Cowboys Organizational Report Card, Part II: Managing The Cap

The Jones boys look disapprovingly at the mountain of dead money they have paid - Matthew Emmons-USA TODAY Sports

How does the Cowboys front office operate in the key areas that determine NFL success? Specifically, how well do they manage the salary cap? A look at different aspects of cap management and assigning the team a five-year grade in each.

As I mentioned in the initial offering of this series, the 2014 MIT Sloan Sports Analytics Conference kicks off today. The genesis for these posts actually occurred at last year's conference, with a fascinating discussion on the use of analytics in football. Three of the panelists - 49ers President Paraag Marathe; former Patriots and Chiefs GM Scott Pioli; Kevin Demoff, the Rams' Executive Vice President of Football Operations & Chief Operating Officer - are NFL front office insiders. They were joined by the ultimate outsider, Football Outsiders' Aaron Schatz.

Over the course of an hour, the foursome, with assistance from moderator Andrea Kramer of ESPN, offered a multitude of thoughtful informational bits about the way organizations approach free agency, the draft, gamedays and the salary cap. I decided to use their words to articulate or to support a set of organizational behaviors that suggest on-field success, and then offer the Cowboys a grade for each of these behaviors. In part one of the four-part series, I looked at overall organizational philosophy; today, we'll examine the way the team has managed the cap; in part three, we'll look at free agency; the final post will examine the team's behavior in the draft.

II. Managing The Cap:

Don't Pay Age: A bit of clarification is in order as we kick this off: I think it's a great idea for teams to pay their top performers as they come off their rookie contracts. The idea, as Roseman says, is to invest in "homegrown guys" - the players who a franchise thought enough of to draft and then spent countless hours developing, teaching, and bringing into the team's specific culture.

And, in the last decade, the Cowboys have done a superb job of this, offering second contracts to a wide array of homegrown talents, from Tony Romo to Bradie James and from Flozell Adams to DeMarcus Ware. This is good business. On many levels, it's smarter to reward the guys other players see working their tails off on the practice field and film room than to spend big bucks on "independent contractors," the equivalent of football mercenaries.

The bad news in this regard lies in what happens after the second contract. Let's say a player is drafted at the age of 21, and received a five year rookie deal. If the team re-ups him before he can hit the free agent market (which is what the Jonses typically have done), that means he'll be signing his second contract after about four years, putting him at about 25 when he inks the second deal. That deal should get him to about 29 - and that's where the team too often gets in a bind.

29 appears to be a magic age for NFL players; that's when the vast majority begin their decline. Sure there are exceptions, but for the most part, any player who signs a long-term, big-money third contract with a sizable signing bonus simply will not be playing up to the level of that contract in the final couple of years. That's why the smartest teams offer only one-year "prove it" type deals to players who have completed their second contracts.

Cowboys Grade: C

Jones' soft spot for productive or only semi-productive homegrown players - the ones whose on-field success justifies his retaining the team's General Manager title - has produced far too many contracts for older, declining guys whose production failed to meet their pay grade by the end of the deal. The only reason the Cowboys don't receive a failing grade in this category is because the team appears to be improving in this area (I have a hard time imagining that a Ken Hamlin gets a big-money deal during the Garrett administration).

And we might not have to wait long for the ideal test case; DeMarcus Ware's contract should be resolved in the upcoming fortnight. Will Jerry once again allow sentiment (and the fact that it was he who pounded the table to get Ware in the 2005 draft) to enter into the negotiations? In fact, the great Bob Sturm just posted a very interesting and compelling article on this very issue. In particular, this section caught my eye:

If Jerry is guilty of anything, it is loyalty and falling in love with his most decorated soldiers. He seldom ever does the 49ers tradition of saying goodbye a year too soon rather than a year too late. Jerry always says goodbye a year too late and rides his investment all the way down to zero...

...As one Cowboys official told me, we never are able to say goodbye to our favorites before it is too late. That is why he thought ultimately, Jerry would take the easier way out and redo DeMarcus yet again and delay the inevitable for one more year. But, it appears, finally, that Stephen and Jerry have realized that with Sean Lee's new deal done and with Tyron Smith, Dez Bryant, and DeMarco Murray due, it is time to make sure we don't lose a young asset because we couldn't say goodbye to an aging player. I don't like the idea that Ware could return to 12 sacks next season in this league and it will be somewhere else, but at some point, it is best to argue that the current mix wasn't working and that they were given enough time.

Should be verrrry interesting.

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Avoid Paying Dead Money Like the Plague: Under the old CBA, teams could safely assume that the cap would climb at a goodly rate every year. Take a look at the annual growth in the cap era's first sixteen years:

Year Cap Total % Increase
1994 $34.6 million -NA-
1995 $37.1 million 6.7%
1996 $40.8 million 9.1%
1997 $41.5 million 1.7%
1998 $52.4 million 20.8%
1999 $57.3 million 8.6%
2000 $62.2 million 7.9%
2001 $67.4 million 7.7%
2002 $71.1 million 5.2%
2003 $75.0 million 5.2%
2004 $80.6 million 6.9%
2005 $85.5 million 5.7%
2006 $102 million 16.2%
2007 $109 million 6.4%
2008 $116 million 6.0%
2009 $123 million 5.7%
Total Growth $88.4 million 255.5%

In the first decade and a half of the cap's existence, the NFL enjoyed very steady growth of between five and eight percent per annum, with two notable spikes in 1998 and 2006. Under this system, a team could confidently sign a player to a big-dollar deal knowing full well that, in a mere two years time, the cap would expand to the point where not only did that deal not have a negative cap impact but, due to the steady and relatively predictable escalation in salaries, looked like a bargain relative to more recent contracts for players at the same position.

