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Bringing Technology to Post Offices and Benefit Payments
PROGRAMME VALUE FACTOR ASSESSMENT - 7 MARCH 1996
Author: Nick Richardson Version: Issue 2.3
Authority: Derek Selwood 20 March 1996
Reference: PWKP4-22
: Contents Page
1. PURPOSE.........
2. PROGRAMME SUMMARY
3. JUSTIFICATION...
3.1. Value Factor 1 - Customer Acceptabilit
3.2. Value Factor 2 - Staff/Agent Acceptabili
3.3. Value Factor 3 - Fraud Free Method of Paymen'
3.4. Value Factor 3a - Fraud Free Systems for POC!
3.5. Value Factor 4 - Credibility of delivery in Steady State
3.6. Value Factor 5 - Start Up
3.7. Value Factor 6 - Innovation..
3.8. Value Factor 7 - Flexibility .
3.9. Value Factor 8 : Management Capability
3.10. Value Factor 9 : Reliability and Support.
3.11. Value Factor 10 : Stability/Coherenc
1. PURPOSE
0 This paper provides a summary of the value factor assessment completed by the
Programme on 7 March 1996, following the assessments completed by the
Partnership, Demonstrator and the Contract Negotiation strands.
1.2. In addition to the summary table of Programme scores, this paper also includes the
scores for the different strands and the high level rationale behind the Programme
scores.
1.3. Given the perceived need to keep the text of the main paper within reasonable
bounds, the high level rationale has needed to be very selective. However, the Demo
Stream evidence, (which formed the bulk of the material on which the judgements ~
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were made),-covers a very wide range of topics, and the assessors were conscious
that in some areas the selectivity in the main text could give rise to misleading
implications regarding the importance of some topics compared to others.
1.4. They therefore thought it appropriate to attach as annexes:
(a) Paper PWKP4-27, Demo Stream Value Factor Assessment - 4/5 March 1996,
which is the full version of the summary information from which the précis in
this paper has been drawn;
(b) Demo Stream Value Factor Assessment Forms
1S, More information is available below that contained in (b) above, and that is being
retained against the possible future need to make it available to audit bodies.
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2. PROGRAMME SUMMARY
21. The following table shows the Programme scores for the Value Factors.
1 Customer Acceptability ss IB I53 IB I 53] c
2. Staff/Agent Acceptability 60 I Bt I 50 I BI 55 I B
3 Fraud Free Payment Method 7.0 A 6.5 A 43 A
3A Fraud Free Systems forPOCL I 5.7 I B I 59] B I 51 I B
4 Credibility of Delivery yd B a5 B 4.1 B
5 Start-Up 5.4 B- 5.1 B- 4.4 B-
6 Innovation 33 B 5.8 B 5.4 B
7 Flexibility pW B 47 B 4.1 B
8 Management Capability 6.2 C+ 52. C+ a3 Cr
9 Reliability and Support 5.5; ce 5.4 Cr 4.0 ct
10 Stability and Coherence 6.2 B 6.0 B 3.7 B
22. The need for Value Factor 3A was identified after the issue of details of the ten
factors to Service Providers. The results of the assessment are presented here, since
they offer a degree of comfort in respect of all three Service Providers, but they are
not proposed as an element of the evaluation
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3. JUSTIFICATION
3.1. Value Factor 1 - Customer Acceptability
The service provider needs to ensure that the services are viewed favourably by
customers at post offices, and that the benefit payment services are acceptable to all
benefit customers choosing to be paid at post offices.
eS eo
eee soe eee
Partnership - a Ls
Contracts - E - E - E
Demonstrator 5.8 B 5.3 B- 33 Cc
Programme 5.8 B 5.3 B- 53 Cc
3.1.1. Cardlink and IBM have demonstrated a good understanding of both BA and POCL
Customer needs. Cardlink, in particular, have undertaken extensive usability tests
involving video-ing the proceedings in a customer/user laboratory and consultation
with interest groups which has been reflected in their procedures. IBM and Pathway
have also undertaken research with customer focus groups but have not used the
findings to such good effect. Cardlink have demonstrated a better understanding of
POCL requirements.
