POLB 16(2"4)
POLB 16/13 — 16/15
Post Office Limited — Strictly Confidential
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 12.00 noon on 09 February 2016
at 20 Finsbury Street, London EC2Y 9AQ and by telephone conference
Present:
Tim Parker
Richard Callard
Alisdair Cameron
Virginia Holmes
Ken McCall
Carla Stent
Paula Vennells
In Attendance:
Alwen Lyons
Jane MacLeod
Piero D’Agostino
Alison Jaap
Apologies:
Tim Franklin
POLB 16/13
POLB 16/14
Chairman
Non-Executive Director (by telephone)
Chief Financial Officer
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive (by telephone)
Company Secretary
General Counsel (GC)
Head of Legal Commercial
Head of Design
Non-Executive Director
INTRODUCTION
(a)
(b)
A quorum being present, the Chairman opened the meeting.
The directors declared that they had no conflicts of interest in the
matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the
Company's articles of association
PROJECT TRINITY
(a)
(b)
The CEO thanked the team for the work undertaken on project
Trinity and acknowledged the complexity involved in addressing the
issues arising from the Front Office IT plans.
The CFO explained that four key questions had been considered
before recommending the Trinity changes to the Board:
1. Would this be the right option commercially and operationally
for Post Office?
2. Would the extension of the Fujitsu (FJ) contract on the terms
described be in the best interests of Post Office?
Could the change be made in a legally compliant way?
4. Would it deliver a long term cost effective relationship with FJ?
»
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(c)
(a)
(e)
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The Board discussed the options available and asked for more
detail on the termination of the IBM contract.
The GC explained that the IBM contract specifically permitted
termination for convenience and set out a formulaic calculation of
amounts payable in the case of exercise. In th
circumstances this resulted in a payment
plus the cost of the work already completed. asked if the
in ‘could be reduced and the GC advised that this would be
difficult to achieve, although the amounts payable for work
undertaken to date would need to be negotiated.
procurement process. The CFO advised that both: RELEVANT (Or
would be aggrieved by the decision and that they represented
the greatest risk. The numbers contained in the business case
included provision for a challenge.
The Board discussed the length of the proposed contract with FJ.
The GC explained that Post Office had proposed an extension to
the FJ contract of 4 years with 2 further one year extensions..
However FJ had suggested a 6 year term, with the ability to
terminate after 4 years. The GC explained that the risk of a
successful challenge would increase if there was a material
extension to the term, as a longer term may not be considered a
‘modification’ of the existing contract, but rather the award of a new
contract, in which case the Regulation 72 exemption would not
apply. The CEO noted that this risk needed to be considered in
light of the benefits that would be obtained from a longer contract.
The GC was asked to test the impact of a longer term contract
period on regulation 72 of the Public Contract Regulations
2015.
The Board asked the CFO to consider whether, and if so, how
the termination costs would be disclosed in the Accounts.
The GC was asked to consider whether the termination costs
would need to be disclosed under an FIO request.
The Chairman requested the GC to provide an update on the risk of
an action for misfeasance in public office. The GC explained that a
complainant, who has suffered a loss, could bring an action for the
tort of misfeasance in public office. However there were a number
of elements of the tort which would need to be established, one of
which was to establish that the Company and/or the Board had
acted with malice or bad faith, causing deliberate injury to the
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()
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(m)
(n)
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complainant. Accordingly, the GC noted that if the Board believed
in good faith that a change of contractor was not possible for the
economic and technical reasons set out in the Board papers, and
that a change would cause significant inconvenience and/or
substantial duplication of costs, then it would be more difficult to
establish that Post Office or the Board had acted with malice or in
bad faith.
The Board considered the decision to terminate the IBM contract
and agreed that it was in the best interests of the Company and
rmination cost was high, it was a contractual
obligation and could be defended if required.
The CEO proposed that a review would be undertaken of the
initial procurement processes leading up to the decision to
award the contract to IBM, to ensure that any lessons from
that review were captured. The findings from that review
would be reported at the ARC.
The CFO stressed that Trinity enabled the Business to remain
within its funding plan to March 2018, explaining that the funding
post 2018 was still to be agreed.
The Board asked, as part of the presentation of the 3 year plan
in March, to be provided with a list of projects, their value and
the committed spend.
After careful consideration, the Board:
Noted the proposal for the termination of the IBM contract and the
extension of the Fujitsu contract for Horizon.
Noted the risks and issues arising around delivery and legal and
procurement.
Approved the termination of the IBM contract.
Approved the extension of the Horizon contract with Fujitsu on the
terms set out in the paper.
Approved the on-off costs offesevr! and the operating costs of
£107.3m for the committed minimum contract of 4 years.
Authorised each of the Group Chief Executive Officer (CEO) and
the Chief Financial Officer (CFO) to:
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e finalise the necessary contractual documentation (including the
II ancillary documentation) to
© finalise the necessary contractual documentation to extend the
Fujitsu Horizon contract and any ancillary documentation; and
° authorise the execution of all such documentation.
POLB 16/15 CLOSE
(a) There being no further business, the Chairman declared the meeting
close.
POL Board minutes, 09 February 2016 4