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Sparrow Sub-Committee
scheme briefing
9 June 2014
DRAFT NOT POLICY
FINAL — CIRCULATED 03 June 2014
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Agenda @
. PROGRESS ON SCHEME
COSTS PROJECTIONS
. POSSIBLE CHANGES WITHIN TERMS OF REFERENCE
COMMUNICATIONS APPROACH FOR OPTION 2 AND 3
STAKEHOLDER HANDLING
TIMELINE
TRIAGING
NEXT STEPS
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1. Progress on the Scheme
* 150 Applications to the Scheme
* 10 Cases Resolved by Business as Usual
* 57 applications have yet to reach Post Office (42 are with advisors and 11 are with
Second Sight)
* 54 are under Post Office investigation
* 22 are with Second Sight for review
¢ 3 draft reports are with applicants
* 1 has been approved by the Working Group for mediation
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2. Cost Projections
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Forecast Cumulative Monthly Spend (£,000) Options 1 - 3
12,000
Illustrative costings (no settlement costs included) -
10,000 + $6e next Slide for assumptions
o
8
a
Z 8,000
3
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Fe I
% 00 Option 1
E = Option 2
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8 4.000 m Option 3
8 4,
2,000 +
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2. Cost Forecast Assumptions @
Option 1 Continuing with the Scheme as currently configured and managed
Estimated Overall Cost of £12.5M
* Scheme duration approximately 18 months
* Second Sight producing 2 reports per week at roughly constant cost
+ Programme team, legal and investigation cost reduce in September and January
+ Mediation costs for mediating 130 cases as a bell curve
«All other costs constant
Option 2 Continuing with the Scheme but seeking to refine within the existing Terms of Reference
Estimated Overall Cost of £10.7M
* Second Sight moved to rate of £3K per case, productivity remains at 2 per week
* Scheme duration approximately 16 months
+ Programme team, legal and investigation team cost reduce in January and May
* Mediation caseload halved to approximately 65
Option 3 Post Office investigations completed, scheme moved in house
Estimated overall Cost of £7.7M
*« Scheme duration approximately 7 months
* Second Sight engagement ended by end July
« Working Group costs end in June
+ Programme team and legal costs stay constant but end in December
+ Mediation caseload halved and spread across three months
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Ministerial Detail of the scheme Management
Commitments as published Working Group Tek cont Time overhead
Tighten the focus of Second Sight role (e.g. Save Pe
lose job 1, lose pre-CQR stage, switch to Yes Yes Yes £36K / month Pay bb ae a ri Increase
piece rate) £3,000 per case. y
Saving 10 weeks /
; : case (pre-and SS- I Short term increase
Se eee Yes No No bent investigation) followed by long term
and POL to investigate cases £50K / month
Investigation of all decrease
cases = 5 months
APL : H ay Short term increase
Replace Second Sight investigation role with Additional Investigation of all
external professional services provider Med Ua Ne £23K / month cases = 30 weeks eloiee by long term
crease
Decrease followed by
Investigate every case before deciding spot increase at
kpproach to resolution (FOS?) ved Moe yea Nice NIL decision
announcement
Avoid future WG
: ie a decisions that
Allow POL veto over Working Group decisions Yes Yes No Minimal negatively impact Decrease
timeframes
; : : Short term increase
Publish independent assurance / Linklaters Yes Yes ve Smalldue to possible I Small ue to possible I sive by long term
piece withdrawal of cases I withdrawal of cases oe
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4. Communication - Key Messages Option 2 @
« We are committed to thoroughly investigating all cases that have been submitted to the scheme.
+ We are determined to be as transparent as possible and will provide applicants with a
comprehensive report of these investigations.
* We believe our approach is reasonable and fair, and balances the position of applicants with
wider public interest
* We have confidence in the Horizon system which process six million transactions every day.
* Applicants in the Scheme represent less than 0.3% of the 68,000 people using the system.
* The on-going investigations and previous reviews over the last two years have found no
evidence of systemic issues with the Horizon computer system
« We have recognised that improvements could be made to training and support in wider areas
and are implementing improvements
¢ We will provide a summary report when all investigations have been completed.
* It would be inappropriate to comment on individual cases as details have been provided in
confidence.
* independent assurance quoted if/when possible
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. Communication Key Messages Option 3 @
As a responsible business the Post Office is committed to listening and learning from our people. That
is why we set up inquiry into Horizon computer system in 2012.
During that time no evidence of systemic issues with the system has emerged.
We have therefore decided to move to a new approach where Post Office will investigate all cases and
provide applicants with a comprehensive report. We will mediate in cases where appropriate.
We have full confidence in the Horizon system which process six million transactions every day.
Applicants in the Scheme represent less than 0.3% of the 68,000 people using the system.
Once we have investigated all cases we will provide a summary report and make any improvements
that can be made in-light of these findings
It would be inappropriate to comment on individual cases as details have been provided in confidence.
* independent assurance quoted if/when possible
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4. Media assessment @
« The following assesses the likely levels of media interest in the issue should we
take decisive action over the coming weeks (either becoming more assertive or
moving to close the Scheme)
« Now to summer: Allegation of white wash by Post Office resulting in 1-2 days
media coverage (poss BBC, Computer Weekly as well as nationals such as
Mirror, Mail as well as regional print and broadcast) This will be driven by and
include quotes from JFSA, MPs and applicants.
