Front Office Scheme Bolstered by Ability to Trade Compensatory Picks

On Friday, February 23 the NFL released its annual list of compensatory picks for the draft on April 26th (see here). Thirty-two draft picks were awarded to fifteen teams, with the Bengals, Cowboys, Packers and Raiders leading the way with four each. In a nutshell, teams receive a compensatory draft pick for each of their unrestricted free agents signed away by another team in a given offseason, minus the amount of unrestricted free agents they sign from other teams, up to a maximum of four. The teams that are awarded the picks, as well as the round in which the picks fall, are determined by the NFL using a “secret formula.” (For a detailed overview see Over The Cap: Comp Picks Explained). Full 2018 list:

2018 NFL Compensatory Draft Picks

Cincinnati4
Dallas4
Green Bay4
Oakland4
Arizona3
Houston3
Minnesota2
Atlanta1
Baltimore1
Denver1
Kansas City1
LA Chargers1
New England1
New York Giants1
Tampa Bay1

With the introduction of compensatory draft picks in the 1993 Collective Bargaining Agreement, the NFL sought to provide relief for teams that lost quality players in free agency. The picks serve as a consolation prize for a team potentially losing a key player within their organization. As with any new provision in a CBA, there are always loopholes to be exploited (and they’re usually first discovered by the Patriots). The advent of the compensatory pick was no different, and many tricks of the trade have since come to the surface.

One such example may have played a role in the Packers’ early dismissal of Martellus Bennett this past season. Putting his struggles on the field aside, Bennett was projected to count against the Packers’ compensatory pick considerations in this upcoming draft. However, one stipulation of the compensatory pick determination dictates that if a team cuts a player before Week 10 that player won’t count against their picks (it’s an added bonus when someone claims the player off waivers and bears the full burden of their contract, which is what the Patriots did with Bennett).

Beginning with the 2017 draft, the NFL owners voted to allow compensatory draft picks to be traded. This update provided further incentive for teams to stockpile comp picks, and it will likely lead to a strong uptick in another popular front office maneuver involving the comp pick formula. With 2018 free agency in full swing, prepare to see more contracts that include team options on the back end, and here’s why:

If a team decides they no longer want a player that has years remaining on his contract, they must cut him before the first day of the league year (March 14th for 2018). If a player is cut, thereby terminating his contract before its natural end, the player cannot count towards a team’s compensatory draft pick award when another team signs him. On the other hand, if a team no longer wants a player whose contract includes a club option for the upcoming season, declining to pick up the option is not considered terminating a contract before its natural end.

Although the result of a cut and declined option is the same; the team foregoes their exclusive right to retain a player, one may result in the team receiving a draft pick while the other cannot. This trick was already enticing to clubs prior to the rule change in 2017, and now that these picks may be traded we should expect to see it even more often. The traditional club option includes an option bonus; a lump sum of money treated as a signing bonus, if the team picks it up then the player has the option bonus amount prorated over the remaining years on the contract. These options were usually attached to the later years of a contract, four or five years after its execution. Recently, teams have begun including club options in contracts that are not tied to an option bonus, but are merely an agreement that the club has the right to terminate the players’ contract at the end of a season without it being considered a true cut. These “options” provide a lot of flexibility for the franchise at essentially no cost, and teams like the Ravens have begun including them after each season of a contract (more on this later).

A prime example of a club option where the team planned for a compensatory pick was Darrelle Revis’ contract with the Patriots. New England signed Revis in the 2014 offseason for 2 years, $32 million. However, here’s the contract breakdown:

($10 million total signing bonus)

Year 1 – 2014

2014 P5 Base Salary of $1.5 million fully guaranteed

2014 Per-game Roster Bonus of $500,000 (total of $500,000 over 16 games)

2014 Signing bonus of $5 million fully guaranteed

Year 2 – 2015 (Club Option)

2015 P5 Base Salary of $7.5 million

2015 Roster Bonus $12 million

2015 Per-game Roster Bonus of $500,000 (total of $500,000 over 16 games)

2015 Signing bonus of $5 million fully guaranteed

The Patriots effectively got Revis, considered by many to be the best cornerback in the NFL, for one-year, $12 million ($10 million signing bonus, $1.5 million 2014 P5 base salary, $500,000 per-game roster bonus for 2014), and won a Super Bowl in the process. The $20 million price tag for exercising the club option on Revis in 2015 ($7.5 million 2015 P5, $12 million offseason Roster Bonus, $500,000 per-game roster bonus for 2015) was presumably not going to be picked up, especially by the Patriots. Revis instead signed a monster deal with the New York Jets, and the Patriots received the second highest compensatory pick in the 2016 NFL draft, the 96th overall pick in the 3rd round.

