Blind Copies:
Q, Cope
Richard Close
Howard Hyman
Tim Brown
Sandra Rees
Keith Baines
Kevin Corrigan
POL00038841
POL00038841
with compliments
Development Director
Post Office Counters Ltd
King Edward Building
King Edward Street
London ECIA IAA
Pou Otice England
‘Not 2154540 Regueored Onice King Ledward Butdng
King Edward Sereet London ECIA TAA
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Post Office Counters Ltd
URGENT - IN COMMERCIAE CONFIDENCE
Development Ditector
Without Prejudice
To: George McCorkell
Sarah Graham
Copy: Graham Corbett.
Ross Newby
Hamish Sandison
Stephen Smith
Stuart Sweetman
Jonathan Evans
Mena Rego 13 October 1998
Jeff Triggs 1013a
Dear George
‘HORIZON: GRAHAM CORBETT PROPOSALS OF 12 OCTOBER 1998
In view of the urgency, I thought it best to set down our reaction to Graham's
proposals, received yesterday. Stuart and I did meet Graham and Ross last
night to talk these through, and we aim to speak to KPMG for modelling
purposes today. :
In coming to a view, we have also taken into account the wider issues
concerned with the project going forward - most immediately, those around
ICL Pathway’s funding and the prospect of lengthy and potentially costly
litigation. In the longer term, there are real policy issues at stake too: for
example, welfare reform, social inclusion, post office review and network, and
Governments PFI/ partnership ambitions. I’m sure Sarah will be acting as
‘guardian’, from a DSS/Government perspective, of the latter, and hence my
writing to her too. With this as background, and bearing in mind the Prime
Minister’s announcement of the Citizen’s Account last week, it would also be
Post Office Counters Led
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13 October 1998
very helpful if, as part of the agreement, DSS could agree not to ‘veto’ the use
of the benefits application on multi-functional cards (given proper security
and programme arrangement of course) if, for example, we were to approach
ICL in bringing smartcards forward as part of the overall transition plan.
I set out our reaction at the attached Annex, using Graham's numbers. Please
bear in mind, when considering this, the wider issues we are facing with ICL
that Graham refers to in passing. Also, that our modelling shows that for
every £1 ‘gained’ from any extension by BA we have given back ICL Pathway @
well over £2 to date! In summary, we think there may be the bones of a deal I
here - but whether it will be acceptable to ICL is up to them of course!
No doubt we will discuss later today.
Regards
POL00038841
POL00038841
eS
IN COMMERCIAL CONFIDENCE
Without Prejudice
Annex
POCL REACTION TO GRAHAM CORBETT PROPOSALS OF 12 ocr ‘OBER 1998
Note: these statements are subject to contract, and to clarifying any other associated
legal issues, and to any final quality assurance in our financial modelling.
G Corbett
Reference
a
b) 12
°) 13,
d) 24
e) 2.2
f 3
g). 5
h) 61
i) 62
) 7
k) 8
yd 9
m) 10
a TETaez
POCL Reaction .
Agreed, assuming this means ACT completes in March 2008, and the Contract
‘A’ floor to POCL extends until then.
To help ‘compensate’, POCL will pay BA their incremental BES charges to ICL
for the extended period. We calculate this as worth c£40 million to BA.
We agree the principle - but we would prefer to raise our business guarantee
levels on all non-BA business to ICL Pathway from 65% to 75% instead though
_ throughout the extended contract. We believe this should be more helpful to
ICL.
Agreed, subject to POCL owning/controlling the new assets, and that the
existing assets have a nll transfer value.
Agreed, as part of this total package. Also, price discounts start one year later
than current contract, as BA and POCL agreed provisionally last week (but
have yet to advise ICL Pathway).
(We hope BA will be able to follow suit, per 1.2 above.)
Agreed.
~ Agreed, subject to this being restricted to waiving rights of termination for
acceptance only (ie not waiving those for disastrous operation).
Agreed, if this is sufficient. We would want assurance that ICL/ICL Pathway
has sufficient funds to continue properly (see also Graham Corbett’s opening
remarks in covering letter regarding parallel activity). .
Agreed - I would hope Hamish would be able to complete this in a helpful
way to ICL Pathway soon.
Agreed.
Agreed (this would be helpful to both of us given previous talks).
Agreed, subject to final legal checks on wording.
Agreed, provided that this does not involve use of any other auditors than the
Post Office's appointed auditors, and that the scope and process of what is
being monitored is agreed between all parties.