3.1.2. _IBM’s card was felt to be a comparative strength because the less intrusive counter
procedures would increase customer confidence in the new system. Cardlink’s
comparatively weaker card is mitigated with strong Card Authentication
Management (CAM) procedures, but with Pathway being comparatively weak in
both areas.. Pathway’s distributed architecture was seen as a comparative strength,
given that it should offer improved availability and shorter and more stable
transaction times for BPS at nominated offices although the extended transaction
times for Foreign encashments reduced this advantage. The pre-printed receipt they
are proposing is also a positive differentiator.
3.1.3. Overall, Cardlink were felt to have a measurable “edge” over the other two,
stemming from a consistently strong performance marginally offset by features
inherent in a centralised solution. IBM and Pathway, had a number of strengths and
weaknesses in different areas which balanced each other out and led to identical
scores.
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a3. Value Factor 2 - Staff/Agent Acceptability
The service provider’s services need to be Post Office and BA local office staff
friendly; for example, by being easy to use, responsive and supportive of their job
functions.
Partnership - es -
Contracts - E - E - E
Demonstrator 6.0 Bt 50) B 5.5 B
Programme 6.0 B+ 5.0 B 5.5 B
3.2.1. Cardlink showed the best understanding of both POCL and BA business and this has
been successfully reflected in their solution. The use of their usability lab has been
key to this. Their approach to transaction processing that supports differing level of
skills is seen as a major strength. Pathway have a potentially good, event-driven
Human-Computer Interface (HCI) including a graphical user interface and colour
screen, but have not demonstrated the detailed understanding of the POCL business
to capitalise on it. Their card counter procedures (placing over-reliance on the PO
clerk) is seen as a negative in comparison to Cardlink.
3.2.2. IBM propose a strong card and sound service management. The usability of their
HCI is seen as the weakest of the three and their apparent over reliance on CBT has
not allowed a plus marking to be given in this area. These aspects, together with a
number of minor “Cons” leads to their lower marking.
3.2.3. All three Service Providers were regarded as at least satisfactory as regards the
acceptability of the system to BA staff.
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3.3. Value Factor 3 - Fraud Free Method of Payment —
S I
The measures proposed to make the service for benefit payment fraud free and to
maintain that fraud free level.
a R
Partnership = -. -
Contracts 4.0 B 4.0 B 4.0 B
Demonstrator 78 A 7A A 44 A
Programme 7.0 A 6.5 A 43 A
3.3.1. The Demo Stream scoring for this Value Factor is the output of the extensive
Security Review undertaken by a representative expert panel. The evaluation
measured all three Service Provider’s solutions against a Best Practice Model, which
considers all proposed security counter measures against the following aspects;
technical, management, procedural and personnel.
3.3.2, Cardlink’s security proposal is consistently strong and reflects a deep and
comprehensive understanding of the BPS business processes and associated security
requirements. The use of a comparatively weak card is compensated for by their
strong management, procedural and personnel controls in card authentication. Their
proposal in the area of fraud and risk management is perceived as particularly strong
and is perceived as a positive differentiator.
3.3.3. IBM have proposed a stronger card (Watermark) that provides a sound basis for their
security strategy. FDR is a particular strength with their bank card experience. IBM
now have a strong proposal which engenders confidence. In comparison with
Cardlink, they took some time to reach this stage. There are still some gaps in their
proposals, but the team are confident that these could be filled post award of contract.
3.3.4. Pathway are some way behind the other two, the main reasons being a heavy reliance
on the vigilance of the counter clerk for card authentication and the lack of clearly
defined management, procedural and personnel controls for fraud and risk
management.
3.3.5. Contract Stream scores had been made on consideration of the degree to which the
Service Providers had taken fraud risk on board. In the final draft contract at ITT
issue, a level playing field approach was imposed, with similar words and limits for
all three Service Providers. This approach gave an adequate level of fraud risk
transfer, which was modified to show the negotiation stance of the service providers.
3.3.6. This Value Factor brought together two different aspects - on the one hand the
physical measures and the procedures in place to reduce fraud and on the other, the ha
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contractual measures to provide coverage for any remaining fraud. The Programme’s
view at its 20 February meeting, which it reiterated at this review, was that in
determining Programme scores the balance between the Contract and Demonstration
scores should be 20/80 unless there were differentiators within the Contracts scores
(e.g. an inferior physical system could be partially offset by stronger contractual
assurances). This was not the case, all scoring identically on the Contracts side.
