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PAGE 4 PAGE 3 To: Hernan Acavedo From: Pete Cannito, Tim Gardner Re: Locomotive Procurement Recommendations Date: September 18, 1996 Based upon the three days we have spent with you and your team interviewing senior managers of the Commission, we would summarize our observations and recommendations as follows: The Commission should regard its locomotive acquisition initiative as part of an overall program of locomotive fleet upgrade and enhancement. This program encompasses not only acquiring the additional 30 locomotives the Commission requires but also addressing the various deficiencies of the Commission’s existing fleet of 80 locomotives. Such a perspective has two advantages: first, it enables the Commission to take a comprehensive view of its resource allocation alternatives; second, it offers a more attractive project scope to potential suppliers – thereby likely broadening the universe of interested suppliers and encouraging more aggressive pricing. In spite of the various deficiencies experienced with the current locomotive fleet, that fleet has been successful in performing its task. Its fundamental design is sound. Many components, however, embody obsolete technology, and many of its parts consequently are expensive to replace. There are problems in the design of some components, for example the tendency of the traction unit to leak oil. Some maintenance operations are difficult to perform due to problems of component accessibility. The most satisfactory new locomotive, therefore, may be an adaptation of the existing Mitsubishi design - - keeping the proven features, correcting deficiencies, and upgrading technology. This approach might provide the most reliable and proven equipment, it would provide a measure of consistency with the existing fleet, and it would reduce the risk associated with new unproven design. Moreover, it might reduce manufacturer design costs. It would be worth asking manufacturers to bid on new locomotives either using