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Introduction to the Contract with Fujitsu Services for Horizon
Version Control
Version I Date Comment
1.0 16/1/2003 I First lssue — corresponds to version 1.0 of the
clauses and schedules of the Agreement as
amended by CCN 1100 and effective from 1 January
2003
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Introduction to the Contract with Fujitsu Services for Horizon
1. Introduction
Fujitsu Services (Pathway) Limited (“Fujitsu Services”) provides Horizon and
related services to Post Office Limited. The contract covering these services
has been renegotiated and the amended contract was agreed on 31
December 2002 and came into effect on 1 January 2003.
This document provides an introduction to the amended contract (which is
referred to in the contract itself and in this document as the “Agreement”)
concentrating on those aspects which are new or significantly changed.
The purpose of this introduction is to provide an overview of how the
Agreement is organised, and how its various provisions fit together. Anyone
who needs to understand specific provisions of the Agreement will need to
refer to the full document and to get expert advice on its interpretation. The
initial contacts for this are the Fujitsu Services Contract team in IT
Commercial (Keith Baines, Mike Hannon, or Nick Samuel) who will bring in
expert legal or purchasing advice as required.
2. Contract Structure
The overall structure of the Agreement has been changed, so that it more
closely matches areas of management responsibility in both Post Office and
Fujitsu Services, and detailed functional definitions have been moved out of
the contract into subsidiary documents (CCDs).
The Agreement comprises the main Clauses and 24 Schedules, which are
summarised in the sections below. In addition there are around 150 Contract
Controlled and Contract Referenced Documents (CCDs and CRDs)
containing more detailed specifications and procedures.
Schedules to the Agreement
1 Interpretation 2 Policies and Standards 3 Audit
4 Governance 5 Change Control 6 Fujitsu Services’ Key Personnel
7 Subcontractors 8 Form of Parent Company 9 Ordering, Invoicing and Payment
Guarantees
10 Charges 11 Value for Money 12 Timetable
13 Licences 14 Consumables 15 Service Levels and Remedies
16 Post Office Responsibilities 17 Infrastructure 18 Application Management
19 Operational Services 20 Development Services 21 Business Continuity
22 Contract Termination and 23 Branch Hardware 24 Banking Implementation
Service Transfer Implementation Services
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3. Main Changes
The contract has been changed largely in line with the non-binding Heads of
Agreement signed by Post Office and Fujitsu Services on 21 October 2002.
The most significant changes are:
a) Change from managed service to more conventional supply contract;
b) Extension of the contract term by 5 years to March 2010;
c) Reduction in the price of the existing services;
d) New governance and change control processes intended to facilitate
new developments and improve time to market;
e) New processes for development in line with the Post Office IS
landscape, and for specifying and ordering work packages under the
contract framework;
f) Better utilisation of Fujitsu Services Systems Integration resources
including making spare capacity available for development work at no
additional charge;
Rationalisation of service levels, including reduction of some service
levels that were out of line with market norms and costly to achieve,
and simplification of service level measurement;
h) Introduction of ADSL (Broadband) telecommunications to branches as
a phased replacement for ISDN (and FRIACO);
i) Extension of scope of services including changes to support end to end
re-architecture of Post Office operating process.
g
4. The Clauses
The Clauses are the top level of the contract; they set out the main terms and
conditions, set the various schedules in context, and have the highest level of
precedence, so that in the event of any inconsistency, the Clauses would
over-rule the schedules and other documents.
The following sections highlight some of the main provisions
4.1 Clause 1.— Performance Of Services
This lists the main services that Fujitsu Services provide under the contract.
These are:
e the Operational Services (set out in Schedule 19)
e the Development Services (Schedule 20)
e the Business Continuity Services (Schedule 21);
e the Branch Hardware Implementation Services (Schedule 23);
e the Banking Implementation Activities (Schedule 24); and
e the Transfer Services and the NBS Transfer Services (Schedule 22).
A diagram showing a more detailed breakdown of the Services is at Annex 1.
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4.2 Clause 5.— Consumables
Specifies that Fujitsu Services will provide consumables (such as printer
ribbons, tally rolls and ink cartridges) required for the Branch equipment if
Post Office requires. This provision would be used if suitable supplies were
not available elsewhere. Further details of consumables are in Schedule 14.
4.3. Clause 6.- Changes To Services
Specifies Post Office and Fujitsu Services rights and responsibilities for
authorising new releases.
4.4 Clause 7— Development Of New Business Opportunities
States the shared vision of Post Office and Fujitsu Services for extension of
the services provided under the Agreement. This is derived from the similar
provision in the Heads of Agreement.
4.5 Clause 10.-- Charges
Summarises the charges to be paid by Post Office, and refers to Schedule 10
for the pricing details.
4.6 Clause 12.-- Ownership
Confirms that the infrastructure and equipment currently used to provide the
Horizon services is owned by Fujitsu Services. (This is transferable to Post
Office at the end of the contract for a nominal payment of one pound.)
4.7 Clause 13.-- Intellectual Property Rights
Sets out Post Office and Fujitsu Services rights and responsibilities in relation
to intellectual property related matters. This Clause deals with the following
topics: Listed Documentation; Fujitsu Services' Software; Third Party
Software; Internal Code; Deposited Software/Escrow Arrangements; Specially
Written Software and Specially Written Documentation; Developed
Documentation; Use of Internal Design Documentation and Specially
Commissioned Design Documentation; and Other Intellectual Property Rights.
