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112401 MDLIAN 6439
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CONSTRUCTION CONTRACT APPROACH PROVIDES CERTAINTY IN TERMS OF PLANNING, COMPLETION AND OPERATION, AND FURTHERMORE ALLOWS US TO START CONSTRUCTION SIX TO NINE MONTHS AHEAD OF A BOT PROJECT. ALTHOUGH SEVERAL CONSORTIA HAVE ALREADY INDICATED THEIR WILLINGNESS TO PARTICIPATE IN A BOT, GOING DOWN THIS ROUTE WOULD INEVITABLY INVOLVE PROTRACTED NEGOTIATIONS AND THUS A PERIOD OF UNCERTAINTY STRETCHING THROUGH MOST OF 1991. THERE IS ALSO THE QUESTION OF WHAT THESE CONSORTIA WOULD HAVE WANTED IN RETURN.
THIS BRINGS ME TO THE QUESTION OF FINANCING THE PROJECT. HAVING STUDIED ALL ASPECTS VERY CAREFULLY OVER A CONSIDERABLE PERIOD, WE HAVE CONCLUDED THAT THERE IS A GREATER ADVANTAGE IN FUNDING THE PROJECT OURSELVES. BUT CLEARLY WE WOULD ALSO WISH TO CONSIDER FINANCIAL PACKAGES PUT FORWARD BY BIDDERS IN RESPONSE TO THE CONSTRUCTION TENDER EXERCISE.
WE HAVE NO DOUBT THAT THE TENDER EXERCISE FOR CONSTRUCTION WILL ATTRACT A LARGER NUMBER OF WELL-QUALIFIED CONTRACTORS, AND THAT THE ADDED COMPETITION WILL RESULT IN A VERY KEEN PRICE FOR THE BRIDGE.
THE CONSTRUCTION CONTRACT APPROACH ALSO OPENS UP ANOTHER ATTRACTIVE OPTION FOR FINANCING THE PROJECT AT A LATER STAGE, THAT IS TO CALL FOR COMPETITIVE BIDS FOR THE FRANCHISE TO OPERATE THE BRIDGE AFTER IT IS COMPLETED. OUR VIEW IS THAT SUCH A FRANCHISE WOULD BE ATTRACTIVE AND THE PROCEEDS FROM THE TENDER EXERCISE COULD AT LEAST MATCH THE COST OF CONSTRUCTION. THUS WE HAVE TOTAL CONFIDENCE IN THE PROJECTS LONG-TERM VIABILITY.
IF THE PROJECT WERE TO BE TENDERED ON A BOT BASIS, THE BIDDERS WOULD BASE THEIR JUDGEMENT OF ITS VIABILITY ON THREE MAIN FACTORS: THE COST OF CONSTRUCTION, THE REVENUE WHICH IN TURN DEPENDS ON TRAFFIC FORECASTS AND THE LEVEL OF TOLLS, AND THE PERCEIVED RISKS INVOLVED. WE ARE ADVISED THAT THERE CAN BE A HIGH DEGREE OF CERTAINTY OVER THE COST OF CONSTRUCTION, BUT THAT PROSPECTIVE BIDDERS MIGHT NOT HAVE THE SAME DEGREE OF CONFIDENCE WITH REGARD TO THE OTHER TWO FACTORS. THE CONTINUING CRISIS IN THE GULF AND THE WORLD ECONOMIC SITUATION HAVE NOT HELPED THE COMMERCIAL CLIMATE.
DESPITE THESE PERCEIVED UNCERTAINTIES, AND I STRESS THE WORD 'PERCEIVED' BECAUSE WE BELIEVE THAT SOME OF THEM ARE UNFOUNDED, WE HAVE NO DOUBT THAT THERE WOULD HAVE BEEN A SUBSTANTIAL RESPONSE TO OUR CALL FOR BOT BIDS. BUT THE COMMERCIAL WORLD WORKS
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