Another Day, Really

An aerial picture of Simpang in the early 1920s. CAAM

SHAH ALAM: The Auditor General in his 2019 report has found various weaknesses and deficiencies in the management of three Defence Ministry programmes, namely the the procurement of the Airbus A400M airlifter; In-Service Support (ISS) contract for the Scorpene submarines and the transfer of units from Simpang/Sg Besi airbase.

Unlike previous reports, the AG report did not name the A400M and Scorpene programmes or the companies involved. The A400M procurement was named as the Asset X Procurement – Perolehan Aset X. I am not sure why the AG decided to do this actually. Just reading the report – anyone with any inkling of the A400M – would surely know its about it. The same goes with the ISS contract for the Scorpenes with KD Tunku Abdul Rahmand and KD Tun Razak reduced to asset 1 and asset 2. Perhaps it did not want to name 1MDB in the report which for once, was reduced to its SSM registration number instead of its full glory.

RMAF A400M M54-01 landing at Subang airport after performing a flypast on 2015 Merdeka Day

Perolehan Aset X oleh Kementerian Pertahanan adalah untuk
meningkatkan keupayaan aset angkut taktikal milik Tentera
Udara Diraja Malaysia (TUDM) dan untuk menggantikan Aset Y
yang sudah berusia. Perolehan ini dilaksanakan melalui program
aset dalam pembangunan melalui sebuah agensi antarabangsa
yang dianggotai oleh tujuh (7) negara. Pengauditan melibatkan penilaian terhadap perolehan dan
pengurusan Aset X bagi tempoh tahun 2015 hingga 2019 yang
meliputi dua (2) bidang utama Audit iaitu prestasi dan
pengurusan program.
Bagi prestasi program, pencapaian outcome dinilai terhadap
keupayaan aset angkut taktikal milik Tentera Udara Diraja
Malaysia dan penggantian Aset Y yang telah berusia.

Hercules M30-08 taking off from Labuan airport in 2017. This is asset Y mentioned in the report.

So what the A400M audit report found – the executive summary. For the full version of the report go here

Secara keseluruhannya, perolehan Aset X melalui kaedah
perolehan dalam pembangunan berjumlah €769.89 juta (RM3.574
bilion) telah dilaksanakan tanpa perancangan yang rapi.
Perolehan Aset X iaitu untuk meningkatkan keupayaan aset
angkut taktikal milik TUDM dan menggantikan Aset Y sedia ada
tidak tercapai sepenuhnya. Hal ini kerana kesemua Aset X yang
diterima tidak menepati spesifikasi dan konfigurasi yang
ditetapkan. Selain itu, tempoh penyerahan Aset X telah
mengalami kelewatan selama 36 hingga 312 hari dalam tahun
2015 hingga tahun 2017.
Selain itu, pengurusan program perolehan Aset X adalah kurang
cekap. Hal ini kerana perancangan perolehan tidak teratur dan
Program Offset tidak dilaksanakan mengikut klausa kontrak yang ditetapkan.
Program retrofit bagi meningkatkan keupayaan Aset X
dan pemantauan juga tidak dilaksanakan dengan teratur. Namun,
pentadbiran kontrak dari aspek pindaan kontrak perolehan Aset X
dan bayaran kemajuan telah dilaksanakan selaras dengan
peraturan yang berkuat kuasa. Kelemahan yang perlu diberi
perhatian adalah seperti berikut:
– Penerimaan empat (4) Aset X tidak menepati spesifikasi dan
konfigurasi yang ditetapkan dalam kontrak.
– Aset X lewat diserahkan kepada MinDef antara 36 hari hingga
312 hari dari tempoh yang ditetapkan dalam kontrak. Denda
lewat [Liquidated Damages (LD)] dikenakan berjumlah €20.91
juta (RM97.08 juta) yang dilaraskan dalam bentuk in-kind.
– Tiada bukti menunjukkan perancangan perolehan Aset X
dibuat oleh TUDM, Air Staff Requirement (ASR) tidak
disediakan dan perolehan tidak melalui proses penyediaan
spesifikasi yang ditetapkan.
– Program Offset dengan anggaran nilai minimum berjumlah
€52.20 juta (RM242.35 juta) tidak dilaksanakan bagi dua (2)
kontrak pindaan dan laporan offset tidak dikemukakan.
– Perancangan program retrofit oleh Syarikat M bagi
meningkatkan keupayaan Aset X telah tersasar dari
perancangan asal dan denda dengan anggaran berjumlah
€3.45 juta (RM16.02 juta) belum dikenakan terhadap syarikat
tersebut.
– Kelewatan pembaikan peralatan antara 40 hingga 235 hari
daripada tarikh peralatan dihantar ke gudang sehingga
peralatan diterima selepas pembaikan.
– Tiada bukti pemantauan laporan pakej kerja dikemukakan
setiap enam (6) bulan oleh Syarikat M kepada MinDef sejak
Program Offset dilaksanakan.

