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From Hazel Grant
Client: BA/POCL
Account No BPOCL/)
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Date: 28 August 1998 ecamen
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Time: Fas Gee
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Number of pages (inchiding this page): QS ees
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Note: This fx ie intended for the vamed addresses only. It vontains information which may be confidential ord 5 4 gmisy
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feces DAter
40 that we can arrange focits rehaen. To do so. or if you have any queries, please telephone) ae
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BIRD & BIRD
* 90 Fencr Lane
OurRelt HRS/HIG/SJB/BPOCL-1 London £C4A 11?
Telephone
28 August 1998
Mena Rego . “ London
Post Office Counters Limited Web Page
Drury House wwwawobleds.com
116 Blackfriars Road
London
SE1 9UA
Pater
ppl
Legal iden’ Green
OMCxytwahe
Tih Cok
RNSCOG
Dear Mena PIchtwe
P Smith
DW ByamCock
(GI Seah
RECOMMENDED NEGOTIATION STRATEGY 1RCWalhay
ker
MMecdonald
OMCstOne
Thank you for your letter of 26 August addressed to Hamish Sandison. Hamish is now eee
on holiday and has asked me to reply on his behalf, Our comments on your points are BRSinceon
as follows: DH Awe
RIWsd
CM Crathwalte
Standstill NTieakin
RMBicarest
We note your initial comments on the Standstill Agreement. Our view is that the one
Standstill Agreement should be signed, especially before any negotiation meeting. As HEPeanen
aresult; we would appreciate your comments on the Standstill Agreement as soon as = Yet
possible. AStearard
C5RBamee
sh
Project Mentors ichep
MR Hate
. GPowell
Lattach: ‘Alssadesson
HIRUbIN
+} 7 PW aker
lL A copy of the terms of reference for Project Mentors, and Werte
to Hunter
2. A copy of the initial report, which is issued for comments, Faas
int
Pepa
T appreciate that you have not yet formally agreed the terms of reference for Project RH Racwonh
Mentors, and therefore sending you the initial report at this stage may be a little NSP elordell
premature. However, I have enclosed the initial report on the basis that you will coossltants
shortly be able to agree the Project Mentor’s terms of reference. KTCAmola
SNUCukon
P1Rsnn
RE Fancen?
. Dr ENWoldont
EC Office 209 Avenve Loulve, 1050 Brussels, Belgium TelephoneI,
ewesTontsrgoezx Hong Kong 20VF Printing House, 18 foe House Street, Central, Hong Kong Telephone {” nota soldier
28/08 '98 18:34 TX/RX NO. PO2
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Joint Instructions to Counsel
We note your comments.
General
Hamish would like to discuss this issue with you direct, upon his rerum from holiday.
Please contact me if you have any questions on this letter.
Yours sincerely
HAZEL GRANT
ce: Dave Miller, POCL
28/08 '98 18:34 TX/RX NO. P03
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TO
PROJECT MENTORS LTD.
as Subcontractor to Bird & Bird
Terms of Reference
Expert roview of BAIPOCL Paynient Card Programme
Cary out an expen review of the BA/POCL Payment Card Programme to support
negotiation and potential fitigation between tne Sponsoring Authorities and ICL
Pathway, Including:
0)
(2)
@)
(4)
6)
6)
Assess the strengths and weaknesses of the Sponsoring Authorities’ case.
Prapare a report, by August 28" 1998, giving an initial assessment of those
areas where ICL Pathway have alleged that there was Sponsor culpability for
delays that occurred before the raplan in February 1897.
Coordinate the preparation of a quantum of costs, incurred by BA and POCL in
their preparations for the Payment Card Programme, that would substantiate a
claim for damages resulting from termination of the Programme.
Work in the negotiation team, carying out such components of the expert
review as are agreed by the taam to be needed at each stage of the
negotiation,
Plan and direct the work that will be needed to identify, retrieve and review all
the documents that will support the negatation and potential litigation.
Prapara such reports as are deemed necessary by the negotiation team to
support ongoing negotiation and potential litigation.
Report to Bird and Bird, the Benefits Agericy and Post Office Counters Limited.
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Project Mentors
August 26, 1998
Mr. Hamish Sandison
Setar GEINERETI
Bird & Bird
90 Fetter Lane Sb ONVL2 = —————_——
LONDON EC4A 1JuP ="
Dear Hamish, i
27 AUG 1998
Independent Consultant Review of BAIPOCL Payment AE@rweED
Privileged and confidential, Prepared in contemplation of litigation
lenclose the following:
.
e
@ paper copy of my report;
a future activities list,
a disk copy of the report;
an involce for my work in August;
a statement of amounts owing.
I will retum to my office on Monday moming, September 7*, and will no doubt speak to
you in the following week. I have arranged with Rod for a meeting with Duncan that
week, I am liaising with Andy Wing and Jim Pimpemell to arrange support so that we
can move quickly when I retum.
