More Investigations Into LCS Project

Maharaja Lela was sprayed with sea water as part of the launch gimmick. This was the closest she got to the sea.

SHAH ALAM: More investigations into LCS project. The Parliament Public Accounts Committee (PAC) will call former defence minister DS Ahmad Zahid Hamidi early next year for its proceedings regarding the failure of the LCS project.

PAC chairman Wong Kang Wah was quoted by Bernama as saying that former RMN chief TS Abdul Aziz Jaafar and the management of the Boustead Naval Shipyard (BNS) the LCS main contractor will also be called for the committee’s proceedings on the project. From Bernama.

Maharaja Lela at the BNS facility in October, 2018. She is still missing her mast and other items. She is likely rusty after undergoing limited harbour trials.

“Pelantikan BNS Sdn Bhd dilakukan secara rundingan terus dan sehingga Oktober lalu, sejumlah RM6.083 bilion telah dibayar, dan tidak ada sebuah kapal LCS siap dibina walaupun mengikut jadual sepatutnya dua kapal LCS siap dibina setakat ini,” katanya pada sidang media di Dewan Rakyat hari ini.

Wong berkata isu itu dilaporkan dalam Laporan Ketua Audit Negara (LKAN) 2019 Siri 1 (Pengauditan Pematuhan Kementerian/ Jabatan Persekutuan) dan Laporan Siasatan Jawatankuasa Siasatan Tadbir Urus, Perolehan dan Kewangan Kerajaan (JKSTUPKK), diterbitkan pada 2019.

Jelasnya PAC Parlimen juga akan mengadakan lawatan tapak pembinaan kapal LCS di Lumut, Perak bulan depan.

“PAC Parlimen memandang serius isu kegagalan pembekalan enam kapal peronda LCS oleh Kementerian Pertahanan (MINDEF), membabitkan nilai perolehan sebanyak RM9 bilion.

“Kegagalan penyiapan kapal LCS amat serius, kerana ia membabitkan kelemahan dari segi tadbir urus, perolehan serta kewangan, tetapi memberi impak terhadap keselamatan dan pertahanan negara,” katanya.

Wong berkata PAC Parlimen berpendapat bahawa suatu penyelesaian hendaklah diputuskan oleh kerajaan secepat mungkin, dan berikutan itu, adalah penting bagi PAC Parlimen untuk menyegerakan prosiding isu itu dan membentangkan laporannya ke Dewan Rakyat.

Beliau berkata setakat ini empat mesyuarat dan prosiding dengan beberapa saksi telah dipanggil, antaranya Ketua Audit Negara Datuk Nik Azman Nik Abdul Majid, Ketua Setiausaha Kementerian Pertahanan Datuk Seri Muez Abdul Aziz dan Pengerusi JKSTUPKK Tan Sri Ambrin Buang.

“PAC Parlimen berhasrat untuk melengkapkan dan membentangkan Laporan PAC berhubung isu pembekalan enam kapal generasi kedua LCS ini ke Dewan Rakyat, dalam sidang Parlimen pada Mac 2021,” katanya.

— BERNAMA

It is interesting to note that the PAC chairman did not mentioned Ahmad Zahid’s successors – DS Hishammuddin Hussein and Mohamad Sabu. So it is unclear whether both will be called to the proceedings.

The keel of the fourth LCS in the BNS hangar for the ceremony in 2018.

I am not absolving Ahmad Zahid from the issue but leaving out Hishammuddin who was the minister when work started on the ship and Mat Sabu who was the minister when the delay became public, is surprising to say the least. Both will be able to give the proceedings an overview on what happened between 2013 and March, 2020.

Boustead executive chairman TS Ramlan Ali (centre) greeting Defence Minister DS Ismail Sabri when the latter visited the BNS yard in mid-November to check on the LCS project. The LCS hull in the background looked appeared to be fitted with the propellers but without the rudder. I am guessing that this is the second hull as it does not have water marks on it. Kementerian Pertahanan picture.

Two more potential witnesses are former Prime Minister DS Najib Razak, who was the minister of Finance during the period and Chief Secretary to the Government TS Zuki Ali, who was the Defence Ministry secretary-general on the latter part of Hishammuddin’s tenure with the ministry. Also not named for the next proceedings is Aziz’s successor, TS Ahmad Kamarulzaman Badarudddin.


–Malaysian Defence

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About Marhalim Abas 1720 Articles
Shah Alam

28 Comments

  1. while they continue with this witch hunt, TLDM will continue not getting the 6 ASW frigates its desperately needs.

    why i came out with option 4.

