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The one bright spot in losing a prime free agent from your roster is possible remuneration in the form of draft pick compensation. In short, when a stud free agent leaves his team for greener pastures, the team can pick up a draft pick or two from the next year’s draft as a consolation prize for the lost affection.

In long, draft pick compensation is a complicated process with many layers that affect whether the team will actually receive anything when said free agent leaves. Last year, I wrote up an extensive explanation of the draft pick compensation process, and how it impacted then free agents to be, Ted Lilly and Derrek Lee. A relevant sampling:

In order to receive compensation picks for a lost free agent, four things have to happen: (1) the player must be designated as a “Type A” or “Type B” free agent; (2) the player must be offered a one-year contract via salary arbitration; (3) the player must decline the offer of a one-year contract via salary arbitration; and (4) another team must sign the player, knowing that they may be giving up a draft pick to do so. Each step in the process presents significant hurdles.

First, the player must be in the top 20 percent of players at his position (as designated by the Elias Sports Bureau) to qualify as a Type A free agent, or in the top 40 percent, but not the top 20, to qualify as a Type B free agent. The former designation yields the team that loses the player a first round pick (unless the signing team has one of the top 15 picks, in which case it becomes a second round pick) and a sandwich pick between the first and second rounds. The latter designation yields a sandwich pick.

Second, the player’s team must be willing to offer him a contract for the following season without knowing exactly what his salary is going to be. Far more importantly – and far too often overlooked – is the fact that player’s salaries do not decline in arbitration. In fact, by the Collective Bargaining Agreement, a player’s salary in arbitration can be reduced by only as much as 20%. Veterans in particular are treated very well by the arbitration system. And the team offering arbitration must be cognizant of the fact that the player might very well accept the offer of arbitration knowing that, although he’ll get only a one-year contract out of the deal, it will be for a much higher rate than he could procure on the open market.

It goes on from there.

This is all a preface to the notable point today: Aramis Ramirez and Carlos Pena have officially been designated “Type B” free agents, rather than “Type A.” As the quoted bit above explains, the latter designation comes with the possibility of two draft picks, the former with one. Pena ended up a middle of the pack Type B, but Ramirez just missed Type A status – indeed, he was the highest ranked Type B free agent. As the title says, sad trombone.

Nevertheless, the Cubs can still pick up a sandwich pick (between the first and second rounds in 2012) for each of Ramirez and Pena. To do so, the Cubs will have to offer each arbitration.

On Ramirez, the decision is an easy one. Having made $14.6 million in 2011, Ramirez would make about that much in arbitration. Given that he just turned down $16 million from the Cubs, he isn’t going to accept an offer of arbitration. Thus, the Cubs will offer, he will decline, and, when he signs elsewhere, the Cubs will get their pick.

Pena is a much tougher question. The Cubs need a first baseman in 2012, but they may not be willing to spend $10 to $12 million on Pena for the position (Pena made $10 million last year, and would make about that much or more in arbitration). Technically, an arbtration contract is not guaranteed. Pena could be cut in Spring Training, and the Cubs would owe him 45 days’ pay. But, in reality, if Pena accepts, he’s the Cubs’ first baseman for 2012 or he’s traded at the first possible moment.

Further, offering Pena arbitration means the Cubs would have to wait out his decision before making a move in the free agent or trade market for first base. Pena’s decision wouldn’t be due until December 7. That’s a long time to wait when you don’t already have an in-house back-up option.

… or do the Cubs have such an option in Bryan LaHair? Depends on whom you ask, I suppose – but, if the Cubs offer arbitration to Pena, it’s a good bet they view LaHair as a reasonable, emergency back-up plan if Pena declines and the Cubs have already missed out on other options by then. Given Epstein’s stated desire to build from the ground up, you can be certain he’s eying these kind of bonus draft picks quite greedily.

  • CDM

    Is it possible the Cubs can re-sign Ramirez he if doesn’t find another team in the free agency? if so… what are the posibilities they will re-sign him again?

    • http://www.bleachernation.com Brett

      Yes, and very slim. He wants – and can get from other teams – a three/four year deal. The Cubs don’t want to give him that.

    • hansman1982

      Yes, he will and less than the odds that we get Tony LaRussa to manage next year.

  • Kyle

    If Pena was type A, I think that would drive his FA price down far enough that you couldn’t afford to offer him arbitration. Nobody’s going to sign Carlos Pena to a high-priced deal and give you Type A compensation, so he’d end up having to take the arbitration and get another one-year payday.

    The supplemental pick is probably the best you could hope for out of him. Even with that I’d be nervous about offering him arbitration. I’d still do it, but I’d be nervously hoping he didn’t accept.

    • hansman1982

      I dont know if this ends up in the world of tampering but you would want to have that discussion with him before you offered arbitration – basically tell him that you want to move on next year and will not be offering a contract but would like to get a sandwich pick from him leaving

      • Hawkeye

        I feel like Pena is a good person, and would probably do what would be in the best efforts of the Cubs, even on his way out the door.   Pretty much polar opposite of Mr. Ramirez and his always changing stance on staying/leaving the Cubs.

