TNAG-0772-FCO40-976-Modernisation-and-electrification-of-the-Kowloon-Canton-Rail-1978 — Page 56

CONFIDENTIAL

Mr Cortazzi

HKK M3/2

RECEIVED IN REGISTRY NO. 51 1 @ NGV 1978

OFFICER

PA

Ido

REGIIRY

Action Taka”

&

HONG KONG : MODERNISATION OF KOWLOON/CANTON RAILWAY (KCR)

21

1. The British firm Metro Cammell (Metcam) are in danger of losing an important contract to supply rolling stock for the Kowloon/Canton Railway, which is to undergo major modernisation. There is a strong case for seeking the Governor's assistance.

2. As you may recall, the British consultancy firm Transmark (part of British Rail) were given the contract to oversee the modernisation programme. They drew up specifications for the new rolling stock in consultation with Metcam. However, when tenders for the contract to supply rolling stock were opened recently, it turned out that Metcam's bid was by far the highest of the four received. We do not know the exact figures, but it appears that the Metcam bid totalling HK$472.5m (about £52m) for 45 three car train sets compared with bids of HK$306m (£34m) from Hawker Siddley, Canada; HK$360m (£40m) from a Japanese company, and HK$405m (£45m) by a French/German/Swiss consortium. The Canadian bid is not compliant with the tender provisions in a number of respects and Transmark had some technical doubts about the Japanese bid. The Metcam bid and that from the European consortium are technically fully compliant.

3.

The Hong Kong Government Tender Board have so far deferred a decision. The Governor has told Mr March-in strict confidence

that there are only three options open to the Government:

(a) to accept the European bid (apart from the technical

doubts, the Japanese offer seems too low);

(b)

(c)

to argue that the British bid is politically desirable and that there will be a reduction in price after the tender award;

to reopen tendering on the grounds that there were too few bids in accordance with the specification.

CONFIDENTIAL

14.