Friday, November 2, 2012

Qualifying Offers

In the old collective bargaining agreement, as the offseason began, free agents were placed in three categories, type A, type B, and neither. Type A free agents were those free agents who, according to the Elias Sports Bureau, were in the top 20% of all players over the last 2 seasons. Type B free agents were in the next 20% according to Elias, and unclassified free agents cover the rest of the available free agents. Say free agent John Smith is classified as a type A free agent. He used to play for Team X, but was recently signed to a contract by team Y. Due to Smith's status as a type A free agent, Team X will receive Team Y's first round draft pick in the upcoming draft. Were Smith a type B free agent, the process would be the same except the compensatory pick would be a 2nd round pick.

Now that you have all read and reread those rules, MLB recently amended the collective bargaining agreement to do away with the free agent classification system. Under the new system, in order for a team to receive draft pick compensation they must give any free agent a qualifying offer. A qualifying offer is a one-year contract. The contract's value is determined by averaging the annual salary of the top 125 MLB players from the previous season. All qualifying offers are for the same amount. Teams have 5 days after the World Series to make these offers while the players have 7 days more to accept or reject the offer. If they accept, they are thus signed to that deal, but if not, they become a free agent.

Making a qualifying offer to a player is very strategic. Each situation is different, but the team must be willing for the player to accept the offer, no matter how unlikely it seems. For example, Josh Hamilton is the biggest name in free agency this offseason, and the Rangers made him a qualifying offer even though they may attempt to resign him. If he chooses a different team, the Rangers will at the very least, get a draft pick in return.

The Rays offered a qualifying offer to B.J. Upton today. They have no intention of making him a contract offer, but small market teams that rely on their farm systems love to nest as many draft picks as possible. While the Rays made an offer to Upton purely to receive the compensatory draft pick, the Yankees made qualifying offers to free agents Hiroki Kuroda, Nick Swisher, and Raphael Soriano. Kuroda may actually accept the offer, which is for $13.3 million, due to his desire to play under a one-year contract and the fact that $13.3 million is $3.3 million more than the 1-year contract he played under last season. A salary increase of 33% is well deserved for a pitcher who, according to Fangraphs was worth $17.5 million. The Yankees most likely want him back. He might be able to negotiate for more, but $13.3 million is good for both sides.

Draft picks are like gold; they are never bad to have. Some pan out, some don't, but stock piling them is a great way to enhance a team, whether the team is from Tampa Bay or New York. Because free agency is a big game of chess, with the player/agent on one side and the team on the other. A good example of this is David Ortiz's situation. News recently came out that the Rangers have interest in Ortiz, which may have pushed the Red Sox to make him a qualifying offer today. Ortiz and the Red Sox will most likely strike a deal to bring the DH back to Boston, but if Ortiz and his agent don't think the eventual offer from the Red Sox will be good enough, they can accept the qualifying offer. The QO puts the ball back in Ortiz's court, forcing him to decide if he is seriously considering offers from other teams.

The qualifying offer is new, and pundits will observe what comes of this new wrinkle in the CBA over the next few seasons, and examine it's efficacy. With other changes made in the signing of prospects, a draft pick has lost some value, but the picks gained through qualifying offers will still yield teams a precious commodity.

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