As they head into the 2018 NFL draft, the Miami Dolphins have multiple holes in their roster to fill: backup quarterback, running back (in spite of the Frank Gore signing), starting tight end, third linebacker, starting defensive tackle, and possibly others (depending on one’s view of the current players at positions such as starting quarterback and free safety).
At the same time, the Dolphins’ draft position (pick 11 overall) ensures that there will be high-quality likely starters available at every position, with the possible exception of starting quarterback. How should the Dolphins use their first pick to provide maximum value to the team?
Well, there’s a simple and reliable way to compare the values of draft candidates at different positions: replacement cost. Put simply, the value of a player is what it would cost to sign an equivalent player as a free agent.
To understand why, consider the situation of the Dolphins’ GM. The team is under a “salary cap” rule that puts a strict limit on how much the team may spend on players. The GM’s goal is therefore to acquire the best possible players for the team within that budget. Most of those players will be acquired on the open market, as free agents, at a price determined by the market. But every year, the team gets seven coupons, each of which allows the team to acquire a single player from a separate pool (draft-eligible college players) at a hugely discounted price for the following four years.
What’s the best way for our GM to use those coupons? Clearly, the optimal strategy is to maximize the discount they generate—that is, to acquire players whose total cost on the free agent market would be as high as possible. Every additional dollar saved this way, after all, is a dollar that can be spent on acquiring better free agents to play alongside the draftees.
This method explains why quarterbacks are drafted so early: given the high price of quarterbacks on the free agent market, drafting a starting quarterback provides the maximum savings compared to the replacement cost of signing an equivalent free agent. Place kickers, on the other hand, make less than just about any other position, so their replacement cost is very low, and drafting them provides very little value.
For other positions, the message is very clear: “high-value” positions—those that command top salaries—have higher replacement costs than low-value ones, and therefore should be preferred in the draft. Top defensive linemen, for instance, earn over $17 million a year these days, whereas the top tight end makes about $11 million, the top strong safety less than $10 million, and the top running back less than $9 million. So based on replacement cost, a team that has needs both on the defensive line and at running back would benefit about as much financially by drafting a fairly average starting D-lineman as by drafting an all-pro running back.
Things get a bit trickier when factoring in team needs. For example, drafting two top quarterbacks may save a huge dollar amount compared to signing free-agent equivalents, but since only one can play at a time, much of the savings from the second pick would be wasted on a backup. A couple of rules can help:
The other positions of need simply don’t meet the replacement cost test. Top linebackers, running backs and backup quarterbacks don’t cost nearly as much on the free agent market as top defensive tackles do. Free safeties cost almost as much, but since the Dolphins already have two highly-paid safeties under guaranteed contract, the savings from drafting a third one would be greatly reduced.
Another intriguing option involves high-value positions such as cornerback and left tackle where the Dolphins have starters on rookie contracts. If the team believes that it can obtain a high-value prospect at pick 11 at one of those positions, and recoup the current starter’s replacement cost via trade, then that option is worth consideration. Of course, the big “if” makes this option somewhat riskier than the defensive tackle route.
What about trading back? The “replacement cost” method can help there, as well. We could calculate the average savings on replacement cost obtained by every pick in the draft, using, say, the last five or ten years’ worth of draft data, and estimating the savings accrued for each draftee per year as the fifth-year salary of that draftee. We could thus come up with a definitive answer to the question, “how much is a given draft pick worth to a team?”, and use it to compare values of picks for trading purposes. A selection of lower picks that results in an overall equal or greater savings in replacement cost would be a good trade, while one that reduces the total savings would be a bad one.
The writer of this "Voice of the Fan" story goes by Football Noob. Follow him on Twitter: @PhinsNoob
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