OFFICE OF THE INSPECTOR GENERAL

Montgomery County, Maryland

MEMORANDUM OF INVESTIGATION

Dr. Thomas W. Taylor

TO:
Superintendent of Schools

FROM: Megan Davey Limarzi, Esq.

Inspector General

DATE: July 25, 2024

SUBJECT: Investigation of MCPS’ Management of the Electric Bus Contract

The Office of the Inspector General (OIG) recently concluded an investigation into Montgomery
County Public Schools’ (MCPS) management of a contract valued at over $160 million to
acquire and operate 326 electric school buses. The investigation substantiated that all of the
buses received during fiscal years (FYs) 2022-2024 were delivered beyond the contractually
required delivery date. We note that the contractor has notified MCPS that they will not be able
to deliver the full complement of buses expected in FY2025. We also found that mechanical
failures with many electric buses rendered them inoperable for extended periods and that MCPS
did not exercise contract provisions to force the contractor into compliance or penalize them for
noncompliance. We estimate that, in addition to other possible actions, MCPS should have
assessed the contractor approximately $372,000 for failing to provide serviceable buses between
FYs 2022 and 2024. Furthermore, MCPS is spending over $14 million to acquire diesel buses to
compensate for not receiving the anticipated electric school buses.

Background
On February 23, 2021, as part of its commitment to sustainability, MCPS announced it was
replacing 326 diesel school buses with electric school buses. The Montgomery County Board of
Education (BOE) approved the acquisition including all associated charging infrastructure,
charge management, electric, and related maintenance expenses totaling $168,684,990.

On March 1, 2021, MCPS entered into a transportation services agreement (Agreement) with a
contractor to deploy the 326 electric school buses, 108 of which were to be electric special
education buses, over a four-year period and continue to provide maintenance support over a
twelve-year period. The contract required buses to be delivered by August 1st of each contracted
fiscal year. Table 1 details the deployment schedule:

Table 1: Delivery Schedule Per Contract with Electric Bus Contractor

Deliverable FY2022 FY2023 FY2024 FY2025 TOTAL
# Buses Due Under
25 61 1 120 2 120 326
Agreement

1
Includes 54 electric special education buses.
2
Includes an additional batch of 54 electric special education buses.
51 Monroe Street, Suite 600 • Rockville, Maryland 20850 • 240-777-8240, 240-777-8254 FAX
email: [email protected]
Dr. Thomas W. Taylor
July 25, 2024
Page 2

The agreement was structured to allow the contractor to retain ownership of the buses and simply
provide their use as a service to MCPS. The agreement did not convey ownership of the buses or
related equipment to MCPS. The base service fee for the use of the contractor’s services is
$38,500 per electric school bus per year, plus a 2% increase for each subsequent year. The base
service fee includes vehicle inspection, maintenance, and repair costs. The agreement includes
provisions allowing MCPS to seek billing credits for expenses related to the repair of buses and
assess fees for “downtime damages” for buses or charging systems being unavailable due to
extended maintenance, repair, and charging system readiness issues. The agreement also includes
a termination clause that permits MCPS to terminate the agreement if the contractor fails to
fulfill its obligations.

In April of 2022, the State of Maryland passed the Climate Solutions Now Act of 2022, which
aimed to reduce greenhouse gas emissions by 60%, expand the State’s electric vehicle fleet, and
help the Maryland economy reach net-zero emissions by 2045. The Act also requires that school
buses purchased starting in FY2025 run exclusively on electric power, but the State has made
waivers of the requirement available through an application process.

At a ribbon cutting ceremony in October of 2022, the then superintendent of schools claimed that
when all 326 electric buses were procured, “we are going to be saving upwards of 6,500 gallons
of diesel fuel per day, and immediately, this is going to cut costs by 50%.” MCPS’s webpage
further states that the “school district is on track to have 326 electric school buses by 2025 and an
entirely electric school bus fleet in 10 years. Replacing the diesel bus fleet with electric buses
brings MCPS one step closer to our pledge of cutting greenhouse gas emissions by 80% by 2027
and 100% by 2035.”

Due to the contractor not delivering the required electric school buses per the contracted
timeframe, MCPS submitted a request to the BOE to purchase 90 diesel school buses at a cost of
$14,749,919. The BOE approved the request on October 12, 2023, in light of the anticipated
electric bus shortfall. During the associated BOE hearing, MCPS’ then chief operating officer
stated that MCPS remains committed to the electrification of school buses but acknowledged a
need to maintain a blended fleet of both diesel and electric vehicles going forward.

