A decisive factor in the selection of Pathway was their acceptance of greater risk, making their bid compliant with the Private Finance Initiative26 The purchasers awarded Pathway the contract despite their ranking on technical and management criteria. Pathway’s bid included only £20 million to take on the contractual liability to pay up to £200 million in damages to the purchasers in respect of direct losses if their system failed to operate or to prevent fraud. This was deemed to represent transfer of fraud risk, which was considered essential for the project to qualify as PFI and not count against public sector capital expenditure. The other bidders had priced this liability into their bids pound for pound. The choice the purchasers felt they had was therefore either to accept the Pathway bid or to not proceed with the project at all. The purchasers did not in the end demand damages from Pathway when the project began to slip. They felt this would not encourage Pathway to succeed and could deflect the firm’s attention away from delivery to a legal battle. When the Card element of the project was subsequently cancelled in May 1999 the government again chose not to claim damages, as part of the agreement with ICL in which the Company also agreed not to counter-claim. Another major consideration was ensuring the successful completion of the continuing project to achieve post office automation. Currently the platform has been installed in around 8,000 of the 18,300 post offices and is planned to reach the entire network by Spring 2001.
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