Talks collapsed: Shapir and state go to arbitration over fast lane to Tel Aviv

A dispute between Shapir Engineering and the government over a project to upgrade part of the Jerusalem-Tel Aviv highway is to go to arbitration, after negotiations between the parties fell apart yesterday.

Failure to agree could endangering Shapir's hold not only on this particular contract but also on other lucrative jobs and TheMarker has learned that Shapir is keen to keep seeking an accord with the state.

Talks between Shapir executives and treasury and Transport Ministry officials had been making progress. The state had agreed to increase its safety net for Shapir and its financial backers because of concerns that changes in plans could reduce potential revenue for them.

Shapir then backed off from understandings already reached and the talks collapsed. The project under discussion is to build a fast lane on the highway between Shafirim intersection, near Ben Gurion International Airport and the Kibbutz Galuyot junction at the edge of Tel Aviv.

The new lane had been supposed to open in April 2010, after 30 months under construction.

Government officials said a week ago that they were canceling another contract with Shapir, to build the Highway 531 link road in the Sharon region and to construct a portion of railway track. They said the reason was that Shapir failed to close financing for the projects on schedule and did not submit its engineering plans on time.

Industry sources believe that a compromise by Shapir on the fast lane into Tel Aviv would soften the state's hard stance on the Highway 531 project.

Shapir cannot afford complacency over the highway project. A potential competitor for that tender is the Africa Israel group's infrastructures company Danya Cebus. It came second in initial bidding and has recently extended its guarantees remaining relevant as a possible alternative contractor.