Cost Breakdown Document (CBD) spot the difference

2019 – Highways England released a copy of the template Kier used when billing the Authority.  A full copy can be found here (CBD template).  It will be noted that the document purports to be for BELOW and OVER threshold claims or ‘incident types’:

However, the format is only used for OVER, when billing to Highway England.  The column headings explain what SHOULD occur:

The above presentation to Highways England sets out:

  1. the hours / quantity the plant (vehicle) or staff (operatives) were engaged
  2. the BASE RATE
  3. the charge – the total of ‘a’ x ‘b’
  4. the OVERHEAD %
  5. subcontractor % – the uplift added to a bill received from a sub-contractor
  6. total cost – ‘c’ x either ‘d’ or ‘e’

But spot the difference with the CBD used to bill an insurer, fleet, haulier or driver:

  1. the quantity is ‘no. of staff’ – so again, quantity
  2. time is another quantity column, separated from staff
  3. the BASE RATE again appears
  5. total cost – ‘c’ x either ‘d’ or ‘e’

An example appears here:

A Third-Party is to be charged:

‘base rate’ (£) + overhead (%) = total

The process is clearly set out in Appendix A to Annex 23 of the contract.  A Third Party is to be charged ‘no more than’ the sum of the above.

Note: the ‘BASE RATE’ to Highways England and Third parties is to be the same. Of course it is!  The base rates is what an asset costs and is not affected by who gets the bill. In Area 9, Kier maintained, the uplifts are:

  •   7.41% to Highways England and is known as a ‘fee’
  • 25.29% to a Third Party and is referred to as the ‘Third Party Claims Overhead’ (TPCO)

it will be understood that the difference in cost of an asset, for example, a van, should be 25.29% – 7.41% = 17.88.  In some instances, Kier is applying a 600% uplift!

If the only billing difference between a Third-party and Highway England is the percentage uplift, why do Kier have such variances in the presentation of costs?  Why not adopt the display for Highways England and simply alter the uplift?

The answer appears to be if Kier did this, their profiteering since 07/2014, would come to an end!

  • The exaggeration: 

BASE RATES are used when Highways England are billed by Kier.  The Authority, working in the DCP environment, understanding processes and agreeing the uplift, expects to be charged 7.41% and this is set out clearly for them

A Third-Party, less familiar with the process, receives no such assistance. Instead, the cost, for example of an AIW vehicle, is presented at £36.91 / hour as a ‘base rate’. In truth, the base rate is actually £13.20; so the column misrepresents the figure.  But at 25.29% (about £3.34), the uplift only sees a charge of £16.54 /hour.  Kier’s approach appears to be ‘how will a Third Party ever discover they are being duped … add over 100%!’*

  • Overhead

Highways England get to see the uplift, the calculation and the resultant total. A Third Party has presented a single figure with no explanation, no overhead percentage. They cannot readily determine what rate they are being charged and what uplift – assuming they even ascertain there are supposed to be 2 components.

  • Charge Rate

Particularly irksome, though damning, is that Highways England does not have a column for ‘charge rate’.  Why not?

The ‘charge rate’ column is used by Kier to apply a ‘multiplier’ to their already inflated, misrepresented as ‘base rates’, charges. This additional uplift is claimed because Kier will say:

  • operatives (such as AIW’s) work 8am to 5pm.  They do not work shifts
  • operatives are paid extra when they work outside of ‘core hours’, it is a cost Kier incurs:
    • 1.5x after 5pm of a weekday
    • 2x of a weekend

But Highways England is not charged these ‘multipliers’ likely because they are aware the AIW service is 24/7 (possibly call-out/standby of a weekend), that AIW’s work shifts and are paid no more after 5pm.  They may also be aware that overtime is at flat-rate.

An AIW costs Kier no more whether they attend a 9pm or 9am incident.  But this is not what they tell Third Parties of the Courts.

These multipliers can see uplifts substantially in excess of the ‘no more than’ 25.29% … in some cases as high as 600%!

The CBD – just one way insurers, fleets, hauliers and drivers are being fleeced.

24/07/2019 update – CBD example provide din response to a FoIA request Area 3 2015: 19599 – cost breakdown document

*what chance does a Third-Party stand when:

  • Highways England hides Appendix A to Annex 23
  • Neither Kier nor the Authority mentions Appendix A
  • Highways England fail to identify non-compliance with the contract
  • having had the non-compliance pointed out, the Authority stands by and permits the conduct to continue
  • Kier is prepared to misrepresent facts even in Court