John Elway has come under heavy criticism for the handling of the CJ Anderson contract. Anderson, a restricted free agent, was given the lowest possible tender by the Broncos which gave them the right to match any contract offer but receive no compensation if Anderson joined another team. For about another $900,000 Elway could have received a 2nd round draft pick if Anderson joined another team, compensation that essentially acts as a block to free agency. Anderson, of course, signed with Miami and the Broncos matched the offer but rather than paying $2.5 million this year will pay $6 million. Is it a mistake by the Broncos? It depends on Elway’s long term thoughts on Anderson and attempts they made to re-sign him prior to free agency.
If we only take the Anderson contract as a one year contract than clearly Elway made a mistake. You don’t need an advanced math degree to realize that $6 million is far bigger than $2.5 million. But somewhere lost in the shuffle of this is the fact that Anderson is under contract for more than one season. Though most of the time we see the tender process as a method of control and contractual leverage it doesn’t always mean that this is all it is.
How often do we hear about letting the market set the price of a player? It’s not uncommon for a team to tell a player to come back to them, with an alternate offer to see what they can do. It’s no different than buying a car and trying to work two different dealerships to get the best price you can. It doesn’t mean you will always bring the offer back or that the team has any intention of matching an offer but it’s possible. The RFA process can be used the same way except in this case the player has no recourse but to bring the contract back to the team and the team has the contractual right to meet that offer and have the player return to the team.
The first question to answer is did the Broncos really just want Anderson for one year but had no choice but to match the offer? I’d say that’s a clear no. Why? Well this is the Broncos. This is the team that cut Elvis Dumervil over a few dollars. This is the team that backed Peyton Manning and DeMarcus Ware into pay cuts. This is a team that wouldn’t go up a few million for a quarterback, opting instead to trade for Mark Sanchez. This is a team that agreed to a trade of a player and then demanded financial compensation back from the team they were trading him to using a somewhat obscure rule after the trade was agreed to. Denver doesn’t do anything because of fear. If they wanted Anderson for a year they would not have matched the offer. It’s that simple. So that immediately throws out the one year argument.
Now the next way to look at this is whether or not they would have been better off playing it out. Anderson has been pretty consistent in his career and in general the running back market is very tight. I doubt he would have done well enough to earn the big money like Lamar Miller, but it’s doubtful he would have really fallen either. Here are the yearly cash totals for a few running backs.
When you look at the numbers Anderson essentially got CJ Spillers contract with the incentives built into the base value of the deal. I included Bilal Powell as the lowest I could imagine Anderson dropping. Powell is basically a complimentary back used on 3rd downs. It shows how tight that market is, though there was some increase this year in that upper tier.
If we assume he gets the same contract from Denver as a free agent, which is a pretty fair assumption given his play and the rising cap, here is how the cash flow breakdown works under the three scenarios.
|Years||Matched Offer||2nd Round No Offer||ROFR, No offer|
The two year payout differential here between the preferred option, according to most, of the 2nd round tender is only $500,000, so first of all we are not talking millions like is being used to categorize the deal. Secondly when we take guarantees into account the finances work better by not using the 2nd round tender.
Despite the fact that the tender is not guaranteed on a piece of paper, that money is functionally guaranteed for a player like Anderson or his teammate Brandon Marshall. They are not going to be cut or forced into a pay cut between now and September. By matching an offer the Broncos will have paid off the entire guaranteed portion of the contract by 2017, after paying $9M. Had they gone into the 2nd round tender arena those functional guarantees end up around $11.5. Given the decline of running backs it’s generally better to get those guarantees out of the way early rather than late. You have way more leverage to renegotiate the back end of those contracts or just move on completely.
When it comes down to really grading the move it all is going to depend on the expected length of production that Elway saw for Anderson. If it’s a two year window he made the right call. If no offer was made he gains $882,000 over two years. If they match he only pays an extra $447,000 over the 2nd round tender scenario. The guarantees are also gone on the matched offer so at that point we are looking at paying $9M over two years and cutting Anderson rather than paying $11.5 million over three years where that third year is really just wasted cap and cash.
It’s more questionable if Elway sees a viable three year production period. In that case he is potentially paying an extra $1.9 million for just $882,000 in potential savings. At that point the guarantees don’t matter that much because he was expecting the player to play for three seasons. The only argument in his favor at that point is that he would rather pay the extra money to see where Anderson is at after two seasons and opt into the third than blindly be locked into the third. That’s an expensive price to pay for that option if he projected Anderson to be productive through 2017 only.
Now if Anderson is considered overpaid that also changes the way we look at it. For what its worth I don’t think Miami did anything out of the ordinary with the contract. His cap hit this year is less than it would have been on the 2nd round tender. $4.5 million is just a shade over the base value of Shane Vereen’s contract with the Giants. About the only thing out of the ordinary was that it sounds like the Dolphins included a guaranteed roster bonus in year 1. A guaranteed roster bonus is treated like a signing bonus against the cap but is not subject to forfeiture in the future. That’s not exactly in Denver’s usual contractual philosophy, but it’s nothing crazy.
If Denver could have negotiated the Ingram deal for Anderson while under the RFA tender then Elway is a loser here. If that was his end game it would have been better for Denver to control the situation and use the 2nd round tender to back Anderson into a corner. Unless you are in the room with the two sides talking initial parameters nobody really knows if they took that approach and Anderson steadfastly refused or if they didn’t make that attempt at all. If Denver did not make that attempt than I would also say that’s a mistake because they did not put their best foot forward and just left him completely to the market rather than being proactive. The gains are only there if he hits the Spiller contract and not anyone lower.
So I don’t think it’s necessarily clear that Elway made a mistake. There are too many ways to look at the contract to firmly say that. The people in that Denver front office are probably the only ones who know if they did or did not make a mistake. We’ll never know for certain, but the case isn’t as simple as saying they paid more this season therefore they made a mistake.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.