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a wv CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
HM Treasu ry Parliament Street
London SWIP 3AG
Steve Robson
Scout Permanent Secretary
Keith Todd lisq
Chief Lixccutive
ICL ple
26 Finsbury Square
LONDON Joly
UC2A 1DS Ke Kane. ego 8 March 1999
BA/POCL AUTOMATION PROJECT: THE WAY FORWARD
1 am writing to confirm that, following our exploratory discussions over the past weeks, the
Prime Minister has now indicated that he shares other Ministers’ enthusiasm for finding a route
forward building on the proposals sct out in the attached annex. The proposed alternative for
achieving the project’s objectives is premised on our view - which we accept you dispute - that
ICT, Pathway has placed itself in breach of contract for failure to deliver on time. On this basis,
Ministers have authorised u further set of discussions to explore whether thero is a commercial
deal aceeptuble to Government around which we can find a way forward,
Allure anxious now to reach a conclusion as a matter oF urgency. The timetable to which we
will need to work - and which we believe {o he practicable - must cnsure that we arc in a
position to reach non-biriding heads of ugreement ideally by the end of March but certainly by
mid-April. If approved by Ministers und the contracting authorities themsclves, it would be our
intention to move as rapidly as possible to incorporate these-heads of agreenient into a detailed
und binding rencgotiation of the current contracts in accordance with the established contractual
change control procedures.
wuld” rollerute formally I What T have already confirmed in our ‘informal I
discussions: that*Ministers still hold to their position that ICI, ‘should not be looking foi a
positive reiurn on their i investment aver the life of the project, given its history. ‘his means we
should only address changes in revenue, costs (including cost savings) and risks compared ‘with
the Option A route. I should ulso make clear that we would wish to establish the ground rules
for the discussions in the form of a binding Standstill or Moratorium Agreement, similar to the
onc agreed at the outsct of the contract discussions in September of last year. ‘Ihe agreement
should be thats I
- our - discussions are without prejudice and confidentials
- all parties reserve their rights and remedies with respect to past performance of
the contracts; .
- ‘none of the parties will take pre-emptive legal actlon against any other party
* while discussions aro continuing;
fs all discussions und any agreements arising from them are subject to contract;
CONFIDENTIAL, WITHOUT PREJUDICE AND SUBINCT TO CONTRACT -
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- any settlement resulting from our discussions is subject (o consideration of the
procurement law consequences;
- work on the Horizon Project will continue in uccordance with existing
contractual obligations while discussions are continuing except and only to the
extent that all the parties agree in writing to suspend the performance of’ any of
their obligations, °
Took forward to taking forward with you and Richard Christou the noxt stuge in developing a
potential approach to which all parties can commit,
Finally, I am grateful to Richard for his letter of 4 March. As I indicated when we met this
morning, I am not in a position to respond to that fetter now - much of it is concerned with
technicul and commercial mutters which are for the parties to address, But, as you know, Ido
understand your perspective on the limetuble,
Copies of this fetter go to. Richard Christou, John Roberts und Peter Mathison; and to those who
will be attending the mecting I am chairing with the parties tomorrow.
CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONT!
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CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
BA/POCL AUTOMATION PROJECT
This note scts out the proposed way forward for the Horizon project, following
discussions between Steve Robson (IIMT) and Keith Todd (ICL). ‘these discussions
were conducted on a without prejudice and confidential basis. ICL accepted that the
public sector purties reserve their rights and remedics with respect to past breaches of
contract by ICI, Pathway, Both sides agreed that they would not take pre-emplive legal
action against any other party while discussions arc continuing.
Che proposal
2, Under this proposal, the benefit payment card (BPC) would be removed from the
- Horizon project. ‘Ihe Benefits Agency (BA) would move directly from the cxisting
order book system to electronic payment of benefils,
3. Benefit recipients who currently reccive their benefits via order books would
have a Post Office “benefit account” set up for them. BA would pay benefits into the
account via ACT, just as they would into any normal bank account,
4. The Post Office benefit accounts would be simple, credit-only accounts. ‘They
could be accessed at any Post Office using a smartcard, but at least initially they would °
not be uccessible at bunks, ‘Phe Post Office might enter into a strategic partnership with
aciearing bank {o operate these accounts for them. Subject to such arrangements being
put in place by the Post Office, ICI. tell us that they could start to roll out a smartcard-
based system into Post Offices following national rollout of the core Horizon system
(currently assumed to he Spring 2001). -
5. Over time, the Post Office could develop tho range of services which were
ollered via the smartcard. It could also enter into negotiations with clearing banks to
- offer counter facilitics, cnabling the banks to shrink their branch network.
6. . The presumption would be that all order book recipients would be paid via a Post
Office benefit uceount, and the move from payment via order book ‘to payment into
benefit accounts would be carried out automatically, However, benefit recipicnts would
at any point be free to ask the BA (o pay their benefits via ACT into a conventional bank
account, just as they can now ask for a move from an order book to ACT.
7. This’ approach should mean that 4 large proportion of benefit recipicnts will
continue to receive their benefits at post offices - either because they do not already huve
a bank account, ar because a post office is more convenient for them, or just because of
incrtia, ‘This means that POCL should have ag much cerlainty over future footfull as
- under the BPC, It also ensures that the smartcard has a largo initial circulation, which
will help the marketing of smartcard-based services. .
CONIMDENTTAL, WITHOUT LREIUDICE AND SUBJECT TO. CONTRACT : A