The Maryland Department of Transportation has agreed to pay $250 million to settle a dispute over cost overruns that caused the construction contractor to quit the Purple Line light rail project in Montgomery and Prince George’s counties in September.
The settlement, which is pending approval by the state Board of Public Works, would allow construction to resume by ending all litigation, salvaging the public-private partnership with two of the contractors — Meridiam and Star America — and replacing Texas-based Fluor Corp., the project’s primary builder.
The settlement amounts to less than a third of the $800 million in overruns that Purple Line Transit Partners, the consortium of contractors, had claimed due to more than two years of delays to the project. Gov. Larry Hogan, a Republican, had accused the companies of trying to “gouge” Maryland taxpayers.
“This agreement is a major step toward completing the Purple Line, a transformative project for our state and the region,” Hogan said in a statement.
If the settlement is approved by the governor, the state treasurer and the state comptroller in December, the two remaining companies would solicit bids for a new design-build contractor to replace Fluor.
Fluor, one of the nation’s largest construction companies, did not respond to a request for comment.
It is unclear how soon construction might resume or when the light rail line will open. The Purple Line was initially scheduled to open in 2022, but the companies have said it will not carry passengers until 2024. Under the terms of the original $5.6 billion deal, they would operate the line for 36 years after it’s completed.
The 16-mile, 21-station rail line, which will run between Bethesda and New Carrollton, is about 40% built, and the state will retain the hundreds of contracts and purchase orders it took on to continue some work while negotiations continued.
That work includes light rail car manufacturing, bridge work, stormwater drainage, paving, utility and pump station construction, according to the state department of transportation.
The state will be “focusing on reducing risks in the upcoming solicitation,” officials said in the announcement, “by completing design, acquiring permits and advancing utility work along the Purple Line Corridor.”
Jane Garvey, chairman of Meridiam North America and of the board of Purple Line Transit Partners, attributed the agreement to the consortium’s “resilient partnership” with Hogan, Maryland Transportation Secretary Gregory Slater and the Maryland Transit Administration.
“The months of challenging but always good-faith negotiations, led by Secretary Slater, have paved the way for an agreement that will allow the project to move ahead,” Garvey said in a statement. “We look forward to our continued partnership with Governor Hogan’s team and with Secretary Slater in delivering what is a critical project for the citizens of Maryland.”
Christophe Petit, president of Star America Infrastructure Partners, said the company is proud to have found a path to continue the job and will seek to reduce the risks to the construction contractor that replaces Fluor.
“We look forward to working together to select a new design-builder, reducing the risks to that completing contractor and rebuilding our operations and maintenance team,” Petit said.
It is not yet clear whether or how Maryland will restructure its deal with Meridiam and Star America. The state previously had been obligated to pay the consortium of companies $150 million per year to design, build and operate the light rail line. But the partnership soured, then teetered on the brink of collapse, as delays mounted.
Settling the disputes and salvaging the public-private partnership, rather than scrapping it entirely, will save time and money — and send a positive signal to other potential builders, said Joe McAndrew, managing director for transportation at the Greater Washington Partnership.
“That will result in a more robust market for folks to consider working with [Purple Line Transit Partners] to design, build and ultimately deliver the Purple Line,” McAndrew said.
For future riders, the settlement might bring the Purple Line closer to reality by a matter of months or even years, he said.
“Hopefully, they will be riding and receiving the benefits of the Purple Line far, far earlier than what would likely have been the case if the state had taken over the project,” McAndrew said.
Slater, who is wrapping up his first year as state transportation secretary, credited collaboration among the partners as the key to negotiating the complex settlement.
“In big projects like this, there are challenges you will encounter, and it takes a good partnership to work together productively on solutions,” Slater said. “Even in the most challenging parts of the negotiations, Chairman Garvey and I spoke every day focused on coming together to deliver this project for the citizens of Maryland.”