Public Audit Committee

Meeting date: Wednesday, March 28, 2012

Official Report 461KB pdf

---

Section 23 Report

---

“Commonwealth Games 2014 Progress report 2: Planning for the delivery of the XXth Games”

Item 2 is consideration of the section 23 report “Commonwealth Games 2014 Progress report 2: Planning for the delivery of the XXth Games”. I welcome Robert Black, Angela Cullen, and Carolyn Smith from Audit Scotland. Mr Black, the Auditor General for Scotland, will present the report.

This Audit Scotland report was prepared for the Accounts Commission—because Glasgow City Council is a major participant in planning for the games—as well as for me. It was published on 22 March. As we are all aware, the games start in July 2014, just over two years from now. The games involve some planning challenges because of the specialist nature of the venture. It is a large and complex project with an immoveable deadline and there are many partners involved.

I am sure that committee members recall that we published our first progress report on planning for the games back in November 2009. The Public Audit Committee subsequently published its own report in 2010. The March 2012 report is Audit Scotland’s second look at the issue and it follows up the recommendations from our first report and the committee’s report.

Four strategic partners are involved in the games: the Scottish Government, of course; Glasgow City Council; Glasgow 2014, which is known as the organising committee; and Commonwealth Games Scotland. In the report, we attempt to provide a position statement on whether the partners were on track in November 2011. We have moved on a bit from that time, so I emphasise that the evidence base is from November last year. The report considers the main risks and how well the partners are managing them. It also comments on the partners’ progress in legacy planning.

I will highlight the four main sets of findings from the audit. The first set of findings relates to the infrastructure planning—it is generally where it should be at this stage. However, there is still a lot of work to do and an important point to emphasise is that the pace of planning will increase significantly over the next two years as the games get closer. The organising committee and the other partners therefore need to ensure that they have the staff capacity in place to meet the challenges that lie ahead.

A key advantage of hosting the games in Glasgow is that a lot of the infrastructure is already in place. There are six new venues and an athletes village is being built, but a further seven venues already exist and are being refurbished. Four of those venue developments are now complete. In November 2011, all the other venue developments and the athletes village were forecast to be ready in time for the games.

However, we highlight in the report that there are particular risks with Hampden Park and the athletes village developments because they are due to be completed less than five months before the games start. The projects also have financial and technical risks associated with them. We found that the partners are managing the risks, but they may not be able to eliminate them completely.

The second key set of findings relates to the budget. The strategic partners that I have mentioned are committed to delivering the games within the £524 million approved games budget. The original budget of £373 million was prepared at 2007 prices and that was increased to £454 million—also in 2007 prices—in 2009. In 2010, after our last report, the budget was restated to £524 million to include an allowance for inflation, and that is the number that is currently being worked to.

The Scottish Government and Glasgow City Council are funding up to £424 million of the games budget, and the organising committee is expected to raise the other £100 million from sponsorship, broadcasting, licensing, merchandising and ticket sales. By September 2011, which was the cut-off point for our analysis, it had secured 33 per cent of its commercial income target from three in-kind sponsorship deals and two broadcasting rights deals. That agenda is proceeding as we speak.

However, as you would expect as this stage, the budget remains inherently uncertain because only 17 per cent of the games budget was committed by November 2011, and many of the budget areas are based on early planning assumptions. Security costs are particularly at risk of increasing based on the experience of other games, and it is not yet clear whether the £27 million provided for security is expected to cover all the security costs.

A third set of findings relates to legacy planning. The Scottish Government and Glasgow City Council have developed Scotland-wide and Glasgow legacy plans. There is no specific legacy funding, but the partners have aligned their existing initiatives to support legacy initiatives. However, in the current climate, other organisations, such as local authorities, might find it difficult to invest in legacy initiatives. According to the strategic partners, some economic and social benefits have already been achieved, including more than 2,000 young people starting apprenticeships. We are told that many Glasgow-based companies are securing contracts to deliver the games projects. The Scottish Government and Glasgow City Council are developing their approach to the evaluation of the legacy, which is needed to demonstrate the impact of the investment in the games.

