Editor’s note: This story, which was originally published July 29, 2024, at 8:37 p.m., was updated July 30, 2024, at 2:30 p.m. to add information from a statement from Highland’s public relations manager.
Montgomery County Public Schools’ (MCPS) management of an electric bus contract led to “millions of dollars in wasteful spending,” according to an investigation by the county’s Office of the Inspector General.
In a report on its investigation released Monday, the office found that after the school district entered a contract with a Massachusetts company to obtain 326 electric buses, the company failed to meet the terms of the deal and MCPS failed to force the contractor to comply or to end the agreement.
“We will take the necessary actions to address the identified issues,” MCPS spokesperson Liliana Lopez wrote in a statement responding to the report. She added that those actions will include “implementing data tracking systems, enhancing management practices, and improving vendor communications and contracts.”
According to the Memorandum of Investigation, the school district announced in February 2021 that it was replacing 326 diesel school buses with electric school buses. The acquisition, which the county school board approved, totaled more than $168 million, including all infrastructure and maintenance-related expenses.
In March of the same year, MCPS entered an agreement with Massachusetts-based Highland Electric Transportation Inc. (now known as Highland Electric Fleets) to deploy all 326 electric school buses over a four-year period and continue to provide maintenance support over a 12-year period. The contract required the buses to be delivered by Aug. 1 of each contracted fiscal year.
The contract allowed Highland Electric to retain ownership of the buses and provide them as a service to MCPS, and the base service fee for use of the services was $38,500 per electric school bus per year with a 2% increase each year.
The agreement included sections allowing MCPS to assess fees for “downtime damages” for buses being unavailable due to extended maintenance, repair and charging system readiness issues. MCPS was also permitted to terminate the agreement if the contractor failed to fulfill its obligations.
According to the report, for the first three years of the contract, the contractor didn’t deliver any of the buses expected by Aug. 1 and didn’t deliver all of them until the third quarter of the fiscal year, which runs from Jan. 1 to March 31. The contractor also notified the district that it wouldn’t meet the delivery goal for the 2024-2025 school year.
According to the report, Highland delivered a total of 25 buses in 2022 and 61 in 2023. In 2024, Highland delivered 37 by the first fiscal quarter, 69 by the second and 14 by the third. So far this year, Highland has only delivered 16 of the 120 expected by Aug. 1.
In a statement sent to MoCo360 on Tuesday by Highland Public Relations Manager Chris Orlando, Highland said supply chain issues were impacting school bus manufacturing “across the board” and wasn’t limited to specific manufacturers, fuel types or models. Orlando wrote that the company is working to mitigate delays by “evaluating replacement schedules, stocking replacement parts and increasing order lead time.”
“To accomplish what Highland and MCPS have collectively done with this new technology during a period of inflationary pressures and supply chain disruption has been a monumental undertaking, not just by MCPS and Highland but also the respective vendors, suppliers, drivers, technicians, and mechanics involved in the project,” Highland said in the statement.
Due to the delays, MCPS, with the approval of the school board in October, is purchasing 90 diesel school buses for a total of more than $14.7 million.
Unlike diesel bus contracts, the district’s electric bus agreement didn’t include provisions to assess fees for late delivery. The inspector general’s report found that if MCPS had followed the model of its diesel bus agreement, the district could have received more than $1.8 million from Highland Electric to offset expenses related to late deliveries.
Mechanical and charging infrastructure issues also prevented the buses that were provided to the MCPS from running routes on more than 280 occasions from February 2022 to March 2024, according to the report. Noting the district didn’t assess the fees required in the contract for mechanical failures, the report stated that MCPS should have assessed the contractor $372,100 in related fees due to the delays.
“During the [inspector general office’s] interviews with members of MCPS management, none of them could explain why this fee was not assessed,” the report stated. “Furthermore, the [office] learned that newly negotiated terms will likely eliminate the fee altogether in a future contract amendment.”
Despite the contractor failing to meet its obligations, MCPS didn’t terminate the contract. Instead, it amended the agreement to potentially extend the delivery of the remaining 120 school buses into 2027.
According to Highland’s statement, the district will have 236 electric buses in operation for the 2024-2025 school year and will have 326 operational by the end of 2026.
The inspector general’s office concluded the district didn’t receive 206 buses by the contract’s specified timeframe. Also, MCPS failed to assess more than $372,000 in fees as required by the contract when buses were unavailable for five or more days because of mechanical or charging infrastructure issues.
“MCPS’s failure to hold the contractor accountable to the term of the contract and their decision to not include provisions to offset incurred expenses has led to millions of dollars in wasteful spending,” the report stated.
More electric bus controversy
The inspector general’s investigation follows several controversies involving the MCPS transportation department and issues with the roll-out of electric buses.
In September, Charles Ewald, the assistant director of the MCPS Department of Transportation from 2016-2021, was sentenced to five years in prison for stealing hundreds of thousands of dollars from the district.
As a result of the theft, AutoFlex Fleet, Inc., a Baltimore-based company that competed for the electric bus bid, appealed the district’s decision to award the contract to Highland Electric to the school board and the Maryland State Board of Education, ultimately taking MCPS to court. AutoFlex argued in a lawsuit that the district showed favoritism during the selection process in choosing the Massachusetts company.
AutoFlex argued that Ewald, who was part of the MCPS bid review committee, exploited the relationship with the company that provided diesel buses to the district, which was affiliated with Highland Electric. That exploitation allowed him to misdirect reimbursement funds to himself rather than MCPS, establishing an “appearance of impropriety that violates MCPS contracting requirements.”
In March, the Appellate Court of Maryland issued an order remanding the issue back to the Maryland State Board of Education and the local school board to review the Highland Electric contract in light of the information about Ewald’s crimes.
Buying more diesel buses
As the inspector general’s report also mentioned, the school district spent more than $14.7 million on 90 diesel school buses.
Former MCPS Chief Operating Officer Brian Hull told the school board at an October 2023 meeting that the district’s electric bus contract was facing challenges, including delayed delivery dates and supply chain issues. Hull said that of the buses the district received that year, only a handful were on the road.
Last November, protesters rallied at the school board’s Rockville headquarters, calling for electric buses in response to the purchase of diesel buses.
The inspector general’s report also noted that in April 2022, the state legislature passed the Climate Solutions Now Act of 2022, which required school buses purchased starting in fiscal year 2025 to run exclusively on electric power, although waivers of the requirement are available. Due to the electric bus shortfalls, MCPS is submitting extension requests to the state to extend the lifespan of the district’s current diesel buses and to acquire the additional 90 buses.
In addition to the allegations of wasteful spending, the report also concluded that the district’s actions regarding the electric bus contract “drastically hindered MCPS’s ability to meet its environmental goals.”