Rio Olympic cost overruns reach US$1.6b: Oxford study

[SAO PAULO] A study from Oxford University's business school found that the Rio 2016 games will cost US$4.6 billion, an overrun of 51 per cent or $1.6 billion, for a country that is facing a second year of economic contraction.

With the opening ceremony less than a month away, Rio de Janeiro state is close to bankruptcy and has delayed salaries for civil servants including police. That has raised security concerns as a spike in crime was punctuated by a dismembered foot washing up near the Olympic volleyball arena last week. Some athletes have pulled out citing the Zika virus, while others have expressed concerns about competing in sewage-filled water.

"The billion-dollar-plus cost overrun on the Rio Games comes at a time when Brazil can ill afford it, given that it's facing its worst economic and political crisis since the 1930s and the state of Rio de Janeiro is particularly hard hit by recession," Bent Flyvbjerg, the lead researcher for the study, said in an e-mailed statement.

The report by Mr Flyvbjerg, Alexander Budzier and Allison Stewart of the Said Business school found that Olympic Games held over the past decade have cost US$8.9 billion on average, not including road, rail, airport and hotel infrastructure. While the cost overruns come at an unfortunate time for Brazil, Rio 2016 will be cheaper than recent summer games. The report found that cost overruns in Sochi and in London were 289 per cent and 76 per cent, respectively. All of the games going back to 1960 that were part of the study cost more than expected.

"If you wanted to make it as difficult as possible to deliver a mega project on budget, you would do exactly what they do at the games," Mr Flyvbjerg said.

"You would assemble a team that has never delivered this type of project before, in a location that has never seen such a project. Then you would enforce a non-transparent and highly questionable bid process that encourages overbidding and places no responsibility for costs with the entity that decides who wins the bid."

A spokesperson for Rio2016's organizing committee, which is privately funded, said in an e-mailed response that there were no cost overruns after accounting for relevant inflation, and that the Oxford report is speculation aimed at creating a negative image of the games.

"When we found ourselves in a position of potential overspending, we immediately implemented a series of cost- cutting measures," the person said.

"We are delivering rational, modern and efficient games."

Mr Flyvbjerg says the report adjusted cost data for inflation, making the overrun calculations "conservative."

The report's analysis includes sports-related costs of the games. That includes operational costs of the organizing committee and direct capital costs incurred by the host city or private investors to build competition venues, and doesn't include indirect costs related to infrastructure and hotel upgrades. The study calculates cost overruns based on the budget and revenue estimates used when bidding to host the games. Rio won the bid in 2009.

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