Examination of Witnesses (Questions 81
- 99)
TUESDAY 4 DECEMBER 2007
LORD COE,
MR PAUL
DEIGHTON, MR
JOHN ARMITT
AND MR
DAVID HIGGINS
Chairman: Good morning. This is a further
session of the Committee's examination of preparations for the
London 2012 Games, and we are pleased to welcome this morning
the Chairman and Chief Executive of LOCOG, Lord Coe and Paul Deighton,
and the Chairman and Chief Executive of the Olympic Delivery Authority,
John Armitt and David Higgins. Adrian Sanders is going to start.
Q81 Mr Sanders:
We are now almost a third of the way from winning the bid in 2005
to the Olympic Opening Ceremony in 2012. Are you where you intended
to be at this stage in the proceedings?
Lord Coe: Chairman, thank you
for the opportunity to bring you up to speed with all these issues.
The bold answer to that is yes. We have had the International
Olympic Committee to London on three separate occasions, a fourth
for the Paralympics, and on each one of those occasions, both
as a co-ordination committee and as a review committee, a smaller
group of executive officers, we have had four very clean bills
of health. That is not said with a vestige of complacency because,
as you will be fully aware, this is a very complex project but
at both LOCOG, and I know John Armitt would echo these sentiments,
and at the ODA we work extremely closely together and we are exactly
where we would want to be and, if I may so, probably marginally
ahead.
Q82 Mr Sanders:
Do you see any risks at all to your timetable?
Lord Coe: As I said, this is the
most complex piece of project management that any city undertakes.
There will be challenges right the way through to the opening
ceremony, but the quality of the people in both the teams and
the forensic detail and planning four years, eight months away
from the opening ceremony I think will stand us in very good stead,
but, of course, we go forward with our eyes wide open. This is
complex.
Q83 Mr Sanders:
Beijing will obviously be the perfect opportunity to see where
things go right or go wrong. Is there anything in particular that
each of you will be looking at?
Lord Coe: I will leave that with
the Chief Executive.
Mr Deighton: From LOCOG's point
of view there are actually two formal programmes to make sure
we get the most out of the learning opportunities in Beijing:
what we call a secondee programme, where we will have something
like 25, 26 people who go and work in Beijing for three months
or so doing the jobs they will then do in London, so that is a
very precise experience, and obviously we target the jobs which
are most directly transferable to what happens in London; and
then at Games time itself we will have what is described as an
observer programme for about 140 people, is the current plan,
two-thirds of whom will come from the organising committee with
a third coming from our various partners who are also involved
in delivery, such as TfL, the GLA, DCMS, the ODA, et cetera, and
that comprises a range of programmes covering arrivals and departures,
security, transport—all the technical, functional, operational
things you need to do in a games—so we can download directly
the Beijing experience. We will go into Beijing with operational
manuals of here are the things we want to observe and learn, we
will come back with that learning experience and that will provide
the basis for the next level of operational planning at the end
of 2008 beginning of 2009. So the Beijing experience is not just
turning up and looking around and saying, "Is not this big
and interesting?", it is very specific, very operational
and it is part of the building block which takes us from a high
level of strategic planning into more day-to-day operational planning.
It is very important for us.
Q84 Mr Sanders:
What area in particular are you going to look at?
Lord Coe: When I say "operational
areas", it is really about running big events. We are looking
at each of the sports events themselves, how those are run, because,
of course, the Olympic Games is typically in each sport the biggest
and most complex event for that sport in terms of numbers—the
numbers of media involved, the amount of TV and press coverage—so
watching how all those things interact and the challenges, the
scale that those interdependencies create are really what we are
trying to understand and accomplish.
Q85 Mr Sanders:
I will ask down the line of others?
Mr Armitt: As far as we are concerned,
we have taken on board the experience of not only Beijing but
Sydney and Athens in terms of the design of stadia and the needs
of the athletes, because by the time of Beijing to a large extent
we will have largely completed the overall design concepts of
the main stadia. There is then the operational aspect of those
stadia, which Paul has just talked about, and, again, we will
want to observe the degree of what is called the overlay, which
is essentially the installations which LOCOG put in place on top
of our permanent facilities. Again, we have already been to Beijing
and looked at that and we draw all the time upon the experience
of other games, not just Beijing, to understand the needs of athletes,
how it works from an operational point of view, so that in designing
the stadia, which we are making progress on now, we have got that
experience understood, but clearly the most recent one is always
worth looking at as well to see what happens on the ground and
so, equally, we will have our staff on the ground during the Beijing
Games.