RMAF A400M M54-01 being loaded with face masks bound for Sarawak on April 10 2020. TUDM

The finding on the fact that there was no evidence that RMAF planned for the procurement of A400M is an evidence of how national interest had hijacked the defence procurement process. Unfortunately, the audit report did not go further into the reasons behind the procurement apart from stating the obvious.

As for the Scorpene ISS.

Secara keseluruhannya berdasarkan skop pengauditan, dapat
dirumuskan bahawa pengurusan senggaraan ISS dan Refit adalah
memuaskan dari segi prestasi kewangan dan pemantauan.
Bagaimanapun, terdapat kelemahan yang ditemui seperti berikut:
– Penyenggaraan Refit Aset 1 lewat dimulakan dari tarikh asal
senggaraan dan lewat disiapkan. Sehubungan itu,
penyenggaraan Refit Aset 2 juga lewat dimulakan dari tarikh
asal senggaraan.
– Jumlah Liquidated Damages (LD) yang boleh dikenakan bagi
kontrak utama ISS adalah berjumlah [RM100.83 juta dan
EUR26.88 juta] (RM225.63 juta). Namun disebabkan
penetapan nilai capping dalam perjanjian, nilai LD yang boleh
dituntut hanya berjumlah [RM53.2 juta dan EUR19.3 juta]
(RM142.81 juta). Kesan daripada capping tersebut, sejumlah
[RM47.63 juta dan EUR7.58 juta] (RM82.82 juta) tidak dapat
dituntut. Klausa had siling LD dimasukkan dalam kontrak tanpa
dirujuk kepada MoF.
– Program ICP di bawah Syarikat 0861849-V dan Syarikat A
masih belum diselesaikan.
– Kelewatan memuktamadkan harga kerana proses rundingan
mengambil masa yang lama, iaitu antara 37 hingga 486 hari
bagi kontrak ISS dan Refit

The hangar where KD Tunku Abdul Rahman undergoing its refit. Picture taken in January, 2016. TLDM picture

It must be said the delays in maintenance and refit of the submarines are common occurrences with other navies as well. The only way to overcome this issue is actually to have more submarines! The report also said the RMN is facing difficulties in attracting personnel for its submarines, again another problem with having too little hulls in the fleet.
KD Tun Abdul Razak at LIMA 17.

As for the relocation of RMAF and army assets from Simpang/Sg Besi airbase, the report got this to say in its executive summary.
The main buildings of the Sendayan airbase. Air Times

Secara keseluruhannya, projek mengambil masa selama tujuh (7)
tahun untuk dilaksanakan berbanding tempoh asal selama
empat (4) tahun. Sehingga 31 Disember 2019, PU Sendayan, PU
Kuantan dan baki dua (2) komponen di PU Subang masih belum
siap iaitu National Air Defence Operational Centre (NADOC) dan
fasiliti-fasiliti lain. Kelewatan ini menyebabkan sebanyak 20
Markas/Unit di PUKL telah berpindah ke lokasi masing-masing
sebelum [Certificate of Acceptance (COA)] dikeluarkan bermula
pada bulan Januari 2017 hingga 31 Disember 2019.

