HONG KONG UNDERGROUND PROJECT
File OPG/300
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NOTE OF A MEETING
1.
Messrs Fryer and Butler of GKN Contractors Ltd called on Messrs Glaves-Smith and Watson by appointment this morning. I was also present.
2. Mr Fryer explained that GKN Contractors Ltd had accepted an invitation from the Franco/German group, headed by Hochtief, to take a one-third responsibility in the group's bid for the above project. GKN were fully aware, of course, of the all-British consortium's bid for this business but had decided that (a) if GKN did not accept the offer some other British, or possibly Italian or Japanese, firm would and (b) if the all-British proposals were turned down in favour of those of the "European" consortium considerable business would still accrue to the UK. The Anglo/Franco/German group's bid was, like the all-British one, on a turnkey basis, so if the Hong Kong Government decided eventually in favour of negotiating the business on a multi-contractual basis, both bids would fail.
3. The Anglo/Franco/German bid totalled some £120m, of which GKN share would be 80me £40m.
Mr Fryer had been both surprised and disappointed to learn that despite the high value of the UK element ECGD were neither prepared to offer to GKN credit terms similar to those covering the all-British bid. nor to consider matching terms. GKN considered that the Anglo/Franco/German bid was in no way detrimental to the all-British group's offer, but that it would provide further competition to the Japanese proposals which were expected to be formidable.
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Mr Glaves-Smith said that he wished to make HMG's position clear in this very important matter. Every effort was being made to secure this contract for the UK. including the most attractive credit terms possible and there was no possibility of help being offered to any competing group. HMG was very anxious to obtain its first major overseas underground contract and considered it vital that the Hong Kong contract should not be lost to foreign competition. The award of the contract to the AFG group would definitely be detrimental to the all-British Group and any attempt by HMG to improve the AFG proposals by offering anything better than basic credit terms would be counter-productive in this context.
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Mr Fryer said that he had hoped that HMG would look upon the AFG group's bid
"second string" to the UK bow and asked that the position be kept under review. The AFG group would definitely put in a bid and would have a second round of discussions with the Hong Kong Government in June it was understood that they would be third in the timetable with the all-British group last.
6. On a more general note, the visitors enquired about the future policy of HMG as far as large overseas projects were concerned. The size of such projects was increasing and it could well be that collaboration between the UK and her new European partners would be necessary if non-European competition were to be overcome. The policy of HMG backing only one, preferably all-British, bid could react to the detriment of a British firm which had decided to combine with a foreign firm or consortium in pursuit of the business, particularly if that firm had committed itself without having pre-knowledge of the all-British bid. Credit terms were based on the total value of a bid and not on individual contributions, which meant that multi- natural bids could in some circumstances be highly competitive.
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