Terron Armstead signed a five year extension with the Saints worth a reported stated value of $66,671,000 over six seasons, of which $65 million is considered “new money” and $20.88 million is guaranteed at the time of signing. The Expected Contract Value of the deal is $52,605,849 (79% of the stated value):
Armstead is given credit under the ECV algorithm for his young age, as his 45% probability of remaining under contract in the 6th contract season is quite high but reflects that he would play the 2021 season at the age of just 30. This raises the question of why Armstead would be willing to provide the Saints with so many team options and forego the ability to return to free agency sooner.
One reason Armstead may have surrendered so much optionality to the Saints is because he was able to secure a partial Accelerated Future Team Option Deadline on the third season of the contract. I refer to this as an “Accelerated Future Team Option Deadline” because the deadline for the Saints to make a decision on Armstead’s 2018 salary effectively accelerates to the beginning of the 2017 offseason. If Armstead remains on the roster the second day of the 2017 league year, then $6.2 million of his 2018 base salary becomes guaranteed. Because Armstead is extremely likely (98%) to remain on the roster in 2017, he is also therefore more likely to remain on the roster in 2018.
It is interesting that Armstead was able to secure a 2018 Accelerated Future Team Option Deadline, as no 2016 free agent was able to accomplish the same (or to obtain 2018 salary fully guaranteed at signing). One would think that Armstead would have had less leverage in contract negotiations than the top 2016 free agents, given that he faced the risk of playing the 2016 season for a low salary. But as I mentioned, sacrificing the ability to return to free agency during his 20’s may explain the outcome.
If this was the bargain, it means that the Saints determined that having team options on Armstead for the 2019-2021 seasons, as well as the potential for surplus value in those seasons due to presumably continuously increasing market contract sizes, was worth the near certainty of $6.2 million worth of additional risk for the 2018 season. This tradeoff is not irrational on its face, but for a team that has boxed itself into a salary cap corner with risky contract decisions in recent years, the more advisable approach would probably have been to limit the contract length (perhaps to four seasons) in exchange for omitting the Accelerated Future Team Option Deadline. However, even though this contract term adds risk, risk does not always materialize into adverse consequences. As a result, if Armstead remains healthy and plays well during 2016 and 2017, the Saints will not be any worse off for having included the Accelerated Future Team Option Deadline.
The commitment associated with this contract moves the Saints from 10th to 4th on the Commitment Index hierarchy, although they will almost surely settle in at 6th once the details of the Cordy Glenn and Jordan Reed contracts become public. With respect to 2017 True Cap Space, the team now ranks 8th (up from 12th), although the Glenn and Reed contracts will likely cause the Saints to fall back down to 10th. As a result, the Saints continue to maintain less salary cap flexibility than most teams in the league. As of now the team’s flexibility looks to be greater going into 2017 than it did entering 2016, but given that Drew Brees remains unsigned for 2017, this mild flexibility may disappear rather quickly.
So while this deal pushes the Saints farther into a salary cap bind, the team should not refrain from executing sensible transactions due to the current and future ramifications of prior poor decisions. This deal is perhaps more risky than was necessary due to the 2018 Accelerated Team Option Deadline, but the team seems to have secured optionality and potential surplus value in the back half of the contract in exchange. Overall, this contract is closer to being part of the solution for the Saints than part of the problem.
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
