LCS Now Costs RM11.2 Billion, Updated

All Is Well. Picture at the signing ceremony of the sixth LCS supplemental contract. DSU Mohamad Hasan picture.

LANGKAWI: The cost for the five-ship LCS project has been bumped up for around RM2 billion more. The figure was released by Boustead Heavy Industries Corporation Sdn Bhd (BHIC) in a Bursa Malaysia announcement today (May 26). The cost for the five ships is now RM11.2 billion compared to RM9.1 billion, the release said. Do note that the new figure tracks the one presented by Malaysian Defence some months back.

As for the other revision to the contract, BHIC said only five ships will be built now. The deadline for delivery has also been moved to August 2026 instead of the very suspect – 2025 – deadline announced earlier by the Defence Minister. This is still seven years delay to the original deadline. The fifth will be delivered in April 2029, some five years after it was supposed to be delivered. Payments will only be made based on progress rather than milestone as had been done previously.

The announcement was made after its associate company, Boustead Naval Shipyard (BNS) Sdn Bhd signed the sixth LCS supplementary contract with the Defence Ministry at LIMA 2023 first public day.

The announcement:

Following the successful implementation and achievement of the objective stipulated in the Fifth Supplemental Contract dated 31 May 2022, the Company wishes to announce that BNS and MoD have finalised the negotiations on the resumption of the Contract and on 26 May 2023 signed a Sixth Supplemental Contract (“SA6”) to vary the Contract, amongst others, with the following salient terms and conditions:

(i) the resumption of all design and construction activities shall commence upon signing the SA6;

(ii) the reduction of the LCS Vessels from 6 units to 5 units;

(iii) the duration of the Contract shall be extended with the first vessel to be delivered, fully tested and trialled in August 2026 and the fifth vessel in April 2029;

(iv) the total contract price is revised to RM11.2 billion following, amongst others, the approved change of specifications and extension of time; and

(v) the terms of payment is varied from milestone activity to progress of works reflecting the various elements in the Contract based on weightage to the design, equipment, construction and trials & commissioning.

Earlier, after the contract signing ceremony, Defence Minister DSU Mohamad Hasan said that the BNS will be taken over by the Finance Ministry. The Finance Ministry will set up a special purpose vehicle to acquire the company and its assets from BHIC and reestablished it as a company under the Finance Ministry.

This is the same way, the MMEA OPV builder was bailed out by the government from Tabung Haji around 2019. Based on this example, one may think that the LCS project immediate future will not be rosy.

Defence Ministry Secretary-general DS Muez Abd Aziz and Boustead Holding Bhd chairman Nazim Rahman signing the sixth LCS supplementary contract at MIEC on May 26. DSU Mohamad Hasan.

Defence Minister DSU Mohamad Hasan announced the creation of the SPV after witnessing the signing of the sixth LCS supplementary contract at the LIMA 2023 on May 26. Malaysian Defence was only present at LIMA 2023 during the three trade days – May 23 to May 25.

The latest picture of PCU Maharaja Lela – LCS1 – taken on January 1, 2023. DSU Mohamad Hasan.

Malaysian Defence was told by industry sources at LIMA 2023 that work on Maharaja Lela was expected to start within three months after the sixth supplementary contract was signed. The sources said Maharaja Lela could undergo harbour trials by end of 2024 as most of the hull and the machineries had been completed.

They, however, cautioned the integration work on the combat management system, sensors, and weapons, may take much longer than the off-quoted 2025 deadline. BNS had also paid money owed to companies working on the LCS project after the signing of the fifth LCS supplementary contract. It is unknown whether BNS still owed other companies for work done with the LCS but it is likely they will be paid before the work on the ship can resume.

— Malaysian Defence

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29 Comments

  1. Boleh dapat heavy frigate atau light destroyer kalau beli direct dengan OEM. Shame on you Boustead. Buang duit rakyat macam tu je. Its time for TLDM and government to find alternative yard that can do maintenance for TLDM fleet, not depending on BNS.

  2. Didnt you read the article, BNS is bought over by MOF, meaning most future naval related contracts will be awarded to BNS, its sort of in-house contractor scenario ..and same as housing developers, in house contractors normally do shit quality of works…

  3. azim – “Shame on you Boustead.”

    Get the right narrative.

