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POST OFFICE LIMITED
BOARD REPORT
Strategic Platform Modernisation
Title: Programme (SPMP) Funding Meeting Date: I 26 September 2023
Request
Ruthor Samantha Swann - Head of Sponsor: Tim McInnes — Director of
. Transformation Portfolio = Strategy and Transformation
Input Sought: Decision .
To approve and delegate authority to IADG (via GE) release of up to ; IRRELEVANT) for the
continuation of the soon to be re-combined (and materially scaled back) SPMP Programme to
end-March 2024. This also includes provision for the cost of the Accenture-led assurance review
which will be reporting to Board in October 2023.
Executive Summary
A. Funding Approvals to Date
Date Period covered Stream ‘umul.
Mar-21 Mar-21 to Jun-21 SPM i
Jul-21 Jul-21 to Dec-21 SPM i
Nov-21 Jan-22 SPM i i
Jan-22 Feb-22 to Mar-22 SPM i
Mar-22 Apr-22 to Jun-22 SPM i
Jun-22 Jul-22 to Sept-22 SPM I IRRELEVANT I
Sep-22 Oct-22 to Jan-23 SPM i
Jan-23 Feb-23 to May-23 SPM I
Jun-23 Jun-23 to Sept-23 SPM H i
Jul-23 Feb-23 to Oct-23 RTP
Current Sept-23 to Mar-24 SPM (incl. RTP) i _. _. _.
B. Introduction
1. At the June Board, two papers were discussed that were relevant to the delivery of the
Horizon replacement: (i) a funding drawdown approval covering the period from June to
September for the technical development workstream; and (ii) a funding request for
onward submission to DBT which outlined the funding gap in the current Spending Review
period for POL and which sought additional investment over FY23/24 and FY24/25 (i.e.
/total funding request, of which ; I was related to the replacement of
Horizon). Both of these papers were approved and, recognising the challenging escalation
of costs and extension of timelines, management agreed to return to Board with options
for SPMP.
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2. These options are still being worked on and an update on this, including on the current
status of wider funding discussions with DBT, is the subject of a separate paper at
September Board.
3. A third paper was then presented at the July Board on RTP, that sought to approve
investment spend up to early October. The new part of this request to October was
responsive to DBT’s and HMT’s initial response to POL's June funding request and so
reflected a lower cadence of spend and a focus on ‘no regret’ planning activity.
4. The present request is to ensure both SPMP workstreams (now being re-combined under
a single programme) can sont i sand remain in governance while discussions with DBT
compared to June and will provide cover up to and including March 2024 when we expect
to have more visibility on longer-term plans for SPMP with Board, DBT and HMT.
Note, this 6-month request covers a longer period than prior requests (which
usually extend to up to 3/4-months) as this enables a closer alignment to the DBT
request that is also being submitted at the same time. It also provides a longer
period to demonstrate progress against key milestones, and critically it enables us
to commence implementation of any recommendations identified within the
assurance review that is currently taking place.
C. Shareholder Engagement & Responding to DBT Challenge
5. Since June there has been extensive engagement with DBT (and some limited engagement
with HMT) on possible ways forward with SPMP and we understand that while there is no
appetite to proceed on the basis of our original June Funding Request, there is also no
appetite to stop all activity given the operational and reputational challenges this would
create for POL and HMG (i.e. in particular it would likely lead to a loss of credibility and
leverage in upcoming contract extension discussions with Fujitsu, and there is also a
challenging read-across to the work of the Inquiry if we extend the operation of Horizon).
There is also recognition within government that cutting activity too much while
discussions are ongoing is not desirable given the impact of this on timescales and lifetime
costs, as well as the challenges POL would face restarting any SMPM activity later.
6. We therefore believe some middle way between these extremes is the most likely outcome
and that there is support for POL to continue to invest at an appropriate level while
discussions with DBT and HMG are ongoing. This position is reflected in the present funding
request where we are narrowing scope and scaling back investment but where we are also
continuing to spend against this new scope up to at least March 2024 (note we hope to
reach alignment on a longer-term plan before this date). This is also aligned to the
proposed ‘minimum case’ funding request covered in a separate paper being discussed at
Board.
7. In practical terms this refined and reduced scope sees POL focus its near-term efforts on
the definition and initiation of development of a full mails, stamps and banking solution
appropriate for deployment to at least 50 branches, while scaling back all wider activity
and therefore pushing out the timeline on any other major releases (e.g., Release 3). The
intention of this approach is that it will provide POL with a solid foundation to prove the
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technology and release process, and it enables the programme to be re-scaled if the
outcome of discussions with DBT and HMT are supportive of the continuation of further
development. It is anticipated that the present funding drawdown approval sought from
the Board will enable the programme to progress to a state of readiness for a small-scale
pilot (ca.5 branches) prior to the end of FY23/24. The request also covers the cost of the
Accenture-led assurance review.
8. What this does mean is that all work on Release 3 and the expansion of Drop and Collect
has been put on hold, hardware purchases and licence payments have been postponed
where possible (recognising while we do have a number of contractual obligations, no
further approvals are required in FY23/24) and delivery of both an identity and access
management solution and second device will be transitioned to the CIO change portfolio
before the end of the calendar year (as this ex-SPMP scope is still required). All external
suppliers and contractors have been stood down where efforts cannot be attributed to the
delivery of short-term results for Release 2.0/2.1 and preparations have been made for a
significant stand-down of POL resource in September. The two strands of SPMP are also
being recombined under a single programmatic structure.
