F1 inequality is starting to bite on track

As the cost cap versus open spending battle continues to rage, it has become increasingly apparent that the two issues which most divide those teams seemingly bent on winning at (virtually) any cost from the independent outfits battling against the odds are in-season research and development, and the sport's inequitable payout structure, with these two factors both impacting heavily on relative performance.

Over recent years Formula 1 has developed into a homogenous formula, with essentially every parameter and/or variable being tightly controlled. Windtunnel speeds and size of scale models are regulated, manpower levels at races restricted and curfews imposed. Regulations specify car dimensions and mass, including front:rear weight distribution, while engine centre-of-gravity and V-angles are specified.

Not only are power units homologated and their sub-assemblies policed, but are supplied to customers at broadly identical cost regardless of badging.

Spare cars are banned, and two rubber compounds per weekend are provided by the sport's sole supplier at identical cost across the grid. Indeed, the number of tyres issued to each driver per race weekend is fixed.

For flyaway races, the commercial rights holder provides 20 (economy class) air tickets and 10 tons of airfreight to teams, while article 23a of the sporting regulations specifies "The FIA will allocate garages and an area in the pitlane on a strictly equal basis".

Thus even garage backdrops are similar in size/construction, while floors will soon be covered thanks to the adoption of MADMAT material to reduce fire risk.

In fact, so tightly controlled are the prevailing regulations that, for example, during last year's Monaco Grand Prix arguments over chassis slots (or not) taxed the sport's best legal brains - until a furore broke out over an alleged illegal test undertaken by Mercedes.

Clearly then, the costs of building two eligible cars and racing them at 20-odd grands prix across the globe are broadly similar, whether one be Ferrari or Marussia, Mercedes or Force India - for there is so little differentiation.

Yes, Lotus may hold an upper hand over Caterham on account of extensive in-house fabrication rather than out-sourcing, or Italian squad Toro Rosso loses out to Sauber through having its windtunnel in the UK rather than on-site as is the case with the Swiss team, but the overall variance is estimated at less than 20 per cent, and in any event mostly plays out over a season.

Whichever end of the pack you're at, the basic costs of getting on the grid are similar © LAT

But, the burning question is: variance of 20 per cent on which base figure? In other words, what does it actually cost to field a grand prix team under current regulations, excluding variables such as driver pay/contribution, executive salaries, marketing and hospitality - all of which impact on the bottom line of a team, but do not affect the purified cost of staging two cars every fortnight between March and November?

As part of negotiations with the FIA over the (non) imposition of cost caps - which the governing body agreed in January to introduce in 2015, but subsequently reneged upon after behind-the-scenes reshuffling by four major teams and the CRH - the four independents (Caterham, Force India, Marussia and Sauber) were requested to prepare a counter proposal.

In the document the quartet made a case for a 'top down' review of the costs to go grand prix racing, breaking down the budget into constituent parts, and in the process covering all headline areas, from power unit and transmissions/hydraulics costs through car production/manufacturing, tyres, salaries and IT to windtunnel operation, professional services and freight.

The document makes provision for teams who manufacture in-house rather than outsource, and the only glaring exclusion - apart from frills listed above - is cost of R&D/car design and development; with good reason, too, for it is this very cost centre that differentiates those at the sharp end from budget teams.

The total calculated in the presentation made to the FIA runs in at $120m (£80m), roughly in line with overall budgets of the non-frills teams estimated here last year.

Indeed, that column stood the test of time, with various team bosses directly or indirectly confirming their spends.

For the purposes of quick comparison, a perusal of various team budgets shows the following spends:

Red Bull      £240m
Ferrari       £250m
Mercedes      £160m*
McLaren       £160m
Force India   £100m
Sauber        £90m

Given that even the most expensive driver is unlikely to cost more than £15m - and in at least one case is paid by sponsor rather than team - and with most team bosses being hired hands on basics/bonuses, the glaring differences spent by Force India versus Red Bull and McLaren beg the question, 'where does the extra money go?', particularly as those three teams have level-pegged recently.

Force India came out of the blocks in good shape this year © LAT

F1's (welcome) change of technical regulations forced all teams to arrive in Melbourne with totally new cars powered by the sport's 'eco-friendly' engines. Thus all started from ground zero, with close grids and no clear pecking order behind the dominant Mercedes entries.

Since then, though, the pendulum has swung away from the impressive Force Indias past McLaren to Red Bull.

True, RBR enjoys the benefit of Renault's massive focus on power unit issues, but the team has brought update after update to races and both in-season test sessions, while Force India has conspicuously lacked in this regard.