Post Office is licensed to use the software and documentation that it needs in
order to receive the Services provided by Fujitsu Services.
Arrangements for software to be held in escrow are set out. At present there is
no such software, but this will apply to Escher software in future, and it is likely
to be used for any significant future development projects.
Provisions for Specially Written Software and Documentation are set out.
These do not apply to any current software or documentation, but are
intended for use with any future software commissioned by Work Order and
developed by Fujitsu Services or on their behalf (for example by a
subcontractor). Post Office will own the IPR in such software and
documentation, but will license it to Fujitsu Services to use in providing
services to Post Office, and will not unreasonably refuse to license Fujitsu
Services to use it for other purposes.
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Documentation (apart from Specially Written Documentation) which Fujitsu
Services writes at Post Office expense will be owned by Post Office
("Developed Documentation”) if it is all original work or derives primarily from
Post Office materials, or be licensed royalty free to Post Office if it
incorporates pre-existing Fujitsu Services intellectual property rights.
Post Office is entitled to use Fujitsu Services’ technical documentation and
disclose it (under non-disclosure agreement) to third parties in connection with
third party development for integration into Horizon and for planning the
replacement of Horizon at the end of the Agreement.
Except for Specially Written Software and Documentation and developed
documentation paid for by Post Office, Fujitsu Services will own the
intellectual property rights in any materials they create in order to provide the
Services to Post Office unless explicitly agreed otherwise.
4.8 Clause 26.-- Post Office Responsibilities
Sets out the principles that apply to Post Office Responsibilities. Post Office is
to use reasonable endeavours to do these at its own cost, and to secure co-
operation from Agents (subpostmasters and franchisees) where necessary.
Fujitsu Services is excused from carrying out any of its obligations which
depended on a failed Post Office responsibility.
Further detail is in Schedule 16
4.9 Clause 28.-- Fujitsu Services’ Key Personnel
Fujitsu Services undertakes to use reasonable endeavours to retain those of
its staff who have been identified as key to achievement of particular tasks for
as long as necessary to complete those tasks.
Further detail is in Schedule 6.
4.10 Clause 29.-- Liquidated Damages And Post Office Additional Cost
Fujitsu Services is to pay Post Office compensation for any service level
failures. This will be as credit notes (unless Post Office specifies otherwise)
Further details are in Schedule 15
4.11 Clause 31.-- Liability
Allocates liability for losses arising from fraud, hacking etc.
Generally, the liability lies with Fujitsu Services unless the loss was caused by
Post Office failure to carry out its obligations and unless the fraud was carried
out using access obtained via a third party interface and Fujitsu Services had
built and operated this interface to specification.
4.12 Clause 32.- Limitation Of Liability
Sets out financial limits on the liabilities (other than for personal injury and
death) that Fujitsu Services and Post Office have under the Agreement.
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4.13 Clause 33.-- Term And Termination
The Agreement will end on 31 March 2010 unless an extension is agreed by
September 2008.
4.14 Clause 34.-- Termination Of Agreement
Sets out the circumstances in which the Agreement can be terminated before
31 March 2010. These include insolvency of Fujitsu Services, change of
ownership of Fujitsu Services, material or persistent default by Fujitsu
Services. All of these are without payment of any termination charge by Post
Office.
Post Office can also terminate the Agreement early by giving 12 months
notice and paying a termination charge.
Fujitsu Services can terminate the Agreement early if Post Office (after
service of a reminder notice) fails to pay for the services it has received.
4.15 Clause 35.-- Rights On Expiry Or Termination Of Agreement
Sets out Post Office’s rights to have hardware, software licences
documentation and data transferred to Post Office or to a replacement
supplier at the end of the contract.
Further details are in Schedule 22
4.16 Clause 37.-- Audit
Sets out Fujitsu Services’ obligation to keep records and Post Office's rights to
audit these.
4.17 Clause 45.-- Publicity
Post Office and Fujitsu Services can not make any public announcement
about the Agreement or the services provided under it without the agreement
of the other. Each party has to avoid damage to the brand or reputation of the
other.
4.18 Clause 47.-- Transfer And Sub- Contracting
Fujitsu Services can not transfer the Agreement to any other supplier without
Post Office consent. Fujitsu Services is allowed to sub-contract some of its
obligations. Agreed sub-contractors are in Schedule 7, and any changes to
this are by formal change control.
4.19 Clause 50.-- Confidentiality
Both Parties agree to maintain the confidentiality of confidential information
they receive from the other. Confidential information includes the Agreement
itself, anything marked as such, and anything that could reasonably be
regarded as such.
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4.20 Clause 55.-- Guarantee
This is Fujitsu Services’ undertaking to arrange guarantees from two of its
parent companies (which are now in place).
5. Schedule 1 — Interpretation
This is an extensive list of defined terms used in the Clauses and the
Schedules.
6. Schedule 2 - Policies and Standards
This sets out various laws, regulations and standards with which Fujitsu
Services are required to comply. They are largely unchanged from those in
Schedule A02 of the previous version of the contract, and include Health and
Safety, Data Protection, electrical safety and noise of Branch equipment,
system security, “look and feel” of the human-computer interface, and banking
industry specific standards.
