This is the accessible text file for GAO report number GAO-05-867 
entitled 'Amtrak: Improved Management and Controls over Food and 
Beverage Service Needed' which was released on September 26, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to the Chairman, Subcommittee on Railroads, Committee on 
Transportation and Infrastructure, House of Representatives: 

August 2005: 

Amtrak: 

Improved Management and Controls over Food and Beverage Service Needed: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-867]: 

Contents: 

Letter: 

Results Summary: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Comments from the National Railroad Passenger Corporation 
(Amtrak): 

Appendix II: Testimony, Amtrak: Management and Accountability Issues 
Contribute to Food and Beverage Service Losses: 

Appendix III: Contact and Staff Acknowledgments: 

Abbreviations: 

Amtrak: National Railroad Passenger Corporation: 

Gate Gourmet: Gate Gourmet International: 

VIA Rail: VIA Rail Canada: 

Letter August 24, 2005: 

The Honorable Stephen LaTourette: 
Chairman: 
Subcommittee on Railroads: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

Dear Mr. Chairman: 

Because of the importance of food and beverage operations to the 
National Railroad Passenger Corporation (Amtrak) and the continued 
interest of Congress in Amtrak's financial performance, you asked us to 
review Amtrak's food and beverage costs. We examined the following 
three areas: (1) the provisions written into Amtrak's contract with 
Gate Gourmet International (Gate Gourmet) to control costs, (2) the 
types of management controls Amtrak exercises to prevent improper 
payments, and (3) the information Amtrak collects and uses to monitor 
the service and to report to stakeholders such as its Board of 
Directors. To gain background information on how other passenger 
transportation companies conducted their food and beverage services, we 
also talked with three other passenger transportation providers. We 
also collected supplemental information from Amtrak and information on 
the food and beverage operations of VIA Rail Canada (VIA Rail) and 
Alaska Railroad--two other providers of intercity passenger rail. We 
also contacted two major U.S. air carriers--Northwest Airlines and 
American Airlines. 

On June 9, 2005, we presented our statement in a hearing to the 
Subcommittee on Railroads of the House Transportation and 
Infrastructure Committee.[Footnote 1] Appendix II contains the 
statement we presented at that time. The information in this letter and 
in our statement was based on completed work done in the course of our 
ongoing review of Amtrak's management and performance, which we will 
report on later this year. 

Food and beverages have been served on board Amtrak trains since Amtrak 
was created. Amtrak's 11 commissaries, located around the country, are 
responsible for receiving, warehousing and stocking food, beverages, 
and other items for Amtrak's on-board dining and café service. Until 
January 1999, Amtrak ran these commissaries with its own employees. 
Since then, Amtrak has contracted out the responsibility for the 
commissaries and for ordering and stocking all food, beverage, and 
related items under a contract that expires in September 2006.[Footnote 
2]Gate Gourmet,[Footnote 3] the contractor, is also a supplier of food 
and beverages to several major airlines. During fiscal years 2002 
through 2004, the period we focused on in our audit work, Amtrak paid 
Gate Gourmet between $59 million and $64 million a year in 
reimbursements and fees.[Footnote 4] Gate Gourmet personnel operate 
Amtrak-owned commissaries and order, receive, store, and stock trains 
with food, beverages, and other related items, such as table linens and 
napkins. Food and beverage supplies are charged to Amtrak employees who 
provide on-board food and beverage service and account for the food and 
beverages en route. When a train arrives at its final destination, all 
remaining stock items are returned to a commissary. Gate Gourmet 
charges Amtrak for the items used, as well as for labor, management, 
and other fees. 

Since Amtrak started operations in 1971, Amtrak has struggled 
financially and has depended on a federal subsidy of more than $1 
billion a year since fiscal year 2003 to remain solvent. For fiscal 
years 2002 through 2004, Amtrak's food and beverage expenses were about 
$487 million--or only about 5 percent of the company's total 
expenditures. However, during that same time period, Amtrak's food and 
beverage service earned about $243 million in revenue.[Footnote 5] This 
means that Amtrak spends about $2 to earn $1 in food and beverage 
revenue. 

We conducted our work from May 2004 through June 2005 in accordance 
with generally accepted government auditing standards. 

Results Summary: 

Little incentive to reduce costs. The provisions of the contract for 
food and beverage services provide little incentive for Gate Gourmet to 
reduce or contain the costs of food and beverages. The contract is a 
cost reimbursable contract, and under it, the contractor can charge for 
the costs of items purchased, in addition to management and other fees. 
Given the way Amtrak is managing the contract, none of the contractor's 
profit is tied to controlling costs. Although the contract included a 
discussion of performance standards, these standards and related 
measures were never created, even though they were required 45 days 
after the contract was signed in January 1999. Performance standards 
would have allowed for performance incentives and penalties. If these 
incentives had been developed, they could have been used to pay Gate 
Gourmet based on such things as finding lower-priced food products of 
similar quality. In addition, another agreement to supply Amtrak's 
Acela train service for food and beverage items from Gate Gourmet's 
flight kitchens was made verbally between Amtrak's former president and 
the president of Gate Gourmet. Amtrak does not have documentation for 
the contract terms for this service. 

Poor control over costs. Amtrak is not fully exercising prudent 
management techniques to control its food and beverage costs and 
prevent potential improper payments. We found three examples of this 
mismanagement at Amtrak. First, Amtrak has never required the 
contractor to submit an annual report (that would be independently 
audited) of budget variances for key line items, even though the 
contract requires such a report. Such a report could detect improper 
payments by Amtrak to Gate Gourmet for food and beverage items. Second, 
Amtrak has not implemented processes to ensure that rebates and 
discounts received directly from suppliers or indirectly through its 
contractor are accurate and complete. Amtrak has not established formal 
procedures to review and verify the amount of rebates and discounts 
actually received from either its suppliers or to determine whether 
there are other rebates that Amtrak is entitled to from the contractor. 

