Does a Qualifying Offer Do Too Much Damage to a Free Agent's Freedom?

They're still relatively new to the baseball lexicon, but qualifying offers already bear a negative connotation.

Qualifying offers are those new things that some free agents get. And based on what happened last winter, they're nothing but trouble. They back some teams into conserving their money rather than spending it, leaving players with quiet markets and, thus, leaving them vulnerable to ending up with disappointing contracts.

And that's no fair, right?

On the surface, no. It's not. Anything that severely restricts the freedom of "free" agents is "no bueno."

But at the same time, we have to ask: Are qualifying offers really that bad?

There's a limit to how much we can study the effect they've had with only a one-year sample size. But if one considers this sample size from a couple objective viewpoints...well, let's just say that qualifying offers look like lesser villains.

We'll get to the good stuff in good time. Since this is tricky free-agency stuff we're about to talk about, we should all get on the same page first.

Before qualifying offers arrived last winter, there was a different system in place for determining how clubs would be compensated if their free agents left for other clubs.

Matthew Leach of MLB.com did a fine job of outlining the old system:

"

Free agents were designated as Type A, Type B, or no-compensation (prior to the 2006-07 offseason, there was also a Type C). For Type A and Type B free agents, a club had the option of offering salary arbitration. If the player accepted arbitration, it was tantamount to agreeing to a one-year contract, with the salary to be determined.

"

As SI.com's Jay Jaffe elaborated, free-agent types were determined by the Elias Sports Bureau using various statistics. The rankings were, in Jaffe's words, "much-despised" due to their arbitrary nature.

Here's a good thing that can be said about the qualifying offer system: It does simplify things. 

Clubs have the option of making qualifying offers to any players who were with the team all season long (sorry, no midseason pickups). These offers are worth the average of the top 125 salaries from the prior year. In 2012, that was $13.3 million. This year, it's $14.1 million.

Since this is a fair amount of money, one advantage of the new system is that it restricts the collection of "elite" players on the market every year. Rather than upwards of 20 Type A guys running around, there were only nine qualifying offer players last winter. There will be 13 this year.

There's also an advantage for the players. Accepting or rejecting arbitration under the old rules meant accepting or rejecting an undetermined salary. With the new system, they know what they're accepting or rejecting. 

As for what happened once players hit the open market in the old system, here's Leach again:

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If the player declined arbitration, he stayed on the market, with the former team receiving compensation if he signed elsewhere. A team losing a Type A free agent received two Draft picks -- one from the signing team and one in a compensatory "sandwich" round. A team losing a Type B free agent gained only a sandwich pick, with the signing team not losing a selection.

"

Per Jaffe, signing a Type A player who had rejected arbitration meant giving up a first-round pick. Unless, of course, a team's slot was in the top 15. Then it would give up a second-round pick instead.

Under the qualifying offer system, signing a player who has rejected a qualifying offer means giving up a first-round pick. But rather than going to the player's old team, it just disappears. The player's old club gets a compensatory pick instead. Also, only clubs in the top 10 of the draft have protected picks.

So on the surface, the qualifying offer system provides the best of both worlds. For players, it means knowing what price they'll have to beat in order to justify entering the open market. For teams, it makes sense that a player's former club shouldn't get too high a draft pick. It also makes sense that only the clubs who are in dire need of first-round draft picks have their picks protected.

There's one notable complication, however: It's not just the draft pick clubs have to worry about losing.

Another rule put into effect in the most recent collective bargaining agreement restricts the amount clubs can spend on draft bonuses. They used to be able to spend as much as they wanted, meaning clubs could pick up players other clubs couldn't afford (or just didn't want to pay) later on in the draft. Teams can still theoretically do this, but it certainly becomes a lot harder with less bonus pool money.

Another complication is that there's now more of an emphasis on drafting and developing. As Grantland's Jonah Keri wrote, the rise in extensions is keeping a fair amount of superstars from hitting the open market. Free agency just doesn't draw like it used to and is kinda-sorta dying as a result.

So if it wasn't already before, it's now more practical than ever for clubs to develop their own superstars than it is for them to buy them.

There's no denying it. These circumstances did seem to have an impact on last year's qualifying offer players.

Take Josh Hamilton, for example. The word was that he wanted $175 million over seven years. He ended up with $125 million over five years.

Nick Swisher was hoping for Jayson Werth money, or $126 million over seven years. He got $56 million over four years.

Michael Bourn supposedly wanted a $100 million deal. He ended up with only a $48 million deal.

Rafael Soriano was rumored to want $60 million over four years. He ended up with $28 million over two.

Adam LaRoche was hard after a three-year deal. He got only two years for $24 million.

Lastly, there was Kyle Lohse. He wanted three years and $45 million. What he ended up with was three years and $33 million.

Lohse had it the worst of anybody. He barely got his contract in time for the regular season. And while he was waiting for it, he had to watch Zack Greinke and Anibal Sanchez sign contracts worth a combined $227 million.

That's a lot of money that might have gone to Lohse, and the only advantage Greinke and Sanchez had was that they had been traded during the 2012 season. They were thus barred from receiving qualifying offers.