Although perhaps not the primary reason for including the option, another example of this practice occurred in the 2017 offseason, and it certainly paid off in a big way. Prior to the start of the 2016 season the Denver Broncos signed Russell Okung (who was acting as his own agent which cannot be ignored) to a 5-year / $53 million-dollar contract. However, the contract included a club option after 2016, and the details left virtually zero incentive for the Broncos to retain Okung after one year. Take a look at the breakdown of Okung’s deal:

Year 1 – 2016

P5 Base Salary: $2 million non-guaranteed

Roster Bonus: $2 million non-guaranteed

Rehab Bonus: $1 million non-guaranteed (Okung had offseason shoulder surgery)

Okung performed adequately in 2016, but anything short of dropping back under center and slinging a few TD passes for the QB desperate Broncos pretty much assured that his club option would not be picked up. The team option ($1 million) going into Year 2, if exercised, provided Okung the following:

Year 2 – 2017

2017 P5 Base Salary of $2 million fully guaranteed

2017 Roster Bonus of $8 million fully guaranteed

2018 P5 Base Salary of $9.5 million fully guaranteed

Had the Broncos exercised Okung’s option they would have been on the hook for $19.5 million dollars fully guaranteed, after not guaranteeing him a penny in Year 1. This was never going to happen, but when Okung signed with the LA Chargers before the 2017 season (4 years / $53 million) his final contribution to Denver came in the form of the third highest compensatory pick in the entire 2018 draft. Denver selected Isaac Yiadom with the 99th overall selection in the 3rd round of 2018 thanks to Okung and a club option that all but ensured he was gone after a year. This scheme can yield tremendous returns for teams, and there is almost no downside. One can only imagine the impact on contract construction across the league now that these compensatory picks are eligible for trade, thus driving up their value.

Compensatory pick scheming can also backfire, such as a team insulting a player with a tender offer, where it is clear the only reason they extended the offer was in hopes of receiving a comp pick. This was the case with the Patriots’ handling of LeGarrette Blount. In the 2017 offseason, the Patriots extended a tender offer to Blount for one-year, $1.1 million dollars. The offer came on the last day that NFL teams would receive a comp pick if they lost a player to free agency. The Patriots had seven other running backs on their roster and had previously shown no interest in retaining Blount. New England was taking a gamble that someone else would top their offer, with the risk of just over one million dollars worth taking. Sure enough, the Eagles stepped in and beat New England’s offer, leaving the Patriots with the right to match it or potentially receive a comp pick. According to our comp pick expert, Nick Korte, Blount was just outside of the 32-compensatory pick limit, and will award the Patriots nothing. Blount certainly has the last laugh for now after steamrolling New England in the Super Bowl to the tune of 90 yards and a touchdown on just 14 carries.

Now, you may be thinking there is no way a late-round draft pick could possibly make up for the loss of a good player. Well, as previously mentioned, the Patriots are known for their excellence in exploiting all that the CBA has to offer. New England used a comp pick in 2000 when they drafted a QB prospect out of Michigan by the name of Tom Brady in the 6th Round with the 199th overall (compensatory) pick. The list of notable compensatory pick selections is a long one, with franchise cornerstone players including:

