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The Impacts Of The Designated Player Exception

Mark D. Smith - USA TODAY Sports

The Veteran DPE is the largest contract in NBA history. How will it affect the landscape of the league?

Shortly before this past Christmas, the NBA owners and Players Association came to terms on a new collective bargaining agreement (CBA) starting in the 2017-18 season. As with the CBA preceding it, some of its biggest changes have come in response to a momentous free agency decision the season before.

The 2011 CBA came shortly after the creation of Miami’s Big 3, and responded to it by increasing luxury tax penalties and revenue-sharing to help level the playing field. Similarly to its 2011 predecessor, a significant provision was included in the new CBA in response to Kevin Durant‘s decision to leave for Golden State.

The league created a Designated Veteran Player Exception (DPE) or what had become known as a “Super Max,” to help teams hold on to their superstars. While earlier CBAs have helped teams keep their core intact, none have gone as far as the DPE has. There has been confusion over the past six months over who is eligible to sign a DPE and what it means for those teams and players, but hopefully this will help answer some of those vital questions.

What Does a Veteran DPE Entail?

The DPE does have some small impacts for players coming off of their rookie contracts, but the effects it has on veteran players are far more important. This veteran DPE is a long-term contract only available to teams trying to retain their own star players.

Teams can either add a DPE-extension onto an eligible player’s current deal or offer them a DPE contract on its own if that player is entering free agency. The DPE allows teams to offer far more money than other suitors in an attempt to give them an advantage in negotiations, and to reward the best players with a contract more resembling their true value.

If a player is eligible to sign a DPE, they could be offered a five-year deal worth between 30-35% of the team’s salary cap. With this season’s cap announced at $99 million, a player who signs a DPE this summer would make between $29.7 and $34.7 million in the first season alone. With an automatic 8% annual raise factored in, the total deal would be worth nearly $200 million.Image title

Brad Penner - USA TODAY Sports

Who Is Eligible to Sign a DPE?

Because a DPE represents such a substantial chunk of a team’s salary cap, only the true stars of the league can sign one. To be eligible, a player must be entering their eighth or ninth season in the league with either the team that drafted them or, if they were traded within their first four seasons, with the team they were sent to in that deal.

So, while Jimmy Butler and DeMarcus Cousins may have met all the other requirements, their trades to Minnesota and New Orleans respectively, have made them ineligible. On the other side, James Harden would still be eligible since his trade from Oklahoma City to Houston occurred before his fourth season in the league.

If a player meets those basic guidelines, they must also meet one of the following criteria:

  1. Won the MVP award in one of the three previous seasons

  2. Won the Defensive Player of the Year (DPOY) award in either the previous season or in two of the three preceding seasons

  3. Made one of the three All-NBA teams the previous year or one of the three teams in two of the three preceding years

Those may seem like very strict criteria, but they’re that way on purpose. The DPE is supposed to be an elite-level contract, so only a handful of players will be eligible every year.

The MVP is the most straightforward, with Stephen Curry and Russell Westbrook the only two winners over the past three seasons. Curry is entering his ninth season with the franchise that drafted him, and he will be one of the first players to sign a DPE this summer. Westbrook still has a year and a player option left on the deal he signed last summer, but OKC could sign him to a DPE-extension if they come to an agreement.

Two-time DPOY Kawhi Leonard would still be eligible since his trade to San Antonio occurred before his rookie year, but he is entering just his seventh season. Similarly, 2017 DPOY Draymond Green would be eligible but is entering only his sixth season. While both players have to wait at least one more season to be eligible, both will very like maintain the requirements and be offered a DPE when their time comes.

The final All-NBA criteria is a little more complicated. Five players meet that requirement and are age-eligible including both Curry and Westbrook again, but also including James Harden, John Wall, and DeMar DeRozan.

Outside of Curry and Westbrook, none of the other three look particularly likely to sign a DPE this summer. Wall has two more years on his deal and probably wouldn’t consider signing a DPE-extension until next summer. Both Harden and DeRozan are entering their final season of DPE-eligibility, but both have multiple years left on their current deals. At this point, it seems pretty unlikely that Toronto or Houston decide to offer their stars a contract that would run all the way through 2024.

Does It Help Anyone Other Than the Players?

CBA negotiations are a difficult, two-sided arbitration process and you can be assured that a $200 million contract wouldn’t exist if it only helped the players. This is where that theoretical Durant example comes back in. Had OKC had the option of a DPE last summer, they would have been able to offer Durant at least $50 million more than Golden State or any other team would have been able to.

I’m pretty skeptical that money was a significant influence on Durant’s decision, but he is an atypical case. If a player like Wall or DeRozan were offered an extra $50 or $75 million, it would be very hard for them to turn that money down. In some cases, having the DPE to offer that free agent could be the difference between them leaving and them deciding to re-sign.

Is Anyone Hurt by the DPE?

On a small scale, role players may feel it a bit in their bank accounts. If one player is making more, that means everyone down the line will make a little less; but in most cases it won’t be that significant. The contracts those mid-level players are signing now are worth five times what they would have been a decade ago, so that slight decrease won’t be all that impactful the majority of the time.

Where a DPE can be truly harmful is when a team chooses not to offer it to their star player. As great an advantage as that extra $50 million can be when negotiating, it can be even more damaging if you don’t. If a player knows you aren’t offering them everything you can, they may very well take that personally and decide to go somewhere else.

That may seem like a hypothetical, but the Kings were worried about that exact situation playing out with DeMarcus Cousins. Cousins would have been eligible for a DPE this summer had he not been traded to New Orleans, but Sacramento was reportedly hesitant to offer him such a massive deal. If the Kings were worried he might leave for nothing if they chose not to offer him a DPE, that may very well have been the driving force behind choosing to trade him in February.

Image title

Cary Edmondson - USA TODAY Sports

So What Can We Expect Going Forward?

It really is hard to say. In the most simple of cases, a player like Curry will be offered a much deserved DPE and sign it quickly; but many others will be more complex.

Once Gordon Hayward missed out on All-NBA this season, it meant Utah wouldn’t be able to offer him a DPE. We don’t yet know if Hayward will leave the Jazz this summer, but if he does, that may be the ultimate reason. If Paul George makes All-NBA next summer, is that extra money enough to convince him to stay in Indiana? These huge decisions will keep popping up and how players answer them will shape the landscape for years to come.

In a possible one-of-a-kind situation, the Warriors will have to choose which of their own players to offer a DPE to. Each team is only allowed to sign two of their players to a DPE and with Curry taking the first one, Golden State will likely have to choose between Draymond and Klay Thompson for the second.

In all likelihood, they choose Draymond, but that could be a real dilemma for the Warriors’ front office. If they do choose Draymond, maybe Klay takes that personally and decides to leave Golden State. Personally, Klay has always struck me as a guy just happy to be living his life and not particularly worried about anyone else, so maybe that won’t bother him; but, if it does, the DPE could become the impetus for the Warriors’ core breaking up over the coming years.

The thing about the DPE, however, is that it will have different effects on every player and situation. It may keep some from joining a super team to stay home for more money, while others decide that winning is worth more than the extra money. There will be unforeseen ways the DPE effects the free agency landscape over the coming years, and we will just have to wait and see how the excitement plays out.

Edited by Emily Berman, Coleman Gray.

Which player was paid the most during the 2016-2017 NBA season?
Created 6/28/17
  1. Mike Conley
  2. Al Horford
  3. LeBron James
  4. Kevin Durant

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