Work has begun on a £13.8 million expansion of the Wednesbury Midland Metro depot.
Centro, the Midlands’ transport authority, has awarded the contract to Morgan Sindall.
The project will see the existing Metro Centre at Potters Lane updated ready to receive 20 new trams as part of the £128 million expansion of the line.
Councillor Tom Ansell, lead member for rail and Metro for Centro, said: “This is an exciting development for the Midland Metro.
“Morgan Sindall have been appointed to the job after a rigorous tendering procedure, having demonstrated a thorough understanding of their brief and approaching the whole process in a thorough and professional manner.”
Jag Paddam, managing director of infrastructure at Morgan Sindall, said: “This is our first project for Centro and we look forward to working with them and delivering a project of which they can be proud.
“We offered a range of value engineering approaches which were enthusiastically received by the customer and which will help to ensure both expectations and budgets are met.”
The work consists of a 42 metre extension to the east of the existing maintenance shed along with additional maintenance births, four new stabling sidings and a separate testing and commissioning shed.
There will also be also upgrades to the existing overhead line, infrastructure and communications, and a new substation will be constructed at Colliery Road, West Bromwich.
It will create 15 new jobs once opened and work is scheduled for completion in summer 2013.
The Midland Metro runs from Wolverhampton to Snow Hill station in Birmingham city centre via Bilston, Wednesbury and West Bromwich.
It has 23 stops and operates a fast and frequent service with a tram every 6-8 minutes during the daytime peak and every 10 minutes at all other times.
The government gave the final go-ahead in February for work to start on a 0.8 mile (1.4km) extension from Snow Hill to New Street station in the heart of Birmingham city centre which will also see a new tram fleet.
Spanish tram manufacturer CAF has been chosen to supply up to 25 Urbos 3 trams in a deal worth in the region of £40 million.
Once completed the expansion of the Metro will result in 1,300 new jobs and be worth £50 million a year in added GDP to the West Midlands regional economy.
The first new tram is scheduled to come into service - on the existing line - in February 2014.
The city centre extension with the full new tram fleet is scheduled to be in service from March 2015.