Recently provided some ‘defined costs’ for Area 9, we can make meaningful comment about the charges presented by Kier Highways Ltd (KHL). We have concentrated upon AIW (Asset Incident Watchmen) operatives, the first-response staff common to most claims.
Based upon the information obtained, Third Parties (drivers, fleets and insurers) should be paying about £30 / hour for an AIW but are charged from £65 / hour to £170 / hour. For the same staff, doing the same job, Highways England Company Ltd (HE) are paying about £25 plus a small (<10%) uplift.
There are other areas of overstatement, for example:
- vehicles (plant)
- debris removal
We have tried to compress 3+ years of information acquisition, collation, examination and presentation into the following. It is import to be aware of the billing process as who receives a KHL invoice is generally governed by the claim value. Following damage to Crown property (DCP) such as a motorway barrier:
- if the repair cost is above £10,000, the Public Authority such as Highways England, is billed by their repairing contractor, pays the invoices then seeks recovery from you.
- if the bill is below £10,000 the contractor is not paid by the Authority but pursues you, your insurer or your company (if a fleet vehicle) for the money.
Why does this make a difference? Because above £10k ‘mates rates’ are used, below threshold a difference process to bill is engaged and the bills are substantially higher.
Note – some pages will be restricted to registered users until such time as investigations are completed.
A brief history:
2012 – ‘Crisis-hit services group Mouchel has gone into administration, enabling it to sell the business to its lenders and management in a deal which will leave shareholders with nothing.’ – source – Telegraph. KPMG appointed as administrators.
2013 – ENTERPRISEMOUCHEL LIMITED Company number 05606089, change their name to EM HIGHWAY SERVICES LIMITED (and in 2015 after acquisition by Kier, become KIER HIGHWAYS LIMITED
2013 – An example of an invoice for attending an emergency incident displays a charge of about £125. (our ref:R06B037)
2014 – incident attendance example – now over £1,500 (our ref: S03A533).
01/07/2014 – KHL commenced the Area 9 contract and uses its ‘1153’ process which is NOT contract compliant. Incident attendance is £2,700 plus £2000 admin’ – £4,700 for just attending an incident.
The contract can be found on-line, as can its Annexes. But the document that protects Third Parties, an Appendix that sets out the process by which the MAXIMUM a Third Party should be charged, their ‘shield’, is unavailable. What use is a shield if you do not know of its existence or it cannot be found? The document ‘Appendix A’, was not discovered until early 2017 – see below.
From the outset, Kier did not comply with the Appendix and Highways England appears not to have noticed, or turned a blind eye. Kier used their own ‘1153’ process which is described here, the figures appear here. ‘1153’ saw gross exaggeration with Third Parties owed £millions. Some obvious observations:
- the process saw total incident attendance costs divided by the number of incidents per year – 1153. But:
- the resources used to attend incidents also cut grass, filled pot holes and picked up litter / debris – paid for by way of lump sum from Third Parties (tax payers) – ‘we’ were paying twice
- the number of incidents per annum was about 5400 (click here for the evidence and implications) not 1153 i.e. the exaggeration on those costs which were applicable, was about 5-fold.
Highways England seemingly failed to note non-compliance with the contract, this despite the agreement requiring Kier to send them costs on EVERY sub-threshold claim.
HE repeatedly informed us they hold no sub-threshold data. But they do (click here for more); the contract requires Kier to convey sub-threshold information on EVERY claim under various headings:
- the amount claimed from third parties,
- a calculation of Defined Cost and resulting Third Party Claims Overhead,
- the amount recovered,
- an explanation of any differences between any of these amounts, and
- explanation of why any loss greater than Defined Cost has been claimed.
We attempted to obtain an explanation from Kier about 1153, we sought an explanation of the process which appeared obviously wrong, but were unsuccessful.
06/2015 – Kier Ltd acquires EM Highways Services Ltd. Seemingly their due diligence fails to identify the non-contact compliant activities – or turns a blind eye to them?
