In response to HE email of 16/12/2019
28/12/2019 @ 1704
To: tim.reardon @ highwaysengland.co.uk, Jim.O’Sullivan @ highwaysengland.co.uk, Colin.Matthews @ highwaysengland.co.uk, Alex.Bingham @ highwaysengland.co.uk>
Subject: State Enabled Exaggeration & Fraud on an Industrial Scale – Kier Highways / Areas 6, 8 & 9 Rates
Dear Mr Reardon and Mr O’Sullivan,
Exaggeration & Misrepresentation – Kier Highways / Areas 6, 8 & 9 Rates
Thank you for your email of 16/12/2019.
Comparing the rates that Kier use to bill third parties with the rates Kier use to bill Highways England and contending that any difference can only be justified by the difference in uplift is entirely the CORRECT approach. The judgement you cite of HH Godsmark’s conveys this succinctly:
It would be odd if a tortfeasor was liable to Highways England for diminution in value of a damaged chattel in one sum if sued by Highways England itself and in a different sum if sued by Highways England via BBMM.
Additionally, there is what we and the Courts have been informed; the base rates are the same, it is the uplift which causing the difference:
a) There is a set of actual costs, base RATES or defined costs. These are said to be used when pricing HE and TP’s.
b) To these RATES are added an uplift:
i. About 7.4% to HE
ii. 25.29% to a TP
The difference in RATES charged should therefore be the difference between ‘a’ and ‘b’, about 18%. It is NOT.
Furthermore, the 05/04/2016, you wrote ‘These unit rates are inclusive of either a Direct Fee, Subcontract Fee and Working Area Overhead, whichever is appropriate, and which are set out in the contract between Kier and Highways England. For sub-threshold claims, Kier apply a third party claims overhead.’
However, for reasons as yet unknown, 04/2016 you provided incorrect figures to me for 12/2015:
a) AIW* staff hourly rate: £70.32
b) AOW (sic) vehicle hourly rate: £35.53
c) CO1 Standard Beam:£41.52
*AIW – Asset Incident Watchman – Kier’s 1st responder to emergency incidents. They also cut grass, fill potholes and pick litter (as examples).
The full email can be found here: https://www.englandhighways.co.uk/highways-england-misrepresent-costs/
You can dress it up anyway you like but a RATE is unaffected by weather, task complexity or the like. What gives rise to a greater COST (total) is the number of HOURS at the RATE applied.
I have been willing to settle claims at ‘actual’ + TPCO i.e. at a sum in excess of that proffered by HH Godsmark. Who is being reasonable?
THIRD PARTY CLAIMS OVERHEAD (TPCO) PERCENTAGE
Highways England have gone to the trouble of calculating a TPCO for each Area, which ‘are set out in the contract between Kier and Highways England’ (as above):
25.29% in Area 9
20.58% in Area 3
1. Why bother; what was the point of calculating the uplift (TPCO,) of this being established and included within the contract, if it was not to be employed and compliance ignored?
FRAUD – MULTIPLIERS
One factor giving rise to the substantial difference between rates to HE and a TP is the use of multipliers, further uplifts on already exaggerated rates. Kier state to us and the Courts in the name of Highways England, their AIW’s work 8am to 5pm weekdays after which they have to pay the operatives 1.5x (weekdays) and 2x (weekend).
AIW’s tell us they works shifts, are not paid any uplift after 5pm of a weekday and even overtime is at flat rate.
Multipliers are applied on the majority of incidents charged to Third Parties; there are only 45 hours in a week that ‘multipliers’ are not applied. Conversely, Highways England not only pay a lower uplift (as above), you also pay no multipliers.
You appear willing, keen to describe aspects of the rates,
2. please explain how the charging of multipliers is other than fraud.
I appreciate this aspect poses a problem for you and Kier, they have nailed their colours to the mast, documenting the applied uplifts. But these are not costs incurred and to justify them, your contractor must be deceitful.
APPENDIX A TO ANNEX 23 (copy attached)
Neither the Courts, you, your contractors nor we need trouble ourselves with the vague ‘reasonable’ approach, the grey ‘range’ of rates. Highways England and Kier undertook the hard work for us; you agreed a base rate and uplifts (cost+) approach. The basis of charging for unscheduled repairs to the network is ‘defined cost’ + TPCO.
The sums claimed are clearly excessive and in some instances fraudulent. Despite the claims being made in the name of Highways England, you are not prepared to put your own house in order but expect the Courts to ‘interfere’ (your description 16/12/2019).
The contract between Highways England and its contractor is relevant. For example, you refer to the contract 05/04/2016 (above) albeit you failed to mention Appendix A to Annex 23; the section you kept secret for years.
