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benefits
rm
agency
ICL Pathway
PA Crsulting
Group
Review Of BA-POCL Programme
Commercial In Confidence
Prepared by: Peter Copping
Deborah Lees
Hugh Crail
David Rees
Version 3.0
1 October, 1997
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PA Consulting Group .
Review Of BA-POCL Programme
Commercial In Confidence
Authors: Peter Copping
Deborah Lees
Hugh Crail
David Rees
PA Consulting Group
123 Buckingham Palace Road
London SW1W 9SR
Telephone 0
Facsimile { 3
j Version 3.0
01 October 1997 —
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DISTRIBUTION OF CONTROLLED COPIES
Controlled Copy N° Surname Name Organisation
ts Crahan Peter BA POCL
2. McNiven Bruce BA POCL
3. Mathison Peter Benefits Agency
4. McCorkell George I Benefits Agency
5. Bennett John H ICL Pathway Ltd
6. Coombs Mike ICL Pathway Ltd
Tt Todd Keith ICL PLC
8. Copping Peter PA Consulting Group
9. Lees Deborah I PA Consulting Group
10. Rich Paul Post Office Counters Ltd
11. Sweetman Stuart Post Office Counters Ltd
42. Wylie Alec Social Security Agency
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TABLE OF CONTENTS
MANAGEMENT SUMMARY
1. CONTEXT AND PURPOSE OF THIS REVIEW 1-1
2. AIM AND SCALE OF THE BA-POCL PROGRAMME 2-2
3. OBSERVATIONS ON THE CURRENT PROGRAMME 3-3
3.1 BA: CAPS PROGRAMME
3.2 POCL : HORIZON PROGRAMME
3.3 PATHWAY.
3.4 PROGRAMME DELIVERY AUTHORITY - PDA..
3.5 ISSUES COMMON ACROSS THE PROGRAMME
4, PROBABILITY OF FURTHER SLIPPAGE
4.1 CAUSES OF. CURRENT SLIPPAGE........ssesssssssssessssecssseessssessneesssneessseesssseessioe
4.2 SLIPPAGE TO DATE ...scssesssssssesessessnessnecencceneensesnsessscesccasssnssssesesscenscssesaneseneeas
4.4 IMPACT OF FORECAST SLIPPAGE
5. ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE 5-26
5.1 PATHWAY.
5.2 CAPS...
5.3 POCL
5.4 PDA.
6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS 6-28
6.1 RESIDUAL STRATEGIC RISKS,
6.2 ACTION PLAN OUTLINE.
APPENDIX A Interviewees
APPENDIX B Terms of Reference
APPENDIX C Trends in Programme Milestone Dates
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I MANAGEMENT SUMMARY... . PA
% MANAGEMENT SUMMARY
M1. CONTEXT FOR THIS REVIEW
\ The driving force for this Review of the BA/POCL programme has been the consistent
* and chronic slippage in delivery dates. At the time the Review started, some 12:months
into the implementation stage of the Programme, difficulties were being experienced in
longer term planning because of slippage of some 13 months in short term plans.
This is putting stress on the viability of each organisation's business case. The resulting
low level of confidence in the robustness of planning and resourcing and the background
of commercial sensitivity, led management in each of the sponsor organisations and
Pathway to commission PA Consulting Group to provide an independent view of the:
© current weaknesses and risks in the Programme
¢ implications for the Programme future delivery obligations
¢ options which may be available to assure its delivery capability.
It is in the nature of a review of this sort to focus on the problems and weaknesses which
need to be addressed. We wish to record that, despite the problems that the
Programme has encountered, there is no doubt that a lot has been achieved by all the
teams in the light of very demanding circumstances.
= Rt am im
M2, PROGRAMME OBJECTIVES
The BA-POCL Programme is a large and complex programme of change. The overall
Programme objectives are to:
¢ deliver a fraud-free method of paying benefits at post offices;
« develop a system that meets recognised accountancy practices;
© provide, through automation, greater commercial opportunities enabling POCL
to improve competitiveness and increase efficiency;
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* provide an improved level of service to all customers.
It is a very major business venture for each of the participating organisations - the
Benefits Agency (BA), Post Offices Counters (POCL) and Pathway:
¢ itis directly business critical for Pathway and is an extremely large and strategic
investment for ICL and its parent company, Fujitsu.
ae «ab
¢ itis a major component in the BA's strategy to reduce fraud and improve
financial and accounting controls, as well as to reduce costs.
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MANAGEMENT SUMMARY. . .
e for POCL, the Programme, as part of an overall programme of automation, is
essential to the creation of a platform for future growth and avoidance of
business decline.
In PA's opinion, the Programme is world-class in its ambitions and our observations
should be seen in that light.
The Programme entails major changes to BA IT systems and an extensive
implementation effort in the Agency's field operations and in their inter-working with the
Agency's customers. For POCL, a number of IT systems require development and there
needs to be an extensive programme of process change, training and the preparation of
some 19,000 post offices. Pathway are required to develop, install and operate a major
national infrastructure with complex real-time transactions through the 19,000 post office
outlets and, with the support of POCL, to prepare outlets and train counter staff.
M3. FINDINGS
M3.1 Benefits Agency
Overall we have concluded that the plans for what needs to be done by BA are being
well thought through. They are robust in terms of the approaches being adopted and the
management resources being applied. Good progress is also being made on process
changes and policy issues; the same is true of planning for BA field operation activity
and the overall migration strategy. There have also been positive moves to rationalise
management responsibilities in relation to the Programme Delivery Authority (PDA).
Recognition towards the end of last year of the scale of data and business migration and
the need to move towards phased CAPS releases have affected BA cost estimates and,
contributed to an increased understanding of the complexity of the overall
implementation. This increased understanding led to the change in time scale for the
Programme agreed by all parties early this year and which is reflected in Master Plan
v3.
The CAPS Programme is currently undertaking a major re-planning exercise. From this,
we would expect to see increased time for testing, data migration, re-work, post-release
enhancements and associated integration testing. This will increase BA costs and
timetable for delivery. Continuation of the tight management control of the Programme,
in view of the scale and complexity of the activities to be completed, will be vital and may
demand further strengthening of the CAPS programme management office.
M3.2 POCL
POCL has much to do if this Programme is to be successful. The first steps, to
implement computer system modifications, are under way and aside from perhaps an
over-reliance on the PDA for programme management of this, progress seems to be
satisfactory.
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MANAGEMENT SUMMARY... .
We do have concerns for the future, in three areas:
e there is a need for POCL significantly to boost resources to co-operate with
Pathway's roll-out of the infrastructure. Plans are in place to appoint national
and regional managers for implementation and some 350 support staff. We do
not, however, believe that there is sufficient recognition in POCL of the-need to
be taking rapid steps to have a robust team in place;
e although work has been done to assess the Service Management Framework
required to manage Pathway as a service provider, the resources needed for
this are not identified, other than those that currently exist in the PDA. We feel
that the scale and difficulty of the service and contract management task is not
yet fully understood in POCL;
inthe longer term there is the issue of developing the POCL requirements for
EPOSS and the supporting computer applications. We understand there is
much still to do here, which will require additional resource.
Despite an apparent focus on planning rather than doing and a general underestimation
of the resources required, we do not believe this has contributed in any significant way
So far to slippage in the Programme. Clearly there is and will continue to be an impact
on POCL costs as the necessary resources are put in place which, together with
slippage, must impact the business case.
Our key concern is that the skills required for many of the new senior posts are, in our
opinion, not those we would have expected to find as part of POCL core competencies:
this is especially true in relation to implementation management and contract and
service management. There seems, however, to be no evidence of external recruitment
activity or robust plans to create the competence internally.
M3.3 PDA
In the PDA, we find strong desire for continued change, shaped by the
recommendations of the Andersen Consulting and French Thornton reports but,
progress with implementation is slow. We generally agree with these recommendations,
which in essence move the PDA towards a body that has responsibility for:
* assurance of the overall business architecture
* assurance of the technical architecture
integrating the work plans of each of the sub-programmes
© management of the joint contractual arrangements during delivery
Meanwhile there is evidence of a change management process that requires time which
is not always allowed for in the plans and of the PDA getting engaged in aspects that
might be better managed directly between one of the sponsors and Pathway.
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MANAGEMENT SUMMARY. . . PA
The PDA expends considerable effort in trying to broker resolutions of issues with
A Pathway and between the sponsors. This is made more complex by the inherent
difficulty in managing a PFI contract - in getting the balance right between assurance
and interference. This is particularly challenging for this Programme where not all the
tisk - which is business critical to the sponsors - is transferred to the supplier and where
there is a natural tension at the boundary of risk transfer as the sponsors and supplier
each seek to optimise their positions as to respective roles, rights and obligations.
We believe that the PDA is too large and that it could be reduced to around one quarter
of its present size by continuing the process of transferring functions to sponsors and, by
removing overhead activity. At the same time there is a need to ensure that the
resources assigned to the PDA are the best available and that they are aligned with the
revised responsibilities. This should not be confined to the resources available in the
sponsor organisations but managed strictly according to competency for the roles.
—_
M3.4 Pathway
At the outset of this procurement, it appeared to Pathway that the development of a
service to meet the PFI requirement could be achieved largely through systems
integration, and that its role was essentially one of a systems integrator. This is
illustrated by the large number of subcontractors to Pathway. In reality, the amount of
development work needed was in our opinion, seriously misjudged. As a result, time
scales and resource needs were underestimated.
As Pathway and sponsors have worked with the PDA to resolve the detail of the
requirement (the contract specifies requirements with the principle of “agreements to
agree” being used to work up the detail of the requirements to give legal expression) and
also to incorporate change requests into planning, the extent of development needed
has become clear. Pathway instituted an internal review early in July 1997 and
subsequently began to implement necessary management and organisation changes to
reflect an enhanced understanding of the demands of the programme. These changes
(including a new management structure, additional resources and application of change
control disciplines) are still in the process of being implemented. There continues to be
a vital need to tightly manage the sub-contractor network and, in particular, Escher, a
small US company who are delivering core functionality to the Pathway solution.
We believe the current status of the Programme is surrounded by considerable
contractual ambiguity. Pathway are, in essence, proceeding on an ‘own risk’ basis to
deliver Release 1c with a “known problems register” and its proposal is to address the
“known problems” in Release 2. Meanwhile the baseline for Release 2 is being
developed. Pathway will only be able to provide firm plans once this Release reaches
approved baseline status. Because so much of the contracted-for solution now appears
to be in Release 2, we must express serious reservations about Pathway’s current plan
to be ready for commencement of national roll-out at the end of July 1998. Pathway
have recently confirmed to us that it is unlikely that Release 2 will be ready for live trial
until late summer or early autumn 1998.
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MANAGEMENT SUMMARY. . .
Much of our review at Pathway has focused on the robustness of the technical solution
since this has become a significant concern for the sponsors and Pathway. Whilst we
have been able to obtain satisfactory answers to all our questions, in particular regarding
the way security requirements will be incorporated and on scalability and performance,
there must continue to be reservations in all these areas until the final design is
baselined and then realised. It is also important to note the dependency for technical
success on Escher whichis a small, Boston-based software house and the source of the
Riposte messaging software which is at the heart of the system.
M4. CAUSES OF CURRENT SLIPPAGE
We believe that there are direct causes of slippage but that these need to be set in the
context of a small number of underpinning root causes as illustrated below.
Root causes Direct Causes
Resourcing
Marginal business cases
[Development and control
Agendas in conflict disciplines Slippage
Requirement clarification and
lsolution drift
Escher dependency
PFI structural problems
M4.1 Root causes
Marginal business cases.
The business cases of each of the sponsors are marginal and built significantly on the
assumption that the required services could be delivered in a relatively short time scale.
The original project time scales have not proved realistic so the basic vulnerability of
each of the business cases is now fully exposed. This is putting strain on relationships
between sponsors and between the sponsors and Pathway
Were this project to be in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative
approaches to the solution might be more attractive in today's environment.
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MANAGEMENT SUMMARY. . .
Agendas in conflict
The BA is a major customer of POCL and it is inevitable that the different commercial
objectives of each organisation make it difficult for them to act in total harmony as joint
Programme sponsors. We note this has the following impacts:
© an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL
¢ there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
¢ decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
Structural problems with the PFI.
The scale of this PFI, its complex supply chain, the conflicting business objectives of the
sponsors, the difficulty in assessing who ultimately carries the risk, and the short time
scale of the operational part of the contract create an environment of uncertainty and
tension. These aspects distract attention from the key objective - to deliver a solution
that works, with acceptable levels of risk transfer and returns for both customer and
supplier.
M4.2 Direct causes
Resourcing
This is a world class programme measured by any standards.
“At the BA, action has already been taken to strengthen the management organisation
by, for example, taking back responsibility from the PDA and drafting in appropriately
skilled and experienced resources from elsewhere. Pathway has acted swiftly, following
their internal review, to make structural changes and to strengthen the management
team. At the PDA, the problem has also been recognised and action is being taken to
strengthen the calibre of its resources. POCL still has much to do and arguably have yet
to recognise that top quality project and service management resource will probably
need to be recruited externally.
In our opinion, sponsors, the PDA and Pathway must continue to seek to identify and
recruit people of appropriately world-class professional stature into every key position as
this programme progresses.
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Development and control disciplines.
Pathway has much still to do to ensure that effective management and change control
disciplines are embedded in the combined development and systems integration
environment in which they now find themselves. This must be done regardless of the
time pressures which exist in the Programme. This is particularly challenging because
of the need to embrace key subcontractors in these processes. This applies specifically
to Escher on whom Pathway are highly dependant for success.
Requirement clarification and Solution Drift
We believe that a better mechanism is needed than currently is in place to manage the
tension between requirements and solutions in the context of a realistic assessment of
the business impact. Whilst we understand the constraints which apply within a PFI
environment, we have not been convinced that the current arrangements are resulting in
@ proper assessment of the real business impact of decisions to adhere either to
timetable or to requirements specification.
In this Programme there has been no formal rebasing of the Master Plan and associated
time scales since March this year to reflect for example, more recent change requests
and emerging or existing exclusions to functionality. In our experience, in a programme
of this complexity, this implies that too rigid an approach is being adopted at the possible
expense of the business cases for all parties. The nature of a PFI contract arguably
reduces the scope for pragmatic “trade offs” in development of the solution and this
remains a significant risk for the Programme.
The Escher dependency
With the realisation that to deliver this Programme requires a substantial development as
well as systems integration effort, the dependency of the solution on Escher (a relatively
small North American software company) and the Riposte software takes prominence.
Much of the architectural development needed has required Escher to commit to major
rework and this is being commissioned by Pathway. This has taken time and effort, thus
causing delay.
Escher will continue to be a major risk to the success of this Programme. This risk will
be manifest both in terms of delivery of solution and in the ongoing security of the supply
chain to Pathway. On the basis that no other remedy is available, its containment will
rely on ICL and Pathway's ability to forge mutually beneficial and sustainable
relationships with the key people involved in Escher.
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MANAGEMENT SUMMARY. . .
M5. IMPACT OF SLIPPAGE
M5.1 On start of national roll-out
We believe this Programme in its present form, and on the basis of slippage to date, will
not be ready to start national roll out by the end of July 1998 - the most recent date
proposed by Pathway to sponsors.
Although we expect there will be further slippage announced in the BA/CAPS
programme from the current re-planning exercise and we believe that POCL are not
moving fast enough into implementation mode, these delays are not, in our judgement,
on the critical path. It is PA’s assessment that the primary driver of time scale slippage
will now be Pathway as they come to terms with the scale of what has to be done.
Based on our consideration of the experience of the Programme so far, the results from
Release 1c testing which imply unplanned rework is needed, the fact that functionality
originally planned in Release 1c is now proposed by Pathway to be delivered in Release
2 and an extrapolation of historical slippage, we do not believe the Programme will be
ready for national roll out before January 1999.
M5.2 On national roll-out
We have not seen convincing evidence that the projected roll-out rate of 300 post offices
a week is achievable. We believe that a roll-out rate of 150 rising to 250 offices a week
is achievable if there are no major delays in getting estate surveys completed to the
revised time scale; there is early agreement of major outstanding issues such as the
commercial arrangement for communications to customers; the commitment of sub-
postmasters to consistent and timely co-operation with roll-out requirements is secured
and POCL develop and resource an effective and timely implementation strategy.
A major area of concern relates to the arrangements for Service Management of
Pathway. We believe this aspect of the Programme needs to be accelerated to provide
a basis for piloting and to undertake this under POCL, not PDA, control and direction.
In summary, we forecast on-going slippage to the key development stages and would
not expect the infrastructure to be ready for commencement of national roll-out before
January 1999, at the earliest, and for roll-out to be completed over a period of between
about 1.5 and 2 years.
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MANAGEMENT SUMMARY...
MS5.3 On business cases
The further slippage will have a significant effect on the business case for each player:
* extended design and development effort will increase Pathway costs while the
“window” for securing a return on investment remains short;
e CAPS Programme costs are likely to increase significantly not only because of
the need to extend the period over which the Programme team need to be in
place but because there are additional work items which the Programme will
need to undertake in the period (and which we believe will emerge from the
current re-plan) to increase resilience and contingency. Further delay to card
based payments reduces the overall NPV for the BA;
¢ Horizon Programme costs will increase due to the extended period for the team
to be in place and due to the need for additional work associated with
implementation and service management provision. Delay in the roll-out not
only delays potential revenue streams but is likely to reduce them overall as
market opportunities are lost.
We do not have access to detailed information which would enable us to project the
overall cost implications for the Programme. However, on the basis of information
provided to us in confidence by each party, we would estimate that overall Programme
costs (including sponsors and Pathway but not including fraud savings and any loss of
future business opportunities for POCL) will increase by between £185m and £250m.
We consider that sponsors should undertake an urgent appraisal of the impact on their
costs as input to assessment of whether or not to continue with the Programme either as
currently planned or in a revised form. Pathway will need to undertake a similar
assessment.
M6. RECOMMENDATIONS TO MINIMISE FURTHER SLIPPAGE
Below are recommended actions which focus on improving the delivery capability of the
Programme and are set in the context of the need for a new, executive-style PDA,
empowered to make decisions on behalf of sponsors and given direction by a PDA
board which provides strategic advice and which gets involved to resolve the big issues.
Actions are summarised for each of the players in turn.
M6.1 Pathway
i. split business development unambiguously from programme delivery
ii. undertake competency assessment of all key first and second line resources in
development programme and commit to rectify where weaknesses against
requirement are identified
iii. produce a firm baseline plan for Release 2 to include all contracted for services
based on a robust evaluation of all technical design issues and to include
application of phase review and other development and design disciplines, to
include all subcontractors
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MANAGEMENT SUMMARY. . .
iv. be absolutely clear with sponsors and PDA of the effect of further changes on
this baseline plan, once agreed
v. produce a formal report for sponsors on the technical issues arising from, for
example, consideration of scalability, performance and, the actions planned to
mitigate any risks
M6.2 CAPS
i. use the firm baseline from Pathway to validate or modify the recently revised
plan
ii. build in contingency and rework as part of the re-planning process
iii. strengthen project management office competencies
M6.3 POCL
i. urgently develop an operational capability that can form a pilot for service
management of Pathway for Release 1c
ii. urgently develop an implementation strategy for
— business process, design testing and implementation
readying the post offices
postmaster training and awareness
training and awareness of other post office staff
customer communications
undertake competency assessment of all key managers and commit to action to
rectify any deficiencies identified
iv. initiate a feasibility study, with Pathway, to validate achievability of the projected
roll-out rate for post offices.
M6.4 PDA
i. expedite moves towards the new structure and function
ii. undertake competency assessment of all key staff and commit to rectify any
shortfalls in requirements
ili. reduce size as soon as possible
iv. rationalise change management to make better use of Contract Negotiating
Team (CNT) and to expedite resolution
v. rationalise programme control and reporting
M7. RESIDUAL STRATEGIC RISKS TO THE PROGRAMME
If action is taken as recommended along the lines indicated above, we believe that the
probability of the Programme delivering against its objectives successfully will be greatly
improved, albeit in the extended time scales we have forecast and at increased costs.
However, we believe that four residual strategic risks will remain.
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M7.1 Cost of roll-out to all post offices
A uniform approach has been adopted to both provision of the infrastructure and, the
charging regime for transactions across it. There is therefore a real possibility that the
true apportionment of costs across high and low volume post offices is not visible in the
business cases.
The increasing availability of alternative and possibly lower cost approaches to benefit
payment encashment, the time scale slippage and the consequential impact.on the
business case is causing reservations at the BA about the economic viability of
supporting the automation of benefit payment at all Post Offices. We have not, however,
seen evidence of robust and cost-effective alternatives which would offer a comparable
service to the post office network for areas with a low density of population.
In PA's opinion, unless the justification for benefit payment by cards and other
automated transactions through all post offices is reinforced as part of a broader
Government context, the ensuing uncertainty about the cost effectiveness of the solution
adopted is likely to continue to undermine confidence in the Programme and,
relationships between the sponsors. The broader context needs to incorporate both the
commercial and social service aspects of the Post Office and the role of payment
arrangements in future social welfare policy
M7.2 PFI
The PFI contract implies a transfer of risk which we do not believe is sustainable in
practice. Although Pathway bear risks associated with encashment fraud, the dominant
risk is associated with resilient delivery of the benefits payments service itself - delivering
some £80 billion in payments each year - and of the transaction handling capability of
post offices.
Failure of the payments service would be business-critical to the BA and DSS and would
carry unacceptable political repercussions. In these, circumstances, we argue that the
tisk of secure service supply is being carried predominantly by the BA and DSS. In
these circumstances, the sponsors cannot afford to take a “hands-off” approach to the
delivery and management of the payments service as a PFI contract would normally
demand.
M7.3 Joint Sponsorship
The current joint sponsorship arrangements are leading to a lack of clarity in
responsibilities and to difficulty and delay in brokering resolutions to problems. This is
exacerbated by the significant commercial tensions between the sponsors. In the longer
term, we believe that the current arrangements carry the risk that the dominant end-to-
end view of the services will remain with Pathway rather than with one of the purchasers.
This has significant implications for the effectiveness of management of the service, the
contract and the supplier.
M7.4 Dependency on Escher and its people
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Escher is a small privately-owned North American software house of some 30 people.
Its software is critical to the Pathway technical solution. In the original evaluation of the
risks associated with a critical dependency on such a small company, we understand
that a key factor was the view that the Pathway solution required integration of the
Escher product and not a major development effort. In the light of subsequent events, it
appears that there is a critical dependency on Escher to design and deliver significant
software components for which Escher will continue to own the IPR. We believe that
this remains a significant residual risk to the resilience of the Pathway business and
technical solution and that ICL need to identify means of assuring sponsors of the
security of this source of supply both at the delivery stage and for ongoing support.
M7.5 Our conclusion on strategic risks
Although PA has high level views about how each of these risks might be addressed we
have not analysed this in detail since it falls outside the scope of this Review. In any
event, we believe that these strategic risks can only be addressed by sponsors and
Pathway working together at the most senior level and we have consequently set out an
action plan in Section M8 below.
It is PA’s considered opinion that solutions to these issues are urgently needed if the
Programme is to avoid further major problems and, command the full commitment of all
the parties.
Clearly, in view of the scale of the risks, termination of the Programme must be an
option. It is PA’s opinion, however, that to terminate would create such major difficulties
for all parties that alternatives and their implications require a considerably more robust
assessment than has been appropriate in this Review.
M8. ACTION PLAN OUTLINE
In view of the seriousness of the residual risks, we suggest that the Programme
sponsors and Pathway should take steps jointly:
¢ to strengthen the Programme's ability to deliver, and
¢ to evaluate the need and scope for reconstruction of the objectives and scope
of the Programme.
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MANAGEMENT SUMMARY. . .
The latter should be with a view either to modifying or reaffirming the objectives in order
to ensure robust commitment from the sponsors or to bringing the Programme to a
close. The two streams of work should be undertaken in parallel and an illustration of
the steps which we would suggest for consideration is as follows.
Outline of Suggested Next Steps
Evaluate Strategic Options Now Strengthen Programme
Assess the impact of slippage and Agree joint approach, under PDA Board
additional activities on the business caseI direction, to implementation and assurancI
of agreed improvement actions.
Review options available, including: ta
continue with current scope and
objectives and projected timetable
Initiate Pathway to
* reconstruct the Programme to revised programme complete
objectives, scope or timetable improvement technical
1 Semiocin steps gap analysis
‘and confirm whether acceptabe in
principle to Minsters and stakeholders. n
Kasdste dates I Pathway to deliver robust re-plan for
and defverablesI Release 2
Conduct intensive evaluation of _
options in the context of DSS and
DTI Ministerial direction.
