2021 Cost Cap Rumours and Speculation

[henry]

Ok, I'm a bit late to the party... but basically, we're still just speculating.
We know that RB and AM are, in some form, over the limit - that was already being rumoured, now just confirmed.
We know the breach is less than 5%. Nothing new there.

The information that we would like to have, however, is still missing.
We do not know how much more was spent exactly. 5% over the limit is still a lot, but it could just as well be $5000 over.
We don't know what it was spent on. It could be crucial - if one team spent a lot more on car development than others - or inconsequential, if it was some thing RB regarded as marketing, but the FIA disagrees for some reason. It could be the costs required to cope with FIA's in season rule changes. We do not know, and we also do not know why RB was under the impression they were in the cap while the FIA judged otherwise.

All we have really learned is that the FIA is completely incapable of transparant communication with regards to issues that are rightfully a big deal for the fans. But then again, we already knew that, too.

It does not matter what the nature of the overspend is. It simply requires the competitors to identify the part of their overall running costs that match the criteria the FIA have set as being those that would be involved in car development, manufacture and operation.It would appear that the FIA and Red Bull disagree on the interpretation one or more of those criteria.

I tend to think that the FIA will have made enormous efforts to accommodate RBs interpretation. The breach is an enormous headache for them given that it can be associated with RBs performance last year and this. It also potentially is a further headache this year, if RB are using the same, disagreed upon, criteria this year then they might well have an overspend this year.

I think Mercedes, for last year, and Ferrari for both years will have a lot to say about how the FIA resolve this. And that’s to say nothing about any benefit that’s accrued that will apply for the rest of this formula. All teams might say something about that.

[Just_a_fan]

That's as much a possibility as it is an uncertainty ..
Good luck in proving that.

It's entirely obvious. If you design next year's car during one year, and during that year you spend more than allowed, then your car for next year has benefitted from the overspend. If you hadn't overspent, you couldn't have spent as much on the new car and still had the performance with the old one.

Nah, you're kinda twisting now ..

.. any overspend during 2021 will have had a beneficial effect on the development of the 2022 car and thus also give a head start on subsequent cars that are developed from it.

And that's just as true as it isn't ...

Of course it's true. There's one pot of money for a period of time. You have to spend it on your current car's development and your next car's design / construction. Without an overspend, you have to decide to limit one or both to some degree. With an overspend you reduce the limitation on both because you can spend the overspend on the new car whilst still developing the current car.

It's as obvious as the Sun in the sky and the only way to miss it is to not look at all.

[DChemTech]

We don't know what it was spent on. It could be crucial - if one team spent a lot more on car development than others - or inconsequential, if it was some thing RB regarded as marketing, but the FIA disagrees for some reason.

While I agree with you that for now the amounts are speculation, and it could be an inconsequential amount, I do not agree with the above.

If the amount is deemed to be of consequence (when you start dipping in the 6 figures that's pretty much an update for some teams) then it doesn't matter where they spent it. They could have cut the same amount off the car's development and then spent that to whatever else they needed it for.

All the other teams had marketing, catering and other expenses. Who knows what development they had to cut in order to stay within the limits. They stayed in budget while RB did not.

I disagree.
Let's say two teams, A and B, spent exactly the same on all fronts, and exactly matched the cap.
The only difference is that team A spent another million on putting their branding on pit equipment, without any technical alterations or replacements of the equipment, and as such there is zero impact on performance.

For some reason, the FIA accounts this as an investment in pit equipment, hence overspending the budget limit. Overspending, but something completely different than if the overspending was on car development.

Now, it is true that the allocation does not matter if it considers the division between the categories that are included in the cap itself. But the situation is that the team itself here claims they did not overspend on those categories - so it does matter where the overspending happened, if we want to try and judge if the FIA or the team is in the right here.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

[e30ernest]

We don't know what it was spent on. It could be crucial - if one team spent a lot more on car development than others - or inconsequential, if it was some thing RB regarded as marketing, but the FIA disagrees for some reason.

While I agree with you that for now the amounts are speculation, and it could be an inconsequential amount, I do not agree with the above.

If the amount is deemed to be of consequence (when you start dipping in the 6 figures that's pretty much an update for some teams) then it doesn't matter where they spent it. They could have cut the same amount off the car's development and then spent that to whatever else they needed it for.

All the other teams had marketing, catering and other expenses. Who knows what development they had to cut in order to stay within the limits. They stayed in budget while RB did not.

I disagree.
Let's say two teams, A and B, spent exactly the same on all fronts, and exactly matched the cap.
The only difference is that team A spent another million on putting their branding on pit equipment, without any technical alterations or replacements of the equipment, and as such there is zero impact on performance.

