Why has RM6 billion been paid for undelivered littoral combat ships?

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RM6 Billion Paid for Undelivered Littoral Combat Ships Due to Contractual Agreements and Project Delays

Malaysia has disbursed RM6.083 billion to Boustead Naval Shipyard Sdn Bhd for the procurement of six littoral combat ships (LCS), despite none of these vessels being completed or delivered. The substantial payment, made under a contract awarded in October 2013, has raised significant concerns as the project has deviated drastically from its original schedule, with an anticipated completion of five ships by August 2022 not materialising. This situation has also led to considerable cost overruns and the accumulation of undeployed equipment.
Contractual Framework and Initial Payments

The contract for the supply of six LCS was granted to Boustead Naval Shipyard Sdn Bhd through a direct negotiation process. This agreement, valued at RM9.128 billion, was set to span ten years, from October 2013 to October 2023. The initial payments made under this contract, totalling RM6.083 billion by the time of reporting, were based on the agreed-upon terms for the phased development of these naval assets.
Project Delays and Schedule Deviations

A critical factor contributing to the current state of the LCS project is its failure to adhere to the original timeline. The project's schedule had stipulated that five out of the six commissioned LCS vessels should have been completed and handed over to the navy by August 2022. However, this benchmark was not met, indicating significant delays in the construction and delivery phases, which has led to the current situation where no ships have been delivered.
Cost Overruns and Fund Allocation Issues

The LCS project has experienced substantial cost overruns, amounting to RM1.4005 billion. An examination of these overruns revealed that a portion of the funds paid to the contractor was not exclusively allocated to the LCS project itself. Specifically, RM400 million of the overrun was reportedly used to settle an outstanding debt from the previous New Generation Patrol Vehicle project, highlighting a complex financial entanglement.
Stored Equipment and Obsolescence Concerns

Further complicating the project's status is the significant amount of equipment procured for the LCS vessels that remains in storage. Valued at an estimated RM1.7 billion, this equipment faces the risk of obsolescence, with approximately 15% already deemed outdated. This situation raises questions about the efficiency of procurement processes and the long-term viability of the project's components.

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Why has RM6 billion been paid for undelivered littoral combat ships?

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