Wednesday, 9 February 2011

Malaysia’s Littoral Combat Ships.

The defense ministry's allocation of a RM 6 billion budget to build 6 Littoral Combat Ships (LCS) has raised some controversies. The DAP's economic czar, Tony Pua has raised some reservations about the budget allocation. He calls for more transparency and straightforwardness in the defense contracts. The ships will be built by Boustead Naval Shipyard which is a subsidiary of LTAT.
Pua's comments have stirred up a chorus of accusations that MINDEF may be over spending. It has also invited a rebuttal from a writer with a weekly defense journal. A blogger who has a hobby reading up on any military hardware and technology has also responded to Pua's comments.
Pua may have fouled up in his comparisons. But I am ready to concede in this case, facts are not that very important- the meaning and reading into the meaning of the contracts are. Pua's comments were meant to raise awareness about the possibilities of shady deals and deals that will later turned bad.
Consider the record. The ships built by Amin Shah are probably better employed as deep sea  fishing vessels now. We bought submarines that had difficulties in submerging. We have airplanes mothballed in the desert in America. We have had magee mee and screw drivers sold to MINDEF at extortion exorbitantly inflated prices.
So when MINDEF makes public its allocation on any project, any right thinking people will stand up.
So I will not denigrate Pua's concerns too much. It has everything to do with financial discipline and financial good governance.
That aside, my main concern is the RM 6 billion sufficient at all to build 6 LCS such as that commissioned by the US Navy?
Usually in any defense contracts, technical teams from MINDEF will be working closely with contractors. Granted that in itself is no guarantee that ships will be built to specifications. That is also no guarantee that the ships built will be operational even.
The ships infamously built and contracted to Amin Shah have not been operational and have been plagued with all sorts of technical deficiencies. So I wouldn't place too high a premium, even if experts from MINDEF were to sit and hold hands with the contractors. Probably they will do that in karaoke bars and over some beer mugs.
Normally I would relish tearing into the contracts to see whether there are any possibilities of grossly inflated numbers which can only mean one thing:- money and commissions passing hands.
I am more interested in the reasoning given by the Minister of Defense. His remarks hardly inspire confidence in our defense capabilities.
Out of the RM 6 billion allocation, 2 billion will be allocated to vendors. The minister says he will monitor to see that vendors are paid. Hello? Are we missing something here? His role is not to oversee that vendors get paid- there will be a committee doing that. Unless the vendors are UMNO contractors mostly from Perak who will be campaigning for Zahid, his primary duty is to see the second generation patrol vessels are built according to technical specifications and will be delivered on time. More important his duty is to ensure there are enough funds to build such an LCS. The US Navy for example is spending around USD600-700 million per vessel.
So in the end, if you under-build, what will the vessels be employed for? To provide escort services for our fishing vessels?

20 comments:

dahseriknganBS 9 February 2011 08:27  

Dato, you're absolutely right.

and UMNO, or the federal government should reply without involving emotions, ive read bigdogs comments on the said matter, what the hell does participation of ethnic chinese into the military have anything to do with the inquiry.

PAKAI OTAK LA WEH, if there isnt anything to hide just come out and say "hey look this is what we bought" and not be emotional and assanine about it. berani kerana benar, takut itu sebab pusing itu ini itu ini.

Frankly 50% of the defense budget should be allocated into local manufacture of local weapons and armory supply.

we are being cheated by the powers of the world by buying their outdated weapons.(malaysia can! lol)

its so easy to outsource outsource outsource...the public has the right to know how funds are being spent, its that simple.....jgn malas, BUAT KERJE!!!!!

and if its right there's nothing wrong with being transparent about it unless ofcourse we have a top seceret military base underground that spands 7000 acres with nuclear facilites included, even with that the people's right to know cannot be denied.(what was it demo amende?)

oh well, what do i know huh?

i believe malaysia can, but i doubt amin shah can. lol

Anonymous,  9 February 2011 09:26  

Dato',

So what else is new? It's nearing election time and politicians needs cash to ensure they get re-elected. That's why Zahid publicly announced he will personally ensure who gets paid.....$$$$$Kaching$$$$$!!!!!. This is a merry go round circus well employed by UMNO. No sooner did your mentor TDM commented that UMNO is a party of contracts, immediately we are greeted with this piece of great news of spending RM1 billion per LCS. Furthermore there is nothing great about Boustead's track record of building any sea faring vessels of repute but who cares anyway as long as Boustead gets paid under Zahid's assurance. I should now buy some Boustead shares before the price shoots up.

