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Abstract

Do different types of megaprojects have different cost overruns? This apparently simple question is at the heart of research at the University of Oxford aimed at understanding the characteristics of megaprojects, particularly in terms of how they are established, run and concluded. In this study, we set out to investigate cost overruns in the Olympic Games. To do so, we examined the costs of the Games over half a century, including both summer and winter Olympics. We looked at the evolution of final reported costs and compared these to the costs established in the Games bids, submitted to the International Olympic Committee (IOC) up to seven years before the Games occurred. In so doing we established the largest dataset of its kind, and documented for the first time in a consistent fashion the costs and cost overruns for the Olympic Games, from 1960 to 2012. We discovered that the Games stand out in two distinct ways compared to other megaprojects: (1) The Games overrun with 100 per cent consistency. No other type of megaproject is this consistent regarding cost overrun. Other project types are typically on budget from time to time, but not the Olympics. (2) With an average cost overrun in real terms of 179 per cent – and 324 per cent in nominal terms – overruns in the Games have historically been significantly larger than for other types of megaprojects, including infrastructure, construction, ICT, and dams. The data thus show that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaproject that exists, something that many cities and nations have learned to their peril. For the London 2012 Games, we find that: (1) With sports-related real costs currently estimated at USD14.8 billion, London is on track to become the most costly Olympics ever. (2) With a projected cost overrun of 101 per cent in real terms, overrun for London is below the historical average for the Games, but not significantly so. (3) The London cost overrun is, however, significantly higher than overruns for recent Games since 1999. London therefore is reversing a positive trend of falling cost overruns for the Games.
© Bent Flyvbjerg, and Allison St ewart 2012
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Saïd Business School working papers
Olympic Proportions: Cost and Cost
Overrun at the Olympics 1960-2012
Bent Flyvbjerg
Allison Stewart
Corresponding author, Allison.Stewart@SBS.ox.ac.uk
The authors would like to thank Sarah-Ann Burger, Alexander Budzier, Atif Ansar, Chantal Cantarelli, and Daniel Lunn for their help
with quality check and analysis of the data presented in the paper.
DRAFT 3.3
JUNE 2012
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List%of%Abbreviations%
AFC Anticipated Final Cost
GDP Gross Domestic Product
IBC International Broadcast Centre
ICT Information and Communications Technology
IOC International Olympic Committee
GBP British Pounds Sterling
LOCOG London Organising Committee for the Olympic Games
MPC Media and Press Centre
NCU National Currency Unit
OGKM Olympic Games Knowledge Management
OCOG Organising Committee for the Olympic Games
ODA Olympic Delivery Authority
RCF Reference Class Forecasting
USD United States Dollar
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Abstract%
Do different types of megaprojects have different cost overruns? This apparently simple
question is at the heart of research at the University of Oxford aimed at understanding the
characteristics of megaprojects, particularly in terms of how they are established, run and
concluded.
In this study, we set out to investigate cost overruns in the Olympic Games. To do so,
we examined the costs of the Games over half a century, including both summer and win-
ter Olympics. We looked at the evolution of final reported costs and compared these to the
costs established in the Games bids, submitted to the International Olympic Committee
(IOC) up to seven years before the Games occurred. In so doing we established the largest
dataset of its kind, and documented for the first time in a consistent fashion the costs and
cost overruns for the Olympic Games, from 1960 to 2012.
We discovered that the Games stand out in two distinct ways compared to other mega-
projects: (1) The Games overrun with 100 per cent consistency. No other type of megapro-
ject is this consistent regarding cost overrun. Other project types are typically on budget
from time to time, but not the Olympics. (2) With an average cost overrun in real terms of
179 per cent – and 324 per cent in nominal terms – overruns in the Games have historical-
ly been significantly larger than for other types of megaprojects, including infrastructure,
construction, ICT, and dams. The data thus show that for a city and nation to decide to
host the Olympic Games is to take on one of the most financially risky type of megaproject
that exists, something that many cities and nations have learned to their peril.