7. Schedule 3 - Audit
This sets out Post Office rights and processes for auditing Fujitsu Services’
performance of the Services, and is largely unchanged from the previous
Schedule A03.
8. Schedule 4 —- Governance
This defines the processes and meetings by which the provisions of services
under the Agreement will be jointly managed by Post Office and Fujitsu
Services. There are to be 6 regular meetings, known as Forums, and in
addition Project Boards established from time to time to manage delivery of
specific developments.
Each Forum has defined areas of responsibility, and valid decisions made by
a Forum within its area of responsibility are binding on both Parties. Outside
the meeting process, lead attendees from Fujitsu Services and Post Office are
empowered to take decisions in order to deal with relevant business promptly.
Certain matters relating to changes to the Agreement and committal of new
expenditure by Post Office are subject to separate authorisation processes
(dealt with in Schedules 5 and 9 respectively).
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An overview of the Forums and their roles in the development lifecycle is set
out in the following diagram:
Executive Forum l
Service Impact
t ¥
New I Joint Demand ; Service
Business Architecture Planning Project Management
Forum I Forum Forum Boards Forum
La —_f
Development Roadmap
¢
Feedback - technical issues
‘Feedback - operational issues
Design > Build > ' Operate >
Commercial Forum
The responsibilities of the Forums are as follows:
Forum
Responsibilities
Executive Forum,
meeting 3 times
per annum
Defining strategic direction and vision
Sharing business objectives and direction
Review effectiveness of joint working
Joint Scorecards — agreeing what components will be measured, and
setting targets
Reviewing Joint Scorecards
Agree key messages for joint Post Office and Fujitsu Services
communications plan
Define relationship development direction — ensuring ability to deliver
scorecard action plan and to address any issues arising
Recognition — agreeing recommendations for recognition. This is key
to encourage the behaviours recognised as vital to ensuring a more
effective working relationship
Agree joint incentivisation targets for projects and services.
New Business
Forum, meeting
every 2 months
Generate and investigate new ideas and opportunities that support
Post Office strategic business direction for inclusion in Post Office
change plan and investigate potential additions to the contracted
services. Post Office change plan is monitored by the executive
committee of Post Office
Scope focuses on new customer propositions and opportunities for
improving operations
Review progress of milestones undertaken as part of Post Office
change plan
Manage contingency budgets approved in Work Orders including,
where appropriate, delegating authority to appropriate managers
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Forum
Responsi
Joint Architecture
Forum, meeting
monthly
Define and agree target architectures within the Horizon domain
Plan and manage migration from current to target architectures
Ensure architectural conformance of projects
Benefits realisation monitoring (ensuring what was done achieved the
benefits forecast, and if not, why not)
Manage contingency budgets approved in Work Orders including,
where appropriate, delegating authority to appropriate managers
Demand Planning
Forum, meeting
monthly
Communication of service development plans — Post Office and
Fujitsu Services
Agree high level planning assumptions for future developments of
services
Joint planning to manage the allocation of pre-paid SI resources and
the progressive commitment to incremental resource above that level
Initiate, monitor and ensure progress on development of service
definitions and terms and conditions for additions to the contracted
services
Approve additions to contracted services (that will then be formally
introduced by CCN)
Oversight of agreeing Work Packages
Prioritise releases in terms of schedule and contents, in accordance
with strategic direction and objectives set by Executive Forum, and in
accordance with any operational constraints (Note — final decision for
Releases to go live will be made by Service Management Forum)
Project Boards,
meeting as
required for each
Project.
Managing Work Packages which relate to major development
programmes
Manage contingency budgets approved in Work Orders including,
where appropriate, delegating authority to appropriate managers
Project management and governance as per this Agreement or, to the
extent not in conflict or inconsistent with this Agreement, PRINCE 2
standard practice. For example:
e Review and resolution of operational issues arising in design,
development and testing
e Review progress and performance against plan
Notwithstanding the Parties’ use of PRINCE 2, or any other design or
project management methodology, the provisions of this Agreement
shall not be varied by such use unless the Parties agree otherwise in
accordance with the Change Control Procedure
Service
Management
Forum, meeting
monthly
Review performance against contracted service levels and agree
remedies payable (if any)
Track MTBF rates, review operational reliability of Branch
Infrastructure and consider/recommend remedial courses of action
(e.g. full or partial technological refresh or service level relief)
Resolve operational issues including, but not limited to, those arising
from non-conformance to contracted service levels
Release Authorisation: agree the criteria and processes by which
releases will be authorised for release into field trial or live operation
and carry out readiness reviews accordingly
Ensure continuous improvement in the ongoing/steady state/business
as usual Service Management environment
Review of future change plans to ensure live environment is
adequately prepared
Capacity management
Monitor and review operations of Operational Business Change
processes
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Forum Responsibilities
Commercial e Management and administration of the Agreement
Forum, meeting * Circulation to Lead Attendees of each relevant Forum of the financial
authority levels
monthly
* Oversight of ordering and Invoicing processes
e Agreement of standard terms and conditions from time to time to
apply to different types of Work Order
e Agreement of Commercial Terms in relation to Work Orders
* Oversight of the carrying out of Work Orders
« Management of price reviews under the benchmarking and open
book accounting provisions of Schedule 11
« Review and, where necessary, improvement of the Change Control
Procedure
° First level of escalation for disputes about the interpretation of this
Agreement, its Schedules or CCDs, about invoice amounts or terms,
or about other matters referred by the Executive Forum
Annex 2 of Schedule 4 sets out the escalation procedure for resolving
disputes that may arise between Post Office and Fujitsu Services.