The overarching governance structure is clear and it allows the strategic partners to maintain an oversight. However, joint working arrangements below the high-level structure are complex. For example, there are 68 joint working groups, but their specific responsibilities and accountabilities are not always clearly documented. As the number of staff and the scale of the activities increase closer to the games—as will definitely happen—there is the risk that the complex arrangements will not be clear enough to everyone involved, which might lead to some duplication in effort or delays in decision making.

We make some recommendations for the four strategic partners in the report but, overall, this is a reasonably positive assurance as to how the planning for the games was proceeding as at November 2011.

To build on that final point, it seems to me that the report is broadly positive. Clearly, I was not involved in the committee when it looked at your first progress report, but that led the committee to take evidence and produce a report making a series of recommendations. Will you comment further on progress between the first report and the work that the committee did then, and this stage? To what degree and with what effect have the recommendations that were made at that time been implemented?

In appendix 2 of the report, which is on pages 36 and 37, we have provided a readable summary of progress against the previous recommendations. The summary uses a traffic-light system to state whether each recommendation had been fully implemented or was in progress when we looked at it in November. One recommendation, on estimating the cost of plans to manage and mitigate risks, had not been accepted by Glasgow City Council. It still does not accept that recommendation, and we comment on that in the report. That is the only recommendation from the previous work of Audit Scotland and the Public Audit Committee that has not been taken forward. Of the rest, 17 have been fully implemented and seven have had good progress made against them.

So it would be fair to say the report is positive about the response to Audit Scotland’s previous work.

Yes. There has been a positive response to that work.

Good.

The one area in which there seemed to be a continuing, unquantifiable risk was security. In his presentation, Mr Black said that it is not clear whether the £27 million budget covers all the security requirements. The report points to other similar events where security costs have been, in the end, significantly higher than planned. It is a budget where overspend seems to be the norm. To what degree is the risk unavoidable, as nobody is sure what the security context in 2014 will be, and to what degree is the risk exacerbated by the fact that security planning has not progressed as far as planning for other areas of the organisation of the games?

On balance, it would be reasonable to expect that the security planning will come slightly later in the planning process. Clearly, it will be essential to know what the venues look like, to have clarity about everything to do with the movement of people, and to know how the events will be managed. Her Majesty’s inspector of constabulary has produced a report on the security aspects. The team will be able to tell you a little bit more about what is in that.

About half of the core number of £27 million is earmarked for police security costs. The other half relates to venue security, including all equipment. The police security budget is based on the estimated costs of providing what might be called core security, rather than on the costs of enhanced security provision, which might be needed if there were an increased level of threat. It is not yet clear whether the budget includes the full cost of bringing in other police forces during the games; there is an element of uncertainty there. I have no doubt that Strathclyde Police, which is the lead agency for co-ordinating overall security, will be addressing that as we speak.

It is the organising committee’s responsibility to organise security for the venues. Security planning for the venues is at a very early stage, for the reasons that I have outlined—there must be absolute clarity about the detailed organisation of the venues and the movement of people. If we compare the Commonwealth games with the experience at other games, we think that security is probably an area where there is a risk of the cost increasing. It is not yet clear whether the £27 million security budget will cover all the security costs relating to the games. It will be important to capture the costs, to help planning for the detailed security of this event and other events to follow.

I absolutely agree with the Auditor General. There is a combination of the two factors that the convener mentioned: we do not know what the security situation will be in 2014, and security planning is at an early stage. It has not necessarily been decided yet what the venues will be used for or how many people will be at them. That level of security planning has not yet been completed, but work is under way on that.

10:15

The report identifies a specific risk with venue security in that there might be a shortage of trained and appropriate staff when the time comes, so that even if the budget is right come the time, it will be difficult to find the right people. Is that fair?

The report picks up on that point, which was picked up by the last Commonwealth Games Federation review that looked at security. The Commonwealth Games Federation is carrying out a more detailed technical review of security planning. I imagine that the results of that will be known in the next few weeks. It will give more details about how security planning has advanced since we looked at it in November.

So work is under way that might address some of these issues.

Yes.

