New Charging Process for Damage to Crown Property (DCP)

24/06/2019 from Highways England

We are introducing a new way of determining the reasonable cost of the repair work covered by a claim using a new National Schedule of Repair Costs (“the Schedule”). We are introducing this Schedule for all Asset Delivery and ASC Areas (other than where there is a DBFO in operation) from today.

Figures are presented and can be found here together with the narrative, for example:

Third-party claims on England’s motorways and Major “A” roads amount to ca. £60m per year. Presently, around 50% of the value is managed by Highways England and 50% by Service Providers. Highways England currently recovers only around 20% of the total value.

The process appears designed to increase recoveries from insurers, fleets and hauliers (Third Parties). The latest ‘AD’ contracts see Highways England paying contractors for all DCP incidents and leaves the Public Authority to undertake the recovery. The days of sub-£10k claims being retained and pursued by contractors using dual pricing, appear to be coming to an end. Clearly there were issues; it is claimed Area 9, an Asset Support Contract (ASC) has not issued a TP invoice in 2019 – expect these to arrive soon … but inquiries suggest the Authorities lawyers are (again) ignoring their master’s voice.

The ‘contractor figures’ referred to above are likely a guesstimate – Highways England have been receiving erroneous statistics, possibly why there is no comment about the success or otherwise, of contractor recoveries.    However, it appears the Authority will be looking to increase its 20% recovery of half the £60m total (£30 million) i.e. they wish to address the £24 million shortfall.  This may appear concerning however, the £60 million is likley overstated, the figures skewed by:

  • untraced culprits – no one to claim against, which could be as high as 40%
  • contractor figures being overstated

The current opaque situation with regard to rates is an Authority problem. For example, Highways England have recently ‘discovered’ they have no agreed rates in any of their ASC’s. The latest response in respect of this is dated 26/06/2019 – and can be found here. Seemingly, for years Highways England could not check (pre-payment) any of the 100’s or 1,000’s (?) of invoices they receive.  This is not only bizarre, it also contradicts what the  Authority informed their Auditor 05/2019; that there IS a schedule of rates – click here. The issue is with the ICO.

As for the new ‘schedule’, this appears to be a return to an older ‘averaging’ methodology that lacked detail and ‘granularity’ i.e. was not transparent and caused a change to the current methodology! Once again, we are presented figures, without breakdown in an environment where the Authority pay less than £30 / hour for an operative who can be charged to an insurer for in excess of £130 / hour – and often these people travel in twos.

At first blush, whilst more detail is required (and we have been assured this would be supplied) there are features that more little sense.  For example, the doubling of planned rates for Labour and Equipment when incident attendance is unplanned i.e. reactive, appears simplistic and misguided:

  • £1,709.00 PLANNED Temporary Traffic Management
  • £3,418.00 UNPLANNED Temporary Traffic Management

Traffic management involves operatives (people), plant (vehicles) and equipment (cones and signs).  A team comprising a supervisor and 2 labourers will attend in a truck and possibly spend 6 hours reinstating the over-sized Mecanno set (no offence intended) that are barriers, post, nuts & bolts.  It is questionable whether these operatives are paid any more; they frequently work a night shift and overtime is often at flat rate.  Their work may need to be shuffled but did any significant disruption occur – likely not as Highways England do not charge for it and when a contractor was challenged, they dropped the £832 fixed fee – without justifying it, producing the calculation.

But what of the plant and equipment?  A beaver-tail wagon does not bleat that it is being dragged out during unsociable hours and demand an enhanced wage.  Cones and signs, inanimate objects, cost no more if placed out when an important football match is on, it is Saturday ‘party’ night or their mum’s significant year birthday celebration … so why are they charged at double?

An initial conversation with Highways England about the process is promising and we are presenting an overview of our first take on the process. The Authority appears open to suggestion and we are due to return to them in a fortnight.  We will be a little less tongue in cheek having received a good initial impression.

But we have a niggle or two …

Why the new process? There is a perfectly good, simple and transparent procedure contractually agreed between Highway England and their agents years ago (Appendix A to Annex 23):

Base Rate (£) + Uplift (%) = maximum (£)

The above ‘uplift’ to the Authority is about 8%, to a Third Party no more than 26% i.e. a TP is to pay ‘no more than’ 18% above the Authority. But a contractor has never complied with this secret process and the Authority has not enforced it … save that it is used when billing Highways England.  As both parties agreed this was the method to achieve the maximum cost, why are both seemingly not prepared to engage with it?

Why new rates? We have received Highways England claims ranging from just over £10,000 to well over £200,000.  We know the rates the Authority is charged, has been comfortable to pay apparently without checking pre-settlement. Why not use these rates?

If the answers to the above are ‘the rates do not enabling sufficient profit’, how does the new process address this?  Are contractors now prepared to take lesser sums?

Are Highways England in  position to make informed comment about sub-threshold rates?  We suspect the answer is ‘no’ and therefore if these formed part of their analysis when compiling the new rates, the figures will have been distorted.

Encouragingly, the Authority will take time to understand any issues with the new methodology – we are due to return to them shortly.

Friday, 28 June 2019

03/07/2019 – Highways England Press release – Smoother journey through Highways England contract changes

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