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Tuesday, June 30, 2020

Purple Line contractors announce mass layoffs as they threaten to walk away from project

A partially-built bridge for the Purple Line
at Chevy Chase Lake
The game of chicken between the contractors building the Purple Line light rail system and elected officials in Maryland has just taken another dramatic turn. Three Purple Line contractors have just filed documents with the state indicating they will lay off hundreds of Purple Line construction workers on August 23, 2020. While the contractors had threatened to walk away from the project due to cost overruns on June 20, they then agreed to extend negotiations with the state for another 60 days.

Purple Line Transit Constructors says will lay off 478 workers, Lane Construction will lay off 125, and Fluor Enterprises will lay off 87, the documents indicate.

If the team walks away, taxpayers will be on the hook for a colossal sum. The end result will boil down to whether or not the contract was written to be airtight by the state. If it was, then the contractors can't try to shift the cost overruns to taxpayers. But if the contract was poorly written, this will end up as a financial disaster.

This is less a lesson in the dangers of public-private partnerships, as it is in the need to make sure such deals favor the state in every outcome in a well-written agreement. There is a chance the Purple Line work could be abandoned as a monument to the Montgomery County cartel's criminality. I suspect it's more likely to end with an agreement where the state picks up a substantive portion of the cost overruns (most likely what the contractors are really seeking; good negotiators always ask for more upfront than what they actually expect to get), or with new contractors - - and taxpayers getting run over like they did in the Silver Spring Transit Center debacle.

Either way, you lose and they win.
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2 comments:

  1. Inquisitor9:07 AM

    I'm missing something in your (Robert Dyer's) logic on this one. You state: the documents indicate:

    This is less a lesson in the dangers of public-private partnerships, as it is in the need to make sure such deals favor the state in every outcome in a well-written agreement....I suspect it's more likely to end with an agreement where the state picks up a substantive portion of the cost overruns....If the team walks away, taxpayers will be on the hook for a colossal sum. The end result will boil down to whether or not the contract was written to be airtight by the state. If it was, then the contractors can't try to shift the cost overruns to taxpayers. But if the contract was poorly written, this will end up as a financial disaster.

    You suggest that the Purple Line result will be about whether or not the state wrote a good contract or not, but then you can't reserve the obsession to blame the "MoCo Cartel" for any bad outcome. If things fall apart at this point leaving taxpayers on the hook, it seems to me that any blame for this would fall on the "Hogan or Annapolis cartel", based on your own logic.

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  2. Robert Dyer1:02 PM

    9:07: You may have forgotten that the Montgomery County Council has put $120 million - for starters - of County taxpayer funds into the Purple Line project. They failed to exercise oversight of their investment here, while promising the public what a good investment the Purple Line would be.

    So they're still on the hook for the overall outcome.

    Now if Hogan's people wrote a bad contract, of course, the Council wouldn't be at fault for the text of that document.

    But we knew this was risky going in, because unlike the P3 for toll lanes, there's no clear source of big revenue from the finished product.

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