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The Sochi Winter Olympic Games will begin next week. Billed as the most expensive Olympics project in history the Sochi Games are estimated to have cost $51bn – a price tag that has been widely criticised amid allegations of corruption and environmental damage.
Allison Stewart – an associate fellow at Oxford’s Saïd Business School – has a personal as well as professional interest in the running of Olympic Games. She was born and raised in Montreal, the Canadian city which hosted the summer games in 1976 and recorded the highest cost over-run of any Olympics.
Dr Stewart’s research ‘Olympic Proportions: Cost and cost over-run at the Olympics 1960 -2012’ with colleague Bent Flyvbjerg calculates that, on average, such mega projects exceed their budgets by 179 per cent.
Why do overruns happen so often?
The bid budget is not incentivised to be a budget that can be delivered. Our study shows that every Games has been over budget, compared with the bid. The budget is a minimum rather than a maximum target. That said, the Games are enormously complex and have to weather significant changes in political, economic and social policies over the course of their development. The global financial crisis hit Vancouver and London particularly hard and security concerns have been tantamount after events like 9/11 for Salt Lake City and the 7/7 bombings in London.
Could project management disciplines be tighter?
I found examples of exceptional management in many of the organising committees I studied. However these organisations are required to build a Fortune 500 company in less than seven years and then tear it down again, which is a huge challenge. Most of the work on organisations and projects is not designed to cope with this kind of timeframe.
Any advice for Games organisers?
Plan for the worst-case scenario. Can your country support a 179 per cent cost over-run? Is there a long-term need for the facilities planned to be constructed for the Games? If your city does not need new sporting infrastructure, is this the right opportunity for the city to invest in? If so, involve the long-term owners and stakeholders as early as possible to avoid costly refurbishment later. Understand the social implications – not everyone will be happy with the decisions to be made. Are you prepared to have your decisions scrutinised under the glare of the media spotlight?
What is at stake?
There are many countries now bidding for the Games that may run into much more serious social problems if they do not manage these overruns properly. We invest billions into these events every year, yet their management is rarely the focus of consideration – that must be changed if the Games are to continue for the next hundred years.