Mindef didn’t do due diligence, BNS financially incapable, says report

 

BNS had requested a 20% advance payment (RM1.8 billion) of the project’s RM9.128 billion total cost to begin construction of six frigates for the navy.

PETALING JAYA: The defence ministry failed to conduct comprehensive due diligence on Boustead Naval Shipyard Sdn Bhd (BNS) before awarding it the littoral combat ship (LCS) project, according to the governance, procurement and finance investigation committee.

The committee’s report on the project, which was declassified and made available to the public earlier today, says that BNS did not have the financial capability to take on the contract when it was awarded the project in December 2011.

BNS had requested a 20% advance payment (RM1.8 billion) of the project’s RM9.128 billion total cost to begin construction of six frigates for the navy.

The finance ministry subsequently approved a 14.95% advance payment, or RM1.365 billion. It also provided an exemption for bank guarantees amounting to RM836.9 million.

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The governance, procurement and finance investigation committee, led by former auditor-general Ambrin Buang, found this to be “out of the ordinary” given that the treasury and government procurement regulations do not permit the government to offer deposit payments over RM10 million to any local manufacturer or supplier.

Further investigations by the committee revealed that BNS had suffered losses between 2014 and 2018, with total losses standing at RM462 million in 2018.

It was also found that BNS’ financial mismanagement and cash flow problems had caused delayed payments to original equipment manufacturers (OEM) and other suppliers.

To overcome these problems, BNS had sought loans from banks and its parent company, Boustead Holdings Bhd amounting to RM956.86 million.

The report said all these factors proved that BNS was financially incapable of taking on the project. It added that the company was expected to face further difficulties in completing the construction of the six vessels and repaying its debts.

The LCS project for the navy has come under heavy scrutiny for its cost and delay in delivery.

The first ship, Maharaja Lela, was launched in 2017 for delivery in 2019, with the rest to be delivered in stages. However, none has been completed or delivered although Putrajaya has spent RM6.08 billion on the project, according to Parliament’s Public Accounts Committee. - FMT