The Olympic Funders’ Group1 met yesterday and agreed to allow the Olympic Delivery Authority (ODA) to access £394 million of funders’ contingency. This decision provides £68 million, to meet the funding requirements of the International Broadcast Centre/Main Press Centre (IBC/MPC), and £326 million to support the construction of the Olympic village. The overall £9.325 billion public sector funding package remains unchanged.
As a result of good progress being made by the ODA, this investment is affordable from the overall contingency funds available and the contingency provision still available exceeds the assessed value of remaining risks. Alongside other contingency allocations, this means that around £1.5 billion of contingency funds remain available. The additional funding required is due to the shortage of private sector funding and the deterioration in the property market as a result of the current global economic downturn.
The IBC/MPC is still planned to be built as two permanent structures, with some temporary elements for games-time, based in Hackney in the north-west corner of the Olympic park as originally planned.
The IBC/MPC will accommodate 20,000 broadcasters and journalists in 2012. It is anticipated that it will contribute to a strong employment legacy post 2012 for the area.
The overall cost of the venue has reduced from £380 million to a new budget of £355 million. The original budget assumed a private sector contribution of £160 million which is no longer available, with £220 million from the ODA budget. As a result, £68 million of funders’ contingency is being provided to bridge the funding gap. This allocation by funders is in addition to £67 million that is being made available from ODA Programme Contingency2, to provide a total budget of £355 million.
The public sector will retain ownership of the asset and the ability to bring in private sector funding at a later stage. The new budget includes funding to ensure that the buildings left in legacy have the flexibility to be adapted to a wide range of uses, to maximise the potential employment opportunities after the games.
The Olympic village is planned to have up to 3,000 apartments, fewer than in original plans, but the IOC requirements for athletes during the games can still be met with this reduced number. The village will house up to 17,000 athletes during the Olympics and over 6,000 during the Paralympics.
The funders’ group have agreed to allow the ODA access to a further £23l million in contingency, to maintain the momentum of the project while discussions on private sector financing continue, following the agreement last year that the ODA could spend an initial £95 million this financial year. The total contingency for the village is therefore £326 million.
The ODA is continuing to negotiate with Lend Lease (the anticipated private developer), and the banks, in terms of the private investment for the Olympic village, and this decision on the funding available will enable good progress to continue to be made on site. Negotiations are also continuing with Registered Social Landlords (RSLs), in relation to the provision of affordable housing, which also contributes to the funding of the overall project.
The Olympic village will provide up to 3,000 homes after the games, of which around 30 per cent. will be affordable, creating a core part of the legacy plans for the future regeneration of the Lower Lea valley.
Contingency funds available
The £9.325 billion public sector funding package announced in March 2007 included £2.7 billion of contingency. Some £0.5 billion was released to ODA when its baseline budget was confirmed at the end of 2007, and £0.238 billion was allocated as contingency for security. Some £2 billion of contingency therefore remained available for the ODA. Further details on the total public sector funding package and the ODA baseline budget is available from the “London 2012 Olympic and Paralympic Games Annual Report: January 2008”.
Of the £2 billion remaining available in the baseline budget, only £35 million (as set out in the table below) has been allocated to projects other than the village and IBC/MPC. Taken together with the decisions now being announced, the ODA have now, in total, been given access to around 25 per cent. of the £2 billion contingency remaining at the time of the baseline budget, leaving around £1.5 billion of contingency remaining available.
Part of the funding required is controlled by the Olympic Lottery Distributor (OLD) and the OLD board will consider the issue in due course.
A full picture on the contingency released for other projects, and an update on the overall picture across the programme, will be contained within the next 2012 annual report due to be published next month.
1The Ministerial Funders’ Group is Chaired by the Chancellor of the Exchequer (Alistair Darling), and also consists of the Chief Secretary to the Treasury (Yvette Cooper), Minister for the Olympics (Tessa Jowell), Culture Secretary (Andy Burnham), Communities Secretary (Hazel Blears) and Transport Secretary (Geoff Hoon). The Mayor of London attends but is not a member.
2Programme contingency is for risks managed by the ODA, in relation to delivering a programme of projects on this scale, on a tightly constrained site, against an immovable deadline. Funders’ contingency is to cover other risks, beyond the project and programme level—principally risks outside the control of the ODA.
Funders’ Contingency Programme Contingency Total £m £m £m Various - balance of funding required after savings -see below 21.5 Olympic Stadium (roof steel strengthening) 8.2 Handball Arena (acoustics and HD lighting) 2.3 Handball Area (increased seating capacity) 2.4 Olympic Stadium (resilience) 0.7 Totals 3.1 32.0 35.1
Various - balance of funding required after savings -see below
Olympic Stadium (roof steel strengthening)
Handball Arena (acoustics and HD lighting)
Handball Area (increased seating capacity)
Olympic Stadium (resilience)
The £21.5 million programme contingency referred to above was released in September 2008, as a result of the net balance of funding required following:
budget increases required on a number of projects, including powerlines and legacy requirements for the aquatics centre, and new budgets for sustainability and technical reviews;
savings arising on various other projects including: enabling works, various transport projects and structures bridges and highways.