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BYR SG ON Une oF. U E
TAWA - ROVICW 7a JIT
98
Agenda
Presentation to Ministers
The Live Service
Programme Status
The Treasury Review
Recovery Plan
oa PY HN >
Actions
Reet. ON THe CG RO UN D ICL Pathway 1998
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ICL Pathway - Review 28 July 98
1. Presentation to Ministers -
agenda
e Objectives of the Horizon Service (CL
e Progress to date
e Future options for Horizon
e Benefits of the Payment Card
e Progress to ACT
e ICL Position
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1. Presentation to Ministers O ) ectives of th e
Horizon service
Eliminate encashment fraud ‘CL
Reduce administration costs of paying benefit
Full and speedy reconciliation of benefit payments
Commence provision of a modern, acceptable
benefits payment service
Exploit the Post Office network reach
e Build a UK infrastructure for Better Government
- e.g. Social Banking
e Deliver counter automation to Post Offices
e Offer new services to UK citizens
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
1. Presentation to Ministers Progress to date delivery
plans
e Delivered to date: ,
Release IGL / Release 1b / Release 1c ‘CL
e Release 1c
@ Live now in 204 Post Offices
@ Payment Card for Child Benefit
@ Order Book Control Service
e Release 2 developed and in test
e National Rollout - Spring 1999
Payment card for multiple benefits
@ Order Book Control Service
@ EPOS service
Bill payment / budgeting service
FEET ON THE GROUND ICL Pathway 1998
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1. Presentation to Ministers AChievements to da te
e 204 Post Offices, 334 Counters
e Number of Payment Cards in use /
28,958 iCL
@ Very acceptable to customers
@ Well liked by counter staff
e Total number of BES Transactions 741,113
e Total value of : BES Encashments
£11.3m
BES Stops & Expiries £109k
e Total Number of OBCS Transactions 4.5m
e Number of OBCS books impounded 13,942
s@ieotential fraud,avoided to date > £1.5m
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1. Presentation to Ministers F. U tu r e Oop ti ons
for Horizon
e Personal Financial Services ‘CL
¢@ Withdrawals
@ Deposits (Savings / ISAs / Pensions)
¢ Insurance
e Family Budgeting Services
e Universal Banking
e ISAs
e Stakeholder Pensions
e Government.Direct
Reet. ON THe CG RO UN D ICL Pathway 1998
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EY ES ON 7 ne FUTUR
1. Presentation to Ministers Benefits of the
Payment Card
e Designed for the Customer (CL
¢@ Face to face counter service
Flexibility to handle agents for the housebound
@ Provides for emergency payments within the hour
@ Capable of handling part payments
@ Cash (£0.01 - £1,000)
¢@ No PIN / Biometric required
Personal safety and security
@ Telephone Help Desks
@ Advice, Stops, Complaints, Emergencies
Reet. ON THe CG RO UN D ICL Pathway 1998
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EY ES ON 7 ne FUTUR
1. Presentation to Ministers Benefits of th e
Payment Card
y,
e Fraud Prevention & Detection (CL
¢ Secure card issue
(Pick Up Notice / Card collection)
¢@ Extended Verification - personal details questions
(Best Financial Service practice)
@ Secure card technology
¢@ Encrypted network and data
@ Immediate application of stops
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1. Presentation to Ministers P r oor ess to
ACT
e Requires national Post Office network to ‘CL
provide access
@ Consistent with POCL vision for Banking
¢@ Takes time to implement
e 900m transactions go to ACT to banks
e A proportion (say 200m) delivered via
POCL
e Net effect on POCL would be £300m p.a.