Applicable Law, Regulation, and Policy

1. MCPS Financial Manual
2. MCPS General Contract Articles
3. Transportation Equipment Services Agreement

Inquiry and Findings

Delivery of Buses
The contractor did not deliver any of the buses expected in FY2022 through FY2024 by August
1st as required by the agreement’s delivery schedule (See Table 2). Our analysis shows that for
the first 3 years of the agreement, the anticipated allotment of buses was not received until the
third quarter (January 1 to March 31) of each fiscal year rather than the first quarter as required
by the agreement.
Dr. Thomas W. Taylor
July 25, 2024
Page 3

Additionally, the contractor has notified MCPS that they will not be able to meet the delivery
goal for the 2024-2025 school year. MCPS is negotiating with the contractor over the number
and expected delivery of the remainder of the contracted buses. As of the writing of this report
MCPS received 16 electric buses from the contractor in FY2025.
Table 2: Actual Number of Buses Received
Deployment Schedule FY2022 FY2023 FY2024 FY2025
Total Buses Due 25 61 120 120 3
Received by August 1st 0 0 0 16
Received September 30th (Q1) 0 50 37 0
Received by December 31st (Q2) 14 10 69 0
Received by March 31st (Q3) 11 1 14 0
Total Buses Received 25 61 120 16

Despite the contractor failing to meet its obligations regarding the delivery of electric school
buses within the specific period, MCPS opted not to exercise contract provisions to terminate the
contract for the vendor’s failure to deliver the buses as required. MCPS has instead been working
to amend the agreement to potentially extend delivery of the remaining 120 school buses into
FY2027.

Unlike MCPS’ agreements to purchase diesel buses, the agreement between MCPS and the
electric bus contractor does not include a provision that would allow MCPS to assess fees for late
delivery of electric buses. If MCPS had followed the diesel bus agreement model, they could
have assessed fees of more than $1.8 million to offset incurred expenses related to late deliveries.

To make up for the shortfall of electric buses, MCPS is submitting extension requests to the
Maryland State Department of Education (MSDE) to extend the lifespan of MCPS’ existing
diesel buses 4 and acquiring 90 diesel buses at a cost of $14,749,919.

MCPS’ Financial Manual defines waste as “the extravagant, careless, or needless expenditure of
MCPS funds, or the consumption of MCPS resources that results from deficient practices,
systems, controls, or decisions.” MCPS’s failure to hold the contractor accountable to the terms
of the contract and their decision not to include provisions to offset incurred expenses has led to
millions of dollars in wasteful spending.

Maintenance of Buses
MCPS also did not assess the required fees per the agreement for mechanical failures.
Mechanical and/or charging infrastructure issues resulted in buses not being able to run routes on
more than 280 instances from February 10, 2022, through March 31, 2024. In more than 180 of
those instances, repairs were not completed within the five working days (averaging 13 days per
bus) allowed by the agreement before a fee equal to $100 per bus per day would be assessed. The
OIG confirmed that MCPS has never assessed the contractor any fees related to the

3
The agreement with the contractor stipulates that 120 buses are due in FY2025, but MCPS anticipates receiving 30
electric buses.
4
Under Maryland law, school bus vehicles may only be operated for 12 years unless certain requirements are met.
Dr. Thomas W. Taylor
July 25, 2024
Page 4

unavailability of electric buses due to mechanical or charging infrastructure issues. The OIG
calculated that MCPS should have assessed the contractor $372,100 in related fees.

During the OIG’s interviews with members of MCPS management, none of them could explain
why this fee was not assessed. Furthermore, the OIG learned that newly negotiated terms will
likely eliminate the fee altogether in a future contract amendment.

Conclusion

We substantiated that MCPS did not receive 206 electric buses for which they contracted within
the timeframe specified by the agreement. MCPS is actively negotiating with the contractor to
determine the number and expected delivery of the remainder of the contracted buses; they have
received only 16 buses thus far for FY2025. We also substantiated that MCPS did not assess
more than $372,000 in fees, as required by the agreement, related to buses not being available for
five days or more from February 10, 2022 through March 31, 2024. Finally, we substantiated
that MCPS’ reluctance to enforce the terms of the agreement and failure to include penalties to
offset incurred expenses has led to millions of dollars in wasteful spending and drastically
hindered MCPS’s ability to meet its environmental goals.

Please contact me with any questions, or a member of your staff can contact Deputy Frank da
Rosa, [email protected], with any questions.

cc: Dr. Henry Johnson, MCPS Acting Chief of Staff