For the London 2012 Games, we find that: (1) With sports-related real costs currently
estimated at USD14.8 billion, London is on track to become the most costly Olympics ev-
er. (2) With a projected cost overrun of 101 per cent in real terms, overrun for London is
below the historical average for the Games, but not significantly so. (3) The London cost
overrun is, however, significantly higher than overruns for recent Games since 1999. Lon-
don therefore is reversing a positive trend of falling cost overruns for the Games.
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Understanding%the%Olympics%
The competition for hosting the Olympic Games has become a hotly debated political
arena, in which cities pitch their ideas for urban development against each other to win the
opportunity to host the world’s biggest sporting event (Andranovich, Burbank and Heying,
2001). To demonstrate their ability to achieve these goals, bidding cities are required to de-
velop detailed plans in the form of Candidature Files that are submitted to the Internation-
al Olympic Committee (IOC). These Candidature Files, or ‘bid books’ as they are more
commonly known, form part of the basis of the IOC’s decision for the next host city.
One of the requirements for these bid books is that they include budgets that form the
basis of the expected investment by the host country and city’s governments, in addition to
funds generated as revenue (IOC, 2004). In the bid book, the governments of candidate
countries are also required by the IOC to provide guarantees to ‘ensure the financing of all
major capital infrastructure investments required to deliver the Olympic Games’ and ‘cover
a potential economic shortfall of the OCOG’ (ibid: p 93), where the OCOG is the Organis-
ing Committee of the Olympic Games, which leads the Games planning in the host city.
The Candidature File is a legally binding agreement, and as such represents the baseline
from which future costs and cost overruns should be measured. However, this is rarely
done; new budgets are developed after the bid has been awarded to the city, which are of-
ten substantially different to those presented at the bidding stages (Jennings, 2012). These
new budgets are often used as new baselines, rendering measurement of cost overrun in-
consistent and misleading. New budgets continue to evolve and develop over the course of
planning for the Games, until the final actual costs are perhaps presented, often several
years after the Games’ completion, if at all, as we will see.
The objective of this study is to consistently examine the degree to which final costs re-
flect projected budgets at the bid stage, and to examine how cost overruns in the Games
are evolving over time. We have searched for valid and reliable cost data from both sum-
mer and winter Games, starting with the Rome 1960 summer and Squaw Valley 1960 win-
ter Olympics, and continuing until bid data for Beijing 2008 summer and Vancouver 2010
winter Games. We also wanted to see whether the IOC’s introduction of the Olympic
Games Knowledge Management (OGKM) programme in 2000 (IOC, 2008), has had an
impact on improving the Games’ execution, including size of cost overrun. Finally, we
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compared the current London projections against our benchmarks, to provide insight into
how London’s costs are progressing as compared to previous Games.
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Cost%Overruns%
Interest in the costs of the Games has been high since the establishment of the modern
Olympics in 1896. As long ago as 1911 Baron Pierre de Coubertin, the man responsible for
establishing the modern Games, referred to ‘…the often exaggerated expenses incurred for
the most recent Olympiads…’ (Coubertin, 1911), and in 1973 Jean Drapeau, the mayor of
Montreal, famously stated ‘The Montreal Olympics can no more have a deficit, than a man
can have a baby,’ (CBC, 2006). Unfortunately, Drapeau was wrong, and problems with
costs and cost overruns are as prevalent today as they were in Drapeau’s time, and in
Coubertin’s time before him.
Despite substantial interest in the costs of the Games, however, attempts to specifically
and systematically evaluate the costs and cost overruns of the Games are few (see e.g.
Preuss, 2004; Essex and Chalkley, 2004; Chappelet, 2002), while those that do attempt
them are often focussed on a specific Games (e.g. Bondonio and Campaniello, 2006;
Brunet, 1995). Previous research on the costs of the Olympic Games has instead focussed
on whether the Games present a financially viable investment from a cost-benefit analysis
perspective. However, what to measure when determining the costs and benefits of the
Games to a host country is open to debate. In particular, legacy benefits described in the
bid are often intangible, and as such pose a difficulty in ex-post evaluations. The benefits of
increased tourism revenue, jobs created by Olympic needs, or national pride are hugely var-
ied and similarly difficult to quantify. Costs are equally hard to determine; for example, one
could argue that if hotels in the city have invested in renovations, and benefits of increased
tourist revenues to those hotels are included in the analysis, then these costs should also be
included in any accounting. Similarly, the percentage of work that an employee in an outly-
ing city spends on Games-related work would be exceptionally difficult to estimate.