    With option 4, they can continue with this witch hunt, which IMO wouldn’t get those involved punished anyway (just look at the recently dropped curruption case circuses). But at the same time get a new programme rolling to really give the 6 ASW frigates TLDM needs by 2025.

  2. A witch hunt is great but only if it really determines who’s to blame; what went wrong and the government and industry makes a concentrated and serious effort to ensure something similar doesn’t reoccur. What we don’t need is a politically driven PR exercise which changes nothing.

    It’s cockups like this – together with others – which have resulted in us not getting the value we should have; despite the amounts poured into defence. It has also resulted in a very anti pathetic and sceptical public becoming even more so with regards to defence.

    Those frigate sizes multi role combatants were intended to significantly improve the RMN’s capabilities; instead it went so horribly wrong and the taxpayer, plus the end user will pay the price.

  3. “did not mentioned Ahmad Zahid’s predecessors – DS Hishammuddin Hussein and Mohamad Sabu”
    Successors you meant? Predecessors are those before Zahid.

    Why Zahid and not H2O and Sabu? Well I am guessing it also relates to the ongoing attempts to unseat the current government and the headcount that could turn Benedict Arnold.

  4. @ alzan

    ” politically driven PR exercise which changes nothing ”

    It will just be a PR circus, and it will further delay whatever Gowinds that can be completed with option 2.

    Better just sign off and give away our EEZ to china by the looks of it.

  5. The PAC is a bipartisan body which will include the participation of opposition figures. So in theory it’s findings will be non political and not shewed to a particular side.

    The problem is the PAC can only determine what went wrong; how it went wrong and who’s to blame. It’s a good start but unfortunately it’s recommendations will play no part in ensuring something similar doesn’t reoccur; the next time we embark on another local building programme which on paper offers nothing but long term tangible benefits – supposedly …

  6. Someone kept mentioning 1MDB but should take note that a past PAC also had audited 1MDB. Despite being theoretically bipartisan I would take PAC audit results with heaps of salt, the same RM 300 salt that I put over Auditor General report on our RWS-less Guardians for UNFIL, and other audit reports subsequently.

  7. Like this ‘sinking’ affair with the Navy and all the rest of the Armed services which by the way have similar penchant for cost overruns and simply Bermuda Triangle projects…it is a reflection of the country and its government. Beyond saving..

  8. @Eddy Azmi
    UK too had to faced thru 62% cost overruns for their QE carriers and they too had to grapple with Brexit from their government. Is it indicative that UK is beyond saving?

  9. @Joe

    I concur with your statement, however cost overruns due to developmental or technical oversight are mostly acceptable. In our case, it’s purely a money pit. I’m sure we all know it for a fact to the point of being sick just by talking bout it. We’ve gone through this multitude of times already, be it in military bills or otherwise..will it ever be done.

    The world is watching, these are supposedly ‘patriotic’ business entities, I think not

  10. @Eddy Azmi
    If you followed QE development, the cost overruns were technical but really it was caused by successive governments flipflop on deciding to pursue nuke or conventional powered, STOL or CATOBAR config, and others.

    These plus the endemic British naval ship building malaise to underdeliver, delay, and again cost overrun.

    Do we have technical difficulties? It shouldn’t if we had followed the OEM specs exactly. Do BNS have financial issues? It shouldn’t if BNS hadn’t have too many units on the plate ongoing. Do we have competency issues? It shouldn’t if BNS project management team had done their due diligence and followed the project closely.

    The fact that 2/3 of the budget is used up and the 1st ship is not even near completion is telling about BNS incompetence to manage it.

  11. For the Gowinds, putting down blame not something straightforward. I dont have high hopes those really causing the delays will be punished. Any investigations will just delay the already delayed project.

    cut and paste what i have written before. This is my observation, probably there are more reasons that we cannot see.

    >>>>

    There are plenty of causes that delayed the gowinds, none is stated in the audit. Below is what is glanced by reading between the lines of public sources.

    – VO changes to the specifications after the steel is already cut and hulls in build (still cannot pinpoint who is the initiator for this, yes the intention was good but it caused the delay to happen)

    – Additional cost incurred because of the VO changes

    – Technical capability of BNS. Too many details has BNS as main PIC (instead of say Naval Group), that BNS cannot handle them all at once.

    – The want for the PN government to have cost savings in all projects. The gowind cannot give that, and actually has cost increase due to VO. So the build stopped to find savings.

    – actually no money in the governments coffers allocated for this project at that point of time. payment delayed.

    – exchange rate of ringgit falling.

    – contract in RM when many items to be bought in Euro or USD.

