Highways England Misrepresent Costs

11/02/2016 to Tim Reardon @ Highways England

Mr Readon

Thank you for this

I shall, all being well, have the chance to review and return to you tomorrow if that is convenient for you.

In the meantime, a quick question … how much do HE pay per hour for an AIW (Keir’s staff member), what is the hourly rate HE are charged


11/02/2016 response from Highws England

Subject: Re: ACTION: Complaints Procedure

Mr Swift

I am sorry but I am not inclined to answer this question without understanding its relevance. Perhaps we can speak when you have had a chance to consider my email.


11/02/2016 reply to Highways England:

The figure will be a matter of record, a fact. I am surprised by your response; the amount is relevant because my writing has been, to a great extent, about the charges presented.

I am considering the report sent in conjunction with my knowledge and experience. I believe it would help, when we speak, if you knew the figure as I do not wish to ambush you or ask a question without you being prepared.

Given the reluctance to disclose the information how about:

    • Do you know the hourly rate HE are charged by EMH / Kier Highways Ltd currently AND for the past 2 years?

19/02/2016 from Highways England:

As I indicated when we spoke last Friday, I do not have information on rates charged by Kier to Highways England for AIW vehicles and staff. We pay Kier a lump sum payment for maintenance work on the network. This is a composite sum for routine maintenance and of course hidden within it, among myriad other items and requirements, will be use of AIW vehicles and staff. The lump sum is a contractually agreed sum arrived at pursuant to a competitive tender process. It will be based upon estimates of how much work (and the nature of the work) is likely to be required over the course of the year, but it is also a competitively tendered amount. Ultimately therefore it will reflect the tenderer’s view as to the figure calculated to win him the contract but on terms which enable him to deliver that contract and make a reasonable profit.

With regard to the rest of your email I have nothing to add to what has previously been provided to you.


The above fails to address the question – how much are Highways England charged.  We knew what we were being charged:

  • £73.05 / hour for an AIW 8am to 5pm
  • £109.58 / hour for an AIW after 5pm of a weekday
  • £146.10 / hour for an AIW of a weekend
  • £35.53 / hour for the AIW vehicle

The information in our possession indicated Highways England were being charged (and are to this day) about:

  • £25 / hour for an AIW with NO uplift after 5pm of a weekday or weekend
  • £16 / hour for the vehicle

Highways England receive about 5 claims / day form their contractors, as AIW’s aare common to each incident in Kier managed areas, to obtain the information it was a simple matter of asking their Green Claims Department


25/02/2016 email to Tim Reardon @ Highways England:

Are you in a position to advise what KHL charge HE by way of an hourly rate for AIW’s

I have also noted a difference with regard to the TCB charges – it appears insurers are charged 30% more


08/03/2016 email to Tim Reardon @ Highways England:

I refer to your message of last Friday. Please can you advise when I can expect to receive:

1. The information about KHL rates

2. HE’s response of 24/02/2016 to my concerns about HE’s approach to my FoIA requests.


21/03/2016 email to Tim Reardon @ Highways England:

I refer to our conversation of 11/03/2016. Please can you advise when I can expect to receive:

1. The information about KHL rates charged to HE


24/03/2016 lengthy email to Tim Reardon @ Highways England extracts from which are as follows:

I believe we agreed in a previous conversation that it was reasonable, if not appropriate,
for the charges presented to HE to mirror those presented to drivers, fleets and insurers. It is
evident from our conversation yesterday that you understand this is not the case.

With regard to the costs currently being presented by KHL, I understand that we have an
option, that we can choose to take a stand and challenge KHL. But why should we have
to; they are your contractor and we have provided evidence that all is not right. Why
does HE enable the environment to occur but sit back and let the parties fight it out – with
KHL employing distasteful tactics?

I note that you have spoken with Sophie Granville of KHL recently, that KHL are looking to
harmonise charges i.e. to ensure charges to HE match those to drivers, fleets and insurers.

On the one hand KHL appear to be telling you that they are looking to harmonise (match)
charges i.e. they acknowledge an anomaly, on the other we are subject to aggressive,
bullying tactics.

I referred to HE’s 07/01/2016 audit as a whitewash; a cover-up.

