New documents reveal State warned of ‘high’ delivery risk to host 2026 Commonwealth Games

The business case used by the Andrews Government to sign up to host the Comm Games was so rushed it did not include a proper analysis of the event’s key elements.

The business case used by the Andrews Government to sign up to host the Commonwealth Games was so rushed it did not include a proper analysis of “key elements of Games planning”.

The document, released on Saturday morning after the Andrews Government agreed to pay $380m to dump its hosting contract, shows the estimated cost of running the 2026 event provided to Cabinet in February last year was $2.5-$3bn.

But the business case says those costs were “baselined” from Gold Coast’s 2018 event – which was held in one metropolitan city.

The document also warns of “high” delivery risks for the 2026 events because there had been a “lack of time to undertake due diligence prior to signing the Heads of Agreement”.

“The estimated budget has been built on a ‘top down’ basis and baselined from the Gold Coast 2018 Commonwealth Games,” the document says.

“Time has not permitted a more robust ‘bottom up’ approach as key elements of Games planning are not yet understood”.

A scene from the opening ceremony of the Commonwealth Games at the Melbourne Cricket Ground when the city last hosted in 2006. Picture: Getty Images

Premier Daniel Andrews defended the rubbery figures on Saturday, saying they were created by the state’s top public servants.

“It is my view that the most senior bureaucrats in the state, supported by external consultants, did their very best work … to try and estimate the cost of delivering these games,” he said.

Just 15 months after the government signed a deal to host the 2026 Games, and allocated $2.6bn in the State Budget, it dumped the event because it now expected it to cost almost $6.9bn to host across five cities.

Costs to build four athletes’ villages were set to blow out from $250m to $1bn, transport costs would soar from $110m to $306m, and police and security costs would balloon from $201m to $492m.

Treasurer Tim Pallas said the Games deal was signed a couple of weeks before Russia invaded Ukraine, which was one contributing factor to blowouts through “hyper-inflation”.

“We’ve also seen as China’s opened up, and the supply chain problems they’ve encountered from Covid, again feeding into inflation and a shortage of supply of vital building materials,” he said.

“Finally, of course, 12 interest rate rises that have had an impact upon … our building industry.”

Premier Daniel Andrews defended the rubbery figures, saying they were created by the state’s top public servants. Picture: Tony Gough

The business case reveals that if the government had wanted to abandon its heads of agreement – signed in February last year – it had a month to back out of the event at no cost.

“If the State decides that it does not in fact want to host the 2026 Games, it can withdraw prior to the provision of the Proposal to the CGF (Commonwealth Games Federation) on the 15 March 2022,” the document says.

Premier Daniel Andrews was unable to say what the direct cause of transport costs almost tripling and police and security costs ballooning by $291m were, but said “estimates were made and then they were revised up as we went further and further into formalising those contractual arrangements”.

The business case is peppered with references to Covid-19, which had resulted in lockdowns in Victoria as the Government tried to stamp out transmission of the virus.

“Victoria’s economy has suffered significantly as a result of COVID-19 impacts, with business closures and unemployment experienced across the State,” the document says.

“These economic impacts along with heightened uncertainty surrounding COVID-19 has also impacted the wellbeing of Victorians.”

An economic benefit of up to $3.1bn was also expected from the Games, largely driven by tourism and jobs.

The business case says Commonwealth Games research showed all Games held since 2002 have recorded a positive benefit cost ratio.

Leaders ‘appalled’ at $380m blowout

The bumper $380m cost of Victoria’s exit from the 2026 Commonwealth Games agreement has been slammed for the harsh financial toll, but also for bludgeoning the state’s reputation for hosting major events.

Tom Tate, mayor of the Gold Coast, which hosted the 2018 Games, said every Australian should be appalled by the loss of $380m.

“That money has been burnt with zero return. Worse, our nation’s reputation across the Commonwealth has been tarnished,’’ he said.

“From a business and contractual perspective, Australia is no longer seen as ‘good for its word’ and that will cost us billions in future trade agreements and international goodwill.’’

Mr Tate said Gold Coast and Perth were both interested in a joint 2026 event, despite a lack of support from the Queensland government.

Former Premier Jeff Kennett lamented the reputational damage coming after major matches of the FIFA Women’s World Cup weren’t played in the state, and feared other sporting franchises may avoid doing business with Victoria.

“We were always the sporting capital,” he said.

Gold Coast Mayor Tom Tate says Australians should be appalled at the $380 million wasted axing the Commonwealth Games. Picture: Glenn Campbell

Mr Kennett said the cost would just be piled up on to the state’s massive debt, but Victoria’s standing in the world had been hit hard.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra also acknowledged the extra burden on state debt.

“(We) are not likely to receive clarity on how such a significant cost blowout occurred, or how much the legal fees and spent wages have amounted to; we now shift our focus forward,’’ Mr Guerra said.

“We will be resolute in ensuring the committed $2bn is spent to recover Victoria’s reputation globally, building infrastructure in the state’s regions and attracting more tourism and events into Victoria in a timely and responsible manner.”

Opposition spokesman for tourism, sport and events Sam Groth said Mr Andrews had negotiated a gag order in the deal so he could not be questioned on the details.

“But the final cost to the state, after salaries, torn-up contracts and damage to our reputation, will be in the billions,’’ he said.

Liberal deputy leader David Southwick labelled the Games settlement a “debacle’’.

“(Paying) $380m to cancel the Commonwealth Games contract is the tip of the iceberg and doesn’t begin to cover the damage to our international reputation,’’ he said.

“Not to mention taking out the trash on a Saturday to avoid scrutiny. Disgusting.”

Originally published as New documents reveal State warned of ‘high’ delivery risk to host 2026 Commonwealth Games