Q86 Mr Sanders:
Maybe you can reassure me. It is just an observation. We were
very fortunate to go to Athens and see the fantastic campus there
of facilities that now lies pretty much empty and certainly not
properly used. It sounds to me like you are falling into the same
trap of focusing everything on the three or four weeks of the
two games rather than actually looking at: let us build something
and the games can fit into it. What we are talking about here
is something that is going to cost us lots of money—at the
moment it is costing us now and will cost us every year up to
the games—and it will last for many, many years after the
games, so, in my view, you should be focusing on the athletes
and the event fitting in to a much wider plan.
Lord Coe: If I may say so, I was
in Athens working, obviously, with the bid team. I think that
a great chunk of our thinking going forward is based on the Athens
experience. I am vice-president of my international federation.
I was there just a year ago for a World Cup in that same stadium
and, you are right, there are large parts of that stadium and
that Olympic park that are now struggling for, not a day-to-day
existence, but even to find one or two events per year. All our
thinking in terms of design of facilities is predicated on what
we use them for afterwards. The world has changed—we know
this from the Olympic movement, we know this from the bidding
process—and leaving facilities in a community that, frankly,
cannot use them in any credible way afterwards is not what this
games is about. We went to Singapore to bid for 16 days of spectacular
sport but what nudged us across the line, in my view, was the
International Olympic Committee's recognition that the regeneration
and the solid legacy that we recognise that a games has to leave
was very much at the centre of our thinking, and I think we have
demonstrated that in pretty much everything that we have done
since we came back from Singapore, both in the delivery of our
programmes at LOCOG and through the Olympic Delivery Authority.
Q87 Mr Sanders:
Can I come back to Mr Armitt and ask that question again? What
are you going to be looking at in Beijing in relation to what
you can learn for London 2012 and beyond?
Mr Armitt: I think to a certain
extent you should not assume that what Beijing sees as its future
requirements, picking up your point about legacy, and ours are
necessarily the same. The point has just been made that every
single time we look at a venue we are looking at what is that
venue going to be used for in the future or at the legacy expectations
for the future as much as for the games and it is under constant
discussion: how do we think about legacy, how do we reflect what
is needed for that stadia, how can we best use it in the future
to ensure that it does not become a white elephant but at same
time meets the needs of the games? The stadium we have now essentially
fixed the design of in terms of 80,000, reducing to 25,000 after
the games. At the velodrome we have got the basic concept design
agreed and fixed and the aquatic centre similarly, and so we have
made a lot of progress on those three very large facilities. To
be frank, I would not see us changing those designs as a consequence
of Beijing in the overall concept. What we will see in Beijing
is the movement of people in and out of the stadium, the positioning
of turnstiles, entrances, all these sort of detailed issues which
we can pick up in Beijing and then bring back and reflect on what
we have designed and see whether there is tweaking which needs
to be made, but I would not see us changing our basic concepts
as a consequence of Beijing. It is very much looking at how it
works in operation.
Q88 Mr Sanders:
A final question to yourself. We know that one of your predecessors
resigned, citing frustration at the political environment. I wonder,
coming from Network Rail, do you find the political environment
more or less marked?
Mr Armitt: Everybody says, "How
do I find it?", and I always answer that this is more political
than Network Rail. I thought the railways were political; the
Olympics are considerably more political.
Q89 Paul Farrelly:
I want to ask a few questions about your income and sponsorship.
Before that, just picking up on the previous points and the way
the bid was won on participation and regeneration. This is a point
that I made with you, Lord Coe, last week on our visit and I have
made with Mr Deighton when we have met and in front of the Committee.
I do not get any sense when I travel around the London Boroughs
that are going to host these Olympics of any expectation at all
so far. Driving across Hackney, for instance, it would be wonderful
to have "The Olympic Borough of Hackney", "The
Olympic Borough of Newham", and clear road signage. It is
a very big building site but very discreet; there is no trumpeting
of the fact that the Olympics is going to be there. Then, if you
get into schools, which is where we had lots of pictures of children
where you won the bid, under-privileged East End children—I
have made this point before—one of the easiest things, surely,
with your power for sponsorship, would be to identify all those
schools in those inner city London boroughs that do not have a
single blade of grass and make sure the legacy starts now, that
at the very least they get a rubberised surface where they can
actually participate in sport, because at the moment it is pretty
woeful.
