From : R F Scott
To
Mr
Mr
Mr
Mr
Mr
Mr
Date. : 11
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ll
J
ha
H- 509
Sir Michael Butler
R Banks Girobank
J White De La Rue
T Reynolds An Post
T K Todd
J H Bennett
A E Oppenheim
October 1995
Subject: Pathway Group Board Meeting
Minutes - Tuesday, 3rd October 1995
Please find attached the Minutes of the Pathway Board Meeting
held on Tuesday, 3rd October 1995 at ICL in Feltham.
Regards,
Rod Scott
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PATHWAY GROUP LIMITED
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS
HELD AT
ICL FELTHAM, MIDDLESEX
oN
TUESDAY 3RD OCTOBER 1995
Present:
In attendance:
n
ir Michael Butler {In the Chair)
Banks
H Bennett
Oppenheim
Reynolds
K Todd
White
F Scott (Secretary)
A Jones (Item 42 )
RE REREER
am GHHPaw
Mr Bennett
Mr Bennett
Mr Bennett
95/40
a)
b)
MINUTES OF THE PREVIOUS MEETING
The Minutes of the Meeting of the Board held on 8th
September were approved as a correct record and
signed by the Chairman.
MANAGING DIRECTOR’S REPORT
The Board discussed issues arising from Mr
Bennett's report. The following points were noted:
Concern was expressed over poor service support
from ICL Sorbus on the ALPS rollout. Mr Bennett
would proceed to define the elements of a new
managed service contract for discussion with ICL
Sorbus. However in the meantime he would brief Mr
Todd and Mr Whitwam on the situation.
The Board noted that Mr Terry Austin had joined
Pathway as Programme Director on an 8 month
contract and was working on the resource plan. It
was agreed that Mr Bennett would arrange a top
level presentation for the Board on the end-to-end
solution and the Pathway Programme plan to deliver
this solution. This would involve Mr Austin and Mr
Dicks. The Chairman asked that Mr Bennett aim to
have a paper on this subject with the Board as
least a few days and ideally a week before the
meeting.
Subject to diaries, Mr Todd, Mr Berry and Mr
Bennett will be reviewing Mr Austin’s programme
plan before the next Board meeting. Mr Reynolds
will be invited to join the review if possible.
minutes/Grp.0310995 Page 1
c)
da)
95/41
a)
b)
Mr Bennett
c)
Mr Bennett
da)
Mr Todd
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A change to the POCL organisation was noted with Mr
Rich seconded to work with Mr Dykes. This may
indicate greater priority being given to the
procurement.
As noted at the last meeting, we were still
experiencing considerable difficulty with the way
the procurement was developing. POCL/BA were
attempting to rewrite the SSR via detailed contract
schedules, then would implement change control so
that "level playing field" would be achieved with a
only one substantial variable left upon which to
make a final decision between the three shortlisted
suppliers, namely price. (See minute 42 b) below)
FINANCE DIRECTOR‘S REPORT - SEPTEMBER 1995
The Board discussed matters covered in Mr
Oppenheim'’s report and the following points were
noted:
The Board were very concerned to hear that POCL may
go ahead with investment in APT (Automated Payments
Transfers) and TIP (to make legacy systems
compatible with Oracle databases), possibly ina
separate procurement. The APT investment in
particular would be in response to a threat from
Cashstop - a new organisation offering a cheap
electronic payment system through terminals in
retail outlets to pay utilities etc. bills. Not
only could these investments delay the main
procurement but they would be superseded by the
main solution when it was in place and thus a waste
of money.
It was agreed that the Chairman would write to Bill
Cockburn expressing the shareholders concerns on
the procurement delays and the Post Office plans to
invest further in APT. The Chairman and Mr Todd
will see the draft letter and Mr Bennett will
ensure it reaches Bill Cockburn before’ he visits An
Post and will advise Mr Dykes of the approach.
