Issues with the MLB qualifying offer system

The qualifying offer system in Major League Baseball was a well-intended and generally well-executed addition to the CBA prior to the start of the 2013 season. Ultimately, the system helped remove draft pick compensation attached to most free agents. This freed up more players to negotiate without any strings attached, a significant advantage for a player.

The idea was that if teams wanted a draft pick in return for the loss of a free agent, there had to be at least some assumption of risk on the team’€™s part. In order for teams to get that pick they had be willing to make the player a qualifying offer, which he could then accept or reject. A rejection meant that the player was free and the team would get a draft pick from the team that ultimately signed him. An acceptance meant the team would then have that player retained for next year at the qualifying offer number.

The qualifying offer is the average of the top 125 salaries from the previous season in baseball. In 2013 that number was $13.3 million, it climbed to $14.1 million in 2014 and will be $15.3 million this offseason.

The system is a benefit to most players, as the majority of free agents are not given a qualifying offer. But a few players each year, the borderline guys, really get hurt by the system because the draft pick attachment limits their value in free agency.

Last year that was, most notably, Stephen Drew and Kendrys Morales. Both players were offered and then ultimately rejected qualifying offers. Drew eventually signed back with the Red Sox on May 21 of this year. Morales signed on June 8 with the Twins.

Both Morales and Drew’€™s signing teams did not give up draft picks to sign them. Drew, because he signed back with the same team, and Morales, because he signed after the June amateur draft. Under those circumstances teams are not required to surrender picks.

Both Morales (.218, 8 home runs) and Drew (.162, 7) had bad seasons. Ultimately the QO system cost them more than just money. It may have cost them their careers as they did not play a full schedule in their age 31 seasons, and when they finally played the production was poor. Neither went to a regular spring training and that seemed to impact both of them negatively.

Two players that did sign before the season started after declining qualifying offers were Ervin Santana (Braves, 1 year, $14.1 million) and Nelson Cruz (Orioles, 1 year, $8 million). Both Cruz and Santana were seeking multi-year deals but could not get the deals they were looking for. That could be partially because the asking prices were too high but also because teams were required to lose a pick to sign them.

Cruz eventually signed on February 24, just as position players were reporting to spring training, and went on to have a fantastic year. He led all of baseball with 40 home runs while hitting .271 and posting a 4.7 bWAR, a career high. The Orioles forfeited their 55th overall draft pick to sign Cruz.

Santana didn’t sign until well after spring training started on March 12. This was more of a reactionary move as the Braves lost both Kris Medlen and Brandon Beachy to Tommy John surgery during spring training. The Braves, in a pinch, surrendered their 26th overall draft pick to get Santana, and he produced for them. Santana made all 31 of his starts, winning 14 games while giving the Braves 196 innings in their rotation.

Both Santana and Cruz lost out on bigger offseason fair-market deals at least partially because of the draft pick compensation attached to them. Unfortunately that could happen to them again.

One of the issues that needs to change with the system is that a player should not be subject to qualifying offers in consecutive seasons. Cruz and Santana were hurt by the system once already. Both were given qualifying offers on Monday. In the case of Cruz, I have to imagine most teams are willing to look past the draft pick, but that is unlikely the case with Santana, and that’€™s not really fair.

Santana is a tweener player — good, yes, but maybe not "surrender a draft pick" good in the eyes of many organizations. This is a cycle that could never end for him. 

Another issue that needs to be addressed is players who are traded mid-season cannot be given a qualifying offer at the end of the season. We saw this last year with Matt Garza. Garza was traded from the Cubs to the Rangers in the middle of the 2013 season. That freed the Milwaukee Brewers up to sign Garza to a multi-year deal in the offseason without giving up a pick. The Brewers, like most teams, value their draft picks, but that didn’€™t have to enter the equation when considering Garza like it did with players like Ubaldo Jimenez, Stephen Drew and Ervin Santana last offseason.

That really isn’t fair to other free agents who remained with their teams the whole year. Garza benefited from the Cubs being a bad team in 2013. Why should players who weren’€™t moved during the year be penalized in free agency while those who were traded gain an advantage? They shouldn’€™t.

This year’s list of attractive free agents that won’t be subject to draft pick compensation because they were traded during the regular season is worth noting. Jon Lester, Brandon McCarthy, Jake Peavy and Justin Masterson are all quality starting pitchers who were moved and will likely see multi-year offers this winter. Draft pick compensation won’t even be a concern like it will for others like James Shields and Edinson Volquez. This is a significant disadvantage to those players.

The final issue I have with the qualifying offer system that needs attention is what happens when teams decline their options on players. An organization is allowed to decline an option of a player that they hold but yet can still make a qualifying offer to that player. This is only done so that they team can gain a draft pick when the player signs someone else.

If a team has an option to retain a player that is already built into his contract and they decline it, they should not be allowed to still make that player a qualifying offer. This makes no sense and is bad faith bargaining. Draft pick compensation was set up so that teams that lose free agents that they were willing to pay qualifying offers to get something in return in the form of a draft pick. If you decline a player’s option, then you obviously have no desire to retain that player. Why should you get something in return?

As I said earlier, the qualifying offer system has helped a lot of players enter free agency without strings attached. However as we have seen the system play out now for two-plus years, there are some holes that need to be addressed.