KUALA LUMPUR (March 12): The long-delayed littoral combat ships (LCS) project is set to get back on track by June this year, according to Defence Minister Datuk Seri Mohamed Khaled Nordin.

The project has reached 67.57%, about 1% behind the 68.77% progress targeted by the Ministry of Defence (Mindef). The detailed design for the ships was only 22 days behind schedule, Khaled said in response to Datuk Seri Ikmal Hisham Abdul Aziz (PN-Tanah Merah) during the wind-up debate on the royal address in Dewan Rakyat on Tuesday.

The Lumut Naval Shipyard (Lunas), previously known as Boustead Naval Shipyard Sdn Bhd, “is in the phase of undertaking mitigation work to ensure that the construction work is set to be back on track by June this year," said Khaled.

On Feb 29, the Public Accounts Committee (PAC) flagged concerns over the persistent delay in the construction of the ships for the Royal Malaysian Navy. The project suffered 86 days of delays, reaching 67.28% completion as of December 2023.

The PAC also pointed out that Mindef failed to finalise the detailed design of the ships with the French defence contractor Naval Group that designed the LCS.

Khaled clarified that the 86-day delay highlighted by the PAC is actually composed of delays in construction, equipment, and design parts even as the work has been progressing simultaneously.

The sixth supplementary contract for the project stipulates that the first ship needs to reach 85.97% progress by November 2024 before undergoing harbour acceptance test and sea trial, which will take two years before the transfer to the navy, Khaled noted.

Under the contract, the second ship would need to hit completion rate of 78.17%, third ship 61.48%, fourth 53.4% and fifth 44.11% by the end of the year 2024, he added.

RM2 bil increase in LCS cost allocated for specification changes

The LCS project has been in the spotlight in recent years due to delays and cost overruns, escalating from RM6 billion to RM9.18 billion and later to RM11.22 billion, with the targeted delivery of six vessels reduced to five.

Originally slated for delivery in 2019, the revised schedule now sets deliveries for August 2026, April 2027, December 2027, August 2028, and April 2029.

The long delays forced the government to step in and acquire the original contractor, Boustead Naval Shipyard, for RM1 through the Ministry of Finance’s special-purpose vehicle Ocean Sunshine Bhd.

Khaled clarified that the RM2 billion increase in the total project cost is intended for changes in the specifications of the vessel, rather than for expenses related to taking over the debt-laden contractor.

Khaled explained that the changes in specifications included the surface-to-surface missile, decoy launching system, and integrated platform management system as required by the Royal Malaysian Navy.

He also insisted on maintaining Boustead Naval Shipyard’s leadership following the takeover as the project's delay was not due to the management team. The company “faced financial challenges rather than issues related to work skills, expertise, or workforce," he added.