A contract was eventually signed in July 2014. BNS would build the six ships with the help of French naval company DCNS beginning in 2015.

The first vessel was slated to be delivered by April 2019, and the five ships to be handed over in six-month intervals until 2023. However, none had been delivered.

In 2018, the short-lived Pakatan Harapan government formed a special committee to investigate the contract, which eventually discovered that over RM6 billion had already been paid out from the total contract amount even before a single vessel was delivered.

A forensic audit was also commissioned the same year on Boustead Heavy Industries Corporation Bhd (BHIC), the parent of BNS, which eventually led to criminal breach-of-trust charges against former BNS managing director, Tan Sri Ahmad Ramli Mohd Nor, last year.


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