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SCHEDULE D3
GAIN SHARE
Version History
1.0 31/08/06 Agreed version as at date of signature of CCN
1200
6.0 16/06/09 Moving all schedules to V6.0 as agreed with
Fujitsu
7.0 26/04/10 Moving all Schedules to v7.0 as agreed with
Fujitsu
8.0 21/02/12 Moving all Schedules to v7.0 in accordance
with CCN1294d
9.0 13/01/14 Moving all Schedules to v9.0 in accordance
with CCN1349
10.0 10/09/2015 Moving all Schedules to v10.0 in accordance
with CCN1506
11.0 31/03/16 Moving all schedules to V11.0 in accordance
with CCN1604
12.0 03/07/17 Moving all schedules to V12.0
13.0 Moving all Schedules to V13.0
14.0 20/12/2021 Moving all Schedules to V14.0
15.0 11/04/2024 Moving all Schedules to V15.0
Schedule D3 Version 15.0
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Schedule D3 Version 15.0
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SCHEDULE D3
GAIN SHARE
1. INTRODUCTION
4.41 Where, in accordance with the provisions of this Agreement, in particular those
relating to the governance and functions of the SIP set out in Schedules A2 and
B1.2, the Parties agree to share the benefit resulting from a cost saving initiative
or future development work:
1.1.1 the principles set out in this Schedule D3 (referred to in this
Agreement as "Gain Share") shall govern the arrangements for
sharing that benefit; and
1.1.2 the details of the arrangement shall be agreed on a case by case
basis under a CCN or Work Order or otherwise agreed in writing
2. BENEFITS ELIGIBLE FOR GAIN SHARE
21 The benefits from future initiatives or developments that shall be eligible for Gain
Share (subject to agreement in accordance with paragraph 1.1.2) ("Benefits") are
as follows:
2.1.1 net savings in Fujitsu Services' costs of delivering the HNG-X
Services:
(a) excluding those resulting from any Partial
Termination;
(b) excluding those resulting from measures taken by
Fujitsu Services to reduce the costs in its business
generally (except to the extent those measures have
been taken specifically in order to generate savings
in the provision of Services to Post Office);
(c) as adjusted to allow for variations in the number of
Branches, Counter Positions and all other variables
referred to in Schedule D1; and
(d) subject to paragraph 5.3, achieved without changing
the HNG-X Services, the Service Levels or other
provisions of this Agreement;
2.1.2 net savings in Post Office's costs, achieved by involving the SIP, in
respect of future IT developments;
2.1.3 net savings in Post Office's non-IT costs that result from initiatives
brought to the SIP by Fujitsu Services; and
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2.14 Post Office's increase in profits or reduction in losses arising from
new additional revenues from product developments that result from
initiatives brought to the SIP by Fujitsu Services. This shall be net of
any contribution that is displaced by the new product.
2.2 Where the Parties identify potential initiatives or developments that may result in
Benefits arising:
2.2.1
the most appropriate Party shall produce a reasonably detailed
business case in writing analysing the potential initiative or
development, amounts proposed for investment and the potential
Benefits arising. Information from each Party required to produce
such a business case that is obtainable through operation of the
provisions of Schedule D4 shall be used in such business case; and
such business case shall be presented to the Systems Integration
Partnership and Executive Relationship at the earliest opportunity
which shall be responsible for determining as soon as reasonably
practicable whether and how to implement the relevant initiative or
development. The Parties shall only proceed with an initiative or
development where they agree that sufficient Benefits will arise from
the relevant initiative or development to provide an adequate return to
enable each Party to obtain approval for their respective business
cases in accordance with internal policies then in force.
23 In relation to Benefits within the scope of paragraphs 2.1.2, 2.1.3 or 2.1.4, these
shall only be shared by the Parties if the initiative or development work in
question is included in the Working Document managed by the Systems
Integration Partnership and Executive Relationship referred to in Annex 1 to
Schedule A2.
