SAFEGUARD
10.1
10.2
The procedures now proposed albeit necessary, introduce two disadvantages compared with the frustrated ceiling price arrangement with the Japanese Consortium, namely uncertainty as to final cost and uncertainty as to the extent of export credit available.
The estimated costs used in the present exercise are based upon 1972 actuals adjusted by known increases to 1974. When tenders are received for the work to be carried out it will be possible to compare the 1975 prices used therein with estimates and thus eliminate a substantial part of this particular uncertainty.
10.3
There will remain the cost of escalation thereafter but excessive inflation affecting these costs will also affect revenue to some extent in that inflation is world wide. Care will be necessary in placing contracts with contractors in countries where in- flation is relatively uncontrolled at the moment, and in choosing the currencies for the various con- tracts. This problem is now inherent to any sub- stantial construction contract being placed on a world wide basis and calls for financial considerations
and judgments not previously necessary. It is likely that this new facet of financial judgment will become a permanent factor in the placing of this type of contract.
10.4
However, to ensure that work is not commenced before the 1975 price content of contracts is tested with estimates, no contracts will be placed with local contractors for the earlier simpler civil work before tenders have been received from international con- tractors for representative sections of the railway. This safeguard has been built into the tendering programme.
10.5
With the above proviso contracts will commence to be placed with local contractors in mid 1975, and during the intervening period it should be possible to obtain up to date indications from financial sources throughout the world, which will illustrate the extent of funds available to finance the building of the railway.
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