Highways England re Costs

From: Philip Swift
Sent: 19 November 2015 11:11
To: Highways England
Subject: RE: Our Ref: T02A444/PBS & Your Ref: 112/003/SG255

Further to our recent communications about EMH’s AIW charges and below, please see the attached letter from EMH (Keir).
EMH charge drivers / insurers for the initial attendance of the ‘Asset Inspection Watchmen’ (AIW) by taking the salary of their 38 AIW staff and sharing the cost of them among the 1153 claims they deal with per annum. The same process applies to vehicles.
This is an extremely crude approach and we believe that it may be unlawful.
To explain, on behalf of insurers we receive sub-threshold claims from the contractor and above-threshold claims from HE. What we do not see is a common , identical, process of charging for AIW’s. 
Your claims are not costed in the same way; you are not charged the ‘fixed fee’ (£2385.89) but at an hourly rate for staff and plant. I would anticipate that this reflects the actual losses which the HE have incurred, and is also set out within the contractual agreement as between HE and EMH. Your claims do not appear to be amongst the 1153 being used to divvy-up the annual costs of the staff.
The conclusion is that as the contractor has already allocated the annual cost of staff and plant to the 1153 claims; the cost of the staff & plant associated with your claims has already been addressed. In turn, your payment of claims (those presented to HE for settlement) represent pure profit for the contractor. If correct, this is a highly dubious arrangement and objectionable upon many grounds. 

I should be grateful if you would confirm if this is the contractual arrangement that HE fully understand that they have entered into for above-threshold claims and whether HE endorse this approach as being legitimate?

I also draw your attention to the figures in the attached document which cannot be reconciled and which your contractor has consistently failed to justify, to provide a breakdown. For example:

  • 38 staff with an annual salary of £2,750,935.90 equates to an annual salary per person of about £70,000. We do not believe the staff are paid more than £40,000 / annum
  • 1153 incidents in a year equates to just over 1 per week for each of the 19 teams (pairs). Simplistically, in a 5 day week if the staff attend 1 incident then 4 days / week are event free.
  • 1153 is a figure that we do not accept is justifiable. Where does this come from? The contractor is unsure.

As per my earlier email, EMH have stated that roughly 60% of an AIW’s time is taken up with these incidents (the figure ranges from 50% to 70% subject to whom you speak with at EMH).

  • Why is 100% of an AIW’s wage allocated to these incidents? Why is 60% not allocated?
  • Why are drivers / insurers paying for the additional 40% of an AIW’s time?

As an AIW’s cost has already been divided between the 1153 drivers / insurer incidents and HE claims do not feature among the 1153, why are HE seeking to be paid twice for the same resource which is recovered elsewhere?
In other words, whilst you may believe “They can do what they like with their own claims, that’s absolutely nothing to do with us”, the fact is what they are doing does have an impact upon claims such as this; if EMH have been paid for the AIW charges already, how do you justify the fees you are presenting (from EMH)?
Their conduct means that your own claimed losses are subject to legal challenge because they are presented to insurers upon a false premise. You have created or allowed a contractual relationship to exist where hidden profit is being taken at insurers’ or drivers expense.
Whilst I note your reluctance to comment on sub-threshold claims, I trust you will appreciate why these have a significant bearing upon the claims you present and in turn why we need the above issues addressed.
Please confirm to whom, if not yourself, we should address these concerns in relation to this above-threshold claim.