    It’s the government which put in place the system we have; insisted BNS not go through a learning curve; allowed vendors to dictate things; did not have in place the needed corrective mechanisms; failed to heed the warning signs; prioritises national interests rather than the end user and taxpayer; perennially underfunds the end user and ensures we don’t get the best value for what we spend; enabled procurement to be part of the patronage system; etc.

    Want to “shame” anyone; “shame” the politicians who put in place the system which enabled the shite to hit the fan; yet again. The politicians who also have a congenital inability to learn from past cockups.

    azim – “Buang duit rakyat macam tu je”

    The list of “buang duit”is a long one; the LCS cockup merely the latest and is the fault of the politicians.

  4. With BNS finally getting bailed out & directly owned by MOF inc it’s safe to speculate that there’s won’t be any direct overseas purchase of any naval vessels in the near & distance future.

  5. I say just finish the damn boats and never build anything big locally again…ever…just buy directly from the Koreans or Turks with kelapa sawit as part payment..

  6. SPV taking over the yard? Sound like when Boustead was the black ship to PSC problem. Same yard, residing at TLDM HQ front door, 2 different owner and management, yet twice they fell into almost the same script of problem, with almost the same script of solution.

  7. 11.2 billion ringgit for 5 Gowinds?

    Considering previously we could have gotten only 2 Gowinds for 9 billion ringgit, well it is a little bit better…

    So the 11.2 billion would be something that is budgeted under RMK12 (2021-2025). As all the hardwares and materials for the 6th ship is already available, i believe the government could give the contract to build the 6th ship with budget under RMK13 (2026-2030). If the contract for the 6th ship is signed, say in LIMA 2027 (after the 1st ship fully operational and displayed there), we could see all 6 ships operational by 2030.

    in 2030 our most capable assets now, the Kasturi corvettes would be 46 years old at the time, it would be time to have them replaced too, with a capable frigate for the time fitting with the name of the 5 famous malay warriors.

    So what is next for BNS Lumut?

    Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS.

    How would the government manage the shipyard? Independently? Merge it with others such as MMHE? That would create a super big company, now with even Sapura is rumored to be merging with MMHE.

    From now up till 2030 there would be other large ship builds to be approved of. Things like more OPVs for MMEA, LMS batch 2 corvettes, MRSS LPDs…

    Also just thinking out loud, the additional budget approved for the LCS Gowinds conveniently amounts to almost the same value originally budgeted for the 3 LMS batch 2 corvettes. Does this really mean that the LMS batch 2 corvette project is officially dead?

  8. Zaft – ”t’s safe to speculate that there’s won’t be any direct overseas purchase of any naval vessels in the near & distance future.”

    If you’ve been around long enough observing things you’ll know that nothing is certain with regards to the Malaysian defence scene.

    … – ”with a capable frigate for the time fitting with the name of the 5 famous malay warriors.”

    All respect to anybody ”famous” or not or Malay or not; what the ships are named is the least of my concern. I want something on spec, on budget; on schedule; in decent numbers and operated on a systems level.

    … – ”Does this really mean that the LMS batch 2 corvette project is officially dead?”

    It’s as much alive as you are so it would seem.

    Farhan – ”yet twice they fell into almost the same script of problem, with almost the same script of solution.”

    Yes but ask yourself why. Ask yourself who created the very system we have which enabled shite to happen and hit the fan. Who insisted on local assembly? Who didn’t give a toss that BNS was not put through a learning curve? Why did MINDEF not place priority on the RMN? ask yourself if those who are really responsible will be made to answer or will it be people lower down the chain. Ask yourself if we’ve learnt anything from yet another blunder of epic proportion.

  9. Hulubalang “Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS.”

    With the LCS increase in value by 3 billions and Without any Increase in funding. The LMS would have to come after the LCS completion & not concurrently. Preliminary works like selecting design can start now But delivery would be in 2030 utilizing capabilities as the LCS leave the dry docks into sea trials which would achieve a continuous shipbuilding programme objectives.

    Well at least that’s the likely plans whether we end up doing it is another story.

  10. … – “Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS”

    Whether it’s battleship or cruiser or a brigantine is immaterial given that there’s hardly any space left [as has been discussed previously] and workforce issues could be an issue for BNS but as it stands no firm decision has actually been taken as to whether the LMS Batch 2s will be partly constructed in a local yard.

