Arguments for Disclosure

We are concerned that the contracting out of some Public Authority services is causing a dilution of the Freedom of Information Act; that whilst a Public Authority can be asked to provide information using the legislation, a contractor (private company) cannot.  A Public Authority could address this simply by including the necessary inclusion terminology within its contract.  Sadly, this appears not to happen often causing us to question whether placing data beyond FoIA is intentional.

To quote a Police & Crime CommissionerThe default position appears to be to withhold information rather than freely making it available for public scrutiny. It may be an appropriate time for Highways England to revisit the Nolan principles of Openness and Accountability” – source 04/02/2016 W. Mids Police & Crime Commissioner 11-SPCB-07-June-16-M6-Inquiry

Whilst Highways England appears keen to keep us from the rates used, just how sensitive are they when previously the contractor has provided a schedule with their claim – they appeared to understand the need to substantiate the charges they were demanding – click here for Kier’s ‘1153’ breakdown.

However, of the requests we have made and have seen made of Authorities’, we are concerned to note frequent reference to ‘commercial sensitivity’ to prevent disclosure.  When it comes to pricing and /or arrangements surrounding payments, it appears some authorities cite ‘commercially sensitive’ as a default position; they will not release the information.  However, a reason for this appears to be that some Authorities / Contractors do not wish to disclose the existence of dual-pricing ; that they are subject to one set of rates (or uplifts) whilst the public (drivers, fleets and insurers) are presented another, higher, schedule – click here for more information.

We are no so naive as to believe contractors do not talk to one another, that they do not know the rates applied.  In 2008, over 100 contractors were taken to task for rigging tenders; arranging between themselves to allow a contractor to gain a contract by over-stating their charges – for more information, click here.  As a result:

  • the Public Purse was potentially depleted by this abuse of the tender process
  • the contractor that ‘won’ the tender would pay others for their high-pricing which it appears meant:
    • there was enough ‘fat’ in the winner’s pricing to afford this
    • the public purse / tax-payer was paying this ‘arrangement’ fee
    • the ‘losing’ contractors had to falsify invoices to account for the payments

The process of tender-rigging or ‘bid rigging’ is a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid. This form of collusion is illegal in most countries. It necessarily requires the involved parties to be aware of one another’s submissions.

In 2016, another form of collusion saw many construction companies to include those providing services to Public Authorities  agreeing compensation following the blacklisting of workers in their industry. The construction industry used to monitor more than 3,000 building workers through the Consulting Association, which was eventually raided by the Information Commissioner’s Office after earlier revelations in the Guardian – for more information click here

Yet Highways England and other Public Authorities permit these contractors to operate below the radar on sub-£10,000 claims and place them beyond FoIA!  How can a driver, fleet or insurer discern whether a bill presented is accurate, appropriate, when information is withheld and in some cases, misrepresented?

A disclosure is specific to that claim which is often dealt with in isolation.  Indeed, the smaller the company receiving the invoice, the fewer such claims they could expect and the less likelihood of them being able to understand the processes and charges involved.  The smaller business is prejudiced.

A larger business or their agents (possibly a loss adjuster), receiving many such claims, is able to collate and compare data.  As a result, the schedule of charges can be compiled by reference to both types of bills, those presented to the

  • Public Authority who then place the invoice before a fleet or insurer
  • public, fleet and / or insurer

Why should only larger organisations benefit because the Public Authority adopts an obstructive approach?  Why should any business be forced to gather and organise data in this fashion?

There exists a ‘reference’ transaction record for the charges being raised by contractors; the schedule of costs agreed with the Public Authority. However, as the charge to drivers, fleets and insurers is higher than the reference charges,  due it appears to exploitation of market power, the contractor gains at the driver, fleets and insurer’s expense.  This appears unfair and not something we would expect Public Authorities to permit. Indeed, in once instance, the past-pricing of a particular aspect provides a good indication that all is not right as the contractor’s charges for attending an emergency incident increased dramatically to drivers, fleets and insurers:

  • 2013 – £125
  • 2014 – £1500
  • 2015 – £2,700

Yet the price to the public authority increased by about inflation … a few percent.