Preuss (2004) has developed the most comprehensive multi-Games economic analysis
to date, looking at the final costs and revenues of the summer Olympics from 1972 to
2008. In his work, he finds that every OCOG since 1972 has produced a positive benefit as
compared to costs, when investments are removed from OCOG budgets. Note that this,
however, restricts the analysis to only OCOGs, which generally represent a fairly small por-
tion of the overall Olympic cost. Further, other authors disagree with Preuss’ findings, and
have suggested that the net economic benefits of the Games are negligible at best, and rare-
ly offset by either revenue or increases in tourism and business (see e.g. Malfas, Theodoraki
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Bent Flyvbjerg and Allison Stewart 2012
and Houlihan, 2004). Furthermore, none of these studies have compared the projected
costs to the final costs, which is a problem, because experience from other types of mega-
projects show that cost overruns may, and often do, singlehandedly cause positive project-
ed net benefits to become negative (Ansar, Flyvbjerg, and Budzier, in progress). Finally,
while it is important to note that increased revenues would potentially allow organisers to
increase their costs for the Games, this in itself does not preclude an analysis based solely
on costs; rather, we should consider that increased revenues could be returned to be used
to reduce the funding required by the host city and country governments.
In research more broadly looking at megaprojects, a number of studies have examined
cost overruns. Flyvbjerg, Holm and Buhl (2002), for example, provide an examination of
rail, fixed-link and road megaprojects, which finds that cost overruns are both prevalent
and predictable, with overruns of 44.7, 33.8 and 20.4 per cent in real terms for each type of
megaproject respectively. Their work has led to the development of a technique called ‘ref-
erence class forecasting’ (RCF) (see Flyvbjerg 2008), which advocates developing budgets
through a comparison with similar completed projects, rather than the bottom-up planning
approach for each individual project that is commonly used. The RCF approach has been
endorsed by the American Planning Association, and has been used in the UK, the Nether-
lands, Denmark, and Switzerland, among others, to predict megaproject costs and benefits.
Research into major IT programmes has confirmed similar results (Budzier and Flyvbjerg,
2011). Daniel Kahneman (2011, p 251), Nobel Prize winner in economics, has called
Flyvbjerg's advocacy for reference class forecasting ‘the single most important piece of ad-
vice regarding how to increase accuracy in forecasting through improved methods.’
Drawing on these insights, this research seeks to develop a better understanding of cost
overruns in the Games. Given that each of the Games hosted in the last 15 years has cost
at least USD 2 billion – not including road, rail, airport, and hotel infrastructure – the size
and financial risks of these programmes warrant further attention (see Table 5). Further-
more, a focus on the cost overruns as compared to the budget is critical for future host cit-
ies, countries, and citizens to understand the implications of the investment that they are
undertaking. The IOC’s requirement that the bid documents contain a guarantee that cost
overruns will be paid by the host city and government means that this is a critical point of
comparison for the Games’ final costs, and the likely overrun should be taken into account
in planning for the Games, as in the RCF approach used for other megaprojects. Finally,
given the current global economic climate and subsequent tightening of government
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Bent Flyvbjerg and Allison Stewart 2012
spending in many countries, understanding the implications of major investments like the
Games is critical for governments to make sound fiscal and economic decisions about the-
se major events. For instance, cost overrun and associated debt from the Athens 2004
Games has contributed to a Greek ‘double dip’ in the financial and economic crises of
2007-2012 (Flyvbjerg, 2011). Other countries may want to make sure they do not end up in
a similar situation by having a realistic picture of costs and risks of cost overruns before
they bid for the Olympic Games. The data presented in this paper will allow such assess-
ment.