Lord Coe: I spend a lot of time
in schools the length and breadth of this country and we have
a very clear programme of engagement in London, particularly in
the London Boroughs but more broadly. I actually slightly disagree.
I see a lot of activity going on in schools both in driving in
some of the educational, the cultural and the sporting values
of the Olympic Games. We are still five years away and, as you
know from your visit the other day, we are dealing with a huge
building site at the moment and so issues of signage and colourways
and all the other things will take place, but we are also one
year away from a preceding Olympic Games. I think in all those
areas, yes, of course, you are right, it is very important that
we drive those values in those boroughs. I witness things that
are happening on the ground, both in London boroughs and more
broadly throughout the UK, that I know simply would not be happening
had we come back empty handed from Singapore, but, you are right,
we need to continue to make sure that people understand what we
are doing, particularly the participation, not just in sport but
through the cultural platforms that we have, the issues of regeneration
are all properly understood, and that is one of the challenges
going forward, to communicate that properly.
Q90 Paul Farrelly:
Given that participation was a fundamental part of the way you
pitched the bid and won the bid, who should be in the driving
seat and making sure that that is delivered from now? Who should
co-ordinate the activities?
Lord Coe: I think we have to look
at this as two very clear and different strands of sport. You
have the elite level programme. We have an ambitious target set
by the British Olympic Association, by UK Sport, of a fourth place
in the medals table and a second, hopefully first, place in the
Paralympics medals table. The funding that has come through into
elite level sport is now unprecedented. I was Chairman of the
Sports Council back in the mid eighties. I had a budget available
to me of 41.5 million that was supposed to deal with participation,
elite level funding and ability provision, so we are in a completely
different landscape. The elite level project work is going extremely
well. The broader implication of participation, which is very
clearly what we talked about in Singapore, is driven ostensibly
by government, the agencies for sport, Sport England, and through
any number of local authority initiatives as well. We should not
overlook the impact that local authorities have on this programme.
Let us be clear about what we can do and what we are doing as
a local organising committee. I think we see our role here as
having provided the inspiration and, frankly, the opportunity.
The broader driving of participation into sport is clearly those
sporting agencies at arms' length from government, and some autonomous,
that need coherent and structured programmes going forward. For
instance, in the last year as an organising committee, we have
secured a road show that took the Olympics message and sport into
27 different venues, not just simply exciting youngsters to pick
up sport but providing aptitude testing. Waltham Forest was a
very good example. We took a road show there where we had some
of our top rowing coaches identifying young talent in the local
community. We can do that. We can use the brand in any number
of creative ways to drive this issue as well, but it is effectively
as an organisation inspiration and opportunity. We look to government
and Sport England and those agencies out there to actually build
on that inspiration.
Q91 Paul Farrelly:
One final question on this point before I move on to sponsorship,
Chairman. Clearly there are lots of quangos involved in sport—there
is yourselves now tasked with the Olympics, the Department for
Education, Culture, Media and Sport is responsible for sport—but
at the bottom level, to make sure this works for that part of
London at the bottom, is there an effective leaders group at the
local authorities that you deal with day in day out?
Lord Coe: Let me make just one
point clear. I think we see ourselves very differently from being
a quango, but, yes, there are structures now developing, four
and a half, five years out, that I think will deliver and will
drive this and that is very clear and that needs to be the case.
We have to be very open about this. The participation legacy is
not simply going to fall into our laps because we have the inspiration
and the opportunity of an Olympic Games. You will need to have
properly structured programmes, properly resourced, to make sure
that we can tap into all that. The history of Olympic Games providing
a once and for all increase in participation is not good unless
that planning and that thinking is taking place now. Barcelona
was a good example. In Barcelona, before the games, something
like 20,000 people in the city were attached to sports clubs,
were regular members of sports clubs. That figure has now risen
to nearly 200,000, but that did not take place simply because
the games came to Barcelona. There was some serious thinking behind
that to go on driving that, and that is what is important.
Q92 Paul Farrelly:
Can I just come to questions regarding LOCOG's income. You initially,
if I remember, saw expressions of interest from tier one sponsors
in six categories. How many do you expect now and how many have
you signed up?
Lord Coe: I am going to ask our
Chief Executive to take you through our income projections.
