NHL Market Softens: RFA Offer Sheets are an Attractive Option

The job of the NHL General Manager is to squeeze as much talent as possible into his lineup while keeping within the parameters of the salary cap.  A GM like Glen Sather opts to fill his New York Ranger’s roster through ill-advised free agent signings.  A GM like Dave Tallon opts to build through the draft in Florida, just as he did in Chicago.  A GM like Brian Burke actively scours the college free agency market and works the phone to make trades as he improves the Maple Leafs.  Finally, a GM like Kevin Lowe opted to supercharge the Oilers a few years back through aggressively pursuing restricted free agents. 

I am previously on the record as being against building a team through high priced free agents.  There simply is not a clear link between marquee free agents and future playoff success.  I suspect this is largely due to the age at which a player becomes a free agent relative to their peak performance.  When a Glen Sather signs a free agent, he is generally paying a premium based on a player’s past and not for what they will bring to the future.  Once a player is past the age of 26 or 27, his best years are behind him.

So why are GM’s reluctant to make use of their ability to attack the Restricted Free Agent market through the use of an offer sheet?  In a salary cap world, there are a number of teams who are up against the cap and might struggle to match an offer sheet.  San Jose used this logic in their failed attempt to poach Niklas Hjalmarsson from the Blackhawks.  If successful, a RFA offer sheet results in the addition of a 21-25 year old player entering their prime.   Those are the types of players that every team should covet.

Looking at the 2010 RFA pool today, the following marquee players are still available:

Bobby Ryan- Anaheim Ducks
James Neal- Dallas Stars
Sam Gagner- Edmonton Oilers
Peter Mueller- Colorado Avalanche
Marc Staal- New York Rangers
Carey Price- Montreal Canadiens

There are two arguments against signing RFA’s as I understand them.  The first argument is that an offer sheet goes against the gentlemen’s code observed by most NHL General Managers.  I would point to the 2-3 years of bickering between Burke and Lowe after the Dustin Penner situation as an example of how GM’s view offer sheets.  Last offseason, Burke maintained the gentlemen’s code by negotiating a trade with Boston for RFA Phil Kessel.  The compensation was essentially the same as an offer sheet, but Burke avoided the element of surprise and element of confrontation.

Quite simply, I find this reason to be a bunch of baloney.  The RFA offer sheet is a perfectly legal tool under the Collective Bargaining Agreement.  If I was a NHL GM, I do not see how I could tell my owner that I refuse to improve our team because I do not want to hurt my relationship with a member of my boys club. 

The second argument is a lot more compelling and it relates to the compensation required to successfully snatch a RFA.   Depending on the salary offered, a team must give up a variety of draft picks to the team that had their player poached.  Historically, the offer sheets put forward had a contract value that obligated the team to give back a first, second and third round choice.  RFA compensation is listed below.

$994,433 or below None
Over $994,433 to $1,506,716 Third-round choice
Over $1,506,716 to $3,013,434 Second-round choice
Over $3,013,434 to $4,520,150 First-round and third-round choice
Over $4,520,150 to $6,026,867 First-round, second-round and third-round choice
Over $6,026,867 to $7,533,584 Two first-round choices, one second- and one third-round choice
Over $7,533,584 Four first-round choices


The compensation argument is compelling in that there seems to be a clear preference and perhaps a need to build a team through the draft.  This ties back to the salary cap and the balance of blending a lot of low priced talent with a few high priced players.  The acquisition of star talent costs big money on either end of the ice.   The exception to this rule is a team’s homegrown talent which costs considerably less.  If a team drafts successfully, they can fill key roster spots without having to pay the premium that comes with signing a free agent. 

My opinion is that the compensation argument does not hold water during the 2010 and likely the 2011 offseasons.  The reason for this is that cap space is tight enough that the market rate for players is much lower than it has been in the past.  If a team could sign a player for under $3 million per season, they could have that player for a second round draft choice.  Even with today’s focus on building through the draft, a team would have to be crazy to pass up a proven player to hold onto a lottery ticket.

