Are ‘Defined Costs’ commercially sensitive?
Firstly, what are ‘defined costs’ or DCP Rates
As a definition, they are simply the cost of assets associated with the attendance upon and restoration of damaged Crown property, such a barrier or the road surface. ‘DCP’ – damage to Crown Property. Usually, they are expressed as a base rate made up of many components to which is added an uplift percentage (to cover profit etc.). They are the ‘base rate’, the actual cost, of items such as staff (office employees), operatives (those ‘on the ground’), plant (vehicles) and materials.
DCP Rates have gone by many names over the years:
- Notional Rates
- Base Rates
- Defined Costs
- Nominal Costs
But we all know what we are talking about; the price of something that appears on a contractor’s bill following emergency incident attendance and repair.
- ASC vs. DCP rates
Do not be distracted by the red-herring that is ‘ASC rates’. This site, we, have no interest in ASC rates, never have. ASC, or Asset Support Contract, rates are those which a contractor agrees for pre-planned works or schemes. These apply to known, agreed works to be undertaken.
Conversely, DCP Rates are for emergency incidents; unplanned events on the network which often require immediate attention and subsequent ‘patching up’. They are generally smaller works necessitating the deployment of a few operatives to get traffic flowing, clear up, assess the damage and instigate a relatively small repair.
- Emergency vs. Unexpected
DCP events are often serious. The operatives attending the incidents can encounter anything from debris in live-lanes to loss of life. Operatives work in a hazardous environment.
They ARE generally emergencies, but they are NOT unexpected.
Whilst the Authority or their contractors will try to convey the issues as unforeseen and therefore requiring costly resources, the fact is they are obviously known to happen, anticipated. A contractor, prior to taking on a contract will have an idea of the number of events they are likely to encounter during a year; clearly, they need to plan, to provide sufficient resources.
Exactly how many emergencies they will attend and when cannot be known with certainty. However, in Area 3 some years ago, the tender figure was 1153 incidents/annum. Kier Highways, in 10/2015, advised attending 5,400 across the Areas they managed.
The emergency attendance staff are not there solely to react to emergencies, they do not sit ‘International Rescue’ style, waiting to hear ‘Thunderbirds Are Go’. They will fill pot-holes, cut grass and clear debris, for example, in the interim.
Secondly, do DCP Rates exist?
They obviously exist because everyday contractors are issuing many invoices to the Authority (Highways England) and Third Parties (drivers, fleets, hauliers and insurers).
The pertinent question appears to be ‘do they exist as a schedule‘ i.e. is there a price list?
We say ‘yes’, the Authority says ‘no’. Yet day after day, their contractors apply the same prices to DCP Incident invoices, they demand the same figures for operatives, staff and plant from the Authority and/or a Third Party.
Highways England understand the concept of ‘defined costs’ and clearly believe their contractor possess them. 21/11/2018 a Tribunal Appeal (EA/2018/0104) wrote:
32. Mr Carney wrote to each of these contractors in July 2018 stating that this appeal “could result in the disclosure of the Overheads and / or Fee percentages applied to Defined Costs by our Service Providers for Damage to Crown Property works”.
Mr Carney asked about rates relating to DCP, not ASC. Mr Carney understands there is a difference. As for the responses:
All five contractors replied, stating that they did regard the information as commercially sensitive and that disclosure would prejudice their commercial interests.
The contractors were asked about DCP Rates, ‘overheads’ and ‘fees’. DCP Rates are the base rates, the pre-profit costs, as for ‘overheads’ and fees’, the Authority and contractor have explained:
- The ‘overhead’ or ‘Third Party Claims Overhead’ or ‘working area overhead’, is a percentage uplift applied to the DCP rates when charging the Third-Party
- The ‘fee ‘is the percentage uplift applied to the DCP rates when charging the Authority
The DCP rates should be common to the Authority and a Third Party, it is the percentage uplift (‘fee’ or ‘overhead’) which causes the ultimate cost, the total to differ; Third Parties are charged using a larger percentage uplift (overhead).
The Tribunal also reported:
39. HE submits that there is a clear difference between the withheld information, which is a schedule of rates provided as a target in the context of a bidding process, and the actual costs charged by contractors in DCP cases.
We agree, the withheld information, the only information supplied to the ICO / Tribunal was ASC rates which we did not request. Unfortunately, whilst we sought DCP Rates, the Authority wrote to their contractors about DCP rates, somewhere along the line, the Authority only disclosed ASC rates – not sought and not what the contractors were asked about! As the Tribunal stated:
‘…the withheld information does not contain specific DCP rates’
The Tribunal accepted:
‘Mr Carney’s evidence that the withheld information sets out target rates for the main contract as part of the tendering process for ASC Area 10, and is very different from DCP rates which are actual costs* charged in emergency situations.’
*actual costs, as opposed to a ‘definition’
However, the Authority helpfully explained the difference between ASC and DCP rates; both exist.
Thirdly, are they commercially sensitive?