Appendix A to Annex 23, sets out the process by which a Third Party is to be charged ‘no more than’, it results in the ‘maximum’ to be billed. Third Parties were not party to this, they had no say in the matter have not agreed the methodology but we can see its merit. We have been prepared to reach agreements using the process.
Kier Highways have never applied the ‘Appendix A’ process when billing Third Parties, Highways England has failed to ensure it was complied with. Indeed, it appears there is a tacit agreement Kier can charge Third Parties ‘whatever they can get away with’ in the name of Highways England.
Is Highways England now so compromised as to be ineffective?
In late 2014, your audit of Kier required the contractor to develop and implement a methodology that offers more clarity and traceability of staff costs on green claims. Kier’s staff costs were not based upon a clear approved methodology or on specific individuals time sheets.
3. What resulted from this process review?
You have brought suspicion upon yourselves. I have provided numerous opportunities for you to address the situation. Instead, each time you have failed to do so preferring to attack my credibility in an attempt to silence me and permitted the continuation of the exaggeration, the profiteering.
The schedule of rates should match or harmonise above and below threshold and this should have occurred from day-one of the contract 01/07/2014. You are aware there are schedules (plural) of rates for below and above threshold matters, there should be one (singular).
You allow your contractor to operate other than in accordance with the contract and to exaggerate claims. To do so, they misrepresent facts in your name and make false statements to Courts in your name. I have advised you of this, you have failed to halt the conduct.
4. What is the rational explanation for HE being charged approx. £25 / hour for an AIW whereas a TP was charged £73 / hour, plus a multiplier that could see £105+ (after 5pm of a weekday) or £140+ of a weekend.
5. What is the rational explanation for the multipliers being charged after 5pm of a weekday?
To hide their activity from Third Parties, Kier use different documentation. You are charged a ‘base rate’ as conveyed in the specimen Cost Breakdown Document (CBD) you supplied. To this is added the uplift ‘fee’, the overhead percentage. Third Parties are not supplied this breakdown. Not only was Appendix A to Annex 23 hidden from them, Third Parties are unable to determine the construction of the rate charged, there was no clue £73.05 / hour was the sum of a base rate + TPCO. But it is not. It should be.
Kier never mentioned Appendix A in our dealings with them
Highways England never mentioned Appendix A
Kier’s correspondence is tailored to remove reference to Appendix A uplift
Kier did not comply with Appendix A and …
Coincidentally, Appendix A was not placed on-line by Highways England (the rest of the contract was).
RATES & COSTS
You stated (above) Highways England was paying £70.32 / hour for an AIW in 12/2015, you will appreciate I question your understanding. You have never been charged this rate.
12/2015, you were paying less than £22.94/hour plus a fee uplift of less than 8%. The rates can be found here https://www.englandhighways.co.uk/aiw-rates-2014-to-2016/ supplied in response to an FoIA with the covering explanation:
“The data below details out the hourly rates charges by Kier to Highways England for Asset Incident Watchmen (all grades) for Third Party Claims which are pursued by Highways England (predominantly where the initial estimate for the cost of the repair exceeds £10,000.00).
The data has been captured for rates in use between the 1st January 2014 to 23rd September 2016 for all of Kier Operating Contracts that have a role of Asset Incident Watchmen”
From 02/02/2016 to 23/09/2016 the RATE of an AIW in Area 9 was £23.71/hour. There was no variance, no ‘defined cost definition’ fluctuation. Instead ‘The AIW rates are calculated using the Schedule of Cost Components’ and resulted in a RATE that was consistent for months.
RATES and COSTS differ.
• An hourly RATE or ‘actual cost’ (pre-profit / uplift) should be the same to Highways England and a Third Party.
• The COST is the sum of the RATE + UPLIFT X HOURS.
It is the HOURS that are affected by the complexity of the task undertaken, possibly weather and terrain. The RATE (operative, plant or material) is unaffected by these factors OR who is to be invoiced (HE or a TP).
Kier bill Highways England using the process, engaging ‘Defined Costs’ (base rates) plus a ‘fee’ uplift. But you abandoned the public you serve (drivers, fleets, hauliers or their insurers) and allow Kier to charge what they want; rates bearing no resemblance to defined costs + TPCO, engaging a process that is not contract compliant from day-one (07/2014 in Area 9).
An example of the overstatement, the exaggeration (which is fraud – to quote your Counsel 12/11/2019) can be found here: https://www.englandhighways.co.uk/example-of-area-9-exaggeration/
You acknowledge different RATES are being used above and below threshold. This should not be the case.
