Free Agency Is Still Broken

The free agent market has never been a good place for baseball teams to find talent. Back in 2014, I wrote an article discussing how the free agent market will break your heart because of the high bust rate of even top free agents. Since that article, it seems that things have gotten worse.

The dataset I use doesn't do a good job tracking option years. It's probable I'm missing a few players that had an option. There were 144 total players signed to a free agent deal worth at least $3 million that covered 2016.  Of these 144 players, 45 contributed either zero or negative WAR to their teams (31%). Another 61 contributed between zero and two WAR of value (42%). Only 38 contributed 2+ WAR (27%). As a result, one free agent WAR cost $8.6M in 2016. In total, these 144 players contributed 186.9 WAR (1.3 WAR per player).

The Detroit Tigers were the huge losers in 2016. They spent $115M on Justin Upton, Victor Martinez, Jordan Zimmermann, Mike Pelfrey, Anibal Sanchez, Mark Lowe and Prince Fielder. One caveat of this is that Prince Fielder was traded to the Rangers in 2013, and so Detroit wasn’t fully on the hook for his 2016 salary. If we include Fielder on this list as a player that the Tigers signed as a free agent to a deal that covers 2016, then they received -1.5 fWAR in return. If we exclude him, then they received .3 fWAR. Regardless, nothing will change the fact that they spent a significant amount of cash on players that were worth roughly the same as replacement level players.

The Orioles spent roughly $70-$75M to sign Chris Davis, Matt Wieters, Pedro Alvarez, Darren O’Day, Yovani Gallardo and Ubaldo Jimenez. In return, the Orioles received 6.2 fWAR - $12 million per WAR. This was only slightly worse than average, and illustrates how teams need to spend a significant amount of money in free agency just to get a slight advantage.

The primary exception to this rule in 2016 is the Cubs, who signed Jon Lester, Dexter Fowler, Jack Lackey, Ben Zobrist, Jason Hammel, David Ross, Jason Heyward and Edwin Jackson to free agent contracts covering 2016. Heyward and Jackson were largely busts, but the other five were huge successes. As a result, the Cubs received 26 fWAR from free agents while just spending $117M. Each free agent WAR cost the Cubs $4.5M, suggesting that free agency can be an excellent option for teams if they can hit on multiple players. Their luck largely ran out in 2017 when Lester, Lackey, Zobrist, and Zobrist fell back to earth and their combined horde of free agents signed for the 2017 season only contributed 6 fWAR at a cost of $96 million.

If the numbers for 2016 look bad, then the numbers for 2017 are catastrophic. There were 165 total players signed to a free agent deal worth at least $3 million that covered 2017. Of these players, 53 (32%) produced negative WAR and another 21 (13%) produced zero WAR. 58 (35%) more produced between 0 and 2 WAR exclusive while only 33 (20%) produced 2 or more WAR. As a result, one free agent WAR cost $14M in 2017 and these players contributed 128 WAR (.78 WAR per player).

Detroit again was a big loser, as they spent a fortune on Jason Upton, Mark Lowe, Jordan Zimmermann, Anibal Sanchez, Mike Pelfrey and Victor Martinez and received 2 WAR on their investment. On the bright side, things would have looked even worse if they didn’t trade Fielder to the Rangers previously. It’s worth noting that Detroit appears to have significantly cut payroll for 2018 and is presumably trying to rebuild their team without having to rely as heavily on free agents. The Angels also did pretty badly as their two main free agent splashes, Josh Hamilton and Albert Pujols ended up costing roughly $55M for -2 WAR.

The Dodgers, however, had significant success as they hit on Justin Turner, Kenley Jansen and Rich Hill. Worth noting is that all three of these players were originally Dodgers that ended up resigning with the club in free agency. In other words, they were known quantities and perhaps more akin to extensions than the average signing. As a result, the Dodgers paid $105M for roughly 16 WAR or an excellent price of just $6.5M per win.

The Orioles spent $73M in the free agent market and ended up receiving 1.1 fWAR for their efforts, resulting in a $/WAR of $66.1M. It turns out that their signings of Castillo, O’Day, Davis, Gallardo, Jimenez and Trumbo did not work out well for them – or anyone else for that matter. Just think, the Orioles could have signed Scherzer and Greinke for the amount of cash they spent on those six players and have money left over. Then again, it is well known how risky it is to spend money on starting pitching in free agency.

Minnesota was one of the most successful clubs. They signed three free agents whose contract covered 2017; Ervin Santana, Jason Castro and Ricky Nolasco. Santana ended up being one of the best pitchers in the majors, while Castro was an average catcher and Nolasco was traded to the Angels. Even including Nolasco in this analysis, free agents signed by the Twins produced 8.6 WAR at a cost of just $34 million.  If we exclude Nolasco, then they produced 7.3 WAR at a cost of just over $20 million, as the Twins were able to earn a wildcard spot in the playoffs. 