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Budget%at%Bid%vs.%Final%Outturn%Costs%
Costs for hosting the Olympic Games fall into three categories:
1. OCOG costs, which are the operational costs incurred by the Organising Com-
mittee for the purpose of ‘staging’ the Games. The largest components of this
budget are technology, transportation, workforce, and administration costs,
while other costs include items like security, catering, ceremonies and medical
services.
2. Non-OCOG direct costs, which are the construction costs incurred by the host
city or country or private investors to build the competition venues, Olympic
Village(s), International Broadcast Centre (IBC) and Media and Press Centre
(MPC), which are required to host the Games.
3. Non-OCOG indirect costs, such as road, rail or airport infrastructure, or private
costs such as hotel upgrades or business investment incurred in preparation for
the Games.
The first two items constitute the sports-related costs of the Games and are covered in
the present analysis. Non-OCOG indirect costs have been omitted, because (a) data on
such costs are rare, (b) where data are available, their validity and reliability typically do not
live up to the standards of academic research, and (c) even where valid and reliable data
exist, they are typically less comparable across cities and nations than sports-related costs,
because there is a much larger element of arbitrariness in what is included in indirect costs
than in what is included in sports-related costs.
Thus, our analysis compares OCOG costs and non-OCOG direct costs at two distinct
points in time, bid budget and final cost, for all Games in which each of these four data
points exist, since 1960. We were able to obtain 94 data points from the period 1960 until
2012, which produced cost comparisons of bid and final sports-related costs for 16 Games,
in addition to current estimated values for London. This is out of a total of 27 Games held
between 1960 and 2010. For the remaining 11 Games, valid and reliable data have not been
reported that would make it possible to establish cost overrun for these Games. This is an
interesting research result in its own right, because it means, in effect, that for 41 per cent
of Olympic Games between 1960 and 2010 no one asked how well the budget held for
these Games, thus hampering learning regarding how to develop more reliable budgets for
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the Games. From a rational point of view such learning would appear to be a self-evident
objective for billion-dollar events like these, but it is not for the Olympics. This problemat-
ic is studied further in Stewart (forthcoming).
The final data used in this analysis are shown in Table 1, which has been reported in real
terms, with final costs controlled for inflation over the Games planning period.
Table 1: Sports-related cost overruns, Olympics 1960-2012; original currencies, real terms
Games
Country
% Cost Overrun
London 2012
UK
101*
Vancouver 2010
Canada
17
Beijing 2008
China
4
Torino 2006
Italy
82
Athens 2004
Greece
60
Salt Lake City 2002
USA
29
Sydney 2000
Australia
90
Nagano 1998
Japan
56
Atlanta 1996
USA
147
Lillehammer 1994
Norway
277
Barcelona 1992
Spain
417
Albertville 1992
France
135
Calgary 1988
Canada
59
Sarajevo 1984
Yugoslavia
173
Lake Placid 1980
USA
321
Montreal 1976
Canada
796
Grenoble 1968
France
201
* Projected final London 2012 cost is used; sources are listed in the references
The difference between bid budget and final costs is statistically significant (V = 153, p
< 0.0001). Further detail on the procedure used to convert these data from nominal to real
terms is available in the Research Methodology section below. Based on the data in Table
1, we have established average and median cost overruns, as shown in Table 2.
Table 2: Average and median percentage cost overruns (not including London 2012), real terms
Metric
Summer, %
Winter, %
Total, %
Average cost overrun
252
135
179
Median cost overrun
118
109
112
Maximum cost overrun
796 (Montreal 1976)
321 (Lake Placid 1980)
796
Minimum cost overrun
4 (Beijing 2008)
17 (Vancouver 2010)
4
Note that the difference between summer and winter Games is not statistically significant, and is presented for comparison pur-
poses only
It will be immediately obvious to many readers that some of these costs may not repre-
sent the complete costs of the Games for every city. Beijing, for example, is unofficially
estimated to have spent much more on the Games than represented by these data, alt-
hough these may be in the category of non-OCOG indirect costs. However, using the offi-
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cial data will have the effect of making our estimates of costs and cost overruns more con-
servative, and as such the following analysis represents the ‘best case scenario’ for cost
overruns.
