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The problem with not signing Randy Foye to a contract extension now

As we all know, the deadline for 2006 draft picks to sign contract extensions passed today without Randy Foye receiving one.  For his part, Foye's not too concerned, saying that not signing a contract is barely on his mind (of course, any player says this, the agents deal with the contract stuff).  Michael Lee also writes that one of his sources said the two sides were not too far off in money, whatever that means.

The common refrain I've heard is that this is a prudent long-term move, because there are too many unknowns -- Foye's fit here, the Wizards' cap situation, the league's cap situation -- out there to make a long-term financial commitment to Foye.  (Keep in mind that, if Foye does sign an extension, he's basically untradeable for a year because of base-year compensation issues).  Lee himself echoed this today.

If you look around, Chicago's Tyrus Thomas and Utah's Ronnie Brewer also let the deadline pass quietly. Foye is one of the standouts of that relatively weak draft class and really shouldn't be worried right now. Neither should the Wizards.

The collective bargaining agreement gives teams all of the leverage with restricted free agents, since they have first right of refusal. The only time restricted free agents walk are in the situations where the team doesn't want them anymore or if he signs an offer sheet with a ridiculous signing bonus (those instances are rare). There has been no indication that the Wizards don't want to retain Foye and if he continues to play as well as he has, Ernie Grunfeld should take care of him next summer.

This is a logic we hear a lot with restricted free agency.  The argument is that other teams are so reluctant to sign players because the players' current teams have a week to match the offer.  Therefore, the price tags of these players tend to go down, so there's no need to make a major financial commitment to them early.

Here's the problem: the data doesn't bear this out.

Let's play a game.  Which group of players do you think has better value on their contracts:

Group 1:

  • Kevin Martin: 5 years, 55 million
  • Devin Harris: 5 years, 43 million
  • Danny Granger: 5 years, 60 million
  • Andrew Bogut: 5 years, 60 million
  • Al Jefferson: 5 years, 65 million
  • Jameer Nelson: 5 years, 30 million
  • Caron Butler: 5 years, 47.5 million
  • Andrew Bynum: 4 years, 58 million
  • David West: 5 years, 45 million
  • Boris Diaw: 5 years, 45 million
  • Leandro Barbosa: 5 years, 34 million
  • Josh Howard: 4 years, 40 million
  • Kendrick Perkins: 4 years, 16 million
  • Kirk Hinrich: 5 years, 49.5 million or so
  • Chris Kaman: 5 years, 53 million
  • TJ Ford: 4 years, about 35 million

Group 2:

  • Marvin Williams: 5 years, 37.5 million
  • Jarrett Jack: 4 years, 20 million
  • David Lee: 1 year, 8 million
  • Charlie Villanueva: 5 years, 40 million
  • Emeka Okafor: 6 years, 72 million
  • Luol Deng: 6 years, 71 million
  • Andre Iguodala: 6 years, 80 million
  • Andris Biedrins: 6 years, 54 million
  • Josh Smith: 5 years, 58 million
  • Delonte West: 3 years, 12.7 million

Group 1 is a list of notable players who signed early extensions.  Group 2 is a list of notable players who did not and became restricted free agents the next year.  Obviously, there are some questionable calls in group 1 (Diaw, Hinrich, Kaman) and some good values in group 2 (Biedrins, West).  But by and large, group 1 has guys on bargain contracts relative to their production.  Jameer Nelson for the same amount of money annually as Jarrett Jack?  Danny Granger making significantly less than Luol Deng?  Josh Howard for less than Josh Smith?  Al Jefferson for less total money than Emeka Okafor?  By and large, the lesson is that if you're worried about guaranteeing a guy too much money, the best way to combat that is to sign them early, not wait for them to hit restricted free agency.

Why do players who hit restricted free agency tend to cost more than those who get early extensions?  Simple: players tend to get better from year four to year five.  And while restricted free agency may cool teams a bit from making gargantuan offers to some of these guys, there's still a large degree of leverage the teams need to navigate through when signing these guys.  Not only is it a pain to deal with agents insisting their client get more money because of their improved performance, but the prospect of forcing to settle on a qualifying offer is a very real threat to the long-term future of the player with his respective team.  Since the new collective bargaining agreement in 1999, there hasn't been a single player that's accepted the qualifying offer and stayed with that team past that one year.  (So, Bobcats fans, don't expect Raymond Felton in Charlotte next year).

Nobody should understand this better than Ernie Grunfeld.  He signed Caron Butler to that early extension, and Butler more than lived up to the contract.  In fact, it's Butler's modest contract that's kept the Wizards from being major luxury-tax payers while still being competitive.  Like Foye, Butler hadn't played much with his new team, but Grunfeld extended him anyway.

Now, faced with a situation where every dollar counts if he wants to also retain Brendan Haywood and/or Mike Miller (not to mention, y'know, improving the team), Grunfeld will likely have to pay Foye more next summer than he would have right now.  Yes, it's true that the economic climate might bring the cap down and curtail free-agent spending.  But the same argument was made last year, and that didn't stop Marvin Williams and Charlie Villanueva from getting near-Devin Harris money or Jarrett Jack receiving Jameer Nelson money.  More teams will have cap room that needs to be spent on someone.  That, combined with the qualifying offer prospect that neither side will want, is sufficient leverage for Foye to negotiate a deal that will pay him more than what he would have been paid now. 

In Foye's case, this doesn't sound like much, but it is. It may be the difference between having him sign a mid-level type contract (5 years, 25 million, for example) now as opposed to getting slightly more (Marvin Williams money) next summer.  That doesn't sound like much, but that's a 2-million plus annual difference.  In other words, it's roughly the difference between signing Fabricio Oberto or signing nobody this season.  Going forward, it might be the difference between keeping Brendan Haywood or seeing him leave because he got more money guaranteed elsewhere and the Wizards didn't have enough cap flexibility to overpay slightly to keep such an important player. 

This, of course, all assumes Grunfeld traded Foye to keep beyond this year.  If he didn't, well, then we can really say that June trade was all about money.  Why else would you trade for Foye if you aren't going to keep him?  (UPDATE: Clearly, this line was not accurate ... as cuppettcj points out, the Wizards could still trade Foye this year for something bigger.  Bad Mike)

So while I understand the apprehension with guaranteeing Foye a long-term deal and removing him as an asset for trading purposes, the data indicates this will likely cost the Wizards some money next offseason when they try to re-sign Foye again.  That money matters next offseason more than ever.  There's now a very large chance Grunfeld will have less breathing room to keep the whole gang together next offseason.