Mike Vrabel – Pittsburgh Steelers, Round 3, Pick No. 91 overall, 1997

Matt Hasselbeck – Green Bay Packers, Round 6, Pick No. 187 overall, 1998

Marques Colston – New Orleans Saints, Round 7, Pick No. 252 overall, 2006

La’Roi Glover – Oakland Raiders, Round 5, Pick No. 166 overall, 1996

Hines Ward – Pittsburgh Steelers, Round 3, Pick No. 92 overall, 1998

Josh Sitton – Green Bay Packers, Round 4, Pick No. 135 overall, 2008

Antoine Bethea – Indianapolis Colts, Round 6, Pick No. 207 overall, 2006

Pierre Garcon – Indianapolis Colts, Round 6, Pick No. 205 overall, 2008

Dak Prescott – Dallas Cowboys, Round 4, Pick No. 135 overall, 2016

David Tyree – New York Giants, Round 6, Pick No. 211 overall, 2003

Malcolm Smith – Seattle Seahawks, Round 7, Pick No. 242 overall, 2011

Ahmad Bradshaw – New York Giants, Round 7, Pick No. 250 overall, 2007

Super Bowl MVPs, perennial Pro-Bowlers, and the greatest Quarterback that ever lived are just some of the compensatory picks from years past. Certain NFL teams prioritize acquiring compensatory picks far more than others, with the Ravens topping the all-time list with 49 (roughly two per draft since 1994), and the Saints bringing up the rear with just 10. Here is the full list:

SUMMARY OF COMPENSATORY DRAFT PICKS, 1994-2018

Baltimore49
Green Bay42
Dallas41
New England35
Los Angeles Rams33
Cincinnati32
Pittsburgh32
Philadelphia30
San Francisco30
Tennessee30
Seattle29
Buffalo28
Kansas City24
New York Giants24
Arizona22
Indianapolis22
Denver21
Detroit21
Oakland21
LA Chargers20
Miami20
Atlanta19
Jacksonville19
Minnesota19
Tampa Bay19
Carolina17
Chicago17
Houston15
New York Jets14
Cleveland13
Washington12
New Orleans10

Contract Construction

Player agents would be wise to leverage the possibility of their client awarding the team a comp pick during contract negotiations, considering the team will likely be the one to introduce the idea of a club option. Draft picks have a ton of value, this was clearly evidenced by the Browns who last year paid $16 Million for a 2nd Round Pick. The Ravens, who love to stick as many club options into their contracts as possible, included a club option in every year of Brandon Carr’s contract. The ability to decide at the end of each season whether a player is worth retaining, or whether you would prefer to let him hit the open market and potentially receive a draft pick in the process, is a very nice position to be in.

Here is the list of players who had club options built into their contracts for the upcoming 2018 season:

2018

Brandon Carr CB Baltimore Ravens – $7,000,000 (Exercised)

Adam “Pacman” Jones CB Cincinnati Bengals – $6,447,918 (Declined)

Austin Howard RT Baltimore Ravens – $5,000,000 (Declined)

Torrey Smith WR Philadelphia Eagles – $5,000,000 (Traded)

Alan Branch DT New England Patriots – $4,550,000 (Declined)

Elvis Dumervil OLB San Francisco 49ers – $4, 250,000 (Declined)

Cordarrelle Patterson WR Oakland Raiders – $3,250,000 (Traded)

Josh Robinson CB Tampa Bay Buccaneers – $1,875,000 (Exercised)

Here are some notable players who have a club option in their contract for the 2019 season (with 2019 Salary Cap Hit) :

2019

Jason Peters    LT       Philadelphia Eagles     $10,666,668

Pierre Garcon  WR      San Francisco 49ers    $8,400,000

Menelik Watson RT    Denver Broncos          $7,458,334

Brandon Carr  CB       Baltimore Ravens       $7,000,000

Jerick McKinnon RB  San Francisco 49ers    $6,000,000

Kyle Juszczyk FB       San Francisco 49ers    $5,950,000

Recent Signings

It should be no surprise that some of the biggest contracts signed so far in free agency (excluding Quarterbacks), are full of club options:

Andrew Norwell G Jacksonville Jaguars 5 yrs/$66.5 million – Club Option 2020, 2021, 2022

Malcolm Butler CB Tennessee Titans 5 yrs/$61.25 million – Club Option 2020, 2021, 2022

Weston Richburg C San Francisco 49ers 5 yrs/$47.5 million – Club Option 2021, 2022

