How Do The Denver Broncos Manage The Salary Cap So Well?

Mandatory Credit: Christopher Hanewinckel-USA TODAY Sports

By now everyone knows how aggressive the Denver Broncos were in the offseason. They signed four big name free agents in T.J. Ward, Aqib Talib, DeMarcus Ware and Emmanuel Sanders. While all of those moves would seem to bring a positive response from Broncos’ fans, there are still many that believe that General Manager John Elway has mortgaged the future. It’s simply not true and if you don’t believe me, how about a sports agent.

Joel Corry wrote an article for www.cbssports.com; CBS: Agent’s Take: How your team structures deals — and why it matters http://cbsprt.co/1uLixN6.

In the article, Corry discusses the salary cap and the different ways to manage it. He also takes a look at the cap situation for each team and how they deal with the salary cap. In a nutshell, Corry is very high on how Elway and the Broncos approach both the way they structure deals, and how they manage the cap.

You can read the article and draw your own conclusions but one quote that stood out was; “The Broncos structure contracts with modest signing bonuses, and conditional guarantees that allow them to exit their deals.”

In simple terms, the Broncos are paying as they go and have almost zero risk if any of the four players mentioned above do not work out, for whatever reason. How do they do that in a league that is notorious for buying now and worrying about the bill later?

When a player becomes a free agent, the only money they truly care about is the guaranteed portion of the deal. Most teams spread that dollar amount over the life of the contract even though the player receives a majority of it in a signing bonus upon signing the deal. That seems like good business but teams get into trouble when, for whatever reason, the player doesn’t work out and doesn’t play out the life of the contract.

When a team is then forced to release that player, the guaranteed money that has all ready been paid comes back to bite the team. Basically what happens is any money that was spread out over the life of the contract gets accelerated into the season of the player’s release. That’s when teams get into salary cap trouble because even though they are not actually paying out real money, it is still counting against the salary cap. This is known as dead money (money being paid to a player who is no longer on the team.)

Dead money can set a team back for years and there’s nothing they can do about it till it comes off the books. The Oakland Raiders, for example, were operating over the past few years with only about 75% of their salary cap available because of dead money, and we all know how bad the Raiders have been.

So why is what the Broncos have done different? It’s actually quite simple and brilliant when you really sit down and examine the free agent deals that the Broncos handed out this season. Each deal is obviously different but there are similarities that show just how smart Elway and his staff are.

The Broncos offer guaranteed money just like every other team in the NFL, but how they structure it is much different. They pay a majority, if not all, of the guaranteed money in the first season. That means the Broncos can get out of the contract at any time after that first season with little to no dead money.

Elway is fond of saying, “It’s not win now, it’s win from now on” and the structure of these deals backs up those words. If, any of the players who signed this year fail to live up to expectations, the Broncos can get out of the deal and still have that money available to address that specific position.

The other myth coming out of the Broncos free agent shopping spree is the belief that they got older as a team. I understand why people think that because 95% of the time teams do get older via free agency, but again the Broncos are different. With the exception of Ware, the Broncos got younger and all four of the free agents signed deals of three years or more.

The Broncos did not sign older guys with the hope of getting a year or two out of them; they signed players in the prime of their careers who are projected to be a big part of the team’s nucleus going forward.

The concern among Broncos’ fans about mortgaging future is understandable because that’s usually what happens. However as Corry pointed out and hopefully we were able to expound on, the Broncos approach is fiscally responsible while allowing them to be competitive today and tomorrow.

A special thanks to Troy Miller, @TheTroyMiller who turned me onto the Corry article.