Inflated 2012 Venues Still On Budget

The construction costs for London 2012 Olympic venues have risen again by close to £100m although officials reasserted that all sites would be completed on time and on budget due to savings in other areas.

In its annual report on the 2012 budget, the Government has admitted the projected for all the venues went up by £97m (7.6%) to £1.36bn. The bill for the Olympic stadium in particular rose by £43m to £547m during 2008.

However savings elsewhere have offset these rises, leaving the overall increase to the £9.3bn budget at just £3m.

‘This shows that we are on course to remain on budget despite the current economic downturn,’ said Olympics Minister Tessa Jowell.

‘It will not be exceeded. While cost forecasts have risen on some venues, these increases have been balanced by savings in infrastructure around the venues and work to clean up the park.’

Comparing cost forecasts made in September 2008 to ones from November 2007, the report uncovered an overall cost increase of £196m, but also found savings of £193m – largely due to a projected under-spend on transportation projects.

There were also unexpected savings due to land at the 500-acre, east London site being less contaminated than previously thought. However there was one notable exception to this, as contamination around the planned velodrome could cause costs to spiral £25m to £105m.

The report blamed the cost rises at the 80,000-seat stadium, which had a provisional estimate of £282m in 2004, on ‘the development of the design, and the lack of competitive tension in the procurement’.

Other items the report flagged up were higher-than-expected costs for the fabric curtain that will wrap around the stadium, offering shelter to spectators, and adjustments to the roof design in order to better accommodate the opening and closing ceremonies.

With the construction industry booming, many firms decided not to bid for London 2012 work, particularly as there was a perception the red tape involved was not worth the effort. Only one contractor, Robert McAlpine, bid for the job of building the stadium.

The industry situation has markedly changed now and any future tenders are expected to be more competitive: this should keep costs down, as should the falling price of steel and other key construction materials.

The major headache now, however, is the scarcity of credit and that has led to a number of well-documented dips into the £2bn contingency fund within the overall budget, most notably for the Olympic Village and media buildings.

However even on this issue London 2012 officials appear calm as, according to the report, 25% of the contingency has been allocated but 28% of the job is already done.