CONCLUSIONS AND RECOMMENDATIONS
We have considered seven main areas of risk, and
our specific conclusions and recommendations on each are as follows.
Governance and delivery structures to coordinate
the multiplicity of organisations and groups involved in the Games
1. The test of whether the plethora of bodies
involved are working effectively will be whether individual projects
and the programme as a whole progress on time.
The Department is responsible for providing cross-government coordination,
and should develop an agreed plan of what needs to be decided,
when and by whom. The Department should periodically seek the
views of the Olympic Delivery Authority and LOCOG, the lead organisations
delivering the Games, on whether government is taking the decisions
required at a pace which will allow them to maintain the necessary
progress.
2. Continuity of key people on major projects
is key to success. The
Department, the Olympic Delivery Authority and LOCOG should identify
which positions are key to the successful delivery of the Games,
specify the skills requirements for those positions, and develop
strategies for retaining individuals, knowledge and skills for
the duration of the Olympic project.
Delivering the Games against an immovable deadline
3. Any slippage in the delivery programme
would bring the risk of having to pay more, or reduce quality,
to be ready on time.
The immovable deadline could weaken the delivery organisations'
negotiating positions on contracts. Any delays could mean that
additional resources have to be brought in to get projects back
on schedule, and result in the specifications having to be changed
to allow projects to be completed on time or to contain costs.
The Olympic Delivery Authority will need to establish incentive
arrangements with their contractors which specifically address
the enhanced risk of cost overruns and quality shortfalls.
The requirement for the budget to be clearly determined
and effectively managed
4. The costs of the Games were seriously underestimated
at the time of the bid and the private sector funding seriously
overestimated. Subsequent
to our hearing, the Secretary of State announced a budget for
the Games which totalled over £9 billion, an increase of
some £6 billion on the position at the time of the bid.
At the time of the bid:
- whole categories of cost were
omitted, including tax, contingency margin and security;
- the Department expected to raise £738 million
of private sector funding, which would have covered a quarter
of Olympic costs, but now there is little prospect of significant
private sector funding being achieved.
We intend to return to the budget for the Games on
the basis of a further report by the Comptroller and Auditor General.
5. As the ultimate guarantor of funding for
the Games the Government is financially exposed. In
addition to the budget announced by the Secretary of State, LOCOG
has a budget of £2 billion for staging the Games and is intended
to be self-financing. In seeking to prevent further calls on public
money the Department needs to satisfy itself that LOCOG's costs
are under control and its revenues on track, and should develop
a plan for doing so.
Applying effective procurement practices
6. The Olympic Delivery Authority has put
in place a procurement policy for the £3 billion worth of
goods, services and works it expects to procure for the Games.
This policy sets out best practice, and any departures deemed
necessary to deliver the Games should be made clear and explicit
at the time. The Department should hold LOCOG accountable for
developing clear policies in advance of starting its procurement
programme in earnest in 2009.
Planning for a lasting legacy
7. There is a lack of clarity about how venues
will be used after the Games, with the risk that designs fail
to reconcile the needs of the Games in 2012 with those of subsequent
users. Legacy plans
for using the five new venues that will remain after 2012 should
now be finalised, with ownership and responsibility for conversion
and running costs resolved for each venue. The plans for delivering
the wider benefits from the Games, which were to have been in
place by the end of 2006, should also be completed, with the expected
outputs and outcomes made clear.
Effective progress monitoring and risk management
arrangements
8. Strong progress monitoring and risk management
arrangements are essential, but are not yet in place. For
the programme as a whole, incorporating 42 sub-objectives assigned
to 17 lead organisations, the Department should develop a framework
of timely progress and risk reporting, which ultimately feeds
through to the Olympic Board and provides early warning of potential
difficulties. This framework should be supported by arrangements
in each individual organisation, and work to complete these should
be a priority.
On the impact on the other National Lottery good
causes
9. Funding the Games means that there will
be about £1.7 billion less money available for the other
good causes supported by the National Lottery.
As well as the £1.1 billion that is to be transferred directly
from the other good causes, the new designated Olympic lottery
games are also having a diversionary effect with an estimated
£575 million coming from players who switch from other lottery
games. The Department should give the Lottery distributing bodies
frank assessments of when and by how much their income will fall,
and they in turn will need to make plans setting out how they
will minimise the impact on the good causes.
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