Warning of extra demand for Olympic contingency money

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The Independent Online

An extra £160 million could be needed from contingency to run and maintain the Olympic Park from 2011 to 2013, Olympic officials warned today.

It is estimated that £110 million to £160 million could be needed by the Olympic Delivery Authority (ODA) which is in charge of Olympic build and infrastructure but is now taking on responsibility for issues such as venue security, operating the Park and venues, through to test events during this period.

A further £13 million from contingency has also been released to the ODA so they can get on with early work needed this year.

The figures are included in the Government's annual report on preparations for the London 2012 Games which stresses the plan is to see where any savings can be made but to stay within the £9.325 billion overall budget.

It says: "This new scope for the ODA is likely to require additional funding to be allocated to the ODA, from within the existing £9.325 billion budget."

ODA chairman John Armitt said: "We are continuing to make strong progress across the project. There are however still big challenges ahead as construction accelerates across the site and the workforce peaks. This will be our toughest year. We take nothing for granted but I am confident that the foundations for success are now in place."

The ODA, which is working to a £8.1 billion overall budget, has seen its anticipated final costs jump by £21 million to £7.262 billion in the three months to December 2009, the report notes.

Upgrading and integrating security arrangements as the venues switch from being a private to public-led project account for part of the £17 million increase in Olympic Village-related costs.

Falling property prices has seen the ODA take a £150 million hit in the amount the ODA can expect to receive in the development returns of the land next to the Olympic Village in Stratford, east London.

This is owned by London and Continental Railways (LCR) and the ODA, which has had to build bridges, roads and invest in utilities, gets a share of future revenue when this area is developed as offices, residential homes and hotels after the Games.

The report said: "The ODA expects at least some of the potential increases to be covered by project savings and the balance by the use of contingency following the mitigation of risks going forward."

So far £715 million gross has been spent from the contingency and "there is more contingency available than assessed risks", officials said.

Corporation tax savings have already clawed back £45 million on this £150 million drop in land receipts while £55 million is expected in savings which could be made through site preparations, infrastructure projects and venues.

Another £13 million could be shaved off costs for the international broadcast centre/main press centre in light of project reviews, performance so far and added value in procurement.

Today's update is "mixed news", according to shadow sports minister Hugh Robertson.

He said: "It is clearly encouraging that the project remains on time and to budget and is understandable, given the dire state of the national finances, that land values in Stratford City have fallen since 2007.

"However, the need to fund Park operations should have been identified by the Government at the time of the revised budget in March 2007.

"Whether it eventually results in a call on the contingency or is met from savings elsewhere, this is a potential £150m mistake that should not have occurred."

With half of the big build of the main venues, including the stadium, aquatics centre and velodrome, at the Olympic Park already complete the ODA points out that it is on track to meet handover dates in time for test events in 2011.

ODA chief executive David Higgins said the project, which already had 9,164 people working at the Olympic Park and Village by the end of 2009, was now starting its "most complicated and toughest year".

"The biggest single risk is the health and safety of all the many people working on a constrained site," he said.

Olympics Minister Tessa Jowell said: "As we enter the busiest and most exciting phase of the Olympic project so far this report shows we are still on time and still on budget.

"This year we have seen a part of east London transformed thanks to the immense progress made by the Olympic Delivery Authority and contractors.

"Because of this progress we are making savings; £390m in the last financial year, and where we have had challenges to meet we are, therefore, well placed to respond to them.

"We have maintained our focus on helping Britain come through the recession and as the economy recovers we will not become complacent.

"We will continue to ensure that the investment in the Olympics is an investment that brings benefits to the whole of the UK now, and for many years through business, skills, sport and culture."