18/11/2016 To Highways England – Alan Woodrow, Jim.O’Sullivan, Tim Reardon, Kevin Mullaney
Subject: Your Ref: Kier Highways Ltd (‘Kier’) ref GC\026142 Our Ref: U02A567
Loss date: 24/08/2016 – damage to Crown Property
Claim value: £3629.97
We are instructed in respect of the above matter by insurers who appear to insure the vehicle alleged to have caused damage to Crown Property (‘street furniture’). Liability is being investigated. Your contractor is Kier Highways Ltd (hereafter referred to as ‘Kier’).
The charging methodology employed by your contractor appears to be a national scandal with over 5,000 claims priced each year at excessive sums. For the past 2 years, the starting charge for a Kier Highways claim was about £4,700. When challenged, after almost a year of questioning, this methodology was blamed on an ex-employee, the process abandoned and the charge per claim plummeted to about £1,000 i.e. as many at 10,000 claims could have been over-charged by £3,770 each. Even if this was the 50% (approximately) of identified-culprit claims, the sum is approaching £20 million.
To quote Highways England:
“They can do what they like with their own claims, that’s absolutely nothing to do with us”
‘They’ (above) are your contractors and ‘their own claims’ are those under the £10,000 threshold which a contract is expected to retain and pursue recovery. However, this retention process is questionable as it appears:
• The contractor prices using Highways England (‘mates’) rates
• If the total cost is less than £10,000 the contractor retains the claim
• The contractor then re-prices using a higher set of rates
• The contractor presents the claim to a driver, fleet or insurer.
Whilst we have managed to put pay to the old ‘1153’ methodology (above), the replacement, current, hourly rate of £70+/hour remains excessive. This can be demonstrated by Kier’s own figures:
• Last year, these emergency staff cost Kier £2,857,934.49 per annum
• there were 38 of them (£75,208.8 each / annum).
• They work 45 hour weeks i.e. 2,340 hours per annum or £32.14 / hour (a crude calculation).
In 02/2016 Highways England paid £23.46 / hour for the staff plus a 7.38% uplift (fee) i.e. less than £25 / hour. Please explain:
1. Why drivers, fleets and insurers now receive demands for £70+ / hour for the very same staff and
2. Why Highways England have sought to convince me that as of 12/2015 they too pay £70+/hour
We are unable to write to ‘Kier’ about any matter but instead are directed to CorClaim. Proceedings will likely be issued as we will not settle at the fees charged because they appear excessive and Kier / CorClaim do not support their claim or address questions. As your General Counsel (Tim Reardon) has apparently agreed with CorClaim that the Claimant on all such matters can be changed from Kier to Highways England where we raise the proprietary interest point, I am writing to yourselves as the claimant / loser.
3. Please confirm whether you have instructed legal representatives in respect of this matter and whether they are Corclaim, as opposed to Government Legal (Treasury solicitors).
This claim dating from 2016, it is not our intention to refer to ‘1153’ unless it becomes necessary to explain to a Court why a lack of confidence can be placed in information emanating from Kier and to demonstrate the pricing anomalies – ‘1153’ disclosed the annual costs for Kier staff and therefore gives an indication, for example, of the hourly rate for an AIW – above.
With regard to this matter, we draw your attention to:
4. Only 1 AIW has signed the IMF; we have been provided no evidence a second AIW was present yet they have been charged for. Why?
5. KHL have charged at 2 differing rates for the AIW’s supporting our suspicion that these are manually created breakdowns, subject of little attention. Why?
6. Why has a multiplier been charged?
The incident occurred on a Wednesday, at almost 8pm. We do not accept that the AIW cost KHL any more to operate at that hour. However, Kier have charged at 1.5x, that is to say, at over £100 / hour. i.e. this aspect appears to be an exaggeration. We are concerned that KHL seek to convince us that they do incur further cost but that in seeking to convince us and insurers, they have provide numerous, contradictory accounts.
The AIW’s appear to have been on duty; they were on a motorway (M6) when contacted i.e. they were not on standby, not at home. Why is there a multiplier if not to falsely inflate the claim?
