[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
AMTRAK FOOD AND BEVERAGE OPERATIONS
=======================================================================
(109-22)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 9, 2005
__________
Printed for the use of the
Committee on Transportation and Infrastructure
_____
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DON YOUNG, Alaska, Chairman
THOMAS E. PETRI, Wisconsin, Vice- JAMES L. OBERSTAR, Minnesota
Chair NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
WAYNE T. GILCHREST, Maryland Columbia
JOHN L. MICA, Florida JERROLD NADLER, New York
PETER HOEKSTRA, Michigan ROBERT MENENDEZ, New Jersey
VERNON J. EHLERS, Michigan CORRINE BROWN, Florida
SPENCER BACHUS, Alabama BOB FILNER, California
STEVEN C. LaTOURETTE, Ohio EDDIE BERNICE JOHNSON, Texas
SUE W. KELLY, New York GENE TAYLOR, Mississippi
RICHARD H. BAKER, Louisiana JUANITA MILLENDER-McDONALD,
ROBERT W. NEY, Ohio California
FRANK A. LoBIONDO, New Jersey ELIJAH E. CUMMINGS, Maryland
JERRY MORAN, Kansas EARL BLUMENAUER, Oregon
GARY G. MILLER, California ELLEN O. TAUSCHER, California
ROBIN HAYES, North Carolina BILL PASCRELL, Jr., New Jersey
ROB SIMMONS, Connecticut LEONARD L. BOSWELL, Iowa
HENRY E. BROWN, Jr., South Carolina TIM HOLDEN, Pennsylvania
TIMOTHY V. JOHNSON, Illinois BRIAN BAIRD, Washington
TODD RUSSELL PLATTS, Pennsylvania SHELLEY BERKLEY, Nevada
SAM GRAVES, Missouri JIM MATHESON, Utah
MARK R. KENNEDY, Minnesota MICHAEL M. HONDA, California
BILL SHUSTER, Pennsylvania RICK LARSEN, Washington
JOHN BOOZMAN, Arkansas MICHAEL E. CAPUANO, Massachusetts
JIM GERLACH, Pennsylvania ANTHONY D. WEINER, New York
MARIO DIAZ-BALART, Florida JULIA CARSON, Indiana
JON C. PORTER, Nevada TIMOTHY H. BISHOP, New York
TOM OSBORNE, Nebraska MICHAEL H. MICHAUD, Maine
KENNY MARCHANT, Texas LINCOLN DAVIS, Tennessee
MICHAEL E. SODREL, Indiana BEN CHANDLER, Kentucky
CHARLES W. DENT, Pennsylvania BRIAN HIGGINS, New York
TED POE, Texas RUSS CARNAHAN, Missouri
DAVID G. REICHERT, Washington ALLYSON Y. SCHWARTZ, Pennsylvania
CONNIE MACK, Florida JOHN T. SALAZAR, Colorado
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
VACANCY
(ii)
SUBCOMMITTEE ON RAILROADS
STEVEN C. LaTOURETTE, Ohio, Chairman
THOMAS E. PETRI, Wisconsin CORRINE BROWN, Florida
SHERWOOD L. BOEHLERT, New York NICK J. RAHALL II, West Virginia
JOHN L. MICA, Florida JERROLD NADLER, New York
SPENCER BACHUS, Alabama ROBERT MENENDEZ, New Jersey
JERRY MORAN, Kansas BOB FILNER, California
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
ROB SIMMONS, Connecticut EARL BLUMENAUER, Oregon
TODD RUSSELL PLATTS, Pennsylvania LEONARD L. BOSWELL, Iowa
SAM GRAVES, Missouri JULIA CARSON, Indiana
JON PORTER, Nevada PETER A. DeFAZIO, Oregon
TOM OSBORNE, Nebraska JERRY F. COSTELLO, Illinois
MICHAEL E. SODREL, Indiana EDDIE BERNICE JOHNSON, Texas
LYNN A. WESTMORELND, Georgia, Vice- JAMES L. OBERSTAR, Minnesota
Chair (ex officio)
DON YOUNG, Alaska
(ex officio)
(iii)
CONTENTS
TESTIMONY
Page
Biggs, Dan L., International Vice President, Transportation
Communications Union........................................... 34
Capon, Ross, Executive Director, National Association of Rail
Passengers..................................................... 34
Crosbie, William L., Senior Vice President, Amtrak.............. 8
Hecker, JayEtta Z., Director, Physical Infrastructure Issues,
Government Accountability Office............................... 8
Preston, Karen, Amtrak Passenger from Sacramento, California.... 34
Weiderhold, Fred E., Jr., Inspector General, Amtrak............. 8
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Brown, Hon. Corrine, of Florida.................................. 81
Costello, Hon. Jerry F., of Illinois............................. 94
Oberstar, James L. of Minnesota.................................. 163
Young, Hon. Don, of Alaska....................................... 185
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Biggs, Dan L.................................................... 46
Capon, Ross..................................................... 90
Crosbie, William................................................. 96
Hecker, JayEtta Z............................................... 124
Preston, Karen................................................... 167
Weiderhold, Fred E., Jr......................................... 172
SUBMISSIONS FOR THE RECORD
Biggs, Dan L., International Vice President, Transportation
Communications Union:
Employee Paid/Unpaid Hours, chart.............................. 58
Job Functional of Amtrak On-Board Service Workers, report...... 62
Amtrak On-Board Service Workers vs. Food Service Workers....... 74
The Truth About On-Board Service Workers' Wages, chart......... 79
Hecker, JayEtta Z., Director, Physical Infrastructure Issues,
Government Accountability Office, responses to questions....... 158
AMTRAK FOOD AND BEVERAGE SERVICE
----------
Thursday, June 9, 2005
House of Representatives, Committee on
Transportation and Infrastructure, Subcommittee
on Railroads, Washington, D.C.
The subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2167, Rayburn House Office Building, Hon. Steven
LaTourette [chairman of the subcommittee] presiding.
Mr. LaTourette. The Subcommittee will come to order.
I want to thank everybody for attending this morning. I
also want to thank people for their patience. This is the
second hearing that this Subcommittee will have relative to
some things going on at Amtrak. I would be remiss if I did not
note that the first hearing we had, we had the plane entering
the air space of the Capitol and we could not have our hearing,
and today we had a fire on the roof of the building. So this
may be our last Amtrak hearing for a little while.
Today, this hearing centers on Amtrak's food and beverage
service. As I indicated, it is the second in a series. The last
hearing focused on the Acela discs, the brake discs. Mr.
Crosbie, we are going to be a little generous with the five
minute rule today for witnesses, and maybe at the beginning of
your statement if you could just give us a little update of
what is going on with the Acela and the discs, I know people
would be interested in learning that.
The purpose of today's hearing is to examine an integral
part of Amtrak's passenger operations--the food and beverage
service provided annually to Amtrak's 24 million passengers. In
the United States there are essentially four types of railroad
passenger service--commuter, intercity, land cruises, and
dinner excursion travel. Although most commuter trains do not
provide any food or beverage service, for the remaining three
types of service the various cafe, snack, and dining services
are an important aspect of rail travel. Indeed, for the
passengers, some form of food service is both a practical
necessity and often the key social and leisure component of the
rail experience.
For the railroad, the food service is an essential and
challenging process that contributes little, other than good
will, to the bottom line of an operation. While the food
operations have never contributed positively to Amtrak revenue,
Amtrak has experimented over the years with different methods
of managing its food operations, trying to improve both quality
of food service while at the same time trying to reduce cost.
It is no easy task for any restaurant operation, especially one
that is traveling on wheels.
As expenses associated with Amtrak's food and beverage
operations are nearly $200 million annually when you include
the cost of labor, and is the main service provided for
customers other than the actual transportation itself, it is
appropriate for this Subcommittee to review the current state
of Amtrak's food services.
In addition, this review is timely and is warranted as the
major contract supporting Amtrak's food service is scheduled to
expire next year absent an agreement in the next few months to
extend that contract. That contract is between Amtrak and Gate
Gourmet International. Presumably, Amtrak has the option of
competitively bidding a new contract if it so chooses, and we
expect today we will get a status report from Amtrak as to what
direction they are heading in that regard.
I would note that my preliminary review of some of the
testimony today would lead me to opine that perhaps the
contract that is currently in existence between Gate Gourmet
and Amtrak is not a good one for Amtrak, and we hopefully can
explore that with questions.
Amtrak provides various levels of food service and beverage
service operations in 65 lounge or cafe cars and 83 dining cars
in its fleet around the country. Prior to entering into a
contract for support services with Dobbs/Gate Gourmet, Amtrak
supplied food and beverage services through Amtrak's
commissaries. As a result of the contract, Amtrak has
outsourced its procurement of food and beverage stock as well
as services supplies stock.
In addition to procuring and delivering stock, Gate Gourmet
manages, operates, and maintains Amtrak-owned commissaries
throughout the country, maintains and provides cleaning and
laundry services, and procures, manages and maintains the
operating equipment for Amtrak's employees to use in the
service of food and beverage operations.
Accordingly, the Subcommittee will hear testimony today
from a range of interested parties concerning Amtrak's food
operations. The Amtrak Inspector General and the General
Accounting Office each have reports and recommendations
concerning Amtrak's management of costs and operations. Amtrak
will provide an overview of current food operations, give a
status and update of its contracted operations, and address
concerns raised in the oversight report by the IG and GAO.
Finally, Amtrak will identify other difficulties in providing
cost-effective food operations.
I do want to note that to compare Amtrak's food and
beverage service to an individual commercial restaurant I think
is difficult, at best. There are a number of costs that Amtrak
and the rest of the travel industry incur that restaurants do
not, such as commissary and employee benefits for a unionized
workforce. There are two expenses that are unique to Amtrak and
the rest of the travel industry.
With that fact in mind, it is easy to see why the travel
industry as a whole does not view food and beverage as a direct
contribution to their bottom line. It is not viewed as a profit
incentive, instead, it is used to drive ticket sales in an
effort to increase revenues. Amtrak's food and beverage service
is no different in this regard.
As I indicated, while the initial contract, in my view at
least, is not a good contract from Amtrak's point of view, and
there may have been some management difficulties, and they will
be identified in this hearing, I would also parenthetically
note that I am impressed by the Gunn administration and the way
that they have attempted to make some changes, that I hope we
will hear about today, in their administration of this
contract.
In addition, the Subcommittee will hear from a member of
the Transportation Communications Union on behalf of Amtrak's
Service Workers Council, which represents the individuals who
provide service to Amtrak passengers in the cafe, dining, and
sleeping car, about the extra challenges employees face in
delivering services on a rolling restaurant. Additionally, the
Subcommittee will receive testimony from the National
Association of Railway Passengers, a passenger interest group,
on their concerns about the state of Amtrak food service. And
lastly, we will hear from Mr. Gary Preston of Sacramento,
California, who is an actual Amtrak customer.
Again, I thank all of you for coming. I thank the members
of the Subcommittee for coming today.
It is my pleasure now to yield to our distinguished Ranking
Member Corrine Brown from Florida.
Ms. Brown. Thank you, Mr. Chairman. I want to begin by
thanking Chairman LaTourette for holding this hearing on Amtrak
food and beverage operations.
In 1999, Amtrak contracted out its catering service to
Dobbs International Services, which was later acquired by Gate
Gourmet International. Gate Gourmet now manages Amtrak's 11
commissaries. At the time, Amtrak estimated that the contract
would be cost-effective. Years later, the savings were never
realized and Amtrak food and beverage operation is running at a
net loss of $84 million.
It is important to point out, however, that Amtrak food and
beverage service is a small part of Amtrak's overall budget.
And while there seems to be some reforms that Amtrak should
implement in the near future, such establishing performance
incentives, I am concerned about Congress' role here. I do
believe that we must ensure that the Federal funds that we
provide Amtrak are not being wasted. However, Congress should
not be micromanaging Amtrak's day-to-day operations. In fact,
our attempts to manage Amtrak have thus far caused more harm
than good.
For 25 years now we have criticized Amtrak because its food
and beverage service was not making a profit. In the 1980s,
Congress mandated that Amtrak food and beverage service break
even. Amtrak responded with drastic cost-cutting measures,
leading one former Amtrak CEO to say that Amtrak's food is so
cheap it is not even edible.
Congress stepped in again. This time it allowed Amtrak to
use up to 10 percent of its revenue on food and beverage
service. That provided some relief for Amtrak, but Congress
continued to pressure the railroad to contract out its food and
beverage operations. Amtrak gives in, and now we're criticizing
them for the very inefficiencies we created.
We have to stop micromanaging Amtrak and allow it to make
its own business decisions. It may actually make sense for
Amtrak to incur some losses on food and beverage service to
attract more business. That is what the airlines have done.
Airlines have struggled for years with their food and beverage
operations. Airlines have gone from offering four meals to
eliminating meals, to offering snacks to outright selling meals
and increasing restaurant service at airports. In 2004, United
spent $6.56 per passenger on food and beverage, while American
Airlines spent $6.24 per passenger, both of which are
compatible with Amtrak food and beverage costs per passenger of
$6.00.
But unlike the situation with Amtrak, Congress is not
considering reducing Federal spending on aviation because of
the airlines food and beverage losses, nor are we considering
managing airline customer service operations through
legislation. The fact is that these expenses are not a major
cause of railroad overall financial difficulties. Years of
starvation budgets is the cause.
And while I am interested in making Amtrak more efficient,
what we ought to be doing here is figuring out how to invest
more in our Nation's passenger rail network and holding
hearings on real issues that require Congress' immediate
action, rail safety, for example.
This Subcommittee has not had a hearing on rail safety
since June 6, 2002, even though the number of train accidents
is increasing. According to the Federal Railroad
Administration, there were 3,127 rail accidents in 2004, an
increase of about 400 since 2002. There have been at least 10
derailments in San Antonio, Texas since May 2004, some of which
had fatalities, and several recent derailments in Southern
California which warrant a congressional hearing immediately.
However, as I reviewed the hearing schedule for the next
few weeks, we have three more hearings on Amtrak but I do not
see anything on the schedule regarding rail safety. Mr.
Chairman, can you tell me if this Subcommittee is going to have
a hearing on rail safety this year?
Thank you. I am looking forward to hearing from our
witnesses.
Mr. LaTourette. I thank the gentlelady very much. I would
say for the purposes of the record, I am in receipt of the
gentlelady's letter of May 26. I appreciate your letter not
only on derailments but other train safety issues. I can assure
the gentlelady that we will work in a bipartisan fashion to
have such hearings as soon as we finish this batch of things. I
appreciate your concern and also your cooperation as we move
forward.
The gentleman from New York, Mr. Boehlert.
