600% Mark-Up Charged to Insurers, Drivers, Fleets & Hauliers by Highways Contractor
As a general ‘rule of thumb’*, who pursues the bill for attendance and repair costs following a motorway incident depends upon the total cost:
- over £10,000, the contractor charges Highways England and it is the Authority who seeks recovery of the monies from the responsible Third Party
- under £10,000, the contractor retains the claim and pursues the Third Party for the costs incurred, they receive nothing from Highways England.
On rare occasions, the circumstances of a collision, fire or fuel spill on a motorway will cause highway contractors to present their sub-threshold (under £10k) attendance and repair invoice directly to Highways England for payment. More commonly, the contractor retains the sub-£10k claims, receives no payment from Highways England and must present their demand directly to the at-fault Third Party (driver, fleet or haulier) or their insurer.
When billing Highways England, Kier Highways (Area 9) for instance, uses the defined cost + fee process, or ‘cost-plus’ procedure. Kier totals up the actual cost (base rate) of employees, plant and materials and applies an uplift, a percentage ‘fee’ to the final invoice.
A recently presented sub-threshold claim (X10C741), billed to the Public Authority, once again enabled us to compare like with like; a below £10,000 claim charged to Highways England, with one presented directly by Kier to an insurer – the claims were a little over a month apart.
Both incidents were in Area 9, the contract for which, since 07/2014, sets out how to arrive at the MAXIMUM a Third Party is to be charged. The process is documented in Appendix A to Annex 23; a Third Party is to be charged ‘no more than‘:
Base Rate (defined cost) + Third Party Claims Overhead (TPCO)
However, since the commencement of the contract, Kier has not complied with this process, instead, charging substantially more. We believe Kier Highways are misrepresenting facts to the Third Parties and the Courts to secure payment of inflated or exaggerated claims pursued in the name of Highways England. Highways England has, until recently, kept Appendix A to Annex 23 out of the public domain, concealed from Third Parties and claims professionals. The Authority has also failed to ensure their contractor complied with the process.
The contractually agreed TPCO uplift is high in Area 9 at 25.29%. But Kier ignored the agreement charging Third-Parties a rate inflated, in some instances, by over 600%. More comparison information about the above claim presented to Highways England can be found here.
On 15/11/2017, CMA Claims explained the issues to KPMG in lengthy teleconference – ‘Project Verde‘.
The problems have been permitted to continue. Highways England has stated that Kier Highways have not issued an invoice in Area 9 since 01/01/2019 … they have … albeit with some ‘interesting’ evidence to support the claim.
*ASC (Asset Support Contract) – the process to change in many areas during 2019, commencing 24/06/2019 – see ‘New National Process‘