July 28, 2008

Global financial turmoil affects budget for 2012 London Olympics

LONDON

Preparations for the 2012 London Olympics are being affected by the global financial turmoil, which could make the project go over budget.

The Olympic Delivery Authority published the warning in its annual report, which stressed that strong progress in the last year means preparations are on track with four years to go.

“There will always be financial challenges on a multi-billion pound program of this complexity,” wrote ODA chief executive David Higgins. “We are directly impacted by the credit crunch and the deteriorating property market.

“We will continue to exert the tightest possible financial control while striving for maximum value from the investment in the project.”

London mayor Boris Johnson warned organizers last month to keep the budget from spiralling out of control after a study found that construction costs increased by 106 million pounds (C$207 million) in the previous seven months.

The ODA has reported that staff bonuses soared from 531,000 pounds (C$1.1 million) in the previous 12-month period to 1.69 million pounds (C$3.35 million).

Higgins was awarded the most performance-related pay, adding 205,000 pounds (C$409,000) to his 373,000-pound (C$738,000) salary.

The rewards were for construction of the Olympic Stadium starting three months ahead of schedule and work on the Aquatics Center beginning two months early, but organizers say that the design has still to be finalized.

While work has started on the Olympic village, the finances are yet to be finalized.

The ODA said there is a 20 per cent probability that the overall project won’t be delivered within the 7.095 billion pound (C$14.1 billion) baseline budget. A contingency of 968 million pounds (C$1.9 million) can be released by the government.

“The risks include the interdependency of projects on the Olympic Park, the impact of exchange rate fluctuations, unexpected ground conditions and the availability of materials,” the report said.

ODA chairman John Armitt cautioned against complacency.

“Impressive progress has been made over the last year with the Olympic Park transformed and construction already under way ahead of schedule,” Armitt said. “This has been reflected by the International Olympic Committee who praised the progress and gave us a 9.75 out of 10.

“We have created strong foundations and we are firmly on track to deliver but there is no room for complacency. This is a unique project with an immovable deadline.”

In the last year, the ODA noted that 192 buildings were demolished and more than one million cubic meters of soil were excavated to shape the Olympic Park. Contractors also were appointed to build the main four Olympic park venues with design work “well-advanced.”

“We are now very well set for the next crucial big build stage that has already begun in earnest with construction starting early on the Stadium and the Aquatics Center,” Olympics minister Tessa Jowell said.

“I am confident that with the world-class team we have in place at the ODA, we will continue to make good progress and deliver a fantastic games for London and the whole U.K.”

Associated Press

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