18/01/2021

England Highways

Damage to Crown Property [DCP] Claim Costs

Highways England – So Compromised As To Be Ineffective?

For years, we have raised multiple concerns about Kier Highways and Highways England.  Our evidenced allegations have fallen on deaf ears, seemingly considered by those with a vested interest in taking no action.


HE, DfT & PHSO


Following the presentation of our complaints, the DfT was recently informed by Highways England the matters were being investigated by their lawyers. This is misleading because their ‘lawyers’ are not independent but an in-house team who are conflicted because they have historically been part of the problem, giving advice which has resulted in the various issues concerning non-compliance with the contracts. For example, their most recent attempt to cover these issues up is to retrospectively amend the historic contracts and thus permit contractors to make up their own rates. The DfT has been misled and this is the modus operandi of HE; obstruct, mislead and hide embarrassing information.

Highways England will welcome investigation delay, one of their ‘tools’ is time’, the utilisation of an inverse proportional relationship; the greater the period between an event and discovery/enquiry, the less important they make it appear.

The PHSO similarly drag their heels and admit they lost experience when moving North. A matter presented in 2016 was ‘possibly’ concluded this year but we still await a reply to an aspect!


HHJ Harrison Judgment & ‘unauthorised uplifts’


The Authority issued proceedings against multiple insurers which were stayed. At the 08/2020 hearing, their witness, an experienced Kier employee, acknowledged overstatement, contract non-compliance. Precisely what we have been telling Kier, Shakespeare Martineau (lawyers), the Authority, DfT, PHSO etc. for years. The findings of a Judge disclosed 10/2020 include:

Furthermore, for the purposes of assessing the extent of Kier’s authority within Area 9 (Area 6/8) the court cannot ignore the evidence given on behalf of the claimant by Mr Cairns. In summary, on this issue his evidence was to the effect that the costs calculated for the purposes of the claim did include uplifts for which he was unable to find authority within the contract.

Charges are presented for which there was no justification.  This, in Area 9, saw Kier’s blatantly profiteering conduct from day-one of their appointment, 07/2014.  Firstly their obviously excessive 1153 approach and figures process and then the ‘Cost Breakdown Document’(CBD) approach and its unauthorised uplifts. The contract defines one process, neither of the aforementioned and Kier never complied with it.  Yet the Authority apparently never realised this, despite having supposedly robust audit processes in place?

Area 9 contained the Third-Party (driver, fleets, haulier or their insurer) ‘shield’, Appendix A to Annex 23 the equation dictating they are to be charged no more than:

  • Defined cost (base rate or actual cost), the same as the authority is billed, plus
  • The Third Party Claims overhead (TPCO) of 25.29% in Area 9

This is to result in the maximum a Third-Party should be charged. But Kier never complied furthermore, the Authority failed to enforce the section even when we presented the facts.

01/2016, Highways England audited and seemingly failed to notice this now admitted non-compliance, reporting no problems following our initial approach.  But at that time (01/2016) we were unaware the Authority was acting in concert with their contractor. Rather than admit fault, they chose to cover it up:

  • Highways England had uploaded the contract but not the relevant Appendix A
  • The Authority never once mentioned the existence of Appendix A
  • Kier never revealed the existence of Appendix A in meetings or phone calls

The very section of the contract that afforded protection to Third Parties, that set out the means by which they were to be charged, was suppressed.

Then, 01/2017, it appears Kier accidentally disclosed Appendix A attached to their Annex 23 (an exhibit in Court proceedings). We circulated the information, placed it in the public domain, and the Authority wanted to meet us.

We prepared for the 06/2017, meeting and the Authority left with documentary evidence of the contract non-compliance. Initially, we were informed Shakespeare Martineau (Kier’s lawyers) were being unhelpful and Kier’s claims manager was abusive. It became apparent Highway England had no control over Shakespeare Martineau; they were issuing proceedings in the name of Highway England, despite the Authority asking them not to! The lawyers have explained their ‘profiting from claims ’ approach in a post (now removed). The ‘audit/investigation’ appears to be an exercise to justify historic decisions, the outcome kept from us, despite requests.

The investigation of Kier took months to progress but 11/2017 we spoke with the Authority’s appointed auditor, KPMG.  It remains unknown why the unauthorised uplifts we evidenced in 2017 were not addressed by Highways England and KPMG. Kier clearly understood what they were doing, that it was contract non-compliant and we alerted Highways England, yet the conduct continued.


Reimbursement


We estimate that between 01/07/2014 and 10/2015 (when we put an end to 1153) Kier overcharged third parties a sum in excess of £10million.

As of 10/2015, the ‘CBD’ process, exaggeration in another guise, saw embellished, contract non-compliant costs presented in legal proceedings as having been approved by Highways England. 

04/11/2020 we wrote to the Authority’s legal department about reimbursement.  We have received no reply as of yet to the email, copied 12/11/2020.


Shakespeare Martineau (SHMA)


In 2016, Kier appointed SHMA to progress their claims.   What part have the lawyers paid in this overstatement and is there a conflict with them being appointed to the 2020 £3million Authority contract concerning the recovery of historic debt?