Disclosure is necessary for the party to whom a contractor presents an invoice to make an informed decision. For example, the contract between the Public Authority and the contractor may include a direction about the fees that should apply and / or how an invoice is calculated.  Contractors have appeared reluctant to produce any correspondence relating to the pricing process.  It is only in relation to Court proceedings that a contract Appendix (for Area 9) has been presented and this can be viewed by clicking here.  However, on 06/03/2017, this Appendix A to Annex 23 was provided in reply to an FoIA request and more can be read by clicking here.  The fee to be charged is by use of:

  • Defined Cost ‘ or base-rate.  this is the same to the Public Authority and third parties such as drivers, fleets and insurers
  • Third Party Claims Overhead.  This is a percentage uplift; the total defined costs are multiplied by this. 

This document, Appendix A to Annex 23, has not previously been located on-line and base rates are withheld.  If the base rates were being used, as per the contract, it appears reasonable that these would be conveyed to third parties (the public) to explain and justify the charges.  Yet at every turn, contractors are doing their best to resist disclosures of the very rates that they should be using which prevents the public from discerning whether charges are being compiled correctly,  It appears that the charges are being overstated and that the resistance to disclosure is to prevent discovery of this – more information about the maximum contractors should be charging third parties can be found by clicking here. Because some contractors are not complying with the terms of the contract and are charging Third Parties other than in accordance with the contract.  Unless you know what the ‘defined rates’ are; how are you able to ascertain whether the charges are accurate?

Further reasons for disclosure:

  1. Some contractors have disclosed information without citing ‘commercial sensitivity’, examples:
    • AOne+ – 2017 schedule of rates Area 12 (and reference to Area 10) – A-One+ ASC Area 12
    • 2015 Area 13 rates – T08C128 2015 charges
    • Colas Charges M£ jct 2a – 4 scheme 2014 – Colas U02A543
    • Kier Highways Ltd, formerly EnterpriseMouchel, ‘1153’ rates* – 2014 2015 1153 charges
      • *For in excess of a year we challenged these charges and were the subject of the contractor’s obstruction and aggression.  In late 2015 the charges were abandoned with the contractor being unable to justify the costs and blaming their implementation on a ‘tricky individual’ who had since left the business. For more information about 1153, click here
    • Kier Highways Ltd 2016 – some charges to their Publci Authroity client, Highways England – Kier Highways Ltd Labour Charges to Highways England
  2. Other contractors appear content to disclose some costs; those to support a claim for the (higher) rates used when seeking monies from drivers, fleets and insurers.  For an example, click here.  Why provide this information and not the pricing used when charging their ‘provider’ the Public Authority unless the rates are substantially different?
  3. Contracts run for many years.  The costs, how they are applied and the contracts used will likely have changed substantially from the contract date to the subsequent re-tender.  The current contractor may even have a clause that will likely enable the contract to be extended.  By the time a new bidding environment exists, new methods of road repairs will be employed or contracts will have changed such that the pricing becomes uniform for the public Authority and the public.  Information disclosed now will be irrelevant in years to come.
  4. Contractors are relatively few and enter into joint arrangements, partnerships to address road repairs.  The companies will know one another’s rates, the ‘going rates’. for tasks.
  5. Rates are, to a great extent, standard.  The Civil Engineering Contractors Association (CECA) is the representative body for companies who work day-to-day to deliver, upgrade, and maintain the country’s infrastructure. CECA provide a schedule of rates to which contractors often refer.  This rates are available, on payment of a fee i.e. many fees are known or can be (generally) determined. Why are these rates available but those charged to the Public Authority not?
  6. How can the public determine whether best value was acquired? 
  7. What cannot occur is a comparison; how can anyone presented a bill by a contractor ascertain whether the rate is reasonable when they are prevented from determining what a Public Authority pays?
  8. Acquisitions occur. Contractors may well be in talks about acquisition of one another – due diligence results in disclosure. Purchase causes the rates to be disclosed, acquired.
  9. Staff are TUPE’d over between companies at end / start of contract – the old contractor departs but their staff are retained by the new.  These staff will be aware of the procedures and rates of their predecessor.  There will be cross-over claims, correspondence from the old contractor that needs to be resolved (repairs concluded) that will necessarily give rise to pricing being known.
  10. Management staff move between contractor companies; staff that are familiar with the pricing of components and services together with the processes involved.
  11. It is evident some contractors operate a dual pricing arrangement, one that a Public Authority appears not to understand.  A pricing methodology is used to compile, invoice and charge the Public Authority, another higher pricing method is used to charge the driver, fleet and / or insurer. This process causes the ordinary motorist, fleet or their insurer to pay excessive fees.  Non-disclosure permits abuse and abuse has occurred with one contractor being forced to abandon its pricing methodology n late 2015 but only after more than a year of obstructive, aggressive conduct.
  12. A Public Authority appears not to understand their own arrangements and contracts, erroneous responses being supplied. This appears to result from an excessive out-sourcing program which has caused a reduction of knowledgeable staff. Authorities should embrace requests that enable others to review processes and ensure accountability; open the conduct to scrutiny of the public who can effectively provide a further (cost free) audit facility i.e. provide a checks & balances process.
  13. A contractor has repeatedly failed to provide information in support of charges and supplied contradictory information about some fees.
  14. Public Authorities do not to audit sub-threshold matters; the contractor is placed in a privileged, monopoly position, is able to act in this vacuum as they see fit; the environment is open to abuse.  At least one contractor has taken advantage of the situation.  There is no transparency.
  15. Public Authorities appear to be aware of the situation (above) and the reluctance to supply data is of concern.  It appears ‘commercially sensitive’ actually means ‘potentially embarrassing’ .  It appears the dual-pricing arrangement is a known, enabled and permitted arrangement  used to subsidize highway maintenance and there is a desire to maintain the situation.
  16. A Public Authority contractor is likely receiving a lump-sum payment from Public Authorities for various tasks.  It appears that some of these tasks are also being claimed from drivers, fleets and insurers i.e. there is dual payment. Someone is losing out but who; the over-charged driver or the public-purse?
  17. The public, fleets and insurers are prejudiced by the arrangement which is kept secret.  Additionally, they reasonably believe that a contractor is appointed following a detailed audit, due diligence inquiries.  Yet, as evidenced by the 2008 ‘rigging’ (above not only are contractors prepared to engage in such activity, the Public Authority was unable to identify the behavior.
  18. Public, fleets and insurers will likely (reasonably) believe that  negotiated fees agreed with the Public Authority will necessarily apply to them also.  Not necessarily!  Whilst a contractor will use the same staff, plant and materials i.e. incur the same cost, the fee charged is affected by the route the invoice takes, not by the resources used.
  19. The information has been supplied by other councils who have not considered such an exemption valid
  20. Pricing is not necessarily the main / only criteria for selection following tender. Accordingly, it will have less (if any) impact upon the Public Authorities’ ability to obtain best value. In fact, costs are not necessarily found in contracts as a general matter, they are incurred after the conclusion of a contract in some instances.  The same is true of operational information generally (e.g. manufacturing processes, construction costs or operating costs).  None of the operations that generate such information and costs would go into effect until after the contract is concluded; thus, these details are not necessarily included in the contract.
  21. By enabling contractors to retain / pursue claims, the Public Authority has created an environment in which abuse can occur and effectively prevented monitoring by placing the matters outside the scope of FOIA. An abuse may not arise but the situation creates suspicion. Abuses of a dominant position can result in an excessive price i.e. one that:
    • has no reasonable relation to the economic value of the product, indicators being:
      • the price-cost margin is excessive
      • the price imposed is unfair in itself or when compared to competing products   
    • more about ‘When Are Excessive Prices Unfair?’ can be read by clicking here.
  22. It is arguable that drivers, fleets and insurers are entitled to the terms of the agreement entered into by ‘their’ Public Authority and that it is unfair if a contractor charges a price that realises a gain at the expense of the driver, fleet or insurer.

  23. There is a lack of explanation from Public Authorities in support of the practice of dual-charging being appropriate, reasonable and necessary.  This suggests there is no good reason, simply that the practice enables profiteering.
  24. Public Authority acknowledges that they do not audit sub-threshold claims.  There appears even greater reason for the public to be able to scrutinise a role that falls to the Authority, one they have abandoned.

  25. We are not seeking to question the correctness and fairness of prices based upon historical rates or competitor’s charging schedules, rather by reference to the charges, presented by a single supplier, at a given date to two differing ‘customers’:
    • the Public Authority that entered into a contract eyes wide open and agreed rates that were visible, capable of being tested and
    • drivers, fleets and insurers who are presented a breakdown of costs with no reference points.

If you have additional reason for the information being released, to support our objection to ‘commercial sensitivity’ please email us info[@]englandhighways.co.uk