Mr. Boehlert. I pass, Mr. Chairman.
Mr. LaTourette. The gentleman from Florida, Mr. Mica.
Mr. Mica. Thank you, Mr. Chairman. I really do want to
thank you. In fact, if you did not have that beard, I would
probably come over and give you a kiss for holding this
additional oversight hearing. I have been on the Subcommittee
for I think all of my 13 years and we have tried several
attempts at reform of Amtrak.
Part of the problem is not Amtrak. The biggest part of the
problem is Congress and its reluctance to make significant
reforms of Amtrak. But I want to thank you publicly for
highlighting some of the serious operational problems.
We have focused on the problems with the Acela. You could
not have a more incredible high-speed rail fiasco if you had
sat down and tried to get Hollywood to produce the disaster for
film. We heard of a bungled acquisition, hundreds of millions
of dollars; we heard of an attempt, after spending hundreds of
millions of dollars, on high-speed rail service, and yet we
have Acela which is neither high-speed, even by our Federal
definition which is 120 miles an hour, I think it was going 83
miles on average per hour, which is about the same or maybe a
mile faster than the Metroliner. A bungled acquisition. And
buying equipment in a fashion that, if you come from the
private sector, is just absolutely astounding. So you have
focused on some of the problems with that beginning hearing.
Today we are going to focus again on operational shortfall.
I believe, ladies and gentlemen of the Subcommittee, only if we
had provided alcohol in large amounts and intoxicated some of
the staff at Amtrak could they possibly blur and bungle an
operation like food service with a captive audience and lose
the amount of money that they have lost, I guess it is
somewhere in the $140 million. We will hear more about that.
Ms. Brown. Will the gentleman yield?
Mr. Mica. No, I will not because I want to illustrate,
maybe when I am done if I have time and the Chairman will
yield, but I want to illustrate the problem with Amtrak. You
hear from the other side and folks that the problem is just
more money, we have to put more money in it. Let me illustrate,
if I may, the Amtrak food service operation. This is not what I
am saying, folks, this is the GAO. It says, ``This means that
Amtrak spends about $2 to earn $1 in food service revenue.'' So
this is the Amtrak method: we take in $1 and then we throw in
the garbage $2. We take in $1 and then we waste $2. We take in
$1, we waste $2.
Again, coming from the private sector
Ms. Brown. Will the gentleman yield?
Mr. Mica. Not at this point, please, I am not finished. But
I may yield
Mr. LaTourette. If you would just wait just a second, Mr.
Mica. The gentleman has indicated that he will not yield. We
are going to go to Mr. Blumenauer next, and then I will give
the gentlelady time.
Mr. Mica. Okay. But to conclude, these are operational
losses that can be resolved. I used this little waste basket as
an illustration. If the staff wants to go back and get the ARC,
Amtrak Reform Council, losses for 2001 of some of these routes,
I could takes chunks of money, from $236 to $347, and put it in
this waste basket. And these are because of operational
deficiencies and losses in the system that need to be
corrected.
So we have the testimony today on another incredible
bungled operation. We have heard a couple of weeks ago in the
last hearing of the high-speed fiasco which I described. Until
we take Amtrak and truly reform it--the other thing people say
is, well, all we have to do is put a little band-aid here and a
little band-aid there.
Folks, that is not going to work. We are going to be back
here again next year if we do not make those reforms. Somewhere
we have to stop throwing money in the waste basket.
So I hope I have made my point through this illustration. I
yield back the balance of my time.
Mr. LaTourette. I thank the gentleman. Mr. Blumenauer.
Mr. Blumenauer. Thank you, Mr. Chairman. I appreciate the
opportunity for this hearing. I apologize in advance, I have a
markup across the way and so I will be coming back and forth.
But my staff and I will be following this closely because I
think it is very important.
I appreciated, Mr. Chairman, your thoughtful comments sort
of setting the context and talking about the role that food
service played as part of the overall rail experience. I also
appreciated our Ranking Member, Ms. Brown's point about
concerns of congressional micromanagement. I think over time
the history of Congress in terms of authorizing and then not
providing money, in terms of interfering with the management of
Amtrak, the on again, off again, I think the unrealistic
expectations and interference plays a major role. I must
sympathize a little bit with Ms. Brown.
Although I think it is important for us to look at all
aspects of rail transportation, and I am committed to
understanding and supporting things that will make service as
effective as possible, but I am thinking about the same level
of scrutiny, talking about a captive audience and something
that is not moving, in terms of our own restaurant and beverage
service here on Capitol Hill for the House and the Senate and
look at that over time. We seem to have some difficulties and
yet we have a captive audience here.
And somebody pointed out to me this last week that the
subsidy that was given to the monument to transportation
inefficient planning and unartful contracting that is known as
the ``Big Dig'' would have run Amtrak for a decade as opposed
to the road project in Boston. And when we are talking about
``Big Dig,'' look at our own big dig outside the Capitol and
the massive cost overruns. I would wish that there would be the
same zeal here on Capitol Hill on things that are simple,
little, tiny construction projects that we have complete
control over and yet Congress does not have its act together.
I note some small degree of irony on my part in terms of
people who want to micromanage Amtrak, do not want to give it
the appropriate resources, and then not spending the time and
energy to get our own house in order and have the gall to talk
about Amtrak's almost criminal negligence when you can just
look outside the back of the Capitol, or look at our food
service, or the lack of oversight for things like the ``Big
Dig.'' I think it is appropriate for us to think about.
I would be interested in the history about the rail
companies before they off-loaded passenger service to Amtrak
and saddled it with many of their obligations and
responsibilities for their employees, for pensions, what their
food service costs were in terms of a profit center. You have
already mentioned the airline industry. You know, we are big
partners with the airlines. We have given the airlines more
Federal money since 9/11 than we have given Amtrak since 1971.
And Ms. Brown again pointed out some of the concerns there.
Mr. Chairman, this is not to say that I am not supportive
of the analysis. I just note a little bit of the irony in terms
of what appears to me to be a double standard on the part of
Congress generally for things that we have under our control,
whether it is construction or it is food service. I think it is
ironic.
I look forward to working with you on the whole range of
rail issues, and look forward to this hearing today. If I have
time remaining, I would yield to my colleague, Ms. Brown.
Mr. LaTourette. The gentleman has about 20 seconds left,
and I think that would be a good idea.
Ms. Brown. With 20 seconds, I would just like to say that
the Chairman of the Aviation Subcommittee knows that we spend
$4 billion a year on aviation, including the appropriation plus
the security reinvestment. That was an interesting stunt that
you just pulled. But in every news article that I have been
watching, there is much discussion about what is going on in
aviation and it is not any more secure since 9/11. Security is
the issue here, whether it is Amtrak or aviation.
Mr. LaTourette. I thank the gentlelady. I agree that
security is the issue in both rail and aviation. But today we
are going to talk about food and beverage service.
[Laughter.]
Mr. LaTourette. A couple of housekeeping matters. I
misspoke in my introductory remarks and apparently Mrs. Karen
Preston is going to speak, and I do not want to cause a
domestic difficulty. Gary Preston is not going to be the
witness on our second panel. But I am assured that Karen
Preston is, indeed, a real Amtrak passenger from Sacramento,
California as well.
Two other things. It is the long-standing policy of the
full Committee and this Subcommittee that we receive testimony
well in advance, and that leads to sort of a problem that I am
having. One is, we did not get testimony until late yesterday I
believe from most of the witnesses on the first panel.
But that goes into the second problem, which is, prior to
our Acela hearing there were news reports about the testimony,
and apparently some of today's testimony has been released to
news outlets again. I would remind witnesses, ask them, because
you are going to be back on other hearings, to not do that. And
if it is people other than witnesses, I would ask you not to do
that.
As you know, testimony is revised and changes are made and
the testimony that actually comes forward at a hearing may be
substantially different from the testimony that is prepared
even a few days before. So I would ask you to respect the rules
of the Subcommittee.
It is my pleasure now to yield to the gentleman from
Louisiana, Mr. Baker.
Mr. Baker. Mr. Chairman, to advance your hearing, I have no
comment to make at this time, but I will have more later.
Mr. LaTourette. I thank you very much. I thank the
gentleman.
It is now time for our first panel. And again by way of
remark, I have been advised that Ms. Hecker may have a plane to
catch. But she has folks from her organization that will be
here to fill in should she have to leave at about 11:30.
Our first panel consists of JayEtta Hecker, who is the
Director of Physical Infrastructure Issues of the GAO; Fred
Weiderhold, who is the Inspector General for Amtrak; and
William Crosbie, who is the Senior Vice President at Amtrak.
All three of you were present at our last hearing. I
appreciated your testimony then, I appreciate your coming
today.
And again, because of the scope of your observations, we
are going to be a little lenient with the five minute rule. But
I would ask you to sort of watch the lights as best you can and
if we can stay as close to that mark as possible, I know that
we would appreciate it.
Ms. Hecker, thank you for coming and we look forward to
hearing from you.
TESTIMONY OF JAYETTA Z. HECKER, DIRECTOR, PHYSICAL
INFRASTRUCTURE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE; FRED
E. WEIDERHOLD, JR., INSPECTOR GENERAL, AMTRAK; WILLIAM L.
CROSBIE, SENIOR VICE PRESIDENT, AMTRAK
Ms. Hecker. Thank you, Mr. Chairman, Ms. Brown, other
members of the Committee. I am very pleased to be here today. I
have a detailed statement, but I have tried to consolidate it
in some slides to more briefly get through the key points. I
think you see it above there.
The bottom line is really in the title, that our focus is
that management and accountability issues are contributing
factors to the unprofitability of food and beverage services.
My remarks will actually focus on three areas: the incentives
for cost control in the contract with the food supplier;
second, Amtrak's exercise of controls over the contract; and
finally, information available to monitor and control costs of
food and beverage services at Amtrak.
I have a couple slides on some background and I think it is
useful before I go to those three questions. The first one, as
Mr. Mica said, is that Amtrak expends $2 of expenses for each
$1 of revenue in food and beverage services. And this is the
data for the last three years, 2002, 2003, and 2004.
The next slide actually breaks it out for each of those
years, and you can see there is actually a consistent pattern
over the three years of expenses consistently exceeding revenue
basically on that two to one ratio.
Now the next slide actually gives you the components of
Amtrak's food and beverage expenses. I think as many of you are
aware, over half of the expenses are actually Amtrak labor
costs. Those are the people on the train actually providing the
services. The orange cut in the circle is actually two pieces
of the Gate Gourmet services. The one on the bottom, the 23
percent, is the food and liquor produce cost.
So that is just the commodities that are bought or handled
by Gate Gourmet through the commissaries and provided onto the
trains. And then there are a series of fees that Gate Gourmet
has, and those are about 15 percent of the total expenses. And
then finally, that yellow wedge is all other Amtrak food and
beverages.
And quickly looking through Mr. Crosbie's statement, he has
not broken out that yellow piece. We did because it is very
distinct, it is direct cost to Amtrak, it includes crew meals.
It is different than the provision of food and beverage
services. So it was our view that it made sense to break it
out.
The final slide on background is some of the points that
all of you have already mentioned, so I will go through it very
quickly. Food and beverage service has been provided since
Amtrak was formed. Until 1999 Amtrak ran the entire operation
internally. In 1999, Amtrak, actually a head of the northeast
corridor business unit, signed a seven year cost-reimbursable
contract with Gate Gourmet, which was Dobbs at the time, and
the responsibilities were, first, to manage the 14 Amtrak
commissaries, and then to handle all of the food and stocking
onto the trains.
Amtrak, under the contract, would be charged for food
costs, a management fee, a labor fee, as well as some other
fees. And the original contract actually included numerous
provisions authorizing Amtrak oversight.
Now getting to my first point about the contract, and I
will try to go quickly over this because I understand Amtrak
really does not have much disagreement with this. The contract
not only provides little incentive, but in our view it is
actually perverse incentives. The contractor is reimbursed for
all costs. They can add the range of these fees on top of the
food and beverage costs.
None of the fees or the guaranteed profit are tied to
controlling costs or any performance features. And despite a
discussion in the original contract of incentive standards and
the call for them within 45 days of the contract, none of them
were ever created. So that is the first point, the contract
really has perverse incentives.
The second is the question of whether Amtrak has really
exercised prudent management of the food and beverage contract.
We have three points there. The first is that Amtrak has really
never required the annual independently audited report that is
called for in the contract. That would be an overview of the
performance of the contract, the controls, and the exercise of
the substantial independence that the contractor has. So that
has never happened.
The next is perhaps even more important. They have never
audited the contract purchase data to assure that the
contractor passed on discounts or rebates to Amtrak. And the
next slide actually shows you some of the data that was put
together based on an inquiry we made to Amtrak. They basically
could not tell us how many rebates or discounts they got.
And at our request, they went in and for 2002 and 2003, for
a total of $90 million of purchases, the big blue circle, $6.5
million of the purchases were subject to discounts and rebates,
and approximately a half a million dollars were actually
credited to Amtrak. So that underscores our point that there
was not really a systematic assurance that these discounts and
rebates were being passed on to Amtrak.
The third point about the management oversight is our
concern that Amtrak has not adequately monitored purchase
prices in particular. My next slide is the result of some
forensic auditing and data mining that we did of actual
purchase orders and actual purchase prices paid. Basically,
this limited sample, this is not representative, showed that
the price of beer went from $0.43, which was actually a great
deal, we agree, to $3.93 for a single 12-ounce beer. Similarly,
on beef tenderloin the price ranged from about $3.00 to $6.50.
So again the prices paid varied widely. And while we
understand there is some daily monitoring by Amtrak, in our
view it is not systemic, it is not adequate, and it is really
not controlling for these significant variations over time.
The third objective, Amtrak collects information to monitor
food but it inhibits accountability. Basically, food and
beverage expenses are not included in the monthly performance
report or the annual consolidated financial statement. And
while there is some pulled out reporting on revenue, it is not
really systematically tracking, reporting, or monitoring food
and beverage expenses.
I have gone over my time, so I will skip these. We had done
some quick comparisons with VIA Rail, the Canadian passenger
rail system, who has a very different system, the Alaska
Railroad, which privatizes the whole function, and Northwest
Airlines, which does detailed auditing of all of the invoices.
Based on this work, we have some recommendations under
consideration which we will be forwarding to Amtrak. First,
follow their own procedures for controlling payments. Utilize
key controls that are actually available under the contract.
Develop a written contract for the Acela food and beverage
services. Improve reporting on food and beverage expenses and
revenues.
And finally, the big one, particularly with the coming
expiration of the contract, comprehensively review the most
cost-effective solution to improving the performance of food
and beverage function, not necessarily to make a profit, but to
assure the most cost-effective delivery of food and beverages
services on Amtrak trains.
