8th August 2020
NAVAL LCS PROJECT FIASCO IS MINISTERIAL RESPONSIBILITY
The Ministry of Defence’s (Mindef) three options consideration after mulling over the troubled littoral combat ships (LCS) project is as troubling that do not clarify but add confusion to the already confused state of the shipbuilding project. Defence Minister Datuk Seri Ismail Sabri Yaakob had stated in parliament on August 3 the three options – (1) appoint Naval Group (French company) as a rescue contractor, (2) allow Boustead Naval Shipyard Sdn Bhd (BNS) to continue, or (3) terminate the contract with BNS to build the six LCS.
Surprisingly Ismail Sabri did not mention a word about the Variation Orders and delays that were major factors that Mindef contributed to the problems. Patriot has some comments and suggestions to offer.
This troubled project started during the tenure of two previous defence ministers. In October 2011 Dato Sri Ahmad Zahid Hamidi, contrary to TLDM’s recommendation, changed the LCS design from Sigma (Dutch) to Gowind (proposed by the French Naval Group and naturally was roped in as the sub-contractor). Setiawangsa MP Nik Nazmi who was previously on the Select Committee for Defence Procurements placed the reason for the LCS delay squarely on the then Defence Minister Datuk Hishammuddin Hussein who did not make any decision on the Extension of Time request and the Variation Orders put up to him in January 2018 by BNS. Every month of non-fulfillment of variation orders added to cost piling up.
Request for change of weapon system and equipment by TLDM halfway into design and construction was the main contributory factor for the project delay and subsequently cost overrun. BNS had to claim for variation orders for the changes. The LCS project started end 2011. Project cost was RM 9 billion for the six ships. Question arises as to why the Naval top brass were indecisive then and had to make vital changes four years after the project commencement that resulted in redesigning and obviously cost increase. Whatever the excuses for the delays, variation orders and exorbitant cost overrun, the defence minister has to take responsibility.
Question also arises as to why, despite the lengthy discussion between BNS, TLDM and Mindef concerning the Extention of Time request and the cost of Variation Orders; Mindef and Putrajaya procrastinated on decision-making and therefore contributed directly to the delay.
In December 2019 then Defence Minister Mohamad Sabu had stated that Mindef had approved the LCS Variation Orders of RM1.4 billion, an amount that was estimated. However, a thorough and more accurate estimation put it at around RM 3 billion variation orders for two ships only. If this estimation is correct, it means the total project cost of RM 9 billion meant initially for six ships is now only for two ships, considering that close to RM6 billion has already been spent. Again, it is the ministers who have to take responsibility for this nonsense both at the shipyard and delay caused by indecision.
This explains the confusion and reason for Ismail Sabri and Mindef now suggesting the first two options utilising the remaining contract ceiling cost (of around RM 3 billion) to complete only two ships. Patriot is totally disgusted with this whole episode of mismanagement, irresponsibility, and absence of accountability. It is a fiasco and national shame.
This statement will be followed with another on Patriot’s suggestion for remedial measures.
BG Dato Mohamed Arshad Raji (Rtd)
Persatuan Patriot Kebangsaan