AG's Report: LCS project faces delay risk over unfinalised supplementary contracts

KUALA LUMPUR: The Auditor General's Report for 2026 has revealed potential delays in the construction of the Littoral Combat Ship (LCS) project due to unfinalised supplementary contracts. These contracts, including Integrated Logistics Support and Trial Aids, Surface-to-Surface Missile, Ammunition 3P Medium Caliber Gun, and Integrated Decoy Launching System, have not been finalised, leading to a delay of over four months since the Letter of Acceptance was signed.

The government had made two progress payments totaling RM100 million, but the contractor failed to submit a claim within the allowed period. The delay is attributed to disputes over warranty periods and minimum requirements for First Outfit of Stores and Onboard Spares, which have yet to be agreed upon. The contractor's work progress on the ILS-TA contract stood at 30.49%, falling short of the scheduled 37.41% as of June.

Despite the contractor stating that critical work scopes were continuing, the physical progress was significantly behind schedule. The defence ministry defended the delay, citing prolonged technical, commercial, and legal reviews, but the issue was resolved after the revised contract was signed. Another concern is the Naval Strike Missile anti-ship missile system contract, which was not finalised following Norway's cancellation of the export licence due to national security grounds.

Malaysia has claimed over RM1 billion against the involved company, awaiting a response from Norway.