Salary Cap Basics – What is a Qualified Offer Sheet?

“The strategic initiatives of UFA, our clients’ real estate financing needs, are the primary focus of our work. “We believe strongly in the strategic management of UFA,” said John S. Pope, UFA’s chief operating officer. “I’m extremely excited to lead our brand marketing strategy and company growth, and enjoy doing it with a group of strong, talented people.” The healthy, low-risk cash position, low-debt service and strong cash position led the recent change in the outlook, the company said. “As the organization transitions to a more agile, externally focused and market-driven brand marketing strategy, we’re also looking at opportunities to enhance our relationship with our customers and strengthen our ability to partner with them,” Pope added.

UFA’s board of directors meets each spring for their annual meeting, which usually goes late into the night. At the end of the meeting, the board will determine its post-season financial goals and prepare a supplemental budget plan. Pope said that at this point in the year, UFA’s expenses, including rent and utilities, have stopped growing due to the low cap hit. He expects that revenue growth will begin to resume in the second half of the year.

The salary cap hit is important to UFA consultants because it indicates the amount of money that the league is willing to pay for a player based on his performance. Based on the NFL’s post-season rankings, every team’s qualifying offer is set at a certain level. When that level is reached, contracts become an option for players with those salaries. Players with qualifying offers (about one-third the league maximum) cannot be traded to other teams during the regular season or restricted free agency begins. In order to remain a qualified free agent, players must wait until their contract is finished and they have played one season in the league.

The cap hit is only the beginning of the salary-cap situation for UFA’s, however. Teams can make offers to restricted free agents, even after a player has received a qualifying offer. The salary-cap specialist for each team works to find the most effective deal for the player. Even when the offers are matched, a percentage of the offer amount is kept by the club for future considerations.

In addition, a qualifying offer sheet for a restricted free agent may be used to continue the existing relationship between a player and his original team while presenting a different picture of the future. For example, if a starting quarterback on a losing team is expected to develop into a Pro Bowl passer, a contract offer sheet can be made that shows the compensations to the new team if that change occurs. The two teams would enter into an agreement where the new team would pay the quarterback a salary that amounts to the difference between the offer sheet value of the restricted free agent and the actual player’s market value. That new contract offer could then be presented to the restricted free agent. If he agrees, he becomes a free agent and can sign with any other team.

There are two main rules for using a qualified offer sheet in this manner. One, you must have made at least one offer to a player prior to using the qualifying offer sheet. Two, you must not submit a contract offer to another team before you receive written notice from the other team that they have accepted your offer sheet if it is a qualifying offer. That means that if the other team makes a counter-offer and you accept, there must be a pre-determined period of time where you can accept the new offer sheet if it is better than the original offer.

Because UFA’s are often the highest paid players on a losing team, their contracts often carry the largest share of the team salary. Because of this, the earning potential of these top players is tremendous. As such many teams choose to keep them, even when other offers become available. For this reason, some UFA’s are often left unprotected in trades.

But perhaps the most important rule in all of UFA negotiation is that there must first be a First refusal. Once a team has made a firm offer to a restricted free agent, he must block the deal before it becomes binding. The entire point of using an offer sheet is to allow a player to have a contract offer accepted if he doesn’t have one. While a team can make an offer, there must be a First refusal, followed by a Second refusal, followed by a Third refusal, and so on. If a player blocks all four offers, he becomes a restricted free agent, and his market value drops to that of a first round draft pick. As such, if he’s unable to sign an offer sheet when his contract expires, he becomes a restricted player with no option to sign a new contract.