Mr Deighton: Let me tell you where
we are on sponsorship. Our target for sponsorship is £650
million. We have approximately £170 million already raised
from three existing sponsors that have come on board—that
is Lloyd's, TSB, EDF and Adidas. In five minutes we will be announcing
another one, a tier two sponsor, Deloittes, in the professional
services category. We have brought forward that particular tier
two category because the services and value in kind they offer
us are actually valuable to us now, at this stage in our development,
so it was to our advantage to secure that relationship now. We
expect to complete another three sponsorships by March this year,
two tier one and one tier two. So, by March this year, I would
anticipate something like, let us say, 40% of our total already
raised—that is both in cash and in value in kind. As you
will understand, with some of the sponsorship arrangements some
people give us cash, some give us the things that we need to put
on the games.
Q93 Paul Farrelly:
In terms of numbers of tier one sponsors you expect, would that
make it seven?
Mr Deighton: We would have—.
No, by March I would expect us to have five tier one and two tier
two.
Q94 Paul Farrelly:
But in total over the—
Mr Deighton: By the time we have
finished, the maximum number of tier one sponsors we have stipulated
is ten, and we do it that way because part of the attraction of
being a tier one sponsor is a degree of exclusivity, so you cannot
have too many of them. My expectation, frankly, is there will
be six or seven. What determines how many tier one sponsors there
are is, frankly, how many people are prepared to pay the threshold
price of entry, which is £40 million. So, I would have ten
if I could get ten people to pay £40 million or more. My
expectation is there will be another one or two after the deals
we have done up to March.
Q95 Paul Farrelly:
Was not the threshold £50 million?
Mr Deighton: No, I think the expectation
was that, on average, the tier one partners would pay 50, and,
as you can tell, if I have done three and got 170, we are exceeding
that. The entry price is 40, so let us call the average 50. It
is really set by the market essentially. Obviously our objective
is to maximise income so we can put on the spectacular games we
are planning and the way we approach it is to take a category,
talk to the participants in that industry, get them as excited
as possible about what an association with the games can do for
their business, how it can improve sales, get their customers
excited, what it can do for their colleagues, their own workforce,
also how it can motivate them, how effective a platform it can
be for their various community initiatives, and then to essentially
have a competitive auction where they bid for the right to be
our sponsor. So, ultimately, the market determines the price.
We do it in a way to maximise the return that we can get from
the level of interest that we generate.
Q96 Paul Farrelly:
As things stand, if you get your seven tier one sponsorships you
are expecting a minimum of 330 million and that might rise to
450 if you get ten?
Mr Deighton: From the tier ones,
yes, and then the rest are filled in by the tier two and tier
three. The tier two sponsors threshold entry price is 20 million
and then tier three, in the main, are suppliers who will provide
us with goods and services in the ten to 20 million pound price
bracket. So, what we are doing at the moment is to identify what
it is we require to stage the games in terms of goods and services
and concentrating those into groups which allow us to go to certain
companies and say, "Okay, here is an opportunity for you
to essentially provide us with those goods and services in return
for which you get a supplier designation as a supporter of the
games."
Q97 Paul Farrelly:
Do you how much Beijing has raised in sponsorship?
Mr Deighton: Yes. I do not have
an exact number, but it is something like a billion and a half
dollars. That would translate on a simple exchange rate to 750,
so a little bit above our target. There are two very significant
differences in the case of Beijing. The most significant one is
nearly all the sponsors are state-owned companies, so they do
not quite go through the same process of persuasion as ours do,
and, secondly, of course it is a significantly larger economy.
Q98 Paul Farrelly:
There was some concern—UK Sport is looking to raise its
own money—that you might be fishing in the same pond, which
might make it more difficult for one or the other. Sue Campbell,
after discussions with you, said she had listened and respectfully
worked in partnership with you and that you, LOCOG, were now very
supportive of the direction that UK Sport are taking. Is that
accurate?
Mr Deighton: Yes, we work very
closely with UK Sport. You are absolutely right, there is clearly
the potential for sponsors to be confused in these related opportunities
and, therefore, UK Sport has been extremely helpful in consulting
us every step of the way. In fact I think they are currently interviewing
prospective advisers to help them with this task, and one of my
staff members is sitting on that panel to make sure that the terms
of reference for those advisers and the on-going process for that
adviser is managed in a way to ensure that there is no competition
in the market place which could damage our respective fund-raising
efforts.
Q99 Chairman:
On that particular point, you attach great significance to exclusivity
of your top level sponsors. Might that exclusivity be diminished
if UK Sport were to sign up a sponsor in the same area as one
of your tier one sponsors?
Mr Deighton: Only if the relationship
with UK Sport or, frankly, anybody else who was looking for those
sponsors, gave the sponsor an association with London 2012.
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