Jamie Magraw, Director of Financial Operations - LOCOG spoke at the CFO Event in Frankfurt 2013

1. Jamie Magraw
2012 Olympics

2. What is the Olympics?
– The Olympics is the greatest sporting event by number of participants, Countries and TV audience.
– The Paralympics is the third with only the World Cup larger.
– The Olympics is equivalent to holding 26 World Championships (17 Paralympics).
– Occur every 4 years.
– Both last roughly 2 weeks in duration.
– The Olympics is first with the Paralympics staged 2 weeks after the completion of the Olympics.
– With the exception of Football, Tennis and Basketball it is the pinnacle of the other 23 sports.
– The Olympics had 10k athletes (the same number of officials) from 204 Countries.
– The Paralympics had 4k athletes from 164 Countries.
– It is the most watched public spectacle in the World. 4 billion watch the Games at some stage or other.
– The Opening Ceremony has the largest TV audience in the World.
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3. Ownership
– The Olympic rights are owned by the IOC (International Olympic Organisation) and the Paralympics by the IPC
(International Paralympic Committee).
– Both are private organisations akin to a Club.
– The Host nation bids to hold the Games.
– The IOC only partly pays for the Games by way of a negotiated contribution to the costs.
– Income is generated by the IOC through the sale of TV and media rights and sponsorship income via the TOP scheme.
– UNLIKE MOST PROJECTS MOST STAKEHOLDERS ARE NOT MEETING ANY OF THE COSTS ALTHOUGH THEY CAN (OR
TRY) TO INFLUENCE SCOPE.
– TO BE ABLE TO BID EITHER THE HOST CITY OR THE GOVERNMENT EFFECTIVELY UNDERWRITE THE COSTS OF THE
GAMES.
– In the case of the London bid the underwriter was the UK Government.

4. Who are the stakeholders?
– The IOC and the IPC.
– The British Olympic Committee who are the party that won the bid.
– LOCOG (London Organising Committee of the Olympic Games) tasked with delivering the Games.
– The 26 Sporting Federations.
– The 204 National Associations.
– The Sponsors (both TOP and Local).
– The Government together with a miriad of Government departments, Agencies and Bodies.
– The Greater London Assembly (GLA) who are the host City – which comprises a number of local authorities.

5. Who Delivers the Games?
– The London Olympic Games was delivered by a number of parties but for the purposes of this presentation they can
be grouped into two:
– The UK Government – mainly through a created entity called the ODA (Olympic Delivery Agency) which can be seen
as redeveloping the physical area of the stadiums and their surround together with all the required infrastructure.
– LOCOG a private enterprise which organised the event, managed all the parties and ultimately delivered the Games.

6. Overall Financial Situation
Budget & Contingency in £m Actual in £m Under Spend in £b
Government Funding (PSFP) 9,300 8,900 400
LOCOG 2,100 2,100
Total 11,400 11,000 400
• Note that within the £8.9 billion Government spend was £0.9billion that was transferred to LOCOG.
• Government decided to transfer both project scope and budget to LOCOG to deliver:
– Security
– Park Operations
– Ceremonies, Village and Cultural Olympics
– Last Mile, Transport, Utilities & Scenario testing
• Government considered it more cost effective to have LOCOG deliver Government responsible scope than existing
Government departments.

7. Government Challenges
– How does LOCOG interact with all the Government Departments?
• Within central Government there were over 40 Government Departments and delivery bodies who were to provide important input
into the delivery of the Games
• It was decided to create the Government Olympic Executive (GOE) who would manage the interface
• With respect to financial matters this worked very well.
– How is the overall Government budget (the Public Sector Funding Package (PSFP) managed?
• Creation of the Cross Party Funding Group (CPFG) which managed all requests from any party on the PSFP.
• All agreements (with the exception of the second military contingency) were contractual between the relevant two parties.
• The body was established early, operated realistically and in a focused manner whilst also providing budget responsibility for each
independent party.
• Decisions were by majority and transparent to all.
– How is the unlimited liability of the Government managed?
• Made clear that there were no additional funds over and above the PSFP approved by Parliament.
• The risk register encompassed all entities responsible for the delivery of the Olympics and was wide ranging taking account of the
National Risk Register (with the exception of a few items categorised as National Security Issues dealt elsewhere).
• Any potential risk was reviewed on a monthly basis in light of full Government and delivery agencies information.
• Each risk was assigned a probability and likely cost together with an “owning entity”.
• The risk analysis was linked into the scenario planning performed by each delivery body (both independently and linked)

