Thoughts on Russell Okung’s Contract with the Broncos

The Russell Okung contract figures came out today and there have been primarily negative opinions on the contract he signed with the Denver Broncos. For those unaware Okung acted as his own agent and represented himself in these negotiations. That decision immediately put many people tied to the agent community in a position where anything he did short of a top 3 contract at the position was going to be criticized. So I wanted to weigh in and offer my opinions on the contract which hopefully are unbiased in looking at deal.

The Contract.

Okung signed a rare, but not unheard of, type of contract with Denver. The contract on the books carries an annual value of $10.6 million, which would make him the 5th highest paid player at the position on a long term contract, $100,000 per year ahead of Ryan Clady, the Broncos current left tackle. There is a big catch to the contract, however.

Okung will only earn $5 million this season and there are no guarantees in the contract upon signing. The final four years of the contract are worth $12 million a year and are only picked up if the Broncos exercise a $1 million option prior to the start of free agency in 2017.  $12 million a year ranks just below Tyron Smith for 3rd in value. $5 million, however ranks somewhere in the 20s. He can also earn up to $3 million in incentives this year for playing time this year. If earned that would bring his compensation to $8 million this year, which is what the annual value of his prior contract was equal to.

Most options generally are used to pick up one season at the end of a contract not multiple years. The options are often protected by injury guarantees, guaranteed salary escalators, or non exercise fees such that the decline of an option really has no bearing on the true value of a contract. They are an accounting mechanism and payment timing mechanism as much as anything else.

Unlike most contracts that contain an option bonus, this is a true contract within a contract. If the Broncos pick up the option, $19.5 million in salary goes from non-guaranteed to fully guaranteed. That number is 4th among veteran left tackles for full guarantees. If they decline the option he gets nothing and goes back into free agency.

Is the contract that bad?

It should be noted that Okung hired JI Halsell, who runs nflcontractmetrics (and is a fan of OTC), to help consult on the contract. I’ve done similar projects as a consultant where I help with the strategy used to set pricing points, identify comparable players, contract structures, and team contract tendencies. JI has worked with the Redskins and as an agent for many years and I am sure did at least that and more in helping Okung. While he may not have been permitted to negotiate the deal on his behalf I can guarantee you that Okung was certainly given the information needed to do a deal and I would imagine got his blessing before officially agreeing to a deal. So I think we should immediately throw out any talk that Okung was simply taken advantage of in these talks.

There are two areas where people are really hammering the contract. One is the option concept and the second is the lack of guarantees. While the option concept being used here is rare it is not unique to Okung. Just two years ago Darrelle Revis signed a two year, $32 million contract with the Patriots. The first year payout was just $12 million with a second year option worth $20 million. The Patriots never had any intention of picking up the option but it allowed them to give Revis the $16 million a year paper APY he wanted in order to get him to sign the contract. That same year Donald Butler of the Chargers signed a contract that paid $6.6 million in the first three years at which point the team could pick up an option for four more year at $8 million a season. Still these contracts did have guarantees which Okung’s does not.

The best comparisons really come from the Cowboys, who I believe the Broncos borrowed a lot from in this negotiation. A few years ago Henry Melton signed a contract with the Cowboys coming off injury with the Bears.  This was also a contract within a contract and I would assume the model for this deal. Melton signed a contract with a paper APY or nearly $7 million but in the first year would earn just $3.5 million with $1 million guaranteed and another $1.5 million in incentives available. If the Cowboys picked up a $1 million option it would kick in 3 years at $24 million with $9 million fully guaranteed. Sound familiar?

While the contract is being reported as containing no guarantees there is $1 million virtually guaranteed in the contract. Okung will earn $1 million for participating in offseason workouts. This is also a concept likely borrowed from the Cowboys who paid Greg Hardy a $1 million workout bonus last year but guaranteeing nothing in the contract. Earning a workout bonus is about as easy as things get.

For what it’s worth each of those contracts above were negotiated by well respected agents, so it is not as if Okung was the first to ever sign this type of contract. So I think the argument that he got swindled because of contract structure is simply not valid.

