[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

                                 _____

                     U.S. GOVERNMENT PRINTING OFFICE
                             WASHINGTON: 2006        

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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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