Panama Canal consortium wins delay and cost ruling

A dispute adjudication board (DAB) has found in favour of Grupo Unidos por el Canal (GUPC), the contractor consortium working on the expansion of the Panama Canal. The board has ruled that the client, the Panama Canal Authority (ACP), should pay US$ 234 million to GUPC and extend the contract period for six months.

The dispute related to poor quality basalt, which was to be used for aggregates on the project as well as a delay on ACP’s part in approving the concrete mix to be used on the project.

Giuseppe Quarta, CEO of GUPC said, "We are pleased with the determination of the DAB because they recognise the merit of our claims that were based on technical realities affecting the cost, logistics and execution of the work. All claims were detected in time and presented according to the requirements of the contract, however the systematic and unjustified rejection by ACP has impacted the project and the contractor.”

GUPC said the issue of basalt quality was raised as early as February 2011, when it said it discovered that the rock was not of the same quality as indicated in the bidding documents issued by ACP. The claim relating to this is based on the additional costs that the consortium had to assume to adjust the processing plant for this material and to seek new sources of aggregates.

On the issue of concrete mixes, GUPC said the mix design it presented in 2010 was rejected by ACP despite complying with the technical specifications required in the contract and exceeding the durability requirement. The consortium said the delay in approving the mix design pushed work back by seven to nine months.

Commenting on the ruling, ACP, noted that the award of the DAB was significantly less than the US$ 463 million claimed by GUPC. Similarly, the consortium had asked for a 265 day extension to the contract, but was awarded 176 days.

Jorge Luis Quijano, administrator of ACP said it would analyse the DAB’s decision before deciding whether to launch an appeal at the International Chamber of Commerce (ICC).

ACP added that as of December 19, the canal expansion project was 83% complete. Construction of the locks and installation of lock the lock gates – the major structures on the project – are due for completion this year. The enlarged route is expected to open to traffic in 2016.

GUPC is formed by Sacyr of Spain, Salini - Impregilo of Italy, Jan De Nul of Belgium and Constructora Urban, SA (CUSA) of Panama.