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PATHWAY GROUP LIMITED
MEETING OF THE BOARD OF DIRECTORS
TO RE HELD ON
WEDNESDAY 6TH DECEMBER. 1995
AT
AN POST, HEAD OFPICE, O’CONNELL STREET, DUBLIN
scons
492D j
1. Minutes of Meeting lst November 1995 a
(Previously circulated)
2. Actions Arising
3. Managing Director‘s Report J H Bennett
(Attached)
4. Finance Director's Report A E Oppenheim
(Tto follow)
5. Sales Review J Jones
6. Programme. Status Review T Austin
7. Risk Register J H Bennett
8. Any other business
9. Date of Next Meetings
Wednesday, 17th. January 1996
Wednesday, 21st February 1996
both at Feltham at 2.30pm
NOTES
1) As previously intimated there will be a dinner kindly hosted
by John Hynes on the evening of 5th December. On the morning
of 6th December there will be a demonstration 9.00 - 10.00 am
for Messrs. Banks and White in particular.
2) The Board Meeting will be followed by a meeting (with working
lunch) of representatives Of ICL, De la Rue and Girobank
12.30 - 2.00pm, then a presentation by Mr T Reynolds followed
by a demonstration arranged by AN POST, 2.00 - 3.00pm then
departure for flights back.
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PATHWAY PAGE 61
FAX Dare: Ist December 1995
Number of pages including cover sheet:
Cover Sheet
Tos RE, Scott From: John Bennew
1Ch. _ ae Pathway
t
Phone: Phone:
Fax phone: Mobile No:
cc: Pax phone:
OC Please comment
1 Urgent OF Foryour review (©) Reply ASAP
Board Meeting - 6th December ‘95 - Dublin
Please see attached Pathway Top 10 Risks for discussion
at next week's Board Meeting
Regards,
John
If transmission is interupted or incomplete, please norify senders as soon as possible.
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@1/12/1995 22:14 PATHBIAY PASE
Pathway - RSK 10V5
PATHWAY TOP 10 RISKS 8.0
Date; 29/95
Document Title: PATHWAY TOP 10 RISKS STATUS ~
Document Type: RISK STATUS CHART
Abstrace: ‘This document is the.status of the internal Pathway Top 10 Risky,
Stairs; Issued
Distibution: Management Team
Author; MH Bennett
Quality Authorisy: MH Benassi
SiquatneDate
Comments To:
Comnients By:
COMMERCIAL IN-CONFIDENCE Pays 20f7
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61/12/1995 12:14 PATHWAY: PAGE 83
Porhway Ret RSK IOVS
PATHWAY TOP £0 RISKS Version: 4.0
Date; 29/1195
O41 CONTENT
OL DOCUMENT TISTORY
Version Date Reason __ ai
Lay 1?.7.95 Originated for Board presentation
I 2.0 ZBIS Update, Risk Group Meeting
3.0 6.9.95 Update for Board Meeting
40 Update following Risk Group Mcering J
Sa Update following Risk Group Meeting 4
[6.0 2. Update following Risk Group Meeting
7 20.11.35 Update following Risk Group Meeting
8.0 2YALIS Update following Risk Group Meetin,
0.1.2 ASSOCIATED DOCUMENTS
[Version I Dae _ Tide _ _ __[ Source
70 17.11.95 Risk Register _ RisW/RECV7
i
O13 ABBREVIATIONS
1 Description
POC, Paste Office Counters LimiteI
S15 Strategic Infrastructure Servic
SLA Service:Level Apreement
COMMERCIAL IN-CONFIDENCE Page 30F7
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RSKIOVS
8.0
29/1198
Pathway .
PATHWAY TOP IDK SS
=}
is}
rey
ir
1. TOP 10 RISKS STATUS / ACTIONS
RISK RESHONSIBLLITY STATUS / ACTIONS
Reaching acceptable SLAs wih * Enrich bascline performance manual as SUA
customer and suppliers » Consider back to hack SLAs with suppliers
+ Consider business case implications
Running PMS/CA*S on NT.
ng experiments completed
* Discussed with customer; accepted siratezy
iftcation developed, under change costre!
* Oracle specialist on board to produce implem
specs {
_ . * Development begins _
Dependency on Escher Technical * Improved technica];contact, application dev:
expertise.
» Srrategy to reduce dependency developed H
. + Implementation of straregy. Deo
Distributed system: not Technical * Papers submitted and discussed with cu
acceptabl + Modelling to complete
+ scalability of Ripaste + Customer acceptance expected Mid Dec
correspondance server
- feaud opportunities
- not proven i
BAPOCL attem:
more risk to Pathway than
business model crovides for,
+ Review the requirements,
* Flex.the revised business model
EPOS; more development * Demonstrator developed by Escher
required, + Demonstrate sohution
} * EPOS.solurion Functionat spec produced & 2
with customer !
