Tags, Tenders, and Texans: Free Agency 101

Tim's post about Arian Foster--- and, more specifically, the comments to that and other recent posts about free agents --- made me realize that there are a number of questions floating around about franchise tags, transition tags, restricted-free-agent tenders, and other assorted free-agency issues. Because it doesn't exactly take John Nash to answer most of these, I figured I'd give it a shot. No, it might not be a truly original idea for a post. But then, I never expected that I would distinguish myself via BRB. That's what my James Earl Jones and Barry White impressions are for!

Anyway . . . we'll tackle this in two sections. First, we'll review the various tags and tenders, including their costs and the rules that govern them. After that, we'll briefly look at various Texans free agents and apply what we learned in part 1 to each of them.

Sound good? Great! Then channel 1/3 of your inner Jonathan Edwards and jump.

Act I: "Already got a guilty conscience. Might as well have the money, too."

So, What Do I Do Now That My Contract Is Expired? Interesting. Your status as a non-contracted NFL player depends entirely on the number of accrued seasons that you have. If that number is 0, 1, or 2, then you are what is known as an Exclusive Rights Free Agent (ERFA). If you have three seasons, you might be a Restricted Free Agent (RFA). And if you have four or more, you are an Unrestricted Free Agent (UFA).

What is an Exclusive Rights Free Agent? Well, like I just mentioned, it's players who are (a) no longer under contract who (b) have 0, 1, or 2 accrued seasons of NFL service. (An accrued season is, generally speaking, a season in which a player he was on, or should have been on, full pay status for a total of six or more regular season games. The main caveat to this is, irrespective of the player's pay status, accrued-season calculations cannot count games for which the player was on: (i) the Exempt Commissioner Permission List, (ii) the Reserve PUP List as a result of a nonfootball injury, or (iii) a Club's Practice Squad.)

ERFA players are can be re-signed by the team holding the exclusive rights if, before the first day of the League Year after the expiration of the prior contract, the team tenders the player a one-year contract with a salary of at least the Minimum Active/Inactive List salary applicable to that player. For 2012, those amounts are:

I Have 3 Accrued Seasons; Did You Say I Might Be An RFA? Yes. You see, no player is automatically a restricted free agent. To be an RFA, a player must (a) no longer be under contract, (b) have fewer than four years of NFL service, and (c) receive a qualifying RFA tender. If a team chooses not to proffer a qualifying tender to a player, that player becomes an unrestricted free agent instead.

If a team does tender a qualifying offer, the player may negotiate with other teams until April 15. On April 16, if he has not signed an offer sheet from another team, the player's rights revert to his old team. Under all qualifying tenders --- which we'll get to in a second --- the original team retains right of first refusal. Thus, if another team signs the player to an offer sheet, the players original team has a "right of first refusal," a seven-day period in which they may match the offer or choose not to match it. If they choose not to match the offer, the original team is compensated with a draft pick based on what tender was originally placed on the player.

So What Are The 2012 RFA Tenders? The old CBA specified amounts, adjusted annually, that would be "qualifying tenders" for RFA players. Under the new CBA, however, those specific amounts were replaced with amounts for 2011 only, in four tender levels:

The new CBA also provides that these amounts will be adjusted annually according to however much the salary cap increases in a given year, with a minimum increase of 5% and a maximum of 10% in any given year. The 2011 NFL salary cap was $120.375M (sorta), and the 2012 cap will be roughly that same amount (sorta), so the RFA tender amounts will increase by the 5% minimum for 2012. The new amounts will be $1,260,000 for the first two levels, $1,927,000 for the second-round tender, and $2,742,000 for the first-round tender. (Art. 2, sec. 5 of the CBA requires that all calculations be rounded to the nearest thousand.)

You Mentioned "Certain Exceptions" In That Table. Yes, I did.

