Construction Project costing Assignment On London Olympics 2012 construction project costing

Question

Task: How to use Construction Project costing assignmentto analyse London Olympics 2012 projects costing strategies?

Answer

1. Introduction
On this Construction Project costing assignmentit is observed that Construction projects involve huge amounts of resources and costs for different activities that need to be carried out for the successful completion of the project. The construction industry in every country is responsible for generating high levels of economic growth and social welfare for individual organisations and communities. Recent empirical evidence suggests that contractors involved in different construction projects have increased their margins from 6 % to 9% because of the increase in labour cost, raw material cost, and tender prices (Chadee et al., 2021). It is also observed that the cost of huge construction projects such as the London Olympics 2012 has faced a significant cost overrun of 76% above the project cost of £15 billion. Therefore, the context of this project is to understand the causes of the project cost overrun for the London Olympics 2012 and also the role of the project manager in preventing and overcoming the risk of overrunning the project cost (Davies &Mackenzie, 2014). This Construction Project costing assignmentwill be in the form of a literature review analysis which will focus on the conceptual background of cost overruns in construction projects with a specific focus on the London Olympics 2012 by discussing the reasons, roles, and responsibilities of the project manager in overcoming the problem.

2. Discussion
2.1 Overview of Research Published

Table 1: Overview of Research Published
(Source: As developed by the learner)

2.2 Key Findings from Previous Research
2.2.1 Causes of Cost Overrun in the London Olympics 2012
As opined by Sanchez et al. (2020), cost overrun is considered to be a common phenomenon in construction project management which is attributed to different reasons and causes. One of the popular causes for such an inevitable risk is inaccurate estimations of cost during the planning phase of the London Olympics 2012 project. It was analysed that the Construction Project costing assignment manager had a tendency to over-promising a budget, which led to the phenomenon of cost overrunning during the project management of the London Olympics 2012 project (Jennings, 2012). The risk of inaccurate estimations is not inclusive of financial estimations or cost estimation but also understanding of resource requirements and estimations. If there is an inaccurate distribution of resources within a construction project, then it will lead to a shortage of raw materials which in turn can lead to cost overruns. The estimation error which was made during the cost estimation was to spend $5 billion during the preparation for the 2012 Olympics but the project ended up sending about $18 billion for the successful completion of the project (Graham, 2012).

Figure 1: Construction Costs of the London Olympic 2012 Event
(Source: Statista, 2022)

According to Watt (2013), a significant cause for cost overrunning in the London Olympics 2012 project management is poor site management. It is the duty of the Construction Project costing assignmentmanager to supervise and manage the project site with efficiency and effectiveness for achieving the target outcomes of the project for fulfilling the stakeholder requirements. If there is bad site management during a construction project, then it leads to a bad reputation, delay in the project schedule and ultimately overrunning the cost of the project. As per the views of Girginov (2012), since the cost was overrun for the London Olympics 2012 therefore the National Lottery and other significant taxpayer funded events were organised for raising funds to conduct the games that year. Through these events it was possible to generate a fund of about $176 million for the project. According to Houlihan and Giulianotti (2012), the other notable investments made in the London Olympics 2012 included the GLA Olympic Council Tax who contributed £0.6 billion, the regional government of London contributed about £0.3 billion and the Central Government donated about £6.2 billion for the successful completion of the project. Other causes of cost overrunning for the London Olympics 2012 included a sudden change in requirement by the client of the construction project that included a change in designs, materials to be used, and preponement of the deadlines. Furthermore, there is a possibility that significant design changes need to be made in the project attracting higher costs and requiring better quality materials which can be expensive and lead to exceeding the project cost.

Figure 2: Cost Budget of the London Olympics 2012
(Source: Statista, 2022)

2.2.2 Roles and Responsibilities of the Construction Project costing assignment Manager in Preventing Cost Overrun in Construction Project Management
According to Haddad (2018), the roles and responsibilities of the project manager are not only limited to planning the different phases of a project and work breakdown but also extend to cost estimation and budget planning. One of the most effective methods which was applied by the project managers of the London Olympic 2012 for preventing cost overrun in the project was by undertaking strategic project planning and management. If there is proper planning for undertaking a huge construction project, then it ensures exhaustive risk management and prevents exceeding the costs and budgets of a project. As per the views of Magano et al. (2021), a project manager should also segment the entire project into different small phases which will allow him to estimate the cost required for completing every phase of the construction project. It is important for the stakeholder of the London Olympic 2012 to define the scope of the construction project with clarity to the team members which would have been a crucial step for not exceeding the budget of the project (Davies &Mackenzie, 2014). This will ensure that the threat of overrunning the project cost is mitigated at an early stage of the London Olympic 2012 project. Therefore, the roles and responsibilities of the Construction Project costing assignment manager in preventing cost overrun in a construction project require him to use a proper project planning tool that will minimise the possibility of exceeding budget.

As analysed by Flyvbjerg and Stewart (2012), the disaster which was created in the London Olympic in 2012 had created widespread debt for the stakeholders. Their interests were also not protected and it led to the project manager seeking advice from diplomats regarding the project cost overrun. Therefore, it should be noted that project managers while managing huge projects such as the London Olympic 2012 needs to have amicable relations with other stakeholders for seeking help in such unwanted and emergency situations. The Construction Project costing assignment manager had also consulted other Olympic organisers and experts regarding possible strategies for mitigating the cost overrun faced by them. The project manager also consulted the Olympic Village association for raising funds and overcoming the risk incurred who supported the project by generating £702 million (Nichols &Ralston, 2015). Moreover, funds were also raised by the London Organising Committee for the Olympic Games who contributed about £2 billion in prices that helped in covering the operating costs of the project. Therefore, it can be evaluated that the project manager should maintain a positive relation with associated stakeholder groups while undertaking huge projects such as the London Olympic 2012.

2.3 Construction Project costing assignmentLiterature Gap
Previous research studies were mostly done on different aspects of construction project management. Political, financial, management all areas and its related issues were portrayed in those studies. However, all the aspects were not covered in a single research study to understand the reasons and impacts of cost overrun issue as a whole. Therefore, this research paper, as a single study, has focused on understanding different areas of London Olympic Stadium construction to assess its different issues that are responsible for cost overrun. In order to fulfil this gap, above-mentioned relevant and significant journal articles have been taken under consideration.

3. Conclusion
The project cost overrunning in construction project management is considered to be a common phenomenon that should be addressed by project managers in the project planning phase. There are different causes for overrunning of costs for the London Olympic 2012 which includes inaccurate estimations, delay in payment from clients, poor site management, change in scope and design of the project, and so on. It was the responsibility of the project manager to identify the sources that gave rise to the cost overrun for the project and seek for funding assistance from prominent stakeholder groups. However, theConstruction Project costing assignment literature survey analysis does not discuss the significant impacts which is created by overrunning the project costs while completing a huge project such as the London Olympics 2012 and the strategies that should be adopted by the finance manager of the project to prevent the risk of overrunning the Construction Project costing assignment.

References
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