The Pain / Gain Share

The pain gain share is a mechanism operated by Highways England contractors and was the subject of a 2016 FoIA response 743153 from Highways England who explained:

  • ‘All contractors reconcile their costs annually against their recoveries.
  • If the proportion of traced incidents exceeds expectations an assessment would be made and the Lump Sum payment would be reduced.
  • 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.
  • The main one being not all damage linked to a driver is reported by the driver.’’

If a contractor is making good recoveries, is obtaining above the pain/gain threshold from drivers, fleets, hauliers or their insurers, the Authority benefits – the taxpayer’s burden, the monthly lump sum payment to the contractor, is reduced.  Yet no contractor had achieved this!

  • How could Kier Highway, with their profiteering and fraudulent conduct since 07/2014, not have achieved the threshold?

In late 2018, we made enquiries of a specific claim, one for which we knew the contractor costs and the payments made by the insurer.  We asked Highways England for the figures and these were supplied.  The numbers indicated a loss but the figures were incorrect and we believe should have conveyed a profit.  An explanation for the pain/gain share threshold not being achieved became evident; Kier Highways submitted false figures to the Authority thereby creating the impression of loss.  This has likely occurred on 1,000’s of claim each year since 2014.

When we reported this to Highways England their response was ‘there is no pain/gain share ‘.  An explanation for the misunderstanding and an apology followed. 

Once again, when Highways England are caught out, they U-turn; their 2016 response wrong, their latest one correct … or is it?

  • We have at least one unanswered question – why is Kier submitting false cost information to Highways England?

But was the 2016 response really false; was the costs/recovery explanation, pertinent to the damage, repair and recovery environment, really incorrect?  Highways England appeared to be ignoring the above question and had also contradicted an explanation provided by a contractor (Kier) that monthly returns were submitted to the Authority, these we believe to be required, Annex 19 reports. 

24/09/2019, clarification was sought by use of FoIA (WDTK and copy here).  14/05/2019, the Authority responded (CRS Ref: 770,263) the Lump Sum payment is subject to changes only made relating to normal annual adjustments, for example, to account for inflation.  They added ‘your remaining numbered questions have not been responded to as they are based on an incorrect premise’.

A false premise? We were acting upon the 2016 FoIA response received.  We explained the premise related to the pain/gain arrangement and the need for a contractor(s) to submit claims costs and recovery amounts for reconciliation. We referred to the 2016 FoIA response (above) and that submission of costs and recoveries is clearly required by Highways England and there is obviously a reason for this.

12/06/2019 saw a response (190600 Pain Gain) the relevant extract being:

  • 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.
  • 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.
  • NEC Option E cost reimbursable (or Defined Cost plus Fee) approach is therefore used for DCP repair work.

For insurers to object and challenge the pain/gain approach they must have known of it, which means the methodology must have been operating. 

But this is illogical, it does not ring true … 

  • insurers were unlikely to know of the process – it has not featured in claims
  • the pain/gain share has no effect upon insurers – why would they object? 
  • would the Authority or insurers make changes based upon insurers demands – they have ignored many protestations about pricing methodologies?

But … the above response confirmed it; the pain/gain process had been in place.  We wished to ascertain when.  Read more here. 

 

 

05/02/2020 in an attempt to get to the bottom of a contradiction caused by Highways England a further request was made:

Please provide for Areas 9 & 10:

1. The original pain/gain correspondence, arrangement, contractual records etc. that relate to the pain/gain arrangements
2. When the arrangement commenced
3. When the arrangement concluded – it is evident this was in place at the time of the 2016 FoI response
4. the pain/gain submissions
5. All information relating to the challenge by insurers
6. How the pain/gain share impacted upon insurers
7. The correspondence between your contractors and Highways England about the concern raised by insurers, the contractor’s consideration and the agreement to change the contractually agreed process

In brief, I am seeking al information relating to the pain/gain share in Areas 9 & 10 from its period of operation to termination and the reasons for this cessation.