That's why a two-month standoff that, early this year, threatened to derail locks construction was a crisis for Panama and global interest groups that have built the new lane into their near-term plans. At root were delays and cost overruns, caused by difficulties meeting the job's exacting concrete standards, and financial problems, due to Sacyr, the Spanish contractor that has a 48% stake in GUPC, experiencing losses of $1.38 billion over two years. The crisis ended on Feb. 27, when the ACP and GUPC agreed to a memo of understanding. Jorge A. de la Guardia, ACP executive director of the locks project-management division, said, "Out of every crisis there is opportunity. Through the memo of understanding, we have made available the funding necessary to finish the contract." In the plan, both the owner and GUPC provided a $100- million infusion of cash to jump-start the work. It grants a one-year moratorium to the contractor on repaying its line of credit, and project surety Zurich North America facilitated a $400-milion loan to help the contractor pay its subs and buy materials.
"It was a very high-stakes negotiation," says Jerry Brodsky, a partner and director in Peckar & Abramson's Latin American Practice Group, which represented Zurich. To bring in another contractor could have caused a "major delay of two to three years," he says. A small group of professionals understood the meaning of that loss to everybody, Brodsky adds; with "bravery and leadership," Quijano agreed to the plan.
Disputes, which total at least $1.6 billion, are still working through a resolution process set out in the original contract. Claims first go to a Panama-based dispute review-board tribunal, whose decisions can be appealed to an International Chamber of Commerce arbitration proceeding in Miami.
De la Guardia gave the example of a $120-million claim for a cofferdam, which GUPC lost at the Panama dispute-resolution board. "We said explicitly in the contract that we will be responsible for the geologic conditions below foundation level on the permanent structures of the locks. Our position was that the cofferdam is not a permanent structure, and, since it's not, we are not responsible for the foundation conditions. They could place them anywhere they wanted." That claim, up to $180 million now, is before the arbitration board in Miami, along with a $465-million claim for problems with concrete and aggregate.
Work at the lock sites has gone from a massive operation to a dispersed one with 150 work fronts, said Quarta, an experienced Impregilo executive who took the helm at GUPC in the spring to put the team back together after the financial crisis. "We have almost 8,000 people working now, but you don't see them over the vast and open jobsite." He added, "What is important at this point is the coordination. We have a schedule with almost 13,500 activities—plus, specific schedules for the subcontracts, which you cannot manage at the macro level." With such strict tolerances, so much redundancy and 99.6% operability, the project will create "the canal of the future," he says.
Detailed Scheduling
In the meantime, crews have to finish the concrete repairs, the culverts and the water-saving basins, excavated and lined ponds that will store for reuse freshwater drawn into the locks. "We are managing 4,000 to 5,000 activities a month. Schedules are getting very detailed," Quarta adds.
