Defence Ministry didn't fine shipbuilder RM217m for late delivery
The Defence Ministry has been censured for not imposing liquidated damages worth hundreds of millions of ringgit against concessionaires in the deliveries of, among others, Littoral Combatant Ships (LCS).
The latest Auditor-General's Report 2019 released today pointed out that the Defence Ministry has not imposed liquidated damages against shipbuilder Boustead Naval Shipyard Sdn Bhd (BNSSB).
This prompted the Defence Ministry to say...
The Defence Ministry has been censured for not imposing liquidated damages worth hundreds of millions of ringgit against concessionaires in the deliveries of, among others, Littoral Combatant Ships (LCS).
The latest Auditor-General's Report 2019 released today pointed out that the Defence Ministry has not imposed liquidated damages against shipbuilder Boustead Naval Shipyard Sdn Bhd (BNSSB).
This prompted the Defence Ministry to say, in its response to the report, that it had issued a notice to the shipbuilder in June 2020.
According to the report, the Defence Ministry demanded the BNSSB to pay RM217.5 million in a notice dated June 15.
"As of June 30, 2020, the ministry has yet to issue a demand letter to the company requesting for liquidity damages. Instead, the ministry only issued a reminder notice to the company on June 14, 2019."
The audit report said the government could only receive RM37.50 million in compensation due to a capping element stipulated in the deal.
The report also pointed out that the progressive payments made exceeded the actual progress of the works by 21.1 percent.
The procurement contract of six LCS worth RM1.01 billion was inked in 2019 where the first ship was scheduled to be delivered in April 2019.
However, it was reported as of July 31, none of the six littoral combat ships had been completed by BNSSB.
"A total RM492.21 million or 48.7 percent payment had been made," according to the audit report.
As of July 1, the overall work progress status of the LCS was 56.7 percent compared to the original plan of 85.7 percent, a delay of 31 months.
On Aug 3, Defence Minister Ismail Sabri Yaakob said the government was considering options in relation to the direction of the LCS project.
The government was said to be considering terminating the contract.
A memorandum would be presented to the cabinet in the near future, said the minister.
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