Company Secret
Minutes of the meeting of the Board of ICL Pathway Limited
Held at 08.00 a.m. on Wednesday 24'" November 1999
At 26 Finsbury Square, London, EC2A 1SL
FUJ00003660
FUJ00003660
Present: Sir Michael Butler (Chairman)
Mr T K Todd (from item 2)
Mr J H Bennett
Mr R Christou
Mr T Escudier
Mr H Kurokawa
Mr M Stares
In attendance: Mr R F Scott (Secretary)
Mr Imanishi
Mr Y Sumida
Apologies were received from: Mr A E Oppenheim
Action by: 1. Minutes of previous meeting
The Minutes of the meeting held on 15" September were
distributed to the Board during the meeting and will be
Secretary proposed for confirmation at the next meeting, in February.
2. Managing Director’s Report
Mr Bennett amplified his written report and there was a
discussion. Points noted:
a) 1,856 Post Offices had been installed and migrated to the
Horizon system. This was a major achievement for ICL
Pathway and Mr Bennett and the team were congratulated
by the Board. The system was stable and was expected to
be so until the re-start of roll-out in January.
b) Much work was required before the re-start of roll-out,
onthe supply chain, with the customer and regarding
Pathway itself. Improvement plans were requested from
several key suppliers including the ICL OSD for the
Helpdesk, on KnowledgePool where there was a
considerable task next year for training people,
from Workplace Technologies Ltd, now taken over by
NTL and also on Energis who were supplying to the
project, the BT ISDN connections into Post Offices
Pathway/minutes/24Nov99 1
Mr Bennett
Pathway/minutes/24Nov99
d)
Company Secret
Here there was a serious issue (also discussed later in the
meeting) where ICL Pathway had been led to believe that
only 100 Post Offices did not have ISDN connections in
place at the present time whereas it now appeared the
actual figure might be as high as 1,500.
The planned release date for the next major software
upgrade needed on the programme, CSR+, was
September 2000 and good progress was being made so far
towards this. This was the last major software update
covered in the existing contract.
There continued to be political interest in ICL Pathway’s
activities, with the National Audit Office picking up and
discussing issues caused by the cancellation of the
Benefit Payment Card by the Benefits Agency. The
Public Accounts Committee was expected to investigate
further and Mr Bennett might be invited to attend one of
their sessions. Sir Michael said we must ensure that the
PAC/NAO concentrated at least in part on the fact that
the CAPS system could not have produced what was
expected of it at the appropriate time in the programme.
Otherwise, it might seem easy to blame ICL Pathway for
the failure of the Benefits Card element of the project.
The joint House of Lords and Commons Parliamentary
Committee, PITCOM had had a successful visit to
Feltham for a briefing on the project.
Payment was received on 22" October for the £68m
acceptance milestone and the invoice submitted for the
£90m implementation milestone.
A major acceptance review was taking place later in the
day There were three big acceptance incidents
un-resolved. It seemed likely ICL Pathway’s proposed
resolution of one of the incidents had already been
accepted but two remained open. The principal issue was
the potentially unsafe state of operation of reference data
within the end-to-end model. Reference data referred to
the process by which POCL could change how the
software works in the field, for example how the price of
a postage stamp could be changed throughout the whole
system. However there were many more complex
reference data issues across all 3,000 of the POCL
offered products and some of the most intractable
problems arose when changes made to one product had
unintended consequences affecting other products or
other elements in the system.
FUJ00003660
FUJ00003660
Mr Bennett
Mr Christou
Mr Bennett
Mr Bennett
Mr Bennett
Pathway/minutes/24Nov99
8)
Company Secret
To a large extent POCL appeared to believe that ICL
Pathway should identify and deal with all reference data
issues whereas ICL Pathway took the view that the POCL
was jointly responsible for stabilising the whole reference
data situation. We also believed that until the reference
data issue had been resolved we should not re-commence
roll-out next year. Difficult negotiations were continuing
with POCL on this subject and it was also apparent that
they were not satisfied with the ICL OSD Helpdesk
service (although in part their impression was
undoubtedly formed by the load placed on the Helpdesks
by reference data issues, for example implementation
errors by POCL of modifications to products/systems).
There was general agreement with Mr Kurukoawa’s view
that ICL Pathway and POCL together had to establish
rigorous test and authentication procedures to apply to
reference data changes. In particular such procedures
needed to ensure that POCL did not make changes
without understanding the consequences on all of their
products. The Board agreed with Mr Christou’s approach
that we would resist re-start of roll-out in January until
POCL made a joint effort with ICL Pathway to resolve
the reference data issues.
The Board noted with concern that BT through ICL
Pathway’s supplier Energis was apparently only able to
supply many less ISDN connections to Post Offices in the
UK than ICL Pathway had been led to expect.