Finally, Amtrak does not adequately monitor purchase prices reported by 
the contractor to identify variances or products with high costs. 
Although Amtrak had some processes that compare prices, the process was 
not robust enough to include a record of price trends or follow-up 
actions taken. Using data mining[Footnote 6] and other audit 
techniques, we selectively reviewed more than $80 million of purchase 
order information for fiscal years 2002 and 2003 and found that the 
contractor was generating purchase orders with significant variances in 
unit prices. For example, purchase order and payment support provided 
to us by Amtrak's contractor in March 2005 show that Amtrak ordered 12-
ounce bottles of Heineken beer and received and paid $3.93 per bottle. 
Though Amtrak believed this was a data entry error, no supporting 
documentation was provided prior to the hearing. However, based on 
information Amtrak provided to us after our June 9, 2005, testimony, it 
appears that Amtrak purchased 10 half-kegs of Heineken beer rather than 
10 cases, as indicated on the original documentation. In another 
instance, the purchase order price of a 10-ounce strip steak ranged 
from $3.02 to $7.58. Amtrak officials testified that the strip steak 
examples were "emergency purchases." However, following our request for 
documentation to support this claim, an Amtrak official told us on June 
29, 2005, that documentation to support the assertion that these were 
emergency purchases does not exist. The establishment of internal 
control procedures that ensure the documentation of the identification 
and correction of errors and approval for emergency purchases would 
ensure that adequate documentation is readily available for review by 
internal and external parties. 

Insufficient data for monitoring costs. The level of information Amtrak 
collects and uses to monitor its food and beverage service and report 
results to stakeholders inhibits accountability for its performance. 
Amtrak does not report food and beverage expenditure information in its 
monthly performance reports or its annual consolidated financial 
statements. While Amtrak reports the combined revenue of its food and 
beverage services in its monthly performance reports, it does not do so 
for its food and beverage expenses. By combining revenue, it is 
difficult for managers to determine the amount of revenue attributable 
to food services compared with beverage services. By not reporting 
expenses, it is difficult to determine how much is spent on food and 
beverage service. This lack of information inhibits Amtrak's ability to 
assign accountability for performance internally or allow for any 
external accountability to key stakeholders. Other transportation 
companies we studied have a different accountability structure for 
their food and beverage service. Because VIA Rail has a fixed subsidy 
from the federal Canadian government, VIA Rail's management has an 
inherent incentive to control its costs in all areas of its operation, 
including its food and beverage service. The Alaska Railroad receives 
biweekly reports from its contractor detailing its labor and food costs 
that show, among other things, contractor performance against the 
contractual cost caps. 

Conclusions: 

Amtrak's food and beverage service may represent a relatively small 
part of the company's operating budget, but it speaks volumes about 
Amtrak's need to get its operations in better order. In administering 
this contract, basic steps for good management have been ignored or 
otherwise set aside. Omissions include not completing agreed-upon 
provisions of the contract, not carrying through with basic oversight 
called for in the contract, and not ensuring that the organization was 
getting products at the most reasonable price. A stronger effort is 
required, beginning with carrying out steps that, under the contract, 
should have been taken all along. Amtrak needs to take immediate steps 
not only to curb the losses in this program, but also to help convince 
the public it is acting as a careful steward of the federal dollars 
that continue to keep it operating. 

Recommendations for Executive Action: 

To improve Amtrak's management of its food and beverage operations, we 
are making the following four recommendations. We recommend that 
Amtrak: 

* better contain its food and beverage costs by following its own 
procedures for ensuring proper contracts and payments and enforcing key 
provisions of the current Gate Gourmet contract, including issuing 
annual reports that are independently audited by an outside auditing 
firm and certified by Gate Gourmet officials, and conducting regular 
audits of discounts and rebates;

* prepare a written contract for food and beverage service on Acela 
trains that specifies the service to be provided, includes incentives 
to ensure efficient and effective contractor performance, and includes 
regular annual reports and audits;

* create separate revenue and expenditure reporting metrics and other 
basic food service metrics to allow for internal and external 
accountability for its food and beverage service and create incentives 
to reduce costs and increase revenue; and: 

* comprehensively review the revenue and cost structure of its food and 
beverage service to determine the most cost-effective solution that can 
increase the financial contribution of its food and beverage function. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to Amtrak for its review and 
comment. In its response, Amtrak did not take a position on our 
recommendations but reiterated that it has initiated a number of 
reforms to lower costs and achieve greater efficiencies in managing its 
food and beverage service. These include such actions as closing the 
commissary in Albany, New York, eliminating food and beverage service 
on its New York City to Albany trains, and reducing the number of 
attendants on Acela and Metroliner trains. Also, to further lower 
costs, Amtrak said it is currently renegotiating its contract with Gate 
Gourmet and is in the process of identifying other providers who could 
offer either localized or regional food arrangements. 

While not being specific, Amtrak disputed our findings on certain 
aspects of Amtrak's food and beverage purchasing oversight and said 
that Amtrak officials are taking "every reasonable step to ensure that 
prices we pay are equitable and correct." While we acknowledge that 
Amtrak has made some improvements in this area, we do not think they 
have gone far enough in managing and overseeing its food and beverage 
service. In line with our recommendations, further efforts are needed 
to enforce the contractual requirement for an annual report from Gate 
Gourmet, to audit discounts and rebates, and to implement a robust 
process for monitoring of product purchase prices. 

Amtrak also contends that despite improvements it has made or could 
make, it would still lose money on its food and beverage service, 
mainly because of high labor costs. Amtrak said that we failed to 
address this issue in our report. To the contrary, we identified in our 
report that Amtrak's labor costs made up about 52 percent of its total 
food and beverage expenditures, a figure substantiated by Amtrak's 
Inspector General. Amtrak contends that changes it has recommended to 
the Railway Labor Act, if adopted by Congress, would greatly enhance 
its ability to reduce labor costs and hence the overall costs of its 
food and beverage service. We have not evaluated the potential impact 
of Amtrak's recommended changes to the Railway Labor Act on labor costs 
for its food and beverage service. However, while we acknowledge that 
labor costs are a major cost element in its total food and beverage 
expenditures and that lowering these costs is not easy, this does not 
obviate the need to develop effective internal controls and oversight-
-in full compliance with our recommendations--as a way of reducing food 
and beverage costs and providing greater accountability and 
transparency. 

As we agreed with your office, unless you publicly announce the 
contents of this report earlier, we plan no further distribution until 
30 days from the report date. At that time, we will send copies to the 
congressional committees responsible for intercity passenger rail 
issues, the President of Amtrak, the Secretary of Transportation, and 
the Administrator of the Federal Railroad Administration. We will also 
make copies available at no charge on the GAO Web site at [Hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or at [Hyperlink, heckerj@gao.gov]. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made major contributions to this report are listed in appendix III. 

