Sunday, March 30, 2008

Death of the Cap: A Contingency Plan

There has been plenty of speculation in recent months about the potentially early dismissal of the NFL's salary cap. In March of 2006, a new, last minute Collective Bargaining Agreement had been reached between the owners and the NFL players' union. One of the critical issues during the negotiations was the salary cap, which would be terminated if a pact could not be reached. The proposed deal, which vowed to keep the cap alive, required agreement from 24 out of 32 owners. 30 owners, with the exception of Buffalo's Ralph Wilson and Cincinnati's Mike Brown, agreed to the new CBA.

The new deal was supposed to run until 2011, the year when a cap may not have been used, but recently there have been rumblings about owners opting out of the deal, effectively terminating the salary cap.

What is the Salary Cap?

The salary cap has been regarded as one of the most sacred aspects of the NFL. Instituted in 1994, the cap is adjusted annually to reflect the increasing market values of the teams and players in the NFL. The cap has different restrictions in different sports. In the NBA, teams are allowed to exceed the cap, but the movement of players via trades and free agency is crippled dramatically.

The NFL cap is considered a very strict cap that cannot be exceeded at any cost. Early on in its existence, teams such as the Denver Broncos had rosters that slightly exceeded the salary cap. As a punishment, teams were punished with valuable first day draft picks, effectively discouraging violation of the salary cap.

Teams have found ways to manipulate the cap to a degree. Late in the season, teams with high amounts of cap space can manipulate the salary cap in future years by including incentive bonuses that are impossible for players to earn. These fake bonuses will factor into the season in which they were implemented-in this year's case, 2007. As a result of contract incentives, most teams were able to create more 2008 cap space while a few teams, who had given incentives that had actually been met, lost cap space. This "adjusted cap" today runs from about $111 million (Detroit Lions) to over $135 million (Minnesota Vikings, almost $5 million more than any other team).

Why is the salary cap considered so important?

With unrestricted free agency coming into full force in the early 1990s, the opportunity was there for big market teams to completely dominate the free agent market and essentially create an unfair league. BY creating this limitation, competitive balance was assured and the parity that is so prominent today had been created. By eliminating the salary cap today, it is feared that some of the teams with huge pockets, such as the Cowboys, Redskins, and Seahawks, would buy themselves championships while everyone else is shoved aside. With the potential of a dead salary cap looming, the NFL's entire fan base is scared to death of the consequences.

No need to worry, my friend.

The owners realize what's at stake, too. The rich, "greedy" owners, such as Jerry Jones, Dan Snyder, and Paul Allen of the three teams above, actually voted for the 2006 CBA. The free market domination would seem to be extremely important to these owners. But the fact is that the NFL does have a Plan B, and that the league and the teams can live without the cap.

How? We're not entirely certain about all of the measures that were to be taken. I personally have a plan of my own that can work. The players' union shouldn't have a major beef with the system, as their players will still get paid. The owners will be able to retain competitive fairness.

Now, let's get one thing straight. It's unfortunate, but it's true.

Regardless of the backup plan, the parity in the NFL today will be a thing of the past.

It's going to die. Even with revenue sharing, teams are going to see financial trouble and we may see relocation once again. But dominance is not going to fall into the mighty hands of the rich. Dominance will go where it deserves, to the smartest teams. Brains, not wallets will win Super Bowls, just like it was in the pre-cap era.

Do we know what this will be? No. The system that was used before the cap was called the Reserve Clause.

What is the Reserve Clause?

Known as the "Rozelle Rule," the reserve clause was used to maintain competitive fairness in the NFL, essentially making free agency a very minor part of the NFL. The draft wasn't considered the best approach, it was the only approach. This clause basically gave the players no freedom to move around. Whenever a player's contract expired, he was a restricted free agent (explained below) and was controlled by the team he played for. However, court rulings, which had already destroyed the reserve clause in other sports, declared this system as an antitrust violation, paving the way for unrestricted free agency. In 1994, the salary cap was added to counter this issue.

What is Restricted Free Agency?

Originally, restricted free agency was universal, giving the team with ownership rights the ability to retain a player without allowing him to choose his own team to play for. Today, this concept still exists, but it is only allowed for players who have three or fewer years of experience.

When an eligible player's contract expires, the team will place a one year offer, or "tender," on this player. There are different tiers, all with low salaries, that can be given to restricted free agents. These players with tenders can be offered contracts of any amount by another team. However, based on the tender, that team will have to repay the team owning the free agent with draft picks if they sign the player. The original owner can match the same offer that the foreign team made, maintaining the player and not obtaining compensatory draft picks. The two highest tenders are considered to be for 1st round picks, and two draft picks, a 1st and a 3rd. As a result, this deters many teams from offering contracts otherwise valuable

If no tender is given, the player becomes an unrestricted free agent.

There is a small but effective degree of compensation for unrestricted free agents today. If a team has signed fewer unrestricted free agents than they had lost in that offseason, they are rewarded with compensatory draft picks in the next year at the end of a certain round. These picks do not come from other teams; they are only rewarded during the NFL Owners Meetings in late March. These draft selections cannot exceed 3rd round value as of today.

