Port of Anchorage: A billion-dollar mess?

January 15, 2011 

The largest economic development project under way in Anchorage has stalled under a cloud of construction troubles and ballooning costs.

The completion date for the massive dock replacement project at the Port of Anchorage has been pushed back to 2021 from a target of 2011 set before major construction began.

The price tag, which was $360 million as of 2005, has escalated to $1 billion.

Some engineers are questioning whether the new dock can even be built as designed. Much of the work done in 2010 involved dismantling construction from just a year earlier. Numerous sheets of steel that were planted in Cook Inlet as part of the dock expansion have been ripped up and now lie stacked in twisted and warped piles at the port.

A city advisory commission is urging an independent review of "all aspects of the design, including the ... constructability."

U.S. Sen. Mark Begich, who was Anchorage mayor when the dock project got going, has been a big supporter over the years. Now he has concerns, too.

"I am troubled by reports I have received of complications during this year's construction season and of the potential financial ramifications for federal taxpayers and for other entities which have contributed funding for the expansion project," the senator wrote in a Dec. 15 letter to the federal Maritime Administration, which is overseeing the project.

Among other things, he sought an accounting of the spending and an explanation of what went wrong with the construction.

Ken Privratsky recently retired as an executive with Horizon Lines Inc., one of the two major shippers that dock at the port, and has been following the project for years.

"What's becoming evident is we've got a real mess on our hands," he said.

LAYERS OF PROBLEMS

Much of what Alaskans eat, wear and drive comes in through the city-owned port, which turns 50 this year. Officials say it is a vital, lifeline facility. Yet many residents never give it a thought.

Port officials and shippers say the old dock, parts of which date to before the 1964 earthquake, is deteriorating and expensive to maintain. The effort to replace it began more than a decade ago.

Longtime port director Bill Sheffield -- a former governor -- pushed for the current design, which has been controversial within Anchorage's engineering community from the get-go.

The city decided not to build a traditional dock on pilings but instead put its faith behind a bulkhead system, which extends the shore into the sea. The design is a patented technique called Open Cell Sheet Pile.

Bit by bit, crews are trying to erect a wall of steel in Knik Arm that, if it's all built, will extend the port into the Inlet as well as north and south -- 1.5 miles of steel in all, nearly the length of two Delaney Park Strips.

The design consists of a series of horseshoe-shaped cells made of steel sheet pile, with gravel fill behind the dock face within each cell. Long tail walls reach back toward shore to secure the structure.

Ultimately, workers will create 135 acres of new land in the Inlet, bigger than three Dimond Center malls counting the parking lots.

All that new dock would accommodate bigger ships than currently call at Anchorage, and more of them. The project includes staging areas for the military, a rail line, roads, a new port administration building and security checkpoints onshore. Initially, it also was supposed to add cruise ship and passenger ferry terminals, but those are no longer part of the plan.

The effort has been plagued by trouble:

• Defects in the structure. The steel piles are supposed to hook one into the next down the entire length, creating a strong, interlocked structure.

Instead, dozens of steel sheets have separated near where they are supposed to be firmly planted into the seabed. These separated sheets buckle, twist and bend, inspections have found. The damaged steel is being pulled up and must be replaced.

• Slow progress. A project manager has said far more steel was pounded into the seabed in 2009 than expected. But the work this past summer consisted largely of inspecting year-old sheet pile, ripping out damaged sections, replacing damaged cells and installing pads for construction cranes. No new sections were added. Some of the work now planned for 2011 will include replacing the damaged steel.

The project has fallen so far behind that Horizon Lines said it had to sell multimillion-dollar cranes that it bought to unload its ships at the new dock. Now the company won't be able to install bigger cranes until 2016, and then only at a temporary berth. Its permanent berth won't be ready until 2021, officials now estimate.

• Money pinch. Without the clout of the late U.S. Sen. Ted Stevens, and with a general anti-earmark mood in Congress, Anchorage's ability to secure the money beyond the $279 million in public dollars already spent or in hand has taken a big hit.