9. Based on these actions, the proposed spend profile from November 2023 to March 2024
represents a cai. on the run-rate as at the June Board. Nick Read wrote to
the Minister on 11 September to update him on the cuts to SPMP spend, as well as on our
plans to continue to make slower progress with SPMP while discussions are ongoing with
DBT and HMT. He appears to be aligned with our recommended approach.
D. Context Supporting Drawdown Request
10. In the period between October 2023 and March 2024, the programme is requesting
approval from the Board to spend, which translates into an average run rate of
er month. The costs break down as follows:
Original J
riginal June proposed 2024
Average (EM) Reduction
Cost Category 2023 Request
(£m)
Tech Delivery
Hardware and Licenses Hl
Service Operations
Tech Delivery Total
=o IRRELEVANT
Content and Training I
Assurance Hl
Retail Transformation i
Total NBIT
11. The current reductions represent a >70% cut in spend and a loss of >500 FTEs compared
to the original plans and we believe it represents the right position in the near-term. While
we have very clearly responded to the Shareholder’s concerns to cut costs and scale back
activity, we have not done so to the extent we lose necessary capabilities / prevent
3
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ourselves from being able to reset activity on SPMP next year. In particular while we are
now consuming the timeline contingency we outlined in June it is unlikely that we will
consume all of it by the time we hope to agree longer-term SPMP funding, and so an exit
from Horizon by end-Dec 027 may still be possible (i.e. each year extension has a
run-cost estimated at c
12. The next key milestone for SPMP is the deployment of Release 2.0 to two DMBs in London
and Leeds. This represents the minimum capability required to pilot Mails and Banking
journeys, to accept payments and to perform core back-office operations such as
managing cash pouches, reconciling cash in a counter and triggering and resolving
discrepancies. The technical solution for Release 2.0 is complete, but an extensive amount
of work remains ongoing with RMG and Banking Framework partners to agree to go live
with real-time customer data. As part of the go-live process the programme will maintain
investment in Postmaster training and support for the two branches, and following go-live
it will then move to capturing and remediating bugs and errors that arise from the
prototype.
13. In parallel with deploying, remediating, and supporting Release 2.0, the programme will
also pivot to delivering its next key milestone, the technical completion of Release 2.1
which is the minimum capability required to safely pilot the Release 2.0 functionality
outside DMBs - i.e. in a small number of independent branches or a strategic partner
locations. The technical milestones to be achieved for Release 2.1 to be launched
successfully are:
« Defect Management: Resolve 71 outstanding defects that can be mitigated in a
pilot in a DMB but which we deem unacceptable in an independent or strategic partner
setting (even though these do not materially impact the Postmaster experience);
e Cyber Security: Address 11 specific cyber security exceptions, which have been
deemed acceptable for the Release 2.0 prototype, but not for further expansion in
non-POL controlled settings;
e¢ AWS Scaling: Design and implement an updated AWS environment strategy to
match the scale of SPMP (i.e. 20k-25k counters) and rationalise the total spend on
AWS environments. This includes re-architecting the data flows between the different
applications inside the platform to minimise consumption of AWS resources; and
e Full Mails: As part of the full Mails portfolio, deliver the full slate of Parcelforce
services, which were previously deprioritised and are not included within Release 2.0.
14. The intention is then to conduct a small-scale pilot with Release 2.1 in ca.5 independent
locations by the end of March 2024, at which point the programme will require further
funding to support investment in training and support, to remediate any new defects and
to scale further to up to a total of ca.50 counters in ca.50 Branches. In parallel with this
POL will continue to support and scale up the number of Drop and Collect Branches, which
leverage underlying SPMP components.
15. From a programmatic perspective the following key milestones will also be achieved
between now and the end of March:
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e Programme Reset: Restructuring of the existing programmatic structures (i.e. STP,
RTP, etc.) into a single programme entity with uniform, GE-level governance and
singular programme management and delivery KPIs;
« SPMP Diagnostic Review: Full support and completion of the Accenture SPMP
diagnostic review, and commencing implementation of the recommendations they
identify; and
e¢ Wider Portfolio Streamlining: Transitioning clearly defined areas of scope into
separate projects (e.g. Identity and Access Management or ‘Second Device’). SPMP
will consume these services from POL but they are wider than SPMP itself.
E. Assurance Review
16. The Accenture-led assurance review of SPMP - the cost for which is included within this
funding drawdown approval - commenced in early-September and is expected to conclude
in mid-October, before reporting to the October Board. This will look at both technical and
programmatic deliverables within the SPMP programme and comprise the review of
programme documentation and interviews with colleagues. Findings will be assessed
against a best-practice assurance framework and RAG-rated against this, and
recommendations will be made on how to align / realign the programme going forward.
F. Next Steps and Timelines
17. Subject to Board approval an update on progress against the deliverables underlying the
funding drawdown will be presented to the October Board, alongside the conclusions of
the Accenture-led review and a wider update on funding discussions (i.e. a large part of
which will relate to progress on discussions with DBT and HMT on SPMP). Monthly updates
will be provided to Board thereafter.
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Appendix 1: Shareholder and Board Briefing
Summary (uploaded to the Reading Room)
Appendix 2: Spend Breakdown
Summary of Run Rate Oct Nov Dec Jan Feb Mar eae
POL Perm / Contractor Staff
3rd Party Resource Augmentation
Other 3rd Party Costs i :
SPO Levy / Contingency {
Identity and Access Management
Total
Appendix 3: Estimated Resource profile
Between August and September POL has reduced aggregate headcount in SPMP by over 500
FTEs. This level will be maintained until at least March 2024.
IRRELEVANT
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