Opinion
Government stuff-up or consultant spin: Who’s responsible for the Games debacle?
Elizabeth Knight
Business columnistVictoria’s stunning backflip on hosting the Commonwealth Games is at its heart a massive case of project mismanagement. Whether it was the state government’s stuff-up, or the consultants who advised it, it is implausible that a project that was costed at $2.6 billion last year can come in at around $7 billion now.
One of these two figures was, or is, a fiction. Probably both.
Victoria’s Deputy Premier Jacinta Allan and Premier Daniel Andrews announcing the decision to cancel the 2026 Commonwealth Games on Tuesday.Credit: Joe Armao
When the true account of how this debacle occurred is told, it will be ample fodder for the writers of ABC comedy series Utopia – which is based on the fictional politically-handicapped and bureaucratically-plagued Nation Building Authority, whose job is overseeing Australia’s (often ill-conceived and under-costed) infrastructure projects.
The internationally embarrassing episode of Victoria ditching the Games is surely the point at which satire meets reality.
In 2022, the hosting of the 2026 Commonwealth Games was a positive announceable for the Dan Andrews government. Costed by outside consultants, it was supposed to be GDP-positive for the state. Fair or not, the fiasco will add fuel to the view that governments should reduce their reliance on consultants, like the big four, whose operations are now the subject of a federal Senate inquiry.
The fact that Victoria was uncontested in its bid should have sent up the first red flag.
The internationally embarrassing episode of Victoria ditching the Games is surely the point at which satire meets reality.
The unravelling of this project will become an unfortunate chapter in the history of the Games, one that will live longer than any positive glow from the Victorian government’s responsible decision to cut its losses on hosting them.
Sure, there is a rich history of federal and state governments grossly underestimating the costs of large projects – from the construction of the National Broadband Network to the Snowy Hydro 2.0 (originally costed at $2 billion and at last count close to $6 billion and counting), or Melbourne’s suburban rail loop, which is expected to blow out to at least four times the original price.
Australian and state taxpayers bear these gross miscalculations, but it is Australia’s sovereign reputation that is damaged by the Victorian government’s volte-face on the Commonwealth Games.
Of course, there are also plenty of examples of major projects in the private sector that blow out over time. Usually, this results in senior management scalps.
And listed companies have to adhere to continuous disclosure regulations, so shareholders receive more timely updates on a potential increase to project costs.
The Commonwealth Games disaster looks like a combination of significant creep in the scope of the project, a Pollyanna approach on the original estimate combined with higher interest rates and some escalation in construction costs.
Commonwealth Games Australia isn’t buying the Victorian government’s explanation, to the extent it has even offered one. CGA’s chief executive Craig Phillips said he would be interested in seeing how the government costed its estimates to host the Games in Melbourne, particularly given the roughly $1.2 billion price tag for the 2018 Gold Coast Games and the $1.8 billion price tag for 2022 Birmingham.
For its part, the Victorian government has batted the ball back to the consultants, who estimated the cost of the project – placing big four firm EY as one of those in the frame.
The Victorian Minister for Commonwealth Games Delivery Jacinta Allen said she preferred not to blame the consultants, but noted that there was a yawning chasm between the cost estimates and the “actuals”.
There is certainly a school of thought that consultants tend to give their clients what they want to hear.
Yet another consulting group, PwC LLP, compiled a report for the Commonwealth Games Federation in 2019 around developing a new Games Value Framework that “defines the potential costs and benefits of hosting the Commonwealth Games, articulates how these costs and benefits should be assessed, collates the existing evidence from recent Commonwealth Games and draws out lessons learned and critical success factors.”
In summary that report states that “hosting the Commonwealth Games offers a unique opportunity to deliver a positive return on public investment and can reposition and transform a host city”.
Clearly Dan Andrews doesn’t share that view. Instead, he contended that the value in spending up to $7 billion on a 12-day sporting event didn’t stack up.
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