For some reason, the FIA accounts this as an investment in pit equipment, hence overspending the budget limit. Overspending, but something completely different than if the overspending was on car development.

Now, it is true that the allocation does not matter if it considers the division between the categories that are included in the cap itself. But the situation is that the team itself here claims they did not overspend on those categories - so it does matter where the overspending happened, if we want to try and judge if the FIA or the team is in the right here.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

That is thinking there is a cap on each category. There isn't. They have a maximum pool of money to spend and it's up to them to divide that. So going over automatically means they had a bigger pool of money to spread across everything.

[DChemTech]

While I agree with you that for now the amounts are speculation, and it could be an inconsequential amount, I do not agree with the above.

If the amount is deemed to be of consequence (when you start dipping in the 6 figures that's pretty much an update for some teams) then it doesn't matter where they spent it. They could have cut the same amount off the car's development and then spent that to whatever else they needed it for.

All the other teams had marketing, catering and other expenses. Who knows what development they had to cut in order to stay within the limits. They stayed in budget while RB did not.

I disagree.
Let's say two teams, A and B, spent exactly the same on all fronts, and exactly matched the cap.
The only difference is that team A spent another million on putting their branding on pit equipment, without any technical alterations or replacements of the equipment, and as such there is zero impact on performance.

For some reason, the FIA accounts this as an investment in pit equipment, hence overspending the budget limit. Overspending, but something completely different than if the overspending was on car development.

Now, it is true that the allocation does not matter if it considers the division between the categories that are included in the cap itself. But the situation is that the team itself here claims they did not overspend on those categories - so it does matter where the overspending happened, if we want to try and judge if the FIA or the team is in the right here.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

That is thinking there is a cap on each category. There isn't. They have a maximum pool of money to spend and it's up to them to divide that. So going over automatically means they had a bigger pool of money to spread across everything.

No, it is stated that marketing budgets (like driver salaries and top staff salaries) are outside of the budget cap.
So if the overspending is on something that one party regards as marketing but the other does not, it matters. If the overspending is on the salary of a tier of employees that is regarded as top level by the team but not by the FIA, it matters. It could be that there are certain development actions for the car of this year that the team accounted in the cap of 2022, but the FIA still regards as spendings in 2021. If that is the case, it matters.

[mwillems]

So, who leaked this info (the two teams which FIA allege to have breached the cost cap) to the media two weeks ago? Where did this leak come from?

No one knows and I doubt we will find out. Expect Toto Wolf's friend at the FIA yo get mentioned, but I yhink the reality is there is a lot of discontent at the FIA as to how things have been handled over the past year.

I'd like to see the RB numbers released, hopefully they can also be leaked to put this to bed one way or another.

[mwillems]

I disagree.
Let's say two teams, A and B, spent exactly the same on all fronts, and exactly matched the cap.
The only difference is that team A spent another million on putting their branding on pit equipment, without any technical alterations or replacements of the equipment, and as such there is zero impact on performance.

For some reason, the FIA accounts this as an investment in pit equipment, hence overspending the budget limit. Overspending, but something completely different than if the overspending was on car development.

Now, it is true that the allocation does not matter if it considers the division between the categories that are included in the cap itself. But the situation is that the team itself here claims they did not overspend on those categories - so it does matter where the overspending happened, if we want to try and judge if the FIA or the team is in the right here.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

That is thinking there is a cap on each category. There isn't. They have a maximum pool of money to spend and it's up to them to divide that. So going over automatically means they had a bigger pool of money to spread across everything.

No, it is stated that marketing budgets (like driver salaries and top staff salaries) are outside of the budget cap.
So if the overspent is on something that one party regards as marketing but the other does not, it matters. If the overspent is on the salary of a tier of employees that is regarded as top level by the team but not by the FIA, it matters. It could be that there are certain development actions for the car of this year that the team accounted in the cap of 2022, but the FIA still regards as spendings in 2021. If that is the case, it matters.

Totally true. Unfortunately unless the conversation will run and run with no trust from any party unless the numbers are released.

Sadly I don't think the FIA or RB will be transparent.

[KeiKo403]

We don't know what it was spent on. It could be crucial - if one team spent a lot more on car development than others - or inconsequential, if it was some thing RB regarded as marketing, but the FIA disagrees for some reason.

While I agree with you that for now the amounts are speculation, and it could be an inconsequential amount, I do not agree with the above.