There are up to 5 stages in the escalation procedure that may be used:
1. Review by the relevant Forum
2. Review by senior negotiators appointed by each party
3. Review by members of the Executive Forum, possibly with assistance
from an external facilitator
4. Either Mediation or Expert determination
5. Court case
9. Schedule 5 —- Change Control
This sets out the Change Control processes to be used for changing the
provisions of the Agreement and its subsidiary Contract Controlled
Documents (CCDs) and Contract Referenced Documents (CRDs). There are
significant changes relative to the previous contract. Only the Clauses and
Schedules (and a small number of CCDs that affect pricing or security) are
subject to the more formal (“Hard”) change control. Most of the CCDs are
under “Soft” change control and are allocated to one of the Forums for that
purpose. CRDs may be amended by the Party which “owns” that CRD.
The effect of this change is to combine the former document review and
change control processes into a single process, with the objective of speeding
up decisions and reducing costs.
10. Schedule 6 - Fujitsu Services’ Key Personnel
Fujitsu Services are required to keep certain key staff in their current roles
until specific deliverables have been produced, or changes implemented. This
schedule sets out the management processes relating to this; the key staff are
listed in a confidential document referred to in the schedule.
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11. Schedule 7 - Subcontractors
This lists approved Subcontractors, the scope of the services subcontracted to
them, and the term of the subcontracts. Fujitsu Services are required to get
Post Office approval before changing these. The Schedule also sets out
specific provisions relating to any future insolvency of Energis (who are the
telecommunications subcontractor).
12. Schedule 8 — Form of Parent Company Guarantee
This sets out the form of the guarantees provided by Fujitsu Services Holdings
plc (the former ICL plc), and Fujitsu Ltd. (the Japanese parent company).
13. Schedule 9 — Ordering, Invoicing and Payment
This sets out the processes by which Post Office can order call-off or
additional services from Fujitsu Services, and the Invoicing and Payment
processes that apply to all services provided under the Agreement.
14. Schedule 10 — Charges
This sets out the payments that Post Office is due to make to Fujitsu Services
throughout the terrn of the Agreement and discounts to be given to Post Office
by Fujitsu Services. The Schedule defines how some of the charges will be
adjusted, for example as a result of changes in the number of Branches. It
also sets out the rates that will apply to additional work (unless agreed
otherwise for specific cases).
The main charges are:
Operational Charges. This covers the provision of the Operational Services
(described in Schedule 19). These are to be paid monthly for the duration of
the Agreement. They reduce over time as the number of Branches is
expected to decline, and as various efficiency improvements are phased in.
Elements of these charges are variable by number of Branches (the
telecommunicatioris charge) and by number of counter positions (System
Service charge).
Availability Fee. This covers the remaining payments for the original Horizon
roll-out, and is payable monthly to March 2005. It is unchanged from the
previous contract.
Systems Integration (Sl) Commitment Fee. This pays for the Fujitsu
Services development team, who provide technical support to the live
services. The fee also covers some pre-paid resource available for new
development work. This amounts to around 13,260 days work per annum
initially, reducing to around 9,180 as efficiency savings are made and the size
of the SI team is reduced. The SI Commitment Fee reduces over time.
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Implementation Charges. — Post Office is to pay costs for hardware and
software required for Fujitsu Services’ changes to their central systems
(required to reduce Operating costs) and for memory chips to enable an
upgrade of the Branch terminals. Post Office will pay the actual costs,
including management overhead, subject to an overall cap.
Special Discounts and Supplemental Charge. — Fujitsu Services will give
Post Office substantial discounts in each of the first 3 years of the Agreement,
and Post Office will pay a supplemental charge in year 4. These discounts
and supplemental charge have been agreed to smooth the payment profile
over the extended term of the Agreement.
Dependencies. There are some key dependencies on which the price
reductions in the Operational Charge and the SI Commitment Fee depend. If
these dependencies are failed, then additional charges will be payable by
Post Office. These dependencies are:
e ADSL Coverage — if the number of branches at which BT can provide
ADSL (broadband) lines is lower than forecast, then the Operational
charge will increase to cover the difference between ADSL and ISDN.
e ADSL Implementation — Fujitsu Services are relying on 1500 spare sets
of Horizon equipment being freed up by reduction in the number of
branches in order to provide a pool of equipment for swap-out during
ADSL installation. If this is not achieved by 31 March 2004, then the
price reduction will be delayed.
e ADSL line rental — Prices assume that an existing PSTN phone line is
available at each Branch for upgrade to ADSL. Post Office will have to
pay line connection and line rental if any new PSTN lines are required
for this purpose.
e End-to-end re-architecture of Post Office processes and systems:
o Fujitsu Services are relying on this to enable efficiencies in their
operational services. If this is not achieved or delayed, then
there will be an additional charge.
o Fujitsu Services are relying on this to simplify reconciliation and
reduce the number of interfaces that have to be supported. If
this is not achieved or delayed, or if the method of rearchitecture
does not result in the expected simplification, then there will be
an increase in the SI Commitment Fee.
e Changes to Requirement Capture, Documentation and Testing —
Fujitsu Services are relying on simplification in these areas to enable
cost savings, and an increased SI Commitment Fee will be payable if
this is not achieved.
