Payment by Performance in Rail Passenger Transportation: An Innovation in Amtrak's Operations

Abstract

Amtrak has recetly arrived at a new contract with a number of its supplying railroads representing over 50 percent of its passenger service. The new contract represents a major regulatory innovation in which payments to the railroads are based on quality of service, according to a fixed schedule. Payments are dependent upon frequency of arrival on time, the total magnitude of delays, the cleanliness and functioning of cars and equipment, and improvements in schedules. The article discusses the features of arrangements in earlier contracts that served as inducements for deterioration in quality of passenger service and argues that the new contract offers hope for the first time in recent years of substantial improvements in the quality of passenger service.