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RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L PANAMA 000732 
 
SIPDIS 
 
DEPT OF COMMERCE - MATTHEW GAISFORD 
DEPT OF TREASURY - SARA SENICA 
 
E.O. 12958: DECL: 08/11/2018 
TAGS: ECON EINV ETRD MARR PM EWWT
SUBJECT: PANAMA CANAL AUTHORITY BIDDING PROCESS 
 
Classified By: Ambassador Stephenson for reasons 1.4 (b) and (d). 
 
¶1. (C) Summary: Consistent with normal operations, the Panama 
Canal Authority (ACP) is running a fair, transparent, and 
predictable process for the Panama Canal expansion contracts. 
 Bids for the 3.2 billion dollar third set of locks contract, 
the centerpiece of the overall 5.25 billion dollar expansion 
project, are due December 10.  Post assesses that the bid 
process would be difficult to manipulate and that the 
government of Panama (GOP) and the ACP remain committed to a 
clean process.  Reportedly, disarray in the French consortium 
could lead to a request to extend the bidding deadline or the 
failure of the group to submit a bid.  Post continues to 
advocate for a level playing field for all companies 
competing for the expansion contracts while generally 
encouraging the selection of the American-led consortium and 
the maximization of U.S. content by all participating 
consortia.  End Summary. 
 
------------------------------------- 
Process of Awarding the Lock Contract 
------------------------------------- 
 
¶2. (C) ACP Administrator Alberto Aleman Zubieta explained the 
bidding process for the third set of locks contract to 
Ambassador Stephenson during her August 21 courtesy call. 
Aleman stated that on December 10, 2008, the remaining three 
or four competing consortia are required to submit their bids 
for the locks contract for the Panama Canal expansion. 
(Note: There are four prequalified multinational consortia: 
Bechtel (American led), United Group for the Canal (Spanish 
led), Atlantic-Pacific Consortium of Panama (French led), and 
CANAL Consortium (Spanish led).) 
 
¶3. (C) Aleman further explained that the ACP requires all 
consortia to include separate technical and financial 
packages.  The Authority promises to immediately lock the 
unopened financial packages in the National Bank vault, while 
the four separate sub-committees of the Technical Committee 
will evaluate independently portions of the technical 
packages based upon known objective criteria.  Aleman expects 
these committees to finish in March, with an independent 
auditor documenting all of their work and decisions. 
 
¶4. (C) When the Technical Committee finishes assigning points 
to the technical packages, the ACP will conduct a public 
televised opening of the financial packages, Aleman noted. 
The process will then advance by the ACP immediately scoring 
the financial submissions and openly adding the technical and 
financial scores together to determine a winner.  The 
technical score contains a maximum of 5500 points or 55 
percent of the total possible points.  The financial score 
contains a maximum of 4500 points or 45 percent of the total 
possible points.  For the financial score, the lowest bidder 
will receive the entire 4500 points and the other consortia 
will receive points proportional to how much more expensive 
their bid are compared to the lowest bid.  ACP interlocutors 
believe a proposed 400 million USD performance bond will 
inhibit a consortium from trying to win the contract with a 
lowball bid and then not being able to complete the project. 
Aleman finished by stating he had told each consortium that 
the process was based upon the "best effort with the best 
price" and not any political or monetary influence.  He 
emphasized that the process would be fair, transparent, and 
predictable. 
 
--------------------- 
Perception of the ACP 
--------------------- 
 
¶5. (C) ACP's management of the bidding process is consistent 
with their overall reputation.  The ACP is considered by the 
Panamanian public, Post, CH2MHill (the project management 
advisor), and Bechtel to be a model of a fair and transparent 
organization.  For example, the ACP cites its safety record 
(29 accidents in 2000 versus 10 accidents in 2007), profits 
(580 million dollars in 2000 versus 1 billion 760 million 
dollars in 2007), and ability to maximize the volume of 
shipping of the canal (230.2 versus 312.8 million net tonnage 
based on the Panama Canal Universal Measurement System).  The 
ACP procurement system also exemplifies its efficiency and 
transparency.  The Authority advertises all needed goods and 
services on-line and subsequently lists the winning company 
along with the price paid and the procurement decision-maker 
in the ACP. 
 
