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Maryland will manage Purple Line construction if partnership falls through, state officials say

Purple Line construction continues on a light-rail bridge at the Paul S. Sarbanes Transit Center in downtown Silver Spring in June. (Toni L. Sandys/The Washington Post)

Maryland transit officials are preparing to manage Purple Line construction if a public-private partnership on the $2 billion project dissolves amid feuds over hundreds of millions in cost overruns, according to a letter sent Wednesday to the project's subcontractors.

The letter to 171 companies involved in designing and building the light-rail line said the state “intends to exercise its step-in rights” to take over managing their contracts if no deal on the cost overruns is reached with the private consortium now managing the project. That would keep construction going “pending resolution of the parties’ disputes” while the state “pursues its rights and remedies” against the consortium, the letter said.

In another sign that the 36-year partnership is at increasing risk of crumbling, the consortium recently said its construction contractor has started buttoning up construction sites in preparation for quitting over the unpaid expenses. A metal grate can be seen covering an enormous hole where a Purple Line elevator shaft was being blasted and built in downtown Bethesda.

The Maryland Transit Administration and private consortium have until Aug. 22 to agree on who will pay what the consortium says are $755 million in overruns related to 2½ years of delays. Unless the state pays the additional expenses, the consortium has said it will terminate the $5.6 billion partnership — one of the first for a U.S. transit project — and its construction contractor will walk off the job.

Purple Line delays, cost overruns reveal long-brewing problems

Both sides could still reach a deal. However, the negotiations don't appear promising, as both the state and private consortium have recently spelled out how they are proceeding if no agreement is reached.

Taking over the subcontractors’ contracts would require the state to manage a highly complex project spanning 16 miles of densely populated Montgomery and Prince George's counties. Without the private financing, the state also would have to find a new way to structure about $1 billion of debt to pay for the remaining construction. That doesn't include the $755 million in reported cost overruns.

The Maryland Transit Administration declined to provide anyone for an interview Wednesday. However, Erin Henson, spokeswoman for the Maryland Department of Transportation, said the state had not yet taken over any contracts.

“Our focus is on ensuring the Purple Line gets completed,” Henson said in an email. “Even as settlement discussions continue, the state has to protect its interests and be ready for any and all scenarios on how we deliver the project.”

A spokeswoman for the construction contractor, Purple Line Transit Constructors, referred questions to the consortium and the state.

Purple Line consortium threatens to dissolve partnership unless state covers cost overruns

A spokesman for the consortium, Purple Line Transit Partners, declined to answer questions but said the companies “remain convinced that a settlement is in all parties’ interest because it will deliver the Purple Line sooner and at lower cost than any other alternative.”

It’s hard to tell whether either side will follow through on their plans or how much amounts to posturing as the Aug. 22 deadline for a deal approaches.

Henson said the state remains “open to a fair and reasonable settlement” and that there are still “some form of discussions almost daily” with the consortium. She said the recent letters are “another example of both parties protecting their interests” rather than a reflection of how well the settlement talks are going.

Even so, it’s striking that both sides have put their “in case of no deal” plans in writing, three weeks before the settlement deadline. The letters read more like contentious court filings than correspondence between people trying to maintain a working relationship.

Construction firms also don't decide lightly to begin demobilizing because it would be costly and a logistical hassle to return massive equipment, such as cranes and earth movers, after they have been dismantled or moved to another project.

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Industry experts have said it’s in all sides’ interests to keep the partnership in place. Companies in the private consortium, led by Meridiam, want to keep their reputations intact as they compete for projects around the world. Meridiam also is seeking to bid on Maryland’s plan to add $10 billion worth of toll lanes to the Capital Beltway and Interstate 270 via a public-private partnership.

Meanwhile, Maryland Gov. Larry Hogan (R) has made the Purple Line a signature project as he has touted the need for infrastructure improvements, including by tapping more private investment.

State Del. Marc A. Korman (D-Montgomery) said he wonders how the state would afford to complete construction without the private financing, especially with its limited debt capacity and massive tax revenue losses from the coronavirus pandemic.

However, he said, the Purple Line needs to be finished. If no deal is reached, he said, it would be a “silver lining” for the state to take over managing construction because it would avoid major delays caused by having to solicit a new private partner or contractor.

“Instead of a scar through Montgomery and Prince George's counties, we could have a light-rail line,” Korman said. ”

Financial pressures on Purple Line contractor made its threat to walk away serious, experts say

Ralph Bennett, board president of the advocacy group Purple Line Now, said it’s possible for the state to manage construction, but “it doesn't sound easy,” especially if hundreds of millions in unanticipated costs remain.

“These are real costs — that's not going to go away,” Bennett said. “By saying we're going to take over the subcontractors, I'm not sure how that solves the underlying problem.”

Prince George’s County Council Chairman Todd M. Turner (D-District 4) said he hopes the state and private consortium reach an agreement to avoid more delays and cost increases. Residents don't want to live with closed and ripped-up roads any longer than necessary, he said.

“As the deadline approaches, that tends to move some people,” Turner said. “Hopefully that's the case here, and it's not just people waiting for the clock to run out.”