Other Charges. Other charges are payable on a call-off basis. These include:
e Additional development resources, chargeable on a daily rate
depending on grade
e Branch Operational Business Change — prices and arrangements are
unchanged, with 1% closures and 1.6% relocations or openings per
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annum covered in the Operating Charge, and additional work being
paid for at pre-agreed prices listed in the OBC catalogue.
Message Broadcast Service — paid for on a per use basis.
Payment for data links to Clients which have been introduced under the
change control process and which will be payable each month unless
Post Office cancels that particular facility.
indexation. Most of the charges (but not the Availability Fee, Supplemental
Charge and Special Discounts) are subject to annual adjustment for inflation
in line with changes to the Retail Price Index.
Current Developments. One-Off Payments for Banking (including Web
Riposte licences) and for PIN Pads are set out in a separate annex to
Schedule 10. These are unchanged from the previous version of the contract,
except that some banking development work is covered by the pre-paid SI
resource, and is therefore no longer separately chargeable.
Limits. Schedule 10 also sets out various limits on Branch equipment
numbers. Initially, these are unchanged from the previous contract. From 31
March 2004, numbers are reduced to allow for spares that Fujitsu Services
require to support ADSL roll-out, and from 31 March 2005 there is a further
reduction to allow for an increased stock of maintenance spares.
After 31 March 2005, ink jet printers will be phased out to be replaced by laser
printers, and CRT screens will be phased out and replaced by flat screens.
15. Schedule 11 — Value for Money
This sets out three mechanisms that will be used to ensure that the services
provided by Fujitsu Services continue to represent value for money. These
mechanisms will apply to existing services specifically listed in this Schedule
and to all new services and are as follows:
Benchmarking — comparison of Fujitsu Services prices with those of
comparable services (or a mix of comparisons if no single comparator is
available). This is applicable from September 2005 onwards, and covers the
following existing services: Help Desk; engineering service (field
maintenance); and Data Centre operations. Benchmarking is to be carried out
by an independent expert.
Competition — At Post Office’s discretion, any new services can be put to
competitive tender.
Open Book — Used in the following circumstances:
e Post Office and Fujitsu Services are proposing to work together in
relation to the proposed new or modified service;
e Post Office decides that competition is inappropriate because the
Horizon Services Infrastructure contains bespoke design; and/or
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e the proposed service differs markedly from industry norms.
Examples where open book would apply are: systems integration and
development network communications, specialist operations and support
functions.
Open Book only results in an automatic price adjustment if this has been
specifically agreecI — a watch point when agreeing Work Packages,
Schedule 11 also refers to possible models for sharing risks and rewards of
new developments. These include possible investment by Fujitsu Services in
return for a share in resulting revenues. Neither Fujitsu Services nor Post
Office is committed to any such arrangement, and terms would have to be
agreed case by case.
16. Schedule 12 —- Timetable
This lists significant contractual events, with their intended dates,
dependencies, and consequences of delay or non-occurrence of the event.
There are a number of “themes” running through the list:
Implementation of new ways of working together:
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New joint foruris up and running 31 January 2003
Standard Terms and Conditions for development and 31 January 2003
consultancy work packages agreed
First Resource Plan agreed 31 January 2003
Resource planning fully implemented and baseline plan for 31 March 2003
2003/4 in place
New Service Level reporting — interim basis 31 January 2003
New Service Level reporting — full basis 30 June 2003
Confirmation Wigan and Bootle data centre leases to be 31 March 2003
extended
Processes for producing Conceptual Designs and Design 31 March 2003
Proposals to be agreed and documented
Contract transferred from Pathway subsidiary to main Fujitsu 1 April 2003
Services Ltd. operating company
New (simpler) processes for testing and acceptance agreed 31 August 2003
and documented
There are cost reductions linked to agreement of the new processes for
design and testing which will be delayed if the relevant process documents
are not approved by the required dates.
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End to End re-architecting of Post Office processes and systems:
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Feasibility study completed and financial estimates delivered 28 February 2003
Review of procurement approach and commercial terms for 4 March 2003
programme
Start of Requirements Analysis 1 March 2003
Post Office decide division into Work Packages 4 June 2003
Completion of Requirements Analysis 31 July 2003
Fujitsu Services deliver Design Proposal for Work Packages 31 August 2003
Start-up phase of solution build 4 September 2003
Fujitsu Services deliver commercial proposal for Work 30 September 2003
Packages
Fujitsu Services start formal build and test stage 30 October 2003
Price reductior linked to simplification of system boundaries 1 April 2004
and improvement of reference data processes
Pilot Implementation completed 31 March 2005
Price reduction linked to SI headcount reduction 1 April 2005
Delays in earlier stages (if caused by Post Office) will result in delays to price
reductions. Price reductions depend on the end to end solution agreed by
Post Office meeting certain constraints that are necessary in order for Fujitsu
Services to make their cost savings.
