LCS construction to take another 7 years, PAC report reveals

KUALA LUMPUR: The Public Accounts Committee (PAC) in a declassified report posted on their 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 Royal Malaysian Navy in 2029.

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 LCS construction period has been extended to 83 months and it is expected that the Royal 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.

PAC had visited the LCS construction site in Lumut on Dec 11, 2021 before making another visit on June 10, 2023.

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

PAC said the main issue of the LCS detailed design has yet to be resolved, which is currently 96 per cent completed, with only 84 per cent having gone through the confirmation, verification and approval stage by the LCS design supervisor, Naval Group, from France.

"However, the contractor has given the assurance that detailed design can be completed before Aug 2024 as mentioned in SA 6 (Sixth Supplementary Contract)," the report said.

In Dec 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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