Taking Cues from Brazil, the Next Olympic Host Cities Try to Rein in Costs
BY SARAH FISTER GALE
Tokyo International Exhibition Center in Ariake, Tokyo will be one of the venues for the 2020 Summer Olympics.
The Olympics capture the world’s imagination. But the race begins long before athletes arrive.
“Effective project management allowed all changes in the city to be done in a coordinated way that involved all relevant stakeholders.”
—Lucia Mazoni, PMP, Civil House State Government, Rio de Janeiro, Brazil
Cities compete to host the Summer and Winter Games, hoping to take a lead role on the global stage.
But winning an Olympic bid can be a mixed bag. From a financial perspective, hosting the games is risky. Every Olympic Games project portfolio since 1960 has gone over budget—and the average cost overrun is 156 percent, according to a 2016 University of Oxford study that looked only at sports-related costs, excluding general infrastructure projects.
Many communities are now questioning the long-term financial value of Olympic venues, which has led to a decline in host city applications. As projects to support the 2016 Summer Olympic Games in Rio de Janeiro, Brazil ramped up, thousands of Brazilians took to the streets in protest.
But Rio 2016 project teams worked hard to win over the skeptics. They reined in spending and built venues they expect to serve the city for the long term. For example, the games’ handball arena will be dismantled to provide material for four new primary schools, and parts from the aquatics stadium will be used to build two community swimming centers. During the years leading up to the opening ceremony, project management drove success.
“Effective project management allowed all changes in the city to be done in a coordinated way that involved all relevant stakeholders,” says Lucia Mazoni, PMP, Olympic projects coordinator for the Civil House State Government, Rio de Janeiro. “It ensured the International Olympic Committee (IOC) knew the status of all projects—both venues-related projects and transportation projects.”
Upcoming host cities and the IOC have taken note. Using a lessons learned process, the IOC is working with Pyeongchang, South Korea (2018 Winter Games) and Tokyo, Japan (2020 Summer Games) to continue to repair the games’ troubled reputation.
PHOTO BY EDUARDO MARTINO
“Keeping projects in scope while reducing costs was very difficult. We had to be creative to find solutions that balanced service levels with our commitment and stakeholder expectations.”
—Flavia Dias, PMP, formerly of the Rio 2016 Organizing Committee for the Olympic and Paralympic Games, Rio de Janeiro, Brazil
After a recession began roiling the Brazilian economy in 2014, the project teams delivering the 2016 Summer Games had to tighten their belts. Project and program managers across the portfolio revamped plans and rethought every spending decision, says Flavia Dias, PMP, former head of the technology program office (TPO), Rio 2016 Organizing Committee for the Olympic and Paralympic Games, Rio de Janeiro, Brazil.
“Keeping projects in scope while reducing costs was very difficult,” says Ms. Dias, who was in charge of the TPO from 2011 to October 2016, when the office began closing down. “Across all the years, we had to adjust our planning through several budget reduction exercises. We had to be creative to find solutions that balanced service levels with our commitment and stakeholder expectations.”
For the first time in Olympics history, cloud-based technology supported data management and telecommunication services throughout the games, says Marta Sanfeliu, COO, major events, Atos, Barcelona, Spain. (Atos is the International Olympic Committee’s worldwide IT partner.)
The decision to reduce on-site data centers and server farms eliminated significant capital infrastructure costs and slashed the delivery timeline. Atos IT teams conducted 200,000 hours of testing before the games began. Because the system was cloud-based, Atos didn’t need on-site testing labs, which were previously part of every project plan. Now testing, monitoring and support is centralized in Barcelona, in a facility that will be reused to test systems for future games.
“We are already conducting testing for South Korea, and when that need decreases, we can start testing for Tokyo,” Ms. Sanfeliu says. “It is a better value for all of the hosts.”
But the cloud-based approach has its downsides. For instance, it’s more difficult to build buy-in with all stakeholders when the lab isn’t centrally located, Ms. Sanfeliu says. To ease concerns for the 2018 games and beyond, Atos’ team met with government officials, news stations that will be broadcasting competitions and other stakeholders to explain how the cloud solution would work, safety protocols the team would follow (including 24/7 monitoring of data flowing through the network) and the overarching benefits of the shift.
“Decisions about the legacy use of venues must be made at the beginning, when you are defining your overall strategy for the project.”
—Stefan Timmermans, Huijbergen, the Netherlands
The Cost of Glory
The Olympics are a challenge course in cost management. But the most recent games kept things (relatively) under control.
A NEW OLYMPIC RECORD?
Estimated cost of the 2020 Tokyo Summer Games—a more than fourfold increase from the initial estimate in 2013
“Once we explained the cost and quality advantages, they were confident in the system’s security and willing to engage,” she says.
The concept will be much easier to sell going forward: The IOC is making the cloud-based solution part of all future host city contracts. “A cloud-based solution reduces the cost while avoiding legacy infrastructure and can be used for multiple games,” Ms. Sanfeliu says.
