[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                 WAGE-GRADE PAY IN GEORGIA AND OKLAHOMA

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON THE CIVIL SERVICE

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                            OCTOBER 4, 2000

                               __________

                           Serial No. 106-273

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                  U.S. GOVERNMENT PRINTING OFFICE
75-928                     WASHINGTON : 2001

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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

                   Subcommittee on the Civil Service

                   JOE SCARBOROUGH, Florida, Chairman
ASA HUTCHINSON, Arkansas             ELIJAH E. CUMMINGS, Maryland
CONSTANCE A. MORELLA, Maryland       ELEANOR HOLMES NORTON, Washington, 
JOHN L. MICA, Florida                    DC
DAN MILLER, Florida                  THOMAS H. ALLEN, Maine

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                      Garry Ewing, Staff Director
                        Miguel Serrano, Counsel
                         Bethany Jenkins, Clerk
            Tania Shand, Minority Professional Staff Member

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 4, 2000..................................     1
Statement of:
    Chambliss, Hon. Saxby, a Representative in Congress from the 
      State of Georgia...........................................     4
    Davis, Jim, national treasurer elect, American Federation of 
      Government Employees.......................................     7
    Winstead, Donald, Assistant Director for Compensation 
      Administration, Office of Personnel Management; and Roger 
      M. Blanchard, Assistant Deputy Chief of Staff for 
      Personnel, U.S. Air Force..................................    31
Letters, statements, etc., submitted for the record by:
    Blanchard, Roger M., Assistant Deputy Chief of Staff for 
      Personnel, U.S. Air Force:
        Prepared statement of....................................    50
        Prepared statement of Diane M. Disney, Deputy Assistant 
          Secretary, Civilian Personnel Policy, Department of 
          Defense................................................    42
    Chambliss, Hon. Saxby, a Representative in Congress from the 
      State of Georgia, prepared statement of....................     6
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    67
    Davis, Jim, national treasurer elect, American Federation of 
      Government Employees, prepared statement of................    10
    Scarborough, Hon. Joe, a Representative in Congress from the 
      State of Florida, prepared statement of....................     3
    Winstead, Donald, Assistant Director for Compensation 
      Administration, Office of Personnel Management, prepared 
      statement of...............................................    34

 
                 WAGE-GRADE PAY IN GEORGIA AND OKLAHOMA

                              ----------                              


                       WEDNESDAY, OCTOBER 4, 2000

                  House of Representatives,
                 Subcommittee on the Civil Service,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:11 a.m., in 
room 2203, Rayburn House Office Building, Hon. Joe Scarborough 
(chairman of the subcommittee) presiding.
    Present: Representative Scarborough.
    Staff present: Garry Ewing, staff director; Jennifer 
Hemingway, deputy staff director; Miguel Serrano, counsel; 
Tania Shand, minority professional staff member; and Earley 
Green, minority assistant clerk.
    Mr. Scarborough. Good morning, I'd like to welcome everyone 
to this oversight hearing. Our purpose today is to evaluate the 
effectiveness of the process for making wage-grade pay 
determinations for particular localities in the United States.
    The Federal Government employs about 250,000 blue-collar 
employees, about 14 percent of the Federal work force. Blue-
collar wages are determined through the wage-grade pay system. 
Although smaller in size than our white-collar work force, 
their work is extremely important. More than two-thirds of them 
work for defense agencies. And on a personal note, my brother-
in-law is one of them. They include such occupations as 
aircraft mechanics that keep our military aircraft flying.
    Since assuming the chairmanship, I have held conversations 
with several Members of Congress whose constituents allege 
unwarranted differences between wages paid in neighboring local 
wage areas. In a system with over 256 local wage areas, 
attempting to resolve such issues legislatively would raise 
difficult, if not insurmountable obstacles, and would likely 
result in perpetual congressional intervention. But that 
doesn't relieve us of our responsibility to ensure that the 
process for determining blue collar wage rates is working 
correctly. As with the General Schedule pay system, we need to 
ensure that the Federal Government's compensation programs are 
adequate to all of our employees.
    Today provides an opportunity for subcommittee members to 
examine thoroughly the issues that are involved in a very 
complex wage-grade system that governs over 250,000 Federal 
employees. A discussion of the current system in practice, what 
administrative options are available for particular localities 
facing challenges, and whether or not legislation is needed to 
improve the process for establishing wage-grade pay will 
greatly benefit this subcommittee.
    In particular, I want to ensure that the pay determinations 
are sufficient to recruit and retain the most qualified civil 
servants. Our blue-collar workers provide valuable services for 
our government; it is only fair that they are going to be 
compensated adequately for all of their efforts. I look forward 
to hearing the testimony of our distinguished witnesses on this 
very important issue.
    [The prepared statement of Hon. Joe Scarborough follows:]

    [GRAPHIC] [TIFF OMITTED] T4928.001
    
    Mr. Scarborough. I would like to begin by asking unanimous 
consent that Congressman Chambliss be permitted to participate 
for the remainder of the hearing from the dias, not only for 
the first panel but for the second as well.
    I would like to ask each witness to present a 5-minute 
summary of your testimony and, without objection, your written 
statements will be entered into the record.
    Let's begin with Mr. Chambliss.

STATEMENT OF HON. SAXBY CHAMBLISS, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF GEORGIA

    Mr. Chambliss. Thank you very much, Mr. Chairman, and I 
particularly want to thank you for your leadership in having 
this important hearing today to explore the wage disparities at 
Georgia and Oklahoma military bases and to look for solutions 
that can help the men and women who serve our country every day 
to keep our military strong and ready.
    Ever since I came to Congress, I have heard complaints from 
many of my constituents who work at Robins Air Force Base about 
the disparity between the wage-grade pay scale in Warner Robins 
and other parts of Georgia. The men and women who work at 
Robins provide vital support to and maintenance on critical 
national security assets that are needed every day to protect 
and defend the national security interests of our great Nation. 
Middle Georgia bleeds Air Force blue and our workers are 
patriotic, dedicated and local public servants determined to 
ensure that essential warfighting aircraft continue to fly. One 
of the successes of Operations Allied Force and Noble Anvil in 
Kosovo last year was the outstanding ability of Air Force 
depots like Warner Robins to meet the surge requirements of the 
warfighters. In many cases our workers labored around the clock 
on additional shifts so that the Air Force's Material Command 
could ensure continued support of military operations in Kosovo 
as well as normal peacetime operations. Air Force logistics 
centers like Warner Robins took extraordinary actions to 
maintain support to all of its Air Force customers, but the 
hard work and dedication of our workers at the base clearly 
made that successful effort possible.
    As you well know, our military services are facing serious 
recruiting and retention problems. The Department of Defense 
must compete intensely with the private sector to hire and keep 
the best and brightest of our work force. Moreover, our current 
work force is aging. Just last week, Air Force Chief of Staff 
General Michael Ryan testified before the House Armed Services 
Committee that workers at our Air Force depots are on average 
about 48 years old. Approximately 50 percent of the current 
depot work force will retire in the next 5 years, and we find 
it increasingly difficult to replace these valued workers who 
will soon be leaving Federal service.
    Earlier this month, our local newspaper, the Macon 
Telegraph, reported that Warner Robins Air Force Base is 
suffering a work force shortage.
    Given these facts, I find it very puzzling that we continue 
to tolerate such a gross disparity in wage-grade pay scales in 
Georgia. It is hard enough already to recruit and retain good 
people. Why should we make it even more difficult by imposing 
unfairness and enforcing unequal wage-grade pay? We are 
perpetuating a disincentive that discourages and demoralizes 
our wage-grade employees.
    Our wage-grade workers at Warner Robins are performing 
skilled, specialized jobs that are not like similar occupations 
in the local area surrounding the depot. However, less than 100 
miles from Warner Robins in Atlanta, companies like Delta Air 
Lines and Lockheed both employ large numbers of highly skilled 
aircraft maintenance workers.
    Last year, I introduced H.R. 2394 to equalize the pay 
between Warner Robins and the Atlanta areas. I believe that in 
determining wage rates, it would make sense to compare similar 
jobs that are within commuting distance of each other.
    I know for a personal fact that there are a number of 
individuals, both in the Macon and Warner Robins area, who 
drive as far as Atlanta every day to go to work. Likewise, 
there are folks living in the suburbs of Atlanta who come to 
Robins Air Force Base to work every single day.
    Mr. Chairman, I look forward to hearing from our witnesses 
today and I thank you for allowing us the opportunity to 
highlight the wage-grade disparities in Georgia and Oklahoma. I 
firmly believe that this hearing will make Congress more aware 
of the challenges facing our dedicated workers and will begin a 
process by which we can provide better pay and maximize the 
effectiveness and efficiency of our depot system. And I thank 
you.
    [The prepared statement of Hon. Saxby Chambliss follows:]

