160110 Kier Highways ‘Audit’

07/01/2016 Audit of Kier Highways by Highways England.  The report which appears below and can be read here) touches upon 1153 which it appears was applied in the Area audited (not Area 9).  However, the report:

  1. fails to identity the gross exaggeration resulting from 1153
  2. appeared unable to identify the exaggeration despite reviewing sub and above threshold claims (para. 4 below) reporting ‘no evidence that Kier recovered over their entitlement’ (para. 7).
  3. conveyed (para. 8) Kier not replying upon ‘ average annual costs for some of its resources (administration costs in particular)’ yet this is precisely what Kier do and some of the ‘administration costs’ are believed to be met in the Third Party Claims Overhead
  4. It is not accepted that Kier’s amendments to their process resulted from ‘changes in the expectations of the insurance industry’ (para. 14).  This is a hackneyed expression from Kier which is not evidenced – irrespective, the process is set out in Appendix A to Annex 23; it is this that needs to be complied with and explained.  At the time of the audit this Appendix was not in the public domain, was unknown, not provided in the audit and not referred to in the audit
  5. the issue has never been about ‘output’ (the preservation) it is about the figures, the pricing (para. 15)
  6. At para. 16, the audit fails to identify that the use of 1153 giving rise to obvious overstatement – the number should have been 5400 – every claim was exaggerated 5-fold. The audit identifies that costs were ‘equally split between incidents’ but claims 1153 was ‘based upon an estimated total number of incidents’.  However, the following are not addressed:
    1. the basis of the estimate – said to be a number appearing in a tender for 1 area, yet applied across all Kier’s areas!
    2. that the process is not compliant with Appendix A to Annex 23
  7. At para. 17, ‘1153’ is ‘considered that this was a reasonable’ without explanation.  The issue has not been about ‘granularity’ (a Kier word repeated in the audit and by others at Highways England). 
  8. It is evident ‘earlier claims’ (para 18) were considered – yet they failed to identify the exaggeration.  If an earlier sub-threshold claim is compared with an above-threshold claim, how is the vast difference not identified?
  9. By 01/2016 (date of audit) Kier was using the ‘defined cost’ process:
    1. it is evident Kier and the auditors knew the process that should have been adopted (Appendix A to Annex 23)  from the outset yet no comment is made upon this failing
    2. 1153 results in an AIW cost of about £32 / hour, overnight (10/2015) this more than doubled to £70/hour yet the audit has missed this and has no explanation
    3. as ‘defined cost’ was being used, how did the auditors fail to identify the below-threshold costs and above threshold costs were vastly different and not consistent with the defined cost method?
  10. Para. 20 refers to meetings with several insurers. This is believed to be misleading:
    1. no evidence of these meetings or the outcome has been provided
    2. the pricing practice is set out in Appendix A to Annex 23, not based upon what can be haggled with insurers
    3. it is inappropriate to force upon all insurers a process allegedly discussed/agreed with others – particularly when the basis of the meetings, what was disclosed, discussed is not provided.
    4. it is highly unlikely any insurers were provided Appendix A to Annex 23 at the meetings or supplied ‘defined costs’
    5. an insurer undermines the ‘positive spin’ Kier put on the meetings – see ‘Insurers Participation‘ 
    6. the ‘insurers guide’ (khl-insurers-guide-v1 ) appears to be a device intended to mislead and further the misrepresentations by Kier.  It is noted that the auditors were aware of this document but failed to comment upon the use of ‘multipliers’ not applied to above-threshold claims.
  11. Para 21; it is not accepted that there are ‘minimal annualized costs with the vast majority of costs being incident-specific’; many of the costs are ‘annualised’, possibly addressed in the Third Party Claims Overhead and exaggerated (a Judge commented the DCP manager would have to work 1.4 hours in every hour to address claims alone)
  12. Para 21. whilst the auditors state ‘back up’ information is supplied, this is incorrect. On the above threshold claims, Kier supply a TR430 cover-sheet which accompanies often 60-pages of information.  Insurers are lucky to see half of this and often lack:
    1. DAS – Daily Allocation Sheets
    2. DTCS _ Daily Time Costing Sheets (operative timesheets) –
  13. It appears likely the DAS & DTCS are withheld intentionally to prevent Third-Parties understanding the shifts operatives work and in turn undermining the use of ‘multipliers’.
  14. para. 24 –  as the auditors were aware Kier was using a ‘defined costs’ process, it is not understood how, when comparing the rate and above/below threshold claims, it could be concluded ‘Kier are compliant with the requirements of the Contract’; their process purports to be compliant but:
