Example of Area 9 Exaggeration

01/07/2014 Kier Highways took on Area 9.  From day-one they did not comply with the contractually agreed process for charging Third Parties (road users or their insurers) and Highways England not only failed to make the process available to those who needed it, Third Parties (drivers, fleets, hauliers & their insurers), they kept it secret and failed to ‘police’ the contract and protect the public and their insurers.

10/2015, concerns were raised and a lackluster audit occurred.  The initial process causing gross exaggeration of claims (‘1153’ see below) was glossed over and the contract non-compliance, overstatement, continued; embellishment in another guise.

01/2017, we were unexpectedly were presented a copy of ‘Appendix A to Annex 23‘ and after presenting requests for re-pricing, a meeting occurred. 21/06/2017 we met the soon to be (but no more) head of Green Claims & Dart Charge, Sarah Green 2019 – senior programme manager @ emovis.  We explained the issues, demonstrated by comparison and Mrs Green left with documentary evidence of contract non-compliance, of systematic, state-enabled, exaggeration. This evidence is now set out here:


The Charging Process


There are two regimes in operation (in some Areas, such as 9) to recover damages in respect of  highway furniture or ‘Damage to Crown Property’ (DCP).

  1. Where the costs are under £10,000 Kier undertake the repairs and recovers damages from the Third Party.
  2. Where the costs are over £10,000 Highways England claims against the Third Party and claims

What should result in reasonable charges is the contractually agreed process (Appendix A to Annex 23).  This simple process has at its heart a common figure; the base rate a.k.a. ‘defined Cost’ or ‘Base Rate’.  These ASC (contract) have a schedule of rates included, and this should be used as the basis for the calculation of costs for claims above and below the £10,000 threshold.  The respective calculations should be:

 Party Billed by Kier Highways Base Rate Uplift   Total
Third Party: ‘defined cost’ <8%   defined cost + fee <8%
Highways England: ‘defined cost’ 25.29% (Area 9)   defined cost + TP Claims Overhead (TPCO) 25.29%

The common value is the ‘base rate’ or ‘defined cost’ (DCP Rate) and a TP pays more due to the uplift (FoIA figures here).  The difference should be no more than 17.29% (25.29% – 8%).

However, from day-one (07/2014) Kier did not abide by the contract and the difference in charges, easily demonstrated can see substantially more than 3-fold uplifts.

‘Only if the sum claimed appears to be clearly excessive will the court be justified in investigating whether that sum exceeds
the cost that the claimant would have incurred in having the repairs carried out by a reputable repairer.’

Note: Between 07/2014 and 10/2015 Kier used their contract non-compliant 1153 process that saw 5-fold (at least) exaggeration of incident attendance costs to Third Parties – conduct that Highways England and their audits either failed to identify or ignored. More about 1153 can be found here:

1153 saw no use of ‘defined costs’ and Highways England failed to address the issue that saw incident attendance charges rise form £125 (2013) to £1500 (early 2014) then £2700 (07/2014) whilst Highway s England say inflationary rises.  We estimate this cost Third Parties (drivers, fleets, hauliers and insurers) in excess of £10 million before we put a stop to it.


Area 9 Case Studies


Comparing claims is never straightforward as there are variables.  However, comparing rates is possible; the greater the similarities the easier and more accurately we can provide meaningful comment.  Highways England now (12/2018) claim costs are ‘fluid’; they are not a fixed figure.  This is not credible but even if it occurred the changes should be minimal.

The following two claims, one over £10,000 and presented to Highway England, the other under £10,000 and presented to a Third Party have common facets:

  • Area 9 – Kier Highways Ltd
  • AIWs – #1 & #2
  • AIW vehicle – HF14XFT
  • they occurred outside of ‘core hours’ (8am to 5pm)

OVER £10,000 TO HIGHWAYS ENGLAND

29/07/2016, after 5pm, this above-threshold (£10,000) claim was billed to Highways England by Kier using Defined Cost (£) + Fee (%) = Cos t(£).  The AIW’s were charged at an hourly rate of £23.71 to which an uplift (‘fee’) of 7.38% was added:

£23.71 X 7.38% = £23.71 + £6 = £29.71 / hour

Note the above layout is clear, breaking down and displaying the charge as ‘rate’ (column) with the ‘fee’ total at the base.

The AIW’s vehicle appears on a similar schedule for ‘plant’ and the relevant extract is:

The above is the charge for a Mercedes Sprinter Hi-Roof van (ISU Spec) AIW @ £14.66 / hour to which is added the 7.38% ‘fee’ uplift (£1.08) i.e a total of £15.74 / hour.

For 2 AIW’s and their vehicle, Highway England are charged £66.66 / hour.

UNDER £10,000 TO THIRD PARTY

05/08/2016, before 8am, a week later, this below-threshold (£10,000) claim was billed to a Third Party by Kier using their post-1153, exaggeration in another guise, process that sees no resemblance to the contractually agreed Defined Cost (£) + TPCO (%) = Maximum Cost (£) process.  Instead, Kier provide no breakdown of the ‘rate’ and ‘uplift’ save that they display the hourly rate as ‘base rate’ which appears intended to mislead; it is not a pre-profit rate.

The AIW’s were each charged at an hourly rate of £73.05 / hour:

If the AIW’s were charged in accordance with the contract, at an hourly rate of £23.71 which an uplift (‘TPCO’) of 25.29% added, the cost would be £23.71 + £6 (TPCO) = £29.71 instead, they are charged more than double this every hour.

The AIW’s vehicle also appears above and is charged at a ‘base rate’ of £36.91 / hour.

If the AIW vehicle was charged in accordance with the contract, at an hourly rate of £14.66 which an uplift (‘TPCO’) of 25.29% added, the cost would be £14.661 + £3.71 (TPCO) = £18.37 instead, they are charged double this every hour.

Therefore, for two AIW’s and their vehicle, each hour, Highway England are charged £66.66 and a Third Party should be charged £77.78.  However a TP is charged £183.01 or almost 3-fold.

MULTIPLIERS

It will be noted the Highways England cost presentation does not display a ‘charge rate’ column, there is no suggestion of an additional uplift.  We understand Highway England are not subject to any further uplifts.  However, the CBD (Cost Breakdown Document) presented to a Third Party displays a ‘charge rate’ column and in this is displayed 1.5.

The AIW rate of £73.05 / hour has been increased by 50% to £109.58 / hour, whereas Highways England are charged £29.71 / hour – a difference of over 250%, an even greater uplift on the ‘defined cost’ of £23.71 / hour.

Why?

Kier state their AIW staff:

  • work 8am to 5pm outside of which an uplift is applied
  • are paid the uplifts (it is in their contract), it is a cost Kier incur.

But we are advised AIW staff:

  • work shifts
  • are not paid the uplifts, even overtime is at flat-rate

If, as is believed to be the case, these uplifts are NOT a cost incurred to Kier, how is the conduct other than a dishonestly made false representation intended to make a gain or to cause loss to another or to expose another to a risk of loss?  Kier have documented these costs in their ‘Insurers Guide’:

Highways England have issued proceedings to recover these ‘costs’ and their witness, a Kier employee, has stated to a Judge that they are incurred costs.  Based upon the evidence in our possession, these statements are false.  In the examples above:

  • both were outside of ‘core hours’ (8am to 5pm) yet only the Third Party was charged the additional uplift
  • only the CBD, the costs presentation to a TP, displays a column for this uplift

If this were truly a cost incurred by Kier, if they had to pay the extra 50% of £73.05 / hour i.e. over £36 / hour, they appear to have a problem … they only charge Highways England £29.71 / hour.

PLANNING

As further evidence of contract non-compliance, the TPCO of 25.29% on base rates covers a number of aspects one of which is ‘planning’ (the repair).  If Kier complied with the contractually agreed process, there would be no separate charge for ‘planning’ as this is addressed by the TPCO (25.29%) at ‘d’; ‘planning repair of damage’.  However, whilst we explained this to Highwaysengland 21/06/2017 and provide copy documentation, the process of charging separately for ‘planning’ continues to this day.  With regard t the above 05/08/2016 incident, the charges for planning were presented as:

The quality of correspondence we obtain is often barely acceptable, but the above displays some interesting figures:

  • £646.17 is charged for ‘planning’ – this appears to be pure exaggeration, duplication
  • AIW’s again appear and are charged at 1.5x
  • The DCP Manager (Dan Hay) costs less than an AIW yet pre 10/2015 he was more.
  • 4 hours to plan this repair.

