Scenario 1: Work on a new deal
The Titans have a two-week period where they can make their decision on whether or not they should give Jonnu Smith the tag, but if they make it through that window without a new deal or a tag he is as good as gone.
If no deal is struck or if no tag is applied, it means that the team and the player weren’t even close in negotiations and that they are willing to let someone else “overpay” for the player.
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A way to extend those negotiations is to give a player the tag while working on a new deal. Maybe the Titans want to make some splashy moves in free agency and they want to put contract negotiations on hold with Smith.
Using this as a bridge (like Titans GM Jon Robinson did with Derrick Henry last year) lets the first wave of free agency pass and let both sides re-evaluate after those signings are over.
This means that the cap space could look strange for a while because teams don’t have to be compliant with the salary cap until the middle of summer. So, they might look over the cap on paper, but could work on a deal that spreads Smith’s money out to fit underneath the cap by that deadline.
Either way, more time and better perspective is never a bad thing.