- The Washington Times - Thursday, June 9, 2005

Amtrak spends $2.06 for every $1 it earns on its food and beverage service as a result of a bad contract and poor management, federal watchdogs told a congressional subcommittee yesterday.

The losses totaled nearly $245 million between fiscal 2002 and 2004, according to the Government Accountability Office, the investigative arm of Congress.

Amtrak is operating with a $1.2 billion federal subsidy this year and is seeking $1.82 billion for fiscal 2006.

The report brought strong denials from Amtrak, which accused the GAO of exaggerating numbers and assuming incorrectly the food and beverage service could operate profitably under the railroad’s mandate to provide public transportation.

Amtrak said the food service is required to serve its customers properly.

“There are people on these trains,” said William L. Crosbie, Amtrak senior vice president. “It’s not just a piece of steel running up and down a track.”

The food service for passengers “was never intended to be a profit center,” he said. “When it’s dinner time, they expect to be served dinner. It will never be profitable.”

The GAO said employee theft contributed to the losses, although determining the amount was difficult.

Amtrak officials admitted some employees stole money, but said they have tried to stop it.

“There were in excess of 200 employees we removed from service for improper handling of funds,” Fred E. Weiderhold Jr., Amtrak inspector general, told the House Transportation and Infrastructure railroads subcommittee.

Amtrak has 19,600 employees. Of those, 1,155 work in the food and beverage service, which is offered on 90 percent of the railroad’s trains.

Amtrak President David Gunn has reduced the railroad’s work force by 20 percent, from about 25,000, since he assumed the post in May 2002.

The congressional hearing coincides with calls by the Bush administration for drastic reforms to Amtrak that include cutting its costs and federal subsidies.

Mr. Gunn told a Senate panel May 12 the railroad was headed for bankruptcy unless it received more federal funding.

Last month, Transportation Secretary Norman Y. Mineta told Amtrak to immediately cut costs to avoid depleting its cash reserves. Among the expenses the Transportation Department has cited as excessive is the food service.

The GAO said Amtrak sometimes paid $3.93 for each bottle of Heineken beer it served customers.

Amtrak officials used the figure as an example of distortions in the report, saying the $3.93 figure resulted from a data-entry error by the GAO and the correct figure is 83 cents per bottle for 200,000 bottles. Amtrak charges customers about $4 per bottle.

Much of the criticism from the GAO and members of the House panel focused on Amtrak’s contract with Gate Gourmet Inc., the contractor that provides the food and beverage service.

The $73 million-a-year contract runs from 1999 through 2006.

The GAO accused Amtrak of failing to properly audit the fees from Gate Gourmet, including rebates and discounts on food purchases the company could have used to reduce the railroad’s expenses.

“They basically couldn’t tell us how many discounts or rebates they got,” said JayEtta Hecker, the GAO’s director of physical infrastructure issues.

Amtrak officials said they plan to renegotiate their contract with Gate Gourmet.

“We do agree that this existing contract is not a good contract,” Mr. Crosbie said.

Rep. John L. Mica, Florida Republican, said the problems with Amtrak involve its business model.

“We’re going to be back here again next year if we don’t make reforms,” he said.

However, Rep. Corrine Brown, Florida Democrat, said Amtrak’s financial problems result from “years of starvation budgets” by the federal government.

Although the food service might not be profitable for Amtrak, it could attract customers, similar to airline food services, she said.

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