8. LOCOG
– Formed to deliver the Games .
– Established in 2005 (post bid) and will be disbanded in 2013
– At its peak employed 7,000 staff but managed 150,000 contractors and a volunteer force of 70,000.
– A private business answerable to its shareholders who are the BOA.
– It’s Board comprised representatives from other delivery bodies but independent of them for voting purposes. This
enabled full discussion and disclosure.
– Experts were invited onto subcommittees. Much of the detailed financial matters were dealt with under delegated
responsibility to the audit committee.
– Although Government had ultimately underwritten the Games financially they remained at arms length.
– Confidence was placed in the mechanisms created to manage risk through the CPFG.
– Funded privately with the exception of a grant towards 50% of the marginal costs of the Paralympics.

9. LOCOG Objectives
– To ramp up, deliver and disband in an 8 year period.
– Create a memorable Games. Do better than the Australians in Sydney?
– Attract sufficient funds to meet the costs as defined within the scope. In effect the income was known to be around
£2.1 billion and this became the costs that could be absorbed.
– Deliver on budget and in time.
– Meet all the stakeholder requirements and standards:
• IOC/IPC
• Sporting Federations
• Some National Federations (Security, food, Visa and funding issues)
• UK Government
• BOA
• GLA
• The Public

10. LOCOG Revenue
• Lifetime Project Revenue was £2.1billion.
• Still to be confirmed after finalisation of the audited accounts in second quarter 2013.
• 95% of revenue has been raised by private means and 5% was a Government grant.
• Breakdown of the revenue base:
– Sponsorship
– Ticketing
– Merchandising/licensing
– IOC contribution
– Grants
– Other income
• The IOC contribution is after negotiation with the IOC and comes out of the revenues they have raised
through the sale of the media rights and sponsorship.
• It should be noted that LOCOG and the IOC jointly raised £1.4billion of sponsorship revenue although the
IOC sponsorship spans 4 years and both winter and summer Games.

11. Specific Global Challenges - Security
• The day after London won the bid London was struck by a wave of terrorist bombings on buses and tubes killing 52 civilians
and 4 bombers with 700 injured.
• Since then there has been a heightened level of security threat.
• All responsible parties had a low tolerance to absorbing security risk.
• UK Government, IOC and National Governments had to be satisfied with the level of security both in venues and generally
within the UK.
• This Games had the most Security resources assigned to it.
• But it was important to balance the Security presents. We did not want an armed camp.
• LOCOG was responsible for the “airport level security” in 142 “venues”.
• This was the largest single cost category for LOCOG.
• Initial plans had this security provided by a mixture of contractor, military, volunteers and Government experts.
• This model required a huge investment in building a pipeline of security staff through educational courses, training
qualifications and recruitment.
• As we progressed towards the Games concern was raised around the ability for the contractor to deliver.
• A contingency plan had to be effected within 2 weeks to deploy additional military personal.

12. Specific Global Challenges - Transport
• London is a congested City with a mature infrastructure.
• The Games were performed in three London centres East, Central and North West with accommodation only in the East.
• London scored poorly in the bid with respect to Transport.
• Action was taken to extend tube/train lines, upgrade the railway, extra trains, longer operational times and a new high
speed line from central London to the Olympic Park.
• London businesses altered their working day and many employees took holiday in the period.
• All maintenance and improvement works stopped including the building of the trans London rail link.
• All spectators and Olympic family were encouraged to use public transport.
• 90% of all venues could be reached by 3 or more forms of public transport.
• 80% of the Games time family had less than a 20 minute travel time.

