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RESTRICTED: POLICY & COMMERCIAL = ANNEX, D
11 December 1998 © pk Artes
Chairman
148 Old Strest
The Rt Hon Peter Mandelson MP Tannen
Secretary of State for Trade and Industry Few
1 Victoria Street
LONDON
SW1H OET
Dear Peter,
HORIZON
As you know we received the latest set of proposals from ICL late on Wednesday (9
December), in line with the request made by the Chief Secretary. We have now had the
opportunity to consider these and, also, have had helpful discussions with ICL and their
advisors to clarify these.
Given your meeting with Ministerial colleagues on Monday (14 December), I wanted to let
you know the Post Office Board’s position. In summary, we welcome the thrust of ICL’s
proposals and believe that they represent the speedy and decisive move we have all been
waiting for.
ICL have made major moves on a number of important issues. These include:
Fujitsu will stand behind the project fully and provide a legally enforceable
guarantee for jts funding and performance - this removes a critical risk to the public
sector and transforms our view of the project.
ICL has confirmed that they retain all the fraud liabilities per their existing
contracts.
ICL has agreed that the system must be seen to work in live operation before we
accept it.
ICL has moved well over a further £100m towards the public sector in their
commercial proposals.
In addition, their total package represents the removal of a further £100m to
£150m of indirect risk to us.
In the light of these changes, and on the assumption that DSS will honour the commitments
made to us under the Graham Corbett discussions, the Post Office Board has a commercially
1
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viable case under these proposals and so the decision is straightforward - we should go ahead
with Horizon.
Of course, we will be taking up ICL’s offer to discuss further the details of their Proposals
during the course of reaching definitive agreements, including finally signing-off the draft
Partnership Heads already agreed. However, we anticipate no major stumbling blocks for our
part. ;
It is clear to us there are real benefits in moving ahead positively now:
@ The much needed boost such a decision will bring to our commercial partners,
existing and new.
@ The confidence this will give to the thousands of subpostmasters whose livelihoods
depend on a modernised network of post offices.
™ The creation of a new public/private sector partnership to develop new services for
customers and exploit the system.
@ Clearing the way for a new partnership with Government and the banks to enable
welfare reform and to help social exclusion in a managed way.
™@ The avoidance of major uncertainties flowing from termination including a massive
loss of confidence that will result in major network disruption.
M The avoidance of protracted, messy and costly litigation.
There is now an opportunity to sweep away the uncertainty surrounding the project, put to
bed the legal and contractual disputes, and focus only on the programme's delivery, and on the
positive benefits the programme will bring to all parties. Such news will, undoubtedly, be
welcomed very warmly by subpostmasters, and by our customers throughout the land, as a
visible and substantial step in providing modem services at post offices.
All parties involved now need to reaffirm commitment to the programme’s delivery. The Post
Office Board endorses and supports the programme and strongly recommends to Ministers
that Horizon should now go ahead.
I am copying this letter to Stephen Byers, Jack Cunningham, Alastair Darling, Ian McCartney
and Peter Mathison.
Mik kn pega
Yours sincerely
DR NEVILLE C BAIN
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