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, Slaughter and May 10-12-1998 17:55 PAGE 1/6 RightFAX
TO:05037 J EVANS COMPANY:POST OFFICE
SLAUGHTER AND MAY
inghall Stree IDB + Telephone ax ol
3486 and 8!
FAX TRANSMISSION
05037 10 17:4
10th December, 1998 Document umber CA983440.166
In reply please qu JRT Total >ages (ine this) 6
Jeff Triggs Vniter’s telephone 0171 710 3162
T Jonathan Evans, Post Office Counters Become wmzer 0171 776 3957
Limited
Horizon
I have had a look at Sarah Graham's draft reply to Fujitsu on behalf of the British
Ambassador in Tokyo.
First, I agree that a reply should be sent refuting the various claims made. However, I
fee] that the draft reply goes into too much detail and, more importantly, allows the reader to
infer various admissions of liability, for example:
(a) “the public sector is in no material respect responsible” equals “the public sector
is responsible to some extent”:
(b) “the assertion ..... is unsupported” equals “the assertion could well be right bur
ICL has not proven it yet:
(c) “there is no documentary evidence” equals “it may be true, and there may be
evidence that it is true, but we have not seen it in writing yet”;
(d) “Since that time, the BA has met all of its obligations” equals “before that time,
BA was at fault.”
ssarily be drawn from the
it seems unnecessary to be less
1 am not suggesting that these conclusions would all ne
words and would not be capable of being rebutted. However,
than forthright in our denials. We should also resist going into too much detail.
THIS FACSIMILE IS CONFIDENTIAL AND MAY CONTAIN LEGALLY PRIVILEGED INFORMATION. IF YOU ARE NOT NAMED ABOVE AS.
OR OTHERWISE USE THE INFORMATION
UTE, DIScLO.
AN ADDRESSEE IT MAY BE UNLAWFUL FOR YOU TO READ, Cory
IN THIS FACSIMILE IF YOU ARE NOT THE INTENDED RECIPIENT OF THIS FACSIMILE PLEASE TELEPHONEOR FAX US IMMEDIATELY
A Ist of the pariners and their professional qualifications is available for inspection at the above address
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« Slaughter and May 10-12-1998 17:55 PAGE 2/6 RightFAX
TO:05037 J EVANS COMPANY:POST OFFICE
SLAUGHTER AND May
A983440.100 2 10th December, 1998
Against this background 1 attach a proposed mark up of the letter
Regards,
Jeff Triggs
ce. Nick Gray, Slaughter and May
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draft 9/12/98
LETTER FROM CST IN RESPONSE TO NARUTO'S LETTER OF 4 DECEMBER TO
SIR DAVID WRIGHT
BAIPOCL ACTOMATION PROJECT
@& Thank you for your letter of 4 December to Sir David Wright about the PFI project
To automate benefit payments and Post Offices. Sir David has passed your leur to me, as
the Minister responsible for co ordinating the cross-Government review of the project.
& Stccopencratie} I can only emphasise HM Government's clear view that ICL Pathway_/! $ )
ae in default for failure to deliver a kcy operational milestone for which thopewene Placed \
formaliy in reach in November 1997; that the public sector j
Cs net responsible for the delays; that, given the importance of this project to Government, to ICL
and yourselves, aud aot least to the British people who arc the ultimate customers for it, we
have been making every effort to find an acceptable way forward: but that so far, ICL wwe MAS
made that difficult for us. HM Government cannot justify using taxpayers’ money to meet
the costs of ICL's failure to deliver; nor would it be fait to do so, given the nature of the
competitive tender on witicit tie commacts were first fet. -Fionity-t stout point our thatthe,
te
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DRAYY
{Annex to lemer from Chief Secretary in response to Naruto's letter of 4 D
David Wright j
Changes in specifications
the assertion that the sponsors instigated many changes to the technig&l specification, thereby
causige the delays which have beset the project, iCunsuppoyéd. here have been uo >
siguificunt changes in the sponsors’ requirements and valine of changes to technical
Specitications sought by ICL Pathway and the spousors is no/more than would be expected
of project of this size and complexity. The decision to awgrd the coumracts to ICL Pathway
was based on the solution tendered by ICL Pathwa¥ in response to the sponsors’
reqnicements. ICL Pathway's solution continues to be te sponsors’ preferred solution. The
Sponsors are, however, concerned to ensure complianze with the contracted solution, subject
fo any changes agreed by all the parties.
Role of the Project Delivery Authority (PDA
‘The suggestiuu tat the PDA - established 36 manage the relationship between {CL Pathway
and the sponsors - was unnecessarily bureducratic, added to the delays and was subsequently
abandoned following complaints by I Pathway. is unsupported. The PDA played an
invaluabie role in the management of/the project and provided an essential single point of
sontact between ICL Pathway and thé two sponsor organisations. It was, however, inevitable
that the Organisation would evolyé as the project moved from the procurement phase to
implementation, This resulted iy/the sponsors’ Proposal that the PDA should be reformed as 5
the Horizon project. Indeed, there is no do mentary evidence of {CL Pathway complaining :
to the spansors about the rojé of the PDA. ICL Pathway, by contrast, found it necessary to
bolster its own organisatidn, Particularly in management, planning and testing areas, in
recognition of its serious/underestimation of the task to which it was committed.
d the BA failed to meet its obligations under the contracts in the supply of
data _w ICL Péthway and that this has added to ICL Pathway's delays and costs is
PP in February 1997 all parties, including ICL Pathway, entered into negotiations >
ise the Project plans in recognition that all of the parties, including ICL Pathway, would ~
e_dil iy in meeting their obligations under the terms of the original contracts. The
/plan was ioreet Oa Seno fault basis. Since that time, the BA has met all of its
obligayions under the terms af the contracts to tame except wherc there were
deperidencies on (CL Pathway and ICL Pathway was umble to meet its own commitments.
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Treasury Review
ICL reters to the review panef established in February 1998 under the auspieés of my officials
here at the Treasury. to provide an independent assessment of the project and to provide an
added impetus to finding an acceptuble way forward. We were pleased that after some
discussion ICL felt able to contribute, along with the 2 public s Parties, to that ceview,
which formed a significant basis for the very carcful consideratiof Ministers have been giving
to the future of the project
Benefits Agency's commitment to the project
ICL has suggested that the BA is a reluctant pa
oubt on the willingness of the sponsors to nege
yer in this project and that this must cast
getiate in good faith. We dispute this. Whilst
the BA sees clear advantages in paying benéfirs via automated credit transfers into bank
accornts. it dls recognises that very many of its customers wish to go on collecting their
Money in cash at the post office. That i why the BA has fully supported this project by
meeting all of its contractual obliga and by giving the project the very highest priority
within its own work programme would also add that the sponsors have every interest in
secing the objectives of the projegt secured, not least to avoid adding (0 the costs which have
already been incurred as a resyit of ICT. Parhway's delays.
Increased costs to ICL Pathway
ICL has referred w ity alating costs aud the difficulties it faces in financing completion of
the project. ICT. alsp/Suggests that it will need to secure commercial terms which will enable
it to recoup its igéestment. But, as you recognise, this is a PFI commact under which the
service provider agrees to bear substantial risks associated with design, development and
implementatigh. The sponsors are firmly of the view that ICL Pathway has been in breach
of contractSince November 1997 for failing to complete an operational crial required under
the termiyOf the contracts. As a consequence of this and other delays caused by ICL Pathway,
doth spOnsors have incurred very significant additional costs. Any proposal which envisaged
a lcgfster of risk back to the public sector would therefore be unacceptable in view of ICL
Pythway's responsibility for the delays
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