Potential Rail Car Cost-Saving Strategies Exist
GAO-10-730: Published: Jun 30, 2010. Publicly Released: Jun 30, 2010.
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Rail transit offers society a number of benefits, including reduced congestion and pollution and increased mobility. However, rail systems and cars are costly: Transit agencies can pay more than $3 million per car, often using federal funds. As requested, this report describes (1) characteristics of the U.S. market for transit rail cars, (2) the federal government's role in funding and setting standards for transit rail cars, and (3) challenges transit agencies face when procuring rail cars. GAO analyzed U.S. and worldwide rail car market data for commuter, heavy, and light rail systems and interviewed Department of Transportation (DOT) officials and domestic and international industry stakeholders, including the American Public Transportation Association (APTA).
U.S. demand for transit rail cars is limited and erratic and orders tend to be for customized cars. Transit rail cars in the U.S. comprise about 5 percent of the worldwide fleet. Transit agencies' purchases vary considerably over time: A large transit agency may replace its entire fleet in 1 year, contributing to a spike in the market, whereas in other years, there may be only a fraction of that demand for the U.S. market. Transit agencies often request custom car designs to address not only legacy infrastructure requirements and interoperability issues with existing fleets, but also preferences. Rail car orders of small size and demand for customized cars can increase the price per car by, for example, concentrating design costs among fewer cars. The federal government provides some funding for transit rail cars and has varying levels of involvement in setting design standards for transit rail cars. More than half of the transit agencies GAO interviewed purchased rail cars with some type of federal funding, such as formula or discretionary capital funds. When transit agencies use federal funds to purchase rail cars, certain requirements apply, such as "Buy America"--which requires, among other things, that rail cars be assembled in the United States. The Federal Transit Administration (FTA) ensures that these requirements are met by overseeing new transit projects and through periodic reviews. The federal government's role in setting design standards for transit cars depends on the type of rail. For commuter rail, the Federal Railroad Administration has established safety standards that must be met, since these cars are intended to run on the same tracks as freight rail traffic. For other rail transit, FTA provided funds to help APTA--the standard-setting industry group--develop voluntary standards, including those for safety. However, the Secretary of Transportation proposed legislation in December 2009, which was introduced in Congress in February 2010, to give FTA more regulatory authority in relation to safety. Transit agency officials identified several challenges in procuring rail cars, including securing funding, given all of their competing needs. Manufacturers and transit agencies also face legal and regulatory requirements, such as "Buy America" requirements, but have generally adapted to challenges posed by them. However, market challenges still exist, including the small size of many orders that may affect price. Joint procurements, whereby transit agencies combine orders, can help them increase their order sizes; however, they can only combine orders if a design exists that meets both agencies' needs. While a few transit agencies have become aware of opportunities to jointly procure rail cars through informal mechanisms, such as industry meetings, there is currently no formal mechanism to identify mutually beneficial opportunities for joint procurement. As FTA helps fund many procurements, it may be in the best position to help transit agencies identify joint procurement opportunities. Furthermore, FTA and APTA have efforts under way to standardize light rail cars to make rail car procurement more efficient and cost-effective. Standards also might be beneficial for other types of systems, such as streetcars, particularly for those without existing infrastructure limitations. GAO recommends that the Secretary of Transportation direct DOT to work with APTA to (1) develop a process to systematically identify and communicate opportunities for transit agencies with similar needs to participate in joint procurement and (2) identify additional opportunities for standardization, especially for new systems. DOT reviewed a draft of this report, generally concurred with its contents, and agreed to consider the recommendations.
Recommendations for Executive Action
Status: Closed - Not Implemented
Comments: FTA continues to work with APTA to develop a clearinghouse and other opportunities for joint transit vehicle procurements.
Recommendation: To ensure that federal funds are used efficiently when procuring transit rail cars, the Secretary of Transportation should direct the Administrator of the Federal Transit Administration to, in conjunction with the American Public Transportation Association, develop a process to systematically identify and communicate opportunities for transit agencies with similar needs to participate in joint procurements of transit rail cars.
Agency Affected: Department of Transportation
Status: Closed - Implemented
Comments: In June 2010, we found that the relatively small and erratic market for transit rail cars in the United States can hamper transit agencies as they purchase rail cars for commuter, heavy, and light rail transit systems, including streetcars. Design specifications that focus on custom designs suited for single-system use have increased the amount of work and related costs needed to design and test these cars resulting in increased cost and difficulty for transit agencies when procuring transit rail cars. Therefore, we recommended that the Secretary of Transportation direct the Administrator of the Federal Transit Administration (FTA) to, in conjunction with the American Public Transportation Association (APTA), identify additional opportunities for standardization, especially for new systems, such as light rail and streetcar systems. In 2013, APTA issued the Modern Streetcar Vehicle Guideline that provides guidelines to support specification and procurement of modern streetcar vehicles by identifying and describing important details and operating principles relating to their application. APTA, funded in part by FTA, also developed rail car standards for light rail vehicle procurement. Through these documents, transit agencies have a better understanding of the core technical and operational issues of designing a streetcar and are better able to navigate the process of specifying a vehicle and designing compatible infrastructure. By working with streetcar manufacturers that have designed a standard platform and selecting options from within a standard product range, transit agencies will be able to take advantage of standardization to reduce streetcar costs and delivery times.
Recommendation: To ensure that federal funds are used efficiently when procuring transit rail cars, the Secretary of Transportation should direct the Administrator of the Federal Transit Administration to, in conjunction with the American Public Transportation Association, identify additional opportunities for standardization, especially for new systems, such as light rail and streetcar systems.
Agency Affected: Department of Transportation