State and communities endorse an increase in the cost of Olympic sites

This is – theoretically – a final upward revision. A final call for public funding. Approved, Friday, December 16, by the board of directors of Solideo, the increase of 140.3 million euros in the budget of the public establishment, in charge of the delivery of the works of the Olympic and Paralympic Games of 2024, is supposed to allow it to approach the coming months calmly: this revaluation has, in principle, been calculated so as not to have to make new financial contributions by 2025, according to Nicolas Ferrand, the executive director general of the Solideo.

The part of the budget financed by public actors concerning the works necessary for the staging of the Games is thus increased to 1.711 billion euros. As the Elysée had announced at the end of September, two-thirds of the additional envelope is matched by the State, the rest by the local authorities taking part in the Games (City of Paris, department of Seine-Saint-Denis, Plaine commune , Greater Paris Metropolis, City of Marseille).

In support of its vote, the department of Seine-Saint-Denis, which benefits from 80% of the Olympic investments, had laid down the condition that the financing of the additional cost be done in proportion to the contribution of each of the communities concerned and that the extension requested be the last until the Games. In 2021, an injection of 175 million euros had already been requested from public funders in order to update the budget, established in 2016 euros.

The total budget for the 64 Olympic structures now amounts to nearly 4.4 billion euros, of which around 2.4 billion is public money, including work not necessary for the Games (620 million euros) but which been added to construction sites and about 2 billion in private investment (developers). This additional funding, public and private, has not been reassessed to date to take inflation into account.

“Prices were negotiated at the bottom of the trucks”

Solideo justifies the 140.3 million euro increase by tensions over the supply of materials and the rise in prices which have hit hard, and are still affecting, the construction sector. The outbreak of war in Ukraine on February 24 deeply disrupted the worksites. Supply chains have been broken.

From mid-March, Bouygues, Vinci, SPIE or Legendre, at work in the Olympic village, explained that they had no visibility on the availability of materials beyond two months, and therefore on their physical capacity to continue the activity. What to give ” cold sweat “ at Solideo.

The site of the athletes’ village, straddling the municipalities of Saint-Ouen, Saint-Denis and Ile-Saint-Denis, in Seine-Saint-Denis, was then at its peak of activity: up to 40 cranes revolved on the 50 hectares where some 14,500 people will be housed during the competitions in the summer of 2024 and which will be transformed into a city district after the Games.

“The offers of certain suppliers were valid for half an hour, the prices were negotiated at the bottom of the trucks. I’ve never seen that “recalls Nicolas Ferrand, who went through several public development establishments – including EpaMarne, that of Marne-la-Vallée – before taking the lead in the Olympic works.

Today, he points to a certain “irrationality of the behavior of the moment” as an aggravating factor. An interruption of the construction sites could have jeopardized the delivery dates: the first is scheduled for December 31, 2023, all the equipment to be delivered on December 1^er March 2024 at the end of the so-called lifting of reservations period.

Extension request to the ordering party

While he thought, in mid-May, to be quit with the logistical difficulties and the repercussions of international tensions on the progress of the construction sites, the polytechnician had to face, from the summer, the rise in prices. China’s zero Covid policy has blocked ships in ports and crippled the global supply chain; at the same time, on the energy markets, prices soared.

Although public contracts are normally indexed to the evolution of construction costs, since the last government circular on the theory of unpredictability, published at the end of September, companies are tempted to go back to see the principal to ask for an extension, particularly with regard to the Ukrainian and Chinese context. However, Mr. Ferrand hopes for negotiations on the margins, 80% of the Solideo contracts having been passed before the inflationary wave.

Solideo’s revised budget must cover the price increase until the work to convert the athletes’ village and the media village in Dugny into real pieces of town by the end of 2025. This will not prevent new stage points next summer, at the end of 2023 and again in the summer of 2024 when everything will have been delivered, or almost.

There will still be the second phase of the media district to be built, as well as equipment and a park near the athletes’ village, the construction of which can only begin once the flame has been extinguished. In the event that, in the long term, there would remain a small surplus, this would be paid back to the public funders.

A reserve of 62 million euros in the event of new difficulties

However, inflation and supply delays are still having their effects today. The announcement of the delivery postponed by four months of the Arena Porte de la Chapelle, the future Parisian sports arena, on December 7, came as a reminder.

For the organizer of the Games, the date does not change: its handling of the equipment (hall and gymnasiums) is still scheduled for April 15, 2024. On the other hand, the City of Paris, which hoped to be able to use the hall from September 2023, will not be able, at best, to take possession of the premises until the end of January 2024.

“We are confident about our ability to deliver in accordance with what we had planned”, assures Mr. Ferrand about the various sites. The risks of power cuts in the coming weeks do not worry him more than that. His topic of the moment is rather the gradual entry of construction sites into the second phase, that of the finishing work.

It will be necessary to ensure that the cohabitation of companies, which intervene one after the other, and sometimes at the same time, goes as well as possible in this last straight line, “while everyone puts pressure on themselves to deliver on time”explains Mr. Ferrand – and fatigue will begin to set in.

If other unforeseen events should arise – for example changes that the organizers of the Games could request – the director of the public establishment remains calm. In its accounts, Solideo shows that it has a reserve of 62 million euros to face new difficulties.