    Zaft – “The LMS would have to come after the LCS completion & not concurrently”

    As it stands that’s not the intention and it’s pretty obvious from the statements made; as well as the rumour mill circulating within the industry. Unless there’s a significant shift the intention is to proceed with the programme.

    Zaft – “Preliminary works like selecting design can start now”

    Actual work in place evaluating designs started moon ago and as it stands the political favorite is a Turkish design as you know; or not.

  11. That is rm2.24 billion per ship. If the price for the 6th ship is the same, than the total project cost would be rm13.4 billion, which is pretty close to what Marhalim said previously.

    @Azlan
    “perennially underfunds the end user”
    If specifically talking about funds for LCS, the initial funds is enough to build the LCS as the price per Gowind still remains the same at usd400-460million over the past 12 years or so. But (IMO) due to delays in the design (thanks politicians and local ship designers) over a period of economic declination (thus worse forex) the price had gone up and no one wants to admit it publicly at 1st until the PAC reports came out, then yes the end user is underfunded for the project not initially but as time goes on

  12. Buying LMS2 from another yard be it foreign or local is just a repeat of the gagah which in parts leads to the failure of LCS as BNS is without order after the completion of the Kedah making them lose talent, experience while making their debt situation worse in the 5 years gaps.

    BNS would have the capacity to start building the LMS2 by end of 2024 when the LCS1 leave the yard for seatrials for delivery by 2030 after the 5th LCS is delivered

    So outside of personal preferences there’s aren’t any significant delivery date difference of LMS2 regardless of Which yard (local of foreign) to BNS.

  13. Luqman – ”then yes the end user is underfunded for the project not initially but as time goes on”

    I was referring to the armed services being perennially underfunded as far as procurement and sustainment goes.

    Zaft – ”Buying LMS2 from another yard be it foreign or local is just a repeat of the gagah which in parts leads to the failure of LCS as BNS is without order after the completion of the Kedah making them lose talent, experience while making their debt situation worse in the 5 years gaps.”

    Do you have a crystal ball or oracle? If not; wait and see how things pan out before becoming a prophet of doom. We have no zero idea at present on what the Batch 2 contract will entail.

  14. 3 billion for a 3100 tonnes ship with just a mere 16 cell vls? Wow..Others cant really beat us in procuring ships at absurd price..3 billion will easily get us 3 or even 4 sigma 10952 like the indonesia..Indonesia built their first martadinata class for 220 million usd perunit..add radars,weapons and what not still doesnt exceeds 400 million usd mark perunit..Sure our Lcs are longer, heavier but we really need to learn a thing or two from our dear neighbour on how to buy military equipments.Even the phils beat us nowadays..They go from having 0 modern latest ships to two frigates in the span of 3 to 4 years only..Sure it lightly armed but still a frigate though..Ordering 2 more bigger “corvettes” and preparing to order 6 more OPV..While us still stuck with LCS and still hesitant to just buy 3 OPV..3 billion perunit i believed are more expensive perunit than formidable with 32 cell vls and herakles radar or even more expensive than the 3600 tonnes htms bhumibol adulyajej with essm + asroc in 32 cell vls,aesa radar and phalanx ciws

  15. 1) BNS bought the rights to the 3100 tonne Gowind. Naval Group doesn’t even sell a 3100 Gowind today. If a country wants a 3000+ ship, they sell them the La’Fayette class. 2) Because Naval Group doesn’t sell a 3100 Gowind, they don’t have designs for the ship from Day-1. I suspect Naval Group provided only the basic structure and internals because Malaysia didn’t ask Naval Group to design – BNS was supposed to design it. If Naval Group was asked to design the 3100 Gowind, the issue with not having detailed design in 2023 will not happen. 3) Malaysia never had the talent to build complex warships. Kedah class was not designed by BNS. BNS built the ships of a ready design. If you ask BNS to build a second batch of Kedah class with SSM and SAM after the first batch, they will struggle unless they get the original designers in. FFBNW and rated or certified for is not as simple as plug and play. When adding equipment, you need to rewire internally, test electrical loads – maybe requiring upgrades to power generation, consider how displacement changes affect speed – maybe need new engines, weight distribution – do we need to move the internals to maintain stability, how it affects maneuverability – is the turning radius affected, can it sprint as fast with the additional load, is the draft affected by the additional weight, etc. Even countries like Japan, Australia, Singapore, Korea didn’t start by designing their own ships. They took a ready design, practiced how to build that design, repeat the process over 2 or 3 cycles, before developing their own designs. What you have in Malaysia is, BNS took a ready design (Gowind 2500), then decide to modify it into an upsized ship (Gowind 3100) by themselves despite zero prior experience designing complex warships. In summary, the idea that Malaysia had the expertise to build complex warships after Kedah class is simply untrue. Then to compare Kedah class with LCS with Gagah Samudera is simply perplexing – suggesting a lack of understanding of what goes into making a warship.

