Federal Court Awards $367M in Damages for Failed Alaskan Port Project
March 23, 2022
In one of the largest construction and government contracts cases ever litigated in the United States, FTI Consulting provided expert testimony in a dispute centered on one of the nation’s most critical seaports.
The Port of Anchorage, now known as the Port of Alaska, is a critical national seaport where 90% of the goods for Alaska’s most populated areas (including five military installations) pass through annually.
As part of the $1.8 billion Port of Alaska Modernization Program, the U.S. Department of Transportation Maritime Administration (“MARAD”) entered into two contracts in 2003 and 2011 with the Municipality of Anchorage to build the Port of Anchorage Intermodal Expansion Project. The project was to develop a new dock that would modernize the port, stimulate economic activity and ensure food security for Alaskans. However, the sheet piling system was defectively designed and constructed, causing sinkholes as backfilled earth escaped into the water. The defective design and construction of the sheet piling left by MARAD on the port’s property presented a dangerous condition, preventing the use of the property and creating navigational hazards, necessitating its removal by the city. The city sued contractors involved in the project’s construction over a decade ago, and in 2015, the city sued MARAD for breaching its agreements related to design, construction and project management failures at the port.
As part of the suit, which was one of the largest construction and government contracts cases ever litigated in the United States, plaintiff’s counsel Seyfarth Shaw LLP called Patrick McGeehin, a qualified expert in forensic accounting and damages calculation, as an expert witness for calculating damages.
Mr. McGeehin testified to the total amount of funds spent on the project, taking into consideration the funds granted, Task Orders, deposition transcripts, prior legal settlements and other expert testimony. He then calculated and allocated costs to certain areas that were deemed usable and excluded them from his impairment cost calculations. In addition, he credited unused building materials that the municipality was able to sell, as well as prior settlements reached by the municipality with engineers and contractors involved with the project.
On February 24, 2022, the court ordered that the city be awarded more than $367 million, representing the full damages sought by the city.
According to the opinion, approximately $186.6 million of the damages were awarded to remove the defective structure and stabilize the area.
The remaining $180.8 million was awarded for impairment damages, which was the subject matter of Mr. McGeehin’s analysis, because the city would have had an asset valued at approximately $180 million more than it is currently valued if the “construction had been done properly,” the court ruled.