The Calculus of an NFL Compensatory Pick

Karl Walter

Is the NFL’s granting of “compensation” for losing free agents the equivalent of a Wimpy "I'll gladly pay you Tuesday for a hamburger today"?

The Steelers had a multitude of needs even before free agency. Now, with the initial feeding frenzy dying down the Steelers find themselves short a running back built for the type of zone blocking system the Steelers appear to be developing, a deep threat wide receiver, a burgeoning starting cornerback, and roster depth at corner.

One need already filled was a serviceable back-up quarterback to buttress the team's ability to remain competitive come the inevitable injury and loss of playing time of franchise quarterback Ben Roethlisberger. By signing ­­­­­­Bruce Gradowski, the Steelers have filled a serious need, and hopefully eliminated the possibility of using a draft pick this year on an unproven rookie from an otherwise un-exciting pool of prospects.

By doing so however, they are chipping away at the total potential pool of compensatory picks they might receive next year; it is a trade of value I think well worth making.

However, they have also signed William Gay, who most recently played for the Steelers' farm team in Arizona. Presumably Colbert calculated that despite considering Gay expendable at the end of 2011, he is of higher value than some other FA corner, having had experience in the Steelers' system just two seasons ago.

Had Gay been an UFA, then Colbert might have concluded the signing of Gay was worth more than the decrease in the compensatory pick valuation the Steelers are presumably going to receive as a result of the free agents they have lost. By having signed Gay, or if Colbert signs any more true unrestricted free agents not cut by their team, in effect Colbert would be de-valuing the compensation the Steelers might expect from the loss of Lewis. A calculated risk, but depending on the free agent, one I believe worth making.

This brings us however, to the current compensatory value position the Steelers hold. On one side of the ledger you have:

Mike Wallace signed by Miami Dolphins; Rashard Mendenhall signed by Arizona Cardinals; Keenan Lewis signed by New Orleans Saints; Ryan Mundy signed by New York Giants;

On the other side of the Ledger you have:

Steelers sign Bruce Gradowski

As I understand the Compensatory Pick formula, the value of the pick assigned to a team such as the Steelers is initially predicated on the volume of players signed and players lost; so far the Steelers have lost four, and signed one. If a team gain and lose the same number of players, but lose higher valued players than they gained, all they will receive the following draft is seventh round compensatory picks.

If the team loses more than it signs, then the formula considers the following on the players lost: salary, playing time and post-season achievements. The round of the pick awarded is determined by the annual value of the contract signed by the lost player; equal contracts between lost and gained players cancel each other out, then lower contracts, before cancelling out higher contracts.

The signing of Matt Spaeth and William Gay by the Steelers won't affect this Compensatory calculus since Spaeth was released by the Chicago Bears and Gay from the Cardinals, but any future free agent signings by the Steelers will.

And that raises an interesting question: Should the Steelers calculate the impact of any future signings against the value they could expect to receive for losing free agents Wallace and Lewis?

If it's true, as it has been alluded to by GM Kevin Colbert, that the Steelers are merely in a "transitional" phase, does that mean he believes in the depth of players currently on the roster enough that there won't be a signing of a free agent linebacker or pass rusher?

If not, then is there a quality free agent linebacker or pass rusher, that the Steelers could afford, that would be of greater value to the team than the compensatory picks the Steelers would receive for losing Wallace and Lewis?

If I understand the complex mathematical valuation of draft picks correctly, a third round pick in next year's draft is worth a fourth round pick in this year's draft (the Time Value of Money concept; a dollar next year is worth $0.75 today due to the discounting factor of time).

Thus if, as has been speculated here by Steeler Nation, we might receive a third round pick in the 2014 draft for Wallace, and a fourth round pick for Lewis, that would translate to an equivalency of a fourth and a fifth this year. What further complicates the matter is that the comp picks come at the end of the round designated; thus, the presumed third round pick for Wallace is actually the 33rd pick of the third round.

This should lead to a mathematical valuation consideration that any free agent the Steelers might consider signing now, in order to address an immediate need in the 2013 roster, would have to be worth more than the combined worth of a fourth and fifth draft pick. You have to combine the worth, because according to the presumed calculation of compensatory picks, it is the overall net effect of players lost to players signed, that determines what compensatory pick(s) you may get.

So, is the "hope" of Steeler Nation for some value received in compensation for the loss of Wallace and Lewis a valid hope for collecting multiple picks with which to offset the trading of our regular picks next year to move up in the draft (comp picks cannot be traded, must be used in the round granted), or should the Steelers focus more on addressing immediate needs this year and not count on, or factor in, any value for the compensation they may receive for losing a deep threat receiver such as Wallace and an apparent rising star of a cornerback such as Lewis?

In other words, is the NFL's Compensatory Pick compensation mere chopped liver as compared to the Grade A Choice meat lost by the Steelers to free agency, in light of the hungry expectations of a quality meal Steeler Nation is expecting in 2013?

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