    [GRAPHIC] [TIFF OMITTED] T4928.002
    
    Mr. Scarborough. I thank you, Congressman Chambliss, and I 
want to thank you right now in front of everybody for your work 
on this important issue and the number of times that you have 
come up and talked to me about H.R. 2394 and the importance in 
equalizing the pay grade differences.
    You have done a great job as Congressman for the 8th 
District. And one man who knows that is a man who actually is 
also speaking today, Jim Davis, who was recently elected as 
national secretary-treasurer of the American Federation of 
Government Employees, and prior to that he was employed at 
Robins Air Force Base in Congressman Chambliss's district, so 
he certainly is very aware of the problems that Congressman 
Chambliss's constituents are facing.
    I'd like to welcome you and congratulate you on your 
election victory. And look forward to hearing your testimony. 
Let me ask if you could, since this is an oversight 
subcommittee, if you could stand up and take the oath.
    [Witness sworn.]
    Mr. Scarborough. Thank you. Go ahead.

  STATEMENT OF JIM DAVIS, NATIONAL TREASURER ELECT, AMERICAN 
               FEDERATION OF GOVERNMENT EMPLOYEES

    Mr. Davis. Mr. Chairman and members of the subcommittee, my 
name is Jim Davis and I am the national secretary-treasurer of 
the American Federation of Government Employees. On behalf of 
the more than 600,000 Federal and District of Columbia 
employees represented by AFGE, I thank you for the opportunity 
to testify today on our concerns about the Federal wage system.
    I am representing AFGE today both from the perspective of a 
recently elected national officer, and as a long-term local 
officer. For the past 8 years I have served as local president 
at Robins Air Force Base and, as such, have witnessed the 
negative impact of the current Federal wage system and been 
intensely involved in our union's efforts to correct the 
inequities our current system generates.
    Mr. Chairman, simply put, the current system is in trouble. 
congressionally imposed pay caps, coupled with the withdrawal 
of the Monroney protections for DOD employees, have conspired 
to prevent tens of thousands of Federal blue-collar workers 
from receiving what the Federal wage system envisioned: wages 
that reflect prevailing rates for similar work in the local 
private economy.
    Our current method of determining wages is sending a clear 
message that if you want to be all you can be, do not seek 
employment in the public sector, because we are not going to 
compete and pay competitive wages for your services. Federal 
blue-collar workers deserve better for their hard work 
performed every day. And AFGE commends this subcommittee and 
Congressman Chambliss for holding these hearings and 
recognizing the needs for solutions to the pressing problems 
being experienced by this forgotten and neglected group of 
Federal workers.
    We started the Federal wage system with all good 
intentions, but almost immediately after the wage system was 
put in place, problems with the Prevailing Rate Act were 
recognized. Specifically, where the government was the dominant 
industry in a particular wage area, certain trades and crafts 
like shipbuilding and aircraft maintenance, there were no 
private sector jobs to be surveyed as prescribed by the law. 
Therefore, the so-called Monroney amendment was enacted, and it 
directed the data collectors to bring in data from the nearest 
area where adequate private sector trades and craft skills 
existed.
    Then in 1979, Congress and the President distorted the 
system by imposing a ceiling on the annual percentage increases 
the system could pay regardless of what the data showed. As a 
result, each year since that time, Congress has limited the 
blue-collar pay increases to the percentage granted by Federal 
white-collar workers who were paid according to the General 
Schedule system. Thus, the Federal wage system has not been a 
prevailing rate system in anything other than name for 21 
years.
    Then in 1984, DOD sought the relief from Congress to exempt 
the Monroney amendment. They argued that their budget made 
compliance with the Monroney unaffordable. Blue-collar workers 
employed by DOD since 1984 have the dubious distinction of an 
even lower wage schedule than their counterparts at other 
Federal agencies.
    This, of course, is an ironic state since the Monroney was 
designed specifically for industries that had the predominant 
rate, and DOD is the one with the predominant skills.
    So what we are doing today is maintaining an enormous 
bureaucratic infrastructure in many agencies charged with 
calculating what blue-collar rates should be if the wage system 
was allowed to work without the pay caps, without the 
withdrawal of the Monroney protection for DOD workers, just to 
make sure that our employees know the magnitude of the loss of 
they suffer year after year. This year, 84 percent of the 
Federal blue-collar workers in the wage-grade 10 and above were 
affected by the cap because the wage system data showed 
prevailing rates above Federal rates.
    Now, you showed some interest in what is going on at Robins 
Air Force Base, my hometown. And to be specific, this year, for 
example, a wage-grade 10 at Robins Air Force base is paid 
$16.15 an hour. Now, the same employee working for another 
agency in the Macon area is paid $16.57 an hour, while at the 
same time, less than 100 miles away, as Congressman Chambliss 
stated, this same wage-grade employee maintaining the same 
aircraft is paid $19.61 an hour. It is a $3.46 difference.
    I would also like to address here the dispute that DOD and 
AFGE have over my contention that the disparities between the 
Federal wage system and the GS pay adjustments between 1987 and 
1999 amount to discrimination. DOD has defended itself by 
arguing that the two pay systems have produced similar average 
wages for the workers in the two systems, and I strongly 
disagree. In 1984, there was a 12.75 percent difference between 
the pay of a GS-11.4 and WG-10, step 2, at Robins. In 1999, the 
percentage difference between the rates was 36 percent. The GS 
salary has grown 56 percent. The wage-grade scale has grown 29 
percent.
    The Bureau of Labor Statistics says that inflation has gone 
56 percent so the GS people are in line while the wage-grade 
people have fell back. Now, you can talk about percentages, but 
in real dollars these same employees, the GS employees, have 
received a $7.62 increase in their wages, while the wage-grade 
people have received $3.48.
    I don't understand what the goal of the DOD is in 
continuing to support this system. They argue that recruitment 
and retention problems that DOD has experienced nationwide can 
best be resolved by some minor targeting--tweaking of the 
existing system. DOD claims that problems with the wage-grade 
system is isolated, but it is not. We firmly believe that if 
DOD wants to recruit people, we can simply go and have a 
conversion of our wage-grade people to the GS pay scale. This 
will allow the flexibilities that we are asking for.
    I see that I am out of time and I will answer any questions 
that you may have.
    [The prepared statement of Mr. Davis follows:]