Under the new CBA, however, cap growth has been reduced substantially:

Year Cap Total % Increase
2010 uncapped -NA-
2011 $120.0 million -NA-
2012 $120.6 million 0.5%
2013 $123.0 million 2.0%
Total Growth $3.0 million 2.5%

Notice that the 2013 and 2009 cap totals are the same. Moreover, annual growth has slowed considerably, to about 25% of previous growth. That's what they call a flat cap, folks.

More importantly, the cap is now calculated after deducting the benefits teams pay to players, including pensions, insurance, injury protection, workers’ compensation, preseason per diem accounts, travel expenses for offseason workouts, rookie orientation program expenses, postseason pay, medical costs, moving and travel expenses, severance pay, annuity programs, tuition assistance, minimum salary benefits, performance based pools, and some potential killers: health reimbursement accounts, payments to players suffering from dementia, legacy benefits and the neuro-cognitive disability benefit.

In short, with all the concussion lawsuits on the horizon, there are some very real medical reasons why the cap could stay relatively level, or even drop. With a flat cap, there is no assurance that current contracts will look like bargains in future. As a result, any dead money on the rolls is doubly painful. Before, it merely reduced the amount of cap growth; now, it means a financial step back. In a parity-driven league, that's equivalent to cutting a player or losing a draft pick. The most prudent teams have figured this out, and rigorously refuse to dole out long-term deals with guaranteed money to 28-32 year old veterans - even productive homegrown guys.

Cowboys Grade: F

I'll repeat here the data that I shared in part I: according to Spotrac, after carrying $17,297,848 in 2013, the Cowboys will carry $11,809,439 in dead money in 2014 (and that's before they cut the likes of Miles Austin, possibly Ware or any draftees or UDFAs to whom they have given guaranteed money). With an adjusted cap of roughly 119.2 million, that 2013 figure represents nearly a seventh of the total cap. The franchise has been, and will, for the forseeable future, be delimited in what it can do thanks to having huge chunks of dead money on the rolls every year. In a parity-driven salary cap world, the Cowboys, by annually carrying that kind of dead money, are essentially putting themselves at a permanent competitive disadvantage.

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Spend near the limit: On the other side of the coin can be found teams that are too financially prudent - so much so that they are typically nearer the cap floor than its ceiling. While some losing teams (Tampa Bay, Buffalo) are mocked for this, presumably for being too cheap to spend the money to win, others (Philadelphia) are lauded as paragons of financial piety. If you think about it further, however, what teams like the Eagles - who, according to Spotrac, are 26 million under the cap as of Friday evening - are doing is not much different that the Cowboys, in terms of real dollars spent.

In a recent email to the other front page writers, the always-savvy KD wrote, "That's why I laugh off the 'Philly does it right' BS.. If you can create room where you need it, 80% of your cap on active players is 80%. Whether it's dead money or self imposed ceiling." KD, of course, is right. In a league that, in all its aspects, is constructed to level the playing field, teams that don't spend all of their cap money are missing out on an opportunity to maximize their potential, in much the same way they would be if they decided not to use one of their third round draft picks.

The best teams, then, carefully tread the narrow path between spending up to the cap limit (but with a bit of wiggle room to take advantage of deals as they come, or to re-sign one of your own guys mid-season) and staunchly avoiding dead money by spending wisely on second contracts that are more likely to correlate to on-field performance.

Cowboys Grade: A

For as long as I can remember, Dallas has numbered among the teams with the least available cap space when the numbers come out around this time every year. This isn't likely to change any time soon; at the Senior Bowl, Jerry Jones noted that the team will always have tight salary caps because of their policy of spending aggressively. Indeed, on those rare occasions in recent years when the team has had some money to play with, they have tended to spend it, and quickly, in an effort at making the team better. As a fan, can you ask for anything more?

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Overall Grade: C+

As the above grades attest, Dallas salary cap situation is a mixed bag. On the one hand, the Joneses receive top marks for spending all the money they can in an effort at maximizing their chances of winning. On the other, they haven't made wise spending choices. Recall the recent big free agent paydays: 2005, when they ponied up 29 million (Jones call it "the most expensive day in Cowboys history") to secure free agents Anthony Henry, Jason Ferguson and Marco Rivera as well as big hauls in 2006 (Akin Ayodele; Rocky Boiman; Jason Fabini; Ryan Hannam; Kyle Kosier; Mike Vanderjagt) and 2012 (Brandon Carr, Kyle Orton, Dan Connor, Brodney Pool, Lawrence Vickers, Mackenzy Bernadeau, Nate Livings). The Cowboys have received very little bang per free agency buck on the vast majority of these deals.

That said, the team is increasingly spending whatever available monies on keeping its "homegrown" stars, with the most recent examples being Sean Lee's six-year, $42 million contract last August and Dan Bailey's seven-year, $22.5 million deal, inked in late January. Because they are drafting better, there are more of this type of player to whom they might reasonably offer a second contract. What that suggests is that they are moving away, ever so slowly, from the old habit of spending crazy money to keep their late-20-something veterans in the fold. Still, they have a lot of those "bad" contracts on the books and continue to have a lot of dead money on their yearly cap totals. See, the good news tempers the bad and vice versa. Thus the C."

So, my final grade reflects this even mixture of good and bad spending behaviors, with an upward pointing arrow in recognition that they seem to be changing their ways by spending on younger, homegrown guys instead of independent contractors.

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