F1: Zak Brown writes letter to FIA calling for tightening of cost cap rules

McLaren F1 boss Zak Brown has written a letter to governing body the FIA in which he says Red Bull breaking the budget cap “constitutes cheating”.

“Any team who have overspent have gained an unfair advantage both in the current and following year’s car development,” he writes.

Brown adds the FIA should “communicate subsequent action and penalties at pace to maintain the integrity of F1”.

The letter, which has been seen by BBC Sport, is dated October 12th and is addressed to FIA president Mohammed Ben Sulayem, and copied to F1 president Stefano Domenicali.

It was sent on Monday to the teams who in addition to McLaren have not committed any cost-cap offenses – Ferrari, Mercedes, Alpine, Alfa Romeo and Haas.

The FIA announced last week that Red Bull were guilty of a “minor” breach of the cap – the lesser of two categories of offense under F1’s financial regulations – as well as a procedural breach.

The dividing line between “minor” and “material” offenses is 5% of the cap – or $7.25m in 2021.

Red Bull declined to comment when approached by BBC Sport about Brown’s letter. The team said last week they were “surprised and disappointed” by the FIA’s decision, adding: “Our belief remains that the relevant costs are under the 2021 cost-cap amount.”

McLaren were contacted about the leak of the letter but declined to comment.

Brown praises the FIA’s work on the cost cap, and says policing it is “critical” to the sport’s future.

He suggests any team guilty of an overspend should be hit with a fine equal to double the amount by which they have breached the cap, and for a reduction in their permitted research and development next year.

He writes: “The overspend breach, and possibly the procedural breaches, constitute cheating by offering a significant advantage across technical, sporting and financial regulations.

“The FIA has run an extremely thorough, collaborative and open process. We have even been given a one-year dress rehearsal (in 2020), with ample opportunity to seek any clarification if details were unclear. So, there is no reason for any team to now say they are surprised.

“The bottom line is any team who has overspent has gained an unfair advantage both in the current and following year’s car development.

“We don’t feel a financial penalty alone would be a suitable penalty for an overspend breach or a serious procedural breach. There clearly needs to be a sporting penalty in these instances, as determined by the FIA.

“We suggest that the overspend should be penalized by way of a reduction to the team’s cost cap in the year following the ruling, and the penalty should be equal to the overspend plus a further fine – i.e. an overspend of $2m in 2021, which is identified in 2022, would result in a $4m deduction in 2023 ($2m to offset the overspend plus $2m fine).

“For context, $2m is (a) 25-50% upgrade to (an) annual car-development budget and hence would have a significant positive and long-lasting benefit.

“In addition, we believe there should be minor overspend sporting penalties of a 20% reduction in CFD and wind tunnel time. These should be enforced in the following year, to mitigate against the unfair advantage the team has and will continue to benefit from.”

Brown proposes changes to the rules to address what he sees as weaknesses, exposed by the process of administering the cost cap in its first season.

“To avoid teams accumulating and benefiting from the multiplier effect of several minor overspend breaches, we suggest that a second minor overspend breach automatically moves the team to a major breach,” he writes.

“Finally, given the financials involved, a 5% threshold for a minor overspend breach seem far too large of a variance. We suggest a lower threshold, 2.5%, is more appropriate.”

Brown makes it clear he feels the FIA should release details of the offenses as soon as possible.

“It is paramount that the cost cap continues to be governed in a highly transparent manner, both in terms of the details of any violations and related penalties,” Brown writes.

“It will also be important to understand if, after the first full year of running and investigating the scheme, there needs to be further clarity on certain matters or any key learnings. Again, any insights or learnings should be shared across all teams – there can be no room for loopholes.”

“The-cost cap introduction has been one of the main reasons we have attracted new shareholders and investors to F1 in recent years, as they see it as a way to drive financial and sporting fair play.

“It is therefore critical that we be very firm on implementing the rules of the cost cap for the integrity and the future of F1.”

Full Letter

FAO: Mohammed Ben Sulayem
CC: Stefano Domenicali
12th October 2022

Dear Mohammed,

Following on from my previous letter, and now that we have more information, I would like to focus more narrowly on the matter at hand.

Firstly, we have the utmost respect and trust in the way the FIA has led the Cost Cap process. We applaud the approach which has been very collaborative and transparent and very much appreciate the work done by Federico and his team. We understand this is a challenging process for both FIA and the teams, but its importance to maintaining F1’s reputation to fans, sponsors and other investors is critical, making the strength of its governance and policing imperative.

Now we understand the spending situation of various teams, we must communicate subsequent action and penalties at pace to maintain the integrity of F1 and the rules it abides by. It is paramount that the Cost Cap continues to be governed in a highly transparent manner, both in terms of the details of any violations and related penalties. It will also be important to understand if, after the first full year of running and investigating the scheme, there needs to be further clarity on certain matters or any key learnings. Again, any insights or learnings should be shared across ALL teams – there can be no room for loopholes.

As the investigation demonstrated, of the ten teams reviewed, seven were found in total compliance with the Cost Cap rules. One team was guilty of a minor overspend breach plus a procedural breach, and two further teams also in procedural breach. The overspend breach, and possibly the procedural breaches, constitute cheating by offering a significant advantage across technical, sporting, and financial regulations.

The FIA has run an extremely thorough, collaborative, and open process, we have even been given a 1-year dress rehearsal with ample opportunity to seek any clarification if details were unclear. So, there is no reason for any team to now say they are surprised.

The bottom line is any team who has overspent has gained an unfair advantage both in the current and following-year’s car development.

We don’t feel a financial penalty alone would be a suitable penalty for a overspend breach or a serious procedural breach, there clearly needs to be a sporting penalty in these instances, as determined by the FIA. We suggest that the overspend should be penalized by way of a reduction to the team’s cost cap in the year following the ruling and the penalty should be equal to the overspend plus a further fine i.e. an overspend of $2M in 2021, which is identified in 2022, would result in a $4M deduction in 2023 ($2M to offset the overspend plus $2M fine). For context $2M is 25 – 50% upgrade to annual car development budget and hence would have a significant positive and long lasting benefit.

In addition, we believe there should be minor overspend sporting penalties of a 20% reduction in CFD and wind tunnel time. These should be enforced in the following year, to mitigate against the unfair advantage the team has and will continue to benefit from.

To avoid teams accumulating and benefitting from the multiplier effect of several minor overspend breaches, we suggest that a second minor overspend breach automatically moves the team to a major breach.

Finally, given the financials involved, a 5% threshold for a minor overspend breach seem far too large of a variance, we suggest a lower threshold 2.5% is more appropriate.

In closing, I would like to refer to Martin Brundle’s recent quote “…the cost cap system is brilliant, in terms of, it’s been a corner stone of why Formula 1 is in a better place today than it has, in my view, ever been….”. I am in total agreement with Martin in fact, the Cost Cap introduction has been one of the main reasons we have attracted new shareholders and investors to F1 in recent years as they see it as a way to drive financial and sporting fair play. It is therefore critical that we be very firm on implementing the rules of the Cost Cap for the integrity and the future of F1.

Sincerely,

Zak Brown
CEO of McLaren F1