Friday, November 4, 2022

***MD Office of Legislative Audits Substantiates Parents' Coalition Allegation of Overpayment in Bus Camera Contract.***

October 2022:
School Bus Safety Cameras [Pages 26 - 30 of Report]

As allowed by State and County law, MCPS contracted for the use of school bus safety cameras to monitor drivers who illegally pass a stopped school bus. In May 2016, the Board approved a five-year contract (with five one-year renewal 
options) with a vendor to install and operate cameras that would be owned and maintained by the vendor on MCPS’ school buses. The contract also provided for cameras to monitor the conduct of drivers and students inside the bus along with global positioning units to track the buses. Prior to this contract, MCPS was 
purchasing buses with cameras inside the bus and global positioning units, which 
were replaced with the vendor’s equipment. In June 2016, MCPS entered into a 
memorandum of understanding (MOU) with Montgomery County since the 
Montgomery County Police Department (MCPD) was responsible for the 
issuance of citations processed by the camera system. 

The vendor is responsible for operating the system and processing citation 
payments. The vendor’s cameras take images of vehicles (including a specific 
image of the vehicle license plate) passing a bus that is operating its alternating 
flashing red lights. The registered owner(s) of the vehicles are identified by 
vendor employees using access provided to Maryland Motor Vehicle 
Administration (MVA) databases, through the MCPD MOU. After MCPD 
verifies the image of the event constitutes a violation, a vendor employee prints 
and mails the citation to the registered owner

Citations can be paid in-person at the Montgomery County Finance Office, online 
by credit card, electronically through the internet, by phone through an interactive 
voice response system, or by mailing a check. The County Finance Office 
processes citation payments paid in-person through the vendor’s system. The 
vendor’s system stores the images of each check payment, remittance stub, 
associated correspondence, envelope and certified mail receipt. All forms of 
citation payments are deposited into a County bank account and the County 
transfers all revenue to a MCPS bank account. MCPS is responsible for 
distributing revenue to the vendor. The vendor is also required to operate a 
customer service center with a toll-free number and respond to inquiries from the 
public. 

issued a report regarding the County’s MOU with MCPS for the School Bus 
Safety Camera program. According to the report, the OIG initiated the review in 
August 2018 after the County was made aware of concerns regarding the vendor’s 
history of prior convictions involving fraud and bribery in another state where it 
operated a similar program. Although the report disclosed that employees of the 
County or MCPS did not violate a rule, law, or procedure, or had any 
inappropriate relationship with the vendor, the report identified the following two 
findings related to the County: 

1. The business case for this program was built around the desired use of a 
predetermined vendor rather than an objective analysis to design an 
effective and economical method to achieve an identified outcome. 
2. County officials relied, at least in part, on information provided by a 
criminal conspirator in vetting the vendor and they continued to rely on 
vendor supplied information when considering the future of the program.

 

Additionally, the report disclosed there was no revenue sharing agreement with 
the vendor and it was unclear as to when, or even if, the County would recover its 
investment in the program. Furthermore, the report disclosed the contract terms 
appeared to be ambiguously, and generously, tilted toward profitability for the 
vendor. Finally, as of the date of the OIG report, the County had paid more than 
$750,000 for administrative and personnel expenses related to this program and 
over $10 million in ticket revenue had been transferred to the vendor.

πŸ‘‰πŸ‘‰πŸ‘‰In addition to the concerns addressed by the aforementioned OIG report related to the County, we received an allegation on our fraud, waste, and abuse hotline that 
MCPS had entered into a contract to place monitoring cameras on school buses 

Based on our review, we were able to substantiate the allegation as the contract 
provided that all funds were to go to the vendor until the vendor recovered its cost 
of investment. As noted below, as of August 31, 2019 MCPS had paid the vendor 
$20.9 million, which exceeded the vendor’s initial $19 million estimated cost of 
investment by $1.9 million. We also found certain deficiencies with the 
procurement of the agreement, its terms, and how it was monitored; although, we 
did not identify any issues that warranted a referral to the Office of the Attorney 
General – Criminal Division. 

Finding 10 
MCPS contracted with a vendor for a school bus camera system without a competitive procurement process or a fixed total cost to be paid. In addition, the contract lacked sufficient details to enable effective monitoring of the 
amounts invoiced and paid to the vendor. 

Analysis 
MCPS entered into a contract for the use of a vendor’s school bus camera system 
without a competitive process or a fixed total cost to be paid. In addition, the 
contract lacked sufficient details to enable effective monitoring of the amounts 
invoiced and paid to the vendor. 

