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Looking into the Free Agent Arbitration & Compensation System with Adam LaRoche

Despite the fact that it appears that Adam LaRoche's stay in the desert has likely come to its end, there is still a question that must be solved with regards to our 2010 everyday first baseman.  LaRoche is a Type B Free Agent, which means that the D-backs could be compensated with a 1/2 sandwich-round pick for losing LaRoche through free agency, but only if the team offers LaRoche salary arbitration.

We just saw how this system can be manipulated when the Blue Jays acquired Miguel Olivo from the Rockies.  After acquiring Olivo, the Jays chose not to pick up his 2011 option, instead hoping to receive a Type B compensation pick for "losing" Olivo after offering arbitration.  There are numerous risks and implications that could come with this offer, though, so I've decided to try to break down the entire situation to get a better idea of how the overall situation may unfold in LaRoche's case.

In this article, I'll break down the following factors in assessing the situation:

- The value of a Type B compensation pick.

- Supply/Demand of/for free agent first basemen this off-season, and, subsequently, the odds of LaRoche accepting arbitration.

- LaRoche's arbitration case.

 

The value of a Type B compensation pick:

LaRoche's Type B status provides the D-backs with the potential to acquire another free compensation pick between the first and second rounds of next year's draft - the team is already likely to collect one when Aaron Heilman departs.  For this to happen, the D-backs would have to offer LaRoche salary arbitration, which LaRoche would have to decline, and then LaRoche would have to sign a major-league contract with another team (this is really only relevant this year in the case of Felipe Lopez, who may be forced to accept a minor-league deal if he declines, preventing the Red Sox from obtaining a pick).

The question, though, is what type of value does this pick have?  Thanksfully, Baseball-Reference exists and is totally awesome.  Here is a list of 1/2 sandwich round picks from 1998 to 2005 - to allow for even the high school prospects ample time to get to the majors - who have played in the major leagues and signed after being drafted with the sandwich-round pick (i.e. Mark Prior was picked by the Yankees in the comp round of the 1998 draft, but went to college at USC instead of signing, and Aaron Heilman, earning his second random mention in this section, having been picked by the Twins 31st overall in 2000 before signing the next year with the Mets as the 18th pick), with their career B-R WAR value and the total number of sandwich round picks for that year:

NOTE: The numbers here are pre-2010 - these were the numbers available on the Draft History pages of B-R.

1998: 13 picks

Chris George (31st, -1.0 WAR), Brad Wilkerson (33rd, 10.3 WAR), Nate Cornejo (34th, 0.1 WAR), Aaron Rowand (35th, 19.3 WAR), Choo Freeman (36th, -1.5 WAR), and Eric Valent (42nd, -0.1 WAR).

MLB-Rate: 6/13 - 46.2%

Total: 27.1 WAR - Average of 2.08 WAR per pick.

1999: 21 picks

Casey Daigle (!!!!!!!) (31st, a totally unsurprising -0.7 WAR), Jason Repko (37th, 0.0 WAR), Colby Lewis (38th, -0.9 WAR), Jerome Williams (39th, 2.6 WAR), Jimmy Gobble (43rd, 1.8 WAR), Chris Duncan (46th, 2.0 WAR), Casey Fossum (48th, -0.9 WAR), Mike Bynum (49th, -2.0 WAR), and Brian Roberts (50th, 20.9 WAR).

MLB-Rate: 9/21 - 42.9%

Total: 22.8 WAR - Average of 1.09 WAR per pick.

2000: 10 picks

Dustin McGowan (33rd, 1.7 WAR), Dustin Moseley (34th, 0.6 WAR), Bobby Keppel (36th, 0.0 WAR), Derek Thompson (0.2 WAR), and Kelly Johnson (38th, 9.8 WAR).

MLB-Rate: 5/10 - 50.0%

Total: 12.3 WAR - Average of 1.23 WAR per pick.

2001: 14 picks

Jeff Mathis (33rd, -1.0 WAR), Bronson Sardinha (34th, -0.3 WAR), J.D. Martin (35th, 0.7 WAR), John Rheinecker (37th, -0.5 WAR), David Wright (38th, 27.2 WAR), Todd Linden (41st, -0.3 WAR), and Jayson Nix (44th, 0.8 WAR).

MLB-Rate: 7/14 - 50.0%

Total: 26.6 WAR - Average of 1.9 WAR per pick.

2002: 11 picks

Dan Meyer (34th, -1.1 WAR), Jeremy Brown (ZOMGZMONEYBALL!) (35th, 0.0 WAR... zomgzMoneyball?), and Mark Teahen (ZO- ... okay, I'll stop) (39th, -0.3 WAR).

