KUALA LUMPUR, Aug 22 — Vendors for the navy’s littoral combat ships (LCS) were chosen even before the issuance of Letter of Awards (LOAs), according to the declassified forensic audit report by Boustead Heavy Industries Corp Bhd (BHIC) released last night.

Amid continued scrutiny into the procurement scandal, the forensic audit report further said BHIC issued 12 LOAs worth RM3.3 billion to Contraves Advanced Devices Sdn Bhd (CAD) and its wholly-owned subsidiary Contraves Electrodynamics Sdn Bhd (CED).

Together, they made up roughly 37 per cent of the total contract value of the RM9 billion LCS project.

Both CAD and CED were appointed by the Boustead Naval Shipyard (BNS) to buy equipment from the original equipment manufacturer for the project.

The forensic audit report also highlighted the lack of structure and governance for the LCS project that started in 2010 and went unchecked until 2015.

“The organisation structure for the LCS Programme was not approved by the appropriate authority (BOD) till 2015.

“The terms of most of the LOAs and VOs were not in the best interest of the company and were more favourable to CAD/CED.

“The evidence of irregularities and lack of proper governance were gathered as early as2010, confirming that vendors were determined, even before the issuance of LOA, by the GOM (government of Malaysia) in favour of BNS,” said the declassified forensic audit report that is now publicly available online.

The 104-page forensic audit report covered 21 LOAs, including variation orders, with a combined value of RM4.97 billion.

The report stated that the terms of reference of the LCS steering committee (LCSSC) appeared lopsided, as the members of the committee were selected by BHIC managing director Tan Sri Ahmad Ramli Mohd Nor without having to consult with the board of directors.

Ahmad Ramli was then chairman of LCSSC.

“As a result, the members became redundant and failed to discharge their function for which they were selected in the LCSSC,” the forensic audit report said.

The forensic audit report also found that the then programme director Anuar Murad took advantage of the situation and made arbitrary decisions relating to the LOAs and variation orders (VOs) with the blessings of chairman Ahmad Ramli.

At the time of issuance of LOAs, Anuar signed as both a witness on behalf of BNS, as well as on behalf of CED when parent company CAD reassigned the awards to its subsidiary CED.

Anuar was named the person who recommended all payments to CED for the approval of Ahmad Ramli, including milestones certificates.

“This indicated that Anuar Murad was acting on behalf of BNS and CAD/CED both at the same time, which was in conflict and showed a serious lack of independence on the part of the decision maker,” the forensic audit report said.

In the board’s meeting minutes, former Royal Malaysian Navy chief Admiral Tan Sri Abdul Aziz Jaafar was reported to have expressed concerns about relying too much on CAD and CED for the RM9 billion LCS project.

Apart from Abdul Aziz, the forensic audit report said committee members failed to raise any objection with the way decisions were being made by the management about the selection of various vendors for the LCS programme.

“In most of the cases, LOAs were issued to CAD or CED without being first presented to the LCSSC for their approval.

“The BOD had also given sweeping authority to Ahmad Ramli to negotiate the terms and executive [of] various contracts with CAD, without seeking their approval,” it said.

The roles of both CAD and CED – which are 51 per cent-controlled by BHIC and the remaining 49 percent held by German outfit Rheinmetall Air Defence AG – were first highlighted in an August 4 report by Parliament’s Public Accounts Committee.

BNS had appointed the two companies to buy equipment from the original equipment manufacturer, which caused acquisition costs to swell several times.

As of 2018, BNS' debt to the original equipment manufacturer stood at RM801 million, while it owed RM956 million to financial institutions.