THE delay in the delivery of six littoral combat ships (LCSs), despite the government’s initial RM6 billion payment, was because the funds were spent to purchase almost all equipment needed to build the vessels, Ahmad Nazim Abdul Rahman said.

The chief executive officer (CEO) of the Armed Forces Pension Fund (LTAT) said with the current deal between the government and contractors requiring all six vessels to be build “concurrently”, a bulk order to purchase equipment was much cheaper compared to getting the individually.  

“RM6 billion of the total contract value of RM9 billion has been paid. 

“Why pay up to RM6 billion but the construction progress for the first five ships is only at an average of 55%? Because RM6 billion was spent to buy almost all the equipment needed to build the six ships. A bulk order is cheaper than buying one by one.

“Most of the expenses are for basic design and detailed design made by France’s Naval Group,” he said in a Facebook post last night. 

Admitting to be directly involved in the drafting the project recovery plan with the Defence Ministry and navy, Nazim confirmed that the construction of the vessels is underway at the Lumut shipyard. 

“I have gone down to the shipyard many times myself and visited the LCS project site.

“I can confirm that ship construction is indeed underway. If you take a boat to Pangkor, one can see the ‘hulls’ of these ships, most of which have already been built,” he said. 

Comparing the price of the LCSs with other countries, Nazim said that the price of one Malaysian vessel is approximately RM1.5 billion, whereas Egypt and the United Arab Emirates spent nearly RM1.9 billion for one of their LCSs while the United States built theirs for RM2.4 billion each, which he claimed was more advanced.

Last week, the Public Accounts Committee released its report on the Defence Ministry’s purchase of LCSs from Boustead Naval Shipyard (BNS) Sdn Bhd through direct negotiations.

Although the government has already paid RM6.08 billion for the cost of the project, none of the ships has been delivered. 

According to the original schedule, five LCSs should have been delivered to the ministry by this month. 

The PAC said that the terms and conditions of the contract is unfavourable to the government as payment for the project was based on development and item procurement instead of the actual progress of the LCSs.

LTAT has a 61% stake in BNS.

Nizam also said some of the money meant for the ships was used to pay off debt incurred by a previous company, which Boustead Holdings and BNS had to cover after taking over the project.

He, however, also said that the project had created job opportunities for almost 3,000 engineers and 400 local vendors in various fields. 

The LTAT CEO also said that the cabinet in April decided to move forward with the project after considering three options.

Among the three options, he said, was BNS’ restructuring plan, which took eight months of work at various levels of the government.

On Monday, Defence Minister Hishammuddin Hussein said the LCSs built by BNS will be completed in “at least a year or two”. – August 10, 2022.