€150 Cost cap proposed by liberty
Discussion
Interesting to read today their proposal, on the face of it it doesn't sound too bad, any f1 accountants on here agree? Taken from TJ13....
........F1 cost cap: €150 million including €100 million ‘participation fund’......
…....the notion of a cost-capped budget set somewhere around the $150m per season mark appears to be crystallising, although it’s far from being universally agreed. Under one model seen by F1 Racing, teams would receive $100m per season from Liberty as a ‘participant’ fund. They would then be free to source a further $50m from sponsors and other backing. Their total audited spend would not be allowed to exceed the notional $150m, with $10m ‘fixed’ as engine spend and driver salaries also bundled into that total. End-of-season prize money distribution, based on championship position, would be shared on a sliding scale from a maximum of around $70m, to a minimum of $10m.
The underlying principle here is that teams would receive more from Liberty to participate, but less performance-based cash, thus ensuring, in theory, that competent minnows such as Manor need not go bust. The promise of F1 team ownership being a viable business model for those not owned by global car manufacturers should then entice more new entrants to join, thus helping underpin F1’s longevity. Simples?
........F1 cost cap: €150 million including €100 million ‘participation fund’......
…....the notion of a cost-capped budget set somewhere around the $150m per season mark appears to be crystallising, although it’s far from being universally agreed. Under one model seen by F1 Racing, teams would receive $100m per season from Liberty as a ‘participant’ fund. They would then be free to source a further $50m from sponsors and other backing. Their total audited spend would not be allowed to exceed the notional $150m, with $10m ‘fixed’ as engine spend and driver salaries also bundled into that total. End-of-season prize money distribution, based on championship position, would be shared on a sliding scale from a maximum of around $70m, to a minimum of $10m.
The underlying principle here is that teams would receive more from Liberty to participate, but less performance-based cash, thus ensuring, in theory, that competent minnows such as Manor need not go bust. The promise of F1 team ownership being a viable business model for those not owned by global car manufacturers should then entice more new entrants to join, thus helping underpin F1’s longevity. Simples?
thegreenhell said:
How will it be policed? How do you stop a manufacturer team from burying €500M of R&D spend in their overall global budget rather than their F1 budget?
This is the biggest issue and why Max Mosley could never get it to happen.There would be so many loopholes with manufacturers using the holding company for F1 development, etc
They should have the same system as in folk racing https://en.wikipedia.org/wiki/Folkrace where you can buy someone elses car for a fixed price as an incentive not to do too much development 
More seriously, presumably the NFL has the same issue - they could just bung their players extra salary in brown envelopes to get round the rules, but it would be a big risk. In F1 sure there'd be lots of loopholes, but the risk of being found out / grassed up by staff who leave for another team would make it not worthwhile doing massive, difficult to hide development programs.
More seriously, presumably the NFL has the same issue - they could just bung their players extra salary in brown envelopes to get round the rules, but it would be a big risk. In F1 sure there'd be lots of loopholes, but the risk of being found out / grassed up by staff who leave for another team would make it not worthwhile doing massive, difficult to hide development programs.
Doink said:
teams would receive $100m per season from Liberty as a ‘participant’ fund.
End-of-season prize money distribution, based on championship position, would be shared on a sliding scale from a maximum of around $70m, to a minimum of $10m.
If I've read this right, I struggle to believe Liberty are happy to hand out $1.3b per year (where is the money coming from?!) to some of the biggest car companies and organisations in the world.End-of-season prize money distribution, based on championship position, would be shared on a sliding scale from a maximum of around $70m, to a minimum of $10m.
F1 would effectively be free to enter for any team that can dig up $50m in sponsorship or cash (with a minimum of $10m prize money in return), which is less than half of what every team on the grid is already spending.
Every car manufacturer on the planet would be on the waiting list to join F1 with those terms.
c6r said:
More seriously, presumably the NFL has the same issue - they could just bung their players extra salary in brown envelopes to get round the rules, but it would be a big risk. In F1 sure there'd be lots of loopholes, but the risk of being found out / grassed up by staff who leave for another team would make it not worthwhile doing massive, difficult to hide development programs.
I think the issue is that as the F1 engine is as near to road-relevant as it's ever likely to be, a manufacturer could fit one in a development hypercar and drive around for months on end outside of F1 budgets. With the likes of the Aston Martin Valkyrie that's probably not as far fetched as it sounds.Edited by ukaskew on Thursday 15th June 12:37
thegreenhell said:
How will it be policed? How do you stop a manufacturer team from burying €500M of R&D spend in their overall global budget rather than their F1 budget?
This is what a forensic accountant does. We currently have to be confident that Mercedes and Ferrari are not running extra terabytes of CFD on parent company supercomputers, but all teams seem happy with that.I am very confident that Ross Brawn and his expanding team would be perfectly able to smell a rat if was one lurking somewhere. The risk of being caught and excluded for a year might also concentrate minds.
If true, this is the basis of a very sensible proposal, excluding the cost of key personnel will probably be a compromise somewhere along the negotiations.
