Following entry is a record in the “Catalogue of Catastrophe” – a list of failed and troubled projects from around the world.
City of Vancouver – Canada
Date : Jan 2009 Cost :$250M cost overrun
While we don’t often touch on construction projects in this database, a construction project is still a form of technology project. The following example nicely illustrates what happens when financial risks are ignored.
Having won the right to host the 2010 Winter Olympics in 2006 the City of Vancouver set out to build an atheletes village. Originally planned to cost $750M, the project was to be financed by a US based hedge fund and the housing units were to be sold as condos following the games to recoup the costs. Following the 2009 global financial collapse and the decline in real estate prices the lender defaulted on their obligations leaving the project unfunded. Facing a fixed deadline, the City of Vancouver admitted that they had secretly underwritten the loan themselves and were now obligated to provide the remaining funds. Unfortuantely due to legal restrictions the city was unable to borrow the needed money and an emergency act of parliment had to be passed to allow the city to access the required funding. While the project is now on track to complete, the costs have risen considerably and the project demonstrates the cash flow problems that can undermine a project and what happens when we assume a risk event will never occur.
Contributing factors as reported in the press :
Lack of risk management.
Reference links :