COMMONS

Committee reports on preparations for London 2012 Olympic and Paralympic Games

09 March 2012

The Commons Public Accounts Committee publishes its 74th Report of the Session, on the basis of evidence from Department for Culture, Media and Sport (DCMS), London 2012 Organising Committee (LOCOG), Transport for London (TFL), and the Olympic Park Legacy Company.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"The venues and infrastructure of the London Olympic Games are on track to be delivered on time and within budget. The Olympic Delivery Authority’s management of the building programme has been exemplary.
However, the £9.3 billion Public Sector Funding Package is close to being used up and we are concerned about whether the running of the Games will be held within budget. Taking into account costs outside the package, the full cost to the public of the Games and legacy projects is already heading for around £11 billion.
We are particularly concerned about the significant increases in the security bill. LOCOG now needs more than twice the number of security guards it originally estimated and the costs have roughly doubled. It is staggering that the original estimates were so wrong. LOCOG has had to renegotiate its contract with G4S for venue security from a weak negotiating position and there is a big question mark over whether it secured a good deal for the taxpayer.
We were promised a strong Olympic legacy but the Government has chosen not to adopt the target of 1 million more people participating in sport by 2013, and plans for the stadium have fallen through. It must not become a white elephant.
The Government is dispersing responsibility for delivering the legacy and we need clarity about who is accountable.
Given the scale of costs outside the funding package, what we need within six months of the end of the Olympics is a single auditable account covering the total costs to the public of the Games and their legacy.

Margaret Hodge was speaking as the Committee published its 74th Report of this Session based on evidence from the Department for Culture, Media and Sport, the Home Office, LOCOG, Transport for London and the Olympic Park Legacy Company.

The Olympic Games are a huge endeavour against a fixed deadline and under the eyes of the world. The Government's preparations and management of the £9.3 billion Public Sector Funding Package are led by the Department for Culture, Media and Sport. The Department works with a wide range of bodies including the Olympic Delivery Authority, which is responsible for the construction of new venues and infrastructure required for the Games, and the London Organising Committee of the Olympic and Paralympic Games (LOCOG), which is responsible for staging the Games.

The Olympic Delivery Authority's programme is on track and within budget. The Delivery Authority’s management of its building programme has been exemplary.  However, due mainly to significant increases in the cost of venue security, the likelihood of staying within the overall £9.3 billion Public Sector Funding Package is very finely balanced once the Department’s own best estimates of the most likely costs are taken into account. The Funding Package of £9.3 billion allocated to the Olympics does not cover the totality of the costs to the public purse of delivering the Games and their legacy, which are already heading for around £11 billion.

The Government is highly dependent on LOCOG to deliver a successful Games and is obliged to meet any shortfall between LOCOG's costs and revenues. However, operational and financial risks have emerged in areas of LOCOG's responsibility. LOCOG's initial estimates for the cost and scale of venue security were based on a "finger in the air estimate", there have been delays in the LOCOG- led consultations over transport arrangements, and LOCOG itself now has almost no contingency left to meet further costs, even though it has done well in its revenue generation.

The number of security guards required in and around the venues has more than doubled from LOCOG's early estimate of 10,000 guards to 23,700. Consequently, the total cost to the Public Sector Funding Package of venue security has nearly doubled in a year from £282 million in 2010 to £553 million in December 2011.  7,500 of the extra guards will be military personnel.  LOCOG and its security contractor, G4S, now face a significant challenge to recruit, train and coordinate all the security guards in time for the Games.

LOCOG has had to renegotiate the contract for venue security it awarded to G4S in December 2010. However, there is no evidence that the Government has secured any price advantage, even though the value of the business it is putting to its contractor has increased from £86 million to £284 million. Despite the assertions of LOCOG and the Home Office, we consider that LOCOG's estimates for venue security could have been better informed much earlier, and that LOCOG's late planning undermined its negotiating position and ability to drive down costs.

With only 109,000 new people regularly participating in sport against an original target (which the new Government chose not to adopt) of 1 million by March 2013, the Department for Culture, Media and Sport has got poor value for money for the £450 million spent through sporting National Governing Bodies. It is unclear what the sporting participation legacy of the Games is intended to be.

On two matters - additional money for ceremonies and the dropping of the sports participation target - the Accounting Officer declined to engage with us on the grounds that these were Ministerial policy decisions. It is important to note that where policy has changed the Accounting Officer remains accountable to Parliament for the value for money of public expenditure incurred.

Whilst we applaud the progress made so far, we heard that responsibility for delivery of the legacy is shared across many different parts of Government, and this rings alarm bells about the effective integration of the various legacy plans and about clear accountability to us and the taxpayer. When we return to the examination of the Olympic legacy we expect clarity over precisely who will be accountable to Parliament for delivering the benefits to taxpayers from their significant spending on this programme. We were concerned that the Department was unable to quantify what funding has been set aside by London boroughs for the socio-economic regeneration of East London as in the current economic climate such funding must be regarded as uncertain.

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