Selain itu, pengurusan projek Pembangunan Penempatan Semula
Markas/Unit TUDM dan TDM di PUKL adalah kurang cekap. Hal ini
kerana berlaku kelemahan di peringkat perancangan projek dan
kelemahan dalam pentadbiran kontrak yang menjejaskan
kecekapan pengurusan projek secara keseluruhan. Perkara yang
perlu diberi perhatian adalah seperti berikut:
– Justifikasi kelulusan pelantikan syarikat induk (848230-V) oleh
Jemaah Menteri tidak dapat dipastikan memandangkan
penyediaan Memorandum Jemaah Menteri bertarikh 27 April
2010 yang disediakan oleh UPE adalah kurang terperinci.
Kertas kerja lengkap mengenai asas dan justifikasi penetapan
kos projek berjumlah RM2.166 bilion yang diluluskan dalam VM
Lab tidak dikemukakan untuk semakan Audit.
– Di samping itu juga, ketiadaan project brief di peringkat awal
semasa penyediaan Perjanjian Penempatan Semula telah
menyebabkan pertikaian antara syarikat induk (848230-V) dan
MinDef berkaitan pertambahan skop kerja dan pembekalan
perabot.
– Skop kerja pembinaan kolam latihan Underwater Escape
Training (UWET) di PU Subang telah dikeluarkan selepas VM
Lab II pada 4 hingga 7 Februari 2014 tetapi telah dimasukkan
semula dalam Supplemental Agreement 2 (SA 2) pada 31 Mei
2016. Keadaan ini menyebabkan kos pembinaan kolam latihan
UWET berjumlah RM1.67 juta diambil kira dalam kos kontrak.
– Terdapat kerja tidak mengikut spesifikasi serta kualiti
pembinaan dan penyenggaraan yang kurang memuaskan.
– Terdapat kelemahan pentadbiran kontrak antaranya syarikat
induk (848230-V) mengemukakan Bon Jaminan Reka Bentuk
yang diserah hak oleh kontraktor A, Polisi Insurans atas nama
kontraktor A dan nilai yang dikemukakan kurang daripada nilai
yang sepatutnya dilindungi. Di samping itu berlaku kelewatan
kelulusan lanjutan masa [Extension of Time (EOT)] antara 132
hingga 967 hari, EOT 2 diluluskan tanpa dokumen dan
justifikasi yang jelas serta EOT 3 masih belum diluluskan dan
telah mencapai selama 232 hari hingga 667 hari menyebabkan
wujud time at large.

This is just my first take on the report, a more detailed one will come in later this week or the next.

— Malaysian Defence

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About Marhalim Abas 1631 Articles
Shah Alam

25 Comments

  1. Is this from the same guy that said we didn’t get paid in full for assets we didn’t buy based on specifications we didn’t put out? Needs a lot salt.

  2. short comments

    1) the A400M was never in TUDM planning. Of course there was no plans for it. This is a wahyu turun dari langit project.

    2) Scorpenes. Late for government to agree on price, late lah start to overhaul. IMO we should give back all the gowind hulls to NAVAL GROUP to resell to anybody and get a scorpene sub in exchange. RMK13 buy 1 more scorpene sub. Then we will have 4 subs by 2030.

    3) 1MDB. What more can be said on that?

  3. Also why a long term plan from each service is important.

    Then they can clearly say and rakyat can clearly see if there is any wahyu projects like A400M, MD530G and others.

    Anyway every single A400M delivered to every airforce buyers around the world was not according to spec. That is why even now they are still testing new capabilities. Just stating a problem without explaining why it happened in the first place is a rubbish piece of information.

  4. @…

    So we bought the A400s for no reason then? I don’t see the 1MDB connection though…

    @Luqman

    The Indonesians are surely ambitious. The thing is if they are able to pay for them or not. Rafales + Eagles + Hornets – very potent – yes, but eye-pokingly
    pricey.

    And if they continue doing this they are becoming like Egypt, a very rojak AF even worse than ours.

    Reply
    The 1MDB is of course in connection with the relocation of the Sg Besi airbase. It is the company that’s paying for the relocation and building the new camps and facilities for units that used to be there

  5. @ ASM

    Technically yes, no reasons. As it is not to replace the C-130H (all of them still operational). It is an additional capability, a useful one, but not at all a planned capability by TUDM.

    @ luqman

    On Indonesias MRCA shopping spree.

    I would hope all of them would go through. It would give Indonesia a good fighter fleet for the next 10 years.

    It would also be good for Malaysia and other countries around Indonesia.