Sincerely yours,

Signed by: 

JayEtta Z. Hecker: 
Director, Physical Infrastructure Issues: 

[End of section]

Appendixes: 

Appendix I: Comments from the National Railroad Passenger Corporation 
(Amtrak): 

NATIONAL RAILROAD PASSENGER CORPORATION
60 Massachusetts Avenue, NE 
Washington, DC 20002

William L Crosbie: 
Sr. Vice President Operations: 

August 2, 2005: 

Ms. JayEtta Z. Hecker: 
Director, Physical Infrastructure: 
United States Government Accountability Office: 
441 Street, NW: 
Washington, DC 20548: 

Dear Ms. Hecker: 

Amtrak appreciates the opportunity to provide comments to your report 
number GAO-05-867 regarding Amtrak's management of its food and 
beverage service. 

Well before this report was requested, Amtrak was aware of the need to 
focus on its management of food and beverage service. This was one of 
the areas of priority identified by David Gunn upon his arrival at 
Amtrak in May 2002. During the past 36 months, management's priorities 
at Amtrak have been largely focused on maintaining liquidity, 
rebuilding cars and locomotives, renewing infrastructure, and building 
an organization to manage the budget and control costs. Though much 
work is left to be done, we feel enough progress has been made so that 
we can now turn to other matters such as the topic described in your 
report. To that end management has initiated a number of reforms to 
lower costs and bring about greater efficiencies in the management and 
delivery of food and beverage service. Some of the initiatives were 
phased in rather quickly such as the elimination of food and beverage 
service on all New York to Albany trains and reducing the number of 
attendants in our First Class Acelas and Metroliners. Other initiatives 
such as rebuilding lounges to provide both dining and lounge car 
service are under way but take time to complete. During the July Amtrak 
Board of Directors' meeting, management provided the Board a list of 
initiatives and pilot projects that are under way or expected to be 
implemented in the next several months. We have outlined these 
initiatives to the GAO staff during the course of their review. 

As significant as some of the initiatives discussed above, we are also 
renegotiating our contract with Gate Gourmet which we hope will 
increase efficiencies related to food service and result in lower 
costs. In the very near future, we also anticipate issuing an RFI to 
identify providers who could offer either localized or regional food 
arrangements. 

Making changes in this area must be done with great sensitivity because 
many of our passengers travel significant distances, and the 
requirement for providing food and beverage is not only an added 
amenity but a necessity. There is not a one-size-fits-all solution to 
this matter. Our approach has been both focused and incremental, which 
we feel is the most reasonable and appropriate way to proceed. 

While the GAO is critical of certain aspects of Amtrak's food and. 
beverage purchasing oversight which we dispute, we continue to take 
every reasonable step to ensure that the prices we pay are equitable 
and correct. At the same time, even if we were able to achieve 100 
percent certainty that the amount we are charged is accurate and that 
the handling of food and beverage from the commissary to the train, its 
sale to the passenger or its return to the commissary were letter 
perfect, Amtrak would still lose a significant amount of money on food 
and beverage service. The principal reason for this is due to the high 
cost of labor to provide this service. Regrettably, the GAO report 
fails to address this and instead would lead the reader to believe that 
Amtrak should simply manage its food and beverage contract with Gate 
Gourmet more efficiently. The Strategic Reform Plan, adopted by Amtrak 
Board of Directors in May of this year, recommended changes to the 
Railway Labor Act, which if adopted by Congress, would greatly enhance 
our ability to reduce the cost of providing food and beverage service 
on our trains. While we understand that this is a very sensitive issue, 
dealing with this forthright is, in our minds, far more significant 
than what we may have paid on one occasion for a bottle of beer. This 
report would have been more thorough had this area been discussed in 
greater detail. In fact, none of the recommendations even mentions the 
labor costs associated with our food and beverage service. 

In closing, let me assure you, and anyone who might read this report, 
that we are actively pursuing a number of initiatives to improve and 
make more efficient our food and beverage service. We believe that the 
approach we are taking will yield beneficial results without degrading 
the service to a point where we loose ridership and revenue as a result 
of an uneven food service offering. We will continue to keep Congress 
apprised of the progress of our activities in this area. 

Sincerely, 

Signed by: 

William L. Crosbie: 
Senior Vice President, Operations: 

[End of section]

Appendix II: Testimony, Amtrak: Management and Accountability Issues 
Contribute to Food and Beverage Service Losses: 

This is the accessible text file for GAO report number GAO-05-761T 
entitled 'AMTRAK: Management and Accountability Issues Contribute to 
Unprofitability of Food and Beverage Service' which was released on 
June 9, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony: 

Before the Subcommittee on Railroads, Committee on Transportation and 
Infrastructure, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 9:30 a.m. EDT: 

Thursday, June 9, 2005: 

AMTRAK: 

Management and Accountability Issues Contribute to Unprofitability of 
Food and Beverage Service: 

Statement of JayEtta Hecker, Director, Physical Infrastructure Issues: 

GAO-05-761T: 

GAO Highlights: 

Highlights of GAO-05-761T, a report to Subcommittee on Railroads, 
Committee on Transportation and Infrastructure, House of 
Representatives: 

Why GAO Did This Study: 

Amtrak has provided food and beverage service on its trains since it 
began operations in 1971. Amtrak has struggled since its inception to 
earn sufficient revenues and depends heavily on federal subsidies to 
remain solvent. While a small part of Amtrak’s overall expenditures, 
Amtrak’s food and beverage service illustrates concerns in Amtrak’s 
overall cost containment, management and accountability issues. 

This testimony is based on GAO’s work on Amtrak’s management and 
performance as well as additional information gained from Amtrak and 
other transportation providers. This testimony focuses on (1) the 
provisions written into Amtrak’s contract with Gate Gourmet to control 
costs, (2) the types of management controls Amtrak exercises to prevent 
overpayments, and (3) the information Amtrak collects and uses to 
monitor the service and to report to stakeholders such as its Board of 
Directors. 

