LCS: Mindef can directly pay OEMs if any 'problems' with SPV - minister

 

PARLIAMENT | The Defence Ministry through the sixth supplementary agreement for the littoral combat ship (LCS) project, signed in May, has negotiated a clause that allows direct payments to be made to all original equipment manufacturers (OEM).

Defence Minister Mohamad Hasan said direct payments to the companies could be made if any “problems” arise with Ocean Sunshine Bhd, an indirect unit of the Minister of Finance Inc.

“Ocean Sunshine is a wholly owned special purpose vehicle (SPV) by the Finance Ministry.

“To (have) control so that there will be no more (problems) like in the past, there is a clause in the supplementary agreement No 6 for the government to make direct payments to all OEMs if there was a problem with the SPV,” said Mohamad (above) in his ministry’s winding-up of the Supply Bill 2022 debates in the Dewan Rakyat today.

On May 26, Mohamad announced that the Finance Ministry established Ocean Sunshine to take over Boustead Naval Shipyard (BNS) and continue construction of the LCS, now ongoing with the first ship expected for completion in 2024.

Ikmal Hisham Abdul Aziz (PN-Tanah Merah) earlier stood up and questioned who were the individuals behind Ocean Sunshine, as well as their merit in handling one of the country’s biggest procurement projects.

“I’m worried that Ocean Sunshine is just a shell company set up to deceive Malaysians.

“What is Mindef’s guarantee that Ocean Sunshine will not be the same as BNS?” said the Bersatu MP in reference to the loss-making company previously involved in the construction, repair and maintenance of naval ships.

Payment based on progress

Mohamad reassured that all payments will only be made based on the progress of the project, unlike the previous “milestone payments” based on certain time periods.

He said the project’s progress will also be monitored by two secretaries-general from the Defence Ministry and Finance Ministry, aside from adhering to a Parliamentary Public Accounts Committee’s (PAC) order for periodic reports to be tabled in Parliament.

The PAC report released earlier this month stated that construction of five LCS at an estimated cost of RM11.2 billion is expected to be completed in 2029, compared to the original contract, where the assets were supposed to be delivered in 2022. - Mkini