Andrews was warned of high-risk Games gamble

A series of warnings exposing how the 2026 Commonwealth Games bid was a disaster waiting to happen are detailed in the business case.

Premier Daniel Andrews announcing on Saturday that Victoria has to pay $380m in Commonwealth Games compensation. Picture: NCA NewsWire/Luis Enrique Ascui

A litany of red flags exposing critical and high risks for the failed 2026 Commonwealth Games bid will be investigated by Victoria’s Auditor-General, including flawed budget assumptions, inadequate venues, insufficient accommodation and a lack of time to implement the strategy.

Victorian taxpayers have paid Commonwealth Games organisers $380m in compensation for the failed bid but the overall cost is expected to be several hundred millions more in sunk costs.

But the government insists its Games trade-off regional package of low-cost housing and sporting upgrades will not cost more than the $2.6bn initially budgeted to run the 2026 event.

It comes as Victorian Chamber of Commerce and Industry CEO Paul Guerra has called for an urgent international campaign to help address the damage to Victoria’s business reputation caused by the games fiasco.

“We have to restore our global reputation,’’ Mr Guerra told The Australian.

The red flags surrounding the event are laid bare in the business case, released at the weekend, outlining how the government was warned in 2021 and again later that there were significant potential issues relating to the fast-tracked Games, with costings based in part on the successful 2018 Gold Coast Games.

But the Gold Coast Games were conducted on an entirely different model, with Victoria opting for a multi-regional event that supersized the eventual budget from $2.6bn to $6.9bn.

The closing ceremony of the XXI Commonwealth Games on the Gold Coast in 2018. The Games were conducted on a different model to Victoria’s proposed multi-regional event. Picture: AAP Image/Darren England

The business case details, to be made available to Auditor-General Andrew Greaves, show how a risk workshop was set up on January 4, 2021 with representatives from the former Department of Jobs, Precincts and Regions, Visit Victoria and the Commonwealth Games working group.

Labor leadership aspirant Jacinta Allan was the minister in charge of the Games debacle and will face a full Auditor-General’s inquiry into the costs associated with securing and planning the event.

Premier Daniel Andrews at the weekend defended the bureaucratic and consultants’ advice on the games but noted the Auditor-General’s inquiry and the business case. “No doubt there will be some learnings that come from that,’’ he said.

The business case produced a convoluted spaghetti diagram risk matrix that sought to identify the risk methodology for the Games, with a series of arrows and words calling for monitoring and reviewing risk as well as communication and consultation.

The matrix appears before the business case starkly outlined the risks of the bid.

Liberal leader John Pesutto called for an urgent budget update with independent oversight to determine how much money in total had been wasted.

“Costings of the Games under Labor’s model are woefully inadequate and another exercise in cynical spin by the Labor government,’’ he said.

Victorian Opposition Leader John Pesutto has called for an urgent budget update with independent oversight to determine how much money had been wasted on the Games. Picture: NCA NewsWire/Valeriu Campan

It is widely accepted in government that Labor bungled the Games strategy in the rush to win votes in Victoria’s regional areas, where it has prospered since 1999.

The business case, which includes some key omissions, warned that some of the proposed facilities were potentially unsuitable to host Games events, opening up the state to penalties and potentially higher capital and operating costs.

It deemed there was a high risk there wasn’t enough accommodation for spectators, officials and others at regional locations, and risks that upgrades to sporting facilities could not be effectively maintained. There also was a high risk that facilities would not be able to be tested within the required framework and might not be delivered on time.

On reputation, the business case said: “Risk that the Games cannot be successfully delivered with(in) the time frame. Generally, host cities have approximately eight years to plan and implement the Games. This will be condensed into four years.’’

It then warns there is a critical risk costs may be underestimated and benefits overestimated.

The three key Commonwealth Games bodies and Victoria announced on Saturday the $380m compensation payout figure, higher than initially expected but lower than the highest estimates floated publicly amid the outrage over the cancellation.

Additional cost pressures added $2bn to the forecast $6.9bn bill including compressed timelines, regional supply constraints and accommodation shortfalls.

The Andrews government, the Commonwealth Games Federation, Commonwealth Games Federation Partnerships and Commonwealth Games Australia came to the settlement agreement after weeks of acrimony over Victoria’s decision to junk the event amid ballooning state debt.

It was a confidential settlement although parties agreed the Victorian model of multi-regional hubs was more expensive to host than traditional city-dominated undertakings.

The original cost estimate was $2.6bn but it blew out dramatically, according to the government, because of hidden costs associated with a multi-region approach.

The bid proved a failure because of the huge costs of providing five lots of security, transport and multiple accommodation centres.

The confidential statement released at the weekend on the $380m settlement reads: “The Commonwealth Games Federation (CGF), Commonwealth Games Federation Partnerships (CGFP), Commonwealth Games Australia (CGA) and the State of Victoria have settled all their disputes regarding the cancellation of the multi-hub regional Victoria 2026 Commonwealth Games.’’

“The State of Victoria has agreed to pay the Commonwealth Games parties (CGF CGFP and CGA) $380 million.

“The parties also agreed that the multi-hub regional model was more expensive to host than the traditional models.

“The settlement was supported by the mediators. The terms of the settlement will otherwise remain confidential.

“The settlement finalises all matters between the parties. The parties are legally bound not to speak further regarding the details of the settlement.’’

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