A Very Simple Fix for the Qualifying Offer
Yesterday, Dexter Fowler re-signed with the Cubs, taking $13 million for one year, or $2.8 million less than he would have made had he accepted the qualifying offer back at the beginning of free agency. Along with Yovani Gallardo and Howie Kendrick, Fowler became the third QO-offered player to accept a deal that was worse than the one they passed up, and Ian Desmond seems likely to join them in that group when he signs as well. These four players were crushed by the draft pick compensation that the QO attaches, as teams were reluctant to give them long-term deals based on perceived risks with their skillsets, but also didn’t want to surrender a valuable draft pick for a short-term asset.
The qualifying offer has worked for MLB teams, driving down free agent prices by serving as a tax on salaries for a select group of players, but because it’s so regressive in nature — and is inequitably applied — it is highly unpopular, and will almost certainly be revised in some way in the next CBA. There have been any number of suggestions for how to amend the system; I suggested removing the seven-day acceptance window a few years ago, and Nathaniel Grow pointed out that the system could work better if it moved to a multi-year offer, instead of a one-year tender that players are loathe to accept before testing the market. There’s also a pretty rational argument that the system should just go away entirely.
But those are big changes. Big changes are difficult, and often have unintended consequences, so more frequently, people prefer to make tweaks rather than overhauls. So if we look at the current qualifying offer system, agree that it needs adjusting, but limit the potential solutions to things that would be easier to agree upon and wouldn’t be a dramatic shift from what is already in existence, is there a way to make it so that players like Fowler, Kendrick, Gallardo, and Desmond don’t get stuck in free-agent limbo after they learn that the market isn’t going to give them the long-term deal they were seeking?
I think there is. As we saw with Fowler’s desire to obtain an opt-out in the deal he was negotiating with Baltimore, players who don’t get long-term deals after turning down a QO shift their priority to wanting to get back on the market as soon as possible. Unfortunately for players like Kendrick, Gallardo, Fowler, and Desmond, teams don’t want to surrender a pick in order to just have a player for one year; the cost of surrendering that selection, and the pool money that goes along with it, are too high for most teams to justify without being able to amortize it over multiple years of expected value.
So what if MLB just got rid of draft pick compensation for one year deals? Under this scenario, any player who turns down the QO can, at any time, sign a one year deal with any team, and the signing team does not surrender a draft pick in order to sign the player.
It is, in some ways, an expansion of my idea to extend the qualifying offer out beyond the seven day window, though that still locked the player into accepting a deal from just one team, and put teams in a position where their offseason plans could be held hostage by a player who could blow up their budget or their depth chart by taking a deal after they had already moved on to other alternatives. In this scenario, instead of having the qualifying offer remain in place for the entirety of the offseason, players who tested the market and found it less exciting they had hoped would still be able to pivot into a short-term deal and try for a big contract again next winter.
For players at the top of the market, this wouldn’t change anything. David Price wasn’t taking a one year deal, and when you’re paying $230 million, giving up a pick worth ~$10 million isn’t a big tax on the price. All the guys who were going to get multi-year offers would almost certainly still get multi-year offers under this scenario, as the long-term value would still be in place to justify surrendering the pick. The big change would potentially be seen in the middle tiers of the free agent market, which is where the draft pick tax represents a significant portion of the price teams have to pay.
If teams could keep their draft pick by offering one year deals, we’d very likely see a shift towards shorter-term, higher-salary offers, and probably a pivot away from the multi-year deal with an early opt-out that we saw this winter. The incentive would then be on teams to get players who aren’t looking for 4+ year deals to settle for one year instead of two or three year deals, and with the removal of the draft pick tax from the cost, teams should rationally be willing to move some of that saved value into the player’s salary. If you value the pick you’d have to give up on a multi-year deal at $10 or $15 million, then it makes sense to give the player $5 million more in salary to get him to take a one year deal.
