The Panama Canal Authority said Sunday that its analysis of the claims for $1.6 billion in cost overruns by the consortium building its new locks are “not valid” and that the arguments raised in the letter it received from the group on Dec. 30 “lack legal basis and are not clear.”
The contracting consortium, Grupo Unidos por el Canal, said it would suspend work on the new locks on Jan. 19 if it did not receive satisfaction for its claims. The canal authority said GUPC has not given any reasons to suspend the work.
The canal authority, known by its Spanish acronym ACP, said it had written a letter on Dec. 13 requesting GUPC to respond, within seven days, to several faults and illegitimate threats to delay the progress of the work. It said the consortium did not respond. The ACP said the concerns it raised included:
- Reduction in the contractor’s personnel.
- Lack of progress with the three Borinquen Dams, which are part of the contract.
- Significant delays in the delivery of the lock gates.
- The lack of progress in the rectification of defective work and, generally, the contractor’s failure to make progress in accordance with its contractual obligations.
In its Dec. 13 letter to GUPC, the canal authority said there is nothing in Panamanian law or in the contract signed that gives the contractor any grounds for suspension of work.
The ACP warned in the letter of the wrongful application of Sub-Clause 16.1 of the contract — cited by the consortium to justify the suspension — because this clause provides only the right to suspend the work when the employer has failed to issue payment to the contractor.
The canal authority, which last week said it has a contingency plan in place to complete the locks if the dispute isn't resolved, said it pays GUPC within the first 15 days after the invoice is presented, significantly in advance of the contractually stated period of 56 days.
The canal authority reiterated in the letter that the only channels to present claims are clearly established within the contract. A third party decides two of the three methods included in the contract for the resolution of claims. These terms were accepted by GUPC upon signature of the contract.
The canal expansion project is 72 percent complete. The project was originally scheduled for completion in October 2014 on the 100th anniversary of the opening of the original canal locks. But the contracting consortium’s inability to manufacture cement for the locks that would last another 100 years delayed the completion date until the second quarter of 2015. After that first delay, what were described as electromechanical problems delayed the opening of the new locks until the end of 2015.