MLB-Rate: 3/11 - 27.3%

Total: -1.4 WAR - Average of -0.13 WAR per pick... what a horrible 1/2 round.

2003: 7 picks

Matt Murton (32nd, 3.3 WAR), Omar Quintanilla (33rd, -0.3 WAR), Jarrod Saltalamacchia (36th, 0.4 WAR), and Adam Jones (37th, 4.9 WAR).

MLB-Rate: 4/7 - 57.1%

Total: 8.3 WAR - Average of 1.19 WAR per pick.

2004: 11 picks

J.P. Howell (31st, 3.6 WAR), Zach Jackson (32nd, -0.7 WAR), Danny Putnam (-0.5 WAR), Gio Gonzalez (38th, -1.8 WAR), and Huston Street (40th, 8.9 WAR).

MLB-Rate: 5/11 - 45.5%

Total: 9.5 WAR - Average of 0.86 WAR per pick.

2005: 18 picks

Ryan Tucker (34th, -1.4 WAR), Cesar Ramos (35th, 0.2 WAR), Travis Buck (36th, 2.4 WAR), Trevor Bell (37th, -1.2 WAR), Clay Buchholz (42nd, 1.3 WAR), Sean West (44th, -0.4 WAR), Jed Lowrie (45th, 1.5 WAR), Michael Bowden (47th, -0.3 WAR), and Garrett Olson (48th, -2.4 WAR).

MLB-Rate: 9/18 - 50.0%

Total: -0.3 WAR - Average of -0.02 WAR per pick, despite the presence of Buchholz and Buck...

Of course, some of these numbers would look dramatically different if 2010 stats were included, particularly with the production put forth by the likes of Kelly Johnson, Gio Gonzalez, and Clay Buchholz this year.  However, there is a general theme of only a player or two from each year's supplemental round becoming a big-league regular, with very few players who I would refer to as "studs" at some point in their careers - Rowand, Roberts, Johnson, Wright, Jones, and Buchholz, a mere six guys in an eight-year span.

Nonetheless, the odds of a guy even making it to the majors, not even considering whether or not they have any real impact at the big-league level, is 50% in a good year.  Now, the 2011 draft is supposed to be deep, but try to keep that in relative terms.  Even if the supplementary round of next year's draft is as good as the best of these eight drafts, less than 2/3 of the players will make it out of the minors and the average pick will produce about 2 WAR, which, keep in mind, is not present-valued - that's an average of 2 WAR that you wait at least a couple of years to start seeing.

There's also research done by one Victor Wang, which can be found here, which states (though there are shady methods and assumptions made) that the average surplus value provided by a supplemental-round pick is $2.63MM.

Also, for what it's worth, LaRoche's Elias Score is 36th among 47 Type B free agents this year, so the compensation pick would likely be in the later parts of the supplementary round.

 

Supply/Demand of/for free agent first basemen this off-season, and, subsequently, the odds of LaRoche accepting arbitration:

I'm using this MLBTR article as a key reference for this section of this post.  In the post, it is mentioned that a staggering fifteen teams could be looking for first base help this off-season, naming Baltimore, Boston, Tampa, Toronto, both Chicago clubs, Texas, Atlanta, Washington, Milwaukee, Pittsburgh, Arizona, Colorado, L.A. (the evil L.A. team), and San Francisco.  Let's take a closer look at these clubs' situations at first base:

Baltimore - Despite his early hot streak, Ty Wigginton basically is a replacement level player, and Garret Atkins was straight-up horrible for the O's.  They need someone who is a solid, everyday 1B that can provide stability, but probably won't get one because that's what the O's do.  They've been rumored to be interested in Victor Martinez as a first baseman and occasional backup catcher to spell Matt Wieters, but I have no idea why Martinez would go to Baltimore, or why the O's would do that.  The last time they made a splash by adding a big name to a crappy roster was the Miguel Tejada signing.

Boston - Last year, the Red Sox were flush with players who could man first base, but not necessarily with players who typically manned first base.  Victor Martinez, Mike Lowell, and Adrian Beltre are free agents, and Adrian Gonzalez appears to be staying put in San Diego for the time being.  This means that the Sox have to fill one of the corner infield spots, since Kevin Youkilis can't play man both at once.  Prospect Lars Anderson made a cameo last year, but doesn't look ready.  If Beltre is re-signed, they are no longer a part of this market, but they're more likely to find a good deal amongst the flush first base market, and will be looking for an elite-level talent.