Enjoy your hofiday ~ I willl
Yours sincerely,
GRO
Andrew Davies
Director
Project Mentors Lintnd
Registored in England no:318018 Registered Officn: 20 Upper High Street Thame Oxon
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Privileged and confidential, Prepared in contempiatiGr’
Bird and Bird
Woyete,
Project Mentors further tasks identified in August 1998 report
in the following table we list all the activities identified as requiring further work in
our August 7998 report. The work will involve a combination of interviews and
document reviews, with relevant documents identified by interviewees. The work will
be carried by a Project Mentors team, with
i split by application area, At
a later stage, if the negotiations move into litigation, it will be necessary to carry out
@ more detailed review of all documents found.
Pare ‘Activity Key peopie
graph
nd
Review Project Management al
SOT I Develop a full understanding of the project management approach I Peter Crahan
304 I taken by all parties and the tasks carried out Bruce McNiven
308 Team Leaders
= Review project reporting ‘As above
a Review the management of design activities John Meagher
Design team teaders
Review design
Develop a detailed understanding of the design of the systems and I John Meagher
the interface systems in BA and POCL Design documents.
a Develop a better understanding of pre-contract design activities Andrew Stott
Dave Miller
Gareth Lewis
= Colin Oudet
404 I Develop a better understanding of information given to Pathway gre- I As above
I contract and their handling of this information,
458" investigate all areas of design to understand whether there was slow I John Meagher
resolution of issues by any party = Design team leaders
“BOS Review ICl claims of delay caused by inadequate business analysis I John Meagher
Land changed requirements Design team leaders
Review history of CAPS development to develop a better ‘Yet Curran
408 I understanding and to assess whether Pathway were impacted by CAPS design tear
CAPE delays: leaders
208 I Review ICL claims of delay caused by slow resolution of issues Peter Crahan
Bruce MoNiven
John Meagher
Design team eaders_I
Review general issues
408 IW appropriate, develop an understanding of the POCL premises Dave Milter
issue e Bruce McNiven,
410 I Investigate the preperation of volumetric information Ken Davenport,
ee Keith Baines.
208 I Review areas of conflict betwen the Authorities and consider the Pater Crahen
407 I impact of the POA Dave Miller
“ Bruce MeNiven
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Privileged and confidential. Prepared in contempe .
Bird and Bird
Expert Review of BA/POCL Payment Card Programme
Initial Report August 1998
Contents
Page
1 Introduction 2
2 Conclusions 3
3 Management of the Project 5
4 ICL Pathway allegations 7
Appendix1 — People interviewed . 47
Appendix 2 Documents reviewed 18
Appendix 3 List of (CL Pathway allegations and replies to these 19
Appendix4 § Terms of Reference 20
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Bird and Bird
Expert Review of BA/POCL Payment Card Programme
Initlal Report August 1998
1 Introduction
401 This initial report has been prepared after a short review of the history of the
Payment Card Programme from its inception in mid 1994, following the
approval of the Feasibility Study report, to the current time. The review
commenced on August 10, 1998 and was completed by August 26, 1998.
This report also takes account of previous Project Mentors reviews of the
programme, conducted in February - April and July 1998,
102 Project Mentors Is a Management Consultancy which specialises In the
theory and practice of large IT based business change projects. All the
directors are experienced IS project managers. Andrew Davies, the director
responsible for the BA/POCL programme review, Is a visiting lecturer at
Cranfield School of Management in Information Systems Project
Management and is the Course Director for the Cranfield course ‘Managing
Information Systems Projects’, We have applied our experience to this
assessment of the Payment Card Programme.
103 This report gives some initial conclusions, based on interviews with senior
management associated with the programme and on some {limited review of
relevant documents (see Appendices 1 and 2). It concentrates on the delays
that occurred prior to the February 1997 replan, focusing In particular on
those areas where ICL Pathway have alleged, In various letters, papers and
presentations, culpability by the public sector parties.
104 Further work will be done to Interview a broader range of people and to
conduct detailed reviews of relevant documents, in order to prepare a
comprehensive report on the history of the programme that clearly identifies
the many problems that have occurred and their causes.
405 Terms of Reference are set out in Appendix 4.
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203
204
205
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Expert Review of BA/POCL Payment Card Programme
Initial Report August 1998
Conclusions
We quote from the Andersen Consulting report of 7™ March 1997, ‘Raview of
CAPS and PDA Organisational Structure and Functions’:
‘At face value, the unique challenge faced by CAPS and the PDA in
delivering against their declared commitments is the commercial buyer-
supplier relationship between two farye sponsors of a joint change
programme to Improve and automate the payment of social security benefits
through the Post Office network. But the substance of the work to be
managed Is itself of enormous complexity because it is effectively 3 separate
major programmes of change, fo be delivered in parallel. In short we knove of
no more complex business/IT programme on-going in the UK foday,
particularly given the Interchange between the three programmes
(BA/POCL, POCL in-house developments and CAPS)’.
We agree with Andersen Consulting's conclusion that the Payment Card and
Post Office counter automation programme. was the most complex IT-
enabled business change programme in the UK in 1997. We suspect it still
holds that position. The role of the main provider of the base services for
such a programme carries enormous responsibility and should be carried out
following best industry practice in all aspects of the service provider's
activity. The evidence we have seen to date suggests strongly that ICL
Pathway have not mat this goal.
