Littoral combat ship project cost surges to RM11.2bn due to delays, changes

The littoral combat ship (LCS) construction project in Malaysia has seen a significant increase in costs, reaching RM11.2 billion, due to extended construction periods and specification changes. Deputy Defence Minister Adly Zahari revealed that an additional 83 months would be needed to complete the project, based on the Sixth Supplementary Contract (SA6) signed recently. The original agreement stipulated that the first LCS ship should have been completed in 2019.

“Among the biggest cost additions involve changes to the specifications based on the Royal Malaysian Navy (RMN) requirements. The government approved the specifications for the Surface-to-Surface Missile System, Decoy Launching System (DLS) and several other systems,” Adly Zahari stated during a question and answer session in the Dewan Rakyat.

The Deputy Defence Minister explained that the specification changes were necessary for national defence, and the SA6 signed on May 26 marked the beginning of the LCS reconstruction. According to the milestone plan in the supplementary agreement, the first LCS vessel’s construction could be completed in November 2024, followed by several evaluations by the RMN. As a result, the first LCS ship is anticipated to be commissioned by the end of 2026.

Adly Zahari also highlighted that the improvements made in SA6 allowed the government to continue paying the original equipment manufacturers (OEMs) through the Ministry of Finance, bypassing middlemen. To ensure the project’s completion, four monitoring committees have been established, and the payment model has been improved from milestone to progress payment.

Regarding the settlement of international agreements involving companies Contraves Advanced Devices Sdn Bhd (CAD) and Contraves Electrodynamics Sdn Bhd (CED), Adly Zahari clarified that the transactions do not involve the government. “The government does not need to bear any responsibility because the agreement is a company business matter not related to the government’s contract,” he said.