I have met the organising committee on a number of occasions and, each time I do, I am incredibly impressed at how it is emphasised from the very top level that the legacy is the most important thing. There is a real understanding that, although the games are the centrepiece and are therefore incredibly important, they will last for two weeks out of a 10-year project. In fact, the project will last even longer than 10 years. I take my hat off to the members of the organising committee.

I read the entire report with interest but was particularly interested in the part that focuses on the legacy. It mentions that the Scottish Government has a legacy vision and Glasgow City Council has a legacy framework. They are juxtaposed very well in exhibit 8 on pages 26 and 27. Are you assured that those two big partners that have a legacy vision are looking in the same direction?

We, too, were impressed with the commitment to taking legacy planning seriously. Given that the games are still more than two years away, exhibit 8 demonstrates that some relevant and strategic thinking has gone into the planning. It would be unreasonable to expect the planning to be much further down the road at this early stage. In my opening remarks, I mentioned how some benefits are already being delivered through the letting of contracts and the creation of apprenticeships and so on in association with the games. I am sure that the team will be able to say a bit more about that.

We highlight some of the legacy benefits that the partners have already identified. Scottish companies won 133 of the 171 contracts that were awarded through the Commonwealth games business portal between October 2009 and October 2011. Scottish companies have also won 158 London 2012 contracts. As a result of staging the games, Scotland has also attracted other high-profile events, such as the world junior track cycling and world youth netball championships. Legacy benefits are already coming through.

The report also mentions that planning for evaluating the legacy to demonstrate the return on investment was at an early stage but, since we published the report, more planning has been done on evaluating the benefits. The Scottish Government and Glasgow City Council recently published their high-level plans for evaluating the games’ legacy, so the planning has moved on since we did our work, which is encouraging.

Thank you. I agree with the Auditor General. There is a clear focus on the legacy. However, an eyebrow may be raised in concern at the fact that, although 40 projects have already been developed and many more legacy projects are in the pipeline, no fund has yet been created. Does that worry you? Have you heard noises from the Government or local authorities that they intend to create a legacy fund?

In talking about the future, by and large, we use the language of risk rather than prediction, and the achievement of the full legacy potential might well be at risk because of the resource constraints on local authorities and other partners. Unfortunately, we cannot do more than mention that that might be an issue.

Perhaps the committee might follow that up.

You mentioned that, when it was contracting for the velodrome and the national indoor sports arena, Glasgow City Council included a community benefit clause. In the current difficult financial climate, and in talking not so much about prediction as about risk, might that be a model for future procurement contracts?

The velodrome is an interesting development. I do not have to tell the committee that it is located at the heart of an area of deprivation and relatively low incomes. The vision that the council has of encouraging community involvement offers the prospect of a template that could be used for similar developments.

When I visited it, I was impressed with how much thought had gone into that.

One of the recommendations in the report is that the Government should ensure that public sector organisations have allocated the resources that they will need to deliver the Commonwealth games. Now that those organisations know their budgets, in general terms, for the next three years, has any direction been given by the Government on the proportion of those budgets that should be reserved to cover the cost of the games?

I do not think that we have any evidence of that sort of direction being given, and I am not sure that I would expect that to happen. It is for the major agencies that are involved to determine their priorities within the budgets that they hold. As I mentioned earlier—in response to the convener’s question about security, I think—a lot of work still has to go into planning the detail of the security arrangements and the associated costs.

I welcome the report, which is quite positive. It is encouraging to see that so much is happening on time and on schedule. I have three questions. First, paragraphs 38 and 85 both refer to an old favourite of the committee—the gathering of data and information in connection with projects. How serious is the lack of data that is referred to?

That is a difficult call to make. My colleagues and I at Audit Scotland are acutely conscious of the fact that we like data. Generally speaking, in the Scottish public sector—as, I am sure, Mr Beattie will recall—there is a recurrent theme about the quality of the management information that people use. Overall, however, the planning for this project is going well. There are certain areas about which we would, on balance, like to see more information, but I would not wish to give the committee the impression that we think that there are significant shortcomings that it should be concerned about.

