191211 Complaint to NAO re DCP Rates U-Turn

11/12/2019 to the National Audit Office

Correspondence Team enquiries @ nao.org.uk
Pat Ryan @ nao.org.uk
Philip Taylor @ nao.org.uk

Dear Sirs,


Thank you for your email of 10/12/2019.

I am raising serious concerns regarding Mr Kay’s audit of Highways England, his meeting record and subsequent reversal of the statement:

‘ASCs include a schedule of rates – these should be used as the basis for the cost pack (for claims both below and above £10k).’ (14/05/2019)

The above is form Mr Kay’s record of a meeting in relation to my complaint about DCP rates. Mr Kay now claims, following an approach by the Authority, his note relates to an entirely different set of rates, those for pre-planned works. This I consider preposterous.

Whilst I note you are moving to ‘stage 2’ I am confused;

a) what HAS the NAO undertaken to date such that stage 1 is satisfied and
b) procedure followed, correct?

Mr Kay’s response of 09/12/2019, commences:

I note and am responding to your correspondence of 11 and 18 November, as well as your request to treat our handling of your correspondence as a formal complaint of 5 December.

It appears Mr Kay has handled stage one, addressed the complaint about himself.

c) Is this usual and considered appropriate?

Rather than receive an acknowledgement within five working days of receipt providing an indication as to who will be responsible for responding to me, Mr Kay has acknowledged and responded. I appear to be disadvantaged; I have not been afforded the benefit of stage 1.

d) Would you agree?

Unfortunately, in responding, Mr Kay has fuelled my concerns by stating a half-truth; he has distorted his earlier statement by writing:

The minute of my original meeting of 14 May 2019 with a Highways England official, which you included in your correspondence, said that ‘ASCs include a schedule of rates’. This might have been taken to imply, in the context, that a schedule of pre-defined rates existed for the settlement of DCP cases

I consider this misrepresentation to be telling. The full sentence reads:

ASCs include a schedule of rates – these should be used as the basis for the cost pack (for claims both below and above £10k).’

As for ‘might’ have been taken to ‘imply’, the record taken at the meeting is unequivocal. There is no ‘might’ but a statement that is not open to misinterpretation. The sentence does not ‘imply’ or suggest a schedule of rates exists, it is a straightforward statement that the schedule is present and goes further, explaining its application – a process that should occur (is stated to Mr Kay it does) but does not – hence you are told ‘there is a schedule’ whereas I am not. To provide me the schedule would be to evidence contract non-compliance, undertaken within the knowledge of the Authority, resulting in1,000’s of exaggerated claims and £millions in wrongly demanded payments, all in the name of Highways England. Hence I refer to the process as ‘state enabled exaggeration and fraud on an industrial scale’

A Judge has already stated, with regard to my pursuit of the rates, my enquiries were conducted properly, were reasonable, have a serious purpose. However, the Judge conveys that I have been provided inadequate or inadequate responses and wrong information. The Judge referenced:

• a contractor inflating their costs on a scale arguably amounting to fraud
• Costs are different according to Third Parties being billed directly on the basis that the costs of the works fall below the procedural threshold
• a lack of transparency and an inability to check costs e.g. on staff overtime and using false registration VRM’s (https://www.englandhighways.co.uk/release-the-rates/)

How did your audit fail to identify the above?

Please note the statement ‘ Costs are different according to Third Parties being billed directly on the basis that the costs of the works fall below the procedural threshold’ and consider this in relation to Mr Kay’s record of the meeting ‘ASCs include a schedule of rates – these should be used as the basis for the cost pack (for claims both below and above £10k).’

The rates are not used for both below and above £10k claims. There is a process that should be adopted:

• Base rates above and below threshold (£10k) are to be the same
• Below £10k, a Third party, pursued by the contractor will be charged an uplift on these base rates (25.29% – Area 9)
• Above £10k, Highways England, billed by the contractor, is charged an uplift on these base rates (6.5% – 2016 / Area 9)

I have handed above and below threshold claims. The base rate process is NOT used. Contractors are prepared to misrepresent this to Third Parties and the Courts.

To the inflated rates (below threshold) Kier Highways will add a further uplift, a multiplier, claiming they pay this to operatives after 5pm. They do not. This, I believe, amounts to fraud.

I am unsurprised the Authority is desperate to undo Mr Kay’s record of their meeting.

