In 1976, the quadrennial Olympic Games were held in Montreal, Canada. The Montreal Olympic Complex included a main stadium known as “The Big O”, velodrome and an Olympic Village housing facility (Todd, 2016). Unfortunately, poor management lead to the project running significantly over budget. Analysis of the cost management errors that occurred during the project will provide clarity as to how the estimated budget of $120 million (Canadian dollars) led to a final cost of $1.5 billion (Patel, et al., 2013).
“The Big O” Montreal Olympic Stadium
Image source: (Plourde-Archer, 2013)
Estimating and The Initial Budget
Appropriate cost management of a project involves estimating, budgeting and controlling costs to reduce the risk of cost overruns (Peebles, 2017). The proposed budget should encompass all estimated costs of activities within the project scope and this establishes a budget baseline. It is then necessary to monitor the status of the project, updating the budget where necessary and managing all changes (Peebles, 2017).
In 1970, cities across the globe could tender to be the host of the 1976 Olympic Games. The bidding process requires cities to develop detailed, legally binding plans known as “Candidature Files” to submit to the International Olympic Committee (IOC) (Flyvbjerg & Stewart, 2012). Candidature Files are essentially the project budget including the expected investment from the host, funds generated as revenue and guarantees ensuring the host’s ability to finance all major infrastructure required for the games and cover any economic shortfalls (Flyvbjerg & Stewart, 2012).
Up against strong bids from Moscow and Los Angeles, Mayor Jean Drapeau won the opportunity for Montreal based on his guarantee that the Olympic Complex would cost no more than $124 million (Patel, et al., 2013). This was a considerably low bid since the preceding Olympic Games in Munich cost approximately $600 million (Patel, et al., 2013). Such a low bid indicates that there were inaccuracies in the estimating process. One area that could have had a large impact is the underestimation of inflation as in the 1970s inflation was high and the cost for structural steel tripled (Patel, et al., 2013). Another example of inaccurate estimations is that Drapeau was aiming for $250 million in revenue through the sale of Olympic commemorative coins, a more realistic expectation for these sales was closer to $100 million (Patel, et al., 2013).
Unfortunately, the initial budget was misleading as a new, vastly different budget was developed after the bid was awarded (Flyvbjerg & Stewart, 2012). The original plans were scrapped and Mayor Drapeau and his chief engineer, Claude Phaneuf, selected French architect Roger Taillibert as the new designer for the stadium and velodrome (Todd, 2016).
One of the key aspects of cost management is cost control. This involves monitoring spending and ensuring this aligns with the budget. Cost control techniques include forecasting, To Complete Performance Index (TCPI), variance analysis and project management software (Project Management Institute, 2013). Unexpected problems and non-budget-friendly spending can make cost control difficult which was the case for the Montreal Olympic Complex.
Mayor Drapeau did not seem concerned about budget restrictions across some of his decisions. Taillibert was selected as the architect with no competition because Mayor Drapeau was enamoured with his previous work in France. It would have been more appropriate to allow architects to tender for the project thus providing lower cost options. Taillibert’s expertise in precast-concrete and the Mayor’s bias towards him lead to the stadium being built from concrete, costing $100 million more than if it had been constructed from steel (Patel, et al., 2013).
A second budget was released in 1972 at a projected total cost of $310 million, almost three times the original budget, yet still an underestimate (Patel, et al., 2013). Of this price, $130.8 million was estimated for the main stadium, $16.4 million for the velodrome and $5 million for the Olympic Village (Patel, et al., 2013). Another example of Drapeau’s expensive choices was his agreement to adding a water cascade to the top of the stadium parking garages at an extra cost of $8 million bringing the total cost for the garages to $60 million (Patel, et al., 2013).
Time management plays a large role in cost control. If time is not managed correctly it can lead to large cost increases. Figure 1 shows that changes made in later stages of a project, particularly after construction/manufacturing has begun, can cost far more than changes made in the early planning stages (Project Management Institute, 2013). This indicates that most of the time and effort to manage a project should be implemented during the planning stages.
Figure 1: Cost of Changes and Stakeholder Influence Over Project Timeline
From: (Project Management Institute, 2013)
In the first 2 years after winning the bid, little progress was made with the project and the original plans were eventually scrapped making those important years of preparation time a waste (Patel, et al., 2013). The new plan was presented at a press conference in April 1972 and 7 months later the $310 million-dollar budget was released. The delay in planning exacerbated time management difficulties due to the fixed construction deadline for the opening of the Games. To make up for the delay, double crews, double shifts and overtime for construction staff was implemented. The overstaffing led to congestion as it was impossible to accommodate all construction activities on site at once, thus for a large cost only a slight increase in productivity ensued (Patel, et al., 2013).
Union labour was used for the construction of the Olympic Complex and due to the fixed schedule, scarcity of labour and lack of agreements between management and labour to restrict strikes, Mayor Drapeau was in prime position to be taken advantage of (Patel, et al., 2013). Between December 1974 and April 1976, 30% (155 days) of the available work time was halted due to labour strikes (Todd, 2016). Even Taillibert acknowledged the issue in following statement he made to le Devoir: “The construction of the Olympic Park and stadium showed me a level of organised corruption, theft, mediocrity, sabotage and indifference that I had never witnessed before and have never witnessed since. The system failed completely and every civil engineering firm involved knew they could just open this veritable cash register and serve themselves” (Todd, 2016).
