MARAD seeks dismissal of port suit


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The U.S. Maritime Administration asked a federal court to throw out the Municipality of Anchorage’s suit against the agency over its involvement in the city’s port expansion debacle.

In its motion for dismissal submitted June 27 to U.S. Court of Federal Claims Judge Edward Damich, the Maritime Administration, or MARAD, asserts the memorandums of understanding it worked under on the Port of Anchorage construction project were cooperative agreements and do not hold it liable for the money lost on the currently stalled project.

MARAD and Anchorage entered into the first memorandum, or MOU, in 2003 to comply with a congressional requirement that federal funds for the project be doled out by the Department of Transportation agency.

In 2011, after widespread construction problems were discovered, MARAD and the city signed another MOU that expanded MARAD’s role to be a part of the Port Oversight and Management Organization. As a member of that group, along with city and port officials, MARAD was to help provide “overall executive leadership vision, policy, strategic objectives, and priorities for the project,” the MOU states. No substantial construction has occurred at the port since damaged sheet pile dock facing was discovered in 2010.

Anchorage sued MARAD at the end of February claiming the agency owes it unspecified damages for the port construction project that has little to show for the $439 million of public money poured into it.

Early designs estimated to cost less than $300 million added an all-but earthquake proof north dock to the port and replaced the aging pile dock that is now 50 years old.

MARAD’s attorneys point out that Anchorage has already tried to recoup damages for similar claims from other parties involved in the construction drama.

The suit against MARAD pulled the last significant player in the port project into litigation with Anchorage. The city sued the project management, dock design and consultant companies in March 2013. That case is ongoing in Alaska U.S. District Court.

Anchorage’s claim alleges MARAD failed to live up to the MOUs because it failed to provide “promised expertise to design, construct, and oversee the design and construction of the project.”

The city also says it has virtually lost the $139 million of federal money appropriated to the project because of MARAD’s mismanagement and will likely not have the benefit of federal funds going forward.

On the original 10-year timeline, the Port of Anchorage expansion was supposed to be completed in 2013. Anchorage Mayor Dan Sullivan has said it now will likely be at least 2019 before a scaled down version of the port is finished.

Finally, Anchorage claims MARAD “recklessly” settled a contract dispute with Integrated Concepts and Research Corp., the project management firm, by paying out $11.3 million to ICRC without the city’s consent or knowledge.

To the first set of allegations, MARAD’s attorneys note that the agency had no experience or technical expertise in designing or managing a complex construction project before the Anchorage work, a fact the city was well aware of.

According to MARAD, the listed terms of the 2003 agreement require it to handle the project financials and little more. MARAD’s attorneys noted in the 45-page motion that the first MOU requires Anchorage — the municipality and the port — to “provide overall program requirements and direction of port expansion to MARAD.”

Further, city officials were to “review all plans, specifications, and status reports submitted by the primary contractor and its subcontractors before submission to MARAD,” the 2003 MOU states.

Because it was tasked mainly with money — a role it claims was directed by Congress — MARAD had the authority to settle its contract argument with ICRC and Anchorage blends the distinctly different 2003 and 2011 MOUs in its complaint, the agency contends.

“The 2003 agreement, which was in place until after discovery of construction and design problems in 2010, placed the risk of failure (as between Anchorage and MARAD) primarily on Anchorage by assigning Anchorage greater management responsibility,” MARAD’s motion asserts.

MARAD also cites the meeting minutes from the June 24, 2003, Anchorage Assembly meeting when the first MOU was formally approved as proof the city was aware of its own and MARAD’s roles in the project.

Then-Port of Anchorage director and former Gov. Bill Sheffield “was satisfied that Anchorage retained sufficient program control of what improvements would go into the port, where they would be located, and what they would do. Under the arrangement with the federal government, MARAD would be responsible for handling and paying construction claims,” according to an excerpt from a report Sheffield gave to the assembly in support of an amendment to the 2003 MOU, cited in MARAD’s dismissal motion.

The agency’s limited role in the Port of Anchorage project was criticized in a Transportation Department Inspector General audit of the agency’s work in Alaska, as well as its involvement in port projects in Hawaii and Guam.

The IG report blames the construction issues on the fact that MARAD delegated its technical and program authority to Anchorage through the MOUs, according to the motion.

MARAD states that Congress did not give it the directive to begin obtaining technical and construction expertise until 2009, after it was involved in Anchorage, as a reason for its purported role as a money-handling agency in the project.

 

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

 

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