We have found no evidence that ICL Pathway have applied effective best
practice project management methods that would have been appropriate for
managing a project of this scale, scope and complexity. Their failure to
deliver products to the published timescales, to wam quickly the sponsoring
Authorities that deliveries would be fate and to inform the sponsoring
Authorities of the timescales for delivery of Authority responsibilitles and the
implications of delay in delivering these responsibilities suggest serious
weaknesses in the planning and estimating techniques applied by ICL
Pathway.
A key component of best practica project management Is efficient, regular
reporting of all activities completed, active and outstanding, together with
assessment of issues arising. We have, as yet, found little evidence of such
reporting in this programme, which, in the PFI environment, we would expect
to be driven by the service provider.
{tis our impression that ICL Pathway have been primarily responsible for the
delays to the programme by seriously under estimating the effort and time
needed to develop the services and, as a result, not allocating sufficient
Tesources to complete their contracted obligations within the agreed
timescale. We have, as yet, found no documented and quantified claims by
ICL Pathway to support their verbal assertions that inadequate business
analysis and changes in requirements have impacted thelr ability to meet the
timescale. Such claims would have been a key feature of a well managed
service provider programme and we have been surprised by their absence.
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Expert Review of BA/POCL Payment Card Programme
initial Report August 1998
206 : Akey issue is that the design of the systems to support the service Is still not
complete, some 2 % years after contract signature. We do not believe that
ICL Pathway have given this activity the emphasis and resource appropriate
for the task to be cartied out. While there are some aspecis of the design
where there has been slow resolution of issues by the PDA and Contracting
Authorities, we have, as yet, found no quantified evidence from Pathway to
support thelr claims that this has caused delay.
207 itis not disputed that the Benefits Agency CAPS programme has also been
delayed. However, it appears fo have met the targets agreed at the February
1997 replan, apart from delays caused by the unavailability of ICL Pathway
releases, We have, as yet, found no evidence suggesting that ICL Pathway
have suffered delay to their activities as a result of CAPS delays, either
before or after the February 1997 replan.
208 We donot dispute ICL Pathways claims that there has been conflict between
the Contracting Authorities and that the PDA could have operated more
effectively. Again we have, as yet, found no quantified evidence that ICL
Pathway have suffered delay as a result of these issues, nor have we, as
yet, found evidence that ICL Pathway took any effective and timely action to
deal with these issues,
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Management of the Project
We have applied our experience of Information Systems Project
Management to our assessment of the approach taken to the management
of the Payment Card Programme. We have to date gained an initial
impression of the management approach. Further work will be needed to
develop a full understanding.
{t is clear that the overall programme of change, to create the Pathway
payment card operation, to change the benefit payment operations of BA
and to automate the counter services of POCL, is vast. We quote from the
Andersen Consulting report of 7* March 1997, ‘Review of CAPS and PDA
Organisational Structure and Functions’:
‘At face value, the unique challenge faced by CAPS and the PDA in :
delivering against their declared commitments is the commercial buyer
supplier relationship between fwo large sponsors of a joint change
programme to improve and automate the payment of social security benefits
through the Post Office network. But the substance of the work to be
managed is itself of enormous complexity because it is effectively 3 separate
major programmes of change, to be delivered in parallel. In short we know of
no more complex business/iT programme on-going in the UK today,
particularly given the interchange between the three programmes
(BA/POCL, POCL in-house developments and CAPS)’,
We agree with Andersen Consulting’s conclusion that the Payment Card and
Post Office counter automation programme was the most complex [T-
enabled business change programme in the UK in 1997. We suspect it still
holds that position. The role of the main provider of the base services for
such a programme carries enormous responsibility and should be cartied out
following best industry practice in alf aspects of the service provider's
responsibility. The evidence we have seen to date suggests strongly that ICL
Pathway have not met this goal.
We hava not yet conducted a review of the project management of the
programme by ICL Pathway, the PDA and the Sponsoring Authorities. Our
initial Impression is that no formal methods, such as PRINCE, were used.
There are well prepared, high level, plans documented in the various
versions of the Master Plan and we understand that lower level plans may
have been prepared in some areas, The comment by Mr. Bennett of ICL
Pathway at the PDA Board meeting on 13” August 1996, when Master Plan
version 1 was approved, Is revealing. The minutes state (tem 4.6): ‘Mr.
Bennett confirmed that ICL Pathway were anxious fo progress fram drawing
up plans to actually using them and were content therefore to sign off this
version for that purpose. He did however want it placed on record that the
plan quoted dates which were a mixture of agreed baseline, planned targets,
and hoped for dates and that this weakened the effectiveness of the plan
and the process for review."
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Expert Review of BA/POCL Payment Card Programme
Initial Report August 1998
The PDA Master Plans are a list of high level activities and milestone dates,
but contain no estimates or resourcing. The covering note accompanying
version 4 identifies that further work will be necessary to:
° develop sub-ordinate plans;
. design and put in place reviewing and reporting for sub-ordinate
plans;
° develop sub-ordinate resource plans within the PDA;
. review ICL Pathway detailed plans for completeness and fit.
We will investigate the extent to which these tasks were canied out in further
stages of our work.
Our impression from the work we have cared out to date is that Mr.
Bennett's comments of 18" August 1996 reflect the weakness in the project
management approach taken by ICL Pathway at that time.
A key component of best practice project management is efficient, regular
reporting of all activities completed, active and outstanding, together with
assessment of Issues arising. We have, as yet, found little evidence of such
reporting in this programme, which, in the PFI environment, we would expect
to be driven by the service provider.
