Monday, February 07, 2011

RM6 billion for 6 Offshore Patrol Vessels - Deal?

Defence Minister Datuk Seri Zahid Hamidi announced the order for 6 units of offshore patrol vessels (OPVs) for the amount of RM6 billion from Boustead Naval Shipyard Sdn Bhd two days ago.

While it is understood that the price is yet to be “finalised”, it brings to questions the practice by the Ministry of Defence (MoD) to award contracts well before the terms of the contract, including the price, have been finalised. Last year, MoD awarded another RM8 billion contract to purchase 257 8x8 Armoured-Wheeled Vehicles (AWVs) from a DRB-Hicom subsidiary when the latter has not even built a prototype vehicle for testing. These contracts were also awarded with no competitive bids which raise the likelihood of massive leakages in the process.

What is the point of making major announcements on such awards, including the value of the contracts when the Government will subsequently explain that “everything is still subject to finalisation of specifications and negotiations on price”? In that case, isn’t it better to finalise the specifications, conclude the price before the relevant announcements?

A cursory check on the prices of OPVs revealed a wide range in prices per ship. The Royal New Zealand Navy (RNZN) took delivery of its 85-metres 1,500 tonnes OPVs from world-renown global defence and security company, BAE Systems last year at the cost of NZ$90 million each or approximately RM210 million. The OPVs were built for maritime counter-terrorism, surveillance and reconnaissance, surface contact detection, apprehension and escort of vessels as well as maritime search And rescue (SAR).

The Irish Roisin class will cost US$34 million (RM103m), the Greek Super Vita US$108 million (RM329m), the German Type 130 US$188 million (RM572m) and the Israeli Saar V US$260 million (RM791m) each. The MoD’s price tag of RM1 billion per OPV is between 26% and 870% above the cost of the various international-class OPVs listed above.

Even at the very top of the range, ships were to be built by Lockheed Martin and General Dynamics, two of the best and biggest military companies in the world were to build the US “Littoral Combat Ships (LCS)” at a budget of less than US$300 million (RM913m) in 2004. These ships are sized at 115 metres and 3,000 tonnes and fully equipped for full-scale anti-mine warfare, anti-submarine warfare as well as surface warfare. The ships will even have helicopter hangers built on its deck and equipped with the most sophisticated combat data weapons system.

The obvious question then, is whether the Government is procuring the construction of OPVs nearer the Irish Roisin class or closer to the US LCS? And if we are indeed making an order for the best-in-class LCS type ships capable of fighting a full scale surface and submarine warfare, does Boustead even have the skills and technology to make these ships?

Finally, it should be noted that even the most advanced defence countries in the world such as the United States procure military construction and defence equipment via competitive bids, open to world class international companies from Canada, Australia and Europe to achieve the best value for its money. In addition, the defence budget and expenditure is not only monitored by the Congressional Committee on Defence, it is also the approving authority for specific budgets for weapons related development including the LCS.

The MoD must practise increased transparency and professionalism in its award of contracts to ensure that the interest of the rakyat are fully protected and money taxed from the people are not wasted on over-priced projects. Otherwise, the call by the BN government for the people to absorb subsidy cuts on basic goods and services to rein in the widening budget deficit only smacks of hypocrisy.


dc said...

dear sir,

care to answer this :

Anonymous said...

Hah Stupid Pua, Talk COCK only....

dc said...

hi mr pua. after browsing the web for hours, i finally found a ship that might suit TLDM's need. Made locally and very cheap. You can have a look here.

Anonymous said...

Tony's job, if done properly, is to contradict or challenge every thing the ruling party does or enacts in terms of law or policy, using clear facts and logical claims. However, the process is perverted if either or both sides make specious arguments or exaggerated claims.

If Mr Pua is an honorable politicina, he would retract this claim of 'hypocrisy' and lack of 'transparency' as they are disingenuous in this article. His claims about the cost and class of military hardware indicates he is no fully apprised of the facts. He is manipulating it to serve his agenda.