* Size implememation and decide:route Dee i
a
B
in
3
=
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Pathway . Ret: RSKIGVS . o
PATHWAY TOP 104 as Version: = 5.0 q
DHT Les 5
3
, 5
Ris! TUS f ACTIONS BAPOCL e
:
FUSKS
+ Discussion with customer, demonstrates capa’ 37
POCLIBA site visits arranged i
Roll-our plan noc sc:
No CMS solution
MS!CMS risk
del
Transition pre
defined
+ Wentify road map of majer activi essary te Jan
ensure smooth
. ulomaiion I
MIS; definition und Operations Jur
development. unatsle to uve Mow I Fy
of control-snppliers ce recancile Mid Dec =I
POCLIBA data FS
j= Lack of contral 0} ; B
Bottom up plaz wi Mid Des 1 !
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“ - —~ ee 3
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Pathway Group Ltd
ing Directors Report
Board Meeting 6th December
1. INTRODUCTION
The last four weeks have seen some marked new changes in the
procurement process as drawn up by the BA/POCL Programme. Many of
these reflect the high profile strategy we have been adopting and
although it’s good to see our ideas included, the net effect has
not been to pull the timetable forward. Indeed as we stand there
is still no formal timetable published.
we have also been through a period of a high intensity of customer
meetings based in Feltham, all to do with a better understanding
and discussion on the Pathway proposal and in so doing, an
opportunity to discuss and handle the customer risk register.
2. PROCUREMENT PROCESS
The Programme is now pursuing the approach of issuing and agreeing
a Requirements. Catalogue with the prospective bidders and using
this as a main driver in the ITT. All bidders have a fixed period
of time to respond to the requirements such that this, together
with the finalised risk register and a series of standard contract
clauses can then be used as the baseline material for an ITT to be
issued. Although this process removes the pressure on the 90 or
so schedules, all of which can be left until a Service Provider
selection has been made, it does depend on a negotiating agreement
to be reached between the sponsors. There is little sign that
this has been yet achieved and as a result there is no definitive
timetable for this new procurement to finish. The only positive
news is that there will be no ITT before the end of the year. As
we stand, progress on the requirements being received and
responded is very slow, no clauses have yet been negotiated and
the core negotiating team meetings have only made a modest start.
In short, although the process is definitély better, is more
requirements based and fits better within a PFI framework, there
is no sign that it will complete before April/May 1996.
3. TOP LEVEL MEETINGS
The meetings with Steve Robson with Treasury and Richard Dykes of
POCL both went very well and the messages and information we took
were well listened to and in some cases acted upon. As a result,
Treasury do understand the need for them to make a contribution to
the business case of their two sponsors in order for early fraud
savings to be of value. In addition ESNS has now been formally
accepted as a requirement for a day 1 service and this is very
much as we were proposing. An active discussion with POCL about
the bill payment market place could. help defer the investment in
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Pathway Group Ltd
further APT devices. The only down side is that this has caused
some. serious concerns within the programme team that Pathway is
making a nuisance of itself and now that we have got our key
messages established we are standing back and getting on with the
jobs in hand.
4. POCL PARTNERSHIP DISCUSSIONS
After a long break we had a useful half day workshop with POCL
Business Managers on how Pathway would contribute to their
development programmes. This was an encouraging positive session
and it is quite clear that once the procurement activity is
complete there is a mountain of work both sides can and want to do
to develop good business products, their marketing, their
successful implementation. Feedback from the session has also
been positive and we are now looking at some follow-up actions
which can still run alongside the procurement work. There remains
howéver the concern about -providing commercially sensitive
information, to three bidders, two of whom are going to be deeply
disappointed.
5. POCL TWINNING ARRANGEMENTS.
These have worked out if anything better than expected and our
post. office region based in Swindon with whom we are "twinned" has
proved endormously helpful in showing us around their network of
Post Offices introducing us to staff both in branch offices and
sub-post offices and generally allowing us to use their user base
as a focus group for our developments. We have so far had several
groups of ten to twelve sub-postmasters visit us in Feltham to
give us the benefit of their thoughts and to show a high degree. of
enthusiasm for the systems we are proposing.
6. PATHWAY SUPPLIERS
A lot of work has been done over the last month to follow up the
Iff's we have issued and particular attention has gone on the
choice of hardware infrastructure on the desk and after a head to
competition with Compaq we have chosen Fujitsu ICL for the main PC
processors on a better total cost of ownership model. We have
however reserved the right to return to cost at ITT time. Similar
discussions are under way with ICL Sorbus for maintenance and
Girobank for Help Desk and Operational Services. Both of these
have more discussion to go. Following a particularly difficult
period with BT, due to highly competitive proposals from Energis,
we are now evaluating a much more innovative approach from BT
which holds out good prospects for us.