Switch-over to ADSL (broadband) telecomms links to branches:
Start of Field Trial 31 October 2003
Start of roll-out 1 April 2004
Large cost reductions are conditional on ADSL implementation; these will not
be achieved if Post Office does not authorise roll-out (unless this is because
of failure of the field trial stage).
Rationalisation of OBC process to reduce OBC costs:
Agreement of terms of reference 31 January 2003
Completion of joint study 31 March 2003
17. Schedule 13 - Licences
This lists the “end-user” licences that entitle Post Office staff and agents to
use the Horizon system in our Branches. This Schedule also details a sub-
licence which Post Office has given to Fujitsu Services to allow their use of
software from Siemens Metering that is required for the Quantum AP smart
card service.
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There are also more detailed licence arrangements relating to use of Escher
Web Riposte and Asset Manager products in Horizon.
The above arrangements are all unchanged from the previous version of the
Agreement.
18. Schedule 14 - Consumables
This sets out the consumables that are approved by Fujitsu Services for use
on Horizon Branch equipment, and sets out the arrangements under which
Post Office can opt to have these provided by Fujitsu Services. (Currently
consumables are sourced from a third party.) The list of consumables is
unchanged from the previous version of the Agreement, but Post Office now
has the right to use substitutes without getting prior approval from Fujitsu
Services; but any use of unapproved consumables is at Post Office risk, and
Post Office would incur the cost of any equipment repair or replacement if
such consumables damaged or reduced the life of the equipment.
19. Schedule 15 — Service Levels and Remedies
This sets out the quantified service levels that Fujitsu Services are required to
meet in providing the services, and the arrangements under which the Post
Office may receive financial compensation for service level failures.
There are up to three service targets associated with each service level:
Service Level Threshold (SLT) is the required level of performance — failure of
an SLT will be reported and remedial actions agreed as appropriate by the
Service Review Forum. The values of SLTs are in a separate document under
soft change control and managed by the Service Review Forum.
Liquidated Damages Threshold (LDT) is the level of performance below which
financial compensation is payable to Post Office according to pre-agreed
formulae.
Additional Remedy Limit (ARL) is a lower level of performance below which
Post Office has the option of either receiving further payments in accordance
with the liquidated damages formulae, or of claiming actual costs incurred as
a result of the failure.
Provisions in previous versions of the contract gave Post Office an automatic
right to terminate the contract for service level failures. These have been
removed and are replaced by the arrangements for additional compensation
for ARL failures described above. (Post Office is still able to terminate the
Agreement if service level failures were sufficiently severe and prolonged to
constitute a material breach of contract.)
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Service levels are grouped under 4 main headings:
Support Desk Services, including help desks and engineering services;
Data Delivery Services;
Banking Services (including debit card services); and
Miscellaneaus Services including installation services and reporting
and correction of data errors and exceptions.
The values of many of these are unchanged from the previous version of the
Agreement. However, the various “100%” targets relating to data delivery
within 4 days and repair of faults in branches within time limits have been
removed. Fujitsu Services are still incentivised to perform well in these areas
by increased financial compensation for any failures.
Service levels are subject to adjustment if certain limits are exceeded. These
are numbers of help desk calls and engineering visits (in Annex 5 of the
schedule) and various business volume limits in a CCD.
20. Schedule 16 — Post Office Responsibilities
This sets out the contractual provisions that cover Post Office responsibilities
and obligations under the Agreement. This is substantially unchanged from
the previous contractual position.
If Post Office fails to complete, or delays completion of one of its
responsi s, then Fujitsu Services is not obliged to carry out any of its
responsibilities which were dependant on that Post Office responsibility.
There are specific provisions relating to Network Banking (which have been
carried across unchanged from the previous version of the Agreement) under
which Fujitsu Services may also, in some circumstances, be entitled to
additional costs it incurs because of a Post Office failure or delay.
21. I Schedule 17 — Infrastructure
This describes the current technical infrastructure used to provide Horizon
services. It is derived from corresponding sections of the previous version of
Agreement and re-organised, but substantially unchanged.
22. Schedule 18 — Application Management
This describes the existing applications (including banking and debit cards) at
a high level and refers to Contract Controlled Documents (CCDs) for more
detailed specification. Much of the detail in the service definition schedules in
previous versions of the Agreement is now in CCDs and therefore under soft
change control, managed by the Joint Architecture Forum.
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23. Schedule 19 — Operational Services
This lists the Operational Services that Fujitsu Services provides. More
detailed specifications of each of these are provided in Contract Controlled
Documents (CCDs) that are listed in the schedule. The services are as
follows:
Operational
Service
Brief Service Description
Horizon Systems
Help Desk Service
The provision of first and second line support to Post Office Branches
and other designated groups through the provision of a support desk
function.
Technical Service
Desk
The service provides a single point of contact for network banking
domains (including those involved in Debit Card) reporting the
occurrence of technical incidents and problems with banking services.
Engineer Service
Service comprises an on-site replacement or repair service for broken
or faulty equipment at Branches together with associated back-up,
support and administrative functions.
Operational
Business Change —
Branch (pre-paid
element)
Accollection of services which can be procured by Post Office in
relation to changes to the Horizon hardware configuration in Post
Office locations.
