A dispute over the Purple Line light rail escalated another step on Wednesday as the contractors filed a notice to lay off more than 700 employees working on the project — if there’s no settlement by an August deadline.
It’s the latest chapter in the tension between the state and the companies overseeing the construction of the light rail line, putting the completion of the project at risk.
The companies, partnered under Purple Line Transit Partners (PLTP), said Tuesday that they might end the public-private partnership with the state over disputes involving cost overruns and extended delays.
Montgomery County officials said Wednesday that the state needs to figure out how to move the Purple Line project forward, regardless of whether contractors walk off the job.
Montgomery County Executive Marc Elrich told Bethesda Beat Wednesday afternoon that the state won’t receiving any more money from the county for the project.
“I can’t fund the basic infrastructure that we’re trying to fund in the county. I don’t have anywhere near the reserves in the state,” he said. “This is their problem. They bought it and they own it.”
The county budgeted a total $223 million for the project — $54 million directly toward the Purple Line project and $169 million toward county-funded, supporting projects, including the Capital Crescent Trail, Silver Spring Green Trail and a new entrance to the Bethesda Metrorail Red Line station.
According to Hannah Henn, senior engineer for strategic innovation at the Montgomery County Department of Transportation, the county has been billed $59 million for the county-funded projects, but hasn’t been billed yet for any direct amount for Purple Line costs.
Part of the contribution — $24 million — has been used for additional costs for property acquisition, utility relocations and other work, Henn wrote in an email to Bethesda Beat.
The Purple Line will extend about 16 miles from Bethesda to New Carrollton in Prince George’s County with 21 stations that connect Silver Spring and College Park, as well.
On Wednesday, the Purple Line Transit Constructors (PLTC) sent a notification to the Maryland Department of Labor of its plans to lay off 478 employees starting Aug. 23 and ending Sept. 5.
Scott Risley, project manager for PLTC, wrote in the letter that the layoff notification was in preparation for leaving the job if the disputes couldn’t be settled.
“All affected employees have been notified of their separation dates and that their separation from employment will be permanent,” he wrote.
There are similar notices filed for the the three contractors under PLTc. The notices list 478 employees from Purple Line Transit Constructors, 125 from Lane Construction Corporation, 87 from Fluor Enterprises Inc., and 28 from Traylor Bros.
On Tuesday, Peter van der Waart, CEO and project manager of the PLTP, sent a letter to the Maryland Transit Administration (MTA) to file a notice of termination of the contract if a settlement can’t be reached in 60 days.
Erin Henson, a spokeswoman for the Maryland Department of Transportation, wrote in a statement that despite “substantive settlement offers” made by the department, PLTP has not proposed “reasonable settlement terms.”
She wrote that the department disputes PLTP’s right to file a notification of termination and consider the action a default.
“We intend to vigorously protect the interests of the citizens of Maryland and pursue all legal options available to the state,” she wrote.
Elrich said it’s disappointing that disputes have come to the point of the contractors threatening to move out of the job.
“I know the state had tried to negotiate, but I got the sense that the [PLTP] had not budged in its demand,” he said. “I can’t say I’m totally surprised.”
At this point, settlements depend on whether the state is willing to “give them every dime they want,” Elrich said.
“The money’s going to have to come from somewhere and I would guess it would be the taxpayers,” he said. “This deal should have had a binding arbitration clause.”
It’s the perfect example of everything that could go wrong with a public-private partnership, Elrich said, and there’s no way the state is getting out of it.
If the contractors walk off the job, there would be miles of abandoned construction and it could be that way for a while, Elrich said.
“The state would have to rebid the project and that’s going to cost more because now, whoever the next bidder is is going to know the things that weren’t accounted for the next time,” he said. “The state is going to be desperate and has an unfinished project like a giant albatross. … They’re not in a good position for getting good rates on bids.”
But looking for a new contractor could potentially delay the project by six months or more.
The only bright side to the contractor leaving the job would be that the state could refinance the project itself and save a “ton of money.” Elrich said.
Greg Slater, secretary of MDOT, wrote in a letter on Tuesday to Elrich and County Council members that the department is evaluating other methods to finish and open the rail line. He wrote that the department plans to send PLTP a notice of Concessionaire Default to dispute its right to file the termination notice.
Slater also wrote that he hopes to schedule a briefing on the project with officials from Montgomery and Prince George’s counties soon.
Montgomery County Council Member Hans Riemer said Wednesday that he’s looking to the state to keep the project and construction partners together.
“I think they (PLTP) have the state in a bad spot and that’s really problematic. I’m glad the state is sort of countering,” he said. “We need the state to pull this through and I think this consortium should recognize that if they mess this up, this is one of the most significant P3s in the country and it could have a huge impact on the P3 market in general. It’s going to be a real problem. They would be wise to compromise here.”
Riemer said that if PLTP and PLTC walked out on the job, the state could take it over and build it.
“I presume that’s the fallback plan. … Montgomery County has put in a significant contribution towards this, but we’re not in a position to bail the state out for the way it’s structured its deal,” he said.
In late May, the project was about 30% complete.
Council Vice President Tom Hucker, who chairs the county’s Transportation and Environment Committee, said Wednesday that he is nervous that MTA hasn’t communicated much about the issue to county officials.
“It’s exceedingly frustrating to find out that things have deteriorated to this point and at this late stage in the game,” he said. “I’m glad to hear [the state is] looking into all their legal options and they’re prepared to use them.”
Hucker said he was told by state officials that the more than 365 days of delay on the project were also partially because of the contractor’s own delays in project work, such as applying for permits.
“It’s certainly understandable that a giant for-profit corporate consortium would make every claim they could make to increase the payments that they think they’re entitled to,” Hucker said.
Council Member Andrew Friedson said residents don’t care who builds the project.
“They want the project built and they want the commitments that were made to be kept. We need the state to figure out how to build the Purple Line as we were promised without any further delays,” he said.
Friedson said he hopes the state will have better communication with county officials on developments in negotiations.
“I think everybody would prefer to be aware of incidents before they occur,” he said. “But more importantly, I would prefer if there were no incidents.”
Council President Sidney Katz said he is still hopeful that the state and contractors can reach a workable solution. He said he wasn’t convinced that the project would be abandoned.
“I don’t think [Slater] would stand for that,” Katz said. “I think he would work towards not having that situation and would try to resolve it quickly as possible if that happens.”
Council Member Evan Glass referred comment on the matter to a statement he posted on Twitter Wednesday afternoon.
MDOT and PLTP have both offered inadequate responses to questions about their timelines, schedules and budgets, he wrote.
“It’s clear that the state and concessionaire have had irreconcilable differences for a long time, but a complete divorce and upending of this project is unacceptable,” he wrote.
Elrich said that either way, the state is probably left with two choices: watch the contractors abandon ship or give in and give them everything they want.
Briana Adhikusuma can be reached at firstname.lastname@example.org.