Well, What Are They? There are two, and they both deal with "Upgraded Tenders." If a team offers the first-round tender to any of its RFA players who were originally selected in a round lower than the first, this is an "Upgraded Tender." When this happens, the team can only receive a second-round pick for any player who was originally selected in the first round who did not receive a first-round tender. Additionally, if a team offers the second-round tender to any of its RFA players who were originally selected in a round lower than the second, that team can only receive a third-round pick for any of the players originally selected in the second round who were not given at least the second-round tender.

Stated a little more clearly, if the team slaps a first-round tender on a guy that they originally got in the fifth round (for example), they can't get a first-round pick for a former first rounder by offering him only the $1.26M/original-round tender. This is basically a way to keep teams from cashing in on underachieving first-rounders while protecting other players.

Do Unsigned Tenders Count Against The Salary Cap? Generally speaking, yes. All outstanding RFA tenders count as salary until they are withdrawn or replaced by a June 1 or a June 15 tender.

Wait . . . what the heck is a June 1 (or a June 15) tender? OK, it works like this: the signing period for tenders has to be at least 35 days long and it has to end no later than five days prior to the draft. At the close of the signing period, if the team has not withdrawn the qualifying tender, that team is the only team with which the player may negotiate or sign a contract for that league year. If the player's tendered amount is greater than 110% of his prior-year salary (with all other terms of his prior-year contract carried forward unchanged), the team may withdraw the original qualifying tender on June 15 and retain its rights to the player, as long as they immediately tender the player a one-year contract of at least 110% of his prior-year salary (with all other terms of his prior year contract carried forward unchanged). This is the "June 15 Tender."

Taking it a step further, for any RFA who was tendered at the lowest level and did not sign a contract with any team during the signing period, in order to be subject to the June 15 Tender, the player's original team must by June 1 tender the player a one-year contract of at least 110% of his prior-year salary (with all other terms of his prior-year contract carried forward unchanged) or extend the $1,200,000 offer from the original tender, whichever is greater. This is the "June 1 Tender."

Does It Worry You That You Are Carrying On This Q&A With Yourself? It probably should, but it does not, mainly because I am asking myself the bolded questions in the voice of Professor John Nerdelbaum Frink, Jr. HOYVIN GLAVIN!

Wow. That's Just . . . Nevermind. What Can You Tell Me About Unrestricted Free Agents? They're less restricted than the restricted ones.

Insightful. What Else? UFA players are, as we already discussed, players with four or more years of accrued service who are no longer under contract. They are free to sign with any team during the signing period, and their original team receives no direct compensation.

If a UFA does not sign with a new team by July 22, then he can only negotiate with his original team, provided that the original team made a June 1 tender of at least 110% of either (a) his prior-year salary (if his expiring contract is not a contract that he entered into as a rookie) or (b) his "Paragraph 5 Salary" (if his expiring Player Contract is a contract he entered into as a rookie, and it has not been renegotiated), in each case with all other terms of his contract carrying forward unchanged. And, before you ask, the distinction between (a) and (b) here is that "prior-year salary" means Paragraph 5 Salary plus roster and reporting bonuses, the pro-rata portion of any signing bonus, and any other payments to the player as compensation for the playing of professional football for the last year of the player's most recently negotiated contract, excepting any performance bonuses other than roster and reporting bonuses.

If the original team does not offer a June 1 tender to the UFA, then the player may continue to negotiate with any team after July 22. If he has not signed with any team by the Tuesday following the tenth week of the regular season, at 4:00pm EST, the player is prohibited from playing football in the NFL for the remainder of that league year, absent a showing to the Impartial Arbitrator of extreme team or extreme personal hardship.

How Do Franchise Tags Factor Into All Of This? During a period that begins the 22nd day prior to the start of the new league year and ends on the 8th day prior to the new league year, each team can designate one of its players who would otherwise be a restricted or unrestricted free agent as a franchise player. There are two types of franchise tags: exclusive and non-exclusive. (For 2012, this period is Monday, February 20 through Monday, March 5.) Players who are given the exclusive tag may not negotiate with any other teams, while players who are given the non-exclusive tag may negotiate with other teams. If the non-exclusive-tagged player signs an offer sheet with a new team, the original team has five days from the time they are presented with the signed offer to decide whether to match the terms. If they elect not to match, the team signing the tagged player must compensate the original team with two first-round draft picks, one in the draft for the current league year and one in the following year's draft.

