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Olympics Minister Tessa Jowell written ministerial statement - Olympic Delivery Authority budget

10 December 2007

In March this year, I announced the overall public sector funding package for the Olympic and Paralympic Games totalling £9.325bn. Of this total, £6.090bn including tax and £500m of initial contingency was identified as public sector funding for the Olympic Delivery Authority (ODA). The remainder of the package covered security, sports and other non-ODA costs, together with a prudent contingency for ODA and security costs. A fuller breakdown is included at Table 1.

As with any major project at this stage, further work was needed to ensure that the budget is fully aligned with scope, programme and risks. This work has now been completed allowing us to publish a more detailed ODA budget in line with the recommendations of the NAO report in July 2007 (The Budget for the London 2012 Olympic and Paralympic Games). I can now confirm that this has validated the ODA Budget and overall funding package I announced in March.

Detailed Project and Programme Plan

The ODA has completed a detailed project by project analysis of its scope, costs, programme and risks, to assess the total projected cost of their programme of works for the Games and for legacy transformation. This has confirmed that the base cost, excluding general programme contingency, is £6.090bn, the same as the ODA budget within the announcement in March 2007 of a total Government funding package of £9.325bn.

It is recognised that regenerating a 500 acre park to stage a great Olympic and Paralympic Games, as well as providing the underlying infrastructure so that long term legacy benefits can be achieved, involves managing significant risks. This is the reason why the Government included a prudent contingency in the March announcement.

Therefore, in addition to the project level analysis, programme-wide risks have also been assessed and quantified. The contingency available, within the funding package announced in March, has been confirmed as sufficient to cover the risks at both project and general programme levels.

Allocated Contingency

In June 2007, the Ministerial Funders’ Group - established to manage the allocation of contingency to the ODA within the overall budget  - met and agreed a first allocation of contingency to the ODA, being £360m out of the £500m of initial contingency announced in March, to enable the ODA to manage early cost pressures.

Following its second meeting on 26 November 2007, the Funders’ Group has now agreed

  • A baseline budget and scope proposed by the ODA. The total budgeted base cost to be met by the public sector funding package remains at £6.090bn including tax and excluding general programme contingency as I announced in March
  • This includes the allocation to the ODA of the remaining £140m from the initial £500m contingency that I announced in March, covering as planned the cost pressures on early projects across the ODA programme.

Total contingency available

As a result of this further work and recent decisions, there still remains £2.009bn of contingency. This contingency includes provision against known programme-wide risks, and against risks that are outside the ODA’s control. The programme-wide risks, and other risks outside the ODA’s control, have been assessed and quantified and the contingency available has been confirmed as sufficient to cover such risks. 

Access to any of the £2.009 contingency will only be on the basis of a case by case assessment of actual risks arising and any mitigation that can be taken. The ODA is also incentivised to limit requests for release of the contingency to the minimum consistent with securing good value in such a large and complex programme, and will manage its contracting strategy accordingly.

Table 2 summarises the funding position, including a detailed breakdown of the ODA Budget as a result of these decisions, and Table 3 summarises the contingency released.

In addition, as previously identified, £238m of the £2.247bn contingency has been set aside to cover the risks in relation to security beyond the budget of £600m I announced in March. The funding allocated to security will continue to be subject to oversight and scrutiny in the coming months and years by the relevant Cabinet Committee, the Home Secretary and the Metropolitan Police.

Next Steps

In the New Year, the ODA will issue a summary of the baseline scope, aligned budget, programme and risks.  The budget and scope now agreed will provide a robust baseline for future reporting.

I will provide a detailed account of progress across the Olympic programme when the first Olympic annual report is produced in the New Year. I will make further reports to Parliament on a 6 monthly basis, including information on further allocation of contingency.
 
Note

The following tables do not include a breakdown of individual project costs, budgets or contingency requirements where this is necessary to protect ongoing commercial confidentiality.

Top
 
Table 1 Funding announcement March 2007.

