Progress Rail is under criminal investigation for failures in its railcar and locomotive repairs operation. Investigators claim that it was charging owners of rail equipment for making unnecessary repairs and replacements. There is also an environmental claim because the investigation indicates that workers were dumping parts in the ocean to hide them from auditors. That environmental claim caught the attention of what otherwise may have been a billing dispute.
Railcar owners and the railroads hire Progress Rail to make repairs or replace worn brake shoes, wheels and other components. Ten thousand railcars a month roll into the Port of Los Angeles County, the busiest port in the United States. While here, most are inspected by Progress Rail.
Progress Rail bills the railcar owners for repairs and looks to employee performance based on the billables they generate. According to early reports of investigators, managers made it clear that workers could lose their jobs if they didn’t generate enough repair revenue.
What happens on a day when the railcars coming thorugh are all in good shape? Make repair work: smash something, remove a bolt, or report a missing part you remove.
There are auditors that review operations to try to keep Progress Rail’s employees honest.
What is the issue from a compliance perspective? Culture.
Middle management was focused on increasing revenue and instilled this focus on its employees. The focus should have been on keeping the railcars well-maintained. Part of the problem is ties back to how the railcar owners structure their contracts with Progress Rail. Presumably they pay for work done, instead of a fee based on performance of their railcars.
Sources:
- Caterpillar Probed for Possibly Dumping Train Parts in Pacific Ocean by James R. Hagerty and Bob Tita in the Wall Street Journal
- Workers at Caterpillar Say Train Repairs Were Often Bogus by James R. Hagerty and Bob Tita in the Wall Street Journal