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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

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

VACANCY

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

ROBERT MENENDEZ, New Jersey

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

(II)
SUBCOMMITTEE ON RAILROADS

STEVEN C. LATOURETTE, Ohio, Chairman

THOMAS E. PETRI, Wisconsin

SHERWOOD L. BOEHLERT, New York

JOHN L. MICA, Florida

SPENCER BACHUS, Alabama

JERRY MORAN, Kansas

GARY G. MILLER, California

ROB SIMMONS, Connecticut

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

JON PORTER, Nevada

TOM OSBORNE, Nebraska

MICHAEL E. SODREL, Indiana

LYNN A. WESTMORELND, Georgia, ViceChair

DON YOUNG, Alaska

(ex officio)

CORRINE BROWN, Florida

NICK J. RAHALL II, West Virginia

JERROLD NADLER, New York

ROBERT MENENDEZ, New Jersey

BOB FILNER, California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

LEONARD L. BOSWELL, Iowa

JULIA CARSON, Indiana

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

JAMES L. OBERSTAR, Minnesota

(ex officio)

(III)

(V)

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

(1)

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.
2

As expenses associated with Amtrak’s food and beverage oper- ations 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
3

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 strug-
4

gled 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
5

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.
6

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.
7

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.
8

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
9

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.
10

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
11

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.
12

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,
13

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.
14

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.
15

‘‘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
16

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.
17

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 presen-
18

tation 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.
19

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
20

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
21

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.
22

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
23

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.
24

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 highspeed 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.
25

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
26

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.
27

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.
28

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?
29

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 con-
30

tractors 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 AmtrakCalTran-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
31

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?
32

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 manage-
33

ment? 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
34

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
35

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.
36

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
37

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 YorkAlbany 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
38

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
39

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
40

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.
41

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
42

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
43

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.
44

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-fromhome 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 ev-
45

erything 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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