Plan B

If the cap is to disappear, a new alternative must be found to prevent big market domination. The reserve clause is dead and buried, but a new alternative can be found to maintain a level playing field. My proposal is to merge Restricted and Unrestricted Free Agency (Only with expiring contracts. Released players and undrafted free agents remain unrestricted.) into a plan that I call Compensatory Free Agency.

Compensatory Free Agency

This approach does merge some of the ideas already in use and is essentially a compromise between the two systems of free agency today.

When a player's contract expires at any point in his career, he will be offered a tender from their team for a certain amount. Any team can still offer a long term contract to the player but will still be obligated to sacrifice draft picks if they pick up the player. The original owner, however, will not have universal power over the player. Instead of matching these offers from other teams, they will have to make an offer of their own, which can be more or less than the offers of the other teams. The player can then choose between his own team or another team freely. This eliminates the major concern that killed the reserve clause system and still maintains fairness and the importance of the draft.

Here is just a simple diagram of how this works. I'll use Terrell Suggs, a Raven whose contract expired this year but received the franchise tag, allowing him to stay for at least one more year.

Terrell Suggs receives 1st & 3rd tender from Ravens
Cowboys, Chargers, and Patriots offer long term contracts to Suggs
Ravens offer long term contract to Suggs
Suggs chooses freely between four teams and accepts an offer from one of them
If he signs with Ravens, he stays there for next season and beyond
If he signs with another team, that team gives 1st and 3rd round pick to Ravens

Compensatory Free Agency will make the price for heavy spending much, much higher. The big market teams will not only potentially be deterred from signing big name players, they will also be limited. With only one first round pick and one third round pick, they have a very limited capacity to sign these players and can't dominate a free agent class.

There will be a few side effects from this plan that will make free agency much different:

These tenders, low in value currently, will skyrocket exponentially in terms of price. The amount of money that will go to players with the highest tender, the 1st and 3rd, could exceed that of the franchise tag right now.

The franchise tag will likely still exist, but the price tag will be higher and the rules may have to be adjusted to prevent teams from underpaying players.

The compensatory pick system used today will be eliminated.

Due to the financial differences between teams, a rookie pay scale will likely be instituted to prevent holdouts.

What trends would develop as a result of this? Here are a few things we'd likely see:

Big market teams and small market teams will have different advantages. This will come from the ability to maintain their players in the draft.

A small market team may have a hard time giving out massive tenders for a very strong draft class in the same year. The teams with wads of cash, on the other hand, should have a very easy time doing this.

But the inability to keep some players may result in major draft benefits. We could see a pattern very similar to today's when teams can handle giving large tenders to fairly average players. If the team gives a 1st or 3rd round tender to a player who is fairly average, and if there is another rich team with a desperate need, the small market teams could be getting a massive amount of draft picks.

Also, if there is a player that is clearly worthy of a massive contract, the original owner, if they choose not to hand out the franchise tag and if they see a high likelihood of losing a big name player, can play with more money than they are willing to spend. If a team is in a desperate financial situation and can't pay the massive 1st & 3rd tender, they can still offer it to the player, then reap the massive reward for an offer that was not at all a gamble.

The combination of the franchise tag and the compensatory process will greatly deter free agency splashes and will maintain the competitive fairness everyone wishes for.

One more thing I'd like to point out:

This has a realistic chance of happening.

It's not a dream. We may not see the same system that I have proposed, but restricted free agency is undoubtedly going to play more of a role in a capless world.

In 2006, they had a backup plan that was going to restrict players more. If the cap was to die out, restricted free agency would be broadened. Instead of applying to the first three years of a player's career, it would apply to the first five years. There certainly will be other measures that will be taken to maintain fairness, and there may be plenty of elements from this system that are utilized. The rookie pay scale seems pretty certain, as any rookie could hold out from a small market team and basically be free to be acquired by a big team. A compromise between the two systems, like mine, could very well be used. The franchise tag may have an expanded impact by adding more years for the player or more tags for the team to use. Today's compensatory draft system could be expanded to include 1st and 2nd round picks.

There are plenty of approaches that the NFL could take. These ideas do little to infringe on the players' freedom and don't ruin small market teams. The draft will dominate even more than it does now, and it will be your team's front office, not their wallets, that will win championships. You may be thinking about doom and gloom, but it's not going to happen. If the salary cap disappears, there will be an efficient plan, either simple or complex, to prevent unfair competition. The NFL has been a great league before and during the salary cap era, and there is no doubt that they will do everything they can to make sure it continues to hold that distinction if the salary cap ever goes away.


About the Undrafted Free Agent

Ron Crimson was the only player on the high school roster to not get in a game. He couldn't argue with the decision, because he sucked. Needless to say, yet stated anyway, when he entered the NBA draft following his sophomore season in college, he went undrafted. Now, Ron Crimson is the Undrafted Free Agent.

Contact the Undrafted Free Agent

Interested in informing the Undrafted Free Agent of his mistakes, advertisement opportunities, or a scoop on the latest sports scandal? (You can guess which is more likely.) Well, email him at undraftedfreeagent [at]

Look at This!

There's nothing here; I just needed to fill some space. Space eater! Space eater! Space eater! Space eater! Space eater! Space eater! Space eater! Space eater! Space eater! I also needed to balance it out a bit.

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