Business Case Study: Conflict Management (Panama Canal)

Following 3 ½ years of construction, the expansion of the Panama Canal once more became a feature on the global news on the 1st of January 2014. A time when a confederation coordinated by Sacyr, a Spanish construction firm, gave the ACP (Panama Canal Authority), a notice of intent to postpone the building of the Grand Post-Panamax locks because of significant violations that the canal authority was to blame for. This announcement came about due to the body failing to realize a cost increase of $1.625 billion (approximately half of the contract budget).1 This reawakened arguments over the suitability of giving the contract to GUPC (Grupo Unidos por el Canal).

The consortium sent a letter to the ACP that provided the authority 21 days to pay the budget overruns before interrupting their activities. These extra expenses were blamed on the discrepancies in the information that was handed to the association regarding the implementation of the project and that have been recognized by the Confederate. Moreover, they were attributed to the recurring infringements of the duty to sustain and re-establish the financial balance of the agreement with GUPC because of unexpected events that happened during the construction. The surplus costs were primarily because of the challenges that were faced in the subsoil that were not discovered in the analyses that were formulated by the ACP and the material applied to the creation of marine structural concrete employed in the operations.