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SCHEDULE!
UPDATED SERVICE DELIVERY FRAMEWORK
Version History
13.0 Added as per CCN1638, Amended as per CCN1639,
CCN1643, CCN1645, CCN1653a
14.0 20/12/2021 Updated as per CCN1667a, CCN1675, CCN1700 and
moving all Schedules to v14.0
15.0 22/12/2022 Updated as per CCN1713a
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Schedule I Version 15.0
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SCHEDULE I
UPDATED SERVICE DELIVERY FRAMWORK
Schedule I
Updated Service Delivery Framework
The Parties have agreed an updated service delivery framework, as is set forth within the parts
of this Schedule I (with each referenced in the format Schedule I[@]). The terms of all such
parts of this Schedule I shall apply in accordance with the terms set forth therein.
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2.1
2.2
Schedule IL
Revenue Switch Mechanism
OVERVIEW
Paragraph 4.7 of CCN 1600 set out a joint intention of Post Office and Fujitsu Services to
evolve the Services under this Agreement to reflect Post Office’s changing business
requirements and also in line with new technology.
Through a joint initiative, Post Office and Fujitsu Services identified and agreed a number of
areas of this Agreement to be updated and Services to be evolved in line with this joint
intention, such initiative being referred to as “Project Everest”
updates and evolution will result in a reduction over the Term in the Operational Charges. In
order to implement Project Everest, Fujitsu Services requires Post Office to make certain
financial commitments with respect to the committed spend under the Agreement and Post
Office has agreed to provide such commitments, as specifically described within this Schedule
I] (Revenue Switch Mechanism).
. It is intended that such
DEFINITIONS
“Actual Spend” means the total amount of spend actually agreed and contracted for between
Post Office and Fujitsu Services under this Agreement in respect of:
2.1.1 the Operational Services (including HNG-X Test Infrastructure);
2.1.2 the Horizon Software IPR pursuant to Clause 30.19 of the Agreement;
2.1.3 the Core Team;
2.1.4 Trinity 3;
2.1.5 Invest to Save provisions as described in paragraph 17 of Schedule D1; and
2.1.6 any Additional Services (whether under this Agreement or otherwise),
during the Commitment Period. This shall include: (i) all amounts invoiced and paid under
the Agreement; (ii) all amounts invoiced and payable but not yet paid under the Agreement;
and (iii) all amounts in respect of which Fujitsu Services is entitled to invoice pursuant to the
terms of this Agreement but has not yet done so.
“Additional Services” means any combination of any of the following:
2.2.1 Committed Development Services;
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2.4
2.5
2.6
2.7
2.2.2 extensions or changes to current Services within the Term of this Agreement but
excluding any extensions or changes or new Services directly related to the current
POLSAP Services, and/or Branch Network Services
2.2.3. evolved and updated services introduced as a result of Project Everest;
2.2.4 Programme Spend; and
2.2.5 new Services (whether under this Agreement or otherwise) which Fujitsu Services
has chosen to bid for, to the extent awarded to Fujitsu Services and which are
performed during the Commitment Period, excluding any extensions or changes or
new Services directly related to the current POLSAP Services, and/or Branch
Network Services,
“Committed Development Services” means any Development Services ordered by Post
Office on the basis of a minimum pre-committed spend or capacity in accordance with the
processes and principles contained within Schedule 13 (Digital Development Services).
“Committed Spend” means committed total spend under this Agreement for:
2.41 the Operational Services (including HNG-X Test Infrastructure);
2.4.2 the Horizon Software IPR pursuant to Clause 30.19 of the Agreement;
2.4.3 the Core Team
2.4.4 Trinity 3; and
2.4.5 Invest to Save provisions as described in paragraph 17 of Schedule D1,
in each case during the Commitment Period that would have been payable by Post Office to
Fujitsu Services pursuant to this Agreement but for the implementation of Variabilisation.
“Commitment Period” means the period starting on I April 2017 and ending 31“ March
2023.
“Pivot to Cloud” means the evolution of the Horizon system services and the underlying
infrastructure to the Fujitsu Services K5 cloud based hosting environment. For clarity, Pivot
to Cloud is being implemented under two programmes of work, referred to as “Cloud
Enablement” (also known as “K5 foundation » and “Belfast Migration”.
“Programme Spend” means all spend relating to Services relating to the following Post
Office programmes of work: (i) Solar (including Project Mercury); and (ii) Pivot to Cloud
(including costs associated with decommissioning, and remaining payments with respect to
the lease charges for Belfast data centres agreed by Post Office within the Belfast Migration
project) including all Charges for all CTs relating to the same (whether ordered on a
committed basis or time and materials).