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    Mr. Scarborough. I appreciate it and will certainly give 
you time to come back and answer any questions and go into any 
information you were not able to give us here.
    I do want to say at the outset, though, that as a Member of 
Congress who represents an area with five military bases, I 
have seen firsthand that this actually is more than just a 
union issue for Federal employees. This is a readiness issue.
    I mentioned before that my brother-in-law is a blue-collar 
civil servant who used to work at NAS Pensacola. Now he is over 
in Jacksonville. But what I found when I toured the bases at 
NAS Pensacola or Hurlburt Field or Eglin Air Force Base or 
Tyndall in Panama City, I found that these blue-collar workers 
were the people that kept the helicopters flying and the 
airplanes flying and were the ones that in a crunch, they went 
to fix these things up and keep them going. And that's why it 
is just absolutely essential that we resolve this issue.
    Again, it is not just a blue-collar pay issue. This is a 
real readiness issue and one that is troubling to me, somebody 
that has seen how important the blue-collar work force is to 
the military operation of this country.
    Let me ask you, Congressman Chambliss, we have obviously 
talked about this issue a good bit. Certainly everybody here 
knows that you have been a champion on this issue. But can you 
talk to me about the contacts that you have had locally; what 
have you heard, for instance, from the local union or from the 
base commander or the leadership at Robins Air Force base on 
this issue? What are they telling you?
    Mr. Chambliss. Well, let me amplify, first of all, on 
what--your statement there with respect to the readiness of our 
troops. You and I serve on the Armed Services Committee 
together and we are very well aware of our readiness problems. 
You were at the same hearing that I referenced in my testimony 
a little earlier last week where we heard that we have got 
serious problems there within our force all up and down the 
line from a readiness perspective.
    Now, that exact same problem exists within the civilian 
work force for the same reasons. We have got pay problems, we 
have got work atmosphere problems and what not that cause 
morale among these wage-grade employees to be low. And you are 
right, they are the heart and soul of our civilian work force. 
They are the folks at Robins Air Force Base that keep our 
planes flying, our warfighters will have the very best 
equipment possible and very best weapons systems available.
    So that issue of readiness is a critical, critical issue. I 
have been up and down the line at Robins both with Mr. Davis 
and without Mr. Davis, and talked to employees both union, 
nonunion, wage-grade, nonwage-grade, and this is a concern to 
everybody within that work force, this wage-grade differential 
issue. And it does not make any difference whether they are a 
wage-grade employee or not, the other folks know what the 
problem is and they are very concerned about those folks. There 
is a morale problem all up and down the line there. And that is 
the primary reason I think we need to address it, in addition 
to the readiness issue overall.
    What I am told from the leadership is that it is reviewed 
from time to time and that basically their hands have been 
tied. They are required to abide by the law and they feel like 
they are restricted from the DOD perspective and they do not 
have any flexibility about what they can do at the local level.
    Obviously, when I kept hearing that over and over, then 
that precipitated this legislation, and we would rather not 
have to go through the legislative route. We would rather 
address it administratively. And I hope that maybe the fact 
that DOD now understands and the Air Force understands that we 
are dead serious about this and we want to get something done 
about it and this committee is ready to move on it, and perhaps 
we can move in the direction, administratively even.
    Mr. Scarborough. Have you talked to the Office of Personnel 
Management or the Air Force about the wage discrepancies in 
your district?
    Mr. Chambliss. Yes.
    Mr. Scarborough. What have they told you?
    Mr. Chambliss. Well, basically the same thing, that their 
hands are tied. That, you know, they are concerned about the 
overall cost for our operation of the depot, and that is a 
concern to them and obviously that is a concern for everybody. 
But if you are having morale problems within the work force and 
you can cure it by spending a few bucks, then you are much 
better off to improve the morale of those folks, increase the 
efficiency of the work force by improving that morale, and I 
think very clearly there is a better response to it and a 
better reaction to it than it just costs too much money. That 
is not good enough.
    Mr. Scarborough. You mentioned morale. Let me ask you, what 
are you finding with morale--how is this affecting morale and 
wage-rate problems, affecting it up and down the line with our 
blue-collar workers?
    Mr. Chambliss. It's been interesting. I will have wage-
grade employees who are so concerned over this issue that they 
will make a special effort to travel the 30 to 45-minute 
distance from Robins Air Force Base to my office, my district 
office in Macon, just to sit down with me and explain their 
problem; about the fact that they have been at Robins as a 
wage-grade employee for X number of years, and they will give 
me their personal history of their pay increases and compare it 
to folks in the General Services as well as folks who are doing 
the same job that they are doing, exact same job on the exact 
same weapons system at Lockheed Martin in Atlanta.
    Mr. Scarborough. Are you hearing complaints also about how 
white-collar workers got 4.8 percent while blue-collar was 
capped? Is that also feeding into this?
    Mr. Chambliss. Yes, that's a part of it too. As in any work 
force, everybody knows basically what everybody else makes and 
they know what pay raises they get. And these folks are feeling 
like they are getting shortchanged. And there is just no 
question but what it is affecting their morale significantly.
    Mr. Scarborough. Mr. Davis, as a leader of that work force, 
would you agree with Congressman Chambliss that morale is being 
severely affected by this issue and others like is?
    Mr. Davis. Yes, sir. When we conduct union meetings, I 
never wanted to hear the issue of pay come up, because in our 
meetings we have the trades and craft people there as well as 
the General Schedule people. And it was dividing the work 
force, because you would have an individual that is a mechanic 
and their spouse would be an office worker, and they would see 
the difference. You know, when you get 50 percent more increase 
in your salary than your co-worker for no reason whatsoever, it 
begins to make you wonder what does your employer feel for you.
    Mr. Scarborough. Right.
    Mr. Davis. And from the perspective of DOD, they say the 
competitiveness. As you stated, 14 percent of the Federal 
Government is wage grade. It does not seem to be a problem with 
the General Schedule people. Their salaries are rolled up into 
those competitive bids just as well as the people turning the 
wrenches. It is a big problem. We need to fix it. We are 
getting to the point where we cannot hire people. You talk 
about readiness, we are going to lose our core capability to 
maintain our weapons systems because people just simply cannot 
afford to work for the Federal Government anymore.
    Mr. Scarborough. And I wanted to ask you about that, 
because that is again, as Saxby said, we had a readiness 
