Budgeting for the Olympics

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At Synergy, the UK’s main event for International Project Management Day earlier this month, Louise Hardy, infrastructure manager for the construction work for the London Olympic and Paralympic Games, gave a presentation about how the budget for this vast piece of construction was managed.

The construction involved all the civil engineering works required to get that area of London ready for the Games. It required building:

  • 20km of roads
  • 13km of tunnels
  • 26 bridges
  • 11 venues.

The Games team had committed to developing the site in a sustainable way, which was a challenge in itself given the level of contamination in the soil and the risk of unexploded ordnance left over from the Blitz. Needless to say, that area of London wasn’t used for much before the Games bid was won, and a strong focus of the construction work has been on making sure the investment leaves a legacy for the surrounding area.

Louise said that there were 3 things that kept them on track.

1. Rigorous change control

Louise said that clear reporting at project level was one thing that helped keep the whole project on track. Changes were discussed at this level. When the project started, there were 60-80 people in the project reporting meetings, which took about 4 hours. A strong change control process, with everyone involved, meant that the cost of change could be properly analysed.

2. Rigorous management of cost

Cost management involved a firm hand establishing and monitoring contingency spending. Contingency levels were based on quantitative risk analysis (QRA) with an 80% level of confidence. All contingency budgets were identified as part of a project or programme; there were no general buckets of money to be drawn from at a later date.

Cost management was particularly important because “the media were fierce in the early days.” Louise said that there was wide belief that the UK in general was not capable of managing the civil engineering works required to put on an Olympic and Paralympic Games. The media were on the look out for examples of where projects were overspent or poorly managed.

3. Performance management

The most important area for controlling cost seemed to be performance management. There were several techniques in use at the Olympic Park for performance management, including project reporting meetings. The reports did not just focus on historical information. While this was useful, it doesn’t help the stakeholders see what could happen in the future, so Louise and her team put some effort into preparing monthly trend reports. “It’s given us good visibility and enhanced reporting at government level,” she said. She also showed us an example of the monthly report, which was a graphic representation of the project’s performance that fitted on piece of A3 paper. Variance analysis, total cost and key milestones were also reported.

Once stakeholders felt that the project was being well managed and the performance was on track, the number of people attending these meetings dropped significantly. In the end, the project reporting meetings were only attended by 6 people, and they took about an hour.

The main message from Louise was that earned value analysis was a critical part of keeping the project on track. “It was absolutely essential to undertake earned value analysis on all areas of the programme,” she said. “There was a surprising amount of resistance.” She knew it was the only way to generate trust and belief in the schedule and the project’s achievements. In order to overcome the resistance, the project team undertook a training and education initiative to bring everyone on board with EVA.

It all paid off. The construction work is already complete, and it finished a year before the Games begin. This gives the other Olympics teams plenty of time to make the final preparations before Olympics fever descends on London in 2012.

Posted on: November 09, 2011 01:20 PM | Permalink

Comments (2)

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It also helped that CH2M Hill was one of the managing partners for the games. The person leading CH was the starting president of Kaiser-Hill which successfully closed a very large nuclear weapons plant in Colorado and was the PMI project of the year and written about in "Making the Impossible Possible." (http://amzn.to/pjn7NY) The methods applied on the weapons plant, the culture of CH and the leadership style all support the "rigorous" management of cost, schedule, and technical performance.

As a program manger on that closure project, it changed the way I think of everything today around managing projects, and resulted in the 5 Immutable Principles applied to all we do.
http://slidesha.re/i7O14h is the overview.
But the management processes of multi-billion $ ventures is not for the faint of heart and requires skill, experience, and near-ruthless control of cost and schedule. It's a testament to the past performance of CH that the outcome is successful

Glen, the companies involved had great pedigrees, which no doubt helped them succeed on this project and others. Thanks for sharing your Immutable Principles presentation. I remember reading about the Rocky Flats project: it was an amazing undertaking. I wish such a team were involved in some of the other plans for the Games, as I imagine we would have far fewer column inches written about plans for the use of bus lanes, road closures, and the overloading of the rest of the public transport system if some of those principles were adopted across all the Olympic initiatives.

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