Teams who designate a franchise player of either variety have until 4:00 PM EST on July 15 of the league year (July 16 this year, due to the 15th falling on a Sunday) to sign the player to a multiyear contract or extension. After that date, the player may sign only a one-year contract at the required franchise-tag amount, and the contract may not be extended until after the team's final game of the season. Also worth noting, a franchise-tag designation may be withdrawn at any time prior to the player's signing the tendered offer, and the player would immediately become an unrestricted free agent, free to negotiate with all teams. Meaning if a team franchise-tags a player who would otherwise be an RFA if a qualifying offer were made, they cannot later withdraw the tag and make a qualifying offer to keep the player as an RFA. Additionally, once a tag is applied to a player, if the tag is rescinded or if the tagged player signs a multiyear contract before the start of the season, the tag cannot be reused in that given year.

What Are The Franchise Tag Amounts For 2012? For non-exclusive franchise tags, the amount is the greater of 120% of the previous-year salary or average of the five largest prior-year salaries for players at that position, with the positions defined as: Quarterback, Running Back, Wide Receiver, Tight End, Offensive Line, Defensive End, Interior Defensive Line, Linebacker, Cornerback, Safety, and Kicker/Punter.

If this sounds straightforward, it isn't. The actual calculation of that average is designed to determine the franchise-tag amounts at each position over the last five years as a percentage of the overall cap figure in each of those five years. The calculation, per the CBA, is done by:

(1) summing the amounts of the Franchise Tags for players at that position for the five preceding League Years;

(2) dividing the resulting amount by the sum of the Salary Caps for the five preceding League Years (using the average of the amounts of the 2009 and 2011 Salary Caps as the Salary Cap amount for the 2010 League Year); and

(3) multiplying the resulting percentage by the Salary Cap for the upcoming League Year (e.g., when calculating the Tender for the 2012 League Year, dividing the aggregate sum of the Franchise Tags for players at that position for the 2007–2011 League Years by the aggregate sum of the Salary Caps for the 2007–2011 League Years and multiplying the result by the amount of the Salary Cap for the 2012 League Year) (the "Cap Percentage Average").

The exclusive tag adds an additional wrinkle, as the tendered amount for that tag is the greatest of either of the two amounts for the non-exclusive tag or the average of the five largest salaries in contracts as of the end of the RFA signing period (explained above) for players at the position that the tagged player participated in the most plays in the previous league year.

With all of this in mind, here are the non-exclusive-franchise-tag amounts for 2012 by position:

Of note, other than the QB number, all of these tag values are lower in 2012 than in 2011 due to the new method of calculation.

Now, obviously, because the RFA signing period has not even started, let alone ended, we cannot figure out the exact exclusive-tag amounts. Most likely, these number will be roughly the same as the non-exclusive numbers, as it would take an overall increase of $5M among the top five salaries at a position to increase the tag amount by $1M. More importantly, with very few exceptions, teams almost always opt for the non-exclusive tag, simply because the amounts are slightly lower and losing the player would net them two first-round picks. (In fact, Michael Vick in 2011 and Richard Seymour in 2010 are the only players that I can recall getting the exclusive tag recently.)

And Franchise Tag Tenders Apply To The Salary Cap Even Before They Are Signed, Right? Yup. Outstanding franchise tenders count against the cap until they are withdrawn. Also, if a tagged player negotiates a new multi-year contract with the team after signing his franchise tender, the cap hit for the current season is determined by the terms of the contract rather than the tag amount.