That concludes my statement, and I will be happy to take
questions. Thank you very much.
Mr. LaTourette. I thank you very much.
And as I indicated before, Mr. Fred Weiderhold, who is the
Inspector General for Amtrak, is here. Mr. Weiderhold, thank
you for coming, and we look forward to hearing from you.
Mr. Weiderhold. Good morning, Mr. Chairman, and also good
morning to the rest of the members of the Committee. It is a
pleasure to be here. Let me give you my take on the reasons for
the review, at least that the IG office undertook.
First, Amtrak's Strategic Reform Initiatives plan, which
was submitted to Congress in April and accompanied the fiscal
year 2006 budget request, calls for internal reform and
improved operating efficiencies. I think Amtrak has to
demonstrate both in its food services and in other parts of its
business line that it is willing to undertake critical reviews
to forward internal reform. I think that is an expectation of
the Administration, I think that is an expectation of Congress,
and I think, more importantly, it is an expectation of Amtrak
itself that it has to take on some of these tough issues.
Second, from an IG perspective, we saw the need to conduct
a systemic review to address what I would call historically
weak controls, some of which JayEtta talked to, and business
losses. This is what I call plugging the holes. I think there
is probably about $7 million to $10 million worth of losses
that are just simply waste. We have to go after that and we
have to change the business model.
Finally, how do you change that business model? I think it
is important to identify those opportunities that will improve
the bottom line performance. But I think those options have to
be viable, to Ms. Brown's comments, that you just cannot
wholesale hold Amtrak accountable to a break-even standard. I
happened to be around at Amtrak in the 1980s when that mandate
was given and the pendulum swung too far the other way, went to
paper plates, worse than airline foods, and that is the last
place that I think Amtrak should be at the end of this process.
Just some general facts on Amtrak's food and beverage
operations, you have heard a few of these before. I have a
slightly different take on it.
First, I think that food and beverage operations and food
and beverage services at Amtrak are absolutely necessary on
trains operating through more than one meal period. Currently,
food and beverage service is operated on 90 percent of the 300
trains that Amtrak operates daily. It is provided on all
overnight trains and most short distance trains. It is
delivered via dining cars, cafe cars, lounges, or a combination
thereof. It is considered by passengers to be an important part
of the rail travel experience, and, indeed, it is something
that differentiates Amtrak from some of its competition. At the
same time, it represents about $200 million in annual expenses,
and that is really the focus of what we are talking about this
morning.
We conducted a report last year, I want to just synopsize
that report briefly for the Committee. We looked at the
financial performance of food and beverage service for fiscal
year 2003. You have a chart here in front of you. You have seen
some of the detail before. Basically, this shows about $80
million taken in in revenue, $162 million in expenses, for a
net operating loss of about $84 million.
I would also point out that this excludes maintenance and
interest for the rail cars themselves. This would add about an
additional $50 million to the loss figure. So Amtrak's annual
losses on food and beverage services are closer to $130 million
annually.
If you took the same data, and this is basically a bar
graph of the data you just saw but it makes it easier to read,
but what you have here, what JayEtta spoke to, is basically
showing that it takes $2.06 worth of expense that is covered by
$1 of food sales.
Moving on to the core of our report. We had to benchmark
against something. And I recognize, and we caveat in our
report, that benchmarking against a U.S. restaurant industry
may not be apples to apples. I think some people may consider
it to be apples to oranges or apples to grapefruit. But we had
to start somewhere and there are in fact more similarities than
differences between Amtrak's food service and that of the U.S.
restaurant industry.
In this chart, there are things that kind of stand out
right away, if you will. Obviously, the blue bar shows labor.
You see that labor is considerably more on Amtrak as a ratio
against the food service dollar than it is for the U.S.
restaurant industry, almost three times greater.
The other thing when we first ran this data, and what
really surprised me, was the high cost of Amtrak's food and
beverage stock against that revenue dollar. If you look at the
limited service restaurant, which is about a $7 sale, more like
a delicatessen but it is very close to Amtrak's lounge service,
and the full service restaurant on the bar graph on the far
right, which is about a $15 to $25 ticket, which is closer to
Amtrak's full dining service, you will see a lot of consistency
both in the percentage of labor and the percentage of food
stock costs between both the limited service and the full
service restaurants.
But what you see with Amtrak is a 50 percent higher number
for their purchase of food. That surprised me quite a lot. I
thought Amtrak would at least be in line with the restaurant
industry with respect to the purchase of its food.
The other thing that surprised me when we did this analysis
was the high carrying cost of the commissary operations. What
you see there is basically $0.37 of every revenue $1.00 has to
go to warehousing and handling the product.
We also attempted, the next graph, we also attempted to get
at what I would call the productivity of the worker. And this
is actually some good news here, because in almost every
instance Amtrak's workers performed better than the restaurant.
Which means that they produced a certain amount of revenue
exceeding those of the restaurant experiences.
The only difference on this chart that you see, below the
line are the six long distance diners that we examined. But I
think that is adjusted because their staffing levels on the
diners run from about four to seven persons per diner. We think
that there is opportunity here for even further revenue
increases, and I will talk to that more in just a moment.
This is also a slide that has caused a little bit of
controversy. This is the annual labor cost per full-time
equivalent employee. And let me just add a couple of caveats to
this slide, if you will. First, this is adjusted to a 35-hour
work week. Second, these data exclude tips but include
benefits. And in the U.S. restaurant industry, as most of you
know, benefits are nominal or non-existent.
Third, we recognize that there are major differences
between the Amtrak model and the restaurant model here. We are
not saying that the Amtrak workers need to be pushed down to
that minimum wage; that is not what we are saying at all. It is
an important data point among others that you have to consider
when you are looking at the cost of carrying this service.
More generally I can say, when we do get to those hearings
on security and safety, I have a position that there are
certain crafts and skill sets inside of the company that are
underpaid. The Amtrak police department, for example, basically
pays wages that are considerably under market. I think there
are crafts and skills inside of the company--electricians in
New York, what we call the A-men that work under the wire--
there are certain skills inside of Amtrak where we lose a lot
of talent because we do not pay what we should be paying. Some
people, I saw a couple of statements, perceive my bringing this
up as being anti-labor. That is not the case at all. What I am
saying is that if you are going to work this problem, you have
to work all of the aspects of the cost at one time.
One of the reviews we undertook basically was where those
opportunities lie for improvement. This first bar above the
line, if you will, is essentially revenues into the corporation
from food and beverage service. The next bar that is
represented here are the costs that are out. And you see this
delta that represents roughly $84 million in losses each year.
Finally, you see what I call the opportunity for savings
that we are presenting to the company, is that if you move the
ratio of labor and get it closer to the U.S. restaurant model,
you have an opportunity to improve up to $50 million. But it is
going to be very, very difficult to get there. The point I
would make here is that this ratio is also a function of
revenue. It is not just the number of workers, it is not just
the rate of pay, those are very important, but you cannot
forget the revenue feature of the ratio proportion.
One of the things that I notice when I go over to Union
Station or New York Penn or whatever, there are a lot of people
that buy their foodstuffs before they get on the train. There
is a line at the various establishments, at Starbucks, at
Corner Bakery, they get their coffee, they get their snacks,
they get their bagels and they get all that before they get
onto the train and they settle into their seats.
Under some models, that might be a business that Amtrak
wants to go after because we would want them to buy that
foodstuffs on the Amtrak train. I think that is a missed
opportunity. I think that is one of the things the company has
to consider in fixing the problem at hand.
Next is the opportunity for what I would call improvement
in the purchase of food and beverage supplies. Again, you have
the same two bars--revenues, on the one hand, coming in, cost,
on the other, going out. If you just move the ratio closer to
what the U.S. restaurant industry standard is for the
acquisition of food and beverage service, there is a potential
net improvement of about $40 million.
One of the comments made to me yesterday was that there was
a certain uniqueness to the Amtrak food product that caused it
to incur cost greater than 50 percent of those costs by
restaurants. I do not think that is the case at all. I think
there is significant room for improvement both with the
commissary contract and with the absolute cost of the
foodstuffs put onto the train.
What has Amtrak done since we delivered our report last
fall? I can tell you we have worked very closely with Mr.
Crosbie and Mr. Gunn. They took our report very seriously. We
have had a number of discussions since the report was issued
and they have already begun to take steps to try to close some
of the weaknesses that we have identified. They have planned
the pilot test at contractor food service on a selected short
distance route; they have replaced a full service diner with a
modified diner lounge on at least two of the long distance
trains; they immediately reduced staffing levels on the Acela
Club service; and they have considered eliminating food service
on one of the short distance routes.
In summary, I think that Amtrak must provide the
appropriate level of food and beverage service that will retain
existing passengers and possibly attract new passengers to
Amtrak service while at the same time implement substantive
changes in the business model. Those changes should be oriented
to reduce the labor cost for each dollar of sales and to reduce
the cost of the food and beverage stock for each dollar of
sales.
That concludes my oral comments. Thank you.
Mr. LaTourette. I thank you, Mr. Weiderhold.
Mr. Crosbie, again welcome to our Subcommittee. I know that
you want to talk about the food and beverage service, but maybe
at the beginning of your testimony if you could give us a
little update on the Acela, we would appreciate that. Welcome.
We look forward to hearing from you.
Mr. Crosbie. Thank you, Mr. Chairman, members of the
Subcommittee.
On Acela, here is where we are. And these things change, I
caution everybody, it is a fairly complex issue we are dealing
with. I think some of the things you would be interested in,
obviously, is when is the Acela going to be back, what is the
solution to bringing it back, and what has changed. Right now,
I can say that at some time in July you will start to see the
Acela back in service. It will be gradual, as we have said
before. By the fall you will have all 20 train sets back in
service.
The solution we are looking at is the new Knorr disc we
previously talked about. We are going through a validation and
a verification process on an instrumented train on the
northeast corridor right now. That is going well. We have
cooperation from all parties. We continually have to remind
everyone, though, to keep the legal counsels out of this and
focus on getting those trains back in service.
The things that will change when it comes back. We have
started to put in place a new inspection testing and
maintenance procedures for whatever disc we use, including the
new Knorr disc and as well the SAB Wabco disc. So that is where
we are. We also have a better understanding of what may have
caused the cracks. It is extremely technical, the explanation
of this, and it is something that we are just beginning to
understand.
Mr. LaTourette. I think we will wait for Mr. Oberstar to be
here to explain the steel to us.
[Laughter.]
Mr. LaTourette. So maybe if you want to move on to food and
beverage.
Mr. Crosbie. Again, Mr. Chairman, thank you for holding
this hearing. I do welcome this hearing for an opportunity to
clarify the food and beverage business at Amtrak.
You have my written testimony I would like that submitted
for the record, you also have a series of slides that I would
like submitted for the record. I had planned on presenting the
slides fully to you today, but I feel compelled, based on the
GAO's written testimony, to clarify, correct, and properly
characterize some of their statements. So I would like to take
you through that.
Let us start by saying where we do agree. We do agree that
this existing contract is not a good contract. I have met with
the chairman, the CEO, and the president of Gate Gourmet and
they also agree that this is not a good contract for them as
well. So we certainly agree there. The current status is we are
trying to manage with a contract that all parties feel is not
appropriate in today's food and beverage business.
In the GAO's report, they mentioned, they mentioned it
again here today, the issue of asking for audited reports. When
Mr. Gunn came on board in May 2002 and on into 2003, he was
definitely focused on the food and beverage business. As a
matter of fact, we did, in light of that clause in the
contract, we did ask our Inspector General, Mr. Weiderhold
here, to do an audit of the contract. He did that audit. I have
it here for you today. Let me just read a couple of key
paragraphs out of that audit.
``We conducted an audit of Amtrak payments to Gate Gourmet
for operation of Amtrak's nationwide commissary services. The
audit project was initiated based on our risk-based audit plan
and our department's request.''
``We found that since food and beverage management was
reorganized under your office, costs have significantly been
reduced and controls have been implemented to reduce losses.''
We felt at the time, and you have got to put this in the
context of where Amtrak was in May 2002-2003, we had a cash
crisis, we were trying to close our books for 2001, we felt
that using to some degree the independence of the Inspector
General was prudent. We felt that their review was thorough and
accurate, and we feel that it certainly complies with the
intent and spirit of that clause. And the GAO has failed to
recognize that effort.
In terms of the rebates that they discuss, we feel that is
very misleading, the presentation. The $90 million they quote
is the entire cost of the goods purchased. The rebates refer to
the $6.5 million that they had mentioned. The way the rebates
are handled is the rebates come directly to Amtrak, they do not
go through Gate Gourmet.
In terms of the talk about systematically analyzing and
monitoring purchase prices reported by the contractor to
identify variances or products with high costs, and I am
quoting right from their written testimony. This is not true.
We monitor food and beverage purchase prices on a daily basis
at all of our commissary locations. We utilize reports entitled
Purchase Comparison Report by Location, which has been provided
to the GAO. This report highlights any purchase prices that
varies from previous known levels.
In terms of the Heineken example, let us get the record
straight on that. Use of this example is grossly misleading.
Amtrak never paid $3.93 for Heineken beer. We reviewed several
years of purchase records and determined that the GAO's example
pertains to a single data entry error that was corrected within
40 minutes of the error. The actual price paid for over 200,000
bottles of Heineken was $0.83 per bottle.
The GAO states that the level of information Amtrak
collects and uses to monitor its food and beverage service and
report results to external and internal stakeholders inhibits
accountability for its performance. This statement is vague and
misleading. We produce reports pertaining to our food and
beverage expense and revenue. Much of this information is web-
based, available to internal stakeholders on an as-requested
basis. Reports are provided to external stakeholders when
requested, for example, our State partners.
They mention comparison with VIA Rail, that it monitors its
suppliers' product prices through regular reporting. Northwest
Airlines examines its actual food and beverage expenditures
against its food and beverage budget every month. While this
statement is completely unfounded, the fact is we do the same
and have demonstrated what we do for the GAO.
In terms of the number of commissaries, we cannot seem to
get that right. They say it is 14. I think we know it is 11.
There is a table in their written testimony which lays out
the financials for 2002, 2003, 2004 and draws some conclusions
from that. But I would submit that any conclusion you draw
should look at the cost per passenger. That is never talked
about in here. Although the loss on food and beverages went up,
you have to put it in the context that ridership has increased.
They make a comparison again with Northwest Airlines, that
they have reduced their food costs by 4 percent. This is an
incredible statement in the context in which it is stated.
Amtrak has reduced its food and beverage costs by 10.8 percent
over the same period. But the GAO makes no mention of this.
In terms of Gate Gourmet's budget, I want to make the
record clear on this, we approve their budget. It is not a
review. The GAO states that it is a review. We approve it.
