IOC warned Rio on construction contracts five years ago: documents

REUTERS: The International Olympic Committee warned organisers of the Olympics in Rio de Janeiro five years ago that construction contracts they drew up could give developers incentives to cut corners, presaging problems with athletes’ housing that drew complaints from several countries this week, documents showed.

Rio’s city government, responsible for the vast majority of infrastructure projects for the Games, has used public-private partnerships, or PPPs, to get private firms to cover the cost of building venues in return for permission to build real estate on the sites.

Rio’s Mayor Eduardo Paes, has taken pride in the fact that 57% of the nearly 40 billion reais ($ 12.3 billion) spent on the Olympics is private money, garnered by using PPPs on a scale never before seen at a Games.

Yet criticism erupted this week over the quality of the work at the privately funded Olympic Village. Australia said housing was “not safe or ready” and other countries such as Italy, Argentina and New Zealand also expressed concerns.

In documents seen by Reuters, the IOC told the city in 2011 it needed to carefully monitor its partners because they might pay more attention to their own commercial interests than delivering Olympic projects on time and to high standards.

“The city recognises that the PPP contractor most likely has two primary objectives, maximize land value and deliver venue obligations at least cost,” the IOC said in one of the documents assessing infrastructure plans for the Games, seen by Reuters using a freedom of information request.

“The city must be diligent in making sure the Games obligations are fully met,” the IOC said.

Rio city officials did not respond to requests for comment. The IOC said in a statement that it was very supportive of Rio’s efforts to ensure the Games venues were constructed in an efficient and cost-effective way, while making sure that what was needed for the Games was delivered.

The IOC document reviewed by Reuters did not go into details about how problems might arise with the contracts, which marked a departure from previous Games dominated by public spending.

London’s 2012 Olympics was over 80% publicly funded and the Olympic Village was paid for using taxpayer money, with the government taking on the risk of having to sell the apartments after the Games.

By contrast, the 31 tower blocks of the Olympic Village in Rio, built at a cost of $ 880 million to house 18,000 athletes and team staff during the 17-day event, will be sold off as luxury housing after the Games.

The IOC has publicly welcomed PPPs as a way of reducing the cost of the Games for host nations but three sources involved in Rio’s preparations told Reuters there were widespread concerns over the quality of work being delivered.

They said the local organising committee, Rio 2016, had been constrained in its ability to ensure projects met IOC standards because it was operating under huge financial strain.

This month, Reuters reported that despite deep cost cuts, Rio 2016 was running a deficit of $ 120 million to $ 150 million.

Low ticket sales, a slump in the Brazilian currency and lukewarm appetite from sponsors have all taken their toll on the privately funded organization that runs the Games before handing infrastructure back to the city.

Organisers deployed more than 600 workmen to tackle last-minute problems with water and electricity at the Olympic Village this week.

Rio 2016, the local organising committee, said the accommodation was delivered in May but electricity and water were not tested properly.

“Theoretically, the builder should have delivered everything ready but we all know what it’s like with building work; there is always something to be fixed,” spokesman Mario Andrada told reporters on Monday.

On Thursday evening, Rio 2016’s Chief Operating Officer Rodrigo Tostes said emergency work had finished and all 31 towers were now “operational.”

Ilha Pura, the joint venture between construction companies Carvalho Hosken and Odebrecht that built and own the village, said the project had been delivered complete and to agreed standards.

“Ilha Pura has completely supported Rio2016 in carrying out tests and maintenance work, deploying specialised technicians and work teams – they are working long hours for the solution of problems as quickly as possible,” it said in an emailed statement.

Developers say they have sold just 240 of the 3,600 Olympic Village apartments that go for between 750,000 and 3 million reais ($ 230,000 to $ 925,000), as Brazil’s worst recession since the 1930s has dented demand.

Rio house prices are down 20% in real terms over the past year.

The development comes complete with a landscaped central park, fountains, tennis courts and swimming pools. Critics said the city missed a chance to build affordable housing like London did.

Just across the lagoon from Ilha Pura, finishing touches were being made to the Olympic Park, which has nine venues and will hold 16 Olympic sports.