C.J. Schexnayder The Miraflores Lake between the Pedro Miguel and Miraflores locks, site of dry excavation.

The progress on the third-lane expansion project for the Panama Canal accelerated this week as officials announced the request for proposal for a dry excavation element of the work.

The current contract up for bid includes the excavation, removal and disposal of 8 million cubic meters of material roughly adjacent to Miraflores Lake on the Pacific side of the canal.

The work is the third of four contracts needed to create a 6.7 km link between the existing navigational channel at the entrance to the Gaillard Cut and the new set of locks yet to be constructed.

The entire Pacific Locks Access Channel will require the removal of 46.8 million cubic meters of material at an estimated cost of $400 million. The bids for the current contract are due Nov. 18, and the work will be awarded to the proposal with the lowest cost meeting all of the RFP’s requirements.

In addition to excavating the 8 million cubic meters of material, the current contract also includes removal of a bridge and clearing 190 hectares of unexploded ordinance on the former site of a US army training facility.

When the $5.25-billion Panama Canal third-lane expansion project is completed in 2014, the 50-mile-long waterway will double in terms of capacity as well as permitting larger post-Panamax ships to use the canal.

With just more than a year of progress on the project completed, the Panama Canal Authority (the quasi-governmental body that oversees the waterway that also known by its Spanish-language acronym ACP) has awarded more than $244 million in contracts.

Initially, the dry excavation for the Pacific Locks Access Channel was divided into five contracts, but the ACP chose to integrate the third and fourth contracts into a single one to speed the project. “The Expansion Program is on-track,” said Executive Vice President of Engineering and Program Management Jorge L. Quijando. “However, we are constantly looking for ways to increase efficiency and decided to merge the fourth and fifth dry excavation projects to streamline operations.”

The canal authority expects to release the request for proposals for the fourth dry excavation during the second quarter of 2009, he said.

The first contract to remove 7.3 million cubic meters of material was awarded to Constructora Urbana S.A. (CUSA) in July of last year. A second contract to remove 7.5 million cubic meters was awarded to Consorcio Cilsa Minera María – a joint Panamanian/Mexican consortium – last November.

The area for excavation of the current contract also included a section beneath the first contract and it was necessary to wait until the initial work was completed before releasing the bid, Quijando explained.

The canal authority is also awaiting the bids on the largest element of the third-lane expansion project – the estimated $3.35-billion design-build contract for the new locks. The size of the effort prompted the ACP to insist on a two-tiered bid pre-qualification system.

Thirty companies comprising four consortia qualified last December: Consorcio C.A.N.A.L. led by ACS Servicios, Comunicaciones y Energía, S.L. of Spain that includes the UK firm Mott Macdonald Limited as one of the designers; Consorcio Atlántico-Pacífico de Panamá led by Bouygues Travaux Publics of France; Bechtel, Taisei, Mitsubishi Corp., led by U.S.-based Bechtel International, Inc. and Grupo Unidos por el Canal, led by Spanish company Sacyr Vallehermoso S.A.

The ACP solicited the bids for the locks in December 2007, giving the qualified consortia until August to submit their proposals. In July, after receiving requests from the participating consortia, canal officials agreed to extend the period for submitting the bids until December 10.

“The extension falls within our Expansion Program execution timeline, which has a projected completion date of 2014,” Quijano said.

The upshot will be allowing the consortia to provide more fully developed bids with comprehensive technical and price proposals, he explained.

Another key component of the project expected to go to bid by the end of the year is the dredging of 14 million cubic meters from the Atlantic entrance of the waterway estimated at $70 million. In April, the APC awarded a $177.5 million dredging contract to the Belgian firm Dredging International to excavate 9 million cubic meters from the Pacific entrance.

While the expansion is being undertaken to enable the waterway to handle the projected growth of shipping traffic in the next several decade, the traffic estimates for this year showed a slowdown in use of the canal for the current year.

Last July, the ACP reported that canal traffic had not grown – the first time that has occurred in the last six years. The 312 million tons projected to be shipped through the waterway this year is the same as in 2007. Despite that, the canal will see more than $1.7 billion in revenues this year – the ninth straight year of growth.

“While we continue to see flat economic trends and a slowdown in growth on a global scale, the Panama Canal experienced an increase in transits and tonnage during the third quarter,” said ACP Executive Vice President of Operations Manuel Benítez. “We expect current positive trends to continue in the coming months.”

The expected growth is one factor behind the decision by the credit rating service Moody’s Investment Service to bestow the ACP an A1 investment grade as a government-related issuer. Moody’s also granted an A2 investment grade for the $2.3 billion in financing the ACP is seeking to finance the expansion.

“This announcement is a matter of national pride for Panama, because it is the result of the business model we use to manage the Canal to ensure its efficiency, safety and profitability,” said ACP Administrator/CEO Alberto Alemán Zubieta.

Since July 2007, the ACP has been approaching financial institutions to determine the most viable financing for the waterway’s Expansion Program. To date, officials with the ACP have approached institutions in New York, Washington, Hong Kong and London for involvement.

The prospect of that financing gained traction in mid-September when Luis Alberto Moreno, president of the Inter-American Development Bank, announced in a meeting in Panama City that the IDB is considering a $400-million loan to help finance expansion program.