Angela Cullen may be able to say a bit more about our recommendations with regard to data.

The availability of information was a theme of our first report, but that was at a much earlier stage. This time, we found that a lot of improvement had been made in response to that. However, as is the case whenever you start improving, there are still more improvements to be made. The Government has made progress in capturing information but, as we say in paragraph 38, it now

“needs to improve its system for ... monitoring and reporting changes to the programme plan”.

It needs to highlight changes to milestones and the achievement of milestones, and flag up due dates so that it is easy for those who are responsible to have an idea of what is going on and capture that information. Work has been done, but there is always room for improvement in capturing and reporting information to make things as easy as possible. As we get closer to the games and things start to move apace, it will become more critical that the partners are on top of exactly what is happening.

Overall, that seems to be reasonably encouraging.

I ask my second question really just out of curiosity. Paragraph 51 mentions

“security costs related to some transport activities.”

What are they?

That relates to the security costs of bringing athletes and officials from airports and transporting them around during the games. That aspect was picked up in the report to which we referred. It did not give any more details about that, so the issue could be broader.

Are we talking about people to escort athletes and officials from airports, for example? Will physical security be provided? What is the security?

The security details and the planning for security for the officials and athletes have not been finalised, so we are not exactly sure what the security will be at this stage. It may involve security guards being with officials and athletes at certain locations.

So you are really just looking at a line in the document.

Yes.

My final question is about part 4. The report says:

“joint working arrangements are becoming increasingly complex.”

I suppose that many stakeholders and people must be involved in the games because of their very nature. Are you saying that the arrangements are unnecessarily complex, or that they are and must be complex because that is the nature of the beast?

We are saying very much the second. We recognise that, as the tempo of activity builds up towards the start of the games, a huge amount of effort will go in in almost countless different ways. We offer the cautionary note that there needs to be awareness at the highest level of all the working groups and project teams that have been established, as much clarity about their roles and interrelationships as possible, and a good understanding by the different groups of their respective roles. In that way, we hope that the chances of delay and confusion can be avoided. We are not doing anything more than making a general cautionary statement at this point.

You said “at the highest level”. Will the organising committee be responsible for at least keeping an overview to ensure that things do not become so complex that they start to undermine the organisation?

The organising committee is key, but I should also mention the Glasgow 2014 strategic group and the working group that reports to it. That body has the overview of everything, including the involvement of all the public sector agencies other than the lead partners.

I want to ask about contract compliance and the management of risk in contracts. Obviously, those matters are a significant part of your on-going assessments of how well the project is moving forward. What role, if any, does the sponsoring department—in other words, central Government—play in assisting the organising committee with procurement and procurement advice?

The Scottish Government provides advice to the organising committee on its procurement, but Glasgow City Council has also provided support to the organising committee on setting up its policies and procedures on procurement.

10:30

Is it your assessment that Glasgow City Council and the Government are saying the same thing in their procurement advice?

We have not done an audit of procurement arrangements for the report. Audit Scotland might want to do something on that retrospectively, but we have not looked at any of that at this stage. However, I think that the general assurance that Carolyn Smith is giving you stands at the moment.

Very fairly, Carolyn Smith mentioned the number of contracts that have been awarded to Scottish companies. You would not be aware whether, in terms of the on-going work, any procurement advice was specific to that geographic point.

No.

It was more around putting procurement policies and procedures in place.

I have a couple questions about Hampden Park. I note from the current report that we are still considering the technical solution for the stadium. I recall that the last time that we looked at the issue, we did not know what the solution for the stadium would be. I understand that the capacity will be reduced from its present 52,000 to about 40,000 to accommodate the new running track. Do you have any concerns about the fact that a design solution for Hampden has not been chosen yet?

Again, the language is about risk as we see it at the moment. We attempted to capture the Hampden position in case study 1 on page 20. On the face of it, the issue looks relatively straightforward: the installation of a temporary track-and-field facility by raising the playing-field level by 1.5m. This is by far not my specialist subject, but my understanding from general conversation is that that is extremely complex and technical and that, for games at this level, it is really important that the technical solution works to the required standard.

