Are the London Olympics shaping up to be the new Millennium Dome, only more expensive and embarrassing, and this time on a global scale?
The wrangling over the budget for the 2012 Games, which could be at least twice the original £2.3bn estimate, has sent a frisson of apprehension through Westminster, Whitehall and all those arms of governance that will have to deal with anything that goes wrong.
This lack of clarity about the costs (though some transparency is promised shortly) is inevitably causing concern among those who might be required to underwrite a project for which — like the Dome — failure to deliver on time is simply not an option.
Yet, for all the derision that is heaped upon the Dome, it was delivered on time and almost on budget. We can argue over whether it was a well-advised venture, and it was certainly expensive, but it was known it would be before it was built.
However, it would have been much cheaper had it not been for government interference and if the rules governing such major projects had been better devised.
No-one is better placed to tell the story of the Dome than David James, the ‘troubleshooting’ businessman brought in to manage the site after it opened for the millennium. Now in the Lords, he recently gave his fellow peers an extraordinary insight into how not to run a public project.
It is a cautionary tale.
When he heard that bringing the Olympics to London was a real possibility, James called together his old management team to consider the lessons that might be learned.
They went so far as to write up a paper and sent it to Sue Street, then the permanent secretary at the Department for Culture, Media and Sport, and Sir John Bourn at the National Audit Office. They consulted James and his team and last month published a report drawing on their experiences.
But some key recommendations made by James have not been taken up and threaten to cost the taxpayer dear. What he found with the Dome was that the government refused to allow the contracting out of certain key financial control functions.
They dictated that for every unit to be delivered, each would have to maintain its own bought ledger. If a similar regime operated for the Olympics, it would be necessary to create 14 separate corporate entities to deliver each venue.
James said the bought ledger at the Dome was ‘a complete and utter catastrophe’. Suppliers were paid in chunks of £100,000 or £50,000. There was an assumed outstanding liability of £35m in unresolved invoices but nobody had a clue whether the work had actually been performed. There was no means of even establishing the validity of the work that was subject to the invoices coming in.
James also urged caution about the use of consultants. They were worth having but only if they did something, not if they were merely going to advise on how to do something. Government rules also prohibit the reappointment of consultants. This is ostensibly to prevent favouritism but it means that good consultants with whom a relationship has developed must be overlooked.
James urged Whitehall to be more flexible about contracting out essential financial control services, which can often be done better by the private sector, and to sort out sponsorship early.
McDonald’s had put a lot of money in but then unexpectedly asked for £5m back to cover the cost of building its fast-food outlet on the Dome site. British Airways and BT insisted on providing their own personnel to staff their zones and then deducted the entire payroll from the value of their sponsorship.
James said there had to be a much more disciplined approach to sub-contracting to prevent fraud. He advised the sale of tickets in advance and not to have turnstiles.
When a dome turnstile operator was caught wheeling £2,000 in cash across the concourse in a Tesco trolley, the management became understandably suspicious about where the money from the 22 turnstiles was going.
James said if the lessons of the Dome are not learned, ‘we shall have a complete and utter disaster’.
The 2012 Games offer a fantastic legacy for London in the form of regeneration for a rundown part of the East End and new sporting venues. There will, arguably, be a fillip for the national economy through tourism, though the experience of previous venues has been that numbers fall because of unfounded concern about crowds and congestion.
However, it should go without saying that the finances must be properly and rigorously managed. This is the biggest public sector project this country has ever embarked upon. There is no reason why an economy the size of the UK’s cannot deliver it. But let the Dome be both a warning and a guide.
