Weekly Highlights

Najib Razak must take responsibility for LCS contract

The Littoral Combat Ship (LCS) was signed in July 2014. Najib Razak as the Prime Minister and Finance Minister of that point of time must explain to us why the contract between Boustead Naval Shipyard Sdn. Bhd. (BNS) was extremely lopsided and put the Malaysian Government in a very unfavorable position.

According to the report of the Parliamentary Account Committee, by 31st December 2019, the handover of LCS1 was already late by 245 days and therefore the Government was entitled to liquidated ascertained damages (LAD) amounting to RM116.54 million.

LCS1 is still not delivered until today, even though it was supposed to be handed over in April 2019.  In other words, by 31 July 2022, the handover of LCS1 was delayed by 1,188 days, and the LAD would be as high as RM582.12 million.

However, the maximum LAD our Government can claim from BNS for LCS1 is only RM180 million as per contract between BNS and the Government!

The delivery of LCS2, LCS3 and LCS4 are also late. Simple calculation would show that by July 2022, the total LAD by days for LCS1 to LCS4 by should be RM1.57 billion, but the total LAD claimable by the government is only RM671 million, due to the RM180 million LAD capping per ship.

Table 1 – LCS Delivery Schedule

What was the rationale for inserting capping of RM180 million in the contract, which only benefits BNS and putting the Government in a very detrimental position?

As the Prime Minister and Finance Minister when the contract was signed, doesn’t Najib Razak think he owes Malaysians an explanation?

Not only that, Malaysia Treasury Circular (No. 5 of 2007) (Pekeliling Perbendaharaan Bil. 5 Tahun 2007) stated that maximum 25% of the contract sum or RM10 million, whichever is the lower, could be paid as advance payment in any contract.

However, RM1.36 billion was paid by the Government to BNS as advance payment, way above the limit allowed under MOF’s financial guideline, causing the Acceptance Letter (Surat Setuju Terima) amended twice. More importantly, such payment could only be made with the approval of MOF. Could Najib Razak the then Finance Minister please explain to us, under what situation the approval was given?

Teo Nie Ching

Kulai Member of Parliament

DAP National Publicity Secretary

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