There were remarkable issues in the construction of the new locks for the Panama Canal. First of all, the tendering process was very intriguing since the beginning. Second, the process of making concrete is a great challenge. It is necessary a pasty mixture of several chemicals and cement as well as sands and rocks to make a solid concrete with a quality enough to lasts 100 years. Thirdly, it is necessary to ensure enough space to maneuver the towboats inside the channels. Fourth, the level above the sea of the water in Gatum lake would impact the amount of containers that the ships can carry to avoid touching the bottom of the canal. Finally, there were environmental costs that affect seriously the budget of the project. This report will discuss in detail all this issues and how they were mitigated.
First of all, the tendering process to choose the preferred proponent was intriguing since the very beginning. After two years of intense competition, a Spanish company on the brink of bankruptcy had won the international tender to build a new Complex of locks in the Panama Canal. This company settled a $3.1 billion bid; it was at least $1 billion lower than any other company bid. However, analysts have warned that the consortium's budget for concrete was 71%. lower than that of the next least costly tenderer. The budget also allocated 25% less for steel reinforcing that concrete. Consequently, the project became precarious since the beginning; hence, it was necessary the refinancing of the project in order to keep running the development and construction of the new locks. Specifically, the final cost of the project was $5.4 billions ($2.3 billions over the initial budget) and 2 years delayed (La Nacion, 2016).
Secondly, the main issue within the project was the making of the concret. The preferred proponent for the building of the new canal had made the cost estimation including thin and coarse agglomerates (sand and rock) of the surrounding building area. However, the quality of those materials was not the right for this project. To mitigate this problem, the consortium needed to bring these materials from other areas. The main consequence was an increase in the cost, taking out of the budget the whole project. At the end, the consortium sought the way to refinance the project, asking for $463 millions to cover this fault on the agglomerates. The government agreed with them, giving an extra $230 million (50% of the requested amount).
Third, there was an issue with the dimensions of the new locks. The design was just enough for the big ships to go through. However, the gap the towboats need to maneuver is not enough, there is not error tolerance especially against windy days and unpredictable currents (Bogdanish, Williams, & Mendez, 2016). As a solution of this issue, the Panama Government made the procurement of 14 new towboats and sent their towboat operators to an exhaustive training in Europe to get familiar with the new technology.
By fourth, it is undeniable that climate change is affecting even the most unexpected areas. The lake (Gatun), which supplies water for the operation of the new locks, was not excepted of this phenomenon. This lake is the most important resource for the Panama Channel. In spite of the optimum level is 26 meters above the sea level; in February 2016 the level of the lake was lower than the minimum (25 meters) due to the climatological effect “El Niño”. To mitigate this situation, the authorities instructed the carriers to lighten their loads and, thus, the boats did not touch bottom. A week and a half later, they were told to lighten them a little more. Ten days later, even more.
Finally, the environmental cost of expanding the Panama Canal needs to be discussed. The initial excavation and detonations also marked the beginning of the destruction of 470 hectares of forest and the diversion of the rivers Grande and Cocolí. By cutting the 332 hectares of secondary forest, the Panama Canal Authority (ACP) has paid $3 million to the National Environmental Authority (ANAM) as an ecological compensation. The ACP has also disbursed $455,800 to the Panamanian Aquatic Resources Authority (ARAP) for ecological compensation for the 22 hectares of mangrove swamps in the Pacific. It also develops a reforestation program in national parks, both in the capital city and in the interior of the country (Arcia, 2016).
Based on your groups selected project, list 5 procurement of financial risks or issues that relate to your project choice. These risks should include the following;
• risk name;
• consequences; and
Student 1 responded the below response to the lecturers question,
What I need is for you to respond to this student in 250 words, agree, disagree, add more notes to him or her and make it interesting and include references