OK, How Does The Franchise Tag Differ From The Transition Tag? The Final League Year of the CBA notwithstanding, a team can elect to use a transition tag rather than a franchise tag in a given season. If a player is designated as a transition player, the team must tender him a one-year contract equal to the greater of 120% of his prior-year salary or the average of the 10 highest prior-year salaries at the position that the player participated in the largest number of plays in the prior year. The 10-highest calculation is done using the same percentage-of-cap methodology as in the blockquote above.

A transition-tagged player may negotiate with any other team between the start of the new league year (March 13 this season) and July 22. If he signs an offer sheet with a new team, the original team has five days to decide whether to match the offer. If they match the offer, the player must sign that same offer with his original team; if they elect not to match, the team gets no draft-pick compensation. If the player does not sign an offer sheet with a new team by July 22, his original team is the only team that he may negotiate with, and the team does not have to make a June 1 or June 15 tender to preserve this right. Additionally, if the transition-tagged player negotiates a new contract with his original team while he is tagged, and he does not sign an offer sheet from a new team, the team cannot use the transition tag again on any player until the newly negotiated contract expires.

Earlier, You Said That A Team Gets "No Direct Compensation" If A UFA Is Signed By A New Team. Ah-ha! Good eye!

Thank You. What's With The Qualifier There? That's where Compensatory Draft Picks come into the picture. There are a total of 32 compensatory picks added on to the ends of draft rounds 3 through 7, and they are awarded primarily to teams that lose more "qualifying free agents" than they gained in free agency the previous year. (Teams that lose and gain the same number of players, but whose losses are more valuable than their gains, may also get compensatory picks, but only in the seventh round.) The round placement of the compensatory picks is determined by a proprietary NFL formula based on the player's salary, playing time, and postseason honors with his new team.

It is important to remember, however, that the compensatory picks are awarded based on the previous year's free agency, so the gains and losses in free agency in 2011 will be reflected in compensatory picks in the 2012 draft. It is also important to note that not every free agent lost or gained is a "qualifying free agent" under the NFL's formula.

Is There Anything Else I Should Know? Probably. For example, are you aware that Italy does not use a king? Also, and more to the point, you should know that a team has to be under the salary cap by the start of the new league year, which might be important in trying to negotiate a long-term deal with a certain player.

Thanks, Freddy Foreshadowing. You are welcome.

INTERMISSION

Act II: "You know what I'd do? I'd take that deal 'n' crawfish, then drill that ol' Devil in the ass."

So, all of that is (theoretically) interesting in the abstract, I guess. But it's (theoretically) far more interesting if we actually apply all of that to the 2012 Texans. And I (theoretically) want to write things that are interesting. So let's, like, do that.

The list of Texans free agents looks like this:

Stuff We Can Say With Some Degree Of Certainty.

• Because of how franchise-tag values are calculated for offensive linemen, it would cost $9,400,000 to tag Myers. That ain't happenin'.
• With Owen Daniels already on the 2012 books with a $6,500,000 cap hit, there's no way the Texans are going to tag Dreessen and have nearly $12,000,000 tied up in two TEs.
• There's no upside for the Texans to use the transition tag in lieu of the franchise tag, so we can basically ignore that option.
• There are, by my count, exactly two players on that list for whom the franchise tag might be a viable option. (We'll deal with the nuts-and-bolts of the money involved a little bit.)
• Jon Weeks, an ERFA with 2 years of accrued service, can be retained for $540,000. Granted, I still think it's absurd to carry a designated long-snapper, but that's more of a philosophical difference than an actual reason for Rick Smith & Co. to not sign Weeks.
• Jake Delhomme and Jeff Garcia are both UFAs, and both should be thanked for their relative contributions and shown the door. Ditto that for Matt Turk and Bryant Johnson.

Dueling Dilemmas

All of which brings us to the meat and potatoes of the entire discussion: what to do about Mario Williams and Arian Foster? So I can get the disappointment out of the way as quickly as possible, I should mention that this section is not going to break down the entire salary cap and come up with a way to sign both of these guys (and Myers). I think it can be done, but that's outside the scope of the post and, to be honest, this post is already sneaking up on 4000 words and a proper salary-cap accounting would take at least another 2000.

