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Lengthy dispute over Canal looms

The dispute over the construction of the Panama Canal expansion is turning bitter and could delay the project by several years.

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When the Panama Canal Authority (ACP) announced the Grupo Unidos por el Canal consortium (GUPC) led by Sacyr Vallehermoso SA had won the contract with a bid price of $3.1 billion questions were immediately asked about how it could undercut the next two bidders, Bechtel and ACS by $1.1 and $1.9 billion respectively.
In a cable to Washington now posted on Wikileaks the US embassy in Panama said "the spread on the bid prices is surprising." GUPC was widely expected to be the low bidder, but not by such a wide margin. "Bechtel reps state a consortium cannot even "pour the concrete" for $3.1 billion and hinted even their $4.2 billion price was closer to a lowball bid than a value bid. It is widely expected that during construction, Sacyr will attempt to renegotiate the price with the ACP" the US Embassy advised Washington. The Embassy also reported some unease within the Panamanian Government over Sacyr’s ability to fulfil the contract.
Reuters is now reporting Panama President Ricardo Martinelli has appeared on national television blaming the current crisis on former ACP head Alberto Aleman for not revealing the full extent of concerns about Sacyr’s financial state and GUPC’s ability to complete the project on budget. Aleman has denied he or the ACP should have known GUPC’s price was unrealstic.
While the finger pointing continues the ACP is no closer to resolving the dispute over the $1.6 billion GUPC claims it has incurred in cost overruns. In a response to questions on its website the ACP denies that there been any actual "cost overruns" within the meaning of the contract. "So far, the contractor has only presented claims. As long as these claims are not processed through the mechanisms included in the contract, they will remain claims. To date, the contractor GUPC has not been able to support, through the mechanisms established in the contract, the sum or viability of the cost overruns allegedly incurred during the construction of the new locks" said the ACP.
If the parties are unable to resolve the dispute through negotiations the contract provides for claims to be presented to a Dispute Adjudication Board made up of three international members. If one or both parties is still unsatisfied they can appeal to an Arbitration Tribunal. There is already speculation that the whole project could be delayed by up to five years.
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