2021 Cost Cap Rumours and Speculation

[Xwang]

Yeah, for me it would be time to close this. Finance is difficult, when it involves a complex supply chain and multiple tax regimes. I can fully see how this overrun was unintentional, but it is an overrun nevertheless.
So there will always be people that think the punishment is to light or too heavy, so be it.

There is one thing that nags me though. And that is the role of Wolff. I do feel that the initial accusations of Wolff based on partial and inaccurate information blew this thing out of proportion and set the stage for the toxic discussions that followed.

And to be honest that is not the first time, not even this season. Actually I like the guy and I understand that he is emotionally invested in the sport but he is also a spokesman for the team, his words have consequences. And unfortunately he is not balanced by Lauda anymore.

Starting fires among a highly volatile fanbase is not helping the sport. It only leads to frustration and conflict.

I do think that too has to have a repercussion. Not something big or consequential, but a symbolic slap on the wrist, to hopefully have him watch his words better in the future.

Then there's the question of how Wolff knew about it ahead of time. There's something seriously dodgy in the FIA, whether you agree with this latest penalty or not. The race directors seem to be at odds with the stewards, and the general management of the sport seems to be just off - not sure how else to describe it. Big teams seem to get more leeway on infringements than smaller teams, e.g. Haas get the meatball flag multiple times but Hamilton has half a front wing hanging off or Perez/Russell have an endplate flapping about for most of a race and that's okay.

Red Bull seem to be the latest example as the team in the FIAs good graces, but Merc and Ferrari have benefitted from perceived favouritism in the past.

The penalty is fair, 10% loss of aero dev on top of already having less time is a big punishment, but wont have an immediate effect. I expect like a Brawn '09 scenario where they start strong based on the development done this year but then drop backwards through the year.

RB will just do as much aero dev as they want and they will account the hours beyond the limit as if they were a leisure benefit they give to their aero engineers to develop their hobby projects

[GrizzleBoy]

"We had a difference of opinion on sick pay; we have always taken a view that we wanted to support our staff in sickness and in health, and, when members of staff have been on long-term [leave] we supported them, as we will continue to do in the future. We felt that sick [pay], the role paid no function in the Grand Prix team in the period of eight months, [so it] was an excludable cost. Unfortunately, the regulations can be interpreted in two ways: had the person died, which thankfully they didn’t, the cost would have been excludable. Thankfully they didn’t die; therefore the cost was includable for that period.”

Crazy statement, I’m still on the side that Christian Horner, Newey and Verstappen are cheaters, so the role played no role on the Grand Prix team, hmmm really, so Red Bull gets to decide what is an excludable role or what isn’t. This gets more and more interesting.

I can not follow this. If the 'employee' is on salary, as I would assume any who are not contractors are, the 'payment' or expense for the year is the same, if they are contractors, RBR are not liable for sick pay it comes out of their own insurance. Same for any 'death in service' payments would come from the pension fund.

Exactly.

Like I said before, Christian Horner trying to say that paymemt to an employee of your company only being a cost when they are at work, is like saying annual leave (aka paid holiday) doesn't cost a company anything!

Lets try turn this around to show the gaping flaw in the logic.

Imagine Red Bull racing when reporting to upper management were told by the CEO of Red Bull that actually, annual leave doesn't count as a cost to your departmemt because employees weren't being productive while off work.

Therefore your profits margin should be X amount millions higher than reported and the CEO and shareholders want to know where all that money went, since it apparently costs nothing to pay an emoyee paid holiday!

[the poster below]

Now that the FIA has set the first penalty under the cost cap regime, an identical overspend by a team in a future year ought to be punished in a like for like manner. This of course assumes "no intent to breach the cap", although I imagine there are lots of ways to argue that point.

So, proof presumably in the pudding... If a team chooses to overspend in a manner that equates to $1.8m with mitigating circumstances for most of it, there's the opportunity to claw back performance for the next couple of years. If 10% reduction (of a percentage of allocated time) is actually draconian, we shouldn't see anyone do that. If it isn't draconian, then with the rule changes for 2026 (I think), calculated 'unintentional' overspending at strategic points seems inevitable.

I feel like this compares to the way UK speed cameras have been used. Initially you had your static cameras and there's a sliding scale of how much you get stung for speeding. Then they developed average speed cameras for motorway roadworks (which could be akin to a total budget for all years of a particular rule set) and my understanding is that you get hit harder for going over average speed in a section (but I don't know for sure). If the same sort of rule was in place here, a team overspending in one year would get penalised twice - first for the overspend in a given year, and again on the overall budget allowed for all the remaining years. I think this would actually change the balance of whether it makes sense to risk going over budget at all - extension of the thing already mooted for reducing a team's budget cap in the next year by the amount of the overspend. It also arguably takes better account of tax credits / rebates etc given the time lag in getting them.

