Rising construction costs will likely force the Vancouver Organizing Committee for the 2010 Winter Olympics to dip into a provincial contingency fund for the Games.
VANOC chief John Furlong outlined his concerns at a Board of Trade meeting last week saying that the cost estimates for the venues were based on 2002 dollars and did not take inflation into account.
As the organization continues to tender major contracts it is facing a 40 to 50 per cent rise in construction costs between 2002 and 2007 due in part to the high cost of steel and concrete. The organization is also concerned about the cost and supply of labour, which will be under intense pressure over the next few years.
The Games will involve a total of about 10,000 contracts covering all aspects of the Games.
B.C.’s Minister of Economic Development Colin Hansen said stakeholders knew at the bid phase there would be pressures during the organizing of the Games and that is why the government created a $139 million contingency fund.
"At the time no one would have been able to say where the cost pressures would have materialized," said Hansen.
"Now as we are getting closer we are starting to find where those pressures are and construction is certainly one of them."
In order to access the contingency fund VANOC would apply to the Treasury Board and each application would be done on a case-by-case basis.
Hansen remained adamant that there is no more money for the Games above and beyond that already committed to.
"We have made it clear to VANOC that the maximum the province is committing to is $600 million and they need to ensure that their spending takes that into consideration," he said.
The provincial and federal governments have committed a total of $620 million, split equally, for the hard costs of the Games – venue construction, security and the contingency fund.
Hansen said he did speak with the federal minister responsible for the Games, Liza Frulla, last week in Ottawa.
"I think the (federal government) recognizes that the costs put in place at the time were in 2002 dollars, but they have to approach that a bit differently and I think the election has certainly complicated it," he said.
A spokesman for Canadian Heritage, the federal department in charge of the Olympics, confirmed that VANOC put in a request for additional funds on Nov. 22. The request is being considered although according to the multi-party agreement signed by all the Olympic Games partners during the bid phase it is the province which is responsible for any cost overruns.
Games officials have already managed $85 million in savings by moving some venues, deciding on temporary facilities at some sites, and striking better deals with partners.
Hansen said that if VANOC needs to access the contingency fund current estimates suggest it would need less than half the money.
Hansen said the government also wants to keep a buffer in place.
"What we have to look at from the provincial perspective is if we allocate from the contingency (now) then will there be enough left for other potential cost pressures in the future," he said, adding that the government is satisfied with VANOC’s progress to date.
"I feel that they are doing a good job of managing these challenges."
Furlong, the only authorized spokesman on the subject, was out of the country and unavailable for comment.
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