This article deals with a problem of setting reliability targets of the railroad systems where the punctuality target is given to the operator and a penalty is imposed for the year when the target is not met. The operator should set the reliability targets of the railroad system and sub-systems because the reliability affects the expected number of years when the penalty is imposed. This paper presents a procedure for setting the service reliability target and equations to calculate the expected number of years when the penalty is imposed and the probability that the operator should pay the penalty per year according to the mean kilometer between service failures of the railroad system and sub-systems.