Overall, this would probably create a system where there was a dramatic difference in the annual average value of a multi-year deal versus a one year offer, so players would have to choose whether they wanted to maximize their salary or take a significant discount to get some security. Most players would probably still choose the security of a multi-year deal, as there are non-monetary benefits for the player’s families and lifestyle. But when a player found that the market wasn’t what they were expecting, they would no longer be trapped, unable to pivot to a short-term deal because of the draft pick compensation that currently exists.
If neither side has the appetite to tear up the existing system and start over — or just eliminate the system entirely — then a more minor change like this could help alleviate the situations that cause the most grief. Rather than having quality players sitting around while spring training begins, this change could create an opportunity for players to accept that the market doesn’t want to give them a long-term contract, and still sign an equitable deal that reflects their value on for one year. I’d prefer a larger overhaul of the system myself, and would be in favor of scrapping draft pick compensation entirely, but if a more minor change is desired, then something like this could solve the biggest issue with the qualifying offer system at the moment.
Dave is the Managing Editor of FanGraphs.
My idea is this: Set the QO value. If the player declines, and signs a deal with an AAV above the QO, picks changes hands. If the player signs under, no picks change hands.
It’s not perfect, but I think it’s better than what’s existing now. People will say it can be “gamed” but then you’re really needing players, agents and teams to be complicit in this “scheme” which I don’t think is very likely.
I like this idea. I feel that a lot of teams are attaching the QO to players who most likely aren’t getting a QO+ contract, that these teams are hurting these players market value when normally they wouldn’t pay that player the QO for one year.
My only worry is that signing teams could game this by signing for QO minus $1,000 (or something low like that). So maybe QO-$1M? Enough that the player who thinks he is worth more is not going to put up with losing that much. Another way to game it is to sign for under the QO plus include easy incentives that puts the player easily over the QO. Not sure how to fix that problem. Still, I like this idea.
The idea in the article about the signing team not losing the draft pick if it is a one year contract is good too. What it did not address is what happens to the team losing the player. Do they still get a pick anyway, since it is a supplemental?
Also, it would incent teams to sign for one year to avoid losing a pick, then sign the player to the long term deal later. Could even be a “trust me” deal, where in the spring, the team announces that they have a long term extension deal with the player, which they had already negotiated prior to the one year deal.
So a rule to add here might be that the signing team does not get to negotiate a long term deal with the player, the player must go into free agency period and is not allowed to sign for, say, a month. So even if a deal is done under the table, another team could come in and beat it, much like Greinke looked like he had to chose between LA and SF, and ended up with AZ.
Both ideas have merits but a team could game them, and I’m not sure there is a way to stop the gaming. Perhaps Dave’s original idea of extending the period beyond 7 days would be better and allow the players to talk with other teams. That would give players a better sense of the market demand for their services, so that they can make a better choice.
Though I’m starting to get the feeling that there will never be a “perfect” system, there will always be gaming going one (cuz we is humans…).
I’ve suggested this in previous discussions, but maybe set it so that any team that matches the QO exactly (no incentives, options, etc.) does not have to give up a draft pick, so avoiding the loopholes.
I’m not fond of it, especially since a multi-year contract is much more valuable than a one-year contract for the same AAV. The QO was about $16MM this year. I don’t see a problem losing a draft pick if you sign someone to a 5 year, $65MM contract, even if the AAV is a few million less than the QO. Or even what Daniel Murphy signed for, or Gallardo almost signed for – that’s a big enough commitment to give up the pick.
I’d be more inclined to agree with the idea if it was 75% of the QO, or something along those lines. If you sign for less than that, then maybe the QO was really impacting your value.
How about if the total value of the contract if less than the QO, regardless of years? That could be a good compromise between 1 year with no restriction on money, and AAV.
Or they could raise the QO to around 18-20 million. Or just get rid of the seven day period to accept it. Why should the player on suffer because he’s tagged let these teams feel it to by using the tag. It’s only fair!