    Remember Indian Rafale contract for 36 Rafales cost USD8.8 billion.Then we dont know how many billions more for F-15 and Typhoons. That would surely mean no other significant fighters, especially 6th generation ones able to be bought in 10-15 years after all those contracts is signed.

    Why?

    Money spent on Rafales, F-15 and Typhoons is money not spent on KF-X or F-35. Getting all those 4th gen fighters now will mean Indonesia will be stuck with those fighters for at least 30 more years.

    It would also mean the KF-X/IF-X would be a low priority for budget allocation. It would be a good time for malaysia to join the KF-X project.

    If Indonesia is to spend big with France to get Riachuelos, Rafales and even Gowinds; it is a chance for us to go to south korea to get a big agreement on defence too.

    Offering to South korea to get a big defence contract would be very beneficial to Malaysia. Combined with low prices of korean defence hardware, with economic offsets that we can ask to them, it would be a big win-win situation for Malaysia and South Korea.

    My suggestion is this:

    – a big government to government contract for 52x TA/FA-50, 6+6 HDF-2600MOD frigates, 6x Tae Pyung Yang OPV for MMEA, 1000 Kia armoured KLTV and KLTV-APC, 60 Chiron MANPADS and 144 Raybolt ATGM and LOI for 32 KF-X after 2030. To use budget of both RMK12 (2021-2025) and RMK13 (2026-2030). KF-X to use budget of RMK14 & RMK15.

    Total cost
    52x TA/FA-50 around USD1.7 billion
    12x HDF-2600MOD around USD1.9 billion
    6x Tae Pyung Yang OPV around USD0.27 billion
    1000x KLTV around USD0.18 billion
    60x Chiron around USD0.05 billion
    144x Raybolt around USD0.1 billion

    – with offset of 30% of contract value of korea buying palm oil and CNG from malaysia, 10% of contract value in contracts to malaysian aerospace companies for FA-50 and KF-X components, 60% of contract value in reciprocal investment of korean companies into malaysian electronic, petrochemical, aerospace and infrastructure sector, local build of 6x HDF-2600MOD and 6x Tae Pyung Yang OPVs, and also free transfer of 2-3x used frigates (ulsan) to MMEA as patrol ships, additional used KIFVs, used blackhawk helicopters for PUTD and other used military equipments.

    – If Indonesia wants some gowinds, sell back the gowind hulls to Naval Group, so that they could sell them on to Indonesia. Ask for 1 brand new scorpene in exchange.
    ______________________________________________

    There is a question, can Indonesia afford that huge French deal among others (and also Malaysia, with my suggestion for the big south korean deal) ?

    Lets say the Indonesian-French deal is worth about USD14 billion (36x Rafales, 6x Riachuelos, 6x Gowinds), and Malaysian-South Korean deal is about USD4.2 billion.

    Lets refer to this:
    https://www.malaysiandefence.com/2021-budget-defence-and-internal-security-allocations/#comment-437978

    Malaysian 2021 defence development expenditure is RM4.505 billion or USD1.09 billion

    Indonesian 2021 defence development expenditure is IDR42.6 trillion or USD3 billion.

    If the same level of funding is to be maintained up till 2030, the total DE for Malaysia will be about USD11 billion, while the total DE for Indonesia is USD30 billion. So basically both the Indonesian-French deal and my proposed Malaysian-South Korean deal is less than 50% of the projected DE budget to 2030. So Indonesia can afford the deal, and have plenty of budget left for F-15s and what not. Malaysia too can afford my proposed deal if we really have the will to do it.

  6. Kudos to Mr Marhalim for taking the time to go through this stuff. This is really cutting-edge defence journalism for Malaysia, please keep it up!

    @joe
    If you want to talk in terms of suspect sources, you can basically eliminate the entire Government based on it’s proven track record of telling the truth, managing costs of programs efficiently and effectively, and delivering value to the rakyat for 60 years. You can take all that with 1kg of salt which is less than RM 3, or maybe if it’s Govt-issued salt, about RM 300…

  7. @Chua
    I cannot trust auditors that cannot do auditing job properly and instead puts in his personal views, no matter what salt you prefer to choose.

