Buffalo is currently about $20M under the cap for the 2012 season, but that number will fall quickly if Fred Jackson is extended (somewhere in the $6M range is my guess) and if Stevie Johnson returns ($7M, maybe slightly more.) Rookie salaries will likely be around $6M total thanks to the hard slotting of the CBA, (Marcell Dareus, as the 3rd pick in last years draft makes about $3M a year and it falls sharply from there. Remember that all picks are not created equal, you do not have to pay a #3 as much as a #10,) so we can see the figure of $6M being even smaller. We have not yet discussed who is coming off the books for this year, and I do not think anyone will miss the $6M that Terrence McGee would be owed if he is not cut. If the Bills draft a Defensive End, Dwan Edwards and his $4M would be mercifully expendable. If you have lost track of things by now, if those players are cut, and choose to re-sign Scott Chandler ($2M should do the trick,) it will roughly leave the Bills with about $10M in room for Free Agent contracts.
Buffalo has still not used its Franchise Tag, and I do not think that that will change. Under the new CBA, the Franchise Tag, if used on someone like Johnson, would give him a bump in pay for about $9.5M for one year, and free agency would resume next year, just like it is now. It is intended to convince elite players on your team not to leave, by paying them a higher amount than other teams can pay them, because the extra amount does not count against your cap. Since Buffalo wants to pay Stevie something in the $6M-$7M range, giving him almost $10M does not exactly make sense for them in terms of leverage, since they would effectively signal to him and his agents that he is worth that much to them. They are currently about $2M apart in negotiations.