Sheffield insists he will come up with the more than $700 million needed to finish the job. He says he has been able to patch together $50 million to $60 million a year through port revenue, loans, state and federal grants, and federal earmarks to keep the work going. He expects to boost those amounts in coming years.

'NOT SATISFIED'

Port officials remain convinced the dock can be built as designed.

"Although these setbacks are frustrating, they are not insurmountable and the project remains on track," the port says in written answers to questions.

Once it's done, engineers say, the dock will stand for 50 years and its life span can extend far beyond that with heavy maintenance.

Roughly one-third of the planned new dock has been built, but much of that must be redone.

The city has yet to accept any of the work as complete, according to port engineer Todd Cowles.

At a work session in May, Anchorage Assembly members challenged the growing costs and evidence of construction problems.

Chairman Dick Traini formed a special port committee to get a handle on the situation.

"I want this port to work because 85, 90 percent of everything that comes into Alaska comes through this port. I don't want to lose that to some other little port somewhere. I want it to come here. It's jobs," Traini said at the time.

No one is stepping forward to take the blame for the port project's problems.

While the city owns and manages the port, in 2003 it gave the lead contracting role to the federal Maritime Administration, which had never run a port-construction project before. That agency hired Integrated Concepts and Research Corp. as project manager. ICRC contends it properly carried out its role as project manager by uncovering problems. It is making changes, including hiring additional staff as on-site inspectors rather than using subcontractors.

The Maritime Administration says it's done what was required in its 2003 agreement with the city.

"While we have had unexpected complications with the installation, it is not likely to have an impact on the actual construction material life expectancy once the installation problems are resolved," the Maritime Administration says.

In his Dec. 27 response to Begich's letter, the head of the Maritime Administration said he too was concerned about the damage. The federal agency ordered additional inspections and has committed more staff members in Washington, D.C., and Anchorage to the project, Maritime administrator David Matsuda wrote.

Port officials say they're not satisfied with the oversight so far. One of their ideas for change is creation of a new team that would include the port, ICRC, the Maritime Administration and possibly others such as a port user.

"We're not happy. We're disappointed. We've lost some time on the schedule," Sheffield said.

Privratsky, the retired Horizon Lines senior vice president, said there wasn't sufficient oversight of the work in 2009.

"That entire project is all suspect because of that," he said. "We're discovering some of the warts. Unfortunately I think that the jury is still out on the extent of it."

Port officials say the project is particularly challenging because ships still must be able to dock at the old port while the new one is being built alongside.

The work must be phased in over a longer time than planned initially to ensure ships can access temporary berths, officials say.

Some challenges became apparent only last year when the berth for one of the cargo shippers began silting up because of construction-caused changes in currents.

In addition, the project is experiencing delays and increased costs because of required shutdowns related to protections for endangered beluga whales, Sheffield said.

"In a situation like this, every party stands up and says 'it's not my fault,' " ICRC chief engineer Brett Flint told the Assembly Port Committee last week. "In reality, the truth probably turns out to be somewhere in the middle."

A PROMISE NOT REALIZED

When Sheffield first began promoting the design in 2002, he said it would be cheaper and better than a traditional dock on pilings.

At that point, the project was going to add 85 acres to the port (50 acres less than what is now planned) and the estimated cost was about $150 million.

"It's a very attractive alternative for us," Sheffield said at the time. "It's bigger and it's millions cheaper, and money is getting harder to come by now."

An equivalent conventional dock would have cost an estimated $230 million, he contended.

Yet a local engineering firm had submitted a design for a smaller conventional replacement dock estimated to cost around $100 million. It could have been completed by 2005.

The winning design came from Peratrovich, Nottingham & Drage Inc., another local firm that now goes by PND Engineers Inc.

"Cost estimates for this project at this level are probably more accurate than for most projects because of recent similar construction in Cook Inlet and nationwide," PND said of its design in 2002.