Kier are understood to issue about 3,000 invoices to TP’s / annum.  This equates to about £2 million of excess on planning alone.

AVERAGING

Admin’ costs, such as ‘planning’ or ‘incident identification’ are said to be the subject of ‘averaging’.  Understandably, issuing over 15 invoices / day office staff cannot be expected to keep a note of every minute or period of time they assign to a specific claim / incident. Averaging is sensible, practical and likely the only means by which to apply a cost.  Whilst Kier believe they under-state these charges, a Judge took a different view:

With regard to the DCP Manager, he is averaged at 1 hour / claim, (planning and pricing).  As the Judge identified; if Dan did nothing else every day he would have to work 1.4 hours in every hour to justify the allocation.

But there is another aspect to ‘averaging’; it is misrepresented to Third Parties and the Courts.

KEEPING RATES SECRET

How is a Third Party, a driver, fleet, haulier or insurer to confirm the charges presented are correct, reasonable and appropriate to pay; how can an informed decision be made?

To check the figures and calculation, it is necessary to be privy to just two components; ‘defined costs’ and TPCO.  The latter was eventually released in response to an FoIA. But the former, the rates have been kept secret.  Time and time again the figures have been sought with Highway England resisting release.  ‘In the course of business’ (associated with claims) requests have been made, emails / conversations have sought the schedule and FoIA requests submitted.  The latter were initially met with ‘commercially sensitive’ responses to prevent disclosure and those who persisted had their requests (or themselves) labelled ‘vexatious’.  Matters progressed to the ICO with some at Tribunal stage.

This was not the odd FoIA request but, between 2013 and 8/2018, Highways England cataloged no less than 175 requests or reviews for rates-related information.  Each was refused with some being looked at in detail, public interest tests being undertaken.  Then ….

11/2018, Patrick Carney of Highways England informed a Tribunal ‘DCP (damage to crown property) rates are NOT commercially sensitive.

12/2018, we made a further FoIA request for rates, the response …. we do not hold them … they do not exist.  More about the mythical rates can be found here.  There have been repeated ‘do not hold’ replies as evidenced here. But there is a schedule of rates.  There are two main maintenance contract models in use:

  • the original Asset Support Contract (ASC), which is in the process of being phased out and replaced with the
  • Asset Delivery model (AD).

In the former contract model, a schedule of rates is included, and (as described above) this should be used as the basis for the calculation of costs for claims above and below the £10,000 threshold.

The issue is with the ICO and Tribunal.

MISREPRESENTATION TO HIGHWAYS ENGLAND

It is bizarre (and implausible) to think Highways England would ‘confess’ to not possessing a schedule of rates for DCP works, that they now admit to have held no schedule of rates since 2012 for any of their ASC.  An oversight on one contract is possibly understandable in the early stages pre-sign off, but could it really be the case the Authority, with the tender process, too-ing and fro-ing to resolve the contract and ultimate considerations failed to notice the absence of a price schedule for DCP works?  What happened when the first invoice arrived; did no one think to check it?  In turn that this was missed on subsequent contracts, at audit … that Highways England never disputed a charge to the extent that they needed to consider the schedule?

Then there are the FoIA requests, questions about the schedule, requests to re-price.  The schedule of rates exist (as explained above) – more information can be found here.

What other purpose do the rates service?  Is it possible the withholding of the rates is not simply to keep form Third Parties just how much they have been overcharged in the name of the Authority?

We understand Kier must submit invoicing and recovery figures to Highways England. The report received is as required by Annex 19:

Third Party Claims handled by the Provider Service Information Chapter 1.9 & Annex 23 Report detailing, for each claim:

  1. the amount claimed from third parties,
  2. a calculation of Defined Cost and resulting Third Party Claims Overhead,
  3. the amount recovered,
  4. an explanation of any differences between any of these amounts, and
  5. explanation of why any loss greater than Defined Cost has been claimed.

The above relates to Third Party claims i.e. below threshold.

  • What figures are Kier presenting to Highways England and
  • if defined cost, why are Kier not presenting these to Third Parties?

Information recently obtained indicates Kier Highways are misrepresenting figures to Highways England – with or without the Authorities knowledge?

Why is this acceptable to Highways England and what do Kier gain from the conduct?