It was acknowledged that Riposte, produced by
Escher, was vital to our proposed solution yet
there had as yet been no effective technology
transfer path agreed to Pathway. Mr Bennett would
prepare a paper on proposals to deal with this
issue, and try to ascertain any technical or
commercial/legal concerns that Escher had.
Mr Oppenheim reported on funding. Credit Suisse
(who wanted a fee in respect of work before award
of the procurement), and Toronto Dominion bank (who
did not) were contenders as lead bank. Mr Todd
agreed to try to make sure Credit Suisse dropped
the request for pre-award fees and the Board were
happy to proceed on the basis there would be joint
lead banks.
minutes/Grp.031095 Page 2
e)
ALL
Mr Banks
Mr Oppenheim
f)
Mr Oppenheim
9)
95/42
a)
b)
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Mr Oppenheim said that Charterhouse Bank had been
appointed as PFI advisers to POCL/BA. As part of
their work Charterhouse had asked for CVs of all
the Directors (please send these in to Mr Bennett).
Amongst other requests Charterhouse had asked for
the proposed Memorandum and Articles of Association
of the Company (i.e. those which would replace the
existing Memorandum and Articles which had been
kept in place for the time being). The Articles
were being prepared by Girobank’s legal advisers
and Mr Banks agreed to speak to Simon Brady on the
matter.
Mc Oppenheim would talk to Mr David Webster of
Hambros about their approaching Charterhouse for a
general discussion on PFI matters.
Mr Oppenheim requested the shareholders to consider
deeds of participation of Pathway Group Limited in
their pension funds in respect of the staff they
were transferring to Pathway, to be effective from
the time the staff were formally transferred aiter
contract award. He would in the meantime speak to
e.g. ICL pension advisers, with experience of such
participations, and provide any guidance to
shareholders on what actions to take.
The Board discussed whether all technical elements
of the solution were understood, operative and in
place. Mr Oppenheim replied that CMS and EPOS,
Systems Management and MIS could not be said to be
ready for integration into the solution. It was
acknowledged as very important to complete the
technical aspects of the solution and have them
under change control, as soon as possible.
TIMESCALES, UPDATE ON COMPETITIVE POSITION AND
CUSTOMER CONTACTS
Mr J Jones presented and there was a discussion.
Points arising:
The present timetable from POCL/BA showed the
demonstration phase ending end December, the ITT
issued in January and selection made in April.
This compared with the original timetable with the
demonstration phase ending end October, ITT issued
mid November and selection in January. However Mr
Jones said that even the current timetable with
considerable slippage from the original might not
be achievable. The selection date could move
further by as much as 6 months. There were a
variety of reasons for this as referred to in the
reports of Mr Bennett and Mr Oppenheim.
The strengths and weaknesses of the three potential
suppliers positions were considered. We still
believed we were well placed, but continued delay
in the procurement would work to our disadvantage.
minutes/Grp.031095 Page 3
Mr Bennett
Mr Bennett
Mr Bennett
Mr Oppenheim
c)
dq)
f)
95/43
95/44
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Mr Bennett will continue his discussions with POCL/
BA and suggest that rather than effectively
rewriting the SSR, through detailed contract
schedules, they should use it as a baseline, drive
the invitation to tender from it and negotiate
contract schedules later when a supplier had been
selected. Our strategy will be to try to have the
ITT issued before Christmas with a selection of a
preferred supplier early in Ql to enable the
contract negotiations to take place at the same
time as discussions on the solution.
The Board considered there would be considerable
sympathy in the Government, especially H M Treasury
for the Company’s point of view that the i
procurement was dragging on too long but also
because of POCL/BA*s approach, we did not seem
likely to have the opportunity to integrate into
the solution as much capability in dealing with
fraud as the original PFI concept would have
allowed us to do. This was a particularly relevant
consideration because the Government was making
much of the savings achievable through reduction in
fraud. The Government: was facing an issue of
confidence in the PFI process from the private
sector and they may be responsive to suggestions.
It was agreed Mr Jones would talk to Mr Swan of the
Treasury and refer to contacts between David
Hancock of Hambros and Mr Robson at the Treasury.