  8. zainal abidin,

    “Wants” are based on “needs”.
    The armed services have shopping lists which are based on actual operational needs (in line with requirements and threat perceptions) and each “want” has to be registered for approval to await funding. MINDEF is the first obstacle before the request goes up the bureaucratic chain.

    The problem is not only does the government fail to provide indications as when funding can be made (enabling the services to plan accordingly); it also on many occasions shifts priorities and insists that the armed services be given certain things which may later lead to issues.

  9. @…
    “6x Tae Pyung Yang OPV around USD0.27 billion”

    MMEA as of now have the requirement of 8 OPV of which 3 are Damen 1800, so there is little chance MMEA would get 6 tae pyung yang. At most it might be 3 with minimum of 2 assuming MMEA wanted it. For now i can see that most if not all of the 8 OPV will consist of Damen 1800. MMEA also got their budget approved this RMK for MPMS which should be larger than current Damen 1800. Tae pyung yang might be more suited for MPMS role rather than OPV. But can the tae pyung yang carry 5 FIC like the MPMS proposed by Muhibbah engineering?
    https://www.navalnews.com/event-news/lima-2019/2019/03/lima-2019-muhibbah-discloses-multi-purpose-mission-ship-project/#:~:text=As%20the%20name%20implies%2C%20the,vessels%20and%20day%2Fnight%20operations.&text=But%20the%20most%20important%20structure,mounted%20above%20the%20ship's%20bow.

  10. @zainal abidin
    The “Wants” is born from the “Needs” just as TDM operational “needs” for an SPH but they “wants” brand new Caesars to fulfill that, instead of making do with free used M109s.

    Since we could not afford the “Wants” then the “Needs” became unfulfilled as TDM do not want to compromise.

  11. … “Money spent on Rafales, F-15 and Typhoons is money not spent on KF-X or F-35. Getting all those 4+th gen fighters now will mean Indonesia will be stuck with those fighters for at least 30 more years.”

    Well, any air force needs 4th gen fighters on hand, whether or not it has 5th gen ones. For reasons we’ve well covered before, it’s neither necessary nor efficient to employ 5th gen fighters on every mission. So acquiring 4+th gens for use well into the future is the financially responsible course of action, even if at some point Indonesia wants F-35s or KF-Xs.

    Indonesia’s early F-16s, upgraded F-16s and Hawks are aging. Neither can they do everything that the Indonesians want the Block 72 F-16s and prospective twin engine fighter to do. These newer 4+th gen fighters will be the direct replacements of the current 4th gen ones.

    “It would also mean the KF-X/IF-X would be a low priority for budget allocation.”

    Indonesia’s arrears in the KF-X program reflect the fact that it prefers to have 4+th gen fighters now rather than 5th gen fighters later. The TNI’s trajectory of acquisitions shows nothing to suggest that it will not acquire 5th generation fighters, even if not at the earliest opportunity.

    “It would be a good time for malaysia to join the KF-X project.”

    Depends on what you mean by “join.” Indonesia wanted to shoulder a share of development costs ($1.46 billion) in return for ToT and local manufacture. This would have been in addition to unit costs of the aircraft themselves. Obviously we should not go anywhere near local manufacture and should be buying the aircraft in complete form from the Koreans.

    https://www.defenseworld.net/news/27910/Jakarta__Seoul_to_Reboot_Indonesia_s_Stalled_Participation_in_KF_X_Jet_Project

  12. AM – “NI’s trajectory of acquisitions shows nothing to suggest that ”

    Personally I’m surprised they haven’t made AEWs a priority at this stage. Never mind the large logistical/support footprint they’ll have from operating various fighters which share nothing in common and require separate support/logistical facilities to be established; without a AEW and the means enable everything they have to work together; they won’t be able to maximise the capabilities offered.

    In joint development it collaboration; unless we have continuity; can commit to ‘x’ funds over a long period and desire numbers (unlikely with the policy we’ve long had in place) there will be no long term payoff.

  13. @ AM

    My definition of join would be to have some design and component manufacturing input on the aircraft. Also technical access to enable us to maintain the aircraft by ourselves and customise the aircraft with, for example electronics and weapons from Turkey. We should not dabble with assembling it in country, unless we are going to order more than 50 of them.