Tampa Bay - Tampa is letting Carlos Pena walk, and probably won't spend a ton of money on his replacement.  They could keep Dan Johnson to man the role, though his age is a concern and he spent a lot of last year at Triple-A.  They could also shift someone to first base, or even enter the market looking for a solid regular.

Toronto - Lyle Overbay had a poor 2010 season, and it appears that the Jays will be headed in another direction.  Toronto could go many routes here - Adam Lind could take some time at first, as could prospect J.P. Arencibia if they re-sign John Buck as their primary catcher.  I don't imagine the Jays making a big splash, but they could look for a bench type who can also play first base.

ChC - The Cubbies dealt Derrek Lee to Atlanta at the deadline, so Xavier Nady manned first for them for the remainder of the year, with limited success and a horrible .306 on-base percentage.  The Cubs might be players for one of the bigger names, and they've been linked repeatedly with Adam Dunn, which would be a nice pickup as long as they never allow him to see the outfield.

ChWS - Likely to re-sign Paul Konerko, and also a player for Dunn, though they would put Dunn at DH on most days, having Donkey man first only a couple times a week in order to keep Konerko fresh.

Texas - I imagine that they'll spend most of their off-season concentrated on Cliff Lee, as Mitch Moreland proved himself worthy of a look at the everyday gig in 2011.  If they're not completely comfortable with Moreland, they could try to find a backup-level bat who can man first as insurance.

Atlanta - Derrek Lee and Troy Glaus were both disappointing for the Braves, but top prospect Freddie Freeman will likely be handed the everyday job in 2011.

Washington - There is still some hope that they'll re-sign Dunn, but the Nats have also been repeatedly linked to Pena, who wouldn't require a four-year deal like Dunn would.

Milwaukee - If Milwaukee goes looking for a first baseman at some point this off-season, it means that they have already dealt Prince Fielder.

Pittsburgh - Possibly looking for someone to platoon with Garret Jones, who was ineffective in 2010 after a breakout 2009.  Won't be a big name, or even an everyday player.

Arizona - LaRoche appears to be gone, but what about Brandon Allen?  The kid is going to make a mere $400K and has showed glimpses of being impressive, though in short stints and with a fair share of concerns to go with the positives.

Colorado - Todd Helton isn't getting any younger, having just posted a career-low .111 ISO and a mere 0.4 FanGraphs WAR, and Jason Giambi is a bench-bat at this point in his career.  There aren't any big-time prospects at first in the system that I can think of off the top of my head, so I could see the Rockies signing an everyday bat there.

L.A. - Since James Loney is horrible, the Dodgers could look to upgrade at first base by non-tendering Loney and exploring the market.

San Francisco - A hard-to-classify part of this group.  It's assumed that they will re-sign Aubrey Huff to fill this role, though they could also put Huff in left field if a nice bat pops up for the taking.  I suppose they technically are players for one of the big names, but it seems so much like a foregone conclusion that they're going to get Huff and still could go after another first baseman.

 

So I'd divide the market into the following groups:

Definitely looking for a big name: Cubs, White Sox.

Could get into the big name market: Boston, Washington.

Looking for a solid regular: Arizona, Colorado.

Could look for a solid regular: Baltimore, Tampa Bay, Milwaukee, L.A., San Francisco.

Looking for a bench bat/platoon player: Atlanta, Toronto, Pittsburgh, Texas.

 

Now, let's divide which players could possibly fill those positions on the open market:

The Big Names: Adam Dunn, Paul Konerko, potentially Victor Martinez, and potentially Prince Fielder.

Potentially Solid Regulars: Lance Berkman, Carlos Pena, Derrek Lee, Nick Johnson, Russell Branyan, Adam LaRoche, potentially James Loney, and Lyle Overbay.

Bench Bats: Ty Wigginton, Jorge Cantu, Troy Glaus, Xavier Nady, and Casey Kotchman.

 

Removing the teams not looking for a regular, I have eleven teams either definitely or potentially looking for a first baseman, and twelve guys who could potentially fill those roles - a wide yet moderately balanced market.

However, if Boston re-signs Beltre, Baltimore is satisfied with retaining Wigginton, Tampa uses Johnson as a cost-effective solution for their hole, Milwaukee keeps Fielder, L.A. is satisfied with Loney, and San Fran plays Huff at first base instead of left field next year, you quickly remove five destinations for free agent first basemen.  Suddenly, you have an incredibly buyer-friendly market, with Dunn, Konerko, VMart, Berkman, Pena, Lee, Johnson, Branyan, LaRoche, and Overbay fighting for everyday roster spots on the two Chicago teams, Washington, Arizona, and Colorado.  That's ten players and five teams.