    1. to which part of the contract are the auditors referring
    2. the process is not Appendix A to Annex 23 compliant .
  15. para. 29 ‘figures of £1500 and £2700 are not purely for Asset Incident Watchman (AIW) attendance on the scene but also for planning for the permanent repair’.  We have never suggested to the contrary BUT:
    1. in splitting the ‘planning’ out, Kier now charges 1 hour for this i.e. £70 / hour for 2 operatives.  This element is just £140 (£60 using Highway England rates) it does not account for the vast increase within 2 years
    2. Planning is addressed in the ‘Third Party Claims Overhead’; it is not a separate cost.  Why was this not identified
    3. how is the vast rise, from £125, to £1,500 then £2700 explained?  Kier acknowledge this should at most be a few £100 yet auditors appear to believe the earlier charges were reasonable and found ‘no evidence that Kier recovered over their entitlement’ (para. 7); Kier were claiming 5-times their entitlement for initial attendance!
  16. para. 29 it is stated ‘the methodology for calculating AIW costs has since improved’.  A simple calculation undermines this as does comparing above and below threshold rates – AIW’s charges are being overstated.  See ‘AIW Mathematics‘.
  17. at para. 37 is stated ‘… the source of this (1153) is from the ASC Area 3 Contract only and does not include for assumptions of incidents in other contracting areas be these with the HE or other bodies (such as TfL).  We have never suggested 1153 extended to other areas.  It is understood that ‘1153’ was (said to be) a figure from one Area.  This issue is that Kier applied 1153 to all areas; they divided their total costs for AIW’s (and other items) over ALL their Areas yet the claims number was (apparently) for one.  It has since come to light (post 10/2015) by reference to Kier’s own ‘Insurers Guide’ that the claims handled each year are 5,400.  The total claims costs should, therefore, have been divided by 5,400 but:
    1. the AIW tasks (as an example) are in part met by the lump sum payment
    2. AIW’s (as an example) do not just attend emergency incidents – so Third Parties are paying for everything an AIW does ergo:
      1. Highways England (in their lump sum payment) and Third-Parties were both paying for the same tasks.
  18. para 38 – ‘ … this figure (1153) was used as the basis for apportioning annualised cost data, ie., an annualised cost such as AIW would be divided by the 1153 assumed number of claims to arrive at a cost per claim.’  If this is understood, how was it not determined that there had been gross overstatement – Kier was applying the 1153 (Area 3?) figure to ALL their areas. How was this simple mathematical task overlooked and why did the audit team not realised/understand that AIW’s in undertaking other tasks, were having these paid for as well by Third Parties – many of these tasks having been paid for by Highways England? 1153 was ‘assumed’ for Area 3, yet it was applied to ALL areas, to 5400 claims.  
  19. para 40. My issue is NOT that the ‘estimated the salary for an AIW at around £72,000’.  The issues are that the sums do not add up:
    1. Highways England are charged £23.71 / hour for an AIW
    2. 1153 figures indicate the annual cost of an AIW is £72,393.05 (salary, all additions plus profit), this equates to £30.94 / hour)
    3. 1153 was abandoned 10/2015 and overnight we saw an hourly rate of £70+/hour. why … and why was this not identified in the audit?
    4. According to Kier, the ‘cost’ of an AIW (salary, NI, training etc.) is £58.32; this equates to £136,468.80/year – far in excess of the £72,393.05.  why is there a discrepancy?
    5. why are Highways England paying a ‘base rate’ or ‘defined cost’ of £23.71; the audit looked at over and below claims, why did they not identify this?
    6. the above exaggeration from 10/2015 is greater than identified by S(iv) above; the charge of £30.94 / hour (using 1153 figures) contains profit (or an ‘uplift’), whereas £58.32 / hour does not. The ‘with uplift’ figure used by Kier Highways is £70.32 / hour sees the annual charge for an AIW of £164,548.80 – overnight the annual cost has more than doubled.
    7. Did the AIW rate to Highways England double overnight in late 2015? Are Highways England paying £70+ / hour for an AIW to pick litter, cut grass etc.?  According to Tim Reardon, as at 12/2015. Highway England was paying £70+ / hour … so presumably:
      1. pre 12/2015 Highways England were paying less and there is an agreement for increased charges?
      2. the audit should have been able to identify ‘defined costs’ for an AIW to Highways England since 01/07/2014 and:
      3. been aware that an annual increase was minor, inflation-linked – not the 100%+ Third Parties were subjected to
    8. Kier appears not to understand that 1153 is helpful- it provides detailed figures by use of which we can undertake calculations
