Valuing Meche

Following the 2006 season, Gil Meche inked a 5-yr/55 million dollar contract with the Kansas City Royals. The deal underwent immediate scrutiny due to Meche’s below average performance throughout the previous few seasons. His ERA ranged from 4.48 to 5.09, with an FIP entrenched in the 4.60-4.70 area. Simply put, an average annual value of 11 million dollars did not seem appropriate for someone with his credentials. Perhaps Dayton Moore, who apparently goes by the nickname DMGM, knew what he was doing, because Meche has established himself as a solid and consistent pitcher over the past two seasons.

2007: 34 GS, 216.0 IP, 6.50 K/9, 2.58 BB/9, 2.52 K/BB, 4.02 FIP
2008: 34 GS, 210.1 IP, 7.83 K/9, 3.12 BB/9, 2.51 K/BB, 3.61 FIP

His walk rate rose a bit this past season, but his WHIP remained in the same general vicinity as 2007, and his FIP improved by almost a half-run, all the while repeating his durability. So, the 55-million dollar question then becomes is he worth the 11 mil per season? As in, if Meche were a free agent right now, what would an appropriate contract look like? To figure out the answer, we turn to the ever familiar dollar valuation formula that Dave and I have used here recently.

For starters, we need to see what Meche is projected to do in 2009. Bill James and Marcel disagree, both in innings logged and FIP, with James calling for more innings and Marcel projecting a lower FIP. Averaging the projections, Meche in 2009 would pitch 199 innings with a 4.18 FIP. His value would be how this compares to a replacement level pitcher. For a starting pitcher, replacement level FIP is set at 5.50. Unfortunately, a replacement level starter would not be left out there for 200 innings. Instead, he would amass somewhere around 150 innings. The remaining 49 innings would be logged by a reliever. For bullpen hurlers, replacement FIP is 4.50.

Replacement SP:    150 IP  5.50 FIP  92 runs
Replacement RP:     49 IP  4.50 FIP  25 runs
Replacement Total: 199 IP            117 runs

Meche, with a 4.18 FIP in 199 innings, would be responsible for 92 runs. Conveniently enough, this cancels out with the 92 runs surrendered by the replacement starter, meaning Meche’s value above replacement level is +25 runs. Converted to wins, Meche would be worth 2.5 wins. Then, factor in that Meche is taking innings away from the bullpen, and I’m comfortable adding another quarter-win, bringing the total to 2.75 wins.

Last year, the average dollar figure per win was around 4.5-4.75 million dollars. With inflation, I’ll call this year’s amount a firm 5 million per win. 2.75 wins multiplied by 5 million dollars per win amounts to 13.8 million dollars. That is, if Meche were a free agent right now and signed a 1-yr deal, 13.8 million dollars would be an appropriate fee. For multi-year deals, we usually factor in a 10% discount rate, since players tend to sacrifice a bit of their monetary value for some security. With that in mind, a 3-yr deal for Meche would come out to 37.3 million dollars. A 5-yr deal would be valued at 62.1 million dollars.

Meche may not have seemed worth the money back in 2006, but as of right now, his average annual value would be somewhere around 12.4 million dollars, above the 11 mil in his actual contract.

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Eric is an accountant and statistical analyst from Philadelphia. He also covers the Phillies at Phillies Nation and can be found here on Twitter.

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This doesn’t affect your premise much, but I think there’s a small flaw in your methodology: you don’t account for the value of reducing the bullpen’s workload by 49 innings. I’m not sure what the best way to value it is, but reduced bullpen innings have value to major league teams because they have a limited roster size.
Think about this example – compare a team that has 5 starters who all have 4.50 FIPs and average 6 innings per start versus a team that has 5 starters who all have 4.50 FIPs and average 5 innings per start. Your methodology would value the two staffs equally, but the latter team is going to need 162 extra innings out of their bullpen, which means they are probably going to need to squeeze an extra 2 relievers onto their 25-man roster.