Malaysia's Auditor-General flags out inconsistencies in littoral combat ship programme

[Kartal1]

Malaysia's Auditor-General flags out inconsistencies in littoral combat ship programme
by Ridzwan Rahmat

The first-of-class littoral combat ship, seen here at its ceremonial launch in 2017. (Royal Malaysian Navy)


Malaysia’s Auditor-General has identified a couple of inconsistencies in the county’s troubled littoral combat ship (LCS) programme, including a failure to collect MYR116.54 million (USD28 million) in late penalty fees from the shipbuilder.


These inconsistencies were highlighted in the 2019 edition of the country’s National Audit Department’s report, which was released on 24 August.


The Malaysian government selected a design variant of the Gowind family of corvettes from French shipbuilder Naval Group (then DCNS) for the LCS programme, and in December 2011 awarded Boustead Naval Shipyard (BNS) a MYR9.13 billion contract to build six vessels.


“Clause 23.1 in the main contract indicates that the physical handover of the six LCS vessels would be done in stages beginning in April 2019 till June 2023,” said the Auditor-General’s report. “However, LCS1, was yet to be delivered as at 31 December 2019,” it noted.


“The audit discovered that given the 245-day lapse, a late penalty of MYR116.54 should have been imposed on the shipbuilder for the period up to 31 December 2019,” said the report, adding that the provision for late penalty payments is provided for in clause 30.1.1 of the contract.


“As at 30 June 2020, despite the delivery being a year late in April 2020, MINDEF [Malaysia’s Ministry of Defence] has yet to issue a letter of demand for the penalty fees to the shipbuilder, only issuing a reminder of the lateness in June 2019,” said the report.


“This delay in enforcing the terms of the contract has caused a MYR116.54 million deficit in the government’s revenue for the 245 days up to 31 December 2019,” it added.

Source: https://www.janes.com/defence-news/...nsistencies-in-littoral-combat-ship-programme

 

[Gary]

I used to be happy whenever Malaysia were left behind by Indonesia, but now looking at the situation in the South China Sea, a strong Malaysia will be more beneficial to us Indonesians and the region as a whole rather than a weak Malaysia. Hope they could finish all 6 ships soon.

 

[Azull]

I used to be happy whenever Malaysia were left behind by Indonesia, but now looking at the situation in the South China Sea, a strong Malaysia will be more beneficial to us Indonesians and the region as a whole rather than a weak Malaysia. Hope they could finish all 6 ships soon.

Yes, couldnt agree more.

Last thing ive heard is that they are considering their options to salvage the project.

the first option was to appoint Naval Group of France (currently subcontractor ) as the rescue contractor to salvage of the project through a deed assignment from Boustead Naval Shipyard (BNS) – the company holds the contract for the project – using the balance of funds from the ceiling cost of the contract (RM9 billion) to complete at least two ships.

The second option was to allow BNS to complete the project with the balance of funds from the ceiling cost (again RM9 billion), to ensure at least two LCS are completed.

The third option was to cancel the contract with BNS altogether and the government salvaging the project. The third is similar to the one taken by the government when it appointed BNS to revive the NGPV project.

Whichever option they take, it is safe to assume that it would be very hard to complete all 6 as planned. As the first two option mentions that the malaysian govt only hope to complete atleast two of the ship from the project.

 

[Saithan]

Gowind-class design - Wikipedia

en.wikipedia.org

Ada-class corvette - Wikipedia

en.wikipedia.org

French version is more heavily armed, but is that necessary.

If Malaysia has had some changes during the building process, then maybe that could explain why there hasn't been any penalty as with construction projects any deviation from the agreed parameters/design that affects delivery would mean an extension to deliverytime.

IMO Malaysia should consider Ada class in case delivery from France takes much longer. Only question is whether we have shipyards that have an opening to build the corvettes.

 

[Anmdt]

The article is misleading the public opinion,
You don't always seek the penalty in cash but can be provided by equipment ,spare parts or services (depending on contractor, could be by munition) etc. A penalty is something you don't actually plan to receive so how does it exactly influence the budget deficit, remains confusing.
Moreover, the shipbuilder's largest stakeholder is affiliated with Royal Malaysian Navy (similar to the TAF's OYAK) so seeking for penalty payment even becomes more absurd:

Boustead Heavy Industries Corporation - Wikipedia

en.wikipedia.org

Given the complexity of the ship and inexperience of the shipyard on such vessels, combined with extensive ToT received from the first ship unlike conventional ToT schedules*1 the delay is foreseeable.

*1 a conventional schedule usually takes place as, 1st ship is being built in home country (here, France) and local personnel is trained, 2nd partially built in Malaysia with extensive assistance from French personnel and some other critical parts installed by foreign personnel or delivered from France, and goes on such that at the 4th ship local shipyard does the most by themselves. In here, they have started somewhere from 3rd to 4th in the 1st ship.