First things first: I'm firmly in the "sign Adam Dunn" camp. Not because it makes Ryan Zimmerman happy, although I do want Zimmerman to be happy. Not because it will make the fans happy, although I think that the Nationals have thoroughly squandered the goodwill of their $600+ million stadium and it would behoove them to make nice with the fans (it would be nice if we could "expect it"). No, I think signing Dunn gives them a better chance to compete - and win. But that's for another time.
However, once the trading deadline was past without a trade or a contract free agency was inevitable. Dunn had every reason to try the open market, and the Nationals had lost their right to trade him. The Nationals (Rizzo) have made it clear that they didn't feel that any deal that they were offered at the trade deadline was worth the two draft choices that they would get if Dunn left as a Type A free agent. And after a bit of excitement and speculation, Dunn did indeed turn out to be a "Type A" free agent. So, Adam Dunn is a "Type A" free agent - what was it that Rizzo was comparing the trade deadline offers to? What will the Nationals get if they lose Dunn to free agency?
First we need to understand that not all Type A's are the same - they are ranked in order. According to Fanhouse, Dunn is 24th of the 31 Type A free agents. If a team loses a Type A free agent, they are awarded a supplemental first round pick, and also are awarded a draft pick from the team that signs the free agent away, generally a first round pick. This is why Rizzo would say that any offer for Dunn had to be worth more than the two first round picks that the Nationals would receive if they lose him. Not one but TWO first round picks! Nice! Well, not so fast there boys and girls - it sounds good but it may not be quite all that. I'll deal with the supplemental pick first.
This is pretty straightforward: each team that loses a Type A or a Type B free agent is awarded a “supplemental” first round pick. These picks are made after all of the "regular" first round picks have been made. The supplemental order is primarily determined by the ranking of the free agents - the higher the rank, the better the supplemental pick. How many supplemental picks there are depends on the number of Type A & B free agents that change teams - many will re-sign with their former teams (Jeter and Rivera in New York, for example). Last year there were 18 supplemental first round picks awarded. There will be 33 picks in the regular first round this year (see below).
Therefore since Dunn is ranked 24th of the 31Type A free agents, the supplemental pick would probably fall somewhere around #50 overall. So it's technically a first round pick, but a lot of talent is already drafted before the Nationals get to use it.EDIT: As noted by JohnBB21 below, the order of the supplemental round pick is determined by the record of the team losing the free agent - lowest to highest for the Type A free agents first, then the order resets for the Type B free agents. This is good news for the Nationals, because they are the worst team to have a Type A free agent, and therefore if Dunn leaves their supplemental pick would be the first of the supplemental round, #34 overall. (source)
In addition to the supplemental pick, a team loses its top "unprotected" pick when it signs a Type A free agent, and that pick is awarded to the team that lost the free agent. This is not in fact automatically a first round pick. As noted in the Fanhouse link above, the first round pick of the bottom half (by record) of ML teams are automatically protected. As one might expect, the break point is at .500; last year 14 teams finished above .500, 14 teams finished below .500, and two teams (Tigers and A’s) finished at .500. According to one site the A’s draft first. I’m not sure how ties are broken, but this could be great for the Nats as the Tigers are one of the teams that has been rumored to be interested in Dunn. Since the A’s draft first, the Tiger’s 1st round pick (#16 – although actually #19 overall*) is unprotected – which would increase the cost of their signing a Type A free agent. At first blush, that’s a #19 overall and the supplemental
(around #50) (#34 overall) for Dunn – not too shabby. If the 2011 draft is as deep as advertised, this scenario makes Rizzo smile.
*There were three teams, (the Diamondbacks (#6), the Padres (#9) and the Brewers (#14)) that did not sign their first round picks this year. They will be awarded compensatory picks in the 2011 draft right after their former slot – Nats fans will remember this is how the team ended up with Drew Storen in 2009 after failing to sign Aaron Crow in 2008. Because all three are in the top 15, effectively the top 18 picks in 2011 are protected, and there will be 33 picks in the first round for 30 MLB teams.
If the team that signs Dunn is in the bottom 15 and their first round pick is protected, the awarded pick is the next available pick, generally the second round pick (unlike the NFL and NBA, MLB teams cannot trade their draft choices). That pick comes after the first round, of course, including all of the supplemental first round picks. So if the Cubs (drafting 9th) sign Dunn, their first pick is protected - the Nats would get the supplemental pick
(around #50 overall) (#34 overall) and the Cubs' pick (around #60 overall). Draft choices are a crap shoot at best, and now the odds for a decent return on Dunn are not quite so good. In this scenario, Rizzo is no longer smiling.
But here's the wrinkle that may cause problems. If a team signs more than one Type A free agent, they only have one top unprotected pick (first or second round) to lose, so they start to lose subsequent picks. Who gets what pick is based on the final rankings of the free agents lost, with the team losing the higher ranked Type A being awarded the better draft pick. And since Dunn is ranked 24th of the 31 Type A free agents, the Nationals are not likely to be first in line. Thus, for example, if the Cubs (drafting 9th overall) signed a higher ranked Type A (say Bengie Molina) AND Dunn, then the Cub’s 1st round pick is protected, the 2nd round pick (around #60 overall**) would go to Molina’s former team, with the Nats getting the Cub’s 3rd round pick, around #90 overall, to go with the #45 overall pick. And if they sign three Type A free agents, that pick may drop into the third round, around #125 overall. This scenario makes Rizzo frown.
**I will note that the diminishing costs associated with signing multiple free agents creates a clear incentive for teams that are going to sign multiple Type A free agents to do so in the same year. For example, when the Yankees signed C.C. Sabathia, A.J. Burnett and Mark Texeira in the same offseason, they had to give up their first, second and third round picks - where signing three Type A's in consecutive seasons would result in losing three first round picks. Texeira was the highest ranked free agent in that year's class, so the Angels got the Yankee's 1st round pick, #25 overall. Sabathia was third in the class, but the Brewers only received a 2nd round pick, #73 overall. For Burnett, the Blue Jays received the third round pick, #104 overall. This was in addition to the supplemental 1st round picks, which was actually in reverse ranking order (Blue Jays #37, Brewers #39, Angels #40). So apparently if a team is pushed to a lower round by other type A signings it at least gets a slight boost up in the supplemental picks – which makes sense.
And to complete the gaming of the system that year, the Yankees still had a compensatory 1st round pick for not signing their #1 pick the previous year, and a compensatory 2nd round pick for not signing their #2 pick the previous year – so they still got some action in the first two rounds of that year’s draft despite signing three Type A free agents.
So if Dunn does sign with another team, hope that it's with the Tigers, or at least with the White Sox or another top 15 team. If it's with the Cubs, Orioles or another bottom 15 team, the compensation goes down. And in any case, hope that the team that signs Dunn does NOT sign another Type A free agent. Or the Nationals may find that a Type A isn't worth what it was cracked up to be.