Free Agent Compensation System Is Unfair To The Pirates

Over at OnlyBucs, WTM notes this post at MLB Trade Rumors, which lists the players in Baseball America's current Top 100 Prospects list who were drafted as compensatory picks for free agents. It's an impressive list, including the Royals' Mike Montgomery, the Blue Jays' Kyle Drabek, and Angels mega-prospect Mike Trout.

There are a number of unfair things about this system. WTM is of the opinion that teams are compensated for the departures of free agents primarily as a way of keeping salaries down, rather than as rewards for teams who develop talent. (We saw this a couple years ago, when guys like Juan Cruz and Orlando Hudson had a hard time signing as free agents because doing so would cause the teams who signed them to forfeit draft picks.)

Also, teams like the Pirates who are out of playoff races typically trade good impending free agents anyway, and thus don't receive draft pick compensation for them. We saw this with Jason Bay, as the Pirates preferred to take a package of talent from the Dodgers and Red Sox rather than holding onto Bay for a year and collecting picks. (That decision didn't work out so well, but trading him was certainly defensible at the time.) In 2006, the Pirates elected to ship Roberto Hernandez (and Oliver Perez) to the Mets for Xavier Nady, and Hernandez ended up being named a Type A free agent, which meant the Mets were awarded the 42nd and 77th overall picks in the 2007 draft.

Of course, the Pirates themselves had picked up Hernandez as a free agent before the 2006 season, so maybe they didn't really deserve those picks anyway. Ideally, as Tim Williams points out in the OnlyBucs thread, teams should be compensated for free agent departures when the free agents are players they developed themselves but can no longer afford. The Rays' loss of Carl Crawford is a good example.

But looking back at the list on MLB Trade Rumors, many, many, compensatory picks are awarded for players who were signed as free agents in the first place, or for players who were acquired in trades to help contenders down the stretch. For example, the Angels got the pick they used to select Trout when they lost Mark Teixeira to the Yankees, but Teixeira was only with them for 54 games. The Royals got the pick they used to select Montgomery when they lost David Riske, who had signed with them as a free agent the year before. The Rangers got the pick they used to select Tanner Scheppers when they lost Milton Bradley, who likewise was a free agent who had only been with them for a year.

Why should teams be compensated in situations like these? When they are, the system awards teams who have the money to sign good free agents (or free agents who are relievers, as Elias' ridiculous method of determining free agent types considers good relievers to be just as worthy of draft pick compensation as, say, star first basemen or starting pitchers). It also awards teams who accumulate veteran talent for stretch runs. In other words, teams like the Yankees and Red Sox are consistently awarded more draft picks, while lowly teams like the Pirates - the Royals' compensation for David Riske aside - rarely are.

In fact, I can't find a single example of the Pirates getting an extra pick as a result of this system. I couldn't remember any, and I went back through the last decade of drafts to be sure. (2009 pick Victor Black was a supplemental first-round pick, but that was for failing to sign Scheppers as a draft pick in 2008, not for the loss of a free agent.)

Whenever the Bucs have a halfway decent impending free agent, they trade him. They must usually believe that they can get better value on the trade market than they would later, in the draft, and for the most part, I think they're right, since they usually get players who have climbed at least a few rungs of the minor-league ladder. But in the meantime, teams like the Red Sox, who this year will have four picks before the Pirates pick for the second time, keep racking up draft picks. It's true that this system occasionally rewards a team like the Rays for developing their own talent and sticking with it, but at this point, it seems like the Pirates shouldn't have such a disadvantage in the draft compared to a team that has been successful for the past few years. And anyway, it's way out of proportion - the Rays will have ten draft picks this year before the Pirates get to pick for the second time, and some of those picks compensate the Rays for the losses of nearly-irrelevant players like Brad Hawpe and Randy Choate.

There are certainly cases where the Pirates should have been gaming the system a bit. For example, I know Nady turned out to be a nifty acquisition for the Bucs, in that he later got them Jose Tabata, but at the time, the Pirates really should have been thinking about Hernandez's potential Type A free agent status. The Pirates under Littlefield could not have cared less about the draft, and therefore it's no surprise that he never, ever got a compensation pick for anyone. But Neal Huntington does care about the draft, and he has never gotten a pick for a free agent either.

It's a silly system, and hopefully the next Collective Bargaining Agreement will do away with or change it. One potential fix would be to have teams be awarded with picks only when the departing free agents signed with them as amateurs. Or, even better, when a player becomes a free agent for the first time (that is, when he has six years of MLB service) and is designated Type A or Type B, the team that player spent the most time with, rather than the team who had him last, would get picks. That way, the Pirates could trade a player like Bay without the Red Sox vulturing picks from them.