Defence minister: LCS gummed up subcontractor’s request for indemnity

Malay Mail
Malay Mail

KUALA LUMPUR, Feb 22 — The federal government is having difficulty proceeding with the Littoral Combat Ship project due to an unresolved dispute with a subcontractor, Defence Minister Datuk Seri Mohamad Hasan told Parliament today.

He said one condition for the continuation of project — which was decided by the previous administration — was the removal of a third-party subcontractor, Contraves Advanced Devices Sdn Bhd (CAD).

“That, I have replied in the Parliament the other day; an international settlement agreement will be made so that CAD will no longer play a role in any projects which involves the LCS.

“So, there is one thing left — the international settlement agreement.

“In terms of payment to them, it was agreed by the previous government and we did an audit on this, it’s correct, this is all payment due to them.

“We need to make the payment, so that CAD will no longer play a role,” Mohamad told the Parliament today during his winding-up speech on the royal address.

However, the minister said the settlement was being held up by CAD’s request for a letter indemnifying the firm over the project.

“That is an issue which made us reluctant to sign (the international settlement agreement).

“We will refer to the Attorney General’s Chambers and let them decide, but for us at the ministry, we do not agree to the indemnity letter as we feel that anyone who is implicated should be implicated.

“It is not the Defence Ministry’s role to absolve anyone of their liability,” Mohamad said.

He was responding to Parti Pribumi Bersatu Malaysia’s (Bersatu) Putrajaya MP Datuk Mohd Radzi Md Jidin who asked if the government could guarantee that CAD would no longer be part of the LCS project, despite Boustead Heavy Industries Corp Bhd (BHIC) controlling 51 per cent of CAD.

BHIC is the company awarded the government contract to build six LCS for the navy.

Last August, PKR deputy president Rafizi Ramli alleged that there were plans from the beginning to hide irregularities in the LCS project for Malaysia’s navy through various complicated transactions.

He said the plan included the engagement of two subcontractors — CAD and Contraves Electrodynamics Sdn Bhd (CED) — when Boustead Naval Shipyard Sdn Bhd (BNS) could have handled the project on its own.

BNS had appointed both CAD and CED to buy equipment from the original equipment manufacturer, which caused acquisition costs to swell several times.

On Monday, Mohamad told Parliament that the Defence Ministry was close to finalising the continuation proposal for the LCS project through a Cabinet memorandum which will be presented soonest.

He also had said that when the singing of the international settlement agreement with the third party is done, the project will be able to continue be completed in the timeline set.

A report tabled to Parliament on August 4 by the PAC highlighted the controversial procurement deal after none of the six LCS ordered was delivered despite a contract of RM9.13 billion being signed a decade ago.

According to the PAC, the government has paid RM6.08 billion — or two-thirds of the total cost — to local contractor BNS, although none of the ships has been delivered.