1.15 As the project slipped and costs threatened to escalate, the differing business objectives of the Department and Post Office Counters Ltd resulted in differing views over how best to manage the consequences of delay and of cancellation. These differences centred principally around how to handle:
■ the consequences of continued slippage of the project in 1997 and the Department's growing concern about delays in securing the intended fraud savings;
■ the issue of legal notices against Pathway in November 1997, and May 1998 for failing to complete the live trial to time; and
■ Pathway's request to increase the price and/or the period of the contract in December 1997.
1.16 By early 1998 the Department were considering options which included terminating their contracts for the Card element of the project. Delivery dates had continued to slip and the Department's business case for continuing the project could not be sustained if Pathway's proposed new contract terms were accepted. There was no strong financial incentive on Post Office Counters Ltd to minimise the delays or the proposed price increase that the Department could identify. Post Office Counters Ltd maintain that they too had a strong interest in playing their full part in delivering the entire project to time. The Department sought to maintain a strong position with regard to Pathway's alleged breach of contract in November 1997 and to keep this open as a means of possibly terminating the contract. A termination option would require issuing a "cure notice", starting a 13 week period after which the purchasers could terminate the contract. After discussion with Post Office Counters Ltd and the Department of Trade and Industry the Department issued the notice on behalf of only itself in May 1998. Pathway told us that the notice was uncalled for and ineffective, and that by electing to continue the project after the notice period, the purchasers had waived any rights they may have had to terminate. The Department did not accept this having taken Counsel's advice. Which party was right in this matter could only have been conclusively established in a court of law.
1.17 At the same time as trying to preserve their contractual position, Social Security Ministers recognised that their concerns were not the only considerations for Government, and deliberately sought a wider discussion across Government Departments to enable a joint decision about the future of the project to be made.