Business
7:35 am
Tue January 21, 2014

Cost Overruns Threaten Widening Of Panama Canal

Originally published on Tue January 21, 2014 8:07 am

Transcript

RENEE MONTAGNE, HOST:

Anyone who's lived through home construction knows that delays and higher costs than expected are inevitable, and that is playing out on an enormous scale at the Panama Canal.

Work on expanding a 50-mile long commercial waterway has been under constant threat of a work stoppage because of a dispute over who will pay huge cost overruns, now estimated to top $1.6 billion.

NPR's Carrie Kahn reports.

CARRIE KAHN, BYLINE: That's right $1.6 billion with a B. That's how much the contractor, a consortium of mostly European construction companies, says it needs to finish building a third lock in the Panama Canal. The new lock will be wide enough for so-called super max container ships to pass through the waterway. The expansion will double the Canal's shipping capacity.

But before that can happen, someone has to pay up. The consortium says the Panamanians should do it, and they threatened to stop all work yesterday unless the Panama Canal Authority stepped up. The Authority stuck to its guns and said no way.

Despite the standoff and the threatened deadline, construction in the Canal continued yesterday, but at a substantially slower pace. The Canal Authority says work has been cut by as much as 70 percent and meeting next summer's completion deadline looks difficult.

In a press statement, the consortium appeared to back away from its threat of a work stoppage and said it is not a scenario being considered at this moment.

But that doesn't mean the overrun cost dispute is any closer to being resolved.

The consortium blames the inflated costs on faulty terrain studies provided by the Canal Authority. The Panamanians say the problem rests with the consortium's gross underestimation of just how much it would cost to expand the Canal.

The consortium's bid was the lowest by far among bidding contractors, about a billion dollars less than second place runner up, U.S. construction giant Bechtel.

Carrie Kahn, NPR News. Transcript provided by NPR, Copyright NPR.