The London Olympic Games in 2012 are expected to come in at up to £500m under budget, despite the financial problems that have beleaguered the sporting jamboree.
As the Olympic torch passes from Vancouver, host of the 2010 Winter Games, to London this weekend, senior officials leading the preparations are estimating that the 2012 Games will cost between £8.8bn-£8.9bn.
This is in marked contrast to earlier fears that the London Olympics could spiral massively out of control, with some insiders putting the eventual cost at £20bn, more than double its current £9.3bn budget. Jack Lemley, the American who led the construction of the East London Olympic Park, until bitterly splitting from the project in 2006, has stoked concerns with claims that the true – hugely inflated – cost of the Games has been hidden from the public.
However, two sources close to the Olympic Delivery Authority (ODA), the public-private body overseeing the building of the Games venues, said the construction bill is expected to come in at between £6.8bn-£6.9bn. The build budget is £7.1bn, including £1bn set aside for contingencies, which typically is swallowed up in major construction projects.
A further £200m is expected to go unspent in a £1bn tranche released in emergencies by the so-called "ministerial funders group". This has been used to help fund the Olympic Village, making up a shortfall in private sector financing.
The final £1.2bn of the budget is for the parts of the project not run by the ODA – such as security – and is expected to be spent in full. It is understood that internal London 2012 papers have forecast the £8.8-£8.9bn final bill, though some fear that publicising this expectation could put pressure on organisers to meet what would in effect be a lower budget.
Savings have been made on the clean-up of the Olympics site in Stratford and by using temporary rather than more costly permanent infrastructure. The remediation budget, based on the cost of cleaning up the Millennium Dome site, has been less as far fewer workers have been needed.
"It would be difficult to spend the entire construction budget," said a London 2012 source. "There has been some scope reduction of structures, like bridges and highways that are bringing the Games under budget. The £7.1bn construction part of the budget is all defined and allocated and will be £200m-£300m under."
Although problems can always emerge in major building works, the source said, with 56-58 per cent of construction completed many of the major obstacles had been overcome.
The Department for Culture, Media and Sport (DCMS) has insisted in quarterly updates that the Games will be on budget and has detailed how much of the contingency has been spent as the project progresses. Yet doubts persist because of a number of high-profile budget-busting construction projects, from Wembley Stadium to the Scottish Parliament. Also, the London 2012 bid team got its sums very wrong when it edged out Paris to win the Games in July 2005. At that point, the Sebastian Coe-led team forecast £2.4bn, before finally settling the budget at £9.3bn two years later.
Although the bill for the 80,000-seat Olympic Stadium has been publicly set at £537m, ODA insiders believe it will be completed for about £530m and this includes a previously unbudgeted £10m-£12m for a multicoloured "wrap" around the stadium, covering walls with illustrations.
Sir Robert McAlpine, the construction firm behind the stadium, is due to complete by summer next year. However, the team is understood to be racing the contractor behind the 6,000-seat Manchester Velodrome to be the first to be built early next year.
An ODA spokesman said: "There is still a long way to go and the potential for more risks to arise: 2010 will be the toughest year yet on the project. The foundations for success are in place, but we are in no way complacent."
Running the Olympics: the costs
September 2000 The Sydney Olympics makes a £3.3bn profit
December 2002 Engineering consultant Arup estimates that a London Games would cost £1.8bn
May 2003 Government backs a London 2012 pitch, citing the economic benefits the Games would bring to London's deprived East End, agreeing to help bear the £17m bid costs
August 2004 Athens hosts the most expensive Olympic Games in history, later estimated at nearly £9bn
July 2005 London, with a £2.4bn budget, pips hot favourite Paris to the 2012 Games
October 2006 Jack Lemley, who had quit the previous month as Olympic Delivery Authority chairman, tells his local newspaper, The Idaho Statesman, that London 2012 is in danger of going over budget
November 2006 The Secretary of State for Sport, Tessa Jowell, admits that the cost has risen to £3.3bn
March 2007 Jowell announces a revised budget of £9.3bn
April 2008 Lemley hits the headlines again with claims that the Games will cost £20bn
August 2008 Beijing dwarfs Athens' record, with some estimates placing the cost of the Games at more than $40bn (£22bn as at August 2008)
October 2008 Steve Norris, London Development Agency board member and confidant of Boris Johnson, predicts the final bill will come to £19bn
January 2009 Government raids its contingency fund to bail out the International Broadcasting Centre and athletes' village, both hit by the collapse of private-sector funding
July 2009 It emerges that ODA chief executive David Higgins got a £200,000 bonus on top of his £384,000 basic salary
February 2010 Olympic officials confirm that up to £160m will be needed in extra expenditure to run and maintain the Olympic Park in 2011-13
February 2010 Jacques Rogge, the International Olympic Committee president, praises the financial health of London 2012Reuse content