CONSTRUCTION PROBLEMS

The sheets of steel are driven into the seabed with giant hammers and vibratory machines maneuvered by construction cranes. The sheets are as long as 90 feet, of which as much as 15 feet is buried in the clay, muck and gravel. The metal is one-half-inch thick, and the steel sheets can bend like a bad nail if they hit hard soil or rock.

PND says more than 180 of its structures have been built successfully around the world, including many in Alaska: on the North Slope, in Dutch Harbor and on the North Star dock near the city port.

The problems in the busy 2009 construction season surfaced early on when a contractor had trouble driving in some of the steel pile. PND arranged for divers to check for damage that October. They found places where the pile pieces were bent and out of joint. In one spot, the gap was big enough for the diver to reach in and touch a side wall about 3 feet away.

Last summer and fall, divers did more inspections -- and found many more places of damage.

Of 66 cells targeted for inspection, 28 showed damage, some of it dramatic, and three more need further review, according to ICRC and the PND inspection reports. Another 26 cells, at the north end of the new barge berths, are visible at low tide and are sound, port officials say.

In one cell some of the sheets were "ripped and curled out like a corkscrew about 3 feet above mud line," PND said in one inspection report. In the neighboring cell, one steel sheet was bent out 8 feet from the wall, toward the sea.

In many cases, joints had separated. Gravel packed behind the steel cells to create new land was spilling out. In some spots, sinkholes were forming.

Other inspections targeted the walls reaching back to shore. They are packed in gravel on both sides. Hundreds of those sheets had to be pulled up for inspection.

In all, the inspections revealed 635 damaged sheets out of 2,611 examined so far, according to ICRC. The inspections are continuing -- about 8,000 sheets of pile were installed. Much of the damaged material discovered to date has been pulled out, and some of it is being repaired and reused. Some of the damage consists only of minor scratches, ICRC says.

Why didn't the steel sheets go in as expected?

"It may be a number of reasons, in which case we are not comfortable at this point putting one and three together and coming up with seven," Lyn Dokoozian, a program manager with ICRC told the Assembly Port Committee in October. "A lot of people have opinions, but they are not necessarily based upon fact and a rigorous evaluation of the data. And that's still to come."

Possible culprits: stiff clays, hard pile driving, methods used by the contractor or other things, Dokoozian said.

"So it could be a combination of a number of causes, not just a single cause," she said.

She maintained: "We know that the structure can be built."

The Maritime Administration, in its response to Begich, provided a similar list but said the contributors also could include "design deficiencies."

The contractor that installed the problematic sheet pile in 2009 was QAP. A different contractor, West Construction Co., took over the work last summer and pre-drilled before hammering in the steel pile. The port says the West-installed sheets, replacing damaged ones, have been problem-free, proving that the design will work. QAP, which used a subcontractor to drive the pile, hasn't returned repeated calls.

How much of the work already installed must be redone? That's unclear, Dokoozian told the Assembly committee.

The engineers and consultants plan to analyze the inspection results over the winter to look for the cause and figure out how to get the new dock built.

The port says it is seeking a forensic analysis of what went wrong.

CAN IT BE BUILT?

Some problems in a large construction project are to be expected, especially when the work environment includes extreme tides, currents, winter ice and other challenges, according to Robert "Buzz" Scher, chairman of the city's Geotechnical Advisory Commission, made up of engineers.

"However, the Commission is troubled by the apparent high frequency and concentration of damaged piling revealed during the recent inspections," Scher wrote in a Dec. 8 letter to Patrick Flynn, the Assembly Port Committee chairman.

Scher and two other engineers from the commission attended the committee's October meeting and were surprised to learn the extent of the damage.

The geotechnical commission has been asking for a thorough, outside review of the project for years.

That is still needed, Scher wrote.

"Further, the independent review should consider all aspects of the design, including the geotechnical, structural, and civil engineering, as well as constructability of the prepared design."

ICRC has told the city the Army Corps of Engineers did an independent review.

