oversight

TRAIN OPERATIONS: Opportunities to Reduce the Cost of Servicing and Inspecting Trainsets

Published by the Amtrak Office of the Inspector General on 2018-11-07.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

TRAIN OPERATIONS:
Opportunities to Reduce the Cost of Servicing and Inspecting
Trainsets




Certain information in this report has been redacted due to its sensitive nature.




                                                   OIG-A-2019-002 | November 7, 2018
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Certain information in this report has been redacted due to its sensitive nature.
Memorandum
To:             Scot L. Naparstek
                Executive Vice President/Chief Operating Officer

From:           Stephen Lord
                Assistant Inspector General, Audits

Date:           November 7, 2018

Subject:        Train Operations: Opportunities to Reduce the Cost of Servicing and Inspecting
                Trainsets (OIG-A-2019-002)

Several of our previous reports identified inefficiencies in Amtrak’s (the company)
Mechanical department and outlined ways it could reduce the cost of its operations or
put funds to better use.1 Most recently, we reported in April 2018 on opportunities to
reduce the cost of rebuilding components at the department’s three major maintenance
facilities, 2 including better aligning the number of staff to the workload and considering
contracting out some activities. Such changes support the Chief Mechanical Officer’s
current efforts to realign workloads and staffing at these back shops and the company’s
efforts to reduce its operating losses.

This report is the second in a series about the Mechanical department’s operating
efficiency and focuses on the department’s service and inspection activities. Workers at
service and inspection sites inspect the company’s locomotives and passenger cars to
ensure that they meet safety standards set by the Federal Railroad Administration
(FRA), and clean and service the trainsets to ensure that they meet the company’s
guidelines for cleanliness.3 The company has a total of 62 locations nationwide where it
services and inspects trainsets; 50 smaller outlying sites (sites), as well as 12 larger

1 Amtrak Mechanical Maintenance Operations (E-05-04), September 6, 2005, found that the company’s
maintenance operation was conducted mostly at time-based intervals and was characterized by a high
number of reactive, unscheduled repair actions. In addition, see Mechanical Maintenance: Improved
Practices Have Significantly Enhanced Acela Equipment Performance and Could Benefit Performance of Equipment
Company-wide (OIG-E-2012-008), May 21, 2012, found that the company made significant progress on its
Acela fleet, but additional improvements in maintenance practices could be made company-wide.
2 Train Operations: Opportunities to Reduce the Cost of Rebuilding and Manufacturing Components at

Maintenance Facilities (OIG-A-2018-006) April 16, 2018. The three facilities are known as back shops; they
are located in Wilmington, Delaware; Bear, Delaware; and Beech Grove, Indiana.
3 49 CFR Parts 229, 236, and 238.




      Certain information in this report has been redacted due to its sensitive nature.
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities to Reduce the Cost
                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

preventative maintenance facilities. This audit focused on the service and inspection
functions conducted at the 50 sites.4

Our objective for this audit was to identify opportunities, if any, for the Mechanical
department to reduce the cost of its service and inspection operations at its 50 outlying
sites. The department staffs 16 of these sites with company employees and the
remaining 34 with contractors, and is responsible for overseeing operations at all of
these sites. In fiscal year (FY) 2017, the service and inspection activities at the
16 company-staffed sites cost about $30.4 million and at the 34 contractor sites about
$11.5 million.

To assess opportunities to reduce costs, we examined financial and operational data on
the department’s service and inspection sites, including data on staffing and
expenditures, such as labor and materials. Because workers at these sites can perform
service and inspection work only when trains are onsite, we also compared work
schedules to train schedules across various sites to identify potential opportunities to
better align the workforce with the workload. In addition, we visited five sites to
interview staff, including supervisors, and to observe daily operations: Lorton, Virginia;
Fort Worth, Texas; Oklahoma City, Oklahoma; Pontiac, Michigan; and New Haven,
Connecticut. We also interviewed company labor relations officials to identify what
type of actions the company could take consistent with its collective bargaining
agreements. Our scope and methodology is discussed in detail in Appendix A.

SUMMARY OF RESULTS
The Mechanical department has opportunities to reduce the cost of performing service
and inspection activities by (1) adjusting workloads and staffing to achieve greater
efficiencies, and (2) better managing overtime. The department has taken some recent
steps to reduce costs in other areas of its operations, but it has not fully assessed
changes that could be implemented to make its service and inspection activities more
cost-effective and efficient without affecting service delivery. By making the changes
recommended in this report, we estimate that the department could put $2.3 million to




4 Preventative maintenance facilities are located in Albany, New York; Boston, Massachusetts; Chicago,
Illinois; New York City, New York; Washington, D.C.; Sanford, Florida; Hialeah, Florida; New Orleans,
Louisiana; Los Angeles, California; Oakland, California; Philadelphia, Pennsylvania; and Seattle,
Washington.
     Certain information in this report has been redacted due to its sensitive nature.
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities to Reduce the Cost
                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

$6.4 million to better use annually, depending on the extent of changes the department
implements.

