Both the GUPC consortium building a third set of locks for the Panama Canal and the waterway's administrators dug in their heels Thursday in a dispute that threatens to delay completion of a $5.25 billion expansion project.

GUPC - Spanish construction giant Sacyr Vallehermoso, Italy's Impregilo, Belgium-based Jan de Nul and Panamanian firm CUSA - said last week that it would suspend work Jan. 20 if the canal authority did not agree to pay an extra $1.6 billion to cover cost overruns.

Canal administrator Jorge Quijano denounced the threatened suspension as illegal and urged GUPC to continue working.

He also said that under the contract, the canal authority, or ACP, could find "other contractors" to complete the locks - now about 65 percent done - if the GUCP can't or won't.

The ACP and GUCP held talks this week at the urging of Spanish Development Minister Ana Pastor, who traveled to Panama as part of Madrid's efforts to mediate the dispute.

The ACP said it would advance the GUPC $100 million and give the consortium a grace period of two months on a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

That proposal is the only "reasonable offer" on the table, Quijano told Panamanian lawmakers Wednesday.

The ACP's stance is "unacceptable and ridiculous," Impregilo said in a statement released Thursday in Panama, adding that a decision by the canal authority to turn to other contractors at this late date would delay completion of the project by at least three years.

Conversely, if the ACP agreed to pay GUPC an additional $1 billion, the third set of locks would be ready at some point during the first half of 2015, Impregilo said.

The contract for the locks, which is the centerpiece of the canal expansion, calls for the ACP to pay GUPC a total of $3.12 billion.

So far, the ACP has paid GUPC $2.83 billion, including repayable advances, plus an additional $180 million for cost overruns.

The parties are expected to meet again Friday, but neither the ACP nor the consortium has officially confirmed that talks will take place.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential. EFE