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Commonwealth Games bureaucrats and Victorian Treasury officials knew in April that the estimated cost of running the event had blown out to double the $2.6 billion figure quoted a year earlier by the government’s own bid team.

The Office of the Commonwealth Games, the government department responsible for overseeing the planning and delivery of the now aborted event, submitted a detailed business case and operational plan to Treasury ahead of the May state budget asking for a $5 billion funding allocation to cover the increased costs.

Moving some events to Melbourne to save money was seen as a dealbreaker by the Andrews government.Credit: Joe Armao

The proposed Games budget included a risk analysis of additional costs likely to come from shortages of labour, materials and accommodation for workers in regional areas which, if realised, could push the total bill to $6 billion.

The Age spoke to sources with knowledge of the proposed Games budget, speaking confidentially to divulge sensitive information.

They revealed the operational cost jumped from $1.3 billion to $1.9 billion and the capital expense of building athlete villages and constructing new and improving existing sports venues had leapt from $1.3 billion to $2.6 billion.

The sources also revealed that the original bid documents contained no financial estimate for the cost of government services – primarily transport and police – required to safely hold the 12-day sporting festival across five regional centres. That resulted in an additional $500 million being lumped onto the overall operational cost, bringing it to $2.4 billion.

The nature of the Games’ cancellation has been widely condemned by the sports industry and Victorian business community.

Sports powerbroker and former Australian Sports Commission boss John Wylie said the decision to cancel the contract had done irreparable damage to Victoria’s reputation.

“It’s not just sport. These sorts of things are really damaging to the reputation of Victoria as a reliable counter-party on the world stage. We all learn in primary school that you do what you say you’re going to do,” he said on Thursday.

Former Qantas chair Margaret Jackson, the first woman to become chair of a top-50 publicly listed company in Australia, described the cancellation of the games as “extraordinary”.

“I live in rural Victoria and I know there was a lot of excitement about the games, and I think yes, it has [done reputational damage],” Jackson said.

The Victorian government, in committing to the 2026 Games, backed a novel concept in which the 12-day sporting event would be spread across multiple regional cities.

Games organisers estimated that this would require 1500 busses and coaches to transport spectators, competitors and staff to and from Melbourne and Games venues – more than are currently registered in Victoria.

Premier Daniel Andrews earlier this week nominated unforeseen transport and security costs as drivers of the Games blowout.

The revised $5-$6 billion price tag, which Treasury and Department of Premier and Cabinet officials further analysed to identify other hidden costs to government, is the basis of Andrews’ claim this week that the Commonwealth Games could have cost the state between $6 billion and $7 billion.

’I could not look the board or the government in the eye and say we should double down and commit to the $5 billion.

“They were sold a dream at half the price it was going to cost,” a source familiar with the costings said.

These figures are disputed by Commonwealth Games Australia chief executive Craig Phillips and the chief executive of the UK-based Commonwealth Sport Katie Sadleir. While both are board members of Victoria 2026 – an operational agency created to stage the Games – they weren’t privy to financial information about all capital costs held by the Office of the Commonwealth Games, a division within Victoria’s public service.

When Treasury officers received the proposed Commonwealth Games budget and saw the gulf between the revised cost estimates and the original, $2.6 billion figure contained in the bid documents, they refused to submit it to Cabinet’s Expenditure Review Committee (ERC) unless significant savings were found to make the event financially and politically viable.

Over the next two months, organisers considered radical changes including dropping one of the four regional hubs – Bendigo, Ballarat, Geelong or Morwell – or some of the sports on offer. Although this would have delivered savings, they weren’t on the scale needed to save the Games.

“Taking out a hub saves you $500 million and buys you a whole lot of pain,” a Victoria 2026 source said. “Nothing got back to within a country mile of the original estimate.” Any change to the sports program would have required the approval of the Commonwealth Games Federation, Commonwealth Games Australia and international sports federations.

CGA and some international sports federations pushed for events to be pulled into Melbourne to save the expense of building temporary venues but Andrews confirmed his government saw this as a deal-breaker. “We are not running them in Melbourne,” he said on Wednesday. “We never signed on to run them in Melbourne.”

A government source said it was common practice for government services like police and transport not to be included in bid costings for major events. Games organisers who tried and failed to make the event fit within its original budget were scathing of what they inherited.

“The original project was just so wrong,” a member of the Victoria 2026 team said. “The fundamental cost of running something across two, three, four different locations, with all the transport, logistics, policing and accommodation costs of that, are just huge.

“It is not value for money. I could not look the board or the government in the eye and say we should double down and commit to the $5 billion.”

The absence of any new funding for the Games in the May state budget and the lack of a funding commitment from the federal government were both indicators that the Games were in serious trouble.

By June, things had reached crisis point, with Victoria 2026 chair Peggy O’Neal and chief executive Jeroen Weimar urging the minister responsible for delivering the Games, Deputy Premier Jacinta Allan, to either commit to staging the event at far greater cost than originally planned or scrap it altogether.

Deputy Premier Jacinta Allan on Thursday.Credit: Jacinta Allan

Allan, who was due to leave the country on a long-planned holiday, returned home early to help deliver the government’s decision.

Over last weekend and on Monday morning, Allan and other members of the ERC – Andrews, Treasurer Tim Pallas and Finance Minister Danny Pearson – met to finalise the fate of the Games. The Office of the Commonwealth Games was informed shortly before lawyers for the state government announced to the Commonwealth Games Federation that they were terminating the contract.

The 2026 bid team was led by Visit Victoria, the government’s major events and tourism promotions company, and informed by consultancy Ernst & Young. The bid was developed over an extraordinarily short period of time, within only two months between the start of the process and the government entering into a memorandum of understanding with the CGF.

A spokesperson for Ernst & Young said the consultancy had no involvement in calculating the revised costs associated with the Commonwealth Games cited by Andrews.

The Victorian government was contacted to respond to the information contained in this article and did not dispute it.

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