More Highways England Misrepresentation

What are the chances of winning a game where you don’t know the rules and your opponent’s only objective is to win at all costs? What do you think your chances of a fair competition are?

How will you know if your opponent breaks the rules or makes them up as they are going along?

If there is a referee you may feel more confident, but what if they too are batting for the other side?

We are informed that, in 2016, Highways England (the ref’?) made another false statement when asked about the rules associated with claims made by their contractors:

With claims under £10,000 the service provider pursues the third party directly to
recover the costs flowing from their actions.

For these claims, the ASC is not prescriptive as to the methodology to be adopted by the service provider*.

The above is incorrect. The ASC is, in some areas, prescriptive (rigid, strict) when it comes to the methodology to be adopted by the service provider, for example Kier Highways Ltd. But in 2016, you would not know this or be able to argue with the above because the rules by which the contractor is to operate, the process they contracted to abide by, was kept secret, known only to them and Highways England.

The contract was placed in the public domain, on-line for all to see, the sub-sections were available, the Annexes readily accessible. But the levels below this were not and it is within these that you find the agreed procedure, the ‘prescribed methodology’ – the ‘rules’ that the contractor was to ‘play’ by.

Kier Highways know the set of explicit regulations and principles governing procedure within the activity of claims against Third Parties. Highways England are privy to the directions. But Kier Highways ignored them from the outset and Highways England failed to monitor them; ‘coincidentally’ the Public Authority placing Kier Highways in a privileged, monopoly position, ‘overlooked’ an exaggerated aspect of their work – but what did they care, these were claims against drivers, fleets and insurers, not the Authority.

In January 2016, Highways England audited Kier Highways following our concerns. The report makes no mention of Kier’s process being contrary to what the contact sets out, the audit found no real issues.

It was not until about early 2017 when, in connection with a Court case, attached to an exhibit, was a brief document that clarified the process and explained how the maximum a Third Party was to be charged should be calculated.

In June 2017 we met with Highways England and presented the evidence. KPMG were appointed to audit and …

To this day Kier Highways Ltd are not complying with the contract and Highways England appear powerless to prevent this. We estimate that Kier Highways are issuing 10+ invoices every working day each exaggerating claims by £1,000’s.

27/04/2018 update … to continue the ‘game’ analogy, what if the ref’ (Highways England) did not know the rules to the (their) game or kept changing them ….?

How does a Public Authority audit their contractor unless they are conversant with agreements – to read more, click here


Under the Asset Support Contract (ASC), third party claims are split into:
• Claims by Third Parties against the Highways England; and by
• Highways England against Third Parties for damage to Crown property.

The FOI request appears to be framed under Highways England’s ASC for Area 3 and what the process for third party claims is, as set out under Annex 23 of this contract.

With regard to the matters raised under this FOI request these relate to the latter type of claim. Generally, the claims against third parties can be further split by value; these are claims over £10,000 and claims under £10,000.

Claims over £10,000 are pursued and settled by Highways England’s internal (Green Claims) team using cost and resource allocations provided by its network area service provider. In Area 3 this is currently Kier Highways Limited (KHL). The cost and resources are captured as set out under the amended New Engineering Contact and follows standard practice principles of Defined Cost plus fee.

With claims under £10,000 the service provider pursues the third party directly to recover the costs flowing from their actions.

For these claims, the ASC is not prescriptive as to the methodology to be adopted by the service provider. However, it is required to provide such breakdowns and supporting information to justify the cost of repair. The specific processes have been developed and evolved between the insurance industry and our service providers to provide improved granularity and consistency required.

With regard to the stated “1153 method”, the number 1153 relates to the assumed amount of third party claims as stated in the Area 3 tender documents. This was a notional number that the tenderers used to build up their tender submission for the sub £10,000 claims. It was not envisaged as the actual future number of claims but simply a benchmark for submitted tenders by Highways England.

It was found that the 1153 number was used by KHL as a basis for averaging some cost elements. As stated, this process has now been reviewed and revised. For clarity, it is understood that any contentious or unsettled claims – priced under the old methods – have been resubmitted under the new process, as agreed with the insurance industry. Please note these are private matters between the service provider and the third parties’ insurers.

It would be incorrect to conclude that 100% of the costs of all claims are met by “fleets and insurers”. For traced third parties this would be the expectation by the service provider for the under £10,000 claims. However, for untraced claims under £10,000 or claims over £10,000.00 these are, for the latter, met initially by Highways England and pursued by its Green Claims team based upon the actual costs as captured and justified by the service provider and – with the former – is met on under an ASC ‘Lump Sum’ payment.

It is accepted that for the sub £10,000 claims an averaging method, as used by the service provider for some elements of the costs, would mean a degree of error (up and down) and the revised methods developed between the service providers and the insurance industry will impact on this possibility. However, it is recognised that a balance is struck between business efficacy in the processing of claims and the costs associated with the pursuit of the precise value.

There is a cost associated with gathering evidence to enable the precise value of a repair. There is sometimes a compromise to accuracy when aiming to reduce the administration in the capture of cost. With the sub £10,000 claims this is a matter between the insurance industry and the service providers and it is evident that over time a moving balance has been struck to assure there is value for money for the taxpayer. Any contentious or unsettled claims have been revised and resubmitted in the latest format, it is, therefore assumed that this balance was accepted or will be made acceptable.

Regarding the release of all labour, plant and equipment rates, this is considered commercially sensitive and inappropriate, particularly given that these rates are detailed individually with each claim form submitted to the insurance company.

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