ICL defends Pathway

Government kills off half of Post Office project.

ICL was rocked this week when the government cancelled half its flagship £1 billion Post Office project.

The move has tipped ICL's annual financial results, also announced this week, into the red - a major disappointment coming only a year before the company's planned partial reflotation.

ICL chief executive Keith Todd insisted 'the project has not been in any technical problems'. He says administrative problems came about because the project had two paymasters - the Benefits Agency and the Post Office.

The former Cabinet minister who commissioned the project backed up sources who said delays to Pathway were caused by problems with related IT systems at the Benefits Agency.

'If I remained a minister, I would have sat on top of the (Benefits Agency) rather than on the Pathway project,' said Conservative deputy leader Peter Lilley.

The DTI said the decision was prompted by three years of delay and the fact that key elements of the project are now 'outdated'.

Pathway was to use swipe cards to authorise social security benefit payments - a technology which the government says has been superseded by smart cards. ICL replies that it designed Pathway to be easily upgraded to work with smart cards.

The government will now change its policy to transfer all benefits electronically into bank accounts by 2003 - five years after the original Pathway completion date. Todd said ICL will still supply the Post Office with a Windows NT-based network covering 19,000 post offices. This revised contract will be worth about £1 billion - the same price as the original card and network deal.

Philip Virgo, advisor to the Institute of Management in Information Systems, said: 'If you issue a major government contract, you have to very confident there will be no major policy changes.'

ICL took a £180m one-time charge to cover the project costs, and posted a £129m loss for 19998/1999.

Automated benefits project: a chequered path
May 1996 ICL wins Pathway, which aims to automate benefits delivery over a secure retail network for 19,300 Post Offices.

Project delivery scheduled for end 1998

November 1997 Computing reveals that ICL has moved the deadline to 2000, blaming changing requirements July 1998 Project is reviewed by the Treasury

May 1999 Government axes the automated benefits half of the project.

Post Office retail network will now complete in 2001, still for £1 billion.