GETTING TO THE GATE
Transportation infrastructure projects to deliver bus rapid transit (BRT) and new subway lines and stations in Rio also required creative thinking. The subway developers had to tear up heavily populated areas. BRT teams needed to coordinate with teams leading sewer, water, power and data infrastructure projects, all of which had to be completed before special asphalt could be laid for the BRT lane, says Ms. Mazoni.
“Various project plans needed to be combined to ensure they didn’t interfere with each so we could be done in time for the event,” Ms. Mazoni says.
To streamline delivery of the full range of range of Olympics-related projects—everything from security to transportation to infrastructure—the state government relied on a project management office (PMO) that worked with every project team to merge schedules and share plans.
“Having an empowered PMO to manage all of the project teams made all the difference,” says Luciana March Detoie, PMP, intermodal coordinator for the Civil House State Government, Rio de Janeiro.
The PMO stepped in to help when needed, facilitating applications and getting stakeholders involved. It also did damage control when things went wrong. For example, when an energy contractor started late and water and sewage teams faced financing delays, the PMO brought everyone together to develop a solution that would get critical projects completed on time.
Of course, this meant making sacrifices. One subway extension didn’t open until days before the games began—and one station had to be removed from the plan entirely. This decision forced tourists to bus the last 8 miles to some venues, “but it was the best solution to avoid the risk that all four subway lines wouldn’t be done,” Ms. Detoie says.
Despite extensive efforts to rein in spending, the Rio Olympics’ sports-related costs ran US$1.6 billion over budget, with a price tag of US$4.6 billion. When all Olympics-related infrastructure projects are factored in, the cost was an estimated $12 billion—a huge price tag for a struggling city, and one that could rise yet higher as all costs are tallied.
But compared to other host cities this century, the cost was fairly low. London, England spent US$15 billion on sports-related projects alone for the 2012 Summer Games (going 76 percent over budget), and Russia spent nearly US$22 billion on the same for the 2014 Sochi Winter Games (going 289 percent over budget). (See “The Cost of Glory,” page 34.) In this sense, the IOC and Olympic boosters in prospective host cities can point to Rio de Janeiro as proof that the games don’t have to cost more every four years.
From Ms. Dias’ perspective, robust dependency and risk management were crucial. “If your program management approach includes strong dependency and risk management,” she says, “you’ll be able to identify opportunities to reduce scope and budget and mitigate the risk of incurring additional costs.”
Gangneung Ice Arena
South Korea Gears Up
In February 2018, South Korea will host its first Winter Olympic Games. Jihye Lee, head of international media relations, Pyeongchang Organizing Committee (POCOG), Pyeongchang, South Korea, says the country is now at a “crucial stage,” transitioning from planning to implementation. PM Network talked to her about how project delivery is taking shape.
What are POCOG’s top priorities in preparation for the Olympics?
We need to be ready for the games in two ways. One is hardware, meaning venues and infrastructure. The other is software, meaning operational know-how and experience. Right now, our biggest and most important assignment is to prepare and operate 26 test events this winter season, so that every member of POCOG can acquire operational experience.
Are you on track to meet those goals?
Yes, the average construction rate of the competition venues is 95 percent as of November 2016. They will be completed in time for the scheduled test events. Construction of noncompetition venues such as the Olympic Plaza, media villages and International Broadcasting Center are also on target for completion in 2017 as planned. The construction of the high-speed railway, expressways and other road networks is also progressing on schedule.
South Korea previously hosted the Summer Games. What unique challenges come with hosting the Winter Games?
Winter Olympics require more contingency plans for various weather conditions, and that adds new risks to project planning. In previous Winter Games, there have been problems with not enough snow.
In the case of Pyeongchang snow venues, the slopes’ curvatures are quite leveled without sharp cliffs, which means artificial snow can be prepared more easily. Pyeongchang Mountain Cluster is also in the coldest region in Korea. However, the International Olympics Committee (IOC) recommended POCOG mitigate the risk of snow shortages during one of its project reviews. In response, POCOG made a plan last winter, in cooperation with IOC-recommended experts, to store 50,000 cubic meters (65,398 cubic yards) of snow for emergency use. The contingency plan has already paid off: Stored snow was used during the FIS Snowboard World Cup in November 2016.
PASSING THE BATON
The Rio teams’ success in reining in spending reflects lessons learned from earlier games. The Olympic Games Knowledge Management (OGKM) program, the IOC’s knowledge-sharing practice included in host city contracts, provides hosts with Olympic Games guides, workshops and seminars on how to plan and execute projects. It also helps project teams close knowledge gaps and streamline project delivery by connecting teams across countries.
PHOTO BY EDUARDO MARTINO
“If your program management approach includes strong dependency and risk management, you’ll be able to identify opportunities to reduce scope and budget.”
—Flavia Dias, PMP
Ms. Dias says one of her first assignments as the head of the Rio 2016 technology program office was to travel to London, England and Sochi, Russia to meet with her counterparts for those games. She was able to review documents and project plans, and even participated in some of the testing phases for those games through IOC-backed knowledge transfer programs.
“It was helpful to observe their program management practices and to share best practices,” Ms. Dias says. She brought back many project management tools, including a plan to centralize the PMO and a strategy to bring stakeholders from interrelated project teams together into working groups at the outset of the project.