The full email can be found here – 160324 Tim re KHL charges. 3 years ago, rates were to be ‘harmonsied’ – seemingly this is now to happen o4/2019.  Why the delay?  What of the 10,000+ inflated, not contract-compliant, invoices Kier Highways have issued in the meantime?

No response has ever been received.


30/03/2016 email to Tim Reardon @ Highways England
Subject: FW: KHL information & charging methodologies

Please can you advise when I can expect to receive the KHL charges to HE requested. I have been seeking this for weeks.

Have HE endorsed or envisaged their appointed contractors in applying more expensive (not cheaper or the same) pricing structures for the SAME damage but in circumstances where a third party recovery is to be undertaken by the contractor if possible? In other words, does the agreement with KHL lay out this as a model to be applied?

What does the contract say about how a contractor charges for these sub-threshold matters?

I am minded of my conversation with Mr O’Sullivan and that ‘transparency’ was expected.


04/04/2016 the above email was resent to  Tim Reardon @ Highways England


05/04/2016 Tim Reardon, Tim @ highwaysengland.co.uk

Sent: 05 April 2016 18:26
Subject: Kier charges

Dear Mr Swift

I refer to your letter of 24 March.

The current charges levied by Kier are as follows:

a) AIW staff hourly rate: £70.32
b) AOW (sic) vehicle hourly rate: £35.53
c) CO1 Standard Beam:£41.52

These unit rates are inclusive of either a Direct Fee, Subcontract Fee and Working Area Overhead, whichever is appropriate, and which are set out in the contract between Kier and Highways England. For sub-threshold claims, Kier apply a third party claims overhead.

A multiplier is applied to time related items such as staff and plant and varies according to time of day, whether it is a weekday or weekend and whether a Bank holiday. The multipliers were developed, we understand, in conjunction with the insurance industry. They are set out in the document published by Kier, “Insurer’s Guide to Incident Management and Claims Recovery”, and they apply to all claims, above or below threshold. That Guide is sent out with every claim.

For above threshold claims, the contract between the Kier and Highways England (as with other service providers) sets out a precise methodology for calculating the charges, including the relevant fee percentage.

The below threshold claims include an additional third party claims overhead because, for example, in these cases Kier is pursuing the case the whole way through (rather than the claim being pursued against the insurer by Highways England) and therefore incurring additional costs.

Nevertheless, notwithstanding there may be some differences, the conclusions of the January audit of the way in which Kier calculate their claims concludes that insurance companies are not being over-charged; differences either tend to balance out or the differences are not significant.

We have noted your comments on the audit. We disagree with them. We believe the audit was conducted properly and we support its findings.

As I have said before, Kier is responsible for justifying to you the sums claimed. If they cannot satisfy you have various legal avenues open to you. Highways England (and we think Kier) has supplied you with the information you should need in order to make an informed judgment.

Yours sincerely

Tim Reardon
General Counsel
Highways England | Bridge House | 1 Walnut Tree Close | Guildford | Surrey | GU1 4LZ


To address the above response:

The current charges levied by Kier are as follows:

a) AIW staff hourly rate: £70.32
b) AOW (sic) vehicle hourly rate: £35.53
c) CO1 Standard Beam:£41.52

The above are incorrect, false. the correct figures, at or about that time are approximately:

  • AIW £23.71 / hour + fee 6.5%* uplift
  • AIW vehicle £16 + 6.5%* fee uplift

*direct fee, a fee of about 4% was added to sub-contractors and the ‘working area overhead’ (Third Party Claims overhead) was not more than 26%

Multipliers:

The multipliers were developed, we understand, in conjunction with the insurance industry.

Really?  Two insurers have been cited, one responded to us advising there is no such agreement. Why would there be, how would this have come about and why would it be inflicted upon the entire industry?  Furthermore, there is a perfectly good process; Appendix A to Annex 23 … a process kept secret.

A multiplier is applied to time related items such as staff and plant and varies according to time of day, whether it is a weekday or weekend and whether a Bank holiday.

This is correct. But why?  It is NOT a cost Kier incur!

