Friday, February 5, 2016

MLB's qualifying offer system needs to change, but it doesn't need to go.

MLB's qualifying offer system is the latest attempt to even the playing field for smaller market teams who can't afford to retain their free agents. However, like the Type A/B system that preceded it, the system is ham fistedly simple. You can submit a default qualifying contract offer of one season for about $15M, and if the player declines it to sign elsewhere, you get a sandwich draft pick (end of 1st round) and the signing team loses their top qualifying draft pick.

However, this vastly discourages teams with departing free agents from making the qualifying offer, since they now add a relative ton of money to the payroll if the player re-signs with them (which they may not want). It also vastly discourages other teams from signing such a player since they lose a prized draft pick if they do.

The system also has rules in place preventing offers to midseason acquisitions, which increases the organization hit to a team acquiring such a player, since they can't recoup a draft pick.

Agent-friendly baseball writers recommend the system be scrapped entirely, forgetting why such a system exists in the first place. Prior to its existence, MLB's richest teams stockpiled talent at will and left lesser teams to flounder, watch their developed young talent leave via free agency, or both.

What the qualifying offer system needs is nuance. Neither the Type A/B system or the QO had much nuance at all. Type A/B somewhat arbitrarily attached a label to a subset of free agents that could net sandwich picks, while the QO gives teams a single blunt instrument offer to levy in exchange for a draft pick. And both systems heavily penalized the drafts of any team that signed such a player.

First of all, the blanket 1st/2nd round sandwich picks and 1st/2nd round draft penalties need not be so ham fisted. It should be possible to open up lower picks in the draft, from the 3rd round down to the teens, to exchange and compensation. The expected value of these picks are far lower, and would levy a substantially smaller penalty to teams that sign a qualifying free agent... yet still aiding the draft of an organization that loses a player.

I think the $15 million qualifying offer is not a bad number... as a maximum. You should be able to offer smaller qualifying offers, that net lesser draft picks in return should the player sign elsewhere.

This can be determined by, say, average WAR per draft pick in each round over, say, the five years prior to the last six years (the span of a team's initial control over a prospect). For this season that period would be 2006-2010. This allows a complete picture of the recent relative value of picks made in that round.

Using WAR as an approximate barometer, you can make the qualifying offers relative to that $15 million total.

For example, a $15M qualifying offer would cost a team their highest available pick (top 10 picks are protected, so if a team's 1st selection is protected, they'd lose their 2nd pick). But then a team could offer, say, $7M, and if that player signs elsewhere the new team could lose their 3rd round pick. The compensated team gets a sandwich pick for that round. Or, you could offer $6M, and losing the player nets you a 4th round pick while the signing team loses theirs, and so on.

Eventually, you'll want to set a minimum qualifying offer amount, maybe $2 million or so, but you could go as low as the 10th-20th rounds in terms of compensation if you wanted, depending on how much of a qualifying offer is levied.

If the signing team has already lost their pick in the relevant round, they can exercise one of two options:

- Forfeit the next round's pick as well in this draft. If you're slated to lose a 4th round pick that you've already lost, you can choose to lose your 5th original pick as well. (Any sandwich picks you have gained are protected, so if you got a 4th round sandwich pick while losing your original 4th round pick, you won't lose the sandwich pick)

- Defer the lost pick to a future draft, losing the relevant pick in the next draft after this coming one. So in this case you could just decide to lose your 4th round pick next year.

This would soften the blow to your draft in signing a QO player. And it would make sure the team losing such players could offer more flexible QO's and get some compensation for more of their losses. A team rebuilding could load up on picks, without ruining the draft of whoever signs their departing free agents. It's much easier to lose a 3rd or 5th rounder than your top pick.

I realize this would dramatically increase the number of qualifying offers, and would send draft picks and draft orders flying all over the place. This would level the playing field, and also better encourage teams to sign these players, rather than discouraging them as the current system does.

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