hearing in the Armed Services Committee and we were talking 
about the problem with recruiting and retaining the best and 
the brightest to go out and fight and protect and defend this 
country and American interests across the globe.
    It seems to me we are having the same problems here. What 
are you finding at Robins Air Force Base? Are you having 
difficulty recruiting and retaining the quality personnel to 
make sure that the jets fly and the helicopters get to where 
they are going?
    Mr. Davis. Yes, sir. A good example is the C-5. You know, 
Robins competed for that workload. It was brought in. It has 
been there, I guess, close to 3 years now, and we have probably 
30 percent of the work force on that C-5, contract field team 
people. I have raised the issue: Why are we not hiring? The 
contract said that this is how many people we would have. We 
won the bid. Why are we not hiring organic people for it? And I 
am continuously told they are not out there to hire.
    But the contractor is hiring them, and we had a meeting 
with them and 50 percent of who they hired was in our local 
area, but they are paying a higher wage.
    Mr. Scarborough. Let me ask you that, because I think that 
is important too, not only looking at it on the recruiting side 
but also on the retention side. When somebody leaves Robins Air 
Force Base, where do they go? What employers are you competing 
with? Who are you losing your employees to?
    Mr. Davis. Well, a lot of them are going outside of our 
area. They are staying with the Federal Government, because you 
know the average age is 47, 48. You don't want to throw your 
career away. Many of them are still under the old retirement 
system so it is the ``golden handcuff'' type deal. They are 
going to other installations, they are going to other areas. 
Those that don't, they go to work for the contractor, and they 
turn right back around and they are on our installation doing 
the same work and making more money. And they are not bashful 
about telling the co-workers out there, hey, you know, I'm 
making more money now doing the same work, living in the same 
house. I'm making more money.
    So it is a critical problem.
    Mr. Scarborough. Have you discussed with the Air Force any 
administrative options that they may have for addressing the 
pay problem?
    Mr. Davis. Not at the level that can make that decision. 
All I have seen is written testimony or statements that they 
want to tweak the system and that they want to use some of the 
options that are allowed under the General Schedule system to 
pay bonuses, moving expenses. That's not going to work. That's 
a temporary fix. We've been tweaking the wage-grade system for 
21 years. We need to examine it from a very broad perspective. 
Tweaking it is not going to fix it. We already have two classes 
of people basically when you get into meetings and you talk 
about the pay. Are we going to generate a third and a fourth 
and a fifth? I just don't see the logic behind that.
    Mr. Scarborough. Let me ask you all just a broad question. 
Again, Congressman Chambliss, you have talked around this, as 
you have, Mr. Davis. But specifically, describe the morale at 
Robins Air Force Base.
    Mr. Chambliss. Well, you know, these folks do a great job. 
And I've not just seen them on the line but I've seen the end 
product. They've been declared the best base in the Air Force a 
couple of times since I have been a Member of Congress. So I 
don't want to let you think that there is not quality work 
going on there.
    But by the same token, this work force knows and 
understands that they're not making an equal pay for equal work 
that their colleagues and folks doing the same thing are 
getting paid just within a few miles up the road.
    And that, in and of itself, requires them to go home every 
day and face their family and say, ``You know, we could move to 
Atlanta, or we could drive to Atlanta every day and I could 
provide you with a better quality of life.'' And having to face 
your wife and your children every night when you go home in 
that type of atmosphere obviously causes significant problems, 
once they get up to go to work the next morning.
    So morale has been significantly affected by it. These 
people are glad to have a job. Don't misunderstand me there. 
They are happy doing what they're doing and they are glad to be 
working at Robins Air Force Base. They would rather not have to 
drive that additional number of miles every day to do the same 
job. And with that type of mind-set, it just has a significant 
effect on the overall morale, not just of that employee, but 
the employee working next to them who may be a wage-grade 
employee, may be a contract employee; and for him to be 
standing side by side with a contract employee, knowing that 
the week before that contract employee was getting paid the 
same thing he is, and now they are doing the same job and the 
contract employee is getting $4 or $5 an hour more, and plus he 
is getting a little different benefit, is really where the 
morale problem hits its height. It is significant. It is 
widespread within the work force.
    Jim was telling me earlier, now we're up to 3,500 to 4,000 
employees who are wage-grade employees. So it is a significant 
part of our work force that is directly affected by it.
    Mr. Scarborough. Mr. Davis, could you talk briefly about 
the morale issue?
    Mr. Davis. Mr. Chambliss was correct, they do quality work 
there. The morale is low with respect to their trust in their 
management structure. They do the work that they do because 
they know who's getting on that airplane. They know who's 
getting on that airplane, and they know what they are getting 
on that airplane for.
    If our work force was not at the age that it is, I'm afraid 
we would see mass exodus. When we get the majority of our work 
force under the new retirement system where they can take their 
money with them, there is not going to be any reason for them 
to stay when they talk about sending their kids to college. 
They're dedicated employees. They grumble a lot. It affects 
them in their home life, but they go out there and do their job 
every day.
    So when you talk morale, that is a very broad issue. They 
are going to do their job. They continue to do that job. And I 
believe it is our responsibility to see to it that they are 
paid what they should be paid because they are a very critical 
element in the defense of this country.
    Mr. Scarborough. Do you all have anything else you would 
like to say?
    Mr. Chambliss. I don't think so, Mr. Chairman.
    Mr. Scarborough. Thank you.
    Mr. Davis. I appreciate the opportunity.
    Mr. Scarborough. I appreciate you coming. Certainly 
appreciate, Saxby, all the hard work you have done on this 
issue, and I appreciate your testimony. And we had a unanimous 
consent request to have you sit up on the dais for the next 
panel, so I would like to invite you up and thank you, Mr. 
Davis.
    Mr. Davis. Thank you.
    Mr. Scarborough. We will now go on to our second panel. And 
that is going to consist of Roger Blanchard and Donald 
Winstead.
    Since 1997, Roger Blanchard has served as Assistant Deputy 
Chief of Staff for Personnel for the U.S. Air Force. He is 
responsible for comprehensive plans and policies covering all 
life cycles of military and civilian personnel management, and 
we certainly welcome his participation.
    Donald Winstead currently serves as Assistant Director for 
Compensation Administration at the Office of Personnel 
Management. OPM develops and maintains governmentwide 
regulations and policies on pay administration including basic 
pay setting and locality pay determinations.
    We will start with you, Mr. Winstead.

