KUALA LUMPUR (Nov 23): The decision to continue with Boustead Naval Shipyard Sdn Bhd (BNS) undertaking the RM11.2 billion project to build six littoral combat ships (LCS) is to avoid larger expenses, said Defence Minister Datuk Seri Mohamad Hasan.

Even during the previous administration, Mohamad said that the cabinet had given the green light to BNS three times to continue the LCS project.

"We cannot afford to change to another company and go through the open tender process again, as it will incur larger expenses. Finding a new original equipment manufacturer, drafting a new contract — it will take more time.

"And also, we have already purchased all the engines. What if the new company comes in and says they want to change the engines? At that time, we need to spend more," said Mohamad during the winding-up ministerial speech for the Budget 2024 in the committee stage on Thursday.

BNS has been in the spotlight for years due to delays and cost overruns in the proposed development of six LCS for the navy, despite the government having made progress payments of RM6 billion to the company for the project. The first vessel was supposed to be delivered in April 2019.

In May 2023, Mohamad announced that the Finance Ministry (MOF) has established a special purpose vehicle (SPV), Ocean Sunshine Bhd (OSB), to take over BNS. After the government stepped in, the project was downsized to five LCS instead of six, with costs expected to escalate to RM11.22 billion from the originally planned RM9.128 billion.

The five LCS are expected to be delivered in August 2026, April 2027, December 2027, August 2028 and April 2029.

Mohamad also came to the defence of BNS, claiming that the delay in the project is due to 2½ years of the pandemic that required construction work to halt.

"In terms of technical capabilities; they do a good job. For the delayed issues, if we refer to the Public Accounts Committee (PAC) report, the construction work is actually ahead of the timeline; it's just the detailed design part that is later than the timeline," said Mohamad.

Mohamad reiterated that the design issues had been resolved with the France-based contractor Naval Group, thus it will not cause further delays to the project.

Answering inquiries from Datuk Seri Ikmal Hisham Abdul Aziz (PN-Tanah Merah), who raised concerns over the BNS debt to vendors potentially causing the construction fees to balloon to over RM11.2 billion, Mohamad assured that the MOF had taken all this into account before acquiring BNS.