Kuala Lampur:The finalisation delay of supplementary contracts for the Littoral Combat Ship (LCS) project is causing potential setbacks in the construction of LCS1 to LCS5, as indicated by the 2026 Auditor-General's Report Series 2.

According to BERNAMA News Agency, the report presented in the Dewan Rakyat disclosed that contracts related to Integrated Logistics Support and Trial Aids (ILS-TA), Surface-to-Surface Missile (SSM), Ammunition 3P Medium Caliber Gun (3P MCG), and Integrated Decoy Launching System (IDLS) remain incomplete. Specifically, the ILS-TA contract, valued at RM535.37 million, had not been finalised by June 25, more than four months after the Letter of Acceptance was signed on August 5, 2025. This contravenes the requirement set by Treasury Circular PK 4.2, which mandates the completion of contract documents within four months of signing the LOA.

During this period, the government made two progress payments totaling RM100 million, yet the contractor did not utilize the provision under PK 4.2 to file a third payment claim. Despite being eligible to claim RM132.73 million based on the work progress, the claim was unfiled due to the contract's pending finalisation. The delay was attributed to unresolved issues concerning the warranty period and the minimum specifications for First Outfit of Stores and Onboard Spares.

By June, physical progress on the ILS-TA was only at 30.49 percent, falling short of the targeted 37.41 percent. Work on the ILS-TA was suspended by the contractor on May 15, but critical activities continued to keep the project on schedule, as stated in a July 7 communication.

The Ministry of Defence (MINDEF) commented that their legal adviser deemed the suspension notice invalid because the LOA acceptance established a binding contract. The ministry cited extensive technical, commercial, and legal reviews since October 2025 for the delay, which was resolved when the revised contract was signed on August 11.

Additionally, the report highlighted that the Naval Strike Missile (NSM) system contract remains unfinalised following the Norwegian government's cancellation of the weapon's export licence. The government had already paid EUR124.35 million, representing 96.6 percent of the contract's total value of EUR128.72 million, before the licence cancellation. MINDEF indicated that negotiations took place in Türkiye on August 12 and 13, with plans to address the issue through the Dispute Resolution Committee and potentially arbitration if no settlement is reached.