  16. I don’t understand the calculations that say BNS has yard capacity for LMS Batch 2. BNS only has 2 production lines. Both taken up by the LCS – i.e. 2 ships build concurrently. After LCS 1 is delivered, the LCS 3 will take its place. After LCS 2 is completed, LCS 4 will take its place. Assuming the LCS 6 “option” is exercised, it means the after LCS 4, LCS 5 will occupy the “free” slot. Suddenly inserting LMS into the production queue means LCS 3 will have to wait until LCS 2 to finish – basically pushing back LCS deliveries. But more perplexing maths is, the first LCS is only due in 2026 – starting acceptance trials. So is LMS Batch 2 meant to start construction only in 2026 if given to BNS? But even more perplexing is, despite 2 consecutive failures, there are people that still advocate giving to a local company to make complex warships. Its as if these people are not at all concerned with the Navy’s issues, and only care about the politics of helping local business.

  17. Lastly, LCS was not underfunded in its original form. It became grossly underfunded because BNS said they have the talent and expertise to design the ship but actually had zero talent and expertise to do it. So the design cost increased because BNS had to ask Naval Group to help them with the design. When they ran out of money to ask Naval Group to help, Naval Group said sorry pay up first. No money no design. With no design, construction couldn’t proceed. Then the extra cost from changing specifications (likely RMN has to bear some of the blame), poor contract management (we already know about the Contraves), delays (more salary, more expenses, more $ for zero progress) – basically waste. If the project was executed properly, sure it will likely be more than the RM9b initial value – as with any project of this size and complexity. But it won’t be 1/3 more expensive, 1 ship less, and nearly 10 years late. Lessons learnt. Next big ship building program, get the foreign yard to lead, design and build the first ship. Ask the local yard to listen, follow, and learn. Don’t try to act smart and make superfluous claims of having the talent and expertise.

  18. So its RM 2.2Bil per boat? Dah agak dah. I said it as much earlier it realistically would not be under 2Bil despite what some claimed.

    Any how its a done deal, and lets hope they will have the stomach to continue on with a 6th ship as envisioned & needed by TLDM.

  19. Some small nuances that i want to highlight

    Our problem is not building complex naval ships. Far from it. Our main issue is designing and do systems integration of complex naval ships on our own. 2 different things. There would be no problems if we just need to follow an already complete design to be build.

    The 6 billion ringgit spent is inclusive of GFE. That is what the government has spent, not what BNS has received in total.

    Currently the only GFE still not yet bought or paid for is the VL MICA missiles.

    All other GFE, even all the steel and hardware for all 6 ships have been fully paid for. So to build the 6th ship, it would not cost as much as what is being paid for to complete the 5 ships.

  20. Nope, the GFE has always been excluded from the amount paid to BNS. The steel was ordered and paid directly by BNS that’s why they got to choose the vendor.

  21. For the Gowinds project, items considered as GFE are only

    – NSM missile itself, other hardwares such as launchers etc are included in the ship price
    – VL MICA missile itself, other hardwares such as launchers etc are included in the ship price
    – 57mm and 30mm ammunition, other hardwares such as the gun itself etc are included in the ship price
    – Torpedo itself, other hardwares such as launchers etc are included in the ship price

    https://www.malaysiandefence.com/abandon-ship-scrap-the-lcs-part-ii/
    In your article, you wrote about the forensic audit. There it is clearly written that items that most hardwares (guns, radars, sonars, missile launchers etc) was bought through Contraves Advanced Devices (CAD) – see Table-1
    https://www.parlimen.gov.my/pac/review/docs-257-319.pdf

    Taking that into consideration, almost all hardwares for the 6th ship is already paid for. What is needed is to pay money to assemble all the parts to become a proper ship.

