Rio Games a Success at ‘Only’ 51% Overbudget

Rio Games a Success at ‘Only’ 51% Overbudget

Will the 2016 Rio Olympic Games be remembered as a success or a failure? It’s hard to know the answer yet.

What we do know, however, is that in the bizarro world of hosting Olympic Games, the cost overruns for Rio are actually quite favorable compared to numbers from past events.

Always Overbudget

The above graphic from HowMuch.net, a cost information site, visualizes data from a recent study by Oxford University to compare the budgets of previous games.

The study found the average cost overruns for Olympic Games to be a whopping 156% from 1968 to 2016. This means that the Rio Games were a budgeting success, at least in relative terms, by ‘only’ running 51% overbudget.

It should be noted that the study accounts only for sports-related costs, such as those relating to operations or building venues. The study excludes indirect capital costs such as upgrading transport or hotel infrastructure, since data on these costs is harder to come by, and is often unreliable. Also, some Olympic Games were omitted from the study, as they did not have available public data on the costs involved.

The Good, The Bad, and the Ugly

The good news for organizers is that cost overruns, as a percentage, are generally going down.

The 1976 Summer Games in Montreal caught everyone off guard after going 720% overbudget, and the city was saddled with debt for 30 years. Lake Placid (1980), Barcelona (1992), and Lillehammer (1994) were all grossly overbudget as well with 324%, 266%, and 277% overruns respectively.

However, recent games – with the exception of Sochi (289%) – have all been pretty good as far as Olympics go. The average cost overrun since 1998 has been just 73%.

The bad news for organizers is that costs, in general, are still going way up. Organizers are just getting slightly “better” at budgeting for them.

Here are the total costs for all games in the study – note that costs are adjusted to be in 2015 terms.

Lastly, the ugly part for future Olympics organizers?

The study found that the budgeting problems for Olympic Games are without precedent, as far as megaprojects go:

The Olympic Games have the highest average cost overrun of any type of megaproject, at 156 percent in real terms. In comparison, Flyvbjerg et al (2002) found average cost overruns in major transportation projects of 20 percent for roads, 34 percent for large bridges and tunnels, and 45 percent for rail; Ansar et al. (2014) found 90 percent overrun for megadams.

A major difference, however, is that sometimes infrastructure projects do get built on budget. Olympic projects, on the other hand, always go overbudget by amounts that seem almost unfathomable.

And, it is only in this bizarre context that the Rio Games can be seen as a budgetary “win”.