TNAG-0424-FCO40-470-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 132

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c)

a)

e)

The Target Price of the contract at any time would

be arrived at by applying the target rates to the

actual measured quantities just as with a normal

contract.

The actual cost of the work would be wholly under the

Contractor's control but would be properly recorded

and made available to the Hong Kong Government. To

the actual cost would be added an agreed percentage fee

to cover the Contractor's Head Office expenses and

profit.

If the Target Price exceeds the actual cost plus the

agreed percentage, the saving would be split between

the Government and the Contractor in pre-agreed

proportions. If the actual cost plus the agreed

percentage exceeds the Target Price then the excess

cost would be split between the Government and the

Contractor in pre-agreed proportions until the overall

fee to the Contractor is reduced to a pre-agreed

minimum.

In our view this form of contract offers great advantages:

It should permit an early agreement on the terms of

4.

a)

the contract since it should be perfectly possible to

negotiate a sufficient basis of target rates for

initial requirements by the end of the year.