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with compliments
Post Office Counters Ltd
King Edward Building
King Edward Street
London ECIA IAA
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COPIED OR FORWARDED WITHOUT DIRECTOR AUTHORISATION
1.
11
1.2
13
14.
Background
There are significant delays to the Horizon programme.
At a programme plan level, a series of tactical actions have been taken both to
baseline the programme, and strengthen resourcing and organisation, as a
result of work identified by the independent PA review in October 1997.
This culminated in the appointment of a new POCL Horizon Programme
Director, David Miller, to be effective from 19 January 1998.
However, at a strategic commitment level, the programme still has question I
marks around it. We understand from good sources that Benefits Agency, via
DSS, wit be recommending a negotiated termination, together with renewed
and vigorous pursuit of alternative payment methods (many excluding post
offices) to Ministers. ICL Pathway, backed by Fujitsu, have informed both
sponsors that their current business case is unacceptable, and they will seek
higher prices and/or a contract extension as a result.
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_ Copy . Toe Ashley
° IN STRICTEST CONFIDENCE Jefe Tons
Nyt
There benves
PROJECT INITIATION DOCUMENT: PROJECT ‘DEEP PINK’ hepmed PL
THIS DOCUMENT IS IN STRICTEST CONFIDENCE AND MUST NOT BE he ‘
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IN STRICTEST CONFIDENCE
23 The renewed urgency of the situation, given our new knowledge about DSS’
and ICL’s latest positions, became clear in the lasi week of December 1997 and,
following a meeting with the Chief Executive in reparation for him advising
the PO Board and DTI Ministers, CEC were briefed on 5 January by Paul Rich
and his team. A proposal was set out, following this briéfing, by Paul Rich to
CEC on 7 January on what needed to be done. This was accepted by CEC, and
is code named ‘Deep Pink’.
2.4 Anembryonic resourcing proposal accompanied the 7 January proposal, and
this has now been refined with David Morphey and Lesley Lawson, and is the
subject of a separate paper from Lesley Lawson to CEC.
3. Links with other projects/exclusions from scope
3.1 To be clear, the running and delivery of the Horizon programme is a baton now
passed to David Miller at CEC level, and is excluded from this project. There
will, of course, be a need through information sharing processes for close
contact to be maintained.
3.2 There are dependencies with the studies mentioned at 2.2 above, and again,
dialogue will need to be maintained by their sponsors and/or project leaders
with this project. Some of the outputs of this project are likely to become inputs
to those.
3.3 There are also links with other projects in train (for example, the social banking
study; the work-in-progress on the rephasing of our automation programme
and generic applications; and information systems strategy develop; our
contract development with Girobank; and PO Group’s work on Government
Direct). The resourcing approach, through its mix of people on core teams,
supported by identified ‘experts’ as necessary is the key vehicle to gain good
integration at working level. At director level, CEC will need to be alert to
project impacts as they review progress of ‘Deep Pink’.
3.4 This work replaced the ‘HRT’ project work currently led by Mena Rego which
helped deal with work associated with Horizon’s review by PA.
4, Structure of Projects, Team Leaders of Strands, and deliverables
4.1 The project sponsor is Paul Rich.
4.2 The project's customers are:
a) CEC
b) Chief Executive and, through him, the Post Office Board.
Indirectly, all POCL’s stakeholders could be affected by the outcome.
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43 The project is structured into five strands: alt
L
Strand Team Leader Timescale => Ne:
I Influepeitfg Plan JonatharEvans Immedjate7/Z weeks Aprad
Il Negotiation Plan Mena Rego ~ 4-6 weeks _
III Legal/ Contractual Plan Mena Rego 4-6 weeks te
IV Contingencies vs Contract A Dave Waltho 6-8 weeks VASAL
continues/ extends Vide as on
V_ Contingencies vs Contract A or Dave Waltho 6-8 weeks wager &
Horizon falls/is severely modified om OUT
PO Come
In practice, Strands II and III may run together. aduky»
44 Key deliverables are:
Strand
¢ Vital audiences/ opinion formers identified I
° Key messages described and delivered to opinion formers TY yee, CO mr?
