190920 FoIA response re Pain/Gain Share

20/09/2019 From Highways England: FOI 100025 (190920 100025 Pain Gain).

Thank you for your e-mail on 19 June 2019 and our apologies for the delay in responding to you.

Your request has been handled under the terms of the Freedom of Information Act 2000 and our response is below –

I will try to explain a misunderstanding

The extract from Highways England Ref: FOI 743,153 (repeated below) is incorrect and as such should not have been sent to you.

All contractors reconcile their costs annually against their recoveries. If the proportion of traced incidents exceeds expectations an assessment would be made and the Lump Sum payment would be reduced. However, no contractor has ever been in the position where the proportion of traced claims exceeds these assessments and there are various factors for this. The main one being not all damage linked to a driver is reported by the driver.’’

The process described above did not and does not exist in the Asset Support Contracts (ASC).

It is not practical for Highways England nor our contractors to establish a precise number of damage incidents on our network and hence the proportion of incidents caused by traced and un-identified drivers. While some un-identified driver damage incidents can be obvious, many others by their nature are not and the damage to the asset may not be established until sometime after the event. Un-identified driver damage incidents tend to be those causing the least obvious damage to both our asset and also the vehicle involved as evidenced by the fact the vehicle has driven way from the scene and off the network unnoticed.

The Lump Sum in ASCs generally remains unchanged throughout the life of the contract apart from annual adjustments due to indexation and other factors (eg tendered efficiencies, etc.) or very occasionally if there is a significant change to the contract that is negotiated between the two parties requiring an adjustment to the contracted Lump Sum.

In respect to schemes work New Engineering Contract (NEC) Option C Target Price with a pain/gain share is used by Highways England in ASC’s for most scheme work.

This is not used for Green Claim repairs in the more recent Asset Support Contracts. This was a direct result in previous Manging Agent Contracts of challenge by insurers who were not prepared to accept any pain/gain approach in their payment of claims for damage repairs from negligent drivers. NEC Option E cost reimbursable (or Defined Cost plus Fee) approach is therefore used for DCP repair work.

So for clarity there is not an annual review of Lump Sums related to Green Claims in ASC. In addition, the use of pain/gain arrangement is for scheme work and is not used for Green Claim repairs and has not been used since prior to 2015.

We apologies for the error in Highways England Ref: FOI 743,153 and any resultant misunderstanding of the how the ASC worked in this respect. We trust this clarifies this aspect.