Pressure on Olympic building plans

The London Olympics faces cost pressures because of stiff competition for contractors, labour and raw materials caused by a boom in construction projects, according to the man responsible for overseeing the building of the 2012 facilities.

David Higgins, chief executive of the Olympic Delivery Authority, says some contractors may also be scared off by the high profile of the Olympics, making it harder to generate competitive bids for games facilities.

The ODA, which has about £5.6bn of the £9.3bn overall Olympics budget at its disposal, is into its most intensive period of activity, working out budget costs and procuring work and concept designs.

Work began this week on clearing the 2.5 sq km Olympic Park site of contamination. Demolition work for the main Olympics stadium begins next week which also marks the five-year countdown to the 2012 opening ceremony. “We will be at full capacity within six months,” Mr Higgins told the FT.

But the key negotiations on construction costs are taking place during huge demand in the marketplace for contractors, he added.

“You just have to look out of the window at all the cranes everywhere, all around you. It is unprecedented, the level of development in the city,” Mr Higgins said.

“We are in a market which is very very competitive, to get the right level of staff and expertise. So we have to be attractive to clients. We have to give clear directions, clear decisions, have a clear client brief.

“We don’t have the luxury of choosing our time,” he said, referring to the fixed 2012 Olympics date.

Mr Higgins said there had been good responses from construction companies for tenders to build the media and aquatics centres and interest in less high profile Olympic projects such as bridges and roads building.

But asked if some construction companies were reluctant to get involved in the Olympics projects in general, given the controversy over Wembley stadium, he said: “High-profile iconic projects are always going to be a challenge. No one needs them on the front pages of their annual reports. No one needs any of that publicity.”

“Contractors worry about clients that can’t make decisions and change their minds. That’s the biggest risk.”

Mr Higgins’ own high profile in the Olympics project is likely to be reduced when John Armitt starts in September as ODA chairman, replacing Jack Lemley who resigned accusing politicians of political interference.

Mr Higgins denied the ODA had compromised on architectural design to cut costs, despite a big revision to the aquatics stadium. On the Olympics stadium, he said its design would be unveiled in November and would be “innovative”, providing a field of play twice the size of Wembley’s, yet surrounded by a structure not that much larger than the national football stadium’s, to house 80,000 seats.

Richard Rogers, he said, was “quite satisfied” with projects, despite his criticism about the ODA’s apparent disinterest in design. One architectural firm had left the Olympic masterplanning team, but that, said Mr Higgins, was the result of an internal issue.

The £9.3bn Olympics budget includes £2.7bn as a contingency for overruns, and Mr Higgins said there was no doubt elements of the contingency would be spent.

“It’s not there to be sat in a pristine box till 2012,” he said. “It will be used to manage risk, to spend money now in order to accelerate something to deliver it earlier.”

He added that the ODA was nearing a resolution on direct employment of workers, after warnings from construction unions that plans by the ODA to recruit self-employed migrant workers to cut costs would compromise safety.

“We’ll reach a sensible agreement. We don’t want to create something that doesn’t set an aspiration for us, but is realistic for the industry,” he said.