2012 countdown: Higgins on the big make or break year

The Olympic site in Stratford is home not only to several major building projects and close to 8,000 workers, but also to 11 canteens. Unfortunately for David Higgins, however, the best establishment is already a distant memory. “None of them could match the cafe at the tunnelling site, back in the earlier days,” says the Olympic Delivery Authority’s chief executive, raising his voice above the din of breakfasting workers as he waits for his coffee. “The contractor, Murphy’s, breeds pigs in Ireland and was having the bacon sent over. Those were fantastic sandwiches.”

Higgins’ knowledge of Stratford cuisine has come a long way since our last interview, back in August 2008, when we met in a rundown greasy spoon on Poplar High Street. And so has his grasp of how tough delivering the Olympics can be. In the intervening two years, Higgins has had to confront the deepest recession construction has suffered for decades. He has seen the property values of the assets he is building fall away, and has come under increasing scrutiny over the cost of the programme in an era when the UK has no extra money to give, even if it wanted to.

Somehow, Higgins has tackled these issues with just a 2% rise in costs from his pre-recession estimate. And the project remains on course for handover for test events this time next year. But as Higgins explains, it hasn’t exactly been easy - and the biggest challenges are yet to come.

A turbulent two years

When London won the right to host the Olympics, in July 2005, the construction industry was on the crest of a wave. By the time much of the work on site had got under way, it was drowning in recession, and serious questions were being voiced over the impact on the project.

In May 2008, our anticipated final cost was £7.1bn. Fast forward two years and there’s only 2% difference

Higgins is quick to point out that the timing hasn’t been all bad. “The recession has in some ways helped us, as there’s less competition for resources,” he says. “If there’s a downturn in the construction industry - well, what a time to build. You can protect the skills, and it’s more competitive on pricing. It’s exactly what you should be doing.”

That said, the recession has thrown up some major challenges. Perhaps the biggest fear was around financing. The media centre and the athletes’ village were both expected to include large elements of private finance, but the combination of a severe tightening of bank lending and a drop in the property market meant that the ODA had to make radical changes to its funding plans - keeping the village in public ownership and scaling back the media centre by £100m.

“We’ve had to rethink from scratch, renegotiating contracts with partners,” says Higgins, underlining the scale of the task. “But in May 2008, our anticipated final cost - our management’s best guess - was £7.1bn. Fast forward two years and there’s only 2% difference. We absorbed the credit crunch, which we’re really pleased about.”

Another big concern was the potential impact of insolvencies within the ODA’s supply chain. Remarkably, Higgins says, there has only been “one very minor insolvency” on the project - a steel supplier on some of the bridges. “We worked with the equity owner of that company to make sure we got that steel out of the factory.”

The fact that the project has escaped largely unscathed is down to the measures put in place by the ODA. “We made sure we didn’t have too big an exposure to any organisation, did our credit checks on our supply chain, watched our cashflow payments,” says Higgins. The other big decision was to accelerate payments to within 18 days.

With so many potential turning points, is there anything, with the benefit of hindsight, Higgins would have done differently? “In all things, the most important thing is to get 80% of the decisions right,” says Higgins, smiling. It’s a mantra he has used before.

He pauses. “There are many small decisions that you could always do again, but there’s none of the big decisions that I’d change.”

He adds that, even if the economic cycle had been reversed and the project begun in a recession, he does not think it could have been delivered for less. “In the end, if contractors bid too cheaply, they make it up some other way. They find variations, they trigger disputes.” He says that it’s right contractors should make a profit on the project. “It’s not about screwing the industry and destroying it. It’s about having an industry that’s very efficient,” he says. “We’ve incentivised everyone to save us money.”

Biggest challenges yet to come

As Higgins talks, the view framing him through the canteen’s window is dominated by the imposing structure of the stadium as it, along with other venues such as the aquatics centre, nears completion. But Higgins waves away talk that the project’s biggest hurdles have been overcome.

“This year, to April 2011, is the big make or break year,” he insists. The ODA has £1.7bn to spend during the period, substantially more than the previous year. “Everyone’s thinking we’re over the hump, we only have a third to go. But my greatest concern is complacency.”

One fresh challenge Higgins faces is the increased pressure on public finances created by the national debt. The ODA has been asked to save £27m, but Higgins insists this is “not a big issue”. He says: “It’s much more a case now of how efficiently we do things, rather than what we do.”

The ODA will disclose the detail of its savings in three months’ time, but Higgins says there have been “little savings on a wide range of projects”. The anticipated final cost is now £7.265bn, although this could rise if the government alters the scope of its work. “They’re talking about us doing some work on park operations after we’ve finished the park in 2011. That could take us to £7.4bn, but we don’t see it going above that.”

The other major target, of course, is the handover of the park and main venues at the end of July next year. Higgins’ confidence over hitting the date is unwavering. He also stresses that complete means complete. “What I’m not going to do is have people coming in here in five or six years’ time trying to settle claims, or understand why agreements with landowners or authorities weren’t sorted out. Finish means everything.”

To help avoid such nasty surprises, the ODA is already working to finalise its accounts with its supply chain. “We’ve already closed up around £600m of contracts completely,” Higgins says. “Well before the Games, we will have closed out the vast majority of all our accounts, which is the test. Because we all know what happens historically: you only get the nasty bill a couple of years later when everyone sweeps up all the final variations. That’s not going to happen here.”

After the party’s over

Higgins has by now finished his coffee, and as we step outside into the park he pauses to look across the Olympic skyline. “I don’t think you’ll ever see a big city regeneration like this in the UK again,” he says poignantly. “It’s unique, because the Olympics is a once in a generation thing.”

He believes the work so far has laid the foundations for that regeneration to be a success, and that the site’s flexibility is what will ensure the longevity of its regeneration. “The biggest thing we did here was not try to pre-empt the market - not building things in to the park that cause future generations of developers to say: ’Why did those idiots put that massive building or bridge or canal there? That’s just restricting us’.”

But in a stark warning to those who will have a hand in determining the use of the site after the Games, he says: “For God’s sake don’t panic. Don’t rush off and try and flog all the land in a hurry. This is a 20- to 30-year project. It’s the expansion capacity that this city needs. Don’t waste it.”

Higgins is realistic about the impact the project will have on the Games itself: as long as the venues are functioning, the stars will always be the athletes. But he hopes that once the Olympic flame has been passed on, the legacy of the park will be what stands out. “Longer term, what I’d like people to feel is that this has become part of the city again.” He pauses. “I hope, and I think, that this has been rebuilt as a heart of the city. And that the rest of London and the rest of the UK think it’s something of theirs.”