The data presented in Tables 1 and 2 suggest a number of arresting trends with relation
to cost overruns in the Games:
1. Notably, every Games, without exception, has experienced cost overruns. While
it is not unusual for observers to suggest that this is ‘obvious’, it is worth con-
sidering this point carefully. A budget is typically established as the maximum –
or, alternatively, the expected – value to be spent on a project. However, in the
Games the budget is more like a fictitious minimum that is consistently over-
spent. Further, even more than in other megaprojects, each budget is established
with a legal requirement for the host city and country government to guarantee
that they will cover the cost overruns of the Games. These data suggest that this
guarantee is akin to writing a blank cheque for a purchase, with the certainty that
the cost will be more than what has been quoted.
2. With an average cost overrun of 179 per cent in real terms, the extent of cost
overruns in the Olympic Games appear to be substantially higher than in other
types of megaprojects. In comparison, Flyvbjerg et al (2002) found average cost
overruns in major transportation projects of between 20 and 45 per cent, and
similar studies on major IT projects found average overruns of 27 per cent, both
in real terms (Budzier and Flyvbjerg, 2011). The high average overrun for the
Olympic Games, combined with the existence of extreme outliers, should be
cause for caution for anyone considering hosting the Games, and especially
small or troubled economies with little capacity to absorb escalating costs and
related debts. Even a small risk of an 800 per cent overrun on a multi-billion
dollar project should be cause for concern when a guarantee to cover cost over-
runs is issued, because such overrun may have fiscal implications for decades to
come, as happened with Montreal, where it took 30 years to pay off the debt in-
curred by cost overruns on the 1976 summer Games (Vigor, Mean and Tims,
2004: 18), and Athens where Olympic cost overruns and debt have exacerbated
the 2007-12 financial and economic crises, as mentioned above (Flyvbjerg,
2011).
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3. Finally, it is important to note that the data appear to show that cost overruns
have decreased over time. Thus for Games after 1999, cost overruns are signifi-
cantly less than for Games before 1999 (W = 27, p = 0.009). The decreasing cost
overruns may be related to the IOC’s introduction of the Olympic Games
Knowledge Management (OGKM) programme in 2000 (IOC, 2008). However,
London 2012 appears to be reversing the trend towards lower cost overruns, as
discussed in the next section of this paper.
For comparison purposes, nominal results, which are not controlled for inflation over
the Games planning period, are shown in Table 3.
Table 3: Sports-related cost overruns, Olympics 1960-2012; original currencies, nominal terms
Games
Country
Type
London 2012
UK
Summer
Vancouver 2010
Canada
Winter
Beijing 2008
China
Summer
Torino 2006
Italy
Winter
Athens 2004
Greece
Summer
Salt Lake City 2002
USA
Winter
Sydney 2000
Australia
Summer
Nagano 1998
Japan
Winter
Atlanta 1996
USA
Summer
Lillehammer 1994
Norway
Winter
Barcelona 1992
Spain
Summer
Albertville 1992
France
Winter
Calgary 1988
Canada
Winter
Sarajevo 1984^
Yugoslavia
Winter
Lake Placid 1980
USA
Winter
Montreal 1976
Canada
Summer
Grenoble 1968
France
Winter
*Projected final London 2012 cost is used; sources are listed in the references
^The Yugoslavian dinar experienced hyperinflation during the Games planning period; therefore, nominal cost overruns are sig-
nificantly more than constant cost overruns
These data show slightly different average and median overruns, as shown in Table 4.