What GAO Found: 

Amtrak’s financial records show that for every dollar Amtrak earns in 
food and beverage revenue, it spends about $2—a pattern that has held 
consistent for all 3 years GAO reviewed. In GAO’s estimation, Amtrak 
has lost a total of almost $245 million from fiscal year 2002 through 
fiscal year 2004 on food and beverage service. Since 1999, Amtrak has 
contracted out the responsibility to Gate Gourmet International (Gate 
Gourmet) for managing commissaries and for ordering and stocking all 
food and beverages and related items managing under a contract that 
expires in September 2006. 

Amtrak’s current cost reimbursable contract with Gate Gourmet creates, 
if anything, an incentive to increase Amtrak’s costs unless properly 
monitored. Gate Gourmet can charge Amtrak for the cost of the food and 
beverage items, as well as management, labor, and other expenses. 
Without defined controls and management, this type of contract 
structure provides little incentive for a contractor to reduce or 
contain costs to provide better value to its customer. 

GAO found five different management controls that Amtrak did not fully 
exercise regarding oversight of its food and beverage service. These 
controls include: (1) requiring an independently audited financial 
report, (2) auditing for all applicable rebates and discounts that Gate 
Gourmet could have applied to food and beverage items purchased for 
Amtrak, (3) adequately monitoring purchase price information for its 
food and beverage items, (4) not considering Amtrak’s food and beverage 
labor costs, as a part of product markups, and that (5) not utilizing 
Amtrak’s procurement department in negotiating the current contract. 

Information that could provide both internal and external 
accountability for the food and beverage function is limited. Amtrak 
does not include any information about its food and beverage expenses 
in any of its internal or external reports, including its monthly 
performance reports, its internal quarterly progress reports or its 
annual consolidated financial statements. This lack of information 
makes it difficult for internal and external stakeholders to gauge the 
profit or loss of the operation as well as to assign accountability. 

Amtrak food and beverage revenues and expenses, fiscal years 2002 to 
2004: 

[See PDF for image]

[End of figure]

What GAO Recommends: 

Since we did not have sufficient time to obtain Amtrak’s comments, as 
required by government auditing standards, prior to this hearing, GAO 
anticipates making recommendations to Amtrak to improve its food and 
beverage service at a later time. 

www.gao.gov/cgi-bin/getrpt?GAO-05-761T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact JayEtta Z. Hecker, 202-
512-8984. 

[End of section]

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to testify on issues concerning the 
National Railroad Passenger Corporation's (or Amtrak) food and beverage 
service, which will clearly illustrate Amtrak's challenges in 
controlling its costs. Since Amtrak started operations in 1971, Amtrak 
has struggled financially, and has depended on a federal subsidy of 
more than $1 billion a year since fiscal year 2003 to remain solvent. 
For fiscal years 2002 through 2004, Amtrak's food and beverage expenses 
were about $487 million--or only about 5 percent of the company's total 
expenditures. However, during that same time period, Amtrak's food and 
beverage service earned about $243 million in revenue. This means that 
Amtrak spends about $2 to earn $1 in food and beverage revenue. Of 
Amtrak's total food and beverage expenditures, about 53 percent was for 
labor costs for Amtrak employees serving the food, about 38 percent was 
for food costs and fees to Gate Gourmet International (Gate Gourmet)--
the contractor for food and beverages and operation of Amtrak 
commissaries--and about 9 percent for other Amtrak costs. 

At your request, my statement today relates primarily to the 
contractor's portion of this expense, as well as Amtrak's oversight and 
control over its food and beverage service, and what Amtrak is doing to 
oversee and control contract costs. I will specifically address what we 
have learned in examining three major types of cost controls: (1) the 
provisions written into Amtrak's contract with Gate Gourmet[Footnote 1] 
to control costs, (2) the types of management controls Amtrak exercises 
to prevent improper payments, and (3) the information Amtrak collects 
and uses to monitor the service and to report to stakeholders such as 
its Board of Directors. We also talked with three other passenger 
transportation providers to get background and comparison information 
on their food and beverage services. The information I will present is 
based on completed work done in the course of our ongoing review of 
Amtrak's management and performance which we will report on later this 
year. We also collected supplemental information from Amtrak, and on 
the food and beverage operations of VIA Rail Canada (VIA Rail) and the 
Alaska Railroad, two other providers of intercity passenger rail, and 
two major U.S. air carriers--Northwest Airlines and American Airlines. 

In summary, we found that: 

* The provisions of the contract for food and beverage services provide 
little incentive for Gate Gourmet to reduce or contain the costs of 
food and beverages. The contract is a cost reimbursable contract, and 
under it, the contractor can charge for the costs of items purchased, 
in addition to management and other fees. Given the way Amtrak is 
managing the contract, none of the contractor's profit is tied to 
controlling costs. Although the contract included a discussion of 
performance standards, these standards and related measures were never 
created, even though they were required 45 days after the contract was 
signed in January 1999. Performance standards would have allowed for 
performance incentives and penalties. If these incentives had been 
developed, then they could have been used to pay Gate Gourmet based on 
such things as finding lower-priced food products of similar quality to 
what is being purchased now. 

* Amtrak is not fully exercising prudent management techniques to 
control its food and beverage costs and prevent potential improper 
payments. We found three examples of this mismanagement at Amtrak. 
First, Amtrak has never required the contractor to submit an annual 
report (which would be independently audited) of budget variances for 
key line items, even though the contract requires such a report. Such a 
report could detect improper payments by Amtrak to Gate Gourmet for 
food and beverage items. Second, Amtrak has never audited the 
contractor's purchase data--which is allowed under the contract--to 
ensure that the contractor is passing along any discounts or rebates 
the contractor receives on items purchased. For example, Gate Gourmet 
reported passing along about $550,000 in rebates and discounts on 
purchases for Amtrak totaling about $6.5 million out of $90 million 
total purchases for Amtrak from fiscal year 2002 through fiscal year 
2003.[Footnote 2] Finally, Amtrak does not adequately monitor purchase 
prices reported by the contractor to identify variances or products 
with high costs. To further test purchase data, we non-statistically 
selected 37 payment transactions and reviewed the underlying supporting 
documentation and found evidence of widely variable product prices. For 
example, Amtrak paid between $0.43 and $3.93 per 12-ounce bottle of 
Heineken beer. (See fig. 1.)