This service supports physical changes in the Post Office branch
infrastructure through the provision of a range of services. The service
supports both planned and unplanned changes.
Data Centre
Operations Service
Service for managing the central operating infrastructure and data
communications network.
Network Service
Provision of network infrastructure. Operational network management
and supplier management of Energis included within Data Centre
Operations Service and Service Management Service.
Systems
Management
Service
Event management and software distribution services.
Product Support
Service
Services related to software licences.
Reference Data
Management
Service
Service for the management of Reference Data.
Third Line Software
Support Service
Service for the diagnosis of new software incidents occurring in
Branches and the data centre.
Management
Information Service
The service provides a mechanism for the reporting and publishing of
Fujitsu Services’ achievement of Service Levels and targets. The
service also provides data for the settlement of liquidated damages,
and provides a vehicle for the request of information regarding data
captured on the Horizon Service Infrastructure.
Transaction The service defines a benchmarked standard in respect of system
Benchmarking components for individual Transactions or an aggregated time for
Service nominated Transactions across each of the Services.
Service The objectives of the service are to monitor, manage and maintain the
Management delivery of the Operational Services using the Applications and to
Service report on the same to the Service Management Forum.
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Operational
Service
Brief Service Description
Reconciliation
This service provides end-to-end reconciliation and incident
Business Change —
Branch
Service management procedures required to investigate, report and resolve
reconciliation and business incidents. This includes the Network
Banking Reconciliation & Incident Management procedures which
shall commence from the start of NB Pilot (Soft Launch).
Security This service provides a wide range of security related activities
Management required for ISO 17799 compliance.
Service
Operational Accollection of services which can be procured by Post Office in
relation to changes to the Horizon hardware configuration in Post
Office locations. This service supports physical changes in the Post
Office branch infrastructure through the provision of a range of
services. The service supports both planned and unplanned changes.
Message
Broadcast Service
The service enables Post Office to communicate directly with
Branches for the purpose of issuing instructions, advice or information
urgently.
AP Business
Change Services
Client Take-On Service
Service for the provision of amendments to APS Clients and Tokens.
AP Client Delivery Agreement Change Service
Service that provides Post Office with the facility to request changes to
the delivery agreement for a live APS Client — for instance to change
the days of the week when files are to be delivered to the APS Client.
AP Client File Re-send Service
Service that provides Post Office with the facility to request that APS
Client Transaction files are re-sent.
Horizon Icon Service for the provision of new Icons.
Service
Capacity Service to manage the capacity of the Horizon Service Infrastructure.
Management
Service
Additional EPOSS.
Data Capture
Service
Service to provide Post Office with a means by which a number of item
Additional Fields can be associated with an EPOSS product during a
customer session.
Counter Training
Service
Service to upgrade software in the Post Office estate of training and
demonstration counter positions.
24. Schedule 20 - Development Services
This sets out the processes that may be followed for new developments on, or
in connection with, Horizon; the roles that Fujitsu Services and other (“third
party”) suppliers may take; and the commercial and resource management
arrangements that will apply.
The services covered are:
e Professional Services; i.e. consultancy, strategy development and
requirements studies;
e Software Development;
e Systems Integration.
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Physical implementation work in Branches is covered in Schedule 23.
The Schedule also refers briefly to SI Support Services (that is, 4" line
support to the operational services, and Fujitsu Services’ internal re-
architecture project) and to Current Development Services which were
ordered before 1 January 2003 (mainly banking and debit cards) and which
will continue to be delivered in accordance with existing agreements, as
documented in Schedule 24 and in relevant Change Control Notes.
The following is a summary of the main provisions of the Schedule.
Application Development and Procurement
Standard applications, i.e. “packages” are generally preferred to bespoke
developments, but if no suitable package is available Post Office may procure
a bespoke application. In either case, Post Office may choose to source the
application from Fujitsu Services or from a third party for subsequent
integration into Horizon by Fujitsu Services, subject to its suitability for this
purpose.
Systems Integration and Systems Implementation
Fujitsu Services are the sole supplier of Systems Integration and Systems
Implementation on Horizon. Post Office may appoint other integrators (or
undertake the integration work itself) for other domains, or as a top level
integrator across clomains including Horizon and others.
Contracting for Development Services
Post Office orders development services from Fujitsu Services by placing
Work Orders. These are, in effect, mini-contracts within the framework of the
main contract, and each Work Order will include the specification of the work
to be done, and the commercial terms that apply.
There are 2 different approaches to the development lifecycle, and the filling
of the roles in the Post Office IS Landscape, depending on whether the
development is to be procured competitively (“Competitive ISL”), or obtained
from Fujitsu Services on a single tended basis (“Joint ISL”.) The initial phases
of the lifecycle are the same in both approaches, and are referred to as
“Common ISL”.
Common ISL
The common stages at the start of the lifecycle are:
e Strategic Approval
e Start-Up and Feasibility
and information is derived during these stages to inform Post Office’s choice
of which approach to follow for any particular development.
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Competitive ISL
This is only relevant to services where Fujitsu Services does not have sole
supplier status, and so is not applicable to Systems Integration and Systems
Implementation or Horizon.
This will be planned on a case by case basis. Post Office and Fujitsu Services
will develop an overall plan that balances the need to achieve time to market
with the need for Fujitsu Services to safeguard its commercially confidential
information.