3.4. Value Factor 3a - Fraud Free Systems for POCL
Partnership
Contracts - E - E : E
Demonstrator ae B 5.9 B 5.1 B
Programme 5.7 B $8. B 5.1 B
3.4.1. Although this “sub-factor” was centred around POCL, appropriate read-across was
made to factor 3 on aspects relevant to BA. Two main areas emerged as
differentiators - the security of data on the network, and the technical security
provided within the office.
3.4.2. Both Cardlink and IBM make use of “financial industry standard” security
mechanisms (SPDH and a variant on APACS 40 respectively) for authenticating data
between each terminal and TMS, protecting both the local as well as the wide area
network.
3.4.3. Pathway’s data security is based on Riposte and is therefore highly bespoke; it
primarily relies on simple cyclic redundancy checking (CRC-ing) and message
sequencing for message authentication, although they do have the facility to apply
digital signatures for “sensitive transactions”. Pathway have proposed the use of
ISDN Closed User Groups to give additional security, however this facility is
unlikely to be available until at least 1997.
3.4.4. Pathway’s use of Microsoft NT, an operating system designed with security as a
requirement and certified to the US “C2” standard, is their major strength in this area.
IBM’s OS/2 is not considered to be as strong as NT, although IBM have indicated
that they are planning to seek “C2” certification this year. Cardlink’s solution is
weakest at the operating system level, being based on Windows 95 (which was not
designed for secure applications), with Cardlink having to place greater reliance on
security at the application level, to bring their overall offering to a satisfactory
standard.
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3.5. Value Factor 4 - Credibility of delivery in Steady State =
.
The service provider’s designs, procedures, tools, methods, resources and
organisation need to ensure that the steady-state services will be delivered to time and
quality, showing understanding of and empathy with the BA and POCL requirements
and objectives.
— : ce
Partnership
Understanding of POCL Good Very Good Good
Capability and Experience Good Good OK
Contracts 4.0 D 35 D 3.5 D
Demonstrator 5.7 B 55 B- 4.1 Bt
Programme Sa B 55 B 41 B
3.5.1, Cardlink’s understanding of the business has given confidence that a good solution
would be delivered. They are using well established products such as Datafit for
counter application software and have demonstrated a credible service management
methodology. IBM have strengths in help desk, peak capacity management and
design methodologies but it is felt that they have not demonstrated such a
comprehensive understanding of the Post Office physical environment and there are
minor doubts regarding the development (from an earlier product) and readiness of
the Storeplace counter application software.
3.5.2. IBM have expressed concerns regarding the complex contract structure. It was felt
that they could have been more proactive in finding a solution to this problem and
there were concerns as to how this attitude would show itself in their ability to
deliver the system.
3.5.3. Pathway has scored comparatively badly because of concerns regarding Riposte,
(which is “all pervading” as it provides the platform for counter application software
and TMS). There were also concerns regarding differing views from consortium
members and the continued reliance on the Irish solution.
3.5.4. _ It was agreed at the 20 February review that in view of the low validity marks on the
contract evidence, the Demo scores should prevail. The Partnership evidence was
regarded as providing a degree of reassurance, but in view of the comparatively small
amount of evidence, it was agreed that this should not be used as a differentiator.
The meeting confirmed that these principles should apply in determining Programme
scores on this occasion.
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3.6. Value Factor 5 - Start Up .
The service provider’s design, development, acceptance and initial implementation
services need to be credible, showing appropriate controls, management interfaces
and capability for managing, controlling and delivering the start-up of the services.
Partnership :
Contracts - E - E = E
Demonstrator 5.4 B- 5.1 B- 4.4 - B-
Programme 5.4 B- 5.1 B- 4.4 B-
3.6.1. All Service Providers have demonstrated an ability that they would be able to meet
the September “limited go live” for a card based benefit payment and the subsequent
roll-out requirements.
3.6.2. Cardlink’s score reflects the fact that they are using low risk proven products -
although their marking has been affected by the need to establish a card
personalisation site. (Citibank have facilities for the low volumes required initially
however).
