NFSP00000226 - Report by the Post Office on PO and ICL Negotiations faxed regarding the Horizon Working Group meeting dated 30 June 1999

Evidence on official site

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Po NA Ob Ot

Rt Hon Ian McCartney MP
Minister of State

For Wearan Working Grony meeting .

Ft Sely Bee ry I
1 Victoria Street
ive lf Ww oofa London SW1H 0ET
i
ie -2 mn 1999 GRO
: JCSy ors care . i
ee) dts en ies

erate
Department of Trade and Industry

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HORIZON WORKING GROUP

REPORT BY THE POST OFFICE ON PO/ICL NEGOTIATIONS
(Item 2 on agenda of the third meeting - 7 July 1999)

1. TIMESCALE FOR NATIONAL ROLLOUT

The Contract and National Rollout

The Letter Of Agreement sets a date of 1 March 2001 for the completion of NRO for the Core
System Release (CSR). This is based on the automation of an estimated 18573 post offices.
The achievement of milestones on rollout trigger very significant contractual payments to
ICL. ICL Pathway and POCL may also be subject to damages if they are at fault in causing
delays to the NRO pian.

A completion of NRO in March 2001 is also of significant operational significance to POCL
as it would allow the organisation to enter the 2001/2002 financial year with a full back

office accounting system which cannot be switched on until all post offices have been

automated,

The Revised National Rollout (NRO) Plan

The plan that formed the basis of the Letter of Agreement was less than robust and not
jointly agreed. A revised plan now being jointly tabled by the ICL and POCL programme

teams. The commercial implications of this plan are still being finalised but the overall
shape is clear. The plan has the following key features: j

* A progressive ramp-up of offices from the start date of 234 August 1999 through to the
end of November 1999, reaching a maximum of approximately 200 offices per week

* A sustained rollout of approximately 300 offices per week throughout 2000

* The completion of the ‘tail’ of offices (up to about 2000 offices) in the first months of
2001 :

« There will be breake in rollout of 5 to 6 weeks over the Christmas periods.
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The plan aims to complete 99% of offices by March 2001. There may be some offices
outstanding at the agreed formal end of rollout due to such practical issues as temporary
closures, the need for further internal modifications, and transfer of ownership of post
offices. These offices, and new offices added after the completion date, will then be handled
under ongoing business change procedures. Both POCL and ICL Pathway are committed to
the delivery of the NRO plan and will formalise this commitment in the new contract. Both

organisations will allocate the required resources to achieve this date and will act promptly
to remove any obstacles to delivery.

Txaining/Support

‘The current Live Trial is revealing a number of important lessons which are being addressed

for NRO. Improvements in training, procedures and software which will give greater

confidence in the service provided and support the achievement of the NRO plan are being i
introduced, These are geared to reducing/ curing the earlier problems of Wednesday cash
balances that have been highlighted in the trial offices.

There will be a process of continuous improvement to processes and procedures as lessons ;
are learned in the wider rollout. For example the period up to Christmas 1999 will be used ;
to test the current assumptions on the number of offices that will go live each week and the

impact on the support services, notably the Pathway and POCL Help Desks. Appropriate
action can then be taken to maintain and where necessary refine the rollout plan during
2000. ;
t
i
1

Rollout and Quality of Service

The key management challenge in NRO is to achieve completion of the NRO plan to
schedule without detrimental impact to business performance or the quality of service
provided to customers and clients. These demands have to be balanced, It will therefore be i
essential that all parties act swiftly to resolve such impacts as and when they occur. This is :
likely to require the continued support of Government and the unions as well as action by
POCL and ICL Pathway. :

In this context it is important to recognise the impact of the totality of change as NRO i
proceeds. The main risk is not in the physical preparation and migration of the individual i
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offices during each week of NRO. Both ICL Pathway and POCL can ptovide the logistics
and resources to implement 300 offices per week. Rather it is the cumulative impact of
moving from the current experience of 300 live offices to a new automated environment of
18500 offices . This will throw up fresh challenges and demands on the organisation and its
people. It will also demand a sustained high quality of service from ICL Pathway and the

flexibility to provide solutions to issues as they arise.
Conclusion

POCL and ICL Pathway have prepared detailed plans for the completion of NRO by March
2001, and are making the necessary commitment of resources to achieve this date. The plan
is supported by regular reviews which will ensure lessons are learned and progress is kept

on track.

2, ICL SPARE CAPACITY

There has been a full exchange of correspondence with ICL on the legal aspects of this issue
with POCL arguing to get commitments to provide capacity for future developments into

the contract, However on the basis of the agreement signed on 24 May POCL lawyers
advise that ICL are legally correct in refusing to incorporate capacity in the full legal
agreement. ICL are clearly not prepared to move from this position. Provided the full
description of the physical inventory and system is supplied under the revised contract and
that work now underway between POCL and ICL (outside of the contract and under a
non-disclosure agreement) defines capacity, POCL will be in a position to calculate and
argue logically with ICL about the use and pricing of spare capacity. This is not the same as
having both items written into the contract document but looks like the best POCL can do

under the circumstances.

3. ACCEPTANCE TESTS

Contractually ICL need to have fewer than 20 medium incidents and no high incidents in
order for the system to. pass Acceptance and claim £68m. At the moment there are 15

medium category incidents and 2 highs, We anticipate 6 more mediums emerging but work
is also going on to clear or reduce all incidents. We cannot predict whether the key
acceptance hurdles will be met but it is our intention to behave robustly but faitly and only
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to apply pressure where there are genuine acceptance incidents. We will report again at the
July 7 meeting when a clearer prognosis will be available.

AREPORT BY THE POST OFFICE ON PO/BA NEGOTIATIONS
(Item 4 on agenda of third meeting - 7 July 1999)

A letter is being sent to Mr McCartney - as requested at the last committce meeting - so that
he can seek to broker agreement on the way forward on negotiations with Ministerial
colleagues. This will be tabled at the meeting for discussion.