TNAG-0563-FCO40-658-Construction-of-an-underground-railway-system-in-Hong-Kong-1975 — Page 22

RR BTC HONG KONG

GPS 400

CYPHER/CAT A

FM DTI 181515Z

RESTRICTED

NO

RECEIVED IN

*'. c. 1

RECI

20 MAR 1975

Гаккан

HKIOD

[TRED/FRD]

TO ROUTINE BTC HONG KONG TELNO CREDA 60 OF 18 MARGH

FOR KINNEAR FROM FARRY OPG

MASS TRANSIT - YOUR CREDA 36

LAST

(27)

131

1. A COPY OF EGCI LETTER WHICH WENT ON 14 MARCH IS ON ITS WAY

TO YOU. IT MAKES THE FOLLOWING MAIN POINTS:-

A. SPLITTING CIVIL WORK INTO A LARGE NUMBER OF CONTRACTS IS LIKELY

TO RESULT IN DEARER AND SHORTER CREDIT WHICH ADDED TO COST

INFLATION SINCE THE FIRST BIDDING ROUND AND THE FACT THAT

REVENUE FROM THE MODIFIED SCHEME WILL BE SMALLER RAISES DOUBTS

ABOUT ITS FINANCIAL VIABILITY.

B. THE AUTHORITY WILL FACE ENORMOUS PROBLEMS IN COORDINATING THE

LARGE NUMBER OF CONTRACTS INVOLVED AND RISKS SEEING DELAY ON ONE CONTRACT AFFECTING WORK AND COST OF OTHERS AND JEOPARDISING

THE PROGRAMME AS A WHOLE.

C. THE MTA APPEAR TO HAVE EXCLUDED CLAUSE 12, RELATING TO BELOW SURFACE IRREGULARITIES FROM INTERNATIONAL (FIDIC) STANDARD

CONDITIONS OF CONTRACT. THIS INCREASES CONTRACTORS RISKS AND

WHILE THOMPSON'S ASSURANCE ON ARTIFICIAL IRREGULARITIES IS RELEVANT, NATURAL IRREGULARITIES WOULD NOT BE COVERED.

D. THE INCLUSION IN THE TERMS OF BOTH LUMP SUM AND ESCALATION

PROVISION SEEMS CONTRADICTORY AND THE FACT THAT NO RE-MEASUREMENT WILL BE ALLOWED IF BILLS OF QUANTITIES ARE ACCEPTED AT A LATER

STAGE MAKES THE BUSINESS EVEN LESS ATTRACTIVE.

E. THE BRITISH CONSTRUCTION INDUSTRY IS PREPARED TO NEGOTIATE

WITH THE MTA CONTRACT OR CONTRACTS PROVIDING A FAIR SYSTEM FOR PRICING UNKNOWN FACTORS AND CONSTRUCTION WORK (AS WELL AS MECHANICAL AND ELECTRICAL INSTALLATION). IT IS NOT PREPARED TO NEGOTIATE ON THE TERMS OUTLINED IN THE BROCHURE.

2. RUMOURS THAT HK GOVERNMENT MAY NOT PROCEED WITH THE SCHEME IF IN THE LIGHT OF BIDS COSTS LOOK EXCESSIVE HAVE ADDED TO THE INDUSTRY'S

DOUBTS.

3. WE HAVE TRIED HARD TO STIMULATE CIVIL CONTRACTOR INTEREST BUT THEIR REFUSAL TO PREQUALIFY IS NOT A TACTICAL PLOY. PRE-QUALIFICATION WOULD IN THEIR VIEW SUGGEST, WRONGLY, THAT THE INDUSTRY IS WILLING TO DO BUSINESS ON THE SORT OF TERMS THE MTA HAVE LAID DOWN. IF THE MTA GET A THIN RESPONSE THE BRITISH CONTRACTORS' REFUSAL TO PREQUALIFY MAY CONCEIVABLY HELP TO GET THE MTA'S CURRENT APPRAOCH

ALTEDED.

4. THE EGCI ARE NOT DISPOSED TO SEND SOMEONE OUT AT THIS STAGE. BUT

I UNDERSTAND THAT THOMPSON MAY BE IN LONDON SHORTLY AND WE SHALL

TRY TO GET THE INDUSTRY TO MEET HIM IF HE TURNS UP.

5. GIVEN EGCI'S ATTITUDE AS OUTLINED IN THEIR LETTER THERE SEEMS

LITTLE POINT IN YOUR TAKING THE INITIATIVE TO PRESS THE ARGUMENT

IT PUTS FORWARD BUT I LEAVE THIS TO YOUR JUDGEMENT.

DTI

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