A Deep Dive Into Big-Money Free Agent Contracts: The Good, The Bad, and The Ugly


When media pundits talk about NFL Free Agency, they focus on the most expensive contracts awarded to the top players available. Contracts are only reported in terms of annual average and guaranteed money and, in some cases, that’s all the info you need to decide if a contract is good or bad. For example, it’s clear that the Falcons badly overpaid for Mohamed Sanu (5 years, $32 million, $14 million guaranteed). For perspective, Sanu received more $1 million more guaranteed money than Randall Cobb did last year, which is just ridiculous.

In most cases, however, you need to dive into the details of contracts to find out how good they are and, unsurprisingly, some teams do an excellent job at contract structuring while others screw it up time and again.

Makin’ It Rain

Take a guess at how much money NFL teams have spent in Free Agency thus far. And I don’t mean total contract values, which are often misleading – I mean guaranteed money only. Seriously, take a guess.

Over five hundred million dollars. To be exact, $539,313,037 at the time of this post. And over half (55%) of that was spent by just five teams: the Giants, Jaguars, Raiders, Texans, and Eagles.

In general, I think that spending a ton of cash in free agency is a bad idea – see my write up on the Malik Jackson signing for more on that – however, there are three exceptions in my mind:

  1. Spending money on the quarterback position.
  2. Front-loading contracts with most of the guaranteed money in early years. This approach will minimize potential dead money against the salary cap in case a player is cut early.
  3. Creating cap hits that are decreasing or roughly equal throughout the contract duration. Note that this excludes the first year of contracts, which almost always carry a substantially lower cap hit than out-years. First year cap hits are usually quite low because players receive a low year-one base salary along with their signing bonus which is paid out instantly but is prorated over the life of the contract in terms of cap hits.

The first exception is easy enough to defend. Decent quarterbacks seldom reach the free agent market, and when they do, teams have to throw tons of money at them to lock them up. It’s also defensible because, unless you have one of the top few picks in the draft, your odds of finding a QB in the draft who can start immediately are slim.

The second exception is even easier to defend. Perhaps the most important question anyone should ask themselves before they make an investment is: what if I am wrong? If you agree to guarantee money to a player in future years, cutting him prior to those years will result in hits against your salary cap even though that player is no longer on the roster (i.e., dead money). In summary, a key aspect of a good contract is structuring it so you can escape relatively cheaply in the event that you are wrong and the player underperforms.

The third exception covers the other case: what if your investment decision is a good one, and the player you sign performs really well? If that’s the case, you would like that player to play out their contract. In practice, however, highly performing players often try to renegotiate their contracts in search of additional guaranteed money. The player usually has little leverage to execute a renegotiation, but one sure way to supply them with leverage is to be facing an untenable cap hit for your team. An excellent, recent example is Joe Flacco, whose cap number skyrocketed from $14 million in 2015 to $28 million in 2016. The Ravens couldn’t afford to have Flacco count that much against their salary cap, so they were forced to extend Flacco to to the tune of $44 million more in guaranteed money.

Now that we have some criteria, let’s look at a few of the big contracts given out this year.

The Good

Brock Osweiler to the Houston Texans

4 years, $72 million ($37 million guaranteed)

First criteria? Check. It’s a quarterback. If you don’t think Houston needs a starting QB, go back and re-watch their playoff loss to the Chiefs.

Second criteria? Calculating dead money is very complex; fortunately, OverTheCap provides us with these calculations for free. We can see the dead money Houston owes if they choose to cut Osweiler after any given year in his contract:

After 2016: $25 million

After 2017: $6 million

After 2018: $3 million

When you look at the contract in this way, you can see that Houston would be able to cut Osweiler after 2017 without incurring much of a penalty. $6 million isn’t negligible, but it is by no means a big deal. About half of the teams in the league have at least $6 million in dead money right now. So, in reality, Houston signed Osweiler to a two year, $37 million contract.

Third criteria? With cap hits of $12M, $19M, $21M, and $19M, Houston has prevented a Joe Flacco situation. The year one hit is predictably low, and the out-year hits, while higher, are roughly equal throughout the life of the contract. If Osweiler does well, the team will have good leverage to avoid giving him a restructuring (inevitably with a boatload of guaranteed money) too soon.

Verdict: Overall, I like this signing. Osweiler is only being paid the 16th-highest annual average salary at his position, so if he plays well, Houston found a viable QB at a reasonable price. The Texans can also get out of the contract after two seasons quite easily because of the contract structure. If Osweiler doesn’t play well in 2016, Houston can draft a QB in the 2017 draft and let the two players compete in 2017. If Osweiler doesn’t improve, he’ll be released after the 2017 season without significant cap implications.

