ACP: Contractor’s Intent to Suspend Work Lacks Merit

marinelink.com January 6, 2014

File Photo: Construction underway on Panama Canal.

After analyzing the letter received on December 30, 2013 by the new locks contractor Grupo Unidos por el Canal, S.A. (GUPC), which was made public on January 1 by GUPC, the Panama Canal Authority (ACP) determined that it is not valid and that the arguments raised by the contractor in the note lack legal basis and are not clear. Therefore, it does not give any reasons for the contractor to suspend the work.

In a letter, the ACP reminded the contractor that on December 13, 2013, it requested GUPC to respond, within seven days, to several faults and illegitimate threats to delay the progress of the works. However, despite ACP’s willingness to find a solution to these issues, the consortium did not offer a response. Some of the concerns ACP had included:

The reduction in the contractor’s personnel;
The lack of progress with the three Borinquen Dams, which are part of the contract;
The significantly delays in the delivery of the lock gates;
The contractor’s apparent intention to slow down performance of the works to match the progress under the PAC4 contract;
The lack of progress in the rectification of defective works and, generally, the contractor’s failure to progress the works in accordance with its contractual obligations.

In its letter to the ACP, GUPC refers to various tenets and interpretations of Panamanian law. However, the ACP reminded the contractor that there is nothing in Panamanian law or in the contract signed that gives the contractor any grounds for suspension of the works. That is, the ACP reaffirmed that the contract was agreed to and should be fulfilled according to the rules and regulations of the Panama Canal.

In addition, the ACP also warns 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. However, this is not the case and, therefore, such notice of intent to suspend works is not valid. In fact, the ACP pays GUPC within the first 15 days after the invoice is presented, significantly in advance of the contractually-stated period of 56 days.

The ACP 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 ACP also trusts that the contractor is able to comply with the terms agreed upon under the contract. If the contractor does not fulfill its commitment, the contract includes mechanisms to ensure that the project is completed.

The Canal Expansion Program is 72% complete, while the construction of the new locks is 65% complete. GUPC has previously indicate that instead of completing construction on October 2014, as originally established in the contract, the new locks will be finished June 2015.