2010/11 budget cap really only restricts personnel numbers.

[John S]

So the big teams will still have the advantage they just have to get by with less team members. I'm personally glad that the one size budget must fit all has been binned, like the cars in F1 over the years team individuality has been the biggest key word driving the sport. 

According to Lawrence Butcher, of IPC magazines RC Engineering, FOTAs ‘Resource Restriction Agreement' that member teams will have to abide by for the 2010 and 2011 seasons will lead mainly to limiting team personnel numbers.

From January 1, 2010, teams will be limited to 250 personnel and a maximum spend of 50 million Euros. In 2011 this number will decrease further to 180 personnel and 30 million Euros. However the budget cap excludes salaries.

Our source quoted ' A major motorsport publication was saying how Peter Sauber has saved Sauber with his brilliant business plan and reducing staff to 250 people, but everyone has to do it!'

The restrictions will cover everything excluding salaries, marketing and engine costs because these are considered beyond control. For example to expect Mecedes Benz, as an engine manufacturer, to spend the same as Force India would not be feasible.

[Alianora La Canta]

€30m? That's a huge restriction! I would argue that personnel numbers are far from the only thing restricted by a resource restriction that severe. It's little things like a supercomputer costing a third of the annual budget to buy and then run for a year. It could also have an effect on the willingness of teams to produce stuff in-house - expect more sharing arrangements like Force India's with Mercedes for hydraulics and gearbox to emerge in the next two years.

[Jericoke]

€30m? That's a huge restriction! I would argue that personnel numbers are far from the only thing restricted by a resource restriction that severe. It's little things like a supercomputer costing a third of the annual budget to buy and then run for a year. It could also have an effect on the willingness of teams to produce stuff in-house - expect more sharing arrangements like Force India's with Mercedes for hydraulics and gearbox to emerge in the next two years.

For just about any business in the world salaries are the majority cost.  When you consider that an F1 team is basically building 10 cars, 30 million covers the raw materials, electricity, and amortised equipment costs.  A passenger car, including the engine and windows, has less than 1000 in raw materials.  Even given that an F1 car has more exotic materials, 30 million is plenty.

[Scott]

That's a bit of an exaggeration.  Those raw materials go through millions of dollars of machines before they can be mounted by employees.  Same thing for a F1 car.  Like it was already mentioned, a supercomputer running simulations could eat up a lot of that budget already, throw in a few autoclaves, and a wind tunnel budget (for running it as well as depreciating it) and I'm sure you're getting near the $30m.

[Alianora La Canta]

The really expensive bits about a F1 car are the design and running. The design because it takes a lot of time and effort to figure out what to tell the computers, get the computers up and running (and the supercomputers are generally on overnight for months at a time, so the power bill is considerable) and also get them tested to satisfaction (scale wind tunnel testing is only one of several performance checks a component can be expected to pass before being put into production).

The running because not only does a F1 car typically do about 4 mpg, but a component needs changing every 20 minutes of running on average. That's a lot of componentry.

To put this into perspective, in 2005 a chassis cost around £250,000 to make and about 10 times that to develop. In fact, even Force India will need to cut its budget to meet the $30m because its estimated budget was around $80m for 2009.

[Jericoke]

To put this into perspective, in 2005 a chassis cost around £250,000 to make and about 10 times that to develop. In fact, even Force India will need to cut its budget to meet the $30m because its estimated budget was around $80m for 2009.

How much of the 80 million was for engines, and how much for personnel, advertising, transportation?  None of that counts to the 30 million cap, and does account for the majority of the F1 budget.

The problem is going to be capital expenditures... the part where F1 gives back to the economy and engineering science by buying outrageously expensive and experimental machines.

My guess... F1 will start partnering with universities, and letting donors cover costs of 'research' equipment.  What engineering programme wouldn't want access to McLaren's shop in the off season?  (Our American friends will recognise an NCAA type problem here.)

[Scott]

The problem is going to be capital expenditures... the part where F1 gives back to the economy and engineering science by buying outrageously expensive and experimental machines.

My guess... F1 will start partnering with universities, and letting donors cover costs of 'research' equipment.  What engineering programme wouldn't want access to McLaren's shop in the off season?  (Our American friends will recognise an NCAA type problem here.)

That would be an incredibly brilliant and sensible idea...which is why the FIA will never let it happen.

[Alianora La Canta]

How much of the 80 million was for engines, and how much for personnel, advertising, transportation?  None of that counts to the 30 million cap, and does account for the majority of the F1 budget. {Jericoke - 2 comments ago}

It's not clear how much was for engines, because Force India get engines (which are not in the cap), gearbox and hydraulics (which are in the cap) from the same deal with one combined price and no number has been mentioned for the total let alone the constituent parts. Said number would probably be wrong anyway because originally KERS was part of the price but now won't be, unless they're doing some serious pre-planning for the final year of the contract.

Force India has a staff of 280 people, which will need to go down by 100 to meet the resource restriction requirement of 180 staff. Note that Minardi employed aroud that many when Red Bull bought it at the end of 2005 and they were paying their staff a combined wage of $12.6m at the time. Add, say, 3% inflation per year and you have an estimated current bill for that staff level of $14.181411m & 6/10ths of a cent (€9,784,677,382.16). By the start of 2011 it will be $14.606853.86 and 18/100ths of a cent (€10,078,218.07 at current exchange rate).