We identified several cost-savings opportunities for the department to consider:
    •     Moving inspection work to the service and inspection areas of preventative
          maintenance facilities. Shifting FRA-mandated safety inspections from some
          service and inspection sites to the service and inspection areas of preventative
          maintenance facilities could reduce costs while still meeting federal safety
          requirements. For example, we found that the department could move some
          trainset inspections from company-staffed and contractor-staffed sites in
          Michigan and Missouri to the Chicago preventative maintenance facility.
          The department could make these changes and still meet the timeframe that
          federal safety standards require – once every 24 hours for equipment in
          operation.

          The department could then adjust staffing at these sites to reflect the reduced
          workload. For example, some trainsets inspected by these sites travel through the
          Chicago facility every day, such as those on the Wolverine and Lincoln routes, and
          Chicago staff are already involved in cleaning these trainsets. An outside
          consulting group found that the Chicago facility has excess capacity, including in
          the train service and inspections section, which a senior company official
          confirmed. Based on the results at the Chicago facility, the company may have
          similar savings opportunities at the other 11 preventative maintenance facilities.
          Depending on the amount of additional inspection work these facilities absorb,
          we estimate that the department could put $1.4 million to $3.9 million to better
          use by conducting more inspection work in these facilities.

    •    Reducing unnecessary full-time positions. At a sample of 4 of the 16 company-
         staffed service and inspection sites, we found that full-time employees work
         standard 8-hour shifts even though the sites do not have enough regularly
         scheduled service and inspection work to fill an 8-hour shift. For example, the
         daily train at Fort Worth is onsite for five hours, and because of track constraints,
         staff have a three-hour window to inspect, clean, and service the trainset.5

5Typically, the timeline for layover or turnaround servicing for an eight-car trainset is two to two and a
half hours. In this report, we used three hours (to include a half-hour lunch) when modeling the time
needed to perform these activities, although this timeframe can vary depending on factors like the length
of the trainset and whether any mechanical issues arise.
        Certain information in this report has been redacted due to its sensitive nature.
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                              Amtrak Office of Inspector General
                     Train Operations: Opportunities to Reduce the Cost
                            of Servicing and Inspecting Trainsets
                             OIG-A-2019-002, November 7, 2018

        However, staff are assigned regular eight-hour shifts to complete the three hours
        of work. We observed, and a site supervisor confirmed, that staff use part of their
        workday to perform other tasks, including gathering their tools and supplies
        before the trainset arrives in a station. During site visits, however, we observed
        that these tasks did not require a significant amount of time to complete.

        Two senior company officials acknowledged that staffing levels at sites were not
        usually based on workload but more on a historical preference to have a full
        complement of staff on-hand to respond quickly to any unforeseen mechanical
        failures on trains at the site or along the route. This is a costly practice. For
        example, we estimated from assessments we conducted on 4 of the 16 sites that
        the idle staff hours at these 4 sites cost the department almost $3 million
        annually.

        We also found that it is relatively expensive to staff a site with company
        employees as compared to contractor employees. For example, along one route, it
        cost 83 percent more for company employees to perform service and inspection
        activities on a trainset than for contractor staff to perform similar work on the
        same trainset.6 This is, in part, because contractors’ pay and benefits differ from
        company employees.

    •   Better managing the cost of overtime. Management of overtime has been a long-
        standing issue for the company.7 However, our work showed that management
        of overtime continues to be a challenge at some of the 16 company-staffed service
        and inspection sites. For example, we found that in FY 2017, company employees
        at all sites earned a total of about $3.1 million in overtime, even staff at the four
        sites we noted earlier who have full-time staff without full-time work. In
        addition, at 8 of the 16 sites, staff were earning on average at least 20 percent
        more than their regular base wage in overtime pay. Supervisors at two of the
        sites we visited were unaware of either why overtime was being incurred or the

6 While company executives told us that there may be some challenges to contracting out work due to
labor rules, they also said there are a number of options the company could consider to adjust its
workforce, including the use of contractors in certain instances.
7 Amtrak: Top Management and Performance Challenges—Fiscal Years 2019 and 2020 (OIG-SP-2018-011)

September 28, 2018. Additionally, in its FY 2017 budget request to Congress, the company committed to
documenting and reporting overtime, including identifying its root causes and reducing any unnecessary
expenses.


     Certain information in this report has been redacted due to its sensitive nature.
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities to Reduce the Cost
                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

        amount of overtime staff earned. Because these supervisors were not aware,8
        they were missing opportunities to manage the overtime and help reduce costs.
        We estimate that taking steps to better manage overtime and reduce it when
        possible could allow the department to put about $900,000 to $2.4 million dollars
        to better use.

