5 November 2009 | Richard Brass

With 1,000 days to go before the London 2012 Olympics, Richard Brass speaks to the organisers about the procurement pressures and pitfalls so far

As athletes, sports fans, tour operators and anyone with the appropriate countdown timer downloaded on to their computer will already know, an important milestone was passed last week. The end of October marked the moment when there were just 1,000 days left to the start of the 2012 Olympic Games in London.

For hopeful participants, those are 1,000 days that can't pass quickly enough, a tortuously long wait until the moment when years of solitary training could turn into global glory and household-name status. But for those responsible for delivering the event 1,000 days could easily seem far too short.

Grim images from previous Olympics of venues being painted on the morning of the opening ceremony and stadium designs redrawn at the last minute could cause any events planner sleepless nights. And for the procurement professionals with the task of getting hold of a huge array of materials and services within a very fixed timeframe, now would be a good time to start worrying about whether things are moving into place.

CHALLENGES AHEAD

Gerry Walsh, recently appointed chief procurement officer at the London Organising Committee of the Olympic and Paralympic Games (Locog), is in no doubt about the scale of his task.

"It's like 20 World Cups, with 26 events [sports] in the Olympics and 20 or so in the Paralympics, massive audiences attending and four billion viewers around the world. There are some significant challenges.

"Next year is the big year, but that's really starting now. A lot of work will be going out over the next 12 months. There's a tremendous amount to be done on the venues and infrastructure, kitting out the stadium, getting power to it and to all the types of temporary structures as well. Then there's sporting equipment. We'll be buying more than one million items over the next 12 months.

"You've then got areas such as the catering, the cleaning and the waste for a massive audience that will be attending, which is a massive logistics challenge. The whole transportation piece and the costs around that; security is another item of significant cost; then the opening and closing ceremonies for both the Olympics and the Paralympics.

"There's significant facilities management as well, and last and by no means least there's the technology that needs to be applied, and the sourcing of that."

Speaking at an event last month, organising committee chairman Lord Coe said the procurement to be carried out over the next two years presented the UK with a £7 billion opportunity.

CAPACITY

It's a Herculean task for which even the most illustrious career in commercial procurement might seem unlikely to provide adequate preparation, but Walsh appears unflustered about getting it done and, most importantly, getting it done on time.

The only area that he thinks might need particular attention is not any specific supply but overall capacity. "We must make sure that we have the capacity for all of the structures within the UK to put the event on," he says. "I wouldn't say capacity is a concern - if you get everything out now and plan well ahead and place your contracts, that shouldn't be an issue.

"All the more reason for doing it promptly. To date, the Olympic programme has been bang on schedule and in some places ahead of schedule."

The International Olympic Committee (IOC), always nervously monitoring progress for signs of incipient crisis, is deeply impressed with work for London 2012, which it said was on track. That verdict was based largely on the work done by the Olympic Delivery Authority (ODA), the statutory corporation responsible for providing the various venues that will be used in 2012, which has now largely completed its task, at least as far as procurement is concerned.

Morag Stuart was the 27th of 206 staff members appointed at the ODA and its procurement director until earlier this year, when she went part-time as the role wound down. She says the determination to be safely ahead of deadline was as much an overriding concern throughout the construction procurement process as it is now.

"We changed the programme a year in, from just-in-time to earliest completion," she says. "There's always a balance with that of then managing facilities for a longer period and the maintenance of empty buildings prior to the Games, but when you offset that against trying to speed up a construction project that's running late, it's far more cost-effective to finish that building slightly earlier. And we're running ahead of that."

The going hasn't always been smooth. Procurement for the construction of the venues began in earnest in 2006, as the economic boom was racing towards the peak from which it has since so spectacularly fallen. Supplies of any kind were at a premium, but none more so than the big-ticket items required for a project on the scale of the planned development at Stratford, and suppliers were being picky.

