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Federal government to audit VANOC

Federal review questions ability to keep Games on budget

By Clare Ogilvie

Both federal government and 2010 Olympic officials said a recently ordered federal audit of venue planning to date for the Games is routine.

“It is a routine audit that we do over 100 times a year,” said Canadian Heritage spokesman Len Westerberg.

“We want to make sure that the recipient is complying with the terms and conditions that were part of the (2002 Multi-party) Agreement.”

The audit, which is focusing on venue spending, will cover from fiscal year 2003-04 to 2006-07. It will also look for any areas which can be improved upon.

“…That way we can make timely improvements,” said Westerberg.

“There is nothing sinister about this. Nothing precipitated it. It was part of the agreements. It is part of our due diligence. We have to make sure that the money being spent is being spent in the best interest of the Canadian taxpayer.”

There will be other audits leading up to the 2010 Winter Olympics and Paralympics in Whistler and Vancouver, which will run from Feb. 12 to 28 and March 12 through 21 respectively.

Said Mary Fraser, manager of communications for the 2010 Vancouver Organizing Committee: “This is a basic preliminary due diligence step for an initiative of this magnitude, typical of the methodology employed by the Department of Canadian Heritage for contribution recipients and is about ensuring that funds provided through the contribution agreements were used for the purpose intended and to make timely improvements to address any weaknesses identified in the audit.

“…Heritage Canada annually conducts over 100 similar audits of its funding recipients.”

Westerberg said the audit had nothing to do with a federal review carried out earlier this year by the federal government as it considered a request by VANOC for a further $55 million for venue construction.

The review, by Pacific Liaicon Associates Inc., was completed last May. The report raised concerns over a number of issues, including the fact that only three venues — the Nordic Centre, the UBC Ice Hockey Arena, and the Whistler Sliding Centre — were close to completing their engineering.

“The rest of the venues are either in the conceptual diagram stage of just starting detailed engineering, which means that there is not enough information to develop a good estimate and a procurement plan,” states the May 19, 2006 report.

“The procurement plan must be married with the estimate to develop the Capital Cost budget.”

Each venue site is examined in the report showing both the bid book cost and the new adjusted costs for the venues made public earlier this year by VANOC.

Overall it estimates that VANOC needs about $2.6 million for various costs, design and business planning consultants just to optimize venue planning and designs.

The report applauds VANOC for getting an early start on the Whistler Sliding Centre and the Nordic competition site in the hopes of getting Canadian athletes training in those facilities before the Games.

However, it describes the Richmond Skating Oval as being in an “extremely tight situation” because of the initial delays in the project, the extended preload requirements, and the fact that design is falling behind.

In some cases, according to the report, capital cost estimate overruns due to escalation have necessitated redesign.

It also called for a restructuring of the project and construction management team. Coincidentally, within days of the release of the report VANOC hired a new construction boss, Dan Doyle.

In conclusion the report states: “In terms of the request for additional funding of $55 million each from the Federal Government and the Government of British Columbia, we have concluded that given the present approach, VANOC will have difficulty in being able to deliver a minimally acceptable (to the International Olympic Committee) package of Olympic venues within the additional capital budget funding requested.”

It then goes on to offer how some of this concern could be mitigated.

“Whether the revised enhanced ($580 million) budget will be sufficient to deliver a venue package that meets IOC satisfaction is questionable.”

In making that statement the report outlines escalations at a couple of the venue sites. For example at bid time in 2002 the sliding centre was projected to cost $55 million. By July 2005 that had gone up to $68.9 million. In December 2005 it was at $80.4 million and now it is estimated to cost $99.9 million.

The reports goes on to outline the challenge of finding trades to work on the Whistler venues, which could add to their eventual costs, because of lack of affordable housing.

“Even with the attraction of premium hours (understand the contractors are now working 60 hours) the high cost of accommodation could be a deterrent to hiring for all the Olympic and related projects once they are underway.”

However, since much of the work is done in the summer VANOC believes housing can be looked after with the help of those who provide employee housing such as Whistler-Blackcomb.

The report made several recommendations including:

• the federal government give VANOC the $55 million

• to confirm with VANOC by Dec. 1 that $580 million is enough

• to build the Hillcrest Curling Rink within the $28 million plus reasonable escalation or cancel the project and move curling to another venue.

“Regardless of the recommendations noted being implemented and regardless of any success they may have in building up their in-budget contingency, with only $13 million in contingency left at his time and with very little construction started except for the outside Whistler venues, unless VANOC can, under the IOC rules, divert part of their $2 billion operating budget to cover capital cost overruns including escalations, the Government of Canada may be facing an additional funding request before completion of the venues,” states the report.

Since that report was made public, amid a flurry of other reports on the 2010 Games last month, Olympic officials have repeatedly said that they are committed to bringing the Games in on time and on budget.

Said John Furlong, CEO of VANOC, at the time; “I believe it is going extremely well and our team is just driven to move that project where it needs to be to come in under budget. That is our objective and that is what we are going to do.”