As part of the Mechanical department’s efforts to realign its workforce and reduce costs,
we recommend that the department consider taking steps to reduce costs at its
50 service and inspection sites including shifting more service and inspection work to
preventative maintenance facilities, reducing unnecessary positions, and better
managing overtime use. In commenting on a draft of this report, the Chief Mechanical
Officer agreed with our recommendations and highlighted efforts the company has
initiated or plans to take, including assessing workload and staffing options, and
issuing a new policy on overtime. These actions, if fully implemented, will address the
intent of the recommendations.

BACKGROUND
The Mechanical department has oversight responsibility for all of the company’s service
and inspection activities conducted at 16 company-staffed sites and 34 contractor-
staffed sites (see Figure 1). The activities that the staff perform while the trainsets are
onsite include the following:
    •   FRA-mandated safety inspections. This includes conducting cab signal tests, air
        brake tests, and interior and exterior inspections, as well as documenting that the
        company completed the required tests.
    •   Cleaning. This includes removing trash, washing windows, vacuuming carpets,
        and wiping down restrooms and café cars.
    •   Other service and inspection activities. This includes replenishing potable
        water, pumping waste from toilets, and repairing equipment.

The department also performs similar service and inspection activities at the
12 preventative maintenance facilities.



8 IMA, The Conceptual Framework for Managerial Costing states that managers’ best guidance for future
outcomes is often provided by understanding the cause-and-effect relationships in the process they are
trying to influence and improve.
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                              Amtrak Office of Inspector General
                     Train Operations: Opportunities to Reduce the Cost
                            of Servicing and Inspecting Trainsets
                             OIG-A-2019-002, November 7, 2018

Figure 1. Mechanical Department’s 50 Outlying Service and Inspection Sites




         Amtrak staff                                          Contractor staff
 LOCATION                STAFFa               LOCATION                  LOCATION
 Baltimore, MD                                Albuquerque, NM           Oklahoma City, OK
 Fort Worth, TX                               Auburn, CA                Omaha, NE
 Harrisburg, PA                               Bakersfield, CA           Port Huron, MI
 Kansas City, MO                              Brunswick, ME             Portland, ME
 Lorton, VA                                   Carbondale, IL            Portland, OR
 New Haven, CT                                Charlotte, NC             Rutland, VT
 Newport News, VA                             Denver, CO                Sacramento, CA
 Niagara Falls, NY                            Eugene, OR                Salt Lake City, UT
 Pittsburgh, PA                               Everett, WA               San Jose, CA
 Pontiac, MI                                  Goleta, CA                San Luis Obispo, CA
 Richmond, VA                                 Grand Rapids, MI          Savannah, GA
 San Antonio, TX                              Lakewood, WA              Spokane, WA
 San Diego, CA                                Lynchburg, VA             St. Albans, VT
 Springfield, MA                              Milwaukee, WI             St. Paul, MN
 St. Louis, MO                                Minot, ND                 Toledo, OH
 Washington, DC                               Montreal, QC              Toronto, ON
                           248                Norfolk, VA               West Quincy, MO
Source: OIG analysis of company data
Note:
a The average number of staff is rounded at company sites.




     Certain information in this report has been redacted due to its sensitive nature.
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                              Amtrak Office of Inspector General
                     Train Operations: Opportunities to Reduce the Cost
                            of Servicing and Inspecting Trainsets
                             OIG-A-2019-002, November 7, 2018

In FY 2017, service and inspection activities at the 50 sites listed above cost a total of
about $42 million as seen in Figure 2. Company-staffed sites represented most
($30.4 million) of these costs.

                   Figure 2. Cost of Service and Inspection Activities
               at Company-Staffed vs. Contractor-Staffed Sites, FY 2017




Source: OIG analysis of company data

MECHANICAL DEPARTMENT HAS NOT ASSESSED OPPORTUNITIES
TO REDUCE COSTS AT SERVICE AND INSPECTION SITES
The Mechanical department is striving to reduce the cost of its service and inspection
activities but has not fully assessed opportunities to shift some safety inspection work
to preventative maintenance facilities, reduce excess staff capacity where sites do not
need as many full-time positions, and better manage overtime costs.

Moving inspection work to the service and inspection areas of preventative
maintenance facilities. The department can reduce the cost of service and inspection
activities by shifting some FRA-mandated safety inspections9 from service and


9FRA-mandated safety inspections that must be performed within a 24-hour period include cab signal
testing.
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities to Reduce the Cost
                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

inspection sites to the service and inspection areas of preventative maintenance
facilities.

