2022 budget cap violations

[DDopey]

Looked at the regulations, but it was not clear to me; https://www.fia.com/sites/default/files ... -02-18.pdf

So car development costs of a car item only count when that part is used. If it is part of inventory, it does not count. So if I develop and build a wing, take a lot of time (costs), people etc. to build it and then put it on the shelf. But then vuild another wing that is just slightly different, so not a lot of development time (costs) and will use that (and thus cheaper one).

How is this going to work ?

[Tiny73]

otherwise it becomes a game of risk/reward as to how far you want to go over.

I don't see it that way. If you base your penalty on the severity of the breach that should deter risk/reward hunters.

“Fine of £1m (that doesn’t come out of the cost cap budget) vs 1 second of lap time, hmmm which shall I choose”.

Maybe you should start by presenting a realistic scenario instead of whatever that is.

Maybe you’d like to tell me how you see it instead of just dismissing my point outright as unrealistic, especially since RB have done exactly what my scenario depicts. They gained significantly and haven’t (to date) been punished. We can disagree but please try and be respectful.

[AR3-GP]

Looked at the regulations, but it was not clear to me; https://www.fia.com/sites/default/files ... -02-18.pdf

So car development costs of a car item only count when that part is used. If it is part of inventory, it does not count. So if I develop and build a wing, take a lot of time (costs), people etc. to build it and then put it on the shelf. But then vuild another wing that is just slightly different, so not a lot of development time (costs) and will use that (and thus cheaper one).

How is this going to work ?

The language used there is "the cost of an item". So the physical item itself, the raw material and manufacturing cost. You could not exclude the Wind tunnel development cost, which led to that part. So that's how you "Catch" the previous issue.

[DDopey]

Looked at the regulations, but it was not clear to me; https://www.fia.com/sites/default/files ... -02-18.pdf

So car development costs of a car item only count when that part is used. If it is part of inventory, it does not count. So if I develop and build a wing, take a lot of time (costs), people etc. to build it and then put it on the shelf. But then vuild another wing that is just slightly different, so not a lot of development time (costs) and will use that (and thus cheaper one).

How is this going to work ?

The language used there is "the cost of an item". So the physical item itself, the raw material and manufacturing cost. You could not exclude the Wind tunnel development cost, which led to that part. So that's how you "Catch" the previous issue.

Makes sense. It falls than under this;
"(c) Research and Development costs:
(i) All costs in respect of Research and Development for F1 Activities must be included in Relevant Costs in the Reporting Period in which they are incurred."
So like you said, any costs spared are just manufacturing/material costs. Not that much compared to the whole picture.

[Cs98]

Maybe you’d like to tell me how you see it instead of just dismissing my point outright as unrealistic, especially since RB have done exactly what my scenario depicts. They gained significantly and haven’t (to date) been punished. We can disagree but please try and be respectful.

You are arguing in bad faith, hence the response. Here's how I see it:

a, The primary punishment was a WT reduction, not a fine like you suggest. b, RB didn't know what the specific punishment was going to be, hence could not reason in the way you suggest. c, You've presumed RB intentionally broke the cap, we don't know this. d, You've presumed they gained significantly from the breach, we don't know this. e, There is no formula for x amount of money = x amount of lap time, like your scenario suggests. f, You've stated there was no punishment, which is just factually incorrect and can only be interpreted as bad faith. If you'd said "I think the punishment was inadequate", we could have a discussion.

All in all I don't think your scenario provides much value for a serious discussion about the CC.

[Hoffman900]

Looked at the regulations, but it was not clear to me; https://www.fia.com/sites/default/files ... -02-18.pdf

So car development costs of a car item only count when that part is used. If it is part of inventory, it does not count. So if I develop and build a wing, take a lot of time (costs), people etc. to build it and then put it on the shelf. But then vuild another wing that is just slightly different, so not a lot of development time (costs) and will use that (and thus cheaper one).

How is this going to work ?

You still have to claim that WT and CFD time and you can audit those together.

For example, you can use up all your WT and CFD time but then only claiming to use a small percentage of your dollar cap on said parts for the car is going to raise a lot of eyebrows.

People also talk about setting up shell companies, but if I have a company that sells $1mil of product to a team, but I have 100 staff and claim to the tax man that I have operating costs of $25mil and no other source of revenue, then that money has to come from somewhere, and that has to be reported, so it’s actually really hard to cheat and raise A LOT of eyebrows.

[Tiny73]

Maybe you’d like to tell me how you see it instead of just dismissing my point outright as unrealistic, especially since RB have done exactly what my scenario depicts. They gained significantly and haven’t (to date) been punished. We can disagree but please try and be respectful.

