Bus transportation plays a vital role in Addis Ababa to achieve the development plan of the country. The expansion of the city and population is radically increasing; this results in greater demand for transport delivery. This demand has, however, not been properly met because of different problems but, failure of buses has greater role on the expansion of the problems. Due to those reasons ACBSE has face challenges in failure of bus components and systems. This thesis focuses on failure of components of DAF and Bishoftu buses with the main goal of identification of frequently failed components or systems, major causes of failures, maintenance problems and assessing the current performance of ACBSE. This thesis, therefore, tries to assess the existing operational performances, procurement strategy, and maintenance strategy of the enterprise and develop different methods that can improve the failure of the buses of the enterprise. The purpose of this thesis is to improve the existing failure problems of buses. To achieve these objectives, the paper conducts an extensive literature review related to bus components and service life. Data was collected from monthly report of 2009E.C, interview with nine (9) respondents in the ACBSE, field observations are data and different international standards related to bus components are used. The findings of the study show that the performance of components and systems of buses, operational performance of the buses and the procurement strategy of the enterprise are inadequate as compared with the international standards. Finally the measures for improvement have been suggested on methods to control failure of components and systems of buses by using of Failure Modes Effects Analysis FMEA. And management issues such as purchasing policy should consider cost and quality as a major issue, there is a need to have good spare part requirement on procurement policy, restrict the Number of Passengers on Bishoftu and to apply all the recommended actions stated in FMEA.