Organizations simply can’t build a winning team out of free agency. There simply isn’t enough free agent talent available unless a team is able to hit on three or four of the best players. Even in that case, the cost is still prohibitive for all but large market clubs. Instead, teams need to build their foundation with team-controlled players. Teams need to be able to accurately assess their talent and determine which players can help their team over the long run and should receive long extensions.

Teams that aren’t in huge markets should go into the free agent market only sparingly and only when they’re really comfortable about a player’s future performance.  Most free agents only contribute a minimal amount at a significantly high cost. From an owner’s perspective, it has to be tempting to just pocket $70 million in profits rather than spending the cash on free agents that will likely do little to help a team going forward.

This means it does make sense to devote a significant part of payroll to one or two players if a team is sure that they’re good (cough cough Machado). Most free agents contribute minimal production, so spending money to keep elite talents in the fold while focusing internally to fill out a roster makes sense. Realistically, small and middle market teams don’t have an opportunity to have many elite talents at once.

This is extremely relevant to the 2018 Orioles. The Orioles should realize it’s highly unlikely that they’ll be able to add significant talent to their club via free agency, so they need to be able to gauge whether their current team has enough talent to win. Since they don’t, it makes sense to look into which of their current players should be considered part of their future core and which players should be traded as part of a rebuild.

Baseball teams today only win if they’re able to develop team controlled young talent, that’s supported by extended home-grown elite talent and a few smart free agent signings. This means that teams can only be successful if they can gauge their own talent and determine which players they should keep and which should be traded based on the situation of their organization. Have the Orioles learned this lesson?

If The Orioles Move On From Mark Trumbo, It Won't Be Because Of A Draft Pick

The Orioles have done some unconventional things under Dan Duquette and Buck Showalter. Some of those things have produced tangible results, while some others may be best described as perplexing.

One area in which Duquette has tried to gain an advantage involves draft picks. The Orioles have not been shy about signing qualifying offer players, which means they're tied to draft pick compensation and their asking prices could be discounted. They've also traded competitive balance draft picks multiple times in order to shed salary during the season that could be used to add another player.

The Orioles' front office, or maybe mostly Duquette, must believe treating draft picks this way gives them some type of edge, and maybe it has. This strategy is frustrating and easy to mock, but even if it's only helped the team marginally, the overall results are still there. The Orioles haven't had a losing season since 2011, and they have compiled the best record in the American League since 2012.

That brings us to the ongoing Mark Trumbo saga. The Orioles seem to still want Trumbo back, but only at a certain cost. As Ken Rosenthal reported last week, Trumbo may be inclined to accept a three-year deal now, despite previously seeking at least four years. That "would at least appear to create room for negotiation," whatever that actually means.

On top of that, Duquette is doing his best to convince Trumbo, Trumbo's representation, and anyone else who will listen that, hey, the draft pick compensation matters in this case. In a recent interview, Duquette said that "as far as the Orioles go, we kind of like the value of that draft pick that’s been enhanced with the negotiation from the new collective bargaining agreement. In other words, it’s about the last time that you can acquire that level of pick for a compensation draft pick."

If you want to take Duquette's comments at face value, that's up to you. It's usually a better idea, however, to judge actions instead of words. And, again, the Orioles have not been shy about giving up draft picks if they think it will be beneficial.

Instances of the Orioles sacrificing MLB Draft picks under Duquette:

• July 2013: Acquired Bud Norris and an international bonus slot for L.J. Hoes, Josh Hader, and a competitive balance pick (ended up being 37th pick)
• Feb. 2014: Signed Ubaldo Jimenez and Nelson Cruz (lost picks No. 17 and No. 55)
• April 2015: Traded Ryan Webb, Brian Ward, and a competitive balance pick (ended up being 74th pick) to Dodgers for Ben Rowen and Chris O'Brien
• Feb. 2016: Signed Yovani Gallardo (lost pick No. 14)
• May 2016: Traded Brian Matusz and a competitive balance pick (ended up being 74th pick) to the Braves for Brandon Barker and Trevor Belicek

As a result of qualifying offer players signing with other teams, the Orioles also added a couple picks: Nelson Cruz signed with the Mariners (added Ryan Mountcastle at No. 36 in 2015); and Wei-Yin Chen signed with the Marlins (added Cody Sedlock at No. 27). Mountcastle and Sedlock are two of the better prospects in the O's system, which both tells you that extra picks matter, and that the Orioles' farm system is not in great shape.

