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QUARRY HOUSE
QUARRY HILL
Peter Mathison LEEDS (52 7UA
Chief Executive -
GINS12
Forest Road
FELTHAM
Middlesex TW3 JES
I \
1
Sir Michael Butler .
Pathway Group Limited - \
POH-733D I
) November 1995
Dear Sir Michael
Thank you for your letter of 25 October 1995.
I am grateful for your weicome of the changes already made to the
procurement process. Although Pathway have not had a monopoly
of good ideas we were, as f have already indicated, grateful for
your contribution - and, indeed, for subsequent proposals.
fou expressed particular concern about tne specification of
requirements. As far as the BA are concerned we are now well
advanced, after discussion with suppliers, to conclude. our
requirements and confirm them with our Ministers. While I cannot
speak for POCL, it is clearly in the BA's interest for POCL.to
ensure that the counter equipment is adequately serviceable and
that it can support other applications which will help us by
spreading the cost. The target date for finalisation of
requirements includes provision for supplier response and
resolving this by December will not endanger ‘the critical path.
You also remind us of the need to resist the temptation to over
specify "how" services are carried out. Tne Stetement cf Service
Requirements (SSR) was deliberately based on service outputs in
line with Treasury guidance. The range of solutions which have
peen proposed is evidence of the scope for innovation from the
private sector. Moreover st the start o= Chapter 4 of the SSR
service providers were told to concentrate on the underlying
business requirements, and where considered appropriate propose
alternative business processes to exercise innovative thinking,
indicating aay benefits, costs or risk implications of their
proposals. It is hard to see how more could have been done to
open up the scope for innovation. However, we are now at a stage
where we need to encapsulate the proposed solution into an
unambiguous basis for a long term business relationship between
the parties involved. We aiso need to ensure that because BA and
POCL will bear the underlying risks ¢f running their mission-
critical businesses in the case of supplier default or failure,
that we are satisfied that the “how” is itself feasible.
7 em Brectsive Agency yf
Da Deperrm nat af Catal Com
Received ine” 8.Mev. 10:56 Print Time 8, Nov, 11:00
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David Riggs has already told John Jones that we cannot see a way
of progressing the ESNS proposal separately from the main PFI as
Pathway had once suggested. We are, however, very interested in
extending our requirement to incorporate ESNS as an interim
protection. This requires some necessary commercial and
technical specification work which is in hand so that we can have
substantive discussions with Pathway as soon as possible.
However, we do not recognise the figures you quote. The widely
uSed public estimate of the amount of instrument of payment fraud
is £150 million per year and this is a ‘raw’ figure prior to the
introduction of specially targeted measures - such as ESNS in
London, the reward scheme and more secure delivery - to reduce
it in the short term,
The problems with the initial proposal that Pathway put forward
were discussed at some length with Mr Oppenheim, your Finance
Director. Pathway had agreed to take away and revise these
proposals. The legal point is, as 1 understand it, that the
Negotiated Procedure envisages some negotiation with a shortlist
of three service. providers (if available) before xXselection
whereas the Pathway propcsal would have hadynegotiation of both
Heads of Agreement and Contracts after supplier selection.
However, I do believe that there is growing common ground on the
possibility of basing ITT on a clear set of contract clauses and
a much reduced set of schedules, more directly reflecting the
requirements and the solution. This work is being proceeded with
the urgency which you would expect.
Yours sincerely
PETER MATHISON
Chief Executive
benefits
sy
Received Time 8 Nov, 10:53 Print Time 8. Nov, 11:00