DAP demands Najib explain lopsided 2014 agreement with Boustead for LCSs

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DAP demands an explanation from former prime minister Najib Razak for the “lopsided” 2014 agreement his government signed for the purchase of six littoral combat ships (LCSs).

Party publicity secretary Teo Nie Ching said Najib, who was also the finance minister at the time, must be held responsible for the non-delivery of six LCSs for which the government has already paid RM6 billion.

“Najib must explain to us why the contract between Boustead Naval Shipyard Sdn Bhd (BNS) was extremely lopsided, putting the government in a very unfavourable position.

“As the prime minister and finance minister when the contract was signed, doesn’t Najib think he owes Malaysians an explanation?” she said in a statement today.

Last week, the Public Account Committee (PAC) revealed that not a single ship had been delivered to the navy after the government paid BNS RM6 billion.

The PAC also said that the terms and conditions of the RM9 billion contract were unfavourable to the government as payment for the project was based on development and item procurement instead of construction progress of the ships.

According to the original schedule, six vessels should have been delivered by this month.

Yesterday, PKR deputy president Rafizi Ramli said Putrajaya was charged three times the cost of the ships.

He said this meant that the contractors were making a 200% commission at the government’s expense.

Teo today said that according to a PAC report on December 31, 2019, the handover of LCS1 was already late by 245 days then and therefore the government was entitled to liquidated ascertained damages (LAD) amounting to RM116.54 million.

“The LCS1 is still not delivered till today even though it was supposed to be handed over in April 2019.

“In other words, by July 31 2022, the handover of LCS1 was late by 1,157 days, and the LAD would have reached RM566.93 million.”

However, the contract stipulates that said the maximum LAD the government could claim from BNS for LCS1 was only RM180 million.

“The delivery of LCS2, LCS3 and LCS4 is also late. Simple calculation would show that by July 2022, the total LAD (for the late delivery of) LCS1 to LCS4 by should be RM1.55 billion, but the total LAD claimable by the government is only RM671 million, due to the (cap).

“What’s the rationale for (the cap), which only benefits BNS and puts the government in a detrimental position?”

Teo added that the Malaysia Treasury Circular (No. 5 of 2007) stated that a maximum 25% or RM10 million, whichever is lower, should be paid as advance payment for any government contract.

“However, RM1.36 billion was paid by the government to BNS as advance payment, way above the limit allowed under MOF’s financial guidelines, causing the acceptance letter (surat setuju terima) to be amended twice.

“More importantly, such payment could only have been made with the approval of the MOF. Could Najib Razak, as the then finance minister, please explain to us, under what situation was the approval given?” – TMI