CONFIDENTIAL
AMA
Mr AJ H Ward
Ministry of Defence
Main Building (Room 6264)
Whitehall
LONDON SWI
Block B Room 913A
DSO 1112/31
3682
September 1975
286
Enter
Лив Занижи
280
-
Dear
HONG KONG
1.
Your minute dated 19 September 1975 refers. Shortage of time has precluded adequate consultation with Fl Air DDAQ but I am responding to your minute in order to put on early record the PSA's present view of works cost implications.
2. Capital Works -
Paragraph 3A of Telegram 924 refers.
The programme as at present framed, embracing work in progress, new works proposed for 1976/7/8 and the tentative programme of work formulated to cater largely for redeployments indicates annual costs including 16% Hong Kong Departmental expenses of the following order:-
3.
1976/7 1977/8 1978/9
- $ 37.5m $37.8m - $ 63.8m
1979/80 1980/1
J
57.2m - 17.Om
The programme of Capital Works will clearly be subject to detailed scrutiny and adjustment in relation to both content and incidence of expenditure in the light of the circumstances after the terms of any new agreement are settled. Broad decisions for LTC purposes will however require earlier consideration.
4.
Maintenance.
1
The inclusion of Maintenance will be a new feature of the proposed agreement, and it is not yet settled whether Departmental expenses will be paid on these. In the new circumstances of cost-sharing all works service costs, it is considered a reasonable assumption that they will be required to be paid and the rate of 16% has been assumed. In passing, the rate of DE's is presently included in the Statement of Working Principles and is open to reconsideration. The following levels of annual cost are estimated as follows:-
1976/7
1977/8
1978/9
$ 49.8m - 8 35m
1979/80 1980/1
$ 35m - $ 35m
- $ 35m $35m
Reductions in the Estate may produce reduced maintenance costs in future years, but there is as yet no indication of the probable scale of this.
5.
Total works costs are thus seen asi-
1976/7
1977/8 1978/9
$78.30 $ 72.8m $ 98.8m
1979/80 1980
- $ 92.2m
$52.Om
CONFIDENTIAL
7
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