Background

In April 2006, Panamanian President Torrijos unveiled plans for a $5.25 billion project to expand the Panama Canal by constructing much larger new locks parallel to the current locks, with the capacity to accommodate state of the art post-Panamax freighters. The proposal was overwhelmingly approved in an October 2006 referendum. The ACP estimates that it will take eight years to complete and will be funded by toll increases and $2.3–2.5 billion in debt financing.

Four major Canal expansion service contracts have been awarded to date with U.S. firms winning three. On February 7, 2007, ACP selected Mizuho Corporate Bank (Japan) as its financial adviser for the expansion project. URS Holdings, Inc. (San Francisco, CA) won a contract to conduct the environmental impact study on February 16th, and the law firm Mayer, Brown, Rowe and Maw (Chicago, London) won the contract for general legal advisory services for the project on February 28. The ACP subsequently hired another U.S. law firm, Shearman & Sterling (New York), as an international legal advisor on financial matters related to the project.

The ACP is expected to release tender documents for the project manager contract in May 2007. The firm or consortium selected for this contract will provide professional services, including project delivery, procurement assistance, scheduling, and cost control. The project manager will also be tasked with ensuring that the planning, design, and construction projects are carried out in conformity with Panamanian standards. It is contemplated that the project manager will choose the risk manager. Selection as project manager will automatically disqualify a firm from the largest of the Canal expansion contracts—the design-build construction of the Pacific and Atlantic locks (estimated at 60% of the total value of the canal expansion program).

Several U.S. companies have expressed concern that the sheer size of the lock construction project, and corresponding bid, performance, and payment bonds necessitate the formation of multinational consortia. The ACP has stated that it expects to have multinational consortia bidding on this portion of the project due to its size and complexity.

Additional forthcoming tenders include: the dredging of the sea entrance navigation channel on the Pacific side (tender expected Q2-07); dredging of the sea entrance navigation channel on the Atlantic side (expected in 2008), and five contracts for access channel excavation on the Pacific side. The ACP will use its own staff and resources to dredge Lake Gatun.