The Summer Olympic Games are synonymous with competition, glory, internationalism — and, lately, prodigality. The 2008 Olympics in Beijing cost $43 billion; today its facilities are rarely or never used. Athens reportedly spent $11 billion on the 2004 Summer Games, double the original budget, and many millions more to maintain vacant venues. Montreal needed 30 years to settle all of its bills for the 1976 Olympics.
Will London, which hosts the 2012 Olympic Games in July and August, avoid such a legacy? Neil Wood thinks so. On leave as a partner with Deloitte, the 47-year-old Wood has been CFO of the London Organising Committee of the Olympic and Paralympic Games (LOCOG) since its inception in 2005. Before that, he was instrumental in putting together London’s successful bid for the Games, an effort for which he was made a Member of the Order of the British Empire.
With a workforce of some 200,000 people, including up to 70,000 volunteers and about 100,000 contractors, LOCOG is responsible for staging the Games. (The Olympic Delivery Authority handles the big investments in permanent venues and infrastructure.) Wood spoke with CFO in April about what remains to be done.
Are the Olympic Games still on time and on budget?
Yes on both counts. We have two separate budgets, two separate organizations delivering the games. One is the Olympic Delivery Authority, which is the public entity that’s responsible for building a lot of the infrastructure. That’s publicly funded and is largely complete in terms of its work. It has delivered below budget.
Then there’s my organization, the organizing committee, which is a private company, privately financed. We are on budget, and ours is approximately £2 billion [$3.1 billion].
That figure is where you started from, several years ago.
That is exactly where it started. Not only have we maintained our costs within that original budget estimate, but we have also managed to deliver within the revenues we’ve been able to raise.
What are you spending the money on?
The single biggest area is venue overlay [temporary facilities and infrastructure]. About 20% to 25% of our budget goes in that, which is unusually large for [an organizing committee]. That’s because we based our bid around lots of temporary build; we didn’t want to leave a lot of white elephants.
Technology is the next biggest area. About 20% of our budget goes to the technology infrastructure required for the Games — everything from the results and scoring systems to the communications systems that enable folks to communicate between venues and back to the international broadcast centers.
What are the sources of your funding?
The single largest source of our income is local sponsorship, where we’ll raise about £700 million. That was the target we set in 2005 when the economic environment was looking pretty buoyant. The good news is that we’ve hit that target, and we closed our sponsorship program at the end of last year. We will also raise about £600 million from ticketing revenues, and there we’ve always balanced three priorities: affordable tickets, full venues, and our revenue targets.
The third large source of income is the two elements of funding that we received from the International Olympic Committee (IOC). One is its fixed contribution, and the other relates to the international sponsors, the top sponsors. The total that has been swirling about between those two elements is about £600 million.
How much of the revenue from the Games goes back to the IOC?
There are two ways that money goes back to the IOC. One is it gets a royalty on all sponsorship and ticketing income. The second way is if we were to make a profit at the end, then 20% of that profit we pay back to the IOC. But it’s looking like we’ll have a balanced budget rather than a profit.
What issues, if any, have been keeping you up nights?
The biggest issue, and it’s an ongoing one, is cost management. The economic model of an [operating committee] is quite interesting. There’s no direct link between the cost of delivering what you have to deliver and the revenue you can raise. As a result, we’ve had to operate with very, very fine levels of contingency. And we’ve had to be incredibly focused on cost control, incredibly disciplined as an organization.
How many finance staffers do you have helping you keep costs under control?
There are just over 100. The two biggest elements of my team are financial control, which is the basic finance back office, where I have about 30 staffers; and then a proportionately large financial planning team of about 35 staffers. That’s quite a large planning team compared to the size of the control team, but it’s been essential to enable us to control the cost base.
China spent $43 billion on the Beijing Olympics. What will be the total tab for the London Games?
We’ve got our core budget of about £2 billion. Then there’s the public- sector budget of £9.3 billion, the bulk of which has gone for building the infrastructure in the Olympic Park. That will almost certainly come in under budget. There’s about £500 million headroom in that budget as we speak, and they’re largely done with their program now. An important point to make there is that about 75% of that spend will remain in legacy. So a lot of that has to do with dealing with basic infrastructure in that part of London, burying power lines, cleaning up the environment, and so on.
The Olympic Park is in East London, correct?
That’s right. It is on an area of land that was largely derelict for many years, really since the Second World War. The Games have been a catalyst for redeveloping that part of London, and it’s fundamentally transformed now. The largest new urban park in the UK in over 100 years has been put in.
As the Games approach, what’s left on your agenda?
We’ve still got a significant proportion of our job to do. A lot of our overlay is necessarily delivered very late in the day. For example, this year is the Queen’s Diamond Jubilee, and one of our venues, beach volleyball, is right in the center of London, in an area called Horse Guards Parade, where we’ve got to build a temporary 15,000-seat arena. That can only be done once the celebrations of the Queen’s Diamond Jubilee are over, which is not until June. That’s just an example. Generally speaking, our overlay program will run right up until the end of June, beginning of July.
Once the Olympics are over, how long will it take you to wind up the committee’s work?
We’re trying to wind up very quickly. We’ve been working on it for almost two years now. In parallel with all the work we’re doing to organize and deliver the Games we’ve also had a little project called our dissolution project, to make sure we have an orderly and rapid dissolution. Ultimately we plan to put the company into formal liquidation in June of 2013. What will happen is that on September 10, the day after the closing ceremonies of the Paralympic Games, the majority of the paid workforce will go. At that stage we’ll probably have about 500 people still on our books, compared with about 6,000 staff at Games time. By the end of 2012, that number will have fallen to about 100 people.
For you, 2013 will mark the end of 10 years working on the Olympics. What are you going to do for an encore?
Take a holiday. [Laughs.] I’m a partner with Deloitte. I’ve been on a very long-term secondment. And my intention is to go back to Deloitte.