3. PAYMENTI/CREDIT
3.1 Benefits may be apportioned between the Parties by:
3.1.4 sharing (in accordance with the principles set out in this Schedule) the
cost savings that arise from the cost saving initiative or development
in question and:
(a) in the case of cost savings made by Fujitsu Services,
reducing the Charges under the Change Control
Procedure to reflect Post Office's share of those cost
savings; and/or
(b) in the case of cost savings made by Post Office,
agreeing the payments that will be made by Post
Office to Fujitsu Services to reflect Fujitsu Services!
share of those savings,
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3.2
3.3
3.4
44
4.2
in each case, provided that each party has carried out those actions
that it agreed to undertake in order to achieve the relevant Benefits;
and/or
3.1.2 sharing (in accordance with the principles set out in this Schedule)
Post Office's increase in profits or reduction in losses arising from
new additional revenues that result from the initiative or future
development in question.
If the Parties agree that paragraph 3.1.1(b) or 3.1.2 apply, Post Office shall pay
Fujitsu Services' agreed share of the Benefits which, unless otherwise agreed,
shall be invoiced monthly in arrear in accordance with the provisions of Schedule
D2.
The amount of the Benefits from each initiative or development available for Gain
Share by each Party shall be ascertained in accordance with the provisions of
Schedule D4.
Any agreed share of Benefits duly payable to Fujitsu Services under this
Schedule D3 shall continue beyond termination or expiry of the entire
Agreement, and the Open Book provisions in Schedule D4 shall continue to
apply to enable verification of the Benefits available.
GAIN SHARE PRINCIPLES
Subject to paragraph 5, the Benefits resulting from each initiative or development
shall be shared between the Parties according to the following principles:
Investment Recovery
4.24 Each Party shall be entitled to recover:
(a) its actual investment in the initiative or development;
plus
(b) sufficient additional amounts to deliver an internal
rate of return equal to the official Bank of England
rate plus 2% per annum,
to the extent the aggregate of (a) and (b) is less than or equal to the
Benefits (such amount being the “Investment Recovery”).
4.2.2 Investment Recovery by each Party shall be achieved over the life of
the assets acquired for the initiative or development or the duration of
the initiative or development (as applicable) and shall be phased such
that Investment Recovery is paid for out of the Benefits.
4.2.3 The amount of the Benefits utilised for Investment Recovery shall (if
possible) be a fixed proportion (to be agreed on a case by case basis)
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of the Benefits in each of the years over the life of the assets acquired
for the initiative or development or the duration of the initiative or
development (as applicable).
4.24 Each Party's Investment Recovery as a share of the Benefits shall be
in proportion to the amount actually invested by that Party in the
initiative or development as compared to the amount actually invested
by the other Party in that initiative or development.
43 Additional Benefits
4.3.1 Subject to paragraph 4.4.1, where Fujitsu Services provides actual
investment entitling it to an Investment Recovery under paragraph
4.2, the proportion of the Benefits remaining after that allocated for
Investment Recovery in accordance with paragraph 4.2 (“Additional
Benefits”) shall, subject to paragraph 4.3.2, be allocated between the
Parties as follows:
(a) in the first twelve calendar months of Investment
Recovery, Additional Benefits shall be allocated 70%
to Fujitsu Services and 30% to Post Office;
(b) in the twelve calendar months after (a), Additional
Benefits shall be allocated 50% to Fujitsu Services
and 50% to Post Office;
(c) in the twelve calendar months after (b), Additional
Benefits shall be allocated 30% to Fujitsu Services
and 70% to Post Office; and
(d) in subsequent years all Additional Benefits shall be
allocated to Post Office.
If the initiative or development in question is implemented in stages or
is phased, the Additional Benefits resulting from each such stage or
phase shall be treated separately and shared in accordance with the
provisions above in this paragraph 4.3 with effect from the date of
implementation of that stage or phase.
