CONFIDENTIAL
AIK 173
MR TWYMAN OPG
173/2
No
Reference
cc Mr Knighton or Mr Wilks or
Mr Dell M
Mr Benjamin IIC Mr Browning CRE4 Mr Simpson IDU Mr Thompson FCO Mr Stephens ECGD
CODE 18 - 77
HONG KONG KOWLOON/CANTON RAILWAY
This minute brings up to date our information on the adjudication of tenders in Hong Kong and mentions the actions that are being taken to try to help Metro Cam stay in the race.
Mr K V Smith of Transmark, whose willingness to act as a source of information must be scrupulously safeguarded, tells me that on Wednesday of last week the Hong Kong tenders board had before them the results of the tender which were as follows:-
Hawker Siddeley, Canada
C Itoh, Japan
50 Cycle Group
Metro Cam
6.8m HK$ per set for 45 3-car train sets
8m HK$ per set
Thought to be 9m HK$ per set
10.5m HK$ per set
The Metro Cam and 50 Cycle bids were regarded by Transmark as technically fully compliant. Transmark had some doubt in relation to the electrical equipment put forward by the Japanese. The Hawker Siddeley contract was not compliant in a number of respects, one of the most important being that it was not a fixed price. Hawker Siddeley, Canada were of course ready to discuss firming up their bid if called to do so.
Faced with these bids the tender board had inclined to the Japanese bid but had then decided, for Hong Kong political reasons and having regard to the experience of the original turnkey project for the mass transit scheme, that they were reluctant to recommend a Japanese contractor. The tender board postponed further consideration, leaving all four bids on the table. They were likely to return to it either on Wednesday 8 November or Wednesday 15 November.
The bidding was complicated because the money to pay for the train sets was to be found from the current income of the Hong Kong Government. Provision in estimates was for a total of $289m whereas even the Japanese bid was for $365m. The finance committee of the Hong Kong governing council had originally agreed to go out to tender on the assumption that the investment would show a 15% return. On the figures presently available it looked as though the investment could not produce a better than 10% return. Whilst, therefore, the finance committee could be expected to accept the recommendation of the tender board on a matter of this kind, there must remain some question mark until the finance committee had considered the position.
Mr Smith said that he was bringing this to my notice since Transmark were expecting to provide consultancy to the Chinese authorities in relation to the extension of the railway beyond Hong Kong borders to Canton. It was extremely distasteful to Mr Smith to envisage having to
CONFIDENTIAL