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The 5 O’Clock Club: Explaining how compensatory draft picks work (Updated 25 Feb)

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It’s 5 o’clock somewhere…

NFL: APR 27 2017 NFL Draft Photo by Rich Graessle/Icon Sportswire via Getty Images

The 5 o’clock club aims to provide a forum for reader-driven discussion at a time of day when there isn’t much NFL news being published. Feel free to introduce topics that interest you in the comments below.

Why does the compensatory draft pick system matter to me?

For the first time in what feels like forever, the Redskins stand a good chance of being awarded a compensatory draft pick following the 2018 free agency period, though it is by no means guaranteed.

A lot of misunderstandings about the system

Reading through comments on Hogs Haven over the past several weeks, it became clear to me that there are a lot of misunderstandings about the compensatory pick system.

The compensatory draft pick system is very confusing, not the least because the rules for it are not written down anywhere. It’s a ‘secret’ system that the league owners administer for themselves.

However, through close observation over a number of years, certain people have created a set of rules that seem to explain how the system works and are able to project compensatory picks annually with great accuracy.

While OverTheCap didn’t figure out the rules, they have written extensively about the Compensatory Draft Pick system, and they publish a “Cancellation Chart” each season to help readers understand which teams are likely to receive compensatory picks.

Ninety to ninety-five percent of everything I know about the Compensatory Draft Pick system I learned by reading OverTheCap.

Determining compensatory picks is a detailed and complex system.

I will provide links to the key articles on the OTC website here, and I will quote extensively from OTC rather than trying to re-invent the wheel in terms of explaining the system, however, I will try to provide more a summary of how it works, rather than the detailed explanations available on the OTC website.

If you find yourself curious about how it all works, I suggest that you follow these links for in-depth discussion:

https://overthecap.com/the-basics-and-methodology-of-projecting-the-nfls-compensatory-draft-picks/

https://overthecap.com/compensatory-draft-picks-cancellation-chart/

List of Compensatory Picks from 2015 onward

First, a word on the “importance” of Compensatory Picks

It’s good sport on Hogs Haven to laugh at the idea that compensatory picks should be considered when making free agency decisions, or that they have value.

Losing a top-ranked free agent like Kirk Cousins who gets a top-tier contract with another team has the potential to bring a 3rd round pick as compensation.

You aren’t impressed by the value of a 3rd round pick? Here’s what James Dorsett wrote recently concerning the value of a pick in the third round:

Every single year teams find gems in the third round between the 75th and 95th picks: Cliff Avril, NaVorro Bowman, Jimmy Graham, Russell Wilson, T.Y. Hilton, Keenan Allen, Trai Turner, David Johnson, Danielle Hunter, Kareem Hunt, the list goes on and on.

Hitting on guys in this range is far from a sure thing, but you want to take every chance you can get at acquiring players of this caliber for the bottom-basement price the CBA calls on teams to pay players taken in this part of the draft. Over the Cap projects the 78th pick in this year’s draft to receive a contract of under $3.5 million total. That is virtually nothing in today’s NFL.

When you miss out on a value like this or you give it away, as the Redskins did in our next case, you have to go out and find a replacement that is likely going to be much more costly in terms of hits to your salary cap.

In this case, James was railing against the Redskins for trading away a third round pick to acquire Alex Smith, but his thoughts on the value of a draft pick apply just as much when the question revolves around the league giving you extra picks in next year’s draft.

How much value can be involved?

Well, in this year’s draft:

  • the Bengals will have 3 extra picks (3rd, 5th and 7th).
  • The Texans will have 4 extra picks (3rd, two 6ths, 7th).
  • The Cowboys have two 4ths and two 5ths.
  • Green Bay gets a 3rd and three 5ths.
  • The Cardinals have 3 extra picks (3rd, 4th, 5th).

How would you feel if the Redskins were able to choose three or four extra players in next year’s draft?

How much flexibility would the team have to trade up for a player they loved if they had a couple of extra draft picks to throw into the deal?

Compensatory picks are certainly not the be-all-and-end-all of NFL roster building, but they are not just throw-away picks either. Compensatory picks offer real value in terms of 32 additional players added to NFL rosters.

So, before you laugh at someone who talks about managing free agency to get (or keep) compensatory picks, remember that they have real value in next year’s NFL draft.

The basics of the compensatory system

Again, all the material in this section is summarized from an OverTheCap article on the topic, or in some cases, from their original source.

1. To qualify for compensatory picks, you need to lose more (or better) free agents than you sign from other teams

As the NFL explains, compensatory picks are awarded to teams that lose more or better compensatory free agents than they acquire. The number of picks a team can receive equals the net loss of compensatory free agents, up to a maximum of four. Compensatory free agents are determined by a secret formula based on salary, playing time and postseason honors. Not every free agent lost or signed is covered by the formula.

In order to qualify for the comp equation, a player must have been a true Unrestricted Free Agent whose contract had expired or was voided after the previous season (i.e., he cannot have been released by his old team); [generally speaking,] he must sign during the UFA signing period

There are some detailed exceptions to these rules, but they are not really important to this summary.

2. Each qualifying free agent must be assigned a value based on his contract, playing time and postseason honors, and that value corresponds to a round in the draft.

