RESTRICTESSCOMMERCIAL
Post Office Counters Led
Peter Mathison Stuart, Sweetman BSc FCA
Chief Executive enenoe Deer
Le April 1999
Horizon - Release Authorisation Board
Litigation Privilege
I thought I should express to you my concerns over the Benefits
Agency's stance at yesterday's meeting of the Release Authorisation
Board. At that meeting POCL, ICL Pathway and the Programme
Director agreed, with supporting papers, that the Programme should
proceed to the Live Trial stage but the Benefits Agency did not wish to
proceed, preferring to hold a further round of model office testing.
My most major concerns are twofold.
First, if plans to proceed to Live Trial are to be halted this will need to be
communicated to all the post offices scheduled to be involved, and
many subpostmasters and ICL subcontractors will need to be stood
down from their scheduled activities. This would be bound to cause
widespread comment, rumour and speculation and would seriously
damage our communication strategy, which to date has been carefully
contained. This risks causing difficulties with ministers' decision-
making later in the month, and is a potential source of embarrassment
at next week’s meeting between the Prime Minister and Mr Naruto of
Fujitsu.
Continued......
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Secondly, we know that the Benefits Agency's position at the RAB has
reinforced ICL's already strongly-held view that the Benefits Agency is
doing all it can to kill off the benefit payment card in advance of
ministers' decision. Naturally we have not agreed with this assertion.
However, we do regard it as potentially very dangerous in the context
of the public sector's fallback position should the Related Agreements
be terminated.
It is fundamental to our litigation strategy and, therefore, to our current
negotiating position, that we can demonstrate that any termination of
the Related Agreements will be as a result of ICL Pathway's repudiatory
breach. As is generally accepted now, there is a strong argument that
ICL Pathway's failure to meet the contractual milestone in November
1997 has effectively been waived. This means that we would now have
to give a time of the essence notice in order to terminate, or rely on ICL
Pathway carrying out its threat to down tools.
Either way, if the current phase of negotiations fails (as is not beyond
the realms of possibility) and ICL Pathway stops work then the public
sector's stance has to be that termination of the Related Agreements was
a result of ICL Pathway's repudiatory breach. This inevitably involves
the contention that but for ICL Pathway's breach the Related
Agreements would have been performed by the public sector parties.
If the public sector continues to give to ICL the impression - however
false it may be - that it is simply not prepared to go ahead with the
benefit payment card then ICL will interpret this as the public sector - or
at least DSS - not being prepared to continue to perform the Related
Agreements. This could seriously prejudice the public sector position
on termination, as ICL Pathway will argue that the failure to meet the
operational trial milestone in November 1997 has been waived and that
the real reason why the Related Agreements are now being terminated
(should that be the case) is that the DSS is no longer prepared under any
circumstances to take the benefit payment card for which it contracted -
in other words the public sector parties would be terminating for
convenience, with the huge financial cost which that would entail.
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Of course, that would not be an issue if the DSS arguments for delaying
the release authorisation until a further round of testing had been
completed were well founded. However, I have to say that POCL has
not yet seen any convincing arguments for this. These issues have been
covered in detail in previous correspondence and Bruce McNiven again
to Vince Gaskill about this. In summary, DSS's arguments appear to us
to be based on a false assessment of risks related to steady state volumes
that would only be reached on completion of roll-out. This is
inappropriate to a decision which only commits us to the live trial, and
only to Child Benefit payment on the card, and would incur wholly
disproportionate costs of delay for all three parties.
Richard Christou has stressed to me on a number of occasions that ICL
Pathway is ready and willing to perform the Related Agreements as
they currently stand but believes that the DSS is not. This line is
reinforced by the letter Bruce McNiven has received from
Steve Muchow as a follow up to the RAB. We should do all we can to
disabuse him of this notion, for the sake of our legal position should
termination happen.
Yours sincerely,
STUART SWEETMAN
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