e Network would become non-viable
FEET ON THE GROUND ICL Pathway 1998
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EY ES ON 7 ne FUTUR
1. Presentation to Ministers P r oor ess to A CT =
The Way Forward
(CL
e Control timing of move to ACT
e Support POCL in re-engineering the
network
e Re-engineering will take time
(5-10years)
e Exploit all the benefits of the payment
card - always better than paper
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EY ES ONT ae FU TU Re
1. Presentation to Ministers ICL Position
e Want to co-operate to make the programme a
success ‘CL
e Strongly support the Payment Card
e We have invested huge amounts to develop
card-based system to meet all BA requirements
e Payment Card is live and successful
e Extensions to support multiple benefits are
developed and in test
e Cancelling card-based system puts ICL in an
impossible position
e Cannot write off our costs - need substantial
compensation
e Either pay to have the system, or pay to cancel
FEET ON THE GROUND ICL Pathway 1998
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EYES ON Tne FUT UR Ee
ICL Pathway - Review 28 July 98
2. The Live Service ‘CL
FEET ON THE GROUN © ICL Pathway 1998
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EY ES ON 7 ne FUTUR
2. The Live Service CS Management Information :
Release 1C Vital Statistics - 30 June 1998
Installed Base: 204 Post Offices, 334 counters / CL
Number of Cards Issued: 34,033
Number of Active Cards in use : 28,958
Total number of BES Counter Transactions to date: 741,113
BES Counter Transactions in June: 74,007
Total value of Benefit Payments received to date: £11.3 millions
Value of Benefit Payments received in June: £2.1 millions
Total value of Benefit Encashments made to date: £10.8 millions
Value of Benefit Encashments in June: £2.3
millions
Total number of OBCS Transactions to date: 4.5 millions
Number of Order Books impounded: 13,942
Potential Fraud avoided: >£1.5 millions
Reet. ON THe CG RO UN D ICL Pathway 1998
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EY ES ON 7 ne FUTUR
2. The Live Service CS Management Information :
Payment Encashments
(CL
£ No.
2,500,000 + + 90,000
Ga £ Encashed 80.000
—+—No. Encashed I ,
2,000,000 + + 70,000
+ 60,000
1,500,000 + + 50,000
1,000,000 + 7 40,000
+ 30,000
500,000 + + 20,000
+ 10,000
0 7 T T T T T T T T T T T 0
97/07 97/09 97/11 98/01 98/03 98/05
Reet. ON THe CG RO UN D ICL Pathway 1998
EY ES
ON
t
H
E
Fug URE
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2. The Live Service CS Management Information :
Stops & Expiries
30,000
25,000
20,000
15,000
10,000
5,000
Hae
97/07
97/09 97/11
Reed
ON
98/01
T
H
E
98/03
GROUND
98/05
No.
+ 1,200
+ 1,000
+ 800
+ 600
+ 400
+ 200
+ O
ICL Pathway 1998
EY ES
ON
t
H
E
Fug URE
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2. The Live Service CS Management Information :
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
(CL
OBCS Data
No.
97/07 97/09 97/11 98/01 98/03 98/05
fe eT ON oH Ee GROUN D
ICL Pathway 1998
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EY ES ON 7 ne FUTUR
ICL Pathway - Review 28 July 98
3. Programme Plan - agenda
y,
e Treasury Review (CL
e Current status
e Key dates
e New Release2
e Summary
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EY ES ONT ae FU TU Re
3. Programme Plan - Treasury Review
*Consultants conclusions on likely National Roll-Out
start date
— 50% chance of January 2000 y,
— Planning date should be April 2000 (CL
*Conclusion based on
— Unexpected BA inputs on need for increased testing
— POCL readiness to “manage” automation in the business
— Lack of clarity on BA/POCL acceptance process
— Interaction between NR2 and NR2+ due to RCD caveats
“ICL Pathway response
— Unacceptable and unnecessary delay
— Restated plan date of April 1999 for NRO
*POCL position
— Delay unacceptable and unnecessary
— Instigated a full plan review supported by ICL Pathway
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
3. Programme Plan - Current Status
*POCL/ICL Pathway proposal for NRO to start with:-
— Child Benefit only but full card roll out ‘CL
— EPOSS and APS for POCL
— OBCS
*Separate and later model offices for other benefits
(JSA,IS,PSCS)
*Additional benefits introduced in a phased manner
from 28 Feb 2000
*BA/CAPS accepted proposal in principle
*Proposal gives earliest start of NRO 5 July 1999 a
slip from April 1999 due to duration of Live Trial
‘ICL Pathway position is to welcome proposal BUT
seek
to maintain April 1999 start of NRO
FEET ON THE GROUND ICL Pathway 1998
EY ES
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23JUL98
HORIZON PROGRAMME RE-PLAN
JAN I FEB, MAR I APR I MAY
1998 —T
JUN I JUL, AUG , SEP
OCT , NOV , DEC
JAN, FEB , MAR
1995
APR, MAY , JUN I JUL I AUG , SEP
OCT , NOV , DEC
ny
JAN, FEB, MAR
APR, MAY
I
I SINGLE BENEFIT
NR2 DIT2
CAPS / JSA Model Office
I
NR2 Model office (ChB / CAPS 3.0)
Release Authorization Wy
I
NR2 End to End (ChB / CAPS 3.0) BAA APE
POCL Migration
Live Trial
ChB I
Start Office Roll Out
CL
Zz
I MULTIPLE BENEFIT
I
Multi Benefit Model Office NR2 / CAPS 3.
