We will run a post-draft series here, starting with a recap of the Baltimore haul and concluding with closer looks at the major signings and non-signings. The first step to understanding, and formulating an opinion about, Baltimore's draft class is assessing the class in the aggregate -- that is, what was the sum of the talent acquired in comparison to the amount of money invested.
In reading the below analysis, keep in mind that player evaluation is subjective, so the opinions expressed should only carry as much weight as you put into our ability to evaluate amateur talent. Further, even if you respect our opinions on the matter, a difference in opinion between what we would do and what the Orioles in fact did, is just that -- a difference in opinion. Time will tell if Baltimore's more traditional approach bears more fruit than our more highly-leveraged strategy.
Overview
Let's take a look at Baltimore's "allotment" picks -- the picks whose signing amounts counted towards their total amount of permitted draft spend. As a recap, here is what Baltimore had to spend (remember, each slot in the top 10 rounds is assigned a value, and you need to sign that pick to gain permission to use the amount designated by that slot value -- signings for under slot allotment can be used elsewhere to make up for overages in bonus paid compared to slot allotment value):
Total slot allotment: $6,826,900
Allotment pool not available (failure to sign 5th round pick): $262,000
Total allotment pool: $6,564,900
Taxable overage (amount that can be spent at a 75% taxable rate): $341,345
Total available for allotment signings: $6,906,246
Total cost to team (including taxes on overages): $7,162,235
Anything over the "total available for signings" would trigger a penalty of loss of first round pick in 2013.
Actual spent on allotment picks: $6,564,700
Baltimore left $200 of non-taxable allotment pool on the table. The Orioles had $341,345 of taxable money available to them. Each pick after Round 10 was permitted $100,000 worth of bonus spending that would not count towards allotment. Baltimore could, therefore, have given as much as $441,545 to any single pick without losing next year's first round pick. Including the taxes assessed, that would mean Baltimore would need to spend a total of $697,534 in order to give that player the $441,545.
The picks and the price tags
The hardest concept to drive home to players and their family members is
that your value is not determined by you, it is determined by your
draft slot. That is not to say that you cannot demand any amount you
want -- you can, and you should if that amount is what it takes to
persuade you to begin your pro career. But you are not entitled to the amount decided upon through your own personal valuation.
From the team's perspective, it is important to tactfully convey this to players prior to signing, and to do your best to determine whether a player is signable at or close to the target amount (within the negotiating sweetspot) that you have internally set. If a player changes his number post-selection, all you can do is shrug and decide whether you should move on or cave to the new demands. Either way, you take note of the player's advisor and avoid working with that advisor in the future.
1:4 Kevin Gausman (rhp, Louisiana State Univ.)
Depot valuation: 1st Round ($3.5 - $4.2 MM)
Target amount: $3.8 MM
Slot allotment: $4.2 MM
Baltimore spend: $4.32 MM
Summary: Gausman was viewed as the top player on our board, but the target amount for recommended bonus reflects the draft slot for the Orioles. This is important in that each signing serves as a data point for future negotiations. That is, Brian Matusz's total package value of $3.5 MM serves as an approximation for how Baltimore values the 4th overall pick when spent on the top college arm in the draft. Signing Gausman for over allotment is confusing on two levels.
First, it sets a precedent for future negotiations with first-round selections. Second, it took away money from the aggregate allotment afforded Baltimore for their selections. As we discuss below, it probably had no practical effect on the O's ability to sign fifth-rounder Colin Poche or fifteenth-rounder Derick Velasquez -- in fact, it is likely Baltimore decide against signing those two prior to aggreeing to Gausman's figure. Still, it is an indication that the overarching draft strategy for Baltimore, including back-up plans for Poche and Velasquez, was lacking. A last second decision to give Gausman "the leftovers", while not a big deal financially, represents a curious strategic decision as far as future negotiations are concerned.