ECONOMIC CONDITIONS

"When we were looking at the market and understanding who would be interested in and capable of providing an aquatic centre or a velodrome, there was definitely a limited supply," says Stuart. "The market was very risk-averse. They didn't want to take on a contract for such a high-profile project, they didn't know the client, we hadn't demonstrated our credentials up to that point in time, and the market was booming.

"So we had to be very proactive - market-testing, supplier days, going out into industry magazines and associations to explain what we were doing. We had to invest a lot more time into generating market confidence."

That was then. The end of the boom and the ensuing downturn changed suppliers' attitudes dramatically. "Towards the back end of 2007 you could really feel the difference," says Stuart. "We started to get an awful lot of people applying for contracts, and we began to see prices come down as people started to make more commercial decisions."

That side-effect of the downturn has certainly made life easier with regard to budgets, a perennially hot potato in Olympic cities, with the potential to turn a celebratory event into an international embarrassment. It's certainly taken some of the pressure off Walsh as he prepares to meet his various targets over the next three years.

"Going out to procure in the current climate is in many ways a good thing, because businesses want work," he says. "In terms of keeping costs under control, I think we're in a good place to do that. We have confidence that we'll come in on budget."

That would be a considerable relief for London organisers. The costs of staging an Olympics are notoriously open-ended, and no city wants to be the next Montreal, which in December 2006 finally paid off the stadium it built for the 1976 games.

However, the final bill for London is far from settled. The bid team told the IOC in 2005 that it could put on the games for just £2.4 billion, barely 10 per cent of the cost of the Beijing games and well below the final £9.4 billion for Athens.

Two years later, that changed, and a new budget of £9.3 billion was produced, almost quadrupling the projected cost of the London games. To be fair, that figure included £836 million of VAT, cost-neutral to the taxpayer, plus £600 million for security, largely connected to the 2005 bombings the day after London's bid was successful, and £2.7 billion of contingency funds.

Those contingency funds, however, have already been hit hard. Despite insistence by the government that no more public money would be made available, the National Audit Office expressed serious concerns about the financial plan, based on uncertainties about security costs, the financing of the Olympic village and the legacy of the games venues.

LONDON'S LEGACY

Some of those concerns have already proven well founded. As the recession took hold, anticipated private-sector sponsorship of key projects such as the £1.1 billion Olympic village and the £355 million media centre evaporated. The government announced earlier this year that both of these facilities would be funded from the public purse, with some money coming from the contingency fund and some from other public agencies. This move cast a shadow over the commitment that there would be no extra public spending.

Meanwhile, at the London Development Agency (LDA), the body responsible for funding the London Mayor's projects, a shortfall of £160 million has been discovered in its budget for land purchased for the games, a deficit that will have to be covered by cuts in other projects for Londoners. And that figure is on top of £800 million in debt that the LDA incurred buying land for the Olympics, a debt that the agency is now trying to hand on to the government, putting the overall public figure under further pressure.

On the other side of the equation, downward pressure on prices caused by the recession has helped reduce costs in some areas, and organisers say they are only £100 million short of their £650 million private sector sponsorship target.

FUTURE USE

But, according to Professor Ian Henry, director of the Centre for Olympic Studies & Research at Loughborough University, the sensitive question of the financial legacy of an Olympic games is determined as much by what becomes of the site afterwards.

Both the Athens and Sydney Olympics have had very poor postgames usage of their facilities, with the Athens venues padlocked and disused and Sydney's struggling to break even. "Ironically, the Atlanta games, although recognised as a fl op in terms of the staging of the show, were financially a great success largely because the legacy in terms of facilities fitted the needs of local professional sport," he says. "The post-games usage of the London site is not altogether resolved yet."

And, while the London Olympic planners are trying to appear confident of their progress, the harsh fact is problems are only likely to appear nearer the time. Did the organisers of the Athens games know in 2001 that they weren't going to have time to put the roof on the aquatic centre, leaving spectators and competitors roasting in the sunshine? Did the Montreal organisers know in 1973 that the retractable roof and distinctive tower for the main stadium would not be put in place until 11 years after the games? Probably not.