Figure 1: Amount Amtrak Paid for a 12-Ounce Beer, Fiscal Years 2002 and 
2003: 

[See PDF for image]

[End of figure]

* The level of information Amtrak collects and uses to monitor its food 
and beverage service and report results to external or internal 
stakeholders inhibits accountability for its performance. Externally, 
Amtrak does not report food and beverage expenditure information in its 
monthly performance reports or its annual consolidated financial 
statements. While Amtrak reports the combined revenue of its food and 
beverage services in its monthly performance reports, it does not do so 
for its food and beverage expenses. By combining revenue, it is 
difficult for managers to determine the amount of revenue attributable 
to food services compared to beverage services. By not reporting 
expenses, it is difficult to determine how much is spent on food and 
beverage service. This lack of information inhibits Amtrak's ability to 
assign accountability for performance internally or allow for any 
external accountability to key stakeholders. Other transportation 
companies we studied have a different accountability structure for 
their food and beverage service. Because VIA Rail has a fixed subsidy 
from the federal Canadian government, VIA Rail's management has an 
inherent incentive to control its costs in all areas of its operation, 
including its food and beverage service. The Alaska Railroad receives 
bi-weekly reports from its contractor detailing its labor and food 
costs that show, among other things, contractor performance against the 
contractual cost caps. 

Background: 

How Does Amtrak Operate Its Food and Beverage Service?

Food and beverages have been served onboard Amtrak trains since Amtrak 
was created. Amtrak's eleven commissaries are located around the 
country and are responsible for receiving, warehousing and stocking 
food, beverages, and other items for Amtrak's onboard dining and café 
service. Until January 1999, Amtrak ran these commissaries with its own 
employees. Since then, Amtrak has contracted out the responsibility for 
the commissaries and for ordering and stocking all food, beverages, and 
related items under a contract that expires in September 2006.[Footnote 
3] Gate Gourmet (the contractor), is also a supplier of food and 
beverages to several major airlines. During fiscal years 2002 through 
2004, the 3-year period we focused on in our audit work, Amtrak paid 
Gate Gourmet between $59 and $64 million a year in reimbursements and 
fees.[Footnote 4] Gate Gourmet personnel operate Amtrak-owned 
commissaries and order, receive, store, and stock trains with food, 
beverages, and other related items such as table linens and napkins. 
Food and beverage stock are charged to Amtrak employees who account for 
the food en route. When a train arrives at its final destination, all 
remaining stock items are returned to a commissary. Gate Gourmet 
charges Amtrak for the items used, as well as for labor, management, 
and other fees. The contract requires that Gate Gourmet provide Amtrak 
an independently audited annual report within 120 days following the 
expiration of each contract year. 

Amtrak's model for handling its food and beverage service is similar to 
other passenger transportation companies, with some important 
differences. Northwest Airlines has outsourced their kitchen and 
commissary operations and have food and beverages delivered to each 
airplane before each flight. VIA Rail Canada, Canada's national 
passenger railroad, serves food on most of its trains and owns and 
operates its own commissaries. Food and other items are delivered to 
each train, consumed during the train's run and restocked at the 
destination. The Alaska Railroad, however, has a private contractor 
that orders, stocks, delivers, prepares, and serves all of its food and 
beverages on its trains using their own labor force. With certain 
exceptions and limits, all food and beverage revenues and expenses are 
the responsibility of the contractor.[Footnote 5]

How Much Is Amtrak Losing on Food and Beverage Operations?

Amtrak's financial records show that for every dollar Amtrak earns in 
food and beverage revenue, it spends about $2--a pattern that has held 
consistent for all 3 years we reviewed. (See table 1 and fig. 2.) 
Amtrak's financial records also indicate that Amtrak has lost a total 
of almost $245 million for fiscal year 2002 through fiscal year 2004 on 
food and beverage service. Section 24305(c)(4) of Title 49, United 
States Code, states that Amtrak is not to operate a food and beverage 
service whose revenues do not exceed the cost of providing such 
service. About half of the total food and beverage expenditure is labor 
cost for Amtrak staff who prepare and serve the food aboard the trains. 
About 38 percent is reimbursements and fees to Gate Gourmet, 
representing the cost of food and other products in addition to other 
fees paid to Gate Gourmet. About 9 percent is for other Amtrak costs. 
While Amtrak's labor costs for its food and beverage service are 
significant, these costs are part of Amtrak's overall labor cost 
structure, and as such, are beyond the scope of work we did for this 
testimony. However, a recent Amtrak Inspector General report suggested 
that Amtrak could save money on its food and beverage labor if the cost 
of this labor was similar to that of the restaurant industry.[Footnote 
6]

Table 1: Amtrak's Estimated Food and Beverage Revenue and Expenses (by 
Major Category), Fiscal Years 2002 to 2004: 

Total food and beverage revenues[A]; 
2002: $84,100,000; 
2003: $78,400,000; 
2004[C]: $80,400,000; 
Total: $242,900,000. 

Expense Category: Amtrak Labor Costs; 
2002: $83,768,416; 
2003: $83,257,574; 
2004[C]: $89,162,529; 
Total: $256,188,519; 
Percent of Total Expense: 52.6%. 

Expense Category: Payments to Gate Gourmet; 
2002: $63,754,973; 
2003: $59,769,085; 
2004[C]: $61,893,852; 
Total: $182,422,910; 
Percent of Total Expense: 38.0%. 

Expense Category: All Other Amtrak Food and Beverage Expenses[B]; 
2002: $16,961,343; 
2003: $15,775,092; 
2004[C]: $13,123,348; 
Total: $45,859,910; 
Percent of Total Expense: 9.4%. 

Total Food and Beverage Expenses; 
2002: $164,489,732; 
2003: $158,801,751; 
2004[C]: $164,179,729; 
Total: $487,471,212; 
Percent of Total Expense: 100.0%. 

Profit or (Loss); 
2002: ($80,389,732); 
2003: ($80,401,751); 
2004[C]: ($83,779,729); 
Total: ($244,571,212). 

Source: GAO analysis of Amtrak data. 

Notes: 

[A] Revenues include a portion of first class ticket revenue dedicated 
toward food and beverage revenues. 

[B] "All Other" expenses include such items as utilities, office 
supplies, crew meals, and reusable support items such as crockery and 
glassware. 

[C] All 2004 figures are unaudited. 

