POLB(12)2"
POLB12/018-27
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Post Office Limited — Strictly Confidential
Post Office Limited
(company no. 2154540)
Minutes of the meeting of the Board of Directors
held at 148 Old Street, London EC1V 9HQ on 9" February 2012
Present:
Alice Perkins
Neil McCausland
Les Owen
Paula Vennelis
Chris Day
In attendance:
Alwen Lyons
Kevin Seller
Nick Kennett
POLB12/18
(a)
(b)
Chairman, Post Office Ltd (excluding item POLB 12/25)
Senior Independent Director, Post Office Ltd
Non Executive Director, Post Office Ltd
Managing Director, Post Office Ltd
Chief Financial Officer, Post Office Ltd
Company Secretary, Post Office Ltd
Head of Government Innovation (Item POLB12/18)
Financial Services Director (Item POLB 12/24)
FRONT OFFICE OF GOVERNMENT (FOoG)
Kevin Seller circulated a paper (attached as Appendix A to the
minutes) showing the estimated contribution for known FOoG
opportunities. The Board noted the relative importance of winning
the DVLA and Passport contracts. Les Owen asked if Network
capacity planning had been undertaken to ensure the business
could cope with all the initiatives. Kevin Seller explained that
detailed capacity planning was underway, but that many of the new
propositions did not use traditional counter time. The Chairman
asked how the tensions between Network Transformation and the
introduction of new products were being managed. Paula Vennells
assured the Board that the Network Director and Commercial
Director were both involved in the respective Steering Groups set
up to ensure these issues were aligned.
In Neil McCaustand'’s view the biggest commercial opportunity lay in
continuing to develop identity checking services and he suggested
that the Business should focus on this area as a core strength. He
asked why the commercial returns for new contracts were
significantly lower than those which were already in place. Kevin
Seller explained that the historic contracts with returns of circa 75%
were not won through competitive tendering and were not
sustainable. He pointed out that the paper POLB(12)17 showed
forecast returns from new contracts with a 25% contribution. In
reality POL is winning new contracts at between 30 and 40%
contribution. Chris Day said that pricing was key to winning these
contracts and that although the recent contract wins were small,
they would be used to showcase the Business to different
Government departments.
The Chairman stressed the importance of presenting opportunities
to Government departments which facilitated cost savings and
assisted digital inclusion.
(c)
ACTION:
Kevin Seller
ACTION: (d)
Kevin Seller
ACTION: (e)
Paula Vennells
POLB12/19
(a)
(b)
POLB12/20
ACTION: (b)
Chris Day
April
ACTION: (c)
Pauline Holroyd
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DVLA Tender
Kevin Seller assured the Board of the strong relationship with DVLA.
and explained that the main competitor for the tender was likely to
be a consortium, possibly with Capita, and Paypoint as its network
provider. There seemed to be little appetite for the work from the
major banks or supermarkets despite the fact that the competitor
analysis showed them as being the most credible network partners.
The Chairman asked how the Board could support the tender
process. Paula Vennells suggested that the tender stakeholder
communications plan be circulated to the Board highlighting the
Ministers and Officials involved in the decision making processes
and detailing how the Board could support this.
Neil McCausland asked for a more detailed DVLA project plan and
resource plan and the incentives in place for the team. Kevin Seller
was asked to organise a meeting with Neil McCausland to take him
through the FOoG communications plan.
The Chairman informed the Board that the DVLA tender would
return to the July Board meeting but if any significant changes
arose in the interim they would be reported to the Board.
MINUTES OF PREVIOUS MEETINGS
The minutes of the meeting of 12” January 2012 were agreed:
the minutes of the Health & Safety Sub-Committee (POLBSC-
HS(12)1*) were noted.
MATTERS ARISING — Status Report
No. 5d (POLB12/02/(b
Chris Day explained that the red status in the Midasgrange Board
Minutes related to the migration of MI databases. The status was
currently amber, moving to green as the majority of products had
now been successfully migrated. ACTION CLOSED
No Se (POLB12/06(a)
Chris Day confirmed that POL’s Going Concern status would be
covered within the RMG consolidation for this year, and that a
paper would be provided to the Board in due course on the
proposed Going Concern process/external audit for FY 12/13.
No 6b (POLB12/01(c’
Les Owen acknowledged the rigour applied to the PDR scoring
system. Chris Day commented that he had also been impressed by
the process used by the Business. Paula Vennells stressed that the
Post Office was a very honest organisation but that the scores
highlighted a concern with the low number of high achievers. Les
Owen explained that he was used to a two-dimensional matrix
rating performance and potential. Paula Vennells suggested the
inclusion of potential ratings for the Top Team in the succession
planning paper at the April Board (subsequently changed to May).