The biggest benefit will be in lower forms of racing as lost of expertise will be available to a wider market.
rdjohn said:
This is what a forensic accountant does. We currently have to be confident that Mercedes and Ferrari are not running extra terabytes of CFD on parent company supercomputers, but all teams seem happy with that.
I am very confident that Ross Brawn and his expanding team would be perfectly able to smell a rat if was one lurking somewhere. The risk of being caught and excluded for a year might also concentrate minds.
If true, this is the basis of a very sensible proposal, excluding the cost of key personnel will probably be a compromise somewhere along the negotiations.
The biggest benefit will be in lower forms of racing as lost of expertise will be available to a wider market.
There will always be loopholes but it could be a step in the right direction.I am very confident that Ross Brawn and his expanding team would be perfectly able to smell a rat if was one lurking somewhere. The risk of being caught and excluded for a year might also concentrate minds.
If true, this is the basis of a very sensible proposal, excluding the cost of key personnel will probably be a compromise somewhere along the negotiations.
The biggest benefit will be in lower forms of racing as lost of expertise will be available to a wider market.
easy to get around and difficult to police.
to put into context when we did formula student there was a cost exercise as part of it. Oxford Brooks managed to convince everyone that their car, which had a carbon tub, built in house by Williams cost less than our space frame car that was built from parts off ebay and a tubular chassis made from scrap metal.
..went to silly lengths including buying 'strengthened nuts and bolts' from china....which were basically junk but cheep and submitted the receipts for those instead of the ones that were actually on the car which cost 10 times as much.
how anyone can prove how much these things cost, where the money comes from and goes to etc etc will be a nightmare. I suspect employees will start getting expensive cars as payment rather than salaries, and then selling them and satellite companies to divert monies around
to put into context when we did formula student there was a cost exercise as part of it. Oxford Brooks managed to convince everyone that their car, which had a carbon tub, built in house by Williams cost less than our space frame car that was built from parts off ebay and a tubular chassis made from scrap metal.
..went to silly lengths including buying 'strengthened nuts and bolts' from china....which were basically junk but cheep and submitted the receipts for those instead of the ones that were actually on the car which cost 10 times as much.
how anyone can prove how much these things cost, where the money comes from and goes to etc etc will be a nightmare. I suspect employees will start getting expensive cars as payment rather than salaries, and then selling them and satellite companies to divert monies around
37chevy said:
how anyone can prove how much these things cost, where the money comes from and goes to etc etc will be a nightmare. I suspect employees will start getting expensive cars as payment rather than salaries, and then selling them and satellite companies to divert monies around
I'm pretty sure the embedded auditor would spot that one pretty quickly.OK, so Ferrari build a road car. And it has a specific aero piece. All done in the Ferrari road car wind tunnel, their engineers etc.
They then make that piece openly available at cost to the market (say €50k). Now any F1 can buy that stock piece, but as aero is so complex simply having that piece won't help you as a competing team. But they are "OEM / off the shelf" components.
Ferrari F1 team then buy it for €50k - but the total cost to produce is an order of magnitude higher. Ferrari road cars then right off the costs of development and disappointing sales levels of this piece.
They then make that piece openly available at cost to the market (say €50k). Now any F1 can buy that stock piece, but as aero is so complex simply having that piece won't help you as a competing team. But they are "OEM / off the shelf" components.
Ferrari F1 team then buy it for €50k - but the total cost to produce is an order of magnitude higher. Ferrari road cars then right off the costs of development and disappointing sales levels of this piece.
Vaud said:
OK, so Ferrari build a road car. And it has a specific aero piece. All done in the Ferrari road car wind tunnel, their engineers etc.
They then make that piece openly available at cost to the market (say €50k). Now any F1 can buy that stock piece, but as aero is so complex simply having that piece won't help you as a competing team. But they are "OEM / off the shelf" components.
Ferrari F1 team then buy it for €50k - but the total cost to produce is an order of magnitude higher. Ferrari road cars then right off the costs of development and disappointing sales levels of this piece.
The auditer looks at the purchased item, investigates where it has come from, spots the ruse and Ferrari get banned from he results.They then make that piece openly available at cost to the market (say €50k). Now any F1 can buy that stock piece, but as aero is so complex simply having that piece won't help you as a competing team. But they are "OEM / off the shelf" components.
Ferrari F1 team then buy it for €50k - but the total cost to produce is an order of magnitude higher. Ferrari road cars then right off the costs of development and disappointing sales levels of this piece.
Vaud said:
Munter said:
The auditer looks at the purchased item, investigates where it has come from, spots the ruse and Ferrari get banned from he results.
Sure, but it's a part available to all teams, like a Brembo disk.What's this £50k bill for?
Part from another Ferrari subsidiary.
How much did it cost them to research, design and build it?
£200m
And you paid £50k for it?
Yes
And it's not really suitable for any other team is it?
No
You just paid £200m for it and got excluded. Have a good day.
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