Is Cost Certainty Better Than Roster Flexibility?

The weeks leading up to the start of arbitration hearings (February 4-20) are typically the time when multi-year extensions are worked out with arbitration-eligible players.  For some other players, a one year deal is signed and then negotiations continue up until Spring Training to work out a long-term deal.

The Pirates have two players scheduled to go to arbitration in the form of Neil Walker and James McDonald.  Three other players — Garrett Jones, Charlie Morton and Gaby Sanchez — signed 1-year deals earlier this month.  Of these five players, Walker is the most likely candidate to sign a long-term extension.  Tim and I have differing opinions on the subject.  I’m for it, while Tim is against it.

The point of this article isn’t to rehash the Walker long-term deal debate.  Rather, it is to question whether it is best to go year to year with players or to lock certain ones in to gain cost certainty against future projected performance.

As of this writing, the Pirates have four players under contract for next year — Andrew McCutchen, Russell Martin, Jose Tabata, and Jason Grilli.  The Pirates have a host of other players under team control, but in theory all of those options could be denied or players could be non-tendered.  As a point of reference, at this time last year there were some who felt that Jeff Karstens could be a good candidate for a small multi-year deal.

Around Major League Baseball, the spectrum of teams with players under contract past 2013 ranges from the Dodgers (11 — totally nuts payroll situation) to the Marlins (1 — not really a good example of a major league franchise right now).  The Yankees have the same number of commitments as the Pirates (4 — but 3 of those 4 are monstrous contracts), while the Phillies have 6 (the end to that Ryan Howard contract never seems to get closer).

If we live in an era where we can expect the Pirates to routinely have $70M payrolls, then in 2014 the Pirates will have roughly 1/3 of their payroll already committed to the aforementioned 4 players ($24.5M).    The Pirates still have a whole bunch of potential 2014 pieces under team control, with those players either at reduced arbitration-scale salaries or league minimum salaries, so it’s not really a worry about a payroll crunch.

Rather, it’s a philosophical team-building question — If you were running a team, would you lock up players long-term to ensure cost certainty or would you ride the peaks and valleys of performance by going year to year?

Personally, I would not give any reliever a multi-year deal.  The vast majority of relievers, due to the smaller body of work they create, are volatile from year to year in terms of performance.  Things like strand rate and BABIP fluctuate greatly for relievers versus starters from year to year.

Starting pitchers are a commodity that I would probably feel comfortable only guaranteeing 4 years, with options for additional years as necessary.  Although the incident rate of major pitcher injuries (elbow and shoulders) appears to be dropping, it would give me pause to extend a pitcher too far out.  The act of throwing a baseball is an unnatural one that inherently puts stress of multiple joints.  Pitch counts and inning limits attempt to mitigate these factors, but plenty of pitchers have seen once promising careers either totally derail (Mark Prior) or start to fade (Tim Lincecum, Tommy Hanson).  As a case in point, the Pirates signed Paul Maholm to a 3 year deal to buy out all of his arbitration years, plus one option year for his first year of free agency.  With the Pirates, Maholm’s performance dropped over the course of the contract to the point that the Pirates did not pick up his $9.75M option for 2012.  Maholm’s peripherals ticked up in 2012, with his K/9, BB/9, and GB% all improving, but he still possesses a marginal 87 mph fastball and relied on a low .281 BABIP.

Position players are a different story, as it is a little easier to project future performance and there is less anxiety about season-ending/career-altering injuries with them.  My personal rule of thumb would be 5 years maximum, with the possibility of 6 years for a franchise cornerstone (for example, Andrew McCutchen).  Option years can be incorporated as a hedge, as well.  To go back to Neil Walker, I have proposed a 5 year/$32M deal patterned after a hybrid of Ian Kinsler and Robinson Cano’s arbitration year contracts, without an inflation riser to account for Walker’s lesser performance to date.  If Starling Marte were to have the type of year in 2013 that his skill set portends, he could be a “team-friendly contract” candidate after the 2013 season.

I’m a believer that you should always look to lock down potential cornerstones and above-average players at an early date.  The Cleveland Indians were the pioneers of this back in the 1990’s and it helped them extend their window during their years of contention.  Not every player needs to be extended.  It’s perfectly OK to go year to year with most players, but if a front office can properly identify their future talent, it is in both parties best interest to attempt to secure a long-term deal.  The player gets guaranteed millions regardless of performance, while the team gets the potential to save millions down the line from not going through the arbitration process with a player multiple times.

Aside from Walker, the Pirates don’t really have a player that deems a contract extension at this time.  James McDonald had too erratic of a 2012 to warrant locking oneself into a long-term deal, Pedro Alvarez’s agent won’t abide by a pre-free agency deal, Travis Snider needs to prove he is not injury plagued, and Garrett Jones may be exiting his peak performance years.

All in all, a team should probably not have more than 5 or 6 long-term salary commitments at any time, in order to hedge against fluctuating performances and changing market conditions.  The Pirates have some extension candidates, but most of them need at least 1 more year to prove their worthiness.

Author: Kevin Creagh

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  • Sandoz

    Very good article. It is essential to approach each player from a contextual perspective. As you say, position, past injuries and future projections should all play into the decision of giving a long term contract to a player.

    The most important advantage in signing a player long term is the potential value added to that player with a team friendly contract. You are able to maximize his trade value in this way and get more in return than he is worth. While if you sign a long term contract to a player that he doesn’t live up to, his value would be low anyways and not greatly affected by the poor contract. All you lose is money at that point.

  • http://battlingbucs.wordpress.com battlingbucs

    I’m all for signing Walker but I don’t think 5/32 does it (I think Walker would need just a little more). He asked for 3.6 so assuming that is 20% of what he perceives his market value at that makes his value 18 million a year. The Pirates would have to pay him .2, .4, .6, .8 and 1 year of that or 54 million dollars.

    On the Pirates side of 3 million that is still 15 million. So that is 5/45.

    Those numbers seem a little high to me as well. So if we split the difference between Walker and the Pirates and say it represent 30% of his value and make it a 30/50/70/90 scale that means a 5 year deal should get Walker 3.4 years of his value and his yearly value would be 11 mil. So that makes it 37.4 million. Take a little offer since the Pirates are assuming the risk and I think 34-35 is the correct neighborhood.

  • http://www.facebook.com/sean.matthews.165 Sean Matthews

    Carlos Santana, Indians catcher, signed a 5/21 deal before last season. I think he was in a similar situation as Neal. Hopefully Neal will be willing to leave some money on the table for more impact players. Is Santana getting ripped off?

  • tempman89

    Very good article
    Watching bedard on ROOT right now. Shame he didn’t give us enough last year, needed him to be a veteran rotation arm