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2.8
2.9
3.1
3.2
3.4
“Project Mercury” means the initial iteration of HNGT delivered as part of Solar.
“Solar” means the development of a new version of the Horizon application with a Thin
Client HTMLS browser driven solution delivered from the Fujitsu Services K5 cloud that is
capable of offering Post Office products and services from the Post Office Counters and retail
partners.
“Trinity 3” refers to the risk and resilience project relating to the data centre asset refresh for
the Belfast data centre, as is set forth within paragraph 1.2.2 (b) of Schedule E (Termination
and The Exit Plan). For the purposes of assessing Committed Spend, the committed value of
Trinity 3 shall be considered to be £7.5m in 2019/20 and £7.5m in 2020/21.
“Variabilisation” means the process by which the parties are agreeing changes to the pricing
model for the Services to a consumption-based, demand-driven, charging mechanism,
including through evolution of the application support, service management and reporting
Services to underpin the move to demand driven charges and which will affect the revised
technology and to support Post Office’s future business strategy, the framework for which is
set out in Schedule I2 (Variabilisation Framework).
COMMITMENT
Post Office shall procure from Fujitsu Services Additional Services that can be compliantly
awarded to Fujitsu Services such that the Actual Spend during the Commitment Period is no
less than the Committed Spend.
The Parties agree that, as at 1 April 2017, the Committed Spend, were the Commitment Period
to run from 1 April 2017 until 31 March 2023, is £195.74m and is made up of the figures set
out in Annex 3 to this Schedule I] (Revenue Switch Mechanism), it being understood that:
(a) the provisions of the Agreement that operate to vary the Charges comprising the
Committed Spend will continue to do so (including, but not limited to, indexation and
termination); and (b) in the event that the Commitment Period ends prior to the 31 March
2023, the Committed Spend will be calculated for the shorter period and will also include the
Termination Charges calculated in accordance with the Agreement. The parties will monitor
and regularly update the Committed Spend in accordance with Annex I to this Schedule [1
(Revenue Switch Mechanism) and the final Committed Spend figure shall only be established
by the parties at the expiry of the Commitment Period.
Where a CT relates to Committed Development Services, all spend under such CT (whether
above or below any commitment therein) shall be included within Actual Spend. In addition,
where any such CT is terminated in advance of its anticipated end date (whether any relevant
commitment has been met or not), all amounts invoiced and paid under such CT shall be
included within Actual Spend.
All Programme Spend from 1 August 2017 onwards shall be included within Actual Spend.
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3.5
3.6
3.7
3.8
3.9
4.1
For the avoidance of doubt, Actual Spend shall not include any amounts relating to any spend
agreed and contracted for between Post Office and Fujitsu Services on an ad hoc, time and
materials basis, save for where such spend forms part of Programme Spend.
Ona six-monthly basis, within the appropriate commercial governance forum, the parties shall
review Actual Spend to date and the Committed Spend in accordance with Annex I to this
Schedule I] (Revenue Switch Mechanism). Notwithstanding any such review of Actual
Spend, Post Office’s success in procuring Additional Services to meet the requirements of
paragraph 3.1 shall only be finally assessed at the end of the Commitment Period.
No later than 3 months prior to the start of the final 12-month period of the Commitment
Period, Post Office and Fujitsu Services shall meet at an executive level to assess whether
Actual Spend is likely to meet Committed Spend by the end of the Committed Period and
agree any relevant actions that may be required.
In the event that at the end of the Commitment Period the Actual Spend does not exceed the
Committed Spend, the matter shall be escalated between the parties to the appropriate
governance forum involving attendees at the most senior level for both Post Office and Fujitsu
Services for consideration and agreement as to any relevant actions that may be required to
bridge the gap between the Actual Spend and Committed Spend. If following such escalation,
no resolution is agreed between the parties within 30 days from the date of such escalation,
Fujitsu Services shall have the right to invoice the Post Office for the difference between the
Committed Spend and the Actual Spend and the Post Office shall pay that invoiced amount
in accordance with the payment timescales set out within Schedule D2 (Ordering, Invoicing
and Payment).
There may be circumstances where Fujitsu Services chooses not to bid for a new service
(including, but not limited to, where the required service is predominantly for pass-through
third party goods or services). To the extent that the parties agree that it would make strategic
sense for Fujitsu Services to provide these new services the parties shall, acting reasonably,
agree the extent to which the spend on such new services shall be included within Actual
Spend. By way of example, this may involve splitting the new services into multiple CTs or
service lines to isolate the pass-through costs from spend on Fujitsu Services’ resources.
