Daniel Andrews blows $380m on Commonwealth Games cancellation
Victoria will pay the compensation to three Commonwealth Games bodies for cancelling the 2026 event after basing the original costs on chronic underestimates.
Victoria will pay $380 million compensation to the three Commonwealth Games bodies for cancelling the 2026 event after basing the original costs on chronic underestimates of how much needed to be budgeted.
New documents also show the government was warned there were risks in running the games under such a tight delivery timeframe.
The three key Commonwealth Games bodies and Victoria announced on Saturday the $380m payout figure, which is higher than initially expected but lower than the highest estimates that were floated publicly amid the outrage over the cancellation.
Secret talks have been under way for weeks to broker the payout figure, which won’t detail money already spent preparing for the games, including costs for preparations, wages and preliminary site works and planning.
However, Victorian Premier Daniel Andrews said on Saturday that no more than $2.6bn would be spent on delivering his proposed new regional package, which will deliver new housing and infrastructure but not the games itself.
New costing figures show that in the original business case for the games, made well before last year’s election, the best case scenario was the delivery of an event costing $2.5bn and a worst case of $3bn.
By the middle of this year, the cost estimates had exploded to nearly $6.9bn.
Additional cost pressures added $2bn to the forecast $6.9bn bill including compressed timelines, regional supply constraints and accommodation shortfalls.
Mr Andrews said officials and consultants who made the initial $2.6bn bid estimate had done their best but he was not pleased about the outcome.
“The estimates were wrong,’’ he said.
“Now, am I pleased about that, no of course I’m not.”
The Andrews government, the Commonwealth Games Federation, Commonwealth Games Federation Partnerships and Commonwealth Games Australia released the statement at 7am on the $380m settlement.
It means there will be no court action.
Mr Andrews said the Auditor-General would investigate the business case and would make findings.
“No doubt there will be learnings that come from that,’’ he said.
Today’s statement on the $380m payout said that the parties had referred the dispute to mediation, appointing former NZ judge Kit Toogood KC and the former WA Chief Justice Wayne Martin as mediators.
It is a confidential settlement although parties agreed the Victorian model of multi-regional hubs was more expensive to host than traditional city-dominated undertakings.
The statement reads in part: “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.’’
It is not yet clear whether the Victorian government will release details of its updated $6bn-to-$7bn cost estimate of running the games.
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 that was framed to bolster Labor’s vote outside Melbourne.
But it proved a failure because of the huge costs of providing five lots of security, transport and multiple accommodation centres.
Opposition leader John Pesutto said taxpayers would pay $380m for getting nothing.
“The true cost of this debacle will be significantly higher but we are likely to never know because the Andrews government will do everything it can to stop Victorians finding the truth,’’ he said.
“Its costings of the games under Labor’s model are woefully inadequate and another exercise in cynical spin by the Andrews government.’’
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