Latest NAO report says increasing security costs mean budget is on a knife edge

A huge increase in security costs for the Olympic Games means the £9.3bn project is still in danger of busting its budget, the National Audit Office has concluded.

In its latest report on preparations for the 2012 Games, the NAO said that forecasts for the number of security staff needed for the games have increased from 10,000 to 23,000 in the last year, adding an extra £271m to security costs.

It said this meant that the government has just £354m of uncommitted funds in the Olympic programme, to cover an estimated £318m of remaining risks.

However, the NAO reported continued good progress on the construction side, with the ODA on course to save more than 11% on the original £8.1bn build budget. The NAO said that remaining projects “are on track, although elements of the Athletes’ Village remain tight for handover to LOCOG.”

In total 91.9% of the construction programme were completed by September 2011, against a target of 92.5%, with 14 of 26 venues handed over.

In total the NAO said it was concerned that just £36m in headroom remained to cover the outstanding risks, which included major challenges around transport integration in addition to security concerns.

The security challenge is so great that the army may be called in to help police venues, the report said.

It also flagged up concerns over the Olympic legacy programme, with the OPLC having failed so far to find tenants for the Olympic stadium or press and broadcast centre.

The body in charge of delivering the legacy, the OPLC, said today that it had received 12 bids from developers to build out its first housing district, called Chobham Manor, and that 10 firms had made bids to take on the press and broadcast centre after negotiations with the BBC to take on the lease fell through.

Amyas Morse, head of the National Audit Office, said: “The programme to deliver the venues and infrastructure for the 2012 Games remains on course, so it looks as if value for money will be achieved in this area.

“However, not everything is rosy. In my view, the likelihood that the Games can still be funded within the existing £9.3bn public sector funding package is so finely balanced that there is a real risk more money will be needed.”

Labour MP Margaret Hodge, chair of the cross-party Committee of Public Accounts, said: “It is deeply worrying that at this late stage plans for venue security are not further advanced. Transport plans are also behind schedule. This leaves planning until the very last moment and cannot be delayed further if transport chaos is to be avoided.

“What is left in the budget for contingency is wafer thin, at only £36m. For a project of this size with unknown risks and eight months remaining that is a tiny amount of money. LOGOC is likely to use all of its contingency funding and would also have to call on further Government support if there are further cost increases.”