The Qualifying Offer (QO) has been in place since the 2012-2013 offseason after the Type A, Type B player system was thrown out. Under the new rules, a team can extend any of their impending free agents a QO, which is a one-year contract that, if accepted, would pay that player the average of the top 125 player salaries from the previous season.
While any player who's about to enter free agency is technically eligible for a QO, teams generally only extend them to those who are likely to net long-term deals with significant money committed.
The QO has generally served its intended purpose, but there have been unintended consequences to pop up, which will likely be addressed after the current CBA expires (after this season). Below is an explanation of the pros and cons of the QO, and why it's days are likely numbered.
Here's what they got right
The main reason behind the QO was to prevent big market teams with huge pockets from signing all the talent they could get their hands on. While a team could theoretically part with their first five ( or however many) picks in order to secure the best players on the market, with the increased importance placed on prospects these days, there are few examples of that happening.
The most recent case would be the 2013 Yankees. They signed three players (Jacoby Ellsbury, Brian McCann, and Carlos Beltran) who all had a QO attached. Fortunately for New York, they also tagged three of their own free agents with QO's (Hiroki Kuroda, Curtis Granderson, and Robinson Cano) which allowed them to offset the penalty for signing the players mentioned above.
However for the most part, teams have refrained from doing what the Yankees did in the 2013 offseason. In this sense, the QO has worked as it was intended to. While the big market teams can still afford to sign players that teams like the A's, Rays, and Twins cannot, the teams that are losing those free agents accrue a number of draft picks; which allows them to restock their system with talent they can afford.
But there was an unintended problem
The worst thing about the QO, and the reason it will likely be thrown out after this CBA expires is that it has hurt players.
In the 2013-2014 offseason, many players were tagged with a QO, but two players in particular had enormous difficulty landing a contract; in fact, they didn't until months after the season started. Both Stephen Drew and Kendrys Morales had good 2013 seasons, but because they were attached to a QO, teams were unwilling to give up a draft pick to sign either player.
While giving up a first round pick for either player is a tough pill to swallow, the point behind the QO's creation was not meant to hurt a players' chances of signing a major league contract. Drew was a valuable player in 2013, posting an fWAR of 3.4, yet he had to miss all of spring training, as well as all of April, and most of May.
As for Morales, he hit 23 home runs for the Mariners in 2013, and posted a slash line of .277/.336/.449 with a wOBA of .339, and a wRC+ of 119. Yet, because of the QO, he had to sit out until June 8th of the 2014 season.
At the time, Scott Boras had this to say about what baseball had done to both of his clients.
"Like any players, they want to play baseball. But they're also looking at the long-term aspect of their careers. This system has placed them not in free agency, but it's placed them in a jail."
There have been even more examples this year. As of this writing, Yovani Gallardo, Ian Desmond, and Dexter Fowler are all available; although Fowler's lack of a team might have more to do with the abundance of outfielders this offseason than the QO. However for Gallardo and Desmond, it's absolutely ludicrous that they don't have a new team.
Since 2009, Gallardo has thrown at least 180 innings, and posted an fWAR of at least 2.0. He's about to turn 30, and while he likely won't get a five-year deal at this point, it's hard to argue he doesn't deserve one. He's not an ace, and he won't turn a pretender into a contender, but for a team that needs that one final push, Gallardo is the perfect pitcher.
Desmond is another player who should already be signed. Yes he had a down year in 2015, but after the All-Star break, Desmond hit .262/.331/.446 with a wOBA of .337 and a wRC+ of 113. He was once again an above average hitter, and with an uninspiring group of two shortstops entering the next two free agent classes.
Last season, only three teams posted an above average wRC+ at shortstop, and many of those who didn't have yet to address their shortcomings. The White Sox no longer have the offensive blackhole that Alexei Ramirez was in 2015, but Tyler Saladino is currently listed as Chicago's starter at shortstop heading into next season, and he has yet to prove himself.
The Diamondbacks, who are trying to make the playoffs this year, and punted most of their farm system in the process, have little, if any reason not to keep pushing. Despite a core of Zack Greinke, Patrick Corbin, Shelby Miller, Paul Goldschmidt, and AJ Pollock, Arizona still has a number of question marks surrounding their team.
Their GM, Dave Stewart, deliberately traded for Jean Segura, who he expects to produce offensively; despite never being an above average hitter. Their middle infield consists of Segura, Nick Ahmed, and Chris Owings, none of whom are projected for an above average wRC+. They're also planning to rely on Brandon Drury and Jake Lamb at third, both of whom are top prospects in Arizona's organization, but who have yet to prove that they're MLB regulars.
Howie Kendrick also suffered at the hands of the QO, as he wound up having to settle for a two year-deal valued at $20 million. In retrospect, he should have taken the Dodgers initial offer, but as a 32-year old-second baseman, his desire was to sign a multi-year deal. Instead, he had to take a two year contract far below market value. He'll re-enter free agency heading into his age-34 season, and the chances of him striking it big will likely be non-existent. Kendrick wasn't even close to being the best offensive option on the market this offseason, but for a valuable player who's been an above average hitter for nearly his entire career, it's disturbing to see him unable to land a deal for at least three-years.
And here's why the QO will never last
Without the QO, Gallardo and Desmond would have new teams by now, and Kendrick would likely have much more spending money in his bank account; and while the QO has generally served its purpose, it's deplorable that this rule is punishing players for wanting to enter free agency. The idea that a team should be compensated for losing a significant player on the open market is sound, but the QO should not dissuade a player from entering the market.
While a one-year deal worth $15.8 million is a life changing amount of money, it still represents a huge risk for a player. A long-term commitment is always the preferred route, as it provides security for their future. The thought behind the creation behind the QO was never to hurt players who want to enter free agency, but there have been too many cases of that happening. With the CBA expiring after this season, the MLBPA will likely fight for changes to the QO. It was clearly an improvement over the Type A, Type B system that was in place previously, but there is still work to be done.