Table 4: Average and median percentage cost overruns (not including London 2012), nominal terms
Metric
Summer, %
Winter, %
Total, %
Average cost overrun
347
288
324
Median cost overrun
133
150
150
Maximum cost overrun
1266 (Montreal 1976)
1257 (Sarajevo 1984)
1266
Minimum cost overrun
35 (Beijing 2008)
36 (Vancouver 2010)
35
Note that the difference between summer and winter Games is not statistically significant, and is presented for comparison pur-
poses only
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However, as can be seen from these data as compared to Tables 1 and 2, there is little
substantial difference in the profile of costs using real vs. nominal amounts. Given that
convention dictates that real costs are used, we have relied on these data for our analysis.
Finally, to provide a perspective for comparison, we have converted the costs of each of
the Games listed above into USD2009, using local GDP indices and National Currency
Units as compared to USD2009 for conversion. This methodology is described more fully
in the last section of this paper. The comparative data are shown in Table 5.
Table 5: Final actual sports-related costs, Olympics 1960-2012, USD2009
Games
Country
Type
Final Actual cost,
billion USD
London 2012*
UK
Summer
14.8
Vancouver 2010
Canada
Winter
2.3
Beijing 2008
China
Summer
5.5
Torino 2006
Italy
Winter
4.1
Athens 2004
Greece
Summer
3.0
Salt Lake City 2002
USA
Winter
2.3
Sydney 2000
Australia
Summer
4.2
Nagano 1998
Japan
Winter
2.3
Atlanta 1996
USA
Summer
3.8
Lillehammer 1994
Norway
Winter
1.9
Barcelona 1992
Spain
Summer
11.4
Albertville 1992
France
Winter
1.9
Calgary 1988
Canada
Winter
1.0
Sarajevo 1984^
Yugoslavia
Winter
0.01
Lake Placid 1980
USA
Winter
0.4
Montreal 1976
Canada
Summer
6.0
Grenoble 1968
France
Winter
1.0
Sources are listed in the references
* Current projected London 2012 cost is used
^Since the Yugoslavian dinar experienced hyperinflation while the Games were being planned and ceased to exist in 1990, we
have converted the cost to USD in the year incurred, prior to inflating it to 2009; therefore, the final costs appear to be lower
than the budgeted costs. However, Table 1 shows the appropriate constant cost overruns in the original local currency.
As can be seen in Table 5, Barcelona 1992, Montreal 1976, and Beijing 2008 are relative-
ly the most expensive Games to date, while London 2012 is on track to exceed them all. In
the next section, we provide a more detailed discussion of London’s costs.
In sum, the data show that the Olympic Games stand out in the following ways:
1. The Games overrun with 100 per cent consistency. No other type of megapro-
ject is this consistent regarding cost overrun. Other project types are typically on
budget from time to time, but not the Olympics.
2. With an average cost overrun in real terms of 179 per cent – and 324 per cent in
nominal terms – overruns in the Games have historically been significantly larg-
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er than for other types of megaprojects, including infrastructure, construction,
ICT, and dams.
3. Cost overruns for the Games have been decreasing over time, with significantly
lower overruns post-1999 as compared to pre-1999. However, London 2012
appears to be reversing this trend.
Given these observations, for a city and nation to decide to stage the Olympic Games is
to decide to take on one of the financially most risky type of megaproject that exists, some-
thing that many cities and nations have learned to their peril.
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London%2012%Compared%with%Previous%Games%
There have been numerous articles in UK and worldwide media over the last several
years highlighting the progression of costs for London 2012’s summer Olympic Games. It
is therefore important to clarify where these costs have originated, how they compare to
our data, and how London’s costs compare to previous Games.
In 2005, the London 2012 Bid Committee submitted a Candidature File to the IOC, as
required by the candidature process. In this bid, the committee specified a projected cost of
£1.54 billion for OCOG operational costs, and £2.67 billion for non-OCOG direct costs
(London 2012 Bid Committee, 2005: p 103-105), for a total sports-related cost of £4.21
billion. An additional £7.2 billion was earmarked for roads and railway development (ibid).
These costs represent the baseline cost for the London 2012 Games.
