The Washington Nationals and Pittsburgh Pirates, two clubs that many expected to improve but few figured would contend, have made their marks on the MLB standings this season.

The NL-East leading Nationals have the second-most wins in the Majors (65-43) while the Pirates, second in the NL Central to the MLB-best Cincinnati Reds, are 16 games above .500 and are on pace to improve their year-over-year record by more than 20 wins.

The young talent they share in common is directly attributed to another striking similarity between the clubs—long two of the worst teams in baseball, the Pirates and Nationals led all 30 clubs in draft spending from 2007-2011.

More than halfway through the 2012 season, the results are coming to bear.

The wins were a long time coming for two of baseball’s worst franchises in recent seasons. From 2006-10, Pittsburgh finished 27th, 29th, 27th, 29th and 30th in the Majors, respectively, while Washington collected two last-place finishes (and two number-one overall selections) in that time.

Rather than spending high on free agents or drafting money-friendly talents, the teams invested in youth—talented youth, specifically.

The two clubs led all MLB teams in spending on draft picks in the 2007-11 draft classes—Pittsburgh leading the way with $52,057,400 spent and Washington just behind at $51,084,600.

While the money was allocated to dozens of players over all rounds of the draft, the clubs spent highest on their highest-rated prospects. Washington’s Stephen Strasburg and Bryce Harper, consensus first-overall picks in their draft years, fetched signing bonuses of $7.5 million and $6.25 million, respectively.

The two franchise talents spent very little time in the minors and are now regular contributors to Washington’s success. Strasburg has a 12-5 record with a 2.97 ERA in 22 starts in 2012, while Harper is hitting .257/.328/.413 with 15 home runs and 48 RBI in his first season in the Majors.

Pittsburgh, too, is finding success with its home-grown talent.

From 2007-2011, Pittsburgh spent $25.855 million on top selections Gerrit Cole ($8 million), Jameson Taillon ($6.5 million), Pedro Alvarez ($6.355 million) and Josh Bell ($5 million), as well as a record $17 million on the 2011 draft class fueled by signing bonuses to Cole and Bell.

Alvarez, a 2008 selection, is the first of those players to reach the Majors and has chipped in 21 home runs and 58 RBI in 97 games this season. Those four players earned Pittsburgh’s richest signing bonuses and it’s little coincidence they were selected by the new-look management group headed by majority owner Bob Nutting and VP and General Manager Neal Huntington.

Former first-round selections Andrew McCutchen (2005) and Neil Walker (2004) have also been integral to Pittsburgh’s success, though they considerably cheaper entry-level deals than Cole, Taillon or Alvarez.

The Nationals and Pirates have discovered the formula for small-market success, but they didn’t develop it. That blueprint belongs to the Tampa Bay Rays, and the key for such small-market clubs to compete is to draft and develop the best talent possible.

Like Washington and Pittsburgh, Tampa Bay continues to spend relatively high in the draft ($40-plus million spent on 2007-11 draft classes, 6th-most in Majors) while gathering relatively affordable wins at the Major League level ($1.132 million per win in 2012 according to BaseballPlayerSalaries.com, or the 3rd-best cost-to-win ratio in baseball).

The template is in place. Whether or not it will survive will be determined by MLB’s kow-towing to large-market demands.

It was the kinds of signing bonuses handed out by the Pirates and Nationals that prompted MLB to institute a hard-slotted draft system in 2012, one which penalized clubs that spent considerably more than market value for its draft picks (while speaking nothing of a system which routinely allows the league’s deepest pockets to spend freely, even in excess of $200 million, on free agents).

The new system has already served its intended purpose, keeping clubs from continuing to spend high on young talent. The Pirates missed out on first-round selection Mark Appel after Appel’s advisor, Scott Boras, held out for more money than Appel was slotted to make as the 8th-overall selection.

The Pirates, not wishing to incur penalties that could have included the forfeiture of future first-round picks and available draft pool funds, declined to meet Appel’s above-slot asking price and were compensated with an additional selection in the 2013 draft.

Competitive balance, indeed.

Whether or not the new system prevents small-market clubs from being able to compete in the future, the recent years of high draft spending have already left their mark.

Pittsburgh and Washington aren’t the only clubs to have benefited from investing in their prospect pools. Of the top-ten draft spenders in the 2007-11 years, half are currently in or competing for a playoff spot, and eight of the ten clubs rank among the 10-lowest payrolls in MLB, with Washington just outside that group at the 11th-lowest payroll in baseball.

Hard-slotting may change the way small-market clubs are able to compete in the future, but in the meantime, clubs which invested heavily in their best draft picks are being rewarded with pennant races just a few years after residing in the league’s basement.