‘Horror’ LCS project shows exactly how not to do defence procurement, says PAC chairman

·4-min read
Malay Mail
Malay Mail

KUALA LUMPUR, Aug 12 — Public Accounts Committee (PAC) chairman Wong Kah Woh expressed his hope that the latest report on the littoral combat ship (LCS) project can serve as a “definitive textbook” on what to avoid during defence procurement.

Saying that he was “heartbroken” by the PAC report, he said the findings should serve as a “lesson”, especially on how power and the process to procure defence can be abused.

“The absorbing horror story in the whole process of (the) LCS project shall serve as a lesson to all those who are in power, now and future,” Wong said on Facebook today.

“How could a company having a RM9 billion contract from the government come to this stage?

“It is more than mismanagement. It is more than poor management. Something is gravely wrong with those who were in power and those who got the contract.”

The Ipoh Timor MP said that after an earlier proceeding on the LCS issue was conducted, the committee decided to visit the project site.

Wong said that the committee went to the Boustead Naval Shipyard Sdn Bhd (BNS) dockyard in Lumut on December 11 last year, which was also witnessed by Sharifuddin Md Zaini, the CEO of Boustead Heavy Industries Corporation (BHIC), Ir Azhar Jumaat of BNS and former navy project team lead by Laksamana Muda Datuk Mohd Shaiful.

“We checked (and) a lot (of the technology) were bought way back in 2013, 2014 and 2015. A question in mind is whether the (equipment) will still be ‘smart’ enough for the current needs (especially) with the advancement of day-to-day technology,” he said.

The committee was told by BNS that around RM1.7 billion worth of equipment was in storage, and 15 per cent (worth roughly RM263 million) of it had become outdated. — Picture from Facebook/Wong Kah Woh
The committee was told by BNS that around RM1.7 billion worth of equipment was in storage, and 15 per cent (worth roughly RM263 million) of it had become outdated. — Picture from Facebook/Wong Kah Woh

The committee was told by BNS that around RM1.7 billion worth of equipment was in storage, and 15 per cent (worth roughly RM263 million) of it had become outdated. — Picture from Facebook/Wong Kah Woh

The committee was told by BNS that around RM1.7 billion worth of equipment was in storage, and 15 per cent (worth roughly RM263 million) of it had become outdated.

“Has all the equipment been paid by BNS? No, not all has been paid. That is why we can read (that) there are huge debts owing to the original equipment manufacturers which had eventually caused the stop work and stop supply.

“There are no longer workers at the construction site, no locals and no foreigners. No contractors. No longer any ongoing works. Totally zero, totally stalled. It is heartbreaking as we all know RM6 billion was already spent,” he said.

The PAC chairman recalled that during an earlier proceeding, it was mentioned that BNS’ finances were in “dire states” due to the company’s financial mismanagement.

He also brought up PAC member and Kluang MP Wong Shu Qi’s query asking if the RM6 billion had been spent by BNS, which the CEO of BHIC said yes, saying “our money is already finished, the company has no more money and we could even shut down tomorrow.”

“Staff salaries were cut since October 2020 (while their) employees provident fund (have) not (been) paid since May 2021. BNS is merely relying on some small jobs like repairing for the Royal Malaysian Navy to survive.

“Sharifuddin (CEO of BHIC) further informed the PAC that if BNS is gone, Boustead Holdings and LTAT will be affected severely. Plantations, Pharmaniaga, Boustead Properties and Boustead Hotels all will be affected. It will go as far as LTAT losing up to 46 per cent of the fund size,” he said.

The LCS project is the largest procurement in the history of the Ministry of Defence (Mindef) with a total cost of RM9 billion.

The said contract began in 2013 with a 10-year time frame and six LCS ships were expected to be built and delivered to the country by the end of 2023.

Cost overruns for the LCS project totalled RM1.4 billion, with RM400 million used to pay old debts from an old patrol vessel project, Wong said on August 4.

The issue was first reported in the Auditor General’s Report 2019 Series 1 (Ministry/Federal Department Compliance Audit) and the Investigation Report of the Government Governance, Procurement and Finance Investigation Committee (JKSTUPKK), published in 2019.

According to Wong, the appointment of BNS as the contractor, was carried out through direct negotiations and until last October, a total of RM6.083 billion had been paid, and not one LCS ship had been built even though according to the schedule two LCS ships should have been built so far.

The LCS project is the largest procurement in the history of the Ministry of Defence (Mindef) with a total cost of RM9 billion. — Picture from Facebook/Wong Kah Woh
The LCS project is the largest procurement in the history of the Ministry of Defence (Mindef) with a total cost of RM9 billion. — Picture from Facebook/Wong Kah Woh

The LCS project is the largest procurement in the history of the Ministry of Defence (Mindef) with a total cost of RM9 billion. — Picture from Facebook/Wong Kah Woh