Anchorage awarded more than $367M in damages for failed construction on Port of Alaska expansion project

A federal judge has awarded Anchorage more than $367 million in damages for failed construction on the city's port.
Published: Feb. 24, 2022 at 4:05 PM AKST|Updated: Feb. 25, 2022 at 9:03 PM AKST
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ANCHORAGE, Alaska (KTUU) - A federal judge with the U.S. Court of Federal Claims has awarded the Municipality of Anchorage more than $367 million in damages for failed construction performed during an expansion project for the city’s port.

The U.S. Court of Federal Claims ruled in favor of the municipality back in December over the city’s port expansion project, finding that the government breached its 2003 and 2011 agreements, or memorandums of understanding, with the municipality.

Anchorage had requested more than $367 million in damages in its suit against the U.S. Maritime Administration. In Thursday’s opinion, Judge Edward Damich ordered that the city will be awarded $367,446,809 in damages over the expansion project.

“The evidence was clear that the structure left by the Government on Anchorage’s property by MARAD is dangerous, prevents Anchorage from using its property and creates navigational hazards,” Damich wrote in the opinion. “The evidence was also clear that Anchorage has no choice but to remove the defective structure, and the cost to remove the dangerous structure is clearly recoverable.”

The municipality sued contractors involved in construction in the Port of Anchorage Intermodal Expansion Project over a decade ago. Then seven years ago, it sued the U.S. Department of Transportation’s Maritime Administration for failed construction at the port. The Port of Anchorage was renamed the Port of Alaska in 2017.

“The MARAD settlement, while it’s a very positive first step in making the municipality whole again, it’s important to note that it’s still subject to the appeals process,” Deputy Municipal Manager Kolby Hickel said. “We don’t know how long that appeals process will take.”

Hickel added the appeal process can take years and the dollar amount of the payout for the municipality could change depending on the appeal.

During a trial this past spring that lasted over a week, the court heard from 24 witnesses. The city had argued that the U.S. Maritime Administration had been required by their 2003 and 2011 agreements to provide technical expertise to oversee, design and construct the expansion project “free of defects.”

In his ruling back in December, Damich found that the Maritime Administration had failed to enforce its contractual remedies or administer funds for the project properly.

In Thursday’s opinion, Damich wrote that in breaching its agreements with the municipality, the administration “has misspent the initial $300 million.”

“Now Anchorage has to fix what was created by MARAD,” Damich wrote.

According to the opinion, about $186.6 million of the damages were awarded for Anchorage to remove to defective port structure and stabilize the area. Another roughly $180.8 million was awarded for impairment damages, because, if the “construction had been done properly,” the city would have had an asset valued at about $180 million more than it is currently valued.

“The awarded damages will enable us to get the north end properly fixed, but we cannot lose sight of the bigger picture: securing funding for the overall project to rebuild and modernize the port,” said Port of Alaska Director Steve Ribuffo in a press release from the city.

Anchorage is in the midst of the Port of Alaska Modernization Program, which according to the release is estimated to cost between $1.6-$1.8 billion.

In the press release, Mayor Dave Bronson said he was pleased with Damich’s decision.

“Though this is a positive outcome, we must remember that the appeal process could take up to a year, and the final amount to be paid is unresolved,” Bronson is quoted as saying. “In the meantime, we still need to construct a seismically resilient port that achieves food security for our state.”

The damages are for the north extension of the port, Hickel said, and any funds the municipality gets will go toward the port’s modernization program.

“The Port of Alaska Modernization Program is to provide food security for Alaskans, and that is the focus that we need to keep on,” Hickel said.

Editor’s note: This article has been updated with additional information.

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