About the F1 Resource Restriction Agreement

[Rob01]

The RRA rule was designed to be lax. The whole point of having FOTA controlled budget restrictions was so that the FIA would NOT mandate a MM 40m or so budget. One that would have been looked at by the FIA and it's accountants. Teams don't want others in their books. The FOTA plan was to show the FIA and Mosley that they(teams) on their own could control or reduce spending. Max's objective is to show that the teams can't control themselves so that FIA can step in an mandate/manage the teams. The era of MM making the rules is over. He has not gotten over the fact that he was thrown out by FOTA. He will try and make the teams fight amongst each other so that control and the concorde can be made favorable to FIA and Bernie. This fight that Max has started is only the begining of what is to come before the next concorde. This is a power struggle and not an issue of what teams spend. Max wants it to be the old way where FIA rights the rules and the teams listen.

[WhiteBlue]

Andrew, your point reminds me of Bernie. He thinks democracy is not worth bothering with because it is not working perfectly. The resource restrictions may not be ideal but it has considerably reduced the budgets and kept F1 viable through a huge crisis. Your personal believe that the RRA is not enforceable has not been supported by facts or published expert opinion. The teams have said that there are grey areas in the actual agreement but grey areas do not mean it is unworkable. It is also said that potential loop holes will be closed by the RRA extension which is nearing completion according to FOTA.

[andrew]

Andrew, your point reminds me of Bernie. He thinks democracy is not worth bothering with because it is not working perfectly. The resource restrictions may not be ideal but it has considerably reduced the budgets and kept F1 viable through a huge crisis.

Right, so I don’t think the RRA is currently working so therefore I don’t believe in democracy? The fact it is not ideal shows up the glaring obvious flaw which you are in denial about its existence. Unit such time that the FIA holds the funds of each team and each team has to apply to the FIA to access fund the FIA will have virtually no idea on how much each team is spending. To this end the RRA is a pointless exercise and as much use as a chocolate fireguard without proper regulation.

Your personal believe that the RRA is not enforceable has not been supported by facts or published expert opinion. The teams have said that there are grey areas in the actual agreement but grey areas do not mean it is unworkable. It is also said that potential loop holes will be closed by the RRA extension which is nearing completion according to FOTA.

I don’t need fact or published expert opion (there is also a lack of that from you…). All I need is simple logic and a basic understanding that companies that operate in several sectors can easily make money disappear by diverting resources used in one area and claiming that they are used in another area.

Of course the teams like it – it has more holes that Rab C Nesbit’s vest! Whilst they claim to be reducing spending, chances are they are continuing to spend astronomical amounts. Once the RRA is properly regulated and overseen by the FIA or an independent observer I wil consider it somehthing that is possibly worthwhile (albeit it is potentially pushing F1 towards being a spec. series).

[WhiteBlue]

Ferrari published some interesting facts on the RRA. As the Autosport articles are closef after one montzh I copy the full wording for future citation.

http://www.autosport.com/news/report.php/id/89127?

Budget deadline still looms for teams

By Jonathan Noble and Dieter Rencken Friday, January 28th 2011, 14:30 GMT

Uncertainty over whether any Formula 1 teams did overspend last year will remain until at least early March, Ferrari team principal Stefano Domenicali believes, with the final deadline to submit budgets still several weeks away.

The last few weeks have been full of speculation that some outfits - including world champions Red Bull Racing - may have overspent in 2010 and therefore breached the terms of the Resource Restriction Agreement (RRA).

Although it had been thought that suspicions above overspending had been fuelled because accounts had been lodged with the Formula One Teams' Association (FOTA), the final deadline for doing so is until the end of February.

That means that Red Bull Racing's insistence that it complied fully with the RRA cannot be proved for several more weeks - although Domenicali said he hoped that in the end it will be shown everyone did hit their targets.

"It [the budget limit] was effective for our dimension, and for all the big teams we need to be very transparent on that," he said at the launch of the new Ferrari at Maranello on Friday.

"We are going in the right direction [with a new RRA] and we know it is something we feel obliged to respect. We have always done that and we are in the right path that, at the end of the season, we are on the target that we have all agreed to respect.

"Every month we have to give FOTA's secretary our figures, and then at the end of February there is the closing of the fiscal year. So for 2010, the dates and figures will be given at the end of February."

