2012 budget to change in new year cost review

Further changes are expected to hit the budget for the London Olympics after the government confirmed a hike in costs last week.

QS News understands that a review of the cost plan for the scheme, undertaken by delivery partner CLM, will not be completed until early next year.

A source close to the consortium, which includes Mace and Laing O’Rourke, said: “The cost plan is still under review. There are bound to be further tweaks.”

It is also understood that Davis Langdon, which was part of the winning CLM consortium, has yet to be officially confirmed as the cost manager for the delivery partner. A source close to CLM said that the firm had to re-apply for the position as it was a second-tier role, but an agreement for the firm to join was “imminent”.

Culture secretary Tessa Jowell confirmed last week a £900m increase in the budget for the Olympic park,

due to an increase in steel costs and a £400m payment to CLM to ensure the construction programme goes smoothly. This led to criticism that cost control was non-existent on the scheme even before work had begun. Meanwhile, this week the Olympic Delivery Authority (ODA) revealed it has scaled down the Aquatics Centre, designed by architect Zaha Hadid (below right).

Asking anyone what the budget will be is like asking me who will win the 2.30 at Haydock

Michael Byng, RICS

Experts, however, have played down the chaotic picture. One source claimed the team had been hampered by poor communication.

RICS QS faculty chairman Michael Byng said discussion of the budget had been one-sided. Byng said: “You need to look at the receipts coming in from the project, such as with land sales, as well as the expenditure. Right now all we are getting is the expenditure, but this seems like a dynamic business case.

It is inevitable that costs are going to vary because of this. However, asking anyone what the budget will be is like asking me who will win the 2.30 at Haydock on Saturday.”

Criticism of the client, the ODA, was voiced last week by the industry. One major contractor claimed the apparent spiralling of costs was due to the lack of early contractor involvement. At the Thames Gateway Forum on 23 November Nick Balmer, business development manager at Edmund Nuttall, said: “Early contractor involvement shows whether you are getting value for money even before you set the budget”.

Balmer said that clients “should come to us and [say] ‘this what we want to build, how do we go about it?’”

He commented that while recent improvements in procurement were commendable, they had not gone far enough. “We have a huge amount of skilled people who are diverted, sometimes for years, by procurement.

It isn’t right that these talented and creative people are spending all their time filling forms

Nick Balmer, Edmund Nuttall

It isn’t right that these talented and creative people are spending all their time filling out forms.” Balmer said the Highways Agency’s move to early contractor involvement was “excellent”.

Howard Shiplee, director of construction for the ODA, said in the same conference session that he welcomed a debate about procurement. “The comments about procurement are good... We want to know what the industry thinks.”

He said the ODA was talking to Team McAlpine, the consortium chosen to design and build the Olympic stadium, in order to establish a collaborative approach based on “one project focus”.

He said: “There is a lot of debate about design at the moment but a lot of what we are doing is temporary, so we are not going to leave white elephants.”

Shiplee added that it was down to the client to “set the conditions for the success of a project”. He refused to be drawn into questions about the costs of the Olympic project: “I am not going to talk about money. It’s being debated in government.”