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Declassified investigation report finds Zahid changed LCS design against Royal Malaysian Navy’s wishes



Former defence minister, Datuk Seri Ahmad Zahid Hamidi, changed the design of the littoral combat ships (LCS) from Sigma to Gowind in 2011, contrary to what the Royal Malaysian Navy (RMN) wanted.

The Report of the Government Governance, Procurement and Finance Investigation Committee (JKSTUPKK) on the construction project of six LCS, which was declassified and published on the Public Accounts Committee (PAC) portal today, said Ahmad Zahid initially agreed with RMN’s decision to choose the Sigma design from the Netherlands, after being briefed by RMN on May 26, 2011.

However, Ahmad Zahid, who was also the deputy prime minister at the time, decided to go with the Gowind design from France, less than two months later, on July 11, 2011, after a recommendation by Boustead Naval Shipyard Sdn Bhd (BNS).

According to the report, this came two days after Ahmad Zahid received a letter from BNS on July 8, 2011 recommending the selection of the Gowind design, before BNS issued a letter of intent to French subcontractor company DCNS on July 13, 2011 to begin the concept design and design evaluation process.

“The Navy Chief at the time, Tan Sri Abdul Aziz Jaafar, defended his position and consistently chose the Sigma design from the Netherlands for the construction of the LCS.

“The Navy Chief at the time, Tan Sri Abdul Aziz Jaafar, defended his position and consistently chose the Sigma design from the Netherlands for the construction of the LCS.

“This is clearly shown in the Navy chief’s letter to the secretary-general of the Ministry of Defence on August 17, 2011 and to (then) prime minister, Datuk Seri Najib Razak, on September 7, 2011,” said the report.

The report found that BNS was determined to choose the Gowind design because it had held prior discussions and negotiations with DCNS to carry out the construction of the LCS.

“This can be proved when BNS issued a Letter of Intent to DCNS on July 13, 2011, two days after (then) defence minister, Datuk Seri Ahmad Zahid Hamidi, expressed his agreement with BNS’ recommendation. In fact, BNS also started the Conceptual Design process with DCNS on July 25, 2011, which was before the original Letter of Acceptance (SST) was issued on December 16, 2011.

“The method of selecting contractors was contractor driven and also determining the selection of LCS designs was based on the recommendations of BNS and did not take into account the views of the end user which was RMN,” said the report.

The report also detailed the Defence Ministry’s 4/11 Series Equipment and Services Procurement Monitoring Committee, which convened on August 12, 2011.

It was during this meeting that BNS’ recommendation to select the Gowind design was accepted despite the Navy chief’s protestations that the ministry had not put the interests and views of RMN first.

“In his letter dated August 17, 2011, the Navy chief said to the chief secretary of the Defence Ministry that the quotation process for the CSM SETIS from DCNS had violated the Standard Practices of the International Tendering Process because previously DCNS was not listed in the original five OEMs that had been invited by BNS to submit CMS quotations.

“The Navy chief also stated that there were elements of data evaluation manipulation by the BNS Evaluation Team to give misrepresented information to the BNS board of directors. This happened during the Analysis on the BNS Evaluation for MS to RMN on July 11, 2011. The technical data for the evaluation was submitted by DCNS two months after the closing date for CMS quotations,” said the report.

Following that, the Defence Ministry made an application to the Ministry of Finance (MoF) for the issuance of an SST that set the conditions for the design of Gowind and the Setis brand combat management system (CMS) as well as 17 equipment and subsystems.

MoF approved the issuance of the SST to BNS on December 15, 2011 with a contract ceiling limit of RM9 billion, the report added.

Following that, the Defence Ministry asked MoF to make an advance payment of RM1.8 billion or 20 per cent of the contract ceiling limit, with a RM500 million advance in 2011, and the remaining advance payment to be completed in 2012.

However, MoF on December 21, 2011 only agreed to approve an advance payment of RM500 million to BNS.

The JKSTUPKK report revealed that the value of the advance payment in the SST was amended twice, with a second advance payment of RM700 million in 2013, and a third advance payment amounting to RM170 million in 2014. Only RM164.9 million was paid in January 2014.

“The total amount of advance payment at the SST level amounts to RM1,364,997,803 or 14.95 per cent of the contract value,” he said.

On August 6, Ahmad Zahid dismissed allegations linking him to the mismanagement of the LCS project.

The Umno president said he was not the defence minister at the time the project was awarded and only held the portfolio from April 2009 to May 2013.

“Those who failed in the LCS procurement must be held responsible, and they must explain the matter to the Public Accounts Committee (PAC).

“It is to support the revelation of the delay in the delivery of the project,” he was quoted as saying by Umno Online. –MALAYMAIL

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