Klaus Wittmeier, BSL Management Consultants
Despite record traffic growth in recent years, the National Railroad Passenger Corp has been under strong political pressure to reduce its costs, and improve operational and financial performance. But as the only inter-city passenger operator in the USA, Amtrak has few local examples on which to draw, so it was keen to benefit from international best practice.
To ensure that its operations were in line with best practice, and identify areas for improvement, Amtrak decided to compare its infrastructure performance and expenditure with those of comparable European operators. Hamburg-based BSL Management Consultants was contracted to assist with this work, focusing on three main areas:
- international benchmarking of key performance indicators;
- identifying areas for improvement in maintenance and asset renewal programmes;
- establishing a continuous exchange of best practice.
Amtrak operates a nationwide network of more than 33 500 route-km, serving more than 500 destinations in 46 states. Many of its services use the tracks of the major freight railroads, although Amtrak owns and operates the busy Northeast Corridor linking Washington DC, New York and Boston and some other short sections of track elsewhere. After a sixth consecutive year of record ridership, Amtrak carried more than 28·7 million passengers in the financial year to September 30 2008. This was no less than 11·1% higher than the figure recorded for 2006-07, and represents an average of more than 70 000 passengers per day on up to 300 trains.
The Northeast Corridor is also used by both commuter and freight operators, making it by far the busiest railway in North America, with more than 2 600 train movements a day using some part of the route. It also accounts for the vast majority of Amtrak’s infrastructure maintenance expenditure, so this is the area on which the benchmarking comparisons were concentrated.
Choosing the right comparators
Not surprisingly, comparing Amtrak’s performance with overseas operators threw up some significant challenges. Data and benchmarking procedures had to be established in a way that would permit meaningful comparisons. Only with such data would it be possible to identify significant gaps between Amtrak’s performance and good practice elsewhere, which in turn should enable the selection of appropriate actions for improvement.
As a first step, it was necessary to identify the main structural factors within the company that influence performance. The core objectives of the study were first to identify how other railways measure the effectiveness and efficiency of their infrastructure maintenance and asset renewal programmes and then to compare infrastructure characteristics, costs and performance to those of Amtrak.
When the project began in 2007, we were able to build on earlier work that BSL had undertaken for the International Union of Railways, comparing business models and costs in railway infrastructure. Thanks to this experience, we were able to determine the appropriate focus, pinpoint possible challenges and pitfalls, and draw upon relevant contacts within the UIC’s global network of railway operators.
Amtrak and BSL jointly selected a peer group of 15 European railways and infrastructure managers for the benchmarking study, based on their fit with the key areas of analysis and the similarities with Amtrak of their basic business structures. We then compared the network characteristics and utilisation data for each operator. Average ages of major asset groups were surveyed, as well as performance indicators, including a breakdown into disciplines, such as:
- infrastructure-related delays;
- train-affecting asset failure rates;
- temporary speed restrictions due to poor track quality.
The study found that Amtrak’s infrastructure maintenance expenses were higher than the average for its European peers. In fact, there was a considerable gap which had a significant effect on overall operating costs. The reasons behind this difference were then analysed in more detail, looking at the core drivers of maintenance effort.
In fact, the performance and reliability of Amtrak’s infrastructure were within the range of European good practice and Amtrak’s service life estimates matched European standards. But we discovered that the obsolescence of rail, turnout and bridge assets was a key driver for higher maintenance costs. Assets were being retained well beyond the point at which renewal should have been carried out to achieve an optimum whole-life cost. As an example, Fig 1 shows the average age of rail, where Amtrak has a significantly higher average age than the mean.
In order to enable meaningful comparison, annual expenditure for infrastructure maintenance and renewal was normalised, using the hypothetical assumption that the benchmarking partners operate under similar conditions. For example, labour costs are a dominant element in total costs for most railways, and these were normalised using purchasing power parity. This showed that Amtrak’s average wage levels were in some cases more than twice those of its peers.
Electrification is another factor in the balance of infrastructure costs, and here the 95% of the Northeast Corridor which is worked by electric traction is significantly above the peer group average of 66%. Train frequencies are somewhat below the European average but given that traffic on the Northeast Corridor is dominated by passenger trains, the annual gross tonnage of both freight and passenger trains that it carries is relatively high.
Once these factors had been taken into account, we were able to identify the remaining deviation between Amtrak’s current performance and European good practice. This could then be analysed in terms of each performance indicator, according to the relevant cost drivers and improvement opportunities.
This comprehensive benchmarking analysis has assisted Amtrak in quantifying the range of financial benefits that could be obtained by performing infrastructure maintenance at the European cost performance levels and it also identified 16 areas of improvement opportunity (Fig 2). These results provided Amtrak with the justification to conduct a formal inquiry into the best practices of its European peers. During 2008, BSL organised in-depth information exchanges between Amtrak and railways in Switzerland, Austria, Great Britain, Germany, Sweden and The Netherlands.
Amtrak is currently evaluating a comprehensive list of the good practices that were obtained during their visits to these European railways. This evaluation will determine which of these best practices Amtrak will implement, test, or evaluate for future use. The sharing of information and the benefits resulting from the benchmarking process have been particularly valuable to Amtrak, the peer group participants and their contractors. It is anticipated that the operators will continue and deepen their exchange of best practice and efficiency measures as a result of additional visits during the 2009 financial year.