Lawsuits and labor troubles, the usual sort of crisis when lowball bidding is the game — now the question is who takes the loss
GUPC shorts its workers — who say they’ll walk out on Wednesday
by Eric Jackson
In the last Panama Canal expansion crisis, between December of 2013 and February of 2014, it was the GUPC consortium composed of Spain’s Sacyr Vallehermoso, Italy’s Salini Impregilo, and as junior partners the Belgian dredger Jan de Nul and Panamanian company Constructoras Urbanas SA (CUSA) that shut down work. In 2009 their bid for the design and construction of the new locks was more than one billion dollars less than the next bidder and no serious construction industry analyst believed that the job could be done for the amount bid, let alone done at a profit. By the 2013-14 shutdown the consortium was demanding nearly $1.6 billion more. Work started again when Sacyr’s and Impregilo’s performance bond insurers agreed to pay $400 million and the Panama Canal Authority agreed to advance another $100 million while disputes would run through the course of the contract’s dispute resolution mechanism. But new claims from the contractors kept coming in and now total nearly $2.7 billion in demands, some $290 million of which have been settled in favor of the company but the rest of which are in various phases of dispute resolution that do not appear to be going so well for GUPC.
This past May Impregilo warned of an impending liquidity crisis. On July 1 the master contract between the SUNTRACS construction workers’ union and the Panamanian Chamber of Construction (CAPAC) called for the nation’s construction workers to get raises, but GUPC, whose contract with the union follows the master agreement, did not pay. After more than a month of fruitless talks SUNTRACS unsurprisingly did not agree to cover GUPC’s crisis and scheduled a strike to begin on Wednesday, August 12.
SUNTRACS has militant communist leaders who make it easy for politicians and business leaders to make it the convenient whipping boy. ACP administrator Jorque Quijano, beset by many labor troubles, is saying that the country can’t tolerate a canal expansion strike. However, he’s blaming GUPC, not the union.
Nobody in the government nor the corporate mainstream media are blaming the ACP or its former administrator Alberto Alemán Zubieta, who came to work for PanCanal having been CEO of CUSA, which members of his family own. At the time that the bid was accepted all allegations of a conflict of interest were rejected because Panama has no conflict of interest law to speak of.
The lowball bid tactic usually doesn’t involve such a conflict. Often it involves a bribe or kickback. In any case, it’s a common enough phenomenon in the construction world, especially where construction industries are allowed to play corrupt games without serious penalties. The bidder gets the contract on an unrealistic low bid, then makes astronomical demands for more money and ultimately the litigation is compromised to give the contractor a lot more money than the bid price.
So where does the new Impregilo claim come in? It’s essentially about the same allegations as the matters in the various phases of contract dispute resolution — concrete mixes that the ACP rejected, the consortium claiming to have relied on faulty ACP geological studies, higher costs of labor and materials and so on. This claim, however, is asserted under a 2009 Panamanian – Italian “free trade” agreement and in it Impregilo asserts that it’s not just part of a consortium hired to do a job, but an Italian “investor” in Panama.
It becomes an existential matter for the SUNTRACS leaders. Most of the members are not so radical as the leaders, but they do appreciate having a hardcore militant dealing with their boss. With the contact and the law on the union’s side and the nation grown weary of the games being played with the canal expansion, SUNTRACS leaders can’t afford to cave in on pay raises owed but unpaid.