The highest goalie contract awarded in free agency this year has averaged $2 million per season.  Stanley Cup winner Antti Niemi had the Blackhawks walk away from his arbitration award of $2.75 million, making him an unrestricted free agent.   The lack of love for the most important position in the game is a topic for another day, but the reality of the market is that goaltending is cheap to acquire.  If I run a team like Washington, Edmonton or Atlanta, I would be looking very closely at taking a run for Carey Price.*  While Price has had issues with consistency, I would point to Marc Andre Fleury as a good comparable.  It takes some time for goalies to mature and Price is still only 22 years old.

The market placed a premium on defensemen this offseason with most of the free agency money on July 1st going towards the back end.  That said, the average salaries of the marquee players was considerably less than the $7.1 million per season thrown to the Brian Campbell’s of the world a couple of years ago.  Sergei Gonchar has the clubhouse lead at $5.5 million per season, with the rest of the top talent coming in between $3 and $4.5 million per season.  If I am a contending team who drafts late every year, I might be intrigued at acquiring Marc Staal in exchange for a first and third round pick.  The Rangers are right up against the cap which would make it difficult for Sather to match an offer.

Wrapping up with the forwards, the market has not been kind outside of Patrick Marleau’s deal to stay in San Jose. *  Matthew Lombardi signed for a nice $3.5 million, while Colby Armstrong and Alexander Frolov managed to obtain $3 million salaries.  Beyond those three guys we had a number of quality players taking pay cuts from their previous bloated salaries.  The enthusiasm of the market really dissipated as the summer progressed.

*I am ignoring the Kovalchuk deal because I guess that one didn’t count. This actually brings up a critical point: the loophole of back ended contracts to acquire or keep talent and manage cap space is quickly closing.  Teams need to look at other ways to build, with the RFA offer sheet being one of the underutilized options available.

Of the available restricted free agent forward, only Bobby Ryan would definitely exceed the $3 million per season mark and therefore require a first and third round pick.  In previous years, a player of his caliber would easily receive a contract over $4.5 million but I am not so sure that contract is out there this year. 

This leaves Neal, Gagner and Mueller available for a second round draft choice through an offer sheet.  These are all really good players and potential stars.  Why would a team not be willing to give up a draft pick to take a run at them? 

The average NHL General Manager reminds me of the average stock market investor.  They buy when the market is hot and they stay away when the market is cold.  Coming out of the lockout, almost every team wanted to be involved in the free agent market.  With Detroit and Chicago’s success, everyone now wants to build and develop through the draft and maximize talent to the expense of solid goaltending.  This year’s free agency period suggests that team’s are putting a premium on defensemen. 

An intelligent investor looks at this situation and concludes that draft picks are currently overvalued.  Boston’s failure to consider an offer of Ales Hemsky and Jordan Eberle for their #2 draft pick is a great example.  The same investor sees a lot of salary cap issues which has caused the market to soften and player salaries to drop. 

These factors combine to provide a great buying opportunity for any team willing to go against the grain.  Quality players can be purchased below historical market values in exchange for currently overvalued draft picks.   The mechanism for their acquisition is the never used RFA offer sheet.*  This means there will be no competition in the intelligent GM’s attempt to tie up players and a reasonable chance the player’s team might settle for the draft compensation offered. 

* I think this is just as viable an option for building a team through trading draft picks for proven talent.  Chicago’s fire sale is just one of several sales that will occur the next couple of seasons by teams who have overspent in the past.

Marc Staal and Carey Price seem to be two players that could be taken due to salary cap and performance issues.  I do think it is likely that the Oilers, Stars, Ducks and Avalanche would match an offer sheet on their forwards.  I would still suggest making an effort as these teams might surprise and settle for the draft picks. 

One final point to those I have not yet convinced.  If the attempt to tie up a player fails, it costs nothing to the team making the attempt.   On the plus side, you get a player at a good price if your offer goes through; on the downside, it might cost you zero dollars if your offer is matched.  On the plus side, you signal to your fans and ownership that you are serious about improving your team; on the downside, you will get some dirty looks at the next GM’s meeting.   

If I am the GM of a team with a lot of cap space and a team that can win soon, I would certainly look hard at making use of the RFA offer sheet.  These teams include:  Anaheim, Carolina, Dallas, Los Angeles, Tampa, Phoenix, Nashville and Colorado.


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