The SCHEDULE OF RATES may look to be similar above and below threshold. There may be differences in the way that COSTS and OVERHEADS are applied; between what Kier charge Highways England and they charge Third Parties. But the differences should eb as explained above. They are not.
6. What are these differences in the way COSTS are being applied?
7. What are these differences in the way OVERHEADS are being applied?
8. Why have the rates not been harmonised (as they should have been from day-one)?
9. What are the good reasons for those differences in the rates being used; the rational explanation?
31/10/2019, after the suspension of NSoRC, you have stated:
We will revert to pursuing claims based on the actual cost of carrying out the repairs and will continue to explore options for a transparent and equitable set of rates.
‘Revert’ indicates this was occurring previously i.e. the costs charged to Highway England pre NSoRC (24/06/2019) are the ‘actual’ costs. In Area 9 we have seen many of these rates, the base rates. I have compared these with what is being charged to a Third Party. The math’ evidences contract / process non-compliance, that Courts and we are being misled:
£23.71 + 25.29% (£6) = £29.71 / hour …. a lot less than £73.05 to £140+ / hour
KIER PROVIDE HIGHWAYS ENGLAND FALSE INFORMATION
In 2016, you said there was a pain / gain share associated with Area Support Contracts for DCP works; if recoveries exceeded a threshold, the contractor’s monthly lumpsum payment would be reduced.
In 2019, I explained to you Kier has provided false cost information to you. It appeared Kier’s motive was to hide their profiteering and thereby protect their monthly lumpsum payment from the public purse. As with other aspects of my enquiries, when I evidence misrepresentation, you U-Turn. In this instance, you made (another) mistake and now state there is no pain / gain share arrangement.
10. Why are Kier providing you with false cost information?
An example of this conduct can be found here: https://www.englandhighways.co.uk/false-information-supplied-to-highways-england/
Lastly, I wish to be provided the rates Jim assured me would be supplied during our conversation of 02/2019:
“You know, you know the very minimum that is going to happen as a result of this call, or certainly as a result of the judgment is that we will have a schedule of rates published by Kier, so that this thing is transparent”. Jim O’Sullivan CEO of Highways England
11. When can I expect to receive the ‘schedule of rates’?
181213 Tribunal Decision EA/2018/0088 – Mr Swift is NOT Vexatious
SERIOUS PURPOSE: ‘We have considered the motive of the requestor and in particular his detailed Reply and exhibits. These submissions supported by the documents provided and annexed have persuaded us not only that the motive of the requestor had a serious purpose and arose from genuine and informed concern but had significant value with a high degree of Public Interest.’
PROPER USE: On the evidence before us we could not find the request were manifestly unjustified, inappropriate or an improper use of FOIA.
NO HARASSMENT: Again looking at the evidence before us we do not accept that there could or should have been any harassment or distress (of and to staff) in an organisation of the size and import of the second respondent in this appeal. They were of such a scale that the important information sought by the Appellant should have been within their capacity to process without causing harassment or distress.
AUTHORITY INADEQUATE / INACCURATE RESPONSES: We find that the failure to recognise and process the requests was principally caused by inadequate or inaccurate responses by the personnel within Public Authority.
NOT UNREASONABLE: we find this to be the cause of what came to be described as “Obsessive behaviour” on the part of the requestor, which in our view, in all the circumstances was not manifestly unreasonable.
AUTHORITY PROVIDES WRONG INFORMATION: We have been persuaded that he (Mr Swift) has received erroneous information.
‘Amongst other issues he requested information on three issues his business is concerned which include;
• One of the contractors was 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 and
• Transparency and an inability to check costs e.g. on Staff overtime and using false registration VRN number plates.
• We are satisfied his requests on these issues would have taken forward these matters which were worthy of investigation.’
04/10/2019 Highways England appealed to the upper Tribunal; every ground was rejected.
The Judge concluding:
I cannot leave this application without observing that, if the present matter is as important to Highways England as their application for permission to appeal suggests, I am perplexed by the way in which they engaged with the Information Commissioner’s investigation into Mr Swift’ s complaint.
Since Highways England did not respond to the Commissioner’s requests for observations, she was forced to take the (in my experience) unusual step of serving a statutory information notice on Highways England (p. 190, vol. 3).
I wish to express my concern that the Information Commissioner was forced to expend resources, which I suspect are less than abundant, on requiring a public authority to do that which it should do as a matter of course, i.e. comply with the law.
I also note that, when Highways England responded to the Information Notice, their response took the form of about 1/2 a page of written representations. If, on reflection, Highways England consider that their engagement with the Commissioner did not serve their interests, I would be inclined to agree with them.
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