The total public sector Olympic funding envelope is £9.325bn and the maximum public sector funding package for the ODA is £8.099m as follows:

 

£m

£m

£m

Total funding package

9,325

Less Non ODA costs

Elite and Community sports

290

Paralympic Games

66

Look of London

32

388

Security 

600

Security contingency

238

838

Total Non ODA

(1,226)

Total Available for ODA

8,099

ODA Base costs inc VAT

5,590

Contingency released

500

Total ODA before  Unallocated contingency

6,090

Contingency remaining

2,009

Maximum funding available for ODA

8,099

 

Table 2   The detailed breakdown of the ODA budget is as set out below:

Project

Detailed Project

Base Cost

VAT

Gross cost

£m

£m

£m

Site Preparation and Infrastructure

Powerlines

240

42

282

Utilities

217

38

255

Enabling works

310

54

364

Structures, Bridges, Highways

706

124

830

Contribution to Prescott Lock upgrade

5

0

5

Other infrastructure (Greenway, Landscaping

175

31

206

Total Site Preparation and Infrastructure

1,653

289

1,942

Venues

Stadium

422

74

496

Other Olympic Park Venues

488

86

574

Non Olympic Park Venues

86

15

101

Total Venues

996

175

1,171

Transport

Stratford Regional station

114

5

119

Contribution to DLR upgrade

86

0

86

Thorntons Field relocation

40

7

47

Contribution to North London Line upgrade

110

0

110

Other transport capital projects

161

17

178

Other transport operating expenditure

328

29

357

Total Transport Projects

839

58

897

Other Parkwide Projects

Logistics for site construction

287

50

337

Section 106 and master planning

108

19

127

Insurance

42

8

50

Security for park construction

301

53

354

Total Other Parkwide Projects

738

130

868

IBC/MPC, Olympic Village, Programme Delivery and  Taxation

IBC/MPC, Olympic Village

491

1

492

Programme Delivery

580

67

647

Corporation Tax and Net Interest

0

73

73

TOTAL

5,297

793

6,090

REMAINING CONTINGENCY

2,009

MAXIMUM FUNDING AVAILABLE FOR ODA

8,099

 

Notes:

  1. The amounts shown above are net of contributions receivable totalling £589m, which includes amounts related to enabling works, utilities and village.
  2. Projects which are not disaggregated such as Other Olympic Park Venues are still subject to contract and accordingly are commercially sensitive at this stage.
  3. Programme delivery includes a provision for performance related payments to CLM, the ODA Delivery Partner.
  4. Contingency as announced on 15 March 2007 totalled £2,247m.  This is included as two separate amounts, £2,009m as included above and £238m identified as Security Contingency within the Non-ODA Budget.  The Security Contingency of £238m was announced to Parliament on 17 October 2007 (Hansard 17 October 2007 Column 1133W).
  5. Whilst a cost to the Games, all tax paid by the ODA will be a future receipt to the Exchequer and accordingly no net additional cost to the public sector.

Table 3 The Detailed Breakdown of Contingency released

 

Released Contingency included in Cost

Site preparation and Infrastructure

177

Venues

100

Transport

21

Other Parkwide projects

208

IBC/MPC, Olympic Village, Programme Delivery and Taxation

(6)

 

500

Tessa Jowell, Olympics Minister, said:

"We are doing what we promised: keeping Parliament and the public up-to-date about the finances for 2012.

This statement shows that after a thorough assessment of all the potential risks associated with a development of this scale, the budget is consistent with the funding package I outlined in March this year.

Months of careful scrutiny have confirmed that the Olympic Delivery Authority has the money it needs to deliver the venues and infrastructure for a terrific summer of sport, as well as leaving a long-term legacy for one of the most deprived parts of the country.

Now we look ahead to what will be a dramatic 2008, with the first building work starting on the Olympic Park site, the Beijing Games and the start of the four year countdown to London 2012. The project has high levels of public support and is on track."

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