POLB12/21
ACTION:
Kevin Gilliland
ACTION:
Alwen Lyons
ACTION:
Chris Day
ACTION:
Martin Moran
(a)
(b)
(c)
(a)
(e)
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MANAGING DIRECTOR’S REPORT
Pay Review
Paula Vennells reported that RMG are working with the
Communications Workers Union (CWU) on a 3-year profit share
payment in return for a no strike deal. She highlighted the CWU's
expectation for a similar offer from POL and the potential risk to the
plan. Chris Day emphasised that the financial headroom this year
did offer an opportunity to the Business if it wanted to offer a
payment to help deliver the plan which assumed a pay freeze over
the next 3 years. However, such headroom would not be available
in FY 12/13. The Chairman challenged whether there was time to
negotiate a deal. Neil McCausland stressed that the Business was
still under an obligation to get the Crowns back to break-even, so
any solution needed to be sustainable.
Kevin Gilliland would be asked to provide a cost benefit analysis
paper to cover all the options available on Crown pay and their
associated risks.
An additional Board meeting may be required to consider the pay
mandate in detail.
Budget Meeting — 8" March
The Chairman asked that the pre-reading for the meeting should
start from the requirements for achieving the strategic plan;
highlighting areas where there is scope to exceed the plan;
documenting the risks and assumptions in order to demonstrate
that the targets have sufficient rigour and stretch.
Chris Day explained that work had already taken place to reconcile
the original strategic plan back to the budget and that he would be
using the meeting to get agreement that the plan contained the
appropriate stretch and risk. The Chairman asked that key
elements in the plan be highlighted such as Mails and methodology
of approach explained.
Quarterly Performance Reviews
Paula Vennells reported to the Board that Quarterly Performance
Reviews were being introduced with individual Directors.
Stamp Pricing
Paula Vennells explained that RMG were planning a significant
increase in stamp prices. She assured the Board that Alana
Renner, the Acting Communications Director, was working closely
with her counterpart in RM to deal with any adverse PR. Martin
Moran to circulate a note covering the effects of the RM price
increases on Post Office revenues and margin.
Collections and Returns
Paula Vennells reported that a joint presentation had been made at
RMH Board which had been very well received.
POLB12/22
POLB12/23
ACTION:
Chris Day
POLB12/24
ACTION:
Nick Kennett
ACTION:
Alwen Lyons
POLB12/25
POLB12/26
ACTION:
Alwen Lyons
(a)
(a)
(a)
(b)
(a)
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HEALTH AND SAFETY UPDATE
The Health & Safety Update (POLB(12)20) was noted.
FINANCE/PERFORMANCE REPORT
Chris Day reported the strong performance in Period 9 had
continued in Period 10. He assured the Board that the investment-
spend was now on track and that he was ensuring it was being
spent appropriately. He explained that a provision of circa £6m may
be made in this year to cover the General Insurance Policies in
Force risk.
Neil McCausland requested a change to the presentation of the
Insurance Policies data to make the trend information clearer.
EAGLE UPDATE
Nick Kennett explained the twelve workstreams in place to ensure
Eagle is achieved. The most challenging of these being: the
valuation of Midasgrange; ensuring the correct termination terms
are enshrined in the contract and the wider HR effects of the
change. He has a target date of early March for signing the contract
and will bring the final agreement to the March Board.
Insurance
Nick Kennett presented the negotiations mandate to the Board.
The Chairman asked how far the proposal would reduce the
bureaucracy inherent in the current relationship. Nick Kennett
agreed that the current proposal had not been his initial desired
outcome but was confident it would work. Les Owen urged the
Business to retain as much control as possible over product design
and marketing. Paula Vennells explained that the relationships
between the two businesses would be very important.
Nick Kennett said that Government concurrence to the contract
extension had not been received. Les Owen expressed concern at
the potential impact on signing Eagle. Nick Kennett did not
anticipate any issues but confirmed that the delay in BIS sign-off
risked the achievement of the critical path as the Bank would not
proceed on other matters until the extension was confirmed.
PERSONAL INJURY REFERAL FEES
The Chairman left the meeting due to conflicts.
Minutes shown at Appendix B.
The Chairman rejoined the meeting.
ANY OTHER BUSINESS
The issue of aggravated robbery and burglary had been raised at
RMH Board and the Chairman asked that future Health & Safety
reports include a report on any incidents.
POLB12/26
POLB12/27
(b)
(c)
(a)
(c)
(d)
Post Office Limited — Strictly Confidential
The risk would also be raised with the Audit, Risk and Compliance
Committee for future monitoring.