The position at the moment is that the work will not be completed until about five months before the games. Thereafter, the facilities will require to be tested before the games, which does not leave a lot of time.

On the wider Hampden decision, we itemise in case study 1 some of the other activities that are required and which need to be managed collectively around the creation of other sporting facilities in the area.

I suppose that we just have to keep a close watching brief on how the technical solution emerges. I think that there will be a decision in May on the chosen option.

The second issue in relation to Hampden is transport, which will also affect Celtic Park, given that it is the venue for the opening ceremony. I was a spectator at the Scottish communities league cup semi-final match at Hampden Park, which was basically a test, using supporters, for security issues surrounding the stadium. The crowd was only 25,000, but transport to get to the stadium that day was a nightmare. I expect that for the Commonwealth games many more people will come by private transport and not on supporters’ buses. That means that there will be a big impact on the transport infrastructure around both Hampden and Celtic Park. The transport arrangements to get the public to and from the stadium venues have never been a clear feature of Audit Scotland’s reports. Is any further thinking being done that could be brought to the committee’s attention—hopefully soon?

Is that a hypothetical question, given that the member for Kilmarnock is unlikely to be at Hampden again in the near future?

I was there twice.

The current report is the second in a series, and we have committed to producing another report after the event to pick up on the legacy issues.

We will keep a close eye on developments over the next few years to see whether there is anything specific that we want to do another report on, but we do not want to make any commitments on that at the moment. Transport is linked to security. Until we know exactly what each of the venues will be used for, the likely audience levels and who the participants will be, the transport and security costs will be unclear. Neither we nor the partners know that information yet.

We highlighted Hampden Park as a particular risk. It is fair to say that the partners are aware that it is a high-risk venue. They are attempting to manage the risks but, at this stage, they cannot eliminate them completely. They are keeping an eye on that, and we will keep an eye on developments over the next few years.

Interestingly, although there was double the crowd at the cup final, the arrangements seemed to work much better in getting the supporters in and out of the stadium. I do not know why that was. Perhaps it was to do with earlier preparation or route planning by the police. The outcome was very successful—not just in transport terms, but in terms of the result of the match, which I was delighted about.

I am interested in the issue, because we know that both the big stadiums have strongly urbanised locations and are tricky to get to, particularly if lots of people travel to them by private transport. We should keep a watching brief on that.

Willie Coffey mentioned Hampden. The other facility that seems to pose a risk is the athletes village, as paragraph 76 highlights. Given that it is due to be ready five months before the opening, there is not a lot of leeway. I was quite concerned to read that

“At November 2011, there were 37 recorded risks in the various Games partners’ risk registers related to the Athletes’ Village, some of which were significant ... Ultimately, an increased public sector contribution may be required to ensure the Village is ready in time for the Games”.

I would have thought that, if anything has to be ready, it is the athletes village. That paragraph caused me a degree of concern. Will you clarify whether the readiness of the athletes village is a serious issue at this point?

There are probably two aspects to that, the first of which is the funding risk. I will pass over to the team to deal with issues relating to the site.

Because of the difficulties in the economy generally, the public sector contribution to the athletes village has had to be increased significantly. That happened not long ago. We understand from a Glasgow City Council report that the public sector contribution will be about £140 million, which is significantly higher than was previously anticipated. That includes a combination of housing association grant funding, regeneration funding and the funding of a care home through the council, which rebalances the funding package in favour of the public sector. The funding risk is being managed. In addition, negotiations have been held between City Legacy and the Strathclyde pension fund to help with cash flow. That is how the financial risk is being managed at the moment.

The other set of risks relates to construction on the site and some of the detailed design and delivery matters. Carolyn Smith might be able to help with that.

Yes, I can give some indication of those risks.

As members know, the athletes village is a major development. It is situated near some of the other venues, so there are risks to do with getting the building work done on time and co-ordinating that with work on other venues that are being developed in the same area. In addition, it will be necessary for utility companies and various other companies to go in and out to do different bits of work. For example, the pylons around the athletes village need to be removed. That obviously presents a risk.

