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 The London Olympics on budget says the IOC

The London Olympic Games are not over budget, the International Olympic Committee President Jacques Rogge recently said. The public sector budget stands at USD 14.6 billion, which includes a contingency fund of USD 785 million.  

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, had earlier said that the venues were on track to be delivered on time and within budget, but that “the Public Sector Funding Package is close to being used up and we are concerned about whether the running of the Games will be held within budget.” She was speaking as the Committee published its report based on evidence from various departments, including the Home Office, Transport for London and the Olympic Park Legacy Company.  

A speaker at the marcus evans Infrastructure Project Management and Delivery Conference, Shankar Narayanan, Head Project Controls at Larsen & Toubro says that the main reason that a project may go over budget is because the requirements of the project sponsor or initiator are unclear. “They need to clearly express what they expect and in what timeframe. If there is ambiguity in these areas, it is very likely that the initial cost estimates will overshoot. It all depends on the clarity of the project initiator,” he said.  

Narayanan, who has overseen the Delhi International Airport project that was completed in the record time of 39 months added: “Project timeframes and budgets go overboard if the requirements change or if sufficient provisions are not made for the areas where cost estimates can go off board. When potential risks are not properly identified and they happen, it means that the risk assessment was not sound enough.”  

In such large scale projects, many external bodies may be involved in making the project conditions suitable; land may need to be acquired and facilities may have to be relocated. If interests are not aligned and the approving authorities do not appreciate the project’s urgency, that mismatch may escalate costs, according to Narayanan.  

“It is very important that the relationship between the contractor and the project owner is in good health. When multiple stakeholders are involved, each one may have his own agenda. If both parties adopt a give and take principle, solutions emerge sooner. How this relationship structure has been set up makes a big difference to the overall success of the project.”  

To ensure that the London Olympics do not have the same impact that the Athens Olympics may have had on the Greek economy, Narayanan said: “Whether it is the Olympic Games or a rail project, a project should be viable. The costs and benefits have to be identified and quantified. The benefit may be the infrastructure itself or the opportunity created for the city or town. The decision to host the Olympics in Athens or London will have taken these into account. Although some may consider running over the budget as an issue, the benefits are still likely to outweigh the costs,” Narayanan concluded.  

The marcus evans Infrastructure Project Management and Delivery Conference will take place at the Novotel Mumbai Juhu Beach in India, 11 - 13 April 2012.

For more information, please visit the event website

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