It's been asked if the Colts can restructure Manning's deal to make it more cap friendly. The answer is an affirmative with lots of caveats. One such scenario is detailed by Jeff Diamond at Sports Illustrated:
So that brings us to Irsay and his new GM most likely trying to restructure the contract by the March 8 deadline with the primary goal of reconfiguring the $28 million option bonus and turning it into future base salary that is not guaranteed (with perhaps some incentives for high playing time and championships).
Then things get interesting as Manning and agent Tom Condon push back in this high stakes negotiation.
Contract negotiations are about power and leverage. Manning seemingly has the leverage because he can just say no to redoing his contract and force the Colts to either pay him the $28 million bonus or release him to the open market. Teams like the Redskins, Dolphins, Seahawks and possibly even the Jets would surely have interest. But would anyone pay him the $18 million per year in his current contract or anything close, considering the injury risk and that they haven't seen him play an NFL game in 14 months? The Colts, with the $16 million cap hit looming if they release Manning, would likely be the most generous team.
The key here is whether or not Manning would be willing to take such a deal. Right now Manning literally has all the leverage--he can simply hang out until March and collect the money whether he's healthy or not. The Colts can't cut him and field a competitive team due to the large cap hit. The only viable options are to pay him or restructure a deal and he has no obligation whatsoever to accept such a deal.