    – Tun M angry at French boycott of palm oil biodiesel in EU. Stopped the signing of VL MICA and probably many other things with Naval Group.

    – The BNS shipyard only have 4 slots for frigate build. as all of the hulls is still on land, it cannot proceed to build hull 6 with hull 4 and 5 only partially build.

  12. Just forget this batch of LCS. Just sue BNS n ger them to finish whatever they can. Be it only one ship. Write off the rest n sue BNS for breach of contract.
    Then start afresh n buy anorher 6 ships. This time dont build locally. Everything to be completed by ori manufacturer.
    No to direct nego etc. Tjats pure rybbish

  13. Lee – “Just sue BNS n ger them to finish whatever they can”

    If it can’t pay then what do we get from suing it? Winning a suit is one thing; getting paid another slightly different thing.

    It’s the main naval refit yard in the country; would be delusional to think it going bust will not affect the RMN.

  14. @ Lee

    If it is 200% the fault of BNS, then it is easy for the government to sue.

    But it is not, and it could end up BNS winning the suit, as the government has a big input in causing the delay.

    Any outcome of a suit, there will be no winners. The loser is the government ( as BNS is a LTAT owned company ), the rakyat and TLDM.

    @ joe

    Why BNS keep on building new ships when the 1st is not completed? because of contact clauses. They need to follow the agreed schedules. Not starting build on schedule will be BNS wrongdoing.

  15. @…
    BNS had 4 slots and yet they have 5 LCS ongoing/started. Why did they fit 5 into 4? Just to paper over delays which eventually would bite them in the rear, which it did! What it did was just robbing resources & manpower from starting units to start work on later units. Again this comes back to BNS mismanagement if they cannot provide a definite answer as to why LCS1 is not in water yet.

  16. @ joe

    its very long to explain here, but it would be understandable why BNS does what it did to those who do project management.

    basically you cannot stop what you are supposed to start just because somebody else delayed their part of the deal.

  17. @…
    I had done project management before. While I do agree with you that projects should have contingencies to continue on the whole despite delays on some parts, projects also should have time-based milestones to track on progress and and regular reports are made on these tracking status.

    If such due diligence were done, the issues of delays would have been known long beforehand and probably could have been resolved or at least highlighted much much earlier. Were this done, I don’t know.

    All indications pointed that both BN & PH governments were clueless about the status & delays until it was tweeted by Mat Sabu one year ago which by then is already too late. And even until today there seems to be no concerted efforts from ANY side(BN, PH, PN) to be transparent and open on this matter other than questioning the Menhan that started this project, not the Menhans when delays started and continued on.

    If it were so simple that money was the cause, the crux is 2/3 of the budget have been spent.

    Reply
    It must be noted that even the AG report in the project stated that BNS had been overpaid some RM100 plus millions only. It goes to show the payments were made according to the progress of the project. And the report did not find any anomaly on the payments apart from this. The AG findings showed that the payments were made based on the milestones of the project, which is to say that this was the contract that the government and BNS had signed. So it is clear that the cost of the project is more than the ceiling price of RM9 billion, from the word go. Both the RMN and BNS knew this and as I wrote earlier the matter came to head when PH became the government. So it is about the money or the lack of it.

  18. “the cost of the project is more than the ceiling price of RM9 billion, from the word go”
    So let me get this straight. The actual cost is really higher than the RM 9Bil and that already consider in RM 3Bil topup on the initial budget?

    That would really make what a lot of readers said, that these ships are the most expensive frigates for what they are capable of! We could have gotten the far better Formidable for that price!

  19. To put it in another way, the ceilling cost calculated from the start was always USD2.8 billion, but the contract signed is for RM9 billion. During the build the exchange rate changed significantly. Add that to all the payment pauses, the VO, the want to have cost savings by new government etc etc that is why it is what it is right now. It is a combination of many factors, but the original contract in ringgit malaysia of rm9 billion is the significant root of the issue.

    Also why i always stressed that this is not a straightforward 1 side wrongdoing or songlap. This is caused by everybodys fault, government (including for the 1st time in our history a government other than BN) and BNS. If government still want to find a scapegoat for this, in the end the scapegoat could be the government itself. After publicly saying its all BNS fault, the government will of course lose face if admitting they are also at fault right now. But longer everyone denies this, the longer the delay will be.

    Goes back to what i said previously. To get 6 ASW frigates for TLDM, either dont beat around the bush and just pay out the needed RM6 billion now to complete those gowinds once and for all (just releasing RM3 billion for initial 2 and think about it later for another 4 will eventually cost much more, with longer lead times), or if really just have around RM3 billion to spend, then please look seriously at my option 4.

