Flyvbjerg & Stewart throw much cold water on the claims that London 2012 came in on budget. This is a point taken up by Financial Times journalist John Kay. Kay traces the evolution of the cost estimates that were commissioned by the Department of Culture, Media and Sport. It started in 2002 with Arup estimating the costs at £1.8bn. A year later PwC estimated the costs at £3.1bn requiring a public subsidy of £1.3bn. The bid submitted to the International Olympic Committee in 2005 put the costs at £4.2bn. By 2007 the costs had risen to £6.5bn.
Irish sports people should not be surprised by the findings of Flyvbjerg & Stewart. In October 2000 the Taoiseach (Prime Minister), Bertie Ahern, presented a €293m figure to the Dail (parliament) on the total costs of building a National Stadium in Abbotstown. In January 2001, he apologies to the Dail for omitting another €68m in costs. In February 2002 the consultants HPR estimated the cost of the project at €890m. The stadium was not built.
The Punchestown Equestrian Event Centre was built. In 1999 the original proposal sought 100% public funding for a €6.9m Centre. In June of 2000 a revised proposal was submitted for €12.78m. The proposal was approved. A further €1.5m was approved in late 2001 – bringing the issue to the attention of the Public Accounts Committee.
Why the consistent underestimate of costs to the public purse? There is probably a bit of optimism bias and a bit of strategic behaviour.
When it comes to major sporting events then the least we should look for is a full and transparent explanation of how the costs of the sporting events are estimated. If not we are likely to get underestimates like the €7bn provided by Anglo Irish Bank. And, lest we forget, the Anglo executive claimed (here) he pulled that €7bn figure "out of his arse”.