Gausman had little leverage as a 21.5-year old sophomore. In order to earn $4.2 MM in next year's draft, Gausman would need to re-enter after another year at LSU (or a year of independent baseball) while meeting or exceeding his solid 2012 performance. Further, he would be as old or older than the other draft-eligible juniors and would need to avoid even minor injuries in order to maintain elite tier value. To not only permit Gausman to negotiate the full draft allotment for slot, but to spend over that allotment (and over 40% more than the bonus received by any other pitcher in the draft) is a significant market overpay.
It is great that Baltimore got their man, and they got the best man in the draft as far as the Depot is concerned. But the process for getting him was, at least on the surface, less than optimal.
2:4 Branden Kline (rhp, Univ. of Virginia)
Depot valuation: 2nd - 3rd Round ($450,000 - $700,000)
Target amount: $600,000
Slot allotment: $793,700
Baltimore spend: $793,700
Summary: Kline would be submitted to our hypothetical scouting director as a future reliever or project starter (meaning he will need not insignificant developmental work in order to play as a starter at the professional ranks). Ultimately, that means he would not have been a second-round selection for us unless he was willing to sign for less than slot. As a third-rounder, we would be willing to pay over slot-allotment. The Orioles selected Kline and paid full slot allotment for him, which is completely defensible and likely commensurate with the Overall Future Potential (scouting grade) their department could reasonably have assigned to him. We view this as a slight market overpay for Kline.
3:4 Adrian Marin (2b/ss, Gulliver Prep., Miami, Fla.)
Depot valuation: 4th - 8th Round ($250,000 - $400,000)
Target range: $325,000 - $375,000
Slot allotment: $481,100
Baltimore spend: $481,100
Summary: Marin profiled as a fringe-regular for us, fitting into the
fourth- to eighth-round. We would be willing to spend over-allotment
for Marin in those rounds, focusing on a $325,000 to $375,000
negotiating window. Absent evidence that Marin were signable in this
range (and no higher than $400,000) we would probably have passed on
selecting him in the third round. He would be a target fourth round or
fifth round selection, representing good value for those rounds. We
view this as a slight market overpay for Marin, but
mostly based upon subjective valuation of the draft profile of this
player.
4:4 Christian Walker (1b, Univ. of South Carolina)
Depot valuation: 4th - 8th Round ($250,000 - $350,000)
Target range: $300,000 - $350,000
Slot allotment: $349,900
Baltimore spend: $349,900
Summary: Walker profiled as a fringe-regular for us, fitting into the fourth- to eighth-round. Our target pricing for Walker would be fourth- to fifth-round money, making him a slot allotment signing in those rounds, or a potential over-allotment signing in rounds six through eight. We view this as a good market value for this player and appropriate draft spend.
5:4 Colin Poche (lhp, Marcus HS, Flower Mound, Texas)
Depot valuation: 9th - 15th Round ($100,000 - $150,000)
Target range: $100,000 - $150,000 (over-allotment candidate up to $300,000)
Slot allotment: $262,000
Baltimore spend: Unsigned
Summary: Poche falls into a tough spot for evaluators in that his current profile is that of a third tier draft prospect, but the projection remaining makes him a candidate for over-allotment spending if the right organization drafts him. Baltimore's popping of Poche in the fifth-round was not a bad move, and the slot allotment amount of $262,000 was a reasonable target amount for negotiations if Baltimore viewed him and his potential for growth in a positive light.
Our position would have been to pass on Poche in the fifth-round, and the fact that he was selected means that it is likely he conveyed he would be signable for an amount not significantly more than the allotted $262,000. Further, the fact that Baltimore had an ability to give him over $500,000 without losing a pick next year and chose not to do so indicates that the player upped his requested bonus amount after being selected. We view this decision not to sign as a good decision, with the player not being worth more than a $300,000 investment at this time. Because we view Poche as a bad investment past $300,000, the decision to overpay Gausman (and limit allotment spending elsewhere) does not come into play.
6:4 Lex Rutledge (lhp, Samford Univ.)
