The contractor building the locks for the Panama Canal’s Third Lane Expansion has filed a claim against the Panama Canal Authority, asking to increase the price of the $3.18-billion contract by more than 18%.
Grupos Unidos por El Canal (or Grupo UPC) submitted a change in the contract on Aug. 14, requesting an additional $573 million for the work. The consortium, 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, cited “unforeseen events” for increased costs that it claims is not its responsibility.
The locks construction is the heart of a $5.2-billion effort to upgrade the historic waterway and allow the passage of shipping vessels almost three times larger than those that use the existing locks. The contract involves the construction of a system of massive three-tier locks at either end of the canal, featuring water-saving basins and rolling gates of unprecedented size.
There are contractual penalties of as much as $300,000 per day if Grupo UPC cannot complete the work on time, with a cap of $54 million. In addition, the contractor can be fined as much as $200 million if the locks fail to reach two critical performance tests when completed: the time needed to fill the chambers and the time required to open and close the rolling gates.
If the claim is approved, the total cost of the locks portion of the project would increase to roughly $3.69 billion, significantly more than the $3.48 billion allocated cost for the work. Grupo UPC’s winning bid for the locks construction in 2009 was the only one of the three proposals under the ACP’s estimate, and more than $1 billion less than the next lowest bid.
To date, there have been four claims against the ACP expansion contracts that have gone to arbitration. Each case ended in the canal authority’s favor.
Initially, canal officials wanted to open the new locks to traffic on the centennial anniversary of the waterway’s first official full transit, taken by the steamer Ancon on August 14, 1914. Earlier this year, ACP announced delays in starting the concrete placement for the locks.
Groupo UPC’s initial concrete mixes for the locks did not meet the ACP’s quality standards and concrete placement was pushed back from January 2011 to June of that same year. That in turn pushed back the estimated completion date of the entire project to the third quarter of 2014.