New Report Highlights Costs of Amtrak's Failure to Compete with Private Sector

Press Release

A new Committee investigative report demonstrates that Amtrak continually fails to successfully compete with the private sector in operating cost-effective commuter rail service across the United States, and that hundreds of millions of taxpayer dollars could be saved if more passenger rail operations are competed out.
U.S. Rep. John L. Mica (R-FL), Chairman of the Transportation and Infrastructure Committee, released today's report entitled "Amtrak Commuter Rail Service: The High Cost of Amtrak's Operations." The Committee also conducted a hearing today on this issue, highlighting the significant cost savings realized by commuter rail agencies through competitive contracting for operations.
The report and hearing also found that Amtrak has previously attempted to stifle competition from the private sector.
"Amtrak is a highly subsidized, Soviet-style rail system, but despite every ticket being underwritten nearly $50 by the taxpayers, Amtrak is an absolute failure in competing with the cost-effectiveness and level of service provided by the private sector," Mica said.
"We already know that Amtrak's losses in food and beverage service are a staggering $833 million over the last decade. Now we know that Amtrak wastes the taxpayers' money bidding on commuter rail contracts that it cannot win, and that hundreds of millions of dollars in savings can be realized if the private sector is given a chance to compete with Amtrak in commuter rail and passenger rail service.
"Even more troubling, we know that when Amtrak has lost competitive bids, it has tried to retaliate against the winning bidders in efforts to stifle competition," Mica said. "Amtrak needs to get out of the commuter rail business, the private sector should be given more opportunities to save taxpayers money in operating rail service, and federal funds should never be used by Amtrak to sue private entities for competition-related lawsuits."
"It is critically important to continue to look for ways to improve service while reducing costs," said U.S. Rep. Bill Shuster (R-PA), Chairman of the Railroads, Pipelines and Hazardous Materials Subcommittee. "Competition can and does save money and offers significant benefits to passengers and taxpayers."
There are currently 26 commuter rail agencies across the country, which provided service for nearly 460 million riders in 2010. Commuter rail operations are typically operated directly by a public transit agency or contracted out. Amtrak is one of the operators that provide contract commuter rail service. Given increasing demand for commuter rail service, as well as the state of the economy, it is critically important that commuter rail agencies continue to look for ways to improve service while reducing costs.
According to the Committee's investigative report, even with high federal subsidies, Amtrak loses when competing with private operators. Commuter rail agencies have saved $107.8 million or 11.5% by awarding contracts to private operators.
Over the past ten years, as the level of competition between the major rail operators has significantly increased, Amtrak has fared extremely poorly. In fact, Amtrak's inability to adapt its nationwide model for intercity passenger rail to regional commuter rail markets has led to its failure to win a single commuter rail operations contract in a competition over the last decade. Over this time period Amtrak prepared offers for seven separate competitions, withdrawing from two prior to the final decision award, and losing the others. This includes contracts for which Amtrak was the existing operator, which should have given it an advantage in prior understanding of the service and the commuter rail agencies' needs. However Amtrak continues to waste money preparing expensive bids for contracts it has a record of losing.
Additionally, after failing to win some of these competitive bids, Amtrak has engaged in anti-competitive behavior that can only be described as an attempt to stifle competition among the burgeoning private operator market for passenger rail.
The report highlights a case in which Amtrak filed a frivolous lawsuit against a private sector competitor that won a contract, and another case in which Amtrak reportedly interfered with the transition to a winning bidder.
Potential Savings of Nearly $100 Million Annually
Commuter rail agencies that have bid out operations to the private sector have already experienced more than $100 million in savings over the lives of those contracts, but more savings can be experienced if the competitive commuter rail model is applied to longer intercity passenger rail routes known as "State-supported routes." These are passenger rail routes 750 miles or less in which State and regional agencies pay most of the operating costs of services not covered by farebox revenues.
The State-supported routes are the sector of Amtrak's passenger rail services that have seen the greatest growth over the past two decades. State-supported routes carried 14.7 million passengers in FY 2011; the total operating cost in FY 2011 of providing the State-supported routes was $793.8 million. Currently, 19 States contract with Amtrak for the operation of 27 State-supported routes.
Beginning in October 2013, States will be responsible for covering 100 percent of the operating and capital costs for their State-supported routes. This new responsibility, mandated in section 209 of the Passenger Rail Investment and Improvement Act (PRIIA), will cost the States and additional $120 million per year.
If the kind of savings that transit agencies have realized through competitive procurement of commuter rail service is realized by also competing out the State-supported routes, the States could potentially save an estimated $91.3 million annually, covering most of the anticipated increase.
Among the report's conclusions are that Amtrak should immediately cease expansion of commuter rail operations, States should consider competing out State-supported intercity routes, and Amtrak should immediately cease the use of federal funds to sue private entities.

Source