Thursday, 14 June 2012

Saving face, if not money

How do you position exceeding budget as a making saving?

Personally, I think that's a pretty hard call but it seems to be the latest coup pulled off by the London Olympics.

A little background first.  Most would view the London Olympics as public funded. Part of that assumption is based on the fact that the public purse was to initially be lightened by £2.4bn. Nevertheless over the last few years we've had a constant stream of justifications for the escalation of those construction costs.  That has contributed to the budget tripling to £9.3bn.  Given the global financial crisis, some view the Olympics as having had the unintended consequence of cushioning the early impact on the construction sector.  That being the case there may well be an economic justification, and I look forward to seeing the economic impact assessment.

Now we learn that there is an anticipated underspend of £476m from the £2.7bn contingency. So, the first observation is that creating an excessive budget and then not spending it all is one way of being perceived as delivering a saving!

We've just celebrated the Queen's Diamond Jubilee (I assume regular readers noted that I chose not to discuss the saga of the Work Programme unpaid 'volunteer' stewards abandoned in London and probe the related procurement issues).  However, the fact that quite a few people turned up to watch the Jubilee celebrations seems to have taken those organising the Olympics by surprise! Can they really be serious? The Jubilee celebrations included a pageant, with a history of near enough 600 years, the likes of which haven't been seen in years, and a star studded concert, and it was only being the 2nd Diamond Jubilee, and the Queen is remarkably popular. Why on earth was there surprise at the interest?  Had the organisers not also given some thought to the Millennium Celebrations?  Had they not previously done more than make a stab at the level of interest?

Regardless of the enduring threat of international terrorism, those responsible for security have now decided that the interest in the Jubilee Celebrations merits a revisit of the security arrangements and a new need for an additional £19m to be spent on security.  This is scary stuff.  Think on this: "We have only recently become aware of the scope of the demand for the Olympic Games", claimed the Sports Minister.

Can they even contract the additional security in the very short remaining window available?  Is there sufficient capacity in the industry to deliver (without resorting to unpaid Work Programme 'volunteers' sleeping rough)?

Well regardless of the procurement practicalities we should rest easy - this isn't a cost increase, no, the cost of the extra marshals, crowd barriers, temporary bridges, and public information signs will come from within the agreed public funding package.  This isn't an extra cost, this is a saving as we're under budget, yes, the under-estimated, tripled budget.  Hooray.

Background reading:
O'Connor, A. (2012) 'Jubilee success adds another £19m to Olympic crowd control budget', The Times, 14 June, p.4.

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