LANGKAWI: The cost for the five-ship LCS project has been bumped up for around RM2 billion more. The figure was released by Boustead Heavy Industries Corporation Sdn Bhd (BHIC) in a Bursa Malaysia announcement today (May 26). The cost for the five ships is now RM11.2 billion compared to RM9.1 billion, the release said. Do note that the new figure tracks the one presented by Malaysian Defence some months back.
As for the other revision to the contract, BHIC said only five ships will be built now. The deadline for delivery has also been moved to August 2026 instead of the very suspect – 2025 – deadline announced earlier by the Defence Minister. This is still seven years delay to the original deadline. The fifth will be delivered in April 2029, some five years after it was supposed to be delivered. Payments will only be made based on progress rather than milestone as had been done previously.
The announcement was made after its associate company, Boustead Naval Shipyard (BNS) Sdn Bhd signed the sixth LCS supplementary contract with the Defence Ministry at LIMA 2023 first public day.
The announcement:
Following the successful implementation and achievement of the objective stipulated in the Fifth Supplemental Contract dated 31 May 2022, the Company wishes to announce that BNS and MoD have finalised the negotiations on the resumption of the Contract and on 26 May 2023 signed a Sixth Supplemental Contract (“SA6”) to vary the Contract, amongst others, with the following salient terms and conditions:
(i) the resumption of all design and construction activities shall commence upon signing the SA6;
(ii) the reduction of the LCS Vessels from 6 units to 5 units;
(iii) the duration of the Contract shall be extended with the first vessel to be delivered, fully tested and trialled in August 2026 and the fifth vessel in April 2029;
(iv) the total contract price is revised to RM11.2 billion following, amongst others, the approved change of specifications and extension of time; and
(v) the terms of payment is 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 & commissioning.
Earlier, after the contract signing ceremony, Defence Minister DSU Mohamad Hasan said that the BNS will be taken over by the Finance Ministry. The Finance Ministry will set up a special purpose vehicle to acquire the company and its assets from BHIC and reestablished it as a company under the Finance Ministry.
This is the same way, the MMEA OPV builder was bailed out by the government from Tabung Haji around 2019. Based on this example, one may think that the LCS project immediate future will not be rosy.
Defence Minister DSU Mohamad Hasan announced the creation of the SPV after witnessing the signing of the sixth LCS supplementary contract at the LIMA 2023 on May 26. Malaysian Defence was only present at LIMA 2023 during the three trade days – May 23 to May 25.
Malaysian Defence was told by industry sources at LIMA 2023 that work on Maharaja Lela was expected to start within three months after the sixth supplementary contract was signed. The sources said Maharaja Lela could undergo harbour trials by end of 2024 as most of the hull and the machineries had been completed.
They, however, cautioned the integration work on the combat management system, sensors, and weapons, may take much longer than the off-quoted 2025 deadline. BNS had also paid money owed to companies working on the LCS project after the signing of the fifth LCS supplementary contract. It is unknown whether BNS still owed other companies for work done with the LCS but it is likely they will be paid before the work on the ship can resume.
— Malaysian Defence
View Comments (29)
Boleh dapat heavy frigate atau light destroyer kalau beli direct dengan OEM. Shame on you Boustead. Buang duit rakyat macam tu je. Its time for TLDM and government to find alternative yard that can do maintenance for TLDM fleet, not depending on BNS.
Didnt you read the article, BNS is bought over by MOF, meaning most future naval related contracts will be awarded to BNS, its sort of in-house contractor scenario ..and same as housing developers, in house contractors normally do shit quality of works...
azim - "Shame on you Boustead."
Get the right narrative.
It's the government which put in place the system we have; insisted BNS not go through a learning curve; allowed vendors to dictate things; did not have in place the needed corrective mechanisms; failed to heed the warning signs; prioritises national interests rather than the end user and taxpayer; perennially underfunds the end user and ensures we don't get the best value for what we spend; enabled procurement to be part of the patronage system; etc.
Want to "shame" anyone; "shame" the politicians who put in place the system which enabled the shite to hit the fan; yet again. The politicians who also have a congenital inability to learn from past cockups.
azim - "Buang duit rakyat macam tu je"
The list of "buang duit"is a long one; the LCS cockup merely the latest and is the fault of the politicians.