¢ Government decision makers influenced I
° Messages to Government integrated with PO Group I s>
* Messages co-ordinated with other influencing bodies (suchas I
CWU, NFSP and ICL)
« Negotiation strategy and planning developed to Government Il
¢ Negotiation briefs for future contract replacement/ extension 0
with BA and/or ICL Pathway developed
¢ Impact of termination clarified to Government Ir
* Consider impact on other clients’ commercial positions Ir
reactively / proactively (eg Government clients, Girobank)
¢ Legal plan t prevent/delay contract termination Til
¢ Plan for claims by ICL (and BA?) tl
r) ¢ Plan for claims on ICL and/or BA Tl
* Scope costs of termination for each legal scenario Il
¢ Review plan for de-coupling Contract A from other contracts Il
* Review any procurement law/commercial freedom/other client TI
contract impacts/joint ventures as necessary
¢ Scope scenarios for contingency of Horizon and Contract A is IV
extended
¢ Develop scenarios, including business modelling, around: Vv
compulsory ACT; a ‘new deal’ for Government suing Horizon as
its business with / without Contract A; and a ‘managed decline’
situation for a manual by based POCL
5. Resourcing
5.1 A separate resourcing plan has been developed (see 2.4 and separate paper
from Lesley Lawson) to staff the strands.
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63
71
8.1
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IN STRICTEST CONFIDENCE .
There will be a core full-time team across the strands, and a call on ‘experts’ to
form ‘virtual teams’ from time to time on a ‘first-call’ co-opted basis. The
sponsor will need to ensure this ‘first-call’ approach happens in practice.
Urgent co-ordination across the strands and general progress will be provided
by a project co-ordinator reporting directly to Paul Rich as sponsor.
Expert legal help for Strand III (and to include Strand I!) will be provided by
Slaughters & May via PO Legal Services.
Further resourcing needs are to be addressed to Lesley Lawson if/when they
emerge.
Timescales and Reviews
Timescales start is immediate and is estimated to last for 8 weeks.
30 minutes (stretch to 1 hour if necessary) weekly reviews should take place at
the end of Wednesday’s CEC meetings, chaired by Stuart Sweetman and with
CEC and strand team leaders and the project co-ordinator present. It may be
advisable to co-opt experts from time to time too at these meetings (eg legal
advisors).
Stuart Sweetman is to decide how best to update POEC/PO Group colleagues
of progress.
Costs
Most costs are use of managerial time; there will be costs for use of Slaughters &
May through usual Group arrangements.
Communication
This is a restricted document. Any communication of this project should be
positioned as part of the Strategic development studies work we are known to
be undertaking.
PAUL RICH
Development Director
13 January 1998
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Commercial: In Strictest Confidence
MINUTES FOR
Legal Contingency Planning Meeting,
Action:
2.0 Noted that ICL Pathway had given their own presentation toDTi-
(McDonald & Sibwick) and a copy shared with POCL. Agreed a copy of KC
slides would be passed to Slaughters. Noted DTi had been invited to visit
Feltham to view the Horizon system with Dave Miller (the POCL Project
Director). Agreed that Kevin Corrigan would offer to support Dave Miller KC
at the visit.
3.0 Noted Mena Rego was leading the Commercial and Legal arms of the
project. Whilst Mena was on leave, Kevin Corrigan would lead the legal
workstream and call on Slaughters as needed. -
4.0 Noted AJR had met Ann Bowtell (DSS Permanent Secretary). If the personal
notes of this meeting were cleared, a copy would be passed to Slaughters.
The main points appeared to be that DSS realised unilateral termination was
not realistic, termination for default is likely to be messy and DSS would
prefer ICL to simply pull out. DSS appeared to be willing to continue the
programme until an (unspecified) autumn milestone. Failure to deliver
would further erode their confidence in Pathway’s ability to deliver. -
5.0 Noted Keith Todd was scheduled to meet Peter Matheson (15th January,
1998) to say the 30% price rise was not acceptable to the Authorities. -
6.0 Noted DSS appeared to indicate that for contingency purposes, and on a
confidential basis they would be interested in discussing an alternative to -
Horizon.
7.0 Noted DSS appeared to be holding itself out to represent POCL at the
Todd/ Matheson meeting. If commercial discussions are to take place two
key areas should be bourne in mind:-
1) ICL Pathway have no automatic right to a price rise; and
2) any discussions should be on a strictly “without prejudice” and “subject -
to contract” basis.
