Mr David Miller
Post Office Counters Ltd.
King Edward Building
King Edward Street,
London EC1A 1AA
17° February 1998
Dear David,
Post Office Estate/Space Issue
Rather than wait until 5 March to crystallise the issue, [ think it would
probably be helpful to set out ahead of time the ICL Pathway position in
response to your letter to Mike Coombs of 4" February.
It is as follows:
© POCL advertised in August 1994 for a service provider to automate its post
office estate. It did not advertise for someone to firstly rebuild and then
automate that estate. Notwithstanding what Clause 707 purports to say about
implied warranties, there was a clear and wholly fundamental implication
that the estate was fit for automation. The position as we now know it is so
bad that we consider POCL to have breached its duty of care to either
provide sufficient information to enable the Contractor to assess the real task
or to issue an explicit “health warning” about its own lack of knowledge.
* Clause 406 of the POCL Agreement includes a statement that the Contractor
confirms that “it has been offered the opportunity to inspect the POCL
premises in order to satisfy itself that the POCL Premises are suitable for the
installation and operation of the Products.” Unfortunately, that statement is
not true: we were given limited access to just ten pre-selected offices under
strictly controlled conditions which did not permit us to properly assess the
space risk overall. We signed the contract including the Clause 406
“confirmation”, not because it was true but because to have done otherwise
would have meant bidding non-compliantly. We had been told that a second
non-compliant bid (we had bid non-compliantly during the first tender round)
would probably rule us out of the contest. In other words, we acquiesced
under duress in the face of POCL’s disproportionate negotiating strength, and
in circumstances where POCL understood the nature of the problem they
were seeking to shift to the Contractor’s risk account and the Contractor
himself could not (by definition, because access had been denied). In court,
we would argue that the disclaimer should be set aside for these reasons.
e The limited assessment we were able to make was however sufficient for us
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ICL Pathway Ltd
Forest Road
to recommend immediately post award (Functional Specification V3.0) that ageipan
small footprint keyboard be adopted in preference to the “Lift” keyboard forMiddx TW13 7E]
the express reason of general space limitation. Our recommendation was
Tel +44 (0)181 730 4140
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IL Pathway Lud
Registered in England no 301561
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rejected and the Lift keyboard was selected by POCL notwithstanding ICL
Pathway’s declared risk assessment. By making that choice, POCL directly
inhibited ICL Pathway’s ability to manage the space risk and effectively took
responsibility for so doing.
In Solution 491, we define the work that we have undertaken to do (in the
limiting context of Clause 406) as “the installation of electrical wiring back
to the power distribution box, the LAN and WAN cabling”, and “any
carpentry required at counter positions required to position and connect the
OPS equipment”. “Carpentry” has a generally accepted meaning, as do
“position” (the verb) and “connect”. In the context, “counter position” clearly
means existing counter position. This in turn leads us to the reasonable
interpretation that ICL Pathway is responsible for “optimising” existing
counter space, but that expanding that space is a matter for POCL. That is
what we agreed prior to implementing the initial 205 live trial offices and
which we stand by.
The experience of the 205 offices still has to be fully assessed in relation to
the estate at large. That work is in hand. However, an interim assessment
indicates that barely half can be implemented without major surgery of one
kind or another, ie. work which goes beyond “optimisation” or “carpentry”.
That is before factoring in the additional constraints imposed by the latest
Health and Safety guidelines. These guidelines (produced by POCL just last
month, some 41 months after the OJEC notice) will inevitably restrict still
further ICL Pathway’s ability to optimise the use of the space currently
available. We hold that POCL should have provided such guidelines in a
timely fashion.
Recent RCD discussions have focused on the mobile configuration, not so
much for its mobile features but as an assumed remedy for the space
problem. POCL had identified the need for up to 100 “mobile”
configurations prior to contract. During Drop Down, POCL requested, and.
ICL Pathway agreed, that the limit be increased from 100 to 250. Subsequent
discussion at the Commercial and Finance Forum indicated that the number
would probably need to go up to circa 600 and ICL Pathway was asked to
quote an incremental price for the additional number. The driver for the
predicted increase was again the lack of space rather than the need for
mobility. It has since become clear that 600 is far short of the actual
requirement.
Although the full extent of the problem has yet to be quantified, it is quite
likely that more than half the post office estate (some 10,000 offices) will
require surgery to provide the space required for the standard configuration
equipment. (That number being arrived at after consideration of approved
stands and extensions, etc. but before consideration of flat screen, chair or
“self-inking date stamp”.) The cost of expanding the space has yet to be
assessed but is likely to be between £10m and £20m.
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* ICL Pathway is quite prepared to look at alternative solutions which reduce
the demands on space so as to reduce the requirement for site surgery. The
flat screen is a possibility. Each alternative drives additional costs which ICL
Pathway will expect POCL to bear. These costs may however be
significantly less than that of surgery and may well represent “good value”
for POCL. ICL Pathway will do all it reasonably can to expedite such
solutions once POCL have accepted the associated price.
A lower cost alternative for the lower volume offices is Pathway Light. Work
is in hand to evaluate this option by end April. Although a functionality trade
off is involved, it may be worth revisiting the upper limit of applicability of
such a solution if cost is the key. As stated previously, availability should not
be assumed before early 2000. Hence there is a dependency on agreeing with
the BA that roll out can be accommodated in two waves, standard
configuration first and Light later. There must also be sufficient confidence
in the Pathway Light approach that its non-availability at start of roll out does
not get in the way of Acceptance.
¢ The alternative, if post offices are found still not to be fit for automation, is
for POCL to close them. This is an opportunity for POCL to establish
minimum service standards and to improve profitability by pruning out
surplus offices. The short term cost of closure should be weighed against cost
of radical surgery (which has so far exceeded £10,000 per office in the case
of two offices).
Finally, and in summary, ICL Pathway rejects the proposition that we have
undertaken to provide a service to all post offices irrespective of their actual
fitness for purpose.
T recognise that this is a long and rather uncompromising letter but see no point
in beating about the bush. Unless we can agree on 5 March how practically we
will deal with the issue of the poor quality of the post office estate, progress will
stop. Finding an answer depends on POCL being prepared to put new money on
the table, cither for more expensive equipment or for remedial works to its post
office estate. If progress does stop on 5th, we will hold POCL to blame for
soliciting work which they could not reasonably have believed was achievable
within the parameters set out in the contract.
Yours sincerely...
Commercial and Finance Director
CC: Mena Rego, Keith Baines
Mike Coombs, Barrie Davies, Liam Foley
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