Amtrak is in the hole to the tune of $140 million in maintenance costs for its current fleet of trains because the contractor Amtrak hired to build and deliver uprated replacement trains is having trouble with testing requirements and production defects and so is nearly three years late on delivery.
Amtrak is also losing even more revenue in anticipated ticket sales from the new, larger trains that were supposed to enter service in 2021. And the railroad is missing out on other revenue because some older Acela units have been pulled from service to be cannibalized for spare parts.
One way for our government to deal with such things is with fixed price contracts, under which the contractor gets a sum of money and must satisfy the production requirements of the contract within that sum. These contracts, though, don’t make the contractee whole from the contractor’s failure.
Here’s another way: write into the contract that the contractor is responsible for the contractee’s maintenance and other costs attributable to the contractor’s failure to meet deadlines. Such a move would make future contractors, e.g., France-based Alstom in the Amtrak case, responsible for Amtrak’s $140 million, and more, inflicted on it by Alstom’s failure to perform. If no contractor is willing to incur that risk, that contractor need have no business from the government at all.