Committee of Public Accounts Press Notice

Preparations for the London 2012 Olympic and Paralympic Games - risk assessment and management

Publication of 39th Report of Session 2006-07

Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

“If the London Olympic and Paralympic Games are to be the great success we all want them to be, then the risks to delivery will have to be managed with an iron hand. The Department for Culture, Media and Sport is ultimately responsible for coordinating the array of bodies involved. It is worrying, therefore, that strong arrangements for monitoring progress and managing risk are so far not in place. Also absent are plans for ensuring the Olympic facilities will meet the needs of users after the Games.

“If the delivery timetable slips, then the danger increases of delivery organisations having to pay more to contractors or reduce standards to ensure that the Games open on 27 July 2012. This risk must be addressed by establishing suitable incentive arrangements with contractors to deliver quickly, to cost and to the right quality.

“At the time of the bid, the Department seriously underestimated the costs of the Games and was far too optimistic about the extent of private sector funding. The truth is that the Government is financially exposed. The Department has finally announced a budget, totalling some £9 billion. The National Audit Office will be reporting to our Committee on this budget.

“The Games will claim some £1.7 billion of National Lottery funding from other good causes. It would be manifestly unfair not to give those many causes good notice of when and by how much their income will fall.”

Mr Leigh was speaking as the Committee published its 39th Report of this Session which, on the basis of evidence from the Department for Culture, Media and Sport and the Olympic Delivery Authority, examined the progress that has been made in preparing for the Games, and the areas of risk that will need to be managed.

On 6 July 2005 the International Olympic Committee chose London as the host city for the 2012 Olympic and Paralympic Games. The Olympics will begin on 27 July 2012, with the Paralympics following from 29 August 2012, so the organisations involved in delivering the Games have a fixed deadline. Progress has been made in a number of areas since London was chosen to host the Games, including on the critical project to re-route underground the power lines on the Olympic Park site. The Olympic Delivery Authority has also begun its procurement activity, including appointing a Delivery Partner to support in managing the delivery of the Olympic venues and infrastructure.

Two new bodies have been set up. The Olympic Delivery Authority will provide the facilities, and the London Organising Committee of the Olympic Games and Paralympic Games (LOCOG) will stage the Games. They are overseen by the Olympic Board, and a new team within the Department for Culture, Media and Sport (the Government Olympic Executive) will co-ordinate the contributions of other parts of government to the Games. The Olympic Board will play a leading role in progress monitoring and risk management, supported by a Steering Group of senior officials and the Olympic Programme Support Unit which provides independent advice to the Board. No one individual has overall responsibility for delivering the Games, however, and the large number of bodies involved presents significant risks, for example to timely decision-taking.

At the time of our examination, 20 months after London was awarded the Games, there was still no final budget in place, although the Secretary of State for Culture, Media and Sport announced in November 2006 that the cost estimates had increased. A number of significant areas of uncertainty remained to be resolved before the budget could be finalised-tax, contingency provision, security costs and private sector funding. 

In the event, the Secretary of State announced a revised budget totalling over £9 billion on 15 March 2007. The revised budget increased the total National Lottery funding for the Games to £2.2 billion, of which about £1.7 billion is to be diverted from the non-Olympic good causes-the arts; sport; heritage; charities and voluntary groups; and health, education and environment projects.

As required by the International Olympic Committee, the Government has underwritten the costs of the Games, including any shortfall between LOCOG’s costs and revenues, although LOCOG is intended to be self-financing in staging the Games.

The prospect of the legacy that the Games would bring was central to London’s bid. Plans are being developed for the legacy use of the five new venues that will remain after 2012, and work is in hand on plans for delivering the wider economic, social, health and environmental benefits that the Games are expected to bring.