In February 2012, the anticipated final cost (AFC) for the Olympic Delivery Authority
(ODA), which administers non-OCOG direct costs for the government, was estimated at
£5.83 billion in real terms, which we have used as the expected final cost (Department for
Culture, Media and Sport, 2012). As of March 2012, during testimony to the recent Com-
mons Public Accounts Committee, Paul Deighton, Chief Executive Officer of the London
Organising Committee for the Olympic Games (LOCOG), reported that the current budg-
et for LOCOG is £2.61 billion in real terms (UK Public Accounts Committee, 2011). This
represents a total sports-related cost of £8.44 billion in real terms, which is a cost overrun
of 101 per cent as compared to the budget in the bid. It is also worth noting that the gov-
ernment is also paying for other indirect costs, which are currently the subject of much de-
bate; a recent report suggested that the total cost of the Games to the government could
reach £11 billion (UK Public Accounts Committee, 2012). However, these costs do not
form part of the current analysis. A summary of the total sports-related costs for London
2012 is included in Table 6.
Table 6: London 2012 bid and current projected costs, GBP2004
OCOG Costs
Non-OCOG Direct
Costs
Total Sports-Related
Costs
Bid
£1,538,750,000
£2,670,000,000
£4,208,750,000
Current
£2,608,691,248
£5,832,761,659
£8,441,452,907
Overrun
70%
118%
101%
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The difference between London's 101 per cent cost overrun and the overall average
overrun for all Olympics of 179 per cent is not significant (V = 88.5, p = 0.301). Statistical-
ly, London is therefore doing neither better nor worse in terms of cost overrun than all
previous Games. However, London’s projected cost overrun is statistically significantly
higher than the seven Games held since 1999 (B(0.5, 6), p = 0.0312). Therefore, London is
on track to reverse the trend of Games since 1999 of having statistically significantly lower
cost overruns than pre-1999 Games (Ws = 27, p = 0.009). Finally, the total sports-related
cost of the London Games is projected to be more than any previous Games by a consid-
erable margin.
In sum, we find for the London 2012 Olympic Games:
1. With sports-related costs currently estimated at USD14.8 billion, London is
on track to be the most costly Olympics ever.
2. With a cost overrun of 101 per cent in real terms, overrun for London is be-
low the historical average for the Games, but not significantly so.
3. However, the London cost overrun is reversing a positive trend of falling
cost overruns for the Games since 1999.
17
Olym pic Prop ort ion s: Cos t and Cost Overru n at th e Olym pic s 1960 - 2012
Bent Flyvbjerg and Allison Stewart 2012
Research%Methodology%
To investigate the question of costs in the Olympic Games, we conducted an extended
search of all data available on the costs. As previously mentioned, we collected data on two
cost components for the Games: the OCOG cost and non-OCOG direct costs. For these
two components, costs at bid were primarily determined through primary data such as the
OCOG Candidature Files. Final OCOG costs are often available from the Official Reports
submitted to the IOC following each Games. Where primary sources were not available,
secondary sources including audits and other research data were used, with primary sources
taking precedence over secondary sources where available. We have used only the most
reliable data in our work, and as such, the findings that we have produced can be said to be
conservative; this is illustrated by the case of the Beijing 2008 summer Games where the
best, officially available data indicate a cost overrun of 4 per cent in real terms (35 per cent
nominal), but unofficially the real overrun is thought to be substantially higher.
Using these data, we then proceeded with nominal and real cost comparisons. For nom-
inal cost comparisons, we used the cost listed in local currency in the year in which it was
reported (e.g. bid year or Games year) for our analysis. This allows us to compare the data
on a like-versus-like basis. Then, to control for inflation over the period from which the
bid documents were prepared until the reporting of the final costs, for constant (real-term)
cost comparisons, we adjusted the data using Local GDP Deflator values to deflate the
cost in local currency to the bid year, using a distribution of costs over the seven years of
Games planning based on known profiles of OCOG and non-OCOG direct costs. This
allowed us to calculate the total cost of the Games in the year of the bid, thereby eliminat-
ing the impact of inflation. This then represents the most conservative comparison of the
bid and final data, since it does not assume that the bid was able to predict inflation. In
other words, if final costs are significantly greater than bid costs when the effects of infla-
tion are removed, there is a cause for concern in the process of developing bid estimates.