So here's the final tally of gained and lost picks:
Extra draft picks: Nos. 27 and 36
Forfeited/traded draft picks: Nos. 14, 17, 37, 55, 74, 74

Maybe you don't mind the Orioles missing some of those later picks. It depends how you view the MLB Draft. I look at it as a glorified lottery, meaning every extra pick gets you a little bit closer to potentially landing a talented player. Still, the O's have tried to use both the qualifying offer and competitive balance pick systems to their advantage, however minuscule it may be.

It's always nice to have an extra draft pick, but the Orioles have also assembled a win-now roster. The future is uncertain; several key players will likely be departing in the next few years. Is this really the time to start worrying about draft picks, just because the pick compensation system will be changing?

The win-now state of the roster is also why it's frustrating that the Orioles didn't make a serious run at Edwin Encarnacion. Trumbo is apparently seeking something in the three-year, $40-$50 million range. Encarnacion signed with the Indians for three years and $60 million (with a club option in 2021). Both players are 1B/DH types, and Trumbo is a few years younger than Encarnacion. Encarnacion, though, is the much better hitter.

The difference in career wOBA between Edwin Encarnacion (.365) and Mark Trumbo (.332) is about the same as Trumbo and Julio Borbon (.298).

— Matt Kremnitzer (@mattkremnitzer) December 23, 2016

Encarnacion's wRC+ of 134 last year was his lowest in the past five seasons. In 2016, arguably the best offensive season of Trumbo's career, he posted a wRC+ of 123 (he also had a 124 wRC+ in 2012). Even at his absolute best, Trumbo falls short of Encarnacion by a decent margin.

If the Orioles didn't want to spend on Encarnacion and don't want to risk disrupting the clubhouse (and fanbase?) with a Jose Bautista signing, moving on from Trumbo still makes sense in ways that have nothing to do with a draft pick (though that's an added bonus). Chris Carter brings similar skills to the table for less money. A Pedro Alvarez reunion at DH, possibly paired with Trey Mancini, would be cost effective. And while the roster is getting rather full with outfield options, there's still a chance the team can add an actual decent defensive outfielder (even if it's Michael Bourn).

The Orioles are playing hardball with Trumbo. It's not wise for them to bid against themselves, so don't think the draft pick is any significant motivation. It hasn't been before, and the O's are doing what they can to maximize the performance of the major league roster. That's what they've done, and it's worked, even if some of the moves have been misguided. Don't go and start taking Duquette's word on things now.

Stats via FanGraphs. Transaction and contract info via MLB Trade Rumors and Cot's.

It's Time to End the Punishment for Signing Free Agents

One of the consequences of the Orioles' signing of Ubaldo Jimenez is that the Orioles will forfeit their first-round pick in the June 2014 amateur draft. The Cleveland Indians, Jimenez' 2013 team, offered a one-year contract at the "qualifying offer" amount, and Jimenez rejected that offer. Consequently, Cleveland would be awarded a supplemental draft pick between the first and second rounds, and the team that signed Jimenez would forfeit one of their draft picks according to a well-documented and specifics-laden formula. This penalty - the loss of a draft pick - is pretty obviously deterring teams from signing mid-level free agents, such as Jimenez. But is the draft-pick penalty right and just? Should a player have a harder time signing a contract, merely because his former team wants compensation? Should a team be penalized for trying to improve itself by signing an unemployed player, merely because his former team pretended to want the player? Is there any valid reason for teams signing a free agent to lose a draft pick? I think not.

In order to understand how the current rules came to be, we have to review the past. Until 1975, players were bound to the team for which they had contracted to play, or to which their contact was assigned, based on a single sentence in the standard player contract:

If prior to March 1, the Player and the Club have not agreed upon the terms of the contract, then on or before 10 days after said March 1, the Club shall have the right by written notice to the Player to renew this contract for the period of one year. [Bill James, The New Bill James Historical Abstract, The Free Press, 2001, p. 284]

Until 1975, this sentence (the "Reserve Clause") had been interpreted so that the renewed contract also contained this sentence, and so the renewed contract could be subsequently renewed, and so on in perpetuity. But on December 23, 1975, arbitrator Peter Seitz cast the deciding vote in favor of pitchers Andy Messersmith and Dave McNally in their grievances. The ruling, as I understand it, was that period of one year meant one year, and that after one year the Club no longer had the right to unilaterally renew the contract. This decision opened the free agency floodgates.

Major league baseball had been operating under what I shall call the "perpetual reserve clause" for over seventy years. Once a Club signed a player, that player would play for that team for essentially as long as the team wanted. Clubs had been counting on that practice while they were planning and building their teams. When the rules were suddenly changed, it was agreed that a team losing a player after he his one-year renewal season - a player it legally had no right to but which by practice it had been allowed to retain - should be compensated.