Further, Washington is strongly linked to Lee, and Konerko is widely believed to be headed back to the South Side Sox.  Supposing those two moves happen, Dunn is then likely headed to the Cubs, and Arizona and Colorado are left with seven everyday-caliber players to choose from.  In other words, if you're Adam LaRoche and one of those two teams offers you arbitration, you take that everyday job while you can still find it.

 

LaRoche's arbitration case:

This is where things start to get really interesting.  The broad term of "arbitration" really describes two things, the three or four years of team-controlled arbitration that every player goes through before reaching free agency, and free agent arbitration.

Team-controlled arbitration is designed to increase compensation, but not to adequately compensate a player based on his free-market value.  From what I understand, the statistical/age profiles of players entering their first year are compared to previous examples in a pseudo-British-legal-system fashion to determine first-year arbitration salary.  Then, performance after this first arbitration year determines the raise in salary that player will receive for the next season, with some, but typically little, regard to what that player has received previously.

If this were the system used to determine the arbitration case for LaRoche, we would certainly have an interesting case on our hands.  After all, even though LaRoche did just earn a $1.5MM buyout, he technically earned a salary of $4.5MM last year, so we could try, though we may not succeed, to start the negotiations at that point (though MLBTR's Tim Dierkes thought it would likely be $6MM).  Based on his performance (high-RBI, high-K, low-BA - because these, unfortunately, are the numbers arbitrators like), I'm not sure LaRoche would be in line for much of a raise.  We may not have wanted him at $6MM for this year, but perhaps $5-5.5MM would be more agreeable?

However, the free agent arbitration system doesn't necessarily work this way.  I e-mailed MLBTR's Tim Dierkes, who I've found is very adept at sorting through arbitration cases, to ask him about LaRoche's arbitration case.  Here are his thoughts:

"[I]t's the D'Backs vs. LaRoche's agent and neither side has to argue based on his '10 salary.  If LaRoche's agent can find some FA 1B with comparable numbers who got $10 mil, he can argue that.  Or he can be less aggressive and argue that LaRoche earned $6-7 mil the last few years and deserves a slight raise."

This, naturally, got me wondering what type of players LaRoche's agent, or even the D-backs, could look to as comparables.  Quickly perusing Baseball-Reference, I was slightly horrified to see LaRoche's most comparable batter to be none other than Adrian Gonzalez (I kid you not, look it up yourselves).  However, Gonzalez was a late-bloomer, while LaRoche has seen his production dip in the last year, so that is a very strained comparison.  I found the tenth name listed, fellow free agent Lyle Overbay, to be much more apt when comparing age-equivalent seasons.

While LaRoche saw his OPS+ dip from 122 to 106 from '09 to '10, Overbay's OPS+ plummeted from 125 to 85 from '06 to '07, Overbay's age-29 and age-30 seasons.  Nonetheless, Overbay subsequently earned $6.75MM in 2008, followed by $7.95MM in both 2009 and 2010 as part of a 4-year, $24MM deal signed before his torturous 2007 season (which included two arbitration years).  It's not a perfect comparison, particularly since Overbay's contract was signed before his down-year, but Overbay's career 111 OPS+ and general career path is quite similar to LaRoche's 114 career OPS+.

In addition, Overbay collected a mere 44 RBI in his "off-year," so LaRoche's party could argue that, in spite of LaRoche having an "off-year" in terms of BA and K's, that he still was highly productive in the RBI department, and thus ought to earn significantly more than Overbay's approximately $8MM salary going forward.  Granted, that's a very risky stance to take, but it's hard to believe that LaRoche couldn't at least match that number through the arbitration process.

 

Summing it all up:

Don't get me wrong, I'd love to be able to have another pick in the supplementary round next summer, but I just don't see it happening.  If you're the Jays and can acquire Miguel Olivo for some cash and a PTBNL, then yes, you do it because Olivo is a catcher, always a highly-sought commodity, and will be seeking a long-term deal.  The chances of Toronto getting a compensation pick from "losing" Olivo is quite high.

LaRoche, on the other hand, is entering a flooded market and would undoubtedly do everything he could to not enter that market if given the choice.  It's hard to imagine a situation where LaRoche wouldn't accept an offer of arbitration from the D-backs.  Suffice it to say that if the D-backs were not willing to take LaRoche back for another season at a mere $6MM, they certainly aren't going to want to see him back for $8MM or more.

 

Finally, thanks to Tim Dierkes for his response to my e-mail, and to B-R for being awesome as usual.

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