*Edit - perhaps also coupled with a moving average metric so that you need to bring your spend down quickly in the next year rather than riding the wave to the end of the cap period.

[langedweil]

Imagine Red Bull racing when reporting to upper management were told by the CEO of Red Bull that actually, annual leave doesn't count as a cost to your departmemt because employees weren't being productive while off work.

Therefore your profits margin should be X amount millions higher than reported and the CEO and shareholders want to know where all that money went, since it apparently costs nothing to pay an emoyee paid holiday!

Except, every major project works exactly like that .. ? Resource costs are company costs, projects take use of those resources within their budgets. Resources have no name or identity, just a function.
If a resource breaks, a new one is brought in (cloud be cheaper, same, or more expensive).
If a resource is no longer needed, it's place will be no longer filled, narrowing the budget or save time/materials for other parts of the project.
Any resource not taking part in the project is a company cost, not a project cost.

[diffuser]

I’ll definitely won’t contribute to this thread again as it brings out the worst of partisan crowds.

.
I agree. I won't do that anymore too. The only things I read here are that RBR are cheaters, Horner is a liar and the FIA are liars.

https://www.fia.com/news/accepted-breac ... ormula-one
.

These new Financial Regulations are a very complex set of rules that competitors were required to adapt to for the first time.

Red Bull Racing was found to be in breach, however, the Cost Cap Administration recognised that Red Bull Racing has acted cooperatively throughout the review process and has sought to provide additional information and evidence when requested in a timely manner, that this is the first year of the full application of the Financial Regulations and that

there is no accusation or evidence that RBR has sought at any time to act in bad faith, dishonestly or in fraudulent manner, nor has it wilfully concealed any information from the Cost Cap Administration.

In these circumstances, the Cost Cap Administration offered to RBR an ABA to resolve this matter. That offer was accepted by RBR.

.
https://www.fia.com/sites/default/files ... 6.32_1.pdf
.

The FIA acknowledges that had RBR applied the correct treatment within its Full Year Reporting
Documentation of RBR’s Notional Tax Credit within its 2021 submission of a value of £1,431,348,
it would have been considered by the Cost Cap Administration to be in compliance with Article 4.1(b) of the
Regulations and therefore RBR’s Relevant Costs for the 2021 Reporting Period

would have in fact exceeded the 2021 Cost Cap by £432,652 (0.37%).

.

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Deal with it. It wasn't a 400k CAP infringement, in was $3.5m

[wogx]

ASTON MARTIN’S F1 BUDGET CAP BREACH PENALTY ANNOUNCED

Aston Martin has been fined $450,000 for 12 cases of “incorrectly excluded and/or adjusted costs” in its 2021 Formula 1 budget cap submission.

The punishment has been decided in the form of an Accepted Breach Agreement between the FIA and Aston Martin.

A procedural breach means Aston Martin made an administrative error or errors. The FIA says that Aston Martin failed to file accurate full year reporting documentation.

https://the-race.com/formula-1/aston-ma ... announced/

[langedweil]

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Which in sense was a strategy any team could have taken up, but most likely for most teams the fear of an uncontrollable aftermath was deemed too much of a risk ..

I feel Toto in particular succeeded pretty well by bringing it into the daylight beforehand, and making things tougher for FIA and RB. And whilst he couldn't possibly be the one leaking, this kind of leaking in financial matters is considered an actual crime.

[dans79]

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Which in sense was a strategy any team could have taken up, but most likely for most teams the fear of an uncontrollable aftermath was deemed too much of a risk ..

I feel Toto in particular succeeded pretty well by bringing it into the daylight beforehand, and making things tougher for FIA and RB. And whilst he couldn't possibly be the one leaking, this kind of leaking in financial matters is considered an actual crime.

I'm betting it was a whistle blower, because if you look the financial regulations have a huge section about protections for whistle blowers.

[Tvetovnato]

I’ll definitely won’t contribute to this thread again as it brings out the worst of partisan crowds.

.
I agree. I won't do that anymore too. The only things I read here are that RBR are cheaters, Horner is a liar and the FIA are liars.

https://www.fia.com/news/accepted-breac ... ormula-one
.

These new Financial Regulations are a very complex set of rules that competitors were required to adapt to for the first time.

Red Bull Racing was found to be in breach, however, the Cost Cap Administration recognised that Red Bull Racing has acted cooperatively throughout the review process and has sought to provide additional information and evidence when requested in a timely manner, that this is the first year of the full application of the Financial Regulations and that

there is no accusation or evidence that RBR has sought at any time to act in bad faith, dishonestly or in fraudulent manner, nor has it wilfully concealed any information from the Cost Cap Administration.