On the application development side, we have been able to move the
argument fairly quickly away from our problems with ACI and CMS
and are now looking towards a major development partnership with
Oracle UK to take development responsibility for both PMS and CMS
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and to do this using more PFI principles than conventional
procurement activities. Oracle are enthusiastic to do this and we
need to tie this down into a commercial framework before we can go
final on this approach. However as we speak, the: design teams
from Pathway and Oracle are working closely on the functional
specification for these critical systems. For counter
applications we. shall use as far as possible proven systems which
can be tailored for BA/POCL and these will of course come from the
An Post implementation set, The major new requirement here is for
EPOS/Operational support services and.on this we are currently in
active debate as to how we can get this developed without a
dependency on Escher but safely in terms of on time delivery.
This is proving quite a challenge and.a final decision is not yet
made.
7. COMPETITION
There is little doubt that IBM have made major strides forward
over the last féw weeks and have certainly done so to Benefits
Agency by putting forward an end-to-end solution which is based
upon proven components from some of their customers in South
Africa and one which they claim will deliver the lowest cost
delivery. Cardlink UK have not apparently moved their case
forward much this last month, we must therefore consider our most
serious threat to come from the IBM grouping.
8. RISKS
“After a somewhat slow start the prospects of the risks being
reduced have now picked up speed and we should gét quite a group
cleared within the next week or so. However of deep concern is
the fact that many outstanding risks are not collecting around our
dependency on Escher and this is something which is occupying the
whole of the management team. Progress with Oracle for back end
systems will clearly help, but we must develop a much more robust
self sufficiency for counter applications: The Programme wants to
know how Pathway intends to handle our dependency on Risposte
middleware itself and its future development direction. We have
early ideas here but they are not yet fully developed.
9. PATHWAY PROGRAMME PLANS
A new version of the programme plan has been recently issued but
many of the dates have had to be based on our own best guess.
Filling in the details of work packages has not been easy
particularly where control over dependencies is fragile.
10. BID BUDGETS
It is extremely difficult to see how a service provider can be
selected before April/May 1996 and therefore work has been done to
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minimise the bid activity costs to those which are absolutely
necessary. Nevertheless, we need to budget for two full quarters
of spend before we can count on a clean decision.
11. STRATEGIC QUALITY MODEL
Although we have been heavily préoccupied in reactive and
responsive procurement based activities, we have taken timeout to
take first look at how Pathway might conform to the EFQM quality
model and we have conducted our first self assessment on the nine
elements. There are quite a few lessons for all of us to learn
from this and we do need to do make background progress on these
areas whilst not losing sight of the critical demands of the
procurement process. In particular good work spent here on being
clear on our critical business processes will almost certainly pay
dividends as we move from procurement to implementation.
John H. Bennett
Managing Director
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Pathway MEMO
To: Pathway Board From: Tony Oppenheim
FEL 01
Tel:
ITD:
Mobile: I.
Date: 29th November 1995
Finance Director’s report - November 1995
Highlights
Good:
* Slimmed down process previewed - but not confirmed
* Real progress made on the ground - understanding and risks
* PFI only approach confirmed
* Political imperatives of PFI and fraud savings hightened
*
Treasury now understand the need to pump prime - but they not
yet committing themselves to helping the business case
* ESNS functionality to be included in requirements
* Selection criteria include regard to fraud savings and to ease
of use
* Favourable "partnership" session with POCL - but concerns
expressed over Pathway / Girobank conflict (bill payments)
* Selection of Pathway suppliers making good progress
*
Oracle decision in principle to engage on PMS/CMS
Not so good:
Timescale slippage still occurring despite deferral of work
No clauses thus far, no CNT negotiating sessions
BA and POCL have yet to agree a joint negotiating position
BA/POCL business case identified as very sensitive to price
IBM catching up - in some respects now judged to be ahead
Requirements catalogue still smacks of traditional procurement
Business case no better than a month ago
Lack of depth highlighted in parts of our solution
Some critical risk areas proving intractable
Intensive customer sessions have sapped resource
Need for more bid moneys confirmed
Morale
SR OF
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Timescales and Process
The Procurement team has acknowledged that, practically (but still
not officially), there is now no chance of ‘achieving ITT by
Christmas.
The Procurement team has proposed a replan of process to the
supplier community and to the sponsors (BA/POCL). As far as we can
tell, that replan is likely to proceed and goes as follows:
- abandon Schedules for the time being
= replace functional requirements with a requirements catalogue
- replace service descriptions with a service catalogue
= charging structure to be set by the Procurement authorities
(not by each supplier)
- concentrate on main drivers now, leave details until later
- draft (agree?) all main "clauses" (terms and conditions)
- go for early ITT and Tender
= qualify the prices against the business cases
bd hold "clarification sessions" with all three suppliers
- simultaneous selection and "award" against that level of
documentation
- fill in the details post award (in parallel with trialling)
There. is no official timetable to go with this process, and neither
has the process been confirmed.