  • Start with the actual APY of the contract signed.
  • Subtract from the actual APY any money that the compensatory formula does not count. It has been determined that workout bonuses, incentives, and salary escalators are the most common money figures that the compensatory formula does not count.
  • Adjust the APY by applying a coefficient based upon the percentage of offensive or defensive snaps the player took in his first year under the contract.
  • Apply a positive coefficient to each UFA that obtained postseason honors

3. Once an adjusted APY has been determined, each UFA is given a value that either (i) assigns him as a CFA to a particular round ranging from the 3rd to the 7th, or (ii) does not qualify him as a CFA at all

The system for doing this is quite complex, but you don’t really have to understand it. OverTheCap publishes a cancellation chart on which they show their projected value for every free agent who changes teams in an off season. At any given point in the free agency period, you can click to this chart and see the status of any NFL team you are interested in.

4. Finally, once each team’s list of CFAs lost and gained are determined and valued, one-to-one cancellations are applied. Cancellations work as follows:

  • A CFA gained by a team cancels out the highest-valued available CFA lost that has the same round valuation of the CFA gained.
  • If there is no available CFA lost in the same round as the CFA gained, the CFA gained will instead cancel out the highest-available CFA lost with a lower round value.
  • A CFA gained will only cancel out a CFA lost with a higher draft order if there are no other CFAs lost available to cancel out.

Any team that has more CFAs lost than CFAs gained will then be eligible for compensatory picks for the CFAs lost that were not cancelled out by CFAs gained.

The key point here is that a team will only be awarded one or more compensatory picks if that team loses more qualifying free agents to other teams than it signs in a single off season.

To maximize the compensatory picks received, the team would lose free agents with high APY (average contract $ per year) and sign no one, or players with low APY.

5. There are two key restrictions that may limit the number of compensatory picks a team may receive:

  • There is a strict limit of 32 compensatory picks that are awarded every year. If the formula initially awards more than 32 compensatory picks, all picks ranked 33rd and below are not awarded
  • A team may not be awarded any more than four compensatory picks in one year. If the formula initially awards a team more than four, the lowest of the picks over the per-team limit of four are not awarded

When would the pick be awarded?

Compensatory picks are awarded by the NFL Management Council, and apply to the draft in the year that follows the Free Agency period. In other words, free agents who are signed in this (2018) off season will determine compensatory picks used by teams in the 2019 draft.

How valuable is a pick awarded this off-season?

In terms of value, there are a few things to take into account:

  • Compensatory picks in each round are used after the 32 ‘standard’ picks have been made, so they represent the lowest draft positions in that round.
  • In terms of TRADE VALUE, draft picks are typically deemed to be worth one round less than a draft pick a year earlier. In other words, a 4th round draft pick in next year’s draft (2019) is generally deemed to be equivalent in value to a 5th round pick in this year’s draft (2018) due to the value of time. Of course, when selecting players in 2019, a 4th round pick is just that - a 4th round pick.
  • Compensatory picks are fully tradeable, so they have value in helping teams move up in the draft. This is a fairly new rule -- originally, compensatory picks couldn’t be traded.

Which upcoming Redskin free agents are likely to qualify for the Compensatory formula?

First, and most importantly, you need to understand that a player who re-signs with the team he played for at the end of the 2017 season has no effect on the calculation (except insofar as that team doesn’t need to sign a player from another team to replace him).

By way of example, if Mason Foster had not been signed by the Redskins, but had instead left via free agency, he would probably been included in the calculation of compensatory picks awarded.

Since Mason Foster re-signed with the Redskins, he did not change teams, and he has no effect at all on the Compensatory Draft Pick formula.

This means that re-signing a team’s own free agents has potentially more value than signing other team’s free agents, since it improves the opportunity to gain compensatory draft picks.

That said, these are the players from the Redskin roster who are most likely to have an impact on the formula if they leave via free agency between March and July:

  • Kirk Cousins
  • Terrelle Pryor Sr.
  • Zach Brown
  • Niles Paul
  • Trent Murphy
  • Junior Galette
  • Spencer Long
  • Bashaud Breeland
  • Ryan Grant

Please note that this is not a comprehensive list of upcoming Redskin unrestricted free agents, but a list of those most likely to qualify for compensatory picks if signed away by another team. For a comprehensive list of 2017 Redskin players who currently don’t have a contract for 2018, see Monday’s 5 o’clock club.

Just a reminder that trades, Restricted Free Agents, and re-signing your own free agents don’t count

Alex Smith and Kendall Fuller have no impact on the Compensatory Draft Pick calculation because trades aren’t included... only unrestricted free agents.

Re-signing Redskin free agents has no impact either. For example, if the Redskins re-sign Galette and Long, there would be no change (positive or negative) to the compensatory draft picks the Redskins would qualify for.

Also, RFAs & ERFAs are not included in the system, so the following players don’t have any impact:

  • Ty Nsekhe
  • Deshazor Everett
  • Tyler Catalina

UPDATE 25 FEB 18:

OverTheCap self-evaluation on comp pick projections:

https://overthecap.com/evaluation-2018-compensatory-picks-projection

Poll

What do you think will happen following the 2018 offseason?

This poll is closed

  • 28%
    The Redskins will be awarded one compensatory pick for Cousins
    (80 votes)
  • 36%
    The Redskins will be awarded 2 or more compensatory picks
    (102 votes)
  • 29%
    The Redskins, as usual, will not get any compensatory picks because they will sign more UFAs than they lose
    (82 votes)
  • 5%
    Honestly. I don’t give a ฟอค...
    (16 votes)
280 votes total Vote Now