Declassified LCS Investigation Report: Buying Ships May Cost Government 11,145mb

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The declassified report also stated that the cost details would have increased by RM41 million and RM722.43 million respectively on July 16, 2019 compared to BNS’ original justification dated May 17, 2019, which was RM1.375 billion. of RM or 693.57 million RM. . — Photo via Facebook

By Radzi Razak

Wednesday, August 17, 2022 6:00 PM MYT

KUALA LUMPUR, Aug 17 – The government may have to shell out RM11.145 billion in total for the six controversial Littoral Combat Ships (LCS), a substantial increase from the RM9 billion agreed years ago.

According to the report of the Committee of Inquiry into Procurement, Governance and Finance (JTSUPKK) on the Littoral Combat Vessel (LCS), the prime contractor, Boustead Naval Shipyard (BNS) Sdn Bhd, claimed in a July 16, 2019 letter that he would need an additional RM1.416 billion to complete the six ships.

This is after the initial cap allocation to the project was set at RM9 billion before being adjusted to RM9.128 billion.

The committee added that the Ministry of Finance (MoF) has approved through direct negotiations the purchase of Integrated Logistics Support (ILS) equipment worth RM800 million from the SNB. The ILS is mandatory equipment and its acquisition will certainly increase the cost of the LCS supply contract to RM9.7286 billion.

“The Board of Inquiry expects the cost of building six LCS to continue to increase following the exchange of major equipment, which also implies additional time for the delivery of the vessel.

“Based on BNS Company’s letter dated July 16, 2019, in order to complete the construction of the six LCS, an additional cost estimate of RM1,416.44 million is required, which includes direct costs if amounting to RM58.41 million and also indirect costs amounting to RM1,358.03 million due to equipment exchange and implementation schedule.

“Indirect costs involve extension of the basic design period, design authority, equipment delivery schedule, warranty, insurance, and financial costs from other sources. This brings the cost project total estimated at RM11.145 billion,” the report said.

The declassified report also stated that the cost details would have increased by RM41 million and RM722.43 million respectively on July 16, 2019 compared to BNS’ original justification dated May 17, 2019, which was RM1.375 billion. of RM or 693.57 million RM. .

“Within a period of two months, there may be a proposed cost increase of RM41 million or RM722.43 million. While for the procurement of the LCS, there was a delay of 24 to 34 months compared to the initial procurement period according to the contract”, according to the report which was declassified today.

The report stated that as of May 31, 2019, a total of RM5.936 billion or 65.03% had been paid to the SNB on the entire project, or RM9.128 billion, of which RM1.365 billion or 14.94 % consisting of advance Payments.

“The overall project implementation performance as of May 31, 2019 is 53.29% compared to the planned progress of 74.73% with a deviation of 21.44% or a delay of 23 months.”

According to the main contract, the construction of the LCS was carried out in phases, with the agreed delivery of the vessel being between April 2019 and August 2023.

Following the delay in the implementation of the construction of the LCS, on December 20, 2018, BNS submitted three change proposals (VPs) to the Ministry of Defense concerning the Integrated Platform Management System (IPMS), the system decoy launch (DLS) as well as amendments to the implementation schedule.

“The exchange of IPMS and DLS has an impact on timing, but according to BNS, ‘cost to be discussed and determined later’ while changes to the ‘implementation schedule’, including ‘payment schedule ‘ and ‘payment data directory’ have been detailed according to current developments and progress,” the report said.

On August 13, Defense Minister Datuk Seri Hishammuddin Hussein said the government would focus on getting the Littoral Combat Ship (LCS) project back on track, as decided by the Cabinet.

He said negotiations with suppliers, original equipment manufacturers (OEMs) and banks were ongoing.

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