They talk about incentives can also be written into a cost-
plus contract to control costs and enhance performance;
however, these incentives are essentially absent from Amtrak's
contract with Gate Gourmet. And as I stated earlier, we
certainly agree with that.
Again a comparison with Northwest Airlines. Northwest
Airlines has cost-plus contract with all of its food and
beverage contractors, including Gate Gourmet. Northwest's
management of them is different, they state. Again, we find
this statement very misleading. We perform essentially the same
functions as indicated. We have never been asked about how we
manage our menu changes, in this specific example.
In terms of the example of the steak, again I want to set
the record straight there. The statement is very misleading.
Our strip steaks are purchased nationally under a contract with
Great Western Beef at a unit cost of $7.95 per pound. This
produces approximately a cost per steak of $4.97. Our review of
the example cited by the GAO references two emergency purchases
in the retail market that were properly documented.
Mr. LaTourette. Mr. Crosbie, are you nearing the end do you
think?
Mr. Crosbie. I will cut it off there. We have other
examples as well.
But what I want to close with is that I am deeply disturbed
with the process the GAO used in preparation for this hearing.
We have been providing the GAO with vast amounts of information
at their request. They e-mail over to us requests for
information and we send it over to them.
The very first time we got a statement of fact was last
week and it was on our management accountability practices.
That is the first time we saw any feedback as to what they were
doing with all of the information we provided them. Tuesday of
this week at 4:00 we were given an advance copy of their
testimony. We went through it and we engaged in a
teleconference with them. The things that I have put on the
record here today were presented to them as well, yet they
never changed anything.
So I am deeply disturbed with this process. I do not like
handling business in this manner. I think it should be handled
where if they take some numbers in, they look at them, they do
not understand them or they draw some conclusions, we should
have an opportunity to make sure that those conclusions are
accurate.
If you would allow me a little bit more time, I would like
to go through a couple of key slides in our presentation.
Mr. LaTourette. If you could try and get us there in about
two minutes.
Mr. Crosbie. Okay. The key item on the history I want to
remind everyone about, I think everybody is getting a sense of
who I am and what I stand for and my principles, and one of
them is safety of our passengers, which is primary in my mind.
In 1992 the FDA consent decree signed by Amtrak, I want to
remind everyone, no matter what we do with the food and
beverage, it involves the safety of our passengers and it is
very easy to get into hot water with that.
I am just going to flip ahead here to something that the IG
has certainly recognized. In terms of getting at the losses, we
have to talk about the labor costs. They represent 60 percent
of our costs. That is what we need to talk about.
Since 2002, as I mentioned, our corporate focus has been to
reduce head count, implement budget controls. In food and
beverage, reducing theft, implementing our cash registers,
controlling Gate Gourmet contract, reducing food and beverage
cost per passenger.
This slide gives you a sense of some of the items we have
done since 2002. I will not go through every one of them in the
interest of time, Mr. Chairman.
When the Acela came out of service, we had adjusted the
menus on our Metroliners in terms of when the Acela was just
prior to it coming out of service. We had also reduced the on-
board first class attendants from three to one, and that was
implemented in two phases. And you can get a sense of some of
the other items that we have initiated since the new management
team at Amtrak has taken over.
And that gives you a sense of the total revenue opportunity
as well.
Here is just some of the things we are looking at. Combined
diner/lounge to save some more money. Basically, many of these
are focused at reducing our labor costs, which is where we feel
we need to be focused.
In the future: We are working with Gate Gourmet, we are in
a renegotiation. It will not be an extension of the existing
contract. There are 12 pages we have of documentation of
clauses that we certainly want modified. We have just added a
new vice president of customer service who will be responsible
for this area, will be the voice for the customer.
That concludes my testimony, Mr. Chairman.
Mr. LaTourette. I thank you, Mr. Crosbie. As you requested,
your statement and your slides are already in the record and so
they will be available for anybody that wants to review the
proceedings here, and also it has been made available to all
members.
Another housekeeping matter. I would just indicate that we
invited Gate Gourmet to appear here today and they declined our
invitation, which is certainly their right to do so. But we
wanted everyone that is going to be mentioned today to have the
opportunity to say what was his or her position.
I want to begin where you stopped before the slides. I do
not know what everybody else does, but in preparation for these
hearings I try to meet with anybody that wants to meet with me
to go over things. I guess I am a little dismayed between the
presentation of Amtrak and GAO in that, Ms. Hecker, I think
when I met with Amtrak officials they indicated kind of what
Mr. Crosbie talked about, and that is that there was a four
hour conference call to go over some of the findings that GAO
had come up with.
And again, the way this thing works here is the staff will
collect some information and they have to sell it to the
members that this is a good idea to have a hearing, and I still
think it is a good idea to have this hearing. But there are
some attention-grabbers in your report that, at least from what
Mr. Crosbie said today and in information that I have received
over the last couple days, that I do not think are fair. And
then I am going to whack you, Mr. Crosbie, and Amtrak about
your contract.
But the things that I do not think are fair, the attention-
grabbers that have sort of been hit upon, I think it would be
horrible mismanagement if there was a fluctuation between
buying a Heineken's beer for $0.43 and $3.93. Mr. Crosbie
indicates that not only was that an accounting error that was
corrected within 40 minutes but that GAO was advised of that in
this conference call.
On page 12, there is a fluctuation on these strip steaks,
which must be nice strip steaks, between $3 and $6. He has
explained that today that that was an emergency. I guess they
had a bunch of guys that liked beef and they ran out of beef
and they had to go to the Stop-n-Shop and get some more steaks
and paid more on two occasions. That is a grabber.
And then further, there is some $400,000 purchase of
napkins, and it is my understanding, at least from this
conference call that took place between Amtrak and GAO, that
the napkins never got purchased.
Mr. Crosbie. That is correct.
Mr. LaTourette. My question I guess to you, Ms. Hecker, is
that in coming forward, I think the purpose of this oversight
is to have oversight and chastise Amtrak for those things that
they are doing wrong, but not to sensationalize on beer,
steaks, and napkins, which if I were in the newspaper business
that is what I would write about tomorrow, I would say beer and
steaks gone amok on Amtrak's rails.
But I do not think those are good examples based upon what
I know. I guess I would ask you, is what Mr. Crosbie said
accurate in terms of that is how those three items at least can
be explained?
Ms. Hecker. Thank you, Mr. Chairman, and I appreciate an
opportunity to go to the heart of Mr. Crosbie's concern. GAO,
as you know, is in the course of conducting a very
comprehensive review for the Chairman of the full Committee on
the large issues of Amtrak's management and performance. That
review has been going on for about eight months and is focused
on five key areas, two of which are cost control and financial
management.
In the course of those areas, we are intensively looking
across several areas and everything that we have learned that I
have shared with you today are just examples across many areas
of the absence of adequate internal controls to control costs.
And this is in areas of maintenance, in legal areas, a number
of areas we have looked at.
We did not conduct an audit of the food and beverage
program. A comprehensive audit would have perhaps provided a
lot more information. But in defense of specific things:
The audit report was required and it was not used.
The data on the rebates was the data they gave to us. We
did not make it up; it was provided to us. And if there were
rebates within actual amounts of that $90 million, it was never
estimated, it was never provided to us.
On the monitoring, yes, there is a daily monitoring report.
Our concern is that there was no audit trail or no
documentation or no evidence of how there was any systematic
tracking of trends or what kind of follow-up.
In fact, taking the examples and the long exit discussion
we had, there were several changes. The $400,000 example of the
napkins is deleted from the draft to the final. And while in
that discussion they advised us that they believed the $3.93
was an outlier, we did not get documentation that showed that.
And similarly on the steaks, we got no evidence that showed
that, oh, that was an emergency purchase and it was only done
that way. These were examples done in the course of a more
comprehensive review. And the examples are just what examples
are, and our evidence is not based just on that.
Mr. LaTourette. I get that. And I would just say I know
everybody is rushed for time and I know what the constraints
are, and maybe you would have preferred in a more perfect world
to not come and present this information today, you would have
maybe preferred to be done with whatever you are doing, and I
understand that.
I think, just my sort of editorial comment, in this world
of 24-hour news cycles, what is sexy about the report are
steaks and beers. And it makes me nervous, if, in fact, Mr.
Crosbie's observations are accurate, that that would be what we
are whacking Amtrak around with today.
But let me get to you, Mr. Crosbie, because I was struck by
something Mr. Weiderhold said in his observations, and I am
distressed by three observations the GAO has made;
specifically, that there is no incentive for Gate Gourmet to
reduce or contain their costs, in fact the incentives are
absent from the contract; and there is no set markup that Gate
receives under the contract, it is I think called
``reasonable'' as opposed to a percentage or tied into anything
else; and Mr. Weiderhold's observation that if you take labor
out of it for a minute and you just compare what I consider to
be apples and apples if you are talking about buying food, why
your food purchase costs and beverage costs are 50 percent
higher than the full service or the limited service restaurant.
And I think that those are in fact deficiencies in the
existing contract. I understand that you inherited them. But
maybe you can tell us what your view is on the contract, you
already said it was a bad contract, if you agree or disagree
with the three things that I laid out that GAO has talked
about, and if you have an explanation for why your stuff costs
50 percent more than the restaurant down the street.
Mr. Crosbie. In terms of the contract, as I stated, the
current management feels that it is not an appropriate
contract. The items that you mentioned are at the heart of the
renegotiation of the contract. And I obviously cannot share the
specific clauses because it would put us in a bad position in
terms of negotiating with Gate Gourmet. But it does go right to
the heart of where we are headed. And they agree, again, that
the existing contract is not good for them as well.
In terms of the cost of our food being 50 percent higher,
my understanding is that the figures include the storage of the
food, and let me explain that. When we run a train, the food
comes out of a commissary and we have to load it onto a train.
That is in that cost. And when the train reaches its end
terminal, we have to remove the food off of the train. That is
in that cost as well.
That is not to say that we cannot improve. We certainly
take the IG's thorough analysis seriously and we think we can
improve that through the renegotiation of the contract, how we
do business, at the commissaries, and on the platforms as well.
Mr. LaTourette. And my last question before yielding to Ms.
Brown is, I think it is important to maybe know, when the
decision was made to contract out this service to Gate Gourmet
and sign the contract six years ago, I assume that the contract
was let out for bid?
Mr. Crosbie. Yes, it was.
Mr. LaTourette. And can you tell me how many people
responded to your RFP to participate in the negotiations to try
and gain your food service?
Mr. Crosbie. I was not here at the time and I do not have a
specific number, but I have asked this question as well and my
understanding is that there were a number of firms that
submitted proposals but Dobbs, now Gate Gourmet, was the only
vendor that was fully compliant with the specification and
could meet all the requirements. So it was tendered, it was a
competitive bid, and the final award was negotiated.
Mr. LaTourette. All right. I thank you.
Ms. Brown.
Ms. Brown. Thank you, Mr. Chairman. Let me just note that I
had an experience just this past weekend with Amtrak in that my
mother was going to Lakeland, Florida from Jacksonville. I put
her on the Amtrak train, her and her friend, and there is a lot
of congestion between Jacksonville and Orlando to Lakeland and
safety is an issue and I certainly did not want her out there
driving, but the important thing is the food and beverage.
My mother, we just discovered, is a diabetic, so it was
very important for her to be able to get that hot meal on the
train in that period of time from Jacksonville to Orlando. So
that is another factor we have to consider when people take
trains is the health aspect of this travel.
Mr. Crosbie, how much time did Amtrak give you to review
the response to the GAO study on foods and beverage operations?
And do you think it was an adequate amount of time? Also, in
looking at page 3, and I would like for you to turn to that in
the report, I did not know that Amtrak people liked Heineken
beer so much, but the point is this discrepancy is still in
this study.
Mr. Crosbie. Firstly, let me say, as I closed out my oral
testimony, this is not the way I like to do business. It is not
my style at all. I would prefer to have opportunities to look
at things, comment on them, and then at the end of the day, if
the parties agree to disagree, then that is fine. But I do not
feel that Amtrak's staff was given a proper opportunity here.
We got a statement of fact, it was part of a larger
statement of fact on the management and accountability audit
the GAO is doing, as I said, we got that last week. When we saw
the testimony on Tuesday, staff scrambled, literally dropped
everything. And realizing that there was some very misleading
and grossly misstated items in the testimony, we agreed to a
conference call on Tuesday. We spent a number of hours going
through that with the GAO and here we are today with basically
the same written testimony.
And that is very concerning to me, that process. Because I
certainly, as someone who is still relatively new to Amtrak and
still understanding the business, I welcome audits. I welcome
audits from our Inspector General, from the GAO. I welcome
input to help us improve things at Amtrak. I was brought in
here to help fix Amtrak.
Ms. Brown. I want to commend you. I still have real issues
with us not talking concerning safety but grandstanding about
items that do not necessarily reflect the progress that Amtrak
has made about cleaning up these discrepancies. But I want to
go back to the comparison between the labor in the restaurants.
To the first presenter, you talked about many of the people
that work in the restaurant industry work 35 hours and they
have no benefits, they have no health care. Of course, we all
pay for that in the end. But the Amtrak employees work a
significant amount of hours, it looks like 49 to 64 hours, and
they are not reimbursed for that. Can you explain that to me?
Mr. Weiderhold. I do not know if that is correct or not,
Ms. Brown. The chart that is presented here before you we
adjusted based upon actual data from payroll. In trying to get
to the best comparison we could, we adjusted the Amtrak bars,
if you will, there to 35 hours to correspond with the
restaurant experience. The actual Amtrak number is probably
closer with benefits to be like $60,000 thereabouts, $58,000-
60,000.
But again, I think you point out that there are important
differences to recognize between the two types of workers. I
went to this simply because the skill sets around a lot of the
food service workers are very much the same.
I think there are a number of employees who work on our
trains in this craft who are very happy to have these jobs
because of the pay and because of the benefits. I think the
kinds of things that we are looking for, I think about 70
percent of these costs also have not come out yet in the
testimony so far, but about 70 percent of the cost that Amtrak
incurs on labor for food services is on our long distance
trains.
And I do not think you have heard anyone here this morning
talk about the need to remove that service. In fact, it is very
important, as you point out in that Florida experience, that
you have meal service there. So I think this is not necessarily
a conundrum, but I think it is a real challenge for the company
to kind of tackle this.
When the airlines got in trouble on a number of flights
they just took food service away. When I first presented these
data to our board, their first reaction was get rid of it, you
lose $84 million a year. And that is at first blush, I
understand that, but at the same time you have to look at what
it is on a train and on a train food service is something that
is different.
