London bids for Olympic record

Barely seventeen months after winning the bid, London looks set to deliver the most overbudget games in Olympic history. The bid document produced in 2005 estimated the cost of the Olympic Sports facilities at £2.4 billion; we are now told the estimated cost is £5.1 billion (113% up), equivalent to a monthly increase of just under 5%. At this rate by 2012 the bill will reach £125 billion, equal to over half of London‘s GDP. Now, that might sound silly if the doubling of costs over the last year was based on a calm and thoughtful reappraisal of the estimates leading to a consensus on the way forward, but in fact it appears that there is widespread confusion in the government and the LOCOG about what to do now. Here are some of the problems:

• There is still no tenant in sight for the Olympic stadium. The government has set a condition that it must retain a running track and any private sector buyer must pay £100 million. The only potential buyer is a football club, and all of them already have stadiums and have no interest in these kinds of conditions.
• There are serious concerns about remediation of the brownfield Olympic site. This is a region that has been home to a variety of toxic industries over the last 250 years, including unknown unknowns not to mention a very large number of unexploded bombs from WW2.
• Start on construction is seriously delayed, provoking a critical comment from former IOC President Samaranch
• Jack Lemley, the American hired to manage the Olympic Development Authority, resigned last month after less than a year in the job, complaining about political interference

I guess most sports economists are going to just yawn when they read all this. Given that the bidding for the 2012 games pitted, London against Paris, New York, Madrid and Moscow it’s hardly surprising if the winner’s curse soon hoves into to view. On the bright side, the construction of the new 90,000 seat national football stadium at Wembley (in London), due to open next year only cost £800 million (that’s a cool $1.5 billion at today’s exchange rate), is only 145% over budget. But then, Wembley was originally meant to be completed in 2003…any chance of London hosting the 2015 Olympics?