8.0 Agreed that a draft letter be drawn up from POCL to ICL Pathway setting
out various optional paragraphs including one pointing out that we do not
believe ICL Pathway are entitled to any price rise under the contract. NG/TB
9.0 Agreed that a paper setting out the trade offs between various options, (e.g.,
continue with programme, current breach position, autumn milestone) and
potential next steps (legal, practical) would be drafted. NG/TB
10.0 Noted that although passage of time dilutes non-exercised contractual rights
(e.g., current breach) the more important consideration is whether one
continues to operate and fulfil the other contractual rights, duties and
obligations of the contract. Noted, however the letter sent by Peter Crahan
specifically reserved all the Authorities rights regarding breach. -
LCPM_161.DOC
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Commercial: In Strictest Confidence
MINUTES FOR
Legal Contingency Planning Meeting
Action:
11.0 Noted that the terms of reference for an Independent Consulfant had been
received. Agreed a reply would be drafted for Paul Rich, constructively KC/JA
critiqueing the proposal. NG/TB
LCPM_161.DOC
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Dales
Mr P. Crahan a lev
Programme Director CL Wear - meek
BA/POCL Programme Wy
Third Floor ha 4°
Terminal House aa aed ~S
52 Grosvenor Gardens
London SW1W OAB
12th January 1998
Rar Fern.
Planning Dates for ICL Pathway New Release 2
Thank you for your letter of 23 December. We can understand that, for reasons of reducing
overall programme risk, you would wish to introduce a safety margin between having the
software ready and deploying it. However, this was not contemplated in the Related
Agreements. On the contrary, they contemplated a single release of software rolled out to 300
offices a week from a base of just 60 Live Trial offices. The programme now in contemplation,
with its incremental releases and ramp up of infrastructure, already effects a significantly reduced
risk profile.
The reduction in programme risk of a January start date as compared with an October start date
does not come without cost, notably to ICL Pathway in terms of lost revenues, and in any event
‘the increased “certainty of delivery” would be small. We maintain that Live Trial for October
1998 is viable, that the contemplated delay and further lost revenue compounds the losses ICL
Pathway already faces and that the further delay is not of our choosing.
We note your reminder that you have served notice of breach upon us as well as your reference
to “the level of improvement required” in our management and technical resources. For the
avoidance of doubt, we do not accept responsibility for the (continuing) delay in achieving
Acceptance, and similarly reserve our position on the relevant rights and remedies.
Since my letter to you of 12" December we have submitted, as requested, on 19 December, our
without prejudice views on the options for re-establishing the contract terms for the BA/POCL
Programme. I suggest we handle any further discussions on this topic in this wider context,
recognising that time is now of the essence
ce: P. Rich, G. McCorkell, P. Kelsey
J. H. Bennett
Managing Director
ICL Pathway Ltd
Forest Road
Feltham
Middx TW13 7E]
ICL Pathway tid
Registered in England oo 3021581,
Office
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POL
21 JAN °98 10:54 a7 00091760
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esvesrS4 15:13 NO. 718 3
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UK Swindon: computer and relaxed services ‘A-major function of tis senfice wll be +2, sonper: the 30o,
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8. Dursdoz vveearace or toe Ke for eoarpletion of the $= criniaat coqvicions Of GFAVE in retadion to the
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(©) Address: POCLIBA. Devdopment c/o Mr Pa ther propased saludons:
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required, bue sate with dhe furdher informacion issued to sccvice Prom
guarantees may be req! Zlew, capeasing an incerest, following 23.9. (996-
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which case ate Chien procareanenc and © whom i
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provida’s lute anowal report and .
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the period:
21/01 '98 10:54 TX/RX NO.3337
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17 DEC 13? 16:28 FROM TO S?76SSS1 P.047es
DRAFT
EESTRICTED - MANAGEMENT AND COMMERCIAL
John Bemnert
Menesing Director -
peer Your statues thet BAIPOCLL ere” Be ‘
; 7 he I Sel resporsible dy wegioa,
Fete TOM OUP Spe Heir aan Resms* G, as Yor we Brose Gvom
ex -
Twi Jer low, S&cusstons od previons Conesporaene I ome
brtlout 4tourdsenn + 15 Deseenber 1997
Desr John
PLANNING DATES FOR ICL PATIWAY NEW RELEASE 2
‘Dhmak von for your letter of 12 December 1997 Covering the above. As you pomt out, we have « draft
nots from Alec Wylie covering the dams we agreed nsthe PDA Board on 1i December 2s piaming:
astimptions for Release 2, These woald see c Live Tria] from TJanvery 1999, srt af National Roliour
Som April 1999 with the contracted date for the end of Operational Trial belag July 1999. As you arc
aware, all of the above is predicated, among other things, on reaching agrecment With sponser ex the
Release Conzents Definiioa which we are porauing actively. Ta the gemutine, of cause, all
communications on this maner are without prejadics and subject to cartract.