[End of table]

Figure 2: Amtrak Food and Beverage Revenues and Expenses, Fiscal Years 
2002 to 2004: 

[See PDF for image]

[End of figure]

Amtrak has responded to these continued losses with some incremental 
reductions in food and beverage service. On July 1, 2005, Amtrak plans 
to discontinue food and beverage service on its routes between New York 
City and Albany, New York, which would allow Amtrak to close its 
commissary in Albany. An official in Amtrak's Office of Inspector 
General stated that Amtrak lost between $6 to $8 per person on food 
service on those routes and that closing the commissary will save 
Amtrak about $1 million per year. However, achieving additional savings 
by closing commissaries could be limited, as Amtrak's other 
commissaries serve multiple Amtrak trains that would continue to offer 
food and beverage service. In other words, closing a commissary could 
affect multiple trains on multiple routes. According to an Amtrak 
procurement official, a team consisting of members of Amtrak's 
procurement, legal, financial and transportation departments is 
currently working to identify ways to reduce Amtrak's costs in its next 
commissary contract.[Footnote 7]

Other transportation companies have taken actions to better control 
their food and beverage costs in recent years. For example, Northwest 
Airlines officials stated that they pay particular attention to food 
and beverage expenses. Since 2002, Northwest has reduced its food costs 
by 4 percent. This has been achieved by reducing or eliminating 
complimentary food service for coach passengers on domestic flights 
(even to the point of eliminating pretzels on these flights), 
aggressive pricing of food products and flexible budgeting that adjusts 
each month to reflect increases or decreases in ridership.[Footnote 8] 
VIA Rail officials told us they have considerable flexibility in hiring 
its onboard service personnel to adjust its labor force to respond to 
peak and off-peak tourist seasons for its long-distance trains. In 
addition, VIA Rail officials said they have considerable flexibility in 
how onboard service staff are used; in essence, all onboard service 
staff can be used wherever and whenever needed. The Alaska Railroad 
restructured the contract with its food and beverage service provider 
to allow for food price fluctuation within defined limits. 

Current Contract Does Not Provide Incentives to Reduce or Contain 
Costs: 

One way to control costs is to build provisions into a contract that 
motivate a contractor to keep costs as low as possible. Amtrak's 
current cost reimbursable contract with Gate Gourmet creates, if 
anything, an incentive to increase Amtrak's costs unless properly 
monitored. Under the contract, Gate Gourmet receives a number of 
reimbursements, including commissary, labor, and insurance costs, in 
addition to an operating fee. The operating fee is defined in the 
contract as 5 percent of the total actual cost of the onboard food and 
beverage items. This fee is an incentive for the contractor to increase 
Amtrak's food and beverage costs. These costs can change in each yearly 
operating budget. This operating budget is subject to review by Amtrak 
and is mutually agreed to by both Amtrak and Gate Gourmet. 

Incentives can also be written into a cost reimbursable contract to 
control costs and enhance performance. Although the contract included a 
discussion of performance standards, these standards and related 
measures were never created, even though they were required 45 days 
after the contract was signed in January 1999. Performance standards 
would have allowed for performance incentives and penalties. If these 
incentives had been developed, then they could have been used to pay 
Gate Gourmet based on such things as finding lower-priced food products 
of similar quality to what is being purchased now, or identifying ways 
the food and beverage service could be operated more economically or 
efficiently. 

Other factors may not provide the needed incentives for Gate Gourmet to 
aggressively seek to reduce Amtrak's food costs. Under current contract 
provisions, Gate Gourmet can charge Amtrak for food prepared in Gate 
Gourmet facilities and delivered to Amtrak's commissaries. The contract 
provides considerable pricing flexibility to Gate Gourmet for these 
items with no detailed definitions or price caps. This makes it 
difficult to determine whether or not Amtrak is being charged a 
reasonable price. In addition, the contract also provides that Gate 
Gourmet deduct any trade or quantity discounts on items purchased for 
Amtrak either immediately from Amtrak's invoices or retroactively based 
on the proportion of Amtrak's purchases. Discounts applied 
retroactively are to be applied by Gate Gourmet in "good faith" and 
retroactive payments are "an approximation and that [Gate Gourmet] 
cannot guarantee exactness." The contract stipulates these payments are 
subject to an audit by Amtrak. However, these audits have never been 
conducted. 

In contrast, while Northwest Airlines has cost plus contracts with its 
largest food and beverage contractors (including Gate Gourmet), 
Northwest's management of them is different. Northwest's caterer 
contracts have labor and other rates specified in the contract. 
According to Northwest's food and beverage officials, they know quickly 
if they change their menu, how much their suppliers will charge them--
even to the addition or subtraction of a leaf of lettuce served as part 
of an entree. In addition, Northwest officials stated that each price 
charged by its contractors is checked and invoices are audited. 

Management Controls Over Food and Beverage Operations Not Fully 
Exercised: 

We identified five types of management controls that Amtrak did not 
fully exercise regarding oversight of its food and beverage service. 
These include the following: 

* Requirement for an annual report has never been enforced. Amtrak's 
contract requires Gate Gourmet to provide an independently audited 
annual report within 120 days following the expiration of each contract 
year; this report must also be certified by Gate Gourmet officials. 
This report is to provide actual and budgeted amounts for key line 
items and to provide a narrative explanation for any actual to budget 
variance greater than one percent in the aggregate for all 
commissaries. However, Gate Gourmet has not provided this report during 
the five completed years the contract has been in place. Amtrak food 
and beverage officials could not provide us with a reason as to why 
they had decided not to enforce this provision. They told us that they 
relied on contractor-provided monthly operating statements and on 
reports from Amtrak's Inspector General instead. Our review found that 
the monthly operating statements lacked critical information that was 
to be included in the annual report, were prepared by the party seeking 
reimbursement, and, perhaps more importantly, were not independently 
reviewed or audited. By contrast, the annual report was to be certified 
by contractor officials and audited by an independent certified public 
accountant. The Inspector General's reports, while providing management 
with information on some aspects of Amtrak's food and beverage service 
activities, should not be viewed as a substitute for a comprehensive 
audit and report. 

* Audits of discounts and rebates were not conducted. The contract 
provides that Amtrak audit Gate Gourmet's allocations of trade and 
quantity discounts received from purchases of food and beverages. 
However, Amtrak has never conducted an audit of the discounts credited 
to it, nor has it requested that the contractor certify that all of the 
discounts that Amtrak should receive have been credited to its account. 

