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_ HM Treasury 9/17/98 10:39 PAGE 003/7 Right FAX
HM Teaenkes Pad)
Treasury Chambers, Parliament Street, SWIP 3AG (%i)
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19 3163
For liou.ction
Keith Todd Mk Sibbeek GBPS vy,
Chief Executive IM an
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26 Finsbury Square MR MACDengdd
LONDON MR acne cu
EC2A IDS Spads 'S September 1998
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7 BENEFITS AGENCY/POST OFFICE COUNTERS AUTOMATION
PROJECT
As you know, Ministers have been reviewing the future of this project in view of the
serious delays to the implementation timetable, and ICL Pathway’s failure to deliver
a key contractual milestone for which ICL Pathway has been placed in breach of
contract
2 We remain seriously concerned by the slow rate of progress on this project
which was originally scheduled to be fully operational by October 1998 However,
we have decided without preyudice to our legal rights under the existing contracts
to allow a period of one month for discussion between the parties to see whether
satisfactory commercial terms can be agreed for continuing the proyect, outstanding
differences on the timetable resolved, and a ore programme a full
implementation settled $
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3 To facilitate ths process, I am proposing to appoint an adviser to work with
the parties towards finding a solution He will report direct to me, and I expect him
to be given full co-operation by all the parties His terms of reference are attached
4 To provide a satisfactory outcome, the conclusion of the discussions must
meet a nunber of basic criteria which include
- any adjustment to the contracts must of course be compatible with
procurement law,
- the contract must provide a firm date after which the Benefits Agency
will have no further commitment to using the benefit payment card
We anticipate the Benefits Agency will wish to complete a transition
to ACT-based payment methods by this date
5. There is one general point I must make to avoid any misunderstanding ICL
Pathway entered into these contracts on PFI terms which entail accepting significant
risks It should be clear at the outset, therefore, that the discusstons are not posited
on an outcome which would ensure ICL Pathway a positive return on the project
6 A condition for opening discussion must be agreement that
- no party will issue legal proceedings against any other party while
these discussions are being conducted,
- discussions will be conducted in strictest confidence and without
prejudice; and
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- work on the project will continue in accordance with the existing
contracts while discussions are continuing .
7 [ trust that you will agree that this is the best way forward and would be
grateful 1f you would confirm by retum that you are prepared to proceed on the basis
set out in this letter
8. T am copying this letter to Alistair Darling and Peter Mandelson, and to
John Roberts and Peter Mathison
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