Jordan's Track Talk

Tag: Cost Cap

  • FIA confirm teams stayed within the Cost Cap

    All 10 Formula 1 teams have successfully stayed within the Cost Cap, which for 2022 was set at $140m, the FIA announced.

    The Financial Regulations were introduced from the start of the 2021 season in a bit to limit spending and ensure the long-term viability of the championship.

    Teams are required to submit accounts of their annual spending against the Cost Caps for the year by the following March.

    Last year, Williams and Aston Martin were found to be in a ‘procedural breach’ while Red Bull were deemed to have commited a ‘procedural breach and a minor financial overspend (less than 5% of the Cost Cap)’.

    Williams and Aston Martin received financial penalties. Red Bull were handed a more significant fine alongside a reduction in their wind tunnel testing allowance.

    Following the submissions for 2022, the FIA reviewed all reporting documentation submitted by each of the 10 teams and has subsequently issued certificates of compliance to all.

    The review has been an intensive and thorough process, beginning with a detailed analysis of the documentation submitted by the competitors. Additionally, there has been an extensive check of any non-F1 activities undertaken by the teams, which comprised multiple on-site visits to team facilities and careful auditing procedures to assess compliance with the Financial Regulations. The FIA Cost Cap Administration notes that all Competitors acted at all times in a spirit of good faith and cooperation throughout the process. The FIA also notes that the Financial Regulations are essential to the long-term financial stability of the sport, and that they will continue to be developed and refined based on the findings of each review process both in terms of the regulations themselves, which are written and approved under the FIA Formula 1 governance process, and the way in which they are enforced and policed. The FIA has made and will continue to make significant investments in this department for the collective benefit of the sport.

    The FIA on the cost cap.

  • Domenicali request to FIA on cost cap punishment

    Formula 1 CEO Stefano Domenicali wants the FIA to be handing out sporting sanctions, not financial ones to any team found to be in the breach of the cost cap, amidst rumours of further transgression’s.

    Last season (2022), the FIA handing out certificates of 2021 cost compliance for the 10 Formula 1 teams.
    Seven passed with flying colours, Aston Martin and Williams were called out on procedural breaches, while Red Bull were found guilty of an overspend breach and fined $7 million as well as being docked 10% of their allotted wind tunnel time.

    Should the FIA find any fresh breaches this time around in the 2022 figures, which could reportedly come to pass with three teams said to be heading for a breach, then sporting penalties, like the wind tunnel time portion of Red Bull’s punishment is the route which he wants the FIA to go down.

    The range of penalties on the sporting side available to the FIA is rather broad, including a reprimand all the way up to points deductions or a reduction in the cap ceiling for the offending team.

    And while it claimed at the time Red Bull would feel the pinch of their 10% reduction in wind tunnel time, that has certainly not yet manifested on track. But the impact is expected to show up towards the end of the season.

    If the FIA then is to set a proper deterrent for breaking the boundaries of the cap, then it seems like they made need to dig deeper into penalties to make sure that happens.

    Do you think the FIA needs to hand out sporting sanctions? Let me know!

    I would like the penalty to be sporting in case of infringement, it is something we asked for very clearly. There are three regulations to be respected: sporting, technical and financial. Any infractions must be punished with sporting measures. You can’t go in other directions. Control is in the hands of the FIA. Personally what I have asked is to anticipate as soon as possible the publication of the investigations made by the staff of the FIA.

    Domenicali talking to Autosport.

  • AM enter agreement with FIA over breach of ’21 Regs

    Aston Martin have entered an Accepted Breach Agreement (ABA) with the FIA following a procedural breach of the 2021 Financial Regulations.

    After the submission of financial documents by all 10 Formula One teams, the Cost Cap Administration carried out a review under the Financial Regulations, and Aston Martin were found to be in a procedural breach of the rules – even though their costs during the 2021 reporting period were under the cost cap.

    The Silverstone based team were found to have incorrectly excluded and/or adjusted costs pertaining to the building of their new headquarters, new F1 simulator, wind tunnel fees, R&D tax credit, a signing bonus cost, use of transferable components, used inventories, service desk costs, cost of catering services at their headquarters, costs of desks and chairs, sponsor services and outsourced personnel services.

    The team now must pay a financial penalty of $450,000 within 30 days of the date of execution of the ABA, plus bear the cost incurred by the Cost Cap Administration.

    The Cost Cap Administration recognised that AMR has acted cooperatively and in good faith 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 AMR has sought or obtained any undue advantage as a result of the breach.

    FIA statement.

    Non-compliance by the team with any terms of the ABA will result in further procedural breach and automatic referral to the cost cap adjudication panel.

