Free Agents and the Qualifying Offer Problem for the Cubs

For as much as we talk about the Cubs’ anticipated draft positioning in 2022, and about the Cubs’ flexibility to go after a wide range of free agents this offseason, there’s a not-so-insignificant factor that we haven’t discussed yet: the qualifying offer and draft pick compensation.

To be sure, the topic was always on my radar, but there’s still so much uncertainty about what will happen with the Collective Bargaining Agreement that I haven’t wanted to go TOO DEEP on a specific rule that might wind up changed in a few months. The current CBA expires on December 1. To the extent the qualifying offer and draft compensation rules remained in place for one more year, however – which is entirely possible – it’s something we need to discuss.

In the current CBA, and perhaps carrying over into the new one (or at least grandfathered in for the 2021-22 offseason), the qualifying offer rules work basically like this: if a team wants to get draft pick compensation for losing an outgoing free agent, they have to make that free agent a Qualifying Offer, which is a one-year deal at a certain rate (it’s projected to be about $19 million this year). If the player rejects that offer and then signs elsewhere, his former team gets some draft compensation (the precise nature of which depends on the size of his contract, the size of the team’s market, and their luxury tax status).

But more importantly for our discussion today, the team that SIGNS the player who rejected the Qualifying Offer loses a little bit when they sign a so-called qualified free agent. That, too, depends on market size and luxury tax status, but for the Cubs – a big market team not currently over the tax – the added “cost” to sign a qualified free agent is (1) your second-highest pick in the draft, (2) the bonus pool space associated with that pick, and (3) $500 in international free agency pool space. The cost to sign a qualified free agent is designed to be more painful for big-market teams, because the system expects that they will otherwise have a financial advantage. No other team in the NL Central fits in that designation, by the way.

That’s the general point on qualifying offers, but it gets even more specific this year for the Cubs.

For the Cubs, who are diving toward the 5th or 6th or 7th pick in the 2022 draft, that second-highest pick is going to be a second rounder near the top of the second round. Losing that pick and its pool space is a little more painful than it would be for a team picking later in the round, and/or a team that gets extra competitive balance picks.

That doesn’t mean you don’t do it for a guy you really want! It’s only a recognition that the “cost” to the Cubs this offseason to sign a qualified free agent is going to be higher than for some other teams, and that is arguably disproportionately so this year given where they are going to be in the draft. This would be their highest second round pick in nearly a decade.

Ah, but the big question! Who exactly will be the qualified free agents this year? Well, that’s pretty darn hard to say for sure given the fact that the qualifying offer decision deadlines will come before the CBA expires! I would be a fool to tell you I could say for certain which players will surprisingly accept the Qualifying Offer for fear of a disjointed offseason, or which players will decline the Qualifying Offer believing that their financial circumstances will improve in the world of the new CBA. There’s just way too much uncertainty.

HOWEVER, we can certainly discuss the impending free agents who will be eligible for a Qualifying Offer (basically anyone who wasn’t traded midseason, or who has previously received one), and consider whether they would typically accept or reject. And then we can can start the process of thinking ahead to which guys are still worth signing for the Cubs if they get the right deal.

Since this year’s free agent class is far more robust than a typical class, there could be an uncommonly large number of players getting Qualifying Offers (even after you chop out the guys like Kris Bryant, Anthony Rizzo, and Javy Báez, who were traded midseason, or guys like Kevin Gausman and Marcus Stroman, who’ve received QOs before, and are ineligible to receive a QO).

Consider that last year, thanks in large part to the pandemic, just six players received Qualifying Offers. This year? MLBTR is already projecting eight guys as “locks” to receive an offer (Carlos Correa, Freddie Freeman, Clayton Kershaw, Robbie Ray, Carlos Rodon, Corey Seager, Marcus Semien, Trevor Story), with another seven as “likely” (Michael Conforto, Jon Gray, Yusei Kikuchi, Eduardo Rodríguez, Noah Syndergaard, Chris Taylor, Justin Verlander), plus Nick Castellanos is going to get one when he opts out, and then there are a handful of other fringy potential recipients.

It’s not hard to see the Cubs having interest in a lot of those guys. For the sake of an example, say they loved Carlos Rodon and believed he was fully healthy now. Say he got and rejected a Qualifying Offer. Say the Brewers also wanted to make a run at him, and those two were his finalists. As a small-market club, the Brewers can sign a qualified free agent and lose only their third highest pick (plus bonus pool space for that pick, which will be much smaller), and lose no IFA money. For the Cubs, signing Rodon costs his contract, plus the high second rounder, plus that bonus pool space, plus $500K in bonus pool space. For the Brewers? It’s the contract, plus a low second rounder (the Brewers will have a first rounder AND a competitive balance pick, and THEN they have their low second rounder as their third pick), and the bonus pool space. That’s it. So when it comes time for each team to decide what contract level they’re comfortable with, the Cubs would be impacted in a way the Brewers would not.

(The footing is not at all equal, though that’s supposed to be the point (the Cubs, as a big market team, are supposed to be better able to absorb the blow by simply spending more money …. ). )

Qualifying Offers are typically due five days after the completion of the World Series, and then the players have 10 days during which to make a decision to accept or reject. So that’s when we’ll really get a sense of landscape, and will more fully be able to talk about which players make sense for the Cubs to pursue at what dollar levels and what number of years. Even at a slightly “higher” “price” for the Cubs, there are guys who are going to make sense in my view. But we shouldn’t act like the loss of a high draft pick, a good chunk of bonus pool space, and also a loss of IFA dollars, is a non-zero consideration in the process, particularly for the guys you’re signing to shorter-term deals (which I suspect will be the Cubs’ focus).

So, anyway, to sum it up: because the Cubs are a big-market team picking very high in the draft, and because they are going to be looking at higher-dollar, shorter-term free agents this year (I suspect), and because free agency this year could be particularly full up on qualified free agents, this is a potential problem that’ll have to be evaluated.

… or the CBA will change everything completely, and none of this will matter come December!