H
Joint On-Line Payments / Stops etc. Pre-Proving
\
Caps 3.5 Release into Model OfficeI 4.
0/JSA/IS/PSCS
Multi Benefit Trial
All Benefits into Trial
Multi Benefit Card Roll-Out
Acceptance
Reed
re)
N
T
H GROUND
ICL Pathway 1998
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3. Programme Plan - Live Trial Issue
*POCL requesting additional time for LT set-up
*POCL requesting extended duration for observation
*POCL requesting additional period for approval ‘CL
“Resulting dates:
ICL Pathway POCL
Start Migration 4 Jan 1999 4 Jan 1999
Live Trial Starts 25 Jan1999 8 Feb 1999
Live Trial Ends 9 April 1999 19 June
1999
Start NRO 12 April1999 5 July 1999
*Above based on BA accepting POCL Programme
Plan
*NR2 acceptance for single benefit is 19 June 1999
‘ICL Pathway position is to achieve earliest NRO ie.
Anri elele
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
3. Programme Plan -
Multi Benefit Introduction
*BA requesting single Model Office for next 3 benefits ‘CL
*BA requesting extended live “Trial” before card roll- out é
*BA linking multi benefit to full acceptance of NR2
*Resulting dates:
Multi benefit MO 12 April 1999 to 1 Oct 1999
Multi benefit Trial 13 Sept 1999 to 31 Jan 2000
Start Multi benefit RO 28 February 2000
*Phased introduction of new benefit to MO and Trial
*All benefits into trial by end November 1999
*NR2 full acceptance is 25 February 2000
“ICL Pathway evaluating proposal (received 22 July 1998)
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3. Programme Plan - Summary
*Treasury Review concluded start of NRO between:
— January 2000 - April 2000 ICL
*POCL and ICL Pathway driving to bring forward to
earliest date
*Current views of earliest NRO start
— POCL, July 1999
— ICL Pathway, April 1999
“ICL Pathway approach
— identify and agree earliest, non contingent plan (ie. April 1999)
— work to produce contingent programme plan
— ensure all parties work to earliest date
*ICL Pathway Plan version 4 identifies earliest dates
FEET ON THE GROUND ICL Pathway 1998
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EYES ON THe FUTURE
3. Programme Plan / CL P a th way
Project Plan Key Dates
V.3.0 V.4.0 ‘CL
¢ New Release 2 Ready for use 05/10/98 18/12/98
¢ Existing PO’s and Data Centres
Migrated 02/11/98 24/01/99
¢ Additional 100 offices ready
for Live Trial 25/01/99 05/02/99
* Live Trial Starts 25/01/99 25/01/99
* Start of National Rollout 29/03/99 12/04/99
* Completion of National Rollout July 2000 Aug 2000
Reet. ON THe CG RO UN D ICL Pathway 1998
EY ES
le}
Tea &
FUTURE
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New Release 2 High Level Plan - Version 4
1SMAY98
JAN
1998
FEB I MAR I APR I MAY I JUN I
JUL
AUG
SEP.
OCT NOV DEC
q
JAN FEB
999
MAR APR
System
[Test
BIT
[06
BIT Col
nt. #1 (10)
BIT
Qo
2 15
i
0
Cont. #2 (17)
vS
16. it
(2 eaonmernt
'S Extended Interface
8
09
Testing (E.
