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The CBA: Guaranteed Contracts and Accompanying Issues

The single issue that drew the most attention when discussing the potential new Collective Bargaining Agreement in the NBA, both via the comment section and e-mail and by a large margin, was guaranteed contracts.  So we're going to start our official CBA conversation with that specific subject with a fly-by of a couple other attached issues.

Your instincts are probably right on, as this is likely to be one of the hotly-contested issues between owners and players the eventual negotiations.  Players want to be able to sell their services anywhere they wish for as long as they can negotiate for and have as much of their money guaranteed as possible.  Owners have an interest in limiting player mobility (and thus competition for their services), length of contractual obligation, and the amount they're obligated to.

Right now player mobility is restricted by various means.  Early in their career the rookie salary provisions lock up first round picks.  Unless their team is willing they essentially can't escape until the end of their fifth season, and that's only if they sign a one-year qualifying offer between seasons four and five, putting their future at risk in order to become an unrestricted free agent.  Even on the open market veteran players are restricted to signing with teams that have the salary space to afford them.  The vast majority of large contracts come from a player re-signing with his current team.  The combination of money and interest from both parties necessary to make a huge free-agent signing is rare.  You have to say this part of the equation tilts towards ownership.  Players who want the freedom to sign with a particular team usually have to sacrifice in order to make that happen.

The current CBA limits the maximum length of contracts a team may offer.  The actual number depends on the flavor of contract and the status of the player involved but it's fair to say that 5-6 years is the maximum allowed in most cases.  Combined with raises every season a six-year contract can produce an enormous sum.  Five or six years is also an eternity in NBA terms.  That's half of a great player's career.  It's enough time for a franchise's fortunes to turn and then turn back again.  To put in into perspective, six years ago the Blazers primary rotation consisted of Damon Stoudamire, Bonzi Wells, Derek Anderson, Ruben Patterson Darius Miles, Sharif Abdur-Rahim, Zach Randolph, Theo Ratliff, and Dale Davis.  A player signed to a six-year deal in that season would have just ended their tenure this year.  Though I'm sure the union would argue otherwise, the players are in a reasonably good position here relative to their average longevity, peak production, and the cycle of the sport.

While the CBA allows some wiggle-room as far as negotiating non-guaranteed contracts the vast majority of NBA contracts are guaranteed for their entire lifespan.  Any player with a modicum of pull will be able to negotiate a fully-guaranteed deal.  This situation benefits the players beyond a doubt.

It's important to consider all three factors because they are tied together (along with a couple other issues which we'll address on ensuing days).  In essence one party pays for getting its way in a certain area by conceding more in another. 

From the player's point of view the argument for the current system is simple.  If you want to restrict where we can work then you have to pay us longer and guarantee those dollars.  You're saying that we're invaluable to these franchises.  Having us move around freely would damage the branding of the teams we moved from, undermine franchise stability, and hurt the league's credibility with its fan base.  We will accept that argument and forego some of our chances to earn the maximum possible in a free, open market but in return we want our contracts with our teams to reflect the value you're saying we have.  You can't say we're too valuable to move but not valuable enough to pay.  Nor can you expect me to sacrifice my potential future earning power without you also sacrificing some of your potential future dollars in the form of those multi-year, guaranteed contracts.

The owners' point of view is more complex.  They also have to consider the bottom line.  Heretofore they've been willing to live with concessions in guaranteed contracts and their lengths.  In the current economic climate that will prove less true.  The owners will argue that most franchises are losing money.  The fix will be retaining stability and brand power while reducing operating costs.  Part of those costs will be player salaries.  We'll get to overall pay in a later discussion but there will also be a strong push in these negotiations to provide more flexibility in potential costs by reducing the maximum contract length and lowering the threshold at which they are guaranteed.

We are never, ever going to see elimination of guaranteed contracts in the NBA.  The union would rather shut down the league forever than agree to that.  No matter how strong of a position the owners hold, I don't believe you'll even see serious discussions about weakening the guaranteed contract system.  That's almost certainly going to be off the table from the outset with the players.  The foregoing should make it obvious why (besides in pure financial terms).

I don't believe the owners will have any incentive to grant the players more freedom of movement either.  All of the reasons against it still hold and the owners won't embrace the inevitable bidding wars and potential franchise disintegration which would follow.

The one issue among these three that, while hard-fought, will probably be flexible is contract length.  Owners are going to push for shorter-term guaranteed contracts, the better to insulate themselves against fluctuations in performance and health (plus advancing age).  If a guy enters the league at 20 it makes more sense to negotiate with him at 24, 28, and 32 than it does at 24 and 30, then possibly being bound to him at an outrageous salary until he's 36.  While the union won't necessarily welcome the proposal it does contain a silver lining for the players as well, in that the opportunity for free agency and its attendant market-testing will come more often for more players.  They actually get a kind of backdoor mobility from the concession, even though they lose some of the richer years from some of the longer contracts.

For the most part I favor this resolution as well.  I don't believe eliminating guaranteed contracts entirely would be fair for the players in this situation.  Mitigating their consequences, even if only through shortening their terms, is probably the way to go.

However I would also like to see another provision added to the salary cap system which has the potential to alleviate some of the roster consequences of guaranteed contracts.  I would like to see a bi-annual exemption put in force whereby a team could waive a player, still be responsible in full for paying his contract, but that contract would not count against the salary cap.  The exemption could be used only once in a two-year period, the team could not re-sign said player as long as the old contract remained in force, and there would perhaps need to be a limit placed on the value of the contract...say $8 million being the maximum cap credit one could receive even if the waived salary was higher.

The league has been notoriously finicky about weakening the cap but I believe this would be of benefit to most parties involved.  The owners have the most grey area.  This has the potential of costing them more money rather than saving it, however nothing says they have to take advantage of the exemption.  A team's progress wouldn't necessarily be hampered for years by one contract mistake or injury.  Other teams would be able to pick up possibly-decent waived players on the cheap as well.  Overall it would put another tool for improving the team in the hands of ownership and management.  Players and their agents would benefit from this provision, as a waived player would be paid in full but would also be free to seek a new contract with another team, earning even more.  This exemption would also go a long ways towards quelling the fans' objections to guaranteed contracts.  If you could get out of the worst of them once in a blue moon and get a do-over the rest wouldn't seem so onerous.

What do you think of guaranteed contracts?  Do they help or hurt the league?  In what ways?  What would be your proposal for mitigating their effects while still protecting the position of the players who receive them?  Share your best thoughts below.

--Dave (