Question

In 1998, the governor of New York, George Pataki, formulated a $185 million plan to update old Amtrak trains. The purpose of such a project was to make the old trains faster than the more current Amtrak trains. Such a reconstruction would allow for a high speed rail system between Albany and New York City. Unfortunately, Amtrak produced only one train, and though millions of dollars poured into the company to fund the project, auditing showed that the company showed little spending on the trains. Problems stemmed in part from the lack of engineering expertise of the Steel company that was picked to work on the trains. Also, the state’s Department of Transportation was not experienced in over seeing projects of this type, so little oversight was given to Amtrak. Furthermore, unforeseen problems arose such as air condition malfunctions and the removal of asbestos from train cabins. After the plan seemed as though it would never be successful and Amtrak was extremely low on money due to normal operations, the company tried to settle with the state to escape the project. However, the state filed a lawsuit against Amtrak. Amtrak’s defense was that both parties made a unilateral mistake because neither party foresaw the problems or extra costs associated with the project that made it unrealistic. How do you think the court decided?

Answer 1

The court will be surely acknowledge the mistake at the part of Amtrak but will surely not penalize it with hefty fines or disbarment as the Department of Transport had not maintained the clarity regarding the scope of project that needs to carried out in the contracting phase. Amtrak was required to carry out many overhead activities which ultimately led to over-expenditures and inappropriate resource allocation. Because of this reason, it is also possible that the court may ask the department to reimburse Amtrak for the overhead activities conducted. Nevertheless, court shall take great concerns about the procedure followed for the selection of steel company and will appropriately penalize the party responsible for the lapse of judgement. Last but not the least, the court shall also take into consideration that Amtrak, in the good intentions, had suggested the department for settlement, which would have certainly led to the department getting appropriately compensated for the inadvert termination of project.

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