Totally fair questions and points. None of what I wrote should be taken as gospel. I'm just reading tea leaves.
My understanding is average per year based on the link. And since you brought him up, Vereen apparently netted us a 6th-round pick with his average contract value of just north of $4M.
The site I was referring to uses a formula for actual average per year which calculates certain incentives and whatnot as you mentioned. More thorough explanation of their methodology here:
The Basics and Methodology of Projecting the NFL's Compensatory Draft Picks - Over the Cap
You're right, I am totally oversimplifying; I am no expert in any of this. Or rather, I'm using the pre-calculated numbers. I'm just passing on what I've read. It's much more complicated if you look at the methodology, as it involves percentiles based on league-wide numbers. Which is why they have Sanu at $6.5M good for a 4th-round comp pick, while Lamar Miller at $6.5M is a 5th-round comp pick.
It looks like they are considering Andre Smith's one-year deal worthy of a 6th-round comp pick:
2017 Compensatory Draft Picks Update (5/10/2016) - Over the Cap
Which makes me think even a big 1-year deal would qualify for a potential mid-round comp pick.
So it's entirely possible he could be worth a 3rd or a 6th, all we're really just discussing is what type of contract he'll get. If it's $9M+ a year, even for one year, that could be a 3rd. If it's $4M like Vereen, probably a 6th. Around $6-7M would put him in 4th/5th territory.
Teams that need WRs will have to choose between Jeffery who is coming off a PED suspension, Floyd and his DUI, DeSean Jackson, or Emmanuele Sanders as their top choices, or look to a draft that has maybe 2 or 3 1st-round guys, none really projected in the top 10 so far that I've seen.
So it's really about how much do you think he'll get average per year? I think he'll get at least $7M, whereas if you're thinking he's 5th/6th, we're thinking maybe a contract in the $4-$6M range.