A controversial multi-billion-dollar contract to build 27 high-tech vessels for the navy is intact despite delays and calls for an inquiry, a company official said today.

PSC Naval Dockyard signed a RM24.3 billion contract in 1998 to build the heavily-armed offshore patrol vessels (OPV) over a 10-year period. It was due to deliver the first two last year.

But the handover of the boats, built with foreign partners led by Germany's ThyssenKrupp AG, was postponed after numerous technical problems during sea trials.

"The contract is still intact... the timing is off because the first two ships have not been accepted by the government because of some technicalities," PSC Industries chairman Amin Shah Omar Shah told reporters.

"We are working out the amount of compensation the Germans need to pay PSC, which in turn will have to pay the government," he said after the company's annual meeting.

Amin Shah said PSC is proceeding with the construction of the "non-technical parts" of six more of the vessels and that they will be completed once the government accepts the first two boats.

Armed forces chief Mohamad Anwar Mohamad Nor said in February there were technical flaws in the OPV's command system and the training package for officers and personnel was outdated.

M'sia biggest financial scandal

The Asian Wall Street Journal reported in March that the government was looking for ways to unwind the contract because it was increasingly sceptical that PSC could deliver.

The opposition has urged a probe into the delays, saying the government had already invested RM2.5 billion in the project and it could turn into "the biggest financial scandal in Malaysia's history".

Amin Shah said however that the group has secured RM270 million worth of contracts from Sudan and Pakistan and is close to clinching another sizeable contract from Sudan.

The chairman had been expected to face opposition to his re-election bid at the annual meeting. But representatives of the major shareholders expected to vote against him were barred from the meeting due to what were termed technicalities.