Other contacts will continue.
The current sales plan and actions being taken were
noted.
A short note on the benefits of the solution in
tackling various kinds of fraud would be prepared
by Mr Jones for the Board.
RISK REVIEW
The Board noted the Pathway top ten risks paper
which had been circulated prior to the meeting.
FURTHER BUSINESS OPPORTUNITIES
Mr Oppenheim said a schedule had now been prepared
by An Post showing the Post Offices etc. around the
World which should be considered as sales
prospects. Mr Reynolds mentioned India in
particular. Mr Oppenheim said activity would: be
stepped up on this and it was agreed that a meeting
would be held with An Post and Escher on the
possibilities. Mr Todd said that the parties
involved must also consider their view on whether
they will bid for any of this business outside of
the Pathway consortium. It was important that the
views of ICL, Girobank, and De la Rue be taken into
account by Mr Bennett and Mr Oppenheim before
minutes/Grp.031095 Page 4
Mr Oppenheim
Mr Bennett
95/45
95/46
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discussions were held with Escher. The Chairman
reminded the executives of the value of liaising
with Embassies and High Commissions. As noted at
the last meeting; he was ready to do this.
OPERATIONS DIRECTORY
The report by Mr Rowe was postponed until the next
meeting.
DATES OF NEXT MEETINGS
The next meeting will be held on Wednesday, Ist
November at 2.30pm in Feltham. This will be
preceded by a Shareholders’ meeting starting at
12.30pm (over lunch). Following the meeting there
would be an opportunity for the Board and the
Pathway management to mingle.
It was agreed the following meeting, 6th December
1995, would be held in Dublin. Mr Reynolds invited
the Board to see the An Post solution in operation,
have lunch, then the Board Meeting in the afternoon
(a change of plan from a morning meeting).
Subsequent meetings would be held on 17th January
1996 at 2.30pm and 21st February 1996 at 2.30pm, at
Feltham.
minutes/Grp.031095 Page 5"
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PATHWAY GROUP LIMITED
MEETING OF THE BOARD OF DIRECTORS
TO BE HELD ON
TUESDAY 3RD OCTOBER 1995
aT.
ICL, FOREST ROAD, FELTHAM, MIDDLESEX TW13 7EJ
AT 10.30 A.M.
AGENDA
1. Minutes of Meeting 8th September 1995
(Previously circulated)
2. Actions Arising
3. Managing Director’s Report J H Bennett
(Attached)
+
4. Finance Director's Report A E Oppenheim
(Attached)
5. Timescales J H. Bennett
6. Risk Review J H Bennett
7. Future Business Opportunities A E Oppenheim.
8. Operations Directorate S Rowe
ay ‘ Update on Competitive Position and J Jones
‘Customer Contacts
10. Any other business All
li. Date of Next Meeting
Wednesday, lst November at 2.30pm in Feltham.
The Board Meeting will be followed by a meeting (with working
lunch) of Representatives of ICL, De la Rue and Girobank
12.30 - 1.30pm
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Pathway Group Ltd
Board Meeting 3rd October 1995
Managing Director’s Report
Introduction
The last four weeks have seen very slow progress on the
Stage 3 plan. BA/POCL have found it increasingly
difficult to meet their timescales for schedule
production and release. Progress has slipped 2/3 weeks
in 4 weeks with little confidence in future dates and
their achievement.
Pathway has not been without its own concerns. Product
descriptions have progressed only after intense and
tiring effort; a number of key components for WINDEM are
still outstanding; in short there is a sense of the
procurement becoming bogged down.
Timescales
Meetings have taken place with Andrew Stott. He admits
privately that on present plans the procurement is
heading for a "quantum" delay of several months (2-5)
rather than on "incremental" few weeks. It is also
clear that. pressure in mounting from both contracting
parties for timely decision. BA are confident on their
delivery of CAPS and want work on integration testing
with the chosen service provider in mid-March 1996.