Domenicali said that his team's observance of the RRA had resulted in its budget being slashed by around one-third - although he voiced some concern about the amount of resource that was now needing to be put into aerodynamic development.

He confirmed that Ferrari had recently used Toyota's wind tunnel facility in Cologne to help with the development of new technologies.

"There is too much focus on aero development, and that has a huge impact on car performance," he said. "This is opposed to the requirements of a GT car and this is something we should consider, especially in respect of future regulations."

He added: "We have given up a lot and followed new directions. Knowing other teams really want to win, I think we should respect the sports rules, its technical rules, but also the engagement and commitments that are part of agreements that we have entered into

"This is something we will control, check and be sure that no-one is going against these rules."

Importants facts:

• Ferrari budget gone down by 33%
• FOTA financial year begins March 1st.

Items of policy:
Ferrari still lobbying for reduction of chassis and aerodynamic developments in contrast to Red Bull

Joe Saward with some detail:
http://joesaward.wordpress.com/2011/01/ ... h-the-rra/?

[WhiteBlue]

http://www.guardian.co.uk/sport/2011/fe ... e-red-bull?

Formula One set to bring in a cap to team budgets, says Red Bull boss
Red Bull's Christian Horner has indicated that a cap to each team's budget may soon be introduced to Formula One

Christian Sylt and Caroline Reid
guardian.co.uk, Saturday 12 February 2011 21.59 GMT

Red Bull team principal Christian Horner (left) says talks about a budget cap for Formula One teams are 'heading in the right direction'. Photograph: Paul Gilham/Getty Images
Formula One is on track to get the equivalent of a cap on team budgets to curb excessive spending according to the team principal of Red Bull, the winners of last year's championship.

Data from F1's industry monitor, Formula Money, shows that the sport's 12 teams had an average budget of £107m last year, with Ferrari the biggest spender, having £248m at their disposal. However, Christian Horner of Red Bull told the Observer that discussions by the Formula One Teams Association (Fota) about a cap on all areas of spending are "heading in the right direction".

In 2009 Fota vetoed plans to introduce a £40m budget cap and instead came up with an alternative known as the "resource restriction agreement" (RRA). This limits areas such as staff numbers, size of computer storage space and the amount of days cars can be tested on track. However, there are significant exclusions from it such as marketing costs and engine development, which alone accounts for around £220m of annual spending.

Horner said: "We agree with restricting activity but don't cherry-pick ... let's do a transparent once-and-for-all deal with this." He indicated that this would be equivalent to a budget cap and when asked if there would be a difference between the two he said "that's a very good question".

The teams currently self-police that they are working within the spending limitations and Horner said: "The other major problem Red Bull Racing had with the RRA was that [other teams] wanted to introduce a penalty which just encourages infighting. The little teams see an opportunity to make some income and you end up with a situation of whistle-blowing. You can see it at the moment, it is putting the teams against each other which is not what Fota was supposed to do."

Fota are currently investigating claims that Red Bull Racing overspent last year but Horner denied this saying "contrary to speculation, we completely adhered to the RRA within 2010". To maximise lead time, development work on F1 cars is done the year before they are introduced and in 2009 Red Bull Racing's costs increased 8.8% to £156.9m.

Horner said: "Red Bull Racing had their cheapest ever year in Formula One last year in terms of their net spend and that will diminish further this year. The RRA saved us a lot of money." Winning the world championship had boosted the team's sponsorship income and they have "signed a couple of interesting deals which will be announced in the next couple of weeks".

The limitations of the RRA have steadily increased every year since it was introduced in 2009 and Horner said: "It has been a very good focus because now you have some financial regulations that have forced the teams to be efficient whereas previously there were inefficiencies I guess in all of them."

It looks like inevitably the refinements to resource restrictions will bring the teams back to the idea of a budget cap. I expect that to be a result of the extended scope that was introduced to the discussions by the lifting of the engine freeze. Some teams do not accept the testing stop and if general budget caps can be arranged it would be in the choice of the teams what they spend their money on.

What I can see is a different cap for teams and engine builders. It would also be good plug some gaps in the old budget cap plan and include driver salaries and marketing cost in the plan. I think a total of €125-150m would probably be a good value to look for. The higher value would apply to the engine building teams.

[andrew]

So MrM gets his way then. Just another step towards F1 becoming a single spec. series.

