| Unrealistic 2012 budget slated by MPs |
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| Tuesday, 22 April 2008 | |
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Page 2 of 2 No assumption that remaining contingency will be used There are over four years to go until the start of the Games but £500 million (18 per cent) of the programme contingency has already been used. The PASC said that, contrary to the Department's suggestion, there should be no assumption that all of the remaining £2.2 billion contingency will be used. “It is for unforeseen costs and the Department should satisfy itself that options to contain costs have been fully explored before further contingency is used,” the Committee pointed out. Despite the £5.9 billion increase in the public funding for the Games, the Department has not specified what will be delivered in return for this expenditure and the current budget cannot be reconciled to the commitments in the original bid. Clear audit trail The Committee added that in order to provide a clear basis for accountability, the Department should publish a statement of what will be delivered, including the legacy plans and benefits for the programme as a whole, as well as an assessment of progress against that baseline in its annual reports to Parliament. It should also show how any subsequent changes to the plans reconcile to the baseline and support them with a clear audit trail. The preparations for the Games depend on the Department's ability to co-ordinate funding from a number of sources. The PASC warned that the Department should maintain up to date forecasts of the cash needs for the Olympic programme and the timing of individual funders' contributions. Given that the date of the Games is fixed, the Committee concluded that the Department needs to identify any funding shortfall well in advance, and put in place contingency plans for dealing with it. Private sector contributions The organisers have been disappointed by the lack of financial support from the private sector to date. Revised expectations for private sector contributions have increased the estimated cost to the public sector by £748 million. The March 2007 budget for the Games included a £175 million public sector contribution to the cost of the Olympic Village, which was previously going to be fully funded by the private sector. In addition, the absence of legacy plans has made it harder to attract private investment, and the estimated private sector contribution has fallen by £573 million. In finalising legacy plans, the Department and the Olympic Delivery Authority should seek to reduce public sector costs by attracting private investors, who could also promote use of the facilities after the Games. Reimbursement inherently uncertain The National Lottery is providing £2.175 billion (23 per cent) of the funding for the Games, but the Committee found that its share of any financial benefits is uncertain. “The estimated £675 million reimbursement to the Lottery is inherently uncertain as it is based on estimated proceeds from future land and property sales, and on an agreement with the Mayor of London which is not legally binding,” according to the PASC report. The long term cost to the public sector may also be offset by profits from the future sale of the Village flowing back to the Olympic Delivery Authority. The PASC concluded that the Department and the Delivery Authority should identify all potential revenue generating opportunities and establish principles for how any benefits might be shared amongst the funders, including the Exchequer and the National Lottery. Supplier competition The Olympic Delivery Authority is having difficulty generating supplier competition for some venues. “Ideally, contracts should be awarded after effective competition between suppliers. If this is not achieved, it is all the more important that the Olympic Delivery Authority builds cost and performance safeguards into contracts,” the Public Accounts Select Committee recommended. It said that the Olympic Delivery Authority should have rights of access to contractors' books to check costs and financial viability, and should establish clear contractual incentives for delivering to time and cost targets. The Authority should also have early warning arrangements and contingency plans in place to identify and resolve any problems with contractors, and, if necessary, replace them. No basis on which to measure achievements The Department is aiming for wide ranging legacy benefits from the Games, but the PASC found that there is no basis on which to measure achievements. “The legacy planning should now be completed and for the full range of expected benefits, extending beyond East London to the United Kingdom as a whole, the Department should make sure that the plans set out quantified objectives and how they will be achieved, how and by whom success will be evaluated, and who will be accountable,” the Committee concluded. Related articles
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