Logically, based on customer declared elapse times and without any
contingency, the timetable would follow the following profile:
- ITT issued: late January
- Tender submitted: late ‘February
= Selection and award: end April
The two month period from Tender to Award reflects previous
intentions based on a fully defined ITT baseline. No additional
time has been allowed for “clarification sessions" or for POCL and
BA to finalise their bilateral commercial arrangements in light of
Tender inputs.
A May or June decision remains most likely.
Customer Negotiations
There have been two CNT sessions in the last month. One dealt with
the revised process, the other with draft charging structure.
Neither involved any negotiation.
As reported elsewhere, the first partnership meeting has been held
and a follow-up is planned.
In addition, also not a negotiation as such, we have held two
meetings with Charterhouse on Pathway funding. They have expressed
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concern as to the adequacy of the equity base plus limited recourse
finance to support this procurement. It is clear that the level of
equity on the table from the other two competitors is significantly
higher. Discussions ranged over acceptance, termination in breach
at various stages, step in and step out rights, and the need for a
bilateral agreement between the banks and the procurement
authorities. Our innovative PFI funding package is likely to be
viewed as riskier than a more traditional package, and such risk
will be weighed against the lower cost. We have pressed for
separation of SIS and BPS acceptance, particularly under a fast
track roll-out, and there is at least an acknowledgement of the
issue. Progress has been made, but there is a long way to go if
contingent liabilities are to be contained to reasonable limits in
all possible (even if unlikely) scenarios.
Funding
Credit Suisse and Toronto Dominion have put forward a joint lead
arranger mandate for signature. Subject to two points requiring
clarification, requested, this will be tabled for agreement by the
Board.
It should be noted that the change in PMS/CMS supply strategy
(separating the design and build responsibility from the operating
responsibility) will make it more difficult to pass risk down.
That will result in greater risk staying within Pathway itself.
The banks have signalled that, to the extent that pass down is no
longer possible, they will be looking to the shareholders for
completion guarantees. I can see no way round this position, hence
am working to limit the exposure (as above).
Supplier pricing and selection
The following suppliers have been selected after due process:
- FJ-ICL Systems for PC's
al Compaq for correspondence servers
- Excel for distribution and installation
We await revised inputs from Girobank and ICL Sorbus on PMS/CMS
help desks and customer services respectively.
BT have offered to "front" Energis (or any other low cost supplier
of long distance ISDN services) for a premium of circa 10%. We are
weighing the benefit of reduced risk against the higher cost. Both
offers represent significant savings over BT's original quote.
Significant gaps remain:
- PMS and CMS production version development
- MIS development
- EPOS, stock control and cash account development
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Overall, costs are. still too high and a number of suppliers have
been told that. they will have to do better.
Risk register
Of most concern:
- PMS/CMS redevelopment/enhancement (from Postdraft base)
= EPOS etc. as a product in the timescales
- continuing dependency on Escher
- lack of operational outsourcing track record
Market opportunity beyond POCL/BA
A number of countries have been identified as worthy of
consideration based on the following criteria:
- English speaking (at least from the standpoint of sales,
consultancy, negotiation and project management)
- UK influence/orientation
= size
- ICL capability on the ground
These are:
- Hong Kong, Malaysia
- Australia
- South Africa, Zimbabwe, ‘Tanzania, Kenya
= India, Sri Lanka, Pakistan
= USA, Jamaica
Realisation of such opportunities, would in part depend on, arriving
at appropriate arrangements with An Post, Escher and probably POCL.
Business Case
At time of writing, this is still being worked on to reflect a
large number of detailed changes. These reflect:
- changes to requirements (as provided by the customer)
- changes to services as a result
- changes to supply components (design or demand driven)
- new volumetric data from POCL/BA
- the proposed charging structure (per CNT input)
- supplier tenders and follow-up changes
The summary position is that the capital requirement is
significantly higher than it was at time of Proposal but that
operational costs are somewhat lower.
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Several areas of targeted cost reduction have been identified and
could make a worthwhile difference. The business case will assume
a level of task in place of contingency and will anticipate a
degree of success. Opportunities range from design changes through
changes to the way the service is carried out, to straightforward
price negotiation (as above).
If time permits, it would be worth discussing price levels at the
meeting, both relative to competition and to POCL/BA‘s own business
cases. A realistic view of pricing is likely to reduce planned
revenues as compared with Proposal Board Business Case.
The business case does not currently reflect the opportunity for
follow-on sales or the possibility of a “buying club/wholesaling"
operation to serve sub-postmasters over the planned infrastructure.
Pathway staff terms and conditions - planning for award
We still need to progress the Deed of Participation item with
respect to pensions, but this is not time critical - yet.
Tony Oppenheim