TNAG-0426-FCO40-472-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 75

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(b)

(c)

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In any case, even on the present basis, the indicative price put forward by one consortium (as adjusted by the Steering Group) comes reasonably close to the limit on the ceiling price. A reduction of this price, as well as some improvement in the consortium's export credit terms, could well be achieved in further negotiation.

There has also been a proposal from another consortium for a lumpsum fixed price contract. Although their maximum indicative price is well above the Steering Group's limit, the consortium's 'best estimate' is again reasonably close to the limit on the ceiling price. addition, the consortium have put forward certain lower prices on the basis of their suggestions regarding possible economies of design).

(In

The next question which arises concerns which consortium or consortia to select for the purpose of negotiations. Despite the significant differences between the financial viability of the four sets of proposals, as illustrated in the cash-flow tables at Annexes B-E, it is difficult at this stage to select (or reject) any particular consortium, bearing in mind the indicative nature of the proposals, and the fact that each consortium have, to a greater or lesser extent, partially met the Steering Group's requirements. Furthermore, there would seem to be tactical advantage in continuing the dialogue with all the four consortia, until at least one of them has come up to the Steering Group's require- ments, so as to maintain the greatest degree of competition possible in the circumstances.

Proposed Next Steps

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If Honourable Members advise that further exchanges should be entered into with the four consortia with a view to bringing at least one of them up to the Steering Group's requirements, it is suggested that the sequence of events leading up to the conclusion of the contract, and the approximate timing of each step in the sequence, might be as follows:

(a)

Beginning of August: Immediately after a decision in principle is taken to adopt the single-contract approach, the Steering Group would open up discussions with the Consulting Engineers with a view to determining what modifications would be required to their work programme. (The Consulting Engineers have hitherto been engaged on a brief which envisaged a multi-contract approach, and which required them to assume responsibility for the detailed design of the system. Under a single-contract approach, this responsibility will rest on the contractor, with the Consulting Engineers laying down broad design parameters and performance specifications and, thereafter, performing a monitoring role).

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