Anthony Hitchens LB Kansas City Chiefs 5 yrs/$45 million – Club Option 2020, 2021, 2022

Nigel Bradham LB Philadelphia Eagles 5 yrs/$40 million – Club Option 2020, 2021, 2022

Jerick McKinnon RB San Francisco 49ers 4yrs/$30 million – Club Option 2019, 2020, 2021

Most of these new club options do NOT include an option bonus, thereby giving all the benefit to the team while the player must enter each offseason with questions about their future. It is quite a luxury when managing a roster headed into the offseason. Additionally, having a stash of compensatory picks during the draft leads to plenty of maneuvering and creativity. Cincinnati, Green Bay, Oakland and Arizona – 4 of the top 5 teams in terms of 2018 compensatory pick allotment – all made trades in the first round of the NFL Draft (Green Bay and Oakland made multiple). With more ammunition in their arsenal, and with the new ability to use compensatory picks in draft day trades, these teams were very active throughout the draft. Whether or not the picks work out is a different story, but what is for certain is because of comp pick capital these teams were aggressive in landing their targeted guys in the draft at the moments they felt necessary.

With some teams carrying up to twelve total draft picks (Green Bay had eight standard picks and four compensatory picks), they can package these in trades to maneuver around the draft board, and ideally get the seven-to-eight guys they want most. In the case of the Packers, they traded back in the first round from 14 to 27 and secured a 2019 first-round pick from the Saints in the process. Green Bay then traded back down with the Seahawks to 18 to take Jaire Alexander from Louisville, sending Seattle their 3rd and 6th round picks and recouping a 7th rounder. They then traded a 4th and 5th round pick to move up to the 88th overall pick in the 3rd round and land Oren Burks from Vanderbilt. With all this maneuvering they still drafted eleven players. They traded away their 3rd, 4th, 5th and 6th round picks, but it hardly mattered considering they had two 4ths, a 5th and a 6th in compensatory picks. Whether or not the players pan out remains to be seen, but the Packers did not have to rely on taking the “Best Player Available,” they didn’t sit in their war room hoping a guy they liked would fall to them, they were able to go get the guys they wanted when they felt they needed to.

It is probably no coincidence that the top four teams on the all-time list of compensatory picks (Baltimore, Green Bay, Dallas, New England) happen to be four of the best teams in the NFL at producing home-grown talent. They simply have a higher likelihood of one or two of their draft picks working out when they bring eight-to-ten new draft picks into camp every year.

Thoughts on the Jaguars, That Superb Defense, and Blake Bortles

The Jaguars defense has played at an elite level this season. They have kept opponents to an average of just 15.3 points per game, a mark which no team has achieved since the 2013 Super Bowl-winning Seahawks (14.4).

They are talented and productive, while also being relatively young when you consider that several of their stars are aged between 23 and 26 — Jalen Ramsey is already a top shutdown corner at age 23; Telvin Smith at 26 has built on his hype and is entering his prime as one of the better defensive playmakers in the league; AJ Bouye is also 26 and has earned every cent of his big deal; and then there’s three players under 24 who are thriving in the system – Yannick Ngakoue, Myles Jack and Dante Fowler Jr. Continue reading Thoughts on the Jaguars, That Superb Defense, and Blake Bortles »

Thoughts on Dolphins QB Situation

With Ryan Tannehill potentially lost to injury the Dolphins have turned towards Jay Cutler to see if there is interest in taking over for the season. Cutler was released by the Bears this offseason and garnered little interest on the free agent market before deciding to go into a career in broadcasting. He has a history with Miami’s head coach, but it’s a move that I don’t think I would make unless the cost is very cheap.

The cost aspect is hard to judge. In free agency we can usually find many comparable situations but I’m not sure I can come up with a comparable in this case. The two most logical comparisons are Sam Bradford last year being traded to the Vikings and Chad Pennington way back in 2008 signing with the Dolphins during the summer.

However neither was unemployed for the entire year the way Cutler was. Bradford was slotted in as the starter of the Eagles and was traded when the opportunity presented itself. Pennington was well on his way to being named the starter for the Jets when they made a trade for Brett Favre. I guess you could throw Favre into the mix as well. I’m sure there must be some others I’m forgetting but with my Jets hat on, the most legit comp I could come up with was the Jets signing Vinny Testaverde off the couch in 2005 to try to salvage a season that got derailed when Pennington went down to injury early in the year.