Said Lohse in an interview with a St. Louis radio station, via CBS Sports:

"

It's not exactly an open, free market when you attach such things on a guy like myself, but yet a guy like a Zack Greinke or Anibal Sanchez got a get-out-of-jail-free card because they got traded midseason, so the rules don't pertain to them. I'm obviously a little biased, but the rules could use some tweaking.

"

Scott Boras, Lohse's agent, was a bit more direct in talking about the new system when he spoke to Jon Morosi of Fox Sports in March.

"When you have a system that does not reward performance, you know we have something corrupt in the major league process," said Boras. "You cannot have that in the major league system, because it’s not rewarding performance."

But here are some questions. Were the free agents who rejected qualifying offers not properly rewarded in the end? And in response to Boras' point, is rewarding performance still what free agency is all about?

Remember how we touched on how qualifying offers allow players to know the price they have to beat on the free-agent market in order to justify turning it down?

To this end, it was mission accomplished for all nine of the players who turned them down last year.

The smallest contract any of the nine got was the one-year, $15 million contract the New York Yankees gave to Hiroki Kuroda. The smallest multi-year deal was LaRoche's two-year, $24 million contract with the Washington Nationals. It's not what he wanted, but the guarantee was $11 million more than what the qualifying offer would have paid him.

With a little help from MLB Trade Rumors' transaction tracker, we also find that, on average, the annual average value for the nine qualifying offer players was over $15 million. For everyone else on the free-agent market, it was a little over $6 million.

Take Greinke and Sanchez out of the equation, and the average AAV for a free agent last winter was barely over $5 million. 

The whole idea of qualifying offers is that they're supposed to go only to elite free agents. In light of how last year's nine did relative to the rest of the free agents out there, they did.

Now, even if they did get paid well, the six guys mentioned above obviously fell well short of their rumored demands. But that was hardly a first. Free agents overestimate their value all the time. You don't enter into a negotiation period by aiming low. You enter by aiming high and then take the best deal the market presents.

And in the case of last year's free agents, it's absolutely worth asking whether "best" was being influenced by something other than the qualifying offers.

Teams don't run themselves the way they used to. They're smarter now. So much so that even a guy with a reputation as the smartest guy in the room feels challenged.

"The difference to me is that the people who are running baseball teams are really smart now," Oakland A's general manager Billy Beane recently told Barry M. Bloom of MLB.com. "The group each year gets smarter and smarter. That's the challenge."

A defining characteristic of smart people is that they're methodical. And when it comes to evaluating players, Brian MacPherson of the Providence Journal recently pointed out:

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Almost all teams — if not all of them — rely on a statistical modeling system to project future performance. Past performance only matters in player evaluation insofar as it instructs future performance projection.

"

So Boras' point about how free agency is supposed to reward past performance? Front office types might have agreed with him in the old days, but these are times when clubs are better equipped to anticipate future performance and pay for that instead.

With this in mind, let's consider how the nine qualifying offer players from last winter did in the first year of their new deals. We'll cross-reference the AAVs of their deals with what they were worth in the eyes of FanGraphs' WAR-based value system and highlight the guys who were underpaid.

Player	Contract Years	Contract Amount (M)	AAV (M)	2013 Value (M)
Josh Hamilton	5	$125	$25	$9.7
B.J. Upton	5	$75.25	$15.05	($3.0)
Nick Swisher	4	$56	$14	$12.1
Michael Bourn	4	$48	$12	$9.8
Kyle Lohse	3	$33	$11	$9.2
Rafael Soriano	2	$28	$14	$2.5
David Ortiz	2	$26	$13	$19.0
Adam LaRoche	2	$24	$12	$2.9
Hiroki Kuroda	1	$15	$15	$19.1

Of the nine, only Kuroda and David Ortiz were underpaid. They could have before the start of the season, but none of the other seven should be complaining about their contracts now.

What's more, you could sort of see it coming with some of them.

Lohse was worth over $15 million in 2012, but it's the only year in the last five he's been worth more than $10 million. The 2012 season marked the first time LaRoche had ever been worth more than $10 million. Hamilton looked totally lost at the plate after getting off to a hot start last season. Bourn also stumbled, posting a .636 OPS in the second half. Upton was a mystery all season, ultimately finishing with an OBP under .300.

The only guy of the seven who looked particularly good in 2012 was Swisher. He had a typical Swisher season. Over 20 home runs. OPS over .800. The works.

...But it was also his age-31 season. According to one study, that's past the peak age for modern hitters.

So maybe, just maybe it wasn't just the qualifying offers that hurt markets last year. Maybe it was a double-whammy: teams hesitant to surrender a pick and teams hesitant—as time would tell, rightfully hesitant—to commit based on what their projections had to say.

The short version: Qualifying offers definitely do have an impact, but maybe they just picked a really awkward time to come along.

"Maybe" is really the best we can say for now. We only have one winter of post-qualifying-offer contracts and one year of fallout to study, which isn't nearly enough for a definitive conclusion.

We'll know more a few years down the line when last year's test subjects are further along and there are additional groups of test subjects to look at. This year's crop will be a particularly good one, as it ranges from a super-duper-star in Robinson Cano to a "Seriously? Him?" guy in Kendrys Morales.

For now, keep your ears to the ground. And be skeptical of any free agent who claims he can't get a job because of the qualifying offer. That might only be part of the story.

Note: Stats and contract figures courtesy of Baseball-Reference.com unless otherwise noted.

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