Another Judge has written:

• ‘Highways England failed to do that which it should do as a matter of course – comply with the law’. https://www.englandhighways.co.uk/190913-he-permission-to-appeal-refused/

My initial complaint relates to Mr Kay’s:

1. Inability to keep an accurate, comprehensive note of the meeting with Ms McCarthy of Highways England 14/05/2019
2. Seemingly, at the meeting, not having discussed the issue I raised but another (about which no mention is made)
3. Failure to understand the processes engaged by Highways England
4. Ignoring the misrepresentations I conveyed whilst, at the time of my writing, auditing Highways England
5. Failure to identify the lack of ‘pricing schedule in an ASC’. I understand Mr Kay has previously audited the Authority
6. Inability to audit the Authority in the absence of a pricing schedule. For example, how were:
a. ‘recoveries from Third Parties for damage to the SRN’ verified and reconciled in the absence of a pricing schedule
b. specimen claims reviewed
7. volte-face; Mr Kay’s letter and note confirm the existence of a schedule of DCP Rates, over a month later, following contact from the Authority, his note / letter are seemingly worthless and the Authority’s uncorroborated, contradictory account taken as fact, supported – Mr Kay has no faith in his own notes?
8. Contact with Ms McCarthy subsequent to their meeting – I suspect there was an attempt to get Mr Kay ‘on-side’, phone calls – where is the note of these (recordings?)
9. Failure to address the concerns I have raised
10. Refusal to review the serious concerns I have raised relating to the misrepresentations emanating from the Authority and its contractors about:

a. Charges to Third Parties (drivers, fleets, hauliers and insurers)
b. Recovery information; the contractor is supplying false cost data to the Authority
c. The pain / gain share – initially the Authority stated this exists, when I presented evidence of misrepresented figures, they too U-turn, there is no pain / gain share

I also wish to understand:

11. Why the issues I raised were considered serious enough for a meeting, Mr Kay now appears to believe he did not address the issues but a completely different matter, yet will not return to the original issues.
12. Why the contractor is providing false figures if not to gain or hide its activities?
13. What did the audit discover about the pain / gain share and related amounts disclosed?
14. Why Mr Kay is now not prepared to review the failed NSoRC; it failed, there is no NSoRC; nothing has addressed the problem, nothing is in place. Why did NSoRC fail?

I also ask you to investigate

15. the subsequent conduct, the handling of my complaint and the statements made and
16. Explain why the issues are insufficiently serious to warrant attention; why the NAO has insufficient resources to commit to the SRN

Additional issues arise from Mr Kay’s note:

‘HE’s relevant regional team assesses the cost pack for reasonableness and challenge’

17. This is believed to be false. In addition to the Authority now claiming there is no price list against which to establish accuracy of costs, I have never seen any challenge and understand this does not occur. I am told anything under £25,000 is simply paid – about a ‘QS’ will look at the matter but this has yet to be evidenced.

The note also records:

‘HE performed their own review into the service providers’ application of the contracts to these claims. HE concluded that costs claimed were reasonable’

18. I do not accept this can be correct; the overstatement is such that it amounts to fraud in many instances.

a. I have yet to be provided a copy of the review, ‘project verde’ undertaken by KPMG. I believe you will require this.
b. I question whether the concerns were raised, the ‘review’ disclosed to you during any audit.

The KPMG review followed my 21/06/2017 meeting with the Authority and presentation of evidence substantiating exaggeration, contact non-compliance and fraud. KPMG and I spoke 15/11/2017. Yet the ‘review’ did not conclude until (it appears) late 2018 when, 09/2018, the Authority’s CEO wrote that no issues were discovered.

19. Why, did Kier Highways agree not to issue any invoice sin Area 9 until NSoRC was finalised (24/06/2019)?

There is a known issue; Kier Highways are overstating claims and have been for years. The Authority is aware of this. Possibly the collapse of Carillion has left them short of contractors, unable to address the issue because Kier need the profiteering revenue? Possibly the Authority are so compromised by their knowledge and permitting the abuse of Third Parties (drivers, fleets, insurers and hauliers) that they are unable to function?

Whatever the reason, it is evident the Authority have no intention of addressing an issue that affects the public they serve.

I believe a schedule of DCP Rates exists. Mr Kay’s note accords with my understanding and the coincidence of this is staggering. Mr Kay’s record of the meeting seriously undermines both his recent stance and that of the Authority.

20. NSoRC failed because the Authority does not understand the environment or is unable to satisfy both parties involved; contractors and Third Parties. The gap between reasonable cost and those being charged is so great as it cannot be bridged. In turn, transparency cannot occur

21. NSoRC assured Third Parties of transparency but did not deliver. NSoRC assures Third Parties they will be provided ‘actual costs’ but to date these have not been advanced, they are kept secret

22. So appalling is the Authority’s recovery rate (£1 in every £5) and conduct, they have found it necessary, as of 11/2019 to appoint a private firm of solicitors to undertake Green Claims recoveries.

23. The Authority has been so lax in recovering, seemingly unable to obtain information from its own contractors to resolve issues, that matters date from over 5 years ago.

24. The Authority, far from seeking to be reasonable, despite delays of their making, is seeking interest on all historical claims increasing the costs to Third Parties substantially

It appears your audit failed to identify any of the above issues.

If, upon reflection, Mr Kay realises he was mistaken and Ms McCarthy (of Highways England) was only asked about and responded to, questions about DCP Rates, I ask that you return to me as a matter of urgency.

I would appreciate being advised by when I can expect a response to the above.

I am able to evidence my statements should further information be required.

Please advise whether you believe any aspect should be referred to the Serious Fraud Office (SFO), whether you intend to make the referral.