TNAG-0563-FCO40-658-Construction-of-an-underground-railway-system-in-Hong-Kong-1975 — Page 41

COMMERCIAL-IN-CONFIDENCE

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NOTE OF A MEETING HELD ON 21 FEBRUARY at 1 VICTORIA STREET

SUBJECT: HONG KONG MASS TRANSIT PROJECT

Present: Mr D Royce OFF (in the chair)

Mr P Bryant OFP

Mr Panton ECGD

Mr M E Farry OFF

Mr J Cohen CRE

Mr N Scott GEC Mr H Kline CEC Mr H Kindersley Mr I Ross EGC1

Lazards

1 The purpose of the meeting was to discuss how British firms were to respond to the HK Mass Transit Authority's (MTA) forthcoming call for tenders and the coordination of action by industry and HMG on the project.

Civil Engineering Contracts

2 Messrs Ross and Kindersley said that their discussions with civil contractors had shown that, except for the immersed tube contracts, few if any British firms would apply for pre-qualification. The MTA's decision to split the civil works into 25 contracts would give rise to problems of coordination between different contractors, risk triggering off competitive bidding for scarce, skilled labour in Hong Kong, complicate financial arrangements and make completion deadlines more difficult to meet. If, however, the MTA could be persuaded to combine contracts and accept an approach based on working to pre-set target prices and fixing final prices on the evidence of bills of quantity, British firms would be keen to bid. Mr Kindersley circulated the draft of a letter, which he proposed to send to the MTA on behalf of the industry, setting out the industry's views. It was agreed that the letter would include a passage outlining the industry's proposed method of handling the civil contracts. The Department would be sent 2 copy.

3 It was also agreed that, since the way in which civil contractors from other countries responded to the MTA's invitation to pre-qualify would be material to the UK industry's tactics, any information emerging on this score should be passed on to Mr Ross, Mr Kindersley and the Department. OPG would raise this point in its report to the Post on the Meeting. Mr Kline said he had heard Italian civil contractors would probably decide not to go after the project because finance on the required scale and terms was unlikely to be forthcoming from Italian sources.

Contracts for Mechanical and Electrical Equipment (M & E)

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4 Mr Kline said he had discussed the project with the MTA's Managing and Engineering Directors and with others concerned during his recent visit to Hong Kong. The Germans, French and Italians had expressed an interest in the M & E contracts and the Japanese were likely to quote keen prices to make up for the collapse of the pre-emptive bid. On what he knew of world capability he doubted that different bids would vary by more than 10% in price unless a bidder was exceptionally keen to obtain the work. But given an edge eg. favourable credit terms, a GEC package worth roughly £65m should stand a good chance of success. All GEC companies concerned would apply for pre- qualification though some of them preferred not to bid unless their offer formed part of a GEC package. Mr Kline noted that, for the MTA, one of the attractions

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