Anchorage wins court victory over feds in dispute about botched port construction and repayment

The Municipality of Anchorage won a major court victory over the federal government in a long-running dispute centered on hundreds of millions of dollars worth of faulty work done during a project to overhaul the Port of Alaska.

Last week, Senior Judge Edward J. Damich with the U.S. Court of Federal Claims ruled definitively: “The Government breached its agreements with Anchorage.”

Though litigation has been going on for seven years, at issue is a contract dating back to 2003 between Anchorage and the U.S. Department of Transportation’s Maritime Administration, or MARAD.

After the city entered an agreement with MARAD to overhaul the facility, much of the work carried out by subcontracted companies proved to be shoddy and substandard. A 2013 suitability study conducted by CH2M Hill found “the design and construction were defective,” which would necessitate portions of the project being redesigned and rebuilt.

According to Damich’s ruling, a total of $306,466,920 in both federal and non-federal money was spent on the port improvement project, with little to show for it in the way of long-term fixes to the facility.

The city is asking for nearly $368 million in damages. Damich’s ruling does not specify an amount the government will have to pay back, though a decision is expected before month’s end.

“Could be a dollar, could be $367 million,” said port spokesperson Jim Jager. “I believe it’s going to be closer to the latter figure, but I don’t know.”

Jager said that while the ruling is a major step forward, outstanding questions remain, such as whether the federal government will appeal the case, or how a potential monetary repayment will be structured.

If Damich does award the municipality money for damages, the funds do not necessarily have to be applied toward the ongoing improvements to the port, although Jager said the current administration has said that is what they will be used for.

“This is a victory for Alaska,” said Anchorage Mayor Dave Bronson in a written statement following the court’s ruling.

Originally called the Port of Anchorage, the infrastructure began operating in 1961, and was the only port in Southcentral Alaska that remained functional after the 1964 Good Friday Earthquake. It has since transformed into the main conduit for essential supplies distributed all across the state, from groceries and consumer goods to cement and fuel. The critical facility has been badly in need of repairs and design upgrades for decades, due in part to the harsh tidal conditions in Cook Inlet that scour pilings with silt and ice, badly corroding metal supports and jeopardizing Alaska supply lines.

[A People Mover bus advertisement directs people in Anchorage to a website pushing false claims of election fraud]

Litigation over the botched project began under Mayor Dan Sullivan’s administration and the Berkowitz administration pursued it aggressively. Anchorage officials have repeatedly tried to draw attention to the dilapidated port conditions in hopes of attracting investment from state and federal officials. In 2017, the city Assembly took the largely symbolic step of renaming the facility the “Port of Alaska” to draw attention to its statewide role as a piece of critical infrastructure.

The city of Anchorage argued MARAD was in charge of overseeing the subcontractors responsible for the the faulty designs and construction, and that after finding inadequate execution, it was the agency’s job to withhold payment to third parties or otherwise rectify the problems. The federal government’s argument to the court was it was only responsible for administrative and financial duties, not managing and executing the improvement project.

After a nine-day trial and testimony from two dozen witnesses earlier this year, Damich sided with the city.

Hundreds of millions have been spent in the years since the litigation was launched to gradually improve components of the port, particularly after damage to the fuel terminal from the 2018 earthquake.

Construction of the new petroleum and cement terminal is largely completed, though problems procuring some necessary components caused delays that pushed back some of the dredging work necessary for optimal operations. It’s the first phase in the port’s more comprehensive modernization program, which is designed to improve and secure the facilities and will continue through at least 2028. Jager said completion of the cargo dock will likely cost upwards of a billion dollars.