Chiefs’ free agency and why the Winner’s Curse doesn’t matter

With the Chiefs signing Sammy Watkins to a 3-year, $48 million dollar deal it clearly looks like they overpaid. Here’s why it doesn’t actually matter.

Just like that, almost two weeks of NFL free agency are in the books. The Kansas City Chiefs started off with a bang, signing Sammy Watkins and Anthony Hitchens to big money contracts. The responses to these deals have not been as favorable as Chiefs’ fans might have hoped. Given Watkins’ career production, most pundits agree that three years and $48 million was too much to spend. But, given the way the free-agent market works this response is overblown.

In economics there’s a common occurrence known as “The Winner’s Curse.” It is the tendency for the winning bid in an auction to exceed the actual value of the object. That’s what happened to the Chiefs with Watkins. That’s also what happens to almost every other team that signs a free agent with multiple interested teams.

Fortunately, how much one player counts against the cap isn’t necessarily the best way to evaluate spending. If we assume that Brett Veach is an NFL GM because he knows what he is doing, it’s clear he evaluates these decisions using a different metric. It is more likely that Veach has a cap number he is willing to spend per position group. Given this assumption and the following analysis, the Chiefs are actually in a great position financially.

A Brief Explanation of Metrics Used

To prove this point, I’ll evaluate three teams on salary cap spending. Obviously, the first will be the 2018 Kansas City Chiefs. As a comparison, I’ll use the 2017 Philadelphia Eagles and the 2017 New England Patriots. This is fitting, as Chiefs’ fans hope this year’s team is championship caliber. I’ll compare these teams based on number of players per position, total cap spent per position, and total cap spent per player.

In computing these metrics, the following factors helped to equalize the three teams’ rosters. First, these measurements compare the current Chiefs’ roster as of March 18, 2018 to the Eagles and Patriots final rosters of the 2017 season. Second, these measurements only include players with dead money greater than $150,000. This serves to equalize the total payroll as a team at the beginning of free agency has far fewer dead money contracts than a team at the end of the season. Third, these measurements combine the strong safety and free safety positions. Each of the three rosters listed certain players only as safety and this position can at times be interchangeable.

Finally, it is important to note that since each team does not have the exact same number of players per position, these numbers are not perfectly comparable. But, they give us a good idea of whether or not recent free agent signings were bad deals and where the Chiefs might actually be overspending. From highest to lowest, the total cap numbers per position as well as cap hit per player are summed up in the table below. All numbers are derived from records on Spotrac.

Cap Analysis Chart 2

Salary Cap Spending Per Offensive Position

From the offensive side of the ball, there are some key takeaways. Even with the Watkins signing, the Chiefs’ are still spending a reasonable amount at the position. They are spending $19.5 million, compared to $20.6 million for the Eagles and $18.7 million for the Patriots. This is in large part because the Chiefs’ wide receivers are comprised of mid to late-round draft picks still on their rookie deals.

Fortunately, these contracts should give the Chiefs flexibility at this position for at least the next two years. Considering most of the guaranteed money that is due Watkins will be paid out after the first two seasons, this actually looks to be a decent deal. Most teams would be pretty comfortable with this price tag and a receiving group that boasted the potential of Tyreek Hill and Sammy Watkins.

Another interesting takeaway from this table is the sheer number of quarterbacks the other two teams had on their balance sheets. Post Alex Smith, the Chiefs’ are only investing slightly more than $10 million at this position, compared to close to $20 million for the Eagles and $15 million for the Patriots. This is a great sign and presumably gave the Chiefs extra flexibility this year.

However, there is very rarely good without some bad. If there’s one position that seems a little lopsided on offense it would probably be left tackle. Given how little the Eagles and Patriots are spending along with Eric Fisher’s production, he seems to be overpaid. Fortunately, next year the Chiefs can work to restructure and extend Fisher for less money or cut him altogether.

Taking the Chiefs’ offensive spending into account, there doesn’t seem to be many positions  where the spending is out of control, compared to the Eagles and Patriots. With this in mind, let’s evaluate the defensive side of the ball.

Salary Cap Spending Per Defensive Position

From the defensive side of the ball, there are also some key takeaways. It is no surprise that the two positions on defense where the Chiefs are spending the most are outside linebacker and safety. In particular, the Chiefs are spending a whopping $32.9 million at outside linebacker. This is significantly more than the Eagles and Patriots combined, at $14.2 million and $12.4 million respectively. The deals between the Chiefs and Eric Berry and Justin Houston were likely the most notable of the John Dorsey era.

At the time of the Houston deal, his contract size was questionable but his value to the team was not. In hindsight, this looks to have been a bad deal for the Chiefs. Again, fortunately there are some options next year to reduce his cap hit.

Berry’s contract impact is more reasonable, with the Chiefs spending reasonably at this position.  He is undoubtedly the leader of the defense, and clearly integral to its success as showcased last year by his absence. Hopefully, he returns to his All-Pro pre-injury form and we never have to question the size of his contract.

What should make Chiefs’ fans feel better is the cap number at inside linebacker. While it is slightly more than the Eagles and Patriots, this amount is marginal. Given the reaction to the Hitchens’ signing, it would be easy to think the Chiefs way overpaid. But again, total Chiefs’ spending at the position is reasonably comparable to the teams in question. Further, the Chiefs now boast what should be a quality group of inside linebackers. Veach still needs to add depth here, but the starting positions seem locked up for the time being.

The Chiefs’ spending on defense is still recovering from past mega deals that hurt the team’s long-term flexibility. Fortunately, that flexibility will return in a year or two and likely won’t be hindered by the most recent deals. With the defense wrapped up, let’s take a look at special teams.

Salary Cap Spending on Special Teams

The Chiefs are doing extremely well in their spending on special teams. They are spending far less at kicker, reasonably at punter, and slightly more at long snapper than the teams in question. In particular, the price tag for Harrison Butker is amazing. The Chiefs are getting an incredible kicker at $1 million less than the Eagles and $4 million less than the Patriots. All in all, the cap flexibility at these positions is a nice bonus to an already decent situation moving forward.

All told, the Chiefs seem to be spending pretty comparably to other championship caliber teams. They made some huge acquisitions over the last week and a half that the national media deemed too costly. They went out and got the players that fit their strategy and suffered from “The Winner’s Curse” in the process. But given the preceding analysis, this shouldn’t affect them negatively.

Like this year, next year’s spending will likely look comparable to other championship teams. Salary cap spending is a balancing act. Sometimes you have to overpay to get the players you want. As long as you can balance overpaying with value contracts, you put yourself in a good position. So far, Veach has made some brilliant moves. Until one clearly doesn’t work out, let’s give him the benefit of the doubt.