Not Saussure

March 7, 2007

Another aspect of Blair’s legacy?

Filed under: hubris, Olympics, UK — notsaussure @ 2:43 pm

Along with cash for honours, the Dome, Iraq and 3,000-odd new criminal offences (one of which, people will be pleased to know, means you can now get your collar felt for causing nuclear explosions), we should not forget what may be one of the longer-lasting reminders of his period in office with Mr Blair leaves us.

The First Post today carries an interview with Sir Christopher Gent, one of the country’s leading businessmen, who turned down the opportunity to lead the Olympics Development Authority, a post temporarily filled by the US construction expert Jack Lemley, who resigned in October saying,

Well, I’ve never walked away from a project ever until I retired from the London 2012 programme, and it was so political that I think there is going to be a huge difficulty in the completion both in terms of time and money and it’s much more difficult because there’s so much time being lost now. The costs are going to go up on an exponential basis and I’m just not going to be part of it. I think at the end of the day if I’m wrong and they can do it all for their budget then maybe I’ll have some regrets about it, but right now I don’t want my reputation ruined being able to deliver projects on time and on budget. If the team can’t do it I don’t want my reputation ruined so I felt it was better to come home now than face that in five or six years, time goes by real quickly. He says,

Sir Christopher says

It’s too late to give it to Paris, […] but there should be serious consideration about whether we want to continue. I like the notion of a referendum.

The problem is, of course, that the costs seem out of all control;

Despite two hours of questioning [by the Public Accounts Committee on Monday], officials from Sports Minister Tessa Jowell’s department still refused to confirm rumours that the budget had already rocketed from £2.37bn – the figure declared at the time London won the bid in July 2005 – to £10bn or higher. They said only that they would provide details “soon”.

This is the real problem, says Gent – no one seems to have a clue. “It’s appalling, one nasty shock after another. The time has come for a total re-budget; a complete recalibration of the project starting from scratch and going back to basics; get in the experts, the project directors, and demand that Government tells the whole picture. That is what you would do if a business was running a vast project like this.”

The First Post points to the precedent of Denver, Colorado, where, in 1972, the citizens voted to withdraw from hosting the 1976 Winter Olympics after a 300 per cent cost increase on the original estimate. London started out at £2.4 billion — a figure artificially deflated because no one remembered to include the VAT, a problem dismissed by Jonathan Stephens, the Department for Culture, Media and Sport’s permanent secretary in his evidence to the Public Accounts Committee as a

technical issue in which money will be moved from one arm of Government to another.

Then cities were invited to play host to the Games, so there was no question of compensation payments for pulling out; the costs of so doing now would doubtless run into many millions, but there is apparently a clause in the agreement that allows cities to withdraw.

Doubtless the citizens of Montreal rather wish they had; apparently they’ve only just finished paying off the debts incurred by running the 1976 Summer Olympics. This fate will probably not befall Londoners, since it’s a racing certainty that part of the bill will end up being footed out of national taxation.

Meanwhile, I see that the Lords held a very interesting debate on the topic last week, which included a fascinating contribution (at least, I found it so) from Lord James of Blackheath, the corporate trouble-shooter who is credited with saving The Dome’s construction (as opposed to its operation) from financial collapse. He and his former colleagues in the senior management of the Dome project had, he explained to their Lordships, submitted a paper to the Department for Culture, Media and Sport and to the National Audit Office, suggesting ways in which the Olympics’ organisers could learn from the mistakes made with The Dome. Many of these, he was gratified to see, had been taken up, but

there were four sections in which the report watered down our advice or eliminated it altogether. I will highlight those points today, because they are potentially the subject of an enormous waste of money in the process of the Olympics as time goes forward. First, the most persistent problem that the Dome had was to sustain solvent trading at all stages, and solvency, if you have not got it, is extremely expensive in commercial consequences. Secondly, there is the use of consultants. I know that there is a big budget for consultants at present but, like the leaves that regularly stop railway trains in bad weather, they are the wrong consultants in the main. I will go into that in a bit more detail.

Thirdly, there is the obstacle race that the Government impose on the sensible contracting-out of essential services. The Government believe that they can do anything better and cheaper than everybody else, and the Government are emphatically wrong. Finally, there is sponsorship, which is a frightening area. A big budget is assumed for sponsorship, as there was at the Dome. If the same shortfall on sponsorship achieved occurs in the Olympics as happened at the Dome, you will immediately need to add half a billion pounds on to the budget now because that will be the shortfall cost.

He goes on to discuss these problems in detail, and very interesting reading it is, too, both for the warning it provides about what’ likely to go wrong with the Olympics and for the extraordinary insight it provides into the chaos that surrounded the Dome. For example,

The bought ledger at the Dome was a complete and utter catastrophe. One day, when I had been at the Dome about a month, I had a phone call from an individual who said, “I really just wanted to thank you, as the new chairman, for the £100,000 I received yesterday and ask you to assure me that it is safe for me to spend it”. I said, “What is it for?”; he said, “It is the £100,000 you send me every month”; I said, “That is very interesting. What do you get it for?”; he said, “Well, we could not balance our invoices with you at the back-end of last year and we were not going to continue to finish the building, so Jenny Page agreed we could have £100,000 every month just to keep us going and that we would sort out the invoices later”. I asked, “And have we sorted them out yet?”; “Oh, no”, he said, “But you keep sending me £100,000 every month, which I do appreciate”.

As he points out, The Dome was one mismanaged project. The Olympics comprise 14 separate ones, one for each stadium.

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1 Comment »

  1. Well, Mr Gent (ex-head of Vodafone) certainly ought to know about carelessly losing billions of pounds

    Comment by john b — March 8, 2007 @ 1:30 pm

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