Designing a system of the scale and complexity required for the Payment
Card programme Is a complex and difficult task. In our interviews we have
been told that ICL Pathway assigned a small team to this task. In the early
stages of the project, the team were very focused on the next deliverable:
Initial go live, then ralease 1c followed by release 2 (release te having been
@abandoned). Design activities for release 2+, the (as yet unscheduled)
release which will deliver all outstanding contracted functionality, continue at
the date of writing in August 1998, We suspect that the planning, estimating
and resourcing for the design activities were not done well and that this has
been a main cause of the delays to the development of the ICL Pathway
systems. We shall investigate further.
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Initial Report August 1998
4 ICL Pathway allegations
401 ICL Pathway have been actively making allegations since January 1998, in
the form of letters, papers and presentations. A list of relevant documents,
including replies to ICL Pathway, Is given in Appendix 3.
402 We have studied all the documents containing these allegations and have
summarised the allegations under nine headings, giving a short précis of the
allegation for each heading:
41 Business Analysis
Inadequate business analysis was carried out prior to contract and
this has resulted In excessive subsequent work.
2. Design of the solution
‘The system has been optimised far beyond that envisaged at
contract as a result of Authority interference.
3 Slow resolution of issues
Slow resolution of Agreements to Agree, Contracting Authority
Responsibilities and Change Control has caused delay.
4 CAPS
The true position on availability of CAPS has been misrepresented
and has caused delay.
§ Conflict between the Authorities
Differences between the Authorities have resulted in conflict which
has been one of the primary causes of delay.
6 PDA
The operation of the PDA has hindered Pathway.
7 POCL premises
The POCL premises are not fit for the purpose of installing
automation equipment.
8 Volumes
The transaction volumes given by the Authorities were inaccurate.
9 Release 1c extension
Release 1c is sufficiently robust for a roll out to several thousand
offices.
Table 4.1 shows the cross reference of the allegations to the various
documents from ICL Pathway.
In subsequent paragraphs, we consider each of the allegations,
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ee 3 4 s 8 7 é &
ar PDA POCL I Volumes /Reisase 1
Allegation Guainese I Design of St caps I Contict re
Booument — Auten
Presentations Y A v v ¥ v
ian f Feb 96. se eRe
Paper ov v v a vw ov w
j60v98_ (refers to pages) fol $58 I GS79) I w19 I Ga BA. coe
ivetter v v
ES ai
ieter } v I
OUTS. = i
iLetter and paper vw vw v
kuzee
iExanptes:
[Position Paper 1/608. i
neve v v
Foreign encashimert a v ¥
SMART APS “ ¥ ¥
4 OSS Reference date x 7 vw v 23
I POCL Reference data I v ¥
6 Conflict and POA A ao ft
7 Drop dower v
‘a OMS end of Interest wv we
[6.2 Summarised receipts: v v
[2 Change control v v 4
Bt Ondine, temporary vw v
Rolvens. and casts! agents
2 Unmatched v x v
ancaghmearite,
1.3 Continuation receipts aa a vw
0 Contracting Authorities of /
iresporesibilties. ‘
Table 4.1 Cross reference of allegations to documents
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gi
Business analysis
‘Inadequate business analysis was carried out prior to contract and this has
resulted in excessive subsequent work’
The Pathway allegations in this area are very general, except in the specific
cases identified in the ‘Examples’ paper of 1/6/08. These cases do identify
some requirements which have proved difficult to specify in detail and which
had not been fully analysed prior to contract. We will investigate and review
these cases in much more detail in the next phase of our work.
However, the overall impression we have gained is that the business
analysis pre-contract was of a scale that we would expect from our
experience of other projects and that it should have enabled Pathway to gain
a good understanding of the scale and nature of the system which they
contracted to deliver. The level of resource which we understand Pathway to
have allocated to the development of the project post contract suggests that
they failed to gain such an understanding.
Dasign of the solution
‘The system has been optimised far beyond that envisaged at contract as 2
fesult of Authority interference’
In the position paper sent to the Secratary of State on 27/7/98, Kelth Todd
makes the following statement ‘The Sponsors have not allowed ICL to
manage the contract in the way required under the PFI regime, without
interference. Until after the PA Consulting report last September a team, 150
strong, named the Project Design Authority (a2 body set up and managed
and staffed from the Benefits Agency, despite the fact that the design risk,
along with the other risks in the project, had been transferred to ICL as
described above) insisted on negotiating every decision in detall, on pain of
rejection of the system if its requirements were not satisfied. As a result of
the PA report the PDA has been disbanded, but the damage has already
been done. The system has been optimised to an extent far beyond that
contemplated in the original contract and, although we have satisfied the
increasingly (and arguably, in some cases unnecessarily) complex
requirements of the Sponsors, the result has been that the prospective
revenue eaming period grew steadily shorter and our costs increased,’
(Page 2) .
This allegation is weakened by serious inaccuracies it contains, in that the
PDA was the Programme Delivery Authority, not the Project Design Authority
as stated, and it was staffed from both the Benefits Agency and Post Office
Counters, a fact which caused some criticism in the PA Consulting report of
40/97: ‘there is a tendency to populate the PDA with a balance of
representation from BA and POCL, rather than strictly according to required
competencies’ - page vi of the Management Summary.