They are set out in the document published by Kier, “Insurer’s Guide to Incident Management and Claims Recovery”, 

They are indeed set out in in Kier’s ‘Insurers Guide’ and this is part of Kier’s / Highways England’s problem; Kier have documented the rates, they have nailed their colours to the mast.  Kier have explained to us and the Courts:

  • AIW’s work 8am to 5pm, not shifts
  • Out of these hours AIWs are paid the multipliers 1.5x after 5pm and 2x of a weekend.

But, we have documents and accounts from AIW’s that:

  • AIW’s work  shifts
  • They are NOT paid the multipliers
  • even overtime is at flat rate

So who is benefiting from this misrepresentation?

and they apply to all claims, above or below threshold. 

No they do not. They are applied to below-threshold claims only, to the bills presented to drivers, fleets, hauliers and insurers.  After 5pm of a weekday, Highways England were charged about £23.71 / hour + 6.5% fee (£1.54) i.e. a little over £25 / hour.  A Third Party would be charged almost £110 / hour.  To put it another way:

Third Parties, who should have been subject to an uplift of about 26% of £23.71 / hour, were being charged a 362.15% uplift.

For above threshold claims, the contract between the Kier and Highways England (as with other service providers) sets out a precise methodology for calculating the charges, including the relevant fee percentage.

Just how precise could the process be 04/2019, Highways England reported ‘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’.

The below threshold claims include an additional third party claims overhead because, for example, in these cases Kier is pursuing the case the whole way through (rather than the claim being pursued against the insurer by Highways England) and therefore incurring additional costs.

And there you have it – the base rates or ‘defined costs’ to Highway England and Third Parties should be the same.  The difference is the uplift; more to Third Parties because, for example, there is additional admin’.  Reading between the lines, with Highways England now stating they have no schedule of costs to compare charges presented against, the extra charge to Third Parties is because Highways England must rubber-stamp invoices for payment whereas drivers, fleets, hauliers and insurers will actually review and challenge the rates presented.


06/04/2016  email to Tim Reardon @ Highways England
cc: Jim.O’Sullivan @ highwaysengland.co.uk
Subject: RE: Kier charges

Dear Mr Reardon

I am currently away from the office and will address the issues upon my return next week.

However, I continue to await confirmation of the charges KHL make to HE. I am aware of the recent charges raised to insurers. Please confirm that you are stating the following apply to HE i.e. that this is what HE are charged:

a) AIW staff hourly rate: £70.32
b) AOW vehicle hourly rate: £35.53
c) CO1 Standard Beam:£41.52

I will send you examples that contradict this next week. It would help to know the date from which the above charges, if to HE, commence.

It is the charges made by KHL to HE for:

For above threshold claims, the contract between the Kier and Highways England (as with other service providers) sets out a precise methodology for calculating the charges, including the relevant fee percentage.

I am seeking; the rates for the above facets.

Please supply the methodology to enable me to better understand what you are conveying.

Also, are you stating that HE are charged the multiplier by KHL?

In the latest I have from KHL, they do not charge a multiplier but charge HE for a complete shift. Indeed, KHL state that HE would have been charged more than insurers in the specific case.

Your email is unclear and does not enable me to make informed decision.

Multipliers being ‘developed in conjunction with the insurance industry’ is illogical and therefore highly unlikely. Multipliers are said to be those KHL pay their staff (questionable) … why would insurers have any say in this?

I feel that I am subject to semantics. I have not asked if insurers are being overcharged i.e. currently. The audit has looked at historical matters. Whilst I have issue with current matters, the audit is flawed with regard to historical for very obvious reasons which it appears I need to evidence further.

I do not expect HE to present anyone with charges raised by KHL for above threshold matters from 2014 / 2015 when a flawed methodology was used and profiteering appears to have occurred. For HE to seek the charges would be inappropriate and potentially unlawful given what has occurred.


11/04/2016 from Tim Reardon @ highwaysengland.co.uk
Sent: 11 April 2016 18:10
Subject: FW: Kier charges

Referring to your email of 6 April, the rates quoted were confirmed to us by Kier as the rates they charge Highways England and were current as at December 2015.

The methodology for calculating the charges is that applicable to an NEC3 contract including both lump sum and cost reimbursable elements. This methodology is well-recognised in the market.

