Olympics may have to raid contingency fund — again — as costs spiral
The Government faces the prospect of having to raid its dwindling Olympic contingency fund yet again, with officials announcing Mbt shoes further cost increases yesterday in the delivery of the 2012 Games.
The Olympic Delivery Authority (ODA) warned that the next 12 months would be the toughest yet as the pace of construction accelerated to meet venue completion deadlines in early 2011.
The authority, which is responsible for the infrastructure at the Games, disclosed that its costs had increased by £21 million in the past quarter.
ODA officials said that the increase, which is largely due to the financial downturn, could be absorbed into the overall budget for the Games, which they emphasised was on track.
The ODA also warned that Mbt
extra funds might need to be released from the Government’s contingency fund to cover up to a further £160 million in unforeseen costs relating to the management of the Olympic Park in East London.
The authority said that it hoped that the extra requirement, which it expects will range between £110 million and £160 million, could be covered by savings in other areas. If not, however, contingency money will be needed.
The contingency fund, which was originally £2.7 billion, has already been raided several times to meet shortfalls in the budget for the athletes’ village and media centre. The two venues were intended to be predominantly funded by mbt sale the private sector but the deals collapsed because of the recession.
Hugh Robertson, the Shadow Sports Minister, said that the need to fund Olympic Park operations should have been identified in 2007 when the Government first outlined its base budget.
He said: “Whether it eventually results in a call on the contingency or is met from savings elsewhere, this is a potential £150 million mistake that should not have occurred.”
The Department of Culture, Media and Sport said that there was still more than £800 million in the contingency fund that had not been allocated to projects. Other estimates range as low as £500 million, leaving very little room for error.
The increased costs were revealed in the Government’s annual report on preparations for the 2012 Games. The report emphasised that they were on track and that delivery of all infrastructure would come within the discount Mbt shoes overall, £9.3 billion budget.
John Armitt, the chairman of the ODA, said: “We are continuing to make strong progress across the project. There are, however, still big challenges ahead as construction accelerates across the site and the workforce peaks. This will be our toughest year. We take nothing for granted but I am confident that the foundations for success are now in place.”
The Olympic programme is now halfway through the “Big Build” phase and the report said that the main projects — the Olympic Stadium, velodrome, aquatic centre, athletes’ village and media centre — were all proceding on schedule. Some of the venues will be completed by early next year.
Tessa Jowell, the Olympics Minister, said: “As we enter the busiest and most exciting phase of the Olympic project so far, this report shows we are still on time and still on budget.”
The new costs that may come from the contingency fund result from a decision, after a Government review, for the ODA to take on extra responsibility by operating the park and venues between 2011 and 2013.
A further £13 million from the contingency fund has already been released to the ODA so that it can get on with early work needed this year.
The report said: “This new scope for the ODA discount Mbt shoes is likely to require additional funding to be allocated to the ODA, from within the existing £9.325 billion budget.”
Any contingency funding can be released only after approval has been given by a committee of senior ministers, including the Chancellor of the Exchequer.
