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Panama Canal Authority denies $586m claim by contractor

Panama Canal Authority denies $586m claim by contractor
The Panama Canal Authority (ACP) has rejected a claim for $ 585.9m, to the consortium Grupo Unidos por el Canal (GUPC) submitted on 20 July  2012 for additional costs in the design and construction of the third set of locks.

The ACP rejected the application on the basis of a number of reasons including the quality of materials to produce the aggregate for concrete to build the locks.

 "It was a totally predictable condition that the contract clearly states.  That added quality and material to produce the full responsibility and risk of the consortium and not the ACP ", said the ACP.

The consortium which was awarded the $3.2bn contract for the construction of the future new locks had argued that extra costs have been motivated by excessive rainfall, delayed permits and work stoppages because the concrete specific tests were not approved on time by the ACP.

So far, GUPC has announced a delay of about six months.  It is estimated that the work will be delivered in April 2015 when the contract’s calendar indicated it would be ready in October 2014.

According to the ACP, Canal officials have also found that the consortium did not show the necessary documentation under the contract for the revision of the concrete mixtures.  In this case the contractor failed to submit approval of their designer blends such samples and in relation to the amount claimed, GUPC did not support in any way the amounts claimed.

The contract of the third set of locks of the Panama Canal Expansion Programme includes a complaint mechanism that allows either party (ACP or contractors) to submit claims for the execution of the work.  Each application is reviewed by the counterparty, which has the power to accept or reject the claim or any component of this. If the party to whom the order is made is in dispute, the claimant may raise its request to the Dispute Resolution Board (DAB), an independent agency also referred to in the contract and made up three international independent members.

In the event that the decision of the DAB does not meet any of the parties, the case can be taken to a Court of Arbitration under the rules of the International Chamber of Commerce, previously defined in the contract.  The contract also provides that if the contractor does not complete the work within the prescribed period 21 October 2014 the consortium will have to pay of $300, 000 for each day of delay up to $54.6m penalty to the consortium.

On the contrary, if the consortium GUPC finishes the work before the due date will receive a bonus of $ 215,000 for each day of advancement that achieves up to an amount of $50m.

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