In 1996, Amtrak executed contracts with train manufacturers Bombardier  and Alstom to build 20 high-speed trainsets and 15 electric high- horsepower locomotives; construct three maintenance facilities; and  provide maintenance services for the Acela trainsets. Significant Issues Have Impacted Acela Program Since Its Inception

Significant issues and controversy have impacted the Acela program since  its inception. What started out as a relatively simple procurement of train  equipment evolved into a complex high-speed rail program, according to  an Amtrak official. Among the issues that the Acela program has encountered since its  creation are the following:    Potential difficulties due to new technology. Manufacturing and production delays. In April 2005, Amtrak once again experienced unexpected  problems with the trainsets due to equipment problems (cracks in brake  assemblies). Concerns about the quality of the Consortium’s work and  Amtrak’s withholding of payments for the Acela trainsets resulted in the  parties suing each other, each seeking $200 million in damages. Amtrak and the Consortium reached a negotiated settlement in March  2004, ending their legal dispute surrounding the Acela trainsets. Achieving a successful transition is critical to the  financial well-being of Amtrak given that the Acela program is such a  significant source of its revenue. Key challenges include:    Achieving trainset modifications and performance requirements. Obtaining technical expertise for maintenance and completing training. As a result of the current brake problem, Amtrak is reevaluating  its training materials. Although the settlement agreement ensures that Amtrak will be protected  by the extended trainset warranties and Amtrak has several methods of  financial recourse, if the Consortium does not honor warranties, loss of  revenue resulting from removal of trainsets from revenue service is not  directly recoverable. Challenges In Managing Other Large-Scale Projects

As we reported in February 2004, Amtrak did not effectively manage the  entire NHRIP project, of which Acela was a part. Among the problems we  found were that (1) Amtrak’s management of this project was not  comprehensive but was focused on the short term; (2) project  management focused on separate components of the project, such as  electrification and acquisition of the high-speed trains, and not the project  as a whole; and (3) did not sufficiently address major infrastructure  improvements needed to attain project trip-time goals. The overall results of  this poor management was that many critical elements of the project were  not completed, project costs and schedules increased considerably, and  the project goal (3-hour trip time from Boston to New York City) was not  attained. We also have ongoing work for this committee on Amtrak’management  and performance issues that we plan to report on later this year. Related GAO Products

Intercity Passenger Rail: Issues Associated with the Recent Settlement  between Amtrak and the Consortium of Bombardier and Alstom, GAO-05- 152 (Washington, D.C.: Dec. 1, 2004).
Why GAO Did This Study

In 1996, the National Railroad Passenger Corporation (Amtrak) executed contracts to build high-speed trainsets (a combination of locomotives and passenger cars) as part of the Northeast High Speed Rail Improvement Project. Since that time, Amtrak has experienced multiple challenges related to this program, including recently removing all trains from service due to brake problems. Amtrak has struggled since its inception to earn sufficient revenues and depends heavily on federal subsidies to remain solvent. The April 2005 action to remove the Acela trainsets--Amtrak's biggest revenue source--from service has only exacerbated problems by putting increased pressure on Amtrak's ridership and revenue levels. This testimony is based on GAO's past work on Amtrak and focuses on (1) background on problems related to the development of the Acela program, (2) summary of issues related to lawsuits between Amtrak and the train manufacturers and the related settlement, (3) key challenges associated with the settlement, and (4) initial observations on possible challenges in Amtrak managing large-scale projects.

What GAO Found

Significant issues and controversy have impacted the Acela program since its inception. According to Amtrak, what started out as a simple procurement of train equipment evolved into a complex high-speed rail program. Acela has encountered numerous difficulties due to such things as new technology and production delays. Even after Acela service began, unexpected problems were encountered, which required Amtrak to remove the trainsets from service, resulting in lost revenue. Concerns about the quality of the Consortium of train manufacturers' (Bombardier and Alstom) work and Amtrak's withholding of payments for the Acela trainsets resulted in the parties suing each other, each seeking $200 million in damages. Amtrak and the Consortium reached a negotiated settlement in March 2004. Although the settlement agreement protects Amtrak through certain warranties, loss of revenue resulting from removal of trains from service is not directly recoverable. Under the settlement, Amtrak is conditionally scheduled to assume maintenance functions from the Consortium in October 2006. Aside from the current problems, Amtrak faces other risks and challenges to the recent settlement, including obtaining technical expertise and providing sufficient funding for maintenance. Achieving a successful transition is critical to Amtrak given the importance of the Acela program. The recent brake problems may impact the transition through such things as delayed management training. As GAO reported in February 2004, Amtrak had difficulties managing the Northeast High Speed Rail Improvement Project and many critical elements of the project were not completed and the project goal of a 3-hour trip time between Boston and New York City was not attained. GAO has ongoing work addressing Amtrak management and performance issues that GAO plans to report on later this year.