Anonymous said...

Dear YB,

You ought to do your homework before you happily lambasting the TLDM.

Jeremy said...

tony pua..

so the singaporeans need to know :

1. which ships our new LCS will be based upon?

2. does boustead have the capability to build malaysian naval assets?

and you start the howling?

Pua Fing Kuat said...

Firstly please pay close attention to the nomenclature of your referred ships. Both these ship classes originates from the Mauritian Vigilant Class OPV launched in 1995, with the Roisin class launched in 1999 and the Protector in 2006 but only accepted in 2010 by the New Zealand Navy as they did not meet their specifications.

On a base level, these ships are 80 meters and 86 meters gunboats respectively with no modular capabilities and can and will only be armed with one 76 mm main guns and supporting machine guns while the Kiwi ships only 25mm main gun, thus their function purely as patrol gunboats. Please keep this in mind. The cost of the Roisin is 20 million pounds in 2000 while the cost of the New Zealand Dollars 90 million per ship for the Protectors is not finalized as per the NZ Ministry of Defence own web posting. Thus the price may actually be more than stated.

tony chen said...

tony pua kata pembelian tak dibuat secara kompetitif ?


sebenarnya pembelian 6 buah kapal LCS ini telah dibuat secara open tender. 6 SYARIKAT telah disenarai pendek.

boustead naval shipyard (BNS) adalah anak syarikat boustead holdings yang dimiliki oleh lembaga tabung angkatan tentera (LTAT).

syarikat ini akan bekerjasama dengan salah satu daripada 6 penender pembinaan kapal LCS.

malah dalam kerjasama ini, hampir 632 vendor syarikat tempatan berpeluang mendapat peluang bisnes kerana 60% daripada bekalan barangan pembinaan ini adalah produk tempatan.

jadi mana justifikasi tony stupid pua yang mengatakan pembelian ini tidak kompetetif ?

632 vendor IKS dapat peluang berniaga dan LTAT yang jelas menjaga kebajikan keseluruhan anggota tentera akan mendapat pulangan.

Kumat Selabin said...

1. Tony Pua gagal membezakan jenis kapal yang ingin dibina (bukan dibeli) oleh TLDM. Menurut Tony Pua, beliau merujuk kepada pembelian 6 biji kapal peronda pesisir pantai atau dalam bahasa English nya 'Offshore Patrol Vessels (OPV)', sedangkan TLDM ingin membina di Malaysia 6 biji kapal 'Littoral Combat Ship (LCS)'. Perbezaan di antara LCS dan OPV adalah LCS berkeupayaan dan kemampuan tinggi, mempunyai keupayaan tiga dimensi iaitu permukaan, udara dan bawah laut, sedangkan OPV hanyalah kapal peronda pesisir pantai yang agak terhad dari segi kapasiti dan penggunaannya. OPV juga tidak mempunyai persenjataan yang canggih seperti LCS yang mempunyai penderia dan radar berkeupayaan tinggi dan mempunyai sonar yang dapat mengesan kapal selam musuh. Antara kelebihan lain kapal LCS yang akan dibina di Malaysia adalah kapal berkenaan akan dilengkapi dengan sistem pertahan yang canggih seperti sistem kawalan dan pemerintahan, sistem peperangan elektronik, sistem pengerak enjin pelbagai kawalan, radar penjejak, radar pengesan tiga dimensi, sistem solar pengesan kapal selam, peluru pepandu di dalam laut dan di udara dan torpedo anti kapal selam.

Anonymous said...

Ah Pua mau tau "what exactly are we buying wif RM 6 billion"..

ha ha ha..teruk betul puak2 DAP skrg, mau tau semua brg yg ada dlm kapal perang TLDM.

oi Pua, bila you dah tau mau bikin apa semua rahsia kapal itu?

lu rasa singapore kasi tau semua detail kapal perang sama MP ka?

Anti-Gay Malaysia said...