But the Corps says it never was asked to sign off on the structure -- and didn't. It did analyze how the new port might affect the Corps' dredging of navigation channels in Cook Inlet, Col. Reinhard Koenig, the Corps' Alaska commander, told the Assembly Port Committee last week.

"This review has nothing to do with the constructability, the appropriateness, the engineering aspects of the project itself," Koenig said. "Whether the project fails or does not fail has nothing to do with this review."

A BIG CONSTRUCTION BILL

Sheffield's latest estimate is that Anchorage's new port will cost $1 billion by the time it's done.

The money won't come from city taxpayers, Sheffield and city officials insist. Nor will it come from hikes in dock fees that would be passed through to consumers in the cars, clothes and groceries they buy, Sheffield promised.

So far, the Maritime Administration has received about $279 million and has spent or committed to spend all but $14 million. Much of it came from congressional earmarks. The state has been putting in from $10 million to $20 million a year.

The city Assembly in March 2008 agreed to let the port borrow up to $75 million. The city is not guaranteeing that loan, officials say. When the project is complete, this debt will be rolled into a bond that will be paid off through port revenue, Sheffield said. The city has put in more than $49 million so far, from the loan and port revenue.

But what about the rest of the money needed?

Sheffield tried to wrest money from the economic stimulus packages approved by Congress but got nothing. He recently made his case directly to U.S. Transportation Secretary Ray LaHood. He said last month that he hopes to get leftover stimulus funds.

He also expects the port project will get a big boost if a new multiyear federal highway bill comes up before Congress this year, just as it did in 2005 after U.S. Rep. Don Young stuffed the highway bill with Alaska projects.

Some $9 million for the project was in an omnibus budget bill that died at the end of the year in the U.S. Senate. Anchorage Mayor Dan Sullivan is seeking $20 million from the Legislature this year, and the governor has included that money in his proposed budget. The city also is pitching the idea of a state bond to infuse money, at least $100 million, into the project, Sullivan said.

"I'm extremely concerned about cost," said Assembly member Debbie Ossiander, who is on the Port Committee. "And I'm extremely concerned about working in some way that we can do this in pieces rather than be obligated for the entire project."

Port officials say the project is designed to be built in phases. A new berth for barges is already generating a little revenue. But a second barge berth is one of the areas with the most damage, and much of it must be redone. Temporary berths for the cargo ships are in progress. One of the last steps will involve tearing out the old dock and building new, permanent berths for the big ships.

All of the phases don't have to be built, the port says. "Each phase is independently stable" and can stand even if the money for all the phases never comes through, according to the port.

Shippers say they aren't sure the permanent berths will ever be built.

Horizon wanted a bigger dock to accommodate bigger cranes for bigger ships. But Totem Ocean Trailer Express Inc., or TOTE, another major cargo shipper into Anchorage, doesn't use cranes to off-load trailers from its ships. It has been vocal from the beginning that it didn't need a bigger dock -- and didn't expect to pay for it.

As costs escalate, the project time frame keeps slipping, said George Lowery, Alaska director for TOTE.

"The dates have changed so many times that I've kind of lost track," he said.

Who's paying for the work that must be redone?

Ultimately it won't be the city, port officials insist. The port is evaluating how to recover money already being spent on repairs.

"We expect to be made whole," Sheffield said.

Lawyers are circling. The effort to figure out what went wrong "is going to be obscured because there may be litigation involved," Ossiander said. No one had sued or pursued a construction claim as of late December.

Congressman Young said he's not getting bogged down in the details of how the project is going. He has secured tens of millions in earmarks for the port project over the years and believes it will work.

More earmarks could get harder to secure in the new Congress, where a number of members are pushing for a moratorium on the practice.

Young said he'll keep trying.

"All I know is the project is a project for Alaska. It's not about Anchorage. It's about Alaska. That's the reason I supported it to begin with."

Sheffield said he has no interest in scrapping what's there and starting over with a traditional design.

"We're going to finish the port, and we will get the money," he said. "This is just one of the most important pieces of infrastructure in the state of Alaska."


Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390.

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