     STATEMENT OF DONALD WINSTEAD, ASSISTANT DIRECTOR FOR 
 COMPENSATION ADMINISTRATION, OFFICE OF PERSONNEL MANAGEMENT; 
  AND ROGER M. BLANCHARD, ASSISTANT DEPUTY CHIEF OF STAFF FOR 
                   PERSONNEL, U.S. AIR FORCE

    Mr. Winstead. Mr. Chairman and members of the subcommittee, 
thank you for inviting me to testify today on issues affecting 
the pay of wage-grade employees of the Federal Government. You 
asked specifically for information about how the process for 
making wage-grade pay determinations is working in particular 
localities in Florida, Georgia and Oklahoma.
    Before addressing the circumstances of specific local wage 
areas of interest to the subcommittee, please allow me to 
provide a brief overview of the pay system under which wage-
grade employees are paid.
    Since 1972, wage-grade employees have been paid under the 
Federal wage system. This system is separate from the General 
Schedule pay system that covers most white-collar Federal 
employees. The Federal wage system covers about 250,000 Federal 
employees in trade, craft and laboring occupations, which are 
sometimes referred to as blue-collar occupations. The vast 
majority of these employees work for the Department of Defense.
    One of the key statutory principles underlying the Federal 
wage system is that rates of pay are to be maintained in line 
with prevailing levels of pay for comparable work within a 
local wage area. For this reason, wage-grade employees also are 
referred to as prevailing rate employees. To carry out this 
statutory principle, the Department of Defense conducts wage 
surveys of private sector employers in each of 132 local wage 
areas throughout the United States to determine local 
prevailing rates. Prevailing rate employees, including local 
Federal employee union officials, are involved in all aspects 
of the prevailing rate pay-setting process. At the local level, 
labor and management officials work in partnership through a 
wage survey committee to collect the data needed to determine 
local prevailing rates.
    The Office of Personnel Management establishes local wage 
areas under the Federal wage system. Generally, we establish a 
local wage area where large concentrations of Federal 
employment coincide with concentrations of private sector 
employment adequate to determine local prevailing rate factors 
such as commuting patterns, distance from major Federal 
installations. Overall population and the size and type of 
private industrial establishments are used to set wage area 
boundaries. Major military installations and Department of 
Veterans Affairs medical centers typically serve as the cores 
around which local wage area boundaries are constructed.
    As in the case of data collection for local wage surveys, 
prevailing rate employees are involved, through their Federal 
employee union representatives, in the process for determining 
the boundaries of local wage areas. At the national level, 
Federal employee unions participate in this process through 
their membership on the Federal Prevailing Rate Advisory 
Committee. This advisory committee is composed of five 
representatives from agency management, five from Federal labor 
organizations and an independent chairman. The committee 
advises OPM on all aspects of administering the Federal wage 
system, including how local wage area boundaries are set.
    Now, let me address your concerns about wage-grade pay in 
certain local wage areas. We're aware that employees in the 
Macon, GA wage area have expressed concerns about the fact that 
their wage rates are lower than those in the neighboring 
Atlanta, GA wage area. And we have heard similar concerns from 
employees in the Wichita Falls, TX/southwestern Oklahoma wage 
area where wage rates are lower than for comparable employees 
in the Oklahoma City wage area.
    The pay situation in both of these wage areas is largely a 
consequence of the principle that levels of pay are to be 
maintained in line with prevailing levels of pay for comparable 
work within each local wage area. Levels of pay under the 
Federal wage system vary, sometimes substantially, from one 
wage area to another. This consequence is in keeping with the 
purpose behind the prevailing rate principle, that the Federal 
Government should compete on an equal footing with private 
sector employers in each local labor market. To do otherwise 
would unnecessarily drive up overall employment costs for the 
Federal Government and for private sector employees as well.
    The pay situation in the Wichita Falls, TX/southwestern 
Oklahoma wage area has been further complicated by a series of 
pay caps imposed on the Federal wage system during the past 20 
years. Pay caps are enacted through appropriations legislation 
and prevent Federal wage system pay increases from exceeding 
the overall average GS pay increase. The pay cap in fiscal year 
2000 was 4.93 percent. However, even without these pay caps, 
the pay rates in the wage area would still be lower than those 
in the neighboring Oklahoma City wage area.
    The concerns expressed by Federal prevailing rate employees 
in the Jacksonville area likely arise because recent pay 
increases for these employees have been smaller than for 
General Schedule employees who are covered by a separate 
locality pay system. The General Schedule locality pay system 
began in 1994 and is being gradually phased in to reduce the 
pay gap for white-collar Federal employees. But in 
Jacksonville, there is no pay gap for blue-collar Federal 
employees; therefore, prevailing rate employees in Jacksonville 
receive pay increases each year to maintain parity with private 
sector blue-collar pay rates in that area, while white-collar 
Federal employees have been receiving larger pay increases in 
order to reduce a significant pay gap.
    We are convinced that overall, the Federal wage system is 
accomplishing the purposes for which it was established in 
1972. No legislation is needed at this time to enable Federal 
agencies to recruit and retain skilled blue-collar workers.
    No Federal agency has made us aware of any significant 
recruitment or retention problems affecting Federal agencies in 
the Jacksonville, FL; Macon, GA; or Wichita Falls, TX/
southwestern Oklahoma wage areas. But if this situation 
changes, you can be sure that OPM will work expeditiously to 
use existing administrative authorities to deal with any 
problems that are brought to our attention.
    For example, at the request of an employing agency, OPM may 
establish special salary rates to address specific recruitment 
or retention problems. In addition, we are now considering a 
request from the Department of Defense to authorize recruitment 
and relocation bonuses and retention allowances for Federal 
wage system employees. If this request is approved, Federal 
agencies will be able to make such payments on a case-by-case 
basis or for groups of employees in certain situations without 
prior OPM approval.
    This concludes my remarks and I would be pleased to answer 
any questions you may have.
    Mr. Scarborough. Thank you, Mr. Winstead.
    [The prepared statement of Mr. Winstead follows:]

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    Mr. Scarborough. Mr. Blanchard.
    Mr. Blanchard. Mr. Chairman, and distinguished members of 
the Civil Service Subcommittee, it is a great honor to be here 
representing the men and women of the U.S. Air Force, and to 
report to you on wage-grade pay determinations affecting Air 
Force blue-collar civilian employees in particular localities 
in Georgia and Oklahoma. I request my full statement be entered 
in the record, and I have a few remarks to make.
    Mr. Scarborough. Without objection, so ordered.
    Mr. Blanchard. I am sorry that Dr. Disney could not be here 
in person for OSD, but I would like to thank her for providing 
a comprehensive statement covering the process for setting pay 
in the Federal wage system and describing the situation at 
several of our Air Force bases, and finally for outlining the 
administrative remedies available to installations that 
encounter recruiting and retention problems.
    [The prepared statement of Ms. Disney follows:]

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    Mr. Blanchard. Our focus in the Air Force is to ensure that 
we have a fair and equitable pay system for all employees, in 
particular a blue-collar wage system that assures the Air Force 
is competitive in today's booming economy, marketing the Air 
Force as an employer of choice, including attracting and hiring 
the highest-skilled employees available into our positions. We 
are working to retain, maintain, and sustain this critical part 
of our total force. We know that when our compensation programs 
are working properly, there is minimum turbulence in our work 
force, and recruiting and retention problems do not exist.
    The other side of this balancing act is that we have an 
obligation to ensure our blue-collar work force is cost-
effective and efficient. This is becoming more important as we 
go through the competitive sourcing process for many of our 
functions. We operate in a competitive environment today, and 
in many cases the margins are very close between the costs of 
in-house and contract labor. We owe it to our dedicated 
employees to be careful that as we tweak the compensation 
programs, we do not create situations where our people are no 
longer competitive in contracting-out situations.
    As indicated in your statements and Congressman Chambliss's 
statements, our Air Force wage-grade work force is critical to 
the day-to-day mission of the Air Force as well as to our 
continued future as the best aerospace force in the world. The 
work they do, particularly in aircraft maintenance, has a 
direct mission impact and contributes directly to the readiness 
of the U.S. Air Force.
    These are skilled and dedicated employees, professionals in 
their crafts, and we have invested substantially in them to 
ensure we have a capable in-house work force to support 
America's Air Force. We believe the Federal wage system can 
operate to provide fair and competitive compensation for our 
valuable employees and that it currently contains enough 
administrative flexibility to address specific recruiting and 
retention problems in a targeted and cost-effective way.
    We do not believe a legislative solution is necessary or 
desirable. However, we are interested in adding flexibility in 
the system by expanding the authority to offer recruitment and 
relocation bonuses and retention allowances authorized in the 
Federal Employees Pay Comparability Act to Federal wage system 
employees. Currently, these three Rs are only available to 
General Schedule employees. We believe these additional 
flexibilities together with the administrative flexibilities 
already available would further enhance our ability to react 
quickly to specific recruiting and retention problems.
    Once again I thank you for the opportunity to be here, and 
I will be glad to answer any of your questions.
    Mr. Scarborough. Thank you. I appreciate it.
    [The prepared statement of Mr. Blanchard follows:]