If the amount is deemed to be of consequence (when you start dipping in the 6 figures that's pretty much an update for some teams) then it doesn't matter where they spent it. They could have cut the same amount off the car's development and then spent that to whatever else they needed it for.

All the other teams had marketing, catering and other expenses. Who knows what development they had to cut in order to stay within the limits. They stayed in budget while RB did not.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

Let’s use Red Bull as an example here, let’s say a TD comes out mid season and requires them, and only them to make changes to their car to comply with the rules. Let’s say the FIA give them an extra $1m to cover the costs. Do the other 9 teams also get the extra $1m budget allowance?

People would say that’s unfair because Red Bull had to spend theirs to become compliant whilst all other teams could use their extra budget to bring direct performance while still maintaining compliance with the regulations.

Plus all of these teams have been in F1 for a long time, they understand that x number of crashes happen during a season, they understand that the likelihood of a TD coming out requiring $xM of spend is say 60% likely, especially given this is a new Formula for 2022 and Brawn said at the inception of these rules that any loophole will just be closed off. Teams had fair warning and although they can’t put a definite number on these types of things they sure well know they can happen and based on previous years how much they’re likely going to need to set aside to cover these things.

[DChemTech]

While I agree with you that for now the amounts are speculation, and it could be an inconsequential amount, I do not agree with the above.

If the amount is deemed to be of consequence (when you start dipping in the 6 figures that's pretty much an update for some teams) then it doesn't matter where they spent it. They could have cut the same amount off the car's development and then spent that to whatever else they needed it for.

All the other teams had marketing, catering and other expenses. Who knows what development they had to cut in order to stay within the limits. They stayed in budget while RB did not.

The other point is overspending with respect to in-season changes mandated by the FIA. Such changes are things that cannot be anticipated upfront and hence cannot be budgetted for upfront, yet that have to be responded to as they come along. I have always found in-season rule changes iffy, but with a budget cap even more so, considering they typically do not affect all teams to the same degree. So in my view, there should be some compensation for these kind of things, but that is not in the setup as it is.

Let’s use Red Bull as an example here, let’s say a TD comes out mid season and requires them, and only them to make changes to their car to comply with the rules. Let’s say the FIA give them an extra $1m to cover the costs. Do the other 9 teams also get the extra $1m budget allowance?

People would say that’s unfair because Red Bull had to spend theirs to become compliant whilst all other teams could use their extra budget to bring direct performance while still maintaining compliance with the regulations.

Plus all of these teams have been in F1 for a long time, they understand that x number of crashes happen during a season, they understand that the likelihood of a TD coming out requiring $xM of spend is say 60% likely, especially given this is a new Formula for 2022 and Brawn said at the inception of these rules that any loophole will just be closed off. Teams had fair warning and although they can’t put a definite number on these types of things they sure well know they can happen and based on previous years how much they’re likely going to need to set aside to cover these things.

The 'what do other teams get, then' is a fair consideration.
Best would be not to have mid season rule changes. I see them as a form of competition falsefication anyway, as they have asymmetric effects on the teams and they essentially penalize what should be praised in F1: operating on the edges of what is possible.

A statement like "any loophole will just be closed off" is the most damning thing one can say in a technical sport. You penalize teams for doing things that are not illegal, and that are there just because the sporting body did not write proper rules. The only correct response in my view is to close them off for the next season, not througout a season when development has been done and points have been scored.

[Quantum]

No, it is stated that marketing budgets (like driver salaries and top staff salaries) are outside of the budget cap.
So if the overspending is on something that one party regards as marketing but the other does not, it matters. If the overspending is on the salary of a tier of employees that is regarded as top level by the team but not by the FIA, it matters. It could be that there are certain development actions for the car of this year that the team accounted in the cap of 2022, but the FIA still regards as spendings in 2021. If that is the case, it matters.

This wasn't dreamt up on the back of a cigarette packet.

What you are suggesting is something that would've been ironed out inside of a month. This has been agreed by teams since the start of 2020 and formalised before that.

What strikes me is that only 1 team on the grid has breached the budget cap. A top tier team.
Why is it that Haas, Alfa etc all meet the requirements but it is RB that falls foul?
The more telling question is, why would Alpha Tauri which is Red Bull owned, be legitimate and Red Bull themselves not? They share parent companies and pretty sure the internal CFO's would use the same methodology and internal auditors according to the rule set.
If they had any appetite to follow the rules that is.

[Just_a_fan]

I disagree.
Let's say two teams, A and B, spent exactly the same on all fronts, and exactly matched the cap.
[...]

