Mosfaisg
The Rt Hon Frank Field MP
Minister of State
Department of Social Security
Richmond House
79 Whitehall
London SW1A 2NS
27 duly 1998
Dear Minister 4) State,
I am glad that you have had an opportunity to see
the ICL Pathway system and that we have been able
to discuss the importance I place personally on
delivering this system on behalf of the Benefits
Agency and POCL. As you have seen for yourself,
the system is already eliminating encashment fraud
in the 204 post offices in which it is operating
and, is capable of being rolled out now to many
others.
I understand that you and = other Ministerial
colleagues will be meeting soon to consider the
next steps in this programme, and that you will be
deliberating on the results of the independent
review of the project carried out by HM Treasury.
I think that, following our meetings, you have a
pretty good idea of ICL’s position but I thought
that it would be useful to spell out our position
once again (enclosed).
The system is technically sound. The entire
project is deliverable within a relatively short
timescale (ie within the lifetime of this
Parliament) provided there is commitment from all
of the partners. The best way forward is to roll
out the infrastructure as quickly as possible and
to issue the payment card to all legitimate
claimants. Failure to do so will significantly
damage ICL and its flotation, and the project’s
Sponsors - the only ones to benefit will be the
fraudsters.
cont'd..../
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Kelth Todd
Chief Executive
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Unless we can get an unequivocal commitment soon
from the Sponsors, it will not be possible for ICL
to raise the additional funding necessary for the
programme to continue beyond September. Therefore
I hope that you and your Ministerial colleagues
will recognise the vital importance of moving
forward rapidly on this project.
I am sending a copy of the enclosed memorandum to
Ian McCartney MP and to Geoffrey Robinson MP.
Keith Todd
Enc
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24 July 1998
WITHOUT. PREJUDICE
BA/POCL AUTOMATION PROGRAMME: ICL POSITION
ICL understands that Ministers will soon be considering how
they should respond to the current situation with regard to
the PFI contract which ICL has undertaken for the BA/POCL
automation programme. We understand that Ministers will
consider the findings of the independent Panel set up by HM
Treasury to review this programme as part of their
deliberations. Whilst we have no major quarrel with the
thrust of the Panel’s report, we hope Ministers might find a
summary of ICL’s position useful.
We bid for this project under the PFI regime. We accepted
the risks inherent in designing, developing, building,
operating and financing a system which would deliver the
services which the Post Office and the Benefits Agency (the
"“Sponsors") required under the contract. We entered into the
contract with the expectation that (as was our right under
the PFI regime, since we had accepted the risk transfer) we
would be allowed by the Sponsors to manage these risks in the
way which we judged most appropriate to deliver the required
level of service.
We also received and relied upon information and
representations from the Sponsors, as to their ability and
readiness to discharge in a timely and proper fashion the
actions in their organisations which were necessary to enable
us to deploy the system within the time period laid down in
the contract.
We also relied upon the Sponsors’ representations as to the
volumes of the various transactions that would be put through
the system in the contract operation period.
It was on the basis stated in the preceding three paragraphs
that we were willing to enter into the project, and on which
we calculated the revenues and profits which we thought we
could generate under the project in order to take a fair
reward for the assumption of the risk which had been
transferred to us.
That is not how things have turned out.
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The Sponsors have not allowed ICL to manage the contract in
the way required under the PFI regime, without interference.
Until after the PA Consulting report last September a team,
150 strong, named the Project Design Authority (a body set up
and managed and staffed from the Benefits Agency, despite the
fact that the design risk, along with the other risks in the
project, had been transferred to ICL as described above)
insisted on negotiating every decision in detail, on pain of
rejection of the system if its requirements were not
satisfied. As a result of the PA Report the PDA has been
disbanded, but the damage has already been done. The system
has been optimised to an extent far beyond that contemplated
in the original contract and, although we have satisfied the
increasingly (and, arguably, in some cases unnecessarily)
complex requirements of the Sponsors, the result has been
that the prospective revenue earning period grew steadily
shorter and our costs increased.
Further, our reliance on many of the Sponsors’
representations as to timely discharge of their dependencies
(particularly in relation to the CAPS project) and as to the
accuracy of transaction volumes turned out to be ill-founded.
We have learnt a lot from this experience and in the spirit
of partnership we have been prepared to share this experience
with HMG. We have made suggestions to HM Treasury as to how
complex IT projects under the PFI might be handled in future.
However, ICL cannot, and cannot reasonably be expected to,
continue on this basis. From our point of view - but also
from the point of view of the Government, it seems to us - a
very early decision to revise the terms of the contract is
absolutely essential.
The Chairman of ICL Pathway, Sir Michael Butler; the Managing
Director, John Bennett, his staff and the Chief Executive,
IcL have not lost enthusiasm for - or belief in - this
project, in spite of the difficulties and disappointments to
date. We are confident that with goodwill and genuine
commitment from all sides, this project will bring credit to
all involved in it by helping the Government to reduce, if
not totally eliminate, social security “encashment" fraud
and, once it is rolled out across the country, will help
address the issue of "entitlement" fraud; it will revitalise
the business prospects for POCL; it will improve the quality
of public service to the citizen; it will demonstrate that
“joined-up Government" is a reality; and finally it will also
help to lay the foundations of an inclusive Information
Society in Britain.
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Once the system is rolled out across the country, it will
provide a means to support many of the Government's
objectives; this is not a technological dead end - it isa
vital piece of the nation’s infrastructure for the 2ist
century. It is already working well in over 200 post offices
and it could be rolled out swiftly across the country if the
Sponsors so wished.
The Treasury’s independent Panel has clearly and objectively
identified the issues which still need to be addressed by all
of the parties most directly involved (BA/POCL/ICL). It is
important to note that the Panel’s review has removed any
reasonable doubts which may have existed with regard to the .
robustness, capability or technological viability of the
system which we are building. Therefore, in our view, it is
now imperative to accelerate the settlement of the
outstanding contractual issues so that all parties can
concentrate on stepping up the roll-out of the system.
Ministers should take careful note that the prolonged delay
in moving forward to the next stage of roll-out has had a
drastic impact on the financial viability of this programme.
Moreover, further delays and changes are still being proposed
by officials. ICL has invested hundreds of millions of
pounds to date and significant further investments are
required.
More to the point, unless there is a clear, unequivocal
commitment soon by the Sponsors to move forward rapidly on
this automation programme, it will not be possible for ICL to
raise the financial support necessary to maintain our
ongoing, heavy investment in the programme beyond September.
In short, the BA/POCL automation programme has become
unbankable. Ministers will understand that the financial
resources available to us are not limitless without the
genuine possibility of an adequate return. The consequences
ef having to halt further work because of lack of funding
would be as serious for the Government as it would be for
Ich.
We have made clear our commitment to this project and have
demonstrated our willingness to reach a fair and amicable
agreement with BA/POCL, but time is running out. We hope
that Ministers will recognise the vital importance of moving
forward rapidly on this project. We are ready to do all
within our power to achieve its successful conclusion.
Keith Todd
Chief Executive, ICL ple
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