PAC criticises Mindef for signing LCS deal without AGC approval

 

PARLIAMENT | The Public Accounts Committee (PAC) criticised the Defence Ministry’s move to enter into an agreement without the approval of the Attorney-General’s Chambers (AGC).

This was over the sixth supplemental agreement signed at the 2023 Langkawi International Maritime and Aerospace Exhibition (Lima 2023) in May.

“The sixth supplemental agreement signed on May 26 did not have the AGC’s approval. Seeing as the relevant department explained that it informed the Defence Ministry there needs to be further action for SA 6 and be submitted to the AGC before it is signed.

“The ministry’s decision to turn its back on the AGC in signing a sixth supplemental agreement is inappropriate as it can result in legal implications to the government and cannot be repeated,” said PAC vice-chairperson Wong Shu Qi today.

Navy chief Admiral Abdul Rahman Ayob reportedly said the LCS construction project was expected to resume in September.

The PAC, however, concluded in its report presented today that there has been no progress in the construction of the LCS ships since its visit on Dec 11, 2021.

Public Accounts Committee vice-chairperson Wong Shu Qi

The committee held a working visit to inspect the progress of the LCS construction works and storage on June 10 this year, which was followed by a committee proceeding.

Wong said the committee also concluded that the detailed design of the LCS had also not been completed.

“(It) is currently at a rate of 96 percent completion at the construction contractor level, with only 84 percent gone through the confirmation, verification, and approval stage by the Naval Group from France as the LCS design supervisor.

“However, the construction contractor assured us that the detailed design must be completed before August 2024 as contained in the sixth supplemental agreement,” she said.

The PAC added that despite the number of LCS being reduced to five, the cost of construction increased by RM2.098 billion from RM9.128 billion to RM11.22 billion.

“This is a result of the cost of design (RM0.211 billion), the price of equipment (RM1.214 billion), insurance and risk (RM0.466 billion), financial costs (RM0.143 billion), project management costs (RM0.066 billion).

“Delays and longer time are also factors for this increase,” said Wong.

The PAC then made several recommendations to the government over the LCS project as follows:

• The Defence Ministry needs to ensure the implementation of the mobilisation plan according to conditions set with the first LCS ship completed in May 2024 and handed over to the navy by August 2026.

• The Ministry needs to ensure the construction contractor completes the detailed design, including obtaining approval from the Naval Group, before August 2024 as contained in the sixth supplemental agreement.

• The government must ensure the acquisition of BNS by Ocean Sunshine Bhd.

• The Defence Ministry and Navy are responsible for ensuring that the entire construction project of five LCS worth RM11.22 billion is completed and handed over to the Navy according to the agreed period and cost in the sixth supplemental agreement.

• Ministries and government agencies must ensure that the draft contract negotiated with the company has been consulted with and reviewed by the AGC.

• The National Audit Department should carry out an audit and present it at the Parliament before LCS 1 is submitted to the Navy.

On Oct 6, Dewan Rakyat speaker Johari Abdul said he would ensure the PAC report on the LCS construction project is debated in Parliament.

Dewan Rakyat speaker Johari Abdul

Wong said while this was welcomed by the committee, the presentation mechanism of the PAC report needs to be scrutinised and discussed in depth.

“The committee is of the opinion that the PAC chairperson and members answer questions from MPs.

“However, there is definitely a constraint from the PAC to give the latest answers because the relevant information is only known by the ministry,” she said. - Mkini