CAPS and Horizon to modify plans
timetable on basis of revised Pathway
dates
Provide robust business
Justification for preferred option
with Government endorsement v
End 1997
We believe that the evaluation of strategic options will need directly to address the
economic, social and political factors which bear both on the future of the post office
network and on the delivery of social welfare payments. It is likely therefore to require
the active sponsorship of Ministers.
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1. CONTEXT AND PURPOSE OF THIS REVIEW... PA
1. CONTEXT AND PURPOSE OF THIS REVIEW
The driving force for this Review of the BA/POCL programme has been the consistent
and chronic slippage in delivery dates. At the time the Review started, some 12 months
into the implementation stage of the Programme, difficulties were being experienced in
longer term planning because of slippage of some 13 months in short term plans.
This is putting stress on the viability of the business cases within each of the
organisations. The resulting low level of confidence in the robustness of planning and
resourcing and the background of commercial sensitivity, because this is a PFI project,
led management in each of the sponsor organisations and Pathway to agree that an
urgent review of the programme was required.
This Review was commissioned from PA Consulting Group to provide an independent
view of the:
* current weaknesses and risks in the Programme
¢ implications for the Programme future delivery obligations
¢ options which may be available to assure its delivery capability.
The review was completed over the period from 12" August to 19" September 1997 and
has involved interviews with key people in each of the organisations involved in the
Programme and analysis of extensive documentation relating to the programme. A list
of interviewees is included as Appendix A. Our detailed terms of reference are in
Appendix B.
Itis in the nature of a review of this sort to focus on the problems and weaknesses which
need to be addressed. We would like to record our thanks to all those that contributed
to this review and in particular note the open approach adopted by all parties to their
discussions with us. We also wish to record that, despite the problems that the
programme has encountered, there is no doubt that a lot has been achieved by all the
teams in the light of very demanding circumstances.
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2, AIM AND SCALE OF THE BA-POCL PROGRAMME. . .
2. _ AIM AND SCALE OF THE BA-POCL PROGRAMME
The BA-POCL Programme is a large and complex programme of change. The overall
Programme objectives are to:
e deliver a fraud-free method of paying benefits at post offices
¢ develop a system that meets recognised accountancy practices
¢ provide, through automation, greater commercial opportunities enabling POCL
to improve competitiveness and increase efficiency;
© provide an improved level of service to all customers.
Itis a very major business venture for each of the three key players - the Benefits
Agency (BA), Post Offices Counters (POCL) and Pathway, and in PA's opinion, is world-
class in its ambitions:
¢ itis directly business critical for Pathway, as the sole basis for the company’s
existence. It also represents an extremely large and strategic investment for
ICL and its parent company - Fujitsu.
¢ itis a major component in the BA’s strategy to reduce fraud and improve
financial and accounting controls, as well as to reduce costs.
¢ for POCL, the Programme, as part of an overall programme of automation, is
essential to creation of a platform for future growth and avoidance of business
decline.
For the total programme to work, significant amounts of work on BA computer systems
need to be completed; at POCL, computer systems also need modification. An
extensive programme of process change, employee and sub-postmaster training and
customer education is neéded to implement card-based benefit payments and various
policy issues, at BA in particular, are impacted by the programme. The POCL
automation objectives (Horizon) essentially run in parallel with the card benefit
programme for the BA although can only be fully exploited once the Pathway
infrastructure is fully in place. Pathway are required to develop, install and operate a
major national infrastructure with complex real-time transactions through the 19,000 post
office outlets and, with the support of POCL, to prepare outlets and train counter staff.
All of these aspects in one way or another either form part of the PFI programme itself
or, need to link up appropriately with it.
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3. OBSERVATIONS ON THE CURRENT PROGRAMME... PA
3. I OBSERVATIONS ON THE CURRENT PROGRAMME
3.4 BA: CAPS PROGRAMME
3.1.1 Overview
The business and IT change entailed by the CAPS Programme is very major and
complex.
Key requirements are:
¢ development of new systems - Card Payment Computer System (CPCS) and
Personal Data Computer System (PDCS);
* modifications to the existing IT systems for handling benefits processing;
¢ clean-up and migration of data from the existing to the new data bases;
* modifications to business procedures and processes;
training of operational front-line staff across the Agency in the new procedures
and processes;
© ensuring that all the above are implemented with a managed and acceptable
impact on the Agency's customers.
The scale of the challenge which this represents is increased by the context of major
organisational and policy change currently being addressed by the Agency and by the
need to secure the active commitment and co-operation of other agencies in the DSS
and of Employment Services (ES).
3.1.2 Management and Organisation
The scale of the management challenge presented by the CAPS Programme was
highlighted in reports by external consultants earlier this year. In the light of these
reports, the BA acted to strengthen the management focus at BA Management Team
(BAMT) level, to rationalise the distribution of responsibilities between CAPS and the
PDA, and to strengthen the CAPS management team. We recognise the major
commitment of resource which the BA have made in this respect and we believe that it is
consistent with the scale and nature of the business and technical challenge which
CAPS represents.
3.1.3 Resourcing
Since the consultants’ reports earlier this year, we understand that steps have been
taken to reinforce key competencies in the Programme, where appropriate through the
use of external consultants. This appears to us to be consistent with the technical and
business complexity of the tasks being tackled by CAPS and with the tight timetable for
delivery. This Programme required excellent and experienced technical and
management skills to be in place to assure success.
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . .
We noted that, due to a planned staff move in the near future, there may be scope for
reinforcing the level of practical experience in the CAPS Programme Management team.
We would endorse the views expressed to us by this team that it would be valuable to
strengthen this team with robust practical experience of programme control in a complex
IT-related programme.
3.1.4 Programme Management Disciplines
Overall, our view is that CAPS programme management is sound and becoming steadily
more robust in terms of the processes and disciplines being adopted and the resources
being applied. It is clear that considerable progress has been made towards
implementing recommendations from the consultancy reports and that progress is
continuing.
As indicated above, the CAPS Programme are currently undertaking a re-planning and a
te-costing exercise: these has been running in parallel with this Review. We anticipate,
from discussion with CAPS representatives that the points we raise in the following
section are likely to be reflected in the revised plan.
As a general point, we believe that there would be value in ensuring that formal critical
path analysis is added to the current programme management disciplines in order to
assist the management team assess the effect of the numerous inter-dependent and
uncertain events within the different strands of the Programme.
3.1.5 Specific issues
Data Migration Strateay
There are significant risks associated with the clean-up and migration of data from
existing benefits processing systems to the new CAPS systems. The strategy for data
migration appears to us to be robust from both technical and implementation viewpoints.
Implementation of the strategy is, however, sensitive to assumptions about the projected
“fall-out” rate for data. Whilst we understand that the current assumption has been
made on the basis of a sound working understanding of the current data, we believe that
the assumption remains a source of significant risk until validated. This should be
reflected in planning assumptions for contingency both in task sizing and in elapsed
time. We understand that a “dry run” is scheduled for November which will enable the
assumption to be validated for Child Benefit data.
Integration with the BA IT Programme
The CAPS Programme is having and will continue to have a significant impact on the
overall IT programme for the BA. Up to the recent past, the consistent slippage in dates
for Pathway releases has made it very difficult to plan effectively in relation to the overall
IT programme. The decision to de-couple the CAPS releases from the Pathway
releases appears to be feasible and to offer scope to insulate the IT programme from
further impact from this uncertainty. Nonetheless, the impact will continue to be major
and we have noted the recent steps to ensure firm prioritisation of the CAPS activities
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . . PA
within the IT programme. This will need to continue in order to ensure the timely delivery
of CAPS releases and the latter will therefore need to secure continued high priority in
relation to planned policy and other changes affecting the benefit IT systems.
Capacity and Resilience .
We understand that there is not yet a working capacity model for either transitional or
“steady state” running of the operational CAPS systems to support planning and sizing
of the batch management and of capacity for handling peaks and troughs in demand.
Similarly, there is not yet a robust model for modelling transactions and flows within the
end-to-end business and IT systems and for modelling the impact of operational failures
and associated recovery arrangements and capacity.
We understand that these issues are to be addressed in the current CAPS re-planning
exercise and we would anticipate an impact both on the plans and on sizing and costing
for the operational systems.
Implementation in BA Operations
There has been considerable work recently to ensure that an effective network of
managers is in place to co-ordinate and manage the implementation of the new systems
and associated business processes and to ensure a co-ordinated and consistent
approach to communications to staff and customers during the roll-out. Staging of the
introduction of customers on to card payment is made more complex by the need to
harmonise readiness of individual groups of post offices with data for the associated BA
customers on the appropriate benefits. In our experience, multi-variable roll-outs of this
sort generate complexity mainly due to the relatively small percentage of exceptions
which arise and which need active management as and when they arise. The need for
“hands-on” management gradually diminishes as experience with the roll-out increases.
We believe that the CAPS Programme plans need to reflect the resourcing implications
of the roll-out complexity and to make provision for contingency in relation both to
customer communications and to “hands-on” management of events.
3.2. POCL : HORIZON PROGRAMME
3.2.1 Overview
POCL's programme of change will have a fundamental impact on the ways in which the
organisation transacts its core business. The BA-POCL dimension of the programme
forms part of an automation programme for the whole organisation.
Key requirements within the BA-POCL component of the programme are:
¢ modification to existing IT systems and development of a new system to provide
reference data to the automated counter systems;
¢ modification to business processes and procedures for a wide range of
transactions;
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3. OBSERVATIONS ON THE CURRENT PROGRAMME... . PA
© ensuring that post offices and post masters are in a basic state of readiness for
Pathway to undertake installation work;
¢ building awareness among post masters and counter staff and ensuring that
they are available for training by Pathway at the appropriate times;
© preparing and implementing arrangements for managing the contract and the
contracted services to be provided by Pathway.
3.2.2 Management and Organisation
We believe that there is inadequate recognition in POCL of the scale and complexity of
the programme management task to be undertaken to achieve initial delivery of the
service and, following that, of the obligations on POCL to achieve excellent service and
contract management capability. Our impression is that POCL management
underestimate the extent to which proactive and interventionist management is required
to ensure successful delivery and management of a PFI contract of this nature.
As a consequence, we believe that top priority must been given to securing excellent
managers to undertake key roles in implementation management and in service and
contract management. We are aware that plans are in place to make appointments to
the National Implementation Manager (NIM) and Regional Implementation Manager
roles but we are concerned that-perhaps too little consideration is being given to the
competencies and experience required, for the NIM in particular, and to the potential for
recruiting externally - either permanently or temporarily - for such a critical role.
Similarly, we believe effective management of the Pathway contract and services will
depend crucially on obtaining the right calibre and professional competence in the
managers appointed to the key roles. Several interviewees commented that the
required skills and experience may be difficult to source from within the Post Office
organisation. We believe that POCL needs to give urgent consideration to this need and
to means of meeting it through external or, suitably supported, internal appointments.
In the overall management structure, we believe that there is some ambiguity in the
programme management responsibilities. There are reporting and tracking
arrangements in place between the Horizon Programme and the related IT projects but
we felt that there needed to be a clearer definition of interdependency management
responsibilities and that the Horizon Programme was relying to an excessive extent on
the PDA in this area. We feel that it is important for POCL to have an integrated and
L comprehensive view of all the BA-POCL delivery activities within their organisation and
should not be dependent on the PDA in this respect. This may emerge as an outcome
of the current rationalisation of PDA and POCL functions.
3.2.3 Resourcing
As indicated above, we have concerns about the resourcing for key management posts.
In addition, we have noted that some 350 support staff will be appointed to assist in the
roll-out. This is a fairly recent decision and we believe that is important to follow through
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . .
the decision rapidly with action to nominate the individuals, ensure their timely availability
and arrange appropriate training and awareness.
3.2.4 Programme Management Disciplines
It appears that the Horizon Programme has appropriate programme control and
management processes but we have some reservations about whether they are being
applied robustly and effectively. We believe that this situation may be helped through
the addition of programme control resource with more direct experience in this field. A
firm of external consultants is currently assessing means of strengthening project
management in POCL and we would expect this issue to be addressed in that context.
We would, however, point to the need to introduce the necessary disciplines as rapidly
as possible.
3.2.5 Specific Issues
Roll-out implementation strategy and management
There appears to be some uncertainty concerning the role of POCL in the roll-out of the
infrastructure to the post office network. The contractual basis is that the responsibility
for roll out is with Pathway and that the obligation of POCL is limited to ensuring co-
operation (of counter and other staff) with Pathway. It has become clear that the scale
of the POCL commitment must be very substantial in order to ensure an effective
implementation and that considerable further investment and management focus will be
required to ensure success.
We have not seen evidence of a robust roll-out implementation strategy which reflects
the various factors of physical readiness assumptions, co-operation of post masters,
handling exceptions, aligning training plans with go-live plans, handling re-work and go-
live failures etc. We understand that considerable planning has been undertaken to
address components of the implementation but we believe that it is important to move to
a robust integrated approach as soon as possible and that the key to achieving this is
the appointment of a suitably experienced person as the NIM as soon’as possible.
We have not seen convincing evidence of the achievability of the projected roll-out rate
for post offices of 300 a week. On the basis of a limited assessment during this Review
and of comparable experience elsewhere, we believe that a roll-out rate of 150 rising to
250 should be achievable. We believe that POCL need to work with Pathway to validate
the projected roll-out rate.
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Service and contract management
At the start of the national roll-out, the Pathway service will be operationally live and
there needs to be strong service management capability in place at that point. We
understand that POCL will take the lead on behalf of the sponsors for service
management and the associated ongoing contract management in conjunction with
Pathway. The PDA is currently defining the service management cepabiiy and the
transition strategy to migrate current PDA functions into POCL.
We would have expected to see a clearer overall definition of responsibilities and
accountabilities for service management at this stage in the Programme. It seems to us
that the division of responsibilities between Pathway and POCL is not sufficiently clear
and, as we understand the proposals, is likely to create difficulties in the operational
service. We also understand that there is some uncertainty between the sponsors about
the extent to which contract and service management will fall to POCL as opposed to
some joint body. We believe that urgent attention is needed to ensure absolute clarity
about the extent and boundaries of transitional and “steady state” operational
responsibilities in this area.
We have considered the Framework which has been developed in the PDA, with POCL,
which makes a valuable first step towards defining the processes which will need to be
in place. These reflect broadly the key activities and functions which we would have
expected to see specified, based on comparable situations and organisations elsewhere.
These are indicated in Table 1.
Table 1 : Management of a Service Provider - Key Functions and Activities
Contract Management Service Management
* negotiating & scheduling service delivery within * review and manage service provided by
the terms of the contract
ensuring that services delivered reflect BAPPOCL
needs
monitoring service levels and targets in
accordance with contract and SLA
resolving problems between customers and
Pathway
advising customers on escalation procedures.
manage escalation procedures
contract review management
Change Control
co-ordinate proposed change orders from
customers that would affect contracted services
impact assessment of proposed change orders
liaison and negotiation with Pathway over change
orders
Pathway
© produce management reports on service
provided and compliance with SLA
¢ contribute to formulation of new/modified
requirements
and update standard price list of
services to BA/POCL customers
« authorise payments to Pathway
* invoice administration
* retain financial records of contracted
expenditure
Relationship Management
establish and maintain constructive
relationship between BA/POCL and
Pathway
* challenge and seek to improve supplier
proposals
* assess and report on value for money
achieved
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . .
Key organisational roles which need to be in place and staffed with highly competent
managers with experience in this field, are:
e Service Control Team;
e Contract Manager;
e Change Manager;
e Financial Manager.
In addition, implementation of the required disciplines will be a major challenge for POCL
and a significant departure from what appears to be currently understood in POCL as
“operations management”. Achievement of the necessary competencies and disciplines
within the required time-scale is not, in our view, likely to be achieved without a major
injection of management focus and effort in this area.
In view of this situation, we recommend that a pilot arrangement for service
management is established in POCL for the operation of Pathway Release 1c in order to
test and prove arrangements. Absence of a test phase increases the go-live risks
significantly and will probably result in later re-work.
3.3. PATHWAY
3.3.1. Management and Organisation
Following the award of the PFI, Pathway was consolidated as a wholly owned subsidiary
of ICL with its own board of directors, including an independent chairman and non
executive directors from Alliance and Leicester (Girobank) and De La Rue. The
Managing Director of Pathway reports directly to the ICL Group Chief Executive.
Obtaining funding for Pathway has been complex process but we are assured that funds
are now secure to the extent that ICL currently believe necessary.
Pathway's business falls into essentially three areas:
— delivery of the contracted-for services to the sponsors;
— acquisition of new retail business jointly with POCL;
— development and acquisition of related business opportunities.
and the organisation structure under the MD reflects these commitments and ambitions.
The delivery of the contracted-for services to the sponsors relies on Pathway integrating
the activities of nine subcontractors and a range of other ICL businesses, with ICL taking
prime responsibility for development and delivery of the services. The core of the
system relies on software products from Oracle, Microsoft and Escher. Alliance and
Leicester (help desks) and De La Rue (card production and management) together with
other ICL businesses provide support to Pathway in operational service.
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3.3.2 Background
The process by which the detailed solutions have been designed to meet the
requirements has been fraught with difficulties. We understand that the contracts were
signed without detailed schedules describing the services required; instead the contracts
were based on the principle of “agreements to agree” with later work to be done on the
detail of the requirements to give them legal expression. Pathway judged that the
agreements necessary could be achieved and delivery satisfied largely through systems
integration. Time and resources allowed for development and rework reflected this view.
Working through the agreements to agree, the extent to which the various sub-
contractors components and products could not be simply integrated to build the
solutions became clear to Pathway. Because of the above, the amount of development
work needed was in our opinion seriously misjudged and as a result time scales and
resources needed were underestimated. Thus, the need for a considerable amount of
development and rework emerged.
Pathway conducted an internal review in July which has been shared with us and which
identified these issues and made certain recommendations for corrective action. As we
started this review, these were beginning to be put in place. Included were, for example,
organisational changes to simplify lines of command and, the appointment of a
dedicated programme manager responsible for delivery. Areas of high risk were also
identified with the result that much tighter management and controls were put in place,
including for key subcontractors like Escher.
With regard to the current status of development, we characterise this as having
considerable contractual ambiguity because of time scale slippage and ‘solution drift’ as
requirements have been baselined. A series of non-contractual development releases
was agreed earlier this year with Release 1c the current focus of development. Release
1c has been under development whilst its baseline was finalised. As a consequence
Pathway has created a ‘known problems register’; a list of exclusions to Release 1c,
mostly in the security area, for later implementation. The consequence is that Pathway
are in essence proceeding on an ‘own risk'-basis to deliver Release 1c. Meanwhile the
baseline for Release 2 is being developed: Pathway’s position is that it is only able to
provide a timed implementation plan once Release 2 is baselined. Given that so much
of the contracted-for solution now appears to be in Release 2, we must express serious
reservations about Pathway's current forward plans to be ready for commencement of
national roll-out at end-July 1998,
3.3.3. Resourcing
As already noted, at the outset of this procurement, it appeared to Pathway that the
development of a service to meet the PFI requirement could be achieved largely through
systems integration. Evidence of this lies in the large number of subcontractors to
Pathway. In reality, the amount of development work needed was in our opinion,
seriously misjudged and as a result the resources and resource mix needed at Pathway
were not fully understood at the time of contract signing.
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Pathway headcount has seen significant growth during 1997 to around 230 staff as it
has resourced up for delivery of the programme and has reacted to the need for a
somewhat different mix of skills than first planned. We have reviewed the HR policies
being developed for recruitment, induction and retention and feel they are appropriate for
the current situation. Current resourcing is achieved with a mix of own staff and
contractors (approximately in the ratio 60/40) and particular attention is being given to
the different needs of these two groups with regard to motivation and retention. More
resources are needed, particularly in skill areas where there is a general market
demand. Meanwhile there is a somewhat uncomfortable dependence on contractors.
The HR policy is that permanent staff must be in place in all key positions and we
understand Pathway are well on the way to achieving this. In summary, we feel that
managing the consequences of a high-pressure environment, attracting and retaining
the best people in all the areas targeted, will be a major challenge for Pathway.
Just prior to our Review, Pathway changed its organisation structure to include a
programme director. We agree this was a vital and necessary first step towards
assigning unambiguous and single point responsibility for delivery of the contracted-for
services both from Pathway and from their sub-contractors. During our Review, the
programme director was given line responsibility for quality and risk management and
systems and customer requirements. There is in our opinion still some minor ambiguity
regarding activities which are more to do with Pathway business development but which
remain within the responsibility of the programme director: in particular, this applies to
customer requirements definition and risk management. There is also the question of
the extent to which Pathway’s MD now needs to directly control the programme itself, as
opposed to directing the business as a whole.
Lastly, given the dependence of Pathway on subcontractors, both companies and
individuals, continuing attention will need to be given to maintaining relationships with
those who will be key to delivery.
3.3.4 Programme management disciplines
Pathway have much still to do to ensure that effective management and change control
disciplines are embedded in the combined development and systems integration
environment in which they now find themselves. This must be done regardless of the
time pressures which exist in the programme. This is particularly challenging because of
the need to embrace key subcontractors in these processes, in particular Escher, on
whom Pathway are highly dependant for success. We believe the organisational
changes together with an overall strengthening of the management resources must be
the primary driver for embedding these disciplines right through the organisation.
3.3.5 Technical issues
Concerns have been expressed to us about the ability of the solution to meet the
security requirements, whether it is scaleable to support a 40,000 terminal network and
what performance will result. Concern has been increasing with failures in test and by
regular requests by Pathway for exclusions to key releases, mainly concerned with
security features.
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We understand the basis for these requests is, in Pathway’s view, that such exclusions
have low business impact and if deferred to a later release, will facilitate on-time delivery
of the release in hand.
The security issues relate to the requirement for extended verification processes (EVP)
and access control (to data centres). With regard to EVP, we understand that the full
solution (to include flexible EVP) is required by sponsors in Release 2, meanwhile
Release 1c is planned with exclusions against requirements. On access control,
Pathway has agreed with the PDA to implement Release 1c without full technical access
controls, but with physical and operational controls to counter any remaining security
tisks, Pathway is discussing with the PDA plans for implementing the full requirement at
Release 2, however, we note there is a gap between the requirement of sponsors for
flexible EVP in Release 2 and, Pathway’s current position, that this will not be provided
at that release. We conclude there is much for Pathway to do here to convince
sponsors that the required levels of security will be available and that there will be no
risks in the plans for Release 2 once finalised.
We have also carefully considered the robustness of the technical architecture since this
has become a significant concer for the sponsors. This also has been a major concern
at Pathway and, whilst we have been able to obtain satisfactory answers to all our
questions, in particular regarding the way scalability will be achieved, there must
continue to be reservations here until the final design is fully tested and realised. A key
milestone was reached at the end of August when a new release of the Riposte software
was received from Escher, capable of handling at least 40,000 terminals. This new
software release is currently being stress-tested at ICL and is planned for incorporation
in Release 2. We have also enquired about performance expectations. Detailed
performance modelling of the overall system is being done and, as might well be
expected at this stage of development, there are outstanding, unresolved issues.
3.3.6 The Escher dependency
With the realisation that to deliver this project requires a substantial development as well
as systems integration effort, the dependency of the solution on Escher and their
Riposte software takes renewed prominence. Much of the architectural development
needed has required Escher to commit to major additional work and this is being
commissioned by Pathway. This has taken time and effort, thus causing delay.
This risk will be manifest both in terms of delivery of the solution and in the ongoing
security of the supply chain to Pathway. On the basis that no other remedy is available,
its containment will rely on ICL and Pathway's ability to forge mutually beneficial and
sustainable relationships with the key people involved.
3.3.7 Slippage
Based on our consideration of the experience of this programme so far, the results from
Release 1c testing which imply unplanned rework is needed, the fact that major parts of
the contracted-for functionality is now to be delivered in Release 2 and an extrapolation
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3. OBSERVATIONS ON THE CURRENT PROGRAMME... .
of historical slippage, we conclude that the Programme will not be ready to start national
roll out before January 1999 at the earliest.
It is PA’s assessment that Pathway is on the critical path for the Programme. It is
therefore of fundamental importance to the Programme as a whole that Pathway, based
on the, yet to be agreed, baseline, take due and proper account of experience and
knowledge so far in terms of time scales needed in drawing up plans for Release 2.
3.4 PROGRAMME DELIVERY AUTHORITY - PDA
In the PDA, we found an organisation with a strong desire for continued change, but
which seemed to be hampered by its size and lack of empowerment.
The currently defined role of the PDA is a difficult one. It sets out to broker decisions
between the sponsors, to assure an optimal end-to-end solution, and to manage the joint
contractual relationship with Pathway. Unfortunately, the value of the PDA is questioned
by a number of managers within the sub-programmes though there is general
acceptance of the need for some central body with responsibilities for co-ordination and
management of the joint contracts.
