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Volume 21 No. 1
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Austerity measures force more cost controls

When the United Kingdom’s new coalition government began to make good on its campaign to reduce government spending, Olympic officials worried that the axe might fall on them and feared significant cuts would require an overhaul of Olympic planning.

“[We] knew they would come,” said Dennis Hone, CEO of the Olympic Delivery Authority, which is responsible for the construction of the London 2012 venues. “They had to treat us like any other part of the public sector. But we’d run what I’d like to think was a pretty tight ship here.”

Hone and others only hoped that the government saw the same thing. It did, and after reviewing the Olympic budget, the government last year proposed cutting only $43 million, a sliver of the $14.8 billion being spent to host the Games.

London organizers were in the middle of their planning process for the 2012 Olympics when the global recession hit. The resulting economic storm had already forced them to make difficult decisions about spending. Their ability to do so resulted in several savings that future cities might borrow as they look to contain the ever-escalating costs of hosting an Olympics.

After being awarded the Games in 2005, London organizers had three years to secure land and finalize venue

Organizers reduced the number of athlete apartments planned by nearly 1,000 units.
construction planning before needing to cut nearly $1 billion from their budget after the recession. They achieved $64 million in cuts by canceling plans to build a temporary facility to host badminton and rhythmic gymnastics competition, relocating those sports to an existing venue, Wembley Stadium, instead.

Organizers also shelved plans to have a private company build the Olympic Village. The credit market was in shambles and the reality was that no private company could finance the $788 million project. The Olympic Delivery Authority shaved costs by reducing the number of athlete apartments by nearly 1,000 units.

Organizers created additional savings by building a single facility to serve as the Main Press Center, which serves global news organizations, and International Broadcast Center, which serves Olympic rights holders. Historically, the Olympic organizers built separate facilities for the users.

“We had to rationalize the design, get the cost down, take a lot of the amenities out of the building and use temporary facilities,” said David Higgins, the former CEO of the Olympic Delivery Authority.

Securing those cost savings wasn’t easy. Moving badminton and gymnastics required approval from both sports federations; building one facility for the press and broadcast center required approval from the International Olympic Committee. However, the resulting approvals may make it easier for other organizing committees to pursue similar savings in the future.

The idea of developing temporary stadiums — an Olympic first — might also benefit future organizing committees. London organizers have already offered to help Rio de Janeiro, which is hosting the 2016 Olympics, by breaking down and shipping the temporary basketball venue built for the 2012 Games. If the cities can get two uses out of one basketball venue, they would not only save a minimum of $100 million, they would also eliminate the white elephant that the stadium would become after the Games.

“One of the great challenges for the Olympic movement moving forward is to make sure we have an Olympics that can go to countries … around the world,” said Hugh Robertson, the United Kingdom’s sports minister. “This shouldn’t just be leading foreign East nations, North American nations, European nations. It should go to developing nations, too.”

Another idea that future host cities could borrow arose from the coalition government’s efforts last year to cut Olympic costs. The government advocated cutting a wrap planned to go around the Olympic stadium. Olympic organizers agreed to cut public funding for the wrap, which was designed for aesthetic, not functional, purposes, but to keep the design element and seek a private sector sponsor.

It was a gamble. There are no corporate signs in or around Olympic venues, so whoever sponsored the wrap would be able to take credit for it only in print or advertising and promote it internally. But the London Olympic Organizing Committee found a partner, which it expects to announce soon.

“I think in this instance going to the private sector and getting the private sector to fill in the gap, they will see that as good business for the future,” Hone said.

The previous London Games of 1948 were known as the Austerity Olympics. The event was underfunded, coming on the heels of World War II, when the country was still rebuilding itself. While the word austerity is being tossed about frequently across Europe, none of the Olympic organizers believe next year’s London Games will be branded the same way as the 1948 Olympics. In fact, there’s optimism that the austerity measures being taken in the United Kingdom will end at the same time the torch is lit for the London 2012 Olympics.

“There’s a feeling 18 months into [the austerity program] that we may be through the worst bit, and this will be a great national celebration,” Robertson said.