Last Wednesday the Timberwolves and Nikola Pekovic agreed to a 5-year contract worth $60 million, with some incentive clauses that could be worth up to an additional $8 million. The amount or length of the contract was not especially surprising, nor was it surprising “Pek” stuck with Minnesota.
What was surprising, however, was the interest, or lack thereof, around the NBA. Pekovic was a restricted free agent, which like regular free agency means that every NBA team has the right to make an offer to Pekovic. The “restricted” part of the equation means that despite what Pekovic might want, the Timberwolves have the right to match any contract offer that is made, and thereby retain the Monster from Montenegro.
You might think then, that opposing teams have multiple motivations in making an offer to Pekovic. Not only might they have the opportunity to add him to their roster, but also even if they don’t, they can ensure the Timberwolves, a competing team, pays a premium. So why didn’t anyone post an offer to Pek this time around?
Pekovic is a valuable NBA commodity. His size, age, and production make him a piece that would be a fit for most teams. At 27, Pek has steadily improved as his minutes have increased each of his years in the NBA. This past season, his best to date, he averaged around 16 and 9, and posted an impressive 20.26 PER. His per 36 minute stats have him averaging a full double-double at 18 and 10 (This is a rarer skill than is typically acknowledged. Last season, just 8 players were in double figures in rebounds and just 7 of those guys averaged double figures in points..
Perhaps even more puzzling is that teams seem to be playing this game more and more in recent history. The Rockets did it twice last season with both Omer Asik and Jeremy Lin. It was widely believed that the Bulls and the Knicks would match offers to their respective players, but the Rockets stepped in anyway, believing that the situation was a win-win. They could add valuable pieces, or make sure their competitors paid a premium to keep theirs. In their case, they nabbed both players.
But a few years back now, the Mavs offered a less proven Marcin Gortat a 5-year deal worth $34 million that Orlando, coming off a deep title run, decided to match. A few short years and a bunch of bad Otis Smith decisions later, the Magic were in serious salary cap trouble, from which they are still recovering. Both the Rockets and the Mavs were winners.
Moreover, the Timberwolves didn’t wind up paying an exorbitant price. Tiago Splitter, a year older and with a similar per 36 minute line of 15 and 9, received a new contract averaging $9 million/year. Tyson Chandler, at the age of 28, inked a deal worth around $14 million/year. As they say in real estate, the comps are about right. So we ask again: what happened with Pekovic?
The restricted free agency game, in general, is an interesting one. In this particular game, Team X moves first and can either decline to make an offer to the player or make any offer from the league minimum up to the league maximum. If there is no offer then typical contract negotiations can begin.
But if there is, then the Timberwolves get to “move” and they can either match or not match Team X’s offer. What’s helpful for analyzing the case further is a look at the potential payoffs for each team in every possible scenario:
Scenario 1: No offer from team X.
This is the best case scenario for the Timberwolves. They get Pekovic minus the cost of his contract. But since no other team drove up the offer, they can offer Pekovic a less valuable contract than they might have otherwise. Team X receives zero.
Represent the Timberwolves payoff for Scenario 1 with the equation: P – c.
Scenario 2: Team X makes an offer and the Timberwolves do not match.
Here the best case scenario depends upon the final contract.
Payoff for the Timberwolves: $ saved – P
Payoff for the Team X: P – C; where C > c
Scenario 3: Team X makes an offer and the Timberwolves match.
This is probably the most interesting scenario as several things come into play. Team X has driven up the cost of the contract, but not so much as to force the Timberwolves to judge that it is no longer worthwhile to match the offer.
It also introduces a new element to our equations: dollars tied up. After team X makes their offer, the Timberwolves have 72 hours to decide whether or not to match. This, presumably, will impact how team X will go about the rest of its free agency business.
Payoff for Timberwolves: P – C
Payoff for team X: $ tied up - Higher cost to T’Wolves
Now, we know the result. We know no other team made Pekovic an offer. Consider just Team X’s possible payoffs:
P – C
$ tied up – higher cost to Wolves.
If we assume teams are acting rationally (not necessarily always a safe assumption, but anyway…), then we should conclude that zero was a higher payoff for Team X. How can this be? There are at least two plausible explanations:
First, the Timberwolves played some games of their own, making it very public that they would match “any” offer to Pekovic. We all know this is unlikely to mean “any” offer, but we might interpret that as any reasonable, or even slightly higher offer to Pekovic. Which means that in order for Team X to be successful, they would have to overpay Pekovic. Overpaid players mean, in these terms, that their contributions to wins are not worth the dollars spent on them. Thereby producing a negative value in the equation P – C.
But why did teams believe that the Timberwolves were being sincere? As we’ve noted above, the Knicks and Bulls played similar games last year. We can’t know for sure and no doubt that the Timberwolves relatively good salary cap situation was a factor, but we might also infer something about the credibility of new team president Flip Saunders. Saunders has been around the league for a while now and made several stops along the way. Do rival execs know that Saunders really means what he says and not to test him? It’s something to watch for going forward.
Second, we might be undervaluing how important it is for teams not to have money dangling or in limbo. Free agency can move quickly, and if a team can’t, in good faith, negotiate with other targets because they are waiting for up to 3 days to find out if an offer is matched, those targets move on. We can at least infer that this cost is higher than the benefit of driving up the cost on the Timberwolves, as we know that this equation too must come out to less than zero.
We’ll never know the whole story behind why Pekovic remained un-courted for well over a month. But trying to figure out can give us some pretty interesting theories.
By: Matt Chick