MRE ASS OSSCEFET MIRED IE Sore maeesbar- ofr interalia: hove. proposed,
Cheer +o us alt
Your own presentation showed thar yoa only bv cemmiaty of delivery to these earlier dates. thet tomy yo
‘This would not be sufficient to 3 or Ministers,
Dower hed omy reel
. se6Gaived thet [CL Pathway hays saengthened both the management end technical Prospect gy
gramme, We do yet have empirical evidence yet that the level of ‘
ghiesod meehna them
wwn-vensene?-—Hsinizcivcely-ssobthewuc. Tha planning dates we hayp agyeed offer a realistic
Prospect of delivery against which all parties m the programme cas itow pina for the significant effort
Pequired in ascuranee, misyction and implementation
1a your final paragraph you ure correct in sisting that all partes: ‘Will work positrcly to have the
software componmits of new Release 2 available for 5 October 1998. Howeves, we bave not yet
‘agreed thar, in these ctreumstances, the Live Trial would stut et that time or that there are “other gutting,
tema outside the ICL Pathway demain”, We heve agreed to explore 3 tangs of options for sensible
activity which could potentially occur beewern Ocrober 1995 and Jonnary 1999.
Yours sincerely
(ready
PE CRAHAN a! ; ;
Pe MIAN ector PDA We heve’ creed QI YOR Moh 3) brecclk
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W7/l2 137 16:00 TK/RX NO.1844 P.004 BE
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Mr P. Crahan
Programme Director
BA/POCL Programme
Third Floor
Terminal House
52 Grosvenor Gardens B,
London SW1W 0AB
28" November 1997
Dear ARS,
Related Agreements between Secretary of State for Social Security, Post
Office Counters Limited and ICL Pathway Limited dated 15 May 1996 (as
amended)
Thank you for your letter dated 24" November 1997 noting that Operational Trial
was not completed by the current contractual milestone date of 21* November.
ICL Pathway rejects entirely any claim that such failure was due to its own
default, and similarly is reserving its position on its rights and remedies until
~ further notice.
We confirm that it is also our strong desire to find a mutually satisfactory way to
continue with this important Programme and will continue to engage fully in
discussions to arrive at such an arrangement. For the avoidance of doubt, we
confirm that all such discussions are without prejudice and subject to contract.
JH. Bennett
Managing Director
ICL Pathway Ltd
Forest Road
Feltham
Middx TW13 7E}
GRO
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benefits Benefits Agency and
Past Office Counters Ltd
Third Floor
Terminal House
agency 52 Grosvenor Gardens
London SW1W 0AB
telephone
John Bennett Facsimile
Managing Director
ICL Pathway 24th November, 1997
Forest Road
Feltham
Mddx
TW13 7ET
near “SS,
Related Agreements between Secretary of State for Social
Security, Post Office Counters Limited and ICL Pathway Limited
dated 15 May 1996
I am writing on behalf of both Authorities to give notice of
breach of the above contracts, as you have failed to complete
the Operational Trial by the designated contractual milestone
of 21 November 1997. We are reserving our position on rights
and remedies resulting from this breach until further notice,
but do not intend to exercise these at present.
On the contrary, it is our current intention to continue in
~ discussions with you on re-planning the way forward of this
Programme. For the avoidance of doubt, however, these
discussions are without prejudice and subject to contract.
Yours sincerely
Peter Crahan
Programme Director
Post Office Coursers Ltd Registered in England
io 2154540 Registered Office Drary Ho 10"
1:36 Mlarkfrars Road verdon SET SU
Cz \BATAL PAT: \ LETTERS TBRRIACH.D0C
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Post Office Counters Ltd
Peter Crahan
BA/POCL Programme Director Development Director
Terminal House
52 Grosvenor Gardens
ro N 20 January 1998
SW1W O0AB 200198
TERMS OF REFERENCE FOR INDEPENDENT CONSULTANT
Thank you for your memorandum of 14 January setting out terms of reference
for an Independent Consultant. I am grateful for the work Bird & Bird have
done. As promised by my letter of 16 January, I am replying on behalf of
POCL, prior to the pre-PDA Board this Thursday.
As we have previously said, it is very important for us to understand the
causes of the failure to meet the operational trial milestone of 21 November
1997. However, we should of course guard against the creation of a
document which could be used against our interests.
