Arbitration: To offer or not to offer?

To offer or not to offer?

In ordinary offseasons, the deadline for clubs to offer arbitration to their ranked free agents, which this time arrives Monday at midnight ET, has been a rather predictable occasion.

With few exceptions, teams not yet able to strike new deals in the roughly four weeks since their players' declaration of free agency would simply decline to make the offer, effectively severing ties and giving up any claims to compensatory Draft picks.

These, however, are extraordinary times -- both for baseball and for the overall economy the sport must use at least as a partial guideline.

Thus, the decisions made prior to the deadline will dramatically shape the rest of the signing season for the 169 free agents remaining on the market.

In fact, were this an auto race at Indianapolis' Brickyard, at 12:01 a.m. Tuesday the call would go out, "Gentlemen, start your engines!"

"Monday is a big day," Brewers general manager Doug Melvin said. "A lot of teams are waiting until that day passes to make other decisions."

That is the case because any ranked free agent signed away prior to the deadline automatically obligates the signing team for compensation. Thus, clubs bide their time to see which free agents in their targets will be unencumbered on the other side of the deadline. Then they can launch into serious negotiations with their quarries.

This first decision facing clubs is a simple one with complex ramifications.

Compensation Draft picks through the years
Offering arbitration to ranked free agents can be a consequential decision -- albeit the impact is deferred. Many outstanding Major Leaguers were drafted with compensation picks acquired through this process.
Player
Year
Drafted by
With pick from
For
Ian Kennedy2006YankeesPhilliesTom Gordon
Joba Chamberlain2006YankeesPhilliesTom Gordon
Jacoby Ellsbury2005Red SoxAngelsO. Cabrera
Clay Buchholz2005Red SoxMetsPedro Martinez
Phil Hughes2004YankeesAstrosAndy Pettitte
Huston Street2004A'sOriolesMiguel Tejada
Conor Jackson2003D-backsMarinersGreg Colbrunn
Mark Teahen2002A'sRed SoxJohnny Damon
Nick Swisher2002A'sRed SoxJohnny Damon
David Wright2001MetsRockiesMike Hampton
Brian Roberts1999OriolesRangersRafael Palmeiro
Brad Lidge1998AstrosRockiesDarryl Kile
Aaron Rowand1998White SoxRaysDave Martinez
Jay Payton1994MetsOriolesSid Fernandez
Torii Hunter1993TwinsRedsJohn Smiley
Shannon Stewart1992Blue JaysDodgersTom Candiotti
Johnny Damon1992RoyalsPadresKurt Stillwell
Jon Lieber1992RoyalsYankeesDanny Tartabull
Shawn Green1991Blue JaysGiantsBud Black
Todd Jones1989AstrosRangersNolan Ryan

Making an arbitration offer to free agents classified either as Type A or Type B in the annual Elias rankings is the only way former clubs can secure Draft-pick compensation from signing clubs.

Basically, Type A free agents return two picks in the 2009 First-Year Player Draft and Type Bs bring one, a sandwich pick between the first two rounds.

But the red-light caveat is the free agent's right to accept the offer of arbitration by a Dec. 7 deadline -- a move that would guarantee him a new contract with his old team.

Normally, teams rarely take that chance.

A year ago, 17 ranked free agents were offered arbitration, and of those only three accepted: catcher Michael Barrett (Padres), infielder Mark Loretta (Astros) and pitcher Andy Pettitte (Yankees). In 2006, the numbers were 25 and two (Tony Graffanino and Todd Walker).

Now, this playing field may be quite tilted. A majority of the 60 ranked free agents -- 27 of them Type A -- could get the arbitration offer, and more of them are expected to accept.

It's a tougher call for clubs that in the past comfortably offered arbitration to free agents who had priced themselves out of their plans, certain of being compensated when they signed deals elsewhere. But if the free agents' anticipated market is shriveled by current economic conditions, they are more likely to accept the arbitration and get locked in for one season at a minimum of 80 percent of their 2008 salaries -- but likely more.

"In this economy," said Colorado general manager Dan O'Dowd, "you never know what the future will bring."

Six years ago, after Greg Maddux had completed a five-year, $57.5 million contract, the Braves offered him arbitration. The future Hall of Famer surely would have gotten a multiyear contract on the open market, but he accepted. The parties eventually worked out a one-year, $14.75 million deal, avoiding a hearing.

As Seattle assistant GM Lee Pelekoudas laid out the process' first commandment, "When you offer arbitration to a free agent, you must be prepared to have him accept and be prepared to keep him."

The paradigm is a no-brainer: Clubs will extend the arbitration offer in win-win situations; if the player declines and signs elsewhere, fine, and if he accepts, even better.

In other words, you offer a player whom you desire to keep anyway, whether that be for one year or more if the two sides negotiate a longer deal. You reach out to guys you expect to play the field, and who would pleasantly astonish you if they didn't.

Hot Stove

Case in point: The Dodgers and Manny Ramirez, to whom they made, then withdrew, a two-year offer. Either Ramirez yields two Draft picks or, seeking shelter in a more-conservative-than-anticipated market, returns for a lower guarantee than the $45 million the Dodgers already had on the table.

Others in that situation, assured of being offered arbitration, include CC Sabathia (Brewers), Kerry Wood (Cubs), Francisco Rodriguez and Mark Teixeira (Angels), A.J. Burnett (Blue Jays), Brian Fuentes (Rockies), Orlando Cabrera (White Sox) and Raul Ibanez (Mariners).

High-profile players who could receive offers include Jason Varitek (Red Sox), Ben Sheets (Brewers), Oliver Perez (Mets), Pat Burrell and Jamie Moyer (Phillies), Bobby Abreu and Andy Pettitte (Yankees), Edgar Renteria (Tigers), Casey Blake and Joe Beimel (Dodgers), Milton Bradley (Rangers), Dennys Reyes (Brewers) and Doug Brocail (Astros).

Some of those players might very well accept. Obviously, this gray area is larger, and the classic example of the quandary is offered by the Los Angeles Angels vis-a-vis Garret Anderson, although it is a scenario mirrored elsewhere.

In late October, the Angels declined a 2009 option on the outfielder at $14 million. By offering arbitration to Anderson, a Type B free agent, the Angels would gain an additional pick in the 2009 First-Year Player Draft if he signs elsewhere. But by accepting, Anderson would lock himself into a raise over his $12 million salary from a typically productive 2008 season. Added to the $3 million they have already paid him to buy out that option, the Angels would end up spending more.

Incidentally, the focus is on ranked free agents because making the arbitration offer to non-ranked players simply is not logical, even in the case of those who their teams wish to retain. That would essentially remove negotiation from the equation and, by accepting, the player would assure himself of at least a salary arbitration hearing, the majority of which return hefty pay raises.

Tom Singer is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.