Russell Okung, Guarantees, and Contract Metrics

Today it was reported that the Broncos would not be picking up left tackle Russell Okung’s four year contract option. That comes as no surprise but it once again opened up the discussion about Okung’s decision to negotiate his own contract. For those who were highly critical of the contract this gave a good opportunity to come down hard on Okung which again leads to a number of statements on the contract that I don’t really agree with. So I thought since this is the kind of stuff we discuss here this was a good platform to discuss the contract.

If you want to read my thoughts last year on this contract and the extreme negative hot takes that were happening you can do so clicking here. My guess is Ill echo some of those same points in this article, but I thought it was good to point out that article as something written before he ever took a snap with the Broncos. For the record I thought Okung probably would have done better with an agent but I don’t think the difference is necessarily that large and he still has the chance to probably earn just as much as he would have had he used an agent rather than someone working in an advisory role (OTC friend, former agent, and all around good guy JI Halsell).

One of the problems with how we all view NFL contracts is the high level metrics by which they are judged. We do that on this website ourselves because that’s the most popular and easiest way to put some hierarchy to contracts.  There are generally three numbers that get reported on a contract which are the total contract value, annual value per year, and the guaranteed salary.

Most readers of OTC know the general way that this works. The biggest numbers generally get reported by the biggest NFL reporters, typically ESPN’s Adam Schefter, and details filter out from there. The numbers reported are usually the most positive spin on a contract which means the value includes all possible incentives and all potential guaranteed salary, such as Colin Kaepernick’s $126 million extension that wasn’t really $126 million, and his record breaking guarantees which weren’t worth that much.

This broke very differently with Okung. The initial reports from Schefter on this contract were that he was signing with Denver followed by a statement on the lack of guaranteed money in the contract. So the immediate reaction to the deal was overly negative.

Phase II of the reporting usually trickles down to Mike Florio of Pro Football Talk who often gets details and adds more context to the contract, most of which is pretty good. In many cases Florio will call BS on the initial details of the contract and rightfully pull out the incentives and escalator clauses from the value of the contract and often pick on the guaranteed package. In that respect Florio was relatively consistent with this one except the approach was more negative basically saying the only reason he did this “bad” was because he had no agent. Since the sentiment was already negative that brought the negativity to an even higher level. Florio brought up the same point today that Okung being cut should somehow be attributed to not having an agent.

In recent years there have been so much reporting that says that the only important part of a contract is the guarantee that too many have totally lost sight of actually putting context into the full contract breakdown and trying to understand what the contract is trying to accomplish. For Okung this number was a big fat $0 so for those overly into the guaranteed contract metric this was a disaster of epic proportions and an example of a team bullying its way past an unprepared player. Obviously a seasoned agent never would have fallen for such a trick!

Guarantees are not something that should be looked at in a vacuum. Guarantees should be a byproduct of the value of a contract, years of potential free agency being given up, market movement, and the ability to negotiate. For Okung this became a double standard of sorts. For example Ian Rapoport tweeted out that most players get at least two years of guarantees, which I’m assuming he meant was for players signing multi year contracts.

At the same time nobody gave any credit to this being a multi year deal, instead stating it was a one year contract having a base value of $5 million with a downside value of $3 million and upside value of $8 million. If that’s the case why should he have gotten two years of protection? The correct apples to apples comparison is 1 year contracts, not multi year contracts. Here are a few of the contracts from last year.

Andrew Whitworth signed for one year at $9 million and got all of $2million guaranteed. Nick Fairley received a $3 million contract, all of which was guaranteed. Morris Claiborne got $500,000 guaranteed on a $3 million deal. Nick Perry got $1.5 million guaranteed on $5 million. Kelvin Beachum got $1.5 million on a $5 million year one payout. Things don’t seem as bad when we compare to correct subset of contracts.

There are also other little things to look at with the guaranteed package such as what is functionally guaranteed. In this case Okung earned $1 million for going to workouts so even though its not stated as a guarantee Okung’s functional guarantee on the contract was $1 million. Why do I say that?  Because the Broncos are not cutting a player less than 4 months after signing him. So basically he was in line with all of those players except Fairley. From that point he is in the same category in that he has to make the roster in September to earn his salary.

Does this mean that Okung got a great deal?  No. I would think if he had an agent he would have gotten the full $5 million guaranteed and probably had more money tied to his paragraph 5, but the fact that he received just $1 million on a $5 million base deal is not outlandish.

The other thing to consider with guarantee offers are the alternatives. When a team offers you a guarantee they are giving up something of value. They are essentially guaranteeing you a roster spot or at least a big chunk of accounting dollars for the year. What is that worth?  That’s not to say that this came up in this particular negotiation but what is a better deal, Fairley deciding to go for a 100% guarantee on a $3M contract with an added $1.75M in upside or Okung taking a 20% guarantee on a $5M contract with $3M in additional upside. The decisions are often made, or should be made, based on shifting risk in the contract.