[Rob01]

Andrew, incorrect. Max wanted a budget controlled by FIA. The teams wanted to control their own destiny by making their own rules. FOTA is handling this on THEIR terms now and FIA is out of the accounting loop. So Max didn't get anything he wanted.

[WhiteBlue]

So MrM gets his way then. Just another step towards F1 becoming a single spec. series.

Sir, this is male bovine manure. Budget restrictions have very little to do with technical restrictions. If at all a budget cap can allow greater technical freedom because technical measures to contain costs are less important with a budget cap in place.

Fundamentally budget restrictions were never disputed by the huge majority of FOTA. The issue was the level of the cap. To the day all parties agree that unlimited spending is not desirable. This thinking will not change because it is obviously correct. Somehow they will find a way to agree on a level that is acceptable to Ferrari and then Ferrari can stop bitching about their pet issues such as third cars and the lack of testing. They should be able to spend as much as they want on testing as long as they respect the budget cap.

Policing the cap, if it comes will be done by external accountants, as proposed by the experts in 2008. That should be something that will need backing with penalties. If the penalties will be of financial nature or sporting penalties exercised by the FiA rests to be seen.

[andrew]

Andrew, incorrect. Max wanted a budget controlled by FIA. The teams wanted to control their own destiny by making their own rules. FOTA is handling this on THEIR terms now and FIA is out of the accounting loop. So Max didn't get anything he wanted.

My mistake. I thought his ghost was still lingering but it appears that it isn't.

[WhiteBlue]

http://www.jamesallenonf1.com/2012/03/t ... melbourne/

The teams are divided with the FOTA seven on one side and five teams on the outside in Ferrari, Red Bull, Toro Rosso, HRT and Sauber.

They are working together to try to control costs and the signs are that this process is about to enter a new phase where the policing of the Resource Restriction Agreement will fall under FIA management. This is something that all the teams, with a couple of exceptions, are in favour of. Ferrari support it as do Mercedes and McLaren. For it to become part of next year’s regulations it needs to be passed by a majority and that is something being worked towards at the moment.

This way, should anyone be found to have overspent, there would be the possibility of some sanction from the FIA, which FOTA did not have and which therefore made it pointless in the eyes of Ferrari.

It looks as if at least one point about the RRA seems to be covered by an understanding of a majority: FiA controlled verification of the auditing

The other point obviously is the lack of cost control in power trains and other big budget items like marketing, hospitality, driver salaries, director spending and dividends. I hope something is being done there as well.

[Mr.S]

Well all 10 teams out of 12 bar Red Bull & Toro Rosso have written to FIA that it should police the RRA. Red Bull & Toro Rosso have apparently not even be invited & Horner has openly opposed the RRA saying he will only support issues like testing being limited or limited the amount of manpower but would not be willing to cap Costs.

Here's the quotes from the Press Conference. I think RRA is a massive thing & deserves a separate thread -


Q. (Dieter Rencken – The Citizen) Christian, last week in the press conference, the team principals that were present confirmed that ten of the twelve had signed a copy of the letter to the FIA regarding cost-cutting and policing of the Resource Restriction Agreement (RRA). I believe that your team and your sister team didn't sign; is there a particular reason for that?

CH: Yeah. We didn't see the letter. Simple. I can't sign something I didn't see. Whether or not we agree with the content is something else. Firstly, I think what I would like to make clear is that Red Bull is absolutely fully behind cost control in Formula One. Whether the RRA is the right route to achieve that is what we question. I believe that letter, from what I read, requested for the FIA to police the RRA which, in our opinion would be the wrong route. We believe full-heartedly in controlling costs in Formula One and not frivolous spending, but we think that there are better ways of doing that and containing that through sporting and technical regulations as opposed to a resource restriction that relies on equivalence and apportionment of time and personnel, which is always tricky in subsidiary companies, particularly of automotive manufacturers. So we would be totally open to any discussion that involves cost control that pursued those avenues.

Q. (Ian Parkes – Press Association) Continuing on that thread, why would you not want to be policed when ten other teams would agree to that? That would suggest you've got something to hide in your accounts or the way you manage your finances?