3.6.3. The comparative concern with IBM is that Storeplace is a new development from an
earlier product and is only just going into live use, and that ISDN-D from Racal may
not be available from day 1 and cause them to revert to ISDN-B. They have,
however, demonstrated a strong solution in terms of FDR’s card management.
3.6.4. Pathway possess good levels of skill at the sub-contractor level. The concerns relate
to their failure to demonstrate strong management and leadership and to the fact that
the counter based application software is being written from scratch.
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37. Value Factor 6 - Innovation I
The service provider needs to be pro-active, change-orientated and demonstrate a
genuine “can do” attitude.
He should generate creative ideas and understand how to apply technology profitably
building upon his initial services, complementing rather than competing with POCL’s
core competencies.
He should seek to do existing things better and better new things.
‘Analysis of Opportaniocs Good Very Good OK
Contracts 4.0 D 4.0 D 4.0 D
Demonstrator a3 B 5.8 B 5.4 B
Programme 5.3 B 5.8 B 5.4 B
3.7.1. IBM have built a technical solution which, although similar in concept to Cardlink,
differentiates in some innovative ways including:
(a) _ use of ISDN-D, which provides an on-demand high capacity network;
(b) watermark cards, which provide enhanced security; and
(c) _ their on-line automated payments solution provides potential added value to
POCL clients
3.7.2. Pathway’s distributed architecture is innovative and could offer major advantages in
terms of high levels of availability and faster benefit payment transaction times as
authorisations are performed locally. However, they have scored poorly against the
other two in terms of the need to demonstrate a ‘can do’ attitude and for this reason,
have been brought down to a level only just above Cardlink.
3.7.3. Cardlink’s technical solution uses well proven component products and lacks
innovation. This is mitigated in the scoring by their approaches to usability
assessment and card status and fraud monitoring which are both strong.
3.7.4. The Programme decided at its 20 February review that as the Contract Stream’s
scores were based upon a lower validity factor, the Demonstrator scores would be
carried forward as the Programme scores. The Partnership ratings provided a further
comfort factor but should not be used as a differentiator, given the relatively low
volume of evidence.. The meeting reaffirmed both of these principles. =
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SS. Value Factor 7 - Flexibility
=
The service provider and his services need the ability to react to external change and
to meet a diverse range of existing and potential needs, thereby maximising value for
money and faster delivery of new products and services.
Partnership - - -
Contracts 5.0 € 4.0 ¢c 3.0 Cc
Demonstrator 5.4 B 55 B a2 B
Programme 5.2 B 4.7 B 4.1 B
3.8.1. On the Demo stream, each of the solutions were found to have a number of
advantages and disadvantages for flexibility, however the effect of averaging has led
to the scores being broadly similar. All solutions have been ‘sized’ to meet the
Workload Brief, but have scalability should more capacity be required.
3.8.2. Specific differentiators within overall near identical scores are:
(a) the network, where Pathway and IBM are providing ISDN-2 to each office
which gives considerable flexibility for future high bandwidth on-line services;
(b) _ in transaction processing, where IBM’s “on-line” automated payment solution
offers potential for flexible delivery of data to clients for POCL;
(c) _ in database technology in the office, where Cardlink’s solution allows easier
access to/from external applications;
(d)_Cardlink’s counter software, which offers potential for rapid development of
new products;
(e) Pathway’s central systems are UNIX based, and offer more flexibility than
Cardlink’s Tandem solution and IBM’s COBOL applications;
(f) Cardlink’s management of fraud risk, which could provide “early warning”
signals and allow for pro-active management.
3.8.3. Cardlink’s approach to contract negotiations was for the most part flexible but with a
warning that some requirements might be priced in a way that would make it difficult
to demonstrate value for money. By the end of the negotiation process they had a
realistic approach and a willingness to trade on some issues.
3.8.4. Concern was expressed at IBM’s and Pathway’s inflexible stance on a number of
issues and how this would be reflected in their ability to deliver the services. The
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Contract Stream scores, reflect the comparative concerns over the negotiating stance
of the three Service Providers.