        • JulioZuleta

          Pena seems like a good guy, but he’s a Scott Boras client. No home town discounts or anything like that.

          • http://cubbiescrib.com Luke

            And because he is a Boras client, the Cubs can let Boras know they won’t be offering a multi-year deal, and that all but guarantees that Pena turns down arbitration. I really don’t think Boras would advise one of his guys to lock himself into a one year agreement when he has a great shot at what could be his last multi-year deal. Pena may love Chicago so much he overrules his agent, but I sort of doubt that would happen. I’d not be surprised to see him get a deal in the 3 year / $33 million range.

            I’d also not be surprised if that deal is with Milwaukee. They could really use his defense if they have to replace Fielder.

      • http://www.bleachernation.com Brett

        That happens.

  • Fishin Phil

    I figured Pena would be type B, but I still think it is outrageous that Ramirez did not make typ A.  I think there may be voodoo magic at work!

  • http://bleachernation.com ricosanto

    How could Cuddyer be a type A and Aramis a B. Surely Aramis is in the top 20 % of 3B.

    • Todd

      Ramirez is a B because of his down year last year. If you combine any two year period of his Cub production that doesn’t include 2010 and he’s a type A. Unfortunately, 2010 was a down year and now he’s a type B.

      • Jeff

        Even that doesn’t mean he was a type B.  I’ve been looking at the rankings all year, and ARam’s 2 year offensive numbers are as good as any 3b in baseball.  Guys like Josh Willingham and Jeff Keppinger get type A status, while Ramirez is type B and the only thing that I see that knocks him to the B rankings is his defense.

    • http://www.bleachernation.com Brett

      Unfortunately, it’s based on the last two years, and Ramirez’s 2010 was shortened and crappy.

  • Spencer

    Brett, do you have a link to all of the FA’s on the market and their rankings? I’d like to take a look at who all is available this off season.

  • Cliffy

    Buster Olney was a guest on WEEI show just now believes that Red Sox fans will be disappointed with the compensation coming from the Cubs. Believes compensation will not be significant. He believes Cuddeyer would be great fit for Red Sox not Sizemore.

  • Mike F

    I think the next couple of weeks will tell most of the story. Incidentally, incredible work Brett and all the people here, the discussion is incredible. First, the Boston thing will shortly be resolved. I keep viewing this from the prism of is there an expanded deal that gets us what Theo wants, either prospects or even Crawford? Then if we sweeten the pot do we simultaneously help ourselves by off loading Soriano. I again agree with you on Soriano in that he’s really a DH. He will help a team with the bat which will improve if he’s not in the field where it distracts him. The other thing, is this, the Wells thing, again I agree doesn’t make sense but Crawford does and here’s why. Crawford was in Theo’s eyes worth the 122 M Boston paid for him 1 year ago. Henry walked away from Crawford just 2 weeks ago, so they clearly aren’t vested. If they are willing to buy a shorter contract, we would get a guy for 70 M who has 5 tools ability when he’s right. So from that lens, Crawford is more attractive to the Cubs if they still believe in him. And of course Boston isn’t going to do this and take Soriano unless we sweeten the pot. So if we willing to pay a little more in prospects and maybe even assume some of Soriano’s salary we still get a discounted star who fits a need a big bat and is not a bad piece.

    It’s just one of the sub plots to all of this, as are some of the more prominent writers speculating Puljois coming to Chicago. But me personally, I like the idea of Crawford, Jackson/Johnson/Sizemore and Byrd with the idea of upgrading to the Boston closer and starting pitching.

    But the place it all starts is this news conference and getting a manager. Great job and great discussion.

    • http://www.bleachernation.com Brett

      I’d just rather not kick the big-contract pain down the road by taking on Crawford – and, make no mistake, even if he bounces back next year, there is plenty of pain coming down the road.

      • Fishin Phil

        Brett, do you get the feeling from Theo’s remarks at the intro press conference that he may have some regrets about the Crawford signing?

        • http://www.bleachernation.com Brett

          You’d hope there were some regrets in there. But, I didn’t really get that sense – in fact, between his remarks on the subject, and Lucchino’s and Henry’s, I never got a great sense of who was Crawford’s biggest champion. You know, which guy really, really wanted Crawford. Cherington tried to take some of the “credit” (blame) at his press conference, but it was hard to tell if he was just falling on a sword as his first act of contrition. All I can do is hope that the Red Sox ownership group felt like they needed a big signing like Crawford, and Epstein did what he was told.

  • Lucas

    Who is the compensation today was the deadline?

    • http://www.bleachernation.com Brett

      It remains undecided. The two sides will either get an extension, or the matter will be submitted to the Commissioner for a decision (which could take some time).

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