Anyways no worries. If these LCS do not meet the specs when they are eventually built and not exceeding the RM6 billion budget, MINDEF can employ as these LCS as flood rescue boats judging from the severity of recent floods. Oh wait a minute, there's also money to be made on flood controls projects....$$$$$kaching$$$$$$$!!!!

1Malaysia Boleh lah!

Anonymous,  9 February 2011 10:15  

'The ships built by Amin Shah are probably better employed as deep sea fishing vessels now.'

If that is so, alhamdulillah. Takut jadi tukun tiruan aje.

-MAKORANG-

Anonymous,  9 February 2011 10:19  

the us class ships have stealth capability. i think the comparison is far off.

Anonymous,  9 February 2011 10:19  

Was there an open tender?
Was the specifications approved by end user?
Was the approval process based on "best practise."
Wat is the benchmark used in developing the specs?
Wat is the defined role for these vessels and timeline for the deployment?
Wat is the adverse impact if the vessels not delivered on time?or project scrapped?
Was a due diligence done on the appointed contractor?
Are the RM 2 billion vendors local?and how much of that involved overseas/imported components or services?

Will there be third party review of this project?

Anonymous,  9 February 2011 10:20  

"So when MINDEF makes public its allocation on any project, any right thinking people will stand up."

Did you say 'right thinking people'?
But as far as I know they are not in UMNO or BN or Perkasa or in rural UMNO heartland .

Billions of ringgit have been squandered by the BN government on defense and yet the 'not-right- thinking-people' continue to vote for them.

Billions of our ringgit have be siphoned off by UMNO warlords.

Egyptians have opened their eyes to similar abuses and corruption. They fear no more the cruel Mubarak regime.
Back home our people are still sound asleep or prefer to be blind. They choose to be cowards.
Their eyes will open when the 'nasi menjadi bubor'.

Anonymous,  9 February 2011 10:36  

Sak,
Six billions is alot of money!Dont you think healthcare and hospitals would have been prudent?
Tell you the truth, its umno way to increase its war chest for the coming elections!not forgetting enrichment!

Anonymous,  9 February 2011 12:07  

If the intention of the LCSs is to protect our shores from sea pirates and illegal immigrants, then you don't need LCSs to do that. All you need are small, fast patrol boats which are very much cheaper.

If the intention of acquiring the LCSs is for defence (against surrounding nations like the little red dot), then its best to buy them from real overseas defence contractors whom would have all the necessary experience, expertise and capabilities to build such ships. And for sure, Boustead is only good at building fishing vessels.

BTW, I don't think the surrounding nations would want to attack bolihland for they have enough problems of their own.

donplaypuks® 9 February 2011 14:27  

"The ships built by Amin Shah are probably better employed as deep sea fishing vessels now."

I understand they are not good enough even as museum show pieces and may well be in permanent dry docks!

As for Boustead, note that they also partnered DCNS of France (whose corrupt business practices are the subject of investigations in France and Taiwan) in the procurement of the 2 infamous $3.8 billion Altantuya-class submarines as well as the contract for maintenance etc., worth a few hundred million more!

So, its very, very clear what the local company's role is in all these high-tech defence contracts.

With one eye on the looming elections and the other on that 30% equity target you have been harping on, Najib has thrown his promise of "open tender" out the window. But then again, it was never really on, especially when you understand who the Defence Minister was during the time of Amin Shah and the Altantutya-class subs purchase!

This is how a $1 item becomes $3. Is this how we M'sians want to re-distribute the national income to achieve economic equality and a level playing field?

My hats off to Tony Pua for consistently exposing these shady deals about highways, helicopters and ships.

dpp
we are all of 1 Race, the Human Race

OneMalaysian,  9 February 2011 14:38  

Dear Sakmongkol

“We have had magee mee and screw drivers sold to MINDEF at extortion exorbitantly inflated prices. So when MINDEF makes public its allocation on any project, any right thinking people will stand up.”

Yes, we should be extremely wary. Look at the closed loop – MINDEF controls LTAT, which controls Boustead (major shareholder and board control), and Boustead controls Boustead Naval Shipyard (the defense contractor), which makes ships for MINDEF. This contract was probably not awarded based on an open tender. So we should expect very high prices and large future variation orders, either because BNS screws up just like Amin Shah’s PSCI did (he was rescued by government despite corruption findings and mismanagement for which no charges were filed despite findings by the Public Accounts Committee) or because MINDEF decides to “upgrade” the weapons systems, or because someone is tempted to pad the contract price to feed some politically-connected cronies. There is no transparency now and there won’t be in the future as well. Stay tuned for price escalations and delays.

