Panama terminates polemical waterworks contract

Panama's national sustainable development council Conades decided to terminate a waterworks contract that it had awarded in 2012, and which allegedly involved a bribe payment revealed in court documents from an unrelated corruption probe being investigated in Spain.

The US$4mn contract in question entailed the design and construction of the sewerage system in La Pintada, a city in the country's Coclé province.

In a letter published by local paper La Estrella de Panamá, Conades informed Nacional de Seguros de Panamá y Centro America, the local insurance company that issued the surety bond required to launch the project, that the contract awarded in 2013 to a consortium formed by Inassa, a subsidiary of Madrid's regional water utility Canal de Isabel II, and Spanish firm Companía Levantina de Edificación y Obras Públicas (Cleop) had been rescinded.

Conades cites the reason for the termination as the company's failure to complete the project works in a timely fashion based on the contract's pre-established deadlines.

The March 28 letter states that the reported progress on the project was only 25%, which makes it impossible for the consortium to finish the works on time. The document also says that the companies were informed of the Conades decision on March 27.

According to the paper, on April 3, Conades requested authorization from the president's ministry to send a termination notice to the consortium's legal representative.

The official order to launch works on the project was issued in February 2013. Works were expected to be finished by March 2016. Based on the contract, the project had to be concluded 1,120 days from the date the order was issued to proceed.

Authorities had agreed to push back the project's completion date on three separate occasions, the last of which set the new deadline as March 31, 2019. These amendments to the contract increased the project's total cost to US$4.9mn, according to the paper.

Cleop had reportedly already exited the project and Inassa failed to secure a new partner to complete the works. Conades had set May 8 as the deadline to resume works.

Manuel Soriano, Conades executive secretary, told the paper that authorities are now hoping that the insurance company would provide the required funds to complete the project.

Allegations came out last week that Inassa had paid a US$274,000 bribe in 2012 in exchange for the waterworks contract amidst revelations from court documents related to Spain's Lezo probe, a high-profile corruption case involving illegal payments to Spanish politicians in exchange for public works contracts and other favors.

The court documents allegedly state that the aforementioned contract was awarded amidst irregularities resulting from "the manipulation of the tender process," and that the bribe was masked as a payment for a service provision contract, the services for which were never provided.