ACQUISITION AND PROCUREMENT: Improved Management of Diesel Fuel Program Could Lead to Cost Savings

August 14, 2017 |  Audit Reports

Our office initiated an investigation into Sevier Valley Oil Company, which supplied fuel directly to the locomotives, and found that weaknesses in the company’s management controls for the testing of diesel fuel allowed substandard fuel to be delivered to these locomotives. This is an important issue because diesel fuel powers the company’s fleet of 269 diesel locomotives on 15 long-distance routes and 26 state-supported routes. The loss of locomotive power on a long-distance route—especially in a remote area—could pose special safety concerns. In addition, delays due to a mechanical failure on any route could diminish customer satisfaction.

The company’s locomotives can be fueled from three sources: the company’s storage tanks, contractors that deliver fuel by truck directly to locomotives (DTL), and by host railroads. The company requires random monthly testing of diesel fuel delivered to company storage tanks and by DTL contractors to ensure that it meets contract specifications.

Our objective was to assess the company’s management controls for purchasing, delivering, and testing diesel fuel. We compared company practices to leading practices we identified for purchasing, delivering, and testing diesel fuel.

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