Separation
The Chairman updated the Board on the likely agreed structure for
the Group post separation. POL would sit as a sister company to
Royal Mail Group under a very thin TopCo consisting of the
Chairmen of both Companies. Responsibility for the businesses
would sit with the respective Boards.
The Chairman informed the Board of several Non-Executive
Director candidates under consideration and three possible
candidates for the Chair of Audit.
NOTING PAPERS
* Significant Litigation Report (POLB(12)23) was noted.
e Post Office Sealings (POLB(12)24) was noted.
e Communication Action Group Minutes (POLB(12)25) were
noted.
« Project Alaska (POLB(12)26) was noted.
CLOSE
There being no other business, the Chairman closed the meeting.
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Annual net income and estimated contribution percentage for all known Front Office of Government propositions
Post Office Limited ~ Strictly Confidential
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POLB(12)2"? Appendix A
Net Net Net Net Net Est Cont
Expected Income12/13 Income13/14_—s income14/15 Income15/16 = Income16/17 {target Weighted
Contract Timescales =m £m =m £m £m 25%) Probability income
London PSN Aug-12 0.1 0.1 0.1 0.4 0.1 32% 100%
Westminster Live 0.4 0.4 0.4 0.1 0.1 25% 100% 0.1
TfL. Public Carriage Office Live 0.1 0.1 0.1 0.4 0.1 64% 100% 0.1
Student Loans tbe 0.1 0.4 0.4 0.4 0.4 75%. 100% 0.4
Skills Funding Agency Jun-12 0.4 0.2 0.2 0.2 0.2 49% 100% 0.2
Care Quality Commission Mar-12 0.9 0.6 0.6 0.6 0.6 70% 100% 0.6
UKBA Mar-12 6.7 6.7 6.7 6.7 6.7 53% 100% 6.7
DVLA tender (incremental) Oct-12 1.0 21.0 25.0 35.0 35.0 30%, 90% 31.5
IPS Passports Sep-13 19.0 27.0 35.0 35.0 35.0 40% 20% 31.5
OSA Mar-13 30.0 30.0 30% 30% 9.0
Identity Services UC 2012/13 8.0 11.0 11.0 30% 75% 8.3
identity Services HMRC. 2012/13 5.0 5.0 5.0 30% 75% 3.8
identity Services GB 2012 3.0 7.0 7.0 7.0 7.0 35%. 920% 6.3
Identity Services Other e.g. Land
Registry 2013/14 4.5 9.0 9.0 30% 60%, 5.4
Universal credit (Asst Applications) 2014/15 5.0 10.0 30% 75%. 75
HMRC (Asst Applications) 2013/14 1.0 5.0 30% 75% 3.8
Security Industry Authority Oct-12 0.1 1.0 1.0 1.0 1.0 35% 75% 0.8
Local Authorities Ongoing 1.0 2.0 5.0 7.0 12.0 25% 80% 9.6
CRB 2014/15 5.0 40.0 25% 50% 5.0
HMCTS (Court Services) 2012 0.4 2.0 5.0 10.0 10.0 25%. 75%. 75
HMRC network 2013/14 1.0 1.0 1.0 1.0 25% 50% 0.5
London PSN (extension to others) Ongoing 3.0 5.0 10.0 10.0 35% 75% 75
Scottish Govt 2012/13 1.0 2.0 4.0 4.0 30%. 50% 2.0
Scottish LA 2012/13 0.1 0.5 1.0 25 25 30% 50% 41.3
TfL contactless 2012 1.0 2.5 2.5 2.5 2.5 30% 25%. 0.6
Total 33.7, 76.2 145.2 189.2 208.2 149.9
POLB12/25
ACTION:
Nick Kennett
ACTION:
Nick Kennett
(a)
(b)
(c)
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Post Office Limited ~ Strictly Confidential
POLB(12)2™ Appendix B
PERSONAL INJURY REFERRAL FEES (POLB(12)18)
Les Owen challenged the statement made at the January Board
that POL could be certain it was not involved with any injury referral
fees. Paula Vennells explained that data was only passed to a third
party if the customer asked for this action to be taken. Les Owen
explained he had two fundamental issues that we should be mindful
of; TCF in a growing FS Business, and also the possible bad PR if
we are shown to be involved in referral fees.
Paula Vennells asked for a formal referrals policy to be agreed with
Junction ensuring no active encouragement of personal injury
referrals unless requested by the customer. This would be copied
to the Board as a future noting paper.
Nick Kennett would also investigate the flow of fees to ensure that
there is no inducement for wrong behaviours.