That does not mean that on selected short distance routes
with a particular criteria where you do not pass through a meal
period or whatever that we should consider if food service may
just be too much to bear. Maybe that example I gave about
people getting their food and beverage on the platform or in
the station before they get on the train may be what is
necessary for some short distance trains; I do not know.
I am encouraging the company to keep all the options on the
table. I think it is important to keep it, I think it is
important to differentiate it, I think it is important to get
to a better business model, because right now what we pay for
food, the whole kit and caboodle is just too expensive and it
needs to be better managed.
Ms. Brown. Thank you. As I travel the airline industry
every weekend, they have taken the pretzels away I understand
at this point. I yield back the balance of my time.
Mr. LaTourette. I thank the gentlelady. Mr. Mica.
Mr. Mica. It is not the pretzels, it is the peanuts because
they got sued.
Ms. Brown. I get pretzels on mine, not peanuts.
Mr. Mica. Yes, it is the pretzels that you have, not
peanuts because of overzealous lawsuits.
Mr. Weiderhold, Ms. Hecker, and Mr. Crosbie, I have a copy
of the 1982 law, and I think somebody cited it here, and there
is another cite which I guess is supposed to be still the law
of the land: ``Beginning October 1, 1982, food and beverage
services shall be provided on-board Amtrak trains only if the
revenues from such service are equal to or greater than the
total cost of services as computed on an annual basis.'' Is
that still the law, Mr. Weiderhold?
Mr. Weiderhold. That was shown to me yesterday,
Congressman.
Mr. Mica. Is it the law?
Mr. Weiderhold. That is the current law that is on the
books.
Mr. Mica. Ms. Hecker, is that the law as you understand it?
Ms. Hecker. I believe so.
Mr. Mica. Okay. Mr. Crosbie, are you familiar with this
requirement by law, by statute? Is this out of date? Maybe I am
wrong.
Mr. Crosbie. I am familiar with it.
Mr. Mica. Is this the law?
Mr. Crosbie. It is an item in the law.
Mr. Mica. Okay. It is the law and the law is actually being
violated by not only the terms but the performance of the
contract.
Ms. Crosbie, was that contract a sole source or was it
competitively bid?
Mr. Crosbie. I want to deal back with the law again,
please. For the last 24 years of the law there has never been
an indication that Congress intended the cost be anything other
than cost of the food and the cost of the commissary
operations. And we cover those costs.
Mr. Mica. But it is still the law. It has never been
Mr. Crosbie. And that is our interpretation of that.
Mr. Mica. Okay. Was the contract a sole source contract or
was the contract bid, do you know?
Mr. Crosbie. I had testified earlier that the contract was
competitively bid. There were a number of proposals submitted.
Dobbs, and now Gate Gourmet, was the only contractor that was
qualified.
Mr. Mica. So they were given the contract. Okay. You
answered my question. Thank you.
Mr. Crosbie. The final award was negotiated. So it was
competitively bid.
Mr. Mica. Okay. Thank you for clarifying that.
Ms. Hecker or Mr. Weiderhold, there have been reports that
some 125 food service Amtrak personnel and 250 conductors were
either let go or terminated because of missing funds or
problems with funds related to food service. Do either of you
know anything about that? Theft, basically.
Mr. Weiderhold. Yes, sir. Those numbers are pretty correct.
My office, in the last three years in particular, conducted--
conductors do not sell food, so the investigations that we have
done that involved conductors relate to cash fare sales, and
there were in excess of 200 employees who we have removed from
service for improper handling of cash fares. And then for the
food service, for predominately the lead service attendants who
handled cash, there was an addition 100 plus, 125.
Mr. Mica. Okay. We do not want to swat at flies and miss
the elephants. Mr. Crosbie, did we lose $80 million, in that
range, in providing passenger food service on Amtrak?
Mr. Crosbie. Yes, it was in that range.
Mr. Mica. And then would you also agree that we lost some
other money, maybe there is some dispute, but somewhere in the
$50 million to $60 million range as calculated by the review in
capital support or support of providing that food service?
Mr. Crosbie. I would not agree with that.
Mr. Mica. You would not agree with that. Okay, what would
you say it cost to provide that? I mean, the tooth fairy did
not bring the food in and put it on the train. Was it $20
million, $30 million? I do not know.
Mr. Crosbie. The loss of $80 million or thereabouts
includes that, if I understand what you are saying. I am not
sure I understand.
Mr. Mica. The total that was given to me--where were those
figures, did you give them to us?
Mr. Crosbie. The losses excluding maintenance and interest
payments are $84 million, and then those maintenance and
interest payments are close to $50 million a year.
Mr. Mica. On top. But did you not quote around $130 million
total loss?
Mr. Crosbie. The $50 million plus the $80 million is the
$130 million. No, I do not dispute that.
Mr. Mica. You do not. Okay.
Well again, the bottle of beer they paid $3.00 for at one
point and $0.80 cents at another point, or a steak $3 or $6, I
do not give a hoot about that. We lost somewhere between $120
and $130 million a year consistently for three years, which
adds up to somewhere in the range of a third of a billion
dollars. There are so many good people, hard working people at
Amtrak that do a great job every day.
That is not the problem. It is the administration and
management and the oversight. Talk about micromanaging, this is
not micromanaging when you lose a third of a billion dollars in
three years. That is not loose change, is it, Ms. Hecker? You
said I think $2.06 is the amount lost for every $1 of revenue
coming in?
Ms. Hecker. We just rounded it off to basically $2 of
expenses for every $1 of revenue. I think Fred used the $2.06
figure.
Mr. Mica. Again, I think we have got to remember who is
paying for this, and that is the taxpayer. Last week I met a
single mother who had three jobs and she has two children. She
was showing me how much she pays in taxes and sends up here.
Boy, she must really be happy today when she finds out that a
third of a billion dollars in three years goes to subsidize
this kind of losing operation. This is just on food service. We
will not get into operation of high-speed service or long
distance service.
Mr. Crosbie, finally, this does need better management.
This does need a better contract.
Also, Mr. Crosbie, could you tell me if there is any
documentation prior to when we started this investigation that
would indicate that Amtrak was prepared to renew this contract?
If I go back and do a search of your records, can I find
anything that prior to the time of your being notified about
this hearing and this situation, is there documentation
somewhere in Amtrak that said they were going to renew this
contract?
Mr. Crosbie. I am not sure I understand your question. But
we certainly
Mr. Mica. I have been told that you guys were ready to
renew this until
Mr. Crosbie. No, it is not a renewal, and I stated that
earlier, it is a renegotiation. We met, I personally met with
senior level
Mr. Mica. Do you have any evidence, Mr. Crosbie, to
Mr. Crosbie. I would like to finish please.
Mr. Mica. Go ahead. And then, if we could, I would like Mr.
Weiderhold to respond. Go ahead, Mr. Crosbie.
Mr. Crosbie. In April, I met with the senior executives of
Gate Gourmet and we advised them of a number of things, and one
is the existing contract would not be renewed. We would be
willing to look at renegotiating a contract with them.
One of the key things I think you want to keep in mind is
even with the existing contract, not that Amtrak is currently
contemplating this, but both parties have the ability with 180
days of notice to exit the contract. So we put them on notice
that the existing contract is not going to be renewed and that
there would be a substantial change in how we are going to do
business, and they agreed.
Now, they did not specify the parts specifically that they
agreed with, but they did agree they felt that the current
business model did not work.
Mr. Mica. Thank you. My time is about up. Mr. Weiderhold,
could you respond?
Mr. Weiderhold. Yes. I think that management did, after we
issued our audit report, did look at the idea because the time
of the contract, the first contract, was running out and so
there was talk inside of the company about renewing the
contract. But I think that we had raised for management, and
they were well aware themselves, that there were some terms and
conditions in that contract that certainly needed revision,
and, as JayEtta commented, there were also, if anything, some
disincentives in the contract for them to run that business
more efficiently.
My concern really, quite frankly, was putting all the eggs
in one basket with one vendor and possibly looking at the need
to look at other people who may be able to step in the shoes of
this particular vendor. I just wanted the company to keep all
the options open.
Mr. Mica. I thank you. I yield back, Mr. Chairman.
Mr. LaTourette. I thank the gentleman.
Ms. Johnson.
Ms. Johnson. Thank you very much, Mr. Chairman. Amtrak is
not a huge factor in my area, so there are a number of
questions I might have concerning management evaluations and
efficiency. Is that done by job description?
Mr. Crosbie. You mean evaluation of the employees
themselves?
Ms. Johnson. Yes, who does that for them?
Mr. Crosbie. We have an internal policy that specifies
really two things. This is currently under review and we are
revising it and hope to get it before our board to change some
of the changes we want. But the current system is every year,
if you are talking about management, okay, is to set goals and
objectives that is specific to the individual, that is early in
the fiscal year that is done, and throughout the year a
supervisor would meet with the employees to see how they are
doing with those goals and objectives, and then at the end of
the year there is a written review of the employee.
Ms. Johnson. What is your incidence of termination or plans
for improvement? Do you have such a plan? What I am getting at
is, is your staff pretty stable, or are there times when you
find that someone is inefficient and you have to terminate?
Mr. Crosbie. Absolutely. Certainly since the new management
team has been brought in, since Mr. Gunn joined me in 2002,
there has been a substantial change at all levels of management
within the company.
Ms. Johnson. You mentioned earlier that your biggest cost
that troubled you was the cost of staff.
Mr. Crosbie. What I said was in terms of reducing that $84
million loss, absolutely we have to manage this contract better
and all the future contracts, as they should be. And I think we
all agree on that.
But in terms of reducing the loss, the financial loss, the
item you have to get at, and we have said this in our Strategic
Reforms Initiatives that we have submitted as part of our
fiscal year 2006 grant application, is the labor costs. At the
end of the day, that is the item that you need to look at.
There were comparisons drawn by the GAO to VIA Rail Canada,
a substantially different operation, and the Alaska Railroad.
The Alaska Railroad is a really good example. We have 13 unions
at Amtrak, they have 5. Some of the items that we have brought
up in our Strategic Reform Initiatives plan, including railroad
retirement, moving it to social security. Alaska Railroad is on
social security. The Railway Labor Act, they are not part of
the Railway Labor Act. FILA, they do not have to be part of
FILA.
So you have got to be careful when you are drawing these
comparisons. But if you want to get at that loss, you have to
deal with the labor costs, and the labor costs can be dealt
with by reducing the number of people serving the food or it
can be dealt with by looking at the cost per hour, if you will.
Ms. Johnson. Have you looked at privatization of the food
service?
Mr. Crosbie. We are looking at that as one of our options.
We are looking at all options, frankly, everything from
elimination, modifications to the way we do it today using our
labor workforce, to contracting out the entire operation. We
would pick a route first, for example, we would not do this in
one grand fell swoop, we would pick a route to deal with that.
I would mention, though, we attempted to do that with the
Hiawatha service and there were no bidders. This is an
industry, I have got to caution everybody, that is not a strong
industry. I mentioned earlier the FDA issues and compliance
with the FDA requirements. When I say be careful, if we bring
in an outside contractor, at the end of the day Amtrak will be
responsible and if the contractor does not comply with the FDA
requirements and somebody gets hurt, those are the things we
have to I think consider.
Ms. Johnson. Well, you have had a number of accidents. We
have had some in Texas. In Texas, it is understandable why we
do not use Amtrak as much. Our distances are very spacious. I
think Amtrak comes through Dallas maybe twice a week or
something. It does not move fast enough to get the people where
they want to go there. If they are on vacation, that is
something different.
But it is not Amtrak's fault; it is the size of the State.
But even with the small amount of Amtrak we have, we have had
some accidents. What is the major cause of the accidents?
Mr. Crosbie. The major cause, I do not have any specifics
on the ones in Texas, but the major cause in the last few years
has been track related and the maintenance, associated with the
maintenance of the track, buckling of the track, for example.
That, in my professional opinion, that is what I see as one of
the major causes.
In terms of the speed, I just wanted to address in terms of
the speed at which Amtrak operates, I think everyone will
recall we operate over many of the host or freight railroads,
and this speaks to the condition of the freight railroads and
the freight infrastructure and the freight congestion that is
out there. We have talked about that, Mr. Gunn has certainly
talked about that in the past and it is an issue that needs to
be addressed if we are going to have a viable transportation
system.
Ms. Johnson. Thank you. I know my time is moving. But I am
asking these questions in a roundabout way because it does not
appear to me that you are over-staffed. Maybe you are, but it
does not seem that way. And you are talking about cutting the
cost, will you also cut the quality?
Mr. Crosbie. I certainly do not want to cut the quality, if
you are talking about in terms of the food served on the trains
Ms. Johnson. Performance and quality of service.
Mr. Crosbie. And the quality of service, I think we should
be improving the quality of our service. And it is not just
Amtrak and the example that you are using in your State. It
involves our partners, the host railroads. We are constantly
reminding them that there are people on these trains, it is not
just a piece of steel running up and down the track. And even
if they are only on vacation, it is still important to them to
get to their destination on time.
Ms. Johnson. Somehow I am not getting what I am looking
for. What I am trying to arrive at is, I guess maybe I need to
read your strategic plan, is the ratio of staff, I have a
feeling that if you cut the pay too much, you get what you pay
for and I am not certain that is where you get the best
investment is cutting staff. Maybe so. Are you aware how the
airlines have changed the food service?
Mr. Crosbie. I am aware of it, yes.
Ms. Johnson. So Amtrak might need to do some similar type.
Mr. Crosbie. In the travel industry, and everybody needs to
remind themselves again that we are in the travel business, and
with train travel food and beverage is a key part of what the
customer is paying for. If you eliminate the food and beverage,
for example, on the long distance trains, if you just got rid
of it
Ms. Johnson. They have not eliminated it. They sell it in
the coach class.
Mr. Crosbie. My point is, if you eliminated that, there
would also be a substantial impact to the ticket revenue to get
on the train because people would go elsewhere. Why do you want
to get on a train if you are not going to get food and beverage
on the train. I think that is a little bit of what you are
getting at.
Ms. Johnson. Well, I was trying to get at some ways you
might reduce your costs and still maintain quality service.
Mr. Crosbie. And on that, as I said, we are looking at all
options, everything from elimination to how we currently do the
business, the cost of doing that, to contracting it out. We
have not decided on any one. There is no magic silver bullet to
this. And that is what I think everybody needs to understand,
is that this was never intended to be a profit center. It is
part of the amenities that we need to offer when a customer
wants to travel on our service.
They expect, if it is a long distance train, when it is
dinner time, they expect to be served dinner. We absolutely
need to reduce the cost of doing that. It will never be
profitable. No railroad in the world that serves food and
beverage, this has never been profitable for any railroad in
the world. And that has been backed up by many people that have
analyzed this.
