Boustead refutes obsolete equipment claims during media visit to LCS shipyard

 

Equipment stored in warehouses at the Boustead Naval Shipyard (BNS) is not obsolete but in the process of obsolescence, said the company’s chief executive officer Azhar Jumaat today.

The BNS chief said this in response to a Public Accounts Committee’s (PAC) report on littoral combat ships (LCS), claiming that about 15 percent of total inventory worth RM1.7 billion was obsolete.

During a media visit to the shipyard in Lumut, Perak today, Azhar told members of the press that these claims were inaccurate.

“A salient point highlighted in the PAC report is that 15 percent of the equipment system (stored at BNS) was obsolete. That’s not entirely accurate in terms of its description.

“…(It is) in the process of obsolescence, moving to the state of obsolete. Why is it being put into that situation is because some of the equipment is being stored for a long period of time which requires for periodical preservation,” he said, adding that the stored equipment can be utilised for a minimum of 25 years from now and is ready to be boarded onto the ships.

BNS CEO Azhar Jumaat

Azhar justified the need to order and store the equipment in advance to the long construction lead times, adding that it takes about 20 months for the ship’s main engine to be imported from Germany to Malaysia.

Among the equipment were electrical and mechanical equipment, which included the ship’s engines.

However, he assured BNS was in the process of engaging with various original equipment manufacturers (OEMs) to conduct a survey on the condition of the equipment, including additional costs that may incur.

During the visit, Azhar led reporters from various media outlets to visit the site’s storage facility, which contained BNS’ inventory, in an attempt to be transparent about the ship’s construction.

Reporters were also allowed to board and tour the first navy LCS (LCS1), which was at 60 percent of its completion stage as of April this year.

He told some reporters that LCS2 was at 48 percent completion stage, followed by 43 percent (LCS3), 36 percent (LCS4), and 22 percent (LCS5). Construction for LCS6 has not yet begun.

All five LCS ships are being built concurrently, Azhar added, as each ship takes an average of four years.

He said LCS1 would take about two more years to reach its completion stage.

RM6b being utilised

PAC’s report revealed a huge overrun in cost amounting to RM1.4 billion in the RM9 billion contract which was awarded to BNS in 2011.

BNS was awarded the job in 2011 through direct negotiation, and RM6 billion was paid as of 2020, but it missed the targeted delivery date of 2019.

According to the contract, BNS should have delivered the first ship in April 2019 and two ships in February and March 2020, respectively.

Despite missing the deadline in delivering the LCS, the cabinet in April 2021 agreed for Boustead Group to continue with the LCS project.

It is understood that BNS’ open doors to the media today were to clarify doubts in the procurement of the LCS ships.

Azhar maintained that the RM6 billion funds supplied to them were being fully utilised by BNS, despite its cash flow issues.

With RM 1.7 billion worth of equipment in storage, Azhar revealed that another RM1.8 billion’s worth had already been onboarded onto the ships.

However, Azhar refused to divulge where the balance of RM2.5 billion was spent.

“I am not going into that detail yet. For me to divulge that information about the RM1.8 billion (worth of equipment) that is already on board is enough for you to have a sense that about RM3.5 billion out of the RM6 billion was spent on actual real requirements.

“Of course, you must understand you have to pay for the overhead and the project management and to finance the costs for the insurance, electricity, infrastructure, construction and all that.

“The other RM2.5 billion go towards those activities and requirements. I am not going to be able to give the detailed background of those, but you should know that it is quite fair distribution in the cost breakdown,” he said.

Earlier, he had told the media that RM200 million was spent on infrastructure.

In 2019, the LCS project was halted due to BNS’ cash flow issues that resulted in non-payment to OEMs.

However, Azhar said today that construction was still carried out sans the OEMs.

“The work that could be done between us, within our means, we can continue because we can’t afford to stop completely,” he said.

He later added that there were ongoing sessions between BNS, the government and the OEMs to discuss the best way to move forward.

The cabinet, in April last year, agreed for Boustead Group to continue with the LCS project, which had been delayed since 2019, with conditions to be complied with by the company. - Mkini