Kier’s Inflated Pricing Cost Road Users or Insurers £millions – KPMG’s Commercially Embarrassing Report

Kier Highways (Area 9) Damage to Crown Property (DCP) Rates  .. according to Highway England they exist … no they do not … but, yes they do  … we have them!

[from post]

The attempts to obtain DCP (Damage to Crown Property) rates, the actual (or ‘defined’) costs Kier Highways should have used to charge drivers, fleets, hauliers or their insures (Third Parties) from 07/2014 in Area 9.

  • Q. Why seek the rates?
  • A. Because Kier was inflating claims – charging Third Parties more than the Authroity for the same works. It transpired contractually they were to charge the same to both, they state this is what occurred.   However, this was untrue. But, armed with the rates, we need not concern ourselves with the antics of Kier and the Authroity, we could re-price claims using reasonable (Authroity agreed) figures.

The Authority looked after itself; knew the process and pricing Kier was to use.  Third Parties were abandoned.

You would think this should be easy … the Authority (the Highways Agency, England Highways and now National Highways) had built in a protection for those they serve, the public.  Possibly, mindful they were dealing with the ‘less sophisticated ends of the construction industry*‘, the Authority anticipated abuse and wanted to limit Kier Highways opportunity to profiteer; they built in a safety mechanism, an equation that set out how Kier was to charge ‘no more than’ the sum of:

cost (£) + uplift (%) = maximum (£)

A simple, logical methodology; charge COST to the Authority AND a Third Party, but vary the uplift – about 7% to the Authority and 25.29% (fixed for the contract) to a Third Party.

But Kier and the Authority obstructed and misled us, hiding the above ‘shield’.  The Authority failed to place the process on-line (uploading much of the contract), never spoke or wrote of it and even the 01/2016 Audit reported on by Tim Reardon (General Counsel @ HE) failed to note non-compliance.  Kier were also silent on the process despite meetings, phone calls and email exchanges.   Kier did not comply with it.  The Authroity failed to act.  Third Parties paid £millions of inflated Kier claims.

*2019 Authroity CEO

In late 2016, the then CEO Jim O’Sullivan explained that Nick Harris (current CEO @ HE) and Tim Reardon were putting ‘a lot of effort’ into the issue of DCP rates – odd then the Authroity would later state these rates did not exist!

  • 2013 to 2018. DCP rates were HELD but ‘commercially sensitive‘  – exempt disclosure (FoIA)
    • The ICO supported the Authority’s ‘held but sensitive’ label, an exemption that obviously necessitated the  rates existing; they were held and had been considered to establish their ‘sensitivity’
  • 12/2018, an Information Tribunal found for us. We expected the rates to be provided.

In 2017, armed with further evidence drivers, fleets, hauliers or their insurers (Third Parties) were being abused in the name of Highways England, the Authority’s Chairman,  appointed their soon-to-be Green Claims manager, Sarah Green, to investigate.  21/06/2017, we met Sarah at our offices and explained, demonstrated and provided documentary evidence:

  • Kier were not complying with the contract when billing Third Parties but profiteering
  • Kier were charging ‘unauthorised uplifts’*
  • Kier were charging for costs not incurred – claiming their operatives worked 8am to 5pm weekdays and were paid uplifts after this (1.5x after 5pm, 2x of a weekend)
  • Highways England had failed to identify and stop this behaviour which was not applied to the bills they received, therefore:
  • Kier were charging higher rates to Third Parties than Highways England** – very ‘odd’.
  • Kier and Highways England  kept the contractually agreed process hidden

It appeared the conduct was enabled and permitted by senior management at the Authority.

Initially, Grant Thornton were to investigate but Sarah commented “we’ve just had a blip with Grant Thornton” (L278 –transcripts – registered users).  It took over 4 months for progress but, 15/11/2017, we spoke at length to KPMG – the conversation transcript can be read here.  the Audit is understood to have concluded in or before 09/2018.  The Authority’s stance with regard to rates remained ‘HELD’ but commercially sensitive – and we were ‘vexatious’ for repeatedly asking for said rates! We were not vexatious, a judge confirmed this.

In 2017/2018 KPMG were investigating DCP rates, to do so they would necessarily need to review and consider them ergo, they existed, were known to exist.  Or did KPMG overlook the very data were had raised concerns about; did KPMG fail to note that the rates were were concerned about did not exist?  Surely, if non existent, they would raise the alarm promptly with their client, Highways England who , in turn, would address the issue, create a set of prices – precisely what they did in 2019, the NSoRC (see below)?

Yet, a short time later, following a 12/2018  Tribunal decision going against them, faced with having to release the rates, the Authority claimed they could not, that there was no such thing.  Did KPMG’s enquiries fail to note this absence?  Highly unlikely because, despite the Authority’s statements, DCP rates DO exist and have since at least 2015 – we have them!

The situation was bizarre, obviously untrue but, once again, the ICO supported Highways England’s position!  We persevered; but now we were vexatious for seeking the rates having been told they did not exist! Given we have more recently discovered they do exist, who is the vexatious party?

The Authority having made a mockery of the FoIA and misrepresented facts about DCP rates, the KPMG document could be potentially damaging to the reputation of many at the Authority and Kier Highways. But whilst ‘commercially sensitive’ is a valid exemption under the FoIA (clearly not applicable as rates have been released, are not considered ‘sensitive’) ‘commercially embarrassing’ is not!

For years, the ICO and Tribunals have been duped.  It was obvious to us Highways England were misrepresenting facts and we have been consistent; rates exist, they are not commercially sensitive and we wish to be provided them.  Ultimately, we obtained these ‘non-existent’ rates and 06/05/2021, faced with this unequivocal evidence of their failings, the ICO conceded:

‘ … DCP rates exist for Area 9, as this was Judge Cragg’s finding in EA/2019/0390’.***

The rates evidence years (07/2014 and 2020) of contract non compliance, of exaggerated rates being applied in Area 9.  Kier Highways and Highways England were aware of our concerns, have been for years.  Whilst a particular ‘undoubtable fraud’ element has now ceased following our investigations and reports, the conduct is ‘state enabled exaggeration on an industrial scale’ that has cost Third Parties £millions.

Will we obtain the KPMG report?  We beleive so.  The Authority’s response to the request was to ‘neither confirm nor deny whether it holds the requested information relating to Area 9‘ which again, appeared absurd, Mrs Green having explained 12/02/2018:

‘ …we had a draft audit report that went to our audit committee last Wednesday …’ (L626 –transcripts – registered users)

Yet despite the Authority confirming the information was ‘held’, the ICO nonsensically ‘decided that HE was entitled to rely on neither confirming or denying whether it holds the requested information relating to Area 9‘. However, unsurprisingly, the Authority conceded it does hold the information! The issue was becoming farcical.

Despite the Authority and ICO joining forces to keep the document from us, the matter will progress to an Information tribunal (EA/2021/0101).  There are clearly some concerns, Kier have been permitted to join the proceedings – an odd turn of events given the Authority has previously been at pains to explain their contractors are beyond the reach of the FoIA. The matter is due to be heard 11/01/2022.

To read more about the request for KPMG’s report, click here – 191125 FoIA for KPMG’s Kier Highways Area 9 Report

* HHJ Harrison (2020) para. 36 – E47YJ407 & E82YM832 IN THE COUNTY COURT AT CARDIFF
** HHJ Godsmark (2018) para. 25 – C08YP765 IN THE COUNTY COURT AT DERBY
*** EA/2021/0048