(The following report by Tim McLaughlin appeared on the Post-Dispatch website on June 10.)
ST. LOUIS — Money-losing Amtrak pays anywhere from 43 cents to nearly $4 for a bottle of Heineken beer, underscoring the national rail line’s haphazard approach to tracking costs, a government report says.
For each $1 Amtrak collects from passengers for food and drink, it spends nearly $2, the Government Accountability Office said in a report this week.
The GAO estimated that Amtrak lost $245 million in a three-year span on food and beverage service. From fiscal 2002 to fiscal 2004, Amtrak’s food and beverage revenue was $84.1 million, while expenses totaled $164.5 million, the report said.
“Amtrak’s food and beverage service may represent a relatively small part of the company’s operating budget, but it speaks volumes about Amtrak’s need to get its operations in better order,” the GAO report said.
Amtrak acknowledges losing money on food and drink, but spokesman Marc Magliari described the GAO report as “badly flawed.”
Still, the GAO held up the financially strapped airline industry as a better example of cost management than Amtrak. Northwest Airlines, for example, quickly knows if one of its suppliers adds or subtracts a single lettuce leaf as part of an entree, the GAO report said.
The GAO’s criticism comes as Amtrak pursues a $1.82 billion federal subsidy for fiscal 2006. The request is $600 million more than the current subsidy as Amtrak’s management undertakes what it calls “a dramatic departure from business as usual.”
In Missouri, Amtrak’s ridership was 422,063 passengers in fiscal 2004, when the state provided the company with $6.2 million in operating support.
In testimony on Thursday before the House subcommittee on railroads, William Crosbie, Amtrak’s senior vice president of operations, said that only recently have Amtrak employees used cash registers rather than cardboard boxes for food and beverage transactions.
“We concede the (food and beverage) contract we inherited was poorly negotiated and, at times, not managed to the best of its capabilities,” Crosbie said. Recently, better monitoring and greater efficiencies have been achieved, he added.
The GAO report indicates Amtrak still has a long way to go.
Since 1999, Amtrak has used outside contractor Gate Gourmet International to manage its commissaries and for ordering food and drinks. The contract expires in September 2006, but Amtrak has told Gate Gourmet it won’t be renewed, Magliari said.
GAO said Amtrak hasn’t required Gate Gourmet to provide annual reports or subjected the contractor’s purchases to an audit. Amtrak also doesn’t adequately monitor purchase prices reported by the contractor to identify variances or products with high costs.
The GAO randomly tested 37 payment transactions to review Gate Gourmet’s purchase data in an exercise that found wild fluctuations in the prices Amtrak paid for food and drink. For example, in 2003, the purchase-order prices of a 10-ounce strip steak ranged from $3.02 to $7.58.
In fiscal years 2002 and 2003, payments for more than $400,000 worth of Heineken beer varied from 43 cents to $3.93 a bottle, the GAO said.
“Without defined controls and management, this type of contract structure provides little incentive for a contractor to reduce or contain costs to provide better value to its customer,” the GAO report said.