CONFIDENTIAL
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Metcam's chances of success under options (b) and (c) rest on their ability to reduce their price to around that of the European consortium. The Department of Trade have been holding urgent meetings with the firm and within Whitehall to explore what can be done. So far they have managed toreduce the gap from about £7m to about £3m. Metcam and their sub-contractors have contributed some £2m of this by reducing their profit margins; the remainder has come from Department of Industry and ECGD funds (Mr Dell gave his approval to the attached submission yesterday). We are told that there are good pros- pects of reducing the gap still further.
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5. The efforts which the Department of Trade have been making to bridge the gap between the Metcam and the European consortium bids reflect the importance which they rightly attach to this project: There is more involved than the contract in Hong Kong, important though it is. The Chinese Government are proposing to carry out similar modernisation work on their side of the border (Transmark confidently expect to win the consultancy contract) and whoever wins the Hong Kong contract will be in a strong poisition to win the larger Chinese one as well. Failure on Metcam's part could also have wider implications: the Chinese authorities are unlikely to be very impressed if a British com- pany is unable to win the Hong Kong contract despite the advan- tage of tendering in a British colony to specifications drawn up by British consultants. Finally, failure to obtain this contract could adversely affect Metcam's chances of winning the
second-phase contract for Mass Transit rolling stock. Metcam
have already won the first-phase contract; tenders for the second are due in very shortly.
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