London Olympics to Be Most Over-Budget Games Since Atlanta 1996

The London 2012 summer Olympics are on course to be the most over-budget games for 16 years after organizers failed to forecast demands for security and private investment, according to a study by the University of Oxford.

The sports-related expense of hosting in the British capital is likely to cost more than twice the original estimate, researchers from the university’s Said Business School said in a paper. That’s the most since the 1996 summer Olympics in Atlanta, when costs overran by 147 percent.

“The Olympics overrun with a 100 percent consistency,” Bent Flyvbjerg, who co-authored the research, said in an interview. “You reach a point of no return seven years before the games where you commit to delivering and writing this blank check. You can’t trade off time with money in the Olympics.”

London beat Paris and New York to host the games, which begin July 27. The U.K. government tripled its first budget to 9.3 billion pounds ($14.5 billion) after failing to get companies to finance and develop the main site. The security budget doubled to 553 million pounds last year as a review found that an original estimate of 10,000 guards was short by nearly 14,000 people.

Adrian Bassett, a spokesman for the organizers of the London games, didn’t comment on the study.

Overruns are typical for large projects like the Olympics and occur when the host “strategically lowballs” the true cost of the event or is overoptimistic of the benefits, according to Flyvbjerg, who’s a professor of major program management at the business school.

‘Too Optimistic’

“In order to get approval for something you make it look good on paper and you do that by estimating the cost low and estimating the benefits of the revenues high,” he said by telephone. “If you are too optimistic, again, that will result in the same pattern and will bias the data.”

The summer games were expected to cost around 8.4 billion pounds compared with 4.2 billion pounds when London bid for the games in 2005, the university said. Beijing’s 2008 Olympics were 4 percent over-budget, while costs in Athens four years earlier were exceeded by 60 percent.

The average cost overrun of the Olympic Games is 179 percent, according to the sample of 17 previous summer and winter events examined by Oxford’s Said Business School.

“Any country that bids for the games probably goes into it, though they wouldn’t admit it, knowing that there’s very little likelihood of it ultimately proving to be cost effective or value for money,” said Alan Seymour, a professor of sports marketing at the University of Northampton.

To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.