Anonymous,  9 February 2011 16:27  

at the meantime the nons will kena hantam left right centre over the economic pie thing while the powers that be dip their hands into the kitty(don't blame me - any right thinking person who can count 2+2 will do the same). UMNO looked desperate, feels desperate and act desperate, how else can you explain Isa Samad being appointed chief of FELDA. have you guys been to Port Dickson lately?

Anonymous,  9 February 2011 16:32  

"So in the end, if you under-build, what will the vessels be employed for? To provide escort services for our fishing vessels?".
More likely to provide escort services for FLOM.

Anonymous,  9 February 2011 17:35  

I think some people do not understand what is military secret and what is not.
contracts are not secret. You can find all US DOD contracts here http://www.defense.gov/contracts/

You can find how much F22 Raptor cost. contractor name, where it is build, allocation. Or how much F22 engine cost, who build it.
These are not secrets.
weapons specs and cost are not secrets.

LCS ship specs and cost can be found here http://www.globalsecurity.org/military/systems/ship/lcs.htm

If you ask the DOD general where is LCS ship Freedom now? He will probably reply: LCS ship max speed is 45 knots, max crew is 40. Current location, direction, speed and crew numbers is classified. If you want to know more about the LCS ship contracts, cost, contractors etc. Ask your congressman to write to DOD. Pentagon will be happy to provide you details on LCS projects

Suci Dalam Debu 9 February 2011 22:01  

Sir,

They still have a long way to go before they can catch up with Husni Mubarak's wealth.

Big inflated projects = big commissions. I just hope high explosives are properly accounted for this time.

s.s.seelan,  10 February 2011 00:01  

Dear Sir,

This is an excellant response. Tony Pua may have made a bad comparison but that really isnt the issue and the UMNOputras know this and they just want to get side-tracked. But Tony Pua's comment must have touched some raw nerve so much so that it had prompted the Navy Admiral himself to issue a rebuttal. Just imagine, a civil servant giving a response directly to a politician. Bt even in his rebuttal, the good Admiral rather coyly refuses to name the contractors involved. Now there you have it...transparency, ala 1masia!!!

walla 10 February 2011 00:22  

Defence is where governments must do it right the first time, not try again through bailouts.

The rakyat can't be blamed for being jittery. After all, a whole fleet of skyhawks Mindef had bought seem to have disappeared either in the arizona desert or over the bermuda triangle. At least they didn't end up in some latam country like two of our jet engines. And then there's that squadron of f-16's. How did we end up being sold planes without firing codes? And next we have mikoyans which are now too costly to maintain just after five years. That's after the rakyat came to know about DRB's non-movable personnel carriers. We may have to wait awhile for the next drama on the eurocopters but then we already have had dessert on our c4-class submarines.

Why can't defence procurements be straightforward, right the first time, and professionally managed end-to-end? Why so messy and mangled one?

Just imagine if there had been an aquatic dispute during the time when those amin-class vessels would have been direly needed to tilt the outcome, our national diet now might have to be sup buntut with ayam sos merah.

It's also strange. Normally littoral vessels first and then submarines afterwards to extend the range and stealth of those vessels. Instead, the other way round...Do we really have an integrated defense system? What are we saying? We don't even have a flood warning system!

Anyway back to this topic. The underlying message is this:

one, whether black-boxed procurements like Mindef or hormonized expansions like Sime or acquisitions galore like Lotus, Sauber, Agusta, InventqJaya and Felda@USA, the rakyat have concluded this government is incapable of doing things right the first time; in fact its incapability is directly proportional to the size of the procurement or acquisition; meaning the bigger the sum involved, the more incapable of delivering right the first time;

two, there is absolutely no conscience about opportunity costs, except maybe opportunity for the players;

three, the govt tends to shoot itself first in the foot through its own double-tap cleverness; this double-tap thing is the SOP used in big-ticket items, namely there must be at least two advantages obtained; in this particular case, it is right-to-left hand 'open' tender.