  • RB enter agreement with FIA over breach of ’21 Regulations

    Red Bull have entered an Accepted Breach Agreement (ABA) with the FIA following a breach of the 2021 Financial Regulations, F1’s governing body have said.

    For the first time in Formula One history, all 10 teams were required to submit their accounts of their annual spending against the Cost Cap for 2021 by the following March. On Friday in Mexico, the FIA announced that Red Bull was found to be in breach.

    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 (Red Bull Racing) 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.

    The FIA.

    In the summary, it was revealed Red Bull exceeded the cost cap in 2021, of £118,036,00 by less than 5% by less than 5% ( £1,864.00 or 1.6%) which is a minor breach. The FIA said they acknowledge that had Red Bull applied “the correct treatment within its full year reporting documentation of their Notional Tax Credit within its 2021 submission of a value of £1,431,438” and therefore would have exceeded the cap by $432,652 or 0.37%.

    Regarding sanctions for breaching the cost cap, Red Bull must pay $7 million to the FIA within 30 days of the date of execution of the ABA.

    They also receive a minor sporting penalty in the form of 10% reduction in their allocated Restricted Wind Tunnel Testing and Restricted Computational Fluid Dynamics (CFD) limits. Based on Red Bull’s championship position, the coefficient used to calculate their allocation will drop from 70% to 63%.

    Non-compliance by Red Bull with any terms of the ABA will result in further procedural breach and automatic referral to the Cost Cap Adjudication Panel.

  • FIA announces cost cap breaches by two teams

    The FIA has announced that two teams have breached the 2021 Financial Regulations, as they announce their review into the regulations.

    According tot the FIA, who released their findings into a cost cap investigation on Monday, Aston Martin are in ‘Procedural Breach’ and Red Bull have committed a Procedural Breach and a Minor Financial Overspend (less than 5% of the cost cap) according to the FIA.

    Williams were found to have made a Procedural Breach on May 2022, that the team then rectified in a “timely, cooperative and transparent manner”.

    Procedural Breaches and Minor Overspend Breaches can result in a financial penalties and/or minor sporting penalties. The following could be penalties for Red Bull-

    • Public reprimand
    • Deduction of Constructors’ Championship points awarded for the Championship that took place within the Reporting Period of the breach.
    • Deduction of Drivers’ Championship points awarded for the Championship that took place within the Reporting Period of the Breach.
    • Suspension from one or more stages of a Competition or Competitions, excluding for the avoidance of doubt the race itself.
    • Limitations on ability to conduct aerodynamic or other testing; and/or reduction of the Cost Cap provided that the reduction specified shall only be applied with respect to the year following the punishment being handed out.

    The review of the Reporting Documentation submitted has been an intensive and thorough process, and all Competitors gave their full support in providing the required information to assess their financial situation during this first year of the Financial Regulations. The FIA Cost Cap Administration notes that all Competitors acted at all times in a spirit of good faith and cooperation throughout the process. The FIA would also note that with respect to this first year of the application of the Financial Regulations the intervention of the FIA Cost Cap Administration has been limited to reviewing the submissions made by the Competitors and that no full formal investigations were launched. The FIA Cost Cap Administration is currently determining the appropriate course of action to be taken under the Financial Regulations with respect to Aston Martin and Red Bull and further information will be communicated in compliance with the Regulations.

    The FIA on the findings.

  • Williams fined for breach of financial regulations

    Williams racing have been fined $25,000 following a procedural breach of Formula 1’s financial regulations, the sports governing body the FIA announced yesterday.

    From 2021, the teams have been required to submit an interim account of their spending against the cost cap – which this year runs at $141.2 millions for the period between January and April by the end of June each year. Their annual spend must be reported by the end of the following March.

    Williams had failed to hit the second deadline of 31st March 2022, with the FIA informing the team of their procedural breach the following month.

    The British team accepted they had not obeyed the rules, with the FIA saying in a statement that the team explained the steps that they had taken in a bit to avert the breach.

    As the breach was voluntarily disclosed by the team in advance of the deadline and fully cooperated in seeking a remedy, the Cost Cap Administration – a body created to monitor compliance of the financial regulations – offered the team an Accepted Breach Agreement (ABA).

    This involved a commitment from Williams to remediate the breach by 7pm on 31st May 2022, pay a fine of $25,000 and bear the costs incurred by the Cost Cap Administration in connect with the preparation of the ABA. Williams accepted the offer and have since fulfilled the tree requirements.

    Why is there a cost cap?

    A cost cap was brought into F1 for specific reasons, to allow the small teams to spend the same amount as the big teams. It also looks like the cost cap will decrease each year until they (F1) are happy with how much teams are spending.