Contract Inked to Revive LCS Project

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KUALA LUMPUR/ LANGKAWI: Malaysia has sealed an agreement with local defence contractor Boustead Naval Shipyard paving the way ahead for the government-linked company to revive a delayed construction of warships programme for the Southeast Asian nation’s navy.

Boustead Holding Bhd’s (BHB) Boustead Naval Shipyard Sdn Bhd (BNS) sealed a sixth supplementary contract with the Defence Ministry. The agreement, among others, details project deliverables and governance of reviving the littoral combat ships (LCS) project, said BHB chairman Nazim Rahman.

“This agreement resulted from the thorough review of multiple options and all aspects of the project by various ministries and agencies under the government and BNS.

“The contract’s sole aim is to revive the LCS project, which is in line with the Armada Transformation 15 to 5 Plan by the Royal Malaysian Navy,” he said in a statement.

Nazim and the Defence Ministry secretary-general Muez Abd Aziz signed the supplementary contract at the Langkawi International Maritime and Aerospace exhibition (LIMA’23) on May 26. It was witnessed by Defence Minister Mohamad Hasan.

Under this agreement, various preventative measures have been put in place to ensure that the ships will be delivered on time and within the allocated budget, Nazim added. He said this includes the formation of a project monitoring committee, co-chaired by the secretary general of the Treasury and secretary general of the Defence Ministry, to strengthen the execution and supervision of the project delivery to ensure the failures of the past do not happen again.

The country’s Finance Ministry (MoF) has established a special purpose vehicle (SPV) to take over the company responsible for the Littoral Combat Ship (LCS) construction project, Boustead Naval Shipyard Sdn Bhd (BNS) as a subsidiary.

The total cost of the navy’s LCS project has been revised to RM11.2 billion, up from RM9 billion previously, says Boustead Holdings Berhad (BHB).

In a Bursa filing, BHB said all design and construction activities for the five naval ships resumed with the signing of the contract. The company said the first vessel will be delivered and fully tested in August 2026, while the fifth ship is expected to be delivered in April 2029.

“The total contract price is revised to RM11.2 billion following, among others, the approved change of specifications and extension of time.

“The terms of payment are varied from milestone activity to progress of works reflecting the various elements in the contract, based on weightage to the design, equipment, construction and trials, as well as commissioning,” said BHB.

The LCS project, said to be the largest defence procurement in Malaysia’s history with a total cost of RM9 billion, came under intense scrutiny last year after the PAC revealed that not one of the six ships had been completed although Putrajaya had already paid RM6.08 billion.

The programme to build six 3,000-tonne modified Gowind design vessels designated as Littoral Combat Ships (LCS) of the Maharaja Lela-class is one of the biggest shipbuilding projects in the region. The Malaysian government on Dec 2011 awarded Boustead Naval Shipyard a RM9.13 billion ($2.1 billion) contract to build six ships. However, the number has been reduced to five ships to hasten the revival of the shipbuilding programme.

On Oct 22 last year (2022) it was reported that French naval ship designer Naval Group has given its assurance to support the Malaysian government’s efforts in resuming the stalled LCS project.

Naval Group also expressed its commitment to ensure that the ships will be completed according to the stipulated time frame set by the Malaysian government, the country’s Ministry of Defence (Mindef) said in a statement.

“The company also agreed to resume talks with Boustead Naval Shipyard Sdn Bhd (BNSSB) on the price,” it said. This followed talks between a Malaysian delegation and Gael Diaz De Tuesta, the head of the International Directorate of the Directorate General of Armaments (DGA), the French Defence Ministry, and Naval Group. – ar/mhi/mgm (Pix: DCN/NG/RMN)