McLaren, too, upgraded constantly - admittedly to little avail - and is pinning its hopes on a major aerodynamic overhaul of the MP4-29, due for introduction in Austria.

Could, say, Force India or Sauber afford such intensive development? Both had nothing new in Canada - and it surely showed, particularly in qualifying - while the entries of Marussia and Caterham have hardly changed one iota over the first seven races, suggesting their development is lagging.

The obvious deduction is that major teams spend double (or more) their actual racing budgets on developing parts which provide a tenth of a second here, a point or two of downforce there.

Think about it: they think nothing of spending, say, £80m on building and racing two cars for an entire season, then willingly splash out a further £160m on finding two or so seconds over the course of the year. Sustainable?

Ironically, most of the time gained is extremely shortlived for the FIA invariably slows cars by two seconds each year in its continuous quest for manageable safety, so the net effect is that sponsors (and team owners in the case of Red Bull/Mercedes) collectively blow hundreds of millions in any currency on minuscule updates with shelf lives of, on average, 10 races...

Against that philosophy, is it any wonder that suits in boardrooms continuously complain about the cost of going F1 racing that the likes of Toyota, BMW, Honda and Renault withdrew in part or full - citing diminishing returns on their 'space race' budgets - enabling Red Bull to mop up serial championships against a depleted field?

Saliently, apart from Honda (as engine supplier only), no manufacturer has made a return despite the new technology and improved trading conditions.

True, collectively the car companies fed F1's great space race, what with duplicated windtunnels and mega-budgets, but saw sense when the global economic crisis bit, and one wonders how much longer Mercedes will keep feeding this voracious sport once it achieves its objective of a first-ever constructors' title.

Herein lies F1's budget conundrum: the majors are pushing back against any form of budget control for they are only too aware that any such restrictions would seriously hamper their ability to spend their ways out of trouble - as, for example, McLaren did for a decade (or more) and Ferrari has for the past three years - while the independents push for limited development over a season so as to ensure they do not lose ground.

Toyota and BMW were among the firms that decided F1 wasn't sustainable © XPB

The imbalance is compounded by the inequitable revenue structure imposed on the sport by the commercial rights holder, one which saw Lotus for 2013 receive 35 per cent less than McLaren in so-called Bernie Money (and half that received by Ferrari) despite comfortably outpacing the former and running the Scuderia uncomfortably close towards the end, beaten only when its development coffers were depleted.

As long as that situation continues, the minnows are perfectly justified in pushing for a budget cap despite the concept (and principle) going against the DNA of F1, for it is the only way the independents can hope to in part redress this glaring imbalance - one that has no place in modern sport where all other parameters are strictly controlled.

Is it not strange that the number of heads allowed in garages is regulated, but not the sport's prize money (derived primarily from a combination of television and race hosting fees), given that both directly affect performance, and that one team receives double another's reward simply for being older?

This column last week published the respective 2013 payouts in diminishing sequence and, in order to place the numbers in further perspective, below a comparison of classification versus receipts versus estimated budgets:

Team         2013 placing  2013 payouts (£m)  Est 2013 budgets (£m)
Ferrari            3rd              99.6                250
RBR                1st              97.2                235
McLaren            5th              57.1                160
Mercedes           2nd              55.2                160*
Lotus              4th              39.0                130
Force India        6th              35.4                100
Williams           9th              33.6                90
Sauber             7th              32.2                90
Toro Rosso         8th              30.0                70
Caterham           11th             18.6                65
Marussia           10th             7.2                 51

Imagine how much more research and development the additional payouts afford a Ferrari or Red Bull in comparison with Caterham/Marussia...

The broad thrust of this column was put to Mercedes executive director Paddy Lowe during the FIA press conference in Canada. The response:

"I don't see why it's any less sustainable than it ever has been. Formula 1 has always existed with some differentials between the teams, some teams being better funded than others, and it's always been that way and teams will sustain themselves, they have to manage themselves as businesses to break even at least.

"They have to be going concerns. If you can generate income then you choose how to spend it and that's the nature of a team. So I don't see any particular difficulty with that, it's always been that way."

Except it hasn't always been that way. Until the end of 2012 only Ferrari received a 2.5 per cent premium over the rest, with all others being treated equally for comparative performances, ie McLaren and Marussia would receive identical shares of the 'pot' for identical performances over identical periods.

No more, as the table above illustrates - and it shows on track, too.

*Substantially upped after intensive recruitment drives in 2013.