No, what I want to do here to wrap this post up is throw out the possible options for each player, aside from the obvious "sign them to a new contract," including what each option would mean vis-a-vis the other player. Hopefully, I'll even add in some speculative stuff that you hadn't yet considered. To wit:

Arian Foster, Option 1: RFA Tender. Without a doubt, should the Texans chose to tender Foster as an RFA, they would use the first-round tender amount ($2,611,000). The upside to this from the Texans' perspective is three-fold. First, it would leave the franchise tag available for Mario Williams (or Chris Myers, though I still say that will never happen). Second, because the only other RFA on the team (Quintin Demps) was a fourth-round pick, tendering Foster at the first-round level wouldn't have any impact on what you could get for other RFAs under the caveats listed above. Third, the cost is over $5,000,000 less than a franchise-tag tender would be.

The downside, however, is that there is a distinct possibility that a team (or teams) might view getting Arian Foster for only a first-round pick as a steal. While the Texans retain the right of first refusal in that situation, a savvy team that wanted Foster badly enough and had enough cap space could sign him to an offer sheet that paid more in the first year or two of the contract, making it much harder for the Texans to match it.

Arian Foster, Option 2: Non-Exclusive Franchise Tag. While this option costs $5M more than the RFA tender, it could be attractive to the team simply because $7,700,000 is pretty fair value for Foster, and the non-exclusive tag gives them the added layer of two first-rounders for protection from another team signing Foster away.

On the other hand, using this tag on Foster (a) prevents the Texans from using the tag on a UFA and (b) only locks Foster up for one year, meaning (c) you have to sign him to a long-term deal next year at the same time that you're trying to re-sign Duane Brown or (d) you'll have to tag Foster again next season for $9,240,000.

Arian Foster, Option 3: Exclusive Franchise Tag. I honestly cannot come up with a reason that the Texans would take this route with Foster rather than the non-exclusive tag. It costs more and has all the same downsides as the non-exclusive scenario, with the added detriment of a higher number next season if the team had to tag Foster again.

Mario Williams, Option 1: Exclusive Franchise Tag. OK, I am well aware that this tag would cost roughly $22,000,000 for Williams in 2012 and that the team does not have that much room under the cap right now. I know this.

At the same time, I know this as well: if the Texans feel like they can get a long-term deal done with Williams, then tagging him now would allow them to work on this deal while preventing Williams from testing the free-agent waters. And --- here's the key --- as long as they got the new deal signed before March 13 (when the new league year starts) and were under the cap on that date, there would be no harm from the amount of the tag. (Likewise, they could rescind the franchise tender prior to Williams' signing it if it appeared that they were not going to be able to sign Mario to a cap-friendly deal.)

Granted, this option is a gamble. If Mario signed the tender right away and a deal couldn't get worked out, the team would be in a world of trouble. Plus, using the tag on Mario means that you can't use the tag on Foster, which in and of itself might make this option too clever by half.

Mario Williams, Option 2: Non-Exclusive Franchise Tag. This would be similar to the previous option, but it would allow Mario to negotiate with other teams and give the Texans the first-refusal option. If another team signed Williams to an offer sheet that was cap-friendly in the first few seasons, the Texans could simply match that offer. If the deal wasn't friendly, they could let him walk and get the first-round picks in return.

Which, of course, is the obvious downside to this deal: the two-firsts price tag would likely prevent some otherwise interested teams from even negotiating with Williams. Also, again, this tag means Foster is not tagged.

***

In the end, my guess is that Foster gets the non-exclusive tag, and the Texans sign him to a longer deal before the season starts. I also think they'll attempt to work out a deal with Williams, only to lose out to a team that can offer appreciably more cash in the early years of the contract. I certainly hope that I'm wrong; Mario's recent comments about loving Houston and the current defense and whatever have renewed the glimmer of hope that I continue holding. But, if I am not wrong, my bigger hope is that he doesn't go to Nashville, Dallas, or Kansas City.