Each offseason a number of the multi-year contracts signed by free agents the previous offseason are terminated. These contracts may be terminated for a variety of reasons: disappointing performance, injury, team salary cap situation, etc. These factors are, for the most part, unpredictable. However, we can use Expected Contract Value to identify contracts that are more susceptible to early termination due to their structure and other characteristics. If a number of free agent signings disappoint to equal degrees during the 2016 season, their respective contract structures may determine which players are released in 2017 and which players are begrudgingly retained.

Expected Contract Value 1.1 is the version of ECV applied at the time of signing. ECV 1.1 considers the age of the player, the number of seasons remaining on the contract, and the salary cap savings relative to the average annual value of the contract. We would expect teams to release older players with fewer remaining contract seasons and greater cap savings relative to deal value more often than younger players with more remaining contract seasons and less cap savings relative to deal value.

Last year we identified 25 players signed during 2015 free agency with a greater than 1 in 5 probability of being released after just one season. The Expected Contract Value model has evolved since then, so the results would not be quite the same if calculated today, but 11 of those players were in fact released this offseason (a pay cut is also treated as a release). The players mentioned were as follows (in order of most likely to be released to least likely): Darnell Dockett, Vince Wilfork, Trent Cole, Tramon Williams, Andre Johnson, Owen Daniels, Antrel Rolle, Jordan Cameron, Doug Free, Cary Williams, Justin Forsett, Jabaal Sheard, Kendall Langford, Curtis Lofton, Brian Orakpo, Frank Gore, Brandon Browner, Nate Allen, James Carpenter, Marcus Gilchrist, Rahim Moore, King Dunlap, Shane Vereen, Bruce Carter, and David Harris. Several more of those players would seem to still be in jeopardy of being released at some point between now and the first week of the regular season.

Expected Contract Value 2.0 is the version of ECV applied each offseason to reevaluate the probability that the player will be released or forced to take a pay cut. ECV 2.0 incorporates a one-year look back of performance, so when ECV 2.0 is applied in February 2017 we will have better probabilities based on how the players mentioned below actually play during the 2016 season. But in order to avoid trying to project performance, the tables below show the lowest expected outcomes for 2017 using the performance-neutral ECV 1.1 of multiyear contracts signed during the 2016 offseason. We would expect about 20% of players with expected outcomes of 20% to actually remain under contract, about 50% of players with expected outcomes of 50% to actually remain under contract, etc.

Player	Probability of Team Retaining Player in 2017
Antonio Gates	8.7%
Brent Grimes	11.6%
Haloti Ngata	15.9%
Donald Penn	18.9%
Mike Wallace	23.1%
Mario Williams	25.3%
Adam Jones	31.3%
Robert Ayers	41.5%
Derrick Johnson	43.6%
Tracy Porter	45.5%
Richie Incognito	46.8%
Eugene Sims	48.2%
Brandon Mebane	48.4%
Jaye Howard	51.6%
William Hayes	57.0%
Matt Forte	57.4%
Vincent Rey	58.1%
Rishard Matthews	58.7%
Sam Bradford	60.2%
Tamba Hali	61.3%
Jerrell Freeman	63.0%
Akiem Hicks	64.8%
Andrew Sendejo	65.8%
Al Woods	66.6%

 

The players with the lowest probabilities of remaining under contract for 2017 are older players on two-year contracts. Because the teams only have one team option year and the older players can be expected to decline more rapidly than younger players, we can expect the teams to be less patient with a performance decline and quicker to terminate the contract. In the case of these two-year contracts, the team does not possess the potential for future value in the form team options in 2018, 2019 and/or 2020.

Another theme of this list is contracts in which one third or less of the guaranteed money came in the form of a signing bonus (and in which there is no guaranteed salary for 2017). This description applies to 11 of the 24 contracts listed above. Signing bonuses cause prorated amounts to be allocated throughout the contract. Such amounts remain behind as dead money if the player is released, which can act as a deterrent to a contract termination if the amount is relevant. This deterrent provides the player with some degree of a buffer to suffer a performance decline before it makes sense for the team to terminate the contract. The more potential dead money associated with prorated signing bonus amounts, the larger the buffer. Contracts that contain little or no signing bonus proration are therefore more susceptible to an early termination.

The degree to which a contract is frontloaded or backloaded also affects the likelihood of it being terminated after just one season. Assuming an equal amount of potential dead money in Year 2, a three-year contract worth $15 million that has a $3 million salary cap number in Year 2 is less likely to be terminated than a three-year contract worth $15 million that has a $6 million salary cap number in Year 2. The team is more likely to view the player in the first example as a bargain relative to the size of the contract and may therefore be more lenient in terms of performance. The player in the second example will more likely be viewed as “overpaid” relative to the initial valuation, which could increase the likelihood that the team chooses to terminate the contract.

Expected Contract Value incorporates all of these considerations and weights them appropriately based on the specific characteristics of each contract. The 2016 performance and health of the recent free agent signees is largely unpredictable, but Expected Contract Value shows us what contracts possess characteristics most susceptible to termination in 2017 if we assume all other considerations to be equal.

Expected Contract Value was created by Bryce Johnston and Nick Barton.

Bryce Johnston earned his Juris Doctor from Georgetown University Law Center in May 2014, and currently works as a corporate M&A associate in the New York City office of an AmLaw 50 law firm.  Before becoming a contributor to overthecap.com, Bryce operated eaglescap.com for 10 NFL offseasons, appearing multiple times on 610 WIP Sports Radio in Philadelphia as an NFL salary cap expert. Bryce can be contacted via e-mail at bryce.l.johnston@gmail.com or via Twitter @NFLCapAnalytics.

Nick Barton is  a junior at the McDonough School Business at  Georgetown University.  He is majoring in Finance and Operations and Information Management. Nick currently interns with an NFL team . His prior work experience includes interning with CollegeSplits and Dynamic Sports Solutions, and working as a research assistant for the Center of Applied Research of the Apostolate.