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CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
Parliament Street
HM Treasury London SWIP 3AG
Steve Robson
Second Permanent Secretary
Keith Todd Esq
Chief Executive
ICL ple
26 Finsbury Square
LONDON
EC2A 1DS
8 March 1999
BA/POCL AUTOMATION PROJECT: THE WAY FORWARD
I am writing to confirm that, following our exploratory discussions over the past weeks, the
Prime Minister has now indicated that he shares other Ministers’ enthusiasm for finding a
route forward building on the proposals set out in the attached annex. The proposed
alternative for achieving the project’s objectives is premised on our view - which we accept
you dispute - that ICL Pathway has placed itself in breach of contract for failure to deliver on
time. On this basis, Ministers have authorised a further set of discussions to explore
whether there is a commercial deal acceptable to Government around which we can find a
way forward.
All are anxious now to reach a conclusion as a matter of urgency. The timetable to which
we will need to work - and which we believe to be practicable - must ensure that we are in a
position to reach non-binding heads of agreement ideally by the end of March but certainly
by mid-April. If approved by Ministers and the contracting authorities themselves, it would
be our intention to move as rapidly as possible to incorporate these heads of agreement into a
detailed and binding renegotiation of the current contracts in accordance with the established
contractual change control procedures.
In addition, I should reiterate formally what I have already confirmed in our informal
discussions: that Ministers still hold to their position that ICL should not be looking for a
positive return on their investment over the life of the project, given its history. This means
we should only address changes in revenue, costs (including cost savings) and risks
compared with the Option A route. I should also make clear that we would wish to
establish the ground rules for the discussions in the form of a binding Standstill or
Moratorium Agreement, similar to the one agreed at the outset of the contract discussions in
September of last year. The agreement should be that:
- our discussions are without prejudice and confidential;
- all parties reserve their rights and remedies with respect to past performance
of the contracts;
- none of the parties will take pre-emptive legal action against any other party
while discussions are continuing;
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- all discussions and any agreements arising from them are subject to contract;
- any settlement resulting from our discussions is subject to consideration of
the procurement law consequences;
- work on the Horizon Project will continue in accordance with existing
contractual obligations while discussions are continuing except and only to
the extent that all the parties agree in writing to suspend the performance of
any of their obligations.
I look forward to taking forward with you and Richard Christou the next stage in developing
a potential approach to which all parties can commit.
Finally, I am grateful to Richard for his letter of 4 March. As I indicated when we met this
morning, I am not in a position to respond to that letter now - much of it is concerned with
technical and commercial matters which are for the parties to address. But, as you know, I
do understand your perspective on the timetable.
Copies of this letter go to Private Secretaries to Alan Milburn, Alistair Darling,
Stephen Byers and Charles Falconer; to Richard Christou, John Roberts and Peter Mathison;
and to those who will be attending the meeting I am chairing with the parties tomorrow.
STEVE ROBSON
CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
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CONFIDENTIAL, WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
BA/POCL AUTOMATION PROJECT
This note sets out the proposed way forward for the Horizon project, following
discussions between Steve Robson (HMT) and Keith Todd (ICL). These discussions
were conducted on a without prejudice and confidential basis. ICL accepted that the
public sector parties reserve their rights and remedies with respect to past breaches of
contract by ICL Pathway. Both sides agreed that they would not take pre-emptive
legal action against any other party while discussions are continuing.
The proposal
2. Under this proposal, the benefit payment card (BPC) would be removed from
the Horizon project. The Benefits Agency (BA) would move directly from the
existing order book system to electronic payment of benefits.
8, Benefit recipients who currently receive their benefits via order books would
have a Post Office “benefit account” set up for them. BA would pay benefits into
the account via ACT, just as they would into any normal bank account.
4. The Post Office benefit accounts would be simple, credit-only accounts. They
could be accessed at any Post Office using a smartcard, but at least initially they
would not be accessible at banks. The Post Office might enter into a strategic
partnership with a clearing bank to operate these accounts for them. Subject to such
arrangements being put in place by the Post Office, ICL tell us that they could start to
roll out a smartcard-based system into Post Offices following national rollout of the
core Horizon system (currently assumed to be Spring 2001).
5. Over time, the Post Office could develop the range of services which were
offered via the smartcard. It could also enter into negotiations with clearing banks to
offer counter facilities, enabling the banks to shrink their branch network.
6. The presumption would be that all order book recipients would be paid via a
Post Office benefit account, and the move from payment via order book to payment
into benefit accounts would be carried out automatically. However, benefit
recipients would at any point be free to ask the BA to pay their benefits via ACT into
a conventional bank account, just as they can now ask for a move from an order book
to ACT.
7. This approach should mean that a large proportion of benefit recipients will
continue to receive their benefits at post offices - either because they do not already
have a bank account, or because a post office is more convenient for them, or just
because of inertia. This means that POCL should have as much certainty over future
footfall as under the BPC. It also ensures that the smartcard has a large initial
circulation, which will help the marketing of smartcard-based services.
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