06/2015 – Kier submits accounts to 06/2015 – approx. £12 million profit on £387.5 million turnover. This appears to be about the amount Kier have overstated claims against Third Parties i.e. it appears without the exaggeration, they broke even.
07/08/2015 – Neil Pendlebury-Green of Kier Highways attempts to progress a 2nd, non-contract compliant process, his ‘4-hour’ charging methodology – click here to view the process.
21/08/2015 – I wrote to Neil Pendlebury-Green – email here.
As evidenced by the above, to our face, Mr Pendlebury-Green was exchanging emails. Behind our back:
21/08/2015 – Neil Pendlebury-Green writes to our clients, complaining about CMA and their director.
Our clients remained faithful, continue to use our services which, it appears, forces Kier to the table:
27/10/2015 we met with Sophie Granville and Neil Pendlebury-Green of Kier Highways. Neither mentioned Appendix A to Annex 23 (a section of the contract we were unaware of until 01/2017 – see below).
10/2015 – After challenging the costs for over a year, KHL abandoned 1153. They commenced using their ‘defined cost’ process – which still did not comply with the contract. However, the existence of the rules contained within Appendix A remained secret:
- HE did not mention it
- Kier did not raise the document
- HE did not place it on line- as they did the contracts and annexes
It appears HE and Kier were acting in concert to keep the public (drivers, fleets, hauliers and insurers) form the protection contained within the contract; Appendix A to Annex 23.
KHL issue their brochure Insurers Guide to Incident Management v1 that conveys uplifts for operatives out of ‘core hours’ (8am to 5pm) – see page 10 of the pdf – but we understand operatives work shifts and are not paid the uplift. Still, there is no mention of ‘Appendix A’.
18/11/2015 we had a lengthy phone call with Ms Sophie Granville
11/2015 – we asked HECL for information about sub-threshold (under £10k) claims but are repeatedly told they do not possess the records – we are misled – more here.
09/12/2015 we met with Sophie Granville and Ms Robinson of Kier Highways
Ms Granville blames 1153 on ‘a bit of a tricky individual’ who has now gone to Amey. We are suspicious of this understand the person concerned left the claims arena at Kier prior to 07/2014 (they also deny any knowledge).
01/2016 – HECL audit KHL. Tim Reardon, HECL’s General Counsel provides the audit 160107 HE audit. No significant issues found. No mention of ‘Appendix A’.
Kier states the TP Claims Overhead (see 01/2017 below) is 20.58% but makes no mention of Appendix A to Annex 23.
27/02/2016 we had a lengthy phone call with Ms Granville.
03/2016 – according to HECL’s general counsel Tim Reardon, Highways England are charged £70.32 / hour for an AIW. No suggestion the rate is ‘commercially sensitive’. We have evidence HECL are NOT charged £70.32. The cxchange with Tim Reardon can be read here.
Breakdown of AIW hourly rate of £70.32 provided by Ms Granville of Kier.
31/03/2016 – we sent a 77-page report to Ms Granville setting out our concerns, the issues and outstanding matters. We evidenced our concerns about charges, in particular that it appeared Highways England were being charged about £25 / hour for an AIW – something Ms Granville denied.
05/04/2016 – Tim Reardon HE’s General Counsel emails HE are charged £70.32 / hour for an AIW and £35.53 / hour for their vehicle as at 12/2015 This is incorrect and at odds with the ‘defined cost’ process.
09/09/2016 – Ms Sophie Granville, Kier Highways head of claims makes a statement for the Court – text here
25/10/2016 – ‘defined costs’ (DCP Rates) are held:
The actual defined cost for incident response and repair work resulting from damage by third parties is calculated after the event depending on the work that needs doing. This is calculated in accordance with the defined cost definition in the attached, which references the schedule of costs components also defined in the attached, which specifies specific costs the contractor is allowed to include and the cost of them.
21/11/2016 – email from CEO of Highways England Jim O’Sullivan
I also want to ensure that drivers only pay appropriately for the damage they do to Crown property. I’m sure the current process could be simpler and I know Tim and Nick will be working to achieve this. We are certainly putting a lot of effort into reconciling the past costs that you are talking about.
