27 August 2020

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.

Malaysia’s Auditor-General has identified a couple of inconsistencies in the county’s troubled litto...

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