Lack of a Competitive Procurement 

MCPS did not conduct a competitive procurement for the camera system contract. 
Rather, a vendor approached the County and MCPS to install and operate a school 
bus camera system, including interior cameras and global positioning units that 
MCPS was already purchasing for each bus. Although MCPS prepared a 
schedule comparing four companies based on various factors (such as number of 
interior cameras, but not including a financial or cost consideration), it did not 
have supporting documentation or an indication of how the information was 
obtained. MCPS management advised us that the contract with the vendor was 
awarded under an Intergovernmental Cooperative Purchasing Agreement (ICPA) 
from another state’s school system. However, our review of the ICPA noted the 
following conditions (several of which were previously noted in finding 1 in this 
audit report): 
  •  Only a single bidder was evaluated by the other school system in awarding the ICPA.
  • The ICPA awarded by the other school system was for a 30 bus fleet, while MCPS had a fleet of approximately 1,300 buses. 
  • MCPS did not prepare a written assessment of the benefits for using the ICPA as required by State law and it did not research or compare other available ICPAs. 
  • MCPS did not use any of the key terms and conditions of the existing ICPA. Instead, it negotiated its own terms and conditions with the contractor (see comments below). 
As a result, we concluded that with the exception of the general service provided, 
MCPA procured its own unique contract with the vendor without a competitive 
procurement process and assurance that it obtained the best value for the school 
bus cameras program. MCPS ultimately awarded the contract to the company 
that approached them after visiting another state using the vendor’s camera 
system and conducting a limited pilot program. A similar condition regarding 
documentation of best value when procuring contracts was noted in our preceding 
audit report. 

Lack of Sufficient Financial Terms 
The school bus camera contract did not specify the total amount to be paid to the 
vendor. The contract provided that the vendor would receive all funds collected 
from citations issued from the cameras (initially $125 per violation and 
subsequently increased to $250 per violation) until the vendor recovered its initial 
and on-going cost of investment which included the equipment, system 
installation and operational expenses. At the time of the contract, these costs 
were estimated by the vendor to be approximately $19 million. In addition, there 
was no provision for the independent verification of the vendor’s cost of 
investment. Further, the contract did not specify the payment terms once the 
vendor’s cost of investment was recovered. Instead, the parties agreed to 
negotiate, at a later date, a revenue sharing plan that would become effective upon 
the recovery of investment costs (see below). 

Monitoring of Vendor’s Recovery of Investment Costs 
Although MCPS was monitoring the amount of citation payments made to the 
vendor, MCPS was not monitoring the vendor’s investment costs. MCPS advised 
us that the vendor did not periodically report its total actual investment costs 
(including changes), and MCPS did not ask for documentation supporting the 
investment costs since the contract did not specifically require the vendor to 
provide this documentation. As a result, MCPS was unaware if the vendor had 
been fully reimbursed for its cost of investment. As of August 31, 2019 MCPS 
had paid the vendor $20.9 million, which exceeded the vendor’s initial $19 
million estimated cost of investment by $1.9 million. 

Due to the lack of specific financial terms and the lack of documentation for the 
vendor’s investment costs, in June 2019, Montgomery County engaged a 
consulting firm to conduct a financial compliance review of the bus camera 
vendor for transactions occurring from July 1, 2016 to August 31, 2019. The 
consultant was able to verify that citation revenue totaling $20.9 million was paid 
to the vendor, but it was unable to definitively determine the amount of the 
vendor’s investment. The consultant offered four options for determining the 
investment amount which ranged from $13 million to $20 million. In response to 
the consultant’s report, the vendor offered an alternative calculation that increased 
its investment cost from its initial estimate of $19 million to $26 million

Effective October 2019, MCPS executed a contract amendment to address the 
vendor’s compensation and resolve all disputes concerning the vendor’s cost of 
investment. The amendment acknowledged the vendor had recovered its cost of 
investment without specifying an amount, and stipulated that going forward the 
vendor would not be required to provide any records concerning the cost to 
install, operate, or maintain the bus camera system. The amendment also 
provided that the County would receive an invoice credit of $1.6 million for 
certain costs incurred for processing citations. 

Finally, the amendment established citation revenue sharing whereby the vendor 
would receive 60 percent of the citation revenue going forward for additional 
future vendor costs. The remaining 40 percent was to be received by the County 
for its citation processing costs. MCPS could not provide us with documentation 
to support how the revenue sharing percentage was determined or its justification. 

As of June 30, 2021, MCPS had paid the vendor citation revenue totaling $21.9 
million and the County had received $4.8 million since the inception of the 
contract. 

Recommendation 10 

We recommend that, in the future, MCPS 

a. adhere to statutory requirements for competitive bidding, where appropriate (repeat); 

b. ensure contracts include adequate and properly defined financial termssuch as total amounts to be paid, and how costs are to be independently verified; and 

c. document the basis and reasoning for revenue sharing percentages. 



 



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