WORKED EXAMPLES
Annex 2 contains various worked examples of the operation of this Schedule I] (Revenue
Switch Mechanism).
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ANNEX 1
Key Principles for Review Process
Part A — Committed Spend Review
1, The Parties agree that the Committed Spend will be reviewed and revised, using the
mechanisms in the Agreement, for the purposes of tracking Actual Spend at the end of the
Commitment Period against the Committed Spend.
Part B - Tracking Actual Spend and Forecast
1. For the purposes of Paragraph 3.6 of this Schedule 11 (Revenue Switch Mechanism) the first
review shall take place before 31 May, 2018.
i
Each review shall:
a. agree the values to be included in the Actual Spend in terms of each of the categories
detailed in paragraph 2.2 of this Schedule I] (Revenue Switch Mechanism); and
b. escalate any unresolved items to the executive governance forum.
3. The parties shall record in the minutes of the executive governance forum the agreed Actual
Spend total for each review period.
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ANNEX 2
Worked Examples
Example 1
In Year X the Committed Spend for the period is £31m including indexation adjustment for BAU and
Test Rigs, and £7.5m for Trinity projects. Through Everest the projected spend is as follows:
1. Horizon Agreement for year x has Operational Services (BAU)
a. fixed price component of £15m
b. variable price estimate of £12m
2. DDS and Core teams has
a. Fixed price of £4m
b. DDS capacity order for the year is £5m for 100 sprint resource units
3. Belfast Migration spend is forecast to be £5m
4. During the year the DDS through governance the following changes are made
a. Capacity reduced and used to 90 sprint resource units
b. POL orders 50 days call off consultancy to support as hoc requirements of which 30
days are used
c. Changes to Belfast solution which simplifies the migration and reduces spend by £1m
d. Additional resources are required from Japan for Belfast Migration and ordered on a
time and material (T&M) basis at an estimated cost of £500k.
5. Consumed resource units for the year are
a. BAU variable £12.5m
b. DDS Resource Units £ 4.5m
c. Belfast main contract £ 4.0m
d. Belfast Japan £ 0.3m
The annual review would therefore confirm the following:
6. Committed Spend for the year is
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7.
a. BAU & Test Rigs £31.0
b.. Trinity projects £75
£38.5m
. Actual Spend for the purposes of calculation are
a. BAU fixed £15.0
b. BAU Variable £12.5
c. DDS &Core Fixed £ 4.0
d. DDS Resource Units £ 4.5
th
i
io
e. Programme Spend
£39.5m
Notes to accompany worked example 1:
The Belfast Japan time and material charges are included in the Actual Spend because all of
Belfast Migration is included in the definition of Programme Spend. Accommodation and agree
travel expenses would not be included in the Actual Spend.
Notwithstanding paragraph 3.6 of Schedule I1 (Revenue Switch Mechanism), although reviewed
on a sixth monthly basis for convenience, the ultimate assessment of whether Actual Spend
exceeds the Committed Spend shall be undertaken at the end of the Commitment Period and
accordingly there is no consequence should Actual Spend fail to exceed Committed Spend in
respect of any given year.
Example 2
The scenario is as per Example 1 with the following additions.
1.
Post Office awards a new Service to Fujitsu Services under the Agreement of an estimated
£1m per annum starting at the beginning of year x, priced 100% on a variable Resource Unit
cost of £500.
Post Office places multiple CTs during the year of £3m on a T&M basis.
Post Office places new project (Project Calculus) with Fujitsu Services at the start of the year
for £2m for a specified mix of skills. Project Calculus is outside of the definition of
Programme Spend. This is placed as follows
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a. £1.5m for fixed capacity order billed on T&M basis
b. £0.5m as a capped T&M.
4. At the year end the utilisation was
a. New Service Resource Units is 1800 = £0.9m.
b. Project Calculus capacity (increased through governance) £1.6m.
ce. Project Calculus T&M £0.3m
5. The impact on the Actual Spend for calculation purpos
a. Existing Actual Spend as per example 1 £39.5m
b. Service Resource Units £ 0.9m
c. Project Calculus (capacity CT only) £ 1.6m
£42.0m
Notes to accompany worked example 2:
Project Calculus charges can only be included in the Actual Spend when it is ordered within the
definition of Committed Development Services (i.e. only those ordered under the CT for
capacity). The time and material charges are excluded in the Actual Spend because the
Development Services ordered by Post Office do not qualify as Additional Services as defined
above. In summary:
All time and material resource under Programme Spend as defined in 2.6 above are
included in Actual Spend (example I — Belfast Japan).