For example, we examined the Chicago preventative maintenance facility10 and found
that the company could move some FRA-mandated safety inspections that are currently
conducted at four service and inspection sites in Michigan and Missouri to the Chicago
facility and still meet federal timeframes for conducting FRA-mandated safety
inspections.11 Specifically, we assessed the schedules of routes that originate or
terminate in Chicago and found a number of routes where the trainsets are in Chicago
once every 24 hours, such as the Wolverine and Lincoln routes, and Chicago staff are
already responsible for cleaning them. Their current route schedules would allow the
Chicago staff to perform the FRA-mandated safety inspections within the required time
frames. In addition, in 2015 an outside consulting group tasked with assessing the
company’s Chicago operations concluded that the facility had excess staff capacity,
including in the service and inspection section.12 Furthermore, a senior Mechanical
department official with oversight responsibilities for service and inspections
acknowledged that the Chicago facility has the staff capacity to take on these additional
inspections.

We recognize that the four affected sites—Pontiac, Michigan; Port Huron, Michigan;
St. Louis, Missouri; and West Quincy, Missouri—may still need to maintain the capacity
to clean trainsets in accordance with company cleaning standards. However, the
reduced workload would allow the department to adjust staffing levels at company-
staffed sites and reduce the scope of work at sites staffed with contractors. For example,
our work shows that by shifting FRA-mandated safety inspections to Chicago, the
department could reduce the scope of work at two contractor-staffed sites in Michigan
and Missouri. We estimate that the department could put approximately $240,000 to




10 We selected the Chicago preventative maintenance facility for this analysis because long-distance and
state-supported corridor routes originate and terminate there. Additionally, during our audit work, a
senior Mechanical department official told us that Chicago has the existing capacity and resources to
conduct these inspections.
11 At some sites where the company also performs service and inspection activities for state-supported or

commuter routes, the company would consult these customers about staffing levels if making
adjustments involves a change in the contractual agreements.
12 Executive Summary, Amtrak Chicago Terminal Assessment, Argo, July 8, 2015.




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                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

better use as a result.13 The department could also adjust staffing levels at two company-
staffed sites in these same states, and we estimate that the department could put more
than $100,000 to better use for each position it eliminated.14

Our findings for the Chicago preventive maintenance facility suggest that by assessing
similar cost-savings opportunities at the company’s 11 other preventative maintenance
facilities, the department could further reduce costs by shifting safety inspections
performed at service and inspection sites. For the company-staffed sites, we estimate
that the potential cost savings of this shift is about $1.2 million to $3.8 million annually,
depending on the amount of work preventative maintenance facilities absorb as shown
in Table 1.15

       Table 1. Estimated Savings Associated with Shifting Company-staffed
                 Inspections to Preventative Maintenance Facilitiesa

 Percent of outlying inspection work that could potentially be
                                                                    5%           10%               15%
 absorbed by preventative maintenance facilities:

 Projected elimination of company inspection staff across
                                                                 12 workers   24 workers    37 workers
 outlying sites

 Potential savings                                               $1,217,000   $2,435,000    $3,753,000
Source: OIG modeling based on company financial data
Note:
a Savings might not be immediately realized if this change is implemented as a transfer in which

employees would be expected to follow their work.


Reducing unnecessary full-time positions. The department could also reduce the costs
at some of its 16 company-staffed service and inspection sites by reducing the number
of full-time positions where the workload does not justify them. At some of these sites,
we found that there is not enough work to fill an eight-hour shift.16 For instance, the
Fort Worth service and inspection site is primarily responsible for servicing and
inspecting the Heartland Flyer. This trainset is scheduled to be onsite for five hours but
due to track constraints, staff can work on the trainset only for about three of those

13 We did not model the cost savings associated with reducing the scope of work at contractor-staffed
service and inspection sites outside the Midwest.
14 Based on the company’s financial data and interviews with company officials, we calculated that the

cost of the average wages and benefits was            per employee in FY 2017.
15 Percentages are based on the total company staff at sites in FY 2017.

16 Full-time is considered to be five consecutive eight-hour days.


     Certain information in this report has been redacted due to its sensitive nature.
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                             of Servicing and Inspecting Trainsets
                              OIG-A-2019-002, November 7, 2018

hours despite working eight-hour shifts. In another instance, the Lorton site is
responsible for servicing and inspecting the Auto Train, but because of the time it takes
for passengers to board and depart from the train, company staff can work on the
trainset only during a five-hour period. Nonetheless, the company staffs each of the two
sites with full-time employees. We found four examples of company-staffed service and
inspection sites where the workload does not justify having full-time service and
inspection staff based on our analysis of the time available to conduct service and
inspection activities, though we did not examine all 16 sites. See Table 2.

              Table 2. Examples of Sites with Unnecessary Full-time Staff
                        and the Estimated Cost to the Company



                               Pittsburgh      Pontiac      Fort Worth        Lorton         Total
 Hours the site is staffed
                                   13             15             8              8
 each daya
 Hours needed to perform
                                   3              9              3              5
 S&I workload each day
 Hours of planned idle
                                   10             6              5              3
 time each day
 Percent planned idle time
                                  77%            40%            63%            38%
 each day




Source: OIG analysis of company shifts, time typically needed to complete service and inspection
activities, and company financial data
Notes:
a Full-time shifts are eight hours each; however, both Pittsburgh and Pontiac have two shifts that overlap.
b Dollar amounts have been rounded for the purpose of this analysis.


