Geof Muigan
42 May 1999 15:56
veer) Heywood, David Miand, Geof Noms
Draft note on Horizon lessons
oie
Any comments? Additions? And who should it go to?
swith the possibility 0 !
avoid anything like this happening a
anning to end. It was misconceiv has fac
pe in has taken up huge amounts of ministerial n
end a far from optimal solution that may be as expensive as the
certainly offer less. This note sets out 8 basic lessons.
1, Clear leadership: No project should ever have two departme! r agi
Jead. One should always be clearly in charge, and bearing responsibility. and ik
should be in the lead in negotiations with private companies. When projects 0 dare
face problems any responsibility for fixing them, or reviewing them, should clearly he
with a single minister with a clear reporting line either to the PM or Chancellor.
f this kind it is essential to prepare serious
2, Fallbacks: In the case of any large project 0!
fallback options. Although No 10 demanded fallback options last autumn, no further
fallbacks were subsequently developed. Having rejected the main option, the government
has therefore effectively had to sign up to an alternative option on which very little work
or serious costing has been done.
3. Commercial freedoms: it will alway:
freedom. But it cannot be right for ministers
itis important that the government Jearns lessons to
disastrous project from
s and problems. Over the
and delivered in the
and will almost
of a deal on Horizon
gain. Horizon has been @
ed. thas faced continual delay
and official time,
alternatives
nts or agencies jointly in the
s be hard to give public enterprises true commercial
and generalist officials to have to make
decisions about extremely complex commercial and technological strategies. At the very
least more transparent methods are needed for offering independent advice to ministers on
the quality of business plans they are being asked to support. In the case of Horizon,
although consultants had been used at various times, at the key moment of decision proper
advice was missing.
has highlighted the absence of any strategic grip on government plans for
uve ‘Throughout, there has been noone within government able or empowered to ensure
ae Horizon fitted into a properly thought through governmental strategy. As a result
lespite much reference to ‘modernising government’, this was always mo! irati
than substantive. : er ae,
§. Political decisions: if ministers cannot reach a} i ‘i i i
agree pons: greement on a project with yubli
implications, it is vital that at an early stage the Prime Minister and Chane Noe eet a -
a for reaching a decision. The worst possible outcome is for the PM and
ellor to become involved at the very last moment without having had time to master
the issues.
4. IT: this project
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j»formation: far better procedures are needed to tie down basic facts. Almost every
ante osed fact in this project has turned out to be unreliable. Moreover facts have been
presented without adequate explanation of their reliability. Part of the role of defining facts
may need to be contracted out. There is also a need to draw on the many imaginative
visual methods developed within business for explaining complex financial data to boards.
Presentation of data in crude NPV and cash flow tables has not helped decision-making.
7. The Post Office. Throughout this process the relative lack of competence of the Post
Office and their failure to develop a proper business strategy has been a key failing.
8. Courage. When a project is clearly failing government needs to be bolder about cutting
its losses. There was a clear case for termination 12 months ago, although the Treasury
and DTI favoured continuation. In effect inertia led to continuation, since noone at the
centre had a sufficiently clear remit or reason to terminate.
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tee
19:4 °
8 PAGE 0037/7 RaghtFAn ae
Treasury Chambers, ROMO AL
bers, Parliament Street, London, SWIP 3AG
Jeremy Heywood
Principal Private Secretary
10 Downing Street
LONDON
SW1A 2AA
\2 May 1999
Dear Jeremy ,
BA/POCL
Thank you for your letter of 11 May. This is an update of the position.
2, Ministers have agreed that they should enter into discussions with ICL on the
basis that:
i. Option B1 is unaffordable and is therefore not on the table;
POCL would, subject to agreeing acceptable terms, contract for the
jon platform,
supply of the core Horizon automat including the EPOS
and OBCS systems. This would take the form of atumkey supply with
g maintenance over a period to be agreed - not PFI,
ii.
on-goint
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AND DS Santis AG b
pooprvoot 10s 9/08 ww
ways 4
qrensory ‘ ” PAO
t v 17/0019% 19) 46 PAGE 04/7 NightrAr
>"
CONFIDENTIAL
\{j, Ministers would like POCL w work vith ICL to devolop their business
strategy for network banking, and Modern Government services and, in
the light of this wuts, wope that it Wil be posalble develop & joint
venture of sirnilar arrangement between POCL and ICL, incorporating,
those wlernenta of 1) whieh have merits and viiioh offer value for
money:
The assumption is that this would Involve moving to ACT 8 the main method of
payne of wenefite (enon ao ennpulsory ACT) by 2008, eivings POCL sufficient
time to install @ system Wo allow the withdrawal of honefits from tank accounts
noruns the coumer,
4, Latiach a draft jeter winch wins frond 10 ICL \aat night to vauie thiit reaction
to the Ministers! deejsion, ICL have now met with T rousury officials and the
teoretory of Male for Trade and Industry, Ae things gurreptly stand they have
newer acnepied Wor rejuoted the propor, We do nen yor have Hujiteu's
reaction although we have offers the porwibillty of a vide contarone
4, Srophen Byer® also met the Post Offive tolay Thay want 10 meet with
‘Treasury officials to discuss details of the proposal:
5, ICL will be filing their aoounts vith Companies House today making ®
enieion for the Horizon projet (ICL have wold DTI that this will be for
1) 5000 wed tet there Will be an sAdivonal #1 som ven fujitsu aooounts are
filed later thie month), However tase wccanunits Ate unlikely to be available
publicly for nurniber of dnt:
yostwy 13
necesved:
HM Treasury
"33 “Ja: Fr
+21 8/00 so:
rm treeeury -ab
Be
19:48 PAGE 006/7 RightFAaXx
12/05/99
DRAFT
RESTRICTED - COMMERCIAL.
Without prejudice and subject to contract
Richard Christou Esq
ICL ple
26 Finsbury Square
LONDON
EC2A 1DS
BA/POCL (“HORIZON") AUTOMATION PROJECT;
1am now ina position to let you know the decision we have taken on how to
proceed with this project.
As you know, we have, with your belp and support, put a lot of effort into working
up Option B1 which we recognis
relatively poor value for money,
proceeding with this option.
¢ has within it some merits. Unfortunately it has
and we have concluded that we cannot justify
We would however like to take forward the project. This would be done in two
parts:
(1) POCL would, subject to agreeing acceptable terms, contract for the
supply of the core Horizon automation platform, including the EPOS and
OBCS systems. This would take the form of a tumkey supply with on-going
maintenance over a period to be agreed; not PFI.
(2) In paralle) we would like POCL to work with you to develop their
business strategy for network banking and Modern Government services, It
is our hope that, in the light of this work, it will be possible to develop a@
joint venture or similar arrangement between POCL and ICL to give effect
to this strategy for mutual benefit, incorporating those elements of Bl which
have merits and which offer value for money.
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os Treasury 12/05/99 :
rege ¢
19:48 PAGE 007/7 RightFAX
DRAFT
RESTRICTED - COMMERCIAL
Asa token of our good faith, we are prepared to fund 50% of ICL’s continuing
audited cash costs involved in (1) above for the next 4 months, The aim would be
to agree the contracts for (1) in this timescale.
Naturally, until acceptable terms are signed under (1) above, all parties must
reserve their rights with respect to past performance of the Horizon project.
ALAN MILBURN
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