Never trust an Olympic Delivery Authority until you can see the white of its balance sheet. On the strength of this, Tony Bingham is quite encouraged, actually
So, the Olympics is upon us. No, not Beijing’s: London’s. Four years of work is under way – 50 projects worth £6bn. Want some? Nervous? Let me tell you this: my confidence in the people running this show is actually increasing. I even think they may know what they are doing.
Look, whether we build in Deptford or Dar es Salaam, you and I know full well that programmes run late and budgets run over. They are late by miles; overbudget by miles. What are the people running the Olympic going to do about that? Well, they intend to finish one year ahead of time, so that’s three years to spend £6bn. That’s £40m a week. The secret to building at that pace is to throw money at the problem. Come on, you know that’s the trick.
My test for the Olympic bosses is to ask how much of the £6bn is the build cost – bricks, scaffold, men, diggers, QSs – and how much is contingency to be kept up their sleeve? The Olympic £6bn includes £500m “to cope with early financial pressures”, plus £238m for “wider security costs”. So it’s £5.4bn for the build costs.
But digging some more shows these Olympians have wisdom. Lurking there is “the project contingency” of another £973m. Then, further up the sleeve is another £1bn to meet “residual risks”. And this is where I gain confidence. These folk have had the heavenly wisdom, the courage, to have a build cost of £5.4bn and a contingency fund of another £2.5bn. That tells me this team knows the ropes at the top end of construction. And if they hadn’t figured out the need for that size contingency, I wouldn’t have touched this outfit with the longest pole vaulter’s pole in the competition. But no. Come on. Embrace this thing. Let’s get involved.
If they hadn’t figured out the need for that size contingency, i wouldn’t have touched this outfit with the longest pole vaulter’s pole in the competition
And there is more. I even reckon they have realised that buildings are actually built by a whole bunch of tiddler-sized subcontractors. Realised, too, that if this end of the business is not treated with a fair payment regime then the game is up. They are putting in very special measures to support the “real” end of the business. Let me come back to that.
Meanwhile, let’s look at the scale of the thing. There are nine projects tackling the enabling works. They began 18 months ago and will finish in September 2009. There are 16 projects for the venues, including: The main stadium, being built by Sir Robert McAlpine for £500m, to be completed by April 2011. That has been on site one month.
Then there is the aquatics centre, being built by Balfour Beatty for £300m, starting September 2008 and ending August 2011.
Then there is the velopark, indoor sports arena and broadcast centre, all to be done by April 2011. On top of that is the Olympic village £1bn, a massive road network and more besides.
It is not always satisfactory to pass ‘design dilemmas’
down to someone trying to beat the hell out of a tight price
It’s true that Sir Robert McAlpine and Balfour Beatty were not overwhelmed by a list of competitors. There was, how shall we put it, a low level of interest that stemmed from the perceived risk of taking on a
high-profile contract in the UK public sector, especially when there was considerable uncertainty about the required design … So, the Olympics folk are keen to focus on a system where the subcontract folk seek to detect savings.
But be careful please: it is not always satisfactory to pass “design dilemmas” down to someone who is trying to beat the hell out of a tight price. To be even more blunt, you will not know if the subcontractor is a qualified engineer or architect or even knows one. So by all means let’s have the subcontractor building £5bn worth of work but not designing it, eh?
Now I have a plea to make. It is to the Olympic Delivery Authority and their partners Hill, Laing O’Rourke and Mace. Not one of you has consulted the specialist contractor world … at least not yet. All of the subcontractor trades are represented by trade associations and institutes; it’s time to call them together. High time, and begin with the National Specialist Contractors Council. Go to all the other associations. Arrange a symposium. Let’s have a look at what’s to be done to win a huge pat on the back for building… and not use one penny of what’s up your sleeve.
Oh, and invite me to come too.
Tony Bingham is a barrister and arbitrator