Unsurprisingly the recent announcement regarding the Second Generation Patrol Vessel program has the DAP up in arms (though noticeably its PR colleagues in PAS and PKR have been fairly quiet on it or maybe I missed something somewhere). I do find it amusing that DAP member Liew Chin Tong said the ships would be better built overseas as it would be cheaper but provided no facts on it and at the same time alienates the people of Lumut where the ships would be built, and there I thought Pakatan Rakyat wanted to win back Perak. I actually wonder if the ships were to be built in Selangor, Kedah, Kelantan or Penang, would Liew still recommend the ships be built overseas?

Meanwhile DAP MP’s Tony Pua has put out a statement on the purchase of 6 offshore patrol vessels, Pua’s assertions though, particularly in regard to similar vessels comparison are fairly misleading to those unfamiliar with defence issues but which a number of people are likely to buy wholesale.

Anti-Gay Malaysia said...

Before going into that sphere though, Pua’s assertion that the Ministry of Defence has a practice to award contracts before well before the terms of contract has been finalized should be addressed. The problem in this is that Pua confuses a Letter of Intent as in regard to the AV8 AFV and OPV announcements as to an actual contract. An LOI is actually a document outlining a preliminary agreement between two parties before the actual contract is finalized and an official notification that the two parties are negotiating. In most cases it is also to clarify key points for complex deals and to provide safeguards for both parties if neither can agree on the final terms of the contract, and mostly it is non-binding in contrast to a contract. A potential value is announced by the government in an LOI for various reasons however it often is not the actual value when the contract occurs, particularly in regard to complex arms purchases. The LOI value is actually an indication of how high the ceiling value of the contract will be provided that the company meets all that the government requires or specifies in terms both in terms of technical and delivery requirements and also if the company offers additional services, equipment etc to the government which the government had not considered in the deal but would like to also include in the deal since the company is offering it. Basically the government is telling the company that is has X amount of money for the deal provided the company meets all that it wants and if possible offers more, but in most cases this never happens, the company naturally has it’s own idea as to what it will for provide for a particular amount and the result is both the government and company will then negotiate down to a deal satisfactory to both parties. The ceiling value is also there so that for the government, it can allocate and plan accordingly for the future as such negotiations may take months so in essence it is necessary for the government to plan based on the highest possible cost though in actuality this would not occur and the contract price would be less. The ceiling value is also necessary for the company in the contract so that it can show to its shareholders, financiers and investors that it has a potential deal valued at such an amount in the works. In the past, under previous administrations, one of the most common complaints of defence companies was that the Malaysian government often would not give any indications publicly of how much a defence deal was potentially worth, which made it hard for companies to justify their efforts to shareholders and investors and also obtain financial backing. Occasionally companies would not be told of the ceiling value but only the requirements and as a result would submit something which met the requirements but be above what the government was willing to pay. Setting a ceiling value offers the company a figure to work around with during the negotiations to meet the potential contract.

Anti-Gay Malaysia said...

Now Pua’s analysis of ship prices is very much the approach of those unfamiliar with the defence field, namely to look on the internet for news reports of contracts on similar type ships and then contrast prices, unfortunately it doesn’t quite work that way for defence contracts for several reasons, first off, the Second Generation Patrol Vessel is a type known as a Corvette warship, however corvette vessels range in weight from 500 tons to slightly above 2000 tons, so in Pua’s case some of the warships he compares are less in tonnage and size than the SGPV’s planned 2,200 tons and 99m length and in the case of the Greek Super Vita, or Roussen class, he has got the comparison wrong as the Roussen class is actually a Fast Attack Craft of 580 tons and 62m in length, so it’s like comparing a mini-Cooper to a 4x4 WD in price. Of course naturally people will say why not divide the price by tonnage for comparison but again this is not possible for three factors, firstly, there key differences to ships even if of similar size and tonnage due to the type of equipment they mount such as weapons, electronics, engines etc and their design along with construction material, all of which makes substantial differences to the price. Secondly, is the time of the ships were contracted for, defence prices are not static prices, and citing prices for ships contracts 5 years or more ago do not reflect current prices. Finally a contract for a ship or ships is not just for the ships alone but also maintenance, support, training and delivery, hence if you decided to forgo maintenance, support and training options the cost would be lower, a slower construction/delivery schedule could result, depending on the negotiations, being cheaper or costing more in the fact that you have a series of lower payments but adds up to more in the end, pretty much like loans or hire-purchase. In all Pua’s ship price comparisons, it all falls foul of the first and second factors so much that it makes the third factor pretty much moot, Morever his statement that the US built it’s LCS for at a budget 300million USD is wrong, the US may have budgeted such but there had been warnings that the US was too overoptimistic on the price which eventually ended up costing USD637 million and USD704 million respectively for each of the two different design initial ships as shown in this article here:

Anti-Gay Malaysia said...

Just to show the comparison, here are the stats of each ship Pua shows (minus the LCS) in terms of tonnage, size and weapons/equipment capabilities, yes I have not mentioned engines/propulsions but pretty much engines are determined by vessel tonnage so somewhat moot

Second Generation Patrol Vessel (Proposed): Corvette/light frigate class 2,200T max displacement, 99m max length, Armament (plus associated sensors for weapons): 76mm main gun, possible 20mm/30mm cannons, Anti-Ship Missile, Anti-Air Missile, Anti-Submarine Weapons, helipad/hangar for ASW helo

Contract date: 2011 or 2012, USD329 mil per ship (expected to be lower at actual contract)

Main Role: Frontline Warship for Malaysian waters plus EEZ claims,

Ancillary role: Annoy Indonesia by being in border waters claimed as Indonesian waters, also annoys opposition by planned construction and fact that it built by Boustead Naval Shipyards acronym to BN Shipyards (BN being normally used for Barisan Nasional govt. party)

Ireland Roisin class: Offshore Patrol Vessel 1700t, 78.9m. Armament: 76mm Main Gun, 2 .50 cal machineguns, 4 7.62mm General Purpose Machine Guns, no helo deck/hangar.

Contract date and price: 1997 USD34 million

Diff to SGPV: 700t lighter, 11m shorter, No ASM,ASM capabilities, AAW only guns no helo deck/hangar, (what do you expect for USD34 million) more than 10 years ago contract price

Main Role: EEZ patrolling, Search and Rescue, Maritime enforcement

Ancillary role: Proving Irish are still relevant outside Rugby, St. Patrick’s and Irish Jokes

German K130 Braunschweig class: Corvette 1840t, 89m. Armament: 76mm Main Gun, 2 27mm cannons, RBS-15 anti-ship missile, Rolling Airframe Missile (RAM) anti-air missile, minelaying capability, helideck for naval helicopters but hangar only large enough for 2 UAVs.

Contract Date: 2001 – Pua says US108m a ship, actual is USD185m

Diff to SGPV – 300t lighter, No ASW capabilities, cannot carry naval helo due to hangar size, has Minelaying capability (not Malaysian req as indiscriminate weapon, we might dmg/sink US or China ship by mistake which would be a bad thing for us), contract signed 10 years ago

Main Role: Anti-surface warfare ship designed to operate beyond German waters together with Coalition fleet.

Ancillary Role: Scaring the French when it cruises in the English Channel.

Anti-Gay Malaysia said...

New Zealand Protector class: Offshore Patrol Vessel, 1900t, 85m. Armament: 25mm Naval cannon, 2 x.50cal MGs, helideck and hangar for Super Seasprite helo with torpedo, bomb or depthcharge.

Contract Date: 2004 – USD70.5 mill or NZ$91mil but not final cost as NZDF states final cost will go higher, Pua fail to mention or unaware of this only cites NZ$91mil

Diff to SGPV: 300t lighter, 10m shorter, 25mm gun only and AAW capability restricted to such, anti-ship and anti-sub capability only contained within helo

Main role: Maritime enforcement, EEZ patrolling, limited wartime role.

