Victorians will pay $380 million for scrapping of Commonwealth Games

Former New Zealand judge Kit Toogood, KC, and the former chief justice of the WA Supreme Court, Wayne Martin, KC, acted as joint mediators.

The original business case for the Games, also released on Saturday, shows that the government was warned early on about the risks of pulling together the event at much shorter notice than typical bids.

Commonwealth Games Australia chief executive Craig Phillips speaks to the media on July 18.Credit: AAP

The document said there was a high risk to the delivery of the event, and its costs because there was not much time for due diligence before signing the initial agreement to host the Games.

To offset this risk, the document said the government should ensure the hosting deal had flexibility for the government to alter its plans to deliver the Games.

Another high-risk category was the “lack of time to prepare for 2026 Commonwealth Games impact cost, quality and benefits realisation”.

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It was proposed that the best way to address this issue was to move towards delivering the event as soon as possible, hire people in key positions with a proven track record for mega events and minimise the amount of permanent infrastructure works needed.

Saturday’s statement which confirmed the compensation sum said: “All parties engaged respectfully and made appropriate concessions in order to reach an agreement.

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

Further details of the settlement remain confidential.

“The settlement finalises all matters between the parties,” the statement said.

Ballarat’s Mars Stadium was to be refurbished for the Commonwealth Games.Credit: Eddie Jim

“The parties are legally bound not to speak further regarding the details of the settlement.”

In a one-page document, the Andrews government also released the July 23 costings that were used to justify axing the event but had not been made public.

The government put an extra $2 billion in costs down to “added pressures” that were not part of the original business case.

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These include “hyper-escalation driven by compressed timelines”, inflation, issues with regional supply chains, shortfalls in accommodation, and the cost of relocating major sporting codes.

The document does not provide further detail about the individual costs of these concerns.

Operational costs, particularly transport and security, were also listed as significant blowouts to the prices from the original business case. The government’s estimates say these would have come out to $3.19 billion, compared to the business case’s “worst-case” scenario of $2 billion.

Police and security costs more than doubled from an anticipated $201 million to $492 million, while transport costs tripled from $101 million to $306 million.

The cost of building venues, the athletes’ village and other infrastructure rose to $1.6 billion from a worst-case scenario of $1 billion.

Premier Daniel Andrews and initial host venues for the 2026 Commonwealth Games.Credit: The Age

In the original business case document, another high-risk category identified was the “lack of time to prepare for 2026 Commonwealth Games impact cost, quality and benefits realisation”.

It was proposed that the best way to address this issue was to move towards delivering the Games as soon as possible, hire people in key positions with proven track records for organising large events and keep the amount of permanent infrastructure works needed to a minimum.

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The business case also confirms that the Andrews government secured an exclusivity deal that shut out competitors from bidding for the Games.

The Commonwealth Games Foundation (CGF) had wanted to have a 2026 host city in place by July 2022, when the Birmingham Games were being held, and Victorian representatives met with the foundation in November 2021 to discuss using the regions for the next event.

By December 2021, the state’s tourism and events company, Visit Victoria, signed an exclusivity deal that meant that “no other region” could provide the CGF with an offer to host the 2026 Games before January 31, 2022.

An initial business case was submitted before this cut-off date and an offer was made, with further negotiations running until the signing of the Games contract in April 2022.

Before the deal was struck, South Australia and Western Australia were floated as potential bidders for the 2026 event.

On July 18, when announcing the cancellation, Andrews said the Commonwealth Games “needed a host city to step in at the last minute”.

Australian performers at the closing ceremony of the 2022 Birmingham Commonweath Games.Credit: Getty Images

“We were willing to help – but not at any price, and not without a big lasting benefit for regional Victoria,” he said.

The Age revealed in July that a previously unpublished bid document had aimed to limit the cost of the Games by keeping events in three regional cities – Geelong, Ballarat and Bendigo – and to mostly use existing facilities.

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But by 2023, the event had been spread to six cities – Shepparton, Morwell and Traralgon were added as venue cities – and announcements were made for a host of new projects and temporary venues.

When the government first announced the cancellation, Commonwealth Games Australia chief executive Craig Phillips disputed the government’s estimates of a total cost of $6 billion to $7 billion.

“The stated costs overrun, in our opinion, are a gross exaggeration and not reflective of the operational costs presented to the Victoria 2026 organising committee board as recently as June,” Phillips said at the time.

“Beyond this, the Victorian government wilfully ignored recommendations to move events to purpose-built stadia in Melbourne and in fact remained wedded to proceeding with expensive temporary venues in regional Victoria.”

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Opposition Leader John Pesutto on Saturday said the true cost of the saga would be significantly higher.

“Victorians will pay at least $380 million for an event that will never happen in a debacle that has damaged Victoria’s reputation internationally,” 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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