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IMMEDIAT
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FM HONG KONG 080792Z
CONFIDENTIAL
LAST
AFF.
TO IMMEDIATE F C O TELNO 1243 OF 8 DECEMBER.
425
NEXT
REF.
447
FOR O'KEEFFE.
PLEASE PASS FOLLOWING TO DAVIES FROM JEAFFRESON.
A FURTHER POINT HAS ARISEN CONCERNING THE APPLICATION OF THE
TENDER PRICE INDEX TO THE BALANCE FOR WORKS SERVICES. AS ADVISED
IN PARA, 3 OF MY TELNO 1223 OF 4TH DECEMBER, BECAUSE OF WAGES AND
FLUCTUATION CLAUSES THE BALANCE SHOULD INCLUDE COMMITTED BUT UNSPENT
FUNDS IN RESPECT OF UNCOMPLETED CONTRACTS. BUT THE BALANCE SHOULD
NOT (REPEAT NOT) INCLUDE SUMS THAT CAN NO LONGER INFLATE. FOR EXAMPLE, IN CERTAIN CIRCUMSTANCES FINAL PAYMENT CAN BE SUBSTANTIALLY DELAYED AFTER WORK HAS BEEN COMPLETED AND IT WOULD BE INAPPROPRIATE
TO INFLATE THIS AMOUNT. THERE IS ALSO THE QUESTION OF RETENTION
HONEY. IN PRACTICE, THE MECHANICS FOR CALCULATING THE BALANCE ON
THIS RASIS MAY TURN OUT TO BE QUITE TRICKY, SO WE SUGGEST THE
PRINCIPLE BE INCLUDED IN THE STATEMENT OF FINANCIAL PROCEDURES BY
MEANS OF THE FOLLOWING AMENDMENTS, LEAVING THE DETAILS TO BE
WORKED OUT BY THE FINANCIAL PROCEDURES COMMITTEE
PARA. 5. DELETE ''ACTUAL EXPENDITURE ON WORKS SERVICES FOR THE
PREVIOUS QUARTER AND ESTIMATED EXPENDITURE FOR THE CURRENT QUARTER''
AND INSERT IN ITS PLACE PROVIDE THE NECESSARY INFORMATION ON
EXPENDITURE ON WORKS SERVICES''.
PARA. 18.
INSERT A NEW SENTENCE IMMEDIATELY BEFORE THE LAST SENTENCE
TO READ AS FOLLOWS:
2 2 THE BALANCE WILL BE CALCULATED IN SUCH A WAY AS TO AVOID APPLYING
THE INDEX TO SUMS WHICH WILL NOT INFLATE (E.G, REPRESENTED BY WORKS
COMPLETED BUT NOT PAID FOR AND BY RETENTION MONEY)''.
CONFIDENTIAL
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