Ms. Johnson. Thank you very much, Mr. Chairman.
Mr. LaTourette. I thank you very much.
We are going to go to Mr. Baker next. But, Ms. Hecker, I
see we have passed the 11:30 mark. I have been giving each
member eight or nine minutes. Are you okay?
Ms. Hecker. I think it is important
Mr. LaTourette. I do, too, but I just wanted to check with
you.
Mr. Baker.
Mr. Baker. Thank you. I shall move as quickly as possible
to take advantage of my eight or nine minutes. Mr. Weiderhold,
can you tell me if Amtrak is compliant with Sarbanes-Oxley or
are they statutorily exempt?
Mr. Weiderhold. They are statutorily exempt.
Mr. Baker. Do they have to register with the SEC?
Mr. Weiderhold. No, sir, they do not.
Mr. Baker. Are they, in your opinion, GAAP compliant?
Mr. Weiderhold. They are GAAP compliant, fully.
Mr. Baker. Do they have annual shareholder meetings? I know
they had one recently, but have they over the period of time
had annual shareholder meetings?
Mr. Weiderhold. I am not sure.
Mr. Baker. No, they have not. Thank you. Did you, in your
conduct of your P&L statement of 2003, have you done this for
other reporting periods?
Mr. Weiderhold. Yes, sir. We have looked at other ones.
Mr. Baker. Which ones, specifically?
Mr. Weiderhold. We have looked at 2004 after the company
did 2004. The numbers are remarkably the same from year to
year.
Mr. Baker. I am shocked. Now how were these figures
determined? Did you engage an outside forensic accountant?
Mr. Weiderhold. No, sir. We are fully capable of it. I have
CPAs on my staff.
Mr. Baker. I understand. I am just asking for resources.
And you, therefore, did not engage any outside auditor?
Mr. Weiderhold. No, sir.
Mr. Baker. And in establishing the line items reportable in
this one-page summary, did you do an audit of invoice accounts?
Mr. Weiderhold. We sampled, certainly.
Mr. Baker. Sampled some. Statistically significant?
Mr. Weiderhold. I am confident in the numbers, sir.
Mr. Baker. Did you do any analysis of the rebate or refunds
that were do?
Mr. Weiderhold. Not with respect to the
Mr. Baker. Did you do a cash accounts analysis?
Mr. Weiderhold. I would have to go back and look at the
work papers, sir.
Mr. Baker. Over what period of time did you engage in this
examination?
Mr. Weiderhold. The review that you are holding up right
there is what was done under the auspices of what we call an
inspections and evaluations unit. It was done over a period of
a few months, sir.
Mr. Baker. Okay. Great. Can you tell me today as a
professional, are you able to certify for the Committee that
the statement you have provided is a true and accurate
statement of financial condition as of its date of preparation?
Mr. Weiderhold. Based upon P&L for food and beverage
service, I think that is a reasonable and accurate
Mr. Baker. But you relied to a great extent on the numbers
provided to you by Amtrak sources; is that correct?
Mr. Weiderhold. Yes, sir. But we know where to look for the
data within Amtrak systems.
Mr. Baker. So you did a little better job than the GAO is
saying in their statement? Because they are telling me they had
to rely on the representations made by Amtrak in preparing
their conclusions as to their findings.
Mr. Weiderhold. Actually, you just struck on something that
is very important, and that is it is sometimes very difficult
to get at financial data inside of a company because of legacy
systems.
Mr. Baker. I will restate my question. Based on that
statement, is it a true and accurate statement of financial
condition as of its date of preparation?
Mr. Weiderhold. That P&L for food and beverage service, I
have high confidence level on that P&L, sir.
Mr. Baker. Ms. Hecker, I want to turn to you for a moment.
In Mr. Crosbie's statement he goes on to say, repetitively, the
primary purpose of food and beverage service is to enhance
ticket sales and ridership. Did you find in your examination
that passengers were making reservations to have dinner on
Amtrak?
Ms. Hecker. We have no information about that.
Mr. Baker. You did not look at that, okay. He goes on to
say there is significant regulatory and statutory hurdles for
Amtrak, or any other entity of any size and reach of Amtrak, to
ever break even on a consistent basis, ever, let alone ever
make a profit. Would you agree with that perspective, the food
and service management perspective?
Ms. Hecker. I think we found that with Alaska Railroad the
contractor is making a profit and Alaska is sharing in that
profit.
Mr. Baker. So you would disagree with his conclusion on
that?
Ms. Hecker. That is our understanding of that.
Mr. Baker. And so when he goes on to say that comparing
Amtrak's food and beverage service to that of a traditional,
standalone restaurant is like comparing apples to oranges, that
would not be true when we are looking at acquisition of
inventory and supplies; would that be the case? It does not
matter where they go, you are going to buy them at a fixed
location and move them to the train.
Ms. Hecker. But it has to move more often for Amtrak than a
fixed location single restaurant.
Mr. Baker. Understood. But when you acquire it, you enter
into a contract with the vendor to provide a box of apples,
that is not on the train where the deal occurs, that is in a
sales of a vendor location. The cost of delivery after that is
an additional cost, but the cost of acquisition of the
inventory itself ought to be exactly comparable.
Ms. Hecker. One would think so.
Mr. Baker. Okay. Mr. Crosbie goes on to say that Amtrak
plans to contract out, willingly to study, but the Railway
Labor Act may mandate to pay into the Railroad Retirement
System, unless the National Mediation Board declares otherwise.
The least expensive alternative would be to engage a vendor to
use independent contractors instead of employees; however, no
such company currently exists in the food service industry. Are
you familiar with the RailPac's Special Report of 2004, Ms.
Hecker?
Ms. Hecker. No, I am not, sir.
Mr. Baker. Okay. Let me just give the highlights to get it
into the record. I will provide this for the Committee should
it need it. This started three years ago from the date of
publication, which on the front page is November 2004.
So prior to the report dated 2004, Chef Mario, who is the
owner of Party Picnic Specialists on the San Joaquin line and
the Capital Corridor line in northern California, engaged in a
special contract with CalTran's Amtrak for the purpose of
providing food service on those lines. The PPS contract, and I
am reading from the record, requires Chef Mario to pass
frequent Food and Drug Administration inspections, that is
apparently a new thing going on over there, and certain spec
checks to ensure he delivers the right food for the right
price.
So he is apparently being watched by Amtrak. ``When we took
radical steps like discontinuing attendant-served meals, we
made detailed presentations about the economics involved in the
alternatives. RailPac,'' that is an interesting group I think,
``are regular attendees and contributors at this meeting.''
Here is the point I am trying to get to. Mr. Crosbie made
it clear over and over again in his statements today here and
in his written testimony they cannot make a profit, they cannot
get close, even though Federal statute requires them to do that
in order to be in the food business, which is a minor problem.
On the San Joaquin line a new pork loin dish costs $7.24
compared to its sales price of $9, representing a 25 percent
markup.
Not to take pork loin as the only contributing factor here.
``In fiscal year ending September 30,'' I would believe that
November, ``Amtrak will report a profit,'' profit, a word that
does not consist with Amtrak often, ``of about 23 percent, with
revenues of $1.7 million and costs of $1.4 million.'' Ridership
was down a bit, Chef Mario was worried, but he said we squeaked
out a profit.
My point in bringing this to your attention, and by the
way, I have always found those GAO guys to be wild and crazy
people who are irresponsible with their financial conclusions.
But despite that, I am going to be confident that your study
judgement in this matter will be very helpful to the Committee.
If the Amtrak-CalTran-Party Picnic Specialist example can be
done here, is there any reason in your mind why on selected
short haul routes it could not be done elsewhere?
Ms. Hecker. That sounds reasonable. It is not something we
have studied.
Mr. Baker. I know Mr. Crosbie in his testimony this morning
indicated he welcomes studies and audits. If we are going to
extend another $60 million, $80 million, $100 million, $2
billion, what in your judgement would it require to have, say,
a three year forensic accounting audit to get all the
misrepresentation about facts out of the way? I think a really
good audit would help this Committee, the public, and everybody
else come to a conclusion.
I am familiar with a forensic accounting audit done on a
small corporation just recently that was engaged for about $6
million. If we provided, say, $8 million or $10 million for a
forensic accounting audit for either you or the Inspector
General, or for everybody to be engaged in, would that be
helpful for all of us to have a better understanding about
Amtrak's true condition?
Ms. Hecker. We certainly agree. And the tentative
conclusion of the larger report is that we believe that should
be done.
Mr. Baker. I thank the gentlelady. Mr. Chairman, I yield
back. I think I am right on my nine minutes.
Mr. LaTourette. You are actually at eight, if you want
another minute.
Mr. Baker. I will take it, and I appreciate the Chairman's
courtesy. Let me say, Mr. Crosbie, I have gone on and I wanted
to get their positions on the record. Would you like to take 40
seconds?
Mr. Crosbie. In terms of the CalTran operation, again, we
welcome input and
Mr. Baker. Are you familiar with it?
Mr. Crosbie. I am not familiar with the exact thing you are
holding. But that operation is one item, it does not involve
any labor, and there is no commissary. So you have got to be
careful drawing the comparison
Mr. Baker. This is a non-attendant meal service. There is
no attendant involved in providing the meals, once prepared, to
the passengers. This is a turn-key, vendor-provided meal
service turning a profit. You said it cannot be done. I will
send this to you so your folks can take it apart.
Mr. Crosbie. Those are some of the things that we are
looking at, the model that
Mr. Baker. But I do not understand why the corporation,
forget the profit and loss, you are not complying with your own
contractual obligations for reporting in a timely manner, you
do not have annual shareholder meetings, you are not compliant
with Sarbanes-Oxley. This is a public operating company
utilizing taxpayer subsidy to keep yourself alive and you are
not meeting your statutory obligations as required by the
Congress or by anybody else.
Mr. Crosbie. On Sarbanes-Oxley, we are not required to
comply with that.
Mr. Baker. I know that, because you have an exemption. I
was on that Committee that helped write it; do not go there.
But my point is you are not meeting the corporate governance
standards that every other public operating company has to
meet.
Mr. Crosbie. We disagree with that.
Mr. Baker. Well, that is just my opinion. Thank you, Mr.
Chairman.
Mr. LaTourette. I thank you very much. I want to thank all
of you for coming. Ms. Hecker, we appreciate your staying past
the time we thought you needed to leave. You all go with our
thanks.
Did you have a question you wanted to ask, Ms. Brown?
Ms. Brown. Yes. Before you leave, I do have a follow-up
question. You mentioned the Alaska Railroad.
Ms. Hecker. Yes.
Ms. Brown. Can you tell me how many people it serves and
whether or not it gets government subsidy in comparison to
Amtrak and how many people they serve?
Ms. Hecker. I do not have the number of passengers it
serves. Our analysis was on the distinct contract provisions,
that their approach was to have the entire operation handled by
a contractor and the contractor was guaranteed a 5 percent
profit, and any profits over that would be shared between the
Alaska Railroad
Mr. Crosbie. The key item that she just mentioned is that
they are guaranteed a 5 percent profit.
Ms. Brown. Yes. But when you are talking about serving
400,000 people with 722 workers as opposed to serving 25
million passengers, it is a big difference. It just does not
necessarily mean that you can duplicate that model. Would you
speak to that, Mr. Crosbie?
Mr. Crosbie. The comparisons, in looking at what companies
to draw comparisons to, I think it is to some degree
appropriate to look at north of the border, if you will, to VIA
Rail Canada and the Alaska Railroad because they are in our
business, and I think it is appropriate to look at what the
airlines are doing as well.
But you have to understand the differences, things like you
just pointed out. You have to get to that and understand the
labor agreements, the pension plans, and make sure that you are
drawing fair and accurate comparisons. And as I submitted
earlier, I question if that was done. The VIA Rail Canada one,
it is one train on the long distance going across that country.
That is not even close to one of our divisions, to your point.
It does not even compare in scale to the operation we run.
Ms. Brown. I have a couple of quick questions on the IG
report. I understand that shortly after
Mr. LaTourette. Can I ask you, do you have any questions
for Ms. Hecker?
Ms. Brown. No.
Mr. LaTourette. We will let you go with our thanks, Ms.
Hecker. Thank you very much.
Ms. Brown. I understand that shortly after he arrived,
David Gunn asked you to examine the company food and beverage
service. At the conclusion of the audit, to whom did you report
this finding?
Mr. Weiderhold. Back to management.
Ms. Brown. You did?
Mr. Weiderhold. Absolutely.
Ms. Brown. Were there other audits done before you?
Mr. Weiderhold. We do audits of different aspects of food
and beverage service. We undertook the systematic review only
last year simply because of the results of the other audits.
Ms. Brown. Did you report this finding to the board?
Mr. Weiderhold. Yes, I did.
Ms. Brown. Is it fair to say Amtrak's board of directors,
Amtrak's stakeholders were aware of David Gunn's request and
your work on food and beverage service? Did they know about it?
Did they participate? Did they make recommendations?
Mr. Weiderhold. Yes, ma'am. That is just our protocol. That
is the way we do business.
Ms. Brown. Given your extensive examination of Amtrak food
and beverage service, how would you judge the current
management handling of the existing contract versus the
previous management? Because I assume that the purpose of this
hearing is to find out what has happened in the past and how we
can correct it and move forward so we can move into something
that really matters, which is safety.
Mr. Weiderhold. I think you hit on a couple points real
fast. One is, the current contract is drawing to a close, and
so history is history. Certainly, with the current management,
I think they are aware, very painfully aware of the
deficiencies in that contract.
There were also other events that kind of converged at the
same time. At the time the contract was entered into in 1999,
Amtrak had an inventory control system that was non-Y2K
compliant. So there was a convergence of some things that
happened that actually made administration of the contract very
difficult and problematic.
It needs to be changed. It needs to be renegotiated. It
needs to be revised. I think management is very much aware of
that. And I am very much in favor of the direction you want to
head with respect to safety and security issues.
Ms. Brown. Have you done some review on the safety issue?
Mr. Weiderhold. We constantly do reviews on safety and
security matters.
Ms. Brown. And so you would be ready to present it whenever
we can schedule a hearing?
Mr. Weiderhold. Yes, ma'am.
Ms. Brown. In closing, are there any statutory provisions
preventing Amtrak from modifying or eliminating food service
from any of its routes? Is there anything that Congress has to
do to ensure some of these internal reforms be implemented by
Amtrak, or is Amtrak able to make these reforms itself?
Mr. Weiderhold. I do not think there is a statutory
impediment to a lot of the reforms that need to be made. I
think they can be done internally. I think that is what Mr.