Other time and material charges not invoiced under a capacity CT are excluded from
Actual Spend.
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ANNEX 3
Initial Calculation of Committed Spend
201718 2018/19 2019/20 2020/21 2021/22 2022/23 Total
£m £m £m £m £m £m £m
FO Run 25.0 26.0 26.7 27.3 276 297 162.4
Invest to Save Credit 15 08 14 14 16 22 8.5
Total FO Run Incl. 28 Credit 23.4 25.2 25.6 26.0 26.1 27.6 153.8
Core Team 28 29 3.0 34 34 33 18.2
Horizon Tech Refresh - - 8.0 8.2 : : 16.2
IP Licensing . - - - - 10.0 10.0
Invest to Save 3.9 0. 0 00 - - - 3.9
Total (excl. Test Rigs) 30.4 28.4 36.6 37.2 29.2 40.9 202.1
HNG-X Test Infrastructure 23 23 1.0 1.0 1.0 141 8.8
Total (Incl. Test Rigs) 32.5 30.4 37.6 38.2 30.2 42.0 210.9
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Committed Spend = £210.9m for full term of the Horizon Agreement, calculated as at 1 April 2022
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Schedule I2
Variabilisation Framework
1. VARIABILISATION APPROACH
Ll Variabilisation Principles
1.1.1
1.1.4
"Variabilisation” refers to the process of changing the pricing model for
the Services to a consumption-based, demand-driven charging
mechanism, including through evolution of the application support,
service management and reporting Services to underpin the move to
demand-driven charges through a revision of technology and to support
Post Office’s future business strategy.
The baseline for the purposes of assessing the success of Variabilisation
is the total 2017/18 Service Charges for the Operational Services plus
HNG-X Test Infrastructure, being £27.24m (the “Baseline”) (established
in accordance with Annex 1).
Through following the process of Variabilisation as described within this
Schedule, the parties aim to move Operational Services plus HNG-X Test
Infrastructure, the Charges for which represent, during 2017/18, at least
50% of the Baseline, to a consumption-based or demand-driven charging
mechanism (the “Variabilisation Goal’).
The parties will aim to achieve the Variabilisation Goal through an open
and transparent joint process. Variabilisation shall be completed by 31
March 2020 (“Variabilisation Completion”).
The parties will, through the relevant joint governance forums, agree a
rolling six-monthly plan, detailing the intended Variabilisation activities
to be undertaken by the parties during such period.
The achieved percentage of Variabilised Services (defined below) as
against the Variabilisation Goal shall be regularly assessed by the parties
within the relevant governance forum and ultimately upon Variabilisation
Completion. A worked example of how this achieved percentage is
calculated is included at Annex 2 of this Schedule [2 (Variabilisation
Framework).
Where any Variabilised Service is charged on the basis of consumption
but for reasons of service continuity, protection, financial reasons or
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otherwise, Post Office agrees to a minimum quantity of consumed units,
the entire spend on such Variabilised Service shall be considered
“variable” for the purposes of assessing the achieved percentage of
Variabilised Services against the Variabilisation Goal.
12 Variabilisation Framework and Candidates
1.2.1
1.2.2
Within this Schedule, a “Resource Unit” shall refer to any unit of
consumption for an element of a Variabilised Service as may be agreed
between the parties.
Certain elements of the Services may be provided on the basis of specific
activities and responsibilities which are Variabilised such that the
consumption of such elements by Post Office is measured on a Resource
Unit basis. The provision of such Variabilised Services shall be
undertaken on the basis of this Schedule I2 (the "Varial
Framework"). Together, those elements of the Services delivered on a
Variabilised basis under this Variabilisation Framework shall be the
"Variabilised Services".
lisation
As part of Variabilisation, the parties shall jointly identify candidate
elements of the Services to be delivered as a Variabilised Service (each
being a "Variabilisation Candidate"). Each Variabilisation Candidate
shall be described in writing, with such written proposal to include:
1.2.3.1 a summary of the Variabilisation Candidate;
1.2.3.2 details of the specific Services that are within the scope of
such Variabilisation Candidate (including describing in
appropriate detail the changes proposed to the existing
Services);
1.2.3.3 any transition or implementation activities that may be
required to deliver the Variabilised Service (including any
proposed charges relating to the same);
1.2.3.4 details of the underlying Resource Unit by which the
Variabilisation Candidate shall be charged to Post Office
(with such Resource Unit meeting the characteristics set out
within paragraph 1.3 below); and
1.2.3.5 a pricing proposal for the underlying Resource Unit for the
Variabilisation Candidate.