----------------- 
Views of CH2MHill 
----------------- 
 
¶6. (C) Panama-based representatives of CH2MHill, the U.S. 
firm that serves as the project management advisor to the ACP 
for the canal expansion, maintain that the ACP is supervising 
the bidding process for the locks contract and other related 
contracts in a fully transparent manner.  CH2MHill 
representatives maintain that their reputation is at stake if 
the process is perceived as being less than fully 
transparent.  They praised the U.S. position calling for 
transparency and that a contract awarded on best price and 
technology was appropriate.  The CH2MHill representatives 
opined that the United States and the many U.S. companies 
involved in the expansion and the consortia would be best 
served if the USG maintained its public posture of monitoring 
and assuring a transparent process. 
 
----------------------------- 
French Consortium in Trouble? 
----------------------------- 
 
¶7. (C) CH2MHill representatives reported that the French 
Ambassador recently called on a senior GOP official (not an 
ACP official), whom they did not identify.  Supposedly, the 
French Ambassador made a blunt push on behalf of the French 
led consortium and it appeared to have been rebuffed.  The 
French group, allegedly, had run into issues that it calls 
"deal-breakers".  From contacts in the ACP, Post learned that 
the last extension for bid submissions (to December 10, 2008) 
was granted to satisfy the French and that the French came 
back once again asking for more time and/or concessions. 
CH2MHill representatives speculated that the French challenge 
might have reflected cash flow issues and the group's comfort 
level in mitigating the overall risk of the project rather 
than actual contractual elements.  It was also possible, 
CH2MHill reps added, that the French were looking for a way 
to leave the competition for reasons other than these.  They 
believed that the evaluation process was immune to 
extraordinary efforts due to the transparency, 
comprehensiveness, and the number of people involved in the 
process.  The ACP recently implemented a rule that mandated 
that the ACP Inspector General (IG) be present at all 
meetings between the consortia and CH2MHill; supplementing 
the prior requirement that the IG be present for all meetings 
between the ACP and individual consortia.  The CH2MHill 
representatives advised that they would not hesitate to 
contact the Senior Commercial Officer if they thought the 
bidding process was less than transparent or one of the 
consortia used unethical means to win the contract. 
Representatives of Bechtel, Caterpillar (who expects to 
supply the winning consortium with equipment), and CH2MHill 
told Senior Commercial Officer in separate meetings that the 
French consortia was in disarray and would likely bow out. 
 
----------------------------- 
Current U.S. Embassy Advocacy 
----------------------------- 
 
¶8. (U) Since the inception of this project, the U.S. Embassy 
has pushed the GOP to be fair, transparent, and predictable 
in its dealings.  Bechtel is the only U.S. company that is 
leading a consortium; however, each consortium plans on 
procuring goods and services from the United States due to 
the proximity of the United States and the weak dollar. 
 
¶9. (U) Since each consortium needs to purchase U.S. goods and 
services, the Department of Commerce provided additional 
guidance to the Senior Commercial Officer (SCO) to maximize 
the percentage of "U.S. content" in each of the four 
consortia.  The SCO provided names of U.S. companies that can 
provide specialized goods and services to each of the 
consortia. 
 
--------------------------------------------- ----- 
Bechtel's Advocacy Request and Views of Bechtel UK 
--------------------------------------------- ----- 
 
¶10. (C) According to the U.S. Department of Commerce Advocacy 
Center, Bechtel submitted a request for "soft advocacy" from 
its U.S. based offices.  The Advocacy Request is pending.  A 
representative of Bechtel UK, the Bechtel Office leading 
Bechtel's bid for canal expansion work, confirmed to the 
Senior Commercial Officer that Bechtel only wanted "soft 
advocacy" - which Bechtel defined as advocacy for an open and 
transparent process, as well as expressing the Embassy's hope 
that an American company wins and is able to carry on the 
tradition of Panamanian-American collaboration in the Canal. 
He believed that the "hard advocacy" would not be effective 
E 
or in Bechtel's best interests.  Bechtel representatives 
repeated the "soft advocacy" request to the incoming Economic 
Counselor during an August 22 meeting at their Frederick, 
Maryland office. 
 
------- 
Comment 
------- 
 
¶11. (C) Post will continue to monitor the bidding process and 
to advocate for a level playing field through a fair, 
transparent, and predictable process.  We will also, as 
appropriate, indicate that the United States - Panamanian 
partnership in the future would be bolstered by an American 
company at the helm of the flagship expansion project.  To 
date, Post sees no evidence that the bid process is in danger 
of being subverted, but will remain vigilant.  Post looks 
forward to a U.S. company winning the locks contract. 
Concurrently, Post continues to maximize the U.S. content in 
all four consortia. 
STEPHENSON