Crosbie has been trying to explain this morning, is that they
want to look at those kinds of options. Congress addressed this
issue of food and beverage service back in the 1980s and, as
you point out, when a dictum was given, the pendulum swung too
far. I do not think any of us want to go there again. But,
certainly, change is in order.
Mr. Crosbie. I would add
Ms. Brown. Yes, sir?
Mr. Crosbie. Certainly, as we have laid out in our
Strategic Reform Initiatives plan some key items. Amtrak, the
management of Amtrak is not broken. And when they talk about
the model being broken, we need to look at the cost, as I
mentioned earlier, of labor, the burden we have of that,
Railroad Retirement, FILA could be put into that category as
well.
So there are items which we have laid out in our Strategic
Reform Initiatives that Congress should take seriously, take to
heart, if they want to fix what they perceive to be as broken.
The issue here is we are managing within the current rules of
engagement and it is very clear how things work once you get to
the numbers. If you want to change the end result, you have got
to change the rules of engagement.
Ms. Brown. Well, on Monday, at 10:00, I am going to board
Amtrak. I am going to take a field trip to Baltimore and I am
going to sample what kind of food is available, what kind of
refreshments, and I will report back to the Committee.
Mr. LaTourette. I hope the gentlelady has a safe trip. And
I would ask for a $0.43 Heineken, if you could do that for me.
[Laughter.]
Mr. LaTourette. Again, I want to thank you. I do want to
clear up one more thing before I let you go, and I want to
thank you for your patience and listening to all of our
questions.
But a couple of times there have been references to this
statute. I want to be crystal clear, and that is, the section
of the United States Code that indicates that Amtrak may not
offer food and beverage service that does not break even or
that loses money, you indicated I think, Mr. Crosbie, but I
want it to be real clear on the record, it is your
interpretation at Amtrak that that exists for the cost of the
food and beverage and you are covering those costs, is that
right?
Mr. Crosbie. The food and beverage and the commissary, and
we are covering those costs. The labor to serve it, our
interpretation, is not in that.
Mr. LaTourette. Very good. You both go with our thanks.
Ms. Brown. Mr. Chairman, I would ask unanimous consent for
the record to remain open for 30 days for members to submit
additional questions.
Mr. LaTourette. Without objection.
We will move to our second panel. I want to welcome our
second panel today. As I indicated earlier, Dan L. Biggs, the
International Vice President for the Transportation
Communications Union, is with us; Ross Capon, the Executive
Director of the National Association of Rail Passengers; and we
have both the Prestons, Gary and Karen Preston from Sacramento,
California, who I understand after a train experience got hold
of the Chairman of this Committee, and by matrimonial agreement
I believe, it is Mrs. Preston who is going to present the five
minutes of testimony.
We appreciate your being here. You have sort of seen how it
goes. There are lights in front of you that go from green to
yellow to red. Your full statements are included in the record.
We would ask you to be as mindful of the lights as you can and
try to get it to about five minutes, but if you have something
that you need to tell us that goes beyond that, we understand.
Welcome to you all.
Mr. Biggs, we will begin with you.
TESTIMONY OF DAN L. BIGGS, INTERNATIONAL VICE PRESIDENT,
TRANSPORTATION COMMUNICATIONS UNION; ROSS CAPON, EXECUTIVE
DIRECTOR, NATIONAL ASSOCIATION OF RAIL PASSENGERS; KAREN
PRESTON, AMTRAK PASSENGER FROM SACRAMENTO, CALIFORNIA
Mr. Biggs. Thank you, Mr. Chairman. I am a Vice President
of the Transportation Communications Union and working with the
Amtrak Service Workers Council which is the collective
bargaining agent for the men and women who work in customer
service on board Amtrak trains. The Amtrak Service Workers
Council is comprised of the Transport Workers Union of America,
the Hotel Employees and Restaurant Employees Union, and TCU. I
thank you for this opportunity to present our views about
Amtrak food and beverage service.
Amtrak was created three decades ago to revitalize rail
passenger service. But its inability to secure adequate and
stable Federal funding has led it to struggle just to survive.
To manage any aspect of its operations, Amtrak needs stable,
reasonable funding and strong long-term investment. The Service
Workers Council salutes the Chairman and Ranking Members of
this Subcommittee and of the full Committee, and other
Committee members for their support for H.R. 1630 and H.R.
1631, legislation that can provide Amtrak the resources it
needs to evolve into an efficient, modern rail passenger
system.
This year, facing yet another financial crisis, Amtrak
management has authored a Federal grant request that includes
some desperate and ill-conceived measures, including its
announcement that it will seek to contract out food and
beverage service. More than 20 years ago Congress called upon
Amtrak to break even on its food costs. It also amended the
Rail Passenger Services Act to remove labor protection from
employees working in food and beverage.
Back then, Amtrak said that it would explore contracting
out that service. And, indeed, over the years, Amtrak has tried
to do so, sometimes resulting in our members losing their jobs.
All of its efforts, however, have either failed to get off the
ground or have done nothing to help the company's bottom line.
Examples of those failed efforts are detailed in my written
statement and include an attempt to contract out the use of
food carts on the trains, an attempt to use vending machines,
the contracting out of commissaries, and the inability by
Amtrak or the States of Maine and North Carolina to secure
vendors to operate cafe cars even on short routes without the
need for ongoing subsidies to the vendors.
Amtrak is now turning a blind eye on that history,
certainly at least the IG is, and it is attempting to justify
its new call to contract out food service by comparing onboard
employees' wages to those of workers in the restaurant
industry, a comparison which completely misses the mark.
Onboard attendants are responsible for the safety of the
riding public. Employees are trained in emergency evacuation
procedures and in fire suppression. They get Red Cross first
aid training, special training to assist passengers with
disabilities, and they are trained to handle bomb threats and
suspect packages. They comply with U.S. FDA regulations
governing Amtrak food service. This fat manual right here is an
onboard employee's handbook. That is what it looks like.
In addition, attached to my written statement are exhibits
further identifying rules and regulations unique to onboard
employees. And the work itself is uniquely demanding. Employees
are subject to incurring injuries, both minor and major, that
come from working aboard moving trains. Thankfully, train
derailments are rare, but all onboard employees are mindful of
the plaque in Washington Union Station that honors those
employees who have lost their lives on the job.
Unlike restaurant workers, onboard employees do not make
overtime pay after working 8 hours in a day or even 40 hours in
a week. It is common for onboard attendants to work 17 or 18
hour days. But overtime pay for them kicks in only after they
have worked 185 hours in a month. In negotiations, the Service
Workers Council has asked Amtrak for overtime pay after 16
hours of work in a day, and Amtrak has said that it could not
afford it.
Our members not only work away from their homes, but their
schedules are erratic. Up to 20 percent of these employees are
on extra boards with no established rest days, and they are
subject to call for assignment at any time.
In addition, their hourly rates of pay are designed to
cover the many hours for which these employees receive no
compensation whatsoever. A look at schedules for service
attendants, as an example, shows that on the Capitol Limited
and the Cardinal they are paid 29 hours and 15 minutes per
trip, but they are required to spend an additional 21 hours and
40 minutes of unpaid time on the trains or at away-from-home
terminals--that is, 42 percent of the employee's time is
unpaid. On other trains, the percentage of unpaid time is
similar.
In negotiations, Amtrak management has preferred to grant
incremental wage increases rather than to agree to work rule
changes such as overtime pay after 16 hours of work, or payment
for more of the time on the job that is currently unpaid. For
anyone familiar with these matters to now tell us that those
pay rates are excessive compared to restaurant workers is to
stand that bargaining history on its head.
The current desperate efforts by cash-strapped managers at
Amtrak to justify contracting out food service belies those
unique working conditions of its trained and specialized
onboard workforce. It also completely ignores the failed
attempts to contract out this service in the past. In other
words, Amtrak's argument in this regard reflects Amtrak's
current problems, not any solution to those problems. Thank
you, Mr. Chairman.
Mr. LaTourette. I thank you very much, Mr. Biggs.
Mr. Capon, welcome. We look forward to hearing from you.
Mr. Capon. Thank you, Mr. Chairman. We appreciate the
opportunity to appear. The first thing I would like to say is
actually to quote the most important sentence from Mr.
Crosbie's statement, which may be the most important sentence
of the morning, and that is, it is the primary purpose of food
service on the trains to enhance ticket sales and ridership,
not serve as a profit center. We hope that the focus that
Amtrak will carry going forward is on increasing sales of food
and encouraging use of the service, not on downgrading it.
The answer to the question how much money did you lose on
food service, is it the $84 million that Mr. Weiderhold showed,
there is really no way to prove it without killing the
railroad. And by that I mean, the only way you know is by how
much ticket revenue did that food service drive. The only way
to really tell for sure is to get rid of food service and see
what happens. And I do not think we want to do that.
There are two specific issues that were referenced earlier
today that I would like to shed some light on. One is the
comments about Chef Mario, which I do not believe were
accurate. Chef Mario, to my understanding, is a vendor who
provides a couple of items that are among the many items that
are sold on the San Joaquin by Amtrak employees. That is all he
is; he is a vendor selling a couple of items. If he is not
making a profit on that, shame on him.
Also, we have heard a lot about the Alaska Railroad that is
pretty irrelevant to Amtrak. The Alaska Railroad's major train
is a 12-hour run, it is a daylight run, it is through some of
the most spectacular scenery on the planet. They are spoon-fed
shiploads of cruise passengers.
There may be some lessons in the details of their contract
or something, but what I have heard today and in the past about
Alaska Railroad in Amtrak discussions is completely irrelevant.
The obvious lessons that people are trying to draw from it are
just not relevant to Amtrak.
We think a more aggressive food service should be available
than Mr. Weiderhold does. He said that food service should be
provided if a train passes through more than one meal period.
We think, as I say in the first paragraph of our written
statement, that snack bar services should be provided, period,
except where demand has been proven not to exist, and proof
should include use of creative thinking, outside the box
methods, to encourage sales.
At the bottom of page three of my statement, we talk about
some of the best practices that exist on Amtrak today which we
think could be more widely replicated. California is a good
place to look. They have been innovative on those trains in
promoting food sales through various means, like window
stickers that tell passengers that the food service is
available, through other signage, through digital message
boards, and through announcements on the public address system.
So there are ways to improve the food service delivery to get
more sales.
I do think that in general the quality of food that is sold
on Amtrak is very good. It is far above what Silvio Conte, the
late Congressman from Massachusetts, commented on in 1982 when
he told an Amtrak witness, ``I bought one of your ham and eggs,
dropped it, and smashed my toe.'' The dining car food, I have
found it pretty uniformly very good. The snack bar selections
are somewhat more variable.
I think, frankly, where States have been doing oversight,
and perhaps providing funds, they have been better. I think the
menus in California are probably better than the menus on the
New York-Albany trains, menus that are about to disappear. And
that is where we think that more effort could be looked at in
terms of improving menus before the service is dropped.
A train can travel through just one meal hour yet providing
food service is still an important thing. Congresswoman Brown
mentioned medical reasons why people need to have access to
food. Also, trains have been known to run late. So a train that
starts out with the intention of running through only one meal
hour might actually run through more than one.
So, clearly, we believe that there is a responsibility to
provide the food service efficiently, but there is also a
responsibility to make sure that the employees have the right
incentives to sell. And as I discuss in my written testimony,
it is not completely clear that that has been done.
It has been a long morning, I will leave it there. Thank
you very much for your attention.
Mr. LaTourette. Mr. Capon, I thank you very much.
Mr. and Mrs. Preston, we welcome you. Mrs. Preston, we look
forward to hearing from you.
Mrs. Preston. Thank you, and thank you for inviting us to
be here. We experienced a trip that was a combination of
mechanical and service failures that we believe placed our
health and safety and the health and safety of several hundred
passengers in jeopardy.
After many years of having both of our parents tell us how
wonderful train travel was, we were looking forward to our
first interstate travel and we chose to do a trip last
Christmas. Unfortunately, what we experienced was 18.5 hours
where we had no access to food, we experienced a night in a
snowy mountain area where it was snowing where we had no heat
all night long, and we had no access to onboard toilets. This
horrendous experience happened to us on the trip from Seattle
to Sacramento on December 29th.
We were supposed to have boarded the train in Seattle.
Unfortunately, the train never made it there the day before and
we were bussed down to Portland. When we got there around noon,
of course it was around lunch time, and even though we should
have already been on board for hours and had access to lunch,
we were told we would not be able to board the train for
approximately two hours and, therefore, our first meal would be
delayed. We chose to go off-site from Amtrak in order to
purchase a lunch prior to then.
When we finally did get on board the train we were told
that all meal service for the remainder of the trip that day
would be delayed, and we were not able to secure dinner
reservations until 9:00 p.m. We also noted that immediately
upon leaving the Portland station we were having intermittent
power outages in all of the cars. We were hearing messages over
the PA system that whenever these power outages occurred food
service was being interrupted because they could not cook food
or run the cash registers.
At 8:30 we arrived in Chemult, Oregon, and at that point
the power did not come back on. We were told shortly thereafter
that all remaining food service for the day would be canceled
and that any pending dinner reservations were going to be
canceled and the snack bar was going to be closed.
There were other announcements at that time. It was at that
point we were advised that the heat was going to be out, and we
were also asked to not use the toilets because they required
electricity as well. Several of us went to the dining car,
myself included, and we were directed to speak to the
supervisor.
We asked the supervisor for some food because it had been a
long time since lunch and we had the whole night to get
through, and we were told that we could not have any food. We
asked for just plain rolls and the cold salads that would have
been served to us anyway, and the dining car supervisor told us
that unless we had a medical condition that required us to eat,
we could not have any food, even a cold piece of bread.
At some point, they finally decided that we would continue
on because the engines were working and we would continue on to
Klamath Falls, although we would not have any heat or
electricity in the car. When we arrived in Klamath Falls,
again, it was a very snowy area, it was snowing and we got
there approximately 90 minutes later. There were no
announcements about how long we would be there, what kind of
services that we could expect, or whether we were able to get
off of the train to go into the station to use the bathrooms.
About 4:00 a.m. a very frustrated passenger in our car
called the 800 Amtrak number, calling here to the East Coast to
try and find out what was going on on our train on the West
Coast. What we learned at that point is that we had been
declared a disaster and that the Red Cross was coming and that
buses had also been ordered and were scheduled to arrive
between 6:00 and 7:00 a.m.
About 5:00 a.m. the Red Cross did arrive and we did receive
some blankets at that point as well as some hot drinks and a
donut. The buses that were to arrive between 6:00 and 7:00 did
not start coming until 7:30 and at that point only two buses
arrived. We were also told that it would require 10 buses to
transport all of the passengers. The last bus, which is the one
we ended up on, did not arrive until 10:30.
