Buy On Price, Pay Twice

This is interesting for you if you ever face pressure from cheaper competition.  I saw an interview with the awesome Seb Coe today.  He’s the winner who (not only won Olympic Gold in Moscow & LA but also) delivered a stunning presentation that, following his amazing political manoeuvering, sealed London earning the 2012 Olympics.  He was being quizzed about potential cost overruns.

The most blatant individual cost concerns the huge centrepiece stadium, and there are several recent examples of stadia being built to time, and to budget.  These include (and forgive the figures as they’re what I wrote down quickly from the interview)  the Parisien Stade de France, Sydney’s Olympic stadium (both £260m), Cardiff’s terrific Arms Park replacement, Millennium Stadium (even with a fantastic sliding roof where I saw Brummagem twice, only £126m) and the most recent, Arsenal’s new stadium at Ashburton Grove (£350m) which took only 2 years and opened July 2006.

And yet the unsightly wart on the face of stadium design remains the new Wembley.  It’s way over-due (possibly 2 years depending on who you believe) and the costs for this totally unnecessary folly have at least doubled, from £350m at first, to a conservative £757m now.

I talked this over with a few sales guys I know, I mean, how can such an obscene overrun occur?  And the answer seems obvious.  The guys I was talking with knew of sales into both Arsenal’s Emirates gig as well as the FA nonsense at Wembley.  The difference between total disaster and success to them is clear.  Emirates decided not to scrimp on anything.  They focussed on what would make money, long-term.  Wembley only gave a monkeys about the lowest bidder. 

Just think of Steve Buscemi’s smart Rockhound character in Armageddon for a reaction on that.  (when they’re about to take off in the Shuttle, he reminds us it’s all been put together by the lowest bidder, implication being, NASA are idiots and it’s bound to fall apart).

The vibe appears to be that Emirates (whether they realised or not) followed the lauded Egan doctrine.  That is, it is not about how much it costs today, think of instead about the entitre project life.  All Wembley (and Aussie firm Multiplex project managing) cared about was “Day One” costs.  Disaster.  Multiplex have apparently lost, as I write, at least £138m on the gig.

One example from Emirates features their beer dispense system.  Yes, it looked at first glance to cost more than the freebies they’d usually get from drink brand owners, yet long-term, they’d earn tonnes more drinks revenue whilst making customer’s experience so much better, meaning more revenues.