TNAG-0426-FCO40-472-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 34

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questioning conversation was that he and a number of other officials in IXCO had been very disturbed by the way the discussion had started to go and in what was apparently a long and lively discussion had fought hard both to try to keep the Anglo/Italian Group in and to make sure that the Japanese bid was viable. They had specifically asked the Steering Group which I assume means Philip Haddon Cave whether they really believed that the Japanese would be able to honour the price they had quoted despite the galloping escalation since they quoted it and whether there were any tricks in the Japanese offer. Apparently the Steering Group had replied that they were confident that the Japanese would meet the price and if costs so escalated that the members of the consortium were operating at a loss then the Japanese Government would subsidise it in order to ensure that the quoted price was honoured.

Apparently the point that clinched it so far as the EXCO were concerned was that they (the Japanese) were offering a fim price on a firm date, ie 11 December and EXCO were concerned that if they did not accept the offer there and then the price would go up or the terms would be changed and they would be left in a position of having to negotiate further without knowing what they might get either from the Japanese or from the Anglo/Italian Group at the end of it. In other words it was a typical Hong Kong decision the cheapest price now.

So far we have been able to discover little or nothing was made of the guarantee point and little or nothing was said about the proposals in the Anglo/Italian bid to cover the escalation gap, nor is it clear whether attention was focused on the maximum figure in the Anglo/Italian bid or on their much lower estimate of what the price was eventually likely to be.

It is difficult to resist the conclusion that whatever efforts may have been made to keep the prospective broad and open, in the event eyes were narrowly focused on the hypnotic figure of £5,000 million. Indeed I have it from one reliable source that Haddon Cave himself took the view that his duty, as keeper of the purse, was to get a firm price within what he knew the system could afford. If any Government was prepared to subsidise the job to ensure such a price then that was their worry and Hong Kong's bonus and it should be accepted conversly if the figure was too high and would give the contractor excessive profit then that was the contractor's bonus for taking a risk and liong Kong should accept it because at least it gave certainty. According to this source it was this view that prevailed with the Chinese members of XCO who lined up with Haddon Cave against most of the rest, to produce a very narrow majority.

It also seems likely that somewhere along the line the comparisons between the Anglo/Italian figures and the Japanese were distorted. From the remarks which the Governor has made to Sir Douglas Clague and some comments which he made to me in a private note (in response from one from on expressing personal surprise at the decision and asking whether there was anything further that could be dono) he at least seems to have been under the impression that there was a very wide gap (1,000 million) between the two prices and this could only be explained by his comparing the maximum ceiling price of the Anglo/Italian Group (in alternative one plus the additional station and ventilation) with the Japanese price, where- as it might well have been nearer the realities to have compared the Anglo/

Italian estimated cost.

I was also surprised to learn from my brief personal exchange with the Governor that he had been pressing for the Anglo/Italien price to be limited to $5,000 million if necessary by subsidy from MMG since this, as I have already mentioned above, does not square with the attitude which he had taken with me and with the Anglo/Italian representatives about the flexability of the ceiling price figure.

Every effort is made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors or omissions CONTI DEZENAIg that information and no responsibility is accepted in regard to the standing of any firms, companies or individuals mentioned.