"We're not going to talk about the contract and all that stuff in general, but we want Champ Bailey to be here. We want him to finish his career here," McDaniels said. "There's a lot of little things that go into these things. These things take time to get right, and sometimes the timing of it doesn't match with the player's desire or our desire, but ultimately when they get worked out, everybody's content and happy.
Reale and the Broncos were close to hashing out a four-year extension that would have kept Bailey in Denver through 2014 before the team decided to pull the offer off the table this week and broke off negotiations.
"I thought we found a way to make it work, but apparently I was wrong," Bailey told The Associated Press on Friday. "My thing is my optimism is slowly fading away about staying here."
McDaniels suggested that Broncos general manager Brian Xanders' negotiations with Reale were complicated and just needed more time.
"If there's something that can happen sooner rather than later, then that's what we'll want to do," McDaniels said. "I love the guy. He's been great for me, professionally, personally. He's great for our locker room, and nobody here wants him to leave, and there's a lot of things that go into these things and factor into timing.
"Brian's handled a lot of these things great through the course of the offseason. I expect that to be the case with this. It might take a little while."
The Broncos could retain Bailey with the franchise tag next season, but that likely would cost them about $10 million for one season.
Bailey, 32, said the Broncos' decision to postpone talks after submitting a proposal last week makes him wonder if he'll soon play somewhere else. He also suggested on his weekly show on KXDP-FM this week that, given the stalled status of his contract talks, he wouldn't be surprised if the Broncos traded him by the Oct. 19 deadline.
"There's so many people just changing teams. I just think anything can happen at any time," Bailey said. "So I'm telling you: If you're a guy in your last year or you want a new contract or you're a free agent, you might go somewhere else. Do I really need to spell it out for you?"
Bailey said he wouldn't request a trade.
"I'm just saying (a trade is) always a possibility," he said, pointing out the New England Patriots' trade of Randy Moss back to the Minnesota Vikings this week. "It wouldn't surprise me. Things like that wouldn't surprise me, but I'm not saying that we're going to ask for a trade or anything. I love being here. So I wouldn't do that."
Bailey said he believes he's playing as well as he ever has after overcoming a string of injuries in recent years.
"I've battled some pretty major injuries and, fortunately, I've gotten myself healthy enough to play again and play at a high level and, you know, that's all I can do. I really can't lose sleep over what's going on right now," Bailey said on his show. "I'm still auditioning for 31 other teams, so my play with speak for itself and ... the money will come when it needs to."
Whatever happens, Bailey said he won't let the snag in contract talks affect his performance on the field.
"It won't get in the way of my playing," he insisted. "It's not going to be a distraction whatsoever."
The Associated Press contributed to this report.