POCL are increasingly impatient and want to get on with
their ambitions to become a powerful UK retailer. Also
the "memorandum of understanding" between BA and POCL is
causing trouble in taking forward. In short something
has to give. Either a new faster procurement with a
tighter focus on PFI, or a cleaner separation between
what BA and POCL want.
POCL Partnership
A first meeting has taken place with just POCL staff.
This will now become a separate but increasingly
important strand of activity running parallel to the
procurement. Setting evaluation criteria is proving
difficult but the message is clear. POCL want this as a
major decision point in their input to the service
provider selection.
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BA/POCL Meetings
These have reduced as staff struggle with their
schedules. No Negotiating Team meetings have taken
place for several weeks.
Presentations to senior POCL managers and BA managers
went reasonably well with plenty of questions. Also the
demonstrations to the Post Office Senior Mangers
conference on 22nd September gave us a first chance to
see IBM and Cardlink UK in action. IBM have nothing to
show, and relied upon a promotional video. Cardlink
have built a good looking front end demo, but it looks
very thin. However they are spending serious money on
model post-office and marketing collateral. The Pathway
message of systems in use and working well today was
well presented and received.
ALPS
Roll-out all but complete but marred by poor service
support from ICL-SORBUS triggering off serious
complaints from POCL. Issue now with MD ICL-SORBUS but
may need to go higher. Work in hand to define and sell
a new managed service contract.
Risks
In the short term the WINDEM risks centre around CMS,
PMS and EPOS functionality. In the longer term we still
have to address the Escher risks, and achieve
acceptable self-sufficiency.
Organisation Development
The Programme Director role is now filled by Terry
Austin on an initial 8 month contract. Terry joints
after a 5 year assignment to Inland Revenue with project
responsibility for Self Assessment. We now urgently
need programme plans, resource plans, work breakdown
schedules and full cost and timescales descriptions in
place.
John Bennett
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Pathway MEMO
To: Pathway Board From: Tony Oppenheim
FEL 01
Date: 26th September 1995
inance Director's report - September 1995 (second report)
Highlights
Good:
* ALPS delivering very significant savings
* Last week’s Post Office demo confirmed we are still ahead
* PD‘s issued: ITfT’s finally underway
* Communications with suppliers improved
* Bank competition between Toronto Dominion and Credit Suisse
* First Escher 32 bit version counter software delivered/working
* PMS demo system delivered on schedule (port of An Post system)
* New agreements with Escher - EPOS and consultancy (pending)
* Microsoft agreement pending - systems management
* Oracle agreement pending - PMS and MIS
* Programmes Director on board
*
Commercial Manager recruited
Not so good:
ALPS loose ends may erode quality image
* Serious timescale slippage pending - not yet declared
ad Signs of dissent between POCL and BA i
- will the joint procurement survive? (Risk or opportunity?)
First two Schedules not, firm / 5 day response time not 4 weeks
Charterhouse confirm ‘intent to minimise PFI - lowest cost
POCL may go ahead with APT and TIP investments
Treasury still refusing to get involved - fraud savings
No progress with overseas joint marketing (at time of writing)
Gaps in service provider solution remain: some PD’s below par
Pathway still has very limited knowledge of Riposte
eee
Bid Budget and Timescales
The Bid Budget is described under separate cover.
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The main issue. is timescales related. Unofficially, all POCL/BA
staff£ we talk to see a slip in dates along the following lines as
inevitable:
- ItT issued: from Dec 22 to Jan/Feb
- Decision: from Feb to March/April
- Award: June?
As identified in John’s report, this may be best case.
There. will be a need to seek additional funding to continue the
bid;
Customer Negotiations
There have been no further meetings of the CNT since the last
Board. We have suggested agenda items worthy of consideration.
They have not been ready to engage.
It is not yet clear whether the meeting we have requested for this
week will happen.
After two weeks, we have not had a response to our proposals'on how
we might contain further slippage in timescales.
‘
The PMS solution switch needs to be done formally by reference
change control - effectively a re-submission of affected parts of
the Proposal. - not expected to be an issue.
