LCS: Evidence of irregularities, lack of proper governance gathered as early as 2010, says audit report

The evidence of irregularities and lack of proper governance in the Littoral Combat Ship (LCS) programme were gathered as early as 2010, according to a forensic audit report by Alliance IFA (M) Sdn Bhd for Boustead Heavy Industries Corporation Berhad (BHIC).

(The Edge Markets) – The declassified report, uploaded to Parliament’s official website on Monday (Aug 22) night, noted that the evidence confirmed that vendors were already determined even before the issuance of the Letter of Award (LOA) by the government in favour of Boustead Naval Shipyard Sdn Bhd (BNS).

The report also found out that the terms of most LOAs and Variation Orders were more favourable to a company named Contraves Advanced Devices Sdn Bhd, with most LOAs to the company being issued without first presented to the LCS Steering Committee (LCSSC) for its approval.

It said major decisions were also taken through Directors’ Circular Resolution without convening a board meeting, which further reduced the transparency and opportunity to discuss in detail and to go through certain vital documents before approving the resolution.

“The board ignored the advice of the ex-chief of navy, who raised objections at the board meeting on the selection of DCNS for design and support contract.

The contract for the supply of six LCS by Boustead Naval Shipyard Sdn Bhd (BNS) became a hot issue after it was revealed that the project, scheduled for implementation in a 10-year period from Oct 3, 2013 to Oct 2, 2023, was only 53.29% completed as at May 31, 2019.

Based on a report by the Investigating Committee on Governance, Procurement and Finance, which was declassified last Wednesday, a total of RM5.94 billion had been paid by the Defence Ministry to BNS for the project so far.

The LOA was awarded to BNS on Dec 16, 2011, on which the final contract was only signed on July 17 2014, approximately two and a half years after the signing of the LOA at a contract price of RM9 billion.

According to the IFA, the Terms of Reference (TOR) of the LCSSC were also found lopsided, as the members of the committee were to be selected by the managing director (MD) of BHIC without the consultation of the Board of Directors, where the MD would be the chairman.

“This provided the MD with absolute control and resulted in a lack of independence amongst other members of the committee. As a result, the members became redundant and failed to discharge their function for which they were selected in the LCSSC,” it said.

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