The view of the people from the PDA with whom we have discussed this
Issue is that Pathway prepared design documents which were submitted to
the PDA for discussion and referral to Sponsors where appropriate, Many of
these documents required extensive rework to meet the established
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requirements of the Sponsors. There were cases, some of which Pathway
have included In their ‘Examples’ set, where there was a degre of
uncertainty and indecision from the Sponsors and, in some cases, conflict
between the Sponsors.
However, we have gained a strong impression that the most common
problem was a failure by Pathway to grasp the detail of the requirement,
which then needed considerable input from PDA and Sponsor staff to
correct. We have also been told that Pathway failed to employ sufficient staff
to conduct the necessary analysis to develop their design and did not
employ effective methods and techniques to perform these tasks.
We have not identified any significant documented complaints by Pathway in
the period when they were doing the design work that the Sponsors were
axtending or ‘optimising’ the requirements, other than in the area of Security.
The Security issues have been researched in detail by PA Consulting, who
Produced a report in February 1998 that stated: ‘our investigations found no
evidence to suggest that the Security Requirements were onerous, ill defined
and constantly changing. The Requiraments were developed in conjunction
with Goverment standards arid industry best practice and as such are
appropriate and adequate for the programme. They have been stable since
February 1996 (before award of contract), with the only post-contract change
being a modification requested by Pathway.
It should be noted that design work is still continuing, at the date of writing in
August 1998, with Pathway and BA/POCL staff working together to complete
it,
Our initial view is that Pathway were given adequate information which
should have enabled them to understand the complexity of the system which
they contracted to deliver. The Statement of Service Requirements (13/4/95)
demonstrates to our satisfaction that the Payment Card system will be a
complex system that will need to handle both benefit payment and other
counter services for BA and POCL. The subsequent extended period of
demonstration (six months) leading to the preparation of an Invitation to
Tender (29/2/96) containing both requirements and service provider
solutions should have given Pathway every opportunity to understand the
scale and complexity of the task which they were taking on. We hava, as yet,
seen nothing to alter our view In our previous report that: ‘It is our opinion
that Pathway seriously underestimated the effort and time needed to
develop the services when they prepared their proposal and did not
recognise this under-estimation in the period from May 1996 to February
1997, when the contract re-plan was agreed’.
It should be noted that the PA Consulting report of October 1997 also took
this view. ‘Af 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. In reality, the amount of development work needed was
in PA's opinion, seriously misjudged. As a result, time scales and resource
needs were underestimated.’ (M3.4)
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We will need to conduct further work to develop a more detalled
understanding of the nature of the information given to Pathway and the way
in whieh they handled the information before we can confirm our current,
initial view.
405 Slow resolution of issues
‘Slow resolution of Agreements to Agree, Contracting Authority
Responsibllities and Change Control has caused delay’.
We quote from our June 1998 report and our letter of 1% July 1998:
June report: ‘Our review of documentation has identified that some of the
hundreds of issues (A2As, CARs and CCNs) have taken a long time fo
resolve and there are a few instances of documented Pathway claims that
delay will be caused if resolution is not achieved quickly. We have not found
a single documented claim by Pathway that quantifies the extent of such
delay or that states that such delay has occurred.
it is normal In a project of this size and complexity for there to be many
issues that require resolution and such resolution may be slow in some
cases. We would have expected the development manager (Pathway) to
have identified any critical path activities that were dependent on Sponsor
resolution and to have documented these to the PDA.
From our interviews, we understand that the responsibility for slow resolution
of issues lies with Pathway as well as the Sponsors, as there have been
many Instances where Pathway have been late in delivering documents or
fave delivered documents of poor quality.’
July letter: ‘It is our opinion that the Pathway examples are typical of the sort
of issues that we would expect fo be raised in a programme of this type. The
fact that none of the issues were escalated through the CNT meeting to the
PDA Board supports this view. The final statement of Paragraph 207 of our
report, ‘Pathway have made no documented claims to support their verbal
assertions of delays resulting from slow issue resolution.’, still holds as even
the 1" June document contains no quantified assessment of the Impact of
the alleged delays. We do not, therefore, consider that the dacumented
examples change the opinion given in our review of the programme.’
In the short raview we have undertaken far the preparation of this report, we
have found nothing that alters these views. We will, however, be
investigating all areas where there has been significant design work and
discussion in order to build a much more complete understanding of what
happened.
406 CAPS
‘The true position on availability of CAPS has been misrepresented and has
caused delay’,
CAPS passes benefit data to the Pathway systems and recelves payment
data from them. There appear to be two Issues which ICL Pathway are
ralsing about CAPS: the first Is that they expected a single release on
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1° September 1996 and the second that they were not Informed of
subsequent delays,
There is some contractual confusion on the plans for delivery of CAPS. In
Schedule 87 of the contract, the Timetable, CAPS is shown as due for
delivery on 1% September 1996, with no reference to the components due for
delivery on that date and with no indication that there will be subsequent
releases. ICL have stated in the 5” March Position Paper that: ‘it was
represented pre-contract that CAPS would be available in one single feed for
integration testing on the 1" September 1996.'