13. Specific Challenges - Venues
• 28 venues were used.
• 8 were permanent build.
• 7 Temporary build.
• 13 existing venues of which 7 were football stadia.
• Almost all required significant change to be “Olympic compliant”.
• All but 7 were owned by third parties other than an Olympic entity.
• Although including items not normally associated with a construction project these were managed by those from the
industry under standard construction contracts and controls.
• Build, takeover, reinstatement and hand back were often within a short time. (HGP was under LOCOG control for 35 days).
• Completion to time was the known risk and weather became an risk.

14. Methods - Budgets
• Effectively many projects varying in nature enclosed in one megaproject.
• Multi facetted with, in many cases, large numbers of stakeholders.
• Many stakeholders tried to influence scope.
• Design and change freeze was a challenge.
• All budgets were time bound.
• Finance was central to all budgets and managed/approved any change to them.
• Contingency was held centrally with the Finance function and not the Functional areas.
• Senior management (CEO, CFO, COO and all Functional Directors) were actively managed in weekly meetings.
• Anticipated Final Cost was used based upon continuous reforecasting.
• Contracts were tied into the budget structure.
• Discipline and consistency was crucial.
• Recognised that we should have used the more dynamic Earnt Value Analysis than the traditional milestone budgeting.

15. Methods – Risk management
• Extensive risk management was used to focus management resources into key areas.
• Although probability theory was used it soon became more hands on.
• Risk was generally seen in the following ways:
– How an event could impact the Games.
– What alternatives were available if plan A failed?
– How much time was required to effect any plan B?
– Supplier lead times were critical – as time progressed we had less and less slippage contingency. There is no Games time contingency whilst
other projects have the ability to slip.
– Costs could accelerate as the Games approached. Managing all suppliers to deadlines was critical and minimising the number of interfaces
key.
– The strength of contract terms and consistent compliance on the LOCOG side was essential.

16. Methods – Cost Control
• Design the cost base on the income you will receive.
• Ensure the form of contract is suitable and robust.
• All material supplier contracts were approved by senior management (CEO, CFO, Director of Commercial, Legal Council and
Procurement) prior to contract signing. Any change needed to return to them.
• All purchasing was done via Procurement.
• Rigid competitive tendering with “sponsorship deals” done after procurement contract.
• Tight Financial control of the purchase cycle (PO, GRN, invoice) for goods and services.
• Terms of trade controlled by Finance.
• Do not let the supplier manage you – some had done many Games.
• Manage your operational colleagues.
• Be consistent – any exception will become the norm.
• Control scope and variation. Any material change in both required financial approval.
• Keep all staff focused on cost before during and after the Games.
• Say no often and don’t reverse the decision.
• Don’t let go in the Games time. LOCOG operated a 24/7 control of all significant spend.

17. Methods – Contract Control
• The Games is effectively delivered by the contractor base.
• No organisation could be created from stratch to provide the large number of deliverables. You need to hire those who have the skills in their normal
work to deliver.
• But in many cases the deliverable is a hybrid of either their normal product or the size and intensity of how they meet demand.
• Many of the demands are industry sector changing and have a major impact on the competitiveness of the market before, during and more
importantly after the Games.
• Some suppliers had to be micromanaged in delivering to project others had to be focused on delivery.
• Many recognised the time risk in the contracts but thought they could resolve by throwing resources at the problem and transfer costs to the client.
• Through managing 700 contracts very closely, and having high internal management visibility, few contracts were allowed to slip.
• Any slippage resulted in a robust utilisation of the contract and use of step in rights. In many cases LOCOG and supplier resolved issues through
mutual assistance.
• LOCOG geared up to review all contracts on a monthly basis using risk analysis. As it was most moved out of “intensive care” quickly.
• Each contract was reviewed by a panel independent of the contract manager and weaknesses identified and resolved quickly.
• Only 5 contracts went to dispute and only 2 to any form of legal action.