Not sure this is how building contracts work mate

The president of Panama said on Thursday he would go to Spain and Italy to pressure companies to honour contracts to expand his country’s canal after a building consortium behind the project threatened to suspend work because of a row over costs.

The consortium – Spain’s Sacyr, Italy’s Salini Impregilo, Belgium’s Jan De Nul and Panama’s Constructora Urbana – said on Wednesday that $1.6bn in cost overruns on the $3.2bn plan to build a third set of locks for the canal should be met by Panama.

Underbid, claim contract changes, yes, we’ve seen this story before.

Martinelli, who took power in 2009, said he expected Italy and Spain to uphold commitments to back the project which the countries’ leaders made to him during his first year in office.

“So I’m going to go to Spain and Italy to demand this from them, because a company should not be able to put such a high amount of overrun costs on a project that belongs to humanity,” he told reporters in Panama City.

Ah, no, I’m pretty sure that’s not how it works actually.

And, umm, if this canal belongs to humanity, it will be humanity getting the fees from ships traversing it, will it? Or is the Panamanian Government going to keep them?

9 thoughts on “Not sure this is how building contracts work mate”

  1. Exactly. What’s the odds a proper company like CH2MHill showed interest but either baulked at the bribery payments or were undercut by companies who spoke primarily Spanish during the negotiations?

  2. But there’s nothing unique to government contracts about this. Most customers only ever look at the price. If you aren’t the cheapest bid you don’t get the job (OK, there are some exceptions). And you don’t get to look the cheapest by actually committing to do what the client needs up-front. If you aren’t trimming the project as much as possible and banking on three or four change orders then your competitors sure as hell are. Whether they speak Spanish or not.

  3. @JamesV: not just governments. Most oil companies only look at price, mainly because the procurement department are not the end users, nor do they have to execute the works.

  4. Tim W,
    Speaking of strange contracts, do you have any comment on today’s Policy Exchange proposal to give teachers performance-related pay? Needless to say, the unions are strongly opposed to any changes.

    Quote: “The report argues that while pay in itself is not the primary motivator for the majority of teachers, the best performing teachers should be rewarded”

    On the face of it that seems like a non-sequitur.

    Press release:

  5. @Andrew M, teachers in my (state) primary school are on performance related pay as of this year. I understand that this is the new policy on pay.

    Cue much gnashing and wailing as to how actually apply such a policy which is not as easy as it sounds for people who have never had any experience of the concept.

  6. So Much For Subtlety

    What promises did the Spanish and French governments make? It looks like not all bribery comes in the form of brown paper bags shoved across the table.

    The Philippinos sometimes claim they had 400 years of a Spanish convent and 100 years of American decadence. I am assuming that the Panamanians are not so stupid that a few years of American control meant they forgot what “contract” actually means in Spanish. But perhaps the President is p!ssed because the previous government got all the kick backs and he is going to be stuck with the bill?

  7. It’s all just posturing in the run-up to presidential elections in May this year – which Martinelli’s party is likely to lose.

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