However, Schedule B7 also specifies that there will be a limited go live on
23™ September 1996 and that roll out of DSS services will take place over
the period January 1997 to July 1988. There is a reference to the CAPS
Component Release Strategy of 28" February 1996, in Requirement 933 in
Schedule B1, This document shows that CAPS was planned for delivery in a
number of phased releases. The main pre-contract document we have
reviewed, the Statement of Service Requirements. of 13” April 1995, which
was the basis for the (CL Pathway proposal! of 8" June 1995, also clearly
states that CAPS would be implemented in phases,
Immediately post contract, work started on the production of a ‘Master Plan’,
and version 1, dated 9" July 1996, was S Presented for approval to the PDA
Board, attended by ICL Pathway, on 43° August 1996. It was approved and
version 1 was distributed on 16° August 1996. This plan was prepared by
PA Consulting for the PDA, BA, POCL and ICL Pathway Jointly and all
parties appear to have committed to it through their approval at the PDA
Board. This Plan shows a phased delivery of CAPS and no comment was
made by ICL Pathway at the time.
We therefore conclude that ICL Pathway were notified and should have .
been aware that CAPS was to be delivered in phased releases commencing
In September 1996.
On the second issue, of failure to notify ICL Pathway of CAPS delays, the
following statements (among others) were mada in the 5" March Position
Paper. ‘indeed it now seems that the true position as to the CAPS
programms was deliberately concealed from Pathway for several months. It
was not until February 1997 that Pathway received notification of the delay
to the CAPS programme, by which time fundamental principles relating to
the basis of the replanning exercise had been established and these
involved Pathway making further substantial commercial concessions so as
to minimise delay to the Project.
We have interviewed some staff whe were involved {n the CAPS and
Payment Card replans in late 1996 / early 1997 and reviewed certain
documents. The situation was not simple, but our initial conclusions are:
. there was a revision of CAPS plans, announced to CAPS in June
1996 and Incorporated in Master Plan version 1, that deferred the
first card payment for a sacond benefit after Child Benefit from
January to April 1997;
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. a CAPS workshop was held on 4" June 1996, where a presentation
was made to show that the revised plans were going to be difficult to
achieve. A number of actions were initiated to establish whether. the
problems could be overcome and what further actions were needed;
. te-planning of the CAPS programme took place over the period to
mid October 1996, concluding with a ministerial submission by Ms.
Rintoul on 11" October 1996 that stated the need to reschedule;
. positive statements were made by Mr. McCorkell, on the progress of
CAPS, at the PDA Board meetings on 10" July 1996 and 13" August
1996, although the August minute includes references to ‘a very
difficult timetable’ and ‘risks of not meeting delivery dates were
tecagnised’, suggesting some concems;
e at the 17° September PDA Board Mr. McCorkell reported that
subsequent CAPS releases would be impacted by the work to
achieve initial go live;
° no CAPS issues were raised at the 8” October PDA Board;
e it was recognised within BA that an independent review of the CAPS
programme would be of benefit and this was commissioned from
Emst and Young, taking place In November and December 1996,
fteporting in December. ICL, as suppliers of the hardware and
systems software for the CAPS platforms, took a part in this review.
The review found that the CAPS programme was sound and
recommended continuation, but with timetable revisions;
° at the 21% November PDA Board it was minuted that ICL Pathway
had taken action to alert and stress the importance of the CAPS
review work with senior managers in ICL. {t was also minuted that Mr.
McCorkell acknowledged the co-operation with and input to the Emst
& Young review from [CL Pathway;
e The revised timetable was formally documented in the ‘CAPS
Migration Strategy’ paper dated 26" March 1897.
Our Initial conclusion from our investigations is that there was concsm that
the CAPS timetable was not achievable in June 1996 and work then took
place to attempt to rectify matters, concluding with a realisation by October
1996 that this was not possible. Indications of possible difficulties were being
made to ICL Pathway by August 1996, but nothing formal was said until mid
October / early November. This suggests that there is little merit in the ICL
Pathway claims, in Keith Todd's letter of 9" July 1998, ‘of deliberate
concealment of the CAPS position in the period June to August 1996,
although our first investigations suggest that there was uncertainty about the
CAPS position in this period. Further Investigation will be needed to fully
understand the position. It will also be necessary to assess whether [CL
Pathway’s claim that such concealment harmed tham holds any merit.
One further issue with CAPS was raised’in Kelth Todd's letter of
-9" July1998, when ha stated: ‘Incidentally, the state of the CAPS programme
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appears to have deteriorated further wither t, unexpected declaratio)
that CAPS will require an additional nine months ind
testing of Income Supphrjand JSA.’ This complaint appears to relate to the
current exercise to pre; anew plan for implementation of the programme.
