SHAH ALAM: How much is that LCS in the window? The honest answer is no one knows, really. They didn’t 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 cancelling 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.
— Malaysian Defence
If you like this post, buy me an espresso. Paypal Payment
View Comments (50)
Same thing with the Indian Tejas and American F35 program. The more delays, the more user will ask to incorporate new technologies that just came up. These moving goalposts if not managed properly will be never ending.
Similar not the same as both countries spend so much more money defence procurement. And to think that the Gempita was already as expensive as an M1 tank
Marhalim, Azlan,
Do you think cancelling the deal is best way out (and buying direct from elsewhere or choose a new and proven design)?
Yes if you prepare to pay some RM12 billion for no ships
There is a way to force the government to finish the damn ship as fast as possible. Just have someone rigged the entire facility with an explosive and threaten to explode the entire place if the project is not continue or cancel.
Marhalim,
The figure of 6.1 billion ringgit is the total amount of money that the Government has spent on the project, not the total amount paid to BNS.
That 6.1 billion ringgit figure also includes all the GFE the government already paid for.
If it is my call?
Government to take back all GFE that is paid for the ships (NSM missile, 57mm bofors, 30mm MSI, CAPTAS2 sonar, FCS, EO)
Cancel the project. Just let BNS cover any expenses by completing to a sailable condition and selling off 2 ships (at least 1.5 billion ringgit in value). Pass all other remaining parts (3 hulls, 4 PRISM integrated mast, etc.) back to Naval Group as 50% payment for a Scorpene. It will be a huge loss to the government, but that is something that cannot be avoided. No need to spend the remaining unpaid 2.9 billion ringgit out of the 9 billion ringgit contract.
To cover other costs, Boustead to sell BNS to MMHE (Petronas). BNS to be MMHE subsidiary. Boustead to use the proceeds to take over Airod and merge it with its AeroServices Group, so to consolidate the aerospace service sector.
Next continue LMS batch 2 as the replacement of the LCS in RMK 12 (2021-2025). Use LMS budget plus unused LCS budget to get 6 ships (target budget 1 billion dollars). Get the cheapest frigate design available so that means just use Jose Rizal class frigate design. Build all 6 in South Korea with NSM missile, 57mm bofors, 30mm MSI, CAPTAS2 sonar, FCS, EO taken from the Gowind project. Take out the TRS-3D radar from the Kedah class and put them on those ship to save more money. Only need to buy new anti air missiles.
When the dust has settled, build 3 more LMS Batch 2 locally in RMK 13 (2026-2030),
by the now MMHE owned Lumut NS for a total of 9 LMS Batch 2 ships. To save costs probably no need to buy towed sonars for these 3 ships.
In RMK 13 (2026-2030), create a new LMMS (Littoral Multi Mission Ship) project to replace the LMS that has replaced the LCS. Go back to the original requirement of small fast and cheap fighting ships (not just a patrol boat). Something just around 50m, small crew (15-25) and large rear deck for container modules. Can deploy as a task force of one LMS batch 2 and two LMMS as "wingman" for ASW. Must not cost more than half of the chinese built LMS batch 1, inclusive with (cheap) anti ship missile modules.
Because it will not be solved tomorrow and there is no guarantees it will be resolved
The shipyard is asking for RM3b to complete the first 2 and RM3b to complete the next 4. What high level mathematics the shipyard is using is a mystery when one consider the 5th and 6th ships are still sheets of steel. The problem with the project isn\'t how much each ship will cost or how many ships will be built. The real problem is whether any ships will be built. Given the shipyard's track record, the likelihood of zero ships even if RM12b is spent is high. So one option is to keep the RM3b, throw it at the LMS Batch 2 program (increasing the number of ships), built by a foreign shipyard, with a high chance of being delivered on time and on spec - protecting the Navy's intetesf. The other option is protect local contractors, who are equally responsible for the project's problems and hope something will be delivered. RM3b or RM6b is a lot of money to be spending on a project with high risk of failure.
I hope this project is the last legacy of an old man, developing a heavy industry in Malaysia. Perwaja failed, DRB Hicom failed and Proton failed. We just have an assembly industry like previously amd not much value add. An industry of rent seekers.
gonggok - ''and selling off 2 ships (at least 1.5 billion ringgit in value).''
great idea on paper but what if potential customers who are not spoilt for choice decide that those 2 ships; configured for the RMN's requirements; are not what they need? What happens to those ships?
gonggok - ''Take out the TRS-3D radar from the Kedah class''
The TRS-3D radar would have to be integrated with the CMS, directors and other things.
Slightly off topic but an issue faced with the TRS-3D is - like other German stuff - slightly over engineered; too many modes and switching to the right mode takes time. The Danes discovered this when they were trialing it alongside SMART.
gonggok - ''Go back to the original requirement of small fast and cheap fighting ships (not just a patrol boat).''
This ''patrol boat'' thing has become somewhat of a cliche but there is zero intention on the part of the RMN to get any; it has pressed the case for fully fitted out ships.
gonggok - '' to replace the LMS that has replaced the LCS''
The narrative is that he LMS Batch 2s are intended to ''supplement'' not ''replace'' the LCSs [can't ''replace'' it as it's a different class of ship intended for entirely different things in different operational scenarios]; to perform niche roles by themselves or alongside other assets; in operational circumstances which no not require a larger LCS or a Lekiu or Kasturi - that is what they are for and why the RMN has been pressing for them. The fact that that a company offered a design to fulfill the Batch requirement armed with a 57mm Bofors amongst other things in a conventional layout; was not because it was a request for the RMN but because it was felt that it might gain interest. As it stands from what I recently asked from someone in the know; the intention is still for a design configured for modular payloads rather than one with a conventional design/lay out. This reinforces what was previously discussed.
For me the key question is what happens if either a mere 2 LCSs enter service or the whole programme is scrapped? The RMN from what I know has already done some paper feasibility studies in case things go ratshit but it's still early days. The LCSs for the RMN are intended to be it's main surface combatant with a certain level of capability; range, endurance and seakeeping; the LMSs operating in a supplementary role. Not having the LCSs and not getting a replacement anytime soon will be a major blow for the RMN's plans; having a huge impact and far reaching consequences.
azlan,
"The TRS-3D radar would have to be integrated with the CMS, directors and other things"
The TRS-3D is the exact model of radar that is supplied with the Philippines Jose Rizal frigate, and it was integrated with Hanhwa Naval Shield CMS. Which is why I mentioned it as an option.
"For me the key question is what happens if either a mere 2 LCSs enter service or the whole programme is scrapped?"
The best option right now is for the LCS program to be scrapped, and whatever allocated budget that has not been spent combined with the LMS batch 2 budget to get the capability that the LCS Gowind was supposed to provide.