Other labour setbacks were due to poor weather conditions inhibiting construction so heating measures were implemented during colder times, costing around $400,000 per day (Patel, et al., 2013). It was mentioned that Drapeau used the critical path method (CPM) and project evaluation review technique (PERT) for the Games but neglected to use this for the construction of the stadium until November 1973 which predicted the work could not be completed until after the games in January 1977 (Patel, et al., 2013). Some of the final construction activities were still in progress when the Olympics had started or were begun after the games (Patel, et al., 2013). These time delays began with the waste of the first 2 years which limited the total time available, leaving the project with inadequate planning and making it vulnerable to corruption.
Construction of the velodrome was awarded to contractor Charles Duranceau who bid $12 million based on half complete plans (Patel, et al., 2013). Building began in August 1973, only a year before the velodrome was required to host the 1974 World Cycling Championships. Issues arose with foundation problems due to an unsupportive rocky subsoil that was not determined from geological soundings and subsurface tests. This problem and labour union conflicts prevented the velodrome from opening in time for the Championships, thus a temporary facility was built at the University of Montreal football stadium (Patel, et al., 2013). These time delays and cost overruns for the velodrome caused the cost of the foundation, estimated at $497,576, to rise to $7,171,876 (Patel, et al., 2013). The contractor experienced more delays as he had to wait for finished plans from Taillibert, leading to the hiring of new, more expensive subcontractors due to the time constraints. The final cost for the velodrome with only 7,000 seats was approximately $70 million. $10 million more expensive than a 60,000-seat stadium built in Seattle, Washington at the same time (Patel, et al., 2013).
Montreal Olympic Velodrome
Image source: (Skyscraper Page, 2015)
The Olympic Village was originally planned to be low-cost housing meaning that the Central Mortgage and Housing Commission (CMHC) would provide 95% of the clearance cost and 75% of construction costs (Patel, et al., 2013). After a puzzling bidding process in which bidding companies did not receive any communication from the city regarding their proposals, a company called Zarolega was awarded the contract and went on to design the building with a pyramid configuration. Unfortunately, this prevented the CMHC from funding the building as their conditions included that the building width must be greater than its height and since the cost had increased to around $20,000 - $60,000 per unit, they were disqualified from being considered low-cost public housing after the games (Patel, et al., 2013).
Zarolega estimated a budget of approximately $45 million, however, a consultant hired by the government to provide a second opinion predicted a cost of $55-58 million (Patel, et al., 2013). After a difficult construction using dangerous construction techniques, theft, botched work and expensive subcontracts the final cost for the Olympic Village was around $70 million (Patel, et al., 2013).
Montreal Olympic Village
Image source: (Capreit, 2017)
Communication with Stakeholders
Stakeholders such as the federal government and Province of Quebec recognised that although the City of Montreal had made the commitment to host the games and fund construction, there was potential that they would become responsible for fulfilling the commitment (Patel, et al., 2013). The City of Montreal and Mayor Drapeau were not experienced enough to manage such a large project thus the Province of Quebec was forced to take over. When a change in major constituents occur during a project there are often communication issues which can add to the overall project difficulty (Patel, et al., 2013). Good communication between clients, stakeholders and project team members is essential for a successful project and cost management.
Other stakeholders included the Montreal Expos baseball team who became a justification for the expensive construction of the Olympic stadium. It was suggested that the stadium could be used after the Games for baseball and other sports. However, the potential users were never consulted during the planning process, thus making it difficult to use the stadium long-term (Patel, et al., 2013). This lack of communication meant that the stadium was not entirely suitable for a purpose that was predicted to generate future revenue to help cover part of the construction expenses, again leading to inaccurate budget estimations.
Summary of Outcomes/Lessons Learnt
After the games the velodrome was converted to an indoor nature museum called the Biodome and has proven to be quite successful (Todd, 2016). The Olympic stadium was not fully finished before the games so additional features have since been added. This included a tower and roof over the playing field which was planned to be retractable however this was difficult to implement (Stadium Database, Accessed 2017). There were construction issues with the tower when in 1986 part of it fell onto the playing field during a game resulting in the installation of a membrane over the area. This membrane eventually leaked, tore and after repairs it still fell onto the field itself and the was eventually judged unsafe in 2010 (Stadium Database, Accessed 2017).
Montreal Olympic Stadium with Tower Velodrome Converted to Biodome
Image source: (Parc Olympique, 1976) Image source: (U Trip, 2017)
The construction of the Olympic Village also proved to be inadequate as a piece of the eighth-floor balcony fell onto the balconies below due to a lack of proper anchoring in 1975 (Patel, et al., 2013). After the games, all the apartments were rented and eventually in 1998 the Olympic Village was privately sold (Patel, et al., 2013).
Mayor Jean Drapeau made claims that the Montreal Olympics would be auto-financed, however, it took 30 years to pay off Montreal’s debt from hosting the games (Todd, 2016). Several lessons can be learnt from the cost management errors made in this project. When creating a budget for a project it is important to include accurate estimations with predicted inflation for products and services. Cost control techniques should be implemented where possible. A project manager’s bias may not always be towards the most appropriate company which is why bidding is an important process that provides lower cost options for the same service or potentially better. It is essential to analyse bids from all companies to determine the most suitable option. Time management is directly related to cost management and it is important for a project manager to dedicate more time and effort into the planning stages to achieve a successful project and avoid unacceptable cost overruns.
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