Under the agreement, the firms will hire a new construction contractor within one year, although that is expected to take closer to six months, Maryland Transportation Secretary Gregory I. Slater said. It’s expected to take another three or so months to refinance the remaining work — the project is about 40 percent complete — before construction would resume in earnest, he said.
The initial contractor quit in mid-September over what it said were $800 million in cost overruns, leaving behind a 16-mile swath of ripped-up roads and mostly dormant construction sites in Montgomery and Prince George’s counties.
By replacing the construction contractor while also preserving the broader financial partnership with the firms managing the project long-term, Slater said, “We have the tools needed for successful completion of this project” in “the shortest time frame possible.”
Slater said a completion date will be determined as part of the new construction contract. The longer-term private concessionaire, known as Purple Line Transit Partners (PLTP), is exploring ways to expedite the remaining work to prevent further delays, he said.
The Purple Line initially was scheduled to open in March 2022, but the previous contractor said it wouldn’t begin carrying passengers until late 2024.
Board members praised Slater and his team for resolving the contract disputes.
Compared with the state paying the $800 million that the firms had sought, Hogan said, “I think we’re going to end up with a much better situation, deliver the [Purple Line] and save the taxpayers $500 million.”
Kopp called the legal settlement a “good investment.”
“We are going to see the Purple Line a little late but still working to unite the suburbs,” the treasurer said. “It’s just going to have a tremendous and positive impact on the communities and on the economy.”
Calling the settlement “expertly done,” Franchot said, “Frankly, I have a lot of confidence in it.”
It remains unclear whether replacing the contractor will cost the state more to complete the line, which the previous construction firms were building for $2 billion. While experts say companies typically charge a premium to assume the risk of completing others’ work, Slater said the project should benefit from a “competitive bid environment.”
“We’ve received a tremendous amount of interest from potential bidders,” he said.
He added that the Maryland Transit Administration is working to reduce that risk — and, in turn, costs — by managing some work in the interim, including moving utilities, completing the design and obtaining environmental permits.
The cost overruns resulted from a lawsuit, slower-than-expected right of way acquisition and delays in obtaining design and permit approvals.
Slater said the state would pay off any additional construction costs over the 30 years of the line’s operation. Those payments, which cover the private debt service and the line’s operations and maintenance costs, are now expected to be about $140 million annually, he said.
With the $250 million settlement, the Purple Line partnership is now valued at $5.84 billion. It is one of the first U.S. transit projects to rely on private financing.
The private financial partner, Purple Line Transit Partners, now consists of infrastructure investors Meridiam and Star America. A third company, Fluor, which also led the construction joint venture, will leave the partnership as part of the agreement.
Fluor and its construction partners will receive the first $100 million by the end of the year. The state will pay the remaining $150 million within 12 months, whenever the state and PLTP sign a new financial agreement after the contractor is replaced, Slater said.
As part of the settlement, Slater said, Meridiam and Star America agreed to spend up to an additional $50 million to keep construction moving until a new contractor is on board.
PLTP board chair Jane Garvey, who also heads up Meridiam North America, said the consortium will begin soliciting a new contractor “without delay” to complete the Purple Line “as soon and efficiently as possible.”
“We now have a clear path to initiate an accelerated, open and transparent process to bring on a replacement design-build contractor,” Garvey said in a statement.
Local officials have praised the settlement, saying residents and businesses have grown frustrated while living amid massive construction zones.
“At the end of the day, what my residents want to know is when the line is going to open and when we’re going to see construction happening,” said Prince George’s County Council member Dannielle M. Glaros (D-District 3), whose district includes nine of the Purple Line’s 21 stations. “I think for people, the most important thing is we’re able to move forward.”