It’s bad enough paying $3bn for concrete. Having the bill jump by half after two-thirds of the stuff is poured really stings.

Admittedly, the concrete here is for huge new locks that will widen one of the world’s great waterways, and not for laying (say) an extremely elaborate patio. On massive public works projects, some level of cost overruns are to be expected, to put it mildly. Even so, the Panama Canal Authority has a point in contesting the extra $1.6bn being laid at its door by its contractors, a consortium led by Spain’s Sacyr and Italy’s Salini Impreglio (And, oh, one other thing: the contractors want the extra payment soonish. In cash.)

The over-run is much more than the $1bn price difference between the consortium’s winning bid in 2009 and a rather more concrete-intensive offer made by Bechtel, a US company. A familiar devil in large infrastructure projects, this: the contracts that have the lowest prices at the bidding stage do not always retain them once the digging starts. Yes, some level of extra cost might be taken as given in a project with a five-year lifespan. But the 50 per cent cost escalation here is also much more than the norm – which is more like a fifth to a third, according to a 2003 Danish study. It is past time this devil was exorcised.

The problem is whether it is any use flinging holy water at a project which is nearer than not to being finished. The canal authority has threatened to end the consortium contract forthwith if talks to fund the remaining locks fall through. However, it will be hard to find other companies that can fill the concrete gap at short notice. The canal will probably not be ready until well into next year to welcome vast gas-carrying ships, bearing the fruits of the US shale gas revolution to Asian shores (and lots of revenue for the Panamanians).

Thus, while 14 per cent of Sacyr sales were tied to the project in the first nine months of last year, its shares – though shaken about by the canal dispute – are now only down 2 per cent year to date. But if the bid had been more conservative in the first place, shareholders could have avoided some nasty sinking feelings along the way.

Email the Lex team in confidence at lex@ft.com

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