Posted by David Golebiewski on Saturday, March 6, 2010 at 8:27 pm

Back in late October, ESPN’s Buster Olney reported that some Major League Baseball executives predicted a “flood” of non-tenders during the offseason. Said Olney:

Executives say many of the names being discussed by teams as possible trade bait include a growing number of players with three to five-plus years of service time — players who are eligible for arbitration. This is widely being read as a precursor to a wave of players in that group not being tendered contracts before the Dec. 12 deadline. “I think the market will get flooded with non-tenders,” opined a veteran executive.

A club holds a player’s rights for the first six years of major league service time. During the first three years, a player makes scarcely more than the major league minimum ($400,000 in 2009). Some players qualify for “Super Two” status: these are players who have between two and three years of big league service time, logged at least 86 days on the active roster the previous year and rank in the top 17 percent in service time among players meeting those criteria. These players are eligible for arbitration four times, instead of three.

Aside from “Super Twos,” players with more than three but less than six years of major league service time are eligible for arbitration. While salaries begin to escalate in arbitration, it has generally been held that players still make significantly less through the process than if all teams could bid on their services through free agency.

However, Olney’s article suggested that perhaps MLB executives felt that this was no longer the case, and that we could see a large number of teams choosing to “non-tender” players. Instead of going to arbitration, clubs might more frequently choose to cut players loose by not offering a contract for the 2010 season.

The non-tender flood was more like a trickle. According to non-tender lists provided by MLB.com and The Sporting News, there were 43 players not offered contracts for the 2008 season, 42 for 2009 and 39 for 2010. Of those 39 who were non-tendered this past offseason, nine ( Scott Olsen, Mark Worrell, Jonny Gomes, Mark DiFelice, Raul Chavez, Adam Miller, Anthony Reyes, Jack Cust and Ryan Langerhans) re-signed with their original teams.

Judging by those figures, MLB teams didn’t start treating salary arbitration differently over the winter. The vast majority of players eligible for arbitration were still tendered contracts for the 2010 season.

As mentioned earlier, arbitration-eligible players are considered to be better values than free agents. Generally speaking, players are thought to earn about 40 percent of their free agent value during the first year of arbitration, 60 percent during the second year and 80 percent in the final year before free agency.

So, how much of a bargain were arbitration-eligible players this offseason? Did the 40/60/80 concept hold true, or not?

In an attempt to answer those questions, I rounded up service time numbers and 2010 salaries for arbitration-eligible players from The Biz of Baseball website. Then, I compiled projected Wins Above Replacement (WAR) totals for those players, based on Sean Smith’s CHONE system.

One Win Above Replacement (WAR) costs between $4-5 million on the free agent market (a number that seemed to hold true over the winter). For the purposes of this study, I used a $4.5 million/free agent WAR figure. Using the 40/60/80 idea for arbitration-eligible players, a first-time arbitration-eligible player would earn $1.8 million/WAR (40 percent of his free agent value), a second-time player $2.7 million/WAR (60 percent) and a third-time player $3.6 million/WAR (80 percent).

With CHONE’s 2010 WAR projections and the actual salaries of arbitration-eligible players, we can get a feel for what arbitration-eligibles earn compared to what they would likely pull in if they were free to sign with any team.

First, the “Super Twos.” These are the first-time arbitration-eligible players who will qualify for arbitration four times prior to free agency, instead of three:

“CHONE WAR” is the player’s projected WAR total for the 2010 season. “FA $” is what the player’s WAR total would be worth on the free agent market (using a $4.5M/WAR figure). “Ex. Arb $” is  is what the player would be expected to earn, based on the 40 first-year/60 second-year/80 third-year system. “Act. $” is the player’s actual salary for the 2010 season. “Pct. of FA $ Earned” is the percentage of free agent dollars earned by the player through arbitration.

For instance, Matt Albers is projected to post 0.3 WAR. That would be worth $1.35 million in free agency. But Albers is a “Super Two,” meaning he’s a first-time arbitration-eligible player. His expected arbitration salary is 40 percent of his $1.35 million free agent value, so his “Ex. Arb $” is $540,000. Albers actually made $680,000, though, which is about 50 percent of his free agent value.

One important note: while Tim Lincecum (two years, $18 million) and Nick Masset (two years, $2.58 million) signed multi-year deals, I only included their salaries for the upcoming season. I’m trying to make an apples-to-apples comparison, so I’m interested in what players make during that first year of arbitration eligibility.

Overall, “Super Twos” (with more than two but less than three years of MLB service time) earn just 24 percent of their free agent value, a far cry from the expected 40 percent figure for first-time arbitration-eligibles.

Here’s the list of non-”Super Twos” who qualified for arbitration after three years of MLB service time. These are also first-time arbitration-eligible players. They’ll qualify for arbitration three times before hitting free agency:

As was the case with the “Super Two” list, I only included salary figures for this upcoming season. Chris Ianetta, for example, inked a three-year, $8.3 million contract. But I want to know what he was valued at during his first year of arbitration. The Rockies backstop will make $1.75 million in 2010, so that’s the number I use here (this will also be the same for guys who signed long-term deals on the lists to come-Justin Verlander, Felix Hernandez, etc.).

Players eligible for arbitration for the first time after accruing three years of MLB service time reeled in 29 percent of their free agent value, significantly below that established 40 percent mark.

And now, the second-year arbitration eligibles:

Players eligible for arbitration the second time earned 49 percent of their free agent value, again south of the commonly accepted 60 percent number.

Here are the players going through arbitration one last time before qualifying for free agency:

Third-year arbitration eligibles earned 68 percent of their free agent value, once again lower than the accepted benchmark (80 percent).

To recap, here’s what arbitration-eligible players are earning in 2010, compared to what their projected WAR totals would earn them on the free agent market:

This isn’t a be-all, end-all look at arbitration salaries. But it certainly doesn’t appear as though arbitration-eligible players have become less cost-efficient. If anything, teams might get more bang for their buck than we thought.