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E
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Counter-bid from Hong Kong Metro Constructors
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XCS(73)12
The final
"
Hong Kong Metro Constructors, representing the Anglo- French-German Consortium, have submitted a range of indicative "technical prices" as at the beginning of November 1973 ("minimum $3,790 million, "maximum" $5, 050 million and "expected" $4, 264 million). These are not binding because the Consortium argue that information is still lacking in some areas, particularly on sub-soil conditions which would preclude "any responsible contractor" from quoting a firm price before April 1974 at the earliest. technical prices, which would exclude any allowance for inflation or "other serious economic dislocations", would be adjusted to a final total contract price by adding a cost escalation rate of, possibly, 8% per annum. In discussion, the Consortium have suggested that, in quoting the final contract price, they might be prepared to bear the excess in escalation costs over, say, 8% per annum up to an undefined threshold level (but see now paragraph 25 below). Any further escala- tion beyond this threshold level would be regarded as constituting "force majeure" and would, therefore, be charged to the client's account.
Evaluation of the Pre-emptive Bid and the Counter-bids
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An up-dated list of the extent to which each consortium meets the Government's requirements for the construction of the Mass Transit Railway is at Annex E. Apart from the crucial question of pricing, which is dealt with in paragraphs 15 18 below, the extent to which the consortia differ in meeting the requirements is as follows:
Requirement
II(a)
(Joint and
several liability)
V (a)
(Export credit type finance)
V (b) (Rate of interest)
Comment
The Anglo-Italian Group are unwilling to offer "joint and several liability", although each constituent is prepared to accept liability for its own portion of the contract.
The Japanese Consortium's finance would amount to Yen 143, 925 million which could be taken as the minimum amount on the basis of the ceiling price of Yen 255, 600 million quoted for the contract. This would amount to 56, 3% of the ceiling price. The Anglo-Italian Group would offer not less than 60% of the contract price. Hong Kong Metro Constructors have offered a maximum sum of $3, 250 million. This would finance 65% of the contract, provided it did not exceed $5,000 million.
Only the Anglo-Italian Group meet this requirement. The Japanese Consortium would charge 7% and Hong Kong Metro Constructors an average of about 7%.
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