Because two of those players came over via trade I don’t think they really have much meaning beyond the fact that both were paid high salaries and there was no attempt at a pay cut. The Jets and Vikings simply paid top dollar. Testaverde was at a point in his career where he was a minimum salaried player and was generally thrilled to get a chance to come back to New York so he was never going to push the issue.

Pennington is really the best example. He earned $4 million in base salary from the Dolphins in 2008 after being scheduled to earn $6 million with the Jets. He had played the prior season with the Jets for $4 million and was on a contract that paid him $5.25 million per year. Pennington also had another $1.75 in incentives which he earned which essentially let him earn back his Jets pay.

Cutler played last season on a contract that paid him $18.1 million per season and he earned $16 million in 2016. If we apply the same situation to Cutler as Pennington we are likely in a range of $13-16 million for the year with another $2-3 million in incentives. While its possible Cutler could sign for less, the end of his career seemed to have more to do with lack of good money offers than anything else. Cutler has made close to $118 million in his career and has never come across as the type that was playing just because he loved it ala Favre. He really doesn’t need the job unless Miami makes him a real concrete offer.

That’s a big price for a team with $18 million in cap room this year and more importantly just $3 million in estimated space for 2018. That kind of salary effectively puts Miami “all in” on 2017 and in looking at their roster I don’t know how wise of a decision that is.

While the Dolphins made the playoffs last year I don’t think anyone took them for real. In my efficiency rankings I do I believe they projected to be a 7 win team and most advanced metrics put them in the same range. I can’t point to anything they did this offseason as a major change and the Julius Thomas for Branden Albert move is probably a downgrade in overall impact.

Here is the thing with Cutler. For all the arm talent that he has and all the money he has earned, he has never really had a run in which you could point to him as the reason a team won games. He had a talented team around him in Chicago with Brandon Marshall, Matt Forte, and Brandon Marshall and it never really amounted to much. As the talent around him fell so did the record.

If you are a team like the Texans that has had a dominant defense or running game I get the idea of a Cutler type since he’s a professional QB that is a known. If Russell Wilson went down with an injury in Seattle or Dak Prescott went down in Dallas I get the concept of bringing in Cutler. It’s the same reason why the Vikings, who had a young and very good defense, brought in Bradford to try to manage the offense while the defense won games.

That isn’t Miami. Miami has a pretty average defense and an inconsistent offense with a few pieces, none of whom can keep the QB upright. Miami isn’t much different than Baltimore and I cant imagine Baltimore considering bringing in a Cutler with the roster they have. Its not worth the resources.

Miami has Matt Moore on the team and is there that kind of difference between Moore and Cutler on this particular team?  I don’t think there is. Part of the issue with Moore, and probably why the Dolphins feel the need to make this move, is that he was a mess in the playoffs. Moore gives the team essentially no chance to compete against good teams. But Moore does give them a chance to win against teams like the Jets, Bills, Chargers, Saints, Ravens, Bucs, Titans, and Panthers.

Does that mix really change with Cutler?  Maybe hes not as embarrassing against a good team but hes never shown an ability to beat those teams either. There are games Moore could lose if he was on a team with a really good defense, but that’s not Miami either. To me this is just a lateral move that is more psychological because of the name. $5 million is fine for him, but once you are going over $10 million its just wasted money for the same result.

I don’t anticipate the Dolphins to be much different with Moore than they would have been with Tannehill.  The lone difference is that Tannehill still had some potential there and a ceiling that maybe we had not seen. Maybe the day was coming when Tannehill could win a game for the team. I cant look at Cutler and say he is going to win a game for the team that they would not have won anyway. Hes never done it on teams similar to this so why would it change now?

The other thing about the Dolphins is the future of Tannehill. Ive gotten some questions about this the last few days and I slant towards thinking that his Miami career could be over especially if they do sign Cutler. Since Cutler is giving up a broadcasting career to make this move and it would be hard to picture Fox, NBC, or CBS taking him right away again after this, he should look for a second year with the team.