CH: Or it would suggest that we're structured in a different way, as a single entity as a race team, and I think that there are things that, when FOTA was first created, did that: clear and tangible restrictions in personnel, restrictions in the amount of engines, restrictions in the amount of gearboxes, restrictions in the amount of testing that has been permitted. All things that you can see policed and genuinely save costs and we think they're the type of things that should be focused on rather than apportionment of people's time and equivalence which is, in any formula, in any mechanism, is fraught with problems and difficulties. I think it was well intended at the time but I think – as with all these things – when you drill into the detail, it's something much harder to police, especially when there are companies or teams which are subsidiaries of other organisations. So for us we would prefer to keep it simple and go on tangible, measurable items.

Q. (Ian Parkes – Press Association) Following that up with Martin and Stefano, can you appreciate what Christian is saying?

MW: I think the challenge of controlling costs in Formula One is something that we've all had a go at and if you can do it by a simple singular number that you can count, see, feel, touch then it's quite a nice simple thing to do. So I can relate to everything that Christian has said. We've done some of those things, we need to do more, and I think you've to carry on. The fact is at the moment we in this room all know that there are Formula One teams that are struggling to survive which tells us that we're not doing enough and that's why we've got to keep pushing.

SD: What I can add is that for sure that is something that we were discussing. We said – well, we were putting on the table certain conditions for us to be considered part of the general picture, because as we said, this could be a fragment of what is really controlled through the sporting and technical regulations, because that, at the end of the day, is the biggest thing that you can consider tangible and you can see would be some effort in saving money, so I think that overall this is the target we should aim at and I would say that if I have to look at Ferrari's interests, thank God that our financial situation is really good in terms of general financial position for the future. But we know that the situation of Formula One is not so stable. We know that there are a lot of struggles around so we need to put aside our self-interest a little bit, to make sure that we can look ahead in order to make sure that we are a lot competing in Formula One, because this is a very critical period, where everyone is smiling but we know that it's very tough.

Q. (Dieter Rencken – The Citizen) Christian, back to the letter: does it worry you that ten people had actually left the two Red Bull teams off the list of invitees, and secondly, being one who has never really been slow at coming forward, did you not consider getting a copy of the letter and seeing if you would like to append your signature?

CH: Maybe it will be printed on the internet, you never know. Maybe you've got a copy that I can look at later, Dieter. As I've said, cost control is something that is important, it's something that Red Bull fully supports but we don't agree with the current RRA. Within the RRA you've got restricted and non-restricted areas. How on earth can KERS be non-restricted, a gearbox be non-restricted? So open resources and spend allowed on those areas. So that's why we think a more workable solution… and indeed, we've sat down and tried, certainly prior to Christmas, and I don't think our teams are so different in structure that we can't find a solution and hopefully, with some productive discussion, moving forward, a solution can be found, to make Formula One cost control for the top teams, but also, importantly, as Martin says, make it affordable for the teams in the middle of the grid and at the back of the grid. The cost to be competitive in Formula One at present is too high. I don't think anybody will dispute that. The debate is how we achieve it.

Q. (Dieter Rencken – The Citizen) Did you not try and get yourself a copy of the letter?

CH: If I don't agree with the content of the letter then why do I need a copy? Thank you.

[WhiteBlue]

James Allan wrote a piece on The RRA and a potential budget cap to replace it:

http://www.jamesallenonf1.com/2012/04/f ... t-against/

Some pretty solid statements from Sauber

formula1.com:

Q: Monisha, the Swiss have always been renowned for being good with numbers, so how long can the smaller Formula One team survive?
Monisha Kaltenborn: Well, I think the question is not about how long we can survive, but how much longer it will take for the big teams to understand that the smaller teams are just as important to Formula One as the four big ones. If the situation of the smaller teams is not good - and I would go so far as saying that we are all in a similar situation compared to the big four - then this is not good for the sport. The challenge is to create parameters which will allow all teams that are here today to run sustainably, to stay in the sport and to have the ability to use whatever assets they have to compete at more or less a similar level.

Q: What in your opinion has to happen to achieve that? Whenever there is a new, must-have technical development, even if it’s worth only a fraction of a second, the big teams go for it whatever the cost, to the disadvantage of the smaller teams. Is a budget cap really the answer?
MK: At the end of the day, yes, I think so. We started it with the Resource Restriction Agreement (RRA), and that in itself was already an important step, but of course it is far from the only one you need. We now have to evolve it to the next step, and in my view the future should indeed lie in some kind of budget cap under which each and every team could do what they want to, because we all have different strengths. Looking at our team, for example, we have a good infrastructure and a good wind tunnel, so it would allow us to benefit from that. Others have other assets. Overall I think it would make Formula One more interesting as it would also mean that we would all use different strategies and take different approaches to the business and the sport.

