Rio Olympics has overshot its budget by $1.6 bn, says study
The original budget for the games for the 16-day-long event was placed at $3 billion
Next month’s Summer Olympics, hosted by Brazil’s Rio de Janeiro, has overshot its budget by $1.6 billion (in 2015 USD), according to a study by Oxford University. The original budget for the games for the 16-day-long event was placed at $3 billion, or 51% in real terms. This, the study said, “is the same as the median cost overrun for other Games since 1999.”
Rio’s cost overrun, however, pales in comparison with the 1976 Summer Games in Montreal, which the study found overshot its budget by a mammoth 720%. The 1992 Barcelona Olympics, held over two and a half decades ago, had a cost overrun of 266%.
Between 2004 and 2014, the study says, the six recent Olympic games “have cost on average $8.9 billion”. Greece, for example, has paid a price for hosting the 2004 edition of the Summer Games, with the increase in budgets and debts playing a role in the country’s ongoing economic crisis, which began in 2007.
However, Rio will not be the most costly Summer Games to date, well below London, which staged the previous edition of the Olympics in 2012 and spent $15 billion. Similarly, the last edition of the Winter Olympics in 2014 in Sochi, a Vladimir Putin pet-project, turned out to be the costliest game ever at $21.9 billion, with its budget overshooting by a whopping 289%.
The study is only based on what it calls “sports-related costs” which includes “operational costs incurred by the Organising Committee for the purpose of ‘staging’ the Games. The largest components of this budget are technology, transportation, workforce and administration costs, while other costs include items like security, catering, ceremonies and medical services. These may be considered the variable costs of staging the Games and are formally called ‘OCOG costs’ by the IOC.” Similarly, the study is also inclusive of direct capital costs “incurred by the host city or country or private investors to build the competition venues, Olympic village(s), international broadcast center, and media and press center, which are required to host the Games. These are the direct capital costs of hosting the Games and are formally called “non-OCOG direct costs”.
The Olympics, the study said, have the “highest average cost overrun of any type of megaproject”, or around 156% in real terms. Equally significant is the fact that every edition of the Olympics (both summer and winter) have seen a case of costs being overrun, “without exception; for no other type of megaproject is this the case.” Interestingly, 47% of the Games studied between 1960 and 2016 “have cost overruns above 100 percent”.
In concluding the abstract, the study gave a clear warning to cities and countries embarking on an ambitious Olympic host city project. “Given the above results, for a city and nation to decide to stage the Olympic Games is to decide to take on one of the most costly and financially most risky type of megaproject that exists, something that many cities and nations have learned to their peril.”
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Business NewsIndustryRio Olympics has overshot its budget by $1.6 bn, says study
First Published:8 Jul 2016, 01:34 PM IST
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