  22. Kel “BNS only has 2 production lines.”

    If that’s is true then LCS 3 to 5 actual progress would be zero like the now defunct LCS6. But LCS 3 to 5 are there, and one can confirm it existence by our very own eyes by paying for ferry tickets to Pangkor.

    Kel “despite 2 consecutive failures, there are people that still advocate giving to a local company to make complex warships. Its as if these people are not at all concerned with the Navy’s issues, and only care about the politics of helping local business.”

    That’s is a problem when one used exchange rates as a method of evaluation. As said before, money for a gov works different then us mere mortals. They do not have access to money changer, while we can’t pay for something with self print make believe papers. all foreign currencies is acquired through trade while local currency is something they print out of thin air. Thus Any local contents significantly increase it affordability. If you get an option to pay for something with cash in your wallet Vs leaf you picked from your yard then the former is no contest to the latter. despite what exchange rates value method of comparison would leed you to believe

    Any navy which solely relied on foreign suppliers are destined to be underfunded & under capable because the ship they sailed on is simply unaffordable (from the gov point of views) Which then Leeds to cancellation of follow up orders when it convenient (since it already unaffordable & Carry no political & economical consequences) which give birth to reboot (when it convenient) which results in lack of commonalities Which increases operations cost & complexity which results in less capable military capabilities.

    Obviously getting ship paid for In currency you printed out of thin air allowing you to afford more ship while reducing operations cost making you more capable is not easy. If it is then most countries would done it already. For countries which achieve it, Military spending to them Is almost as attractive as infrastructure spending. Which is why they are more than happy to spend the money despite not having existential crisis rather than reluctantly like us currently.

    Quilting halfway is an option but then we would fall back to the earlier problem of military hardware is unaffordable dilemma & would falls into the cancellation & reboot cycle again & again till perpectuality.

  23. Given the price of the LCS, if we can fit the same towed array sonar or even the higher spec same size CAPTAS4c and smart-s mk2 radar on the LMS batch 2, then RMN do not need the LCS at all. Just scrap the additional 6 LCS. Unless RMN want to put 400km class radar plus sm2 or aster30 and ASROC or MILAS. I would also say that RMN can just get the larger Type 31 if they wanted a larger size ship to carry more USV and UUV. Or else just make LMS batch 3 as a dedicated USV and UUV carrier though with lesser numbers carried

  24. @Firdaus
    “Sure our Lcs are longer, heavier”
    And can travel further, well thats about it really. redesigning it but without any tangible advantages, thats how stupid some people are. We can just straight away buy La Fayette for the same size but oh well. One could quad pack ESSM into 8 cells and have already 32x ESSM with remaining 8 cells for other things. Just scrap future LCS and put MICA and captas on any future LMS will do, or just get the jose rizal instead

  25. Asking LCS to be cancelled is like hoping tooth fairies to be real. Anwar already has said it was too big to fail and despite what he said preelection, PH-BN Govt has committed to continue. This sentiment was echoed previously as well by PM Sabri & Muhyddin. Take a leaf from the Brits as they did with QE carriers and grit our teeth to see this until completion.

  26. zaft – ”Any navy which solely relied on foreign suppliers are destined to be underfunded & under capable”

    Here’s news for you : the bulk of the world’s navies are dependent on foreign suppliers…

    Luqman – ” I would also say that RMN can just get the larger Type 31 if they wanted a larger size ship to carry more USV and UUV. ”

    If we ever went for a much larger ship it would have to be for a number of reasons.

    Luqman – ”and ASROC or MILAS.”

    There is a reason why almost nobody these days buys anymore ASROC or MILAS and why navies which operated Ikara never replaced it. the Russians still have Silex but it’s a raririty.

  27. @Azlan
    “There is a reason why almost nobody these days buys anymore ASROC or MILAS”

    And what would be the reason? is it cost? Yes only select few have this stand off capability but the navy that uses it use on many of their ships (USA, Japan, and Italy). Having the towed sonar array enabled the ship to detect submarine at longer ranges and with ASW helo, it need some time to be launched hence the ASCOR/MILAS can give the ship an immediate standoff capability if needed to fire at submarine quickly

  28. Luqman – ”And what would be the reason? is it cost? ”

    Various things; namely the fact that it’s not very accurate; once the torp is released there is no control and the ship which fired it can’t do anything given the distance involved. It’s a useful capability but one which has largely fallen out of usage.

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