Its like insurance in that the more risk you take via deductibles the lower your premium. You gain a potential benefit but take greater risk in your decision. If things go bad you might be out $1,000 bucks on an auto repair, but if they go well you saved more than $1,000 over the term of your insurance agreement. Its no different here. If Okung played well he would earn $8M if he didn’t he might just earn the $1M. There was probably a different balance that could have been struck that would have raised one number and lowered another.

The proper way to value a contract like this one is to look at this as two contracts. The first contract is your one year “prove it” contract. The second contract is what happens if you do prove it, which in this case was a four year, $48 million contract extension of which $20.5 million would be guaranteed upon signing. That contract would have ranked 4th in average per year among tackles and the full guarantee would only have ranked 7th among all left tackles behind Trent Williams, Cordy Glenn, Tyron Smith, Duane Brown, Eric Fisher, Greg Robinson, and Terron Armstead.  As per year basis it ranked sixth.

Ask yourself this question when looking at this contract what criticism would you have if Okung had an agent, signed a 1 year, fully guaranteed $5 million contract with no potential upside, and then signed a 4 year, $48 million contract with over $20 million in guarantees. I can tell you right now the tagline on that second one would overwhelmingly be that “Okung bet on himself and won”. So why was it never that on this contract? While there are some who will argue that there was no upside in this contract for Okung even if we value it this way, would he have ever gotten more than $12 million a year as a free agent?  No chance.

Okung was one of many players who has kind of been stuck in no man’s land when it came to a contract decision. Okung came into the NFL under the old contract system in which he was paid over $8 million a season. He was a former 6th overall pick in the draft and was once selected to a Pro Bowl. Unfortunately for Okung his career probably peaked early and he struggled more in the last three years of his contract. He also was not the most reliable of players often missing a few games every season. But it is not like he was a bust or a bad player.

For those players it becomes a very difficult decision to face the reality that while it may seem there is no logical reason to accept a pay cut the NFL views you very differently. While free agency is often great for many players for others it can be a humbling experience. In this respect he is no different than players like Fairley, Prince Amukamara, Claiborne and countless other first rounders who are good enough players but for one reason or another it doesn’t come together at the right time for them to be a standout.  I would expect the same to happen this year to Matt Kalil of the Vikings.

I have no idea what Okung was offered on any long term deals but IIRC last year I thought he would track with a number of mid tier veteran starters who earn around $7 million a season on a long term contract. It is possible that this is a contract that Okung or any other number of players in his position were willing to consider. This contract gave him the opportunity to realize what he felt was his full worth without having to go through the free agency process a second time.

If he did not hurt himself this season and that $7 million contract still exists he probably didn’t cost himself. As long as he earns between $7 and $9 million this season his 2016/2017 salary will be about the same as if he just signed a $7 million long term contract off the bat.  If he comes in less than that and had a $7M contract offer last year he probably loses out. That’s the risk he took. But no agent was securing him a contract worth $12 million a season with a $25 million two year pay out last season. He simply wasnt worth it.

As far as other issues with the contract you can find some but those were not the criticism of the deal. Like I said before the yearly contract details are often the most important part of a contract, but are rarely discussed with any context, and those are areas where he came up short. A $1M option bonus is far less beneficial than the $5 million one that was negotiated for Beachum. The cash flows of the first two option years do not compare (nor did Beachums but Okung should be considered a better player) to other recent contracts signed. Those are details that full time representation might have been able to nail down, though it would not have saved him from being cut since the reality is he is a $7M player who did his best to earn a $12M contract and came up short.

Unless you are the highest level of star in the NFL like a Von Miller or Dez Bryant, the guarantees in a contract often do little to protect the player except in the event of catastrophic injury.  Look at Tyrod Taylor. He signed a contract with a “massive” $37 million guarantee package. Taylor will likely be cut in the next few weeks earning just $9.5 million of that guarantee. The Bills went far enough to protect themselves from making that guarantee mean anything that they fired the head coach who wanted to play him in a game after being eliminated from the playoffs. Often the effective guarantee (stated guarantee versus money already contractually agreed upon but not technically guaranteed in an extension) is very low. The examples are endless of guarantees being little more than words on a piece of paper.

The fact is the only real guarantee for probably 80% of the league come from playing well enough to make a team in September especially now that the union agreed to take salary cap spending minimums out of the CBA. By allowing massive amounts of salary cap carryover and thus obscene amounts of cap room each year teams have no worries of carrying huge amounts of dead money due to prorated bonuses or carrying big yearly cap charges by avoiding signing bonuses altogether.  More and more contracts are becoming one or two year contracts with options for the future. That’s a far cry from the days where most decent players would be a lock to earn the three year value of their contract simply based on contract structures and cap ramifications of cutting the player.

I would expect this contract to continue to be overwhelmingly derided over the next month as Okung shops for a new home and if he represents himself, which I think he should consider, he next deal will probably get more harsh criticism than he will get for giving up a sack to his quarterback. And for all the faults that may exist with any contract he signed or will sign just remember there are a ton of inexperienced agents who represent players each year.  Long term the NFL is not going to ever be a place where a majority of players represent themselves so Okung is not opening the floodgates any more than Master P was able to use his celebrity to take over the agent business some 20 years ago.  Everyone should be fair in the criticism of the contract and treat it the same as they would any other one.