BBMM Area 10 Subsidy, CECA and ‘Something Else’

Was the Court misled by Balfour Beatty Mott MacDonald in the name of Highways England when their witness sought to justify the use of CECA rates for billing Third Parties (drivers, fleets, hauliers and insurers) on below-£10,000 claims?

His Honour Judge Godsmark QC was informed:

  1. above-£10k rates to Highways England are subsidised and therefore not a true reflection of repair costs
  2. CECA rates are reasonable, appropriate.
  3. No one could suggest other rates

  1. above-£10k rates to Highways England are subsidised

Not according to Highways England.

Whilst HH Godsmark has recorded several references to above-£10k rates being ‘subsidised’, 23/02/2019 we asked Highways England:

  • Are rates for incidents where a recovery against a Third Party (driver, fleet
    or insurer) is identified in any way subsidized or reduced by the lump-sum
    payment BBMM receives?
    If yes, what is that subsidy/reduction, how is this calculated and applied?

The response was:

Third-Party Claims are covered in part by the Lump Sum Duties. Balfour Beatty Mott
MacDonald (BBMM) receive a contribution towards elements of its running cost through the Lump Sum. The value of the Lump Sum was tendered as part of BBMM bid for Area 10 based on a number of assumptions including the number of third party claims with an unknown culprit.

  • Are rates for Third Part or culprit -unidentified incidents in any way
    subsidised/reduced by the lump-sum payment BBMM receives?
    If yes, what is the subsidy/reduction, how is this calculated and applied?

The response was:

The Lump Sum, as tendered by BBMM during the procurement process, includes an
assessment for incidents where a culprit is not identified.

A subsidy/reduction is not applied.

  • Is any aspect of emergency incident attendance or repair covered by the
    lump-sum payment and if so, what aspects?

The response was:

An element of emergency incident attendance and repair is covered by the Lump Sum in respect of incidents caused by unknown culprits.

In matters where an insurer has been presented an invoice, it follows a culprit (driver / insured) must have been identified i.e. the lump-sum payment has no effect on these claims, the rates are not subsidised.

The full FoIA request and response can be found here.

But even if the rates are subsidised:

  1. they exist – contrary to Highways England’s response (Area 9 & 10 rates do not exist and more recently Area 10 are not held).
  2. the subsidy can be ‘reverse-engineered’.  Tell us the equation and in possession of the figure claimed, we can determine the actual figure – why withhold this?

2. CECA rates are reasonable, appropriate

The Civil Engineering Contractors Association (CECA) is the representative body for companies who work day-to-day to deliver, upgrade, and maintain the country’s infrastructure. CECA produces the Schedules of Dayworks carried out incidental to contract work and ensures that these remain relevant and up to date.

Firstly, DCP (damage to crown property) events are hardly ‘incidental’; they are a fact of life, tendered for (based on known events) and occur in their 1,000’s every year.

Secondly, CECA do not believe the rates are appropriate in the circumstances:

  • CECA rates are agreed by parties to the contract i.e. the supplier (Highways england) and provider (BBMM).  Third Parties are not a party to the agreement, they have no say in the contract. The rates would only be used if they are either specified in the head contract – or used through mutual agreement between all parties.
  • CECA rates are ‘base rates’, a starting point; they are negotiated between the party seeking the service and a supplier.  BBMM apply them ‘as is’.CECA rates are meant to be a benchmark which can then be used (if the contract allows) with adjustments in the percentage (plus or minus) to reflect amongst other things;-

a) the fact that the contractor owns his own plant/equipment and/or
b) how keen the contractor is to win the work.

  • The rates were not particularly intended for detailed analysis by third parties
  • CECA does not produce specific ‘emergency repair’ rates.

3. no one could suggest other rates

The obvious set of rates is that used to bill Highways England; the same admin’ staff,  operatives and plant are involved whether the incident is minor or major – they cost no more per hour, their total cost (the number of hours they are employed) will logically be less below threshold (for minor matters) than above (for more serious incidents).  But the Judge had discounted above£10,000 rates:

para. 34: The only one suggested is the £10,000 + repair regime rates and I have already accepted that they are artificial in that they are partly subsidised by the lump sum. No-one can suggest anything else.

BBMM could have suggested something else.  Prior to commencing the contract, Highways England asked:

What is the basis of the Damage to Crown Property claims sums – cost+fee or CECA schedule of rates?

26/08/2011 BBMM replied:

For claims under the £5k threshold (the threshold subsequently increased to £10k) – costs are made up of

  • partly CECA rates,
  • partly market rates and
  • partly cost.

The above information provided in response to a FoIA request which can be found here: RESPONSE 21/03/2017 the detailed exchange, here.

Subsequently, BBMM used CECA alone.  Whilst it is claimed this was agreed with Highways England, no evidence of this has been provided by BBMM or the Public Authority – to whom a FoIA request was made for the information.