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Managing Programmes and Portfolios (MPP) Module M32494

Interactive Workshop: Lessons Learned from

London Olympics 2012 – Programme Management

London Olympics 2012

• Olympic Delivery Authority (ODA) established by an Act of Parliament April 2006 - public funded body to resource, procure and deliver major construction works

• Bid cost £4.036bn to Final cost £9.325bn increase of 131%

• Fixed deadline for Olympic Games Opening Ceremony July 2012

SUMMARY

6 THE BUDGET FOR THE LONDON 2012 OLYMPIC AND PARALYMPIC GAMES

6 This increase in cost estimates, along with a reduction in anticipated private sector funding, means that public sector funding for the Games has increased by £5.906 billion (Figure 2). The costs to be covered by this increase in funding include £1.173 billion of tax3 which will ultimately flow back to the Exchequer. On the basis that the Department has confirmed to us that the tax liabilities associated with the Games will be met entirely from Exchequer funding, this means that the net increase in public sector funding should be £4.733 billion. The funding increase of £5.906 billion includes contingency of £2.747 billion which the Department has made clear to us may not be used in full.

7 The main reasons for the difference between the cost estimates at the time of the bid and the budget announced in March 2007 are:

n A new provision of £2.747 billion for programme contingency (including £337 million of tax).

n A new provision of £836 million for tax, following the Treasury’s confirmation that the Olympic Delivery Authority would be liable to VAT in the normal manner and unable to reclaim it (which, although a real cost to the Games, will flow back to the Exchequer).

n A new estimate of £600 million for policing and wider security (which remains subject to further oversight and scrutiny).

n An increase in the Olympic Delivery Authority’s programme delivery budget from £16 million to £570 million (the original estimate of £16 million

at the time of the bid was based on the costs of a small Urban Development Corporation and did not include the costs of complex site logistics, or a delivery partner to undertake programme and project management which the Department and the Delivery Authority deem necessary for successful delivery of the venues and infrastructure).

n A decrease in anticipated private sector funding from £738 million to £165 million. This excludes, however, the significant increase in the estimated private sector contribution to the Olympic Village which is outside of the budget. It also excludes any receipts from future sales of land and property after the Games, out of which the Government has since estimated, in June 2007, that £675 million would be available for repayment to the National Lottery.

8 From the outset of any programme or project it is vital to use sound processes to establish a clear and accurate budget. The budget should not only set out the costs involved and the funding to meet these, but also the main benefits to be delivered, with a clear statement of any underlying judgements and assumptions. It enables stakeholders to plan and progress with confidence and certainty, and establishes a baseline against which to assess progress and performance. A programme of the scale, complexity and profile of the 2012 Games gives rise to a high level of inherent risk and uncertainty, and the need for significant judgements and assumptions about future costs and benefits. This increases the importance of adopting a rigorous and sound approach in establishing a budget for the Games.

2 The difference between the estimates at the time of the bid and the March 2007 budget

Source: National Audit Office drawing on information from the Department for Culture, Media and Sport

March 2007 budget (£ million)

9,3252

1652

9,3252

9,3253

Difference (£ million)

6,027

(573)

5,289

5,906

Estimate at the time of the bid (£ million)

3,2981

7381

4,0361

3,4193

Net cost of the Games to be met from public sector funding

Expected private sector contribution4

Gross cost of the Games4

Public funding available

NOTES

1 See paragraph 34 on page 15.

2 The Department told us that, should the anticipated £165 million private sector funding not materialise, this would be met from within the contingency provision (which is included within the £9.325 billion) or from a reduction in costs. Therefore, the gross and net cost of the Games as stated here are the same, with the £9.325 billion representing the Department’s upper limit on public funding for the Games.

3 See paragraph 37 on page 18.

4 The figure for gross cost of the Games includes the expected public sector contribution to the cost of the Olympic Village, but does not include the gross cost of the Village itself, which is expected to be largely funded by the private sector. Similarly, the figure for expected private sector contribution does not include the expected contribution to the cost of the Village.

3 £1.173 billion is the sum of £836 million and £337 million as set out in notes 5 and 6 to Figure 6 on page 16.

The budget for the London 2012 Olympic and Paralympic Games, National Audit Office HC 612 Session 2006-7 20 July 2007

Olympic Delivery Authority Core Costs

• Olympic Delivery Authority Costs – Building New Venues and facilities (including legacy

conversion) – Upgrading and enhancing existing facilities (i.e. at

Weymouth) – Transport Infrastructure – Programme Management – Site Security

• Infrastructure and Regeneration Costs (preparing ground to enable construction)

• Staging Costs (broadcasting, sponsorship) • Wide Costs

– Improving transport links in London – Policing to support games in London

The budget for the London 2012 Olympic and Paralympic Games, National Audit Office HC 612 Session 2006-7 20 July 2007

The Nature of Different Programme Types

2 Guide to developing the Programme Business Case

Chapter 1: Introduction

Figure 1. The different nature of different programme types Focus of programme

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External or societal changeOrganisational change

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Vision-led, Outcome driven, Ambiguity and clarity co-exist,

Proactive adjustment to scope, loose levers

Vision-led, Benefits driven, Good clarity / Some ambiguity,

Reactive adjustment to scope, clear levers

Specification-led, Output driven, High clarity / Low ambiguity,

Reactive adjustment to scope.

Making and delivering: where the change being delivered is based on making and delivering new facilities, the programme will tend to be led by the specification of the outputs required – Figure 2, bottom left. There will be relatively low levels of ambiguity about what the programme is to deliver. The scope will be reasonably well defined and adjusted according to circumstances.

Organisational change: where the change is more focused on changing the way an organisation works, the programme will tend to be led by a vision of the desired outcome and the benefits it will deliver – Figure 2, (middle). There will typically be some level of ambiguity about what the precise changes are and how they will be delivered; but there are fairly clear levers that can be employed to achieve the vision.

External or societal change: where the change is focused on interventions and improvements in society, the programme will be driven by the desired outcome, but will typically be highly ambiguous and complex to define in terms of what it will involve – Figure 2, (top right). The scope may need to be adjusted as ambiguities are clarified over time.

Developing a Programme Business Case applies to all types of programmes and needs to be undertaken by trained people who have the capabilities and competencies to undertake the tasks involved.

How does a programme align with the strategic planning process? A programme is a major undertaking for most organisations and that involves significant funding and change for the parties involved.

Figure 2 below shows a typical environment for programme management.

(HM Treasury, 2018)

Interactive Workshop

• Please read and refer to the following two Olympic Games Learning Legacy papers on Moodle:

– Kintrea K (2012). Learning Legacy Lessons Learned from the London 2012 Games Construction Project, Programme Management, Olympic Delivery Authority, April 2012.

– Mackenzie I and Davis A (2012). Learning Legacy Lessons Learned from the London 2012 Olympic and Paralympic Games Construction Programme, Olympic Delivery Authority, October 2012.

For Discussion in Groups

1. What was the Olympic Delivery Authority’s (ODA’s) approach to programme management? and what was key in each of these areas?

2. The ODA appointed a Delivery Partner (DP) - What experience did they require from the appointed DP? what was their role in the programe? And why did ODA have this as a preferred approach.

3. Explain why the Olympics was a programme? (refer to the definition of a programme) and What were the key elements of the programme?

4. What 4 areas were critical within Programme Management?

5. What were the reasons for the cost increases (bid v outturn)?

6. Were the Olympic Games a success? And why?

Reflection

• Reflect on the Case Study in the context of Programme Managament and the material covered