In a series of tweets Thursday, the Broncos chief of football operations said the team is engaged in constructive conversations with Bailey's representatives about keeping the 32-year-old star in orange and blue.
The Broncos are not planning to use their franchise tag on Bailey because that would cost them about $15 million in guaranteed salary next season. If they don't sign him to a new deal, Bailey would become an unrestricted free agent when a new collective bargaining agreement is hashed out.
Bailey just completed his seven-year, $63 million contract with a 10th Pro Bowl berth, a record for cornerbacks.
New coach John Fox's massive makeover of Denver's deficient defense would be much easier with Bailey as the cornerstone. But Bailey is putting his Littleton home up for sale, which could be a sign that he'd rather join a team that's closer to contending for a championship.
"We've been working with Champ Bailey's representative this week on a new contract, which is an important priority for us," Elway wrote on Twitter. "Our conversations have been constructive, and we'll continue those talks in the hopes that we can reach an agreement. Champ's an elite player who means a great deal to our entire organization and our fans. We want Champ to finish his Hall of Fame career as a Denver Bronco."
The Broncos may already have blown that chance, however.
Bailey was close to signing a four-year extension for more than $40 million in October when the Broncos suddenly pulled the offer, concerned about his age and the league's labor uncertainty.
That means Bailey, who's coming off one of his better seasons in Denver, stands to become an unrestricted free agent for the first time in his career.
Despite Bailey's presence, the Broncos have long been bad on defense as Shanahan and then Josh McDaniels focused more on the offensive side and annually changed defensive coordinators, who had to deconstruct schemes and implement new philosophies.
The Broncos ranked last in several defensive categories last season and Fox's deep defensive roots are part of what made him an attractive replacement for McDaniels. Fox hired New Orleans secondary coach Dennis Allen as his defensive coordinator, the team's sixth in six seasons.
Yet another switch in scheme and philosophy would go down easier with Bailey on board, especially with talented second-year cornerback Perrish Cox's status uncertain as he faces a sexual assault case.
"Champ is an outstanding player and I'd love to have the opportunity to work with him," Allen told The Associated Press. "I think he'll fit in the things that we're going to ask him to do and we'd love to have him back. At the end of the day, it's really a decision for management and him and his agent and hopefully they can all come to an agreement that both sides can live with."
Bailey has long maintained that he loves Denver and would like to stay put but that winning is his top concern. He's been to the playoffs just three times in his dozen NFL seasons and has never made it to the Super Bowl.
At the Pro Bowl last month, he said he listened to several players making sales pitches about joining their teams next season. Among those hoping to lure him was Baltimore Ravens linebacker Ray Lewis.
"Several guys realized I was a free agent and said they'd love to play with me," Bailey said. "But they don't make the decisions. Hopefully teams will show interest and we can really get things going in a couple months."
Bailey also said at the time that he was buoyed by Fox's hiring but noted player acquisitions were equally important for a team that has so many defensive needs.
"I think we're going in a good direction," Bailey said. "I don't think things can get worse. One thing I do know is Coach Fox is a good defensive-minded coach and won a lot of games throughout his career, as both an assistant and head coach. I know he can do a good job for the Broncos. It's all about who they bring in and try to fill the roster."