Defined Costs – Held & Audited!

26/05/2017 FoIA Request:

Dear Highways England Company Limited,

Explanation of Defined Cost and Uplift

Under the freedom of information act I am requesting the following information from you. I am informed as below regarding the construction of invoices. Please let me know
– What are defined costs, who calculates these, what is the calculation, what is the defined cost
– What are the uplifts to Highways England and Third Parties who calculates these, how are they calculated, what is the calculation. What is the uplift
– How is compliance with the process monitored?
– Is the process complied with?
– what reports of noncompliance been made and what investigations undertaken. A copy of the reports.
Please give me a full explanation. Thankyou

From: England Highways
Sent: 21 May 2017 08:11
Subject: Fw: website figures
Thank you for your email. Your incident appears to be in Area 9. We are advised that an invoice from Kier should comprise 2 components:
1. Defined cost (£)
2. Uplift (%)
It appears the contract has been ignored since commencement by Kier Highways Ltd in 2014.
The defined cost is said to be the same to both Highways England (over £10k claims) and to Third Parties (under £10 k claims). It is the uplift which it is claimed causes the difference in charge to the parties – why TP’s are charged more.
We can determine some of the defined costs. For example, an AIW is presented as £23.71 / hour.
The uplift to Highways England has varied over time from 4.5% to 6.5%, 7.38% and recently we have seen 7.4%.
The defined cost to TP’s is said to be 20.58%. However, this information originates from Kier Highways and should not be accepted at face value. Kier Highways have stated that both the defined costs and uplifts are dictated to them by Highways England.
If you take the 7.38% to Highways England as an example, if the uplift to TP’s is 20.58%, the difference is 13.2%. so, using the AIW cost example, this should be:
£23.71 + 7.38% = approx. £26 / hour to Highways England
£23.71 + 20.58% = approx. £30 / hour to Third Parties
I suspect you are being charged about £73 / hour for an AIW with ‘multiplier’s added, subject to the time of day the incident occurred!
It therefore appears you will need to ask Highways England for information about these figures – I would suggest the use of www.whatdotheyknow.com to submit a request – feel free to use the above as you wish. If you do, please let us know. If you need more information, feel free to return to us – we will however update
www.englandhighways.co.uk regularly.

Yours faithfully,

John Stephenson


21/07/2017 751869 FoIA response:
Thank you for your email. I am writing to advise that we do hold the information you requested but have decided some of the information cannot be disclosed.

Information relating to some points, outlined below, is being withheld under the exemption in Section 43(1) and (2) of the Freedom of Information Act 2000 because information is exempt information if its disclosure under this Act would, or would be likely to, prejudice the commercial interests of any person (including the public authority holding it).

In applying this exemption we have had to balance the public interest in withholding the information against the public interest in disclosure. Our arguments are set out below

The procurement process must be seen to be fair and that commercial interests of the suppliers of services are not unduly prejudiced by the release of commercially sensitive information. It is important to maintain the confidence of our suppliers in order to achieve best value for the tax payer;
The methodology outlined in the bid may be construed as a “trade secret” in that it is a strategy owned and developed by the consultant. If the methodology was made available to competitors in the market place it would undermine the commercial interests of the consultant when bidding for other contracts by reducing their competitive edge;
• To reveal the details of the bid, or audits of processes, would seriously undermine our ability to negotiate the best value for money for the public purse on future contracts as the rates and methodology are still current;
• The consultants object to the release of their bid information on the grounds that it contains commercially sensitive information in terms of a “trade secret” and rates; and such a release would be actionable.

Dealing with the points you raised, in turn:

  • What are defined costs

Defined Costs are the actual costs incurred by area service providers in carrying out the services they are contracted to provide.

  • who calculates these

They are calculated by providers and agreed by Highways England.

  • what is the calculation

This is typically the amount of payments due to subcontractors for work which is subcontracted without taking account of amounts deducted for
• payments to others and
• the supply of equipment, supplies and services included in the charge for overhead costs incurred within the working areas in the contract
• the cost of the components for other work.

  • what is the defined cost

This will vary from scheme to scheme depending on the costs incurred by the contractor.

  • What are the uplifts to Highways England and Third Parties

The “uplift” referred to is the Service Provider’s Fee. There is a subcontracted fee percentage which is applied to the defined cost of subcontracted work and a separate direct fee percentage which is applied to the defined cost of other work. In addition there is a third party claims overhead percentage for damage to Crown property where, in accordance with the contract, the claim is the responsibility of the Service Provider to action. The Service Provider’s fees form part of their tender bid and are applied in accordance with the contract.

  • who calculates these

The fees are calculated by providers during contract tenders, and agreed by Highways England.

  • how are they calculated

Information withheld

  • what is the calculation.

Information withheld

  • What is the uplift

Information withheld

  • How is compliance with the process monitored?

In terms of costs, representatives of Highways England audit costs applied for and check that it is line with the contract. They will then certify the amount due.

In terms of the process, this is done through compliance audits.

  • Is the process complied with?

Withheld

  • what reports of noncompliance been made and what investigations undertaken. A copy of the reports.

Withheld

Andy Farquhar
Highways England | Piccadilly Gate | Store Street | Manchester | M1 2WD
Web: http://www.highways.gov.uk