Try and find the RRA?

What is the Resource Restriction Agreement (RRA)? Try Googling it, try searching the mainstream F1 media sites, try Wikipedia, try even asking senior team F1 personnel. There’s plenty of articles to be found where F1 people are for it, against it and mostly there is an agreement that costs should be controlled. Yet there is nothing out there that defines the scope of the RRA.

Formula 1 has in the past been most profligate in the area of spending. Rumours have it that Ferrari in their dominant era were spending $100m a year on tyres that were bullet proof. Honda allegedly spent $1bn during 2008 on the present car and the design of the 2009 car. Ironically following Honda’s last minute withdrawal from the sport at the end of 2008, the car they had designed for 2009 won both WDC and WCC titles under the badge of Brawn GP.

At the other end of the spectrum teams have regularly run out of money and ceased to exist and even more that sell out and change their names due to funding problems. In the last 10 years alone, these teams have gone from the Sport: Jordan, BAR, Renault, Jaguar, Arrows, Minardi, Toyota, Honda, BMW-Sauber, Midland, Super Aguri, Spyker, Brawn and Virgin. So the casualty rate is high, and its mostly to do with a lack of funding.

The end of unlimited spending

Max Mosley, as head of the FIA, successfully reduced some of the biggest excesses in the years following the turn of the millennium. The use of special qualifying engines that were finished after a few hundred miles, spare cars ready to go should the drivers crash theirs and working arrangements that included a 24 hour continual activity in the garages were effectively outlawed by introducing a parc ferme rule at the end of each qualifying session.

Engine spend has been particularly targeted as this could be as much as 50% of a teams annual budget – anything from 25m euros to 200m euros – and the number of them a team could call upon used to be unlimited. Its only 8 years ago in 2004 that an engine was first required to last a whole race weekend. in 2006 this was extended to 2 weekends and in 2009 the teams were restricted to 8 engines per season per car.

Many believe this principle applies in F1: The  team that spends the most money will invariably win the competition, and the differential between the smaller teams ability to spend has at times been clearly reflected in lap times – often several seconds per lap slower than the big spending teams. This does not make for great competition and means the smaller teams look bad and struggle for sponsorship which in turn reduces their ability to spend… a vicious circle.

The FIA proposes a spending cap

In the ongoing push to reduce costs and increase competition, the FIA published its proposed regulations for 2010 and there was uproar. The huge bone of contention was what has become know as ‘the budget cap’ rule which stated teams should spend no more than $40m ($70m). The teams association FOTA walked out of the talks and threatened to set up their own series called the, “Grand Prix World Championship”. As ever in F1, the solidarity of the teams was short lived and Williams together with Force India who had some contractual obligations with the FIA refused to participate in the breakaway series.

Max Mosley was determined to implement a budget cap but later admitted he had been weakened by the News of the World expose of his exotic sexual exploits. According to Mosley whilst many in F1 had distanced themselves from him over the matter, Ferrari had been highly supportive and he felt a loyalty to them not to drive through the cost capping measure that would affect them much more than most.

The fudge – RRA

A fudge was achieved that got Concorde signed and the sporting regulations for 2010 agreed and the teams entered for the following years competition. Instead of a fixed cap there was an agreement amongst the teams to begin a progressive restriction of certain resources such as testing, staff levels, wind tunnel time used and some other mysterious measures not known to us mere mortals.

Mosley has been vociferous that the RRA will not work as the team that spends the most money will invariably win the competition. He argues restricting resources is a flawed methodology because if a team is allowed to only have 100 people, the team with the most money will recruit the 100 best people by paying them more and will still invariably win the competition. 

RRA in action

Since then the RRA has regularly been the topic of heated debate. The teams through FOTA are meant to police the RRA, and at a FOTA meeting towards the end of 2010, Red Bull asked for an exception, presumably because they had breached their allotted  allocation of a certain resource – which means overspent. After a number of teams complained that Red Bull had cheated and bought the 2010 titles, FOTA instigated an investigation hiring a dutch audit company. As is the F1 way, nothing was heard and even though there are sanctions available non were either enforced or not publicly revealed.

Red Bull have repeatedly claimed their spend is only the second or third largest in F1 and in effect when the RRA was agreed the teams were frozen with their current levels of spend. It was agreed the bigger spending teams could not instantly half their workforce – even though that’s what happened with Honda and Brawn in 3 months – so there was meant to be a progressive and proportional decrease in spend until 2012 when the next Concorde agreement was due.

The Red Bull problem

The real difficulty for this arrangement is Red Bull. They claim that unlike Ferrari, McLaren and Mercedes they do not have access to associated automotive engineering companies as a ‘non-manufacturer’ of road cars. It is argued that the manufacturers can hide resource allocation/spending on F1 technology in these associated companies and appear to be spending less on F1 racing – Red Bull cannot do this.

