19/06/2019 Pain / Gain Share FoIA

19/06/2019 FoIA Request to Highways England

Dear Highways England Company Limited,

Further to my request at:

https://www.whatdotheyknow.com/request/c…

There was (is?) a plain/ gain share (relationship?) between Highways England and their contractors in respect of DCP (damage to Crown property) claims. Seemingly, at some time post-10/216 it concluded. However, I have been provided no information about this.

07/2014, Kier Highways took on the contract for Area 9, an ASC.
25/10/2016, Highways England stated, in an FoIA response FOI 743,153:

A. All contractors reconcile their costs annually against their recoveries.
B. If the proportion of traced incidents exceeds expectations an assessment would be made and the Lump Sum payment would be reduced.
C. However, no contractor has ever been in the position where the proportion of traced claims exceeds these assessments and there are various factors for this.
D. The main one being not all damage linked to a driver is reported by the driver.’’

You have not contradicted the above statements which confirms, for in excess of 2 years, there was:

You have previously not responded to questions claiming they are based on an incorrect premise
https://www.whatdotheyknow.com/request/c…

This appears to be incorrect; the situation, as I understood it, existed however, you now state the process has changed. At the very least I should have been provided information from 07/2014 to 25/10/2016.

You now state:

E. ‘You will be aware NEC Option C Target Price with a pain/gain share is used by Highways England for most scheme work although not used for Green Claim repairs.
F. This was a direct result of challenge by insurers who were not prepared to accept any pain/gain approach in their payment of claims for damage repairs from negligent drivers.
G. NEC Option E cost reimbursable (or Defined Cost plus Fee) approach is therefore used for DCP repair work.’

The above reinforces the existence of a pain / gain approach at and until some date after 25/10/2016.

1. On what date did the pain / gain share cease to used by Highways England in each Area

2. Please provide the challenge presented by insurers;
a. Insurers arguments
b. Highways England’s responses
c. The ultimate conclusion and
d. Copies of the information conveying this to contractors and
e. Their responses

3. How did the refusal by insurers affect each contract?

You state insurers were not prepared to accept any pain/gain approach in their payment of claims for damage repairs from negligent drivers. This suggests insurers were aware they were being subjected to a pain / gain relationship.

4. In what respect (how) were insurers subject to a pain / gain relationship? Please provide all information relating to the existence of this, the removal of the process and how this was agreed with contractors and insurers.

Insures were and are invoiced on an incident by incident basis, there has never been a suggestion by Highways England or contractors that they were charging third parties (drivers, fleets, hauliers and insurers) on a pain / gain approach. In Area 10, for example, there was no change to the pricing process used by BBMM from 2012 to 04/2019.

5. How did the cessation of the pain / gain relationship affect pricing and Highways England’s’ approach to the lump-sum payment?

The Area 9 contract commenced 07/2014 and was / is managed by Kier Highways Ltd. My request will result in the provision of all information used to calculate the pain / gain relationship annually for at least 2 years.

Area 9, an ASC, is the subject of Appendix A to Annex 23 which dictates the charges to Third Parties are not to exceed DEFINED COSTS (£) plus the THIRD PARTY CLAIMS OVERHEAD (%). The defined costs are base rates common to charges presented to Highways England (on claims over £10k) and to Third Parties (on claims under £10k).

6. How does Appendix A to Annex 23, which involves incident specific costs, incorporate a pain / gain share?

In order to meaningfully submit to a pain / gain process, Kier Highways Ltd would need to present accurate, truthful figures to Highways England about costs and recoveries.

With regard to ‘A’ above:

7. Please advise the date annual reconciliations occurred and provide copies of the submissions and your reports

If I have misunderstood any aspect (above) please clarify.