Modernising the Panama Canal

Business case

Modernising the Panama Canal

Context

In 2006, Panama’s authorities decided to build a third set of locks in the Panama Canal to double its freight capacity. In 2009, Panama hired a European consortium for the project based on its low price ($3.2bn – over $1bn lower than competitors), which then outsourced a significant portion to our client. However, the project faced issues from the outset, delaying the start of our client’s construction by fifteen months.

Key Takeaway

Our expert report provided assessments of the time-related costs, non-time-related costs and the damages caused by the consortium’s actions as well as an assessment of several external factors such as adverse weather conditions and labour cost inflation. Our findings were presented to both parties and their advisors in the context of an amicable mediation, which led the parties to find a temporary settlement and allowed the project to continue.

Accuracy Role

Early on, we confirmed that our client had been incurring significant costs without being able to deliver. By the time we became involved, our client was verging on bankruptcy. We performed focused as-planned vs as-built and quantum valuation analyses, aiming to assess the damages resulting from the critical path delay. The consortium decided to change its initial construction plans to compensate for some of the losses it was suffering. This led to significant cost savings for them but significant losses for our client: output had been reduced by about 35%.