The Rams and Buccaneers Create New Model Contracts for Draft Picks

Normally we don’t spend too much time with the particulars of individual rookie signings but in the last few days I thought two interesting contracts came through that were worth discussing.

The first is the contract signed by the 7th overall selection, Mike Evans of the Tampa Bay Buccaneers. Evans was selected high enough to where his agent could argue for a contract with no offsets on the guaranteed contract. For those unfamiliar with offsets, a no offset clause allows a player to collect salary from two teams in the event he is released and signs with a new team. If you do not have that clause the money you earn from a new team first pays back the guarantee from the old team with the only extra earnings coming in salary paid above the guarantee from the old team.

In 2012 players were winning the fight against the teams and signing contracts with the no offset provisions, until the Miami Dolphins signed QB Ryan Tannehill to what I call the “Tannehill compromise” in which offsets existed but the team would pay large roster bonuses in August thus improving the timing of the cash flows and any possible release from the team.  Basically it blocked a team from “evaluating” for a fourth summer and then releasing with no cash repercussions in September. This became the model in 2013 and 2014 for almost every team not named the St. Louis Rams.

Evans contract is the first top pick to receive partial no offset clauses in his deal.  He received the roster bonus benefit that Tannehill received, but those roster bonuses have no offset clauses. His base salaries, for the minimum each year, do not. I thought it was an interesting decision by the Buccaneers as it illustrated a fundamental concept that more teams maybe will consider in regards to the drafted player, making the fight over offsets a bit more meaningless. Here is what I mean by this.

Offsets are only an issue if the player is released. For a top player to be released he basically has to be a bust that has fallen out of favor with the organization. While those players almost always get a second opportunity elsewhere, what is the usual contract that they earn?  The answer is not a very large one. Most teams will usually sign those players for the league minimum or close to it. Of recent picks who were free, Danny Watkins signed for the minimum as did Brandon Weeden. Gabe Carimi received an additional $65,000 bonus and a chance to earn another $140,000 in gameday roster bonuses.

When it comes to the offsets its more or less just that minimum base salary that a team would in reality ever recover. If he is a bad fit with some upside the Buccaneers could always trade his contract and the guarantees with it ala Trent Richardson or Carimi, making the offsets moot. If Evans was so bad to warrant his outright release no team is going to bend over backwards for his services. If he makes a another team in 2017 you can be 99% certain that it will be for just $690,000, which is the amount Tampa Bay has allowed themselves to recover in the contract.

It’s really a neat little deal that I could see more teams tinkering with in the future. I’d specifically be interested in seeing if the Jaguars use it as a compromise in the negotiation with QB Blake Bortles.

The second deal is that of a very low level pick, Garrett Gilbert of the St. Louis Rams. Gilbert, who is represented by Leigh Steinberg, was a 6th round compensatory draft selection. Everyone drafted in a compensatory slot usually gets the same contract- minimum P5 salaries and a $78,680 signing bonus. The only exceptions to that would have been players selected by the Kansas City Chiefs who give players small workout bonuses worth a few thousand over the minimum workout payments.

Now I have always talked about a “QB premium” that is paid in the draft, but that has just been for players drafted in the late first and second round where they get slightly better guarantees or cash flow structures and in the third round in which teams often bump up their year 3 and/or 4 salaries. The only non third rounder to get a slight pay bump was Matt Barkley who was drafted with the first pick of the 4th round and received some workout bonuses.  The third rounders never received added guarantees.

Gilbert’s contract contains $100,000 in guarantees, basically putting his guarantee on par with the 24th pick of the round. This guarantee is made up of his slotted signing bonus, a guaranteed $10,000 roster bonus in 2014, a $29,917 March roster bonus in 2015, and $21,403 in guaranteed 2015 salary. All of the guarantees are of the no offset variety.

The contract itself seems more or less like a hedge against success. Success in pretty limited for these late round picks and if Gilbert gets released in 2014 he’ll ensure himself $100,000 compared to just $78,680 for those around him, which makes this a smart deal. However, if he makes the team his salary in 2014 will actually be $30,000 less than the comparable player. That will more or less balance out in year two when he earn an additional $29,917 that will put him at $83 behind the comparable pick. The $83 will never be made up, which I guess we could say is the cost of the added guarantee and a low cost at that.

I guess when negotiating a deal like this it begs to consider the time value of money. Is it better to defer additional money for a year to lock in more guarantees?  Or is it better to receive the money during the course of the first year in the NFL.

Would other teams consider using this model in the future?  I have to think it will come up in other negotiations in the future now that one team has done it. Though there is some sacrifice in the timing of the money the bottom line is trying to ensure the most realistic money possible for a player and they did that here with Gilbert.  Something to keep an eye on for next season.


 

 

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