4:30pm Impact will spread beyond venues to nearby schemes

Olympic venues will suffer price escalation of up to 6%, a new report has warned. Nearby schemes are also likely to be affected.

Gardiner & Theobald predicts an escalation of 5% in 2007 and 5.5% in 2008 in the base price of each 2012 project. A tender price index should be added to this forecast.

The report suggested that price escalation would hit some venues worse than others. The Olympic stadium was likely to be a hot spot due its high profile/high risk status.

The average price escalation expected for between now and 2012 was around 4-6%.

G&T added: "A project right on the doorstep of the main game campus may experience the full effect of price escalation as these projects will compete for the same resources.

G&T’s Olympic Bulletin highlighted four causes of price escalation:

  • Perceived risk
  • Ability to command above market price
  • Higher input prices to secure resources and materials
  • Attractiveness to the construction market
G&T said special arrangements were already being discussed with trade unions to secure vital labour at premium rates, as has happened on T5.

The firm recommended a list of measures to mitigate Olympic price inflation:

  • Well thought out procurement process
  • Secured supply chains
  • Identification of likely bottlenecks
  • Timing of procurement
  • Contracts attractive to the market
  • Longer term partnering arrangements
  • Key personnel incentives
  • Risk balance profiles

Source

QS News