Whether he should or should not have agreed to the contract is a different story.  I’ve long felt that Okung tracked with players like Eugene Monroe, Jermon Bushrod, and Jared Veldheer more than Tyron Smith, Joe Thomas, and Anthony Castonzo. Okung has been injury prone the last few years and good but not great when healthy. He’s a NFL starting caliber tackle. The difference between good and great though is playing for $7 million-$8 million versus $10-$12 million. With the exception of a few contracts here and there the left tackle market has generally not seen a boost the way receivers, pass rushers, and cornerbacks have with the increased salary cap so those contract numbers are still pretty valid.

This is where the question of risk tolerance comes into play. While every agent should discuss with his player at which price point are they willing to take a one year contract versus a multiple year contract, they are generally removed enough from the emotion of the situation to give a reasonable contract expectation.

The other day Joel Corry made a good point on Twitter about Okung and how, because he was one of the old CBA rookie players, his contract expectations are likely going to be higher than what he as paid on his rookie contract which was slightly over $8 million a season. That makes sense since Okung earned that as an unproven player out of college and while he has not been a superstar at the NFL level he has certainly been good. That is probably a very difficult thing to explain as to how a good player who has been in a Pro Bowl and is in the prime of his career somehow should take a paycut.

The backend of the contract it would sure seem to suggest that Okung was primarily interested in an upper echelon contract and I’m not sure that was a reasonable expectation. I would say it is highly doubtful that he has sees the final four years of this contract. Unfortunately the way the option is structured when the Broncos decline the option it is publically going to be looked at as him being cut, regardless of how the NFL sees it officially. Whatever someone may want to believe about being a free agent the fact is players who are looked at as releases rarely score big contracts.

It may have been better for Okung to take a one year contract and become a true free agent rather than look unwanted by a second team in two years. While those big numbers sure look appealing an agent may have balked at that deal or done something to earn Okung slightly more in the first year of the contract. He hasn’t been injured enough to include a $2 million bonus tied to making it out of training camp uninjured and that probably would not have been in the contract either, at least at that level. It would have either been a reporting bonus or at least split between something in the summer and then something for being healthy in the regular season. Considering Clady is still on the team right now I would have much rather seen some summer money roll in rather than giving Denver $2 million reasons to send me walking.

The $5 million first year value seems to be based on what he played at last year in Seattle. The “well you played at this level last year” tactic with incentives that “will at least bring you to where you were before and help us with the cap”. I don’t know the thresholds for the incentives to be earned and maybe they are very realistic but these are also areas where I tend to think a third party would have helped. At the least he should have been able to get a small raise from last year and they could have used a voidable contract structure to create the same cap impact for the Broncos. Okung probably would have received a signing bonus in that situation.

The other thing that I don’t like about the contract is that while the APY of the deal is geared towards the “elite” category the general pay structure is not. The two year payout is $17.5 million which is on par with Monroe ($17.5M) and below Beatty ($18.5M) and well below the Branden Albert ($20M), Nate Solder ($20M), Clady ($23M) and Castonzo ($27.5M). Even the three year, which would be generally protected if the option is picked up, is only at Alberts level and well below Clady’s. It was clearly sold as pre-negotiating a second contract and there definitely could have been more money put into the 2017 season if the option was picked up to at least be more on par with some of the others.

My guess is overall an agent would have probably tried to push Okung more toward the possibility of finding him a contract around $8-$8.5 million a year that offered more security. Would he have taken that?  We cant say.

If the answer is no then overall I don’t see anything in this contract so out of the norm that should bring on the criticisms it is receiving. This isn’t Master P doing an illogical contract where money normally to be paid to a rookie somehow became huge incentives.  This isn’t Andre Johnson taking a contract from a team that generally pays a premium and agreeing to a long term discount that costs you millions and millions of dollars. Maybe there are some things that he would not have normally gotten in a contract but I don’t look at this as bad, I just don’t think I would look at is as something that is great either.

Other factors

Probably where Okung was hurt more by not having an agent was the fact that he was not in a position to do the legwork that would normally be done at the combine. Regardless of what is the “legal tampering” period it is still the combine that begins the process of really informing agents of what market is shaping up for their players and how lukewarm or aggressive teams seem to be towards someone. Okung couldn’t take part in that. The most he did was send a letter to every team, which he wasn’t supposed to do, explaining his injury and prognosis.

