Boston 2024, the organization that dropped its bid for the 2024 Olympic Games last month and has since disbanded its staff, lashed out in a statement against a report released Tuesday that identified major risks and questionable legacies that the bid represented.
“We were surprised that the report failed to thoroughly and accurately account for important cost differences between Boston’s bid and other Olympic Games,” the statement said.
Prepared by the Brattle Group for Massachusetts Governor Charlie Baker, the report identified understated construction costs with a gap amounting to as much as $970 million, and risks to financing and revenues that could leave taxpayers on the hook for millions of dollars more.
“We respectfully disagree with some of their assumptions and analyses and have identified several misrepresentations and/or errors within the report.”
“Unfortunately, the Brattle Group never fact-checked many of their findings, which would have prevented these errors.”
And while the authors of the report spoke with many state and municipal organizations, and even to bid opponents No Boston Olympics, “the Brattle Group never consulted the City of Boston for its report, despite the city’s involvement in the planning and bidding process.”
The Brattle Group describes itself as a global consultancy specializing in economics, finance, and regulation.
“We work with corporations, law firms, and governments around the world to answer complex economic and financial questions in litigation and regulation, develop strategies for changing markets, and make critical business decisions,” the commissioned report explains.
“Unfortunately, the Brattle Group never fact-checked many of their findings, which would have prevented these errors.”
“We are distinguished by our credibility and the clarity of our insights, which arise from the stature of our experts, affiliations with leading international academics and industry specialists, and thoughtful, timely, and transparent work.”
As indicated in the report, the Olympic expertise seems to stem from Allen R. Sanderson, a Senior Lecturer in the Department of Economics at the University of Chicago. His Web page indicates that “Sanderson is an oft-cited authority on sports economics issues, a contributor to op-ed pages on sports and non-sports topics in newspapers around the country, a frequent guest on national and Chicago-area television and radio programs, and a speaker at several local gatherings.”
Though he wrote academic papers about Chicago’s failed 2016 Olympic bid, his analysis was more related to socio-economic and political motivations and less about the fundamentals behind the organization of the Olympic Games and related development projects.
“More broadly, the Brattle Group’s analysis is a simple comparison of our budget to past Games including London,” the Boston 2024 statement contends.
Further, the former bid suggests that the lack of depth in the analysis neglects key fundamental factors that the were provided right down to the cost of building materials.
No Boston Olympics co-Chair Chris Dempsey said in an email to GamesBids.com “Boston 2024’s efforts to discredit the independent analysis done by the Brattle Group are nothing more than an attempt to save face.”
“Boston’s Olympic boosters worked on the bid for more than two years, spending more than $15 million, but still couldn’t answer basic questions about venue locations and costs, or how taxpayers would be protected.”
“Boston 2024 made aggressive and reckless assumptions on both costs and revenues that simply didn’t stand up to the dispassionate, third-party analysis provided by the experts at the Brattle Group.”
Dempsey balked at Boston 2024’s claim that the report erroneously suggested that there is a $450 million understatement on costs for the main broadcast and press centre, “after two years of planning, Boston 2024 couldn’t even identify a location,” Dempsey said.
“Why wouldn’t the Brattle Group call that out in the report and raise it as an area of concern, which is really all they did?”
Dempsey, a Harvard MBA Graduate who worked for management consultants Bain and Company also questioned Boston 2024’s objection to the report’s suggested 25 per cent project contingency. He asked “why is Boston 2024’s chosen percentage (5 per cent) any better or more accurate than the Brattle Group’s (25 per cent)? Given the project is this far out, wouldn’t a larger number be more conservative?”
This may seem like water-under-the-bridge after the Boston 2024 bid has met its demise, but it does raise serious questions for the United States Olympic Committee (USOC) as it plans to move forward with a Los Angeles 2024 Olympic bid – and more broadly for the International Olympic Committee (IOC) while it is in the midst of changing the entire bid process to better align with recently approved Agenda 2020 reforms aimed at improving the Games’ feasibility and sustainability.
Did Boston 2024’s plans for a more widespread Games with temporary venues completely miss the point? Or did the expert consultants misunderstand or disregard the Agenda 2020 initiatives as they filed their report?
Either way, the IOC will be paying close attention as they try to make bidding for and hosting the Games a more attractive option for potential cities. They’ll need to sort out whether communication failures continue to damage the Olympic brand as they did when the Sochi 2014 Games were said to have cost $51 billion to stage, or whether Agenda 2020 bidding reforms – while sensible on paper – simply fail in execution.
FULL TEXT OF BOSTON 2024 RESPONSE TO BRATTLE REPORT
We appreciate the serious attention Governor Baker, Senate President Rosenberg and Speaker DeLeo gave to reviewing Boston 2024’s Bid 2.0. Boston 2024 closely collaborated with the Brattle Group in an open and transparent manner during this process. We are gratified that the Brattle Group report noted that Boston 2024’s ideas to improve housing, transportation and parks are worthy of future discussion and we look forward to supporting Gov. Baker, the Legislature and Mayor Walsh in those endeavors.