    9. it is of note that to support their process of exaggeration (1153) Kier Highways were prepared to disclose a great deal of information about costs, yet with regard to the current process, this is withheld, for example, both Kier Highways and Highways England have failed to provide ‘defined costs’ – the very basis upon which they claim to price third party claims. 
  20. Para 41 confirms comments above; AIW’s carry out other tasks – ‘safety inspections, detailed inspections of certain assets, identify renewal schemes needed etc’.  This paragraph also corroborates a further concern: the costs of these other tasks are met ‘under the ASC Contract by lump sum payment’.  But the total annual cost of AIW’s (and much more) was being paid for (charged to) Third Parties; how did the audit (noting the use of the 1153 division for total annual costs) fail to identify and understand that Third Parties and Highways England were paying for the same thing, that duplicates payment was being made?
  21. para 42 is contradicted by para 43; we know the difference, this is just ‘puff’
  22. para 44 reinforces the fact that no one assisted us with regard to ‘1153’ and the actual number of incidents per annum, that we had to pursue this information ourselves and that, at the time, we were working in the dark; as an example, in 01/2016, we were unaware that Appendix A to Annex 23 existed and defined a charging process. It was evident 1153 could not be correct; for example, 19 AIW pairs attending 1153 incident per year meant that in any one week there was about 22 incidents/week.  Even allowing for holiday, sickness training etc. if 50% of the AIW’s were working, on average 10 pairs attended 2 each per week or, at about 4 hours (max.) per incident, 1 in 5 of their days was occupied dealing with incidents.
  23. We cited 2849 claims/year because we saw this figure in an audit which we had to obtain using FoIA – see page 3 Swift Attachment 1 Redacted.  It was not until Kier produced their ‘insurers guide’ that we realized the number was 5,400. As Highways England receive detailed information from the contractors each month (Annex 19 reports) this data should have been at their finger-tips
  24. and if 1153 was the total number of Green Claims … where do those above the threshold fit in?  The process was not used with above threshold claims, Highways England was not charged in accordance with the process – a methodology that from day-1 was applied in Area 9 contrary to the contract (Appendix A to Annex 23). 
  25. para. 47 – the schedule of AIW and vehicle rates given on page 17 demonstrates Kier’s lack of understanding and failure to comply with the contract.  It also further corroborates Kier’s unwillingness to come to us with open hands … here they were trying to impose another process upon us whilst knowing, in the background, kept from us, was Appendix A to Annex 23. Page 17 of my 10/2015 report to Highways England displays a further methodology whereas there should only ever have been one.  This further process was obviously flawed; Kier wished to charge a multiplier for vehicles – presumably, these too work core hours and are paid more for activities after 5pm of a weekday? this was put to Kier who appeared agitated at having their process challenged: 615. “How is that your vehicle that charges, costs you £90 for a standard inquiry, before it will come out to work of a weekend costs you more”.  This process was also abandoned.
  26. para 48. It is said the Current practice uses the actual number of hour’s attendance and ‘notational hourly cost rates’ which are ‘derived in accordance with the prevision of the schedule of cost components under the ASC Contract’. As evidenced by information within these pages, these ‘notional rates or ‘base costs’ or ‘defined rates’ are not being used and this should have been evident to the auditors; £23.71 to Highways England, £70.32 (inclusive to TP Claims Overhead) to Third Parties. We see the ‘defined costs’ on above threshold matters but to date, Highway England and Kier Highways appear keen to keep the schedule from us – the very document we need to compare the costs with what is being charged are kept secret. 
  27. It is also reported within the audit that the charges are ‘factored by time of day/week, as set out in the Insurer’s Guide document attached’.  It is agreed that the Guide conveys this, but these are not costs incurred by Kier Highways, they are not charged to Highways England.
  28. para 49 relates to vehicles.  These are simpler; there are no multipliers.  They are plant which has a depreciating value, costs a fixed sum and likely is easier to gauge the hourly rate for. Highways England are changed about £15 / hour for an AIW v,. Third Parties are charged about £35  hour for the same vehicle. the same mathematics applied to AIW’s can be sued for vehicles.  To date, there has been no explanation for the 100% uplift to Third Parties. 
  29. Para 50.  The new process is the problem!
  30. we have issues with the VRMs / vehicles Kier claim to use on repairs – we have raised the problems with Highways England but they are ignored – click here for examples. 