In turn, Ms. Dias hosted her counterparts from future host cities in South Korea and Japan, offering signposts for balancing risk management and innovation in project delivery. The Pyeongchang Organizing Committee for the 2018 Olympic and Paralympic Winter Games (POCOG) sent 167 people to Brazil to observe the operations and activities of different functional areas during the 2016 games. A total of 600 representatives from the Pyeongchang 2018, Tokyo 2020 and Beijing 2022 committees, as well as delegates from other bid cities like Paris and Los Angeles, went to Rio de Janeiro.
“The Rio games were an invaluable chance for all of us to experience and learn,” says Jihye Lee, head of international media relations, POCOG, Pyeongchang, South Korea. (See “South Korea Gears Up,” page 35, for how POCOG is approaching the 2018 games.)
AFTER THE CLOSING CEREMONY
With many communities unsure of the long-term value of hosting the Olympics, project teams must carefully plan how venues will be used once the games end, says Stefan Timmermans, who has worked on several Olympics projects. He most recently served as senior program manager for venue technology for the Rio 2016 Organizing Committee.
“Decisions about the legacy use of venues must be made at the beginning, when you are defining your overall strategy for the project,” says Mr. Timmermans, Huijbergen, the Netherlands. (Partly to reassure skeptical stakeholders, cities are making the long-term role of Olympic facilities part of the bidding process; see “California Dreaming,” page 37.)
Many cities have made the expensive mistake of building massive sports venues without crafting a realistic long-term plan. To position Sochi as a world-class winter sports destination, for example, Russia built a US$300 million ski jump and a US$8.5 billion rail link connecting the town to the Black Sea coast. These facilities now sit largely idle; Russia’s national ski team uses the ski jump.
Other cities have seen long-term benefits from hosting the games by repurposing facilities and sparking urban redevelopment. London’s conversion of its 560-acre (227-hectare) Olympic Park into a tourist attraction is part of a more than £500 million transformation program that includes adding office buildings, a museum, university campuses and a 600-seat contemporary dance theater. The program is scheduled to close by 2022.
“Having an empowered PMO to manage all of the project teams made all the difference.”
—Luciana March Detoie, PMP, Civil House State Government, Rio de Janeiro, Brazil
Following London’s lead, Rio’s Organizing Committee designed many facilities to be repurposed. For instance, the International Broadcast Center will become a high school dormitory, and the 300-acre (121-hectare) Barra Olympic Park will become a combination of public parks and private development sites.
South Korea envisions the 2018 Olympics as part of a larger plan to make the Pyeongchang region a top destination for winter sports enthusiasts across East Asia by 2032. The government plans to invest US$3.1 billion through a two-phase plan that includes 40 projects.
But no matter how early the planning process begins, Olympic host cities and their project teams should anticipate surprises. For instance, South Korea’s government had to come up with extra funds and extra terrain when the IOC added eight competitions to its freestyle skiing and snowboarding events, bringing the total to 20. The country’s original bid to host the 2018 games was based on fielding 12 competitions in this area.
To guard against the unknown, future host cities should make project management a priority in the earliest stages of the bid process, Mr. Timmermans says. “Bring project management experts into the conversations from the very beginning of planning to help validate assumptions about cost, schedule and feasibility.” The earlier project managers join the team, the less likely the final months will be a mad dash to the finish line. PM
Applying to host the Olympic Games is a project unto itself.
Bidding to host the Olympics is a time-consuming civic workout—and some cities don’t make it to the finish line. Two of the five candidate cities for the 2024 Summer Games withdrew their bids over concerns about financial risks and other potential negative impacts. That leaves just three contenders: Paris, France; Budapest, Hungary; and Los Angeles, California, USA.
Bill Hanway of AECOM, which created the master plans for the Olympics parks in London and Rio de Janeiro and helped prepare Los Angeles’ bid, says the LA2024 Bid Committee team has focused on a number of issues since the application process began in 2015. These include innovation, transportation, safety and managing costs. (The bid process will cost approximately US$50 million, all paid for by private donors.)
“Los Angeles is blessed with an amazing number of world-class venues and stadiums, and we are taking full advantage of these existing facilities,” says Mr. Hanway, executive vice president and global sports leader, AECOM, Los Angeles. He serves as lead design and technical consultant to the committee. “The ability to use those existing facilities rather than build new ones is a key component of the LA2024 bid as it showcases Los Angeles’ ability to manage costs more effectively.”
Los Angeles, California, USA
Touting its bid as “high-tech, low-risk and sustainable,” LA2024’s application doesn’t include a traditional single Olympic Park. Instead, the bid proposes four separate “sports parks” spread across the city, all of which would rely on existing venues supported by temporary ones.
Still, the state of California has offered clear support for the delivery of the 2024 games, which in December LA2024 estimated to cost US$5.3 billion. Last year, the state’s governor signed a law to contribute US$250 million to the games to cover cost overruns.
The International Olympic Committee will announce the winning bid for the 2024 Summer Games in September 2017.