We observed, and a site supervisor confirmed, that employees complete some tasks
before they start work on the trainsets, such as gathering tools and supplies; however,
these tasks do not require a significant amount of time to complete. Additionally,
two senior company officials told us that the company typically did not base staffing
levels at these sites on workload. Rather, it based levels on a historical preference to
ensure that sites have a full complement of staff on hand to quickly mitigate any
incident that may arise at a site, or along the train route. However, this practice results
in staffing inefficiencies for the company.

We also found that it is relatively expensive to staff a site with company employees
compared to contractor employees. One train route, the Heartland Flyer, is serviced and
     Certain information in this report has been redacted due to its sensitive nature.
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                              of Servicing and Inspecting Trainsets
                               OIG-A-2019-002, November 7, 2018

inspected by company staff at one end and contractor personnel at the other. The
FY 2017 cost associated with company-staffed operations in Fort Worth was about
$1 million while payments to the contractor for services provided in Oklahoma City
was about $177,000—an 83 percent difference. This is partly due to the difference in
pay and benefits between company staff and contractors.

When making adjustments to staffing levels, the vice president of labor relations told us
that labor agreements generally do not restrict staffing levels or starting times so the
company has some flexibility within the current agreements. He said that although
unions generally favor full-time employment positions, the company has a variety of
options to reduce the number of unnecessary full-time positions, including the
following:
     •   eliminating positions
     •   choosing not to replace staff who leave the company, or if necessary, replacing
         them with part-time, flexibly scheduled contract support
     •   assigning certain work to other crafts

 Some of these actions might raise union concerns, but the company said it would
 consult labor representatives, if needed. In a 2013 report on public transit, the
 Government Accountability Office (GAO) noted that companies have to weigh the
 potential for union resistance against the financial pressures to increase cost-
 effectiveness when making decisions on how to use resources most effectively.17

Better managing the cost of overtime. The department could also reduce the cost of
service and inspection activities by better managing its use of overtime at the 16
company-staffed sites.18 As we have previously reported, management of overtime has
been a long-standing issue for the company.19 However, we found that staff at all 16
sites earned overtime, including 4 sites where we identified significant idle time,20
although the amounts varied significantly across sites. In FY 2017, average overtime


17 GAO, Public Transit: Transit Agencies’ Use of Contracting to Provide Service (GAO-13-782), September 2013.
18 Amtrak generally pays a fixed monthly fee to the companies that staff contractor service and inspection
sites.
19 Amtrak: Top Management and Performance Challenges—Fiscal Years 2019 and 2020 (OIG-SP-2018-011)

September 28, 2018.
20 The four sites with significant idle time are listed in Table 2, and are Pittsburgh, Pennsylvania; Pontiac,

Michigan; Fort Worth, Texas; and Lorton, Virginia.
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                           of Servicing and Inspecting Trainsets
                            OIG-A-2019-002, November 7, 2018

costs at these 16 sites ranged from $7,289 to $27,661 per employee, as shown in Figure 3.
This resulted in $3.1 million in overtime.

                       Figure 3. Average Overtime Incurred
              at Company-staffed Service and Inspection Sites, FY 2017




Source: OIG analysis of company data

The average, annual extra percentage of pay employees earned above their base wage
as a result of overtime (or the overtime-to-straight-time ratio) across all 16 sites was
21 percent, and it ranged from 11 percent to 38 percent at individual sites as shown in
Figure 4.




    Certain information in this report has been redacted due to its sensitive nature.
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                             Amtrak Office of Inspector General
                    Train Operations: Opportunities to Reduce the Cost
                           of Servicing and Inspecting Trainsets
                            OIG-A-2019-002, November 7, 2018

                     Figure 4. Overtime-to-Straight-Time Ratios
            at 16 Company-staffed Service and Inspection Sites, FY 2017




Source: OIG analysis of company data

In some cases, however, we found that site managers did not know why their staff were
earning overtime or how much they were earning. Without this information, these
managers could not take steps to ensure that the overtime was necessary or to assess
ways to reduce it in line with the company’s stated goal.

For example, the foreman at one site was unaware of how much overtime his staff
incurred and was surprised to learn that it averaged more than $20,000 per person in
FY 2017. At another site where staff incurred on average more than $16,000 in overtime
per employee in FY 2017, the assistant superintendent initially said this overtime was
needed to complete work on late trains. However, our analysis of on-time performance
data and work order data shows that the primary driver of overtime costs at this site
was staff working at least a full eight-hour shift of overtime on their scheduled days off.
This occurred even though the daily trainset that is serviced at this site is only available
for work for about three hours during a typical eight-hour shift.