Finally, for cost comparisons in USD2009, we used the same Local GDP Deflator values
to inflate the nominal bid and final cost data in the year in which it was incurred to 2009
local currency, and then used World Bank National Currency Unit (NCU) values (World
Bank, 2012) to convert the data from 2009 local currency to USD 2009. For Yugoslavia,
which ceased to exist in 1990, we converted the data to USD1990 and then inflated it using
the Local US GDP Deflator.
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Olym pic Prop ort ion s: Cos t and Cost Overru n at th e Olym pic s 1960 - 2012
Bent Flyvbjerg and Allison Stewart 2012
Based on the constant data in local currency, we then conducted a number of statistical
tests to understand the differences present in the data. First, we wanted to test whether
there was a significant difference between the bid and final costs. To do so, we began by
testing the data for normality. As the Shapiro-Wilk test was significant (p < 0.01), the data
do not fulfil the assumptions for normal parametric tests. Thus, we used the non-
parametric Wilcoxon signed rank test, which confirmed that final costs are significantly
greater than bid costs (V = 153, p < 0.0001).
Then, we wanted to test whether there was a difference between summer and winter
Games cost overruns. To do so, we used the Mann-Whitney-Wilcoxon test. The test
showed that there was no significant difference between cost overrun for summer Games
(median = 118 per cent) and winter Games (median = 109 per cent) (W = 56, p = 0.588).
Next, we assessed the data to see if cost overruns of the Games have changed with
IOC's introduction in 2000 of the Olympic Games Knowledge Management (OGKM)
programme in conjunction with the Sydney Olympic Games (IOC, 2008),. We used the
Mann-Whitney-Wilcoxon test to compare the Games post-1999 (Sydney 2000 to Vancou-
ver 2010, median = 44 per cent) with the Games pre-1999 (Grenoble 1968 to Nagano 1998,
median = 187 per cent). The test showed the post-1999 Games to have significantly lower
cost overruns than the pre-1999 Games (W = 27, p = 0.009).
We then compared the difference between the current projected cost overrun of the
London Games and the cost overrun of each of the previous Games using the Wilcoxon
signed rank test. We found that the difference between all of the previous Games (median =
112 per cent) and the London Games (median = 101 per cent) was not significantly differ-
ent (V = 88.5, p = 0.301).
Finally, we compared the London Games’ projected cost overrun to that of the six oth-
er post-1999 Games (Sydney 2000 to Vancouver 2010), using the sign test. For this test,
our null hypothesis is that, given a random comparison between London and each of the
Games of the previous decade, there is an equally likely probability that London’s overrun
would be greater or less than each of the previous six Games’ overruns. Since London’s
projected overrun is higher than each of these six Games, the difference between London’s
projected overrun and that of the Games post-1999 is statistically significant (B(0.5, 6), p =
0.0312). Thus, we conclude that London's projected cost overrun of 101 per cent is signifi-
19
Olym pic Prop ort ion s: Cos t and Cost Overru n at th e Olym pic s 1960 - 2012
Bent Flyvbjerg and Allison Stewart 2012
cantly greater than that of the Games since 1999. London 2012 is therefore on track to re-
verse the trend of post-1999 Games towards lower cost overruns.
Future research on this data set is planned to include a more detailed exploration of the
trends in the data, including the incremental development of budgets over the course of
the Games, trend analysis, and comparisons of Games by outcome, such as viewership and
city size.
20
Olym pic Prop ort ion s: Co st and Cost Over ru n at the Olym pi cs 1960 - 2012
Bent Flyvbjerg and Allison Stewart 2012
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The contents of this document cannot be reproduced, neither in whole nor in part, without the previous consent of authors. This document has been published as part of the book: Miquel de Moragas Spà and Miquel Botella (eds.) (1995). The Keys of success: the social, sporting, economic and communications impact of Barcelona'92. Bellaterra: Servei de Publicacions de la Universitat Autònoma de Barcelona.
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