You are arguing in bad faith, hence the response. Here's how I see it:

a, The primary punishment was a WT reduction, not a fine like you suggest. b, RB didn't know what the specific punishment was going to be, hence could not reason in the way you suggest. c, You've presumed RB intentionally broke the cap, we don't know this. d, You've presumed they gained significantly from the breach, we don't know this. e, There is no formula for x amount of money = x amount of lap time, like your scenario suggests. f, You've stated there was no punishment, which is just factually incorrect and can only be interpreted as bad faith. If you'd said "I think the punishment was inadequate", we could have a discussion.

All in all I don't think your scenario provides much value for a serious discussion about the CC.

There’s nothing bad faith about it.

A) They were fined $7m (which doesn’t come out of the budget cap) and had a future reduction in wind tunnel time. Future penalty, not one relating to their overspend, such as a points deduction for example or an in-season penalty. I’ll concede that there was a penalty and therefore my point was factually incorrect but I suspect you know that I was referring to penalising their overspend directly vs one that would/could/may/may not impact them markedly going forward. But you knew that, right?
B) You’re absolutely right about the cost vs lap time discussion but you don’t spend the money in anticipation of going slower do you? (Even Mercedes aren’t doing that, despite the results suggesting otherwise )
C) The punishment was a future punishment (with the exception of the small fine), not one that has had a material impact on them until now if the spin is to be believed that they have to now work on the 2024 car as a result of the penalty.
D) Even the penalty was reduced to 10 % of their post success allotted wind tunnel time, not 10% and then their “success ballast” allocation of wind tunnel time (10% of 70 is not the same as 10% of 100 minus the 30%).
E) RB had every opportunity to test the budget cap assumptions and chose not to. Whether they did this willingly or deceptively we’ll never know, but they had exactly the same opportunities as every other team. Who all managed to stay under the cap.

Oh, and if you don’t think any of the above is the basis for a discussion then feel free to ignore it rather than dismissing it as “bad faith” when it’s anything but.

[Just_a_fan]

Teams that have overspent in year 2 of the cap should get harsher penalties IMV

If a team has overspent by $400k then they should get the same punishment as RB last time.

I don't get fined more for a first speeding offence just because you got caught previously. Why should this be any different?

If a team has breached for a second year running, however, then they deserve a stiffer punishment - partly for the breach and partly for being bone-headed stupid enough to mess it up twice.

[chrisc90]

Teams that have overspent in year 2 of the cap should get harsher penalties IMV

If a team has overspent by $400k then they should get the same punishment as RB last time.

I don't get fined more for a first speeding offence just because you got caught previously. Why should this be any different?

If a team has breached for a second year running, however, then they deserve a stiffer punishment - partly for the breach and partly for being bone-headed stupid enough to mess it up twice.

Speed awareness course for your first offence in the UK in certain areas.

There are probably a lot of little niche and fiddly areas of budgeting, where a overspend happened etc. I'm not sure a sliding scale with RB being somewhere on that is really the best way to go.

I mean do the rules state that repeat offenders are to be sanctioned differently? Or is the FIA just picking and choosing what the penalty should be with a few options on the table.

[Just_a_fan]

So like you said, any costs spared are just manufacturing/material costs. Not that much compared to the whole picture.

We hear of front wings being 6-figure sum parts. That's quite a lot to lose if your drivers wipe 3 or 4 off in a few races. When the teams are thought to only have a few million each year to develop the car, losing half a million or more on a few front wings is going to hurt development.

[Just_a_fan]

Teams that have overspent in year 2 of the cap should get harsher penalties IMV

If a team has overspent by $400k then they should get the same punishment as RB last time.

I don't get fined more for a first speeding offence just because you got caught previously. Why should this be any different?

If a team has breached for a second year running, however, then they deserve a stiffer punishment - partly for the breach and partly for being bone-headed stupid enough to mess it up twice.

Speed awareness course for your first offence in the UK in certain areas.

There are probably a lot of little niche and fiddly areas of budgeting, where a overspend happened etc. I'm not sure a sliding scale with RB being somewhere on that is really the best way to go.

I mean do the rules state that repeat offenders are to be sanctioned differently? Or is the FIA just picking and choosing what the penalty should be with a few options on the table.

Yes, I've been on a speed awareness course - during lockdown, on zoom. First ticket in over 25 years (having had one in my first year or two of driving so over 30 years ago).

The point, however, is that just because I've been caught, doesn't mean that you'll get a massive fine if its your own first offence. That's not a normal way of applying penalties.