From: Tim Reardon @ Highways England
Sent: 10 February 2016 17:14
Subject: FW: CMA Complaints regarding Green claims

I am responding to the matters raised in your report dated 26th October 2015 into the Highways England Complaints Process. I will also take the opportunity to respond to your further note of 25th January in which you seek to summarise the outstanding FOI matters.

May I make a couple of general points before seeking to address specific issues.

First, it is true that for sub-threshold green claims, the service provider is contractually entitled to progress the claim and retain any proceeds without recourse to Highways England, except where it comes to issuing legal proceedings which will have to be in our name. That does not mean that Highways England has no interest in how the service provider chooses to interact with drivers, their insurers and loss adjusters. We are concerned to ensure that there is not over-charging and that claims represent a fair reflection of the costs involved.

Secondly, it is of course open to a loss adjuster to advise its insurance company client not to pay the amount being claimed if it considers the claim, or any aspect of the claim, to be misconceived or inflated or otherwise inappropriate. At the end of the day, it is up to the service provider (and ultimately Highways England) to prove the claim and the amount.

Turning to your 26th October report, the main focus of your complaint appears to be EM Highways (Area 3) and Connect Plus M25, although you also raise issues in connection with Skanska (Area 2) and Balfour Beatty (A50 DBFO). I do not propose to deal with issues with the Government Legal Department in relation to their handling of a number of cases as I understand you have been in direct correspondence with them.

EM Highways

In view of the matters raised by your complaint, we conducted a specific audit of the processes adopted by Kier Services, the Asset Support Contract provider in Area 3, in relation to their handling of sub-threshold Green claims. We attach a copy of the audit report which we have Kier’s permission to release. It is apparent that Kier’s management of claims has undoubtedly evolved over time in order to give insurance companies more granularity. The conclusion of the audit is that Kier now appear to be producing claims which represent reasonable incident specific costs. Further, I understand that Kier have resubmitted to you claims that were priced under the “old processes” so that all their claims now reflect the new approach. You will also see that the report comments upon the specific concerns identified in the CMA report. More generally, I am also aware that Kier have supplied you with considerable amounts of information as to how their charges are broken down. We will continue to monitor the handling of these claims by Kier, as with other service providers.

M25 Connect Plus

It would appear that you are not raising this as a complaint with us. We have nonetheless reviewed the matters you have raised which relate to how Connect Plus have handled FOI requests made directly to them. As you may be aware, the M25 DBFO contract is different from the ASC or MAC in that Connect Plus indemnify Highways England in respect of damage to the highway infrastructure. All claims of whatever value are, therefore, handled in a similar manner to so called “below threshold” claims in other Areas.

Regarding your FOI request, our review confirms that Connect Plus did not act in accordance with their contract in replying to you directly in response to your FOI request. We have raised it formally with them.

In respect of the information requested in your letter of 29th September 2015, information requested under item K of your letter was, I understand, provided to you on 27th January. The other information requested is not held by Highways England.

Separately I should also say that I have also seen the latest email chain regarding your request for Connect Plus monthly returns. I have to say, looking at the information we have already provided and the nature and scope of your further questions, these seem to me to be disproportionate requests, and something of a fishing expedition. I know that our FOI team are responding to you on this request but if you wish to have a discussion about your particular reasons for requesting this information I am happy to have that discussion with you.

Balfour Beatty and Skanska claims

In relation to C/13/11 – CESC0905/11/6/2/SA0748C, we understand that this claim is still being pursued by Balfour Beatty but other matters are delaying progressing the claim. I do not as yet have any information in relation to the Skanska matters you mention.