We suspect SHMA were party to the 2020 Deed of variation between Kier and the Authority seeking to enable the contractor to increase their charges (see above).

In 2017, we wrote to Mr Merrell of SHMA, an extract from our letter is as follows:

Appendix A to Annex 23 (at Appendix C) sets out the method by which the maximum charge to a Third Party should be calculated. Your client is not complying with this, nor have they since the contract commenced (Area 9 – 01/07/2014).

We have made you aware of the situation, or our serious concerns and sought explanations from you; we remain without your reasoning. We have heard Ms Granville of Kier, on behalf of your client Highways England, state to the Court (as per emails – Appendix D)that Third Parties pay more than Highway England only because of the differing uplifts; 7.38% to HE, 20.58% to TP’s. That is to say, TP’s pay 13.2% more. This is factually incorrect.

full letter here

As evidenced by the Court’s 2020 finding 2020 (HHJ Harrison) the methodology continued, the contractual scope of authority was being breached, and truth withheld from the Courts.


Information Commissioner’s Office (ICO)


The issue with the ICO relates to their conduct toward me personally and ‘evidence’, not to the practices of the Authority. The ICO wishes others to believe that the concerns we raise about their conduct are a means by which to ‘attack’ the Authority.

When they are presented with factual evidence that they have been misled by the Authority, they refuse to review that information and utilise their statutory powers in bringing sanctions against Highways England. That is the reason they have been given such powers, which they are reluctant to exercise.


Pain/Gain Share


The ICO/PHSO will not touch upon the existence of the pain/gain relationship, a significant concern. The ICO has been dismissive; it appears they do not see the point that because the ‘pain/gain’ contractual sharing has not been applied, the public purse has been short-changed. Furthermore, the association between pain/gain and the existence of rates is complex and they are not geared up to address ‘complicated matters’

It is currently not possible to understand why:

Kier is not simply overstating costs to Third Parties, they are doing so to the Authority, by under-declaring the actual recoveries that have been achieved. The two are linked and in turn this is related to the existence of DCP rates:

  1. Kier exaggerates costs to a Third Party, using a contract non-compliant process, unauthorised uplifts
  2. This conduct is pointed out to the Authority
  3. Kier continued to submit inflated costs, and understate recoveries
  4. Kier advise Highways England they make a loss on claims, which in turn
    1. Creates the impression Kier are ‘suffering’
    2. Ensures no reduction in their monthly sum payment – there is no ‘pain’ engaged
  5. Highways England cannot disclose ‘defined costs’, the price schedules as if they did, the calculation can be easily completed, and the overcharging exposed:

The calculation:


The contract, at Appendix A (the hidden ‘shield’ for Third-Parties), provides a simple, logical and reasonable, process for billing Third parties who cause damage to the SRN:

Defined cost + TPCO = maximum

In Area 9 the Third Party Claims Overhead (TPCO) uplift = 25.29%.  Armed with the ‘defined cost’ the equation can be accomplished. Using the ‘Example of Area 9 Exaggeration’ (actual claim) above, the ‘defined cost’ (or base rate) for an AIW is £23.71:

£23.71 (Defined Cost) x TPCO (25.29%) = maximum

This is:

£23.71 + £6 = £29.71

£29.71/hour is the maximum a Third-Party is to be charged for the operative but they were charged £73.05.

HHJ Harrison was advised of ‘unauthorised uplifts’. This appears exceptionally euphemistic. The uplift on the already uplifted £29.71 is almost 150%.

But this is just one ‘unauthorised uplift’. Kier claims their operatives work 8am to 5pm weekdays after which they cost Kier more, the staff are paid an uplift of 50%. This is then charged to Third Parties – an unauthorised uplift or an already unauthorised increase! The operatives were therefore charged to a Third Party at:

£73.05/hour + 50% = £109.58/hour

But:

1. We (and the Court) are told the defined cost to the Authority and Highway England is the same – the difference is the uplift (25.29% to a Third-Party, about 8% the Highways England), about 17%. The figures indicate a 200% difference!

2. Highways England does not pay the operative multiplier after 5pm, they are charged the flat rate of £23.71 plus a smaller uplift (about 8%). If Kier incurs the 50% uplift, this alone is more than they charge the Authority, more than the operative costs them. They are losing money every hour!

3. Kier has documented the cost of the operative- over £58/hour. Again, if this is the ‘cost’ (before profit) they are charging the Authority less than half this. This appears to be false, intended to enable the contractor to profit.

4.Kier tell us (and the Courts) they pay the operatives the ‘after 5pm of a weekday’ uplifts as they do not work shifts.  Operatives tell us:

a. They work shifts (not 8am to 5pm)
b. They are not paid the uplifts
c. Even overtime is at a flat rate – a ‘leaked’ presentation slide also supporting this.

We believe this requires immediate attention because the Authority has still not put its house in order.


Nte – HE told £20/hour increase – who authorised this?