01/2017 – Tagged on to the end of a Court exhibit is Appendix A to Annex 23 – a brief document setting out how to calculate the MAXIMUM a Third Party is to be charged, ‘no more than’:
‘x’ defined cost (£) + ‘y’ Third Party Claims Overhead (%) = maximum charge
In possession of the above calculation, to ascertain the MAXIMUM charge to a Third Party, you require:
- defined costs (£) and
- TP Claims Overhead (%);
confirmation of which has repeatedly been kept from us.
It is evident Appendix A of the contract has not been complied with since commencement 01/07/2014.
2017 – We made an FoIA request for AIW defined costs. HECL refused to release the information citing ‘commercial sensitivity’.
Concerns about non-compliance with Appendix A and evdience of gross overstatement raised with Colin Mathews, Chairman of HECL.
20/06/2017. Tim Reardon of HE writes:
Matters relating to the contract between Highways England and the service provider are for those parties alone and are nothing to do with you or your firm.
We believe this in incorrect, the contract relates to Third parties, for example:
Possibly this explains why our FoIA requests are treated dismissively?
21/06/2017 – We met with Sarah Green of HECL and explained our concerns; we presented evidence that HECL was paying a base rate of £23.71 / hour in Area 9 for an AIW yet Third Parties were paying £70.32 / hour. Appendix A was not being complied with, if it was:
defined cost (£23.71) + TP Claims Overhead (20.58%*) = maximum charge £28.59
*as yet, not evidenced and suspected of being exaggerated.
Subsequent Kier statements made in support of Court action taken in the name of Kier, do not display Appendix A to Annex 23.
Sarah Green emails Jim & Tim (HE) extract as follows:
I met with Mr Swift today and he does have valid points and raised a few points that are actually of some concern. (Kier quoting VRM’s for vehicles attending repairs which turn out to be VRM’s for a motorbike, a Mercedes convertible, a privately owner Ford Focus etc)
I have asked that he now only writes to me as I am the one trying to resolve the issues and that rather than have email war
22/06/2017 – Sarah Green phones and asks CMA if their Fraud unit should be appointed.
06/07/2017 – we wrote to Corclaim / Shakespeare Martineau solicitors regarding Appendix A.
27/07/2017 – Sarah Green of HECL states there were ‘gaps’ in the original audit (01/2016)
Grant Thornton were to be appointed to audit… but replaced by …
KPMG are appointed to audit Area 9. As at 08/2018 this has yet to be completed.
15/11/2017 – KPMG Overview of Concerns provided to Damian Byrne of KPMG. We spend almost an hour conveying facts.
CMA compile on-line repository of evidence to support allegations of systematic overstatement of claims by Kier, supported by Highways England.
12/2017 – Audit summary to have been completed.
Mrs Green of HECL emails ‘The below threshold claims are the sole responsibility of Kier and they do no collect any information on behalf of Highways England hence this information cannot be obtain via an FOI request‘. But KHL do submit information to HECL – it is a contractual requirement.
2018 – The ICO rejects the ‘commercial sensitivity’ exemption and directs HECL to provide AIW rate data – this supports the £23.71 / hour ‘defined cost’ sum – see 03/05/2018 below.
04/01/2018 – Sharon McCarthy @ HECL states she is responsible for getting to the bottom of the allegations that have been raised. Sharon accuses me of sending ‘at least 30 to 50 emails a day’ (preposterous, denied and asked to evidence – has thus far failed to do so).
18/01/2018 – Sarah Green advises HECL should be getting the initial draft of KPMG’s report next week.
04/01/2018 – Sharon McCarthy accuses CMA of sending 30 to 50 emails / day to KPMG and mentions harassment. The statement is false; such volume of emails has not been sent.
18/01/2018 – Peter Williams of Government Legal Department, acting for HECL
‘I am instructed that Sarah Green is satisfied that there is no substance to your complaint about Kier. Accordingly I am further instructed to press this claim, bringing proceedings if necessary.’
Sarah Green of HECL denies making the above statement.