This presented an issue since we were responsible for
connections to Post Offices in accordance with the
contract. We would however take legal advice on the
responsibilities of BT in this matter but more particularly
on the responsibilities of Energis who had led us to
believe ISDN coverage was much greater than now
appeared. This led on to consideration of alternatives
which could be followed in this situation including
installation of dedicated land lines (unlikely because of
the cost) or satellite connections, some of which could be
put in place economically. Mr Bennett would talk more
to Camelot about their use of satellite communication
with their outlets.
There had also been further speculation in the media that
further numbers of Post Offices would be closed and
Sir Michael pointed out it would be desirable if POCL
were able to advise ICL Pathway of which ones were
affected, so extra cost would not be incurred in
FUJ00003660
FUJ00003660
FUJ00003660
FUJ00003660
Company Secret
communicating with them.
Pathway/minutes/24Nov99 4
Pathway/minutes/24Nov99
Company Secret
Commercial and Financial Directors’ Report
In the absence of Mr Oppenheim who was committed with the
customer today, Mr Bennett amplified his written report and
there was a discussion. Points noted:
a)
b)
Good progress had been made with re-negotiations with
sub-contractors following the cancellation of the Benefit
Payment Card.
Mr Bennett said it appeared at present that we would be
able to write back around £18m of the large provision
taken in the last year’s accounts for the cancellation.
As regards De La Rue in particular, we would attempt to
come to a fair, final determination, acknowledging their
efforts on the elements of the project which were
cancelled. Mr Bennett explained to the Board the
substantial modifications to the business case model.
Two versions of the business case had been considered.
Option A assumed limited incremental review over the
life of the contract, some £15m and an outsourcing/sweat
the assets/cost down approach. Option B as is stood
assumed much greater success in exploiting Horizon with
the Post Office and consequently some £50m of
additional revenue (not counting business taken outside
Horizon and before possible contract extension)
The approach of Option B was to press for more new
business under the existing contract, keep the door open
for contract extensions particularly around year 2002/3/4
and also press the case for a joint venture or other
partnership arrangement to fully exploit our position.
The difficulties of securing significant upside business
within the framework of the existing contract
arrangements (which had largely been put in place to
protect the downside) was noted. The Board accepted the
revision so far of the business plan as a good basis for
going forward. Points made in the discussion included
that the possibility of a contract extension must
continually be borne in mind but particularly from 2002
onwards and that we should understand fully the cost
drivers and their relationship with revenue. For example
after the development of CSR+ (for which ICL Pathway
would be paid cost plus 10%) we would carefully
consider whether we would undertake further
development work and if so how this could be fully
recompensed with an appropriate margin. Similarly we
wu
FUJ00003660
FUJ00003660
Mr Bennett
Mr Bennett
Mr Christou
Pathway/minutes/24Nov99
Company Secret
had to ensure that for any additional business and indeed
within the existing contract we had the best service
delivery model implemented. Mr Todd was also keen to
ensure that the new ICL inter-trading rules were fully
comprehended in establishing the profit ICL Pathway
would make and that full costs including HQ were
included in ICL Pathway as a discrete unit.
c) There was also discussion about the latest developments
in “better Government” and other perhaps more
promising business possibilities for the Post Office
including links to banks. Within the whole context of the
importance to ICL of the overall Government relationship
and Government business, we were determined to be the
Post Office’s partner for IT in the future and our efforts to
revise the business plan would continue on this basis,
perhaps using Option A as the immediate way forward by
way of a base line. Mr Bennett would take members of
the Board through the cost drivers of both options.
The Board meeting in February would be the focal point
for a report on costs and development whereas a
subsequent Board meeting, probably July, would consider
the full strategic way forward and the modification or
replacement of Option B.
Fujitsu Liaison
Mr Kurokawa renewed his previous offers of assistance from
Fujitsu with the roll-out.
Ms R Lomax
Mr Todd said he had met Ms Lomax, the new Permanent
Secretary at the DSS, Miss Anne Bowtell having retired.
There had been frank discussions and it seemed that
Ms Lomax was favourable to ICL, and continued to want us
involved with the DSS.
Changes in the Public Finance Initiative
Sir Michael said changes had been made to the PFI system
and these were not yet generally known. Mr Christou was
seeing Mr S Robson of the Treasury and might establish his
views on these.
Mr Todd referred to advice he had given to the Government
in particular that they should stop issuing PFI tenders from
individual Government Departments or “Silos” and instead
issue them from the centre to apply across all Government
operations.
6
FUJ00003660
FUJ00003660
Mr Bennett?
Pathway/minutes/24Nov99
Company Secret
“Business Links”/SMEs/Small Business Service
ICL was not entering the Small Business/SME marketplace
but would consider whether any opportunities might arise for
our existing operations from the Business Links programme
involving the DTI and regional offices.
Date of Next Meeting
23 February
09 May
18 July
29 November
FUJ00003660
FUJ00003660