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They didn't franchise him because of the cost. Because they restructured his contract several times, and pushed money forward (like we tend to do), it pushed the franchise tag cost WAY up. It would have cost them 26m in cap space for this year, there was no guarantee he would sign a long term deal after signing the tag offer either. There are other players the lions need to lock up and replace as well, and they already have large contracts in Johnson and Stafford. Tagging Suh would have made it impossible to field a competitive team this year. They took a chance, they are still working on trying to sign him long term, so there is nothing that "they know more than the rest of us". They still have plans to continue building their D around him, they've been talking about trying to sign him long term for the past season and a half.
And this penalty machine is just media hype over the few plays that caused a stir. He had 7 accepted penalties last season, only two personal fouls (one facemask, one roughing the passer). For reference, Watt had 8 penalties accepted, 3 roughing the passers, 2 roughing the kicker and he's looked at as a clean defensive player.
Suh may lose his head occasionally during a heated game, he plays in the trenches where some unsavory things can happen (lets not forget our own Cody Wallace move during a Ravens game), but he's far from a penalty machine. He gets a bad rep for being a dirty player because of the media. The same way Harrison is labeled dirty.
We're obviously not seeing eye to eye here but that's cool. I think we both are on the same page with Suh being a very good player but where we differ I think is that I think he could be much better. I've read reports and read comments from coaches and even trainers one in particular who had Suh under his wing in a training program who said that very thing. "The guy doesn't have the dedication and work ethic that he should". You mention JJ Watt and that's a good example of what I'm talking about. Here's a player who works extremely hard, is extremely dedicated and plays hard every down. If I had the choice between the two today I'm taking JJ in a heartbeat.
The salary cap be it as it may and you seem to have a better grasp of their situation in Detroit than I do, would then make it a poor decision to franchise him. If they really felt like there was no way they could go without him they would find a way to offer a contract to his liking.