In our discussions we have been told that there Is Indeed additional time
Suggested for testing, to recognise that previous ICL Pathway testing
estimates have proved inadequate in practice. The implementation of further -
benefits (Income Support and JSA) has been delayed by some six months,
to reduce the time before starting the rofl out of Child Benefit and Counter
Services to more Post Offices, as it was felt that adding the two additional
benefits to the test would unduly delay this activity, to the disadvantage of all
parties. The statements in Keith Todd's letter suggest that the logic of this
approach has escaped [CL Pathway. We understand that they do not agree
with the ‘extended’ testing which the Benefits Agency requires, not accepting
that their test estimates may be insufficient
We have been told by the CAPS team that their preparations for roll-out of
Income Support and JSA are well advanced and are dependent on the
availabllity of Pathway release 2 for integration testing. Subject to a more
detailed understanding of the precise position, we therefore conclude that
there is a genuine dispute between the Benefits Agency and [CL Pathway on
the timetable for testing and subsequent rol-out, which has nothing to do
with the CAPS programme,
Conflict between the Authorities
‘Differences between the Authorities have resulted in conflict which has been
one of the primary causes of delay’
This issue, documented primarily in the ICL Pathway ‘Examples’ paper of
1*June 1998, appears to rely heavily on the conclusions reached by PA
Consulting in their October 1997 review of the BA/POCL programme, where
the issue Is documented in paragraphs 3.6.4 and 4.1.1. Neither ICL Pathway
nor PA Consulting attempt to quantify the impact of such conflict on the
delays to the programme.
We have found in our interviews that there {s agreement that there Is conflict
between the Authorities but disagreement that it has seriously impacted the
programme. The general view Is that where coflict has become an issue, It
has been dealt with by one of two methads:
e escalation of the issue to senior management, who have managed
resolution;
. or, if that was not successful, production of a ‘working solution’ that
ICL Pathway have worked on pending resolution, with a clear
understanding that Change Control would be applled if the final
resolution amended the ‘working solution’.
There appear to be examples where considerable timo elapsed before
escalation, but this option would always have been open to ICL Pathway.
Further investigation will be needed to establish the facts in this area. We
have certainly, as yet, seen no quantified evidence that the, admitted,
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assisted Pathway to complete their design earlier. We shall investigate these
claims In subsequent stages of our work.
409 POCL Premises
‘The POCL premises are not fit for the purpose of installing automation
equipment’
This issue is the subject of a separate arbitration procedure and so we have
not investigated it. Investigation may become necessary In subsequent
stages of our work.
410 Volumes
‘The transaction volumes given by the Authorities were inaccurate’
This issue was first raised In Kelth Todd's letter of 1* June 1998 when he
stated that: ‘The facts are that in bidding for the contract, Pathway relied
upon volumetric information supplied by the DSS which was represented to
be the product of proper and thorough analysis.’ This sentence appears to
suggest that there was some fault with the ‘volumetric information’, but
contains.no further clarification.
In Keith Todd's latter of 9" July, he states: ‘this information (designated by
the DSS as ‘Best View Volumes’ and yet apparently negligently prepared)
was relied upon by Pathway.’ He then refers to the 6" March position paper
which contains no reference to volumes other than to present the contract
volume implications of the delayed conversion schedule.
In Keith Todd's fetter of 27” July, he states: ‘...our reliance on many of the
Sponsors’ representations......as fo the accuracy of transaction volumes
tumed out to be ill-founded,
We understand that the volumes of DSS transactions given in the ‘Workload
Brief prior to contract were based on the same Information as was used by
DSS for their own projections. We understand that a recent increase in the
number of racipients opting voluntarily for payment by ACT has somewhat
reduced the numbers to be paid through Post Offices, but we are not aware
of any other major changes to the projections. We do not understand the
substance of this claim, but will investigate further.
411 Release 1c extension
‘Release 1c is sufficiently robust for a call out to several thousand offices’
This claim, made in the Keith Todd letters of 1% June, 9” July and 27" July
1998, was refuted in a meeting between George McCorkell and John
Bennett of {CL Pathway in August 1998. In a letter dated 7" August 1998,
Jonn Bennett sets out the work that would be necessary to extend release
1¢ to enable rall out to more offices. He Identifies several weeks work but
then states: ‘f do not necessarily recommend that we change the current
plan.’ In the past there was no need to roll out release 1¢ to more offices, as
it was expected that release fe, ar later release 2, would follow shortly after
1c. It is only the delay to these releases that has caused Kelth Todd to
suggest further roll out of 1c.
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conflict has had a serious impact on the programme. We also take an initial
view that it would have been naive of ICL Pathway to expect complete
agreement between the two Authorities on all issues, particularly given the
extensive experience which ICL have of working with UK Goverment
Departments, which was emphasised as a positive benefit In the ICL
Pathway proposal of 8" June 1995.
PDA
‘The operation of the PDA has hindered Pathway’
The complaints about the PDA take two forms:
. the 6” March Position Paper contains a number of direct criticisms of
the operation of the PDA, stating that:
° ‘the PDA has sought to manage the Contract as a joint agent
of the Authorities but has lacked the competence and proper
authority to do so to the extent that no dacision could be taken
by the PDA without the direct agreement of both Authorities,
This has caused delay, ...
° ‘Tho Imposition of the PDA between Pathway and the
Authorities has acted as a hindrance to the proper
understanding of the Authorities' requirements In
circumstances where direct access fo the Authorities has
been denied.’
. ‘Regrettably, delay has been the hallmark of the Project
inscribed by the PDA, which, without its own business case or
Incentive ¢o expedite the Project, has acted as if there was no
correlation between time and money.’