An initial meeting has been held with POCL on "partnership": they
seem genuinely keen to pursue this, albeit their agenda is none too
clear. Meetings at high level have been proposed and we have
responded positively with agenda proposals and a framework for
discussion. However, dates remain to be fixed and are slipping
against target.
If this does come off, it is clear that whatever evaluation
criteria are adopted, POCL will have this. component of’ value to
consider whereas BA will not have an equivalent - another tension
between the two parties.
. Funding
As indicated above, competition for lead bank is centred on Credit
Suisse and Toronto Dominion, either as joint lead or one or other,
The deciding factor may be pre-award fees: Credit Suisse are
holding out for fees whereas Toronto Dominion appear to have
dropped their similar demand.
The following have declared strong informed interest in being part
of. a syndicates:
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- Bank of Scotland
- Merita Bank
ABN Amro and Bayerische Landesbank remain possibles.
On the customer front, Charterhouse have indicated strongly that
they intend going for "minimum compliancy to qualify as a PFI".
Minimum cost is emerging as the main driver. Fraud savings do not
appear to register because Treasury are still standing back from
the fray.
The steer is to limit risk transfer to an absolute minimum.
However, this is at odds with an apparent lack of understanding of
the exposure with respect to counter infrastructure investment if
after say two years operation the system fails to size for volume
growth. This is going to be a key item for the banks.
Supplier pricing
ITT’s underway. Responses are due just in time to enable supplier
selection and then a joint programme of customer schedule drafting
and negotiation. With all the other activities, this process will
however be very tight.
An experienced commercial manager with exposure to PFI has been
brought in. to oversee this work.
Girobank have also nominated a commercial manager to represent
their interests on the other side of the boundary, which is useful.
Risk register
Progress made but much to do. An update will be presented at the
Board meeting.
The Customer interface is good.
There is very high correlation between the customer perceived risks
and those identified by Pathway.
We have had confirmation that the risks we identified on POCL/BA
have been passed to their Schedule owners for consideration - but
that does not. constitute a commitment to include.
Market opportunity beyond POCL/BA
Discussions have, at time of writing, not moved forward pending
resolution of immediate development priorities (now essentially
done, subject to signature)..
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An Post are talking to Norway, Iceland, Hungary, Isle of Man and
possibly others. All small so far.
Escher have had very early discussions with Canada and the US.
Canada is believed to be considering putting benefits through post
offices. US is rather different.
Australia is the origin of "Australis" and is already automated.
Australis. is believed to be the basis of the IBM solution which
both IBM and Unisys proposed in different guises in Singapore -
decision in favour of ICL/Escher/An Post (subject to contract).
South Africa have decided on a Cardlink-like system (Barclays).
France has recently started implementing a new system, which rules
it out.
No knowledge ‘yet about other European countries, except that the
fit is not generally very good - no benefits content, may already
be automated to a degree, language.
China and India are both believed to be looking for a solution of
some kind. India may be a good fit, but difficult to crack. China
is clearly a wild card.
Insurance
D&O for the non-executive directors (Willis Faber and Dumas) and
Key Man (Berkeley Insurance - Hambros) are close to being
finalised.
Auditors
Engaged. Two initial meetings held. One was on VAT structure,
which is better understood now, with options defined. We will
follow up with Girobank especially.
Bank Account
Girobank account opened. and £100 credited.
Pathway staff terms and conditions - planning for award
To minimise transfer problems, we would ask that the Pension funds
of all shareholder companies approve a resolution extending pension
cover to those employees who will be transferring from the
respective parént organisation ~ a Deed of Participation.
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Staff
Graham Wingrove is on board and up-to-speed as Chief Accountant:
Oracle ledger implementation October to December.
Warren Spencer has begun work on a dedicated basis as lawyer: focus
on framework terms and conditions and schedule vetting.
Steve Reed will join by mid-October as Commercial Manager: focus on
sub-contracts. back-to-back.
Tony Oppenheim