Ironically, Red Bull have more than one related company themselves – Red Bull Racing and Red Bull Technology. Red Bull Technology was generally regarded as a loop-hole used by Red Bull to run two teams (Red Bull Racing and Scuderia Toro Rosso) with the same car, which otherwise is prohibited in Formula One. The rival Spyker team lodged complaints about this early in the 2007 season, as they were direct competitors with Toro Rosso. The FIA did not uphold the complaint.

Adrian Newey was employed by Red Bull Technology and neither team denied that what they ran was fundamentally the same chassis, but claimed that things such as separate development programs, differing engines as well as the fact that the chassis was designed by neither team made it legal.

Yet such was the similarity of the cars that in 2008 Toro Rosso eclipsed Red Bull Racing by finishing 6th in the Constructors championship with 39 points, compared to Red Bull Racing’s 7th place with 29 points. From 2010 onward, new rules brought in to Formula One which outlawed the use of identical cars between teams, and Scuderia Toro Rosso can no longer share chassis designs with Red Bull Racing. Each team now designs and builds their own chassis in house. Newey now works exclusively for Red Bull Racing and the effect is obvious.

Disintegration of FOTA

Following the allegations of breaking the RRA rules and the ensuing investigation, Red Bull warned October 2011 that the whole matter was threatening the very existence of FOTA. In a statement issued to Reuters, Christian Horner said “I think that FOTA has reached the crossroads where it needs to deal with some of the key issues moving forward or we’ll stop – it’s as simple as that.

Ferrari’s Stefano Dominicali had a different slant, but the same conclusion. “In terms of cost cutting, we can no longer afford to continue like this. If there is no trust, there is no need to go forward.” (APG News). The sub text was that with a new Concorde agreement looming, Ecclestone, the CEO of the commercial rights holders would know exactly how to exploit divisions and deal individually with the teams rather than the force of a collective.

Within weeks, Red Bull Racing, Toro Rosso, Ferrari and Sauber had pulled out of FOTA

Concorde 2013: More formal rules

So to the here and now, 2 years on and the disputes over how to reduce costs in F1 continue. The FIA issued a statement in June stating, “the intention is to help all teams participate in a fair and equal manner”, but fundamental disagreements still lie unresolved.

Red Bull are a little isolated as they are adamant that control from the FIA should be brought only by the technical regulations, and then teams should be able to do as they please after that.

There are those like Monisha Kaltenborn of Sauber who still argue that cost capping is the way forward. “We now have to evolve it [RRA] 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, because we all have different strengths.”

Frank Williams represents an old school attitude, “There are 12 teams and each operates in different circumstances. We have several manufacturer teams. One of them is Ferrari, who seem to have a great deal of money and who are in effect subsidised. But that is fine – they are Ferrari. They are the core of Formula One and that is how it should be. That is fine with me. Take me, there are so many men in the paddock who have more hair than me and it has always pissed me off, but I live with it! You learn to get on with it.”

The core difficulty in passing over the self-regulated RRA to become sporting regulations as enforced by the FIA is that a unanimous vote is usually required. The first deadline for agreement was the 30th June 2012 – this came and passed with no resolution. The proposal from the FIA is to regulate and enforce limited spending on the chasis development, and whilst there appears to be agreement among most regarding this matter, Red Bull are not happy with this and fear the new engine regulations for 2014 could leave them at a big disadvantage.

To this week’s meeting between the FIA, the teams and the commercial rights holder. If you read the tea leaves they are as far apart as ever and Jean Todt is refusing to be a ‘dictator’ and just enforce a majority opinion. Yet this option is unusually available to Todt because Concorde is not yet signed – usually a majority is required under Concorde but as this also is not agreed yet it cannot be appealed to to enforce unanimous agreement as the only way forward.

Interestingly one of the issues under discussion at the meeting (mostly unreported) included a redefining of the ‘customer car’ rules. This would allow smaller teams to save money by acquiring a chassis from one of the larger teams and then developing the rest of the package themselves – a little like the Red Bull and Toro Rosso arrangement pre 2010.

Likely outcome

When I began writing this article I already had a solid conclusion in mind. Yet having waded through the same old F1 disputes and disagreements, vested interests, arch manipulators and special treatment reserved for some and not others I am as frustrated as ever over F1’s inability to get its act together – but then what would there be for me to do? A small part of me wishes Max Mosley were still heading up the FIA even though his biggest sin was selling the commercial rights for 100 years at around $3m per year (probably worth in real terms about $10,000 p.a. in 2104 AD)

Interestingly I came across the latest figures for 2011 spend today (not all teams are in obviously)

Red Bull Technology spent 245m euros (Red Bull Racing 207m euros up 42m euros on 2010)

Mercedes AMG 145m euros – about a second a lap

Lotus 155m euros

Williams 111m euros

The most likely conclusion will be a conditional Concorde agreement that kicks the matter into the long grass until 30th June 2013 when the sporting regulations for 2014 must be unanimously agreed once again. This itself will be a missed opportunity because at present a strong head of the FIA can force through majority decisions – once an 8 year Concorde is signed that opportunity will pass until 2020.