With BNS finally getting bailed out & directly owned by MOF inc it's safe to speculate that there's won't be any direct overseas purchase of any naval vessels in the near & distance future.
I say just finish the damn boats and never build anything big locally again…ever…just buy directly from the Koreans or Turks with kelapa sawit as part payment..
SPV taking over the yard? Sound like when Boustead was the black ship to PSC problem. Same yard, residing at TLDM HQ front door, 2 different owner and management, yet twice they fell into almost the same script of problem, with almost the same script of solution.
11.2 billion ringgit for 5 Gowinds?
Considering previously we could have gotten only 2 Gowinds for 9 billion ringgit, well it is a little bit better...
So the 11.2 billion would be something that is budgeted under RMK12 (2021-2025). As all the hardwares and materials for the 6th ship is already available, i believe the government could give the contract to build the 6th ship with budget under RMK13 (2026-2030). If the contract for the 6th ship is signed, say in LIMA 2027 (after the 1st ship fully operational and displayed there), we could see all 6 ships operational by 2030.
in 2030 our most capable assets now, the Kasturi corvettes would be 46 years old at the time, it would be time to have them replaced too, with a capable frigate for the time fitting with the name of the 5 famous malay warriors.
So what is next for BNS Lumut?
Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS.
How would the government manage the shipyard? Independently? Merge it with others such as MMHE? That would create a super big company, now with even Sapura is rumored to be merging with MMHE.
From now up till 2030 there would be other large ship builds to be approved of. Things like more OPVs for MMEA, LMS batch 2 corvettes, MRSS LPDs...
Also just thinking out loud, the additional budget approved for the LCS Gowinds conveniently amounts to almost the same value originally budgeted for the 3 LMS batch 2 corvettes. Does this really mean that the LMS batch 2 corvette project is officially dead?
Zaft - ''t’s safe to speculate that there’s won’t be any direct overseas purchase of any naval vessels in the near & distance future.''
If you've been around long enough observing things you'll know that nothing is certain with regards to the Malaysian defence scene.
... - ''with a capable frigate for the time fitting with the name of the 5 famous malay warriors.''
All respect to anybody ''famous'' or not or Malay or not; what the ships are named is the least of my concern. I want something on spec, on budget; on schedule; in decent numbers and operated on a systems level.
... - ''Does this really mean that the LMS batch 2 corvette project is officially dead?''
It's as much alive as you are so it would seem.
Farhan - ''yet twice they fell into almost the same script of problem, with almost the same script of solution.''
Yes but ask yourself why. Ask yourself who created the very system we have which enabled shite to happen and hit the fan. Who insisted on local assembly? Who didn't give a toss that BNS was not put through a learning curve? Why did MINDEF not place priority on the RMN? ask yourself if those who are really responsible will be made to answer or will it be people lower down the chain. Ask yourself if we've learnt anything from yet another blunder of epic proportion.
Hulubalang "Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS."
With the LCS increase in value by 3 billions and Without any Increase in funding. The LMS would have to come after the LCS completion & not concurrently. Preliminary works like selecting design can start now But delivery would be in 2030 utilizing capabilities as the LCS leave the dry docks into sea trials which would achieve a continuous shipbuilding programme objectives.
Well at least that's the likely plans whether we end up doing it is another story.
... - "Surely their hands would be full until 2029 so no other new shipbuild contract would be given to them. So corvettes are out of the picture for BNS"
Whether it's battleship or cruiser or a brigantine is immaterial given that there's hardly any space left [as has been discussed previously] and workforce issues could be an issue for BNS but as it stands no firm decision has actually been taken as to whether the LMS Batch 2s will be partly constructed in a local yard.
Zaft - "The LMS would have to come after the LCS completion & not concurrently"
As it stands that's not the intention and it's pretty obvious from the statements made; as well as the rumour mill circulating within the industry. Unless there's a significant shift the intention is to proceed with the programme.
Zaft - "Preliminary works like selecting design can start now"
Actual work in place evaluating designs started moon ago and as it stands the political favorite is a Turkish design as you know; or not.