TNAG-2407-FCO40-3500-Airport-issues-in-Hong-Kong-Provisional-Airport-Authority.-W-1992 — Page 6

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CONFIDENTIAL

HKA 182/1

Mr Ricketts

Hong Kong Department

FROM: S H Broadbent

DATE : 12 June 1992

CC: Mr Hum

Mr Eba 1816

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AIRPORT: RICHARD ALLEN

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1. Airport timetable getting tighter, but no sense of impending crisis.

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Key date 14 October. Some worries over costs. Economic background reasonably favourable for building the airport.

2.

The Chairman of the Airport Authority called this afternoon immediately before seeing Mr Hum. He gave me copies of the latest material on airport costs made publicly available in Hong Kong. He was glad that this was at last expressed in money-of-the-day prices; it would still take some time for the confusion and misrepresentation arising from successive constant price data to disperse. Partly for this reason, he was now beginning to feel happier about the way the project was evolving. He had been the focus of a good deal of criticism of it. This was inevitable in a period devoted to planning and building up staff rather than action on the ground.

3. As we knew, the two critical contracts for the project were the bridge (the responsibility of the government) and the airport platform, which was the PAA's business. Tenders for the latter had been some 20% above budget which would, if replicated for other contracts, represnt the "low case" and result in callable equity being called. It was essential to contain costs, so bidders were now being asked to reprice on the basis of a revised programme which relied less on the cartelized Dutch dredgers. Dredging accounted for some HK$7bn of the HK$10-12bn platform contract.

4. The overall programme would not, however, slip as a result of the delay in letting the contract, because the section of the platform required for the terminal buildings would be completed first. The platform contract was now scheduled to be let in August. The bids would be valid until 14 October. If a start was not made by then, there would have to be further repricing which would push the completion date firmly beyond mid-1997 and result in the additional complication that the contracts would then become subject to approval by the Chinese.

CONFIDENTIAL