All of this time we were still not being given any food
from the train. And because the train track was several blocks
from the business area in town, we were also advised that we
should not go into town to purchase food because the buses were
supposed to arrive any minute and we did not want to miss the
bus.
We were also told during the night by a staff member in the
station that a hot meal would be provided to us when the buses
arrived, that they would take us for a hot meal. When we
boarded our bus about 10:30 and asked our driver about the
arrangements for food, we were advised that food was being
taken to a roadside rest area in Redding, California, which was
still a several hour drive away. By the time we finally got to
where the food was it was 3:00 in the afternoon and our
promised hot meal was a cold sandwich and a bottle of water.
There are many more details that are outlined in the letter
that we sent to Amtrak as part of our complaint, and you will
certainly have those to read.
What we think should have happened is that we should have
been able to have boarded the train immediately in Portland
when we arrived and been able to purchase lunch. We also
believe that the dining car should have the capacity and be
open for the required number of hours it is needed to serve the
passengers. When we book a trip we fully expect that there is
going to be food service available, and it should be available
to us.
Despite the power outage, there should have been some
provision for food. We do not understand why no provisions were
made to have groceries brought to the train. Surely some peanut
butter sandwiches could have been made and provided for us.
We also think that there should have been better
communication. We should not have had to call the East Coast to
find out what was happening on our train. We were also very
angry that the Red Cross had to be called and utilize our
charitable dollars to fix a mistake that we believe Amtrak
should have been able to fix. We did request that Amtrak
reimburse the Klamath Falls Red Cross, although we have not
received any information that has happened.
We also believe that when a train is traveling through any
area where there is excessive cold or excessive heat that there
should be immediate provisions for protecting the passengers'
health and safety. There were many young children, elderly
people, and disabled people on board the train who should not
have been forced to go through a whole night without any way of
getting warm.
And above all, we think that the staff should have the
ability to think creatively and to problem-solve and to
implement solutions. They should not have to refer to some
manual on how to protect the safety and the well-being of the
passengers. Thank you.
Mr. LaTourette. I thank you very much. I guess I will start
with you, Mrs. Preston. Did you receive a response back from
Amtrak?
Mrs. Preston. Yes, we did receive a letter from the
customer service department expressing their apologies that we
were disappointed with the trip. Her letter also indicated that
she was sure that the staff had done their very best and that
she was sorry that we were upset that it took the Red Cross so
long to respond.
Mr. LaTourette. I will tell you what I think Ms. Brown and
I will do. I think the fellow from Amtrak has left the room,
but not the building. If you and your husband want to work with
the staff of the Subcommittee and you require a better
response, we will see that we get you one. We appreciate your
coming here and telling us your story.
Ms. Brown and I were on a train that was supposed to take
two hours and it wound up taking six. We did not have your
nightmarish experience and we did not have snow, we had French
people on strike that laid across the tracks to keep us from
going to where we wanted to go. But it is the same type of
thing and we recognize how frustrating that can be.
Mr. Capon, I agree with you about the Alaska Railroad
story. You I do not think were with us at our first hearing
this year, but we had a fellow from the Colorado Railcar
Company who has now sold some cars up to the Alaska Railroad
and those people really are tourists. They are getting off the
cruise ships, as you say, and driving through the mountains and
I am sure having pretty nice meals. But that is an apples to
oranges calculation to me and did not impress me.
Mr. Biggs, I think you did a great job in outlining the
fact that if you look at what Amtrak employees are required to
do, not just the manual but the actual hours that they are on
the train, the fact that they do more than serve food, I really
think it is not fair, and I tried to get at that with the GAO
report. I am all for fair comparisons, and if somebody is doing
something wrong they should be held to task, that is our job.
But to compare a waitress in a Bob Evans with someone who
is serving food on an Amtrak train, I do not think it is a fair
comparison. I think you have done a good job of outlining that.
I do have a couple of questions. Again, in preparation for
this hearing some issues came up, and maybe you know about them
or maybe you do not. One is, I think Mr. Crosbie talked about
the conversion. It sort of boggles the mind that money for food
would be collected, that the cash register was a cigar box in a
lot of cases, is my understanding, and now they have moved to
cash registers.
But I understand that even with the improvement to cash
registers, and somebody focused on theft, somebody was talking
about theft earlier, that at the end of the shift or the run or
whatever it is, the employee in charge of the cash register is
still tasked with taking the money out of the cash register and
taking it back to his or her hotel room until the next day's
transactions. In my mind, that not only invites difficulties
but it sets up the employee to become a target, if you will. I
would think having maybe a lockbox or a bank drop or something
like that.
So my question to you, Mr. Biggs, is that true? Is that how
it works now?
Mr. Biggs. It is not supposed to work that way. At the end
of each line, Amtrak does have employees that are effectively
cashiers who are supposed to collect the revenues both from the
onboard attendants and from conductors who might have ticket
sales.
However, really because of Amtrak trying to economize or
cut back, when you have a late train situation it might close
down that cashier's cage effectively and not hold those people.
And then you have that situation that is really quite awful for
an onboard attendant, because if something happens to that
money, Amtrak will tell them they are responsible if they get
robbed or something, if they did not take good care of it. It
is a way that Amtrak I think feels forced to economize. But it
is a mistake and they should not do it.
Mr. LaTourette. I tend to agree with you. The other
observation that came to my attention, I think where Amtrak
really is not right at this hearing we have had today is when
they attempt to explain this bad contract that they have with
Gate, and then the fact that they are paying 50 percent more
for the food. I think that is a fair comparison in that, I do
not know if I would use Mr. Baker's example of a box of apples,
but a box of apples should cost whatever a box of apples cost,
aside from the transport to the train. Anyway.
What has come to my attention is that Amtrak under this
contract eats spoilage. In other words, if you have some milk
that is delivered to the train and the expiration date is June
9th and you cannot use it, that they eat the spoilage and that
is part of the cost of doing business.
An allegation has been made that one of the difficulties
with this vendor is that there is a high incidence of spoilage
or items delivered trackside, trainside that are right on the
edge. When I go into the grocery store, for instance, I do not
ever get the milk out front because I know that is going to
expire tomorrow or the next day, I dig in the back. It probably
makes them real mad at the grocery store, but I get the stuff
that expires two weeks from now. Have you received any
observations or do you have any observations from your members
relative to the issue of spoilage?
Mr. Biggs. Our members work right alongside the workers
from the vendors so we get a lot of anecdotes and we also talk
to the managers. My particular union used to represent Amtrak
commissary workers, so we lost 300 jobs. So we had a stake in
this and we are always interested did this experiment that we
opposed work in the end. We get all this information from
people that it has not, that it has been a managerial disaster
and a financial disaster, that Amtrak lost a significant amount
of control over its stock and inventory of food, that sort of
thing.
But to go back to 1999, really what Amtrak told us at that
time when they said they were being forced to contract out
these commissaries--they call it the commissaries closings
because their view was because of not having enough capital
funding they could not literally keep the physical facilities
open and put in the long term investment that was needed
because they were dilapidated, falling apart, that sort of
thing. I think that is what pushed them into this contract,
quite frankly.
And the kind of details that you just asked about about
spoilage, I do not know. I hear anecdotes that, yes, that is a
problem, that there is a problem that they do not get full
credit for items that are turned in at the end of a trip that
were not sold, that sort of thing.
My union, TCU, did go to Amtrak several times and say,
look, we are hearing that you do not make money on this
venture, bring the work back in-house, we believe that we can
perform the work in terms of labor costs for the same cost as
the vendor, and they said that is probably true that labor
costs are competitive with this vendor in this contract
operation, but we no longer have managers capable of
supervising the operation. That is effectively the answer that
we got.
Mr. LaTourette. I forgot to ask Mr. Crosbie, and under Ms.
Brown's unanimous consent request, maybe I will just send them
a quick note with the question. But prior to the engagement of
this contract, the contracting out of the commissary service,
do you through your union have any figures on what the relative
profits and/or losses were in the food service business on
Amtrak when it was Amtrak commissaries?
Mr. Biggs. Not with me. I might have it in my files.
Mr. LaTourette. If you could look and maybe drop us a note
and I will follow up with a more formal letter, and I am going
to ask Mr. Crosbie the same thing, because I think that would
be apples to apples. Whether or not the contract provisions
have been enforced the way that they should be enforced, and
management at Amtrak has exercised the oversight that they
should have exercised, I do think that, you called it an
experiment, I do think it would be worthwhile for this
Subcommittee to go back and look at apples to apples and see
how that experiment has fared.
My experience, quite frankly, is that, and I know I
represent the party of privatization, but my experience has
been that a lot of these privatization activities wind up
costing more rather than less. I would be interested to see if
you have those figures.
Ms. Brown.
Ms. Brown. Thank you, Mr. Chairman.
Let me just say, Mr. and Mrs. Preston, I am sorry about
your horrible experience. The Chairman told you about an
experience that we had on the train and a trip taking six hours
that should have taken two hours. But I told you about the
great experience that I had with my mother last weekend, she
being diabetic.
I guess my question to you, though, did you send a copy of
your letter to the Amtrak board? It seems like someone should
have offered something. Usually, when you have these horrible
experiences on the airline, you have to sit on the runway for
six hours, they do something.
Mr. Preston. Yes, they certainly did do something. We did
include several members of the board, including Mr. Crosbie and
Mr. Weiderhold who are here, but did not receive anything back
from either of them. But through their customer service, we did
receive a full refund. But that was not the point of our letter
nor the point we were trying to make.
Ms. Brown. Right. Well I was just sitting up here thinking
that maybe you did not receive anything. But it is good to know
that you did receive a refund.
Mr. Preston. We did. But that was not the point.
Ms. Brown. Yes. I understand. I had a terrible experience
this morning at McDonald's. I went there for coffee and I
bought a McGriddle and I got home and I had sausage biscuits.
If you do not check right there at that point, you have got a
problem. But thank you.
Mr. Biggs, there was a comparison between the food service
workers and the restaurant workers. You mentioned something
about safety and security, and of course I am very interested
in security. Can you elaborate a little bit more in that area?
Mr. Biggs. I think some of the things in the written
testimony and that I mentioned previously that onboard
employees are required to be trained for, to know what they are
doing in a situation. Emergency evacuation, very important.
Fire suppression just does not mean knowing how to use a fire
extinguisher. It means knowing each piece of equipment and
where the blower switches are and how to get to them quickly
and turn them off. How to use emergency exits for people, that
sort of thing. Employees get Red Cross first aid training, CPR.
There is some homeland security training in terms of bomb
threats and suspect packages, there should be more. Our members
want more and we have been asking for more. Lots of updates in
terms of the FDA regulations, people are always getting
training in terms of bacterial control, being careful about
cross-contamination.
But instead of just listing regs, if I could for a moment
turn to something here. This is in the attachment to my
testimony. This is about real events and real people. It is
under section 4A of what is really the second attachment. It
talks about some of the derailments that happened at Amtrak and
some of the actions that employees took. I will just very
quickly go through a few of them.
An April 2002 auto train derailment. An employee named
Reggie Jackson climbed on top of a car where he had heard
screaming, popped open the windows, helped passengers to
safety. James Pierce, on the same train, pulled out an
emergency window and pulled people out through the window to
safety and then spent the rest of his time handing out bandages
to people who had cuts and bruises.
A 2001 derailment on the Zephyr in Iowa. An employee named
Jimmy Coleman received a citation for having assisted more than
80 people to evacuate the train and also providing them comfort
and security. And there are more of those, the list goes on.
But those are real things that these people are trained to do
and that they do.
Ms. Brown. Just one other question. You noted that the
onboard service workers are not paid for their real time on the
train. Can you explain that to me because I was trying to ask
somebody earlier about that?
Mr. Biggs. Yes. On every employee's work schedule they have
time on the outbound trip, and then they lay over at an away-
from-home terminal, not their home base, and then they come
back on the inbound trip. And in all three times there are
times they are not paid. On the outbound trip, they will have a
down time where they can go to a sleeping car or something and
they are not paid for that. On the outbound trip they are not
paid for virtually their whole layover. And on the inbound
trip, they are not paid again.
If you add up all those times, it is very common that
employees, in terms of the actual time required to be on the
job, are not paid for anywhere from 35 to 42 percent of their
time.
I have a chart that the chairman of the Amtrak Service
Workers Council did. It is actually very nice looking. You can
see it probably from there. If I could make the chart a part of
the record, Mr. Chairman, I would. But what it shows is that if
you look at the full rate of pay, which is what the most senior
service attendant would make, of $18.86 an hour and not
considering any other factors but only considering the unpaid
time, let us say, on the Cardinal or the Capitol Limited, that
translates into a real hourly wage of $10.83. So that is the
kind of impact just that one factor has on those wages.
Ms. Brown. My last question. Mr. Capon, in the past Amtrak
has instituted various cost-cutting measures from lowering the
quality of the food to increasing meal prices, and most
recently Amtrak eliminated food service from New York to
Albany. How do these changes impact your membership and/or
Amtrak ticket sales?
Mr. Capon. The New York-Albany change is scheduled to begin
July 1st. The one that they just implemented was the
elimination of hot meals on Metroliner First Class. And I would
have to disagree with Mr. Crosbie's earlier statement about not
downgrading quality. No hot meals is certainly an example of
downgrading quality. And since they just began it last week, I
guess we will find out quickly enough whether people still
think it is worthwhile to spend the extra money for Metroliner
First Class.
On the short distance runs, obviously, it is possible for
people to grab something before they get on the train, if the
place is open. Apparently, the snack bar in Albany does not
open until after the first or second morning departures have
already left. For people that have diabetic or other medical
conditions, lack of on-board food service may constitute a
reason to travel a different way.
It is hard to say how many people will be driven off. They
are running right now from New York to Harrisburg, which is
three hours or so, and that is with no food service at all. If
they can fix all their problems with internal controls and cost
controls and everything and figure out a model of efficiency
for delivering food, we would like them to try to put the meals
back there and see if that has a net positive effect, because
you never know until you try.
We know that on very short runs in California, with the
very innovative approach, the food service is very popular and
very well used and I think is part of the reason that ridership
has skyrocketed on the California corridors. So we would like
to see that tried in the East as well.
Ms. Brown. My time has expired, Mr. Chairman.
Mr. LaTourette. I thank the gentlelady. Ms. Brown and I
have six minutes to get ourselves over to the floor to vote on
the last vote of the day. We want to thank you very much for
participating in today's hearing. The record will be kept open
if you have any additional observations you would like to make.
And we may send a couple of follow up questions to you, Mr.
Biggs.
But thank you very much.
This subcommittee is adjourned.
[Whereupon, at 12:40 p.m., the subcommittee was adjourned.]
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