By Matt Slater

The Olympic stadium's price tag is now nearly 10% up on the 2007 estimate

Construction costs at the Olympic site have risen steeply again but London 2012 officials remain certain the project is on time and on budget.

In its annual report on the 2012 budget, the Government has admitted the projected bill for the Olympic stadium rose by �43m to �547m during 2008.

The price tag for all the venues went up by �97m (7.6%) to �1.36bn.

But savings elsewhere have offset these rises, leaving the overall increase to the �9.3bn budget at just �3m.

"This shows that we are on course to remain on budget despite the current economic downturn," said Olympics Minister Tessa Jowell.

"It will not be exceeded. While cost forecasts have risen on some venues, these increases have been balanced by savings in infrastructure around the venues and work to clean up the park."

In a programme of this size, it is inevitable there will be upwards and downwards movements within the funding package over its life DCMS report on 2012 budget

Comparing cost forecasts made in September 2008 to ones from November 2007, the report uncovered an overall cost increase of �196m, but also found savings of �193m - largely due to a projected under-spend on transportation projects.

There were also unexpected savings due to land at the 500-acre, east London site being less contaminated than previously thought. But there was one notable exception to this, as contamination around the planned velodrome could cause costs to spiral �25m to �105m.

In general, however, a Department of Culture, Media and Sport spokesman said the budget was "under control", whilst admitting that "construction inflation" has been an issue.

The report blamed the cost rises at the 80,000-seat stadium, which had a provisional estimate of �282m in 2004, on "the development of the design, and the lack of competitive tension in the procurement".

Other items it flagged up were higher-than-expected costs for the fabric curtain that will wrap around the stadium, offering shelter to spectators, and adjustments to the roof design in order to better accommodate the opening and closing ceremonies.

"In a programme of this size, it is inevitable there will be upwards and downwards movements within the funding package over its life," it said.

The prize that lies ahead is awesome for our capital and will reap benefits for generations to come if we get it right - to get it wrong is unthinkable London Mayor Boris Johnson

With the construction industry booming, many firms decided not to bid for London 2012 work, particularly as there was a perception the red tape involved was not worth the effort. Only one contractor, Robert McAlpine, bid for the job of building the stadium.

The industry situation has markedly changed now and any future tenders are expected to be more competitive: this should keep costs down, as should the falling price of steel and other key construction materials.

The major headache now, however, is the scarcity of credit and that has led to a number of well-documented dips into the �2bn contingency fund within the overall budget, most notably for the Olympic Village and media buildings.

But even on this issue London 2012 officials appear calm as, according to the report, 25% of the contingency has been allocated but 28% of the job is already done.

While this is probably true, it would be a mistake for anybody involved in the Olympic project to take their eyes off the ball, particularly as the problematic subject of security has not yet been fully addressed.

It is for this reason that any confident predictions about contingency funds being returned to the taxpayer should be taken with a degree of caution.

There was further news from the Olympic Park later on Thursday when Jowell, London Mayor Boris Johnson and Communities Secretary Hazel Blears announced the formation of a "dedicated 2012 legacy delivery company" to maximise the post-Games opportunities for firms and local people at the redeveloped site.

"We have reached a landmark in the delivery of the 2012 legacy," said Johnson.

"The prize that lies ahead is awesome for our capital and will reap benefits for generations to come if we get it right. To get it wrong is unthinkable."

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