Thursday, November 23, 2006

London 2012 Budget Bashing Right On Schedule

There comes a time in the life of every Olympic organizing committee when suddenly everyone, especially the press, discovers that things aren't going exactly as planned in the original Olympic bid proposal. Now it's London's turn.

This happens every two years - coinciding with the frequency of Olympic bids elected by the International Olympic Committee. But it always seems so "new" and "unique" each time it happens because it is being observed for the first time by that city organizing the Games.

With the organization of every new Olympic Games comes a new set of media personnel, a new group of critics and a whole new population trying to make sense of it all. Olympic preparations are generally only news to the local country and those who are in the industry (and a niche group of Olympic fanatics - you know who you are), so Londoners have had little exposure to Olympic preparations past, and most people outside the U.K. don't really know or care what's going on now.

So, to the point - the escalating costs of the London 2012 Games is not really news, and not really a big surprise.

Without being too specific about the recent developments of London's Olympic preparations, it's easy to point out some very significant misconceptions.

If you're organizing an Olympics to make a profit - you're in the wrong business (unless, of course, you're the IOC - but that's another story). There are many benefits from holding an Olympic Games; national pride, increased tourism, a legacy of venues and infrastructure, an increase of interest in sports and physical fitness and more. And while there are financial benenfits such as increased tax revenues and Games revenues from ticket sales, sponsorships and licensing - these are generally used to offset the costs involved and won't necessarily help turn a profit.

When reported on, Olympic organizing costs are often bundled with capital development costs such as venues, roads, housing etc. This is very deceptive and not a true measure.

For instance, airport upgrades, highway improvements and additional support infrastructure might be part of the bid proposal - but it's unreasonable to attribute the entire capital expense to the Olympics. The new assets will be of benefit to the City well beyond the Olympic closing ceremonies. So when there are increases in these budgets, they may well have occurred anyways - but under someone elses portfolio.

The biggest misconception when observing the organization of an Olympic Games is believing that the bid documents used to win the host city honours are an accurate representation of how everything will play out. Simply, it isn't.

The real purpose of these documents and the budgets within is to win the bid in a highly competitive race. Accordingly, the bid committee is faced with unreasonable and conflicting expectations from the public and the IOC.

It's arguable that organizing an Olympic Games is the largest and most complex project that can be undertaken. The original plans are drawn up in a time spanning from six to 24 months. There is often "scope-creep" - the IOC will change sports events and other requirements during the process and after the budget is "finalized", and other local interests might try to "piggyback" their projects on the Olympic project. Compound this with the fact that the completion of these plans is about 8 years away and at the mercy of changing economies, exchange rates, governments, and other priorities and you'll understand that estimating such a budget is a guessing game at best.

Then consider that during the budgeting process the information is made public and falls under the scrutiny of the very taxpayers who might be on the hook for the final bill. While the IOC wants to see that the bid will have access to deep pockets and be able to deliver a high quality plan - they also want to see that the public is solidly behind the plans and will support the organization of the Games. They'll even commission polls to test this.

If this isn't already enough to make the organizers sick to their stomachs, the final and most important aspect of the bid is that it must compete against others to win - and the pressure to achieve a victory is huge. So while there is a necessity to propose a costly plan, there is an unreasonably extreme pressure to keep the cost estimates low.

But as I've already explained, this bid proposal is simply a means to an end - an attractive and feasible story designed to win the competition and created by people who won't necessarily be around to deliver it. When the Organizing Committee is formed, they receive the bid book as a legacy from the bidding process - then they go back to the drawing board and figure out how to deliver - and at what price.

London's 2012 budget surprise isn't news, it's a milestone that's often coupled with an increase to the public relations budget.

2 comments:

Alex said...

Very good piece. You might like to see http://blog.london2012.com

jim jones said...

well great opinion piece the thing I see is that cities elcted to host games repeat the mistakes of the past. Montreal of course is the mac daddy of the cost overun games in many peoples mids but it was going on before that as well. Toyko had huge cost overruns and so did munich. Sometimes these thing are occuring while other cities are biding on games and they continue to be delusional in think it would not happen in there city.
I see a new trend towards biding. You your veneus inwhich the specs have remained stable first before you bid and then you begin construction of the venues that are changing in spec. IE bobsledding and speed sakting . A hockey arena has remained very constant in spec and can have revenue pre olympic bid. IE the calgary saddledome .

The same is being done with athletics stadia to a certain extent and hosting regional games
first

good column and good site cheers paul