Why does KHL’s insurers guide’ booklet seek to support this conduct is not to inflate the claim
Highways England are not charged multipliers – see below
7. We again see the AIW (emergency incident attendance) vehicle HX14XFT. Please explain why the vehicle is charged to drivers, fleets and insurers at £36.91 / hour.
For example, this appears in our reference U02A556, Highways England reference TR43094 an incident that occurred in 2014 and also a 10/02/2016 incident our reference U01A013, your reference HE112/09/SG642.
When charged to Highways England in 2014, the rate was £14.12 / hour plus 7.38%.
When charged to Highways England in 2016, the rate was £14.66 / hour plus 7.38%.
This is just the vehicle element; every aspect is charged at a higher rate to insurers than to Highways England and Highways England are not:
• Charged a multiplier
• Charged more in Area 9 than elsewhere; insurers, drivers and fleets are
Further information about rates appears below.
8. We have no time sheets, why not?
Please see HE reference HE112/013/Sg153 Our Ref: T08C128/PBS which is being handled by ******.******@highwaysengland.co.uk and in respect of which we are advised about KHL:
Operatives book their time electronically to incidents, negating the requirement for timesheets (this is for reporting, billing and efficiency reasons).
Costs then transfer into our billing system which is submitted to the HE every month for payment.
An extract for each incident is produced from this report, in an Excel spreadsheet format, which is what is submitted as our final account.
As such, individual ‘hard copy’ timesheets are not produced.
Highways England are provided electronic time sheets, drivers, fleets and insurers are not. It appears these are intentionally kept from us.
Aside of this claim being under or over threshold, Ms Granville of Kier has said:
“in terms of the operatives timesheets every month every person completes such timesheet which we have then to send to Highways England”
9. re-price this matter using Highways England rates i.e. the lower rates you are charged by Kier as opposed to the higher schedule Kier use when invoicing drivers, fleets and insurers.
10. provide the electronic time sheets for all the operatives.
It makes no sense that KHL operate differing claim presentation methods for below threshold claims unless this is to enable a different set of rates and potentially to keep information from us that would enable a claim to be correctly costed and settled.
On 25/10/2016, Highways England stated:
Where the over threshold claims are concerned, Kier would pass the charges through to Highways England and assist in their recovery in the same way as they would with the below threshold claims that they pursue directly.
The only differing factor between the claims is the format as the insurance community have worked with Kier to display their breakdown of charges in a manner that they prefer.
With an over threshold claim, Kier would allocate charges in accordance to its minimum shift allowance i.e. if an incident occurs out of hours they would charge for the full period of coverage as opposed to charging a multiplier. Ultimately, this results in the same number; it is just a different way to display it.
The above appears obviously false:
a) It is accepted that the formats are different but this is not the ONLY differing factor.
b) The process does not and cannot function as described; the same number cannot and does not result.
For example, if of a weekend, an AIW attends an incident for 3 hours
To Highways England this is:
Possible ‘minimum shift allowance’ of 4 hours
£25.19 x 4 hours x 2 (AIW’s) = £201.52
Possible ‘minimum shift allowance’ of 8 hours
£25.19 x 8 hours x 2 (AIW’s) = £403.04
To drivers, fleets & Insurers this is:
£73.05 x 3 hours x 2 (AIW’s) = £438.30 @ double time = £876.6
There is no similarity, the numbers are not the same, it is not a different way of locating or displaying the same number.
The above25/10/2016 account from Highways England also ignores:
c) Non out-of-hours incidents. For example, I have referred to your reference Highways England112/09/SG642, a 10/02/2016 incident – Wednesday at 3pm i.e. ‘in-hours’ (between 8am and 5pm).
Highways England have been charged 3 hours @ £25.19 (£75.57).
