Balfour Beatty was named preferred contractor for the £18.6m scheme back in May 2012, when it was hoped that work would start in early 2013.
It will now start this month, August.
Detailed design and advanced works have already been completed. Completion is set for 2015.
Calling on the resources of its consulting engineering division, Parsons Brinckerhoff, Balfour Beatty is responsible for designing, constructing, testing and commissioning the new tramway.
Client for the project is the passenger transport executive, Centro.
Balfour Beatty has undertaken to provide “up to” 1,000 weeks of employment for local people and has formalised agreements with its supply chain to recruit at least 75% of the workforce locally.
Balfour Beatty director of operations Bill Gifford said: "We have a long standing presence in the West Midlands, so we're delighted to be delivering a scheme that will contribute so significantly to the region's economic and social prosperity. We are also committed to helping build lasting communities, and as a local employer we want to make sure that throughout the duration of the project, we're helping to support those who are currently unemployed getting back to work."
The extension is part of a wider £127m project that will see a fleet of 20 new trams for the Midland Metro system, which runs between Birmingham and Wolverhampton.
The photo below shoes Centro chief executive Geoff Inskip and Balfour Beatty's Bill Gifford signing the contract.