TNAG-0426-FCO40-472-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 94

XCS(73)12

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Anglo-Italian Merger and Counter-bid

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Before 2nd December 1973, identical letters were received from the British Group and Intermetro informing the Steering Group of their merger.

This means that there are now only three consortia (namely, the Japanese, the newly formed Anglo-Italian and Hong Kong Metro Constructors) vying for the contract. The Anglo-Italian Group have confirmed that, should their merger fall apart, the original British Group and Intermetro might still wish to continue bidding for the contract separately.

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The counter-bid submitted by the Anglo-Italian Group is based on December 1972 technology which could affect the validity of their figures, but only to a fairly marginal extent. The Japanese Consortium pre-emptive bid was not so qualified. As regards pricing, the Anglo- Italian Group put forward two alternative proposals and a further option, viz:

(a)

(b)

(c)

Alternative 1: on a "base" price of $4,300 million approximately escalated at 10% per annum for cost increases in respect of both off-shore and local elements of the contract, the ceiling price would be $6, 121 million. The ceiling price would not necessarily be the final contract price which would be determined by the middle of 1974, that is to say, soon after the soil surveys had been completed and all design information had been made available to the consortium. The final contract price would not exceed the ceiling price quoted and could be lower depending upon the results of the soil surveys, the nature of the design information and the actual rates of escalation (up to 10% per annum) experienced over the construction period. However, any cost escala- tion above a threshold rate of 10% per annum would be treated as "force majeure" and would be an additional charge to the client's account.

Alternative 2: the contract price would be $5, 391 million and would include escalation costs of 10% per annum for the off-shore element only, as in Alternative 1. All cost escalation for the local element of the contract would be charged to the client's account and cost escalation over 10% per annum for the off-shore element would again be treated as "force majeure".

Option: this is an offer to revert to a unit price contract with quantity remeasurement for civil works after negotiations have begun under Alternatives 1 or 2.

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