Amtrak Risks Hundreds of Millions in Equipment, IG Says

Amtrak, the U.S. intercity passenger railroad, may waste hundreds of millions of dollars buying equipment it doesn’t need and require more taxpayer operating subsidies as a result, a watchdog said.

The railroad, based in Washington, doesn’t have a “disciplined process” to figure out what locomotives and passenger cars it needs, its inspector general said in a report released yesterday. Inspector General Ted Alves pointed to a $563 million deal, backed by a U.S. loan, to buy 70 Siemens AG (SIE) electric locomotives when 56 are needed at peak demand on a normal day.

“Pursuing acquisitions before adequately analyzing needs could result in spending hundreds of millions of dollars more than necessary on future equipment,” the report said. It also criticized the railroad for not evaluating what it would cost to refurbish existing equipment.

The report was released as Amtrak is testing the first of those Siemens locomotives to roll off the assembly line, and as the railroad plans later this year to seek proposals to replace its Acela trainsets that serve the Northeastern U.S.

Those and other equipment purchasing plans “could exacerbate its operating deficit and negatively affect operations, particularly if the acquisitions are not properly integrated into overall financial planning,” the report said. “If Amtrak does not improve its fleet planning process, it risks spending hundreds of millions of dollars more than necessary, and potentially needing additional operating subsidies.”

Amtrak, in a response included with the report, said it agrees with the “theme” of the conclusions while disagreeing with some examples. Chief Executive Officer Joseph Boardman pointed to its work with California to buy new Acela equipment as an example of a way to save money, by working with a partner on train purchasing.

“We agree with the inspector general that the changes we are undertaking will provide improved analysis for decision-making and support our goal of running Amtrak more like a business,” Amtrak spokesman Steve Kulm said in an e-mail.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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