Q: What time frame are we talking about?
MK: I think very soon. I think that we should have the next step already in place for next season and take it from there. Next season for me should already see a major step forward in the financial feasibility of a team. When the current Concorde Agreement comes to an end at the end of this season, I think it would be a good time to set some kind of rules.

Q: What you say sounds logical, so why has it not become reality? What is the biggest hurdle?
MK: I think the biggest hurdle is us, the teams ourselves! (laughs) But I think by now even the big teams should appreciate that Formula One with four teams would not be overwhelmingly attractive to fans. That would be a very wrong message. So my hope - and I have to say that most of them have already supported the RRA and have now signalled that they would give their support to taking the next step - is that something is happening very soon.

James Allan:

There is some support for focussing spending limits on the ‘tangible’ elements, like the number of updates each team may make per year, but the big teams believe that the RRA ultimately failed because of the impossibility of measuring ‘intangible’ things, like how much support a manufacturer backed team gets from the manufacturers’s off-site resources.

Putting the RRA into a new structure whereby it is managed by a third party and subject to arbitration in the event of dispute is the logical next step – it’s being discussed now – and one that sounds like it might be agreeable to the likes of Ferrari and Red Bull.

A budget cap remains a step too far; however much the midfield and backmarker teams might want it.

I hope that Kaltenborn with her view is closer to the discussion than James Allan. If his view becomes the reality the teams will once again fudge it and create a second best solution.

I have no doubt that Red Bulls vision of restricting only tangible assets will not work. Money is not tangible and if you do not even make an effort to limit it's use you can never stop the rich teams to use it for their advantage. In the end you have to have a budget control by an independent authority that is also combined with enforcible penalties.

[marcush.]

money will not buy you titles-see Toyota so a RRA will not be a big equalizer
and it will not work to restrict teams from finding finance
I think the best solution would be Fia policing budgets ,e.g.teams would need to submit their budget plans for the season say in january and transfer say 30% of their planned budget to FIA.leaving them with 70% .the rest would be put into a pot and given back to the teams but now in 24 equal slices redistributing 30 % of the total towards the minors .For the big teams it would be a blow but as they generally are better in finding finance they always can try to find better finance ,but for small teams it would be so much of help to get aslice of the cake -i´d call it a fighting fund.

[WhiteBlue]

I think you mean funds and not finance. Finance is making money available at a different time than it will actually be generated by your business. To a certain degree most teams use financial means - for instance by late payment - but generally it should not be the basis of their budget. The funds should come from revenues they create by going racing and serving their sponsors.

This plan of a fighting fund seems unrealistic to me as it would have to be fed from the FOM money. The distribution of that money is pretty much set in stone by the signatures under the 2013-2010 Concord Agreement.

Only an agreement on engines and chassis spending can stop another cost race in F1 and all the teams must agree on it to make it effective. Naturally the cost frame must be considerably lower than the budgetary power of the four leading teams to have any effect.

[WhiteBlue]

Ecclestone has performed one of his typical 180° U-turns.
http://www.forumula1.com/news/eccleston ... udget-cap/
http://www.forumula1.com/news/eccleston ... -workable/

30.09.2012 Ecclestone:"Working to an imposed maximum budget is the direction people are going in. It is workable.”
18.04.2012 Ecclestone: "It wouldn’t work. You can’t stop people from spending the money they have. They will always find a way to get around whatever you try to do to control it. Instead, the technical rules should be written so that it is not possible to just use money to make a faster car”.

Beside these direction changes it is annoying not to know any details of what is happening. Any budget cap solution obviously has to address the question of budget control for engine development which has long been a controversial issue. If F1 would be taking that direction one wants to know how that conflict is supposed to be resolved.

There is obviously a lot still going on behind closed doors with Ecclestone leaking sound bites to stir the pot and spin things to suit his agenda. Some days ago the rules for 2013 hve been published with all reference to the concord agreement deleted. It means the three parties of FOM, temas and the FiA are not yet in one boat and things are still open regarding the big questions how to proceed with cost control and the rules in 2014.