Rio $1.6 Billion Cost Overrun Normal, Says Oxford Study Blasting ‘Fictitious’ Olympic Budgets

Rio 2016 Olympics Mascots

An Oxford University study notes that the budget-busting Rio Summer Olympics represents standard operating procedure for the quadrennial contest despite the cost overruns contributing to financial troubles and political instability in Brazil.

The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games” points out that “for a city and nation to decide to stage the Olympic Games is to decide to take on one of the most costly and financially most risky type of megaproject that exists, something that many cities and nations have learned to their peril.”

The study maintains that costs exceed budgets by an average of 156 percent for Olympiads. At $4.6 billion, the cost of the Rio de Janiero event roughly equals the average cost of past games but its 51 percent budget overrun actually comes in lower than recent expenditures exceeding planned outlays. But the study points out that Olympiads, more than bridges, dams, roads, or rail systems, display “the highest average cost overrun of any type of megaproject.”

London’s 2012 pricetag of $15 billion set the high water mark for summer games. Despite winter games generally costing much less than summer games, 2014’s Sochi Olympics holds the record for the most expensive bread-and-circus event at $22 billion.

Economic geographer Bent Flyvbjerg, information systems management specialist Alexander Budzier, and management expert Allison Stewart write:

Unfortunately, Olympics officials and hosts often misinform about the costs and cost overruns of the Games. For instance, in 2005 London secured the bid for the 2012 Summer Games with a cost estimate that two years later proved inadequate and was revised upwards with around 100 percent. Then, when it turned out that the final outturn costs were slightly below the revised budget, the organizers falsely, but very publicly, claimed that the London Games had come in under budget (BBC 2013). Such deliberate misinformation of the public about cost and cost overrun treads a fine line between spin and outright lying. It is unethical, no doubt, but very common. We can therefore not count on organizers and governments to provide us with reliable information about the real costs and cost overruns of the Olympic Games. Independent studies are needed, like the one presented here.

Brazil experienced a painful recession, and the impeachment of its president, in the lead-up to the games. Widespread corruption, polluted waters, the Zika virus, and terrifying crime remain among the South American nation’s problems spotlighted by the summer games. With billions of dollars spent on a sporting event in a nation facing more pressing issues, a financially failing Rio summer games may prove disastrous for both Brazil and the International Olympic Committee.

The authors of the study conclude that “the budget is more like a fictitious minimum that is consistently overspent. Further, even more than in other megaprojects, each budget is established with a legal requirement for the host city and country government to guarantee that they will cover the cost overruns of the Games. Our data suggest the guarantee is akin to writing a blank check for the event, with certainty that the cost will be more than what has been quoted. In practice, the bid budget is really more of a down payment than it is a budget, with further installments to be paid later.”