Panama Canal, which took 10 years to build and openedin 1914, handles 5% of world trade.
The government of Panama recently initiated a project to expand thecanal in order to
increase its share of global shipment, boost job creation,stimulate economic growth and
boost foreign exchange and tax revenue. Among other things, theexpansion project involves
the building of a third set of locks that can accommodate megacargo ships carrying up to
12,000 containers; at the moment the biggest ships that cannavigate the canal carry 5,000
containers. The work was awarded to GUPC (Grupo Unidos por elCanal), a consortium of
international construction firms led by Sacyr of Spain. Others areImpregilo of Italy, Belgian
firm Jan De Nul and Constructora Urbana, a Panamanian firm. Workbegan in 2009 and was
expected to be completed in September 2014 at a total cost of $3.2billion, according to the
contract.
As of January 2014, the work was already nine months behindschedule (with project
completion now expected in June 2015) and a cost overrun of $1.6billion had been incurred
as of January 2013. According to GUPC, the cost overrun andschedule slippage were due to
“many and varied unforeseen costs which came up during thesegigantic works... They are
technical matters, questions over cement ingredients, geotechnicalmatters, geological
questions, taxes matters, financial matters, labour issues andweather conditions\". However,
Panama Canal Authority (APC), the Panamanian state-owned companyresponsible for
managing the canal and overseeing the project, attributed theproblem partly to a delay of
four months shortly after the project began as a result of GUPC’sattempt to use low-quality
cement, which was rejected by the canal authority.
Since January 2013, there had been an escalating dispute over whoshould bear the additional
cost of $1.6 billion. The position of APC was that GUPC shouldrespect the existing contract
by absorbing the additional cost, arguing that the cost overrun wasdue to events that were
\"normal\" in such a construction project. But GUPC said the costoverrun was due to
\"unforeseeable\" circumstances and delays caused by APC. On December30, 2013, the
dispute had become so bad that GUPC threatened to halt work unlessthe Panamanian
government paid the money within 21 days. In response, thepresident of Panama, President
Ricardo Martinelli, threatened to go to Europe to demand that thegovernments of the
member firms of GUPC “take moral responsibility for what happened,because it is not
possible that a company puts such a huge extra charge on expansionwork.\"
News of the suspension threat sent Sacyr’s shares plunging by morethan 18% on the Madrid
stock exchange. On January 4th, 2014, Spain's minister for publicworks, Ana Pastor, flew to
Panama for an emergency meeting with President Martinelli and alsomet all the parties
involved to try to resolve the impasse. According to a spokespersonfor Spain's foreign
ministry, \"Panama is a country that is close and friendly towardsSpain, and we share the
desire and interest to find a solution as soon as possible\".Spain's ambassador to Panama,
Jesus Silva, added that all stood to lose out if the contract fellthrough.

Question
Explain the main issue in dispute, the disputants involved, and whythis dispute was or
may be related to the following aspects of the project:
i. Project Scope
ii. Project Quality
iii. Project Schedule
iv. Project Risks
v. Project Procurement