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    Mr. Scarborough. Let me ask both of you, before we start 
asking questions, if you will stand up and take the oath.
    [Witnesses sworn.]
    Mr. Scarborough. Now you are prepared to answer tough 
questions from Saxby Chambliss. Saxby, why don't we defer to 
you?
    Mr. Chambliss. Thank you, Mr. Chairman.
    Mr. Winstead, can you tell me what comparison is made for 
the wage-grade salary determination at Robins?
    Mr. Winstead. Every year the Department of Defense conducts 
a wage survey in that local wage area. We conduct--the 
Department of Defense conducts full-scale surveys every other 
year, and in the years in between they conduct surveys by 
telephone or mail to update those surveys, and the Department 
of Defense compares jobs at a similar level of work.
    For example, there are a number of jobs under the system 
that are graded at a similar level, and so the Department of 
Defense looks for jobs having similar level of work in the 
private sector in the Macon wage area, and surveys private 
sector establishments that have those kinds of jobs to come up 
with an overall salary level for the private sector and 
compares that with the rates that are being paid to Federal 
wage-grade employees in that area.
    Mr. Chambliss. Do you know, specifically, though, who those 
wage-grade employees' jobs are compared with?
    Mr. Winstead. There are a number of jobs that are graded at 
wage-grade 10 level, which is, I believe, the job--the level at 
which aircraft mechanics are graded under the system. And, for 
example, those would include motor grader operators, automotive 
mechanics, welders, pipe fitters, sheet metal workers, 
electricians, and machinists.
    Mr. Chambliss. But again, can you tell me who they are 
compared with? Do you have a list of folks that were called to 
check to see how much they were being paid to compare the wage-
grade folks at Robins with?
    Mr. Winstead. Your question is which employers?
    Mr. Chambliss. Yes.
    Mr. Winstead. I don't have a list of the employers. I can 
defer to the Department of Air Force or get back to you on that 
question.
    Mr. Chambliss. I would like a list of those as far as the 
last survey that was conducted. Is that survey, in the case of 
Robins, limited to Bibb County and Houston County?
    Mr. Winstead. No, there are other counties in the survey 
area in the Macon wage area.
    Mr. Chambliss. All right. What determines how far the area 
would go that the survey would include? What is the criteria 
there?
    Mr. Winstead. We look at areas that have large numbers of 
wage-grade employees, at least 100 employees in that county. 
And we look at the private sector establishments in those 
areas.
    Mr. Chambliss. Well, of course, the problem with that is 
once you leave Houston and Bibb County, you're in rural areas 
all around Robins Air Force Base and you simply don't have, Mr. 
Winstead, any comparable jobs there. And that's been my 
continuing problem with this; that, sure, I understand that you 
can compare a mechanic to a motor grader to a mechanic on an 
airplane just from the standpoint that they are both mechanics. 
But the level of sophistication of that job to ensure that that 
warfighter has a properly prepared weapons system that that 
mechanic is working on doesn't compare, really, with the 
mechanic that is working on a motor grader.
    And that is my problem that I have had continually with 
this. You are not comparing apples to apples, you are comparing 
apples to oranges when you try to do that.
    Second, the area is obviously very limited. This has been 
somewhat of a fuzzy area that I get every time I ask this 
question about what is the area, what counties are included? 
But as I say, when you get outside of Macon and Bibb County, if 
you go to Bleckley County, you have no heavy construction folks 
there. Twiggs County, you have no heavy construction folks 
there; no airplane mechanics that you can compare them with.
    But yet if you go to Delta Airlines at the Atlanta airport, 
which is approximately 80 miles away, you have a strong 
contingent of airplane mechanics that you could look at.
    And I am just continually bothered by that. And I know that 
you recently in the State of Rhode Island--excuse me, in the 
Boston area--that you have proposed adding the entire State of 
Rhode Island to the Boston locality pay area; and that in 
California, you are proposing adding Monterey, CA to the San 
Francisco pay area for the purpose of comparing wages. Can you 
tell me what the difference would be, then, why we don't 
include Atlanta in the area for Robins for the same reasons 
that you are adding areas in those particular localities?
    Mr. Winstead. Well, of course, we are talking about two 
different pay systems to start with. The pay system for the 
white-collar employees is the General Schedule, and we do have 
a locality system for that work force. The folks in Rhode 
Island--the agencies in Rhode Island presented some issues to 
the Federal Salary Council last week regarding recruitment and 
retention problems there that lead the Federal Salary Council 
to make a recommendation regarding adding Rhode Island to the 
Boston locality pay area. And the President's PAYGEN, which 
consists of OPM and the Office of Management and Budget and the 
Department of Labor, agreed with that recommendation.
    I think in general, though, our observation would be that 
the local labor market generally is broader in scope 
geographically for white-collar-type workers in professional, 
administrative, technical-type jobs as opposed to the trades 
craft and labor kinds of occupations that are covered by the 
Federal wage system. And so under the Federal wage system, we 
generally have smaller pay areas or wage areas.
    Mr. Chambliss. Why would that be, though? Why does that 
make sense to do that? Why don't you treat your blue-collar 
employees the same way you do for white-collar employees?
    Mr. Winstead. We think the labor market for those two 
categories of employees are different and we believe it makes 
sense to compare blue-collar workers with blue-collar workers 
and white-collar workers with white-collar workers.
    Mr. Chambliss. I understand that, and surely that is the 
way to do that, but you are saying that the area encompassed by 
the survey for white-collar employees is broader than the area 
for blue-collar employees, so really you are discriminating 
against those blue-collar employees if that is in fact the 
case. And my question is why do you do that? Why don't you have 
a broader area for the blue-collar workers?
    Mr. Winstead. Again, I would say that the local labor 
markets for most occupations that are covered by the Federal 
wage system is generally smaller than is the case for most of 
the occupations that are covered by the General Schedule.
    Mr. Chambliss. Well--and that is a classic reason why, Mr. 
Winstead, in the case of airplane sheet metal workers, airplane 
mechanics, folks that pull seats out of airplanes and repair 
those seats and put them back in airplanes, there is nobody 
else in the Macon area that does that. That's exactly why we 
are having this conversation today and exactly why, if you go 
80 miles up the road, you are going to find people that do 
that, that ought to be compared to the employees at Robins.
    You just answered my question specifically, and I am glad 
that is exactly the way you feel.
    Now, can you explain why a wage-grade 10, level 5, position 
in Atlanta would make 23 percent more than a wage-grade 10, 
step 5, at Robins?
    Mr. Winstead. Again, that has to do with the local labor 
market for those jobs in those two areas. The Department of 
Defense conducts surveys in the Macon wage area and conducts 
separate surveys in the Atlanta wage area, and the conclusion 
based on those surveys is that the local prevailing rates in 
the Atlanta area are higher than the local prevailing rates in 
the Macon wage area.
    Mr. Chambliss. Let me ask either of you if you know of--
have any personal knowledge of why we don't extend the area 
north to Atlanta where there are these jobs at Lockheed? Mr. 
Blanchard, do you have any comment on that? Do you have any 
knowledge about that?
    Mr. Blanchard. I do not have any personal knowledge about 
why the wage area has not been extended. I know that the 
process for doing that requires a recommendation to come 
forward through the system, the prevailing rate system for 
