Panama Canal lock builder threatens to down tools

The year celebrating the 100th anniversary of the Panama Canal’s opening was marred on its first day by the threat of work ceasing on a crucial part of the canal's expansion plan.

A contract dispute between the Panama Canal Authority (ACP) and the consortium responsible for building the third set of locks, Grupo Unidospor el Canal (GUPC), has escalated as the GUPC began the process of suspending construction by late January, claiming serious contract breaches by ACP relating to additional costs of $1.6bn on the project.

Yesterday GUPC sent a notice of suspension to the ACP in line with the construction contract, under the same terms ACP has 21 days to respond to the letter. In a statement issued today, ACP claimed "To date, the contractor has not followed the claims and conflict resolution mechanisms established in the contract to support the claims."

"ACP categorically rejects the pressures by contractor GUPC in recent statements, the sole purpose of which is to force the ACP to negotiate outside the terms established in the contract for the new locks.

"No matter what kind of pressure is made against the ACP, we maintain our request that GUPC respect the contract that they have agreed upon and signed."

While PCA responds to the GUPC notice, work on the third set of locks will continue 'normally', said a statement issued by the consortium, which added that the ACP is "aware of the repeated attempts by the contractor to meet at the highest level with the intention of discussing, in a fair and appropriate solution under Panamanian law, the large financial problems affecting the project."

GUPC was awarded the contract for the design and construction of the third set of locks at a cost of $3.2bn in July 2009. It submitted claims in July 2012 for additional costs for $586m relating to poor weather and a dispute over conrete mix, which were rejected by the ACP. The claims are in the process of being examined by an independent group of three members, in line with the construction contract.

Although the ACP is confident that the contractor has the ability to meet its commitments, the ACP says that there are mechanisms that will allow completion of the works, even in case of suspension of construction by GUPC. GUPC is composed of the Spanish Sacyr Vallehermoso, Italy's Impregilo, Belgium's Jan de Nul and Panamanian CUSA.

The Canal Expansion Program recorded a total completion of 72%, while the construction of the new locks is 64% complete. The ACP acknowledged earlier that the construction of the new locks should be completed by June 2015 with commercial transits likely to open in the third quarter of 2015.

Posted 02 January 2014

© Copyright 2019 Seatrade (UBM (UK) Ltd). Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade.

Michele Labrut

Americas Correspondent, Seatrade Maritime News

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