12/02/2018 – Sarah Green states HECL had a draft audit report (KPMG) sent to their audit committee last Wednesday. The committee had asked for further work to be undertake.
I was asked to give Sarah 3 weeks and was assured Mrs Green would come and see me if only to ‘buy me a cup of tea and a cake’. We agreed I would diarise to 01/03/2018 to touch base by email about a meeting. I explained that I would be sending stuff on each file in the meantime to which Mrs Green replied ‘I know you’ve got to, and that’s fine’.
28/02/2018 – I spoke with Mrs Green and agreed to call late Friday. I expressed concern for Mrs Green explaining part of the reason that I send so much is that I feared, in the background, there was a lot more going on than meets the eye; there is an awful lot of money involved.
02/03/2018 – Subject Access Request to Sharon McCarthy, Jim O’Sullivan and Colin Matthews.
08/03/2018 – we seek an update about the audit – email. To date, no response.
22/03/2018 – Highways England threaten police action against the author – click here.
03/2018. It appears Mrs Green is removed from the audit of KPMG and Tim Readon (General Counsel) has taken over.
04/2018 – We post information about systematic overcharging, misrepresentation about the charging process and that Appendix A is not being complied with – click here.
14/04/2018 – it appears the HE audit of Kier is a sham – click here.
These figures are for ‘x’ (see 01/2017 above), specifically for AIW’s in Area 9.
- Note: in 03/2016, more than 2years ago, HE’s General Counsel wrote that HE was charged £70.32 for an AIW. This is untrue – more here
14/05/2018 – SAR made to KPMG.
24/05/2018 – FoIA Response – Rates are Commercially Sensitive – PIT upholding this undertaken by Patrick Carney. See 21/11/2018 (below) – Patrick Carney states the rates are NOT commercially sensitive.
23/07/2018 – TPCO disclosed: ASC DCP Analysis Begum Appeal (1). This is the Third Party Claims Overhead percentage, the ‘uplift’ referred to in Appendix A to Annex 23, a figure of 25.29% in Area 9. The Decision notice can be read here.
21/09/2018. Jim O’Sullivan, CEO of Highways England writes:
I can tell you that the investigation into Area 9 Green Claims has concluded. Tim Reardon has written to Kier and other service providers operating under Asset Support Contracts reminding them of the need to charge the reasonable cost of repairing the damage to the road network, and making the point that costs which appear to be over-inflated, too remote from the damage or which duplicate other costs can expect to be struck out by a court.
The letter concluded:
The Court is the appropriate forum in which to challenge any costs you disagree with. I therefore see no grounds for taking your complaint further.
The full text can be found here – JOS letter to P Swift 210917
- But has the investigation concluded? See 19/02/2019 below.
28/11/2018 – Highways England confirm that they DO receive information about sub-threshold (£10,000) claims by providing data they received about a specific claim – Highways England Response 766898 CMA ref.: U05B654
21/11/2018 – Highways England’s witness Mr Patrick Carney, at a Tribunal, states DCP Rates are NOT commercially sensitive – for more click here.
04/12/2018 – Judge finds that Highways England provided incorrect information, that requests have a serious purpose and their actions have caused approaches. Public Authority’s exemption of ‘vexatious’ which had been supporter by the ICO, was dismissed, overruled – for more click here.
10/01/2019 – DCP Rates a myth … shame I was not told this 5 years ago! For 5 years they exited but were withheld, now, just weeks after a HE manager says ‘NOT commercially sensnive’ Highways England employers sing from the same hymn sheet; there is no schedule of rates – examples here.
From Neil.Cook @ highways England Cc: Kevin.Mullaney @ highways England
Subject: FoIA request – DCP Rates for Areas 9 and 10 CRS number: 768,020
Each incident is treated on its own merits in line with the relevant contract and costs are built up from Defined Costs using the Schedule of Cost Components plus fees and third party overheads where appropriate. Defined costs for individual DCP work are provided as part of the claims cost pack.
As each incident is treated on its own merits Highways England do not use or possess a Schedule of Damage to Crown Property Rates in Asset Support Contracts.