In these circumstances, the Cost Cap Administration offered to RBR an ABA to resolve this matter. That offer was accepted by RBR.

.
https://www.fia.com/sites/default/files ... 6.32_1.pdf
.

The FIA acknowledges that had RBR applied the correct treatment within its Full Year Reporting
Documentation of RBR’s Notional Tax Credit within its 2021 submission of a value of £1,431,348,
it would have been considered by the Cost Cap Administration to be in compliance with Article 4.1(b) of the
Regulations and therefore RBR’s Relevant Costs for the 2021 Reporting Period

would have in fact exceeded the 2021 Cost Cap by £432,652 (0.37%).

.

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Even going down to that sum, it’s still a performance advantage that can be gained. Mercedes refrained from taking a new floor worth 300KEUR in 2021 because of the cost cap limit. With that, the season might have looked quite different.

It’s a travesty of a penalty really. Only a sporting penalty for running with a doped car is feasible. Might as well scrap the cost cap now as teams will push it now that RB gets away with their titles.

[DChemTech]

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Which in sense was a strategy any team could have taken up, but most likely for most teams the fear of an uncontrollable aftermath was deemed too much of a risk ..

I feel Toto in particular succeeded pretty well by bringing it into the daylight beforehand, and making things tougher for FIA and RB. And whilst he couldn't possibly be the one leaking, this kind of leaking in financial matters is considered an actual crime.

I'm betting it was a whistle blower, because if you look the financial regulations have a huge section about protections for whistle blowers.

But there was no need to blow the whistle. The FIA was aware of the breach and was dealing with it. By making it public, if anything, it led to rushed statements, speculation and accusation.
Whistle-blowing is fine if there would have been indications that the FIA and RB were covering things up and planning to keep the affair secret. But that does not seem to be the case.

[littlebigcat]

I think the fact that there was negotiations between Red Bull and the FIA over what the punishment was going to be is an indication of a willingness from the FIA to minimise the harm to Red Bull. What might have been happening behind closed doors before that who knows.

[diffuser]

.
I agree. I won't do that anymore too. The only things I read here are that RBR are cheaters, Horner is a liar and the FIA are liars.

https://www.fia.com/news/accepted-breac ... ormula-one
.

.
https://www.fia.com/sites/default/files ... 6.32_1.pdf
.

.

If they would have started out by doing what most teams did, set a internal soft cap of 2 million less than the actual cap, they would have come under. They purposely pushed the limits and thought to themselves we'll deal with the fall out.

Even going down to that sum, it’s still a performance advantage that can be gained. Mercedes refrained from taking a new floor worth 300KEUR in 2021 because of the cost cap limit. With that, the season might have looked quite different.

It’s a travesty of a penalty really. Only a sporting penalty for running with a doped car is feasible. Might as well scrap the cost cap now as teams will push it now that RB gets away with their titles.

I bet, if the rules read. If you go over by $1. We'll
- Wipe all the points, $s and trophies for the last 2 years
- Cut CAP and wind tunnel time by 50% for 2 more years.

They would have come under budget. So the FIA has to share some of the blame.

On the other hand...I can't forget what Josh C from William's said "atleast we're not being out spent by 100 of millions now".

[chrisc90]

I think the fact that there was negotiations between Red Bull and the FIA over what the punishment was going to be is an indication of a willingness from the FIA to minimise the harm to Red Bull. What might have been happening behind closed doors before that who knows.

I dont think that is any favouritism or anything.

Im sure Aston Martin would have been in the same position as RB.

Its just part of the process if a breach has occurred - the same for any team on the grid.

[dans79]

But there was no need to blow the whistle. The FIA was aware of the breach and was dealing with it. By making it public, if anything, it led to rushed statements, speculation and accusation.
Whistle-blowing is fine if there would have been indications that the FIA and RB were covering things up and planning to keep the affair secret. But that does not seem to be the case.

That depends on what they knew and when! The long term sick leaving not being counted is something very specific, and imo not something you would find in a high or mid level audit, specially when they are talking about one person (how horner made it sound).

[dans79]

I think the fact that there was negotiations between Red Bull and the FIA over what the punishment was going to be is an indication of a willingness from the FIA to minimise the harm to Red Bull. What might have been happening behind closed doors before that who knows.

I dont think that is any favouritism or anything.

Im sure Aston Martin would have been in the same position as RB.

Its just part of the process if a breach has occurred - the same for any team on the grid.

Maybe not this specific issue, but the FIA has for sure played favorites over the decades. They tend to look the other way or minimize penalties for whoever the "It" team/driver is.

Imo, this is because a substantial portion of their revenue (40% is what comes to mind) comes from F1. So The FIA has a good reason to keep the fan base happy.