DIT Cont. (17) >
E2E Cont. (10) > —4
JSA -
lodel Offic
08
Model Offi
JSA
lode! Office
Roll
21
2 LLL
22
Cont. >
MO Cont. (1 Wa ¢
Ready for Live ¥
1c ta NR2 Migration Period
Wigan to Bootle Data Center Mig
Out additional 100 Live Trial Post
24
IS - Model
04
41
Office sca tnaneneneneenemneemeeemeneminenen
a
2324
ration
Offices
2
25 09
Live Trial ete’
22
S05
Start Nal
tional Roll O ute
Reed
ie)
Nod
H
ROUND
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EYES ON THE FUTURE
3. Programme Plan P r Oj ec t
Milestones - NBZ Plan V4.0.
Start End
System Testing (1st & Main Pass) 08-Dec-97 24-Aug-98 y
System Testing (Final Pass) 25-Aug-98 30- CL
Oct-98
Business Integration 06-Mar-98 29-Sep-98
Testing (1st & Main Pass)
Business Integration Testing
(Final Pass) 15-Sep-98 30-Oct-98
Technical & Security Testing 04-Dec-97 30-Oct-98
Direct Interface Testing (DIT2) 16-Jun-98 08-Jul-98
End to End Testing (Main Pass) 03-Aug-98 23-Oct-98
End to End Testing (Final Pass) 02-Nov-98 04-Dec-98
Model Office Rehearsal #1 10-Aug-98 11-Sep-98
Model Office Rehearsal #2 21-Sep-98 23-Oct-98
Model Office Test 02-Nov-98 04-Dec-98
New Release 2 ready for use 18-Dec-98
Start of Live Trial 25-Jan-99
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3. Programme Plan N R2 = Current Sta tus
*Direct Interface Testing (DIT2) Complete
*Business Integration Testing (BIT2) Complete y,
(CL
“System Testing (Main Elements)
— Benefit Payment System (BPS) complete
— Order Book Control System (OBCS) complete
— Automated Payment System (APS) complete
— Electronic Point of Sale System (EPOSS) 24 August 1998
— Transaction Processing System (TPS) 24 August 1998
*Preparation for Model Office Rehearsal (MOR1)
— System test criteria for entry met
— Other preparation activities underway
— 1st MOR1 activity is environment reset 3 - 10 August 1998
— Plan tight but achievable for 10 August 1998
FEET ON THE GROUND ICL Pathway 1998
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EY ES ON 7 ne FUTUR
3. Programme Plan NR2 = Risks & Issues
*Risks to start Model Office Testing on 10 August 1998
— ICL Pathway environment reset (CL
— Establishing software baseline
— POCL supplied reference data impacts
— EPOSS/TPS/Counter Procedures and Training
*Issues to be managed
— POCL supplied live reference data
— Functionality upgrades (Audit/Reconciliation/RODB/Frame
Relay)
— Migration process 1c to NR2
— Large Pinicl stack
Reet. ON THe CG RO UN D ICL Pathway 1998
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3. Programme Plan Project Summary
*Implementation process to prepare Post Office Estate
commenced 8 June 1998 y,
(CL
°On target to start MOR1 10 August 1998
— BA not joining until 7 September 1998
*POCL proposal for Live Trial gives 8 Feb 1999 start date
— ICL Pathway seeking 25 January 1999
*POCL proposal for Live Trial duration gives 5 July 1999
for NRO
— ICL Pathway seeking 12 April 1999
*ICL Pathway preparation for acceptance progressing well
— POCL and BA have not agreed a process
*New BA proposal for multi benefit roll-out being
evaluated
FEET ON THE GROUND ICL Pathway 1998
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EY ES ON 7 ne FUTUR
ICL Pathway - Review 28 July 98
4, Treasury Review - agenda
y,
e The Expert Panel report (CL
e Options under consideration
e Sponsor attitudes
e Decision making process
Reet. ON THe CG RO UN D ICL Pathway 1998
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EY ES ONT ae FU TU Re
4. Treasury Review The Expert Panel Report
e Completed 7 July, to Working Party {CL
e A positive endorsement for ICL -
technical & programme plan
e Implied criticism of sponsors (edited
ICL Version)
e Recognises ICL have a case
e ICL response copied to Working Party
e 6 options, 2 recommended
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EY ES ONT ae FU TU Re
4. Treasury Review Options
e Option 1: Full Restructuring :
«Payment Card used from the outset (CL
Order Books & GIROs withdrawn
@POCL build new financial services, banking
etc capability
Card & ACT coexist until full ACT
¢BA transfer to full ACT when POCL ready to
compete - beyond current contract end date
“Pathway well placed to compete for new
business”
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
4. Treasury Review Options
e Option 2: Partial Restructuring (CL
¢@Paper-based payments continue - no Card
@POCL build new financial services,
banking etc capability
@OBCS for high fraud areas
Until POCL ready to compete for ACT
“Pathway compensated for reduced scope
of contract”
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
4. Treasury Review Sponsor attitudes
e BA determined to kill Card
¢@ Slowdown in planned Card Rollout ‘CL
Lobbying Ministers
¢ Objected to Treasury Report - “beyond
brief”
e POCL supportive but ineffective
Criticism from BA, DTI
¢@ over-optimistic on new business potential
e DTI supportive
PO need Automation
e Treasury as deal broker
Seeking acceptable resolution
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
4. Treasury Review Decision Process
e Expert Panel Report 8 July (CL
e Working Party report 24 July
e Ministers to meet 30 July
e Decision target date 1 August
e Commercial negotiation August/Sept
e BUT impact of a Cabinet re-shuffle??