consideration, and is a product of a labor-management effort to 
bring that kind of issue forward.
    I also know that Robins, the commander at Robins presently 
is working within the system to identify additional industries 
and jobs within the survey area to be surveyed, and included in 
the survey process in an attempt to ensure that a wider range 
of industries are included in that process. Of course, 
industries may or may not agree to participate in the survey 
process, and that's another issue that needs to be resolved.
    If, in fact, we are able to identify additional industries 
within the survey area for inclusion in the survey process, 
getting them to agree to participate is the next step. And 
hopefully by doing that, then we begin to see the reflection of 
their rates in the overall rate.
    Mr. Chambliss. You mentioned that it's preferable from the 
Air Force perspective to try to resolve this administratively 
as opposed to legislatively, and I agree. I wish we could come 
to some resolution of it. What can the Air Force do, what sort 
of steps can you take from a positive perspective to try to 
resolve this administratively?
    Mr. Blanchard. We're working with Robins now to support 
their effort to gather the kind of data that the system 
requires to reflect the recruiting and retention problems, 
either present or anticipated, that are being experienced or 
anticipated to be experienced, to justify either advances in 
hire rates which would be helpful in a recruiting sense and/or 
special salary rates which might be helpful in a retention 
sense, and are targeted to the occupation--specific occupation 
where the special salary rates would be required.
    That, however, is dependent upon demonstrating the 
recruiting and retention problems and/or the serious likelihood 
of those problems in the system, so that the administrative 
action can be taken to either authorize one or the other of 
those actions. Robins is looking at that activity now, based on 
their experience. The commander is very much engaged in that 
process both with the DOD wage-fixing activity as well as with 
us, and we're supporting that effort. We think that is the 
right way to go.
    Mr. Chambliss. Well, you heard what I had to say about 
contract workers working side by side with wage-grade 
employees. And Mr. Davis even gave you some specific numbers on 
what contractor employees make versus what wage-grade employees 
make. Now, knowing that scenario, knowing that these guys were 
both wage-grade employees, they were working side by side, both 
of them making $16 an hour, then 2 weeks later, the contractor 
employee, who is the exact same employee doing the exact same 
job, stands side by side with that individual and he's all of a 
sudden making $19 an hour, sitting there telling his buddy, 
well you come to work for this guy and you will make $19 an 
hour, is that fair?
    Mr. Blanchard. I'm not going to comment on whether it is 
fair. I will tell you that one of the things that we have 
asked, that the Robins commander is asking, is that the rates 
of contractor employees at Robins be included in the wage 
survey data so that those can be reflected in the overall rates 
for setting the wage-grade pay as well. Which, if it is unfair, 
then that would correct the inequity.
    Mr. Chambliss. And I think that will certainly help the 
problem, and I think what you're going to find is that they are 
paying Atlanta wage rates. It is exactly what they are paying, 
because that is where the contractors come from, that's where 
the employees come from, and that's where the contractors come 
from.
    In that same vein--I mean, when we hire a contract 
employee, that employee is really still paid by the Air Force, 
correct?
    Mr. Blanchard. Through the contractor; yes, sir.
    Mr. Chambliss. Yes. And when we hire that contractor to do 
a job, we fully expect that contractor not just to do the job, 
but he's going to make money on that job, would he not? 
Otherwise, he's not going to stay in business.
    Mr. Blanchard. Yes, sir.
    Mr. Chambliss. So my point being, that if we have the 
contractor wage rate higher than our wage-rate employees, and 
built into that is not just a higher wage, but some profit 
factor, then it just looks to me like that the Air Force ought 
to be making that profit, if nothing else; and in the long-term 
we are going to be saving money, because we are going to hire 
less contractor employees, we are going to be paying our folks 
a little bit more, we are going to be improving morale, we are 
going to be thus improving efficiency of those employees. And I 
could just tell you, having been in the private sector and 
having to hire folks and fire folks that did not do the job for 
one reason or another, it just makes absolutely perfect sense 
that we ought to be hiring those folks ourselves and paying 
them a little more rather than paying that contractor plus 
paying that contractor's built-in profit. It almost makes so 
much sense that the folks in Washington can't understand it. 
And I am not saying the Air Force doesn't understand it.
    Let me just ask you, because I have heard from time to 
time, as I mentioned a minute ago, that one reason that we 
cannot change the pay scale of our wage-rate folks is that it 
is going to have a financial impact on the base. We do want to 
make sure that we provide quality work at reasonable rates in 
order to be competitive.
    Could both of you-all comment on this issue of what effect 
raising wages for wage-grade employees would have on our 
ability to compete in the open market for our various 
contracts?
    Mr. Blanchard. From our perspective, we need to be 
concerned, and we are concerned, about the cost-effectiveness 
of the work force and controlling those costs as of one factor 
along with other factors in terms of providing the service that 
we provide and maintaining the readiness of the force.
    To the degree that contractor rates or that our wage rates 
rise and increase the cost of our labor, I'm not exactly sure 
how that is reflected in wage rates that private employers must 
pay in terms of Department of Labor wage rates under the 
Contract Act. I'm not an expert in those areas. However, our 
bottom-line concern has to be on maintaining a cost-effective 
and efficient work force, whether it is a contractor work force 
or an in-house government work force. And our focus needs to be 
on the product and the service delivery of those work forces, 
whether they are in an in-house work force or a contractor work 
force.
    Competitiveness is becoming more of an issue, as I 
indicated in my opening statement. And the ability of the in-
house work force to compete on an equal basis with the 
contractor is obviously a concern to the work force, to the in-
house work force, and one that we need to be concerned about as 
well as we rely on either of those work forces to provide the 
services that we are procuring.
    I think with regard to the overall competitiveness, it may 
end upon being sort of a wash in terms of the labor costs 
associated with each contract. But that's a product of the A-76 
process under OMB Circular A-76 on contracting out, and I am 
admittedly not an expert in that area.
    Mr. Winstead. Representative Chambliss, we would defer to 
the Department of Defense's observations on the competitiveness 
and the issue of contracting out. I would just say that the--of 
course, the Office of Personnel Management is interested in 
maintaining a system that allows the Federal Government to get 
the work done. And that's what we believe that the Federal wage 
system is designed to help do and we will, of course, depend on 
the agencies--in this case the Department of Defense--to let us 
know when there is a problem with the system so that we can use 
some of the administrative flexibilities that are available to 
try to address the situation.
    Mr. Chambliss. How long has the current system been in 
place?
    Mr. Winstead. It was established in 1972.
    Mr. Chambliss. OK. So 28 years, roughly, almost 30 years. 
During that time, Mr. Blanchard, you and I were talking about 
earlier that we have significantly downsized the force 
structure, which has caused some downsizing of our civilian 
work force also. But we have certainly changed the way we do 
business within the Air Force from the standpoint of Air Force 
personnel. And after 28 years, I think it may be time that we 
took a look at maybe some new ideas and some creative things 
that ought to be done to ensure that we continue not just to 
