TNAG-0424-FCO40-470-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 198

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exchange rate prevailing on a date to be agreed. (This figure is exclusive of land costs, client's supervision costs and Consulting Engineers' fees payable by the client). This being the case, it is essential to achieve agreement on an absolute ceiling price, which must be below $5,000 million. It is also essential for this absolute ceiling price to be circumscribed by suitable conditions of contract, and for the contractor to assume responsibility and liability for the successful completion of the project.

4.

In view of these considerations, the Government has drawn up a comprehensive set of requirements which it considers to be essential (or, in some cases, desirable) elements of a single contract which would ensure not only the system's financial viability, but also the successful completion of the project. It is the Government's understanding that, by the latest available indications, the proposals put forward by the British Group fall short of the Government's requirements in respect of the following items:

(a)

(b)

(c)

Provisions for cost escalation must be clearly defined and limited to a pre-agreed maximum.

There should preferably be no 'unforeseen circumstances' clause: if there has to be one, claims must be limited to a pre-agreed maximum.

The consortium must state a ceiling or maximum price for the contract which will not be exceeded in any circumstances.

(a) The ceiling contract price must be below $5,000 million.

(e) The consortium should be prepared to take over responsibility

for detailed design as and when basic data and design parameters for civil works are available and performance specifications for E & M equipment are defined.

5.

I should be grateful if the British Group would consider the above requirements, and advise me on or before 23rd August, 1973 whether they would be prepared to enter into negotiations with the Steering Group with a view to developing a suitable contract. At this stage, the Steering Group has in mind that the sequence of events leading up to the conclusion of the contract might be along the lines of the annex to this letter.

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