KUALA LUMPUR (Aug 3): The Ministry of Defence intends to salvage at least two of six littoral combat ships (LCS) construction that was awarded to a unit of Boustead Holdings Bhd in 2011, having paid RM6 billion out of the contract value of RM9 billion.

The ministry is considering allocating the contract balance of up to RM3 billion to either instruct Boustead Naval Shipyard Sdn Bhd (BNSSB) — a unit of Boustead Holdings — to complete two of six vessels, or to have two vessels completed by vessel designer France’s Naval Group, via a deed of assignment with BNSSB.

The ministry is also not discounting the option to terminate the contract with BNSSB, and for the government to take other steps to salvage the project, said Senior Minister (Defence) Datuk Seri Ismail Sabri.

In the meantime, the ministry intends to issue a letter of demand, and to fine BNSSB in relation with the project, Ismail Sabri told the Dewan Rakyat today.

“Two of six LCS units should have been received, but until July 31, no vessel has been completed, and the overall status of the entire project is 56.67% complete, as opposed to original schedule of 85.73% or a delay of 29.06% or 31.1 months,” said Ismail.

In terms of each vessel, five of them are under construction with the highest completion level at 59.79%, while one vessel has not started construction at all.

Ismail Sabri said a Special Committee has been tasked to review the entirety of the project, including from the perspective of integrity.

The proposals to continue or terminate the project will be presented to the Cabinet in the near future for approval, he added.

The ministry also acknowledged a report that has been filed to the Malaysian Anti-Corruption Commission (MACC) to investigate the project delays and cost overruns.

To recap, BNSSB was awarded the contract to construct six LCS, which has a contract ceiling of RM9 billion, in December 2011. In 2019, then-Minister of Defence Mohamad Sabu said the government will fork out an additional RM1.4 billion to complete the project, having paid RM6 billion prior to that.

Boustead Holdings has an effective interest of 82% in BNSSB, according to its latest annual report. Its other shareholders include Lembaga Tabung Angkatan Tentera (LTAT) with 10.38% stake, while the Ministry of Finance holds a golden share in the shipmaker.

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