Why Brisbane, like all Olympics, will face a serious cost blowout

The International Olympic Committee (IOC) has in the last decade attempted to reform the games and reduce the cost of hosting. Despite this, cost overrun remains a feature of hosting. The cost of Paris 2024 is reported at US$8.7 billion with a cost overrun of 115%, Los Angeles 2028 has revised its forecast from US$5.3 bn to US$6.8 bn, and Brisbane has committed to a budget of A$7.1 bn (approx. US$4.6 bn). The real question is where the total number will land.

Professor Bent Flyvbjerg, an expert in mega-projects, has identified a number of factors driving the overrun including irreversibility, fixed deadlines, the blank check syndrome, tight coupling, long planning horizons and an eternal beginner syndrome. These are briefly addressed in turn.

Irreversibility

When scope and costs begin to escalate as on other projects, hosts generally do not have the option of walking away when it comes to the Olympics. Flyvbjerg writes that hosting the games is a particularly difficult decision to reverse with Denver the only city to have abandoned hosting the Games, in 1972, after winning the bid to host.

A domestic example of where this was possible, however, is, of course, the Victorian government’s 2023 decision to decline to proceed with the 2026 Commonwealth Games in July 2023.

Fixed deadlines

The opening date of the Olympic Games cannot be moved.  When problems arise, there can be no trade-off between program and cost, as is common for other types of megaprojects.  All that can be done by organisers of the Olympics is to allocate more money, which is what happens, further perpetuating what Flyvbjerg describes as the “Blank Check Syndrome” described further below.

Tight coupling

Tight coupling of the events is another feature giving rise to the complexity of hosting the Games. For example, Rio 2016 hosted 42 sports, with 306 events across some 32 venues.  Design standards for venues are set in detail by the IOC and individual sports associations. These are tight and non-negotiable constraints that set the Olympics apart from more conventional megaprojects where trade-offs can be drawn between budget, program, scope, and quality.

Blank check syndrome

It took Montreal some 30 years to pay off the 1976 Games because, with no room to move on time or scope, the host city has no choice but to spend more, whenever needed. This is the “blank check syndrome”.

Long planning horizons

By design, staging the Olympics comes with a long planning horizon of between seven and 11 years. This is longer than an average political and business cycle in most nations. The longer the duration, the larger the window, and the greater the risk of problems, according to Flyvbjerg.

An example is the Tokyo 2020 Olympics, when the covid-19 pandemic made it impossible for Japan to host the games in 2020 as planned.

Other countries have experienced economic downturn between landing the games and hosting. When Rio bid for the 2016 Games, Flyvbjerg reports that the Brazilian economy was doing well, but two months before the opening ceremony, it declared a state of emergency to secure additional funding for the Games. Athens 2004 Games is another example with the significant Games spend contributing to a weakened state economy.

Eternal beginner syndrome

As the Olympics move from nation to nation and city to city, hosts are each “eternal beginners”, with no city able to capitalise on prior experience. This is another explanation as to why the games have the second highest cost overrun of any type of megaproject, behind only nuclear storage projects, according to Flyvbjerg.

The question, ultimately, is not whether Brisbane will have a cost blow out. It’s how much and what can be done to preserve quality in the process and to rein in the overrun.