While there are legitimate reasons for the use of overtime—the vice president of labor
relations said that sites could more cost-effectively manage overtime. For example, he
said they could do this by calling in staff for only the number of overtime hours needed

    Certain information in this report has been redacted due to its sensitive nature.
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                      Train Operations: Opportunities to Reduce the Cost
                             of Servicing and Inspecting Trainsets
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or supplementing the workforce with contractors on days certain staff are not
scheduled to work or for certain shifts. Depending on the amount of overtime reduced
by the sites, we estimate that the department could save annually, on average, about
$900,000 to $2.4 million, as shown in Table 3.

                        Table 3. Estimates of Potential Cost Savings
                         Associated with Reduced Use of Overtime
 If outlying sites reduced their average overtime-to-
                                                          15%          10%               5%
 straight-time ratio from 21% to:

 Resulting savings would be:                            $858,000   $1,609,000     $2,361,000
Source: OIG modeling based on company financial data

The Chief Mechanical Officer updated us in September 2018 about the status of plans to
realign the workforce and workload of the Mechanical department and noted that he
will be able to use the findings outlined in this report as he considers the department’s
workforce needs. He also noted that he anticipates the needs will change again over
the next decade as the company moves through the process of procuring and
commissioning a new fleet of locomotives and passenger cars that come with new
technologies and, therefore, new maintenance strategies.

CONCLUSIONS
The Mechanical department has several opportunities to reduce the cost of service and
inspection activities across its nationwide network of service and inspection sites.
We determined that the company could put $2.3 million to $6.4 million in funds to
better use annually by shifting more service and inspection work to the service and
inspection areas of preventative maintenance facilities, reducing unnecessary full-time
positions, and better managing overtime use at these sites. Implementing changes to
reduce costs across its service and inspection sites as part of its continuing efforts to
realign its staffing to its workload would help the Mechanical department operate more
efficiently and the company meet its broader goal of eliminating its net operating loss
by 2021.

RECOMMENDATIONS
As part of the Mechanical department’s efforts to better align workforce with workload
and reduce costs, we recommend that the Chief Operating Officer direct the Chief
Mechanical Officer to consider the extent to which the department can take actions to

     Certain information in this report has been redacted due to its sensitive nature.
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                   Train Operations: Opportunities to Reduce the Cost
                          of Servicing and Inspecting Trainsets
                           OIG-A-2019-002, November 7, 2018

operate more efficiently at its service and inspection sites, including implementing the
following changes:
   a) identifying opportunities to shift work from these sites to the service and
      inspection areas of preventative maintenance facilities
   b) reducing unnecessary full-time positions at sites without a full-time workload
   c) better managing the amount of overtime that staff incur at these sites

MANAGEMENT COMMENTS AND OIG ANALYSIS
In commenting on a draft of this report, the company’s Chief Mechanical Officer
generally agreed with our recommendations and stated that the company will take
actions to implement them in a timely manner. The company’s planned actions are
summarized below.

Recommendation 1 (a): Management agreed to identify opportunities to shift work
from service and inspection sites to the service and inspection areas of preventive
maintenance facilities. As part of this effort, the Mechanical Department will review
train schedules to determine if it can consolidate required federal inspections at larger
maintenance locations. The target completion date for these actions is July 2019.

Recommendation 1 (b): Management agreed to consider reducing unnecessary full-
time positions at sites without a full-time workload. The company will annually
evaluate the staffing of each service and inspection site and its hours of operation and
will seek to balance reducing costs with operational considerations such as train
schedules, distance between repair locations, and terms of collective bargaining
agreements. The target completion date for these actions is once per year, in conjunction
with the development of the company’s annual operating plan.

Recommendation 1 (c): Management agreed to better manage the cost of overtime.
On November 1, the Mechanical department issued a new policy addressing requests,
use, and approval of overtime. The department also now issues a daily report to front
line managers so that they can better monitor overtime as employees incur it. The target
completion date for these actions is November 15, 2018.

For management’s complete response, see Appendix B.




    Certain information in this report has been redacted due to its sensitive nature.
                                                                                         16
                            Amtrak Office of Inspector General
                   Train Operations: Opportunities to Reduce the Cost
                          of Servicing and Inspecting Trainsets
                           OIG-A-2019-002, November 7, 2018

                                     APPENDIX A

                              Scope and Methodology
Our objective for this audit was to assess the extent to which the Mechanical
department has opportunities to reduce the cost of performing service and inspection
activities at its 50 service and inspection outlying sites. This report identifies
opportunities for the Mechanical department to reduce costs by assessing how it
conducts trainset service and inspection activities. This is our second audit to assess the
extent to which the Mechanical department has opportunities to more efficiently
conduct its maintenance activities. Certain information in this report has been redacted
due to its sensitive nature.