    The gowinds will be the most expensive frigates if it is stopped at just 2 ships. If we are able to complete all 6 for RM12 billion, it will still be around the original USD2.8 billion in the end.

    2012 – USD2.8 billion is around RM9 billion

    but

    2020 – USD2.8 billion is around RM11.7 billion.

  20. Nobody talked about how they used RM6B without a single ships completed. How about the equipment? Project like this the equipment can cost as much as 40% (probably somebody can comment on this) and mostly imported. I wonder if equipment were bought for all 6 ships. Which could easily caused the cash flow issues, and stopped work as cash drained out. Wonder about the warranty too. If you buy a car, once the title transferred, the warranty clock start ticking, regardless if you use the car or not.

    Reply
    Again the AG report has stated that the equipment has been bought. As for the warranty it depends on the contract I am not purview of it

  21. @…
    “it will still be around the original USD2.8 billion in the end.”
    If according to what Marhalim’s assertion, the project actual cost is way higher than USD $2.8Bil from the start, in other words it was under-capitalised. As alluded in the earlier article, Forex wasn’t the reason why money wasn’t enough apparently.

    But again, wouldn’t that make LCS a very expensive frigate? Lets say it might eventually cost RM 2Bil per boat, that is way higher than what SG got for their Formidables (some estimated at USD $300-350mil or RM 1.2-1.5Bil), and that is an even more lethal ship.

    Reply
    Of course it is, it is a moving target. We always like to set world records, see Gempita and Kedah class

  22. Gempita price (around USD2.5 billion) is because of the inclusion of 30mm turret + ATGM missiles, also all the local infrastructures. In 2010 it was an unthinkable price as nobody did a 30ton 8×8 IFV with 30mm turret + ATGM.

    As a comparison the aussie buy of 211 boxers is for USD2.4 billion.
    http://www.defenseworld.net/news/28007/Australian_Army_Starts_Training_on_New_Boxer_8__8_Vehicles

    There is no excuses really on the Kedah class. But the meko 100 is an expensive piece of kit. Just look at poland gawron fiasco
    http://en.m.wikipedia.org/wiki/Gawron-class_corvette

  23. @ joe

    The original planned cost of the programme was always USD2.8 billion. That is really equivalent to RM9 billion in 2013. So you cannot say it is at the start (in 2013) it was under-capitalised.

    Final cost is, as of now due to all the multitude of reasons is unknown. The main point is USD2.8 billion now in 2020 is not RM9 billion, but now is RM11.7 billion.

    Forex is not a reason? That is marhalims point of view. IMO it is one of many reasons, and a main one at that. It wont be a reason if all of the RM9 billion was allocated and disimbursed in 2013. You can say the real reason is all the delays in decisions, VO and what not, but whatever it is, RM9 billion in 2020 is not the same as USD2.8 billion, and isnt that because of the change in forex?

  24. @…
    You don’t seem to grasp.
    From what inferred by Marhalim, the actual project cost in 2013 is likely way higher than the budgeted USD $2.8Bil. It could be $3Bil or $4Bil (in 2013), I don’t know.

    It doesn’t matter if today 2.8Bil is no longer RM9Bil, If we don’t have sufficient funding for back in 2013 we still won’t have enough funding now in 2020, in fact that just moved the goalpost further away with the Forex as it is now but that isn’t the main cause of funding shortages.

    That is what I meant by under-capitalised.

    What I suspect is, the Government then might have planned RM9Bil as the “official” budget for LCS and subsequently silently issued supplementary budget/s to meet up the actual cost of build. When BN fell, this plan went FUBAR since PH was not reading the same playbook anymore.

  25. @ joe

    it does not matter as that is your and my different assumption anyway.

    does not change what needs to be done to move this project forward.

  26. @…
    Knowing the real root cause of the problem will allow us clarity on the right actions to take and move this project forward. Making assumptions will lead us to the wrong conclusion and whatever actions we take most likely will not resolve the situation.

  27. Ini mesti something wrong telah berlaku.Tak kan tak ada wakil dari kerajaan atau wakil dari Kementerian Pertahanan buat permerhatian bersama-sama.Jika ada sedikit masaalah dikesan ,meeting akan di buat ,cara masaalah di atasi,kos yang ditanggung dan sebagainya ,keputusan meeting dihantar kepada boss, dan boss pula meeting dengan Kementerian Pertahanan dan Kerajaan.Masaalah dah jadi besar, baru nak bincang ,itu yang peliknya

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