Kier, Area 9, National Highways & Claims for Damage to the SRN
In response to a FoIA request about National Highways audits of Area 9 bills,?those presented to drivers, fleets, hauliers or their insurers (Third Parties), it appears you may be the subject of semantics. The Authority responding:
'There isn’t a pre-payment audit for all over ￡25,000 claims for Area 9 Asset Support Contract (ASC), there is however a Commercial review of all over ￡25,000 Green Claim cost packs received from Kier (the Service Provider) before it is sent on to the National Highways Green Claims Team.'
Kier has lost Area 9 (07/2022) due to 'price' and their ‘quality submission’ – the latter was not as good as Colas.??Acknowledged by Kier, Area 9 was problematic, the contractor blamed this on Amey (pre-2014 contractor).
In 2016, the Midlands Region Operations team requested support from the Regional Commercial Team to undertake reviews of above threshold Green Claims cost packs.?
It appears there should be some evidence/information about this, some exchanges on the subject, if only internal.?Possibly, the request needs to focus on this and an example, or examples, of the audit/review conduct.
The purpose of the review was to identify errors/anomalies with costs submitted by the Service Provider and where necessary to ensure the claim is adjusted accordingly. The following year that process was adopted on a permanent basis.
It appears the Area was singled out for attention.?I know of no other Area subjected to such attention and scrutiny.
It appears no sub-￡25,000 is reviewed other than to ensure the documentation is on file i.e. price was less of an issue.??It is apparent the Authority considered the documentation worthy of attention, correspondence that is now commonly absent from claim packs submitted to insurers.?
In Area 9 there is a two-stage quality assurance (“QA”) procedure for claims packs received from Kier exceeding ￡25,000 in value. Once a claim pack has been subject to initial QA checks by the Authority (checking that all the right documents, photographs and so on have been provided for the relevant claim, and that they are legible and complete, for example), it is passed for review to a quantity surveyor (“QS”).?
The QS’ review is largely a paper exercise, a matter of their own extensive experience and industry knowledge. For example, it is known that, by agreement with the Authority Kier charge plant at CECA rates (i.e. industry standard rates published by the Civil Engineering Contractors Association, minus 30%.? As part of this review the QS also looks at a sample of the hourly rates charged for various staff and operational personnel recorded as involved in making repairs and checks that there are no obvious errors or anomalies.
The following may also be of interest/note:
1. For plant (vehicles) the Authority is charged CECA minus 30%.?It is apparent National Highways do not accept CECA rates are an applicable standard – a position agreed by CECA. The rates are a benchmark which can then be used (if the contract allows) with adjustments in the percentage (plus or minus) to reflect amongst other things;-
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Imposing the rates upon Third Parties appears wrong; there is no mutual agreement between ALL parties and those agreeing to the figures have settled upon a 30% reduction - whereas Third parties are subjected to 100%.
2. The latest agreed rates for Area 9 are available and can be found here.?
It will be noted, as with all rates agreed between Kier & National Highways since 2016, they are NOT CECA rates.?That is to say, there are two sets of rates for the same people doing the same work:
a. ‘mates rates’ agreed between National Highways and Kier, since 2016 but kept secret for years – withheld, their existence acknowledged, then denied and eventually disclosed
b. CECA rate, far higher rates, that Third Parties are subjected to?
This conduct files in the face of the 2014 contract (the relevant section also kept secret for years) that should have seen Kier utilise ‘cost’ (the same base rate) to the Authority and a Third Party, but adding a different uplift:
i. About 8% to the Authority
ii. 25.29%* to a Third Party?- the 'Third Party Claims Overhead'
*25.29% was a rate agreed upon between Kier & National Highways, to be applied throughout the contract.?However, the exercise/agreement appears to have been a waste of time; Kier never complied, and the Authority never enforced.?Instead, from the contract commencement, Kier used their own, profiteering process (1153).?
Almost 6 years later, in 2020, National Highways, rather than direct Kier to comply with the contract, rather than protect Third Parties (those they are to serve?), changed the contract to allow Kier to charge Third Parties differently, more! The ‘Kier Schedule of Rates’ (KSoR) were applied.?But the Authority was not subject to this new, higher pricing, they maintained their own, far lower, agreed-on rate process – referred to above.
The dual pricing, the use of the KSoR, seemingly arose due to Coles v Heatherton.?The lawyers for Kier and the Authority (they share the same legal representation) wrote about this, their post (now removed) can be read here:‘Inflating Costs to Make a Profit’.
Those handling claims may wish to consider the above in relation to a remark of his Honour Judge Godsmark (2018 judgement, para. 25) about an Authority claim progressed by their contractor:
'It seems to me that the only sensible interpretation of the authority is that it relates to cost of repair to Highways England. Otherwise it would not reflect the measure of damages by reference to diminution in value. It would be odd if a tortfeasor was liable to Highways England for diminution in value of a damaged chattel in one sum if sued by Highways England itself and in a different sum if sued by Highways England via BBMM (the Authority contractor).'
The above should also be considered in relation to Kier's conduct when progressing Birmingham City Council claims – read more here.