Generally the non-agent approach works best when the goal is to re-sign with your current team. You are allowed regular communications with the team and you are already familiar with the contract people and general manager. By having to go out you are in a position to have to build relationships with people you never met and understand the way they negotiate. For someone who doesn’t do that for a living that’s difficult.

Okung ended up doing a bit of a world tour of visiting teams and discussing deals as an agent while also getting the pitch as a player and being checked out to make sure he is physically ok. Those are a lot of hats to wear and it is hard to separate them. Almost every player in the NFL wants to win and when you get the pitch it can be hard to turn down with those emotions pulling you towards a deal.

With an agent he may not have had to go through all that. They probably could have had an earlier start at free agency before teams started allocating their money and also been able to better sort through potential landing spots so he only went to teams really interested in meeting his contract desires.   They can have the poker face when it comes to how excited a player really is about joining a team.

I actually think it’s the softer factors like this that would have made it a more efficient process. He’ll likely be back in this position next February though this should be a bit easier for him since he will have a month to work with Denver on reworking his contract and has now been through the process once already. Normally I would say that Denver would approach him about renegotiating during the season but given his status as a player I don’t think they would do that because it might be too much of a distraction.

But I don’t think he “got slaughtered” the way many are saying. The market for what he wanted as a player simply wasn’t there and it wasn’t going to be there whether he was repped by the highest powered agency in the world or himself. Players like Okung land one year deals all the time because they end up overpricing themselves. Nick Fairley did it last year. So did Joe Barksdale. Michael Bennett was there in the past. These player all had agents doing those deals. For some it works out for some it doesn’t.

Would he have gotten a better deal if he had an agent?  I think slightly better. He would have signed sooner and generally the quicker you sign the better off you are. There might be more value in it for him if the option was picked up. I think the breakeven for Okung is probably to make sure that over the next two years he earns between $17 and $18 million.  That’s the Monroe level which is where he should have landed on a long term deal this year. Hes taking more risk to get there but a great season and he’ll do pretty well. It’s not a great deal but plenty of agents do contracts that aren’t great and we shouldn’t forget that.

  • theowl

    Another factor could have been that Okung wanted to play in Denver.

    Last year Evan Mathis signed an under market, one year contract to play for a winner in Denver. He said he could have got more. And this year he did, getting his 6 mil with the Cardinals, also a winning organization.

    It wouldn’t surprise me if Okung was offered more from other clubs. He has made a lot of money already, and after a year in Denver can explore the market again.

    For Denver it is a win, win, win. They get Okung on a geat deal for one year, have an option to have him on a second contract, or score another nice compensation draft pick two years from now!

    It’s good to be the Broncos!

    • osoviejo

      “…or score another nice compensation draft pick two years from now!”

      Jason, could you weigh in on that? How is the failure to pick up an option handled with regards to compensatory picks? Seems to me that’s a lot closer to simply being cut (no compensation), than it is losing a “free agent.”

      • Teams have learned that using those options give them the same chance for comp picks as a contract expiring

        • Troy Sowden

          What happens to next year’s comp picks in the unlikely event they do pick up the option? Does the APY go from $5M to $12M for the Broncos and Seahawks cancellation chart? Or more likely to matter, what happens if he earns either or both of those $1.5 M playing time escalators? Does his APY become $6.5M or $8M if he hits them, or is it locked at $5M?

  • eddiea

    Even though he had someone to “advise” him,i still think Denver took advantage of him. Now,if he wanted to play with for them,that’s another story,but i think that wasn’t the case. Denver just gave him the apy he was looking for,even if he’ll never come close to getting it. So basically going agentless actually cost him money,but if he’s happy no one should really “bad mouth” this deal. Even though we know he could’ve gotten more,even though he’s injury prone.

  • AKGrown

    Because the option has to be exercised before the last day of 2016 season does the APY move his compensation Draft level up to 3rd? Isn’t the lock on Compensatory Picks decided by the roster at the end of the current season? If so, if picked up by Denver, his APY would be near the 3rd level for the three years the contract was guaranteed.