Our work focused on the service and inspection activities conducted at the company’s
50 sites. We performed our audit work from May 2018 through October 2018,
conducting site visits in New Haven, Connecticut; Pontiac, Michigan; Oklahoma City,
Oklahoma; Fort Worth, Texas; and Lorton, Virginia, as well as interviewing company
officials in Chicago, Illinois, and Washington, D.C. We selected the five sites to visit
based on the types of trains serviced and the type of staffing arrangement to ensure that
we included contractor-staffed and company-staffed sites.

To understand the range of activities at the company’s service and inspection sites, we
reviewed Mechanical department manuals, interviewed company officials, and visited
the five locations listed above. We also reviewed FRA regulations related to passenger
train safety tests and inspections. Additionally, we interviewed company labor relations
officials to better identify the actions the company could take based on its collective
bargaining agreements.

To identify opportunities to move inspection work to the service and inspection areas of
preventative maintenance facilities, we examined the train schedules for all state-
supported routes that originate and terminate in Chicago—the location of one of the
company’s 12 preventative maintenance facilities—and assessed whether work at some
of the company’s service and inspection sites could be moved to the service and
inspection area of this facility. We chose state-supported routes because long-distance
routes do not meet the timeframe criteria described below. Additionally, we focused
our assessment on the Chicago facility because, during our audit work, a senior
Mechanical department official told us that Chicago had excess capacity, which an
outside consulting firm also concluded.

    Certain information in this report has been redacted due to its sensitive nature.
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                            Amtrak Office of Inspector General
                   Train Operations: Opportunities to Reduce the Cost
                          of Servicing and Inspecting Trainsets
                           OIG-A-2019-002, November 7, 2018

We identified trains scheduled to depart Chicago and return within 24 hours, which is
the maximum time interval allowed for conducting FRA-mandated cab signal tests.
We then performed 2 types of estimates for potential savings: 1 for all 16 sites staffed by
company personnel and another for 2 sites staffed by contractor personnel in Michigan
and Missouri.

For the company-staffed sites, we estimated the potential savings if the company
moved 5 percent, 10 percent, or 15 percent of service and inspection work from the sites
to the service and inspection areas of preventative maintenance facilities. We used
average wages and benefits per employee for FY 2017 as the basis for these estimates.
For the two contractor-staffed sites, we compared the costs paid to the contractors that
conduct both the cleaning and inspection activities in FY 2017 with the cost paid to
another contractor in the Midwest that performs only the cleaning services.

To identify opportunities to reduce unnecessary full-time positions, we reviewed train
schedules and selected a sample of four outlying service and inspection sites staffed by
company personnel who service a small number of trains each day. To determine the
number of shifts and the associated start- and end-times, we interviewed supervisors
from each of these four sites and compared this information to the hours that trains
were scheduled to be at these sites. We calculated the approximate amount of time
required to service and inspect the trainsets (plus a meal period) based on company
documentation and our observations during our site visits, then calculated idle hours
when staff were scheduled to be at the site without a scheduled train on site. To
estimate the cost of idle time, we calculated the percentage of planned idle hours at each
site and multiplied it by the FY 2017 costs of operations at those sites.

To identify opportunities to reduce the cost of overtime at the service and inspections
sites, we calculated the average, annual extra percentage of pay employees earned
above their base wage as a result of overtime (overtime-to-straight-time ratios) for each
of the 16 company-staffed sites for FY 2017, as well as a company-wide average across
all 16 sites. Our estimation model calculated the potential savings if the company
reduced the overtime-to-straight-time ratio across the company-staffed sites from the
FY 2017 average of 21 percent to 15 percent, 10 percent, or 5 percent. Additionally, for
Fort Worth, Texas, we performed an analysis of on-time performance and work order
data to validate the information obtained from an assistant supervisor about the cause
of overtime spending at this site.



    Certain information in this report has been redacted due to its sensitive nature.
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                            Amtrak Office of Inspector General
                   Train Operations: Opportunities to Reduce the Cost
                          of Servicing and Inspecting Trainsets
                           OIG-A-2019-002, November 7, 2018

We conducted this performance audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit
objectives.

Internal Controls

We reviewed management oversight of the service and inspection work process.
We interviewed superintendents and managers at various service and inspection sites,
as well as budget and finance personnel. Additionally, we reviewed financial reports
prepared for the outlying service and inspection sites. We discussed these controls with
various managers to understand how they apply to the service and inspection
workload. We did not conduct an independent review of the company’s overall system
of controls.

Computer-Processed Data

The company uses the Systems Applications and Products (SAP) software solution, an
integrated, module-based Enterprise Reporting Package that shares data between
functional modules. SAP is also interfaced to and from external partner systems, such as
the company’s Work Management Systems (WMS), which is used to initiate, track and
finalize work orders on various company assets. Additionally, we relied on computer-
processed data from the company’s on-time performance database during the audit.