The first compensation was in the form of amateur draft choices. A team signing a free agent - I haven't found out which free agents were eligible for compensation - surrendered a draft choice to the team that lost the free agent. This was a direct compensation from the team that signed a free agent to the team that last a free agent. But there was a perception that the draft choice wasn't a sufficient compensation for the free agent. So, beginning in 1982, the free agent compensation draft was instituted. This was a pure compensation system - the team signing the free agent didn't necessarily lose a player or draft pick, and the team losing the draft pick received compensation. This was problematic - teams that didn't sign free agents felt it unfair that they would lose a player. So, after 1985, the free agent compensation draft was eliminated and compensation went back to draft choices.

Under this system, a certain percentage of free agents at each position were classified as 'A', 'B', or 'C' free agents. A team potentially losing a classified free agent could offer salary arbitration for one year to a free agent, and if (1) the player rejected the offer and (2) signed with another team, the team losing the free agent was awarded compensation. You're all familiar with the details of this system. The system had several major problems - (1) the compensation for a type 'B' free agent - a draft pick from the signing team - was too high, and deterred teams from signing type 'B' free agents; (2) because the classifications were based on positions, the compensation for middle relief pitchers was too high; (3) the compensation from teams that signed multiple free agents was perceived as inadequate; (4) the compensation to teams which lost multiple free agents, especially to different teams and especially if some of the lost players were middle relievers, was too high; (5) teams could acquire free agents late in the season and receive compensation for them.

But all of the elements of this system were at least secondarily intended to compensate the team that lost a free agent. There is an element of the new system which entirely intended to punish a team that signs a free agent. When a team signs a free agent who receives a qualifying offer, that team loses a draft choice, but the draft choice doesn't get transferred to the team that lost the free agent. It's just lost. It's a pure punitive deterrent, intended to discourage teams from signing free agents. And it works. As of this writing, at least four free agents who would cost the signing team a draft pick - Kendry Morales, Nelson Cruz, Ervin Santana, and Stephen Drew - remain unsigned. Teams which these players would help are unwilling to surrender a draft pick - and its corresponding pool money - to sign them.

And that's not fair to the players, the teams, or the fans. Players who are not employed by any team should be able to sign a contract with whichever team they want. Teams should be able to improve themselves by any legal means, without arbitrary punishments. And fans should have the opportunity to root for successful teams, teams which are doing everything they can to put a successful team on the field in the present without being hamstrung in their future development. Free-agent compensation should be limited to supplemental draft picks; teams should be allowed to sign any free agent without penalty.

One final point. Free agency has been around now for nearly forty years. Teams have had plenty of time to adjust to it and to take it into account when building a team. The very idea that a team which wants to keep a player beyond the terms of his current contract should be compensated when he goes somewhere else should be reconsidered.

Why Giving Up a Draft Pick for LaRoche Might Make Sense

How much is LaRoche worth?  Depends.

With Nick Swisher signing with the Cleveland Indians, my perspective has become that there are no longer any true difference makers on the free agent market and that the Orioles will need to seek out improvement in talent by engaging the trade market with all of their efforts.  Although that thought is excellent in terms of twitter sound bites, it does use a context that is assumed.  It is a statement that can be misunderstood and repeated in ways that are not intended.  In truth, there certainly are lines of argument to say that Adam LaRoche and Kyle Lohse are indeed difference makers.  However, my usage is a player that can improvement a team by 2 to 3 wins.  An amount that justifies the cost being outlaid to a player.  However, at times it does make complete monetary sense to pay 12 or 15 MM for a player who may only improve a team projection by half a win.

How can half a win be worth 15 MM?  Well, it is a matter of looking at worth of a single player versus the worth of an entire team.  If a payroll budget is 100 MM that will be spent or lost, then it may well make complete sense to full utilize that budget.  A team may be projected at 95 wins and sit at a 85 MM payroll.  At that point, adding a high profile reliever for a year at 15 MM does make the team better and improves the likelihood for a playoff run while staying under the team payroll budget.  To put it another way, no way is a reliever worth 15 MM to add a half win or a full win to a team, but it is important to maximize that win profile by fully utilizing that budget.  It may well be the most useful way to use up that payroll is to go big and deep on a reliever.

Recently, there has been talk that the Orioles have frittered away last season's good will and success that may have paid dividends on the free agent market.  There has been a tidal surge of interest suggesting a run at Adam LaRoche (which seems to be a common event every other year) and a smaller sportswriter push for Kyle Lohse.  Reactions to those pushes are that the players are mediocre commodities (likely true) and will not add much to the win total of the 2013 Orioles (probably true).  However, a use-or-lose payroll and cost outlay may have the addition of these players make sense, somewhat.