While the Brattle Report confirmed many of the risks and opportunities that were identified in Bid 2.0, we were surprised that the report failed to thoroughly and accurately account for important cost differences between Boston’s bid and other Olympic Games. Boston 2024 appreciates the work of the Brattle Group, however we respectfully disagree with some of their assumptions and analyses and have identified several misrepresentations and/or errors within the report. Unfortunately, the Brattle Group never fact-checked many of their findings, which would have prevented these errors.
To correct the record, Boston 2024 offers the following facts:
– The Brattle Group suggested that our International Broadcast Center/Main Press Center estimate of $50.5 million was 90% lower than London’s and thus was a $450 million shortfall in our bid. This is a critical, nearly half-billion dollar error on the part of the Brattle Group. Our budget estimate was to lease and retrofit space only, while London’s cost included construction of a brand, new permanent facility. London actually built one million square feet but used only 600,000, while we budgeted rent for one million square feet but most likely would have needed far less space;
– For the Aquatics Center, Boston 2024 budgeted $69.5 million for a temporary facility for swimming and synchronized swimming while London spent $423 million for a larger permanent facility. Also, London’s Aquatics Center included diving and triathlon swimming, while Boston 2024 included an additional $24 million for separate facilities for those sports. Other Olympic cities have built aquatics facilities for far less than London. London had a different plan for a permanent facility with long-term social use. We budgeted for an acceptable, low-cost facility but as we stated repeatedly, we also had universities interested in building a permanent facility.
– For the Olympic Stadium, Brattle merely assumed Boston would experience an overrun exactly the same as London’s (48%), and simply applied that percentage to our Olympic Stadium budget. No analysis of our detailed construction estimates was actually done to refute our cost estimate. In addition, the report suggests the $176 million cost for the temporary stadium was not feasible. As Boston 2024 stated several times, the price quote for the stadium provided by firms that build similar temporary facilities around the world was significantly less than $176 million. We built a 15 percent contingency into the stadium cost and believe that the $176 million figure was conservative.
– The Brattle Group believed our contingency figures were too low and arbitrarily increased the percentage to 25% for all smaller venues. Again, no detailed critique or analysis was done of our construction budgets.
– The Brattle Group states that it was not provided with incremental costs associated with venues outside of Boston and suggested that those costs would impact potential revenue upside. In fact, those costs were provided, and more importantly were accounted for in our projections. We specifically budgeted in Bid 2.0 for $33 million for regional venue costs including overlay, transportation and accommodations;
– More broadly, the Brattle Group’s analysis is a simple comparison of our budget to past Games including London. There was no effort to critique our venue by venue construction budgets which we provided, down to very specific costs of steel, concrete, plumbing, electrical and HVAC on a square foot basis;
– The Brattle Report suggests that a financial guarantee for the Olympics is “generally signed by a combination of national, regional, and local government authorities,” falsely implying that the governor or other authorities of the Commonwealth would have had to sign a contract with the International Olympic Committee. In fact, only the City of Boston and its mayor would have been required to sign a taxpayer guarantee;
– In addition to working with Boston 2024, the Brattle Group consulted a number of organizations for its analysis, including: No Boston Olympics; Metropolitan Area Planning Council; Massachusetts Smart Growth Alliance; Transportation for Massachusetts; the Massachusetts Department of Transportation; and the Massachusetts Bay Transportation Authority (“MBTA”). It is worth noting that the Brattle Group never consulted the City of Boston for its report, despite the city’s involvement in the planning and bidding process.
– With regards to revenue, the Brattle Report states that “Boston 2024’s estimate was already 43% higher than the $1.05B that London received; if Boston were to have received the same contribution as London, its revenue would have been nearly $450M lower than projected.” In fact, the IOC guidance was for all bid cities to assume $1.5 billion, with a high possibility for upside. In addition, NBC’s new $7.75 billion broadcast rights contract from 2022 through 2032, coupled with international broadcast rights increases, will almost certainly mean even higher revenues by 2024;
– The Brattle Report states that Boston 2024 “disclosed no detail on the potential costs of the Paralympics.” In fact, the Brattle Group was informed that the Paralympic costs were included in the OCOG budget. Boston 2024 also reported to the Brattle Group that ticketing revenue from the Paralympics was projected at $75-80 million and that Paralympic sponsorship revenue in London was roughly $300 million. Without the Paralympic revenues included in Bid 2.0, Boston 2024 still projected a $210 million surplus. Figuring in this revenue, the surplus would have more accurately been in the $400-500 million range;
– The Brattle Report suggested Boston 2024 would have a potential financial risk with regards to security costs, but Bid 2.0 – like all American Olympic bids – is dependent upon the federal government paying that cost. The fact is, there can be no American Olympics – in Boston, Los Angeles, or any other city – if the federal government doesn’t pay that important cost;
– The Brattle Group never mentioned that the last three United States Games were privately funded and all had surpluses – even without the Agenda 2020 reforms reflected in Boston 2024’s Bid 2.0.