Well I agree they should have pulled out all the stops to keep Joe. Especially how much he had obviously improved after Marbury was traded during the 2004 season.
But not giving him that contract wasnt Colangelo's call. In fact, the "rumor" (its never been confirmed) was the Colangelo Sr. told Sarver to give Joe what he wanted (the contract you are refering to) but Sarver said no.
To be fair, Sarver has said several times that it was a mistake. But I dont know why you are comparing his decision to "wait-n-see" with Joe to Colangelo's decision to extend this other guy.