BAE Systems, the ship repair giant that operated the dry docks at Pier 70 for more than a decade before walking away last year, has agreed to pay the Port of San Francisco a $4.9 million settlement, money that will help fund improvements needed to lure a new operator to revive the facility.

The settlement agreement comes less than two months after the ship repair facility shut down amid a legal squabble between BEA and Puglia Engineering, which took over the dry docks from BAE earlier this year.

For a dozen years BAE Systems operated the repair facility, which consists of two dry docks. One, Dry Dock No. 2, is a monumental steel cradle capable of lifting 900-foot cruise ships weighing 60,000 tons. The other, named Eureka, is smaller: At 528 feet long, it can hoist ships weighing 14,500 tons.

But in 2016, with repair revenues declining because of new competition in Portland, Ore., BAE decided Pier 70 no longer fit its business plan. It sold the business to Puglia Engineering, which is based in Washington state. Puglia paid just $1 for the business but took on $38 million in pension liabilities.

But soon after taking over the dry docks, Puglia filed a lawsuit alleging that BAE had misled it into thinking that the two dry docks were “well-maintained and could be put to immediate use.”

Instead, Puglia said, it discovered the smaller of the two dry docks had “deteriorated to an extent that it would cost $9 million” to render operational. In addition, Puglia’s lawsuit claims that an additional $12 million in dredging is needed just to be able to ensure that vessels could get into the dry docks.

While the legal squabble between Puglia and BAE is not yet resolved, the $4.9 million will help pay for some of the most pressing repair work, “which will help recover operations at the shipyard quickly,” said Elaine Forbes, executive director of the Port of San Francisco.

In addition on Tuesday, the Port Commission authorized staff to issue a request for proposals for a new operator for the facility, which includes two dry docks, 15 acres of land, numerous buildings and port-owned cranes.

The port is hoping to select a long-term operator in October to bring back the 250 jobs lost when the shipyard closed May 28.

“We will continue to act quickly, so the local union jobs return to our shipyard and city,” said Port Commission President Willie Adams.

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen