Risk

Operational

NS&I

SBS

Failure to meet key performance standards

Has discretion to set performance deductions within an agreed range

Faces substantial performance deductions for failing to meet KPIs

Post Office Counters Automation

Bears a £5m per annum risk on operating costs for Ordac and Invac until counters automation is delivered or NS&I withdraws the products from sale

Failure to implement business transformation by the dates specified

Will have to employ more staff than expected and cannot recover those costs in the contract price. It will also have to pay NS&I 70 per cent of the contingency provision it has not used

Failure to further improve KPIs if business transformation programme not in place by December 2000

Still has to meet the improved KPIs even if it has not completed the programme by the required date

Year 2000 compliance

Has indemnified NS&I for all loss or damage resulting from breach of this obligation. Contract can be terminated and SBS will pay the cost of a third party to undertake the work. SBS will be penalised through failure to meet KPIs, but can gain relief from such penalties if third party computer systems' non-compliance leads to poor performance

Euro compliance

NS&I specified system and process requirements for which SBS has the right to charge a maximum of £9m. SBS have the right to charge an additional sum for ongoing euro compliance should the UK join the single currency

Responsible for development of a suitable Euro Compliance Plan. If SBS misses a key date in the plan, it must take steps at its own cost to fulfil that key date. If it fails to do so, NS&I can arrange for a third party to carry out the work and SBS shall reimburse costs incurred. SBS must deliver euro compliant systems at a cost of below £9m

Fraud

Annual exposure to fraud reduces from £250,000 to £90,750 over the life of the contract

Bears higher losses resulting from fraud and will indemnify NS&I in respect of any claim and loss of any person arising out of operational error

Product variations

Implements at own cost except where an adjudicator judges the change is necessary because of negligence by NS&I

New NS&I products and channels

SBS will not be able to charge NS&I more than it bid and NS&I can share in lower costs below a given threshold

Transaction Volumes

The unitary payment is adjusted if transaction volumes fall outside a nil adjustment band. SBS bears the risk that the cost of additional transactions exceeds the price for those transactions

Change of Law

SBS will bear all this risk unless the change of law is unforeseen and an unreasonable cost or business burden