The Panama Ministry of Public Works will relaunch bidding for the coastal ring road in Bocas del Toro. This decision comes after the government terminated a 55.9 million dollar contract. The legal process later nullified sanctions against the contractor. The failed project has been plagued with problems from the start.
The Panama Ministry of Public Works confirmed it will re-tender the Playa Paunch to Playa Bluff to Boca del Drago coastal bypass project on Colon Island. The contract with Constructora Santa Fe Limitada was rescinded amid a legal dispute. The dispute ended with a partial victory for the contractor. The original project cost was set at 55.9 million dollars.
Construction began in May 2023 under the previous administration of Rafael Sabonge. The plan included a new coastal road with a bridge over the Mimitimbi River. It also featured sidewalks, a bike lane, drainage systems, lighting, and wildlife viewing parking areas. But disagreements emerged between the ministry and the company during execution. These disputes centered on the project scope and economic conditions for completion.
The situation culminated in an administrative contract resolution. The case reached the Administrative Tribunal for Public Procurement. Through Resolution 173-2025-Pleno-TACP dated October 17, 2025, the tribunal confirmed the administrative rescission. However, it annulled the four-year disqualification sanction imposed on Constructora Santa Fe Limitada.
The company then filed a clarification request. They argued the ruling left doubts about contractor responsibility and the possibility of executing the performance bond. The clarification was contained in Resolution 192-2025-Pleno-TACP from November 25, 2025. In this document, the tribunal explained the legal reasons for concluding that sanctions against the construction company should not stand.
Tribunal Finds Contractor Not at Fault for Project Delays
One of the most relevant aspects of the resolution involves fault. The tribunal expressly recognized that the low percentage of project execution was not attributable to the contractor. The decision adds that an obligation cannot be reproached to someone who had little or nothing to do with the impossibility of fulfilling it. [Translated from Spanish]
The tribunal explained that to impose administrative sanctions or execute contractual guarantees, the existence of fault or intent by the contractor must be demonstrated.
The resolution develops the principle of culpability within administrative sanctioning law. It cites criteria from the Supreme Court of Justice. According to these criteria, it is not enough that a contractual breach exists. The breach must be proven to have resulted from negligent or intentional conduct by the contractor. The ruling states that culpability is a determining factor for executing the guarantee or its non-return. [Translated from Spanish]
The TACP also recalled that Article 130 of Law 22 of 2006 establishes that guarantees must be returned or canceled when the contract resolution is declared without fault of the contractor. The rehabilitation project covers a length of 28.30 kilometers. This includes approximately 10.4 kilometers of internal streets on Colon Island. It also includes 3.7 kilometers of the La Feria to Playa Paunch section and 14.2 kilometers of the Big Creek to Boca de Drago section.
External Factors and Legal Arguments Shape Outcome
The resolution maintains that project difficulties were related to findings or situations that arose during the contractual stage. These issues delayed and made normal contract execution impossible. The document does not eliminate the contract termination. But it makes clear the tribunal considered the company was not directly responsible for the project’s failure under the originally agreed conditions.
This reasoning was decisive for the TACP annulling the four-year disqualification initially imposed against the construction company. The company itself had warned in its appeal that maintaining the sanction would mean severely and unfairly penalizing a foreign contractor without any cause justifying the administrative contract resolution. [Translated from Spanish]
Another key aspect of the clarification involves the performance bond. The tribunal determined that executing the bond is also not appropriate. The ruling clarifies it is improper to notify the surety company to pay the bond amount or substitute the contractor in their rights and obligations. The decision is based precisely on the fact that the contractual breach was not attributed to company fault. The effects of the resolution make notification to the surety improper, the tribunal states. [Translated from Spanish]
This means the State cannot recover funds through the insurance company despite the contract rescission. The coastal ring road in Bocas del Toro, valued at 55.9 million dollars, remains unfinished. It now awaits a new tender process following the contractual termination.
Contractor Raised Concerns Before Contract Termination
Constructora Santa Fe Limitada maintained that from the first months of contract execution starting May 2023, it sent multiple notes to the Ministry of Public Works. These notes warned about problems and design errors in the project. According to the company, the ministry ignored those warnings despite allegedly knowing about the technical deficiencies beforehand.
The case highlights ongoing challenges with public procurement disputes in Panama. Following the unilateral contract rescission, the company presented its legal challenge. The tribunal’s final decision protects the contractor from sanctions but does not restore the contract itself. The Ministry of Public Works now faces the task of restructuring the project for a new bidding process. Officials have not yet announced a timeline for the new tender. The project remains stalled with no clear date for resumption of construction activities.