SHAH ALAM: How much is that LCS in the window? The honest answer is no one knows, really. They didn’t now know it when the Boustead Naval Shipyard (BNS) was awarded the Letter of Award (LOA) back in 2011. They still didn’t know when the RM9 billion contract was signed back in 2014 (and amended in 2017 to allow for the first delivery in 2019). Below is the official release from BHIC on the contract:
KUALA LUMPUR, 17 July 2014 – Boustead Holdings Berhad (BHB) and Boustead Heavy Industries Corporation Berhad (BHIC) today announced that Boustead Naval Shipyard Sdn Bhd (BN Shipyard), a subsidiary of BHB and an associate of BHIC, has today signed a RM9 billion contract to design, build and deliver six (6) second-generation patrol vessels with littoral combat ship capability for the Royal Malaysian Navy (RMN).
BN Shipyard was previously presented a Letter of Award (LOA) from the Ministry of Defense (MOD) on 16 December 2011. The contract is to be implemented over three Malaysia Plans, 10, 11 and 12.
BN Shipyard Managing Director, YBhg Tan Sri Dato’ Seri Ahmad Ramli Hj Mohd Nor, said: “We are pleased to have formally signed this important contract with the Ministry of Defense and we are honoured to be entrusted with carrying out this vital national project. Work on the final design and the key procurement aspects of the project is well in hand, and the formal contract allows us to recognise a greater element of our on-going work.”
The RM9 billion (around RM600 million per ship) was supposed to be the ceiling price of the project. But by the time the first ship was about to be launched in 2017, they already knew that the cost would go higher. By how much? Again, I was told the figure was fuzzy which led to me to believe it would be around RM12 billion or RM2 billion per ship (by 2020) excluding the government furnished equipment (GFE) – the guns and missiles mostly.
By 2022, I am told that the cost will be RM14 billion (if work started on January 2022, again excluding the GFE). With the resumption of the project seemingly being dragged out (likely punted over to the next government), it may well cost RM16 billion by 2025 arrived. Why 2025? That was the time when the first ship was supposed to be handed over to the RMN (announced last year when the project was supposed to start this year).
So how about canceling the whole project then as espoused by some quarters? The government could do that but it is likely that it will have to pay around RM5 billion more to clean up the mess. That’s on top of the RM6.1 billion already paid to BNS.
The extra payment included the RM3.7 billion needed for the work already done by BNS and more importantly, to its subcontractors up to November, 2019 when the project stopped. Do note that BNS had already secured a court judgement to pay these subcontractors the amount it felt appropriate although most of them are seeking higher charges. The rest of the money are to pay for the cost of storing the equipment that already been paid. Some of these are stored locally and overseas.
Of course, I could be wrong about the amount that needed to be paid out as I am just guessing the numbers. But I do not think anyone has the exact figure. Which is course emblematic of the whole project, no one really knows the actual figure. As for completing the project, I am inclined to believe that each of the completed LCS will cost around RM4 billion . If only two are actually completed it will be RM8 billion each. And how much is that is due to forex losses then? Only 10 per cent.
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