The timescale is fairly tight, so it is critical that things happen when they are supposed to happen—otherwise, there could be slippage, which could impact on the opening dates. We see that as a potential risk because, if there is slippage, more money could be required to get things done more quickly.

Those are some of the risks involved.

I am not familiar with such development projects, but I am slightly surprised to hear that some money is being taken from the Strathclyde pension fund. Is that what you said, Mr Black?

Yes.

Is that normal?

Yes. There is an issue about ensuring that the cashflow keeps flowing. Angela Cullen will keep me right on this, but my understanding is that there have been negotiations to take money from the Strathclyde pension fund, underwritten by Glasgow City Council.

Was that the pension fund for Strathclyde Regional Council, and is it now managed by Glasgow City Council?

The pension fund is clearly the owner of the funds and will make the loan available to the games, but it will be underwritten by Glasgow City Council to keep the money safe.

I presume that the pension fund is managed by its trustees.

Yes, that is correct.

Okay.

I can clarify the position. The application has been made to the pension fund but, at this stage, we do not know the outcome and whether the loan from the pension fund has been granted. As far as we are aware, at the moment, it is not definite that Strathclyde pension fund will contribute that funding.

It is the last sentence of paragraph 76 that I am concerned about. I hear what you say about utility companies and the removal of pylons. I appreciate that there are many different factors and significant risks. However, do you have any idea what the “increased public sector contribution” could be?

No, we do not.

To set the context, I emphasise that, within the overall budget of £524 million, there is a general contingency fund of £75 million to meet unforeseen costs. Even beyond that, the Scottish Government has set aside £24 million in a special reserve, which could be drawn on in special circumstances. The organisers are confident that they will deliver the project within the £524 million, and I consider that the contingency provisions are reasonable in the circumstances.

You are saying that it is unlikely that there will be an additional public sector contribution over and above the two contingency funds.

I suspect that I am not saying that to the committee. I am saying that the planning arrangements are reasonable at this point in time.

Thank you.

I have a final question on something that the convener mentioned in relation to the recommendations in appendix 2. It is good to see that four out of the five recommendations for Glasgow City Council have been implemented. Councillor Archie Graham—who eats, sleeps and breathes the games—is doing a good job on that front. Like many members of the committee, I am a new member, and I do not know how these things work. Does the fact that one recommendation, about planning and the cost of managing risks, has not been implemented cause you concern, or are you fairly relaxed about that? Budgets are a key factor in the public perception of the success of an event.

We pursued the recommendation with Glasgow City Council, as you would expect. We made the recommendation for good reasons. We would expect the plans to mitigate risks to be costed, and a sensitivity analysis to be done, to give us an idea of what the range of costs might be.

We pursued that issue again with the council. It still does not believe that that action is necessary and that it would take more effort and resources and divert attention away from tasks that have to be done right now. We have not made that recommendation again.

However, we are keeping an eye on developments with the games over the next couple of years. The risk register is one of the areas that we will continue to look at and, if there are significant risks that do not reduce or the risk ratings change, we may come back to and pursue that through our annual audits of Glasgow City Council and the Government.

10:45

To build on Angela Cullen’s point, it is probably helpful to distinguish between the costing of the risk, where there has been a conversation, and the preparation of a risk register. It is fair to say that the council has done good work on the risk register front and Audit Scotland will keep an eye on that.

Thank you for that clarification.

Yours was not quite the final question, Mr Yousaf; that privilege falls to me.

This is probably an unfair question, but I am the convener and I cannot resist. Paragraph 69 of the report states that

“The Organising Committee has signed leases with seven venue owners to use their facilities for certain sporting events.”

The related footnote identifies Ibrox as one of the seven venues. The ownership of Ibrox—although not at the time when Audit Scotland was producing its report—is a question of some contention. Has the organising committee allowed itself some leeway in the leases that have been signed for unexpected changes in the ownership or the running of some of the venues?

I encourage you to ask that question of the organising committee because we would not have that information.

Ask it of Ibrox.

I thank the Audit Scotland team and the committee. Once we move into private session, we can discuss how to proceed with the report.

I will allow a moment for the witnesses to change over.