* Over the summer: Potential for media coverage driven by any Fol placed by JFSA
on cost of the scheme.
* Summer — Christmas: Possible regional and national stories by those who
continue to follow the story e.g BBC and Computer Weekly and regionals
¢ Run up to election: Potential remains for follow up around any announcement on
digital/ITC developments though our judgement is that while the JFSA would
continue to seek to generate coverage, media interest in the issue would start to
fade, certainly at national level.
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5. Stakeholder handling
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the role of Second Sight following the
statements made in Parliament in July 2013,
and the associated risk of calls for a further
ministerial statement and BIS select
committee interest.
The prospect of adverse media coverage is a
further factor as well as:
Further issues include:
+ Value for money and related FOI requests
on spend
* Potential to play into general election
timing:
+ MPs with cases may become critical of
the Post Office
+ Issue having potential to detract from
positioning Post Office across
Government as a good partner.
Stakeholder Concerns Handling
Minister The Minister will have concerns in relation to I Many of the risks set out here apply
whatever decision is made on the
Scheme. Indeed it could be argued that
the potential for hostile coverage playing
out across the next 12 months, up to and
including the election in May 2015 is
significant.
Our proposed approach is to seek
opportunities to set out the position as
fully as possible to the minister, signalling
a preferred approach and associated
options, but with clarity that we need to
make changes to the Scheme.
We will develop a detailed
communications strategy (supported by
external advice) and ensure approach
where timing is carefully considered and
the Post Office “fronts up” messaging.
We would include within this detailed
assessment of MP-related factors.
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5. Stakeholder handling @
Stakeholder
Concerns Handling
Sir Tony Hooper
* May resign as Chair if Post Office * Continue with one to one
approach changes meetings
+ Will not assist Post Office if itlooks I * Discuss how we can handle any
to disband the Working Group and changes in a way that helps him
end Second Sight’s engagement I, stregs importance of putting the
« We do not believe he will take a business and applicants first
public stance against or for the + Build a narrative (supported by
Post Office . Linklaters positioning) to assist
+ Believes Post Office should accept in handling
that the Scheme will take around
18 months and that is normal for a
Scheme of this type
* As Chair, will maintain the status
quo rather than managing conflict
necessary to redesign the Scheme.
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5. Stakeholder hand
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Stakeholder
Concerns
Handling
James Arbuthnot MP/other MPs
+ Being seen to champion the
concerns of subpostmasters
* The rate of progress
+ Receiving progress updates
and providing them to MPs
* The impact on his legacy as he
is standing down at the next
election
* Oliver Letwin MP, a member of
the Cabinet, has a high profile case
with decision whether to mediate or
not imminent
Face to face meeting (AP and
PV) — use letter as basis
Play back concerns raised by
JA in last letter
Stress positive legacy of his
involvement
If we don’t take action the work
will not be completed before the
general election when JA
stands down
Write to all MPs with a
constituent in the Scheme and
offer face to face meetings
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6. Timeline
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Implement new approach
Stepsto -
implement
option two
Discussion with BIS re next
steps at ministerial level
Further development and
refinement of stakeholder
and communications plans
Potential support from
external PR agency
Schedule ministerial
discussion (subject to further
discussions with BIS)
and MP handling
Scheme
progression
Second Sight complete 2
final case reports
2/3 new draft case reports
sent to applicants
Face-to-Face Working Group
meeting (16'") /mediation
decision on 2 cases
Second Sight complete 2 final
case reports
2/3 new draft case reports
sent to applicants
Working Group mediation
decision on 2 cases
Second Sight complete 2
final case reports
2/3 new draft case reports
sent to applicants
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7. Triage @
At the Board’s request we examined the impact of the Horizon definition on the cases
where we have received detailed case questionnaire responses (70 cases). We used
the definitions below::-
* Core Horizon: ghost transactions; power/telecoms issues; recovery process; lost
data; Horizon terminal/hardware failures; remote access to Horizon
* Branch operating issues: cash and stock remittances; synchronisation with client
systems; other hardware failures (eg. pinpad/lottery/etc); branch accounting practices;
ATMs; paystation;
¢ Support: training; NBSC / HSD support; lack of investigation team; lack of audit trail;
allocation of risk; access to Horizon data; proof of errors
¢ Other: NT payments / branch relocations / issues with previous SPMRs / anything
else
It is not possible to examine the full caseload as the quality of the initial applications is
very poor. Firm conclusions cannot be drawn until the claims are investigated — currently
25 cases.
any
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7. Triage @
Results (based on applications only — not investigation findings):
30 of the 70 have raised core horizon issues
59 of the 70 have referenced branch operating issues (38 of these cases do not
mention core horizon issues).
67 of the 70 have raised support issues (only 2 cases relate to support issues
only).
20 cases are criminal.
38 refer to incidents that occurred prior to 2007
We also examined the history of the wider Horizon definition and found it has
been in use since 2012. Given this we do not recommend using this approach
to reduce the caseload facing the Scheme.
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8. Next steps @
Subject to the Sub Committee’s decision :
¢ Further work to develop communications strategy possibly with an external provider
(week commencing 9 June)
* Official level discussions will be opened with BIS (week commencing 9 June)
* Ministerial discussion will be arranged subject to BIS views (week commencing 16
June)
¢ New approach will be implemented (week commencing 23 June)
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