Intercity Passenger Rail: Issues Associated with the Recent Settlement between Amtrak and the Consortium of Bombardier and Alstom
Highlights
As part of the Acela high-speed rail program, the National Railroad Passenger Corporation (Amtrak) executed contracts in 1996 with train manufacturers Bombardier and Alstom to build 20 high-speed trains--called trainsets--and 15 electric high-horsepower locomotives; construct three maintenance facilities; and provide maintenance services for the Acela trainsets. The trainsets, locomotives, and facilities contracts totaled $730 million. Bombardier and Alstom, referred to as the Consortium, created the Northeast Corridor Management Service Corporation (NecMSC) to manage the facilities and maintain the trainsets, including supervising Amtrak maintenance employees. Amtrak pays NecMSC for its management and maintenance services. Concerns about the quality of the Consortium's work and Amtrak's withholding of $70 million in payments resulted in the parties suing each other, each seeking damages of $200 million. After entering into negotiations at the end of 2002, officials from the Consortium and Amtrak signed a settlement agreement in March 2004. In general, under the settlement, the Consortium must complete modifications to the trainsets and locomotives, achieve established performance requirements, provide training to Amtrak staff, and provide and extend warranties. In addition, Amtrak agreed to release up to $42.5 million of the $70 million previously withheld to the Consortium and will assume facility management and trainset maintenance responsibilities as soon as 2006, rather than in 2013 as originally planned, if the Consortium satisfactorily completes its commitments under the settlement agreement. Amtrak has received substantial federal funding in the last several years, and there is considerable congressional interest in Amtrak's financial performance--particularly in the Acela route in the Northeast Corridor, since it generates more revenue for Amtrak than all of its other routes combined. Beginning in fiscal year 2003, the Congress authorized the Secretary of Transportation, through the Federal Railroad Administration (FRA), to provide oversight of Amtrak's use of federal funds and required that Amtrak submit a business plan to the Secretary and the Congress prior to receiving funds. Because of the importance of the settlement agreement to the Acela program and the continued interest of the Congress in Amtrak's financial performance, the Chairman, Senate Committee on Commerce, Science, and Technology, asked us to review the settlement, specifically to (1) delineate the costs Amtrak incurred to prepare for and settle its lawsuit with the Consortium and the estimated costs Amtrak avoided by settling rather than pursuing further litigation, (2) determine the responsibilities of Amtrak and the Consortium under the settlement and the associated benefits and future costs, and (3) identify key challenges related to the settlement and the actions Amtrak and the Consortium are taking to address these challenges.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| National Railroad Passenger Corporation | The President of Amtrak, working with Amtrak's Board of Directors, should develop a comprehensive implementation plan. This implementation plan should address the key challenges and include important milestones for achieving each of the critical tasks associated with the key elements of the settlement, a risk analysis showing the potential impacts if tasks and milestones are not achieved, methods to accurately evaluate and measure progress, contingency plans should tasks and milestones not be met, and funding strategies to support new maintenance responsibilities. The plan should be included in any business plan later submitted to the Secretary of Transportation. |
Closed – Not Implemented
In July and August 2008, Amtrak indicated that it had prepared a comprehensive implementation plan for the settlement agreement with Bombardier and Alstom. Amtrak said the plan included establishment of two cross-functional teams and monthly progress meetings about settlement implementation issues. Monthly status reports were also prepared for the Acela Executive Oversight Committee at Amtrak. A review of material provided by Amtrak indicated that an Acela Executive Oversight Committee was created, that monthly meetings were held that included a wide variety of Amtrak officials from various departments, and that these meetings covered issues associated with Acela performance and transition of the Acela maintenance functions from the consortium to Amtrak. These actions met many aspects of the recommendation. However, Amtrak did not appear to prepare a comprehensive written implementation plan that included a risk analysis, a contingency plan, a financial plan that identified required sources of funding, or established milestones and quantitative or qualitative measures of progress toward those milestones. Amtrak assumed the Acela maintenance responsibilities from the consortium on October 1, 2006, as scheduled. A written, comprehensive implementation plan that included the elements discussed in the recommendation would have better ensured a successful transition and, more importantly, the long-term sustainability of the Acela maintenance program.
|
| Department of Transportation | The Secretary of Transportation should direct the Acting Administrator of FRA to review and monitor Amtrak's implementation of its comprehensive plan for implementing the settlement agreement as part of FRA's overall responsibilities to oversee Amtrak's activities. |
Closed – Implemented
In October 2006, Amtrak completed its takeover of the maintenance of the Acela trainset and the related maintenance facilities from the consortium of Bombardier and Alstom. Although Amtrak did not prepare a written, comprehensive implementation plan for the settlement agreement with defined milestones, risk analyses, and other important elements, Federal Railroad Administration (FRA) officials told us they monitored implementation of the settlement activities through regular meetings with Amtrak staff. FRA officials also said they continue to monitor the safety performance of the Acela fleet and that the expertise of the FRA Office of Research and Development has been made available on both a continuing and as-needed basis to assist in that oversight.
|