Transportation should be covered by "Bernie Air" (a service which transports a certain number of people, considered the minimum for competitiveness, plus three chassis, their engines and 2 tonnes of other car parts to every race free) except for excess baggage, sea transport and people transport. As a guideline, Minardi took 60 people to races in 2006 (13 more than can enter the paddock under the resource restriction guidelines) and paid $2.47m (€1.7m) for their travel and accommodation expenses in a season. It had Bernie Air priviledges, albeit not perhaps as generous as they might be now. I'd guess at a ballpark figure of €3 million for the sum total of Force India's transportation expenses, noting that accommodation on Grand Prix weekends has gone up by rather more than 3% per year (much to the chagrin of spectators).

Advertising is impossible to calculate because it's not even clear how much of Force India's advertising is coming from the team and how much from the wider comglomerate that owns it at this stage (there have been some combination advertising going on and the team itself is effectively considered an advertising board for Vijay Mallya's companies and values). I would expect Force India's advertising bill to skyrocket in the next two years as money previously spent by UB Group is now spent by the team on advertising... ...but that doesn't help me figure out how much it's spending on it now!

I would dispute those three items being the main expenses in a F1 team's budget - at least in the case of those teams not producing their own engines. In 2006 (the year for which I have figures in front of me) engines cost $180m for Toyota in 2006 (36% of its budget) but Jordan, who bought those same engines, only paid $15m (14.42% of its budget). Advertising isn't given in the figures I've got, but it does include corporate entertainment, which took up $11.5m of Toyota's $499.05m budget (2.30% of its budget). Jordan spent $1.4m (1.34% of its budget). Travel is the only item out of the three that is roughly proportional to budget (in fact it's an inversion; Toyota spent $12.97m/2.60% of budget while Jordan spent $4.86m/4.67% of budget on travel).

The expensive bits of running a small F1 team that isn't an engine producer are operating cars at races and tests, along with R&D costs. These are very much included in the budget caps. Wind tunnels used to also be a major item before the 2009 restrictions came in.

So the short version is that I can't answer your question, Jeri, but I'm sure at least $13.078m of the current $80m won't count towards the 2010 or 2011 budgets... ...and it's nowhere near the $50m Force India needs to remove by the latter year.

[raindancer]

WOW Ali ! This post is awesome. How did you get all the data points ? 

[Alianora La Canta]

The initial data points are in the March 2006 edition of F1 Racing and the Force India staff stat came from an article in the November 2009 edition of F1 Racing. I used Yahoo!'s search engine to figure the exchange rates and my calculator to do inflation.

[raindancer]

  Good one. But actually technology can reduce the cost of design and development in F1. Its just that some of the teams in the interests of secrecy or whatever dont fully use technology, simulation, CFD's and so on.
I know companies which design aerospace parts using CFD completely and they pass all the physical test by Boeing, Airbus and so on. And moroever today we dont need supercomputers any longer. The Average pentium chip has immense processing power and massively parallel computing and Cloud Computing are changing development cycles all over the world.
For a sector which prides itself on innovative usage of technology and science, their reluctance to harness all the advances are a bit of a paradox.

[Alianora La Canta]

Supercomputers still have much more processing than an average (or even exceptional) Pentium chip and although cloud computing has potential, it's currently rather slow because information can only be sent across the cloud at broadband speed. It's possible to make a small supercomputer out of five graphics cards for around £3000 these days, but even small supercomputers are a tad limited in what they can contribute to CFD. The new technologies make certain kinds of R&D cheaper, but are of limited utility in a F1 R&D context at the moment.

[raindancer]

Point Taken Ali ! But today's Super Computers do work in Geo Physics, Earth Mapping, Nuke explosion simulations and so on.
Dont think designing F1 cars really require Super Computers Ali.

[Jericoke]

Point Taken Ali ! But today's Super Computers do work in Geo Physics, Earth Mapping, Nuke explosion simulations and so on.
Dont think designing F1 cars really require Super Computers Ali.

Actually... a simple arithmetic exercise shows that they do.

A modern desktop computer does approximately 2 billion operations a second.  A Supercomputer does more than a trillion.

The point of the CAD is to see how a car performs in real world conditions... a computer game might get away with a couple hundred polygons making a car, and a vector simulating wind, but to do that in F1, to make the world a set of vague rules, instead of real conditions, is a waste of time.  Basically, for real time results, you can make a super computer 1000 times more detailed, which is nice if you're trying to adjust a winglet a millimetre.

However, they don't have to do real time.  They can let a programme run for two weeks, and then see what happens.  Just try letting a home computer run one intense programme for for two weeks and see what happens.  Suddenly a supercomputer can provide results that are literally a billion times more accurate than you could hope to do on a PC.

And this technology does 'trickle down' to real world car design.  So while it's not needed per se, it does make the world a better place.

[gato]

There will always be big gap between top and back grid teams. Force India has severe financial problems but some bigger teams have less. Now when economics situation is difficult locally, also bigger and richer teams lose their sponsors like Renault will lost his own this year.