Had the claim been presented to a driver, fleet or insurer the cost would have been 3 hours @ £73.05 (£216.15). However, £216.15 is for a single AIW and we are advised they patrol in pairs, they are charged as such. Therefore the costs would be:
i. Highways England £151.14
ii. Drivers, fleets & insurers £432.30
d) That ‘out-of-hours’ are dictated by Kier and appear to have no bearing upon what they pay their staff i.e. out-of-hours does not mean increased charge rates
11. Please explain what appears to be a deliberate attempt to misrepresent, to mislead and
12. What action or enquiries Highways England have undertaken to ensure the information they are presenting is accurate, factual.
There is a difference between those who gild the lily but stand to obtain nothing more than their legal due and those who misrepresent in an attempt to gain something to which they are not entitled. That Highways England appear to be supporting the latter conduct is of concern.
On 18/01/2016, I asked Ms Granville of KIER “Please also explain why Highways England are charged differently and how much they are charged”. Ms. Sophie Granville of KIER replied:
“The Highways England are not charged a different fee not sure why you are convinced of this.
“The notional rate is the notional rate and there is only one per person so it doesn’t make a difference if the claim is for the Highways England or an insurer. “
Highways England state they pay the same as insurers, Kier state they charge the same to Highways England & insurers but the documents in my possession tell different story, one that undermines the statements of Kier and Highways England.
13. Why are Highways England & Kier both seeking to convince me the rates are identical when as evidenced by above and the information in my possession, they are not?
Ms Granville of Kier has recently said:
‘The way in which we price and repair damage to the road is strictly set out in accordance with the contractual terms for the particular area.’
14. Is the above a factual statement i.e. true? If so, please provide the relevant extract form the contract.
Where in the contract is it set out that Kier may charge:
15. A higher rate to insurers and
16. Present rates differently to insurers
Ms Granville has also said
‘Any claim related overheads are applied as an uplift at each individual item as opposed to a lump sum.’
We know the various individual item charges to Highways England for many aspects of a claim, we know the uplift (fee). But whereas Kier present their charges to Highways England in this manner, we have never had presented a claim to an insurer detailing the ‘item’ and ‘uplift’. When re-presenting this claim, please clearly:
17. Identify the individual item rate for each aspect and
18. The uplift applied to each
It appears Highways England have agreed with Kier that your (Highways England) costs are to comprise a:
a) Defined cost (individual item) and a
b) Claims overhead percentage (uplift)
This accords with the rates presented to Highways England for the AIW and vehicle (above). Indeed, it agrees with the claim presentation we see when Highways England is changed by Kier and it is Highways England who subsequently seek repayment of their outlay.
The contract indicates at section 87 (see extract at Appendix I) that Kier may pursue a claim against any third party to recover the costs but the amount the Provider claims is no more than above (‘a’ & ‘b’).
19. Why are Third Parties charged at rates, in amounts, greater than the contract defines, in sums greater than those charged to Highways England?
At Appendix II is a letter recently sent that identifies our general concerns.
This is an Area 9 claim.
20. Why are the charges to insurers higher for every aspect
21. Why are Highways England not charged at a higher rate in Area 9
To date, Ms Granville of Kier has only been able to state, with regard to the increased rates:
“Area 9’s is higher and none of us really understand why, to be honest with you, don’t really understand why, we have queried why it was higher. I have a sneaky suspicion that the reason it’s higher is because they knew what a shambles it was. And it is, you know, it was a shambles, it was an absolute sham, to be honest, and it’s cost us an absolute fortune to start rectifying it”
I refer you to Ms Granville’s more recent statement:
‘The way in which we price and repair damage to the road is strictly set out in accordance with the contractual terms for the particular area.’
22. Where in the contract is it set out that insurers (anyone0 may be charged a higher rate in Area 9?
Traffic Management (TM)
To drivers, fleets and insurers, an 18t TM truck sidwell with cushion is charged at £71.11 / hour in Area 9. To Highways England (16/05/2016 our reference U01A165) the cost is £32.68 /hour.
23. Please explain the mark-up to drivers, fleets and insurers at in excess of 100%.
As an example, in 2015, the DCP manager was charged by reference to 1153 at £104.42 / incident based upon an annual cost of £120,395.77 (our reference S07B497).