4.3.2 If Fujitsu Services’ anticipated return, being calculated as the internal
rate of return of a cash flow at constant prices (i.e. without adjustment
for inflation) and before tax, comprising (i) its investment (as a
negative amount) and (ii) its Investment Recovery and (iii) its share of
the Additional Benefits (each of (ii) and (iii) as positive amounts):
(a) is less than 13% per annum then Fujitsu Services’
share of the Additional Benefits shall be increased
and Post Office's share decreased such that Fujitsu
Services’ total return on investment is above its
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anticipated total return on investment but no more
than the lesser of:
(i) 13% per annum; and
(ii) the level at which Fujitsu Services’ and Post Office's
similarly calculated anticipated total internal rates of
return on investment are equal; or
(b) exceeds 30% per annum then Fujitsu Services’
share of the Additional Benefits shall be decreased
and Post Office's share increased such that Fujitsu
Services’ total return on investment is equal to 30%
per annum.
In the case of both (a) and (b) any such adjustments to the share of
Additional Benefits will be on a basis that takes into account the years
in which the investment is made and the extent of investment made in
each year.
44 Alternative Approach
4.44
Where Fujitsu Services does not provide any actual investment
entitling it to an Investment Recovery in relation to an initiative or
development resulting in Benefits or if the application of the principles
set out in this paragraph 4.4 in respect of any Additional Benefits
would result in Fujitsu Services having a greater share of those
Additional Benefits than it would do under paragraph 4.3, then the
principles set out in this paragraph 4.4 shall apply instead of those in
paragraph 4.3.
In relation to each initiative or development resulting in Benefits, any
Additional Benefits (which, if Fujitsu Services does not provide any
actual investment, shall be the proportion of the Benefits remaining
after that allocated for Investment Recovery to Post Office only) shall
be allocated between the Parties as follows:
(a) in the first thirty six calendar months of Investment
Recovery, Additional Benefits shall be allocated 10%
to Fujitsu Services and 90% to Post Office; and
(b) in subsequent years all Additional Benefits shall be allocated
to Post Office.
If the initiative or development in question is implemented in stages or
is phased, the Additional Benefits resulting from each such stage or
phase shall be treated separately and shared in accordance with the
provisions above in this paragraph 4.4 with effect from the date of
implementation of that stage or phase.
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5.1
5.2
5.3
6.1
6.2
For Benefits of the type described in paragraph 2.1.1, if during the periods
referred to in paragraphs 4.3.1(a) to (c) (inclusive) and 4.4.2(a) in which
Additional Benefits are apportioned (as adjusted in accordance with paragraph
4.3.2, where applicable) it is established through Benchmarking that the Charges
for delivering an HNG-X Service (excluding the Gain Share payments (if any) in
respect of that HNG-X Service) are above the target price range (as described in
paragraph 3.8 of Schedule D6) the Gain Share payments being made to Fujitsu
Services in respect of that HNG-X Service shall cease.
ALTERNATIVE GAIN SHARE APPROACHES
The Parties acknowledge and agree that the Gain Share principles set out in this
Schedule in relation to the Benefits eligible for Gain Share and the means of
sharing those benefits may not be applicable or appropriate to every Gain Share
initiative or development.
Each Party shall consider and shall not unreasonably withhold or delay its
agreement to any reasonable modified or alternative Gain Share arrangement
proposed by the other Party in relation to a particular initiative or development.
Such matters shall be dealt with by the Systems Integration Partnership and
Executive Relationship.
The parties acknowledge and agree that in exceptional circumstances it may be
beneficial to consider proposals which generate savings in the Charges but only
if the HNG-X Services, Service Levels or other provisions of this Agreement are
changed. Any Gain Share payable in such cases shall be agreed on a case by
case basis following the general approach set out above.
ASSOCIATED DOCUMENTS
There are no CCDs associated with this Schedule D3.
There are no CRDs associated with this Schedule D3.
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