What is a ‘Third-party Claims Overhead’, also referred to as the ‘working area overhead’?
Simply put, it is a percentage uplift added to the defined costs associated with the attendance and repair following an emergency incident.
A repair can involve many contractor assets, usually an array of staff, vehicles and materials all of which have a ‘defined cost’ or base rate. A contractor will identify the assets used, how long they were engaged and using the base rate will calculate the total cost of the work. For example, one common facet to an incident is the initial attendance the breakdown of the costs may appear similar to:
Having established the total, to this is added the uplift. To a Third-Party in Area 9, this has long been 25.29% which equates to £31.36 (of £124). The grand total is therefore £155.36.
In Area 13, Kier informed us and the Courts that the TPCO was 20.58% which equates to £25.52 (of £124). The grand total is therefore £149.52.
Why is the TPCO important?
In Area 9, since 07/2014, the process of charging Third Parties is clearly set out in the contract, specifically in Appendix A to Annex 23. The MAXIMUM to be charged is:
defined cost (£) + TPCO (%)
Defined costs are to be common to Highways England and Third Parties, it is the uplift percentage that causes a Third Party to be charged more. the uplifts are:
- to HE: 7.41% referred to as a ‘fee’
- to TP: 20.58% (Area 13)
- to TP: 25.29% (Area 9)
But Kier Highways do not comply with the contract when charging Third Parties, they have not done so since the contract commenced in Area 9 (07/2014). The claim to, will tell a judge they do, but in the name of Highways England, they misrepresent facts.
The above table provides some approximate rates and conveys how Highway England sees a bill; nicely broken down with the ‘fee’ displayed.
A Third Party is obstructed. Their bill sets out the figures but there is no TPCO breakdown, no mention of this element, the percentage or the proportion of the charge it makes up.
Using the above example, A Third-Party should be charged £124 + 20.58% in Area 13. But Kier does not present their charges to an insurer in a format that enables the breakdown of ‘defined costs’ and ‘TPCO’ to be determined. In Area 13, the Cost Breakdown Document for the claim referred to below (Court transcript) the breakdown was presented (as is usual for kier) displaying a ‘base rate’:
The above are not ‘base rates’. As explained to a Court (see below) they are claimed to be ‘base rate’ + TPCO. But they are not, the Court was misled.
- a rate of £24/hour (approx.) does NOT become £70.32 using an uplift fo 20.58%
21/06/2017 – this was explained to Highways England’s former head of Green Claims, indeed, we believe the following are all aware:
- Sarah Green – former head of Green claims
- Sharon Mccarthy
- Tim Reardon
- Jim O’Sullivan
- Colin Matthews
We have subsequently conveyed further examples of the costs being misrepresented and evidenced claims supported by false statements in the name of Highway England (in whose name proceedings are being issued). The conduct continued.
30/01/2017 Court Transcript – T06B428 Area 13
Court transcript – Kier Highways Claims manager (@ ‘A’ below):
COUNSEL FOR THE CLAIMANT: What is the working area overhead?
A. 20.58 per cent.
THE DISTRICT JUDGE: The working… I am sorry; you are going to have to explain it to me. The working what?
A. Area overhead, so under the contract—
Q. Hang on. I will write it down and then you can explain it to me. The working area
A Is… an overhead calculated at the time of contract award with Highways England.
And it’s basically all the costs associated or the overhead costs associated with
(inaudible) the incident response divided by the number of incidents over a period
which would be a year in this instance, and then it comes down—
Q. Hang on. I have got to write it down.
A. I’m sorry.
Q. The cost of running the incident cost divided by…?
A. The number of incidents in a year.
A. Then that spits out a percentage that you have to uplift claims by to cover—
Q. It splits out or—
A. Produces, if you like, produces.
A. The number, which is the percentage.
Q. The percentage.
A. Yeah, that is checked and signed off by Highways England, and their procurement
Kier: With the working area (inaudible) system but it’s a calculation that’s, that’s made by the procurement team in Highways England, not by us as a contractor. We’re just given that to use. So they put all the costs in, so there is a big calculation.
Q. Highways England—
Q. —add a percentage.
Q. They worked it out by those overheads.
Kier: Yeah, they worked it out from the costs provided—
Q. (Inaudible) you just told me —by the last incumbent, yes.
COUNSEL FOR THE CLAIMANT: Do you know what the calculation is?
Kier: There is a big sheet of numbers that I haven’t got with me, but because they are sensitive of Highways England but they can be produced.
THE DISTRICT JUDGE: Presumably, you did not produce these and neither did Kier.
Q. Highways England produced them.
Q. They had not given you anything to back them up, is that right?
Kier: We do have the costs, the costs that had been used and the working calculation, yes, we do have that. It’s quite a big calculation. So that can be retrieved if necessary.
COUNSEL FOR THE CLAIMANT: Does that uplift ever change, or is it the same?
Kier: No, it hasn’t changed and the same—
THE DISTRICT JUDGE: The contract is still the same, is it not?
Q. Therefore, it would not then, would it?
Kier: No, no. But it’s the same calculation now used by other contractors, but that is why working area overhead varies between contracts because it’s based on cost detail that they assessed during (inaudible).
COUNSEL FOR THE CLAIMANT: Therefore, area 13 the uplift is 20.85 per cent.
Q. 20.58 per cent.
02/02/2017 Court Transcript
THE DISTRICT JUDGE: Sorry, what is? The overhead.
COUNSEL FOR THE CLAIMANT: The working area overhead, sir.
THE DISTRICT JUDGE: That is 20.58. COUNSEL FOR THE CLAIMANT: 20.58 per cent.
That is calculated from costs.
So it’s calculated from overhead costs and then there’s, like, a, a calculation that takes place, but it’s something that takes place at the tender stage with Highways England procurement team and we’re just told, “This is the one you have to use.” Every contractor has, to be honest, a slightly different one which you would expect because they have different costs bases. It has been put to you that you are charging insurers like the defendant in this case— Mmm-hmm. —higher rates than that which you charge Highways England directly. So if you take, taking away the overhead, they’re exactly the same, so the base rate is the same. The overheads are a different factor, and that is just down to the way that Highways England has put a process out.