° the 4“ June ‘Examples’ paper repeats a number of the comments
_made by PA Consulting in theit October 1997 repart.
Our view is that, as should be expected, there is always scope to find fault in
a project organisation and experiance will show better ways in which it could
be managed. This process has been followed by the Authorities in the
Payment Card programme, with regular reviews and subsequent
teorganisations to implement improvements.
it is our view that any supplier wishing to develop systems for two, very
large, Government organisations would demand that there was a single,
central, body to which they could interface. The PDA was set up to carry out
this role. It is an interesting debate as to whether ICL Pathway would have
benefited from more direct interaction with members of the sponsoring
“Authorities, as opposed to working through members of the PDA responsible
for the relevant area, but it is a debate to which there can be no definitive
answer.
It has also been suggested to us that ICL Pathway failed to use the PDA
effectively in designing their solution, not involving members of the PDA who
believe that they could have made a valuable contribution that would have
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Appendix? People interviewed
John Cook BA/POCL 12/8/98
Colin Oudot BA/POCL 13/8/98
George MeCorkell BA 14/8/98
Peter Crahan BA 14/8/98
Derek Brown . BA 14/898
Ken Davenport BA COBAP 14/8/98
Steph Fowler BA COBAP 14/8/98
Andrew Stott DSS 17/8198
Dave Miller POCL Horizon 17/8/98
Val Curran BA CAPS 19/8/98
Parry Jenkins : BA CAPS 19/8/98
Vinca Gaskell BA CAPS 19/8/98
Peter French BA CAPS 19/8/98
Pat Kelsey BA/POCL 21/8/98
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Appendix 2 Documents Reviewed
Minutes
BA/POCL Programme Steering Committee Minutes
Programme Management Board Minutes
PDA Board Minutes
PDA Pre-Board Minutes
CAPS Programme Steering Committee
CAPS/Pathway Technical Interface Minutes
CAPS Programme Board Minutes
Demonstrator meeting minutes
Reports and specifications
‘Contract
Statement of Service Requirements
Pathway ITT
Pathway proposal
Functional Specification Version 6
Emst & Young ‘Review of CAPS’
Andersen Consulting ‘Review of CAPS and PDA
Organisational Structure and Functions’
CAPS Component Release Strategy
CAPS Migration Strategy
Horizon Programme Replan Summary
HM Treasury Independent Panel Report
PDA Master Plan Version 1
PDA Master Plan Version 3
Bird and Bird (Project Mentors) independent Consultant
Review of BA/POCL Programme
Bird and Bird (Project Mentors) Independent Consultant
Review of responses to ICL Pathway examples
Miscellaneous
Correspondence between ICL and HMG 1998
Various CAPS and ITSA papers, memos and letters 41995-1997
CAPS Submission to Ministers (Jane Rintoul) 110/96
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4/5196 (‘Evaluation’ meeting)
(from 7/95 ~ 5/96)
(from 6/96 - 4/98)
(May-July 86)
(from 5/95 - 7/95)
15/5/95
13/4195
29/2/96
8/8/95 (Including 9/10/95 update)
26/7198
12186
73197
28/2/96
26/5197
29/7198
duly 1998
16/8/96
10/4197
816/98
25/6/98 and 1/7/98
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Appendix3 List of ICL Pathway allegations and replies to these
Document type From . To Date
Presentation Keith Todd Peter Mathison 15/1/98
H M Treasury 2712/98 —
Letter Peter Mathison Keith Todd 23/2/98
Letter Keith Todd Peter Mathison 21898
Position Paper Keith Todd Peter Mathison 6/3/98
Letter Peter Mathison Keith Todd 22/4198
Letter Pat Kelsey John Bennett 1415198
Letter Keith Todd Peter Mathison - 1/6/98
Position Paper Keith Tadd Peter Mathison 4/68
Letter Peter Mathison Keith Todd 28/6/98
Letter Keith Todd Peter Mathison 9/7198
Letter Keith Todd Secretary of State 27/7/98
Paper Keith Todd Secretary of State 27/7/98
Letter Peter Mathison Keith Todd 8/98
Letter John Bennett George McCorkell 7/8/98
Letter George McCorkell John Bennett 12/8/98
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(1) Assess the strengths and weaknesses of the Sponsoring Authorities’ case.
(2) Prepare a report, by August 26” 1998, giving an Initial assessment of those
areas where ICL Pathway have alleged that there was Sponsor culpability
for delays that occurred before the replan in February 1997.
(3) Coordinate the preparation of a quantum of costs, incurred by BA and POCL.
in their preparations for the Payment Card Programme, that would
substantiate a claim for damages resulting from termination of the
Programme.
(4) Work in the negotiation team, carying out such components of the expert
review as are agreed by the team to be needed at each stage of the
negotiation.
) Plan and direct the work that will be needed to Identify, retrieve and review
. all the documents that will support the negotiation and potential litigation.
(6) Prepare such reports as are deemed nacassary by the negotiation team to
support ongoing negotiation and potential litigation.
(7) Report to Bird and Bird, the Benefits Agency and Post Office Counters
Limited.
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Appendix 4 Terms of reference
Carry out an expert review of the BA/POCL Payment Card Programme to support
negotiation and potential litigation between the Sponsoring Authorities and [CL
Pathway, including:
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