Area 9 Claim Warning
Area 9 – if you receive an invoice that displays an hourly rate for an AIW at over £30, in particular if it is for £73.05 / hour and / or the AIW has been charged with a multiplier (after 5pm of 1.5x i.e. £100+? hour) – BEWARE! Do AIW’s really cost that much and do they only work 8am to 5pm weekdays?
If in doubt, email us
Kier Highways Ltd (KHL) took over Area 9 on 01/07/2014, but from the outset applied a charging process to drivers, fleets and insurers (Third Parties) that grossly exaggerated incident attendance costs – the ‘1153‘ methodology. Bills of £4,700 (minimum) were issued for attendances that should likely have cost less than £1,000 … on potentially 3,000 claims / year.
After year of ‘battling’, KHL who, as an example, had written to our clients criticizing us, seemingly wishing for us to be removed from claims handling, abandoned the process. KHL’s head of claims blamed the ‘time bomb’ that was 1153 on a ‘tricky individual’ who had left their employ.
What replaced 1153 in 10/2015, is no better. Claiming to comply with a ‘defined cost’ and ‘uplift’ process, we were assured the ‘base rate’ (‘defined cost’ or ‘notional rate’) was the same to both Highways England and Third Parties. In 03/2016, KHL’s head of claims told us:
‘The notional rate for any individual is the same regardless of if it is a HE claim or an under the threshold claim. The differing pounds is a result of the contract overhead which does differ but the HE are looking to make more consistent in the future. Other than that the numbers are identical and I have given you the full notional breakdown which also shows the contract overhead.’
But as the ‘overhead’, the percentage uplifts were known (7.38% to Highways England and said to be 20.58% to Third Parties) the math’ contradicted the statement, the charges could not be reconciled.
The issue was confused because Highways England’s General Council informed us that AIW’s cost them, the Public Authority, £70.32 / hour. It transpires this is false.
We examined charges for regularly encountered KHL operatives, AIW’s (Asset Inspection Watchmen), the emergency incident attendance crews. The figures contradicted the ‘defined cost’ process and Highways England’s information. The rates were about:
- £25 / hour to Highways England
- £70+ / hour to Third Parties
If the ‘defined cost’ process were applied, Third Parties would be paying about £30 / hour:
- £25 / hour – cost
- £ 5 / hour – uplift (at about 20%)
Third Parties should be paying about £5 / hour more than Highways England, not £45 / hour more – and AIW’s are said to work in pairs, the exaggeration is doubled.
Another indicator things were not as presented was the reluctance of KHL and Highways England to provide information. When 1153 was employed, KHL disclosed substantial detail. But now, very little was forthcoming and Highways England cited ‘commercially sensitivity’ when approached using the Freedom of Information Act.
But KHL had informed us, in early 2016, that the actual (defined) cost of an AIW was just over £58 – we were provided a breakdown.
Eventually, on 02/05/2018, Highways England, at the direction of the ICO, released the rates they pay for an AIW in Area 9; about £25 / hour.
- If the actual cost (before profit) of an AIW is £58 / hour, why have KHL agreed to charge Highways England £25 / hour?
- Why did Highways England’s General Counsel inform us that the Public Authority pays £70.32 / hour?
It appears facts have been misrepresented to us to enable systematic exaggeration on an industrial scale.
More recently, the Third Party rate has dropped to £65.75 / hour – still an excessive sum and inconsistent with the agreed process. However, it is encouraging to see that the charge for a 3am attendance is now at a ‘flat rate’*. KHL have told us and the Courts, AIW’s work 8am to 5pm and outside of these hours a multiplier of 1.5x is applied because this is what they have to pay the operative i.e. the hourly rate to a Third Party would be neigh on £100 (whilst remaining £25 to Highways England).
- A KHL employee has informed us that they work shifts and
- another that overtime is paid at a flat rate.
*Possibly the failure to apply a multiplier was an error – these uplifts have been used for about 2 years
You can expect to see each AIW charged, using the high rate, at a further 1 hour for ‘planning’. The rates are just one facet of a claim giving rise to exaggeration and extend to the vehicle – the above rate is £36.91 / hour. But this too does not comply with the ‘defined cost process’ – more information about the vehicle rate can be found here.
On 22/06/2017, we met with Highways England’s new head of claims and were assured an audit of Area 9 would occur. It was not until 11/2017 that we were contacted by the auditors, KMPG and provided a detailed account of our concerns subsequently providing documentary evidence. Further reassurances of updates and the impending completion of the audit saw dates pass. To date, about 6 months later, we appear no further forward. However, Government Legal Department have apparently been told by the head of Highways England’s claims department there is no merit in our concerns – a statement Highways England say is incorrect.
The exaggeration, which appears to be profiteering, continues. If you do not pay KHL’s invoice, expect to have proceedings issued against you. We received an assurance from the head of Highways England’s Green claims that all CMA matters were ‘on hold‘, that lawyers Shakespeare Martineau (Corclaim) have been informed of this. However, proceedings continue to be issued in the name of Highways England who appear powerless to control their own lawyers.