  14. @AM
    “Well, any air force needs 4th gen fighters on hand, whether or not it has 5th gen one”
    Indeed, one factor is 5th gen fighter is very expensive in operational or maintenance cost.

    “Indonesia’s arrears in the KF-X program reflect the fact that it prefers to have 4+th gen fighters now rather than 5th gen fighters later”
    KFX 1st block is 4.5 gen. No indication indonesia will leave the KFX project. Indonesia primary objective is building local defence cabality, the aquisition of rafale or F15 or F18 is part of their plan to build fightet locally. Changbogo sub is an example how they have the will to let go branded “western” one for the sake of building local defence caoability.


    The TNI’s trajectory of acquisitions shows nothing to suggest that it will not acquire 5th generation fighters, even if not at the earliest opportunity.”
    Well, if the US not reject on indonesia wish, TNI has join SG in operating F35 in near future.

    @…
    “Money spent on Rafales, F-15 and Typhoons is money not spent on KF-X or F-35. Getting all those 4th gen fighters now will mean Indonesia will be stuck with those fighters for at least 30 more years.”
    Indonesia will not buy all of them. They will choose one that give big support on their KFX program. TNI have plenty of refurbished F16s that will need replacement in 15 years .

    ““It would be a good time for malaysia to join the KF-X project.”
    Really not.

    “My definition of join would be to have some design and component manufacturing input on the aircraft. Also technical access…..”
    Which malaysia real company can manufacture aeroplane part exceot ctrm? Over these years busy only being middleman.
    Even for modification or MRO will not effective if RMAF only buy 1 sq of KFX

  15. @AM
    “Well, any air force needs 4th gen fighters on hand, whether or not it has 5th gen one”
    Indeed, one factor is 5th gen fighter is very expensive in operational or maintenance cost.

    “Indonesia’s arrears in the KF-X program reflect the fact that it prefers to have 4+th gen fighters now rather than 5th gen fighters later”
    KFX 1st block is 4.5 gen. No indication indonesia will leave the KFX project. Indonesia primary objective is building local defence cabality, the aquisition of rafale or F15 or F18 is part of their plan to build fightet locally. Changbogo sub is an example how they have the will to let go branded “western” one for the sake of building local defence caoability.


    The TNI’s trajectory of acquisitions shows nothing to suggest that it will not acquire 5th generation fighters, even if not at the earliest opportunity.”
    Well, if the US not reject on indonesia wish, TNI has join SG in operating F35 in near future.

    @…
    “Money spent on Rafales, F-15 and Typhoons is money not spent on KF-X or F-35. Getting all those 4th gen fighters now will mean Indonesia will be stuck with those fighters for at least 30 more years.”
    Indonesia will not buy all of them. They will choose one that give big support on their KFX program. TNI have plenty of refurbished F16s that will need replacement in 15 years .

    ““It would be a good time for malaysia to join the KF-X project.”
    Really not.

    “My definition of join would be to have some design and component manufacturing input on the aircraft. Also technical access…..”
    Which malaysia real company can manufacture aeroplane part exceot ctrm? Over these years busy only being middleman.
    Even for modification or MRO will not effective if RMAF only buy 1 sq of KFX

  16. still I cannot reply to Luqman? is the MPMS price that i wrote sensitive?

    Anyway…

    http://sg.news.yahoo.com/special-report-china-launches-gray-121406551.html

    Future is grey… Something we need to be adept at pushing it back.

    These encroachment tactics are “super effective,” Admiral Lee Hsi-ming, who until last year was the commander of the Taiwanese military, told Reuters in an interview. “You say it’s your garden, but it turns out that it is your neighbor who’s hanging out in the garden all the time. With that action, they are making a statement that it’s their garden – and that garden is one step away from your house.”

    One of the way IMO is to always be out there on our garden. Be there before your neighbour comes to your garden. If China coast guard is 280++ days in our EEZ, we need to make sure there is a malaysian ship 365 days at the same spot.

  17. Just my 2 kepangs.
    The 4th gen planes are not passe as assumed by some
    Even America cannot afford to replace the high end stuff on a one to one basis. So they are buying brand new F15s themselves for this purpose Similarly they are also buying more FA18s to complement the F35s.

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