THE additional construction period of 83 months is among the reasons for the ballooning cost of building the littoral combat ships (LCS), says Deputy Defence Minister Adly Zahari.
He said the additional period is among the terms included in the sixth supplemental agreement (SA6) inked between the contractor Boustead Naval Shipyard (BNS) and the ministry on May 26.
The cost of the project has increased from RM9bil to RM11.2bil while the number of vessels has been cut from six to five.
“If we look at it, the 83 months will add to the cost,” he told the Dewan Rakyat during the oral question and answer session yesterday.
Apart from that, he said the variation orders and the additional specifications, such as the surface-to-surface missile and Decoy Launching System, are another factor leading to the cost hike.
“When we drafted the SA6, we included a term that the government can pay the original equipment manufacturer (OEM) directly through the Finance Ministry.
“These are the improvements we made to the agreement,” he said, while adding that there had been concerns about leakages to middlemen.
He said the move for the Finance Ministry to take over BNS via a special purpose vehicle (SPV) was to ensure there were no irregularities in terms of payments.
On the international settlement agreement with third-party subcontractor Contraves Advanced Devices that was removed, Adly said the transaction did not involve the government.
He said the progress of the project would also be monitored by four committees, including the Public Accounts Committee, whereby the ministry would table the quarterly report to the parliamentary select committee.
The first vessel is expected to be completed in November next year and the vessel will be commissioned for use in 2026.
“The LCS project involves 400 vendors; it will spur the economy but the most important thing is that we must be transparent to ensure success and the ship can be used for national security,” Adly said while responding to a question by Datuk Seri Ikmal Hisham Abdul Aziz (PN-Tanah Merah), who asked for a time frame on the completion and commissioning of the first vessel.
Ikmal had also questioned the bloated cost in a supplementary question, in which he said that with an additional RM2bil 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 can be completed in 2026; the completion period has stretched to 10 years. Egypt spent RM1.9bil on a ship that was completed in three years.
“This is a big scandal and a tragedy that we cannot close our eyes to. 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 from the continuation of the project.
He also questioned the lack of legal action against those implicated.
Adly said the Finance Ministry would be able to regulate the financial aspect of the project’s takeover via the SPV.
“It is accurate to say there were no (court) charges. There are charges but we are just not satisfied that we have spent so much and have yet to see the results,” he added.
On May 26, Boustead Heavy Industries Corp told Bursa Malaysia in a filing that the duration of the contract would be extended with the first vessel to be delivered, fully tested, and trialled in August 2026, and the fifth vessel in April 2029.
