The Washington PostDemocracy Dies in Darkness

Purple Line consortium says it will dissolve public-private partnership with state if it can’t reach a deal on cost overruns

Workers with Purple Line Transit Constructors work on the first 1,680 feet of track on Sept. 5, 2019. (Sarah L. Voisin/The Washington Post)

The consortium of companies overseeing the Purple Line told Maryland officials Tuesday that it will dissolve the project’s entire 36-year public-private partnership in 60 days if it can’t reach a settlement with the state over extensive delays and cost overruns.

The notice of termination filed by Purple Line Transit Partners (PLTP) came two business days after the consortium and its contractor passed a June 20 contractual deadline to reach an agreement over who will pay the delay-related costs. The contractor threatened to quit the light-rail project May 1, saying the state had refused to pay for any of the $755 million in additional expenses on the $2 billion project.

Under a public-private partnership reached in 2016, PLTP agreed to build the 16-mile rail line, help finance its construction and then operate it long term. If that partnership dissolves, the state would have to find another way to finish building a legacy project for Maryland Gov. Larry Hogan (R). Just as importantly, the state would have to find another way to finance the line’s construction with limited debt capacity.

Maryland likely to be on the hook for millions if it wants to save the Purple Line project, analysts say

The consortium said it still hopes to resolve the cost dispute with the Maryland Transit Administration before Aug. 20. If it doesn’t do so by then, the consortium’s overarching partnership with the state would end, 60 days after Tuesday’s notice.

In a letter to the state, Peter van der Waart, chief executive of Purple Line Transit Partners, said the consortium “continues to be encouraged by recent discussions to resolve” the cost-overrun issues. He said it also believes that reaching a settlement before the partnership would terminate Aug. 20 “is in the best interest of all parties.”

The consortium added in a statement that it remains “committed” to the negotiations in hopes of reaching a settlement that would allow it to complete the project.

Erin Henson, a spokeswoman for the Maryland Department of Transportation, said the state plans to send the consortium a “notice of concessionaire default” that disputes its right to file the termination notice.

“Despite the substantive settlement offers made by [the state], PLTP has yet to propose reasonable settlement terms,” Henson said in a statement. “We intend to vigorously protect the interests of the citizens of Maryland and pursue all legal options available to the state.”

Maryland transportation chief says he’s trying to keep Purple Line builders on the job

Henson added that the state “will utilize all measures available to the state to ensure work continues on the Purple Line and to mitigate the impact of [the construction team’s] and PLTP’s actions on construction momentum.”

The state, she said, has “continued to work diligently to evaluate other project delivery methods to get this important transit project built and open for service as quickly as possible for the citizens of Maryland. We remain fully committed to completion of the project.”

Industry analysts have said that Purple Line Transit Partners might seek to terminate the partnership if it can’t reach an agreement with its construction contractor because replacing the contractor would be costly and add up to another year of delays.

Project officials have said construction is about 40 percent complete. Any interruption in construction would leave a 16-mile swath of the Maryland suburbs with ripped up roads, an incomplete tunnel and partially built rail bridges jutting over busy intersections. Many of the construction sites run through long-established neighborhoods and behind back fences.

Firms building Maryland Purple Line say they plan to quit the job over disputes with the state

The Purple Line, which would run between Bethesda in Montgomery County and New Carrollton in Prince George’s County, is designed to connect the state’s spokes of the Metro system with Amtrak and commuter rail stations. It’s believed to be the first suburb-to-suburb rail line in the country to not require passengers to first travel through a city center.

The construction team, a joint venture known as Purple Line Transit Constructors and led by Texas-based Fluor, referred questions to the concessionaire.

State Del. Kumar P. Barve (D-Montgomery), chairman of the House Environment and Transportation Committee, said a state transportation official briefed him on the notice Tuesday.

Barve said the consortium is “trying to weasel out” of a commitment to assume the risk of cost overruns during construction in exchange for being paid to operate and maintain the light-rail line long-term.

“It’s not the obligation of the state to pay for their cost overruns,” Barve said. “They shouldn’t expect to receive a single penny of taxpayer money. . . . They’re supposed to deliver the project to us on time. They shouldn’t be making excuses like this.”

Montgomery County Council member Tom Hucker (D-District 5), who chairs the panel’s transportation committee, said he hopes the state will continue to try to reach an agreement on the cost overruns.

However, he said, he hopes the state also explores its legal options against PLTP and immediately pursues other teams of private companies that could assume a new public-private partnership if necessary. Those should include the three teams of firms that lost out to PLTP, he said

Determining if the Purple Line contract is a good deal isn’t easy

“It’s kind of shocking that [the state] has allowed it to get to this point,” Hucker said. “And it’s unconscionable for PLTP to walk away at this advanced stage. . . . If there’s still room to negotiate, that would be good news, but this sounds pretty final.”

While Maryland officials have said the Purple Line will begin running trains in two stages, in late 2022 and mid-2023, the contractor has said delays will add at least another 2 ½ years.

The state, the contractor has said, is responsible for delays stemming from an early lawsuit against the project, problems obtaining state environmental permits and changing design requirements for a crash wall along CSX tracks.

The state also has lagged in providing right of way, the contractor has said.

The state has granted the contractor a five-month extension for delays related to the lawsuit but no additional money, saying the other delays are the contractor’s responsibility.

After three years of disputes, it’s difficult to tell how well the negotiations are going. All parties have remained tight-lipped.

The timing of the notice — within two business days of the June 20 deadline for resolving differences with the construction contractor — is required by PLTP’s contract with the construction team, a project official said.

PLTP is a joint venture of Meridiam, Star America and Fluor. Its partnership with the state has attracted national attention because it is one of the first U.S. transit projects to include private financing.

The construction team is a joint venture of Fluor, Lane Construction and Traylor Bros.