There is often confusion about how NFL contracts affect the available salary cap for a team. With the possibility that Brock Osweiler may be on the chopping block after a historically terrible first season in Houston, let’s explore his contract to determine the impact to Houston’s available cap space depending on when and how they terminate him, should they choose to do so.

BROCK OSWEILER’S CONTRACT TERMS

Last March, the Houston Texans signed Brock Osweiler to a four-year contract valued at $72 million, with $37 million fully guaranteed. This included a $12 million signing bonus. If you follow the actual cash, Osweiler was paid $12 million upon signing the contract, and then was paid another $9 million in salary during the 2016 season. That represents $21 million received of the $37 million guaranteed, so there is another $16 million of that guaranteed amount still owed to Osweiler. His 2017 salary is $16 million, so by the end of this next season, Osweiler will have received all the guaranteed money owed to him by the Houston Texans.

You might be wondering how the team actually accounts for the money they have paid. Let’s take a look.

SIGNING BONUSES

It is important to understand how signing bonuses impact the cap over time. In Brock’s case, he received payment of $12 million as a signing bonus. The team gave him the cash up front, and now they will account for it in the cap space by spreading it equally over the four-year term of the contract: 2016, 2017, 2018, and 2019. So for each of the four years, there is a value of $3 million applied to the team’s cap cost for Brock Osweiler. This allows teams to be a bit creative in managing their cap flexibility over time, without respect to when the actual cash was paid out. It’s a flexible feature that enables teams to pull forward guaranteed money to the player but then account for it in smaller amounts over time.

SALARY CAP IMPACT

After one season, we know that there is still another $16 million in actual cash yet to be paid to Brock Osweiler. However, the cost of the signing bonus being spread out over the term of the contract has yet to be fully accounted for with respect to the team’s salary cap. At this time, there is still another $25 million to be accounted for as part of Osweiler’s deal.

Brock has received $21 million so far and will get another $16 million at a minimum to reach the fully guaranteed amount of the contract. The Texans have only accounted for $12 million of the contract so far through 2016 ($9 million salary + $3 million prorated signing bonus,) so they still have another $25 million to account for over the life of Brock’s deal.

Let’s say for a moment that Brock had a better first season with the team, and he looked to be the franchise quarterback we all hoped for. Stop laughing. This is just for demonstrative purposes.

Thanks to Over The Cap, here is how the contract affects the Texans’ actual salary cap over four years if Brock stays with the team:

Osweiler’s cash to be received for 2017 is $16 million, the exact amount remaining of his guaranteed portion of the deal. However, his salary cap hit to the team is $19 million as we just discussed, thanks to $3 million of his $12 million signing bonus being prorated into the second year of the four year contract. You can see how that number continues going forward in terms of money the Texans would pay Osweiler and the effect on the cap each subsequent year. By 2018, Brock and his agent would likely want to negotiate an extension with new guaranteed money; they’d again want to front-load it with another signing bonus to spread the cost over time and so on. Not many players are willing to play without any guaranteed amounts due under a contract.

CAP HIT NOW OR LATER?

What happens if the Texans decide that moving forward without Brock is better for the team and to just put this whole failed quarterback experiment in the rear view mirror? It depends on when they decide to waive him. There is another vehicle in the collective bargaining agreement between the NFL and NFLPA that allows for teams to make a choice about how to account for the outstanding balance of prorated signing bonuses. In some cases, the team may want to take the full hit all at once and move forward with a clean slate. In other cases, like when a team has less available cap space for the upcoming season, they may choose to continue to minimize the impact now and defer the rest until later.

If the team cuts a player before June 1st of a given season, ALL outstanding prorated signing bonus (“dead money”) is accounted for in the current year. If the team waives a player after June 1st, the current year cap cost remains the same as if the player remained with the team that season, and then ALL the remaining prorated values after the current year are accounted for in the following year.

There is also flexibility in the fact that a team can waive a player before June 1st, but “designate” him as a June 1st transaction. This benefits the team with respect to managing the impact to the salary cap, and it benefits the player so that he can potentially find employment with another team as soon as possible without having to wait until after June 1st to start the search process.

Let’s examine the Texans two options for parting ways with Brock Osweiler this offseason.

Cut BEFORE June 1st:

What does it mean?

If the Texans part ways with Brock before June 1st, all of his remaining signing bonus is accelerated to 2017. This means they recognize the full cost of all outstanding cap implications now and start 2018 with a clean slate with no remaining “dead money.” This would end up costing the Texans $6 million more in 2017 than if they cut him (or designate him as cut) after June 1st.

2017: $25 million cap hit ($16 million base salary and $3 million signing bonus carryover, plus accelerated $6 million from remaining bonus carryover ($3 million from 2018 and $3 million from 2019)).

2018 No cap hit.

Cut (Or Designated) AFTER June 1st:

What does it mean?

If Houston cuts (or designates) Brock Osweiler after June 1st, they defer $6 million of cap cost into 2018 to lessen the burden on Osweiler’s cap hit for 2017.

2017: $19 million cap hit ($16 million base salary and $3 million signing bonus carryover).

2018: $6 million cap hit (accelerated balance of remaining signing bonus carryover of $6 million ($3 million from 2018 and $3 million from 2019)).

2019: No cap hit.

SUMMARY

At a minimum, Brock Osweiler is going to receive another $16 million in cash. At a minimum, the Texans will have to account for $25 million in cap space.

Here is where things stand with respect to Brock and the impact to the Houston Texans’ available cap space with a variety of decisions and outcomes.

I. Proceed without any changes and honor all of Osweiler’s current contract as is:

2017: Brock receives $16 million cash; Texans’ cap hit is $19 million.

2018: Brock receives $18 million cash; Texans’ cap hit is $21 million.

2019: Brock receives $13 million cash; Texans’ cap hit is $20 million.

2020: Free Agent.

II. Texans waive Brock at the end of 2017 NFL season (before June 1, 2018):

2018: $6 million cap hit. Accelerated balance of remaining signing bonus carryover of $6 million ($3 million from 2018 and $3 million from 2019).

2019: No cap hit.

III. Texans waive Brock at the end of 2017 NFL season (June 1, 2018 or designated):

2018: $3 million cap hit.

2019: $3 million cap hit.

2020: No cap hit.

IV. Texans waive (or designate as waived) Brock as of June 1, 2017:

Note: This has the exact same effect to the Texans’ salary cap as waiving him at the end of the 2017 season (before June 1, 2018).

2017: Brock receives $16 million cash. Texans’ cap hit is $19 million.

2018: $6 million cap hit. Accelerated balance of remaining signing bonus carryover of $6 million ($3 million from 2018 and $3 million from 2019).

2019: No cap hit.

V. Texans waive Brock before June 1, 2017:

2017: $25 million cap hit. $16 million base salary and $3 million signing bonus carryover, plus accelerated $6 million from remaining bonus carryover ($3 million from 2018 and $3 million from 2019).

2018: No cap hit.

It’s a shame things didn’t go better for Brock during his first season with Houston. Will the team give him another shot to improve in 2017, or will they walk away from this and chalk it up to the reality of the costs involved in attempting to find that ever-elusive franchise quarterback? If the Texans do decide to waive him, when do you think that might happen? When do you think it should happen?

Based on the details above, it seems clear that Brock would be designated after June 1, 2017 if the Texans don’t want him on the roster this year. If they do give Osweiler another shot to redeem himself, and if he fails again, they would almost certainly designate him as a cut for June 1, 2018.

Please share your thoughts in the comments below.