Kevin Mullaney, Head of Green Claims, The Cube, Birmingham B11RN
This reply is reiterated by others and the responses can be found here.
It appears failing to place the appendix that protects Third Parties, the brief document that is Appendix A and sets out an equation to be followed was ‘overlooked’
Unfortunately, the Procurement Officer who placed the contracts online omitted to upload Annex 23.
In six years, most of it under chief executive Haydn Mursell who found himself pushed out last week, Kier moved from a company with a £95m cash surplus, to one that owed £410m. So what went wrong?
31/01/2019 – HE reiterate the schedule of base rates for above threshold works, the schedule also referred to as ‘defined costs’, ‘DCP Rates’ or notional rates’ does not exist. Really? just what was withheld as ‘commercially sensitive’, the subject of public interest tests, objected to by contractors and seeking them results in a ‘vexatious’ label being applied … why not just say, years ago, ‘they do not exist’? Could it be because 21/11/2018, Mr Carney states they are not sensitive?
We do not hold this information. The term ‘Defined Cost’ refers to the definition in the contract as previously provided. The contract does not contain a schedule of Defined Costs. The Defined Cost for each incident is calculated in accordance with the definition. [The overhead is not applied according to a schedule of rates. The overhead is calculated in accordance with the definition, as previously provided.]
07/02/2019 – the response of 22/01/2019 (above) is subject to an Internal Review which upholds the ‘do not exist’ response – request history here. For 5 years HE have been telling us these rates were ‘commercially sensitive’, public interest tests supported the decisions, the contractor objected to their release and ultimately requests are deemed ‘vexatious – yes all along, the schedule of costs did not exist … or do they?
19/02/2019. The Area 9 investigation is not concluded? This contradicts the CEO’s email of 21/09/2018 (above). A WDTK response states:
I have established that the information you requested is not held by Highways England as the review into our service provider contract for Area 9, is not complete
The full response can be read here: 190219 FOI response Jacob Smith 768 553 investigation
12/03/2019. £50M of new debt revealed in Kier accounting error. Kier has revised its end-of-year financial statement for 2018, declaring an additional £50M of debt that went unnoticed due to an “accounting error”. More here.
19/03/2019 Kier Group plc has announced the appointment of Andrew Davies as its chief executive from 15 April 2019. Mr Davies had been drafted in to help save Carillion but the troubled firm became insolvent in January 2018 before he could take over. Before that he was chief executive officer of Wates Group Limited – the construction, developments and property services firm – from 2014 to 2018. More here.
27/03/2019 tim reardon @ highwaysengland.co.uk
Subject: FW: DCP Rates
As you note from your discussions with Jim, Highways England is working on a schedule of repair costs for typical instances of damage to the strategic road network, or DCP. This new schedule of costs, which we intend to publish on Highways England’s website in April this year, will be piloted in Areas 3, 7 and 9 with a view to national roll-out. The new schedule of costs makes no distinction between above threshold and below threshold claims. All future claims in those Areas will be taken forward on the basis of the new schedule.
In Area 9, Kier have withheld bringing new DCP claims since January this year. Those outstanding claims will be taken forward on the basis of the new schedule of repair costs.
08/04/2019 Highways England … unable to price a claim:
Following complaints from loss adjusters, Highways England commissioned an
independent investigation into the pricing in Area 9 of below threshold (i.e. below £10,000)
claims for damage to the strategic road network (sometimes referred to as Damage to
Crown Property (DCP) or Green Claims). The investigation revealed a lack of
transparency in the pricing of Green Claims in Area 9, citing the lack in the Asset Support
Contract of any schedule of rates (labour or materials) for third party repairs.
As none of the ASCs contain schedules of rates, and Highways England considers that
the lack of transparency applies equally to above threshold claims (i.e. those above
£10,000) claims as well as claims below threshold it was considered that a review
covering all areas was required.
Whilst the investigation into Area 9 in isolation was concluded it was widened into a root
and branch review to improve the end-to-end process for the recovery of Green Claims
generally. This review is ongoing and a final report has not been produced