3.8.5. _ In determining the Programme scores, it was considered at the 20 February review
that both streams should count equally, and this was reaffirmed at the meeting. The
Demo and Contract scores were therefore averaged, rounding up where necessary
(ie. in IBM’s case) toward the Demo scores to reflect their higher validity.
38. Value Factor 8 : Management Capability
The service provider management needs to be competent, customer focused,
accountable, with evidence of well defined internal controls enabling a proper
external focus. Suitable quality processes must be in place, and key resources must
have skills and experience appropriate to their roles.
Partnership a
Contracts 6.0 Cc 5.0 B 3.0 Cc
Demonstrator 63 Cc 6.4 C+ a5 c
Programme 6.2 Cc 5.2 Gr 3.3 Cc
3.9.1. This value factor was scored by the Demo Stream only on the basis of interaction,
presentations and outputs. Neither it, nor the Contract Stream assessment, is a
management capability audit.
3.9.2. _IBM’s management capability has been very impressive throughout the demonstrator
phase. They are clearly a very customer focused and professional organisation who
place great emphasis on quality, planning, and internal controls. They introduced
appropriate expertise when needed and were straight-forward in all dealings - raising
problems at appropriate forums and offering constructive assertive criticism. The
management capability of FDR is equally impressive.
3.9.3. IBM’s negotiating team were disrupted at the start by changing their team leader.
The new leader failed to control his legal team to the extent that IBM adopted an
overtly legalistic and at times pedantic approach to the discussions demonstrating
poor use of the time available. The later addition of a Programme Manager added
significant momentum and realism to the negotiation team.
3.9.4. Cardlink’s management capability was viewed almost as highly as IBM’s throughout
the demonstrator phase with evidence of customer focus, internal controls, balanced
skill set, and good management organisation. The consortium gave the impression of
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a tight, coherent team, with an Andersen’s partner attending meetings to show the
level of commitment
3.9.5. Cardlink’s approach to contract negotiation, as described in para 3.8.3, is reflected in
the Contract Stream’s assessment of their management capability.
3.9.6. Some individual companies within the Pathway consortium scored well in the Demo
Stream assessment, but the overall capability of the Pathway management, staff and
organisation raises strong concerns. There is an apparent lack of internal controls,
mixed messages were often given to the Demonstrator Teams and their fraud
management capabilities were deemed weaker than'the other two.
3.9.7. The Pathway contract negotiation team leader was personally competent, but
appeared overstretched by the scope of his remit and did not receive the support from
other team members that we would have expected. The Pathway Managing Director
appeared intermittently but failed to add significant value.
3.9.8. A broader based Service Provider evaluation taking into account performance by the
Service Provider on other contracts was not considered appropriate: Pathway is a
company formed specifically to bid for and operate this contract and Cardlink did not
exist prior to this Programme. There is also a legal requirement which makes it
inadvisable to allow information gained from other contracts to influence decisions
on this contract, especially when the circumstances may not be comparable.
3.9.9. Following the Evaluation Board review on 14 March, the Contracts Stream re-
examined the evidence and amended the Validity Mark for IBM from C to B.
3.9.10. In establishing the Programme score, it was agreed at the 20 February review that the
differentials in scores established by Contracts should be maintained, and this
principle was reaffirmed at the meeting. The Cardlink and Pathway scores therefore
show little change in moving from Contracts/Demo to Programme, but in IBM’s case
the approach of averaging and rounding took second place to the principle of
maintenance of differentials
3.9.11. The Partnership input was regarded as providing a degree of reassurance, but was not
used as a differentiator given its comparatively small volume.
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3.10. Value Factor 9 : Reliability and Support
The service provider needs to anticipate and prevent problems, with robust fallback
procedures for benefit payments and other customer services in the event of system
failure. He should regard his first priority as maintaining continuity of service rather
than referring to the contract in the event of unforeseen problems.
Partnership - = : - =
Contracts 5:5 C+ a5 ce 3:0 — ice
Demonstrator 55 c 5.4 Cc 49 Cc
Programme 5.5 Cr 5.4 Gt 4.0 C+
3.10.1. All solutions have similar fallback procedures for benefit payments involving voice
authorisation that are acceptable. The differences arise in the contingency
arrangements prior to fallback being required.