The problem with double-tap methods is that they tend to overtap. They lock up the minds of the buyers.

walla 10 February 2011 00:22  

2/2

Mindef gives to Boustead which belongs to Ltat which belongs to Mindef, so you get happy shareholders, happy suppliers, happy users and very happy bagan datoh minister. Therefore, suppliers and vendors will be even more bold to markup the price because it is a confirmed kill. Since it's hand-holding specifications, the markups are already incorporated into the budget. There will be the customary renego's and they will cut a bit; but the cut bits will be magnified and added to the (a) maintenance, (b) variation orders, and most important of them all, (c) the spare parts.

If ever the MACC starts an academy, the first research thesis it must do is this: THE REAL COST OF SPARE PARTS IN GOVERNMENT PROCUREMENTS.

This is put in caps to signify that people tend to think leakages is just about taking things out of the kitty. No, it is official siphonage through inflated pricings that are tacitly accepted without question at great opportunity cost to the rakyat, if not the original objective of the procurement.

The savings for instance could have been used to buy better sonar or more accurate capitation torpedoes or hardier bulletproof suits for our naval special forces or even an aero-ambulance to ferry dying passengers thrown out of crashed buses on tolled highways.

The same mindset lock by double-tap methods is aggravated by mindset lock that what is entered into a budget must be spent without calculating how savings could have been used in other areas and places. Because people forget where the money comes from. It's not the gomen’s; it's the rakyats’.

There is another thing about double-tap methods. They put the buyer under the duress of inflexibility. The specs are like that but does that mean they cannot be something else? Must it be just ship defense from General Electric Boat Division or Marconi? The compulsion to fixate becomes subconscious, persuaded by double tap rationale; it becomes benefiting the parties involved and not the final objective of the acquisition. When secondary objectives supersede primary objectives in double-taps, that's when things go haywire.

Umno has been practising double-taps ever since Gene Kelly double-tapped.

Having said that, i am cognizant that our armed forces must have means to modernize. We can't have our airmen, sailors and soldiers sitting for years on outdated hardware and software. Training and familiarization take time. Confidence must be built. Cutting edges must be sharpened. But at the least do the right thing right the first time.

Which is more than what we can say about how the govt has been managing inventories. You can read in Janes that news about how a large quantity of firearms were broken into in an army barracks some years back.

But you don't need Janes to read about the theft of ammonium nitrate in Sabah recently. That's the sort of fertilizer used to make the sort of explosives that were used to blow up one oklahoma federal building.

Comprende', home minister?

Suci Dalam Debu 11 February 2011 01:31  

The Egyptians are tired of the massive corruption under Mubarak.

Are our politicians not worried?
Does Najib care at all?

Anonymous,  12 February 2011 00:10  

Dear All,

MR6 Billion is a lots of money - we can use to built better roads and connect all the major cities with High Speed Bullet trains. Reduce travel time = more productivity hence more business done thus GDP and GNP increase. And what do we have - only 4-6 cariages that does not carry enough passengers, two lines (Putra and STAR) and when was the last you sat on any of our LRTs? Can you bear the screeching noise comming out of them? Does thie issue sound familiar?

As you can see all these MEGA deals (LCS purchase) are confirmed first. The annoucements are made to just make it official so that the public knows that the Government is going to spend this amount of money. This has always been the practice.

Question: Doesn't this hugh amount require the approval of Parliment?

And there is nothing the Nation can do about it. The minute someone question the authencity of any deals, they will be slam with how little they know about this and that. Worse off, interrogated, abused and lockup.

When will we learn. Our country is full of resources, so diverse (which puts us at an advantage - but our UMNOputras does not recognize it - they are so short sighted) yet we so far from our neighbours. We can never get anything done when MPs forget their roles and responsibilities to the Nation. They were voted into office by the people! But when they had won, they treat us like a bunch of idiots as though we owe them a living but in actual fact, we are their boss and no them!

I can just imagine if one day our Prime Ministers are voted into office by people from all 13 states and not by a bunch of UMNO delegates. That will be the day Malaysia will truely be liberated.

What do you think?

Anonymous,  12 February 2011 00:39  

Hi,

RM6B is a lot of money. Buying is one thing. Can you imagine how much it will cost the tax payers to maintainance!!! Anyone's guess? I can tell you, it will be a lot more painful in the long run i.e. if at all those ships make it to the docks.....

The maintenance income will feed a lot of retirees la....

May the FORCE be with them. Malaysia has lots of RICH people but they are not WEALTHY. Food for thought.

Cheers.

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