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Tuesday, March 23, 2010

Contract on Scorpene submarine maintenance yet to be signed

The government has yet to formalise the Integrated Service and Support (ISS) contract with Boustead DCNS Naval Corp Sdn Bhd (BDNC) for the maintenance of the Royal Malaysian Navy’s two Scorpene submarines.

Defence industry sources told The Malay Mail that although Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi had told Parliament last week that the cost of maintaining the submarines had been capped at RM270 million per year, no formal agreement had been signed.

According to the sources, it is still unclear whether BDNC is agreeable to the new arrangement. Officials from BDNC declined to respond when contacted by The Malay Mail.

However, an official statement on the matter is expected next week. Sources said the formal contractsigning could take place during the upcoming Defence Services Asia 2010 show to be held from April 19 to 21.

BDNC is a joint venture between BHIC Defence Technologies Sdn Bhd and France-based DCNS S.A.

BHIC is a subsidiary of publiclisted Boustead Heavy Industries Corp Bhd. BDNC engineers and technicians are already stationed at the RMN base in Teluk Sepanggar, Sabah, to conduct maintenance and support for KD Tunku Abdul Rahman, one of two Perdana Menteri-class submarines of the RMN, as part of the warranty programme included in the procurement contract.

During Lima 2009, it was announced the government awarded a contract worth RM187.8 million to DCNS for the procurement of operational-level maintenance spare parts and support and test equipment for the Perdana enteri class submarines.

Last Thursday, it was reported that Zahid, when responding to a supplementary question, denied the government had agreed to pay RM600 million per year for the cost of maintenance and spare parts.

He said under the agreement with BDNC, such costs were capped at RM600 million a year.

“For now and in the years to come, it is RM270 million per year as the submarines are new and it would take some time to reach the RM600 million figure,” he said.

The Malay Mail reported last month that negotiations for the ISS contract had reached an impasse due to a dispute over the cost of the contract.

In a statement to Bursa Malaysia made in June last year, Boustead Heavy Industries stated the government had expressed an intent to award a contract worth RM600 million to its joint-venture unit for in-service support for the RMN’s Scorpene submarines.

BHIC told Bursa Malaysia the government, in its letter of intent dated June 3, stated its intention to sign a contract with BDNC.

It was anticipated negotiations would have culminated with a contract- signing at the Lima 2009 show in Langkawi in December but the matter has dragged on until now.

The Malay Mail also reported last month that KD Tunku Abdul Rahman suffered a technical defect that prevented it from diving for three months.

The submarine only started its delayed tropical water trials on Feb 20.

The defect forced the RM1 billionplus French-built Scorpene submarine to delay its tropical water trials that were scheduled to be completed last month.

As a result, builder DCNS extended the warranty for the submarine, which was supposed to expire on Jan 25, until May 25 so that KD Tunku Abdul Rahman could complete its trials — the first step in obtaining its Initial Operational Capability (IOC).

KD Tunku Abdul Rahman was commissioned early last year after undergoing two years of trials in France.

The submarine is expected to complete all trials by May and be cleared for operations in the same month.

It is also expected to conduct live firing of its SM39 Exocet anti-ship missiles.

The Royal Malaysian Navy procured the two submarines, KD Tunku Abdul Rahman and KD Tun Abdul Razak, for RM3.4 billion in 2002 from French/Spanish shipbuilders, DCNS and Navantia.

KD Tun Abdul Razak is scheduled to return home on May 31.