3.4.1 Role
We generally agree with the Andersen Consulting and French Thornton
recommendations which seek to move the PDA towards being responsible for:
e assurance of the end-to-end business architecture;
* assurance of the technical architecture;
e integrating the work plans of each sub-programme.
However, the PDA will still face a number of problems:
¢ the sponsors have different business objectives and would prefer to keep their
options open for as long as possible while developing their own programmes of
work;
e the PDA is not fully empowered to take decisions itself;
« anumber of contractual issues remain to be solved between Pathway and the
sponsors;
e the PDA is not in a position to manage the Programme towards economic
benefits, since it does not hold an integrated view of the business cases for the
Programme.
These factors will, in our view, continue to impede the efforts of the PDA to expedite the
Programme, and will make it difficult to recover lost time.
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; 3. OBSERVATIONS ON THE CURRENT PROGRAMME. .. PA
3.4.2 Processes
While the PDA seems to be well in touch with what is going on, this seems to be
achieved at the cost of a great deal of meeting time. We identified in excess of 25
forums that meet on a regular basis, and were told that numerous additional ad hoc
meetings were held as well. Relatively few of these forums are attended by
representatives of all three sub-programmes together.
We also question the need for three top management forums for the Programme - the
Programme Steering Committee, the PDA Board, and the PDA Board pre-meeting. This
approach would seem to result in inefficiently long lines of communication, particularly in
the light of the PDA's role as a broker of decisions between the sponsoring
organisations. In our opinion, these factors have contribute to the slow decision making
that has been a source of delay on the Programme. For example, we understand that
certain change requests have taken more than six months to be resolved.
Perhaps because of the considerable time taken up by meetings, the PDA appears to
have experienced difficulty moving from a reactive style of management, to one of active
leadership of the Programme. We saw a tendency to uncover issues and problems
rather than to actively foresee and prevent their occurrence. For example, we were told
that the PDA has only recently turned its attention to contingency planning.
We also found the PDA to be focusing almost exclusively on achieving a high quality
outcome, even potentially at the expense of timeliness and cost effectiveness. This is
not surprising considering that the achievement of business cases does not form a
framework for programme management decision making, except at the very highest
level.
3.4.3 Organisation and People
We found an organisational culture that is not conducive to the efficient delivery of such
a complex programme. A number of people told us of the unwillingness of many
individuals to take personal ownership of results.
Although there are some excellent individuals in the PDA, we were also told that it is
difficult to attract the right calibre of staff to work there. In part, this is because of its
London office location, but we were also told of morale problems caused by perceived
doubts over the future of the PDA, as well as that of the Programme itself.
In this regard, the size of the PDA compounds the problem. At 160 people including 40
contractors, we consider it to be too large for a central role that needs to be particularly
agile. We fully support the thrust to pass certain activities back to the sponsoring
organisations. .
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . .
3.4.4 Management of Pathway Contract
A major part of the PDA's current role is to manage the relationship with Pathway.
This task is made more difficult by the fact that the contracts do not, as we understand it,
set out how the PDA is to keep appraised of Pathway’s progress during the
establishment phase. Indeed, we were told that the PDA is not specifically recognised in
the contracts.
We were concerned to find all communications with Pathway labelled "without
prejudice". The contract seems to be playing an unhealthily significant role in dealings
between Pathway and the PDA.
Nevertheless, we found the Core Negotiating Team from Pathway and the PDA to be
playing a very useful role in resolving some conflicts. The personal respect that exists
between the key individuals involved has resulted in a number of pragmatic win-win
solutions.
Their negotiating task is made more difficult, however, by there being no practical
contractual baseline for the pricing of change requests. Each has to be negotiated
afresh,
3.5 ISSUES COMMON ACROSS THE PROGRAMME
3.5.1 Impact of Chronic Change
Acommon finding in our investigations during this Review has been the damage caused
by consistent slippage since the Initial Go Live position. The damage has not only been
in relation to impact on costs, timetable and business cases but also in relation to the
ability of managers within the Programme to find a firm baseline and to build credible
plans for communication within their parent organisation. The consequent lack of
credibility of the Programme's plans in the wider organisations has been cited by several
interviewees as one of the key reasons why active co-operation and commitment has
been hard to secure in relation to external dependencies.
3.5.2 Integrated Implementation Strategy for Roll-out
We are aware that considerable work is being undertaken, in each of the programmes -
CAPS, POCL and Pathway - to define the components of the implementation strategy
for roll-out of the infrastructure, system and business processes to post offices. We
have observed, however, that the end-to-end integration of the strategy is not as far
advanced as we would have expected at this stage of the Programme. It appears that
this may be largely related to the chronic planning uncertainty indicated above which has
undermined drive towards creation of a robust end-to-end picture.
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We believe that the roll-out will be relatively complex. It will combine the geographical
roll-out of post offices with the BA’s customers in the associated areas who will be
provided with card payments as the relevant benefit systems are rolled out and as their
data becomes available to support card payments. This needs to be underpinned with
communications, on a carefully targeted basis, to the customers affected and by
appropriate communication and training for the large numbers of BA staff, POCL staff
and post masters. Since it is rare for an implementation programme of this sort to
proceed closely to plan - unforeseen constraints and issues virtually always arise during
the implementation - it will be important to ensure tight and responsive management for
the roll-out events.
We understand that there remain a number of key areas where the responsibilities for
delivery remain to be finally resolved. Specific examples are the respective
responsibilities between POCL and Pathway for undertaking and funding post office
readiness work and the lack of a shared view between the BA and Pathway on the
handling and funding of communications to customers. We recognise that work is under
way to address these issues but believe that the level of uncertainty for a critical
dimension of the Programme.is a cause for concern at this stage of the Programme.
3.5.3 Business Case Alignment and Robustness
In our view the sponsors’ current business cases, which have been shown to us, are
over-optimistic. The BA has already recognised this and initiated a fundamental review
of their business case and this should be complete at the same time as this Review.
The POCL business case has been revised to reflect the additional resources
associated with implementation of the roll-out.
The business cases are treated as commercial-in-confidence between the sponsors. As
a result, we found each sponsor having reservations about the real drivers in the
business justification of the other. This is, in our view, giving rise to considerable tension
and lack of shared trust and commitment. It also limits the extent to which the PDA can
be mandated to drive towards a clearly articulated and quantified set of business
benefits. We would have expected to see a “meta business case” from a Government
perspective which articulated the benefits and costs of the Programme and which each
organisation would reflect back into their individual business cases.
Of particular concern to the BA is the extent to which the POCL business case will
ensure a full commitment to roll-out to all post offices. It is not clear to us, that the
POCL business case demonstrates an economic argument for automating all the
currently operational post offices. From the BA perspective, (notwithstanding any
concerns that now exist about the costs of the Programme), full roll-out is essential both
in terms of ensuring appropriate levels of coverage and service to their customers and to
avoid running parallel automated and paper-based payment systems which would be
cumbersome and uneconomic. These latter points are also of concern of course to
POCL.
The business cases of each of the sponsors are marginal and built significantly on the
assumption that the required services could be delivered in a relatively short time scale.
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The original project time scales have not proved realistic so the basic vulnerability of
each of the business cases is now fully exposed. This is putting strain on relationships
between sponsors and between the sponsors and Pathway
Were this project to be in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative
approaches to the solution might be more attractive in today's environment.
3.5.4 Joint Sponsor Commitment
We found very substantial tension and distrust between the sponsor organisations at
most levels. This appears to reflect a long history of strained relationships relating to the
costs and characteristics of the payment services which POCL have provided to the BA
over many years. The BA is a major customer of POCL and it is inevitable that the
different commercial objectives of the each organisation make it difficult for them to act
in total harmony as joint Programme sponsors. We note this has the following impacts:
e an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL;
e there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
e decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
It would be inappropriate for us to take a view on the causes for the tensions but we
observe that they appear to have had and continue to have a negative effect on the
Programme. Specifically, they result in slower brokering of resolutions to problems or
proposed changes and in an unwillingness, in many instances, to “trade off competing
requirements. The resulting pressures make the mandate of the PDA, as a jointly
sponsored entity, difficult to sustain. There are too many conflicting agendas.
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4, PROBABILITY OF FURTHER SLIPPAGE. . .
4, _ PROBABILITY OF FURTHER SLIPPAGE
After good progress at the outset to achieve the Initial Go Live (IGL) to schedule, there
has been persistent slippage.
The PDA is currently forecasting national roll-out to start thirteen months late in July
1998, and it is generally accepted on the Programme that further slippage seems highly
likely.
4.1 CAUSES OF CURRENT SLIPPAGE
We believe that there are direct causes of slippage but that these need to be set in the
context of a small number of underpinning root causes as illustrated below.
Root causes Direct Causes
Resourcing
Marginal business cases
Development and control
Agendas in conflict Kisciplines Slippage
Requirement clarification and
lsolution drift
Escher dependency
PFI structural problems
4.1.1 Root causes
Marginal business cases.
The business cases of each of the sponsors in their original form are marginal and built
significantly on the assumption that the required services could be delivered in a
relatively short time scale. Indeed this assumption was reflected in Pathway's proposal
and a five-year contract was signed. The original project time scales have not proved
tealistic so the basic vulnerability of each of the business cases is now fully exposed.
This is putting strain on relationships between sponsors and between the sponsors and
Pathway
Were this project to be in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative future
approaches or alternative supplementary sources of funding for post offices might play a
stronger role.
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Agendas in conflict
The BA is a major customer of POCL and it is inevitable that the different commercial
objectives of the each organisation make it difficult for them to act in total harmony as
joint Programme sponsors. We note this has the following impacts:
¢ an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL;
e there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
¢ decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
Structural problems with the PFI.
The scale of this PFI, its complex supply chain, the conflicting business objectives of the
sponsors, the difficulty in assessing who ultimately carries the risk, and the short time
scale of the operational part of the contract create an environment of uncertainty and
tension. These aspects distract attention from the key objective - to deliver a solution
that works, with acceptable levels of risk transfer and returns for both customer and
supplier.
4.1.2 Direct causes
Resourcing
This is a world class programme measured by any standards.
At the BA, action has already been taken to strengthen the management organisation
by, for example, taking back responsibility from the PDA and drafting in appropriately
skilled and experienced resources from elsewhere. Pathway has acted swiftly, following
their internal review, to make structural changes and to strengthen the management
team. At the PDA, the problem has also been recognised and action is being taken to
strengthen the calibre of its resources. POCL still has much to do and arguably have yet
to recognise that top quality project and service management resource will probably
need to be recruited externally.
In our opinion, sponsors, the PDA and Pathway must continue to seek to identify and
recruit people of appropriately world-class professional stature into every key position as
this programme progresses.
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Development and contro! disciplines.
Pathway has much still to do to ensure that effective management and change control
disciplines are embedded in the combined development and systems integration
environment in which they now find themselves. This must be done regardless of the
time pressures which exist in the Programme. This is particularly challenging because
of the need to embrace key subcontractors in these processes. This applies specifically
to Escher on whom Pathway are highly dependant for success.
Requirement Clarification and Solution Drift
We believe that a better mechanism is needed than currently is in place to manage the
tension between requirements and solutions in the context of a realistic assessment of
the business impact. Whilst we understand the constraints which apply within a PFI
environment, we have not been convinced that that the current arrangements are
resulting a proper assessment of the real business impact of decisions to adhere either
to timetable or to requirements specification.
In this Programme there has been no formal concession, either to time scale or
functionality since March this year when the master plan was last updated. In our
experience, in a programme of this complexity, this implies that too rigid an approach is
being adopted at the possible expense of the business cases for all parties. The nature
of a PFI contract arguably reduces the scope for pragmatic “trade offs” in development
of the solution and this remains a significant risk for the Programme.
The Escher dependency
With the realisation that to deliver this Programme requires a substantial development as
well as systems integration effort, the dependency of the solution on Escher (a relatively
small North American software company) and the Riposte software takes prominence.
Much of the architectural development needed has required Escher to commit to major
rework and this is being commissioned by Pathway. This has taken time and effort, thus
causing delay.
Escher will continue to be a major risk to the success of this Programme. This risk will
be manifest both in terms of delivery of solution and in the ongoing security of the supply
chain to Pathway. On the basis that no other remedy is available, its containment will
rely on ICL and Pathway's ability to forge mutually beneficial and sustainable
relationships with the key people involved in Escher.
4.2 SLIPPAGE TO DATE
The table of milestone dates in Appendix C shows how they have changed as the
Programme has developed. There has been a regular re-plan every three or four
months, and the latest one is underway now.
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4. PROBABILITY OF FURTHER SLIPPAGE. . .
This means that there has been no consistent baseline against which to measure and
evaluate performance. This in itself, has undermined confidence in plans and
commitment to planning disciplines. The current climate in the Programme appears to
one where slippage is regarded as an inevitable “fact of life”. In such circumstances it
tends to become a self-fulfilling prophecy.
Other causes of significant delay have included:
¢ under-estimation by Pathway of the development tasks and failure to apply
appropriately robust planning and control disciplines;
¢ the experience gained during the initial Go Live preparation which lead to an
agreed re-plan early this year which included the release of CAPS software
over an extended period through to 1998 rather than having it available for full
integration testing on 01 September 1996, as stated in the contract with
Pathway;
¢ the length of time needed to broker agreements and change. As an example, a
some change notices remain unresolved several months after being raised;
e the absence of a set of comprehensive end to end technical and business
architectures.
4.3 ANALYSIS OF SLIPPAGE
In our estimation, the Roll-Out completion date is likely to be at least 18 months late
relative to the original contracted dates. In making this estimate, we have assumed that
the work currently being done to improve the Programme's performance continues and
that further changes are made in line with this Review.
The following chart compares the original contract dates with the currently signed-off
Master Plan (v3), together with our forecast, which is based on:
© dates given in the latest PDA monthly report (July 1997);
© an analysis of the movement in forecast dates as the Programme has
developed;
¢ and the logical sequence of events set out in version 3 of the Master Plan.
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4, PROBABILITY OF FURTHER SLIPPAGE. . .
1996 1997 1998 1999 2000 2001
Contacts signa 1Say 68 4 eee
1
cass: premiers
CAPS Releases ee
(I Statintal gobo 549 96
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The chart below (based on the data summarised in Appendix C) shows how the planned
and forecast dates for certain key events have slipped over time, and how our projection
implies a significant improvement in performance.
The extent of this slippage has been so severe as to indicate a Programme that has
been, to a large extent, uncontrollable in the past due to chronic slippage. This is
indicated in particular by the date for start of national roll-out, which slipped by 13
months in the 8 months between version 2 of the Master Plan and the July forecast. No
effective progress was made during this period - indeed the target ended up further
away than before.
Pinvi funvt ns Repot
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Date of PlaniForecast
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In our experience, an analysis of trends in milestone dates’ slippage is an very reliable
indicator of projected future performance. The above diagram illustrates that very robust
action is needed to bring the slippage to date under control.
The critical path leading to completion of the operational trial and start of national roll-out
flows through:
¢ delivery of Pathway’s Release 1c;
¢ resolution of the requirements for Release 2;
e delivery of Release 2;
e delivery of CAPS releases 2.2 and 3;
¢ integration of the Pathway and CAPS releases;
« conduct of the live trial;
¢ evaluation of the trial and completion of any necessary rework.
In our opinion, the current planning forecasts do not allow enough time in particular for
the agreement of Pathway's Release 2 requirements or for the live trial, including its
evaluation and the inevitable rework that will result. Pathway, towards the end of this
Review, now take the view that Release 2 is unlikely to be ready for live trial until late
summer or early autumn 1998.
Therefore, we cannot see this chain of activities being completed before the busy 1998
Christmas period, and this means that national roll-out will only be able to start in
earnest after mid -January 1999 at the earliest.
In addition, a number of sources of additional work do not appear to have been fully
factored into the plans we have seen. These include:
« changes that will arise from the end-to-end integration work;
« rework that will surface as the Pathway and CAPS releases are acceptance
tested;
¢ resolution of the outstanding change requests and agreements to agree;
¢ the development of detailed solutions, for example to ensure security;
e review, validation and rectification of the national roll-out plans as they are put
into practice;
all of the work necessary to prepare the post offices for automation particularly
in the light of Pathway's assertion that only a limited proportion of them are fit
for automation.
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4. PROBABILITY OF FURTHER SLIPPAGE. . . PA
We assess that these will have a limited impact on slippage, for which the primary driver
is availability of the Pathway releases, but will affect the scale and cost of activities to be
undertaken.
4.4 IMPACT OF FORECAST SLIPPAGE
4.4.1 On commencement of national roll-out
We believe the Programme in its present form, and on the basis of slippage to date, will
not be ready to start national roll out by the end of July 1998 - the most recent date
proposed by Pathway to sponsors.
Although we expect there will be further slippage announced in the BA/CAPS
programme from the current re-planning exercise and we believe that POCL are not
moving fast enough into implementation mode, these delays are not, in our judgement,
on the critical path. Itis PA’s assessment that the primary driver of time scale slippage
will now be Pathway as they come to terms with the scale of what has to be done.
Based on our consideration of the experience of this programme so far, the results from
Release 1c testing which imply unplanned rework is needed, the fact that major parts of
the contracted-for functionality is now to be delivered in Release 2 and an extrapolation
of historical slippage, we do not believe the Programme will be ready for national roll out
before mid-January 1999 at the earliest.
te
4.4.2 On national roll-out.
We believe that a roll-out rate for post offices of 150 rising to 250 offices a week is
achievable if there are no major delays in getting estate surveys completed to the
revised time scale; there is early agreement of major outstanding issues such as the
commercial arrangement for communications to customers; the commitment of sub-
postmasters to consistent and timely co-operation with roll-out requirements is secured
and, POCL develop and resource an effective and timely implementation strategy. A
major area of concem relates to the arrangements for Service Management of Pathway.
We believe this aspect of the Programme needs to be accelerated to provide a basis for
piloting and to undertake this under POCL, not PDA, control and direction.
In summary we forecast on-going slippage to the key development stages and would not
expect the infrastructure to be ready for commencement of national roll-out much before
the mid-January 1999, at the earliest and for roll-out to be completed over a period of
between about 1.5 and 2.5 years.
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4, PROBABILITY OF FURTHER SLIPPAGE. . . PA
4.4.3 On business cases.
The further slippage will have a significant effect on the business case for each player:
* extended design and development effort will increase Pathway costs while the
“window” for securing a return on investment remains short;
« CAPS Programme costs are likely to increase significantly not only because of
the need to extend the period over which the Programme team need to be in
place but because there are additional work items which the Programme will
need to undertake in the period (and which we believe will emerge from the
current re-plan) to increase resilience and contingency. Further delay to card
based payments reduces the overall NPV for the BA;
¢ Horizon Programme costs will increase due to the extended period for the team
to be in place and due to the need for additional work associated with
implementation and service management provision. Delay in the roll-out not
only delays potential revenue streams but is likely to reduce them overall as
market opportunities are lost.
We do not have access to detailed information which would enable us to project the
overall cost implications for the Programme. However, on the basis of information
provided to us in confidence by each party, we would estimate that overall Programme
costs (including sponsors and Pathway but not including fraud savings and any loss of
future business opportunities for POCL) will increase by between £185m and £250m.
We consider that sponsors should undertake an urgent appraisal of the impact on their
costs as input to assessment of whether or not to continue with the Programme either as
currently planned or in a revised form. Pathway will need to undertake a similar
assessment.
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5, ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE. . . PA
5. _ ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE
These actions focus on improving the delivery capability of the Programme and are set
in the context of the need for a new, executive-style PDA, empowered to make decisions
on behalf of sponsors and given direction by a PDA board which provides strategic
advice and which gets involved to resolve the big issues. Actions are summarised for
each of the players in tum.
5.1. PATHWAY.
I. split business development unambiguously from programme delivery
Il. undertake competency assessment of all key first and second line resources in
development programme and commit to rectify where weaknesses against
requirement are identified
Ill. produce a firm baseline plan for Release 2 to include all contracted for services
based on a robust evaluation of all technical design issues and to include
application of phase review and other development and design disciplines, to
include all subcontractors
IV.be absolutely clear with sponsors and PDA of the effect of further changes on this
baseline plan, once agreed
V. produce formal report for sponsors on the technical issues arising from for
example consideration of scalability, performance and, the actions planned to
mitigate any risks
5.2 CAPS
I. use firm baseline from Pathway to re-plan
Il. build in contingency and rework
Ill. strengthen project management office competencies
5.3 POCL
I. urgently develop an operational capability that can form a pilot for service
management of Pathway for Release 1c;
Il. urgently develop an implementation strategy for :
+ business process, design testing and implementation
readying the post offices
postmaster training and awareness
training and awareness of other post office staff
customer communications
Ill. undertake competency assessment of all key managers and commit to action to
rectify any deficiencies identified;
\V.validate, with Pathway, the feasibility of the projected roll-out rate for post offices
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5. ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE. . .
5.4 PDA
I. expedite moves towards the new structure and function
ll. undertake competency assessment of all key staff and commit to rectify any
shortfalls in requirements
Ill. reduce size as soon as possible
\V. rationalise change management to make better use of CNT and to expedite
resolution
V. rationalise programme control and reporting
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . .
6. _ OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS
6.1 RESIDUAL STRATEGIC RISKS
If action is taken as recommended to address the risks listed above, we believe that the
probability of the Programme delivering against its objectives successfully will be greatly
improved, albeit in the extended time scales we forecast in section 5 and at increased
costs.
However, we believe that four residual strategic risks will remain.
6.1.1 Cost of roll-out to all post offices
A uniform approach has been adopted to both provision of the infrastructure and, the
charging regime for transactions across it. There is therefore a real possibility that the
true apportionment of costs across high and low volume post offices is not visible in the
business cases. :
The increasing availability of alternative and possibly lower cost approaches to benefit
payment encashment, the time scale slippage and the consequential impact on the
business case is causing reservations at the BA about the economic viability of
supporting the automation of benefit payment at all Post Offices. We have not, however,
seen evidence of robust and cost-effective alternatives which would offer a comparable
service to the post office network for areas with a low density of population.
In PA's opinion, unless the justification for benefit payment by cards and other
automated transactions through all post offices is reinforced as part of a broader
Government context, the ensuing uncertainty about the cost effectiveness of the solution
adopted is likely to continue to undermine confidence in the Programme and,
relationships between the sponsors. The broader context needs to incorporate both the
commercial and social service aspects of the Post Office and the role of payment
arrangements in future social welfare policy.
6.1.2 PFI
The PFI contract implies a transfer of risk which we do not believe is sustainable in
practice. Although Pathway bear risks associated with encashment fraud, the dominant
tisk is associated with resilient delivery of the benefits payments service itself - delivering
some £80 billion in payments each year - and of the transaction handling capability of
post offices.
Failure of the payments service would be business-critical to the BA and DSS and would
carry unacceptable political repercussions. Given this, we argue that the risk of secure
service supply is being carried predominantly by the BA and DSS. In these
circumstances, the sponsors cannot afford to take a “hands-off” approach to the delivery
and management of the payments service as a PFI contract would normally demand.
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . . PA
6.1.3 Joint Sponsorship
The current joint sponsorship arrangements are leading to a lack of clarityin
tesponsibilities and to difficulty and delay in brokering resolutions to problems. This is
exacerbated by the significant commercial tensions between the sponsors.
Furthermore, in the longer term, we believe that the current arrangements carry the risk
that the dominant end-to-end view of the services will remain with Pathway rather than
with one of the purchasers. This has significant implications for the effectiveness of
management of the service, the contract and the supplier. .
6.1.4 Dependency on Escher and its people
Escher is a small privately-owned North American software house of some 30 people.
Its software is critical to the Pathway technical solution. In the original evaluation of the
tisks associated with a critical dependency on such a small company, we understand
that a key factor was the view that the Pathway solution required integration of the
Escher product and not a major development effort. In the light of subsequent events, it
appears that there is a critical dependency on Escher to design and deliver significant
software components for which Escher will continue to own the IPR. We believe that
this remains a significant residual risk to the resilience of the Pathway business and
technical solution and that ICL need to identify means of assuring sponsors of the
security of this source of supply both at the delivery stage and for ongoing support.
6.1.5 Our conclusion on strategic risks
Although PA has high level views about how each of these risks might be addressed we
have not analysed this in detail since it falls outside the scope of this Review. In any
event, we believe that these strategic risks can only be addressed by sponsors and
Pathway working together at the most senior level and we have consequently set out an
action plan in Section 6.2 below.
It is PA’s considered opinion that solutions to these issues are urgently needed if the
Programme is to avoid further major problems and, command the full commitment of all
the parties.
Clearly, in the view of the scale of the risks, termination of the Programme must be an
option. It is PA’s view, however, that to terminate would create such major difficulties for
all parties that alternatives and the implications require considerably more robust
assessment than has been appropriate in this Review.
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . .
