-- Did the Sixers make the right move by signing Robert Covington to a new deal now? How else can they build around Ben Simmons, Joel Embiid and Markelle Fultz long term?
Let's look back at Covington's unique contract and what this move means for Philly's ability to add another star player to its core.
The contract signed in 2014
Hired in May of 2013, former GM Sam Hinkie was notorious for signing players to four-year contracts that reflected deals for late first-round picks. The low-risk signings targeted players who went undrafted the previous June. In Covington's case, he was waived by the Houston Rockets after the 2013-14 season.
The catch, though, was that while a player signed to a rookie scale contract had his first two years guaranteed, the contract would give the player a small guarantee in year one but lock that player in for years 2-4 on a non-guaranteed salary. The deft approach by Hinkie resembled that of an angel investor who provides money for a start-up, in this case a player who might have fallen under the radar.?The downside: A player signed to one of these four-year contract would enter free agency unrestricted.
Covington spent two weeks with the Pistons' D-League team, and then the small forward signed a four-year, $4.5 million deal in November 2014 with a salary of $1 million in the first year and $400K guaranteed. The appeal of the contract for Covington was the guaranteed amount mirrored that of the salary earned in Houston after he was cut. For Philadelphia, there was no risk in the investment. If Covington developed, the Sixers would have a player on a non-guaranteed salary for $1 million, $1 million and $1.5 million from 2015-16 to 2017-18. If Covington failed, Philly would be on the hook for a small loss.
Now three years since signing the contact, Covington has developed into one of the NBA's premier wing defenders. He has started 178 out of 224 games and is on pace this season to post career highs in field goal percentage, 3-point percentage, defensive and offensive rating, PER and points per game -- all while averaging fewer minutes than last season.
Could Covington have been extended before Nov. 15?
There is a difference from the renegotiation and extended contract that Philadelphia took with Covington compared to just extending his current $1.6 million contract.
Like the Raptors'? Norman Powell and the Heat's? Josh Richardson, Philadelphia was eligible to extend Covington in the offseason to a four-year contract worth $42 million. The new CBA allows a player who is signed to a three- or four-year contract to become extension eligible after the second-year anniversary. The new pact would not have started until 2018-19 and Covington would have continued playing on his $1.6 million salary.
Unlike Richardson and Powell, who signed three-year contracts in 2015, Covington signed a four-year contract and is renegotiation eligible. A player who signs a four- or five-year contract is eligible to renegotiate his contract if this team has cap space after the third-year anniversary from signing. Because Philadelphia had $15.1 million in cap space, both sides met the criteria.?Below is what the new contract is projected to look like.
The 2017-18 $1.6 million salary is now increased to $16.7 million, a combination of the current salary and cap space. Though a significant pay increase, Covington's new 2017-18 salary still is outside of the top-10 small forwards (14th).
The advantage that Philadelphia has with renegotiation is that the $16.7 million salary can decrease by up to 40 percent in the next season. In this case, Philadelphia will now have a modest cap hit of $10 million, $10.8 million, $11.6 million and $12.4 million in future seasons.
Both sides benefit from this arrangement. Covington technically gets a $15 million signing bonus this year and the 76ers have a player on a four-year, $45 million contract starting next season.
While cap space is sacrificed now, the Covington contract next season and in future years is slightly above the midlevel exception, which is a bargain for a player who turns 27 in December and is in the prime of his career.
Why not wait until 2018?
Three words had the 76ers concerned when it came to Covington's future: Unrestricted free agency.
Covington was the fourth-best free-agent small forward behind LeBron James, Kevin Durant and Paul George, and he would have entered the summer as a player that teams coveted, even with a shrinking pool of teams with cap space. Though the 76ers would have had an advantage based on Covington's bird rights and the ability to offer more years and a higher percentage increase, Philadelphia could not afford to let the small forward enter free agency even if it came at the expense of cap space.
Sixers management could have gambled, held off on a new contract until July and used Covington's $1.5 million free-agent hold to preserve cap space and chase a big name. However, doing so would have been reckless based on the unrestricted tag.
The future in Philadelphia
GM Bryan Colangelo has been busy the past four weeks.
Starting with the Embiid $146 million extension and now with the $61.6 million Covington contract, Colangelo has signed two foundational pieces for the foreseeable future.
Although cap space is decreased with both signings, Philadelphia will have multiple options in July.
The 76ers can elect to keep the same team intact, including soon-to-be free agents JJ Redick and Amir Johnson on one-year contracts like this season, while adding their own first-round pick and a likely first from the Lakers (either No. 1 or Nos. 6-30; ESPN's Basketball Power Index currently gives Philly a 86.9 percent chance of getting the pick).
This approach, while conservative, would set the 76ers up with a projected $30 million in cap space in 2019, with Fultz, Simmons, Embiid, Covington, Dario Saric, Furkan Korkmaz, Timothe Luwawu-Cabarrot, their own 2018 first and a likely Lakers' lottery pick all under contract. Philadelphia can also retain free agents T.J. McConnell and Richaun Holmes based on their low free-agent cap hold in 2019. Both players were signed to a contract similar to Covington, only one year later.
The window to use cap space after the 2019-20 season will begin to close with Simmons, Saric and Luwawu-Cabarrot hitting restricted free agency in 2020.
Philadelphia could go free-agent shopping in 2018 at the cost of Redick and Johnson, opening up about $25 million in cap space, but even if they overpay to keep their veterans, the best path is to wait for 2019.
The 76ers are unlikely to be in the conversation for LeBron James and Paul George, and they do not have a real need for Chris Paul, DeAndre Jordan or DeMarcus Cousins. Once you get past the five All-Star free agents, there is a steep drop-off in players that long-term cap space is worth risking for. In fact, out of the 150 potential free agents in July, 125 are likely to have a role coming off the bench.
Setting aside cap space until 2019 would allow 76ers management to develop their young core and target a position of need: shooting. The 2019 free-agent group has two names that will be on the 76ers' wish list in the Warriors' Klay Thompson and the Timberwolves' Jimmy Butler.