3.10.2. Cardlink’s major strength derives from the perceived ability to anticipate problems
and maintain a strong customer focus as witnessed by all members of the Demo.
Team during Phase 3 meetings. The higher volume offices have network resilience
with two links per office. A relatively weak area in the solution is that there may be
reconciliation lags due to overnight polling failures.
3.10.3. IBM’s solution has a high level of resilience and reliability both within the network
and the hardware. The network is managed by RACAL and this is considered a
Positive factor as it provides an integrated solution with a single point for system
management. FDR’s status as a leading provider of card and financial transaction
services is also considered a strong point, particularly in relation to the continuity of
service. Comparative weaknesses are fears about the reliability of Storeplace during
early operations as it is an unproven product.
3.10.4. The strong points of these two Service Providers place them almost equally in front
of Pathway. Pathway’s distributed architecture offers the highest availability for BPS
and the Riposte software has a high level of built in resilience and self repair
features. The main weakness is the single link network, which has implications for
stops management and POCL client on-line transactions.
3.10.5. With regard to Contract, Cardlink’s approach throughout was to focus on the key
commercial issues and resolve them through negotiation rather than be distracted by
detailed drafting issues. IBM raised an early major concern on contract structure, but
this was creditable as it enabled the issue to be tackled in good time rather than
becoming contentious later in the process. Pathway raised a “no-bid” issue on Partial
Acceptance claiming that if they pass each individual acceptance test, then they
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should automatically pass overall acceptance; however legal advice was clear that if
we do not have a test for an issue which is critical to the operation of the service,
failure to satisfy the Authorities on the issue must allow the Authorities to reject the
overall service. In addition, Pathway were at no stage prepared to accept that
Requirements should prevail over Solutions in the event of conflict or inconsistency.
3.10.6. In deriving the Programme scores, it was felt that the overall weight of evidence
justified the validity of C+ being carried forward. With regard to the scores
themselves, it was agreed at the 20 February meeting that these should be averaged,
rounding towards the Demo score which was considered more important to this value
factor. The meeting confirmed this principle.
3.11. Value Factor 10 : Stability/Coherence
The prime service provider and his associated consortium members and/or main
subcontractors need to have a stable relationship from which to provide the services.
The member organisations should balance each others’ skills and resources to match
those needed to deliver the services. The prime service provider should show his
competence to successfully lead such a group of organisations to deliver similar
services.
Partnership
Leadership and Synergy Very Good Very Good OK
Contracts 6.0 B 6.0 B 4.0 B
Demonstrator 6.5 Cc 6.0 Cc 3.0 Cc
Programme 6.2 B 6.0 B 37 B
3.11.1. The Demonstration scores for this Value Factor are based only on observed events
and background knowledge of constituent companies.
3.11.2. Both streams felt that Cardlink and IBM have shown strong cohesion and
management of consortium members throughout the procurement. Neither give rise
to any particular concerns. Cardlink particularly have demonstrated a seamless front
and leadership.
3.11.3. Similarly, both streams felt that although key individual organisations within the
Pathway consortium have good skills, ideas and experience, it was very apparent that
the lack of leadership demonstrated by the prime contractor has meant the group has
not gelled together as unit. On occasion this has resulted in inconsistent information
being presented, leading to confusion within the Programme. However, one
exception to the rule has been the coherence demonstrated by the components of the
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organisation responsible for roll-out. On the whole the consortium represents a
group of diverse organisations thrown together to solve a problem without a leader
who provides direction and consistency of approach. Pathway’s shareholding
arrangement did not appear to allow the lead company to focus its partners to achieve
contractual outputs required by the Contracting Authorities.
3.11.4. Charterhouse Bank acted as advisers to the Authorities on the financial structure of
all three service providers, and this is reflected in the Contracts scores. Serious
reservations concerning Pathway resulted in an “A” risk being raised against them.
This was cleared only after the final negotiation due to a late change of their
company structure by Pathway.
3.11.5. In deriving the Programme scores, it was agreed at the 20 February review that the
bias should be 70/30 in favour of the Contract Stream scores, with the Partnership
input being useful but neutral given its relatively low volume. This principle was
reaffirmed at the meeting.
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