Joint Working ISI
This will follow a standard set of stages:
Requirements Analysis, normally managed by Post Office;
e Solution Specification,
e Solution Build and Test,
e Implementation, all normally managed by Fujitsu Services.
There will be clear ownership of each stage, and close collaborative working.
Stages will be overlapped where appropriate, but with clear decision points
where Post Office will approve work orders (or not) dependant on the outcome
of earlier stages, and business case approvals.
Substantial Work Packages may be subdivided and, at Post Office option,
some may be placed with other suppliers if this is more cost effective.
Fujitsu Services will no longer formally maintain some of its technical
documentation, unless Post Office commissions an update. This includes the
Systems Architecture Design Document, and the Generalised Applications
Programming Interface specification, after these have been updated to include
Network Banking developments. However, Fujitsu Services will make their
internal documentation available on an “as is” basis to Post Office and third
party developers (subject to non-disclosure agreement).
New processes for requirements capture and for testing and acceptance are
to be developed by 31 March 2003 and 31 August 2003 respectively. These
will both be simplified processes following high level principles set out in the
Schedule.
Development Resource Management
Post Office pays for Fujitsu Services to maintain a core Systems Integration
capability, and this includes a team of developers available to undertake new
developments — if this capacity is not used, Post Office still pays but gets no
value from the expenditure.
There is a joint process for managing the utilisation of this pre-paid resource
through a joint working group meeting monthly to review the previous period
and revise forward plans.
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If the development workload is greater than the core team can support, then
Post Office can order additional resources from Fujitsu Services. The price for
this is based on man-day rates listed in Schedule 10, but with discounts of
20% (or more by agreement on a case by case basis) if large amounts of work
(20 developers for 6 months or 10 developers for 12 months) are ordered at
least 3 months in advance.
There are lead times for ordering additional resources. Fujitsu Services
undertakes to get the resources within these lead times (ranging from 2
months for 10 developers to 9 months for 100) and will try to get them on
shorter notice.
Post Office can cancel additional resources that have been ordered, but may
have to pay a cancellation charge of 50% of the rates for the cancelled work,
depending on the amount cancelled and the notice given. However,
developers can be switched between jobs at no additional cost.
The Demand Planning Forum will review the skills mix of the core team every
6 months to ensure that the skills available remain aligned with the changing
support and development needs over the life of the contract.
Utilisation of Core Team
Fujitsu Services underwrites a minimum level of utilisation of the Core SI
team, regardless of the actual amount of work that they carry out. The level of
the guarantee depends on the total development work ordered, and on this
being “smoothed” over the year; with guideline for acceptable “smoothing”
being 2 releases in the year with no more than 30% difference in release work
content.
Provided that the workload is “smooth”, the guarantee ranges from 60% to
100%, depending on workload. For workload which is not “smooth”, the
guarantee is reduced by half.
If the guaranteed level of utilisation is not achieved in any quarter, then Fujitsu
Services will give Post Office a compensating reduction in the cost of the
additional resources that Post Office had to purchase as a consequence.
25. Schedule 21 — Business Continuity
This sets out Fujitsu Services’ obligations to have contingency plans and
arrangements in place to ensure continuity of the operational services (other
than in very exceptional circumstances covered by force majeure). The
schedule also provides for a programme of business continuity tests.
26. Schedule 22 — Contract Termination and Service Transfer
This sets out the arrangements that will apply towards the end of the
Agreement, or if Post Office terminates it early. The arrangements are an
improvement on the previous position, providing greater certainty and earlier
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information to allow Post Office to develop its sourcing strategy for services
after the end of the Agreement.
Key terms are:
e Early provision of information about assets (hardware, software,
documentation, subcontracts and leases) that could be transferred to
Post Office or a future new supplier, and development of outline
options and strategies
e Provision of fully developed exit options starting 2 years before the end
of the Agreement.
e Arrangements to allow disclosure of information about Horizon to
potential new suppliers (subject to Post Office obtaining non-disclosure
agreements from them) come into effect 2 years before the end of the
Agreement.
If Post Office terminates the Agreement early (other than in circumstances
such as a major failure by Fujitsu Services to provide the services) then a
termination charge will be payable to cover Fujitsu Services’ costs and to
compensate Fujitsu Services for loss of profit.
27. Schedule 23 —- Branch Hardware Implementation Services
This sets out arrangements that will apply in future to any implementation of
new hardware, or hardware upgrades in Branches (where the hardware is
linked to Horizon or if Post Office chooses to use Fujitsu Services to procure,
install or maintain stand-alone hardware.)
The Schedule sets out the roles and responsibilities that could be assigned to
Fujitsu Services, Post Office, or a third party supplier to Post Office (for
example, Romec).
Fujitsu Services are the sole supplier of software and associated support, and
will always carry out assessment and testing of the suitability of hardware for
connection to Horizon. Post Office will have sole responsibility for non-
technical support to installation, such as arranging access to Branches. Other
roles will be decided by Post Office on a case by case basis.
28. Schedule 24 — Banking Implementation
This covers project management, development, acceptance and
implementation of Release 1 Banking, and the provision and deployment of
PIN Pads. The Schedule is based on the corresponding provisions in the
previous version of the Agreement with no significant changes.
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Annex 1
Overview of Services Provided
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