Each party shall provide the other with reasonable support and assistance
as may be required to establish and document each Variabilisation
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Candidate. This may include appropriate workshops and other assistance
with discovery and establishment of appropriate Resource Units.
1.2.5 Where the parties agree a Variabilisation Candidate, the Parties shall
document in writing such Variabilisation Candidate through the execution
of a CCN (each a “Variabilisation CCN”). For the avoidance of doubt:
1.2.5.1
1.2.5.2
each Variabilisation CCN shall include: (i) all relevant
changes to the Services; (ii) all relevant changes to the
provisions of this Agreement relating to the Charges for the
Services to include the agreed charge per Resource Unit and
other associated Resource Unit details relating to the
Variabilisation Candidate; and (iii) any other required
changes to the Agreement; and
where a Variabilisation Candidate requires transition or
implementation activities in order to deliver the Variabilised
Services, the parties will execute an appropriate CT where
necessary.
1.2.6 The parties acknowledge that:
1.2.6.1
1.2.6.2
standard commodity-based services provided by Fujitsu
Services may meet the requirements of Variabilisation using
the standard pricing mechanisms for such services;
not all elements of the Services or components of the pricing
mechanism may be suitable to move to a demand-driven
model; and
protection and surety of the Horizon system may require a
form of minimum consumption commitment from Post
Office to enable Fujitsu Services to meet the service levels
and obligations in this Agreement, both current and as may
be varied. Notwithstanding this, such minimum commitment
should be with reference to a minimum number of Resource
Units, rather than minimum spend.
13 Resource Unit Characteristics
All Resource Units will have the following characteristics:
1.3.1 consumable on a variable basis by Post Office based on actual demand;
1.3.2 sufficiently granular so as to be truly flexible such that the number of
resource units consumed changes meaningfully with an increase or
decrease in consumption (for example, if Post Office requires an activity
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to be performed by Fujitsu Services 100 times, a Resource Unit for the
single activity, with the task charged as 100 Resource Units, would meet
this requirement, whereas a Resource Unit for the activity to be performed
100 times, with the task charged as 1 Resource Unit, would not);
capable of tangible, individual and objective measurement;
wherever possible, aligned with an industry-standard definition of the
applicable Resource Unit;
individually priced with a clear and objective adjustment mechanism for
changes in consumption; and
accompanied by clear, agreed factors which qualify an activity as meeting
any size qualification which may apply to the Resource Unit (for example,
the factors that establish the Resource Unit as being "small" or "large" or
“simple” or “complex”).
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Annex 1
Baseline Figure
FO Run 24.90
Test Rigs 2.34
Total 27.24
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Annex 2
Worked Examples
Calculation of like-for-like service charges
The following hypothetical example assumes that all transitional programmes have
completed across each Service line. The revised split of operational costs are as follows:
1. Data Centre Operations and Central Networks - calculated on a like for like basis within
the Pivot to Cloud project
a. Fixed price element £4.0m
b. Minimum Resource Unit value £2.0m
c. Like for like other variable Resource Units £1.5m.
d. Total £7.5m
2. Third and Fourth line support (excluding any impact of creating of OpEx to Capex)
a. Fixed price element £3.5m
b. Minimum Resource Unit value £2.0m
c. Like for Like variable Resource Units £2.8m
d. Total £8.3m
3. Service & Security Management (£6.5m)
a. Fixed price element £3.0m
b. Like for like variable Resource Units £2.8m
c. Total £5.8m
4. Test Rigs
a. Fixed Price Element £0.5m
b. Minimum Resource Units £1.8m
c. Total £2.3m
5. Summing the above totals, the total cost of like for like Operational Services and HNG-
X Test Infrastructure post-Variabilisation is therefore £23.9m
Calculation of achieved Variabilisation percentage is as follows:
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6. Minimum Resource Units and variable Resource Units
a. Data Centre Ops and Central Networks £3.5m
b. Third and Fourth Line Support £4.8m
c. Service & Security Management £2.8m
d. Test Rigs £1.8m
e. Total charges from variable Resource Units £12.9m
7. Variabilisation Achieved
a. £12.9m of the total £23.9m is charged ona variable basis
b. The Variabilisation achieved is therefore 12.9 / 23.9 = 54%.
Note to accompany the Worked Examples:
The approach adopted above is to base the calculation on a like for like service obligations.
Thus in the example the numbers reflect a hypothetical saving as a result of the revised
operating model and new technology. This equates to baseline number pre-variabilisation
of £3.34m.
For the purposes of this illustrative example a hypothetical split of Operational Charges has
been used.
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