Littoral Combat Ships or Littoral Cruise Ships?

 

The littoral combat ship (LCS) project is running behind schedule again with weaknesses found in its implementation. According to the Auditor-General's Report Series 2/2026 tabled in Parliament on Monday (Oct 5), the project was 7.55% behind schedule as of 25 June 2026. All five LCS vessels experienced completion delays ranging from 30 to 108 days. 

If the physical handover (PHO) takes place by 26 December 2026, it will be handed over without achieving full operational capability, as training and the weapons systems have yet to be completed. Full operational readiness of the vessels depends on the complementary contract, which can only be completed in December 2035, beyond the expiry of the main contract on April 25, 2030. 

The report said the PHO delay of LCS 1 would affect the handover of the remaining vessels. The procurement was carried out through direct negotiation. The construction of six LCS vessels, with an original contract value of RM9.128bil and a contract period of 10 years, was from Oct 3, 2013, to Oct 2, 2023. 

During the implementation, eight supplementary contracts to the main contract were signed to amend and align the contractual terms with the requirements of the project’s implementation. Following these supplementary contracts, the construction scope now involves five LCS vessels, with a contract value of RM11.227bil and the contract period extended until April 25, 2030,". The payment mechanism has also been restructured from being milestone-based to progress-based. 

Cumulative payments under the main contract amounted to RM8.557bil, or 76.22% of the RM11.227bil contract value, leaving a balance of RM2.670bil. For the procurement of the complementary contract, the government had made payments of RM100mil for the procurement of integrated logistics support and trial aids (ILS-TA) and 124.35mil euros for the surface-to-surface missile (SSM) system. No payments had been made for the procurement of the surface-to-air missile (SAM), ammunition (for the) 3P medium calibre gun (3P MCG) and integrated decoy launching system (IDLS), as the procurements had yet to be finalised.

In response to the audit findings, the Defence Ministry said the technical committee had instructed the contractor to take appropriate action to ensure that work progress remains in line with the stipulated targets. 

The Auditor-General recommended that the ministry establish a realistic recovery action plan to ensure that all critical activities under the main contract and complementary contract are coordinated with the scheduled PHO of the LCS vessels. It also recommended that the ministry ensure any conditional acceptance of the vessels clearly sets out the contractor’s obligations, completion timelines and responsibilities until the vessels achieve the stipulated capabilities. It also called for the project progress monitoring to be strengthened by setting milestones, designating officers responsible and establishing completion timelines for each critical issue until the project is successfully completed. 

Contract value has increased; number of vessels to deliver is now five instead of six; LCS 1 if handed over in December 2026, will not have any weapons – just the boat! Maybe we could do a cruise ship for peace instead of a defence ship for war! Why do we get into this muddle? Because of greed and corruption? Because of poor project management? Because we awarded contract to the wrong party? Or, all of the above? AG is very kind, please set a recovery plan, o a unconditional acceptance of ships and have proper progress reviews or monitoring via milestones! Wonder if by the time we receive an operational ship by 2035, will it be obsolete? 

 

Source: Auditor General’s Report 2/2026 

Reference:

Auditor-General's Report: LCS project behind schedule again, Ragananthini Vethasala, Divya Theresa Ravi and Gerard Gimino, 05 Oct 2026