Sunday, June 07, 2009

Under The Cap: 2008 Leaguewide Cap Efficiency

by J.I. Halsell

A few weeks back, we discussed the Eagles' salary cap management technique of extending the contracts of young players. While that particular technique may lead to several unhappy players, as a whole, the Eagles rank right up there in terms of teams who have efficiently managed their cap while fielding a winning team.

The table below illustrates 2008 Salary Cap Efficiency, which essentially compares a club's 2008 cap accounting to their success on the field. As we all know, the team that spends the most money on players isn't always the team with the most wins; to that point, the Seahawks had the fifth highest 2008 Team Salary with $122 million but could only muster four wins. Conversely, the Giants had the fourth lowest Team Salary at a little under $105 million, yet had 12 wins.

Keep in mind that "Team Salary" is not cash paid, but instead represents contract amounts accounted for. For example, if a player signs a contract with a $1 million signing bonus, the full $1 million isn't counted in 2008 Team Salary, but instead the prorated amount counts; that would be $200,000 on a five-year contract.

While the Efficiency Rating does not account for injuries, poor talent evaluation, or blown calls by Ed Hochuli, it still serves as a good barometer for illustrating which clubs are getting the best value out of their salary cap dollars. Without going into the details, the formula consists of 50 percent wins, 25 percent team salary, and 25 percent cap space rolled over. Wins trump everything because regardless of whether you do a great job or a poor job of managing your cap, if you win games and ultimately a Super Bowl, your team is a success. Accordingly, wins hols the most weight in this rating. The cap space rolled over component is important in my opinion because the NFL practices a "use it or lose it" philosophy towards unused cap space. Therefore, teams are wise to roll over their unused cap space into the next capped year; interestingly, not all teams rollover their unused cap space.

As you look at the Efficiency Ratings, the team that stands out to me is the Bucs, who rank second despite just nine wins in 2008. The Bucs fired their General Manager, Bruce Allen, who was responsible for salary cap management and contract negotiations; the tremendous work that Allen did in Tampa Bay wasn't enough to save his job. (At least someone got recognized for the good work: Allen's salary cap assistant, Kevin Demoff, left the Bucs to become Executive VP of Football Operations for the Rams soon after Allen was let go.) If you're a club looking for a front office executive, given the job he did in Tampa Bay, Bruce Allen is a name you'd have to seriously consider. The metric that stands out about the Bucs is the fact that they rolled over a whopping $25 million of 2008 cap space; this rollover credit put their 2009 cap in excess of $153 million.

Think of rolled-over cap space as a savings account; using that analogy, as the table above illustrates, the Bucs and Eagles have done a great job of building their savings accounts ($25 million and $20 million respectively), while the Bills sufficiently squandered their entire savings by going from a 2008 rollover amount of $12 million to a 2009 rollover of zero dollars. In Kansas City, the Chiefs chose to let a whopping $21 million go to waste, instead electing to only rollover $6 million of $25 million of unused 2008 cap space. Arizona and Cincinnati have historically never rolled over unused cap space.

Interestingly, the Vikings, despite spending $7 million of their "savings," still have the fifth highest salary cap in the league at $139 million. Like the Bucs and the Giants, the Niners have positioned themselves well by rolling over in excess of $10 million; the Niners are now just hoping the product on the field becomes a winner under Head Coach Mike Singletary. However, if that isn't the case, the Niners will not (assuming there is a cap in 2010) be handicapped by the cap and will have enough of a war chest to acquire some pieces to potentially make them a winner.

The key to that last sentence is "potential," because as mentioned earlier, efficient and prudent salary cap management does not ensure a winning product, if your talent evaluation and selection is poor. However, salary cap conservation does go a long way towards sustainable winning. A team can buy a one-year run to the Super Bowl, but the examples of the Eagles and Patriots show you that sustained excellence in the salary cap era comes from outstanding salary cap planning and execution, coupled with solid talent evaluation and little bit of luck.