Note of 25th January 2016 regarding outstanding FOI matters

Regarding your FOI request in relation to the claim with your reference AO3AOO1/L502415/L512213, I understand we are sending a further response. With regard to the Green Claims Handling Manual, this is an internal Highways England document, and while a previous version may have been provided to you, this latest version contains legally privileged and commercially sensitive information. Accordingly, we would not wish to release, nor would we expect to have to release, such information. Regarding the four claims you refer to going back to 2013, we do not appear to have information on their current position. In relation to Kier, we are providing you with the results of our most recent audit into Area 3. I understand you have also been supplied with information on previous audits on Area 3. Your point in relation to Highways England’s knowledge of Kier process changes is unclear. I am happy to speak with you regarding your request for information about Kier’s lump sum payments but in the context of the information that you have already been provided with this seems to be a disproportionate request for information which is very likely commercially sensitive, and again it has the flavour of a fishing expedition.

Conclusion

It is apparent that the way in which service providers deal with sub-threshold claims has evolved. It would appear from the audit of Kier, for example, that they do appreciate that these claims need to be based upon actual and reasonable costs. This is reflected in their own guidance document on dealing with insurers. But it is also not a precise science. Amounts claimed in individual cases will take account of local differences, the time of day/night involved, resource availability etc. Those involved are also entitled to earn a reasonable profit in relation to their activities.

We are reinforcing the message to all service providers in relation to sub-threshold claims that as with above threshold claims, they need to be based upon actual and reasonable costs. We will continue to monitor that. If you continue to experience examples of what you consider to be over-charging we will be happy to look at them.

However, there is also something I would like from you. The sheer amount of FOI requests (and the extent of other requests for information) is unreasonable, and should stop. Requests for information frequently appear repetitive which is causing confusion, and a number of requests appear to us to be persistent fishing expeditions for information. Furthermore, the tone of some of your emails is causing distress to Highways England staff. Can I therefore suggest that we try to draw a line under the information requests to date, except those requests which are currently being handled.

I am happy to discuss these issues with you.

Yours sincerely

Tim Reardon
General Counsel
Highways England | Bridge House | 1 Walnut Tree Close | Guildford | Surrey | GU1 4LZ
Tel: 0300 470 1224
Mobile: + 44 (0) 7525 908857
Email: tim.reardon@highwaysengland.co.uk


Green Claims investigation

Introduction and Executive Summary:

  1. Further to complaints raised by Philip Swift of Claims Management and Adjusting Limited (CMA) a review of the Green Claims process used by Kier Services (Kier), the ASC Provider (Provider) for Highways England (HE) in ASC Area 3 was carried out.
  2. The audit was undertaken on the 7th January 2016 at Kier’s Basingstoke office between 10:30 and 16:30. The review was conducted by a team of 2 Highways England staff, one Operational and the other from Commercial to ensure independence.
  3. The audit focused on:
  4. • The contractual requirements within the ASC Area 3 Contract
    • Kier’s Green Claims process and its fitness for purpose
    • A sample audit of Green Claims (including sub and over threshold claims) against Kier’s process/contractual requirements
    • A specific review of the complaint made by CMA as set out in their document dated 26th October 2015
  5. It is considered that the process and claims were audited in a thorough manner, though the number of claims audited were limited given the time frame set aside to audit and produce this preliminary report.
  6. Executive Summary
  7. The processes used by Kier have evolved over the life of the ASC Contract (since November 2013).The processes meet the requirements within the ASC Contract. There was no evidence that Kier recovered over their entitlement though the early claims did contain a small number of minor errors. The errors, it is considered, were by flaws in the process rather than by design.
  8. Kier’s processes have been improved and whilst they continue to meet the requirements of the ASC Contract they are now better tailored to meet the expectations of the insurance industry. The key improvements are with regard to granularity of data, and the capturing of claim / incident specific costs rather than relying, in part, on average annual costs for some of its resources (administration costs in particular).
  9. Provisions of the ASC Area 3 Contract
  10. The Conditions of Contract, Service Information (and annexes) were reviewed. In summary, the scope for recovery for a Green Claim is on a defined cost basis; however the path to which party (Provider or HE) pursues the claim varies on the initial estimated costs of the claim and dependent upon the severity of injury suffered by the third party.
  11. In general terms;
    • should an estimated cost be less then £10,000.00 the Provider (Kier) the claim falls within the Lump Sum duty of the Provider and he may pursue a claim against the third party to recover the costs involved in the name of the Employer
    • for claims where the estimated cost of the works is in excess of £10,000.00 the Provider follows procedure as set out under Annex 23 of the ASC Contract, “TR430” and the HE Green Claims team will process the claim using the defined cost data supplied by the Provider.
  12. Kier’s Green Claims Process
  13. The processes adopted by Kier are predominantly consistent between sub and over £10,000.00 claims with the few differences being outside issues raised by CMA.
  14. The process Kier use has evolved since the commencement of the ASC Area 3 Contract in November 2013. With changes to the process implemented to meet the changing requirements of the ASC from the previous MAC Contract in conjunction with changes in the expectations of the insurance industry as to the presentation and granularity of claim costs.
  15. It is considered that the original process was based on Kier’s aim to meet the requirements of the new ASC Contract with HE alone. However the output was not in a format that best suited the requirements of the insurance companies.
  16. Specifically, the processes of cost capture used a number of cost elements that were derived from annual average cost data which were applied to individual claims rather than incident specific cost data captured against individual claims. For example Asset Inspection Watchman (as raised in CMA report at page 13), with the annual costs for staff and resources being equally split between incidents based upon an estimated total number of incidents; i.e. total cost divided by total expected incidents.
  17. From the investigation it is considered that this was a reasonable but, perhaps not the most appropriate approach to take under the requirements of the Contract. It also fell short of the expectations by the insurance companies with regard to granularity of cost and incident specific cost capture.
  18. In addition it was noted that with the earlier claims a number of errors existed within the cost data, errors with both a positive and negative effect on value. It is considered that this was by poor practice rather than by design. Within the claims audited, the end figure was within a reasonable tolerance of the actual costs for the resources expended; however some of the build-up of those costs was flawed.
  19. In addition to the review of individual claims, the audit team had sight of Kier’s internal management Cost / Value Reports for Damage to Crown Property claims from which it has been shown that the costs are marginally less than value (approximately – 3.5%), though it is considered that this loss will be mitigated through recovery of some of the aged debts (claims outstanding after 12 months).
  20. Following a dialogue and meetings with several insurers in 2015, Kier have improved their allocation and presentation of costs to be much more incident specific cost with an improved clarity within their paperwork. Kier have produced an Insurer’s guide to Incident Management  (khl-insurers-guide-v1)  and claim recovery which is attached with every claim pursued (copy attached).
  21. The current processes implemented in the later part of 2015 uses minimal annualised costs with the vast majority of costs being incident specific with back up supplied to incident specific timesheets and plant and labour returns.
  22. It is considered that for those few costs that are based upon annual average cost data, it is reasonable to do so, for example the time claimed by the DCP depot admin assistant.
  23. Conclusion:
  24. It is considered that the processes currently in place by Kier are compliant with the requirements of the Contract with the HE and produce claims that are the reasonable incident specific costs incurred by Keir when they respond to, plan and repair the damage caused to Crown Property.
  25. Examination of the specific complaints raised by Mr Swift of CMA
  26. We have focussed on the specific issues raised about Kier’s practices as detailed within Mr Swift’s 55 page précis of issues. For convenience, we have referenced each of the issues examined within that précis:
  27. Page 13 – Scene attendance costs by AIWs
  28. Mr Swift describes scene attendance costs starting in the £100s, going up to £1500, then £2700, then higher still and then back down to a reduced level.
  29. Kier explained that the figures of £1500 and £2700 are not purely for Asset Incident Watchman (AIW) attendance on scene but also for planning for the permanent repair. A typical permanent crash barrier repair may take place a few nights after the incident and this will require a job pack (e.g. risk assessment, traffic management drawing etc) to be produced. This work was described as Planning and was, in the past, charged for in the same cost item as scene attendance. These costs are now being split out and so it appears to Mr Swift (as reported in August 2015) as though the AIW attendance cost has come down. Kier explained that this is the main reason for AIW attendance going down, although as will be shown later, the methodology for calculating AIW costs has since improved.
  30. Mr Swift writes that Kier stated to him in February 2015 that the £2700 charge was actually undercharging for the AIW attendance. Kier responded that Mr Swift emailed one of the DCP administrators at Kier and was told that, for the particular claim under discussion, the £2700 fee represented an undercharging of incident specific costs due to the complexities of that particular incident.
  31. It was simply a statement considered as fact for that particular incident by Kier’s representative and not representative of an upward trend on claims generally from £2700.
  32. Kier informed the HE audit team that they have explained all of the above to Mr Swift and also that this methodology is no longer used for charging.
  33. Page 13 AIW attendance and 1153 incidents
  34. Emphasis has been placed upon the use of 1153 incidents as a basis for allocation of annualised costs.
  35. 1153 is the number of incidents (traced and untraced) per year that was stated in the ASC3 tender as an assumption to be used by tenderers as to the annual number of claims.
  36. On page 14, Mr Swift raises concerns that this includes incidents outside of the ASC Area 3 Contract.
  37. This was queried with Keir and the source of this is from the ASC Area 3 Contract only and does not include for assumptions of incidents in other contracting areas be these with the HE or other bodies (such as TfL).
  38. From our audit it has been seen that until the processes were revised in the last quarter of 2105 this figure was used as the basis for apportioning annualised cost data, ie., an annualised cost such as AIW would be divided by the 1153 assumed number of claims to arrive at a cost per claim.
  39. We have been informed that Kier have explained to Mr Swift the source of this figure and the period it relates to.
  40. With regard to concerns raised by Mr Swift with regard to the estimated the salary for an AIW at around £72,000. Kier explained that this is not the salary of an operative but is the cost of the operative and includes the costs of salary, pension, national insurance, training etc.
  41. On page 14, Mr Swift raises the question as to what AIWs do when there is no incident. AIWs do not solely attend incidents they also carry out safety inspections, detailed inspections of certain assets, identify renewal schemes needed etc. The costs that are outside are met (under the ASC Contract) by lump sum payments, the value is a fixed sum under the Contract between the HE and Provider, costs are captured though they do not affect the payments made.
  42. Kier stated that they believe that Mr Swift was under the impression that AIWs were the same as Incident Support Units, that were part of the requirements under the MAC Contract (i.e., prior to November 2013).
  43. Incident Support Units were, to an extent, a more reactive resource in place to deal with incidents accidents, which it is believed the centre of misunderstanding between the roles that Mr Swift has made reference to. Kier stated that they have explained and clarified the difference between ISUs and AIWs to Mr Swift.
  44. A further issue raised by Mr Swift centred on that the number of incidents should be approximately 2849 per annum, not 1153, based on a 2010 audit.
  45. As stated above, changes to the methodology with regard to the use average annual costs used to calculate AIW costs has changed, as a result it was considered that this matter was no longer an issue.
  46. Page 17 – 07/2015 new schedule of charges for AIW attendance
  47. The schedule of AIW and vehicle rates given on page 17, criticised by Mr Swift as “naïve, ill-conceived, unreasoned and unsupportable”, were based on a standard four-hour charge for every incident. The use of this schedule of charges no longer applies and all claims being dealt with by Mr Swift have, we have been informed, been resubmitted under the revised incident specific process, therefor consider this matter closed.
  48. Current practice uses the actual number of hour’s attendance applied to notational hourly cost rates derived in accordance with the prevision of the schedule of cost components under the ASC Contract. This is factored by time of day/week, as set out in the Insurer’s Guide document attached.
  49. The vehicles are also charged using a blended rate for the vehicles used with the time claimed being that incurred in dealing with the individual incident. This is not factored by time of day/week.
  50. As stated, Kier have stated that they have recalculated all of CMA’s claims using the previous methodology and resent them to Mr Swift in the new format.
  51. Page 17 – AIW vehicles
  52. Kier informed Mr Swift that the vehicle rates are based on a Ford Ranger. However Mr Swift identifies that a Mercedes Sprinter van and an Audi appear to have been used on occasion. Kier state that the Mercedes Sprinter Van and the Audi car referred to by Mr Swift at the bottom of p17 are not used. The confusion is believed to stem from a degree of illegibility of the recorded number plate on the operatives timesheet / job sheet. CMA have traced the vehicles from this data and, as a result, a different vehicle has been generated by the Motor Insurance Database.
  53. Appendix 3
  54. This Appendix relates to a claim under the LoHAC Contract; this is a separate Contract between Keir and Transport for London. Unfortunately Kier sent backup for an Area 3 claim to support a LoHAC claim in error. Kier have explained this to CMA.