Changes Needed in Procedures for Setting Freight-Car Rental Rates

CED-77-138: Published: Nov 11, 1977. Publicly Released: Nov 11, 1977.

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When one railroad uses another railroad's freight car, it pays a per-diem rental rate. The Interstate Commerce Commission (ICC) establishes the criteria and procedures for determining per-diem rates. The per-diem rate reimburses freight-car owners for the costs of owning a freight car and for a fair return on investment. Although this should ideally allow an adequate supply of freight cars to move easily and fairly among railroads, shortages have been common. In 1966, Congress authorized an incentive payment to be added to the per diem; ICC implemented the incentive program in 1970. The Railroad Revitalization and Regulatory Reform Act of 1976 mandated that ICC revise its rules, regulations, and practices for compensation paid for the use of freight cars.

Although the Commission's August 1977 report in response to the congressional mandate should produce some improvements, these problems remain: (1) the assumptions on which per diem is based and formulas used for calculating per diem may not be current, possibly causing rates to be inadequate; (2) ICC has not evaluated whether incentive-per-diem payments achieved the desired results of producing better use of existing freight cars and providing money to buy more cars; and (3) ICC has not established specific measurable objectives for incentive per diem.

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