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Post Office Counters Led
Horizon Programme Disror
SUBJECT TO CONTRACT - PREJUDICE
Mike Coombs
Director Programmes
ICL Pathway
Forest Road . 15 December 1998
Feltham . .
MIDDLESEX
TW13 7EG
(ar be
* Here is the suggested veto conditions on the Expert decisions. Can I stress that these have
not been discussed with the Benefits Agency nor do I expect them to agree with the concept
of the Expert.
Post Office Counters Led
King Edward Buitding
King Edward Sree
London
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15/12°'98 14:54 TXRK No. 093902. POL
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15/12 '98 TUE 20:56 FAX oor
* SUBJECT TO CONTRACT - WITHOUT PREJUDICE
DRAFT
CONDITIONS FOR A VETO ON THE EXPERT OPINION
If the PO Board disagrees with the Expert decision and believes acceptance on that matter is.
reasonably likely :
1 To adversely affect the Post Office's key commercial relationships - particularly
clients, sub-postmasters and other strategic partners.
2. -, Todemonstrably damage the Post Office by:
= undermining our overall customer offer
- damaging our image with customers
- damaging our market position
- adversely affect significant numbers of customers
3. To adversely impact Post Office control of critical operations including our need to
retain end to end design and integration of operational processes.
4, To compromise the integrity of Post Office accounting systems.
°15/12°°98 1258 * ~ TX/RX NO. 0332 POL
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To Stuart Sweetman
From Mena Rego 14 December 1998
Subject COMMERCIAL TERMS
ICL have asked the public sector to take on a further NPV hit of £113m made
up as follows: POCL £105m, BA £8m. The POCL figure includes c £25m for
Benefit Encashment Services which under normal circumstances we would
pass to BA under Contract B but are now proposing to meet ourselves.
I believe the Chairman and John Roberts have agreed that we can work toa
minus £135m NPV on the mainline case. This does not include the £8m,
additional NPV that ICL are seeking for PAS/CMS.
In addition there are aspects of the Commercial and Contractual proposals
and Funding where BA agreement will be necessary if we are to meet ICL's
terms ie back to back arrangements on Guarantees, BA agreement that ICL's
funding proposals are acceptable etc funding proposals are acceptable etc.
I believe Sarah Mullen has accepted my suggested amendment to the report
(issues section) on this point ie "the offer is acceptable to POCL... from
existing resources" has been changed to .
“the offer is acceptable to the Post Office who would meet the remaining gap
on its contracted services and absorb increased prices for benefit payment
transaction without passing them onto BA".
(NB She has also reinforced the point that the PO do not favour option 2)
However, my note does not emphasise the point that BA co-operation is
needed if we can finalise agreement with ICL Pathway (as I did not wish to
sound "equivocal"). However, if we do not clarify our position now I suspect
then George McCorkell will consider that he has carte blanche to pass all
charges/risks back to POCL. I believe at very least you need Adrian
Montague's confirmation that he/Treasury/DTI will support us in this area
(though I very much doubt they will - I hear the loud sound of drawbridges
going up around Whitehall).
Mena Rego
‘Sweetman30
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Donetran Eves
& Pour Rich
David Sibbick
Department of Trade & Industry
151 Buckingham Palace Road Post Office Counters Led
LONDON Stwort J Sweetmon BSc FCA
: ‘Menoging Director
SWI1W 9SS . \UY December 1998
Dear 2.8 wes -
BA/POCL AUTOMATION PROGRAMME
Iknow Ministers are meeting this evening to agree the way forward on
the BA/POCL Automation Programme.
I have just been briefed on the contents of the latest Inter-Departmental
Working Group Report and I know that POCL have been given.
opportunities to input and comment, for which I am grateful. I do feel
that there are a couple of points we have commented on at working level
that I would like to reinforce in the event that Ministers are giving serious
consideration to termination.
First, on the legal front - I believe the Solicitor General has now offered
a view on Treasury Counsel opinion. I am pleased to see that both the
Solicitor General and Treasury Counsel support the same view as
POCL, ie, that issuing a Timie of the Essence Notice is the lowest risk’
strategy from a litigation point of view.
Our legal advice is very clear. To issue anything other than a Time of
the Essence Notice for a reasonable period (in this context completion of
the Operational Trial by 1 October 1999) would expose the contracting
authorities to significant risk. If you take the Public Sector as a whole
this could be a significant damages claim of up to almost £400m of
which a significant proportion would fall to the Post Office. The Post
Office Board would like to be assured that Ministers have given very
careful thought to this exposure before they take a decision not to
follow the legal advice on the safest way forward.
Post Office Counters Led
King Edward Building
ft. King Edward Street
Cont LONDON
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Contd./2
Weare firmly of the view that issue of a Time of the Essence Notice
would force ICL to co-operate in a negotiated termination. They clearly
cannot afford to continue without our agreement to improvements in
the current contractual terms. I believe as an exit strategy this is exactly
what Ministers would want to see.
Secondly, I would like to make it clear that the Post Office are in full
. support of the programme’s continuation, to the extent of absorbing
significantly worsened commercial terms, on the basis of the
programme continuing in its current form. If there is any notion of a
negotiated settlement leading to Option 2, i.e., cessation of the
Benefit Payment Card, then we would need to consider our position
afresh. John Roberts previously made this point to Frank Field, then
Social Security Minister in June this year. We would not wish this point
to be overlooked in any Ministerial decision.
I look forward to hearing the outcome of Ministerial deliberations. I
sincerely hope that there is a way forward on this programme which is
of strategic importance to not just ICL/Fujitsu, but also the Post Office.
Yours sincerely ....
GRO.
STUART SWEETMAN
copy: Adrian Montague