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XCS(75)1
These two over-riding considerations have been re- examined in the light of changed circumstances. As regards project management: the Provisonal Authority has now created an organisation capable of dealing with the complexities of the project be it implemented by one or several contractors. The need for having only one contractor is thus no longer as cogent as it appeared in the past when all that was available was the small Mass Transit Department of the Public Works Department.
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As regards uncertainty as to the total price: this can be minimised by securing fixed price contracts for some parts of the project and, for other parts, by confining price escalation to fluctuations in the prices of materials and in wages in accordance with established criteria.
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As regards uncertainty as to the availability and terms of finance: although export credit terms are now less favourable than in the past, this is true regardless of whether a single contract or a multi-contract approach is adopted. Furthermore, continued world recessionary conditions could lead to an easing of the current tight- ness of export credit finance. In the circumstances, it would be reasonable to assume that export credits could be secured for approximately 40% of the total estimated price. As regards the availability of other types of finance, proposals have now been made in the report at Annex D that consideration be given to allowing the future Mass Transit Railway Corporation scope for developing station and other sites on a commercial basis and for the introduction of a premium bonds scheme. The current proposals, which were there but not brought into play before when analysing the viability of the Japanese Consortium's pre-emptive bid, would now provide a reason- able degree of assurance as to the viability of the system even if un- foreseen adverse factors were to arise. For instance, property development would offset any revenue shortfall while premium bonds could offset any inability to obtain residual loan finance.
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In the circumstances, it is proposed to proceed with the Modified Initial System on the basis of a multi-contract approach. This will enable the financial viability of the Modified Initial System to be confirmed, as regards both the total price and the availability of finance, at the end of a tendering and evaluation process in mid-1975, when Honourable Members advice will again be sought.
Conclusion
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The Japanese Consortium has recently informed the Mass Transit Railway Provisional Authority that it is unable to honour its moral and commercial obligations under the Letter of Intent. A definitive announcement of the Consortium's withdrawal could have serious political and economic repercussions unless the situation is well handled. These difficulties could be mitigated by a statement to the effect
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