Mindef, Boustead ignored navy’s views on LCS project, says PAC
PAC chief Wong Kah Woh says the initial Sigma model ships chosen by the navy were approved by the defence ministry, before a recommendation by Boustead Naval Shipyard led to a change in design. (Bernama pic)
KUALA LUMPUR: The defence ministry and Boustead Naval Shipyard Sdn Bhd (BNS) had ignored the navy’s views on the littoral combat ship (LCS) project, says Parliament’s Public Accounts Committee (PAC).
At a press conference, PAC chairman Wong Kah Woh said the initial Sigma model ships chosen by the navy were approved by the defence ministry.
However, he said this was changed to the Gowind design on July 11, 2011, after BNS recommended it to the then defence minister three days earlier.
“To quote the then navy chief Abdul Aziz Jaafar at the time, ‘something was gravely wrong’ with that decision,” said the Ipoh Timur MP.
Umno president Ahmad Zahid Hamidi, who was among the top officials summoned by the PAC, was the defence minister in 2011.
The others summoned included current defence minister Hishammuddin Hussein, defence ministry secretary-general Muez Abd Aziz, former auditor-general Ambrin Buang, current navy chief Mohd Reza Sany and BNS’ CEO and chief operating officer.
Wong pointed out that not a single ship had been completed although RM6 billion had been spent by Putrajaya over the project given to BNS via direct negotiations.
He said the navy should have received five of the ships by August.
He also said the PAC found that the government had failed in its duty to carry out due diligence on BNS’ financial problems.
“This was proven when the government had to make an advance payment of up to RM1.36 billion to BNS, going against a Treasury circular which was in force at that time,” he said.
He said BNS’ financial position was in a weak and critical state, due to abuse of power and deficiencies in its financial management.
“As of 2018, BNS’ debt to original equipment manufacturers (OEM) amounted to RM801 million, while its loans from financial institutions stood at RM956 million,” he said.
Wong also said the terms of the contract were unfavourable to the government, as the LCS project payments were based on activity progress or item supply instead of being based on actual progress.
He added that even the ship’s design had yet to be finalised by the government and BNS, causing the continuous release of variation orders (VOs), which left room for manipulation.
Wong said BNS’ payments to the government were not entirely used for the LCS project, resulting in a cost overrun of RM1.4 billion.
“Of that sum, a total of RM400 million was used to settle the debts from the old New Generational Patrol Vessel (NGPV) project, while equipment kept in storage is estimated at RM1.7 billion, with an estimated 15% (of the equipment) already obsolete.”
The PAC chief urged the Malaysian Anti-Corruption Commission to take immediate action over its findings, calling for prosecutions to be expedited.
He also called for the governance, procurement and finance investigation committee’s (JKSTUPKK) report on the procurement of the six ships to be fully declassified.
Wong also suggested that the defence ministry be required to present a progress report to the PAC on the LCS project every three months until its completion, while substantive procurement planning is periodically presented to a special select committee.
“The defence ministry needs to review all (its) options and determine the best direction for the LCS project, to ensure that public funds are spent responsibly,” he said.
KUALA LUMPUR: The defence ministry and Boustead Naval Shipyard Sdn Bhd (BNS) had ignored the navy’s views on the littoral combat ship (LCS) project, says Parliament’s Public Accounts Committee (PAC).
At a press conference, PAC chairman Wong Kah Woh said the initial Sigma model ships chosen by the navy were approved by the defence ministry.
However, he said this was changed to the Gowind design on July 11, 2011, after BNS recommended it to the then defence minister three days earlier.
“To quote the then navy chief Abdul Aziz Jaafar at the time, ‘something was gravely wrong’ with that decision,” said the Ipoh Timur MP.
Umno president Ahmad Zahid Hamidi, who was among the top officials summoned by the PAC, was the defence minister in 2011.
The others summoned included current defence minister Hishammuddin Hussein, defence ministry secretary-general Muez Abd Aziz, former auditor-general Ambrin Buang, current navy chief Mohd Reza Sany and BNS’ CEO and chief operating officer.
Wong pointed out that not a single ship had been completed although RM6 billion had been spent by Putrajaya over the project given to BNS via direct negotiations.
He said the navy should have received five of the ships by August.
He also said the PAC found that the government had failed in its duty to carry out due diligence on BNS’ financial problems.
“This was proven when the government had to make an advance payment of up to RM1.36 billion to BNS, going against a Treasury circular which was in force at that time,” he said.
He said BNS’ financial position was in a weak and critical state, due to abuse of power and deficiencies in its financial management.
“As of 2018, BNS’ debt to original equipment manufacturers (OEM) amounted to RM801 million, while its loans from financial institutions stood at RM956 million,” he said.
Wong also said the terms of the contract were unfavourable to the government, as the LCS project payments were based on activity progress or item supply instead of being based on actual progress.
He added that even the ship’s design had yet to be finalised by the government and BNS, causing the continuous release of variation orders (VOs), which left room for manipulation.
Wong said BNS’ payments to the government were not entirely used for the LCS project, resulting in a cost overrun of RM1.4 billion.
“Of that sum, a total of RM400 million was used to settle the debts from the old New Generational Patrol Vessel (NGPV) project, while equipment kept in storage is estimated at RM1.7 billion, with an estimated 15% (of the equipment) already obsolete.”
The PAC chief urged the Malaysian Anti-Corruption Commission to take immediate action over its findings, calling for prosecutions to be expedited.
He also called for the governance, procurement and finance investigation committee’s (JKSTUPKK) report on the procurement of the six ships to be fully declassified.
Wong also suggested that the defence ministry be required to present a progress report to the PAC on the LCS project every three months until its completion, while substantive procurement planning is periodically presented to a special select committee.
“The defence ministry needs to review all (its) options and determine the best direction for the LCS project, to ensure that public funds are spent responsibly,” he said.
If the MACC were to do what it is supposed to do, investigations would have commenced years ago.
ReplyDeleteEven a blind man can see some funny going-ons that should have been investigated.
The question is "will a proper investigation be conducted by the MACC now?"
The corrupt processes occurred under the countenance of the Prime Minister Najib.
ReplyDeleteMr. Impropriety, but he is being celebrated as an economic hero.