Is budgeting really so difficult?

Anyone who has ever faced putting together a budget might take comfort from the news that the 2012 London Olympic organisers have received a quote for double the cost they budgeted in relation to the main stadium.

Teaching budgets on the Advanced Certificate and Diploma courses is always an interesting session, as few public relations practitioners relish this part of the job.  Personally, I have always considered budgeting along the principles that:

  1. every penny is viewed as if it was my own – so I take nothing for granted
  2. there is a psychology to budgeting – so know what level of spend is acceptable (you may be allocated a figure or need to gain agreement for your estimate)
  3. check the detail – before, during and after so that you are never surprised

Apparently, the bid book used by the Olympic Development Authority gave a quote for the stadium, but the preferred bidder, McAlpine, says the cost will be more than double this.  What is the basis then of the bid book – how were the estimates determined and how reliable has it been before?  Why are they surprised by this new quote? 

Construction News, (subscription only) is reported as quoting “a source close to the negotiations saying”

McAlpine is in a very strong position because it knows the ODA can’t let them walk away because it would be a public-relations disaster for the Games.

So which is it?  Was the original estimate correct – in which case, why is the company allowed to blackmail the ODA in this way?  £630m is said to be “an opening price” which will be subject to negotiation over design and terms.  But as we’ve seen over costs tend to escalate after a contractor has been appointed.

Although if wants to protect its reputation for delivering projects on time and on budget (as it did witth the  £375m Emirates Stadium), maybe the company is putting in a realistic bid here.

When working with suppliers – even on simply public relations tasks such as obtaining a photograph or designing a leaflet – the most important elements of budgeting are openness and trust.  Specifications and circumstances can change, but both sides need to be clear and open in communicating these – immediately the development occurs.  There needs to be trust on both sides – gained usually from building a good working relationship. 

It doesn’t appear that this is the case here – and one wonders about the relationships with any suppliers, given that the initial £3.4bn estimate for hosting the Olympic Games in London is soaring.  No-one appears to be considering the spend as they would their own money. 

In public relations, you are normally working with a supplier on behalf of an organisation – whether you are in-house or a consultancy.  So you also need to consider your own reputation in relation to your client.  They are the ultimate paymaster and expect you to be able to forecast, manage and review budget matters accurately.

In the case of the Olympics, the client is the British taxpayer – how do you feel then about the budgeting process going on here?  That’s a useful lesson to remember when putting any public relations budgets together.

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Heather Yaxley

Heather Yaxley is passionate about PR - teaching the CIPR qualifications, lecturing part-time at Bournemouth University and running the Motor Industry Public Affairs Association (MIPAA). I'm undertaking a PhD looking at Career Strategies in PR. I love sharing ideas and knowledge - connecting news and views by blogging on public relations and educational developments, especially relating to accelerated and active learning. I'm also a published author, qualified trainer and experienced consultant.

2 thoughts on “Is budgeting really so difficult?”

  1. How do you build in a contingency fund or process that allows for ‘snagging’? Is this where a trusting relationship pays dividends? (no pun intended.)

  2. When I budget with clients, I agree a fixed price based on clear roles and responsibilities. This means that we only need to revisit it if there are any changes to what has been planned. For example, if I am asked to do something additional, we can either look at dropping something else, or that is charged as extra. For me it is about being clear and open about the basis of your budget so that everyone can understand what is covered and what isn’t.

    I don’t build in “contingencies” since I find the concept is too vague and in my view not very professional. I prefer transparency so we all know what is covered and can discuss anything that arises and whether it is necessary for additional funding.

    If there is a need for “snagging”, ie something that I didn’t get right (heaven forbid!!), then surely that is a cost that I should have to accommodate.

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