Measuring the state of London's progress against that of other recent games this far ahead of the event is consequently tricky. Athens had severe difficulties in meeting its deadlines throughout its build-up, while Beijing had a completely different problem.

"The IOC's concern with Beijing was that it was ready too early," says Henry. "According to IOC insiders they were concerned about the overzealousness of the Chinese preparations. The danger was that the high-profile Bird's Nest and the Cube would be either built, ready and empty for two years, or built, ready and partly used. "The IOC didn't want the stadium's thunder stolen by pre-events of any kind, so they asked the Chinese to slow down." For any Olympic planner, that would seem a welcome problem. Better to be a Beijing than an Athens.

PROCUREMENT'S GIFT

While it may be too early to identify the likely legacy of the games overall, what procurement will leave behind is already taking shape. Stuart points to the use of purchasing to embed policy objectives as one of the key achievements of her time at the ODA. "The procurement policy went through a lot of public consultation, so everyone got an opportunity to say what they believed best practice to be. We sifted that to seven key criteria and built it into everything we do - procurement, contracts and the management of contracts.

"Most of what we've done in terms of innovation is the way we've implemented best practice. So all of our contracts are NEC3 [a type of construction agreement]. We've put obligations within our contracts to say that, wherever it's appropriate, 3 per cent of all labour directly employed on the Olympic Park must be apprentices.

"We've also taken the supply chain management seriously. We map all tier two and critical tier three suppliers across the entire programme, and we assess them regularly for financial credibility, how fast they're paying their suppliers and a number of criteria. Whenever there's a warning sign we highlight that to the contract manager of that deal and become proactive.

"We also aggregated the supply of concrete and ensured contractors had to source it from our framework, cutting down the number of vehicle movements, for sustainability purposes. We set up a panel for sustainably sourced timber to ensure only that timber goes onto site. We also set up small plant hire on site, to avoid something like 5,000 vehicle transactions a day."

Stuart also has high hopes for the wider applicability of CompeteFor, the online portal for Olympic contracts, which has been used to advertise more than 4,000 opportunities so far. "With public procurement, you invest a huge amount of time into open and transparent purchasing for the big contracts, and then it effectively goes into the commercial world for the smaller contracts.

"We developed this system and said all tier ones have to sign up, and any subcontracts have to be advertised on CompeteFor, unless you get our approval not to. The policy objective was to involve small business. "It was also a way of livening the market up. People get complacent with their supply chains. It's healthy to keep a turnover of suppliers, and that's what we're seeing.

"CompeteFor will be a really good legacy if we can make that work, and we are doing a lot of work with other public sector bodies and the Office of Government Commerce to take it further."

SUSTAINABILITY

Another area in which the Olympics may leave a lasting legacy is sustainability. Shaun McCarthy, director of Action Sustainability and chair of the Commission for a Sustainable London 2012, says he has been impressed with the way the ODA has made sustainability part of its mainstream activity.

"What we've done on the Olympics is not perfect, but it is in many areas a sight better than it's been done before," he says. "It has been very well defined. At the ODA the whole management process, risk management reporting and target setting, works well, and that behaviour is translated down to the people with the hard hats and boots. That's a fantastic achievement and legacy in its own right.

"Locog is still very much in the planning stage. Last time we looked it had a really solid commitment and understanding of sustainability in the core of the organisation. But the sustainability of all the stuff they need to buy is going to be very challenging to achieve."

For Walsh of Locog, the procurement legacy of the Olympics will go beyond the organisers themselves to the companies that have become part of the supply chain, even though this is, in effect, a one-off project.

"Come 2012, in many instances the relationship with our suppliers terminates. However, the great thing potentially for suppliers to us is that we can help them become fitter and more competent to the point where they could then supply to the next Olympics in Rio. I think we'll be making British industry more capable and more competent."

Richard Brass is a freelance journalist.