Wednesday, December 7, 2022

Malaysian Fighter Contract ‘Under Investigation’ Over Favouring Korean FA-50 Over LCA Tejas & Other Jets — Reports

The Malaysian Anti-Corruption Commission (MACC) appears to have opened an investigation into the suspected irregularities in Malaysia’s Light Combat Aircraft (LCA) competition after receiving a complaint from an unsuccessful bidder, according to reports. 

In 2021, Malaysia’s Defense Ministry launched a tender to procure 18 Light Combat Aircraft/Fighter Lead-In-Trainer (LCA/FLIT) for Royal Malaysian Air Force (RMAF). The country received proposals from six international companies to provide the RMAF with the LCAs.

China’s JF-17, South Korea’s FA-50, Italy’s M-346, India’s Tejas, Turkey’s Hürjet, Russia’s MiG-35, and the Yak-130 fighters were competing for the contract.

The latest report by the Malaysian Tabloid, The Edge, claimed that Korean Aerospace Industries is in the lead for the multi-billion-ringgit deal to purchase aircraft for the Royal Malaysian Air Force (RMAF).

Mohd Iswandi Mohd Sharif, KAI’s local representative, said that the result of KAI’s tender submission for the FA-50 Block 20 to the Ministry of Defense looked “positive.”

However, an unsuccessful bidder has questioned the selection procedure and filed a complaint with the nation’s anti-corruption body. Based on papers and text exchanges seen by The Edge, the anti-corruption body is said to have initiated a case file. 

FA-50 Fighting Eagle
File Image: FA-50 Fighting Eagle

On October 27, caretaker Defense Minister Datuk Seri Hishammuddin Hussein announced that the price negotiations with bidders for the LCA procurement were over and that they were now simply awaiting the Ministry of Finance’s approval of the contract award.

However, Datuk Lau Kong Cheng, a consultant for one of the bidders, told The Edge that the current Finance Ministry should not be negotiating with KAI because the current administration was only a caretaker and hence had no right to engage in any contracts.

He alleges that decision-makers analyzing the tender decided on one bidder without visiting other shortlisted bidders’ OEM (original equipment manufacturer) facilities or plants to conduct a proper verification, review, and comparison process.

Lau was earlier quoted in a November 1 Harian Metro article that said one of the FLIT/LCA bidders had filed a police investigation alleging irregularities with the tendering procedure.

At the time, Lau was mentioned as a retired Brigadier General and the managing director of Paragon Avtech Sdn Bhd. The story omitted the name of the aircraft manufacturer who submitted the complaint. 

“This now looks like an attempt to speed up the procurement of the FA-50 and ignore OEM visits to all three initially shortlisted aircraft,” says Lau, adding that the RMAF had initially shortlisted the KAI FA-50, the Tejas from India, and the JF-17 B from China.

Meanwhile, caretaker Defense Minister Datuk Seri Hishammuddin Hussein ensures that officials in charge of the multi-billion ringgit agreement handle the contract professionally. 

Tejas-Singapore
The Indian Air Force Tejas performs at the opening ceremony of the Singapore Air Show on February 15, 2022.

Question Over The Procurement Process

The RMAF had specified five requirements for the producers of fighter jets. These include the capability to deploy missiles beyond visual range, 30% local content, supersonic performance, air-to-air refueling capabilities, and delivery of the LCA on a staggered basis over 36 months following the signing of the contract.

The unsuccessful bidder alleges that the international open tender for military aircraft’s evaluation process seemed unfair. The sources familiar with the outcome told The Edge that each tender’s evaluation procedure appears to be opaque. 

If such were the case, they might not have requested an open tender but started a Government to Government negotiation with the favored supplier, the sources added.

It is believed that the Ministry of Finance and the FA-50 bidder are currently engaged in direct discussions over commercial and technical modifications to the original bid filed in 2021. 

The sources alleged that the manufacturer of FA-50 appears to have altered its pricing and technical requirements during the continuing direct discussions. It is important to note that the current LCA procurement is an open international tender rather than a direct negotiation.

Lau notes that when bidders file their bids, they often invest a significant amount of time and money in explaining in their tenders how they will meet the end-evaluation user’s criteria and demand.

He pointed out that it is against all proper tender and procurement procedures to choose such a significant and expensive military system (a multi-billion project) without conducting necessary verification, appraisal, and comparison trips to all shortlisted LCA OEMs.

Nevertheless, experts have noted that a caretaker government’s primary responsibility is to manage primarily administrative matters up until the election of a new administration. It lacks the authority or privilege to approve, ratify, or enter into any contracts, agreements, or commitments, whether national or international.

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