That happens out in the real world too with things like taxation offsetting. Companies try to put things down as "marketing" or some other thing in order to reduce their tax liability. And the tax authorities will come along and say "no dice, I'm afraid, as we don't agree that it is marketing". The only way to avoid that is to talk to the tax authority / FIA and agree what can go where.

Of course, if you're trying to hide some money from the tax authority, you're not likely to go and ask them where to hide it...

[Cassius]

No, it is stated that marketing budgets (like driver salaries and top staff salaries) are outside of the budget cap.
So if the overspending is on something that one party regards as marketing but the other does not, it matters. If the overspending is on the salary of a tier of employees that is regarded as top level by the team but not by the FIA, it matters. It could be that there are certain development actions for the car of this year that the team accounted in the cap of 2022, but the FIA still regards as spendings in 2021. If that is the case, it matters.

This wasn't dreamt up on the back of a cigarette packet.

What you are suggesting is something that would've been ironed out inside of a month. This has been agreed by teams since the start of 2020 and formalised before that.

What strikes me is that only 1 team on the grid has breached the budget cap. A top tier team.
Why is it that Haas, Alfa etc all meet the requirements but it is RB that falls foul?
The more telling question is, why would Alpha Tauri which is Red Bull owned, be legitimate and Red Bull themselves not? They share parent companies and pretty sure the internal CFO's would use the same methodology and internal auditors according to the rule set.
If they had any appetite to follow the rules that is.

The teams you mention (Alfa and Haas), and also Alpha Tauri are probably easily within the budget cap.

Who knows what kind of interpretations Alpha Tauri have done. It could be FIA also didn't agree with theirs but still they were within the budget cap.

Also, I don't think the Alpha Tauri and RB use the same methodology. They share some common parts, but they are still separate teams. I don't know whether the rules allow for sharing of financial methodologies etc.

[DChemTech]

No, it is stated that marketing budgets (like driver salaries and top staff salaries) are outside of the budget cap.
So if the overspending is on something that one party regards as marketing but the other does not, it matters. If the overspending is on the salary of a tier of employees that is regarded as top level by the team but not by the FIA, it matters. It could be that there are certain development actions for the car of this year that the team accounted in the cap of 2022, but the FIA still regards as spendings in 2021. If that is the case, it matters.

This wasn't dreamt up on the back of a cigarette packet.

What you are suggesting is something that would've been ironed out inside of a month. This has been agreed by teams since the start of 2020 and formalised before that.

What strikes me is that only 1 team on the grid has breached the budget cap. A top tier team.
Why is it that Haas, Alfa etc all meet the requirements but it is RB that falls foul?
The more telling question is, why would Alpha Tauri which is Red Bull owned, be legitimate and Red Bull themselves not? They share parent companies and pretty sure the internal CFO's would use the same methodology and internal auditors according to the rule set.
If they had any appetite to follow the rules that is.

I am not suggesting that they did not due proper due diligence here at all - you are completely taking my comments out of context.

What I am saying is that, considering this is a sports with strong fan support and strong fan opinions, things should not be handled completely behind closed doors. If there is overspending, it should be transparant how much that was, what were the controversial items that led to the difference in opinion between RB and FIA on whether the cap was breached, and why did the FIA decide what they did.
It won't change any outcome, but since we are undoubtedly going to have heated debates about the breach itself and whether the yet to be announced penalty is proportional to the crime, we should at least know the, conditions, circumstances and criteria that were used to judge. Perhaps these details will follow once the penalties are communicated, but in any case the announcement today was completely underwhelming, as it provided no clarity on what was speculated already.

[Quantum]

I am not suggesting that they did not due proper due diligence here at all - you are completely taking my comments out of context.

What I am saying is that, considering this is a sports with strong fan support and strong fan opinions, things should not be handled completely behind closed doors. If there is overspending, it should be transparant how much that was, what were the controversial items that led to the difference in opinion between RB and FIA on whether the cap was breached, and why did the FIA decide what they did.
It won't change any outcome, but since we are undoubtedly going to have heated debates about the breach itself and whether the yet to be announced penalty is proportional to the crime, we should at least know the, conditions, circumstances and criteria that were used to judge. Perhaps these details will follow once the penalties are communicated, but in any case the announcement today was completely underwhelming, as it provided no clarity on what was speculated already.

I definitely agree that all fans deserve transparency and consistency. Equally, so do Red Bull's competitors.

[saviour stivala]

In my opinion, that the FIA announced the breach but not yet the penalty. It means one of two things. The penalty have not yet been decided, or the penalty is being negotiated. The FIA having announced the breach means they know exactly what the breach was. The FIA knowing what the breach was means they are supposed to know what the exact penalty for such breach is supposed to be.