Human error led to costly LCS design contract, says report

 

The report by Boustead Heavy Industries Corp says the LCS design contract with DCNS, now known as Naval Group, was ‘poorly negotiated’.

PETALING JAYA: A report by Boustead Heavy Industries Corp (BHIC) has revealed that human error led to a costly design contract being awarded to DCNS as a sub-contractor in the troubled littoral combat ships (LCS) project.

Referring to this human error as “a series of common sense lapses”, BHIC’s recently declassified audit report stated that one such lapse was the appointment of Anuar Murad as LCS project director.

The report found that Anuar had inadequate expertise on designing warships, its related costs and associated risks when he held the position.

This contributed to the “vague and weak” initial contract awarded to DCNS for design, engineering and support of the LCS project.

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“The design contract with DCNS was poorly negotiated with common sense lapses,” said the report.

It found that in March 2012, Boustead Naval Shipyard Sdn Bhd (BNS) issued a letter of award (LoA) to DCNS for the provision of the Gowind design of ships as well as support services amounting to €58.9 million based on an evaluation by Anuar and his team.

However, nine months later, the LoA was amended to increase the value of the contract to €62.8 million with the scope of the agreement completely changed.

The report also found that upon the recommendation of Anuar and then BNS managing director Ahmad Ramli Mohd Nor, payments were released to DCNS without project milestones or deliverables being met.

It said the project’s procurement team was also misled due to the vague information provided by DCNS during meetings. This, it said, led to numerous variation orders amounting to €67 million being issued.

DCNS, now known as Naval Group, is a sub-contractor for the LCS project, tasked with assisting BNS in the construction of six frigates for the navy.

Last night, a forensic audit by BHIC into the late delivery of the ships in the RM9 billion LCS project was declassified and made available through Parliament’s official website. BHIC is the controlling shareholder of BNS. - FMT