Company budgeting and planning managers generated standard cost center reports for
FY 2017 from the SAP Business & Planning Consolidation module. We used these
reports to determine the total spending at contractor-staffed and company-staffed
service and inspection sites. We validated the total spending in the cost centers through
interviews with a Finance department official, who recreated reports to verify the totals.

We also extracted work order data from WMS and downloaded on-time performance
data from a company database to determine whether late trains were the primary cause
of overtime spending in Fort Worth, Texas. We validated these data by having an
independent auditor recreate our extraction of work orders from WMS, as well as our
download of on-time performance information, and verifying the totals.



    Certain information in this report has been redacted due to its sensitive nature.
                                                                                            19
                            Amtrak Office of Inspector General
                   Train Operations: Opportunities to Reduce the Cost
                          of Servicing and Inspecting Trainsets
                           OIG-A-2019-002, November 7, 2018

Based on this analysis, we determined that the data were reliable for the purposes of
our audit.

Prior Audit Reports
We identified and reviewed the following relevant reports by our office and GAO:

Amtrak OIG:

   •   Train Operations: Opportunities to Reduce the Cost of Rebuilding and Manufacturing
       Components at Maintenance Facilities (OIG-A-2018-006), April 16, 2018

   •   Amtrak: Top Management and Performance Challenges—Fiscal Years 2019 and 2020
       (OIG-SP-2018-011) September 28, 2018.

   •   Acquisition and Procurement: Opportunities Exist to Improve Management of Technical
       Support Services Contracts (OIG-A-2016-013), September 30, 2016

   •   Mechanical Maintenance: Improved Practices Have Significantly Enhanced Acela
       Equipment Performance and Could Benefit Performance of Equipment Company-wide
       (OIG-E-2012-008), May 21, 2012

   •   Amtrak Mechanical Maintenance Operations (E-05-04), September 6, 2005

GAO:

   •   GAO, Public Transit: Transit Agencies’ Use of Contracting to Provide Service
       (GAO-13-782), September 2013




    Certain information in this report has been redacted due to its sensitive nature.
                                                                                    22
                       Amtrak Office of Inspector General
              Train Operations: Opportunities to Reduce the Cost
                     of Servicing and Inspecting Trainsets
                      OIG-A-2019-002, November 7, 2018

                                APPENDIX B

                        Management Comments




Certain information in this report has been redacted due to its sensitive nature.
                                                                                    21
                       Amtrak Office of Inspector General
              Train Operations: Opportunities to Reduce the Cost
                     of Servicing and Inspecting Trainsets
                      OIG-A-2019-002, November 7, 2018




Certain information in this report has been redacted due to its sensitive nature.
                                                                                    22
                       Amtrak Office of Inspector General
              Train Operations: Opportunities to Reduce the Cost
                     of Servicing and Inspecting Trainsets
                      OIG-A-2019-002, November 7, 2018

                                APPENDIX C

                     Acronyms and Abbreviations
  FRA                  Federal Railroad Administration

  FY                   fiscal year

  GAO                  Government Accountability Office

  OIG                  Amtrak Office of Inspector General

  SAP                  Systems Applications and Products

  the company          Amtrak

  WMS                  Work Management System




Certain information in this report has been redacted due to its sensitive nature.
                                                                                    23
                       Amtrak Office of Inspector General
              Train Operations: Opportunities to Reduce the Cost
                     of Servicing and Inspecting Trainsets
                      OIG-A-2019-002, November 7, 2018

                                APPENDIX D

                           OIG Team Members
  Eileen Larence, Deputy Assistant Inspector General, Audits

  Michael Kennedy, Senior Director

  Melissa Hermes, Senior Audit Manager

  Cindi Anderson, Senior Auditor

  Alexandra Gabitzer, Intern

  Alison O’Neill, Communications Analyst




Certain information in this report has been redacted due to its sensitive nature.
      OIG MISSION AND CONTACT INFORMATION
                                Mission
The Amtrak OIG’s mission is to provide independent, objective oversight
of Amtrak’s programs and operations through audits and investigations
focused on recommending improvements to Amtrak’s economy, efficiency,
and effectiveness; preventing and detecting fraud, waste, and abuse; and
providing Congress, Amtrak management, and Amtrak’s Board of
Directors with timely information about problems and deficiencies relating
to Amtrak’s programs and operations.



           Obtaining Copies of Reports and Testimony
              Available at our website www.amtrakoig.gov



                Reporting Fraud, Waste, and Abuse
        Report suspicious or illegal activities to the OIG Hotline
                      www.amtrakoig.gov/hotline
                                    or
                              800-468-5469



                         Contact Information
                              Stephen Lord
                   Assistant Inspector General, Audits
                            Mail: Amtrak OIG
                         10 G Street, NE, 3W-300
                         Washington D.C. 20002
                           Phone: 202-906-4600
                   Email: Stephen.Lord@amtrakoig.gov