Courtesy of Panama Canal Authority

Work has stopped on giant canal project, but it was not clear on Feb. 20 how many workers are returning to work under pact reached Feb. 19.

A work stoppage that paralyzed the $5.2-billion Panama Canal Third Lane Expansion for more than two weeks has ended, with a tentative agreement reached Feb. 19 between the contractor and owner battling over alleged cost overruns.

"This preliminary agreement to resume works does not imply a negotiation on the alleged cost overruns claimed by the contractor," said the Panama Canal Authority in a statement.

Neither side disclosed on Feb. 20 how many workers are returning to work and in what areas of the project.

Grupo Unidos Por el Canal (GUPC), the contractor team building the waterway's new locks, stopped work on Feb. 4 after weeks of negotiations with the Panama Canal Authority related to overruns it claims have reached $1.63 billion.

Canal officials have insisted that claims must go through a three-step arbitration process agreed in the 2009 contract for the work.

The owner and contractor group had reached an agreement in principle over the issue one week before, but continued negotiations on the details. The authority agreed to pay the contractor $36.8 million for December invoices to ensure work can go forward.

The two sides will continue to discuss key points such as the delivery of the massive gates for the locks, several of which are completed and waiting for transit from Italy.

While the financial details of the agreement have not been disclosed, canal Administrator Jorge Quijano said that any agreement was incumbent on the cooperation of Zurich Insurance Group who also participated in the negotiations to find a solution to the crisis.

The Swiss insurance company holds a $400-million performance bond for the locks work issued at the beginning of work on that portion of the project.

Quijano said that if an agreement with GUPC was not reached, the agency was prepared to take over the job and complete the project by the end of next year. Currently, the canal expansion is 72% complete and the locks are 65% complete.

GUPC, composed of Spain’s Sacyr Vallehermoso S.A., Italy’s Impregilo S.p.A., the Netherlands' Jan De Nul n.v. and Constructora Urbana, S.A. of Panama, won the design-build contract for the locks work in July 2009.

The consortium’s $3.12-billion bid was the only one below the ACP's allocated cost of $3.48 billion.