27Panama Canal Expansion
For supersizing a century-old waterway to meet modern shipping demands
Carving out one of the world’s most important shipping shortcuts helped Panama earn its independence in 1903. Rebuilding it a century later helped the Central American nation restore its pride—and ensure the global trade waterway will bolster the country’s economy for decades to come.
A shift toward supersized vessels had put the Panama Canal’s popularity on global trade routes in danger as the 21st century began: 1 out of 8 container ships was too big to fit through. Looking to turn things around, the government launched a more than US$5 billion project to double the canal’s capacity.
Unlike the original project completed in 1914 by the U.S. Army Corps of Engineers, the overhaul took on a more local flavor. It was led by a project management office (PMO) created by the Panama Canal Authority, the government agency that manages and operates the canal. And some 90 percent of the program workforce was Panamanian. There was intense drama, including a lock leak during commissioning tests and a compensation dispute with a contractor that led to a two-week labor stoppage. Yet the project team persevered.
“If we were going to continue to be a global player in the world of commerce, the canal had to add not only more ships but bigger ones,” says Ilya Marotta, vice president for transit business for the Panama Canal Authority. “The project united the country.”
Like many storied infrastructure achievements, the 50-mile (82-kilometer) canal, long the primary trading artery between the Atlantic and Pacific, had become out-of-date. It took five years of study and a national referendum before the Panama Canal Authority launched a major renovation in 2007 to add bigger locks and deeper channels, among other improvements.
Karen Smits, an organizational anthropologist at Practical Thinking Group, closely shadowed the project for years, given what she called “in-the-trenches access” to teams by the Canal Authority. “Over time I witnessed an impressive collaborative transformation,” Smits says. “Putting people first helped project leaders tame the complexities of a marathon megaproject.”
The PMO approached preparation from the outside and the inside.
Nearly 300 bidding contractors were invited to Panama for intense briefings, and the PMO’s own people were rigorously prepped. “The organization took the time to train a team in project management,” says Itzel Ulloa, a civil engineer with the Panama Canal Authority. More than 50 employees, including Ulloa, underwent project management training and earned Project Management Professional (PMP)® certification.
“The project united the country.”
vice president for transit business, Panama Canal Authority
That training paid off when bottlenecks emerged. “When I started attending meetings at construction sites, it was clear that each stakeholder had idiosyncratic methods and notions that often stalled the process of collaboration,” says Smits. “Several months into execution, ‘bridging actors’ emerged. For example, one project manager organized workshops about the submittal process at various organizational levels to stem the risk of chaos and conflict.”
The PMO also established a clear matrix of project authority and the range of budget and schedule changes that each level could approve—from project manager all the way up to the board of directors. That matrix ensured “the project wasn’t held back by bureaucracy because we empowered each project manager to make decisions,” says Marotta, who personally could approve a change of up to US$5 million. “It allowed us to move fast, and it made each project manager accountable.”
Another example of the dynamic project culture: “The Panama Canal Authority assigned behavioral chaperones to several leaders,” says Smits. “In this arrangement, external consultants supported local leaders by giving advice and teaching the ins and outs of managing people on megaprojects.”
Since the expansion’s debut in 2016, volume through the canal has been brisk. By 2018, the canal was bringing in US$3.2 billion in annual revenue. (Panama charges passage fees based on vessels’ capacity). Over the next two years, the authority is projected to add US$2.1 billion more in annual revenue.
“There’s no doubt that the Panama Canal expansion program achieved technical greatness by meeting demand for an even larger global trade channel,” says Smits. “But from my perspective, its lasting lesson was unmistakable: Taking time to develop people skills will forge unbreakable bonds, boost project outcomes and, just maybe, change the world.”
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