CONFIDENTIAL
tenders are out weighed by the certainty of having a fixed
price to aim at. The Hong Kong Government are constrained by their need to have HK$25 billion left in the kitty in
1997. They are also mindful of the uncertain economic future that may face Hong Kong in the run-up to 1997. They would rather have a fixed price even if a high one, than the
prospect of Channel-Tunnel type cost escalation in the
sensitve pre-97 period."//Inevitably as the deadline nears,
To
nervousness in the contracting community will increase.
an extent the conditions are the same for all. But in two
ways, British firms may actually be at a disadvantage:
(i) the fact that no price escalation is allowed over the
five year period of the contract - perhaps an unprecendented
length of contract time for no escalation could affect
British companies worse than others. Japanese companies may
be large enough to accept such big risks and may know that their government would provide help in extremis. They, and the Koreans in particular, may also be more prepared to take the risks than British companies.
(ii) The stipulation that there should be no change of the
parentage of companies during the life of the contract. Beezer, which is now owned by Lord Hanson, could probably
not accept such a condition.
4.
We shall not know until bids are opened how they have
been affected by these factors. It may be that the bids
received will contain quite a lot of fat to protect companies from the many unseen eventualities that may arise
over the period of the contract. But the Hong Kong Government are well aware of this possibility. Neither we
nor the DTI believe that no-one will at the end of the day tender for the bridge. The Governor, quite naturally,
shares this view. Rumour has it that some consortia may put
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CONFIDENTIAL