As for the comparison with RB, I was using the oft-quoted figure of their breach (well, the PR version rather than the FIA-quoted one) as an example. It doesn't really matter where the overspend occurs within the list of controlled things - if you overspend on X, it means you get more to spend on Y for the simple reason that you didn't have to use some of Y's budget on X.

And if the rules don't require that repeat offenders be treated harsher, the FIA would certainly be hard pushed to sell the idea that another team overspending by $400k should get a harsher penalty than another team that did the same thing.

[AR3-GP]

As for the comparison with RB, I was using the oft-quoted figure of their breach (well, the PR version rather than the FIA-quoted one) as an example. It doesn't really matter where the overspend occurs within the list of controlled things - if you overspend on X, it means you get more to spend on Y for the simple reason that you didn't have to use some of Y's budget on X.

That's not really a logical way to think about it because it presumes that if a team knew of their procedural error which lead to the re-classification of expenses, that they would not have changed course in other areas to avert a breach. I.E that they could have gone to more extreme lengths like cancelling some other discretionary activity of the F1 team.

The big problem currently is finding out 7-8 months after all is said and done, that your classifications are not correct. There should be an in-season ongoing assessment involving more than "10 people" at the FIA making sure that teams can in fact go into crisis management towards the end of the season being audited in order to stay under the cap. If that meant that at team parked their cars at the last 3-4 GPs, staff get sacked off the payroll, or a canteen gets shut down for the year, then that is what it comes down to. T

[Just_a_fan]

As for the comparison with RB, I was using the oft-quoted figure of their breach (well, the PR version rather than the FIA-quoted one) as an example. It doesn't really matter where the overspend occurs within the list of controlled things - if you overspend on X, it means you get more to spend on Y for the simple reason that you didn't have to use some of Y's budget on X.

That's not really a logical way to think about it because it presumes that if a team knew of their procedural error which lead to the re-classification of expenses, that they would not have changed course in other areas to avert a breach. I.E that they could have gone to more extreme lengths like cancelling some other discretionary activity of the F1 team.

We saw Mercedes decline a tyre test because the rebuild costs of Bottas-Russell accident were so high that they risked breaching the cap limit by attending the test.

We'll probably see such things happen again in future with various teams.

The fact that a team breaches suggests they either knew - in which case they're chancing their arm and got caught, or they're incompetent with regards to cost management - either by virtue of not knowing what they're spending/miscalculated a figure, or by virtue of not knowing what they have to include in the controlled items cost list.

[AR3-GP]

As for the comparison with RB, I was using the oft-quoted figure of their breach (well, the PR version rather than the FIA-quoted one) as an example. It doesn't really matter where the overspend occurs within the list of controlled things - if you overspend on X, it means you get more to spend on Y for the simple reason that you didn't have to use some of Y's budget on X.

That's not really a logical way to think about it because it presumes that if a team knew of their procedural error which lead to the re-classification of expenses, that they would not have changed course in other areas to avert a breach. I.E that they could have gone to more extreme lengths like cancelling some other discretionary activity of the F1 team.

We saw Mercedes decline a tyre test because the rebuild costs of Bottas-Russell accident were so high that they risked breaching the cap limit by attending the test.

We'll probably see such things happen again in future with various teams.

The fact that a team breaches suggests they either knew - in which case they're chancing their arm and got caught, or they're incompetent with regards to cost management - either by virtue of not knowing what they're spending/miscalculated a figure, or by virtue of not knowing what they have to include in the controlled items cost list.

Your reference of the Mercedes tire test is exactly the point.

Also, there is a third option. A team believes that their own reading is trivially and unambiguously correct, only to find out 7-8 months later that the FIA had another interpretation. This happens often under the technical regulations.

[Just_a_fan]

The big problem currently is finding out 7-8 months after all is said and done, that your classifications are not correct. There should be an in-season ongoing assessment involving more than "10 people" at the FIA making sure that teams can in fact go into crisis management towards the end of the season being audited in order to stay under the cap. If that meant that at team parked their cars at the last 3-4 GPs, staff get sacked off the payroll, or a canteen gets shut down for the year, then that is what it comes down to. T

It is the team's responsibility to stay within the cost cap. It's not the FIA's job to hold their hands through it on a month-by-month basis.

A sensible team will put in place sufficient resources to ensure they meet their obligations and therefore have nothing to fear from a year-end assessment. Indeed, it appears that 9 teams did this previously, even going so far as doing a dry run with the FIA to make sure they knew what they were doing. It might be considered an act of hubris to not make use of the dry run and then, ironically, to get caught breaching the cap.