Grain Shipments

Agriculture Can Reduce Costs by Increased Use of Negotiated Rail Rates Gao ID: RCED-87-42 January 21, 1987

In response to a congressional request, GAO reviewed the methods that the Department of Agriculture's (USDA) Agricultural Stabilization and Conservation Service (ASCS) used to ship government grain by rail, focusing on: (1) the extent to which USDA negotiated rate and service concessions with railroads, in comparison with private grain shippers and other government agencies; (2) savings that resulted from negotiations; (3) constraints that kept USDA from negotiating more often; and (4) methods private shippers and government agencies used to increase their negotiating effectiveness.

GAO found that: (1) ASCS negotiated rate and service concessions for 10 percent of its 1985 rail grain shipments; (2) ASCS negotiated larger shipments more often because they provided railroads with greater incentive to negotiate; (3) the private sector negotiated rates for 57 percent of its shipments in mid-1985; (4) of the seven shipments GAO reviewed, ASCS saved an average of 29 percent over published tariff rates, while private-sector shippers saved 17 percent; (5) although ASCS experienced negotiating constraints that included the inability to predict shipment volumes, lack of personnel, lack of bargaining leverage, lack of adequate notice of grain shipments, and lack of data on other shippers' contract rates, it could deal with those constraints through management actions; (6) in response to deregulation, private shippers strengthened their transportation planning systems to improve negotiating leverage, automated their development of traffic pattern information, rail rates, and carrier costs, and developed negotiating and marketing expertise; (7) ASCS negotiated shipments on a shipment-by-shipment basis, and did not automate transportation management functions, provide formal training to its transportation specialists, or use outside expertise to supplement staff skills; and (8) ASCS did not have a written policy to specify when its transportation specialists should negotiate or a system for tracking negotiations and monitoring its transportation specialists' performance.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.