Orioles Avoid Arbitration With Guthrie, Scott
The Orioles just agreed on a contract with Jeremy Guthrie to avoid arbitration, so I thought it would be good to take a look at all such deals the team made this off-season.
First up is Guthrie, who signed for $3 M in his first year of arbitration after he and team exchanged figures at $3.625 M and $2.3 M respectively (with $3 M being almost exactly the mid-point between the two, which tends to happen). In a player's first year of arbitration, he typically gets about 40% of his free agent market value. I currently have Jeremy projected as a 1.7 Wins Above Replacement player (which happens to be about half-way in between his down 2009 season and his 2008 season). Though the going rate now is about $3.5 M per win, my understanding is that in arbitration a player is compared to comparable ones from previous years and so last off-season's $4.5 M per win might be the correct figure to use. In that case, 40% of Guthrie's market value would be about $3 M. Bingo! That surely worked out quite nicely.
Earlier in the off-season Luke Scott signed for $4.05 M in his second arbitration year. In a player's second year of arbitration, he typically gets about 60% of his free agent market value. For now, I've got Luke projected as a 1.1 WAR player. Using $4.5 M per win, 60% of Luke's market value would be just $3 M. I think the discrepancy can largely be explained by age though. Usually, a player is in his arbitration years going towards or already in his prime. Therefore his expected production should be increasing or staying level. Luke, on the other hand, is already 31 years old and likely headed away from his prime years. If you project no regression from Scott for 2010, and expect him to produce at about the same level as 2009 - say, 1.5 WAR (compared to his 1.4 WAR) - his contract is then exactly in line with 60% of his market value at $4.5 M per win (60% * 1.5 * 4.5 = 4.05). It's probably a slight over-pay, but given that Scott made $2.4 M last year and his numbers were pretty good, I don't see any way the team could have gotten away with a much cheaper deal.
Cla Meredith signed for $0.85 M and Matt Albers signed for $0.68 M in their first arbitration years, but as middle relievers on cheap deals I don't think there's much to judge them on. Maybe Cla is overpaid by $0.2 M or something (given his service time), but that's really a rounding error.