Information we reviewed indicates that such audits may yield savings 
for Amtrak. For example, Amtrak officials advised us that discounts and 
rebates totaling over $550,000 for fiscal years 2002 and 2003 had been 
credited on gross purchases of about $6.5 million.[Footnote 9] However, 
total Gate Gourmet purchases exceeded $90 million for the 2-year 
period--roughly 13 times the amount of purchases the contractor 
reported as being subject to discounts and rebates. Because Amtrak did 
not require an independent audit or otherwise analyze the trade and 
quantity discounts received, Amtrak does not know whether or not it 
received all of the discounts and rebates to which it was entitled. 
Amtrak could not provide us with reasons supporting its decision or its 
consideration of this issue. 

* Adequate monitoring of purchase price information needs improvements. 
Amtrak did not adequately monitor its purchase price information for 
food and beverage items purchased by Gate Gourmet. Amtrak officials 
said they monitored contractor purchases using daily price reports that 
listed unit prices for purchases ordered the previous day and the price 
the last time the item was ordered. However, given the importance of 
purchase orders in a food and beverage operation, internal controls 
need to be developed to systematically monitor and analyze purchase 
information. These controls should then be monitored on a regular basis 
to assess the quality of performance over time.[Footnote 10] For 
example, controls should include processes to identify unit price 
variances over established or pre-set amounts and actions taken to 
document follow-up work performed. Although Amtrak had some processes 
that compare prices, the process was not robust enough to include a 
record of price trends or follow up actions taken such as corrections 
of amounts billed. Our testing of this control showed that if Amtrak 
had approached this review in a more rigorous manner, it may have 
identified discrepancies warranting further investigation. For example: 

* Monitoring of Purchase Order Pricing: Using data mining[Footnote 11] 
and other audit techniques, we selectively reviewed more than $80 
million of purchase order information for fiscal years 2002 and 2003 
and found that the contractor was generating purchase orders with 
significant variances in unit prices. For example, in 2003, the 
purchase order price of a 10-ounce strip steak ranged from $3.02 to 
$7.58. 

* Monitoring of Actual Product Price Charged by Gate Gourmet: When 
Amtrak officials told us that purchase order information did not always 
reflect actual amounts paid,[Footnote 12] we tested actual prices paid 
by Amtrak to Gate Gourmet. To test purchase order data, we 
nonstatistically selected 37 payment transactions and reviewed the 
underlying supporting documentation and found evidence of widely 
variable product prices. For instance, in fiscal years 2002 and 2003, 
payments of over $400,000 for 12-ounce Heineken beer varied from $0.43 
to $3.93 per bottle. 

* Amtrak product pricing excludes labor costs. Our work revealed that 
Amtrak's product price to the customer does not take into account over 
half of Amtrak's total food and beverage costs. Amtrak's target profit 
margin is 67 percent for prepared meals and 81 percent for controlled 
beverages. These target profit margins are expressed as a percentage of 
sales over the item product cost charged to Amtrak. However, these 
target profit margins do not take into account Amtrak's on-board labor 
costs, which our work has determined is estimated at over half of 
Amtrak's food and beverage total expenditures. Amtrak's current food 
and beverage product pricing seems to ensure that its food and beverage 
service will not be profitable. 

* Available procurement expertise not brought to bear. Finally, 
Amtrak's procurement department was not involved in the negotiation of 
the original contract.[Footnote 13] The current contract was signed by 
officials of Amtrak's now defunct Northeast Corridor Strategic Business 
Unit.[Footnote 14] The contract's initial period was for about 7 years 
(January 29, 1999, to September 30, 2006), with a 5-year extension 
option. In addition, another agreement to supply Amtrak's Acela train 
service for food and beverage items from Gate Gourmet's flight kitchens 
was made verbally between Amtrak's former president and the president 
of Gate Gourmet. Amtrak does not have any documentation for the 
contract terms for this service. 

In contrast to Amtrak, other transportation companies we interviewed 
closely monitor their invoices and contractor payments through periodic 
audits or have given the responsibility for costs and pricing to the 
contractor. For example, Northwest Airlines officials stated that they 
conduct regular audits of "every [food and beverage] price" they are 
charged from their contractors and have found errors in either prices 
or labor charges in their contractor invoices. VIA Rail selectively 
audits their food supplier invoices that are attached to every billing 
statement they receive. Finally, the Alaska Railroad food and beverage 
business model gives responsibility for food and labor costs to the 
contractor, subject to contractual limits. 

Information for Accountability Is Limited: 

Finally, information that would provide accountability over this 
service, both internally and externally, is limited. We noted that 
while Amtrak reports the combined revenue from its food and beverage 
services in its monthly performance reports, it does not identify for 
stakeholders the revenue attributable to each service. Amtrak also does 
not include any information about its food and beverage expenses in any 
of its internal or external reports, including its monthly performance 
reports, its internal quarterly progress reports, or its annual 
consolidated financial statements. Absent this information, it is 
difficult for internal and external stakeholders to determine the 
amount of expense attributable to the food and beverage service and to 
gauge the profit or loss of the operation. This hinders oversight and 
accountability. 

Other transportation companies we studied have a different 
accountability structure for their food and beverage service. Because 
VIA Rail has a fixed subsidy from the federal Canadian government, VIA 
Rail's management has an inherent incentive to control its costs in all 
areas of its operation, including its food and beverage service. VIA 
Rail controls its food and beverage costs in many different ways 
including fixed fee supplier contracts, item price reports, monitoring 
of supplier markups and item prices, and fixed food cost budgets to VIA 
Rail menu planners. Northwest Airlines has a flexible monthly food and 
beverage budget that increases or decreases with ridership levels. In 
addition, each supplier contract has established markups on product 
prices and its contracts with food preparation and delivery providers 
have detailed labor rates that are all audited for accuracy. The Alaska 
Railroad receives biweekly reports from its contractor detailing its 
labor and food costs that show, among other things, contractor 
performance against the contractual cost caps. In addition, the 
contractor and the Alaska Railroad will conduct annual audits of its 
contractor's performance under the contract. 