6.2 ACTION PLAN OUTLINE.
In view of the seriousness of the residual risks, we suggest that the Programme
sponsors and Pathway should take steps jointly:
¢ to strengthen the Programme's ability to deliver, and
¢ to evaluate the need and scope for reconstruction of the objectives and scope
of the Programme.
The latter should be with a view either to modifying or reaffirming the objectives in order
to ensure robust commitment from the sponsors or to bringing the Programme to a
close. The two streams of work should be undertaken in parallel and an illustration of
the steps which we would suggest for consideration is as follows.
Outline of Suggested Next Steps
Evaluate Strategic Options Now Strengthen Programme
Assess the impact of slippage and Agree joint approach, under PDA Board
additional activities on the business case} direction, to implementation and assuranc}
of agreed improvement actions.
Review options available, including: ee:
* continue with current scope and
objectives and projected timetable Initiate Pathway to
* reconstruct the Programme to revised Programme complete
objectives, scope or timetable improvement technical
> timninate steps gap analysis
and confirm whether acceptabe in
principle to Minsters and stakeholders. 4:
Kicestecates I Pathway to deliver robust re-plan for
arddehentesI Release 2
Conduct intensive evaluation of PS
options in the context of DSS and
DTI Ministerial direction. CAPS and Horizon to modify plans.
timetable on basis of revised Pathway
dates .
Provide robust business
Justification for preferred option
‘with Government endorsement
End 1997
We believe that the evaluation of strategic options will need directly to address the
economic, social and political factors which bear both on the future of the post office
network and on the delivery of social welfare payments. It is likely therefore to require
the active sponsorship of Ministers.
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APPENDIX A: INTERVIEWEES
Organisation Contact Organisation Contact
PDA Peter Crahan POCL Stuart Sweetman
Pat Kelsey Paul Rich
Bruce McNiven Mena Rego
Keith Downer Tim O'Leary
John Meagher Tim Brown
David Smith
BA/CAPS Peter Mathison Pathway John Bennett
George McCorkell Tony Oppenheim
Vince Gaskell David Groom
John Delamore Martyn Bennett
Val Curran Stephen Muchow
Indra Morris Mike Coombs
Alexis Cleveland Terry Austin
Parry Jenkins (AC) Barry Vaughan
David Riggs Graeme King
Liam Foley
John Dicks
John Hunt
Dave Hollingsworth
PDA Board Alec Wylie ICL Keith Todd
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APPENDIX B: _TERMS OF REFERENCE
Terms of Reference
REVIEW OF BA-POCL PROGRAMME
Context for the Review
Management in each of the stakeholder organisations has agreed that a review of the
delivery plans and resourcing of the BA-POCL Programme is required to underpin future
stakeholder discussions with Ministers and at the main Boards of ICL/Fujitsu and POCL.
In particular:
¢ the Programme has suffered consistently from chronic slippage and is
undertaking its third major re-planning exercise. The re-plan is up to July 1998
and longer term planning is “on hold” until the next year’s plan is more robust,
and
* asa result of the slippage, there has been some tension in the commercial and
contractual relations with Pathway and the contracts have been subject to
rigorous assessment and review in the recent past.
There is, therefore, a low level of confidence in the robustness of current plans and
resourcing and there is a background of commercial sensitivity because this is a PFI
project.
There is very active ongoing work and the review is timed to begin at or just after
completion of detailed plans for CONGO Release 4. Longer term plans are still under
development.
Scope
The scope of the review is to include all the supplier and sponsor domains - DSS, POCL
and Pathway - as well as the PDA. Within these domains, the review will address any
relevant management and technical areas which bear on the ability of the Programme to
meet its end-to end delivery obligations.
Requirement
The review should give the sponsors and Pathway:
¢ arobust assessment of the Programme's future delivery capability
© specification of the changes needed in order to provide assurance of the
Programme's ability to deliver - accepting that this may entail changes to
timetable, resourcing and management arrangements.
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This will, in due course, underpin submissions by the relevant parties to their respective
Boards and to Ministers to secure their ongoing commitment to the Programme.
In undertaking the review, it is important to ensure that we:
« do not re-open debate on the overall business rationale for the Programme;
¢ focus on future capability to deliver, not past problems;
© look at commercial, managerial and technical aspects in an integrated way;
¢ establish clear priorities for the review (looking at everything in detail would be
both uneconomic and disruptive);
¢ take care not to interrupt ongoing work while conducting the review.
Overall, the review must be rapid - a first draft is required on September 5th - and reflect
the strategic importance of the programme to each of the sponsors and to Pathway.
Specific requirements are that we should:
e review, for each organisation in the supplier and sponsor community, and
across the whole Programme:
— arrangements for change management and control;
- delivery plans;
— progress reporting and information flows;
- escalation arrangements and associated decision-making (including
commercial negotiations);
— the management structure and the match of competencies to the allocated
scope of work;
— resourcing levels in the light of programme and project management best
practice.
¢ identify and assess any weaknesses in the delivery capability of the
Programme, including risks in relation to:
— managing delivery of the PFI services;
- supplier management;
— linkages between the various parts of the Programme;
— management and resourcing, including planning of service and contract
management.
Deliverables from the Review
The Review should initially deliver an appraisal of any weaknesses and risks in the
Programme's delivery capability.
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The subsequent deliverable should be a draft of the final report which will assess the
options available to address the risks and weaknesses and give our recommendations
on the actions which should be taken. The draft will be delivered to Alec Wylie by 5”
September for distribution to the DSS, POCL and Pathway representatives.
The final report will be completed by 19" September. In view of the rapid timetable for
the Review a “presentation style” report will be acceptable.
The findings and recommendations will be preserited to the PSC on 24” September.
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APPENDIX C: _TRENDS IN PROGRAMME MILESTONE DATES
MPlan V4 MPian V2 I MPlanV3 I Latest
Description 13-Aug-96 I 13-Nov-96 I 08-Apr-97 I 31-Jul-97
Rof Dato I Rof Dato I Rof Dato I F/C Dato
Group A- Initial Go Live
1 PO automated for ChB by card SM1 Sep-96] A1 Sep-96] A1 Sep-96I 23-Sep-96
10 POs automated for ChB by card SM2 Oct-96] A2 Oct-96] AZ Oct-96 I 21-Oct-96
Group B - Pathway Infrastructure & Roloasos
Bootle & Wigan operational SM24 Dec-96] G1 Deo-96I B1 Mar-97I 07-Mar-97
Rel 1(b) OBCS authorised for use 82 Apr-97 I 02-May-97
Rel 1(c) BPS authorised for use 83. Jun-97 I 13-Oct-97
Rel 1(e) EPOSS/APS authorised for use B4 Sep-97I 30-Mar-98
Rel 1(e) authorised for national roll-out BS Nov-97I 30-Mar-98
Rel 2 authorised for national use SM25 Oct-97] G2 Oct-97] BG Jan-98 I 31-Mar-98
Rel 3 authorised for national use SM26 Apr-98] G3 Apr-98I B7 Apr-98 I 31-Jul-98
Rel 4 authorised for national use SM27 Oct-98 I G4 Oct-98] B8 Oct-98} 31-Oct-98
Group C- CAPS Roloasos
CAPS Rel 2 authorised for use Ct Mar-97 I 31-Mar-97
CAPS Rel 2.1 authorised for use C2 May-97I 02-Jun-97
CAPS Re! 2.2 authorised for use C3 Jub97 I 03-Nov-97
CAPS Rel 3 authorised for use C4 Jan-98 I 30-Mar-98
CAPS Rel 4 authorised for use C5 Jubg8 I 31-Jul-98
Group D - POCL Foador Systoms
Reference data system ready for E2E testing D1 Mar-97 I 10-Mar-97
HAPS system ready for E2E testing 02 Mar-97 I 27-Mar-97
TIP Phase 3 ready for E2E testing F1 Mar97] D3 Mar-97 I 27-Mar-97
Full TIP system operational SM15 Jun-97
POCL feeder systems authorised for lve trial D4 Sep-97 I 08-Sep-97
Group E- Live Trial Roll-out
Start of roll-out to up to 190 PO + IGL Pos, ‘SM3 Mar-97I B1 Mar-97] 1 Apr-97 I 02-May-97
200 POs ready for customer use SM4 Apr-97I B2 Apr97I E2 Jun-97I 13-Oct-97
Start of live trial evaluation period E3 Sep-97I 31-Jul-98
ve trial evaluation complete & accepted E4 Nov-97 I 21-Nov-97
Start of roll-out to 1450 POs with limited functionality E5 Jubo7 I 28-Jul-97
‘Secodary stream POs migrated to full system E6 Jan-98 I 31-Jan-98
Group F - National Roll-out
Start of national R/O to POs & BA offices on mainland SMS Jun-97] C1 Jun-97} F1 Nov-97] 31-Jul-98
Instin of POs in large conurbations ready for customer use] C2 thd I F2 TBA I TBA
Installation of PO (4+ counters) ready for customer use C3 thd I F3 TBA} TBA
Start of roll-out to existing ECCOVALPS within M25 C4 thd I Fé TBA I TBA
Existing ECCO/ALPS within M25 ready for customer use C5 thd I FS TBA I TBA
All POs & BA dist offices ready for customer use SM9 Nov-98] C99 Nov-98I F6 TBA I TBA
Group G - Norther Ireland
Start of Rollout in Northem treland M10 Juk97 I D1 Aug-97] G1 TBA I TBA
All POs & SSA local offices ready for customer use SM11 Sep-97] D2 Sep-97] G2 TBA I TBA
Group H - BA Bonofit Migration
Payment of ChB by normal renewal cycle (NRC) SM16 Jan-97I E1 Jan-97I Hi May-97I 13-Oct-97
Payment of ISIPSCSvincap benefits by NRC SM17,20 Oct-97 ]E2,5 Oct-97} H2 Jan-98 I 20-Jan-98
Payment of JSA/FamC/DWAVETU by NRC SM18,20 Oct-97 ]E3,5 Oct97 I H3 Apr-98 I 30-Apr-98
Payment of AA/DLA/Social Fund by NRC SM19,21 Jan-98 I£4,6 Jan-98I H4 Jub98 I 31-Jul-98
Payment of War Pension/IIDBVICA by NRC SM21_ Jan-98 IE6,7 Feb-98} H5 Nov.98I 30-Nov-98
All benefits can be paid by card at mainland POs ‘$M23] May-99I E99] May-89] H6 May-99] 31-May-89
Group 1-SSA Bonofit Migration
Payment of income support by NRC in NI SM14 Jan98] D6 Jan98] 11 Jan-98I Jan-98
Payment of PSCSiincaplJSAFamC/IDWAIETU by NRC ISM12-14 Jan-98 103-6 Jan-98I 12 Apr-98I Apr-98
Payment of Child Benefit by NRC SM14 Jan98I 07 Jan-98I 13 Jun-98I Jun-98
Cs
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as pee ED OS SS Be ss Eo oe
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Creating Business Advantage
PA Consulting Group is a leading management, information and technology
consultancy, operating worldwide from around 50 offices in over 20 countries.
For clients, PA is distinguished as a consultancy that focuses on creating, rather
than just proposing, change, using skills that combine deep experience of sectors
and industries with an innovative, insight-driven approach. PA's outstanding
implementation track record is achieved through the integration of process, people
and technology capabilities using multinational, interdisciplinary teams that work
worldwide with client organisations in industry, commerce and government.
Established over 50 years ago, PA draws on the knowledge and expertise of over
2,000 employees, whose skills span a wider range of capability than any other
major consulting firm. Our consultancy services —Strategy, Improving Performance,
IT, Technology, Human Resources, Change Management- are helping our clients
transform their businesses to achieve significant increases in value, profitability
and effectiveness. We are proud that our clients say: “PA makes it happen’.
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benefits
2
ane
ICL Pathway
PAS”
Group
Review Of BA-POCL Programme
Commercial In Confidence
Prepared by: Peter Copping
Deborah Lees
Hugh Crail
David Rees
Version 3.0
4 October, 1997
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PA Consulting Group
Review Of BA-POCL Programme
Commercial In Confidence
Authors: Peter Copping
Deborah Lees
Hugh Crail
David Rees
PA Consulting Group
123 Buckingham Palace Road
London SW1W 9SR
Telephone 0’
Facsimile I
Version 3.0
01 October 1997
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DISTRIBUTION OF CONTROLLED COPIES
Controlled Copy N° Surname Name Organisation
1. Crahan Peter BA POCL
2. McNiven Bruce BA POCL
3. Mathison Peter Benefits Agency
4. McCorkell George I Benefits Agency
5. Bennett JohnH = I ICL Pathway Ltd
6. Coombs Mike ICL Pathway Ltd
Te Todd Keith ICL PLC
8. Copping Peter PA Consulting Group
9. Lees Deborah I PA Consulting Group
10. Rich Paul Post Office Counters Ltd
11. Sweetman Stuart Post Office Counters Ltd
12. Wylie Alec Social Security Agency
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TABLE OF CONTENTS
MANAGEMENT SUMMARY
4. CONTEXT AND PURPOSE OF THIS REVIEW 11
2. AIM AND SCALE OF THE BA-POCL PROGRAMME 2-2
3. OBSERVATIONS ON THE CURRENT PROGRAMME 3-3
3.1 BA: CAPS PROGRAMME
3.2 POCL : HORIZON PROGRAMME
3.3 PATHWAY....ecssssseeeneereee oe
3.4 PROGRAMME DELIVERY AUTHORITY - PDA
3.5 ISSUES COMMON ACROSS THE PROGRAMME. .....ssccssssssssssssssessessnessscennees 3-15
4. PROBABILITY OF FURTHER SLIPPAGE 418
4.1 CAUSES OF CURRENT SLIPPAGE
4.2 SLIPPAGE TO DATE...
4.3 ANALYSIS OF SLIPPAGE
4.4 IMPACT OF FORECAST SLIPPAG!
5. ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE 5-26
5.1 PATHWAY.
5.2 CAPS...
6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS 6-28
6.1 RESIDUAL STRATEGIC RISKS.
6.2 ACTION PLAN OUTLINE. ......
APPENDIX A Interviewees
APPENDIX B Terms of Reference
APPENDIX C Trends in Programme Milestone Dates
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MANAGEMENT SUMMARY... . PA
MANAGEMENT SUMMARY
M1. CONTEXT FOR THIS REVIEW \
The driving force for this Review of the BA/POCL programme has been the consistent
into the implementation stage of the Programme, difficulties were being experienced in
longer term planning because of slippage of some 13 months in short term plans.
This is putting stress on the viability of each organisation's business case. The resulting
low level of confidence in the robustness of planning and resourcing and the background
of commercial sensitivity, led management in each of the sponsor organisations and
Pathway to commission PA Consulting Group to provide an independent view of the:
© current weaknesses and risks in the Programme
¢ implications for the Programme future delivery obligations
© options which may be available to assure its delivery capability.
It is in the nature of a review of this sort to focus on the problems and weaknesses which
need to be addressed. We wish to record that, despite the problems that the
Programme has encountered, there is no doubt that a lot has been achieved by all the
teams in the light of very demanding circumstances.
M2, PROGRAMME OBJECTIVES
The BA-POCL Programme is a large and complex programme of change. The overall
Programme objectives are to:
¢ deliver a fraud-free method of paying benefits at post offices;
¢ develop a system that meets recognised accountancy practices;
© provide, through automation, greater commercial opportunities enabling POCL
to improve competitiveness and increase efficiency;
¢ provide an improved level of service to all customers.
Itis a very major business venture for each of the participating organisations - the
Benefits Agency (BA), Post Offices Counters (POCL) and Pathway:
* itis directly business critical for Pathway and is an extremely large and strategic
investment for ICL and its parent company, Fujitsu..
¢ itis a major component in the BA's strategy to reduce fraud and improve
financial and accounting controls, as well as to reduce costs.
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MANAGEMENT SUMMARY. . .
e for POCL, the Programme, as part of an overall programme of automation, is
essential to the creation of a platform for future growth and avoidance of
business decline.
In PA's opinion, the Programme is world-class in its ambitions and our observations
should be seen in that light.
The Programme entails major changes to BA IT systems and an extensive
implementation effort in the Agency's field operations and in their inter-working with the
Agency's customers. For POCL, a number of IT systems require development and there
needs to be an extensive programme of process change, training and the preparation of
some 19,000 post offices. Pathway are required to develop, install and operate a major
national infrastructure with complex real-time transactions through the 19,000 post office
outlets and, with the support of POCL, to prepare outlets and train counter staff.
M3. FINDINGS
M3.1 Benefits Agency
Overall we have concluded that the plans for what needs to be done by BA are being
well thought through. They are robust in terms of the approaches being adopted and the
management resources being applied. Good progress is also being made on process
changes and policy issues; the same is true of planning for BA field operation activity
and the overall migration strategy. There have also been positive moves to rationalise
management responsibilities in relation to the Programme Delivery Authority (PDA).
Recognition towards the end of last year of the scale of data and business migration and
the need to move towards phased CAPS releases have affected BA cost estimates and,
contributed to an increased understanding of the complexity of the overall
implementation. This increased understanding led to the change in time scale for the
Programme agreed by all parties early this year and which is reflected in Master Plan
V3.
The CAPS Programme is currently undertaking a major re-planning exercise. From this,
we would expect to see increased time for testing, data migration, re-work, post-release
enhancements and associated integration testing. This will increase BA costs and
timetable for delivery. Continuation of the tight management control of the Programme,
in view of the scale and complexity of the activities to be completed, will be vital and may
demand further strengthening of the CAPS programme management office.
M3.2 POCL
POCL has much to do if this Programme is to be successful. The first steps, to
implement computer system modifications, are under way and aside from perhaps an
over-reliance on the PDA for programme management of this, progress seems to be
satisfactory.
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We do have concerns for the future, in three areas:
¢ there is a need for POCL significantly to boost resources to co-operate with
Pathway's roll-out of the infrastructure. Plans are in place to appoint national
and regional managers for implementation and some 350 support staff. We do
not, however, believe that there is sufficient recognition in POCL of the need to
be taking rapid steps to have a robust team in place;
¢ although work has been done to assess the Service Management Framework
required to manage Pathway as a service provider, the resources needed for
this are not identified, other than those that currently exist in the PDA. We feel
that the scale and difficulty of the service and contract management task is not
yet fully understood in POCL;
e inthe longer term there is the issue of developing the POCL requirements for
EPOSS and the supporting computer applications. We understand there is
much still to do here, which will require additional resource.
Despite an apparent focus on planning rather than doing and a general underestimation
of the resources required, we do not believe this has contributed in any significant way
so far to slippage in the Programme. Clearly there is and will continue to be an impact
on POCL costs as the necessary resources are put in place which, together with
slippage, must impact the business case.
Our key concern is that the skills required for many of the new senior posts are, in our
opinion, not those we would have expected to find as part of POCL core competencies:
this is especially true in relation to implementation management and contract and
service management. There seems, however, to be no evidence of external recruitment
activity or robust plans to create the competence internally.
M3.3 PDA
In the PDA, we find strong desire for continued change, shaped by the
recommendations of the Andersen Consulting and French Thornton reports but,
progress with implementation is slow. We generally agree with these recommendations,
which in essence move the PDA towards a body that has responsibility for:
* assurance of the overall business architecture
¢ assurance of the technical architecture
¢ integrating the work plans of each of the sub-programmes
e management of the joint contractual arrangements during delivery
Meanwhile there is evidence of a change management process that requires time which
is not always allowed for in the plans and of the PDA getting engaged in aspects that
might be better managed directly between one of the sponsors and Pathway.
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The PDA expends considerable effort in trying to broker resolutions of issues with
Pathway and between the sponsors. This is made more complex by the inherent
difficulty in managing a PFI contract - in getting the balance right between assurance
and interference. This is particularly challenging for this Programme where not all the
tisk - which is business critical to the sponsors - is transferred to the supplier and where
there is a natural tension at the boundary of risk transfer as the sponsors and supplier
each seek to optimise their positions as to respective roles, rights and obligations.
We believe that the PDA is too large and that it could be reduced to around one quarter
of its present size by continuing the process of transferring functions to sponsors and, by
removing overhead activity. At the same time there is a need to ensure that the
resources assigned to the PDA are the best available and that they are aligned with the
revised responsibilities. This should not be confined to the resources available in the
sponsor organisations but managed strictly according to competency for the rolés.
M3.4 Pathway
At the outset of this procurement, it appeared to Pathway that the development of a
service to meet the PFI requirement could be achieved largely through systems
integration, and that its role was essentially one of a systems integrator. This is
illustrated by the large number of subcontractors to Pathway. In reality, the amount of
development work needed was in our opinion, seriously misjudged. As a result, time
scales and resource needs were underestimated.
As Pathway and sponsors have worked with the PDA to resolve the detail of the
requirement (the contract specifies requirements with the principle of “agreements to
agree” being used to work up the detail of the requirements to give legal expression) and
also to incorporate change requests into planning, the extent of development needed
has become clear. Pathway instituted an internal review early in July 1997 and
subsequently began to implement necessary management and organisation changes to
reflect an enhanced understanding of the demands of the programme. These changes
(including a new management structure, additional resources and application of change
control disciplines) are still in the process of being implemented. There continues to be
a vital need to tightly manage the sub-contractor network and, in particular, Escher, a
small US company who are delivering core functionality to the Pathway solution.
We believe the current status of the Programme is surrounded by considerable
contractual ambiguity. Pathway are, in essence, proceeding on an ‘own risk’ basis to
deliver Release 1c with a “known problems register” and its proposal is to address the
“known problems” in Release 2. Meanwhile the baseline for Release 2 is being
developed. Pathway will only be able to provide firm plans once this Release reaches
approved baseline status. Because so much of the contracted-for solution now appears
to be in Release 2, we must express serious reservations about Pathways current plan
to be ready for commencement of national roll-out at the end of July 1998. Pathway
have recently confirmed to us that it is unlikely that Release 2 will be ready for live trial
until late summer or early autumn 1998.
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Much of our review at Pathway has focused on the robustness of the technical solution
since this has become a significant concern for the sponsors and Pathway. Whilst we
have been able to obtain satisfactory answers to all our questions, in particular regarding
the way security requirements will be incorporated and on scalability and performance,
there must continue to be reservations in all these areas until the final design is
baselined and then realised. It is also important to note the dependency for technical
success on Escher which is a small, Boston-based software house and the source of the
Riposte messaging software which is at the heart of the system.
M4. CAUSES OF CURRENT SLIPPAGE
We believe that there are direct causes of slippage but that these need to be set in the
context of a small number of underpinning root causes as illustrated below.
Root causes Direct Causes
[Resourcing
Marginal business cases
Development and control
Agendas in conflict Kisciplines Slippage
Requirement clarification and
fsolution drift
Escher dependency
PFI structural problems
M4.1 Root causes
Marginal business cases.
The business cases of each of the sponsors are marginal and built significantly on the
assumption that the required services could be delivered in a relatively short time scale.
The original project time scales have not proved realistic so the basic vulnerability of
each of the business cases is now fully exposed. This is putting strain on relationships
between sponsors and between the sponsors and Pathway
Were this project to be in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative
approaches to the solution might be more attractive in today's environment.
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Agendas in conflict
The BA is a major customer of POCL and it is inevitable that the different commercial
objectives of each organisation make it difficult for them to act in total harmony as joint
Programme sponsors. We note this has the following impacts:
« an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL
e there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
e decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
Structural problems with the PFI.
The scale of this PFI, its complex supply chain, the conflicting business objectives of the
sponsors, the difficulty in assessing who ultimately carries the risk, and the short time
scale of the operational part of the contract create an environment of uncertainty and
tension. These aspects distract attention from the key objective - to deliver a solution
that works, with acceptable levels of risk transfer and returns for both customer and
supplier.
M4.2 Direct causes
Resourcing
This is a world class programme measured by any standards.
At the BA, action has already been taken to strengthen the management organisation
by, for example, taking back responsibility from the PDA and drafting in appropriately
skilled and experienced resources from elsewhere. Pathway has acted swiftly, following
their internal review, to make structural changes and to strengthen the management
team. At the PDA, the problem has also been recognised and action is being taken to
strengthen the calibre of its resources. POCL still has much to do and arguably have yet
to recognise that top quality project and service management resource will probably
need to be recruited externally.
In our opinion, sponsors, the PDA and Pathway must continue to seek to identify and
recruit people of appropriately world-class professional stature into every key position as
this programme progresses.
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Development and control disciplines.
Pathway has much still to do to ensure that effective management and change control
disciplines are embedded in the combined development and systems integration
environment in which they now find themselves. This must be done regardless of the
time pressures which exist in the Programme. This is particularly challenging because
of the need to embrace key subcontractors in these processes. This applies specifically
to Escher on whom Pathway are highly dependant for success.
Requirement clarification and Solution Drift
We believe that a better mechanism is needed than currently is in place to manage the
tension between requirements and solutions in the context of a realistic assessment of
the business impact. Whilst we understand the constraints which apply within a PFI
environment, we have not been convinced that the current arrangements are resulting in
a proper assessment of the real business impact of decisions to adhere either to
timetable or to requirements specification.
In this Programme there has been no formal rebasing of the Master Plan and associated
time scales since March this year to reflect for example, more recent change requests
and emerging or existing exclusions to functionality. In our experience, in a programme
of this complexity, this implies that too rigid an approach is being adopted at the possible
expense of the business cases for all parties. The nature of a PFI contract arguably
reduces the scope for pragmatic “trade offs” in development of the solution and this
remains a significant risk for the Programme.
The Escher dependency
With the realisation that to deliver this Programme requires a substantial development as
well as systems integration effort, the dependency of the solution on Escher (a relatively
small North American software company) and the Riposte software takes prominence.
Much of the architectural development neéded has required Escher to commit to major
rework and this is being commissioned by Pathway. This has taken time and effort, thus
causing delay.
Escher will continue to be a major risk to the success of this Programme. This risk will
be manifest both in terms of delivery of solution and in the ongoing security of the supply
chain to Pathway. On the basis that no other remedy is available, its containment will
rely on ICL and Pathway's ability to forge mutually beneficial and sustainable
relationships with the key people involved in Escher.
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M5. IMPACT OF SLIPPAGE
M5.1 On start of national roll-out
We believe this Programme in its present form, and on the basis of slippage to date, will
not be ready to start national roll out by the end of July 1998 - the most recent date
proposed by Pathway to sponsors.
Although we expect there will be further slippage announced in the BA/CAPS
programme from the current re-planning exercise and we believe that POCL are not
moving fast enough into implementation mode, these delays are not, in our judgement,
on the critical path. It is PA’s assessment that the primary driver of time scale slippage
will now be Pathway as they come to terms with the scale of what has to be done.
Based on our consideration of the experience of the Programme so far, the results from
Release 1c testing which imply unplanned rework is needed, the fact that functionality
originally planned in Release 1c is now proposed by Pathway to be delivered in Release
2 and an extrapolation of historical slippage, we do not believe the Programme will be
ready for national roll out before January 1999.
M§.2 On national roll-out
We have not seen convincing evidence that the projected roll-out rate of 300 post offices
a week is achievable. We believe that.a roll-out rate of 150 rising to 250 offices a week
is achievable if there are no major delays in getting estate surveys completed to the
revised time scale; there is early agreement of major outstanding issues such as the
commercial arrangement for communications to customers; the commitment of sub-
postmasters to consistent and timely co-operation with roll-out requirements is secured
and POCL develop and resource an effective and timely implementation strategy.
A major area of concer relates to the arrangements for Service Management of
Pathway. We believe this aspect of the Programme needs to be accelerated to provide
a basis for piloting and to undertake this under POCL, not PDA, control and direction.
In summary, we forecast on-going slippage to the key development stages and would
not expect the infrastructure to be ready for commencement of national roll-out before
January 1999, at the earliest, and for roll-out to be completed over a period of between
about 1.5 and 2 years.
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M5.3 On business cases
The further slippage will have a significant effect on the business case for each player:
¢ extended design and development effort will increase Pathway costs while the
“window” for securing a return on investment remains short;
e CAPS Programme costs are likely to increase significantly not only because of
the need to extend the period over which the Programme team need to be in
place but because there are additional work items which the Programme will
need to undertake in the period (and which we believe will emerge from the
current re-plan) to increase resilience and contingency. Further delay to card
based payments reduces the overall NPV for the BA;
¢ Horizon Programme costs will increase due to the extended period for the team
to be in place and due to the need for additional work associated with
implementation and service management provision. Delay in the roll-out not
only delays potential revenue streams but is likely to reduce them overall as
market opportunities are lost.
We do not have access to detailed information which would enable us to project the
overall cost implications for the Programme. However, on the basis of information
provided to us in confidence by each party, we would estimate that overall Programme
costs (including sponsors and Pathway but not including fraud savings and any loss of
future business opportunities for POCL) will increase by between £185m and £250m.
We consider that sponsors should undertake an urgent appraisal of the impact on their
costs as input to assessment of whether or not to continue with the Programme either as
currently planned or in a revised form. Pathway will need to undertake a similar
assessment.
M6. RECOMMENDATIONS TO MINIMISE FURTHER SLIPPAGE
Below are recommended actions which focus on improving the delivery capability of the
Programme and are set in the context of the need for a new, executive-style PDA,
empowered to make decisions on behalf of sponsors and given direction by a PDA
board which provides strategic advice and which gets involved to resolve the big issues.
Actions are summarised for each of the players in tum.
M6.1 Pathway
i. split business development unambiguously from programme delivery
ii. undertake competency assessment of all key first and second line resources in
development programme and commit to rectify where weaknesses against
requirement are identified
iii. produce a firm baseline plan for Release 2 to include all contracted for services
based on a robust evaluation of all technical design issues and to include
application of phase review and other development and design disciplines, to
include all subcontractors
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iv. be absolutely clear with sponsors and PDA of the effect of further changes on
this baseline plan, once agreed
v. produce a formal report for sponsors on the technical issues arising from, for
example, consideration of scalability, performance and, the actions planned to
mitigate any risks
M6.2 CAPS
i. use the firm baseline from Pathway to validate or modify the recently revised
plan
ii. build in contingency and rework as part of the re-planning process
ili. strengthen project management office competencies
M6.3 POCL
i. urgently develop an operational capability that can form a pilot for service
management of Pathway for Release 1c
i. urgently develop an implementation strategy for
— business process, design testing and implementation
readying the post offices
postmaster training and awareness
training and awareness of other post office staff
— customer communications
undertake competency assessment of all key managers and commit to action to
rectify any deficiencies identified
iv. initiate a feasibility study, with Pathway, to validate achievability of the projected
roll-out rate for post offices.
ot
M6.4 PDA
i. expedite moves towards the new structure and function
ii. undertake competency assessment of all key staff and commit to rectify any
shortfalls in requirements
iii, reduce size as soon as possible
iv. rationalise change management to make better use of Contract Negotiating
Team (CNT) and to expedite resolution
v. rationalise programme control and reporting
M7. RESIDUAL STRATEGIC RISKS TO THE PROGRAMME
If action is taken as recommended along the lines indicated above, we believe that the
probability of the Programme delivering against its objectives successfully will be greatly
improved, albeit in the extended time scales we have forecast and at increased costs.
However, we believe that four residual strategic risks will remain.
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M7.1 Cost of roll-out to all post offices
A uniform approach has been adopted to both provision of the infrastructure and, the
charging regime for transactions across it. There is therefore a real possibility that the
true apportionment of costs across high and low volume post offices is not visible in the
business cases.
The increasing availability of alternative and possibly lower cost approaches to benefit
payment encashment, the time scale slippage and the consequential impact on the
business case is causing reservations at the BA about the economic viability of
supporting the automation of benefit payment at all Post Offices. We have not, however,
seen evidence of robust and cost-effective alternatives which would offer a comparable
service to the post office network for areas with a low density of population.
In PA’s opinion, unless the justification for benefit payment by cards and other
automated transactions through all post offices is reinforced as part of a broader
Government context, the ensuing uncertainty about the cost effectiveness of the solution
adopted is likely to continue to undermine confidence in the Programme and,
relationships between the sponsors. The broader context needs to incorporate both the
commercial and social service aspects of the Post Office and the role of payment
arrangements in future social welfare policy
M7.2 PFI
The PFI contract implies a transfer of risk which we do not believe is sustainable in
practice. Although Pathway bear risks associated with encashment fraud, the dominant
risk is associated with resilient delivery of the benefits payments service itself - delivering
some £80 billion in payments each year - and of the transaction handling capability of
post offices.
Failure of the payments service would be business-critical to the BA and DSS and would
carry unacceptable political repercussions. In these, circumstances, we argue that the
tisk of secure service supply is being carried predominantly by the BA and DSS. In
these circumstances, the sponsors cannot afford to take a “hands-off” approach to the
delivery and management of the payments service as a PFI contract would normally
demand.
M7.3 Joint Sponsorship
The current joint sponsorship arrangements are leading to a lack of clarity in
responsibilities and to difficulty and delay in brokering resolutions to problems. This is
exacerbated by the significant commercial tensions between the sponsors. In the longer
term, we believe that the current arrangements carry the risk that the dominant end-to-
end view of the services will remain with Pathway rather than with one of the purchasers.
This has significant implications for the effectiveness of management of the service, the
contract and the supplier.
M7.4 Dependency on Escher and its people
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Escher is a small privately-owned North American software house of some 30 people.
Its software is critical to the Pathway technical solution. In the original evaluation of the
tisks associated with a critical dependency on such a small company, we understand
that a key factor was the view that the Pathway solution required integration of the
Escher product and not a major development effort. In the light of subsequent events, it
appears that there is a critical dependency on Escher to design and deliver significant
software components for which Escher will continue to own the IPR. We believe that
this remains a significant residual risk to the resilience of the Pathway business and
technical solution and that ICL need to identify means of assuring sponsors of the
security of this source of supply both at the delivery stage and for ongoing support.
M7.5 Our conclusion on strategic risks
Although PA has high level views about how each of these risks might be addressed we
have not analysed this in detail since it falls outside the scope of this Review. In any
event, we believe that these strategic risks can only be addressed by sponsors and
Pathway working together at the most senior level and we have consequently set out an
action plan in Section M8 below. .
It is PA’s considered opinion that solutions to these issues are urgently needed if the
Programme is to avoid further major problems and, command the full commitment of all
the parties.
Clearly, in view of the scale of the risks, termination of the Programme must be an
option. It is PA’s opinion, however, that to terminate would create such major difficulties
for all parties that alternatives and their implications require a considerably more robust
assessment than has been appropriate in this Review.
M8. ACTION PLAN OUTLINE
In view of the seriousness of the residual risks, we suggest that the Programme
sponsors and Pathway should take steps jointly:
e tostrengthen the Programme's ability to deliver, and
e to evaluate the need and scope for reconstruction of the objectives and scope
of the Programme.
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MANAGEMENT SUMMARY. . .
The latter should be with a view either to modifying or reaffirming the objectives in order
to ensure robust commitment from the sponsors or to bringing the Programme to a
close. The two.streams of work should be undertaken in parallel and an illustration of
the steps which we would suggest for consideration is as follows.
Outline of Suggested Next Steps
Evaluate Strategie Options Now Strengthen Programme
Assess the impact of slippage and Agree Joint approach, under PDA Board
additional activities on the business caseI direction, to implementation and assurancI
of agreed improvement actions,
Review options available, Including: ee
* continue with current scope and
objectives and projected timetable Initiate Pathway to
* reconstruct the Programme to revised programme complete
objectives, scope or timetable improvement technical
* terminate steps gap analysis
and confirm whether acceptabe in
principle to Minsters and stakeholders.
“atete cates I Pathway to deliver robust re-plan for
ass Release 2
Conduct intensive evaluation of + ee:
options In the context of DSS and
OTI Ministerial direction. CAPS and Horizon to modify plans
timetable on basis of revised Pathway
dates
Provide robust business
Justification for preferred option
with Government endorsement
End 1997
We believe that the evaluation of strategic options will need directly to address the
economic, social and political factors which bear both on the future of the post office
network and on the delivery of social welfare payments. It is likely therefore to require
the active sponsorship of Ministers.
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1. CONTEXT AND PURPOSE OF THIS REVIEW. . .
1. I CONTEXT AND PURPOSE OF THIS REVIEW
The driving force for this Review of the BA/POCL programme has been the consistent
and chronic slippage in delivery dates. At the time the Review started, some 12 months
into the implementation stage of the Programme, difficulties were being experienced in
longer term planning because of slippage of some 13 months in short term plans.
This is putting stress on the viability of the business cases within each of the
organisations. The resulting low level of confidence in the robustness of planning and
resourcing and the background of commercial sensitivity, because this is a PFI project,
led management in each of the sponsor organisations and Pathway to agree that an
urgent review of the programme was required.
This Review was commissioned from PA Consulting Group to provide an independent
view of the:
¢ current weaknesses and risks in the Programme
¢ implications for the Programme future delivery obligations
¢ options which may be available to assure its delivery capability.
The review was completed over the period from 12 August to 19" September 1997 and
has involved interviews with key people in each of the organisations involved in the
Programme and analysis of extensive documentation relating to the programme. A list
of interviewees is included as Appendix A. Our detailed terms of reference are in
Appendix B.
It is in the nature of a review of this sort to focus on the problems and weaknesses which
need to be addressed. We would like to record our thanks to all those that contributed
to this review and in particular note the open approach adopted by all parties to their
discussions with us. We also wish to record that, despite the problems that the
programme has encountered, there is no doubt that a lot has been achieved by all the
teams in the light of very demanding circumstances.
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2. AIM AND SCALE OF THE BA-POCL PROGRAMME...
2. _ AIM AND SCALE OF THE BA-POCL PROGRAMME
The BA-POCL Programme is a large and complex programme of change. The overall
Programme objectives are to:
e deliver a fraud-free method of paying benefits at post offices
e develop a system that meets recognised accountancy practices
¢ provide, through automation, greater commercial opportunities enabling POCL
to improve competitiveness and increase efficiency;
¢ provide an improved level of service to all customers.
It is a very major business venture for each of the three key players - the Benefits
Agency (BA), Post Offices Counters (POCL) and Pathway, and in PA's opinion, is world-
class in its ambitions:
¢ itis directly business critical for Pathway, as the sole basis for the company's
existence. It also represents an extremely large and strategic investment for
ICL and its parent company - Fujitsu.
¢ itis a major component in the BA's strategy to reduce fraud and improve
financial and accounting controls, as well as to reduce costs.
¢ for POCL, the Programme, as part of an overall programme of automation, is
essential to creation of a platform for future growth and avoidance of business
decline.
For the total programme to work, significant amounts of work on BA computer systems
need to be completed; at POCL, computer systems also need modification. An
extensive programme of process change, employee and sub-postmaster training and
customer education is needed to implement card-based benefit payments and various
policy issues, at BA in particular, are impacted by the programme. The POCL
automation objectives (Horizon) essentially run in parallel with the card benefit
programme for the BA although can only be fully exploited once the Pathway
infrastructure is fully in place. Pathway are required to develop, install and operate a
major national infrastructure with complex real-time transactions through the 19,000 post
office outlets and, with the support of POCL, to prepare outlets and train counter staff.
All of these aspects in one way or another either form part of the PFI programme itself
or, need to link up appropriately with it.
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3. OBSERVATIONS ON THE CURRENT PROGRAMME. . . PA
3. I OBSERVATIONS ON THE CURRENT PROGRAMME
3.1 BA: CAPS PROGRAMME
3.1.1 Overview
The business and IT change entailed by the CAPS Programme is very major and
complex.
Key requirements are:
e development of new systems - Card Payment Computer System (CPCS) and
Personal Data Computer System (PDCS);
© modifications to the existing IT systems for handling benefits processing;
¢ clean-up and migration of data from the existing to the new data bases;
* modifications to business procedures and processes;
¢ training of operational front-line staff across the Agency in the new procedures
and processes;
© ensuring that all the above are implemented with a managed and acceptable
impact on the Agency's customers.
The scale of the challenge which this represents is increased by the context of major
organisational and policy change currently being addressed by the Agency and by the
need to secure the active commitment and co-operation of other agencies in the DSS
and of Employment Services (ES).
3.1.2 Management and Organisation
The scale of the management challenge presented by the CAPS Programme was
highlighted in reports by external consultants earlier this year. In the light of these
reports, the BA acted to strengthen the management focus at BA Management Team
(BAMT) level, to rationalise the distribution of responsibilities between CAPS and the
PDA, and to strengthen the CAPS management team. We recognise the major
commitment of resource which the BA have made in this respect and we believe that itis
consistent with the scale and nature of the business and technical challenge which
CAPS represents.
3.1.3 Resourcing
Since the consultants’ reports earlier this year, we understand that steps have been
taken to reinforce key competencies in the Programme, where appropriate through the
use of external consultants. This appears to us to be consistent with the technical and
business complexity of the tasks being tackled by CAPS and with the tight timetable for
delivery. This Programme required excellent and experienced technical and
management skills to be in place to assure success.
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We noted that, due to a planned staff move in the near future, there may be scope for
reinforcing the level of practical experience in the CAPS Programme Management team.
We would endorse the views expressed to us by this team that it would be valuable to
strengthen this team with robust practical experience of programme control in a complex
IT-related programme.
3.1.4 Programme Management Disciplines
Overall, our view is that CAPS programme management is sound and becoming steadily
more robust in terms of the processes and disciplines being adopted and the resources
being applied. It is clear that considerable progress has been made towards
implementing recommendations from the consultancy reports and that progress is
continuing.
As indicated above, the CAPS Programme are currently undertaking a re-planning and a
re-costing exercise: these has been running in parallel with this Review. We anticipate,
from discussion with CAPS representatives that the points we raise in the following
section are likely to be reflected in the revised plan.
As a general point, we believe that there would be value in ensuring that formal critical
path analysis is added to the current programme management disciplines in order to
assist the management team assess the effect of the numerous inter-dependent and
uncertain events within the different strands of the Programme.
3.1.5 Specific issues
Data Migration Strateay
There are significant risks associated with the clean-up.and migration of data from
existing benefits processing systems to the new CAPS systems. The strategy for data
migration appears to us to be robust from both technical and implementation viewpoints.
Implementation of the strategy is, however, sensitive to assumptions about the projected
“fall-out” rate for data. Whilst we understand that the current assumption has been
made on the basis of a sound working understanding of the current data, we believe that
the assumption remains a source of significant risk until validated. This should be
reflected in planning assumptions for contingency both in task sizing and in elapsed
time. We understand that a “dry run” is scheduled for November which will enable the
assumption to be validated for Child Benefit data.
Integration with the BA IT Programme
The CAPS Programme is having and will continue to have a significant impact on the
overall IT programme for the BA. Up to the recent past, the consistent slippage in dates
for Pathway releases has made it very difficult to plan effectively in relation to the overall
IT programme. The decision to de-couple the CAPS releases from the Pathway
releases appears to be feasible and to offer scope to insulate the IT programme from
further impact from this uncertainty. Nonetheless, the impact will continue to be major
and we have noted the recent steps to ensure firm prioritisation of the CAPS activities
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within the IT programme. This will need to continue in order to ensure the timely delivery
of CAPS releases and the latter will therefore need to secure continued high priority in
relation to planned policy and other changes affecting the benefit IT systems.
Capacity and Resilience
We understand that there is not yet a working capacity model for either transitional or
“steady state” running of the operational CAPS systems to support planning and sizing
of the batch management and of capacity for handling peaks and troughs in demand.
Similarly, there is not yet a robust model for modelling transactions and flows within the
end-to-end business and IT systems and for modelling the impact of operational failures
and associated recovery arrangements and capacity.
We understand that these issues are to be addressed in the current CAPS re-planning
exercise and we would anticipate an impact both on the plans and on sizing and costing
for the operational systems.
Implementation in BA Operations
There has been considerable work recently to ensure that an effective network of
managers is in place to co-ordinate and manage the implementation of the new systems
and associated business processes and to ensure a co-ordinated and consistent
approach to communications to staff and customers during the roll-out. Staging of the
introduction of customers on to card payment is made more complex by the need to
harmonise readiness of individual groups of post offices with data for the associated BA
customers on the appropriate benefits. In our experience, multi-variable roll-outs of this
sort generate complexity mainly due to the relatively small percentage of exceptions
which arise and which need active management as and when they arise. The need for
“hands-on” management gradually diminishes as experience with the roll-out increases.
We believe that the CAPS Programme plans need to reflect the resourcing implications
of the-roll-out complexity and to make provision for contingency in relation both to
customer communications and to “hands-on” management of events.
3.2 POCL: HORIZON PROGRAMME
3.2.1 Overview
POCL's programme of change will have a fundamental impact on the ways in which the
organisation transacts its core business. The BA-POCL dimension of the programme
forms part of an automation programme for the whole organisation.
Key requirements within the BA-POCL component of the programme are:
© modification to existing IT systems and development of a new system to provide
reference data to the automated counter systems;
modification to business processes and procedures for a wide range of
transactions;
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e ensuring that post offices and post masters are in a basic state of readiness for
Pathway to undertake installation work;
¢ building awareness among post masters and counter staff and ensuring that
they are available for training by Pathway at the appropriate times;
¢ preparing and implementing arrangements for managing the contract and the
contracted services to be provided by Pathway.
3.2.2 Management and Organisation
We believe that there is inadequate recognition in POCL of the scale and complexity of
the programme management task to be undertaken to achieve initial delivery of the
service and, following that, of the obligations on POCL to achieve excellent service and
contract management capability. Our impression is that POCL management
underestimate the extent to which proactive and interventionist management is required
to ensure successful delivery and management of a PFI contract of this nature.
As a consequence, we believe that top priority must been given to securing excellent
managers to undertake key roles in implementation management and in service and
contract management. We are aware that plans are in place to make appointments to
the National Implementation Manager (NIM) and Regional Implementation Manager
roles but we are concemed that perhaps too little consideration is being given to the
competencies and experience required, for the NIM in particular, and to the potential for
recruiting externally - either permanently or temporarily - for such a critical role.
Similarly, we believe effective management of the Pathway contract and services will
depend crucially on obtaining the right calibre and professional competence in the
managers appointed to the key roles. Several interviewees commented that the
required skills and experience may be difficult to source from within the Post Office
organisation. We believe that POCL needs to give urgent consideration to this need and
to means of meeting it through external or, suitably supported, internal appointments.
In the overall management structure, we believe that there is some ambiguity in the
programme management responsibilities. There are reporting and tracking
arrangements in place between the Horizon Programme and the related IT projects but
we felt that there needed to be a clearer definition of interdependency management
responsibilities and that the Horizon Programme was relying to an excessive extent on
the PDA in this area. We feel that it is important for POCL to have an integrated and
comprehensive view of all the BA-POCL delivery activities within their organisation and
should not be dependent on the PDA in this respect. This may emerge as an outcome
of the current rationalisation of PDA and POCL functions.
3.2.3 Resourcing
As indicated above, we have concerns about the resourcing for key management posts.
In addition, we have noted that some 350 support staff will be appointed to assist in the
roll-out. This is a fairly recent decision and we believe that is important to follow through
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the decision rapidly with action to nominate the individuals, ensure their timely availability
and arrange appropriate training and awareness.
3.2.4 Programme Management Disciplines
It appears that the Horizon Programme has appropriate programme contro! and
management processes but we have some reservations about whether they are being
applied robustly and effectively. We believe that this situation may be helped through
the addition of programme control resource with more direct experience in this field. A
firm of external consultants is currently assessing means of strengthening project
management in POCL and we would expect this issue to be addressed in that context.
We would, however, point to the ead to introduce the necessary disciplines as rapidly
as possible.
3.2.5 Specific Issues
Roll-out implementation strategy and management
There appears to be some uncertainty conceming the role of POCL in the roll-out of the
infrastructure to the post office network. The contractual basis is that the responsibility
for roll out is with Pathway and that the obligation of POCL is limited to ensuring co-
operation (of counter and other staff) with Pathway. It has become clear that the scale
of the POCL commitment must be very substantial in order to ensure an effective
implementation and that considerable further investment and management focus will be
required to ensure success.
We have not seen evidence of a robust roll-out implementation strategy which reflects
the various factors of physical readiness assumptions, co-operation of post masters,
handling exceptions, aligning training plans with go-live plans, handling re-work and go-
live failures etc, We understand that considerable planning has been undertaken to
address components of the implementation but we believe that it is important to move to
a robust integrated approach as soon as possible and that the key to achieving this is
the appointment of a suitably experienced person as the NIM as soon as possible.
We have not seen convincing evidence of the achievability of the projected roll-out rate
for post offices of 300 a week. On the basis of a limited assessment during this Review
and of comparable experience elsewhere, we believe that a roll-out rate of 150 rising to
250 should be achievable. We believe that POCL need to work with Pathway to validate
the projected roll-out rate.
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Service and contract management =
At the start of the national roll-out, the Pathway service will be operationally live and
there needs to be strong service management capability in place at that point. We
understand that POCL will take the lead on behalf of the sponsors for service
management and the associated ongoing contract management in‘conjunction with
Pathway. The PDA is currently defining the service management capability and the
transition strategy to migrate current PDA functions into POCL.
We would have expected to see a clearer overall definition of responsibilities and
accountabilities for service management at this stage in the Programme. It seems to us
that the division of responsibilities between Pathway and POCL is not sufficiently clear
‘and, as we understand the proposals, is likely to create difficulties in the operational
service. We also understand that there is some uncertainty between the sponsors about
the extent to which contract and service management will fall to POCL as opposed to
some joint body. We believe that urgent attention is needed to ensure absolute clarity
about the extent and boundaries of transitional and “steady state” operational
responsibilities in this area.
We have considered the Framework which has been developed in the PDA, with POCL,
which makes a valuable first step towards defining the processes which will need to be
in place. These reflect broadly the key activities and functions which we would have
expected to see specified, based on comparable situations and organisations elsewhere.
These are indicated in Table 1.
Table 1 : Management of a Service Provider - Key Functions and Activities
Contract Management Service Management
© negotiating & scheduling service delivery within «review and manage service provided by
the terms of the contract Pathway
© ensuring that services delivered reflect B/POCL I produce management reports on service
needs provided and compliance with SLA
© monitoring service levels and targets in © contribute to formulation of new/modified
accordance with contract and SLA requirements
© resolving problems between customers and
Pathway Finan Management
© advising customers on escalation procedures publish and update standard price list of
* manage escalation procedures services to BA/POCL customers
© contract review management e authorise payments to Pathway
© invoice administration
Shane Control © retain financial records of contracted
co-ordinate proposed change orders from expenditure
customers that would affect contracted services
¢ impact assessment of proposed change orders Relationship Management
¢ liaison and negotiation with Pathway over change I ¢ establish and maintain constructive
orders relationship between BA/POCL and
Pathway
e challenge and seek to improve supplier
proposals
* assess and report on value for money
achieved
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Key organisational roles which need to be in place and staffed with highly competent
managers with experience in this field, are:
¢ Service Control Team;
e Contract Manager;
e Change Manager;
e Financial Manager.
In addition, implementation of the required disciplines will be a major challenge for POCL
and a significant departure from what appears to be currently understood in POCL as
“operations management”. Achievement of the necessary competencies and disciplines
within the required time-scale is not, in our view, likely to be achieved without a major
injection of management focus and effort in this area.
In view of this situation, we recommend that a pilot arrangement for service
management is established in POCL for the operation of Pathway Release 1c in order to
test and prove arrangements. Absence of a test phase increases sthe go-live risks
significantly and will probably result in later re-work.
-3.3 PATHWAY
3.3.1 Management and Organisation
Following the award of the PFI, Pathway was consolidated as a wholly owned subsidiary
of ICL with its own board of directors, including an independent chairman and non
executive directors from Alliance and Leicester (Girobank) and De La Rue. The
Managing Director of Pathway reports directly to the ICL Group Chief Executive.
Obtaining funding for Pathway has been complex process but we are assured that funds
are now secure to the extent that ICL currently believe necessary.
Pathway's business falls into essentially three areas:
~ delivery of the contracted-for services to the sponsors;
— acquisition of new retail business jointly with POCL;
- development and acquisition of related business opportunities.
and the organisation structure under the MD reflects these commitments and ambitions.
The delivery of the contracted-for services to the sponsors relies on Pathway integrating
the activities of nine subcontractors and a range of other ICL businesses, with ICL taking
prime responsibility for development and delivery of the services. The core of the
system relies on software products from Oracle, Microsoft and Escher. Alliance and
Leicester (help desks) and De La Rue (card production and management) together with
other ICL businesses provide support to Pathway in operational service.
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3.3.2 Background
The process by which the detailed solutions have been designed to meet the
tequirements has been fraught with difficulties. We understand that the contracts were
signed without detailed schedules describing the services required; instead the contracts
were based on the principle of “agreements to agree” with later work to be done on the
detail of the requirements to give them legal expression. Pathway judged that the
agreements necessary could be achieved and delivery satisfied largely through systems
integration. Time and resources allowed for development and rework reflected this view.
Working through the agreements to agree, the extent to which the various sub-
contractors components and products could not be simply integrated to build the
solutions became clear to Pathway. Because of the above, the amount of development
work needed was in our opinion seriously misjudged and as a result time scales and
resources needed were underestimated. Thus, the need for a considerable amount of
development and rework emerged.
Pathway conducted an internal review in July which has been shared with us and which
identified these issues and made certain recommendations for corrective action. As we
started this review, these were beginning to be putin place. Included were, for example,
organisational changes to simplify lines of command and, the appointment of a
dedicated programme manager responsible for delivery. Areas of high risk were also
identified with the result that much tighter management and controls were put in place,
including for key subcontractors like Escher.
With regard to the current status of development, we characterise this as having
considerable contractual ambiguity because of time scale slippage and ‘solution drift’ as
requirements have been baselined. A series of non-contractual development releases
was agreed earlier this year with Release 1c the current focus of development. Release
1c has been under development whilst its baseline was finalised. As a consequence
Pathway has created a ‘known problems register’; a list of exclusions to Release 1c,
mostly in the security area, for later implementation. The consequence is that Pathway
are in essence proceeding on an ‘own risk’-basis to deliver Release 1c. Meanwhile the
baseline for Release 2 is being developed: Pathway's position is that it is only able to
provide a timed implementation plan once Release 2 is baselined. Given that so much
of the contracted-for solution now appears to be in Release 2, we must express serious
teservations about Pathway's current forward plans to be ready for commencement of
national roll-out at end-July 1998.
3.3.3 Resourcing
As already noted, at the outset of this procurement, it appeared to Pathway that the
development of a service to meet the PFI requirement could be achieved largely through
systems integration. Evidence of this lies in the large number of subcontractors to
Pathway. In reality, the amount of development work needed was in our opinion,
seriously misjudged and as a result the resources and resource mix needed at Pathway
were not fully understood at the time of contract signing.
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of historical slippage, we conclude that the Programme will not be ready to start national
roll out before January 1999 at the earliest.
Itis PA's assessment that Pathway is on the critical path for the Programme. Itis
therefore of fundamental importance to the Programme as a whole that Pathway, based
on the, yet to be agreed, baseline, take due and proper account of experience and
knowledge so far in terms of time scales needed in drawing up plans for Release 2.
3.4 PROGRAMME DELIVERY AUTHORITY - PDA
In the PDA, we found an organisation with a strong desire for continued change, but
which seemed to be hampered by its size and lack of empowerment.
The currently defined role of the PDA is a difficult one. It sets out to broker decisions
between the sponsors, to assure an optimal end-to-end solution, and to manage the joint
contractual relationship with Pathway. Unfortunately, the value of the PDA is questioned
by a number of managers within the sub-programmes though there is general
acceptance of the need for some central body with responsibilities for co-ordination and
management of the joint contracts.
3.4.1 Role
We generally agree with the Andersen Consulting and French Thomton
recommendations which seek to move the PDA towards being responsible for:
e assurance of the end-to-end business architecture;
e assurance of the technical architecture;
e integrating the work plans of each sub-programme.
However, the PDA will still face a number of problems:
« the sponsors have different business objectives and would prefer to keep their
options open for as long as possible while developing their own programmes of
work;
e the PDA is not fully empowered to take decisions itself;
«© anumber of contractual issues remain to be solved between Pathway and the
sponsors;
e the PDA is not in a position to manage the Programme towards economic
benefits, since it does not hold an integrated view of the business cases for the
Programme.
These factors will, in our view, continue to impede the efforts of the PDA to expedite the
Programme, and will make it difficult to recover lost time.
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I
i}
'
While the PDA seems to be well in touch with what is going on, this seems to be
achieved at the cost of a great deal of meeting time. We identified in excess of 25
forums that meet on a regular basis, and were told that numerous additional ad hoc
meetings were held as well. Relatively few of these forums are attended by
representatives of all three sub-programmes together.
We also question the need for three top management forums for the Programme - the
Programme Steering Committee, the PDA Board, and the PDA Board pre-meeting. This
approach would seem to result in inefficiently long lines of communication, particularly in
the light of the PDA's role as a broker of decisions between the sponsoring
organisations. In our opinion, these factors have contribute to the slow decision making
that-has been a source of delay on the Programme. For example, we understand that
certain change requests have taken more than six months to be resolved.
Perhaps because of the considerable time taken up by meetings, the PDA appears to
have experienced difficulty moving from a reactive style of management, to one of active
leadership of the. Programme. We saw a tendency to uncover issues and problems
rather than to actively foresee and prevent their occurrence. For example, we were told
that the PDA has only recently turned its attention to contingency planning.
We also found the PDA to be focusing almost exclusively on achieving a high quality
outcome, even potentially at the expense of timeliness and cost effectiveness. This is
not surprising considering that the achievement of business cases does not form a
framework for programme management decision making, except at the very highest
level.
3.4.3 Organisation and People
We found an organisational culture that is not conducive to the efficient delivery of such
a complex programme. A number of people told us of the unwillingness of many
individuals to take personal ownership of results.
Although there are some excellent individuals in the PDA, we were also told that it is
difficult to attract the right calibre of staff to work there. In part, this is because of its
London office location, but we were also told of morale problems caused by perceived
doubts over the future of the PDA, as well as that of the Programme itself.
In this regard, the size of the PDA compounds the problem. At 160 people including 40
contractors, we consider it to be too large for a central role that needs to be particularly
agile. We fully support the thrust to pass certain activities back to the sponsoring
organisations.
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3.4.4 Management of Pathway Contract
A major part of the PDA’s current role is to manage the relationship with Pathway.
This task is made more difficult by the fact that the contracts do not, as we understand it,
set out how the PDA is to keep appraised of Pathway's progress during the
establishment phase. Indeed, we were told that the PDA is not specifically recognised in
the contracts.
We were concerned to find all communications with Pathway labelled "without
prejudice". The contract seems to be playing an unhealthily significant role in dealings
between Pathway and the PDA.
Nevertheless, we found the Core Negotiating Team from Pathway and the PDA to be
playing a very useful role in resolving some conflicts. The personal respect that exists
between the key individuals involved has resulted in a number of pragmatic win-win
solutions.
Their negotiating task is made more difficult, however, by there being no practical
contractual baseline for the pricing of change requests. Each has to be negotiated
afresh.
3.5 ISSUES COMMON ACROSS THE PROGRAMME
3.5.1 Impact of Chronic Change
Acommon finding in our investigations during this Review has been the damage caused
by consistent slippage since the Initial Go Live position. The damage has not only been
in relation to impact on costs, timetable and business cases but also in relation to the
ability of managers within the Programme to find a firm baseline and to build credible
plans for communication within their parent organisation. The consequent lack of
credibility of the Programme's plans in the wider organisations has been cited by several
interviewees as one of the key reasons why active co-operation and commitment has
been hard to secure in relation to external dependencies.
3.5.2 Integrated Implementation Strategy for Roll-out
We are aware that considerable work is being undertaken, in each of the programmes -
CAPS, POCL and Pathway - to define the components of the implementation strategy
for roll-out of the infrastructure, system and business processes to post offices. We
have observed, however, that the end-to-end integration of the strategy is not as far
advanced as we would have expected at this stage of the Programme. It appears that
this may be largely related to the chronic planning uncertainty indicated above which has
undermined drive towards creation of a robust end-to-end picture.
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We believe that the roll-out will be relatively complex. It will combine the geographical
roll-out of post offices with the BA’s customers in the associated areas who will be
provided with card payments as the relevant benefit systems are rolled out and as their
data becomes available to support card payments. This needs to be underpinned with
communications, on a carefully targeted basis, to the customers affected and by
appropriate communication and training for the large numbers of BA staff, POCL staff
and post masters. Since it is rare for an implementation programme of this sort to
proceed closely to plan - unforeseen constraints and issues virtually always arise during
the implementation - it will be important to ensure tight and responsive management for
the roll-out events.
We understand that there remain a number of key areas where the responsibilities for
delivery remain to be finally resolved. Specific examples are the respective .
responsibilities between POCL and Pathway for undertaking and funding post office
readiness work and the lack of a shared view between the BA and Pathway on the
handling and funding of communications to customers. We recognise that work is under
way to address these issues but believe that the level of uncertainty for a critical
dimension of the Programme is a cause for concem at this stage of the Programme.
3.5.3 Business Case Alignment and Robustness
In our view the sponsors’ current business cases, which have been shown to us, are
over-optimistic. The BA has already recognised this and initiated a fundamental review
of their business case and this should be complete at the same time as this Review.
The POCL business case has been revised to reflect the additional resources
associated with implementation of the roll-out.
The business cases’are treated as commercial-in-confidence between the sponsors. As
a result, we found each sponsor having reservations about the real drivers in the
business justification of the other. This is, in our view, giving rise to considerable tension
and lack of shared trust and commitment. It also limits the extent to which the PDA can
be mandated to drive towards a clearly articulated and quantified set of business
benefits. We would have expected to see a “meta business case” from a Government
perspective which articulated the benefits and costs of the Programme and which each
organisation would reflect back into their individual business cases.
Of particular concem to the BA is the extent to which the POCL business case will
ensure a full commitment to roll-out to all post offices. It is not clear to us, that the
POCL business case demonstrates an economic argument for automating all the
currently operational post offices. From the BA perspective, (notwithstanding any
concems that now exist about the costs of the Programme), full roll-out is essential both
in terms of ensuring appropriate levels of coverage and service to their customers and to
avoid running parallel automated and paper-based payment systems which would be
cumbersome and uneconomic. These latter points are also of concern of course to
POCL.
The business cases of each of the sponsors are marginal and built significantly on the
assumption that the required services could be delivered in a relatively short time scale.
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The original project time scales have not proved realistic so the basic vulnerability of
each of the business cases is now fully exposed. This is putting strain on relationships
between sponsors and between the sponsors and Pathway
Were this project to be in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative
approaches to the solution might be more attractive in today's environment.
3.5.4 Joint Sponsor Commitment
We found very substantial tension and distrust between the sponsor organisations at
most levels. This appears to reflect a long history of strained relationships relating to the
costs and characteristics of the payment services which POCL have provided to the BA
over many years. The BA is a major customer of POCL and it is inevitable that the
different commercial objectives of the each organisation make it difficult for them to act
in total harmony as joint Programme sponsors. We note this has the following impacts:
¢ an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL;
e there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
¢ decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
It would be inappropriate for us to take a view on the causes for the tensions but we
observe that they appear to have had and continue to have a negative effect on the
Programme. Specifically, they result in slower brokering of resolutions to problems or
proposed changes and in an unwillingness, in many instances, to “trade off" competing
requirements. The resulting pressures make the mandate of the PDA, as a jointly
sponsored entity, difficult to sustain. There are too many conflicting agendas.
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4, PROBABILITY OF FURTHER SLIPPAGE. . . PA
4. I PROBABILITY OF FURTHER SLIPPAGE
After good progress at the outset to achieve the Initial Go Live (IGL) to schedule, there
has been persistent slippage.
The PDA is currently forecasting national roll-out to start thirteen months late in July
1998, and it is generally accepted on the Programme that further slippage seems highly
likely.
4.1 CAUSES OF CURRENT SLIPPAGE
We believe that there are direct causes of slippage but that these need to be set in the
context of a small number of underpinning root causes as illustrated below.
Root causes Direct Causes
[Resourcing
Marginal business cases
IDevelopment and control
Agendas in conflict disciplines Slippage
[Requirement clarification and
solution drift
Escher dependency,
PFI structural problems
4.1.1 Root causes
Marginal business cases.
The business cases of each of the sponsors in their original form are marginal and built
significantly on the assumption that the required services could be delivered in a
relatively short time scale. Indeed this assumption was reflected in Pathway's proposal
and a five-year contract was signed. The original project time scales have not proved
Tealistic so the basic vulnerability of each of the business cases is now fully exposed.
This is putting strain on relationships between sponsors and between the sponsors and
Pathway
Were this project to be'in the planning stage today, PA has no doubt that significant
attention would again be given to ensuring the supply of an economic infrastructure for
benefit payments and EPOSS. At the margin, where automated transactions at post
offices are economically at their most vulnerable, this could mean that alternative future
approaches or alternative supplementary sources of funding for post offices might play a
stronger role.
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4, PROBABILITY OF FURTHER SLIPPAGE. . . PA
Agendas in conflict
The BA is a major customer of POCL and it is inevitable that the different commercial
objectives of the each organisation make it difficult for them to act in total harmony as
joint Programme sponsors. We note this has the following impacts:
¢ an adversarial approach between senior managers in BA and POCL and
tensions at working levels, for example between POGAB and the DSS Account
Team in POCL;
e there is a tendency to populate the PDA with a balance of representation from
BA and POCL, rather than strictly according to required competencies;
e decision-making structures are cumbersome and the people in them do not feel
particularly empowered. This is evidenced in the extensive and only partially
productive brokering work of PDA staff and the many pre-meetings required to
support the PDA Board and Programme Steering Committee (PSC).
Structural problems with the PFI. :
The scale of this PFI, its complex supply chain, the conflicting business objectives of the
sponsors, the difficulty in assessing who ultimately carries the risk, and the short time
scale of the operational part of the contract create an environment of uncertainty and
tension. These aspects distract attention from the key objective - to deliver a solution
that works, with acceptable levels of risk transfer and retums for both customer and
supplier.
4.1.2 Direct causes
Resourcing
This is a world class programme measured by any standards.
At the BA, action has already been taken to strengthen the management organisation
by, for example, taking back responsibility from the PDA and drafting in appropriately
skilled and experienced resources from elsewhere. Pathway has acted swiftly, following
their internal review, to make structural changes and to strengthen the management
team. At the PDA, the problem has also been recognised and action is being taken to
strengthen the calibre of its resources. POCL still has much to do and arguably have yet
to recognise that top quality project and service management resource will probably
need to be recruited externally.
In our opinion, sponsors, the PDA and Pathway must continue to seek to identify and
recruit people of appropriately world-class professional stature into every key position as
this programme progresses.
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4. PROBABILITY OF FURTHER SLIPPAGE. . .
Development and control disciplines.
Pathway has much still to do to ensure that effective management and change control
disciplines are embedded in the combined development and systems integration
environment in which they now find themselves. This must be done regardless of the
time pressures which exist in the Programme. This is particularly challenging because
of the need to embrace key subcontractors in these processes. This applies specifically
to Escher on whom Pathway are highly dependant for success.
Requirement Clarification and Solution Drift
We believe that a better mechanism is needed than currently is in place to manage the
tension between requirements and solutions in the context of a realistic assessment of
the business impact. Whilst we understand the constraints which apply within a PFI
environment, we have not been convinced that that the current arrangements are
resulting a proper assessment of the real business impact of decisions to adhere either
to timetable or to requirements specification.
In this Programme there has been no formal concession, either to time scale or
functionality since March this year when the master plan was last updated. In our
experience, in a programme of this complexity, this implies that too rigid an approach is
being adopted at the possible expense of the business cases for all parties. The nature
of a PFI contract arguably reduces the scope for pragmatic “trade offs” in development
of the solution and this remains a significant risk for the Programme.
The Escher dependency
With the realisation that to deliver this Programme requires a substantial development as
well as systems integration effort, the dependency of the solution on Escher (a relatively
small North American software company) and the Riposte software takes prominence.
Much of the architectural development needed has required Escher to commit to major
rework and this is being commissioned by Pathway. This has taken time and effort, thus
causing delay.
Escher will continue to be a major risk to the success of this Programme. This risk will
be manifest both in terms of delivery of solution and in the ongoing security of the supply
chain to Pathway. On the basis that no other remedy is available, its containment will
tely on ICL and Pathway's ability to forge mutually beneficial and sustainable
relationships with the key people involved in Escher.
4.2, SLIPPAGE TO DATE
The table of milestone dates in Appendix C shows how they have changed as the
Programme has developed. There has been a regular re-plan every three or four
months, and the latest one is underway now.
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4. PROBABILITY OF FURTHER SLIPPAGE. . .
This means that there has been no consistent baseline against which to measure and
evaluate performance. This in itself, has undermined confidence in plans and
commitment to planning disciplines. The current climate in the Programme appears to
one where slippage is regarded as an inevitable “fact of life". In such circumstances it
tends to become a self-fulfilling prophecy.
Other causes of significant delay have included:
¢ under-estimation by Pathway of the development tasks and failure to apply
appropriately robust planning and control disciplines;
e the experience gained during the initial Go Live preparation which lead to an
agreed re-plan early this year which included the release of CAPS software
over an extended period through to 1998 rather than having it available for full
integration testing on 01 September 1996, as stated in the contract with
Pathway;
e the length of time needed to broker agreements and change. As an example, a
some change notices remain unresolved several months after being raised;
e the absence of a set of comprehensive end to end technical and business
architectures.
4.3 ANALYSIS OF SLIPPAGE
In our estimation, the Roll-Out completion date is likely to be at least 18 months late
relative to the original contracted dates. In making this estimate, we have assumed that
the work currently being done to improve the Programme's performance continues and
that further changes are made in line with this Review.
The following chart compares the original contract dates with the currently signed-off
Master Plan (v3), together with our forecast, which is based on:
e dates given in the latest PDA monthly report (July 1997);
e ananalysis of the movement in forecast dates as the Programme has
developed;
¢ and the logical sequence of events set out in version 3 of the Master Plan.
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4, PROBABILITY OF FURTHER SLIPPAGE. . . PA
1996 1997 1998 1999 2000 2001
(Contracts signed 15 May 98 ({{setamen ante
sive taint
CAPS Releases ed
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Operational Trial uJ l Original rotons I 28 Feb 00
Plan Rolt-out I (
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—
ay 68 Agreements Master Pan V3 CCH 105 Resorocast based
on Aly 97 Report,
The chart below (based on the data summarised in Appendix C) shows how the planned
and forecast dates for certain key events have slipped over time, and how our projection
implies a significant improvement in performance.
The extent of this slippage has been so severe as to indicate a Programme that has
been, to a large extent, uncontrollable in the past due to chronic slippage. This is
indicated in particular by the date for start of national roll-out, which slipped by 13
months ’in the 8 months between version 2 of the Master Plan and the July forecast. No
effective progress was made during this period - indeed the target ended up further
away than before.
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4. PROBABILITY OF FURTHER SLIPPAGE. . . PA
In our experience, an analysis of trends in milestone dates’ slippage is an very reliable
indicator of projected future performance. The above diagram illustrates that very robust
action is needed to bring the slippage to date under control.
The critical path leading to completion of the operational trial and start of national roll-out
flows through:
e delivery of Pathway's Release 1c;
« resolution of the requirements for Release 2;
e delivery of Release 2;
e delivery of CAPS releases 2.2 and 3;
e integration of the Pathway and CAPS releases;
© conduct of the live trial;
e evaluation of the trial and completion of any necessary rework.
In our opinion, the current planning forecasts do not allow enough time in particular for
the agreement of Pathway’s Release 2 requirements or for the live trial, including its
evaluation and the inevitable rework that will result. Pathway, towards the end of this
Review, now take the view that Release 2 is unlikely to be ready for live trial until late
summer or early autumn 1998.
Therefore, we cannot see this chain of activities being completed before the busy 1998
Christmas period, and this means that national roll-out will only be able to start in
eamest after mid -January 1999 at the earliest.
In addition, a number of sources of additional work do not appear to have been fully
factored into the plans we have seen. These include:
¢ changes that will arise from the end-to-end integration work;
e rework that will surface as the Pathway and CAPS releases are acceptance
tested;
e resolution of the outstanding change requests and agreements to agree;
e the development of detailed solutions, for example to ensure security;
¢ review, validation and rectification of the national roll-out plans as they are put
into practice;
¢ all of the work necessary to prepare the post offices for automation particularly
in the light of Pathway's assertion that only a limited proportion of them are fit
for automation.
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4, PROBABILITY OF FURTHER SLIPPAGE. . .
We assess that these will have a limited impact on slippage, for which the primary driver
is availability of the Pathway releases, but will affect the scale and cost of activities to be
undertaken.
4.4 IMPACT OF FORECAST SLIPPAGE
4.4.1 On commencement of national roll-out -
We believe the Programme in its present form, and on the basis of slippage to date, will
not be ready to start national roll out by the end of July 1998 - the most recent date
proposed by Pathway to sponsors.
Although we expect there will be further slippage announced in the BA/CAPS
programme from the current re-planning exercise and we believe that POCL are not
moving fast enough into implementation mode, these delays are not, in our judgement,
on the critical path. It is PA’s assessment that the primary driver of time scale slippage
will now be Pathway as they come to terms with the scale of what has to be done.
Based on our consideration of the experience of this programme so far, the results from
Release 1c testing which imply unplanned rework is needed, the fact that major parts of
thie contracted-for functionality is now to be delivered in Release 2 and an extrapolation
of historical slippage, we do not believe the Programme will be ready for national roll out
before mid-January 1999 at the earliest.
4.4.2 On national roll-out.
We believe that a roll-out rate for post offices of 150 rising to.250 offices a week is
achievable if there are no major delays in getting estate surveys completed to the
revised time scale; there is early agreement of major outstanding issues such as the
commercial arrangement for communications to customers; the commitment of sub-
postmasters to consistent and timely co-operation with roll-out requirements is secured
and, POCL develop and resource an effective and timely implementation strategy. A
major area of concern relates to the arrangements for Service Management of Pathway.
We believe this aspect of the Programme needs to be accelerated to provide a basis for
piloting and to undertake this under POCL, not PDA, control and direction.
In summary we forecast on-going slippage to the key development stages and would not
expect the infrastructure to be ready for commencement of national roll-out much before
the mid-January 1999, at the earliest and for roll-out to be completed over a period of
between about 1.5 and 2.5 years.
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4. PROBABILITY OF FURTHER SLIPPAGE. . .
4.4.3 On business cases.
The further slippage will have a significant effect on the business case for each player:
e extended design and development effort will increase Pathway costs while the
“window” for securing a return on investment remains short;
CAPS Programme costs are likely to increase significantly not only because of
the need to extend the period over which the Programme team need to be in
place but because there are additional work items which the Programme will
need to undertake in the period (and which we believe will emerge from the
current re-plan) to increase resilience and contingency. Further delay to card
based payments reduces the overall NPV for the BA;
Horizon Programme costs will increase due to the extended period for the team
to be in place and due to the need for additional work associated with
implementation and service management provision. Delay in the roll-out not
only delays potential revenue streams but is likely to reduce them overall as
market opportunities are lost.
We do not have access to detailed information which would enable us to project the
overall cost implications for the Programme. However, on the basis of information
provided to us in confidence by each party, we would estimate that overall Programme
costs (including sponsors and Pathway but not including fraud savings and any loss of
future business opportunities for POCL) will increase by between £185m and £250m.
We consider that sponsors should undertake an urgent appraisal of the impact on their
costs as input to assessment of whether or not to continue with the Programme either as
currently planned or in a revised form. Pathway will need to undertake a similar
assessment.
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5. ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE. . .
5. I ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE
These actions focus on improving the delivery capability of the Programme and are set
in the context of the need for a new, executive-style PDA, empowered to make decisions
on behalf of sponsors and given direction by a PDA board which provides strategic
advice and which gets involved to resolve the big issues. Actions are summarised for
each of the players in tum.
5.1 PATHWAY.
I. split business development unambiguously from programme delivery
* I, undertake competency assessment of all key first and second line resources in
development programme and commit to rectify where weaknesses against
requirement are identified
Ill. produce a firm baseline plan for Release 2 to include all contracted for services
based on a robust evaluation of all technical design issues and to include
application of phase review and other development and design disciplines, to
include all subcontractors
IV.be absolutely clear with sponsors and PDA of the effect of further changes on this
baseline plan, once agreed
V. produce formal report for sponsors on the technical issues arising from for
example consideration of scalability, performance and, the actions planned to
mitigate any risks
5.2 CAPS
I. use firm baseline from Pathway to re-plan
Il. build in contingency and rework .
lil. strengthen project management office competencies
5.3 POCL
I. urgently develop an operational capability that can form a pilot for service
management of Pathway for Release 1c;
Il. urgently develop an implementation strategy for :
business process, design testing and implementation
readying the post offices
postmaster training and awareness
training and awareness of other post office staff
customer communications
lll. undertake competency assessment of all key managers and commit to action to
rectify any deficiencies identified;
\V. validate, with Pathway, the feasibility of the projected roll-out rate for post offices
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5. ACTION NEEDED TO MINIMISE FURTHER SLIPPAGE. . .
5.4 PDA
I. expedite moves towards the new structure and function
Il. undertake competency assessment of all key staff and commit to rectify any
shortfalls in requirements .
Ill. reduce size as soon as possible
\V.rationalise change management to make better use of CNT and to expedite
resolution
V. rationalise programme control and reporting
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . .
6. I OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS
6.1 RESIDUAL STRATEGIC RISKS
If action is taken as recommended to address the risks listed above, we believe that the
probability of the Programme delivering against its objectives successfully will be greatly
improved, albeit in the extended time scales we forecast in section 5 and at increased
costs.
However, we believe that four residual strategic risks will remain.
6.1.1 Cost of roll-out to all post offices
A uniform approach has been adopted to both provision of the infrastructure and, the
charging regime for transactions across it. There is therefore a real possibility that the
true apportionment of costs across high and low volume post offices is not visible in the
business cases.
The increasing availability of alternative and possibly lower cost approaches to benefit
payment encashment, the time scale slippage and the consequential impact on the
business case is causing reservations at the BA about the economic viability of
supporting the automation of benefit payment at all Post Offices. We have not, however,
seen evidence of robust and cost-effective alternatives which would offer a comparable
service to the post office network for areas with a low density of population.
In PA's opinion, unless the justification for benefit payment by cards and other
automated transactions through all post offices.is reinforced as part of a broader
Government context, the ensuing uncertainty about the cost effectiveness of the solution
adopted is likely to continue to undermine confidence in the Programme and,
telationships between the sponsors. The broader context needs to incorporate both the
commercial and social service aspects of the Post Office and the role of payment
arrangements in future social welfare policy.
6.1.2 PFI
The PFI contract implies a transfer of risk which we do not believe is sustainable in
practice. Although Pathway bear risks associated with encashment fraud, the dominant
tisk is associated with resilient delivery of the benefits payments service itself - delivering
some £80 billion in payments each year - and of the transaction handling capability of
post offices.
Failure of the payments service would be business-critical to the BA and DSS and would
carry unacceptable political repercussions. Given this, we argue that the risk of secure
service supply is being carried predominantly by the BA and DSS. In these
circumstances, the sponsors cannot afford to take a “hands-off approach to the delivery
and management of the payments service as a PFI contract would normally demand.
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . . PA
6.1.3 Joint Sponsorship
The current joint sponsorship arrangements are leading to a lack of clarity in
responsibilities and to difficulty and delay in brokering resolutions to problems. This is
exacerbated by the significant commercial tensions between the sponsors.
Furthermore, in the longer term, we believe that the current arrangements carry the risk
that the dominant end-to-end view of the services will remain with Pathway rather than
with one of the purchasers. This has significant implications for the effectiveness of
management of the service, the contract and the supplier.
6.1.4 Dependency on Escher and its people
Escher is a small privately-owned North American software house of some 30 people.
Its software is critical to the Pathway technical solution. In the original evaluation of the
tisks associated with a critical dependency on such a small company, we understand
that a key factor was the view that the Pathway solution required integration of the
Escher product and not a major development effort. In the light of subsequent events, it
appears that there is a critical dependency on Escher to design and deliver significant
software components for which Escher will continue to own the IPR. We believe that
this remains a significant residual risk to the resilience of the Pathway business and
technical solution and that ICL need to identify means of assuring sponsors of the
security of this source of supply both at the delivery stage and for ongoing support.
6.1.5 Our conclusion on strategic risks
Although PA has high level views about how each of these risks might be addressed we
have not analysed this in detail since it falls outside the scope of this Review. In any
event, we believe that these strategic risks can only be addressed by sponsors and
Pathway working together at the most senior level and we have consequently set out an
action plan in Section 6.2 below.
Itis PA's considered opinion that solutions to these issues are urgently needed if the
Programme is to avoid further major problems and, command the full commitment of all
the parties.
Clearly, in the view of the scale of the risks, termination of the Programme must be an
option. Itis PA’s view, however, that to terminate would create such major difficulties for
all parties that alternatives and the implications require considerably more robust
assessment than has been appropriate in this Review.
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6. OPTIONS FOR ADDRESSING RESIDUAL STRATEGIC RISKS. . .
6.2 ACTION PLAN OUTLINE.
In view of the seriousness of the residual risks, we suggest that the Programme
sponsors and Pathway should take steps jointly:
e to strengthen the Programme's ability to deliver, and
e to evaluate the need and scope for reconstruction of the objectives and scope
of the Programme.
The latter should be with a view either to modifying or reaffirming the objectives in order
to ensure robust commitment from the sponsors or to bringing the Programme to a
close. The two streams of work should be undertaken in parallel and an illustration of
the steps which we would suggest for consideration is as follows.
Outline of Suggested Next Steps
Evaluate Strategic Options Now ‘Strengthen Programme
Assess the Impact of slippage and Agree joint approach, under PDA Board
additional activities on the business case] direction, to implementation and assurancI
of agreed improvement actions.
Review options available, including: ta
continue with current scope and
objectives and projected timetable Initiate Pathway to
* reconstruct the Programme to revised programme complete
objectives, scope or timetable improvement technical
© terminate steps gap analysis
and confirm whether acceptabe in
principle to Minsters and stakeholders.
Aaidate dates Pathway to deliver robust re-plan for
and Release
Jdobverables
Conduct intensive evaluation of wv —
options in the context of DSS and
DTI Ministerial direction. CAPS and Horizon to modify plans
ee Grelabiel on basis of revised Pathway
lates
Provide robust business
Justification for preferred option
‘with Government endorsement
End 1997
We believe that the evaluation of strategic options will need directly to address the
economic, social and political factors which bear both on the future of the post office
network and on the delivery of social welfare payments. It is likely therefore to require
the active sponsorship of Ministers.
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APPENDIX A: INTERVIEWEES
Organisation Contact Organisation Contact
PDA Peter Crahan POCL Stuart Sweetman
Pat Kelsey Paul Rich
Bruce McNiven Mena Rego
Keith Downer Tim O'Leary
John Meagher Tim Brown
David Smith
BA/CAPS Peter Mathison Pathway John Bennett
George McCorkell Tony Oppenheim
Vince Gaskell David Groom
John Delamore Martyn Bennett
Val Curran Stephen Muchow
{Indra Mortis Mike Coombs
Alexis Cleveland Terry Austin
Parry Jenkins (AC) Barry Vaughan
David Riggs Graeme King
Liam Foley
John Dicks
John Hunt
Dave Hollingsworth
PDA Board Alec Wylie ICL Keith Todd
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APPENDIX B: TERMS OF REFERENCE
Terms of Reference
REVIEW OF BA-POCL PROGRAMME
Context for the Review
Management in each of the stakeholder organisations has agreed that a review of the
delivery plans and resourcing of the BA-POCL Programme is required to underpin future
stakeholder discussions with Ministers and at the main Boards of ICL/Fujitsu and POCL.
In particular:
e the Programme has suffered consistently from chronic slippage and is
undertaking its third major re-planning exercise. The re-plan is up to July 1998
and longer term planning is “on hold” until the next year’s plan is more robust,
and
¢ asa result of the slippage, there has been some tension in the commercial and
contractual relations with Pathway and the contracts have been subject to
rigorous assessment and review in the recent past.
There is, therefore, a low level of confidence in the robustness of current plans and
resourcing and there is a background of commercial sensitivity because this is a PFI
project.
There is very active ongoing work and the review is timed to begin at or just after
completion of detailed plans for CONGO Release 4. Longer term plans are still under
development.
Scope
The scope of the review is to include all the supplier and sponsor domains - DSS, POCL
and Pathway - as well as the PDA. Within these domains, the review will address any
relevant management and technical areas which bear on the ability of the Programme to
meet its end-to end delivery obligations.
Requirement
The review should give the sponsors and Pathway:
° arobust assessment of the Programme's future delivery capability
¢ specification of the changes needed in order to provide assurance of the
Programme's ability to deliver - accepting that this may entail changes to
timetable, resourcing and management arrangements.
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This will, in due course, underpin submissions by the relevant parties to their respective
Boards and to Ministers to secure their ongoing commitment to the Programme.
In undertaking the review, it is important to ensure that we:
do not re-open debate on the overall business rationale for the Programme;
focus on future capability to deliver, not past problems;
. look at commercial, managerial and technical aspects in an integrated way;
establish clear priorities for the review (looking at everything in detail would be
both uneconomic and disruptive);
take care not to interrupt ongoing work while conducting the review.
Overall, the review must be rapid - a first draft is required on September 5th - and reflect
‘the strategic importance of the programme to each of the sponsors and to Pathway.
Specific requirements are that we should:
review, for each organisation in the supplier and sponsor community, and
across the whole Programme:
— arrangements for change management and control;
— delivery plans;
— progress reporting and information flows;
- escalation arrangements and associated decision-making (including
commercial negotiations);
— the management structure and the match of competencies to the allocated
scope of work;
— resourcing levels in the light of programme and project management best
practice.
identify and assess any weaknesses in the delivery capability of the
Programme, including risks in relation to:
— managing delivery of the PFI services;
— supplier management;
— linkages between the various parts of the Programme;
— management and resourcing, including planning of service and contract
management.
Deliverables from the Review
The Review should initially deliver an appraisal of any weaknesses and risks in the
Programme's delivery capability.
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The subsequent deliverable should be a draft of the final report which will assess the
options available to address the risks and weaknesses and give our recommendations
on the actions which should be taken. The draft will be delivered to Alec Wylie by 5"
September for distribution to the DSS, POCL and Pathway representatives.
The final report will be completed by 19" September. In view of the rapid timetable for
the Review a “presentation style” report will be acceptable.
The findings and recommendations will be presented to the PSC on 24" September.
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APPENDIX C: TRENDS IN PROGRAMME MILESTONE DATES
y
MPlan V4 MPlanV2 I MPlanV3 I Latest
Description 13-Aug-96 I 13-Nov-96 I 08-Apr-97 I 31-Jul-97
Rof Date I Rof Dato I Rof Dato I FIC Dato
Group A- Initial Go Livo
1 PO automated for ChB by card SM1 Sep-96I At Sep-96I At Sep-96] 23-Sep-96
10 POs automated for ChB by card SM2 Oct-96] AZ Oct-96] AZ Oct-96 I 21-Oct-96
Group B - Pathway Infrastructure & Roloasos
Bootle & Wigan operational SM24 Dec96] G1 Dec-96] B1 Mar-97I 07-Mar-97
Rel 1(b) OBCS authorised for use B2 Apr-97, I 02-May-97
Rel 1(c) BPS authorised for use 83. Jun-97 I 13-0c1.97
Rel 1(e) EPOSS/APS authorised for use B4 Sep-97 I 30-Mar-98
Rel 4(e) authorised for national roll-out BS Nov.97I 30-Mar-98
Rel2 authorised for national use SM25 Oct97] G2 Oct-97] BS Jan-98 I 31-Mar-98
Rel 3 authorised for national use SM26 Apr-98 I G3 Apr-98] B7 Apr-98I 31-Jul-98
Rel 4 authorised for national use SM27 Oct-98} G4 Oct-98] BB Oct-98 I 31-0c-98
Group G-CAPS Roloases
CAPS Rel 2 authorised for use C1 Mar-97 I 31-Mar-97
CAPS Rel 2.1 authorised for use C2 May-97I 02-Jun-97.
CAPS Re! 2.2 authorised for use C3. Jub97 I 03-Nov-97
CAPS Re! 3 authorised for use C4 Jan-98 I 30-Mar-98
CAPS Re! 4 authorised for use C5 Jub98 I 31-Jul-98
Group D- POCL Feeder Systoms
Reference data system ready for E2E testing D1 Mar-97 I 10-Mar-97
HAPS system ready for E2E testing D2 Mar-97 I 27-Mar-97
TIP Phase 3 ready for E2E testing Fi Mar97] D3 Mar-97 I 27-Mar-97
Full TIP system operational SMI5. Jun-97
POCL feeder systems authorised for live tal D4 Sep-97I 08-Sep-97
Group E - Live Trial Roll-out
Start of roll-out to up to 190 PO + IGL Pos M3. Mar-97I B1 Mar-97] E1 Apr-97 I 02-May-97
200 POs ready for customer use SM4 Apr-97I B2 Apr-97] E2 Jun-97 I 13-Oct-97
Start of live rial evaluation period E3 Sep-97I 31-Jul-98
ve trlal evaluation complete & accepted E4, Nov-97 I 21-Nov-97
Start of roll-out to 1450 POs with limited functionality 5 Jub97 I 28Ju-97
‘Secodary stream POs migrated to full system 6 Jan-98 I 31-Jan-98
Group F - National Roll-out
Start of national R/O to POs & BA offices on malntand SMS Jun97} C1 Jun-97] F1 Nov97I 31-JuL98
Instin of POs in large conurbations ready for customer useI C2 thd I F2 TRA I TBA
Installation of PO (4+ counters) ready for customer use C3 thd I F3 TBA I TBA
Start of rot-out to existing ECCOVALPS within M25 C4 thd I Fs TRA I TBA
Existing ECCO/ALPS within M25 ready for customer use C5 thd I F5 TRA I TBA
All POs & BA dist offices ready for customer use SM9 Nov98]C99 Nov88] F6 TBA I TBA
Group G - Northom Iroland
Start of Rollout in Northem Ireland SM10 Juko7 I D1 Aug-97] G1 TBA I TBA
All POs & SSA local offices ready for customer use SM11 Sep-97I D2 Sep-97] G2 TBA I TBA
Group H- BA Bonofit Migration
Payment of ChB by normal renewal cycle (NRC) SM16 Jan-97] E1 Jan97] Hi May-97I 13-Oct-97
Payment of IS/PSCS/Incap benefits by NRC SM17,20 Oct-97 IE2,5 Oct-97 I H2 Jan-98 I 20Van-98
Payment of JSAFamC/DWAJETU by NRC SM18,20 Oct-97 IE3,5 Oct-97 I H3 Apr-98 I 30-Apr-98
Payment of AA/DLA/Social Fund by NRC SM19,21 Jan-98 IE46 Jan-98I H4 Jul98 I 31-Jul-98
Payment of War PenslorvIIDB/ICA by NRC SM21_Jan-98 IE6,7 Feb-98] H5 Nov-98I 30-Nov98
All benefits can be pald by card al mainland POs SM23I May-99] E99] May-99] H6 May-99I 31-May-99
Group ISSA Bonofit Migration
Payment of income support by NRC in NI SM14 Jan-98] D6 Jan-98] 11 Jan-98I Jan-98
Payment of PSCS/incaplJSA/FamC/DWAETU by NRC ISM12-14 Jan-98 ID3-6 Jan-98I 12 Apr-98] Apr-98,
Payment of Child Benefit by NRC SM14 Jan-98] D7 Jan-98] 13 Jun-88I Jun-98
. cs
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Post Office Counters Ltd
Outline of the proposed end state and
transition project for the support of
automated services.
29 June 1998
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Post Office Counters Ltd
Outline of the proposed end state and
transition project for the support of
automated services.
29 June 1998
Client Confidential
©PA Consulting Group
Prepared for: D Miller, Horizon PA Consulting Group
Programme Director 423 Buckingham Palace Road
Prepared by: Graham Beck London SWiW9SR
Richard Harrison
Version 1.0
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TABLE OF CONTENTS
4. Changing To Meet The Developing Needs Of An Automated
Business
1.1 The Impact Of Automation On The Business
1.2 Conclusion
1.3 Summary
2. Achieving The Desired End State.
2.1 Scope Of Change
2.2 Commercial Relationship With Icl Pathway
2.3 Desired End State
2.4 Developing Service Management For An Automated Pocl
2.5 Business Support
2.6 Aligning With The Current Horizon Programme
3. Service Management Transition Project
3.1 Delivering The Service Management End State
3.2 Project Management Structure
3.3 Project Costing, Resources And Timescales
3.4 Options For Devolving Year 1 Spend To Year Two.
3.5 Factors Likely To Affect The Project Costs
3.6 Outline Cost Projection (Indicative Cost Only)
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1. CHANGING TO MEET THE DEVELOPING NEEDS OF AN AUTOMATED
BUSINESS
POCL have recognised the need to make appropriate changes to their operations and
organisation to accommodate and manage the implementation and operation of
automated services.
This paper describes and defines the proposed changes POCL need to undertake and
the rationale for doing so. It identifies the target “end state” the business should seek to
establish, supported by the transition plan to achieve this.
The recommendations made conform to principles and best practice methodology
developed to successfully manage automated services and the environment they reside
within.
Unless POCL changes its business to meet the demands placed upon it by automation
it will fail to gain the benefits and value from its investment. The key risk to POCL’s
business is that without change automation will jeopardise its ability to deliver the
quality and performance of service demanded by its customers and clients.
The suggested end-state describes a solution to position the POCL Organisation to
manage itself as an automated business. It will provide the means for supporting its
staff and Outlets to make optimum use of the automated services.
To minimise the risk of automation the achievement of the ‘end-state’ requires a
substantial change in the way POCL organises and operates its business.
1.1. THE IMPACT OF AUTOMATION ON THE BUSINESS
1. Immediacy
. Scaleability
. Diversity within the current operational environment
2.
3.
4. Lack of operational disciplines
5. Non-conformance
6.
. Operational ownership and accountability
Issue - 1. Immediacy
Automation of POCL’s Outlets and associated operations is to be progressively
undertaken via the implementation of various systems over the next three years. This
will introduce an immediacy and visibility hitherto unknown which in tum generates a
need for comparable support.
A simple example of this being the inability of a sub-postmaster to serve a customer
due to the “failure or malfunction”, (whether real or perceived), of the automated
system. Any time taken to deal with the “incident” by the proposed support channels
potentially translates into longer waiting times and customer dissatisfaction.
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Issue 2. Scaleability
The Outlets currently face a variety of support services sourced from seven disparate
regional Helplines and an array of other organisations. This situation will be
compounded by the introduction of automation, adding a further array of organisations
to contact. It is unrealistic to expect sub-postmasters to make action determination
decisions in an increasingly complex working environment in order to select the
appropriate support service to satisfy their need.
The likelihood is that sub-postmasters will not perform such diagnostics and refer to the
last source of helpful support experienced. In a worst case scenario this would lead to a
chain effect throughout the various support services until the appropriate area became
engaged on the incident. Again the impact and visibility to the customer will be evident
as well as to the sub-postmaster and eventually the RNM.
It is therefore imperative that the nature and style of support service provided to the
Outlets is changed to meet the breadth and speed of response the emerging business
environment demands.
Issue 3. Diversity within the current operational environment
Automation is successful when deployed and used in accordance with prescriptive
disciplines, The introduction of automation into a business environment that operates
without such disciplines is likely to generate significant management, support, and
education issues within the business.
The manifestation of such issues will be a poor and totally inconsistent level of service
offered to the customer; this in turn will undoubtedly have a negative impact on
telationships with existing clients. The potential exposure to “bad press” is also
heightened as POCL will come under even greater scrutiny due to the introduction of
automation.
Issue 4. Lack of operational disciplines
Undisciplined working routines will result in rework of issues and duplication of effort.
Automation requires common and understood processes to be operated ensuring
tesponsive and accurate resolution of business incidents.
Classic Service Management disciplines such as Incident, Problem, Change and
Configuration Management need to be adopted and embedded within the day to day
operation of the business. Although considered onerous, experience has shown that
they provide the appropriate framework and accountability to successfully manage and
control an automated business environment. .
The use of such disciplines reflects the prescriptive practice POCL management will
need to adopt in its management of an automated ‘Network’. Automation will both reject
and immediately highlight occurrences of non-conformance which will require resolution
within timescales previously indicated.
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Issue 5. Non - conformance
In order to diminish the potential for non-conformance it is important that automated
services are deployed with simple work instructions of clarity and precision. The current
monitoring and reporting mechanisms provide poor quality information, in an
inconsistent and untimely fashion as to be of little value in terms of providing input to
the management process.
Education of the Outlet based staff should emphasise the necessity of following the
work instructions. Reinforcement of the required approach will come from dynamic
resolution of non-conformance incidents or from trend analysis undertaken as a
standard Service Management process.
Issue 6. Operational Ownership and Accountability
Using Horizon as an example, it is apparent that the existing organisational
arrangements serve to deploy automation and develop the basic disciplines to manage
it. The need to prepare for and accommodate automation to deliver business as usual
has not been recognised prior to the development work undertaken by Service
Management.
The business is poorly placed in terms of timescales and expertise to make the
changes necessary to support the automated environment operationally.
Reacts to non conformance
Sized to meet increasing needs
Currently receives 500 calls per week direct from outlets
Cc
NETWORK Oo
U
CLIEN U 5
T T
£7 L o
E M
T .E
R
Demanding Multiple points of entry Manual = Demanding
Unforgiving No consistent approach Processes Unforgiving
Lack patience Inefficiencies Lack patience
Non-conformance
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1.2 CONCLUSION
POCL is not in a state of readiness to discharge its responsibilities within the automated
environment. Unless it changes its current support arrangements, the organisation by
which it provides the support, the process against which it operates and the skills and
capabilities of its organisation it will fail to achieve the benefits afforded to it by
automation.
The risks of not changing, to meet the demands of automation, are that POCL will not
be able to:
e discharge its responsibilities within Horizon with the required levels of quality and
performance
¢ leverage the benefits of Horizon and more importantly the Automation Programme
e deliver the expected level of improved efficiency and effectiveness in the outlets
realise the value of the knowledge about the business:contained within a range of
disparate databases
The retail performance of the outlets is likely to be adversely affected in the long term.
Inhibiting commercial growth through the outlet and jeopardising new commercial
initiatives.
Failing to change will stretch the current POCL infrastructure to breaking point and will
absorb increasing levels of resource to address the negative impact of automation on
the business. This will in time begin to severely compromise the delivery of products
and services, thereby damaging POCL’s credibility to compete in the marketplace.
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Recommendations
The following recommendations will address the issues identified if applied as a
cohesive package of measures to change the operational mode of the business at a
pace to support the timescales of the Horizon programme.
Issues - immediacy and Scaleability
The business should consolidate its support for Outlets into one logically integrated unit
in order to simplify and co-ordinate the multiplicity of current and planned support
organisations required to provide business support.
The scope and scale of this undertaking is extremely significant to POCL as it provides
the fundamental basis for dealing with the impact of automation. The scope,
establishment and running costs, and operational characteristics for the proposed
solution are outlined separately in subsequent Sections of this document.
Issues - Diversity within the current operational environment.
Lack of operational disciplines.
If POCL continue with their current Regional organisation structure a conscious change
has to be adopted with regard to significantly reducing the licence and scope allowed in
the deployment of operational services.
In the case of automation, such scope should be zero. A totally prescriptive deployment
policy should be developed and deployed from the centre. This of course should be
achieved with Regional involvement but NOT via Regional interpretation.
The ongoing opportunity for the business will be that of continuous refinement, to which
all strands of the organisation should contribute through the recognised disciplines of
Service Management. This capability and approach to continuous improvement will
assist in managing any risk associated with all future automation activities.
Service Management should become an integral part of POCL’s “operational” function.
-The adoption and deployment of its range of management disciplines are the
recognised basis for creating the appropriate business environment for automation to
succeed.
This will result in a prescriptive, highly controlled environment which is currently alien to
POCL as it will introduce invasive disciplines on current working methods across the
business. The temptation to pay “lip service” to such an approach is understandably
appealing; however the price to be paid for taking the “easy” option is not worth
considering.
Issue - Non- conformance
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If POCL successfully adopt and deploy the previously stated recommendations,
significant in-roads will be made to this long standing issue. Automation itself will be a
driver to conformance, as it simply will not work in most instances of poor practice.
Those incidents that do escape normal automation type controls will need to be logged
as incidents using an integrated management system that is a fundamental part of the
technical infrastructure of Business Support.
Itis proposed to deploy such a system across the relevant parts of the business in
order to operate Incident and Problem Management in timescales appropriate to the
needs of automation. The system will also provide the bulk of the management
information required to determine performance achievement, pre-emptive corrective
action and validation of supplier performance.
The outline of establishment, deployment and running costs can be found in Section
3.6.
Issue - Operational Ownership and Accountability
Given the implications of some of the previous recommendations, POCL has to
determine, within the context of other organisational considerations, where and by
whom is this particular issue to be addressed.
In the meantime Service Management are undertaking tactical measures in conjunction
with Network Operations to address gaps and weaknesses in the existing arrangements
surrounding the support of the 204 pilot Outlets using the Horizon Service.
The scope and nature of this initiative is documented in a separate paper.
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1.3 SUMMARY
In order to minimise the negative impact of automation on POCL business
operations it will be necessary for POCL to change its current operational
support arrangements. Delivering a more prescriptive, conformant,
measured, resilient and accountable service in support of automation.
The change will need to address the scope of support provided, the way in
which it organises itself to deliver the support, the framework of processes
against which it manages its service and the skills and capabilities of its
people and support tools.
It is strongly recommended that POCL initiate a change programme to
address the current limitations within the operational organisation as
indicated within this document. The project will deliver a set of disciplines
derived from the current Horizon Service Management Framework and will
develop a suitable organisational structure. This will deliver a desired ‘end-
state’ which will position POCL to successfully manage its automated
services.
1.3.1 Pace and Degree of Change
The fundamental point at issue is the current lack of preparedness within POCL
to deal with the impact of automation and its implications on “business as usual.”
Horizon as the ‘First Past the Fence’ is driving a pace of change which limits the
options available to POCL to address the issues described in this document.
Implementation of Horizon is assumed to commence in June 1999, delivering
automated outlets at a ‘beat rate’ of 200/300 per week - potentially doubling the
number of live outlets by the Friday of that first week of implementation. There
will be a greater issue as Crown Offices are brought online, with Horizon, each
increasing considerably the baseline number of automated counter position over
a short space of time.
The anticipated degree of change suggests that within 18 months of
commencing implementation there will be 19000 live automated outlets and
40000 live automated counter positions - each delivering Automated Payment
Services, Automated Stock and Cash distribution and an array of other
automated services.
To minimise impact upon the POCL business a minimum of 70% of the desired
end-state, described in the remainder of this document, must be achieved before
live implementation commences. The timing of Horizon effectively limits the
options open to POCL to address the potential negative impact of automation on
its business.
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2. I ACHIEVING THE DESIRED END STATE.
The objective for POCL is to achieve an operational end state capable of proactively
managing the quality and performance of the POCL service supply chain. Supporting
the receipt of products at the client interface and distributing them through appropriate *
channels into the outlet infrastructure with minimum disruption to the customer and the
client.
The organisation will provide a single front end to a Business Support group
responsible for the receipt and resolution of failures affecting POCL automated services
and the provision of advice and guidance relating to POCL products and services.
The solution proposed is complimentary to the current initiative within POCL to move its
customer call management to SSL. This paper assumes that the transfer of customer
calls to SSL will take place.
It will be necessary to transition the current POCL organisation towards the desired end
state as a discrete project owned within POCL Network Services. This transition will be
managed through a project structure drawing upon the expert knowledge currently
invested in Horizon Service Management. The transition will position POCL to manage
and reduce the risks of failures and disruption in the service.
To ensure the transition meets the requirements to deliver a solution in line with the
pace driven by Horizon it will be necessary to ensure the availability of skilled and
experienced resource. POCL will need to ensure the release of these skills from within
the business or Post Office Group. The lack of appropriate skilled resource will
jeopardise the transition project and inhibit the achievement of the desired end-state to
manage the risk of automation.
2.1 SCOPE OF CHANGE
Current arrangements for supporting an automated POCL have been developed and
aligned to the commercial arrangements with ICL Pathway under a PFI agreement.
Whilst this arrangement will continue for the foreseeable future it does not address all
the requirements for POCL to support an automated business. POCL are also not
organised to manage the ICL Pathway service let alone deliver to meet its own
business needs.
Automation will fundamentally change the operations of POCL. It will force the business
to adopt a new organisational structure, new methods of working, new skills and
competencies and a heightened level of conformance throughout the business. These
changes will be positive, enhancing the commercial viability of the business and
positioning it as a 21* Century retail business.
2.2 COMMERCIAL RELATIONSHIP WITH ICL PATHWAY
Under the current agreed PFI arrangements with ICL Pathway they will provide their
own Service Management operation for the delivery of a managed service. This
includes a scaleable single point of contact for the provision of Horizon Systems
Technical Support to the outlets. The proposed end-state solution does not detract from
the PFI arrangement and therefore does not expose POCL to a potential transfer of
tisk. The end-state solution addresses wider support issues for the Outlets, many of
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which are related to automation but do not fall within the contracted remit of ICL
Pathway.
Service Management process and technology integration between the ICL Pathway
service and the POCL Business Support service will be necessary. Ensuring the flow of
management information between the two organisations to support the POCL/Pathway
supplier relationship and the transfer of service information.
The Service Management transition project will consider the provision of a technical
solution to provide contact through a single telephone number for any Outlet
requirement. It is not the intention to receive Horizon System technical calls within the
Business Support organisation prior to their delivery to the Pathway Horizon System
Help Desk (HSH). Provision will be made to seamlessly transfer a call which has been
placed with the wrong support area e.g. HSH rather than POCL Business Support. The
frequency with which these non conformance's occur will be monitored and remedial
action taken to reduce the volume.
Business Support will provide a single point of contact for all non-Horizon automated
services. The current arrangements for IT support from POITS will continue where it is
appropriate to do so.
2.3. DESIRED END STATE
The end state will comprise two components -
e Service Management Framework
e Business Support group
The end-state will deliver a capability to meet the future needs of an automated POCL
2.3.1 Benefit Of Delivering The End-State
e Improved service levels, fewer service interruptions, improved reputation, and
efficient support through focused, disciplined effort.
¢ Increases stability and reliability of automated services, and readiness of users and
providers for service changes.
e Reducing corrective and recovery work thereby improving conformance within the
“back-end” business process.
e Positions the organisation and capability set of the business to accommodate new
commercial opportunities and aligns it to the strategic direction of the business.
¢ Provides a solution scaleable to support all current (Hybrid platforms) and future
(Horizon, SAPADS) automation activities
¢ Delivers the capability to manage third party suppliers e.g. ICL Pathway
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¢ Positions POCL well to source more successfully the delivery of non-core services
from other organisations where appropriate to do so
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2.3.2 Critical Success Factors
POCL will:
* successfully manage the relationships with its suppliers, managing their performance
and quality of service through an effective framework of service management
disciplines and functions
¢ Be capable of effectively managing non third party related automation incidents
through to resolution
¢ Manage changes to the environment without impacting on the automated services
e Reduce numbers of problems affecting POCL as a direct result of automation
IcL
PATHWAY
‘ATEORATED
SERVICE MANAGEMENT POCL ‘EQ, SUPPORT
SUPFORTORGANISATION SERVICE iia!
MANAGEMENT
& BUSINESS SUPPORT
ICL THEDENT MANAGEMENT
PATHWAY
A ron. RESPONSE CENTRE
WORLZON sysTEs HEL? DESK
CALL MANAGEMENT.
OTHER
POCL
BUSINESS UNITS
POcL
LOGISTICS
SAPADS
Conceptual diagram of the relationships between POCL Service Management,
Suppliers e.g. ICL Pathway, clients e.g. DSS and other service providers and internal
customers.
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2.4 DEVELOPING SERVICE MANAGEMENT FOR AN AUTOMATED POCL
The Service Management Framework will initially consist of seven disciplines.
Call Management, Incident Management, Problem Management, Change
Management, Configuration Management, Supplier Management, Business
Continuity.
Each of these disciplines will need to be developed in line with the four dimensions of
change.
SUPPORT - To define the scope of the support provided by POCL to support its
implementation of automated services
ORGANISATION - To define the necessary roles, jobs and organisation to meet
business objectives. To recruit and deploy staff as necessary within this agreed
structure ensuring the organisation is appropriately resourced. To define
strategy and policy in support of an automated business
PROCESS - To define what POCL will do to meet the needs of Automation. To
define how it will discharge its responsibilities. To define common and integrated
processes.
SKILLS/CAPABILITIES - To establish the future skills and competencies
requirements and identify any gaps with current capability. Giving managers
time to address the skill and competency shortage or oversupply in their areas.
To deliver common and integrated support tools.
As an example:
The Service Management discipline of Call Management will deliver a single point of
contact in support of automated POCL outlets. Service Management will be organised
to set guidelines and standards for Call management. Network services will organise to
deliver the single point of contact through the Regional Helpline organisation. The Call
Management discipline processes will be documented to define what constitutes Call
Management and how it will be deployed within POCL. The process of Call
management will require skilled and capable resources supported by common and
integrated tools to carry it out.
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Service Management and an Automated Supply Chain
CLIENT
CHIE MGT
NETWORK
PLANNING
ACCTING
&
RECONC
BUSINESS
SUPPORT
Service Management Disciplines
Service Management defines the scope of the service, the organisation delivering
that service, the standard processes to be adhered to and, the skills and capabilities
of the staff to deliver to the agreed levels of service performance and quality.
Business Support is defined solely by Service Management and therefore becomes
accountable to a Service Management functional area.
2.4.1. Service Management Framework
The objective of a Service Management Framework is to establish mechanisms:
PA
ET
© To control service delivery by responding in a timely fashion to incidents and
problems, and reducing the risks to live automated services from changes.
¢ To plan the development and testing of changes to a service so that they are
integrated into regular releases
¢ Toensure that users, operators and support staff are resourced, trained and
prepared for each new release
¢ Toestablish and manage the relationships between POCL and its suppliers of
automated services
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2.5 BUSINESS SUPPORT
The successful delivery of automation into POCL outlets will be dependent on the
successful deployment of a first line support organisation.
NETWORK SUPPLY CHAIN
Plaeniog
Single Point of Contact
Resolving call on first Contact
Skilled resource :
Intuitive
Innovative use of appropriate technology
Single repository of business support and service inform ation
Proactive
The organisation will provide, via a single point of contact, support to automated outlets
on any subject appropriate to POCL. The objective will include, over time, the resolution
of 70% or more incidents on initial contact with the outlet.
The organisation will consist of a structure of an estimated 150 full time equivalent staff
including a shallow management structure. The organisation will be distributed across a
minimum of two geographically split sites, logically integrated through common
technologies and processes.
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The first line support group will be backed up by second and third level expert domains
including POCL business centres e.g. Transaction Processing and external suppliers
such as ICL Pathway (where a POCL automation incident has been placed for
investigation with the Response Centre). These organisations will be integrated by the
same common technologies and processes.
Business Supports provided by a
single logical Response Centre @
with a single point of overall Expert
responsibilty and a single pointot A Domain
contact for End Users. B bg
i ms ative A
PA
‘Three geographically spit sites,
150+ staff across the three wi
V4 single management stuctre
Entry into the Business Support Response Centre will be via a single telephone
number. Investigations will take place into establishing the best arrangements and
technologies to manage the call and direct them to the appropriate destination.
The Response Centre will receive calls relating to an automated business including:
wT wT
Business Advice & Guidance e.g. Reconciliation, Bank Holiday Payments
Product Advice & Guidance: Postal Orders, Insurance, Stamps, Cash and
Stock
Business contacts: Contacting RNM, other POCL support groups
Technical Advice & Guidance: How do I calibrate the scales?
Non Conformance: POCL/Pathway/DSS have not followed the procedure.
Requests: Stock and Cash
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The ‘end-state’ assumes that all external customer calls will be supported by SSL and
ICL Pathway (Payment Card Help Line) This includes calls from Outlets to the ICL
Pathway Helpline on behalf of an external customer.
In addition to receiving calls the response centre will actively deliver information relating
to the products and services provided by POCL and the status of automated services to
the end users (e.g. Outlets).
A detailed call matrix defining what calls would be acceptable for receipt by the
Business Support Response Centre will be developed as part of the Service
Management Transition Project.
2.6 ALIGNING WITH THE CURRENT HORIZON PROGRAMME
Itis essential that the transition to the ‘end-state’ is aligned with the current Horizon
programme specifically in respect of timescales and key deliverables. The Service
Management Transition project will effectively determine POCL's ability to absorb and
manage the impact of the Horizon implementation. Correspondingly Horizon will provide
the vehicle for assuring the suitability and acceptability of the ‘end-state’.
To ensure the necessary alignment is achieved is recommended that both a Project
Board and Steering Group is established with membership for both including key
members of the Horizon Programme. It is recommended that the Steering Group is
chaired by the Horizon Programme Director (David Miller) and attendance includes the
POCL Automation Manager (David Smith), the National Service Manager, ICL Pathway
Service Manager, GM Logistics and GM Transaction Processing and the Service
Management Transition Project Manager.
The Service Management Transition Project Manager will also sit on the Horizon
Programme Board to ensure continuity and conformance across the two projects.
Alignment will also be achieved through the integration of the work of the Horizon
Service Management Team into the Transition Project.
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2.6.1 Benefits To POCL Derived From Establishing A Business Support Function
¢ Anational service which is perceived by the customers as a locally provided support
service
delivering a support service driven by customer and business needs, within
timescales that reflect the immediacy and visibility of automated operations.
© providing a support service which would be the customers first choice
* successfully resolving increasing numbers of calls on first contact
* accountable for delivering a seamless end-end support service for the increasingly
complex POCL Supply Chain
resolving service issues before they impact upon the outlet or the business
¢ position POCL to manage the risks of automation
¢ maintaining a support service which is not impacted upon by increasing volumes
utilising appropriate tools and technology to improve quality and performance across
all automated services
¢ establishing accountability, with the appropriate management information and control
to enable both pro-active and corrective action to be taken to optimise service
¢ enhanced client management and responsiveness of the service.
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3. SERVICE MANAGEMENT TRANSITION PROJECT
The project is required to start at the beginning of August 1998 and will run until the
third quarter of 1999.
The project will be managed by a single project manager reporting into an executive
project board and supported through a project office.
The project will be managed outside of the Horizon Programme as a discrete activity
within Network Services.
The project will deliver, over a twelve month period, a series of solutions to deliver the
new organisation, required processes, establish the scope of support, and define the
skills/capabilities for POCL operations. The transition will achieve 70% of the desired
end state prior to June 1, 1999.
3.14. DELIVERING THE SERVICE MANAGEMENT END STATE
3.1.1 Objective
¢ To implement a framework of Service Management disciplines within POCL to
minimise the risk to the business resulting from the deployment of automated
services.
Transferring POCL from the current profligate arrangement of Helplines and Help
Desk (more than ten) operating a diverse range of tools and processes.
© To plan the transition for POCL and support it in its deployment of automated
services
Abandoning the current piecemeal approach to addressing the impact of automation.
3.2 PROJECT MANAGEMENT STRUCTURE
The Service Management Framework will need to be developed under strict project
management controls and standards to ensure that the necessary changes become
embedded within the organisation.
Key tasks within the project will include:
14. Planned communication activities both within POCL and externally to Outlets,
clients and suppliers.
2. — The project will establish a baseline of the current automated service, including
performance measures and management information
3. The seven Service Management disciplines will be developed and implemented
across all organisations involved in supporting automated services within POCL.
Where appropriate these will be integrated with other involved third parties. Two
of the key disciplines, Change and Configuration Management will have a wider
impact within the business.
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A key factor in delivering effective Service Management is the provision of an
Integrated Tool Set accessible to all support organisations.
The project will build on the current work being carried out within the
POCL/Horizon Service Management Function.
Current emphasis within POCL has been placed on documenting the processes.
Key deliverables from this project will go beyond this and will provide in addition to
the documentation.
e Metrics and measurements: service delivery targets, key performance
indicators and service levels, mechanisms for service reporting and service
reviews leading to continuous improvement activities and the provision of the
appropriate breadth and depth of management information
¢ Organisation design & structure: specifying levels of accountability and
ownership, clearly defined role & responsibility, Job Descriptions, Sourcing
and Resourcing plans.
¢ Processes will be defined to include: assigning process ownership, process
definitions and procedures Definition of training, education and awareness
activities for POCL operating staff
¢ Mechanisms for attracting and selecting staff, selection and deployment of
contractors, identification of current skill requirements & skills sets,
forecasting future skills and competency requirements; defining skills
shortages
© The project will develop and implement appropriate tools & technologies and
define non technical environment requirements.
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3.3. PROJECT COSTING, RESOURCES AND TIMESCALES
To continue the current development and implementation of the Service Management
Framework and to develop and implement the Business Support Response Centre
organisation it is estimated that a (Year 1) cost provision of £11,325K should be
budgeted for during the second half of 1998. Within this total £9,525K is incremental to
the established Service Management budget for 1998/99.
The costs include (Capital & Revenue)
3.3.1 Project Management (Revenue)
Provision of a Project Manager, Project Office Manager and Project Office Analyst (Part
Time) for a period of thirteen months. Responsible for the development and
management of the Service Management Transition Project
3.3.2 Service Management Framework (Revenue)
Development resource to design and develop Service Management disciplines for an
automated POCL. First year costs include developing: Call, Incident, Problem, Change,
Supplier and Configuration Management and Business Continuity.
3.3.3 Service Management (Capital)
Provision of Service Management Support tools (Desktop devices and communications
equipment) for use by the POCL Service Management central function (Non Response
Centre staff).
3.3.4 Business Support Response Centre (Revenue)
Expert resource to design, develop and implement the POCL Business Support
Response Centre (Indicative Cost).
Expert resource to develop and implement the Response Centre Support Tools
(Indicative Cost).
Procurement of Response Centre Support software licences (Indicative Cost)
3.3.5 Business Support Response Centre (Capital)
Response Centre IT and Telecommunications equipment for use in receiving, logging
and managing calls into and out of the Response Centre. (Assumed on the basis of
£23K per Response Centre Agent for an estimated 146 staff )
3.3.6 Staff Recruitment and Relocation (Revenue)
Staff costs for recruiting new skilled staff to operate and manage the Response Centre.
Costs also include a provision for relocation of staff to Response Centre locations.
(Assumed on the basis of £18K per Response Centre Agent)
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3.3.7. Staff Training (Revenue)
Staff training costs for Response Centre staff. (Assumed to be £3K per Response
Centre agent).
3.3.8 Accommodation (Capital)
Costs associated with refurbishment of existing POCL office space, including cabling,
furniture, power and lighting. (Indicative Cost)
3.3.9 Transition Support (Revenue)
Resource costs for migrating current arrangements for supporting automation to the
desired ‘End-state’, including: Communications Planning, Service Review and Baseline,
Piloting the transfer of Regional Liaison Managers to Regional Helplines and
implementing required organisational changes within POCL. Audit of current technical
and non technical environment.
3.3.10 Operating costs (Revenue)
Costs for day to day operation of the Service Management functions and the Response
Centre. (First year: Maximum 3 months)
Maintenance and support costs for Support Tools, IT and Communications
(Maintenance assumed to be 15% of capital purchase cost. First Year: Maximum 3
months)
A budget cost of £12,667K (Revenue £10,157K and Capital £2,510K ) should be
planed for in 1999/2000
Year 1 cost includes £7,775K revenue and £3,550K capital.
The project will require an estimated 13-15 man years effort to complete all essential
work over the project timeframe of twelve to eighteen months.
3.4 OPTIONS FOR DEVOLVING YEAR 1 SPEND TO YEAR TWO.
Option 1 - Deliver the Service Management Transition to the desired ‘end-state’ in line
with current Horizon timescales. This will budgetary provision as outlined above in
Section 3.3. This remains a high risk option with only nine months elapsed time before
implementation commences.
Option 2 - Delay national roll-out of Horizon Automated Systems by a minimum of six
months. This will allow the transfer of spend on all capital items and a further £2 million
of revenue spend to 1999/00. This is the least risk option.
Option3 - The highest risk option will be to focus all development activity to a single
Regional Helpline - gearing them to handle the take on of all work generated by the first
3-6 months of Horizon live traffic (June - Dec '99). This would require at a minimum the
transfer of all Regional Liaison staff to work within the Regional Helpline environment.
This is not considered as a viable option because of the inherent risk and the unknown
capability of the current Regional Helpline. This would allow the greatest transfer of
costs into 1999/00.
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3.5 FACTORS LIKELY TO AFFECT THE PROJECT COSTS
1. Sourcing decisions for providing the Response Centre
. Technologies chosen to deliver the solution
. Actual volume and type of calls generated by the automation of POCL
. Impact of the increased functionality of Horizon
. Quality of training given to outlets prior to and after receiving automated systems
. Availability of appropriately skilled resources within POCL
. Final agreed design of the Business Support solution
oN ®D Oo F Ww DN
. Redeployment or other costs associated with the dislocation of staff have not been
included
9. Costs of providing systems for second and third level support groups have not been
included
10. Human Resource costs to manage personnel issues
11. Costs of any Systems Integration between POCL Business Support and ICL.
Pathway.
12. Resource costs for developing local work instructions and procedures
13. Capital depreciation of Service Management Support Tools
14. It is assumed that the current POCL technical infrastructure is capable of supporting
the overlay of the service management tools
15. It is assumed that flexible staffing arrangements can be used, i.e. part time workers
to handle peak activity in the Response Centre.
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3.6 OUTLINE COST PROJECTION (INDICATIVE COST ONLY)
BUSINESS SUPPORT Potential Incremental
Budget £K
(indicative figures)
A Establish Business Support
Cap
Planning, Design & Imp!
Software Procurement
Software Customisation
IT & Comms Infrastructure 1950
Staff Recruitment & Relocation
Staff Training
Accommodation 1000
Project Management
Transition Support
Operating Costs
1998/99
Rev
200
2000
1000
1200
200
480
535
960
1999/00
1000
Rev
100
1000
1200
250
223
140
5444
Ni
Areas of Opportunity for POCL to mitigate costs
Potential use of POIT Research Group
Potential use of POIT Development Group
POCL staff re-deployment (Regional Help Desks, etc.)
- Utilisation of POCL accommodation portfolio
POCL staff re-deployment
LA. cove may +
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BUSINESS SUPPORT TOTAL 2950 6575 2410 8357
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SERVICE MANAGEMENT Identified Budget
1998/99 1999/00
Cap Rev Cap Rev
B Apportioned Budget
Operating 100 300 100 800
Development 500 900 ~ 1000
TOTAL 600 1200 100 1800
Aggregate Costs (A + B) 3550 7775 2100 10159
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