Depot valuation: 4th - 8th Round ($150,000 - $250,000)
Target range: $175,000 - $225,000
Slot allotment: $196,200
Baltimore spend: $196,200
Summary: Rutledge profiles as a future relief arm with late-inning
potential, or a project starter with longish odds to stick in a rotation. He fits in as an under-allotment signing in the fourth round, a full allotment signing in the fifth round, and a potential over-allotment signing thereafter. We view this selection and signing as good value for a player of Rutledge's draft profile.
7:4 Matt Price (rhp, Univ. of South Carolina)
Depot valuation: 4th - 8th Round ($125,000 - $225,000)
Target range: $150,000 - $200,000
Slot allotment: $149,300
Baltimore spend: $149,300
Summary: Price profiles as a future relief arm, despite some history of starting at South Carolina. He fits in as an under-allotment signing in the fifth
round, a full allotment signing in the sixth or seventh round, and a potential
over-allotment signing thereafter. We view this selection and signing
as good value for a player of Price's draft profile.
8:4 Torsten Boss (of, Michigan St. Univ.)
Depot valuation: 4th - 8th Round ($125,000 - $250,000)
Target range: $175,000 - $225,000
Slot allotment: $139,500
Baltimore spend: $139,500
Summary: Boss has a pinch-hitter/fourth outfielder profile, fitting in as an under-allotment signing in the fifth round and a full allotment or over-allotment signing in rounds six and higher. Though Baltimore announced him as a third basemen, we do not feel he profiles there, defensively. We view this acquisition as good value and a below-market signing for the Orioles.
9:4 Brady Wager (rhp, Grand Canyon Coll. (Ariz.))
Depot valuation: 9th - 15th Round ($100,000 - $175,000)
Target range: $100,000 - $125,000
Slot allotment: $130,200
Baltimore spend: $125,000
Summary: Wager profiles as a middle-reliever with a moderate chance to find his way to a Major League bullpen. Risk associated with his draft profile pushes him down the draft board, but upside, arm strength and build give him above-allotment bonus potential in the ninth to fifteenth rounds. We view this acquisition as a solid value for a player of Wager's draft profile. Going with a allotment-saving selection here (as they did with Joel Hutter in round ten) would have potentially freed up more money to sign an over-allotment selection, such as fifteenth rounder Derick Velasquez.
10:4 Joel Hutter (ss, Dallas Baptist Univ.)
Depot valuation: 15th+ Round (<$25,000)
Target range: $5,000 - $15,000
Slot allotment: $125,000
Baltimore spend: $10,000
Summary: This was a pick and signing meant to give Baltimore flexibility under their allotment pool -- most likely to free up some cash to sign Poche. We view this as a solid investment in order to allow for the signing of more valuable players already selected. Baltimore could have done this with the previous pick, as well, but because they stayed close to full allotment signings in rounds two through five, not taking stabs at significant over-allotment signings, they did not need to build in more cushion.
15:4 Derick Velasquez (rhp, Merced Coll. (Calif.))
Depot valuation: 4th - 8th Round ($300,000-$400,000)
Target range: $300,000 - $325,000 (over-allotment candidate up to $525,000)
Slot allotment: First $100,000 not attributable to allotment pool
Baltimore spend: Unsigned
Summary: Velasquez's young age, projection and commitment to Fresno State give him solid leverage. He could see substantive growth in his draft value as he gets stronger and continues to refine as a pitcher over the next twelve months. Were he signable in our target range, he certainly would have come off the board in the third or fourth round to some organization. The easy inference is that his asking price was at minimum $500,000, and potentially as high as around $625,000. We would consider an investment of up to $525,000 a reasonable price to pay, albeit above-market.