However, KIER advise that the annual incidents were 5,400 i.e. the average charge (assuming the cost was correct) should have been £22.30. this appears to be the maximum charge that should be assigned for the DCP manager per incident
The mathematics associated with KIER’s current annualised charges have yet to be demonstrated however, approaching the charge for the DCP (Damage to Crown Property) manager using a different methodology:
a. cost per year in 2015 was £120,395.77. We understand this is salary and other overheads.
b. The DCP manager is charged to each claim:
i. Incident Identification 0.5 hours
ii. Pricing 0.5 hours
c. Therefore, the DCP manager is charged on each incident at 1 hour.
d. By reference to KIER’s ‘Insurers Guide’ (10/2015) they handle 5,400 claims per annum. It therefore appears that KIER assign 5,400 hours per annum to the DCP manager.
e. Working a 45-hour week, 52 weeks a year (without holiday, sickness or Bank Holidays) an employee completes 2,340 hours per year.
f. We would therefore anticipate the DCP manager’s annualised association being less than ½ hour per claim
Charged at £53.67 / hour to insurers equates to an annual charge (5,400 claims) of about £290,000.
The above figure does not take into consideration any other tasks the DCP Manager may undertake or any contribution from Highways England (or KIER’s other clients) to address the costs of those incidents where KIER have no party to claim from i.e. lump-sum payments KIER receive from their clients such as Highways England.
24. Please explain the sum charged for the DCP manager and address the above concerns.
Our thanks in anticipation.
Claims Management & Adjusting Ltd
CONDITIONS OF CONTRACT FOR Highways England ASSET SUPPORT CONTRACT
Area 9 ASC
87 Claims against third parties
87.1 The Provider in accordance with this contract
• repairs defects in the Area Network caused by a fault in the work of Others (including an Outgoing Provider) and
• repairs and replaces loss or damage to the Area Network and any Materials and Equipment caused by the act or default of Others.
87.2 Where the repair or replacement falls within the Lump Sum Duties, the Provider may pursue a claim against any third party to recover the costs involved in the name of the Employer. The amount the Provider claims is no more than
• the actual Third Party Claims Defined Cost for repair or replacement work already done,
• the forecast Third Party Claims Defined Cost for repair or replacement work not yet done and
• the resulting Third Party Claims Overhead
Your Ref: Kier Highways Ltd Our Ref: A03A001/L536529
Highways England & Kier Highways Ltd (Kier) rates
As will become apparent today, a number of Kier matters have been passed to me to review. I am hopeful we can cut through some of the issues and reach a process that will enable prompt, amicable settlements.
More claims that Kier instigated proceedings on are the subject of applications to have the claimant changed to reflect ‘Highways England’. The claimant pressing for exaggerated sums is no longer Kier, proceedings are now being presented in your name.
These are indemnity claims; a request by Kier (or Highways England) to be compensated for a loss.
We want to make a payment where a driver is negligent. We have been unable to do so because the charges presented by Kier are high, exorbitant. It appears Kier are making vast sums from claims; why would they want to stop? But the manner in which Kier charge has not stood up to scrutiny and rather than defend their actions, they have attacked.
I am asking Highways England to explain the appropriateness of the:
• dual pricing, the higher charges to drivers, fleets and insurers and
• the two claim presentation processes; one to Highways England, another to insurers.
It is our belief that the payment to address the loss should be calculated by reference to the sums agreed between Kier and Highways England at the commencement of the contract. These sums are the only ‘valuation’ available.
• If this stance is unreasonable, unsuitable, please explain why?
To date, where liability has been agreed, we have recalculated the claim to the best of our ability, with one hand tied behind our back. Settlements have been arrived at by reference to known charges Kier make to Highways England but I appreciate we have used guesstimates where we have no known figure.
Having said this, I believe we have been generous, erred on the side of caution. For example, we have allowed a sum for the ‘planning’ which is, in some respects, presented by Kier as an annualised figure. However, Kier / Highways England are pursuing a claim in negligence; you are only entitled to recover the cost of the negligent act. I am therefore asking Highway England to
• ask Kier to recalculate every claim we are handling using Highways England rates and Highways England processes.
My thanks in anticipation.