recruit, but to retain these folks and that we don't lose them, 
as Mr. Davis had reference to.
    And I want to make sure that you all understand and that 
you convey to the folks that you are going to go back to and 
report on this hearing that we are dead serious about this 
issue and we want to see something done about it.
    I don't like employees coming to me and saying that they 
like living in Warner Robins, GA, but they are considering 
moving to Atlanta because they are going to be able to make 
more money and provide a better education opportunity for their 
children, because there is such a significant difference in 
that wage-grade scale in Atlanta and in Warner Robins.
    And I should have mentioned this story earlier, but I will 
close with this, Mr. Chairman, and I think you will appreciate 
this. I was on the line 1 day talking with a particular 
individual who is a wage-grade employee. And he related a story 
to me of a guy who worked next to him doing the exact same job, 
who was fired from his position by the Air Force for the right 
reasons. He just simply was not doing his job. Two weeks later 
he is hired by the contractor, brought back to the same job, 
right next to this individual, and he is making $4 to $5 an 
hour more than the wage-grade employee.
    Now, when we talk about morale-busting, folks, that will 
bust your morale of your work force. And everybody out there 
knew the guy should have been fired and he shouldn't have been 
hired by the contractor, but he was. And it caused some very 
serious problems just in that one particular instance.
    Mr. Chairman, I thank you very much and I apologize for 
going probably too long.
    Mr. Scarborough. Actually, you were given 5 minutes and you 
went 4 minutes and 59 seconds. I would like to also 
congratulate you on using the official word, which is now in 
the lexicon of all Republicans, by accusing Mr. Winstead of a 
``fuzzy'' answer. I thought that was very good. At least he did 
not go to the ``fuzzy numbers'' thing. And notice Mr. Winstead 
did not sigh while you were asking the questions. I think we 
have elevated this debate to a higher level than others.
    So, Mr. Chambliss did ask a question that I did not 
understand the answer to and would like a clarification. I 
guess it would be easy for people from a distance from 
Washington, DC, who have been to Macon, GA and Atlanta, GA, to 
say, gee, they really are two separate types of cities, and 
maybe we could understand about the wage differences until he 
brings up the fact that Rhode Island is connected to Boston, 
all of Rhode Island, and Monterey is connected to San 
Francisco.
    And I don't know if--I am sure you have been in Monterey 
and San Francisco and Rhode Island and Boston. Obviously, two 
very distinct cultures. And I would think that somebody that is 
familiar with those areas, even more distinct than Macon and 
Atlanta.
    What was your answer as to why Rhode Island was in the same 
wage area as Boston, and Monterey the same as San Francisco, 
but Macon not connected with Atlanta?
    Mr. Winstead. The General Schedule has a locality pay 
system and under that system we have 32 locality pay areas, 
many fewer than under the Federal wage system. Those locality 
pay areas are designed to coincide with metropolitan 
statistical areas. And the boundary of the Boston metropolitan 
statistical area includes many of the--much of the eastern part 
of Massachusetts, but it did not include portions of Rhode 
Island. And, similarly, in the San Francisco area, the San 
Francisco metropolitan area does not include Monterey County.
    However, the Federal Salary Council, which is responsible 
for making recommendations regarding the administration of the 
white-collar pay system, recommended to us last year that those 
two locations that immediately adjoin Boston in the one case 
and San Francisco in the other, should be added to those 
localities for the General Schedule locality pay purposes. They 
presented--the individuals from those areas presented 
compelling cases to the Federal Salary Council and the Federal 
Salary Council subsequently recommended to us that those 
changes be made. And the PAYGEN has agreed to those changes.
    Mr. Scarborough. I guess that is what I am saying. I am not 
taking this up with you here, but those people that made those 
arguments and made those decisions were inaccurate. Again, you 
look at San Francisco, just go a little bit south to Los Gatos 
or to Palo Alto or further south to San Jose, those areas are 
radically different than San Francisco; but you keep going 
south to Monterey, and I think you are just in a completely 
different world. And to connect those areas and to connect 
Rhode Island with Boston--some parts of Rhode Island are fairly 
rural. I just think it's--I just don't see the consistency 
there. And certainly I think, Mr. Chambliss, that is something 
that, certainly to me at least, would be a compelling argument 
to connect Macon with Atlanta.
    Let me ask a question about retention and recruitment. Mr. 
Blanchard, have you discussed the issues with OPM as far as 
your requests for bonuses and other incentives to help for 
retention and recruitment?
    Mr. Blanchard. That request has gone to OPM via OSD, and it 
is under active consideration by OPM at the present time and we 
have discussed it. They are obviously aware that we are in 
favor of it and that it provides an additional set of 
flexibilities, as I indicated, that would be useful to target 
recruiting and retention.
    Mr. Scarborough. OK. And, of course, Mr. Davis testified 
earlier that he did not think that would be enough and that was 
a piecemeal solution. But, still, are you confident that they 
are going to end up accepting that proposal from the Air Force?
    Mr. Blanchard. I hope so. I hope so. I think that together, 
as I said, with the administrative flexibilities that are in 
the Federal wage system already--that is, the ability to set 
advanced in-hire rates and the ability to set special pay rates 
on an occupational basis--this would be more flexibility to 
target at specific recruitment and retention problems within a 
particular wage area. And it is cost effective in that it 
allows you to target to the specific area where there is a 
problem, rather than applying a generalized increase that may 
or may not solve other problems.
    Mr. Scarborough. Mr. Winstead, has OPM made a decision? Are 
they close to making a decision? Can you give us an update?
    Mr. Winstead. We have not yet made a decision but I believe 
we are very close to reaching a conclusion of our review of the 
request that we received from the Department of Defense, and 
that it is very likely that we will make that decision very 
quickly.
    Mr. Scarborough. What criteria is OPM using right now to 
come to a decision on the Air Force request?
    Mr. Winstead. We are looking at the question about which 
groups of employees generally are eligible to receive these 
kinds of bonuses and make--taking a look at whether or not we 
believe it would be appropriate to extend that authority to the 
Federal wage system.
    Mr. Scarborough. Has OPM extended that authority to other 
agencies?
    Mr. Winstead. We have extended that authority to other 
groups of--other pay systems outside the general pay schedule 
in the past, yes.
    Mr. Scarborough. Can you cite a few of those?
    Mr. Winstead. I could get you a list of those for the 
record.
    Mr. Scarborough. If you could just, in the next 2 weeks if 
you could, and we will certainly put that in the record.
    OK. I appreciate it. Mr. Chambliss, do you have any 
additional questions or comments?
    Mr. Chambliss. No, Mr. Chairman, I think that covers it. 
Thank you very much.
    Mr. Scarborough. Great. Thank you. I thank both of you 
gentlemen for coming and testifying today. Certainly it was 
helpful. Mr. Davis, I thank you again. And, Congressman 
Chambliss especially, thank you for bringing this issue to the 
forefront.
    I ask unanimous consent that the statement of Elijah 
Cummings, ranking member, be entered in the record.
    And I ask unanimous consent that the statement of Colleen 
M. Kelley, the president of the National Treasury Employees 
Union, be included as a part of the record.
    Without objection, so ordered.
    We are adjourned.
    [Whereupon, at 11:25 a.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information referred to follows:]

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