Added to the complexity of acquiring these players is that their former teams offered arbitration which was turned down.  Upon turning down the offer, the former team will receive the top draft selection remaining by the signing team that is not within the first ten selections in the draft.  In other ways, if the Orioles sign a player like LaRoche of Lohse who turned down arbitration, the Orioles will be required to forfeit their first round pick (24th overall).  If they sign both of them, they would lose their first round and second round selections (they cannot lose their compensatory pick between the first and second rounds).

For some, the loss of a draft pick is something that is unacceptable.  Amateur talent is essential to almost every team as it is the primary way to field a competitive team.  A cost controlled group of players under their first six years of MLB time helps reduce cost to enable teams to go out and find what is useful on the free agent market.  Additionally, teams are locking up their star players and preventing them from entering free agency.  This makes it even more important to be able to develop your own guys as available free agent star players simply are becoming a low probability event.  That said, nothing is infinite in value, so the idea of never losing a draft pick is likely an extreme point of view.

Challenging my original statement, is there an arguable position to say that the Orioles should go after a player like Adam LaRoche or Kyle Lohse?  Well, the following is an exercise to see if I can develop that argument and will be primarily focused on LaRoche.

The value of LaRoche

Last year, LaRoche entered the season coming off an injury plague 2011 where he was atrocious when he was able to get on the field.  Expectations were not incredibly high with PECOTA projecting him as having a slash line of 251/321/435 and worth 1.3 wins over replacement production.  An entire win of that total was based on his defense.  That projection was spot on...if you only consider defense.  Offensively, he slugged 271/343/510, hit his 90th percentile projection, and was worth 3.6 wins above replacement production.  Entering his age 33 season, it is difficult to think that this past season set a new level for expected production, but it certainly happened.  My expectation is that LaRoche is worth about 2.5 wins next year, 2.2 wins in 2014, and 1.8 wins in 2015.

The cost of LaRoche

At 6.5 wins, he is worth about 32.5 MM if the market value is 5 MM per win.  However, that alone is not his cost.  The Nationals placed a tender on him, which enables them to take the Orioles' pick (1:24; top 10 picks are protected).  The loss of a draft pick for signing LaRoche has caused great consternation among some Orioles fans.  It is a sentiment that many share when considering moves by other teams.  The problem by taking a hard line on losing prospects is that it is clear that draft picks have a limit to their value.  There certainly is a price point for which losing a prospect makes complete sense.

The Orioles selection, the 24th pick, carries a certain probability of producing a useful player down the road.  If selection does become a league average player, he will save the Orioles quite a bit of money that could be spent elsewhere.  It will take several years for that value to come into being.  If it does, it will be worth about the following:

	Value	Cost	Diff
2014	minors
2015	minors
2016	minors
2017	minors
2018	12.2	0.5	11.7
2019	12.7	0.5	12.2
2020	13.2	2.6	10.6
2021	13.7	5.5	8.2
2022	14.2	8.5	5.7
2023	14.8	11.8	3.0
Total			51.4

 This suggests the cost for signing LaRoche would be an additional 51.4 MM on top of his total salary.  However, it is unlikely that the draft pick becomes an average player.  From 1996 to 2005, picks 23 through 25 resulted in seven players you could argue were valuable as starters (this forces one to consider Phil Holmes and Jeff Franceour as suitable starters).  This is a rate of 23%, which drops that 51.4 MM value to 11.8 MM when you consider average value (or 0 MM if you wish to consider the mean as your outcome) or 9.0 MM in 2013 dollars.

I think it also helps to consider what it means when you consider the draft in general for a team.  As in, how many average starters does a team produce in a draft.  The following looks at how many starters were produced from each draft position for the Orioles 2013 draft.

1996-2005
Round	n-1	n	n+1
1	3	2	2	23%
c	0	2	0	7%
2	1	2	1	13%
3	1	1	0	7%
4	1	0	0	3%
5	0	0	0	0%
Players				0.53

You could expect an average of half a useful player coming out of the 2013 draft.  Another way of thinking is that the Orioles stand a 53% chance of getting a useful starter.  If you remove that first round pick, it becomes about a third of a player or a 30% chance.  The point here is that even though a team loses a first round pick, it does not mean the team has no chance to produce a starter.  It certainly decreases that chance.