FEET ON THE GROUND ICL Pathway 1998
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ICL Pathway - Review 28 July 98
5. Recovery Plan - agenda
y,
e Planning assumptions in Jan 1998 (CL
e Planning assumptions in July 1998
e Re-structuring Option 1 / Pathway
approach
e Possible business case scenarios
Reet. ON THe CG RO UN D ICL Pathway 1998
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EY ES ONT ae FU TU Re
5. Recovery Plan Plan assumptions in Jan 1998
e National Rollout to start March 1999 ‘CL
e Contract ends: May 2005 for BA
Sept 2005 for POCL
e Transaction volumes as per original
contract
e Results in loss of £200m and peak cash
of £350m
FEET ON THE GROUND ICL Pathway 1998
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EY ES ONT ae FU TU Re
5. Recovery Plan Plan assumptions in July 1998
e National rollout - April 1999 for Pathway y
- July 1999 for BA/POCL ‘CL
- Jan 2000 for Treasury
e BA want to - cancel Payment Card
- continue with OBCS
- accelerate to ACT
- encourage POCL into banking
e Contract extension iS _ unger discussion
- acceptable in principle to POCL
- rejected by BA
- legal
e Treasury Review has _ -Iimited options
- no concensus
- preference for restructuring Option’
FEET ON THE GROUND ICL Pathway 1998
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5. Recovery Plan Pathway approach to Option 1
(CL
e de-risk BA volumes on Payment Card
(2?)
e extend timescales to 2010
e de-risk POCL volumes on new business
e include realistic view of banking
transactions - 370m transactions in 2010
(??)
e uplift cost base for delays / complexities
Price Increase
1997-99
Price Increase
from 2000
Profit £m
IRR %
Peak Borrowing
PBT % to Rev.
Yr 2004 Prices vs
Contract
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EYES ON THE FUTURE
=
5. Recovery Pian Business Case
Scenarios
Scenario 1 Scenario 2 Scenario 3
Impact of price increases To achieve 3% return on Revenue I To achieve 10%return on Revenue
10% 10% 10% 0% 5% 10% 0% 5% 10%
Flat 1.5% 3.5% 4.70% 3.75% 2.85% 5.7% 4.75% 3.85%
(423) (172) 175 65 65 68 236 234 232
(0.8%) 4.9% 10.6% 8.9% 8.9% 8.9% 11.3% 11.4% 11.5%
483 482 481 490 485 481 489 484 481
(22.6%) I (8.4%) 7.6% I 3.0% 3.0% 3.0% 10.0% 10.0% 10.0%
126% 136% 150% 144% 146% 145% 151% 152% 152%
FEET ON THE GROUND ICL Pathway 1998
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EY ES ON 7 ne FUTUR
ICL Pathway - Review 28 July 98
6. Actions
y,
e Continue lobbying to Ministers, (CL
advisers, MPs Select committee, DSS
e Plan for PO banking business
e Position for negotiations
e Prepare contingency plan
Reet. ON THe CG RO UN D ICL Pathway 1998