The current qualifying offer system has been in place for three years now. A qualifying offer is a one year contract worth the average of the top 100 salaries in baseball. This year, that makes the offer worth $15.8 million. If a player turns down the offer, the team that signs them has to forfeit their highest draft pick. I think at it’s heart the system was meant to help those small market clubs that lose their star player to a team that can afford to overpay him. But as usual, that is not how things have been working out. Big market clubs have been able to take advantage of the system and mid-tier players have had their earning potential hurt the most. The system as it is now is unfair and it needs to be fixed.
Right now if a player turns down a qualifying offer they have draft pick compensation attached to them. That means the club that does sign them has for forfeit their highest draft pick. If you’re Zack Greinke, Jason Heyward, Justin Upton, or any other elite level player this doesn’t impact you at all. Teams are going to fall over themselves fighting for your talent and you’re getting paid regardless.
But if you’re a mid-tier talent, it’s likely you’ll end up getting less than you would with out the draft pick compensation attached. Kyle Lohse in 2013 had to settle for a three-year deal worth $33 million, which he didn’t sign until Spring Training was almost over. At the time, Lohse was a 2/3 caliber staring pitcher. He was a bit older at 34, but he still should have been able to get a better deal.
Kendrys Morales was never a good fielder and bit of a light hitter for a a guy who was mostly a designated hitter. However he owned a 128, 119, and 119 wRC+ in his three seasons prior to becoming a free agent. It’s a pretty similar profile to Billy Butler who signed a three-year deal worth $30 million last offseason. But Kendrys Morales didn’t sign a deal until June of 2014 – he had to wait until the draft was over. He only ended up making $7.5 million that year. On top of that he had a terrible season likely related to the fact that he could play for so long. He then signed a deal that paid him $6.5 M this year, $9 M next year, with a mutual option for 2017 at $11 M. His total earnings are well short of the 3/30 deal he possibly could have received.
In addition to hurting mid-tier players, the QO system favors teams with the most money to spend. In 2014, the Yankees and Red Sox each had three players turn down a qualifying offer. The Yankees ended up re-signing one player. Then they signed two different players with draft pick compensation, which resulted in them forfeiting their first round pick and one of the comp picks they received from the QO system instead of forfeiting their first and second round picks. The Red Sox re-signed two players and netted one comp pick. This year the Dodgers have extended three qualifying offers and stand a good chance of getting three comp picks.
Teams like the Brewers, Royals, Twins, etc are never going to be able to take the risk of handing out three qualifying offers worth a total of $47.4 million. That accounts for 45.5% of the Brewers payroll in 2015, 42% of the Royals, and 43.8% of the Twins. These teams simply can’t afford to take the risk of tying up so much of their payroll in three players like the Dodgers, Yankees, and Red Sox could.
The current collective bargaining agreement ends on December 1, 2016. So next offseason, a new one will have to be negotiated. It’s my hope that a new qualifying offer system is negotiated to take the place of the current (broken) system. In a perfect world, it might just be best to eliminate draft pick compensation entirely. But MLB doesn’t like things simple and this system does limit free agent earning potential, so the owners will want to keep something like it in place. Lucky for them, I have a suggestion.
Instead of one flat rate offer, I suggest a multi-tiered method. Tier A is a three-year deal with an annual average value equal to the average of the top 100 paid players in baseball. Assuming the player turns this offer down the team that signs him would forfeit their first round pick. The team that extended the qualifying offer would then get a pick after the first round.
Tier B would be a two-year deal with an annual average value equal to the average of the top 100 paid players in baseball. The team that signs this player would only lose their second highest pick. The team that extended the qualifying offer would then get a pick after the second round.
This way rich teams cannot abuse the qualifying offer system to net draft picks. There is no team that would extend a Tier A qualifying offer to Marco Estrada or Ian Kennedy. They’d even have to think twice about offering it to guys like John Lackey, Colby Rasmus, and Howie Kendrick. Those players would only get a Tier A offer if the team really wanted them back because there’s a strong likelihood they’d accept. And then it’s fair to both parties.
Or instead the team could extend a Tier B offer. Maybe the team doesn’t think they’re worth the risk of the three-year deal but either wants them back on two-year deal or is hoping they’ll get some kind of draft pick compensation. Having to forfeit your second highest pick – typically a 2nd round pick – is a lot easier to do. This would mean the potential earning penalty these players face won’t be as severe because it wouldn’t limit their market quite as much. They’d also have the option of accepting, in this case, a two-year contract worth $31.6 M. It’s also far less valuable to get a draft pick after the second round so I don’t think you’d see a lot of team extending the offer simply for the draft pick.
It’s not a perfect system but I do think it’s more fair than the one currently in place. It would stop teams from abusing it too much. I think it’s would also help those mid-tier free agents get better contracts. At the same time it could help a team keep a mid-tier free agent they actually want to keep. Because even those guys tend to turn down one year deals for the security of multi-year deals even if they have to settle for less annual average value. Hopefully we’ll see something like this adopted in the next CBA.