The concept of the multiplier is used for the purposes of presenting the costs of sub-threshold claims to insurers and is the approach developed by Kier with help from the insurance industry. In over-threshold claims, Highways England seeks to recover the actual costs of undertaking the repair.

We do not accept your comments in relation to the audit.


30/04/2016 email to Tim Reardon @ Highways England
cc: Alan Woodrow@ highwaysengland.co.uk; ‘Jim O’Sullivan @ highwaysengland.co.uk; highwaysmonitor@orr.gsi.gov.uk
Subject: FW: Your Ref: M-MT-048398 Our Ref:S11C492/WV/ps Kier Ref: EMGC\020868

Dear Tim,

I refer to my recent emails in respect of Kier Highways Ltd’ (KHL) charging and the prices Highways England pay – I again ask, is Highways England really paying Kier Highways Ltd £70 / hour for emergency attendance?

As you and your audit team (coincidentally) are clearly unaware of the process KHL are to utilise to instigate proceedings having misled me, I have serious concerns about the audit in general (and as advised hope to report upon this next week).

With regard to the £70 / hr, I refer you to:

https://www.whatdotheyknow.com/request/pricing_methodologies_2

I suspect I need to amend the annotation I made based upon your assurance, that you are incorrect (again) and that I can place little confidence in your account and involvement.

However, if Highways England are in fact paying £70 / hour, the public pursue appears to have been abandoned by Highways England – there is evidence this would represent an increase in charges of over 100% on last year’s fees.

The situation is either a scandal or a farce. It appears time to place the content of my 55-page report, dealt with in a shameful fashion, on-line. I have clearly wasted my time believing Highways England would act professionally and appreciate the time I took to compile my concerns, present them to enable Highways England to address the situation.


From: Tim Reardon, Tim @highwaysengland.co.uk
cc: Jim O’Sullivan, Jim @ highwaysengland.co.uk
Subject: Kier charges

I write in response to your email below as well as your other emails referring to Kier’s charges.

Our position is as follows:

1. As you know, we have looked at Kier’s charges. From the audit that was carried out, we are satisfied that what we are charged by Kier in relation to over £10k claims is in accordance with the contract between ourselves and Kier. We are also satisfied that in relation to sub-£10k claims, the basis of charging looks reasonable and, moreover, Kier do not appear to be making an undue profit. We stand by the results of the audit.
2. My previous emails of 5th April and 11th April have sought to explain the basis of the charging in relation to both over-threshold and sub-threshold claims, and why there may be differences. Suffice it to say, in relation to above threshold claims, notwithstanding what we pay to Kier pursuant our contract, we seek only to recover actual costs from the insurers.
3. The hourly rates provided to you for AIW staff and AOW vehicles are correct. I have sought to explain the make-up of those rates, but it is also apparent from your email of 10 May to Shakespeare Martineau that you understand very well the make-up of those rates. There is nothing I can add.
4. Further queries in relation to the calculation of sub-threshold claims must be directed at Kier. And, as I have said, it is for Kier to justify their charges to you. If you consider the charges to be inaccurate or misconceived for any reason you can challenge them.
5. We are not going to engage further on matters relating to Kier charges unless we consider you are raising new points which warrant a response.

Tim Reardon
General Counsel
Highways England | Bridge House | 1 Walnut Tree Close | Guildford | Surrey | GU1 4LZ


13/07/2016 From: Tim Reardon, Tim @highwaysengland.co.uk
Subject: RE: S04A735 request for information

Thank you for your email of 11 July.

As previously indicated, we are not going to engage with you regarding the Kier charges. It is a matter you will have to take up with Kier directly. Your requests for information, whether under the Data Protection Act or otherwise, are declined.


Note:- at this time Appendix A to Annex 23 remained secret; not disclosed on line and unmentioned by Highways England or Kier Highways

No mention of Appendix A to Annex 23 by Highways England, no explanation that there is a contractual process by which to arrive at the MAXIMUM a Third Party (driver, fleet, haulier or insurer) should be charged.

Appendix A means that the charges to Highways England will never be the same (the percentage uplifts differ) but here is their General Counsel stating that in 12/2015, they were charged exactly the same as a Third Party:

a) AIW staff hourly rate: £70.32
b) AOW vehicle hourly rate: £35.53
c) CO1 Standard Beam:£41.52