Conclusions: 

Amtrak's food and beverage service may represent a relatively small 
part of the company's operating budget, but it speaks volumes about 
Amtrak's need to get its operations in better order. In administering 
this contract, basic steps for good management have been ignored or 
otherwise set aside. Omissions include not completing agreed-upon 
provisions of the contract, not carrying through with basic oversight 
called for in the contract, and ensuring that the organization was 
getting products at the most reasonable price. Prudence requires a 
stronger effort, beginning with carrying out those steps that, under 
the contract, should have been taken all along. Amtrak needs to take 
such steps not only to curb the losses in this program, but to help 
convince the public that it is acting as a careful steward of the 
federal dollars that continue to keep it operating. 

Recommendations: 

Based on our work to date, we anticipate making recommendations to 
Amtrak to improve controls over its food and beverage operations. Since 
we did not have sufficient time to obtain Amtrak's comments, as 
required by government auditing standards prior to this hearing, the 
recommendations remain tentative until that process is complete. At 
that time, we anticipate making the following recommendations that 
Amtrak: 

1. Better contain its food and beverage costs through: 

* Following its own procedures for ensuring proper contracts and 
payments;

* Enforcing key provisions of the current Gate Gourmet contract 
including annual reports that are independently audited by an outside 
auditing firm and certified by Gate Gourmet officials and conduct 
regular audits of discount and rebates. 

2. Prepare a written contract for food and beverage service on Acela 
trains that specifies the service to be provided, includes incentives 
to ensure efficient and effective contractor performance, and includes 
regular annual reports and audits. 

3. Create separate revenue and expenditure reporting and other basic 
food service metrics to allow for internal and external accountability 
for its food and beverage service and create incentives to reduce costs 
and/or increase revenue. 

4. Comprehensively review the revenue and cost structure of its food 
and beverage service to determine the most cost effective solution that 
can increase the financial contribution of its food and beverage 
function. 

Mr. Chairman, this concludes my testimony. I would be happy to answer 
whatever questions you or the other members might have. 

Contacts and Acknowledgments: 

For further information, please contact JayEtta Z. Hecker at 
heckerj@gao.gov or at 202-512-2834. Individuals making key 
contributions to this statement include Greg Hanna, Heather Krause, 
Bert Japikse, Richard Jorgenson, Steven Martin, Robert Martin, Irvin 
McMasters, Robert Owens, and Randy Williamson. 

FOOTNOTES

[1] Gate Gourmet International was formerly known as Dobbs 
International prior to January 1, 2001. 

[2] Fiscal year 2004 audited financial information was not available 
when we conducted our analysis. 

[3] There is an option for a 5-year extension. 

[4] Gate Gourmet has contracts with food and non-alcoholic beverage 
suppliers for Amtrak's food and beverage service. Gate Gourmet 
purchases alcoholic beverages from distributors but Amtrak is directly 
billed as Amtrak holds the liquor license to serve alcohol on its 
trains. 

[5] Under the Alaska Railroad contract, the contractor is guaranteed a 
5 percent profit margin. If food and beverage sales do not provide this 
5 percent margin, then Alaska Railroad makes up the difference. If 
margins exceed 5 percent, then the contractor and Alaska Railroad split 
the excess amount. 

[6] Evaluation Report: Food and Beverage Financial Performance, Report 
E-05-03, Amtrak Inspector General. 

[7] The current contract expires on September 30, 2006. 

[8] Northwest officials noted that in lieu of complimentary food 
service for coach passengers they have instituted a "Buy On Board" 
program which offers certain food items for sale to passengers. 

[9] Audited 2004 financial information was not available during our 
analysis. 

[10] GAO, Internal Control Standards: Internal Control Management and 
Evaluation Tool, GAO-01-1008G (Washington, D.C. Aug. 1, 2001). 

[11] Data mining applies a search process to a data set, analyzing for 
trends, relationships, and interesting associations. For instance, it 
can be used to efficiently query transaction data for characteristics 
that may indicate potentially improper activity. 

[12] For example, a price change may have occurred between the time an 
item was ordered and when it was delivered. Record keeping errors may 
also have occurred and unit prices in the inventory system may, for 
example, be based on a different pack size than that received or from 
that used for the last purchase. 

[13] Since the original contract, Amtrak's procurement department plans 
to take the lead role in any future renewal, bidding and negotiating 
the next iteration of the outsourced commissary contract. 

[14] According to Amtrak, Strategic Business Units (or "SBU"s) were a 
method for better managing performances and differences in businesses 
or markets within a company and were designed to anticipate and 
facilitate rapid response to change, place decisionmaking close to the 
customer, and establish authority and accountability. Amtrak 
established 3 SBU's--Northeast Corridor, Intercity, and West. The SBU's 
were largely self-contained units that had their own chief executive 
officers, handled their own train service, procured their own materials 
and supplies, and handled their own financial management and planning. 

[End of section]

Appendix III: Contact and Staff Acknowledgments: 

GAO Contact: 

JayEtta Z. Hecker, (202) 512-2834: 

Staff Acknowledgments: 

In addition to the contact named above, Greg Hanna, Irvin McMasters, 
Robert Owens, and Randy Williamson made key contributions to this 
report. 

(544109): 

FOOTNOTES

[1] GAO, Amtrak: Management and Accountability Issues Contribute to 
Unprofitability of Food and Beverage Service, GAO-05-761T (Washington, 
D.C. June 9, 2005). 

[2] There is an option for a 5-year extension. 

[3] Gate Gourmet International was known as Dobbs International prior 
to 2001. 

[4] Gate Gourmet has contracts with food and nonalcoholic beverage 
suppliers for Amtrak's food and beverage service. Gate Gourmet 
purchases alcoholic beverages from distributors, but Amtrak is directly 
billed as Amtrak holds the liquor license to serve alcohol on its 
trains. 

[5] All 2004 figures are unaudited. 

[6] Data mining applies a search process to a data set, analyzing for 
trends, relationships, and interesting associations. For instance, it 
can be used to efficiently query transaction data for characteristics 
that may indicate potentially improper activity. 

GAO's Mission: 

The Government Accountability Office, the investigative arm of 
Congress, exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548: 

To order by Phone: 

Voice: (202) 512-6000: 

TDD: (202) 512-2537: 

Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director,

NelliganJ@gao.gov

(202) 512-4800

U.S. Government Accountability Office,

441 G Street NW, Room 7149

Washington, D.C. 20548: