10th August 2020
PATRIOT’S SUGGESTIONS FOR THE LCS PROJECT
Our statement on Saturday August 8 made the case of indecision by Mindef and Putrajaya that led to a marathon chase for fulfillment of Variation Orders (VO) for the construction of the navy’s six littoral combat ships (LCS). As veterans and with fond memories of our service in the forces, we offer our sincere opinions and remedial measures concerning the troubled LCS project. Our views and suggestions are as follows:
1. Mindef and Ministry of Finance should hasten the approval process of the VO. It was first estimated to be RM1.4 billion. A detailed audit had put it at RM3 billion. Whatever the amount, once agreed an official announcement has to be made, LTAT (Armed Forces Fund Board) and the board of Boustead Heavy Industries Corporation Bhd (BHIC), the parent company of Boustead Naval Shipyard Sdn Bhd (BNS), could then approach a bank for bridging finance if there is any delay in government disbursement.
2. The management of LTAT and BHIC makes a decision to recognise half of the approved VO value (be it RM1.4 or RM3 billion) as revenue and then as profit after deducting the bank’s financial cost, and be reflected in the next quarterly report to Bursa Malaysia. With this the shares price of BHIC should spike. Dividend contribution to LTAT should increase and is good for the welfare of the military personnel.
3. Patriot is not in favour of the first option mentioned by Defence Minister Datuk Seri Ismail Sabri Yaakob in parliament on August 3, i.e., to appoint the French Naval Group as a rescue contractor. The reason is obvious. The responsibility of building naval crafts must remain with Malaysian companies. It is not that we do have capable engineers and shipbuilders. We have. Bring in the right people, and this includes some who were with BHIC since the commencement of the LCS project.
4. Patriot favours BNS, under supervision of BHIC and LTAT, to continue with the LCS project. According to Ismail Sabri the overall progress of the project is 56.67%, with the first ship 59.79% completed, second ship at 48.09%, third ship at 43.75%, fourth ship at 36.49%, fifth ship at 20%, while the sixth ship has yet to commence building. If what Ismail Sabri claimed was true, then it should be easy and plain sailing for BNS to complete building all the six ships utilising the remaining RM3 billion of the RM9 billion project sum. The percentage mentioned was misleading. Evaluation of the progress in shipbuilding is much more complex and quite impossible to put a percentage figure due to the numerous subjective factors. Engineering and architectural designs alone can hold back or speed up the construction process.
5. The other reason favouring BNS to continue is because the design of the ship is a prototype. The exact ship with its size, weight and displacement has never been built anywhere. Our design engineers together with the French are building it for the first time. Keeping the contractor in Malaysian hands is helping in competency molding.
6. Patriot is with a heavy decision to suggest that the current LCS project team be replaced along with those who sat in the BHIC board directly involved in the project. They have failed to deliver and shown incapable of integrating and managing a cohesive team.
7. A new team with a new project director has to be quickly emplaced. The new team has to revisit the engineering detailed design, Recalculate (or to calculate if it was not done) the weight of ship and its centre of gravity. Check and recheck the emergency generator and the firefighting system. There must be no materials take off without all the engineering designs in place. Procurement without detailed design will see inevitable wastage, cost overruns, and eventual failure.
8. There is a need to reschedule engineering works, construction, commissioning and handing over of the ships.
9. Board members of BHIC involved in the LCS project should resign, as they are part of the failure. Likewise, those board members who are political appointees, ex-civil servants no matter how high their previous positions, and those who know nothing about shipbuilding, should resign. The business of building ships for our navy is for the real professionals. It is not meant for those to merely warm seats and occupy space for RM1,500 a meeting. We have among us design engineers, shipbuilder, and many very successful businessmen with large international businesses. We will be happy to offer our service if invited.
With regards to board members under the LTAT corporate umbrella, Patriot has more to say in another statement.
BG Dato Mohamed Arshad Raji (Rtd)
President, Persatuan Patriot Kebangsaan
www.patriotkebangsaan.org.my
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