Tannehill has also been injured two years running and there are a number of intriguing free agents next year. You cant wait forever for a QB to potentially develop and if you can sign Drew Brees or Kirk Cousins you will make that move. There are other options out there too next year that would be at worst lateral moves from Tannehill.

So when you hear about Tannehill wanting to avoid surgery again to rest the knee and hope for the best, its probably in his best interest to do so. If he at least sees the field this year he will give the Dolphins consideration to keep him at a $17.5 million salary next year. If he was to get injured later in the year and be forced to get surgery its likely that a $5.5 million injury guarantee would kick in and at least give Miami a good reason to not release him and to give him the opportunity to reclaim a starting job. So if he fights surgery I think there are a lot of reasons for him to do that.

NFL Cutdown Day 2015 Part I: Salary Cap Considerations

Its not often that the first cutdown day in the NFL brings with it much news, but over the last 24 hours there have been a few moves with cap implications and there may be more to come as teams need to reach 75 players by Tuesday at 4PM. I’ll keep this as a running thread for updates on some of the name players that are moving on from their teams over the next day so to discuss the cap implications so check back every now and then for updates. Continue reading NFL Cutdown Day 2015 Part I: Salary Cap Considerations »

Vikings Extend John Sullivan

The Vikings have extended the contract of center John Sullivan through 2017 according to ESPN’s Field Yates.  Technically the extension is valued at one year for $8.5 million, but the reality is that the contract is a $2.25 million raise for this season and $3 million over the next two years. Such a contract avoids any potential contractual problems this summer, keeping the team’s starting center happy and fully involved with the team.

Sullivan, who was scheduled to earn $4.75 million this year, will now earn $7 million, but just $1 million of that raise comes from a signing bonus, which keeps the Vikings accounting records clean in the event they want to move on from Sullivan at any point in the future. His actual “extension year” carries a $5.5 million salary, but he could be released that year with just $333,334 remaining on the salary cap, so this is essentially a pay as you go style contract.

The Vikings lost $1.333 million in cap room by extending Sullivan. Sullivan had previously counted for $6 million on the cap. His new cap charge this year is $7.333333 million. The following two seasons will have Sullivan at cap charges of about $5.83 million each year. Sullivan had been OTC’s pick for best contract on the Vikings due to their decision to lock him up early rather than allowing him to test free agency. The $6 million he can earn over the next three seasons puts him somewhat back in line financially with his actual production.

49ers Stars Planning Retirement

Per multiple news outlets it sounds as if both Patrick Willis and Justin Smith will retire from the NFL rather than returning to play to the 49ers in 2015.  The deal will clear a great deal of cap space for the 49ers, but will also mark the end of the careers of two exceptional players who helped the 49ers to a period of great success that nearly culminated in a Super Bowl win.

Willis was the premier inside linebacker in the league for his generation. He was rewarded with a $10 million per year extension in 2010 that has stood as the gold standard for the position since then. The 49ers and Willis did a wonderful job in working together on his contract such that they dumped millions of charges into the uncapped 2010 season and expected down 2011 season to make his cap hits manageable in the future. Willis really had no “dead money” protection in his contract by agreeing to such a structure. Because of the way his contract worked Willis will only count for $843,500 against the 49ers salary cap if he retires. That will give the 49ers $7,424,500 in cap relief this season, which is a significant number.

Smith also found a home in San Francisco and became one of the best defensive ends in the NFL after signing with the team in 2008. He had signed a very reasonable contract extension with the team in 2013 despite possibly being able to earn more by playing his contract out and hitting the open market. The 49ers will carry $2.187 million in  dead charges for Smith, but it opens up $4.25 million in space for the team.

If both players do retire this will likely mark the end of an era for the 49ers. I had speculated that their window had shut last season when they struggled to remain in playoff contention. Now it looks as if long term stars in Willis, Smith and Frank Gore will be gone. Mike Iupati will likely not be back and Ahmad Brooks should soon be out the door as well. It is hard to say that this is a rebuilding effort, but the team will clearly be looking at many new faces for the first time in years.