We agree that the instruction of the Independent Consultant should be
effected through Bird & Bird for reasons of both procurement law and
documentary privilege.
Overall view - purpose of the report
In headline terms, I am pleased to say that we should proceed, subject to this
letter. We consider the expert's remit should be limited to establishing the
technical causes of the failure to meet the Contractual Milestone 21 November
1997, together with the extent to which each of the technical causes as
identified has contributed to the delay. We think it important that the
independent expert should not express any opinion on the legal implications
of his views - this being a matter on which appropriate legal advice could
then be sought.
Post Office Counters Led
King Edward Building
King Edward Street
London
ECIA IAA,
ag Savace Seer London ELIA TAA
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-2-
20 January 1998
Peter Crahan
More detailed points
Our agreement to proceed is subject to the following points (adopting your
Terms of Reference numbering):
(5) We would like to understand what classes of documentation held by the
Authorities (and not already by the Programme) could be considered
directly relevant to the purpose you have set out.
(6) We would also prefer not to include examination of Pathway
documentation and staff at this juncture. We do not think the validity of
the independent experts report would be prejudiced, however, should it
look necessary for the independent consultant to consult Pathway staft/
documentation, at that point we should review our position, together
with other sponsors.
(7) Our view on the purpose of the report is set out above.
(8) Agreed, but in addition we would require the following:
a) Independent Expert to sign a contract with an effective
confidentiality clause agree by the Authorities.
b) Each party to agree to keep the report confidential to its own
organisation.
Further we would require the following:
(9) Neither Authority may use the report except with the consent of the
other.
(10) POCL should agree the wording of the letter of Instruction and have
sight of the documents which are to accompany it.
(11) The independent consultant must be instructed to issue his report in
draft and POCL and BA are to be given a reasonable opportunity to
comment on the draft before the final version is issued.
(12) Could you please confirm that ownership/ copyright of the report is
jointly vested in the Authorities, and not in Bird & Bird or in the
consultant.
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20 January 1998
Peter Crahan
Short list of Potential Consultants
Thank you for letting us have a CV for Mr Davies. Would it be possible to
consider the CVs of the other three candidates whom Bird & Bird considered,
before we definitely proceeded with Mr Davies.
I look forward to discussing how best to progress the matter now at the pre-
PDA Board to take into account the above points.
GRO
PAULRICH
Copy: pre-PDA Board members
Stuart Sweetman
Peter Mathison
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Post Office Counters Ltd
Mr. Nick Grey
Slaughter & May
35, Basinghall Street
London 20th January, 1998
EC2V 5DB KC/2001_S&M.DOC
Dear Jeff,
Re: Drop Down of Related Agreements Schedules
Ihave discussed the status of drop down (extrapolation) schedules with the
PDA Contracts Team. Iam told the exercise is complete and ICL Pathway
have written to confirm that they consider it complete.
As you are aware, the Authorities and ICL Pathway agreed a major change
(CCN 105) which amended key elements of the contract, in particular
specifying the end date of the POCL Agreement as September 2005 and the
DSS Agreement May 2005 (in line with Contract A).
Although schedules were amended as a result of CCN 105, two key areas
remain outstanding:-
(i) Schedule A06, there remains a difference between Pathway and
the Authorities whether CCN 105 merely slipped the payments
during the Roll Out period or recalibrates them.
(ii) Schedule B7, there remains a difference between Pathway and
the Authorities on whether Operational Trial, Roll Out and end
date st:ould be dependent/linked to CAP’s software release
dates.
\: It
Post Office Counters Ltd
King Edward Building
King Edward Street
London
ECIA IAA
Telephon en
foaimie,_ GRO I
ot Oe Comers Rages ord
No 2154840 Repmered Otc King Edvard Bulg
King Edard Set Londen ECIA TAA
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Page (2),
Nick Grey
20th January, 1998
It is these two areas of difference that I confused as being outstanding from
schedule drop down. My apologies for being mistaken. I trust this
effectively removes the potential of a Pathway right to termination for non
Agreement of Schedules drop down.
Should you need anything further please get in touch.
Yours sincerely,
Kevin Corrigan
Contracts Manager
cc: Paul Rich (POCL - Development Director)
Keith Baines (POCL)
Joe Ashton, (POCL - Legal Services)
Jeff Triggs (Slaughters & May)
Trevor Barnes (Slaughters & May)