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Annex A
BA/POCL AUTOMATION PROJECT
This note sets out a possible way forward for the Horizon project, following
discussions between Steve Robson (HMT) and Keith Todd (ICL). These
discussions were conducted on a without prejudice and confidential basis. ICL
accepted that the public sector parties reserve their rights and remedies with
respect to past breaches of contract by ICL Pathway. Both sides agreed that they
would not take pre-emptive legal action against any other party while discussions
are continuing.
he pri
2. Under this proposal, the benefit payment card (BPC) would be removed from
the Horizon project. The Benefits Agency (BA) would move directly from the
existing order book system to payment of benefits through ACT.
3. Benefit recipients who currently receive 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 accessible at banks. The Post Office might enter into a strategic
partnership with a clearing bank to operate these accounts for them. Subject to
such arrangements being put in place by the Post Office, ICL 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 be Spring 2001).
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5. Over time, the Post Office could develop the range of services which were
offered via the smartcard. It could also enter into negotiations with clearing banks
to offer counter facilities, enabling 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 account, and the move from payment via order book to
payment into benefit accounts would be carried out automatically. However,
benefit recipients would at any point be free to ask the BA to 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 a large proportion of benefit recipients will
continue to receive their benefits at post offices - either because they do not
already have a bank account, or because a post office is more convenient for them,
or just because of inertia. This means that POCL should have as much certainty
over future footfall as under the BPC. It also ensures that the smartcard has a large
initial circulation, which will help the marketing of smartcard-based services.
Impact on the various le:
Benefits Agency
Advantages:
- avoids having to develop and implement the IT infrastructure which is
required specifically for payment of benefits through the benefit
payment card (PAS/CMS/BES), although much of the development
work has already been done;
- should allow earlier move to ACT than under original benefit payment
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card project.
Disadvantages:
— delays move away from paper-based systems for paying benefits by
two years compared to BPC option.
t ice
Advantages:
— should help to maintain footfall revenue;
— gets smartcard in circulation earlier than under BPC option, bringing
forward potential revenues from smartcard-based services;
— simplifies Post Office relationship with ICL if Benefits Agency is no
longer a party to the contractual relationship with ICL.
Disadvantages:
— the cost of managing bank accounts and of the smartcard would be bore
by POCL;
— may not be consistent with POCL’s long term commercial strategy
which is to provide counter services to all the banks rather than to run
its own bank accounts;
— restricts Post Office to contracting with ICL. The Post Office have
previously maintained that if they lost the BPC they would wish to
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Te-tender.
ICL
Advantages:
-— removes BA from the contract, helping to clarify ICL’s relationship with
PO as its single client.
Disadvantages:
- ICL will want compensation for cancellation of the bpc and payment for
the development of the new facilities;
- ICL would still need to be paid for ongoing bpe work until Heads of
Agreement are signed.
- extra development work required for smartcard-based banking services.
Vv: dis ment:
Advantages:
— boost to Modern Government initiative - early introduction of
technology to support Modern Government services;
— boost to social exclusion agenda by providing simple banking facilities
to those currently without bank accounts.
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Disadvantages:
- not a clear-cut solution, involves further period of negotiation which
may take three to six months and might result in failure to reach
agreement with ICL;
- from a procurement perspective, to cancel a major part of the automation
project and re-shape the remainder involves an inevitable risk of legal
challenge.
Benefit recipients
Advantages:
- unlike the BPC option, provides a bank account to those currently
without one;
— compared to BPC and conventional ACT, provides a smartcard earlier
(although only an advantage if there are attractive smartcard-based
services available).
Disadvantages:
- unlike with the BPC, there are no facilities for urgent payments or
payment to nominated proxy. But BA would find alternative methods
of offering these services.
in: -n in i L
12. In order to preserve our leverage on price with ICL (and in the case of the
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BPC to meet DTI’s concerns about not putting the whole Horizon project at risk),
it would be vital to keep the Government’s alternative options open (either to
proceed with the BPC or to pull the whole project) until the commercial terms for
this new approach have been agreed.
13. This will require a careful negotiating strategy with ICL. They will argue that,
as the Government has changed the specification, the Government should pay
ICL’s sunk development costs for the BPC. ICL have already said that they would
want to split the contract in two, with the Horizon infrastructure, excluding the
BPC, rolled out and paid for first, and then a second set of negotiations on the
smartcard and the method of paying benefits. This would need to be avoided,
since it would leave ICL in the driving seat for negotiations on the smartcard.