Ancillary role: Protecting Middle Earth from seaborne invasion

Israeli Saar V class: Corvette, 1275t, 85.6m. Armament: 25mm Phalanx Close in Weapons Systems, Barak anti-air missile, Harpoon anti-ship missiles, anti-submarine torpedoes, helicopter hangar and helipad.

Contract date: Early 1980s –USD 260million Pua’s figures is correct but neglect to note that with Israel enjoying special relationship with US, the figure may be subsidized somewhat in the building of these ships in the US and I am not sure that even a phone call by the PM’s wife to Michelle Obama would get us that price for these ships. On a more serious note, the SAAR V also benefits from vitually all of the electronics and combat systems along with the Barak missile being Israeli produced, which in turn keeps cost down

Diff: To SGPV: Close to 1000t lighter, 25mm CIWS capability over SGPV but no main gun, likely built at discounted price.

Main Role: Frontline warship for employment within Israeli waters

Ancillary role: Inviting attacks by everyone who hates Israel.

Greek Roussen class (Super Vita class): Fast Attack Craft, 580t, 62m Armament: 76mm main gun, 2 30mm cannons, Exocet Anti-ship Missile, RAM anti-air missile, no helo/helipad

Contract date: 2000 – approx USD108 million per ship –Pua’s figure correct but this is much smaller ship than SGPV

Diff to SGPV: almost 1,700t lighter, no helo/helipad, no anti-sub capability

Main Role: Fast attack craft

Ancillary role: discouraging Turkey in the Aegean.


Jerry Chin said...

Dear TONY,

As much as I respect you for being one of those 'UP & COMING' young local politicians but sadly, you got this one WRONG (way WRONG).

The way you came out BLASTING this issue is similar to a MAD DOG having just released from its' cage running around BARKING as if it hasn't seen the sun for decades.

Do you really have complete FACTS & INFORMATION before opening your silly mouth???

Or are you just TALKING for the sake of SHOWING OFF in view to steal CHEAP PUBLICITY???

YB, I prefer you to only speak when you have the FACTS instead of talking when you know NUTS about an issue.

BUCK-UP, please!!!

Anonymous said...

Judging form the posts giving their views here, we do appear to have a surfeit of naval vessel experts!
They would surely do the country proud!!
It would indeed be interesting if they will reveal their "naval" qualifications!
Or are they merely empty vessels!!!

Anonymous said...

It is not right when the ships are built by boustead and accepted by the navy. It is deem a related party or a conflict of interest. If the ships are substandard but are accepted by the navy wouldnt that be sweeping the issues under the carpet? What happened to the first six ships? Did the navy accept them and bypass the sea trials and certification by the equipment vendors? Are they seaworthy or are they written off?

Anonymous said...

Mr pua, the insider info was that the 6 ships did not performed up to spec at the sea trials so TLDM accepted the ships and then got the vendors to sign a retro certification. Keep this in mind when u next have a chance to find out where the 6 ships are now. Dont print this letter.

Anonymous said...

Author, it appears you have jumped the gun on blaming Tony Pua. At the time of his writing in February 2011, the specifications for our ships were not publicised.

The BAe Systems 57mm gun were only finalized on 4 April 2013. Boustead reported that the Captas sonar and Smart S radar were selected on 22 April 2013.

Quoting Anuar Murad, Director of Defence and Security at Boustead Heavy Industry Corporation, 16 April 2013:

-confirmed the BAe Systems 57mm gun, SETIS combat system, Rheinmetall and MTU engines.
-quote "all the other equipment is in negotiation stage and we cannot reveal who they are yet (sic)."

There was no way of knowing the specifications of equipment for the ship the government was intending to procure in 2011, or whether it would be delivered without major equipment like our Kedah class.

Tony Pua also did write in his statement: "The obvious question then, is whether the Government is procuring the construction of OPVs nearer the Irish Roisin class or closer to the US LCS?"