Appendix A to Annex 23

Contractor charges to Highways England for repairing damage to Crown Property are often calculated using:

  • A ‘defined cost’ (£) or base rate
  • A ‘fee’ (%) – 7.38% (has varied from 4.5% to 7.4%)

Charges to the public SHOULD follow a similar process. It appears the Public Authority (in this case Highways England) sought to protect Third Parties (drivers, fleets and insurers) from excessive fees by building into the contract a maximum that could be charged.  This safeguard is set out in Appendix A of Annex 23 which can be viewed by clicking here. However, such protection is meaningless, useless if third parties do not know of its existence. Appendix A has been kept secret for almost 3 years, only being disclosed 06/03/2017. The contracts appear on-line, the associated annexes, but not the appendices, until now.   The Appendix contains the following statements:

‘This Appendix sets out the principles to be followed when calculating the maximum amount to be claimed for damage to Crown Property when the Provider is pursuing a claim against any third party to recover the costs involved in the name of the Employer.’

The amount to be claimed is no more than:

  • Total Defined Cost for Items (a), (b) and (c) +
  • Third Party Claims Overhead.

The covering letter to the release can be found by clicking here and reiterates the above.  It also states ‘no amendments have been made’ i.e. the process in place at the commencement of the contract in mid 2014 remains the same to this date.

The Appendix example is from the Area 9 contract; the ‘provider’ is Kier Highways Ltd and the ’employer’ Highways England Company Ltd.  The process is also understood to apply to Areas 3 & 13. The invoice to third parties should be a little more than to the Public Authority; the ‘defined cost’ is the same but rather than the 7.38% fee, the ‘third party claims overhead’ is 20.58%*.

But how do you know whether you are being charged the correct sum unless you know what the ‘total defined cost’ is?  To this date, the contractor and Public Authority cite ‘commercial sensitivity’ and withhold the information.  But the evidence in our possession demonstrates that the ‘defined costs’ to the Public Authority are not the same – despite the contractor stating otherwise!

Defined costs will not be disclosed, the process will not be made known by the contractor or Highways England.  The public are presented figures that make no reference to ‘defined costs’ or a percentage ‘uplift’.  Instead, fees bearing no resemblance to those used when invoicing the Public Authority are displayed with the contractor demanding payment or threatening legal action.  If the process detailed in the contract (Appendix A to Annex 23) was being followed, the charge for a Mercedes van, as an example, would be presented as:

Base Rate Fee / uplift Fee Charge Total / hour
Highways England £15.65 7.38% £1.15 £16.80
Third Parties £15.65 20.58% £3.22 £18.87

However, the public are charged £35.53 / hour for such a vehicle i.e. the ‘fee’ or uplift they are charged on the £15.65 ‘base rate’ is 127.03%.  The exaggeration is across the board of charges; staff, plant and materials.  For example, regarding emergency incident attendance staff, referred to by Kier Highways Ltd as AIW operatives, the fees to Highways England are:

Base Rate Fee / uplift Fee Charge Total / hour
Highways England £22.73 7.38% £1.68 £24.41

To the public, by reference to Appendix A of Annex 23, the charge should be:

Base Rate Fee / uplift Fee Charge Total / hour
Third Parties
£22.73 20.58% £4.68 £27.41

But Kier Highways Ltd charge the public £70.32 / hour for an AIW staff member explaining that the base cost is £58:

Base Rate Fee / uplift Fee Charge Total / hour
Third parties
£58 20.58% £12.32 £70.32

The ‘fee’ or uplift third parties are charged on the £15.65 ‘base rate’ is 209.37%.  But the excess does not end there … if an AIW attends the incident out of ‘core hours’, Kier Highways Ltd will charge a 1.5x multiplier of a weekday and the hourly rate to the public becomes £105.48 /hours whereas Highways England pay no such multiplier and are invoiced the standard £24.41 / hour.  It should also be remembered that, per Kier Highways Ltd., AIW’s work in pairs; the charge for 2 AIW operatives per hour of a weekday evening is:

  • £48.42 / hour to England Highways
  • £210.96 / hour to the public

But ‘core hours’ are defined by Kier; as they have provided so many accounts (click here to view these) of the shifts giving rise to multipliers and Highways England are not charged these additional uplifts, it is difficult not to conclude that the multipliers and are not (as is claimed) a cost incurred but intended to result in extraordinary profits at the expense of the public.

*Information conveyed by Ms Granville, head of claims for Kier Highways Ltd.

16/05/2017 – HE FoIA: 751,563 

I have investigated your query and can confirm that there are no appendices to Annex 23 for Area 2, 3 and 10 contracts. I apologise that this was not explained to you at the time.