The Talent on the Current Team

The decision on whether to acquire a free agent is greatly dependent on how good the team is with and without the player.  The concept was expressed well in an article on Baseball Prospectus from 2006.  Basically, not all wins are created equal.  A team moving the needle from 60 wins to 61 wins is not going to earn as much from that 61st win as a team will by pushing from 89 wins to 90 wins as the latter scenario results in a greater likelihood of a big pay day in the playoffs.

Below is an updated version of the graph from the previous article (only difference in market price is addressed, not the expanded playoff system):



Keep in mind, I am not certain those updated numbers above are accurate, but lets use them as a basis for discussion.

If you believe that the Orioles are an 83 win team (what an even one run record would have resulted in), then a 2.5 win player would be worth about 6.1 MM (if the graph above is accurate).  If the team is at 89 wins then the 2.5 wins would be worth 17.4 MM.  Assuming the latter is the real scenario, then a 3 year 36 MM deal is more like earning 2.4 MM (12 + 3 - 17.4) in 2013.  However, this assumes that the first base scenario is Adam LaRoche or replacement level.  The two scenarios to compare are Chris Davis (1B, 2.1 WAR), Wilson Betemit (LH DH, 1.2 WAR), and Danny Valencia (RH DH, 0.4 WAR) against Chris Davis (DH, 1.6 WAR) and Adam LaRoche (1B, 2.5 WAR).  The DH positions cancel out, so the projected difference is 0.4 WAR.  The increase from 89 to 89.4 wins, the difference is worth 2.5MM.  Instead of a windfall of 2.4 MM, it would be a cost of 12.5 MM.

However, the above situation views the move in a cost vacuum.  That is, does the cost paid out to an individual match the improvement in wins attributed to that single player.  The Orioles payroll stands roughly at 87 MM and there is some suggestion that the payroll limit is at 100 MM.  Although the free market rate for a win improvement is about 5 MM, would it make sense to spend 13 MM to get as half win and pay five times the going rate for that improvement in talent? 

Conclusion

The first segment simply noted that LaRoche has value.  The second segment noted that the cost of acquiring LaRoche is his salary and the value associated with the loss of a draft pick.  The third segment showed that cost can change depending on the talent level of a team and that a team can have surplus value to overpay a player.  In other words, draft picks are not commodities that must never be dealt away.  They have a certain value and sometimes it is quite beneficial to sacrifice them in exchange for signing a free agent.  Furthermore, the value and cost of a free agent are often subjective based on current talent level of a team and surplus money on a payroll.

So, yes, you could argue that LaRoche is a needed addition on this team.  Actually, a much better argument would be for Kyle Lohse who probably stands as being a 1.5 win improvement over whatever becomes the filler for the Orioles' fifth rotation slot.  However, I still wouldn't pay out as I believe this team is the fourth or fifth best team in the AL East and a good bit behind the two teams I think are the best in the division (Tampa and Toronto).  The Orioles need to improve by about 5 games worth of talent (two excellent players in areas that are holes).  I think that would have best been addressed by filling LF with more dependable talent and acquiring another SP.  However, Melky Cabrera and Nick Swisher are gone.  R.A. Dickey is gone as well as the secondary market with guys like Edwin Jackson.  As it is, it probably is best for the team to seek fringe talent and hope to catch lightning in a bottle.

If I was under a use or lose scenario with money, my efforts at this point would be to try to offer a signing bonus to Matt Wieters or Manny Machado to lock them up long term at a low base salary.  Of course, maybe that is a topic to more fully engage at a later date.

International Draft Addendum: Free Agent Compensation Part II

This is the final part of a series looking at a potential international draft and free agent compensation.

Aspects that work well?
1. Subdivision of positions.
It makes sense to value players by subgroups.
2. Taking into account the value of a player for his current team.
At bats and innings pitched connotes a players worth to his own team.

Why is the current system not very accurate?
1. Poor statistics are used.
The numbers used are either of dubious use (fielding percentage, chances) or are rather useless (RBIs, winning percentage).
2. Undervaluing/overvaluing certain positions.
A major issue often encountered are free agents who flounder around due to unrealistic compensation statuses attached to them. For instance, Jose Valverde is struggling to find a decent market for his services because he is a type A reliever, but no team is willing to offer both the cash and loss of their first unprotected pick for him. The same thing happened to Orlando Hudson, Adam Dunn, and Juan Cruz last year.
3. Potential over-compensatory approach for players on disabled list.
There really is little reason why a player like Erik Bedard would qualify for compensation even though he has only seen 164 IP over the past two years. Being able to stay healthy should be a consideration as it affects a player's future cost.

But what is the major failing of the system?
Value lost is not value gained. Losing a top free agent results in getting two players who are, at best, 4 years away from the free agent signing to making a difference on the big league club. This is the most glaring issue with the current approach. The other failings need to be corrected, but making the adjustment closer to real time is a better solution.

