Construction
Federal Appeals Court Reverses $367M Port Construction Award to Anchorage
2024-12-19
A portion of the dock at the Don Young Port of Alaska on November 22, 2024. (Marc Lester / ADN) showcases the significance of this port. In 2021, a federal claims court judge awarded the Municipality of Anchorage more than $367.4 million in its lawsuit against the federal government over failed construction work. However, a federal appeals court panel has now partially rescinded that ruling and slashed damages to just $11.3 million. This decision has significant implications for the municipality and the future of the port.Mayor Suzanne LaFrance's Perspective
Mayor Suzanne LaFrance expressed disappointment during her opening remarks at Tuesday night's Assembly meeting. She stated that this is a setback and that the municipality is continuing to consider appropriate next steps. The long legal saga that started in 2013 had seemed to reach a victorious conclusion with the 2021 ruling, but now it appears that the fight is far from over.The 2003 Memorandum of Agreement
Anchorage entered a memorandum of agreement with the federal Maritime Administration (MARAD) in 2003 to overhaul the facility. Little did they know that much of the work done by subcontractors would be botched. The U.S. Court of Federal Claims in 2021 held MARAD liable due to its poor oversight and management. The judge found that the federal agency breached two contract agreements with the city. In 2022, the judge awarded the city the full sum of damages it sought, including $180.8 million for the value of the project and $186.6 million to remediate the faulty work.But now, U.S. Circuit Judge Todd M. Hughes has written in Monday's opinion that MARAD was not actually required to deliver a finished, structurally sound port under the memorandum. The memorandum does not state that MARAD was responsible for delivering anything to Anchorage. Instead, the onus is on Anchorage officials. They were responsible for providing the overall program requirements and direction to MARAD and for reviewing plans and certifying completion.The Panel's Confirmation
The panel did confirm the federal claims judge's prior decision holding that MARAD broke an agreement with the municipality when it agreed to a roughly $11.3 million settlement with subcontractors. Monday's decision kept this amount awarded to the city intact and sent the case back to the claims court to consider other breaches of duty by MARAD and other damages due.The municipality disagrees with the panel's interpretation of the memorandum and believes that MARAD had a duty to deliver a defect-free port. After entering the port overhaul agreement with MARAD, much of the work by subcontracted companies was found to be faulty. A 2013 city-commissioned study and a U.S. Department of Transportation inspector general audit highlighted the flaws in the design and construction.The Financial Impact
Monday's decision comes as a financial blow to the municipality as it pushes ahead with a massive modernization program at the port. The port's infrastructure is deteriorating, putting the state's supply chain at risk. About 75% of the state's inbound cargo comes through the Port of Alaska. The total modernization project is estimated to cost between $1.8 billion and $2.2 billion.The Anchorage Assembly last month approved a $180 million bond sale and designs for rebuilding the port's two cargo terminals. Without the large settlement, the municipality may need to rely more heavily on revenue bonds paid back through surcharges on goods coming across the port docks. This could have an impact on consumers.So far, the port has secured more than $500 million in federal and state grants to help pay for the project. The city is seeking other funding options as well.