Ideally, you wouldn’t give so much money to an unproven player – the best case here would have been a one year, ‘prove it’ type of contract. That said, the first exception I defined above is listed first for a reason: QBs are incredibly tough to come by. The mere fact that Osweiler was a QB gave him a ton of leverage in contract negotiations, and that’s a big reason why he was able to land this deal. I can’t give Houston an “A” grade since Osweiler is so unproven, but I’m comfortable giving them a “B”. A two-year risk on a potentially viable QB seems worth the risk to me.

The Bad

Mohamed Sanu to the Atlanta Falcons

5 years, $32 million ($14 million guaranteed)

First criteria? Nope. In fact, I’d argue that slot receivers are among the least valuable players around, because they are relatively easy to find when compared to quarterbacks, pass rushers, cornerbacks, and good offensive linemen. If you’re going to overpay for a slot receiver, he had better be amazing. The Falcons overpaid, and Sanu is most definitely not amazing.

Second criteria? Here are the corresponding cap hits after each season if Sanu is released, courtesy of OverTheCap:

After 2016: $11.6 million

After 2017: $4.2 million

After 2018: $2.8 million

Not only did Atlanta overpay; they structured the contract such that it carries a huge dead money penalty ($11.6 million) if Sanu is released after this season. Even if Sanu eats as much as Eddie Lacy did during 2016, he’s all but guaranteed to be on the roster in 2017.

Remember that Osweiler’s contract above also carries a huge penalty ($25 million) if Osweiler is released after 2016. But he’s a QB, and I’m willing to write it off for that reason. I absolutely will not write it off for a slot receiver, as they can usually be found in the middle rounds of the NFL draft, where you’d only have to pay them $200-400K per season.

Third criteria? At least Atlanta got this part right. The cap hits are consistently a little over $7 million in each of 2017-2020.

Verdict: This was a poor signing and a poorly structured contract, and is very deserving of a “D” grade. The only thing saving this from an “F” is the fact that the overall sum of money over five years isn’t backbreaking. Another way to put Sanu’s contract in perspective is to look at the contract signed by former teammate Marvin Jones. Even though Jones is a more talented player, the Lions gave him $1 million less in guaranteed money. They can also cut Jones after one year with just $6 million in dead money (remember, Sanu’s dead money after year one is over $11 million!). I wasn’t a fan of the Jones signing, either, but it’s still quite a bit better than the Sanu signing when you compare them side by side.

The Ugly

Olivier Vernon to the New York Giants

5 years, $85 million ($40 million guaranteed)

First criteria? Pass rushers are rare, so while Vernon isn’t a QB, he at least plays a more valuable position than slot receiver.

Second criteria? Dead money hits if released early (thank you, OverTheCap):

After 2016: $27.25 million

After 2017: $12 million

After 2018: $8 million

After 2019: $4 million

The Giants won’t want to swallow $12 million in dead money, so Vernon is all but guaranteed to be on the roster for the next three season (2016, 2017, 2018). After 2018, getting out of the contract is feasible, though $8 million in dead money certainly isn’t fun.

For perspective, the Jaguars gave Malik Jackson similar dough (6 years / $85.5 million / $40 million guaranteed), but their out-year dead money hits would be much smaller: $6 million after 2017 and $4 million after 2018. Granted, I still disagree with giving Jackson that much money, but at least the Jaguars can get out of the contract more easily in a couple of years if they need to.

Third criteria? Up, up, and up:

2016: $13 million

2017: $16 million

2018: $17 million

2019: $19.5 million

2020: $19.5 million

These are far from ideal. Putting the dead money and cap hits together, you can see that cutting Vernon after 2017 is untenable ($12 million in dead money), so he will play 2018 at a huge cap hit ($17 million). J.J. Watt, arguably the best defensive player in football, doesn’t approach a $17 million cap hit until the final year of his current deal (2021). Watt’s cap numbers are also more consistent throughout the life of his contract.

We can also stay with the Malik Jackson comparison – Jackson’s cap hits throughout his contract are much more consistent after year one (remember, year one cap hits are almost always significantly lower due to the prorated signing bonus): $10M, $15.5M, $15.5M, $15.5M, $15.75M, $13.75M. Still a bad idea, but superior structuring.

Too much money for a non-QB. Bad dead money. High and increasing cap hits. Sounds like the very definition of an “F” to me.

Wrapping Up

To recap: big-money free agent contracts are usually a bad investment, but you can improve them dramatically with creative structuring. Or, you can structure them poorly, and ensure that your team exists in salary cap purgatory for years to come.

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Engineer by day, aspiring football writer by, well, any other time that he has.

Loves data-driven, analytical approaches to NFL analysis.

Also loves pizza, gin, and taking co-ed sports too seriously.
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