After the jump, a better way to identify type A and B classifications and a more fair way to compensate.


How to better classify free agent classes:
Use a condensed statistic like WAR. This system would use all of the attributes from the current one and place them in a more defensible construct. It also incorporates health as a attribute as opposed to assuming a players health is a constant. For defense, the system should use a three year weighted average to determine UZR for fielders. Assume all catchers are average defensively until a dependable measurement technique is devised to measure that.

What is a more fair way to compensate teams?
Get rid of the draft pick compensation scheme. It makes no sense. I think the best way to do it is to issue a signing tax on any type A or type B free agent on the team that signs the player. A type A player contract would be taxed 20% and a type B player contract would be taxed 10%. The tax would be paid from the signing team to the one who lost the player. That team has the option of beginning the program that year or waiting until the following off season to begin. This tax money must be spent on a free agent and must be at least on a 1:1 dollar shared ratio. Any unspent money is forfeited back to the player on which the tax was issued.

For instance:
Lets say Mark Teixeira signed an 8 year deal for about 180MM. That is a yearly average of 22.5MM. Assuming that yearly sum is what the Yankees are willing to offer him, under the new scenario he would be paid 18MM with 4.5MM being sent to the Angels. This would happen in years n to n+2 or n+1 to n+3. The Angels would have that 4.5MM allotment to spend on 9MM or more for a single free agent. If they only spend 8MM on a free agent assigned to this allotment, they can only receive 4MM in compensation and 0.5MM goes to Teixeira.

Why would this be good for teams?
Compensation for a type A players generates on average about 5.6MM in value. In order for a team to get similar compensation a player would need to sign a 3/27MM contract. That is about what an average baseball player would sign for if 1 WAR is worth about 3.5 to 4MM. That seems about right. The better the player, the higher the compensation. The value of that compensation is also more immediate and more dependable than draft picks would be.

Why would it be good for players?
It would probably push for players demanding long term contracts as well as forcing teams to spend money on MLBPA free agents. Money cannot disappear from the market if a team wishes to get compensated. It also encourages the teams to sign a player for 3 years so they can fully really that compensation. Likewise, a team/player is only taxed for three seasons and it is based on his lifetime contract, so it is not a great burden.

Amateur Talent Addendum: Free Agent Compensation Part I

After writing a piece on an international draft, I figure there were some aspects of it that need more exploration. This multipart series will reintroduce what Type A or B compensation means as well as how to implement compensation into this new draft system I propose. Part I will reacquaint you with what this compensation means.

As it stands now, the loss of a type A or B free agent results in compensation in the form of draft picks. For a type A free agent this means that the former team of the player receives a sandwich round pick between the first and second rounds according to the Elias rating (higher ranking free agents result in a higher draft pick during this round) as well as the new team's first unprotected draft pick. This translates to the second half of the first round (first half picks are protected) or the first half of the second round. Further complicating this approach is that if one team signs two type A free agents, the team who gave up the higher rate free agent would be the one who secures the higher pick. The second team then winds up with the next unprotected pick. An example would be last year when the Yankees signed CC Sabathia, AJ Burnett, and Mark Teixeira. The Yankees gave their 1st round selection to the Angels for Teixeira (98.889 rating), their 2nd round pick to the Brewers for Sabathia (98.110 rating), and their 3rd round pick to the Blue Jays for AJ Burnett (89.729 rating). It should be noted that although original round 1 to 3 picks are protected for one year, compensatory picks are not. If a team fails to sign a player with a compensatory pick, they do not receive a replacement in the following year's draft.

After the jump, we will more greatly characterize how Type A and B status is determined.


After the conclusion of each season, Elias Sports Bureau uses a somewhat secret formula to determine a rating of every player in baseball . . . not just the free agents. A type A player is considered to be a free agent who has performed in the top fifth of baseball over the past two years. A type B player is considered to be a free agent who has performed in the second fifth of baseball over the course of the previous two years. Former teams who lose players beneath the 60th percentile will not receive compensation.

So are there restrictions on compensation?
Yes, compensation is in effect until the first week in December when there is a deadline for the former team to offer arbitration. Compensatory terms remain in effect if the team offers arbitration and the player declines.

How are players rated?
First, players are divided by position. The groupings are as follows:
Group 1: 1B, OF, and DH
Group 2: 2B, 3B, and SS
Group 3: C
Group 4: SP
Group 5: RP

A weighted system that takes into consideration for lost time on the DL uses these statistics:
G1: PA, AVG, OBP, HR, RBI
G2: PA, AVG, OBP, HR, RBI, total chances, Fielding %
G3: PA, AVG, OBP, HR, RBI, Fielding %, Assists
G4: Total games (relief appearances are discounted by half), IP, W, Win %, ERA, K
G4: Total games (relief appearances are discounted by half), IP, wins and saves, H/IP, K/BB, ERA


As you can imagine, this system is needed in terms of granting compensation for lost players for small market teams, but the manner in which they do this is rather poor. In the next part of this series, I will discuss a revamped approach that will fit into the proposed system of slotting I made earlier.

Jose Valverde and Type A Compensation

There has been some discussion about the merits of signing a pitcher like Jose Valverde. He is a very good relief pitcher though he did have some wrist issues last summer. When you get down to it, Valverde just does not seem to be important enough to sign in comparison to others out there. For a crude comparison, look at blown saves over the past two years for Valverde, Matt Capps, and Fernando Rodney. Respectively, they are 11, 10, and 7. None of these guys are true shut down closers. You can expect somewhere between 5-7 blown saves a season for any of them. Is Valverde the best pitcher? Sure, but the instances where he can actually deliever plus value is limited. Really, Valverde at his best against Rodney at his worst might be a difference of 15 runs. That sounds more important than it really is given the fact that save situations are often given with a two or three run lead.

A secondary line of consideration is that Valverde qualifies as a type A free agent. For a team that is not good, it is thought often that spending money on type A free agent compensation is questionable. It is thought particularly foolish to spend money on relief pitching that qualifies as type A compensation. Just that happened to the Orioles after the 2006 season when General Manager Mike Flannagan surveyed the previous year and determined that our greatest weakness was our relief pitching. He set out to spend heavily on Danys Baez (3/19MM), Chad Bradford (3/10MM), and Jaime Walker (3/12MM). Danys Baez proved to be wholly ineffective with one season lost on injury. Chad Bradford was serviceable for 1.75 seasons before being dealt to the Rays for cash and getting injured in his final season under contract with the Rays. Walker was very good for a season and them plummeted. None of these moves helped the Orioles much. Maybe shifting them a game or two in a positive direction. But what about the free agent compensation?

Both Danys Baez and Chad Bradford qualified as type A free agents. Walker did not. Danys Baez had a higher rating, so the Braves were awarded a sandwich pick and the Orioles pick in the second round (2:5, 69th overall). This left the Mets with compensation for Bradford in round three (3:5, 99th overall). Who was selected and how have they done . . . after the jump.


2007 Draft

2:5 (69th Overall) Braves
Type A compensation for Danys Baez

Joshua Fields (so.) RHRP University of Georgia
Advised by Scott Boras and thought to go in the supplemental round, Fields was disappointed to fall into the second round. Boras had been suggesting 1+MM signing bonus for the college closer, but several teams passed on that. The Braves selected him knowing that negotiations were going to be an issue, but were confidant they could acquire him for slightly above slot. That never happened. Fields went back to school and pitched his senior season. Reentering the draft, he was selected by the Seattle Mariners 20th overall and signed for 1.75MM. He is currently a C+ prospect in the Mariners system. Fields still has a live arm, but his control and command are issues.

Other players selected at 2:5
2009 Mychal Givens SS/RHRP Baltimore
2008 Anthony Gose OF Philadelphia LoA
2006 Chris Tillman RHSP Seattle (now with Baltimore) MLB
2005 Craig Italiano RHSP Oakland HiA
2004 Yovanni Gallardo RHSP Milwaukee MLB

3:5 (99th Overall) Mets
Type A compensation for Chad Bradford

Eric Neisen (sr.) LHSP Wake Forest
Neisen signed for slot and has been struggling to make his way through the minors. He was not considered much of a prospect coming in and has been ignored by the main trade journals. Four year college lefties usually progress through the minors quickly and get hung up on AA or AAA. Neisen had to go through HiA twice and showed some issues during his stint at AA this season. He profiles mostly as a middle reliever or LOOGY.

Other players selected at 3:5
2009 Tyler Townsend 1B Baltimore LoA
2008 Roger Kieschnick OF San Francisco HiA
2006 Tony Butler RHSP Seattle (now with Baltimore) LoA
2005 Wil Inman RHSP Milwaukee (now with San Diego) AAA
2004 Josh Wahpepah RHSP Milwaukee AA

Conclusion
The Orioles did not give anything of much worth away in these acquisitions. The problem is though that there was no upside. The draft picks will typically fail out. Few are actually worth much in comparison to a free agent acquisition. The issue is that there is some prospective worth to these picks, so you better receive good value in return. Baez and Bradford did not give the Orioles much in return. Their presence or absence on the 2007 team did not matter to much. It was irrelevant. Handing out lottery tickets for irrelevance is just not a smart move.