Because Baltimore had only taxable money remaining to give to Velasquez, they would have needed to spend $697,534 in order to give Velasquez $441,545 (which was clearly not enough to entice him away from Fresno State). This is the largest casualty of the Gausman signing, if we are to assume that Velasquez remained signable up until this past Friday. Either Velasquez changed his asking price post-selection or Baltimore simply got scared they couldn't close the deal with both Gausman and Velasquez. We view the non-signing of Velasquez as a missed opportunity if he were signable for $525,000 or less, but not necessarily a bad decision. If Velasquez were asking for more than $525,000, we view the non-signing as a good decision.
Conclusion
The Orioles took a general draft approach of finding players signable for full allotment and selecting them. So far as we can tell, there was one allotment selection they viewed as likely to require an over-allotment bonus to sign (Colin Poche, 5th Rd) and there was one selection made with the intent of freeing up room in the aggregate allotment pool (Joel Hutter, 10th Rd).
Baltimore appeared to select one potential impact over-allotment signing after the tenth round (Derick Velasquez, 15th Rd), but did not have room in their allotment pool to sign him. Overall, Baltimore did fine, landing the top player in the draft and generally paying market values for their players.
It can be argued that they did not fully leverage their pool allotment, as we saw no real effort to take some stabs at tier one talent that slipped. Because Baltimore, in our mind, paid over market for each of Branden Kline and Adrian Marin, it seems like they may have missed an opportunity to get a higher-ceilinged player in one of those slots, or to get (in our subjective opinion) a better overall talent for full allotment price. In order to land one of the tier one players that dropped, the Orioles would have had to value those players at an amount commensurate with their asking price, and of course would have had to likely get more savings out of at least the ninth round selection. They likely would also have needed to take a harder line in negotiating with Gausman.
As noted above, the bonus Baltimore arrived at for first-rounder Kevin Gausman is confusing in that it appears a college arm with little leverage was able to force a team to pay 44% more for him than any other team paid for an arm, and about 20% more than the Orioles have paid a college arm of same draft slot in the past. True, the first arm selected should be expected to get more than any of the other arms, but the delta between Gausman's bonus and the bonus for the next highest paid arm ($3 MM for sixth overall selection Kyle Zimmer) is much larger than it probably should be. That said, we can't know for sure it was possible to sign Gausman for less than the $4.32 he agreed to, though we maintain it is highly unlikely he would have walked away from, say, $4 million, given the multitude of things that would have to go right for him to land in the top four picks again next year (a likely necessity given the allotment flexibility needed for a team to give him more than $4 million).
There were ten MLB teams that spent such that they will incur some degree of tax on over-allotment bonus amounts. Of the teams that wished to avoid paying a tax, it would appear Baltimore utilized their full pool allotment more effectively than any other team, with just $200 left over (closest to full use without being taxed -- the Brewers were next best with just $5,600 under full allotment spent). The extent to which Gausman was overpaid, however, takes some of the fun out of that stat, as he should have been reasonably signable for $3.7 MM to $4.0 MM, which would have left $200,000 to $500,000 on the table. The salt in that wound is that the further savings may have easily provided enough room to sign Vasquez, assuming he was open to starting his pro career.
Overall, from an outside perspective, there is little to be angry about
with respect to the Orioles' draft haul. They landed Gausman, they
avoided any gross overspends, and they found some good value in the mid-
to late-single digit rounds (particularly Rutledge and Boss). There is
also little to be overly excited about, as there was little creativity
or forward thinking evidenced in the cross-section of players selected,
and the rounds in which they were selected. It was a vanilla draft strategy under the new collective bargaining rules, but a solid implementation of that strategy.
New scouting director Gary Rajsich did a solid job bringing in talent and landed the best in the class with Gausman. Also, keep in mind he did so while working with a scouting department in flux, and will have the opportunity this off-season to bring in more, or different, scouts and to better mold the department as he and Dan Duquette see fit. Finally, while we write here that Gausman appears to be a significant overpay, the only true casualty of that overpay is the ability to sign Velasquez, and even there the decision not to sign Velasquez was most likely one made prior to inking Gausman for $4.32 million. You can wish for a more creative overarching strategy, but there is little evidence here that fans should be disappointed with the job the O's did between early June and early July.
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