Named after a quote by sprinter Linford Christie, who said he left his starting blocks at the start of a race "On the 'b' of the bang," the structure has been plagued by problems since it was unveiled in January 2005.
The structure cost twice the projected spend, eventually costing £1.4M when it opened in 2005. Since then, the 56m tall sculpture has suffered from its characteristic spikes falling-off.
Last October client for the structure Manchester City Council issued proceedings against Thomas Heatherwick Studio and its subcontractors Packman Lucas, Flint & Neill, and Westbury Structures for negligence and failure to meet their contract, following a series of failures on the sculpture.
The council today announced that it will drop this action following the design team agreement's to pay £1.7M compensation.
Manchester City Council city solicitor Susan Orrell said: "The settlement allows the Council to recover substantial damages and avoid further cost and the risks that are always associated with legal proceedings.
"I am pleased we have reached a settlement that is, in my view, in the best interests of the Council and now that this has been achieved, it means the Council can move on and consider the options for the future of the structure in conjunction with the project’s funders. When this work is completed a report will go to the Council’s Executive in the New Year."
Thomas Heatherwick Studio and subcontractors Packman Lucas , Flint and Neill and Westbury Structures issued a joint statement saying: "The B of the Bang sculpture was an ambitious and ground-breaking design. It is a matter of considerable regret to all of us that the sculpture that was intended to symbolise the outstanding success of the Manchester Commonwealth Games has suffered the problems that have come to light.
"We are pleased that a settlement has been reached to the proceedings."
A total of 9 spikes have fallen or been removed so far, with fatigue cracking caused by wind-induced vibration blamed for the failures.
The sculpture remains cordoned-off from the public.