[Senate Hearing 107-470]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-470
 
        THE FEDERAL WORKFORCE: LEGISLATIVE PROPOSALS FOR CHANGE
=======================================================================



                                HEARINGS

                               before the


INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION


                               __________

                         MARCH 18 AND 19, 2002

                               __________

      Printed for the use of the Committee on Governmental Affairs








                         U.S. GOVERNMENT PRINTING OFFICE
79-887                            WASHINGTON : 2003
___________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001









                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 PETE V. DOMENICI, New Mexico
THOMAS R. CARPER, Delaware           THAD COCHRAN, Mississippi
JEAN CARNAHAN, Missouri              ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota               JIM BUNNING, Kentucky
           Joyce A. Rechtschaffen, Staff Director and Counsel
              Richard A. Hertling, Minority Staff Director
                     Darla D. Cassell, Chief Clerk

                                 ------                                

INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 THAD COCHRAN, Mississippi
ROBERT G. TORRICELLI, New Jersey     TED STEVENS, Alaska
MAX CLELAND, Georgia                 SUSAN M. COLLINS, Maine
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
JEAN CARNAHAN, Missouri              PETE V. DOMENICI, New Mexico
MARK DAYTON, Minnesota               ROBERT F. BENNETT, Utah
                Nanci E. Langley, Deputy Staff Director
                  Dennis Ward, Minority Staff Director
                      Brian D. Rubens, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................ 1, 45
    Senator Voinovich............................................ 2, 46

                               WITNESSES
                         Monday, March 18, 2002

Hon. Kay Coles James, Director, Office of Personnel Management...     6
Hon. David M. Walker, Comptroller General, General Accounting 
  Office.........................................................     7
Colleen M. Kelley, National President, National Treasury 
  Employees Union (NTEU).........................................    21
Bobby L. Harnage, Sr., National President, American Federation of 
  Government Employees, AFL-CIO..................................    23
G. Jerry Shaw, General Counsel, Senior Executives Association....    25
John C. Priolo, General Executive Board Member, Federal Managers 
  Association (FMA)..............................................    27

                        Tuesday, March 19, 2002

Paul C. Light, Senior Advisor, National Commission on the Public 
  Service, and Vice President and Director of Governmental 
  Studies, The Brookings Institution.............................    48
Carolyn Ban, Dean, Graduate School of Public and International 
  Affairs, University of Pittsburgh, and President, National 
  Association of Schools of Public Affairs and Administration....    49
Max Stier, President, Partnership for Public Service.............    51
Steven J. Kelman, Professor of Public Management, John F. Kennedy 
  School of Government, Harvard University.......................    53

                     Alphabetical List of Witnesses

Ban, Carolyn:
    Testimony....................................................    49
    Prepared statement...........................................   207
Harnage, Bobby L., Sr.:
    Testimony....................................................    23
    Prepared statement...........................................   128
James, Hon. Kay Coles:
    Testimony....................................................     6
    Prepared statement...........................................    77
Kelley, Colleen M.:
    Testimony....................................................    21
    Prepared statement...........................................   111
Kelman, Steven J.:
    Testimony....................................................    53
    Prepared statement...........................................   221
Light, Paul C.:
    Testimony....................................................    48
    Prepared statement...........................................   191
Priolo, John C.:
    Testimony....................................................    27
    Prepared statement...........................................   178
Shaw, G. Jerry:
    Testimony....................................................    25
    Prepared statement of Carol A. Bonosaro with attachments, 
      submitted by Mr. Shaw......................................   144
Stier, Max:
    Testimony....................................................    51
    Prepared statement...........................................   215
Walker, Hon. David M.:
    Testimony....................................................     7
    Prepared statement...........................................    95

                                Appendix

Majority Subcommittee Memorandum ``The Federal Workforce: 
  Legislative Proposals for Change,'' with attachments...........   232
``Changing Role of NRSROs'' submitted by Glenn Reynolds, 
  CreditSights, Inc..............................................   241

Questions and responses from Senators Akaka and Voinovich for:
    Ms. James....................................................   263
    Mr. Walker...................................................   277
    Ms. Kelley...................................................   284
    Mr. Harnage..................................................   286
    Mr. Shaw.....................................................   289
    Mr. Priolo...................................................   291
    Ms. Ban......................................................   294

Questions and responses from Senator Akaka for:
    Mr. Light....................................................   299
    Dr. Kelman...................................................   300

Questions and responses from Richard N. Brown, Directing Business 
  Representative, National Federation of Federal Employees 
  Federal District I, and Frank Carelli, Jr., Director, 
  Government Employees, International Association of Machinists 
  and Aerospace Workers, AFL-CIO.................................   301


        THE FEDERAL WORKFORCE: LEGISLATIVE PROPOSALS FOR CHANGE

                              ----------                              


                         MONDAY, MARCH 18, 2002

                                     U.S. Senate,  
                Subcommittee on International Security,    
                     Proliferation, and Federal Services,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:36 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka, Chairman of the Subcommittee, presiding.
    Present: Senators Akaka and Voinovich.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. The Subcommittee hearing will come to order. 
This morning, we begin 2 days of hearings on the Federal 
workforce and several legislative proposals offered by Senator 
George Voinovich and Senator Fred Thompson.
    We have with us a distinguished group of witnesses both 
today and tomorrow who will share their insights on how to best 
meet the challenges of recruiting and retaining the people that 
agencies need to carry out their missions. I thank you all for 
being with us today and I wish to extend a special hello to 
John Priolo, Director of the Hawaii Chapter of the Federal 
Managers Association, who will testify on behalf of his 
association's President, Michael Stiles.
    Unfortunately, Senator Cochran and Senator Thompson are 
unable to be with us today. However, I am delighted to be 
joined by my colleague, and I would say buddy and good friend, 
the Senator from Ohio, who has championed the importance of a 
strong Federal workforce. I appreciate his support today, just 
as I was pleased to support him during the many hearings he 
held on these issues.
    I will not recount statistics or talk about my concern over 
the loss of critical institutional knowledge, and I leave the 
discussion of the bills to our panelists. I will, however, talk 
about the men and women who make up our government's workforce. 
I am pleased that in the wake of the terrorist attacks last 
fall, anti-government rhetoric has abated and a higher 
percentage of young Americans say they would consider Federal 
service as a job option.
    We saw that for every essential service these attacks 
disrupted, the government responded quickly and effectively. 
Our Nation's recovery is being aided through the talents and 
professionalism of our Federal workforce, who are selflessly 
supporting the efforts of armed forces abroad. After September 
11, more than 2,100 Federal employees were deployed in disaster 
response teams, and to this day, thousands of Federal employees 
are responding to the war on terrorism as a part of their 
normal duties.
    The Federal workforce is this Nation's backbone and I think 
it is time to drop the pejorative use of the word 
``bureaucrat.'' Our hearing continues the dialogue on what 
needs to be done to make government service more attractive to 
young people and to inspire and compensate those who have 
chosen government as their job choice.
    Just last week, this Subcommittee heard from agency and 
expert witnesses that the lack of employees with language, 
science, and technical skills threaten our national security. 
That hearing focused on S. 1800, a bill I introduced with 
Senators Durbin and Thompson and cosponsored by Senators 
Cochran, Collins, and Voinovich. As we examine the Thompson and 
Voinovich legislative proposals, I want to make sure that the 
bills will not cause harm to either employees or their 
agencies.
    Federal agencies have been operating under flattened 
budgets for years and the administration's fiscal year 2003 
budget proposal, after removing funding for homeland security 
and defense purposes, would see this discretionary spending 
decline by 1 percent. This leaves no room to fund recruitment, 
retention, and training programs. Moreover, the lack of parity 
between the pay of civilian workers and military service 
members sends the wrong message to prospective and current 
Federal employees.
    I support good management and I want to make sure that we 
have the right people and the right skills to operate the 
government in an effective, efficient, and economic manner. But 
I do not see how we can expect young people to consider 
government employment if we are unable to provide them with 
comparable pay, benefits, and opportunities for training.
    How do we advertise the government as an employer of choice 
if agencies lack funding for incentives, including money to 
implement fully the student loan repayment program? How do we 
balance recruitment and retention goals with this 
administration's goals for competitive sourcing? These are 
among the questions I hope we will answer today. There must be 
a commitment from the highest levels of government and a 
willingness to allocate the resources necessary to achieve a 
strong and vibrant workforce.
    Again, I wish to thank our witnesses for being with us 
today. You deserve our gratitude for your commitment to our 
Federal service system, and together, we face this new kind of 
national emergency in our country.
    Now, I would like to yield to Senator Voinovich for any 
statement he may have.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Mr. Chairman. I want to 
extend my deep appreciation to you for holding this hearing on 
The Federal Workforce: Legislative Proposals for Change. I 
would also like to welcome our witnesses and I want to thank 
you for being here today.
    Mr. Chairman, I would like to congratulate you on the 
hearing that we held last week on S. 1800, the homeland 
security workforce bill you introduced with Senators Durbin and 
Thompson this past December. I am very happy to be a cosponsor 
of that legislation. I think the witnesses offered some 
excellent testimony on the national security aspect of the 
human capital crisis, demonstrating again the real urgency of 
this issue.
    As you know, Mr. Chairman, reforming the Federal 
Government's strategic human capital management has been my 
highest priority as a Member of this Subcommittee and I know 
you share my concern over this human capital crisis. You have 
been an important leader on this issue and I want to thank you 
personally for attending all of the hearings I held on human 
capital during the time that I was Chairman of the Oversight of 
Government Management Subcommittee. It is encouraging to me 
that we have forged a productive bipartisan partnership on this 
issue, which is so important to our Nation.
    Because of your participation in those hearings, we were 
able to produce a report called ``Report to the President: The 
Crisis in Human Capital,'' summarizing the hearings that we had 
and making recommendations for action, and that was the report 
that we were able to give the incoming new administration, a 
benchmark on our progress at that time.
    In addition to the Subcommittee's activities, other 
government offices and agencies are addressing the human 
capital crisis, which is very encouraging, and several have 
joined us today. In January 2001, Comptroller General David 
Walker designated strategic human capital management as a 
governmentwide high-risk area, and he has also been elevating 
the profile of and developing solutions to this problem as a 
top priority. To quote Mr. Walker's admonition, and David, this 
is going to be famous, ``Too often, we have treated Federal 
employees as costs to be cut, rather than assets to be 
valued.'' I think that is really it in a nutshell. That is what 
our past has been and we need to change that.
    Last August, the Bush Administration prioritized strategic 
management of human capital as its No. 1 governmentwide 
management initiative. OPM Director Kay James has done an 
excellent job moving her agency and the Federal Government in 
the right direction when it comes to Federal personnel issues. 
Kay, I really appreciate how conscientious you have been in 
picking the ball up and carrying it, and we are pleased that 
you are here today.
    Mr. Chairman, I have also been working closely with other 
Federal organizations, particularly our employee unions, 
organizations that are important to our efforts to address the 
Federal Government's human capital challenges. Bobby and 
Colleen, I am grateful for the partnership that we have forged 
during my time here in the U.S. Senate.
    I would like to take this opportunity to state publicly 
that my legislation is just a down payment on reform. I would 
like to encourage you, Mr. Chairman--and you have already 
spoken about this--to hold hearings later this year on issues 
such as pay comparability and compensation, health care 
benefits, and the performance of Federal agencies.
    Just last week, Steve Barr's ``Federal Diary'' column in 
The Washington Post offered another example of how far Federal 
pay lags behind comparable positions in the private sector--and 
often among agencies--citing that there was a 40 percent gap 
between the SEC and other banking agencies. A comprehensive 
examination of these important but long-overlooked aspects of 
the human capital crisis and a strategic plan for action are 
urgently needed as next steps in the process of reforming the 
Federal Government's personnel systems. I know, Kay, you have 
put together a draft to try to respond to that problem, and it 
is going to cost more money. Let us face it. We are just going 
to have to be realistic and face up to it.
    I would also like to acknowledge Carol Bonosaro of the 
Senior Executives Association. Carol has provided a number of 
excellent recommendations for strengthening our legislation, as 
has John Priolo of the Federal Managers Association.
    A great deal of action has been taken to address the human 
capital crisis over the last several years, and we are building 
momentum daily for the passage of reform legislation in 
Congress. The continued involvement of these people and 
organizations and many other stakeholders is critical to our 
success in solving these problems. I would particularly like to 
thank Pat McGinnis for her leadership on the human capital 
crisis as President for the Council for Excellence in 
Government. Pat has just done a wonderful job.
    Many people and organizations have had an impact on the 
provisions in our bill. As you know, my original proposal, S. 
1603, was improved several times before I introduced it in 
October. Since then, we have continued to solicit the advice of 
many stakeholders, including a number of them that are here in 
this room. Currently, I am working on a draft manager's 
amendment that combines part of S. 1603 with S. 1639, the 
administration's human capital proposal, which I introduced 
last November. I believe this compromise--representing the 
efforts of the Bush Administration, our colleagues on this 
Subcommittee, and many others that are here--is really 
something that we can be proud of.
    It is my sincere hope that we can advance legislation 
through the Governmental Affairs Committee that will 
incorporate the best elements of my proposal and the broad 
array of others that have been introduced in the 107th 
Congress, such as S. 1800. I am extremely optimistic that we 
can enact legislation this year that will really make a 
difference to the Federal workforce.
    All the bills that I have discussed, as well as several 
others, including important flexibilities and innovative 
programs designed to make the Federal Government a more 
attractive employer for applicants. In the interest of time, 
Mr. Chairman, as you did, I am not going to get into the 
specifics of this legislation, but I would mention that a lot 
of work has gone into it. If you want to make change, you have 
to first underscore urgency for change and then you have to 
have a vision, and I think that we do have a vision. Now we 
have got to make sure that people understand that there is an 
urgency to achieve the change we envision.
    Senator Akaka, last week you mentioned the words of former 
Secretary of Defense James Schlesinger, who testified before 
our Subcommittee last March when he said, ``Fixing the 
personnel problem is a precondition of fixing virtually 
everything else that needs repair in the institutional edifice 
of the U.S. security policy.'' He was a member of the U.S. 
Commission National Security in the 21st Century.
    Then last week again, Lee Hamilton, another member of that 
Commission, reiterated this point before this Subcommittee when 
he said, ``although there has been renewed public interest in 
national security work since September 11, the U.S. Government 
faces a serious problem in attracting and retaining talented 
people for key jobs in national security departments and 
agencies.'' That conclusion was backed up by a poll that the 
Partnership for Public Service conducted. People are more 
interested in government today as a result of September 11, but 
the issue is, are we going to be able to take advantage of that 
renewed interest to recruit them?
    Each day, it seems we learn of a new example that verifies 
this testimony and demonstrates anew the enormous impact of the 
human capital crisis on our national security and our economic 
prosperity. At the Immigration and Naturalization Service, 
there are only 2,000 agents to enforce immigration within U.S. 
borders. This has resulted in an enormous workload that 
requires the INS to focus on their most serious cases, such as 
deportation of immigrant felons. This leaves little time to 
round up student no-shows, including at least two of the 
September 11 hijackers.
    In no way, Mr. Chairman, do I condone the fact that the INS 
failed to properly screen the applications of these evil-doers. 
However, the human capital problem INS faces must be addressed 
in a priority fashion if we are to prevent similar instances 
from occurring again.
    As I mentioned earlier, at the Securities and Exchange 
Commission, staffing levels have failed to keep pace with the 
agency's growing workload and salaries are not aligned with 
other Federal agencies due to a lack of resources.
    At the Central Intelligence Agency, Director Tenet in 
recent testimony before Congress said that, within 3 years, 
between 30 and 40 percent of his workforce will have been there 
for less than 5 years, and he proposed overhauling the 
compensation system to keep the ``best and brightest,'' and 
those with more experience.
    Last week, Administrator Joe Allbaugh of the Federal 
Emergency Management Agency, testified before the Environment 
Committee that he is probably going to lose 55 percent of his 
workforce in the next 2 to 3 years. And he said, after 
September 11, many of them, as I am sure is the case at a lot 
of other Federal agencies, have basically said, look, I 
reevaluated my life. I am retiring. Many of them were not 
thinking of retiring. But now they are going to take early 
retirement to spend more time with their families.
    So this is a real crisis that we need to face up to if we 
are going to deal with our homeland security and our war 
against terrorists abroad. I am very pleased, Mr. Chairman, 
that you are holding the hearings today and tomorrow, and I 
hope that our colleagues will understand how urgent this 
situation is so that we can move on with this legislation. 
Thank you very much.
    Senator Akaka. Thank you very much, Senator, for your 
urgent statement here.
    Our first panel needs no introduction, but before we begin, 
I wish to thank both of you for the outstanding support you and 
your staff provide to this Committee and this Subcommittee. I 
ask that you limit your oral statements to 5 minutes. However, 
please be assured that your full written statements will be 
made a part of the record.
    Director James, you may now proceed.

   TESTIMONY OF HON. KAY COLES JAMES,\1\ DIRECTOR, OFFICE OF 
                      PERSONNEL MANAGEMENT

    Ms. James. Thank you, Mr. Chairman and other distinguished 
Members of the Subcommittee. Thank you very much for inviting 
me here today and for holding these very important hearings to 
bring these issues to the forefront of the American people and 
to Members of Congress and to all those who are interested in 
our Federal workforce.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. James appears in the Appendix on 
page 77.
---------------------------------------------------------------------------
    Among the goals that I identified when I was confirmed for 
this position were that we would aggressively go after 
recruiting the best and the brightest in public service and 
expediting streamlining the Federal Government's hiring 
process. Immediately after being sworn in, I reoriented the 
focus of our agency and OPM began to provide tailored 
assistance to agencies governmentwide through strike forces 
staffed by some of the best career professionals that this 
country has. They are equipped with outstanding skills and have 
been providing service to our agencies around the Federal 
Government.
    Since September 11, however, the world has changed and OPM 
has accelerated the pace of our activities to support the 
growing human capital demands across government. Consistent 
with the pledge that I made before you in June, we are working 
to place tools in the hands of managers responsible for 
reshaping their workforces to meet current and emerging needs.
    The legislation that we are discussing today furthers these 
objectives and is consistent with the pledge that I made to 
ensure that agencies are accountable to merit principles and 
other civil service core values, whether the agency is exempt 
from or bound by the traditional civil service system. I want 
to acknowledge and offer appreciation for the work of Senators 
Lieberman, Akaka, Thompson, and Voinovich, who are key leaders 
in this legislative effort. Without your leadership, I am not 
sure we would be at this place and the Federal civil servants 
would not be well served, and so thank you very much.
    As you all know, good government is not a partisan issue. 
This Committee on Governmental Affairs has a long history of 
working in a bipartisan manner to improve the operation of 
government. Indeed, this Committee oversaw the enactment of the 
Government Performance and Results Act and the Clinger-Cohen 
procurement reforms, and now the Committee has the opportunity 
to move forward on reforms to improve the way we manage the 
people who serve in the Federal Government, the people we need 
to successfully wage the war against terrorism and to protect 
our security at home.
    In that spirit of cooperation, David Walker, who has 
provided so much leadership on this issue at the General 
Accounting Office, has agreed to work with OPM and OMB on a 
common set of human capital management standards for Federal 
agencies. This collaboration between the Legislative and 
Executive Branches, I believe, promises improvements which will 
lead to better management of the Federal workforce and will 
result in shared measurable criteria for judging that 
performance, and so David, I wanted to thank you this morning 
for your leadership on these very important issues and for the 
work that we have been able to do together.
    But in addition to clear standards and assistance that OPM 
is providing, our agencies and managers must have greater 
flexibility to manage their workforces effectively to keep high 
performance on the job and to compete successfully in the 
market for talent. Over the last 2 months, OPM and OMB have 
worked in partnership to train over 500 senior managers on the 
many flexibilities that already exist. The legislation before 
you today provides a very vital step toward giving Federal 
agencies the additional tools that they need.
    Many of the changes are technical fixes that remove 
barriers to efficient management and allow even better use of 
the flexibilities currently in place. Two of the bills, S. 1612 
and S. 1639, contain proposals developed by the administration. 
S. 1603 includes many of the same provisions but differs in 
some ways. I will briefly outline the specific Federal employee 
management reforms that we at OPM believe to be essential, 
summarizing my written statement. I respectfully respect, and 
you have already granted that we should include that.
    There are many. I will just mention them because of time, 
and I would also say that I am very pleased with the level of 
cooperation that exists between staffs. As we work through 
this, I feel confident that we will be able to resolve those 
and end up with one bill we can all support.
    As you know, we are talking about voluntary separation 
incentives, recruitment and retention incentives, relocation 
payments, and new hiring flexibilities, and we want to do all 
of this within the context of making sure that core merit 
system principles are protected, that veterans' preference is, 
in fact, protected, and we also know that we have a lot that we 
need to do to promote and encourage and look at how we treat 
our senior executives.
    In closing, Senators, I would just say that there is a lot 
of work to be done and that, again, I am very encouraged with 
the level of cooperation that exists on these important issues. 
We have got to keep this issue before the American people, and 
I think with the leadership that you are providing, we can do 
that and we will get legislation that we can pass.
    Senator Akaka. Thank you very much, Director James, for 
your statement.
    Mr. Walker, you may proceed with your statement.

  TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL, 
                   GENERAL ACCOUNTING OFFICE

    Mr. Walker. Thank you, Chairman Akaka and Senator 
Voinovich. Let me first at the outset thank you for holding 
this hearing and thank you for both of your leadership in this 
important area. Clearly, you are making a difference and this 
is an area where we critically need to make additional progress 
as quickly as possible.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 95.
---------------------------------------------------------------------------
    As Senator Voinovich mentioned, people represent our most 
valuable asset. Government is a knowledge-based enterprise. 
People are the source of all knowledge. It is time that we 
recognize that and it is time that we come into the 21st 
Century with regard to our strategies, policies, and practices 
dealing with our most valuable asset, namely our people.
    As you know, GAO designated strategic human capital 
management, or I should say the lack thereof, as a high-risk 
area in January 2001. Significant attention has been given to 
this area. That is appropriate. When we put something on the 
high-risk list, we want to bring light to a subject. With light 
comes heat and with heat comes action, and action is exactly 
what is needed in this area.
    I am pleased to say that there is a lot of additional 
attention and increasing momentum to take necessary steps in 
this area. The President in August 2001 made strategic human 
capital management the No. 1 item on his management agenda. 
That was also a positive first step. That was, in part, due to 
the encouragement of Director James, and I am sure Director 
Daniels from OMB, as well, and I commend them for that.
    We have said all along that it is going to take many 
players working together collaboratively to make real progress 
in this area, and we have a lot of players here today and 
others that are not able to be here with us today but some of 
which will be here tomorrow who are contributing positively in 
that regard.
    In GAO, we have said we need to take a three-step approach. 
First, agencies need to do everything that they can 
administratively. Eighty percent-plus of what needs to get done 
can be done within the context of current law. Agencies need to 
get on doing it.
    Second, there need to be incremental legislative reforms 
that provide management with reasonable flexibility, yet 
incorporate adequate safeguards to prevent abuse of employees.
    And third, we need to move towards comprehensive civil 
service reform under which more decisions in the Federal 
Government are based on the skills, knowledge, and performance 
of the individuals rather than the passage of time or the rate 
of inflation.
    Senators, I found last year, for example, that over 80 
percent of the billions of dollars that were appropriated by 
this Congress for compensation was on auto pilot. It was 
automatically predetermined who was going to get the money, 
based upon cost-of-living increases and based on locality pay, 
and it had absolutely nothing to do with performance. That is 
unacceptable. It is unacceptable for any enterprise and it is 
unacceptable, I am sure, from the standpoint of the taxpayers, 
as well. So ultimately, we are going to have to take that issue 
on.
    Some agencies are making progress administratively, but not 
enough. We need to make more progress in this area. One area 
that is critically important and where more progress needs to 
be made is in the area of performance management. Most agencies 
do not have modern, effective, credible, and properly validated 
performance appraisal systems that link their strategic plan, 
their core values, and desired outcomes with both executive-
level performance appraisals all the way down cascading within 
the organization. This is critically important to maximize 
performance and assure accountability. It is also critically 
important to make sure that we are making progress to 
effectuate the needed cultural transformation in government.
    We at GAO are trying to do three things. One, help others 
to help themselves in this critically important area. We 
earlier published a self-assessment guide. We are today 
publishing a new strategic human capital model that is 
available on our website. We have obtained input from a variety 
of parties, including OPM and OMB, of which we are very 
appreciative, and I look forward to working with Director James 
and Director Daniels and others to try to see if we can come up 
with a single set of tools and methodologies which the 
Executive Branch may end up mandating and which we can help to 
make sure that people are making appropriate progress in this 
area.
    Second, we are conducting a variety of audits and 
evaluations in this area for the Congress in order to assess to 
what extent people are making progress.
    And third and not least, we are leading by example. We are 
practicing what we preach, and I think that is critically 
important.
    I would say that the act that is before us, the Human 
Capital Act today, represents a positive step, and as Senator 
Voinovich said, a first step in what will be a long and winding 
road. But it is a positive first step and I commend you for it. 
There are a number of positive provisions in this legislation 
that I think would help meet the two objectives that I 
mentioned, provide management reasonable flexibility and at the 
same point in time incorporating appropriate safeguards to 
prevent abuse.
    There are several areas that I would like for you to 
consider as you look forward on this legislation, items that 
you may want to consider incorporating.
    First, I think consideration should be given to providing 
OPM the authority to provide class or agency-specific 
broadbanding for certain critical occupations. It is important 
that in doing so, however, that agencies understand what skills 
and knowledge they need and that they have appropriate 
performance management systems to properly implement 
broadbanding.
    Second, I believe that it is important in looking at the 
early out and buyout authority that performance be able to be 
considered in determining who would be granted an early out or 
buyout. I do not believe that it is appropriate to consider 
performance in determining what functions or positions would be 
offered early outs or buyouts. However, I do believe that it is 
important that management have the ability to say no if one of 
the top performers wants to exit under this program. It is time 
that the government start managing based upon dollars and 
results, not FTEs, and this provision is a positive first step 
to doing that.
    Third, I think it is critically important that independent 
and objective studies be done of the real pay gap. We have had 
a tremendous debate for a number of years. It is time that we 
get the facts. Reasonable people can differ on how best to 
proceed, but we need the facts on the pay gap.
    In addition, we need additional facts on the existing 
performance appraisal systems that agencies have, and I think a 
study is necessary there.
    And last but not least before I close, Mr. Chairman, I 
believe the time is coming, if it is not already here, that the 
Federal Government is going to need to consider whether or not 
major departments and agencies need to have chief operating 
officers, individuals who are focused on trying to deal with 
the basic good government infrastructure issues that are not 
partisan in nature and that should span administrations. We 
have a significant amount of turnover among political 
appointees and it is understandable that political appointees 
are focused primarily on the President's agenda, the department 
head's agenda, but somebody needs to be focused on the good 
government items that span administrations and require extended 
amounts of time in order to effectively address.
    Having chief operating officers who are under performance 
contracts with a term appointment who might be able to be 
extended at least one term, I think would represent a positive 
step to try to make real progress in these areas and to help 
effectuate the needed cultural transformation in government. 
These would be in addition to, not in lieu of, the current 
deputy secretaries, who are properly focused on the President's 
as well as the Secretary's priorities and agenda, and should 
be. But there are things that just do not get done under the 
current system that need to get done. Thank you.
    Senator Akaka. Thank you very much for your statements.
    Director James must leave by 10:30, so with your 
indulgence, Mr. Walker, Senator Voinovich and I will direct our 
questions to her first, and I will limit my questions also.
    Director James, I want to thank you for your statement and 
for all that you are doing. The bills under consideration today 
would provide agencies expanded authorities for recruitment, 
retention, and training. However, the compensation gap between 
the government and the private sector also plays a critical 
role in whether people consider a career in government.
    I understand that OPM will release a white paper on pay 
shortly, which I hope will address this problem. Added to the 
pay issue is the fact that most agencies are unable to use 
existing authorities for employee incentives because of 
budgetary constraints. My question is, what do you feel are the 
most critical funding requirements to address the government's 
human capital needs?
    Ms. James. Thank you, Mr. Chairman. Let me say a couple of 
things. Yes, we will be releasing a paper fairly soon, and 
before we can get to the point where we come up with a 
solution, much as you are doing here today, I think it is 
important to bring to the attention of the American people and 
to policy makers the importance of compensation, the outdated 
system under which we are currently operating, our inability in 
many cases to be able to tie pay and performance. So the first 
leg of our very long journey will simply be to ask the 
question, to raise the issues, and to begin a dialogue.
    Second, I would say that in the whole arena of issues 
facing us right now, recruiting, hiring, retaining employees, 
that I would not like to place a value on which is more 
important and where do we need to put the compensation dollars. 
While we are aggressively looking for tools and mechanisms for 
recruiting, I think at the same time we have to make sure that 
our current employees know the value that we place on them. 
They have a knowledge base which a new hire would not have. 
They have experience and they have wisdom.
    So at the same time that we are trying to recruit and 
attract the best and brightest, I think that we have to look at 
putting resources behind retaining those employees that we 
currently have. I would not like to rank them and put them in 
priority order because I think they are all important.
    Senator Akaka. I know you have to leave. I have a final 
question to you and then I will yield to Senator Voinovich.
    The proposals we are reviewing today are intended to allow 
agencies to better recruit and retain the people they need. 
However, some of our next witnesses believe that personnel 
ceilings act as barriers to this objective. How can recruitment 
incentives be reconciled in the current personnel ceiling 
limitations?
    Ms. James. Well, let me say that in recruiting, 
particularly people that we need in critical positions in the 
higher ranks of our government, that the current issue that we 
have before us with SES pay compression. Sometimes when you 
bring someone in, it defies logic to explain to them what this 
system is and when they are brought in at a certain level in a 
senior position what that means.
    I think that those issues have to be addressed in the 
broader context of total compensation reform. It does not make 
sense to many individuals, particularly--and I recently had 
that experience in trying to bring someone in at a senior level 
and saying, this is your starting salary and will pretty much 
be your salary for the entire time you are in the Federal 
Government. Those are issues that we must address.
    Senator Akaka. Let me yield to----
    Ms. James. Mr. Chairman, before you yield, I do want to say 
thank you and that I would request to leave to attend a funeral 
of a very dear friend. Many of you may remember Elaine Crispin, 
who was Nancy Reagan's press secretary. I had the privilege of 
working with her at ONDCP in a previous administration. She was 
a great woman and her memorial service is at 11 o'clock this 
morning.
    Senator Akaka. I am sorry to hear that. Senator Voinovich.
    Senator Voinovich. Kay, we have talked a lot and spent a 
lot of time together. Would you like to just comment on what 
provisions of this legislation you think will be the most 
helpful to you?
    Ms. James. I do want to comment on that and I want to 
comment on one proposal that David Walker has laid before us 
this morning, as well.
    I think that we are absolutely right when we talk about the 
flexibilities that managers currently have before them. I think 
it is also important for legislators as they are considering 
this legislation to understand that these are tried and true. 
These proposals that they have before them have been tried in 
pilot projects and been found to be effective, and so as a 
result of that, they are things that we are ready to take 
governmentwide.
    Which are most important and will be most helpful? I think 
anything that will help us to attract and maintain employees 
are helpful and many of those provisions will. I think that the 
targeted buyouts are an important measure so that we can have 
an efficient right-sizing of government and not just downsizing 
of government, that we can target those buyouts to where they 
are needed.
    I think the provisions that are in the bill for the SES 
senior managers, where we are able to allow them to get their 
full bonuses in a year, will do much to encourage those in our 
senior management ranks, who are doing a fabulous job on behalf 
of their government, are very important.
    I think our ability to pay bonuses to individuals and 
relocation fees, these are all things that folks are used to 
getting in the private sector and will help us, I think, to 
compete aggressively for those individuals so that we are not 
losing the talent to the private sector and can attract them to 
the public sector.
    I just have one comment, and I know David feels very 
strongly, and this is newsworthy because David and I hardly 
ever disagree, ever, and so this is newsworthy because this is 
one where we do, and that is on the chief operating officers. 
My take on that is that this is a new administration and this 
President has designated chief operating officers. What is 
different, I think in this particular case, is that maybe 
historically and traditionally, chief operating officers have 
not focused on management but have focused on advancing the 
President and/or the Secretary's agenda.
    This President, as you know, is the first MBA President and 
this President cares a great deal about management, and in the 
portfolio of activities that these now-designated chief 
operating officers have is the management of these agencies, 
and as you know, the President has given them five management 
agenda items, and I think any CEO coming into an organization 
feels strongly that they would like to have their chief 
operating officer be the one that is going to be responsible 
for implementation.
    I think that David is absolutely right when he says we need 
chief operating officers who are, in fact, focused on 
management agenda items. So we will continue to work through 
that and I am sure that we can come up with something that will 
be mutually agreeable to all, and as I said, that is about the 
only thing I can find that we might disagree on.
    Senator Voinovich. Thank you very much. I would like to say 
that one of the concerns that I had, in fact, one of the things 
that we worked with Mr. Walker on, was a questionnaire for 
political appointees that the administration was recruiting to 
find out whether or not they knew anything about management. 
That is the key----
    Ms. James. I do remember some of those questions during the 
confirmation process, Senator, yes.
    Senator Voinovich. The problem is, does the Federal 
Government recruit individuals that appreciate how important 
management is. That is the big hurdle. I know that Donna 
Shalala, who headed up the Department of Health and Human 
Services, said that when she came through her confirmation 
hearing, no one ever asked her one question about management, 
not one, and she had one of the largest agencies in the Federal 
Government.
    Mr. Walker. Can I comment quickly, Senator?
    Senator Voinovich. Yes.
    Mr. Walker. I am confident that we probably can work 
something out that would make sense here. I have no doubt 
whatsoever that this President, that OMB, that OPM, that the 
cabinet secretaries and the President's management council are 
committed to making meaningful progress on management issues 
during this administration. I have no doubt about that.
    However, that is this administration and that is these 
individuals. The issues that we are talking about here will 
concern every administration, will span every individual who 
ends up having a responsible position, and I think history has 
shown that there has not been an adequate amount of sustained 
attention over time which is going to be necessary in order to 
make the type of cultural transformation we are talking about, 
and what we know for sure is it will take more years than the 
current incumbents are in their jobs.
    Senator Voinovich. I will say this to you, that I think 
that setting a precedent is very important and this is very 
interesting. When I left the governor's office, several of the 
people who were my cabinet directors stayed on. Governor Taft 
kept them on because they were talented professionals. For 
example, in the Department of Transportation, he promoted an 
individual to the position of Director of Highways. A new 
administration can set a new tone for what is expected, through 
actions like these.
    I am hoping down the road here in the next year or so, Mr. 
Chairman, we can start talking about quality management and 
empowering the people who work in Federal agencies to have more 
to say about the direction of those agencies. And again, if you 
get that going in an administration, that can carry over from 
one administration to the next.
    Last but not least, I am going to be meeting with Mitch 
Daniels today. I am very impressed with what you are doing, 
Kay. I am very impressed with what Sean O'Keefe did and I am 
pleased that the administration brought Bob O'Neill in from the 
National Academy of Public Administration to help them develop 
their recommendations in the area of human capital. But we 
still do not have a Deputy Director for Management in the 
Office of Management and Budget, and I really believe, in spite 
of the great job that you are doing over at OPM, we need 
somebody in the administration who concentrates on nothing but 
the President's management agenda, somebody who gets up every 
morning and stays up late at night working on that agenda and 
who can keep hammering away at it and be your partner in 
getting the job done. I hope that you would encourage the 
President and Mr. Daniels and others in the administration that 
we need to get that management person in the Office of 
Management and Budget.
    Thank you. If you want to take off, you can.
    Senator Akaka. Thank you very much, Senator Voinovich.
    As I said, you are looking forward to leaving at 10:30 and 
I see we have a few minutes. I would like to ask you another 
question, Director James.
    Ms. James. Certainly.
    Senator Akaka. It is along the line of this management that 
Senator Voinovich has been speaking about. As we heard from the 
Comptroller General of GAO, GAO has developed a new model of 
strategic human capital management. This model was developed 
independently of OMB, OMB's performance ranking scorecard that 
shows how agencies are meeting the President's management 
agenda and will aid OMB in evaluating agencies' budget 
requests.
    From what I have heard, the GAO model would provide 
managers and employees with clearly defined objectives and 
goals. I would be interested to hear your views on the GAO 
model----
    Ms. James. Certainly.
    Senator Akaka [continuing]. And how you believe it could be 
integrated into OMB's scorecard approach.
    Ms. James. Thank you. The GAO was very gracious in allowing 
us the opportunity to review that model and we had some input 
into that. We are still working to make sure that we are not 
confusing Federal agencies by having standards out there that 
come from OMB, and from GAO, and they are pulling their hair 
out and saying, well, which standard do we adopt and how do we 
know we have made it and how do we turn to green on the 
President's scorecard, because as you know, this President and 
all of his managers are taking his management agenda so 
seriously because you know that you get more of what you 
measure, and so this President has decided to measure how 
effectively his managers are adopting the management agenda.
    So with that, our staffs have been working to incorporate 
it and come up with one standard so that we will not offer 
confusion to the Federal workforce and to managers as they 
utilize this new tool. What you will probably end up with is 
the GAO model, and we may add one or two things that we think 
are important that are not reflected in that model.
    But I think basically what you are going to see is we are 
trying to reach consensus on that in the interest of not 
confusing the Federal workforce. The model is an excellent one 
and we very much endorse and support what the General 
Accounting Office is doing.
    Senator Akaka. You had another comment on that?
    Senator Voinovich. No, I do not.
    Mr. Walker. Mr. Chairman, if I can note, this is an 
exposure draft and so, therefore, we will be experimenting and 
others will be experimenting with this over the next several 
months, and as a result, this gives us a period of time that we 
can do exactly what Director James said, see if we can work 
together towards one that we can all agree with, and I am 
confident that is going to be possible.
    Ms. James. I am, too.
    Senator Akaka. Thank you so much, Director James.
    Ms. James. Thank you very much, and I appreciate your 
indulgence.
    Senator Akaka. You may be excused.
    Ms. James. Thank you.
    Senator Akaka. Mr. Walker, I thank you for your patience. I 
am pleased that you unveiled the GAO strategic human capital 
model at our hearing this morning. I believe it is a good 
complement to the OMB scorecard.
    My first question is a theoretical one, but because GAO 
provides nonpartisan assistance to Congress, I thought you 
might be able to offer an unbiased view. Every administration 
comes into office with a specific agenda and I feel that we 
must separate policy from politics. Friday's Washington Post 
included an article on career attorneys in the Justice 
Department Civil Rights Division. Let me be clear, I am not 
commenting on the merits of this issue but rather a statement 
made by aides to the Attorney General who described the 
transferring of certain responsibilities traditionally handled 
by career lawyers to political appointees in this way. I quote 
from the article, ``Aides describe the actions as part of the 
normal process of a new administration taking over an agency 
previously led from a different political viewpoint.''
    Mr. Walker, how can we best achieve reform of the civil 
service system without imposing changes dictated by political 
considerations?
    Mr. Walker. Whichever administration is in, they are going 
to end up having certain priorities that they believe need to 
be pushed. They are going to allocate resources based upon what 
they believe those priorities should be and they are going to 
have certain principles or strategies that they want to try to 
employ in doing that.
    I do, however, believe that it is important to recognize 
that civil servants represent a vast majority of the Federal 
workforce. Civil servants are to be professional, objective, as 
appropriate, and nonpartisan in nature. In order for us to be 
successful in the human capital area, it is going to take the 
combined efforts and appropriate collaboration between both 
political and career officials, and, I might add, also between 
labor and management, whether the employees are organized, then 
obviously the bargaining unit, if they are not organized, then 
through other means such as our Employee Advisory Council in 
our case because we do not have a bargaining unit.
    I do not know all the details of that particular situation, 
Senator. I had some concerns when I read that article, as well, 
but quite frankly, I do not have all the facts and so it would 
be premature for me to try to specifically address that 
situation based on one newspaper article.
    Senator Akaka. Thank you for that response.
    You have said on many occasions that agencies already have 
90 percent of the flexibilities they need. Your comments 
prompted some of us on this Subcommittee to ask GAO to review 
the use of flexibilities currently available to Federal 
agencies to better recruit and retain Federal workers. However, 
we know that agencies have used them sparingly, mostly because 
of lack of resources.
    In her written testimony, Colleen Kelley draws attention to 
the statistic that in fiscal year 1998, less than one-fourth of 
1 percent of the Federal workforce received any form of 
recruitment, retention, or relocation incentives. Do you 
believe that agencies will be more likely to use the 
flexibilities offered under these legislative proposals than to 
use the ones that currently exist, and if so, why?
    Mr. Walker. I believe that this will be a positive step 
forward and it will help. I also believe, however, that we have 
got to recognize that it is not a panacea. In some cases, 
people are not using the flexibilities because they have not 
been properly educated with regard to what the existing 
flexibilities are. In some cases, they have not used the 
flexibilities because of the priorities that they have set.
    For example, we all have a certain amount of money that we 
have been allocated in order to accomplish our various 
missions. Unfortunately, many agencies have tended to manage 
more based on FTEs rather than dollars or results, and in some 
cases, people have decided to try to maximize the number of 
FTEs they have rather than deciding that, well, I need to 
manage to a budget.
    For example, at GAO, we do not always use our total FTE 
limit. Sometimes we make a conscious judgment that we are going 
to have certain incentives to attract people, certain 
incentives to retain people, or training, development, other 
types of things where we are investing in our existing 
workforce and we may have somewhat fewer people than we are 
authorized to have. On the other hand, we are investing more in 
those people that we do have.
    So I think it is a combination of education and setting 
priorities. Let me also say that I think it is personally 
inappropriate to be managing based on FTEs, period, either way. 
In other words, I think it is inappropriate to have arbitrary 
FTE caps. It would be much better if we managed to dollars and 
managed to results and recognize that, over time, we are going 
to be much better off if people are held accountable for 
managing to a dollar budget and managing to desired outcomes 
and results rather than an historical FTE approach.
    Senator Akaka. Thank you for that response.
    You mention in your testimony that GAO has a chief human 
capital officer. I have a three-prong question for you. Has 
this approach worked? Were there any problems associated with 
creating this new position? And if this provision of the bill 
becomes law, what advice would you have for agencies?
    Mr. Walker. Well, first, I would argue that I am the chief 
human capital officer at GAO. I think it is appropriate to 
recognize that if people are your most valuable asset, and in 
our case, they are really the only asset we have that will help 
us get our job done on a recurring basis. So I think the agency 
head clearly has to spend time.
    Second, our executive committee, which is comprised of 
myself, our chief operating officer, our chief mission support 
officer, and our general counsel, spends from 25 percent to 35 
percent of its time on human capital issues. So a significant 
chunk of the time of our top executive body is spent on human 
capital issues.
    We do have a human capital officer, Jesse Hoskins, who came 
to us within the last year or so with an extensive background 
at local and State Government in the human capital area and 
also had some prior Federal experience. He is doing an 
excellent job in trying to help us lead by example in this 
area. But for him to be successful, he has to have the support 
of the agency head, he has to have support of the executive 
committee, and he has to have the support of a variety of other 
players because you need to have line management very much 
involved in this area, as well. It is not something you 
delegate to the human capital function.
    As far as the provision under this bill, I think it is 
appropriate to provide flexibility to allow agencies to decide 
how best to accomplish the intent of this bill as to who is 
going to be responsible primarily on a day-to-day basis for the 
human capital activities. At the same point in time, I think it 
is critically important that we recognize that human capital is 
fundamentally different than human resources, which was 
fundamentally different than personnel. We are talking about a 
strategic position. We are talking about a person that has the 
ability to deal at the executive level, as a partner sitting at 
the table, trying to determine what modern, effective, and 
credible strategies in the human capital area need to be 
designed and deployed in order to achieve the objectives of the 
agency.
    Some people who are currently in the personnel or human 
resources function in government may be able to make that 
transition, but not all. And so it is critically important that 
you have the right kind of person with the right kind of skills 
and knowledge to be able to perform that role in order to be 
effective. That may be the case at some agencies. In some 
cases, they may have to hire, which we did in our case, to have 
somebody who can fit that need.
    Senator Akaka. I want to thank you very much, Mr. Walker, 
for your insights and your advice. I wish I had more time, but 
we have another panel, so I will yield to Senator Voinovich for 
his questions to you.
    Senator Voinovich. We have talked about the fact that, 
since September 11, there is a new attitude toward working for 
the Federal Government. We have had a couple of sessions at 
Harvard, and I have had a chance to talk to some of the 
students there. Ten years ago, about 75 percent of John F. 
Kennedy School graduates would go into government. Now, about 
30 percent of them are going.
    I believe that if we do not capitalize on this new interest 
in government, not only by young people but also some ``dot-
com'' people that are out there today who may be looking around 
for more stable employment at mid-level positions, what is your 
advice on how we would best capitalize on this new opportunity 
that we have?
    Mr. Walker. First, I think it is a positive step that 
people are not bashing Federal employees as much as they used 
to, which is clearly inappropriate and counterproductive. I 
mean, if they are our most valuable asset, then we need to be 
doing things to attract and retain good people in the Federal 
Government and we need to recognize that, that is a fundamental 
part of us being successful in government.
    Second, clearly, the statistics show that there are a lot 
more people interested in public service of which government 
service is a subset of public service and the Federal 
Government is only one level of government. You have obviously 
had leadership responsibilities at all three major levels of 
government, Senator Voinovich, and you know that. You have been 
on the front line.
    I think we cannot be deceived by numbers. The fact is while 
there are a lot more people who are interested in government 
service, while applications are up, we need to make sure that 
we have an ability to get back to people in a timely manner to 
let them know, to acknowledge that we have received their 
application and to let them know what the prospects are for 
there to be a match and what kind of timing that they can 
expect to have a decision.
    My brother is somebody who was with a dot-com that became a 
dot-bomb, and he has been trying for months to do something in 
public service and it has been a case study in what is wrong 
with our system, just frustration after frustration after 
frustration in lack of communication.
    I think we also have to recognize it is not just getting 
into government, it is keeping good people, and that is making 
some of the changes to where we are investing in our people, we 
are having more empowerment involving our people, that we are 
creating learning organizations, that we are allowing people to 
be promoted, recognized, and rewarded based upon their skills, 
knowledge, and performance, not their passage of time and rate 
of inflation.
    And so I think that it is going to be more important for us 
over time to be able to do those kinds of things that it will 
take to keep people in government and to recognize that we will 
never pay the same that the private sector pays. But then 
again, we should not have to, because we have something that we 
can offer here the private sector never can and that is the 
ability to truly make a difference for your country and for 
other people.
    Senator Voinovich. Another thing that I am looking at is 
this issue of pay comparability. Pay is not necessarily an 
incentive but it is a disincentive if it is not comparable. You 
were commenting that 80 percent of the people are on automatic 
pilot. Part of the reason for that, I believe, is that we have 
never made enough money available in the personnel area so that 
the government can offer anything but a cost-of-living 
adjustment. So if agencies do not have the money to reflect 
performance evaluations, most managers just ignore that process 
because it does not make any difference. And that gets into the 
issue of broadbanding, which is something that you have talked 
about that managers must have some more flexibility, but that 
cannot have an impact unless they have the money in order to 
make broadbanding work. So pay comparability, it seems to me, 
is something that needs to be reinvented.
    The other thing that is of concern to me currently is the 
issue of outsourcing. Again, when I talked with these students 
at Harvard, I would ask, ``Where are you going to go?'' They 
would answer, ``Well, I can go to work for a nonprofit or I can 
go to work for somebody that has a contract with the 
Government.'' If you anticipate that a large share of the 
Federal jobs are going to be gone in an exciting area, and I am 
interested in your reaction, is that a disincentive for wanting 
to come to work for the Federal Government?
    Mr. Walker. We clearly need to reform how we go about 
making key decisions in the competitive sourcing area right 
now. As you know, the Congress passed an act about a year and a 
half ago asking me, as Comptroller General, to chair a panel 
dealing with competitive sourcing issues. We have had a number 
of meetings. We are scheduled to issue our report by May 1. We 
will hit that date. That panel is comprised of a number of 
leaders, both within the government, with employee 
organizations, including Bobby Harnage and Colleen Kelley, who 
are going to be on a panel after me, and a variety of other 
respected individuals in academia and the private sector.
    I expect that we will be making recommendations for 
consideration by this Congress and I would hope that the 
Congress will give serious consideration to that, because 
clearly, there are certain aspects of the current system that 
are broken and that need attention.
    Senator Voinovich. One of the frustrations that I have is 
that, if you look at the motivation of people who work for an 
agency, one of our problems today is that we have had this 
reduction in the workforce without consideration to proper 
reshaping. I think that is one of the reasons why we find 
ourselves in this position is that, during those years, they 
just lopped people off without considering what skills they 
needed to get the job done. Also, I think, it cast a bad 
reflection on working for the government in general because the 
1990's downsizing was on autopilot.
    If we want to attract and retain people today, to set up 
targets of 5 percent, 15 percent, 50 percent is 
counterproductive. The issue becomes, are the executives in the 
departments going to be spending their time trying to figure 
out what they can outsource to meet a target or are they going 
to be spending their time trying to figure out what kind of a 
workforce they need to get the job done. Again, I would like 
your comment on this.
    Do we not have a situation here where we have one message 
that says, shape up your workforce and keep the people that you 
need and attract the people that you need to get the job done, 
and on the other hand it says, concentrate on what positions in 
your shop can you outsource?
    Mr. Walker. Competitive sourcing, I would say, is one 
element that you need to look at as a potential tool. It is a 
tool to enhance performance, to improve economy, and assure 
accountability, but how you go about it matters.
    My personal opinion is, it is inappropriate to have 
quantitative or percentage targets in this area. One needs to 
be able to have a more informed judgment based upon past 
experience, based upon public and private sector trends, about 
targeting areas of opportunity where you think it may make 
sense to do it without having arbitrary number or percentage 
targets in this area. I think that sends a mixed signal and I 
expect that is one of the issues that the panel will end up 
deciding whether or not to make a specific recommendation on in 
our May 1 report.
    Senator Voinovich. One last question and that is on 
training. This legislation talks about training. I would like 
you to comment about how important you think it is that we have 
allocated resources for training in the departments in terms of 
attracting and retaining people to the public service.
    Mr. Walker. I think it is critically important. A number of 
the people that we have are very good people, but they need 
help in a variety of areas, whether it be dealing with new 
technology, whether it be dealing with how to effectively 
manage people, whether it be dealing with difficult situations, 
whether it be technical training. We have to invest in our 
people.
    World class organizations make training a top priority and 
they invest in their people, and it is not just the current 
people you have but these new people that we are trying to 
bring in. One of the primary factors that they will use in 
determining whether or not they are going to stay or how long 
they are going to stay is are they learning? Are they growing? 
Is their employer investing in them?
    And if the answer to any one of those three questions is 
no, then the likelihood that you are going to have turnover 
increases exponentially, and so it is, therefore, critically 
important, and one of the areas that I have set as a top 
priority for GAO this year is we are investing more in 
training. We are doing more to invest in our people. We are 
developing this fiscal year a modern and forward-looking 
training and development program for our staff that will be 
implemented over the future and we are allocating dollars to be 
able to make sure that it is real, not just form, but there is 
substance behind that form.
    Senator Voinovich. And I suspect it is your intention to 
use that also as a recruitment tool when you are going out 
trying to get the best and brightest people to come, because 
people want to come to work for an organization where they are 
going to learn and grow and see a future. And if the word is 
that there is no money for training it is a disincentive to 
come to work there. You get to a point where the agency needs 
some new people, and rather than giving current employees 
training and upgrading their skills, they look around to try 
and find some way they can to farm their work out to somebody. 
Who wants to go to work for that kind of an operation?
    Mr. Walker. You have to invest in your people. They have to 
believe that they are part of a learning organization, and it 
is particularly important for us. We are fortunate. We have a 
lot of people who want to work for GAO and our applications to 
work at GAO have tripled in the last year. I think some of that 
is the economy, but some of it is because we are trying to lead 
by example and truly make our organization a world class 
professional services organization who just happens to be in 
the government.
    Senator Voinovich. I would think that many other 
secretaries of departments ought to look at the good role model 
that you have put together at GAO. I think if we could get some 
of that throughout the Federal Government, we would see a whole 
lot better situation. Thank you.
    Mr. Walker. Thank you, Senator. We are not perfect, we 
never will be, but we are sure trying hard, that is for sure.
    Senator Akaka. Mr. Walker, we really appreciate you taking 
time from your schedule to be with us this morning and I thank 
you very much for your insights and your advice and what you 
have said this morning will be useful to this Subcommittee. 
Thank you very much.
    Mr. Walker. Thank you, Mr. Chairman. Thank you, Senator.
    Senator Akaka. I would like to ask our second panel to come 
forward and be seated. We have with us four individuals whose 
commitment to Federal workforce issues is well known.
    I am pleased to welcome Colleen Kelley, National President 
of the National Treasury Employees Union; Bobby Harnage, 
National President of the American Federation of Government 
Employees; Jerry Shaw, on behalf of Carol Bonosaro, President 
of the Senior Executive Association; and John Priolo, a member 
of the General Executive Board of the Federal Managers 
Association, President of FMA Zone 7 and a longtime employee at 
the Pearl Harbor Naval Shipyard in Hawaii.
    Again, we appreciate your being with us today. Before we 
begin, I ask that you limit your oral statements to 5 minutes. 
However, please be assured that your full written statements 
will be made a part of the record.
    Ms. Kelley, we will begin with your statement.

TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL 
                TREASURY EMPLOYEES UNION (NTEU)

    Ms. Kelley. Thank you very much, Chairman Akaka and Senator 
Voinovich. I am very pleased to be here today on behalf of the 
150,000 Federal employees represented by NTEU. I think we all 
share the same goal. We want to entice the brightest, the most 
talented, and the most committed employees to public service 
and to ensure that the Federal Government becomes and continues 
to be the employer of choice.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Kelley appears in the Appendix on 
page 111.
---------------------------------------------------------------------------
    A decision to fully implement FEPCA and to provide 
compensation mirroring that received by the private sector 
would do more to address the recruitment and retention problems 
in the Federal Government than all of the Federal Government's 
other incentive programs combined. In spite of this, of course, 
the President's 2003 budget proposes a 4.1 percent pay raise 
for the military while at the same time suggesting that the 
Nation's civilian workforce deserves only a 2.6 percent raise. 
This is not a proposal that the administration would make or 
one that Congress will support if we are serious about the 
human capital crisis. While I accept that S. 1603 is offered as 
a downpayment on the human capital crisis, in NTEU's view, any 
human capital legislation worth passing must address the crisis 
in Federal pay.
    The Federal Health Benefits Program, too, must be 
addressed. This program has become too expensive for current 
employees and unattractive to prospective employees. 
Legislation is pending before this Committee, S. 1982, that 
would increase the employer FEHBP premiums from the current 72 
percent to the more common industry standard of 80 percent. 
This would represent a modest step, yet the legislative 
proposals pending before this body today do nothing to address 
this issue, either.
    Likewise, the administration's blind targets for 
contracting out 15 percent of all commercial activities work of 
Federal employees by the end of 2003 continues to erode the 
morale of the Federal workforce and cannot possibly attract 
prospective employees. Arbitrary one-size-fits-all quotas will 
not work. Would you seriously consider employment with the 
Federal Government knowing that your job may be contracted out 
from under you to meet an arbitrary number? I do not think so.
    And I do want to thank Senator Voinovich for speaking out 
at the March 6 hearing on this issue. These mindless quotas 
show a lack of wisdom of the impact they have for the 
government as a potential employer. Congress must let the 
administration know that these quotas are counterproductive and 
will not stand. Until that happens, the Federal Government will 
continue to send negative messages to current and to 
prospective employees.
    NTEU appreciates S. 1603 drawing attention to the need for 
properly training employees. However, it does not address the 
resource problems that prevent agencies from adequately 
training their employees. This legislation also suggests 
changes in hiring, and NTEU questions the advisability of 
moving away from the current rule of three. A new hiring system 
must be considered fair by employees, preserve merit 
principles, and lead to the best candidate being hired. Critics 
of the Department of Agriculture hiring system have raised 
questions about expanding that system governmentwide. In 
addition, a December 2001 MSPB report raises questions about 
the protection of Federal merit hiring in today's decentralized 
hiring system. With the lack of expertise in assessing the 
candidates found in so many agencies, we believe that there 
should be further discussions with this Subcommittee on these 
issues.
    S. 1603 would also grant critical pay authority to Federal 
agencies on a limited basis. Serious questions about the use of 
critical pay authority and how it has been used to date in the 
Federal Government have been raised and, I believe, need to be 
addressed before proceeding any further on this issue.
    NTEU does not support language in S. 1603 reducing poor 
performance employee notices of termination from 30 to 15 days. 
Rather than focusing on the notice period to employees, NTEU 
believes that it makes better sense to train managers and to 
help managers develop the necessary skills to manage, mentor, 
and motivate their employees.
    I also want to comment on several provisions of S. 1612, 
the Managerial Flexibility Act of 2001. NTEU objects to 
changing the nature of demonstration projects as well as 
permitting them to be made permanent without Congressional 
approval. We also object to provisions that would grant certain 
management-level employees 8 hours of leave each pay period. 
Rank-and-file Federal employees must work 15 years before 
earning 8 hours of annual leave per pay period. If Congress 
believes that annual leave limits are a barrier to hiring, then 
the system should be reformed and it should be reformed for all 
Federal employees.
    NTEU also opposes Title II of S. 1612, which would require 
agencies to pre-fund retirement and health benefit costs for 
their future retirees, subjecting these mandatory payments to 
the annual appropriations process. If Congress did not 
appropriate the money, agencies would be faced with several 
choices: To restrict retiree benefits, to curtail employee 
training, to reduce public services, or to conduct a reduction 
in force, a RIF. And these possibilities are not far-fetched. 
As you noted, Chairman Akaka, domestic discretionary spending 
suggested in the President's 2003 budget declines by 1 percent 
compared to the 2002 budget. These retirement costs are already 
accounted for through mandatory payments to the retirement 
fund. This change is unnecessary and NTEU will strenuously 
oppose it.
    I thank you for the opportunity to appear today and look 
forward to any questions you might have.
    Senator Akaka. Thank you very much for your statement, Ms. 
Kelley.
    Mr. Harnage, please proceed with your statement.

  TESTIMONY OF BOBBY L. HARNAGE, SR.,\1\ NATIONAL PRESIDENT, 
      AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

    Mr. Harnage. Chairman Akaka and Ranking Member Voinovich, 
thank you for the opportunity to testify on the draft proposals 
addressing various Federal personnel issues. In your 
invitation, you requested that I address five broad questions 
regarding the draft proposals. I have addressed all five in my 
written statement and today I would like to focus on just two.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Harnage appears in the Appendix 
on page 128.
---------------------------------------------------------------------------
    But first, I want to commend the Chairman as well as 
Senator Voinovich and Senator Thompson for removing several of 
the provisions of the Federal Human Capital Act of 2001 and the 
Managerial Flexibility Act which AFGE had opposed. We were 
particularly gratified to see that the draft proposals exclude 
extending to OPM the authority to make alternative personnel 
systems permanent without the approval of Congress and shifting 
Federal employees' earned retirement benefits from mandatory to 
discretionary accounts. In addition, we were pleased to see 
that the draft proposals rejected the concept of a one-on-one 
ratio for buyouts and full time equivalent eliminations.
    Chairman Akaka, you asked me to respond to two 
extraordinarily important questions that are often excluded 
from the debate over how to address the human capital crisis, 
first, how recruitment and retention concerns could be balanced 
with the administration's privatization quotas, and second, how 
the gap between the compensation offered to private sector 
employees and that offered to Federal employees can be 
addressed. These questions hold the solution to the Federal 
Government's human capital crisis. The draft proposals, while 
clearly well intended, offered little of substance that will 
affect the rank-and-file Federal employees AFGE represents.
    However, if the administration's privatization quotas go 
forward and they succeed in handing over 425,000 Federal jobs 
to the contract, civil service reforms, such as those of either 
the draft proposals, S. 1612 or S. 1603, will become truly 
irrelevant. There will be no civil service, just a corps of 
political appointees of acquisition officers churning through 
the revolving door between contracting agency and contractor.
    Likewise, the large growing gap between the pay and 
benefits provided to employees of large private sector firms 
and unionized State and local government employees on the one 
hand and Federal employees on the other hand is not a mere 
detail. A decade after the bipartisan Federal pay law was 
signed by the elder President Bush, Federal salaries still lag 
the private sector by 22 percent.
    Thirteen years after the CRS wrote the definitive report 
showing FEHBP to be inferior to the plans in the most 
successful private firms and largest States by a substantial 
margin, the benefit gap has also worsened. There is no excuse, 
no physical excuse, no excuse that data describing the 
dimensions of the gaps were not available, no excuse that 
unions were intransited and unwilling to negotiate even partial 
solutions.
    The draft proposals include broad authority to provide 
large recruitment and retention bonuses to select Federal 
employees. We could not pretend that bonuses, especially 
bonuses that come at the expense of adequate staffing or 
adequate salaries and salary adjustments, will improve the 
government's ability to recruit and/or retain Federal 
employees. Bonus payments do not count as basic pay for 
purposes of retirement or annual salary adjustments. If, in 
fact, they are designed to recruit for temporary positions or 
to recruit those with an intention to remain only a short time 
with an agency, it must also be said that they are not a 
solution to the human capital crisis as we understand it.
    The government's crisis is that it is on the verge of 
losing its workforce to retirement, privatization, and more 
lucrative offers of State and local governments and the private 
sector. When the workforce leaves, it takes its institutional 
knowledge, skill, experience, and the public sector's devotion 
to the common good. Bonuses will not solve such a problem.
    Mr. Chairman, you also asked if the human capital crisis 
could be solved in the context of the administration's 
privatization quotas, as they call them, competitive sourcing 
targets. The short answer is that unless the administration 
rescinds its privatization quota, the government's recruitment 
and retention problems will only worsen. The Department of 
Defense has recently acknowledged that its plan is to 
automatically replace retiring Federal employees with 
contractor employees. As agencies are forced to privatize half 
of the so-called commercial jobs on their FAIR Act list, they 
will increasingly follow DOD examples.
    The administration's privatization quotas should not be 
referred to as competitive sourcing initiatives. AFGE does not 
oppose competitive sourcing. In fact, our position is that 
Federal agencies should be permitted to contract out commercial 
work, but only if it can be shown that through public-private 
competition it will be less costly to taxpayers than continued 
in-house performance. Only through public-private competition 
can taxpayers learn whether their interest is to have the 
government's work performed in-house by Federal employees or 
contracted out to the private sector.
    As I have mentioned, there is no way to avoid the fact that 
Federal salaries are inadequate and that the health insurance 
program is inferior. Solving the human capital crisis requires 
paying higher Federal salaries and improving both the 
affordability and quality of the health plan.
    We have our own recommendations on civil service reform. I 
believe it is necessary for the true and lasting solution to 
the human capital crisis. Components of this package are in S. 
1152, the Truthful Responsibility, Accountability, and 
Contracting Act, TRACT, to make sure that contracting out only 
occurs when public-private competition shows it is in the 
public interest to do so, and S. 1982, Senator Barbara 
Mikulski's bill to improve the funding for the Federal health 
benefit program.
    We commend the Subcommittee for taking the issue of the 
human capital crisis so seriously and we look forward to 
continuing to work with you on this issue. I would be happy to 
answer any questions that you might have.
    Senator Akaka. Thank you very much. We appreciate your 
testimony, Mr. Harnage. Mr. Shaw, you may go ahead with your 
statement.

    TESTIMONY OF G. JERRY SHAW,\1\ GENERAL COUNSEL, SENIOR 
                     EXECUTIVES ASSOCIATION

    Mr. Shaw. Mr. Chairman, I apologize that President Carol 
Bonosaro was unable to attend today. She became ill this 
morning.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Bonosaro with attachments 
submitted by Mr. Shaw appears in the Appendix on page 144.
---------------------------------------------------------------------------
    I am the General Counsel for the Association. I was one of 
the founders of the Senior Executives Association while I was a 
career executive in the Chief Counsel's Office of IRS and 
subsequently was the first President of the Association and 
have been its General Counsel ever since its inception some 23 
years ago.
    We appreciate this opportunity to testify and we want to 
commend you and Senator Voinovich and Senator Thompson for 
their concern and efforts on behalf of the Federal workforce. 
The Subcommittee has requested that we address several 
questions. It will come as no surprise that SEA will focus its 
remarks on the questions of compensation and in particular with 
regard to the executive corps.
    First, an aside. The chief operating officer which is 
proposed by the OMB Director has been something that the SEA 
has supported for a number of years. We have put together a 
number of proposals along that line and we think it would be a 
great idea and it is something, I think, that could truly be 
revolutionary in changing agencies and bringing about some 
continuity in the workforce.
    The compensation gap for career executives with private 
industry was well illustrated by a 1996 study by the Hay Group, 
which showed that average SES total compensation, including 
bonuses--and this is total cash compensation--for jobs of 
exactly the same difficulty in the private sector would have 
required that SES pay be increased by a range of 46 to 137 
percent to obtain comparability with the private sector. Now, 
obviously, that is not going to happen, and SEA does not 
propose that.
    However, money, while not a motivator, is a substantial de-
motivator and what it goes to is the person's perception of 
their own worth. This kind of a gap with the lack of raises in 
5 out of the last 8 years for the career SES has truly damaged 
their morale. Many of them have stayed on in Federal service 
just because of the September 11 crisis and thereafter.
    In 2000, GAO projected that by fiscal year 2005, 70 percent 
of all career executives would be eligible to retire. It 
behooves us, I believe, to ensure that we retain as many of 
these highly capable, experienced, and accomplished executives 
as possible while we develop and have in place the necessary 
talent to succeed those who do retire. Yet right now, we are 
driving these executives out and discouraging middle managers 
on the executive track because of failure to address the pay 
compensation problem, which has reached critical proportions 
within the corps.
    SEA welcomes the provision of S. 1603 which would raise the 
total annual compensation cap to the Vice Presidential level 
but it would do nothing to affect compensation other than to 
allow employees to receive their earned bonuses and awards in 
the year in which they were earned.
    While the Association does not objection to Section 205, 
which would shift oversight for critical pay positions from OMB 
to OPM, we are in strong opposition to any substantial 
expansion of the use of this critical pay authority throughout 
the Federal Government. Reliance on this authority would 
continue the piecemeal attack on the pay compression problem 
which is most severe in the SES ranks.
    After having their pay frozen in 5 of the last 8 years, the 
pay cap has filtered down through the six pay levels or ranks 
of the SES until approximately 70 percent of all career 
executives receive the same pay. ES-4, 5, and 6, the top three 
ranks, are now all capped at Executive Level 3 in all 32 
localities. ES-3 is now capped in 15 localities. In Houston and 
San Francisco, even ES-2 is capped. This would be similar to 
having a pay cap and earnings by GS-15s, 14s, 13s, and 12s all 
being paid the same pay as GS-11s.
    We do not believe the administration or Congress would or 
could allow that to happen. They should not allow that to 
continue in the SES. The situation is unfair and would be 
unthinkable in any private sector corporation, yet is tolerated 
by both the administration and Congress. It must be rectified 
with legislation. H.R. 1824 and S. 1129 would raise the 
statutory maximum on pay and we strongly support those efforts 
by Congressman Davis and Senator Warner.
    The current system, in fact, encourages early or immediate 
retirement by eligible career executives. From 1994 to 2001, 
the average annual COLA adjustment on retirement annuities was 
2.5 percent per year, higher than the average SES pay increase 
of 1 percent over the same period. This results in SESers 
losing 1.5 percent of their retirement annuity for each year 
they remain in the government. Is it any wonder the best of 
them feel compelled to retire as soon as they are eligible?
    Substantial use of critical pay authority has been tested 
in only one agency. The experience, while being studied, is not 
uniform and there must be much more study before critical pay 
authority should be extended anywhere else in government.
    In closing, we believe it is critical that the Congress and 
the administration consider and respond to the full range of 
human capital issues and reject continuation of piecemeal 
approaches. Agency and occupation-based fixes approved by 
Congress are fragmenting the civil service, creating a crazy 
quilt of personnel and pay systems across the government 
without addressing fundamental issues affecting the workforce. 
At the executive level in particular, pay compression has 
clearly contributed to the pressure by agencies for separate 
systems. In addition, however, we have heard over and over from 
agency officials of the need for additional career executive 
positions so that they can be independent of the OPM allocation 
process.
    During the Clinton Administration, the career Senior 
Executives Service was downsized by almost 20 percent and that 
downsizing is having a substantial impact today. We believe 
that the top ranks were thinned unnecessarily. The ratio of SES 
positions to the rest of the Federal workforce, after all, is 
very slight, and the number of positions in the executive corps 
should be increased to enable agencies to meet their mission.
    Finally, the use of existing flexibilities and authorities 
is limited by a lack of funding and a lack of an effective 
mechanism for agencies to share successful approaches. 
Therefore, the pressure for designer systems will continue 
unabated and new authorities will continue to proliferate 
unless and until the underlying problems are addressed through 
a coherent governmentwide solution which provides overarching 
principles, flexibility within limits, and some bottom line of 
uniformity.
    Thank you, Mr. Chairman. Thank you, Mr. Voinovich.
    Senator Akaka. Thank you very much, Mr. Shaw, for your 
statement. Mr. Priolo.

 TESTIMONY OF JOHN PRIOLO,\1\ GENERAL EXECUTIVE BOARD MEMBER, 
               FEDERAL MANAGERS ASSOCIATION (FMA)

    Mr. Priolo. Chairman Akaka, Senator Voinovich, on behalf of 
the nearly 200,000 managers and supervisors in the Federal 
Government whose interests are represented by the Federal 
Managers Association, I would like to thank you for inviting 
FMA to present our views. My statements are my own as a member 
of FMA and do not represent the official views of the 
Department of Defense or of the Navy.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Priolo appears in the Appendix on 
page 178.
---------------------------------------------------------------------------
    Mr. Chairman, thank you for the kind introduction. I would 
be remiss if I did not personally thank you for your support 
over the years of my chapter, Chapter 19 at Pearl Harbor Naval 
Shipyard. Your efforts have been instrumental, particularly in 
the area of workforce revitalization at the shipyard whereby we 
have been able to hire over 520 new apprentices and 100 
engineers over the past 4 years.
    Established in 1913, FMA is the largest and oldest 
association of managers and supervisors. We are responsible for 
daily management and supervision of government programs and 
personnel and possess a wide breadth of experience and 
expertise that we hope will be helpful in seeking to address 
the human capital crisis that we are currently faced with.
    Before I present FMA's perspective, I would like to take 
this opportunity to thank you, along with Senators Cochran, 
Durbin, Voinovich, Thompson, and Collins for your leadership on 
S. 1799 and S. 1800, providing additional educational benefits 
for employees at those Federal agencies responsible for 
homeland security. It is not a focus of today's hearings, but 
they are certainly critical elements in the human capital 
discussion.
    As well documented and certainly mentioned quite often 
today, we have been downsized by more than 400,000 positions 
from 1993 to 2000 and we are continually being asked to do more 
with less, to compete with the private sector, to streamline 
procurement, and at the same time deliver higher quality 
service to the American public. Civil servants have proven time 
and time again that we are more than capable of fulfilling our 
duty, but we need civil service reform to increase the 
efficiency of the Federal Government.
    We are facing a human capital crisis. We need added 
flexibility to use existing resources to recruit new talent and 
prevent the ``brain drain'' that will occur with the retirement 
of so many career civil servants.
    As the number of civilian employees continues to shrink, 
the task of doing what is best for the American people becomes 
more and more difficult. There are fewer graduating college 
seniors that view the public sector as a desirable employment 
option, though that seems to be changing, hopefully. The hiring 
procedures takes so long that it becomes a deterrent to bring 
on board personnel, and it becomes an impractical option for 
mid-career professionals to transfer into the Federal 
Government. And finally, our salaries still lag far behind 
those of the private sector.
    Hiring policies continue to be patterned after a World War 
II era process. We post a vacancy, interview, offer a position, 
and it can take a year to accomplish all of that. A lot of the 
best people in that chain go somewhere else. We have got to 
shorten that, and I am certainly pleased to see OPM attempting 
to make inroads in those areas.
    We need alternate ways of evaluating job applicants. We 
need to be able to directly hire candidates when we have 
identified shortages or critical need. We need to have the 
authority to fill positions within respective agencies in an 
expedited fashion. We believe full-time equivalent ceilings 
must be made more flexible rather than use hard and fast 
numbers. Let us manage to the dollars instead of to the 
numbers.
    S. 1639 offers some improvements in the area of hiring 
personnel and retaining personnel, because truly, ``you get 
what you pay for.'' Retention bonuses do not always have to 
take the form of financial incentives. When we talk to 
personnel exiting the Federal service, they complain about a 
lack of recognition, of a long-term sense of purpose, and 
career progression. That is not dollars speaking, though 
dollars are clearly important. That is frustration at a lack of 
development of the folks we already have on board.
    We are supportive of S. 1603 to develop a career training 
officer. We are supportive of pilot individual learning 
accounts as a way of, again, developing our personnel and our 
future leaders. All agencies should have structured 
developmental programs, be they SES or, in our case, generally 
second- and third-line managers and supervisors.
    Obviously, I will never get through this report, but I 
would like to wrap it up without going too far over, since you 
have my written remarks. We would like to serve as a sounding 
board for Congress and the administration to ensure that 
decisions are made rationally and provide the best value for 
the American taxpayer. We recognize, and value the importance 
of a top notch civil service in the future.
    Again, we would like to thank you, Mr. Chairman, for 
providing an opportunity to present our views. We look forward 
to working with the administration as well as with the Congress 
to deal with the government's workforce challenges in our 
mutual pursuit of excellence in public service.
    Again, I would be happy to answer any questions you may 
have.
    Senator Akaka. Thank you very much, Mr. Priolo, for your 
insightful observations.
    The proposals we are reviewing today are intended to allow 
agencies to better recruit and retain the people needed to 
carry out their agencies' missions. However, as Mr. Priolo said 
in his testimony, FTE ceilings must be made more flexible in 
order to allow Federal managers to fill positions of critical 
need in an expedited manner.
    My question is, to all of you, do personnel ceilings act as 
barriers to recruitment and retention? How do these ceilings 
influence agency recruiting? What recommendations do you have 
for an employee and managerial perspective? Let me start with 
my left. Ms. Kelley.
    Ms. Kelley. Thank you, Mr. Chairman. In my experience, 
personnel ceilings are not the impediment to agency hiring. The 
impediment are resources. It is the bottom line; agency funding 
dollars. In many agencies, as we speak right now, hiring that 
they had planned to do based on last year's budget is not being 
done. It is now being delayed because part of the January pay 
raise for Federal employees was not fully funded in their 
agency budget and they are having to make up that money 
somewhere else and it is coming in the way of delayed hiring 
that they desperately need.
    But in my experience, it is not about the FTE ceilings, it 
is about the overall agency budget and even if they were to 
hire with the funds that they had, what it leaves is nothing 
for flexibilities. When Comptroller General Walker talked about 
using resources, making a choice of whether to use them for 
FTEs or for flexibilities, in my experience, again, that is a 
difficult, if not an impossible, choice for agencies to make.
    For example, in both the IRS and the U.S. Customs Service, 
they have had staffing shortages for many years. In Customs, 
this has been exacerbated after September 11. We did not have 
enough inspectors on the borders before September 11. Now they 
are working 12- and 16-hour days 5 and 6 days in a row with no 
additional staffing.
    So the idea of taking resources that are not even there for 
adequate staffing and then converting them to flexibilities is 
one that I have a hard time putting together in most of the 
agencies that I am familiar with.
    Senator Akaka. Mr. Harnage.
    Mr. Harnage. Yes. The personnel ceilings or FTE ceilings, 
we have been told now for 4 or 5 years that they do not manage 
by FTEs, but you and I both know that they do and that they 
have a ceiling, and very often, that determines the funding. It 
is sort of an argument of the chicken or the egg, which one 
comes first, but much of the funding is reduced based on the 
expectations of being limited in the manpower ceilings and the 
FTEs. So it is sort of an argument either way you want to take 
it.
    But, sure, it is a barrier in hiring and I think a lot of 
that has to do with the level of approval. When OMB comes out 
with a manpower ceiling, whether it be suggested or actually in 
writing, then that goes to the agency and then the agency 
passes that on down the different lines of management. And so 
when a manager has a vacant position, it has to go all the way 
back up through that line before they can get approval to fill 
it and it appears to be a very long delay in hiring when really 
it is the FTE ceiling that is causing that delay.
    Sometime when we have more time, I will give you my Air 
Force experience in weight control, which very much resembles 
the FTE ceilings. But it is a way of OMB measuring the funding. 
Therefore, they are bean counters, and that is what they are 
doing with the FTEs. That is the way they are controlling the 
funding.
    Our position is, simply, let the managers be managers. They 
have a mission. They should be able to come forward with a plan 
that reaches the goal of that mission and whatever number of 
employees it takes to be efficient and effective, that is how 
many you approve without a magical number being picked out of 
the air and that seems to be what this administration as well 
as the past administration has tried to do.
    Senator Akaka. Thank you. Mr. Shaw.
    Mr. Shaw. I agree with both Mr. Harnage and Ms. Kelley. An 
experience that I saw--in fact, I was thinking about David 
Walker's brother-in-law where he was trying to come into 
government. It depends on the time of year how fast that 
process is going to work. For example, let us assume that 
Congress delayed the amount of salaries or did not fully fund 
the salaries. What they will do is put off the hiring process. 
They will not hire until the back end. Then they really try to 
hire everybody. Then you have got to get them trained, and then 
the next year, depending on how much Congress gives them, 
determines whether the agency can keep them or not.
    It is a very difficult process, but in one situation, an 
individual was offered a job in February, and the decision was 
not made until September because there was a requirement that 
all the people in this agency be trained on a particular 
program and they used all their money for training so they 
could not afford to fund the hiring until the last month of the 
fiscal year. So that FTE, to which $30,000 was allocated, was 
used in the early part of the year to pay for training and 
other things and, therefore, they could not fill the position 
until the end of the fiscal year because they were counting on 
the new funding to pay for it.
    So it is a chicken-egg. Everybody wants to know whether an 
agency has grown, has got more employees or less employees, so 
you have to count them somehow on the one hand. On the other 
hand, when you give people specific numbers and there are so 
many dollars that goes with each number, you can play with the 
dollars to try to meet your needs and, therefore, the hiring 
process can really get slowed down in some situations.
    Senator Akaka. Mr. Priolo.
    Mr. Priolo. I must agree with everyone else on this panel. 
I work at a Navy shipyard. We fix ships. Our motto is we keep 
them fit to fight. We send them out to harm's way. Every year, 
we do more work than what we plan on. Things happen when you 
work ships as hard as we work them nowadays. Obviously, it is a 
Department of Defense issue. It is a serious concern and we 
certainly cannot solve that here.
    But FTEs hard and fast are an impediment because then we 
have to decide, do we fix ships or do we hire the personnel we 
need so that we will be able to fix ships 5 years from now when 
those people get qualified and the existing folks retire? It is 
all rolled up together. It is all one big circular problem that 
we have got to break so that we can do our jobs and to get our 
jobs accomplished.
    Ms. Kelley, you mentioned your concerns over the quotas for 
contracting out that are in the President's management agenda. 
How do the objectives for contracting out prevent the 
legislative proposals we are considering today from achieving 
high recruitment and retention?
    Ms. Kelley. I think the quotas send a very negative message 
to those who are even considering Federal service. They do not 
provide any rhyme or reason or any kind of an explanation or 
expectation that you would have a position in 3, 4, or 5 years 
as these quotas move forward. There is no explanation or 
criteria within agencies other than if they are commercial 
activities, if they are designated as commercial activities on 
the FAIR lists.
    Other than that, there is no criteria in looking at the 
agency's mission, at the overall budget, at how that fits into 
the operations of the agency as a whole, how long they have 
done those jobs, if there is a better way to do them, and to 
provide them with the resources to become more efficient. So I 
think it flies right in the face of the language in the 
legislation that is being discussed today. I think the quotas 
just derails it every step of the way because of the message 
that they send.
    Senator Akaka. Thank you, Ms. Kelley.
    Mr. Priolo, I want to thank you for joining us today all 
the way from Hawaii. Your testimony raised a number of 
questions, not all of which I will have time to ask. You heard 
Ms. Kelley and Mr. Harnage express their opposition to changing 
the termination notification time from 30 days to 15 days. Do 
you believe 15 days is adequate and would you expand on your 
statement that a more comprehensive governmentwide employee 
performance appraisal system is needed, including the idea of 
tutoring an employee who receives an unacceptable performance 
rating?
    Mr. Priolo. As for the 15 or 30 days, I do not have a lot 
of expertise in that area but I certainly think the more time 
you have, the better off you are.
    We have limited personnel. We have a lot of controls and we 
have got to do our best to develop the folks we have. That is 
my responsibility as a manager--to mentor the young folks. We 
have started an apprenticeship program, thanks to your support, 
that provides us hope for the future, because, frankly, without 
the young folks coming in, without the apprenticeship program, 
we would lose the expertise of the people that are of 
retirement age and not be able to feed that back into the up-
and-coming workforce.
    I actually left a job as a nuclear engineering manager to 
move over into curriculum development because I am a firm 
believer that if we do not develop our folks, we will die by 
attrition. So you give us the ability to bring people in, which 
you have, and we will go develop them so we will have the 
people in place to do the jobs in the future. Thank you.
    Senator Akaka. Thank you, Mr. Priolo.
    You also said that OPM has delegated substantial personnel 
authority to agencies over the past 5 years, but in many 
instances, line managers do not have this authority. Why do 
line managers not have this authority and what can be done to 
change the current situation?
    Mr. Priolo. What I tend to see, again, in my activity, 
because that is what I can refer to, is there seems to be a 
disconnect from the policies and the processes and the good 
ideas that come out of OPM and the folks at my level that have 
to execute. Somewhere in between, the train jumps the track and 
it just does not get down to us. Maybe it is just a 
communication problem. Maybe it is folks not wanting to change. 
Maybe it is fear of trying to work outside-the-box and doing 
something different. I certainly do not have the answer, but I 
do definitely have the frustrations. We sometimes have to make 
progress in spite of the system, not in accordance with the 
system.
    Senator Akaka. Mr. Shaw.
    Mr. Shaw. I think one of the things that is absolutely 
fascinating to me is the inability to use the performance 
appraisal system to remove non-performing Federal employees. In 
1978 when they changed the law, our first perception as a 
lawyer, and I am in private practice and we represent hundreds 
of Federal employees in performance cases, was that there was 
going to be a wholesale slaughter of Federal employees thrown 
out because the appeals and the rights of the employees are so 
narrow in performance cases, (not in conduct cases but in 
performance cases).
    The 30 to 15 days is fine. It does not really make any 
difference because by the time you get to proposing an adverse 
action in a performance case, the employee should have been 
through a performance improvement period and you should have 
your ducks in a row.
    The problem with the system is not the difficulty of the 
system, it is the HR people in the agency and the lawyers in 
the agency saying, ``Oh, you cannot do that.'' There is a 
requirement in the statute for a performance improvement plan. 
OPM extended the time for the performance improvement plan. 
This agency not only required you to go through that 
performance improvement plan, but after you got done with that 
one, you had to start another one. They literally had two 
performance improvement plan periods that you went into, and 
then by the time they got finished, everybody had given up, it 
had lasted so long and the under-performer remains there.
    Let me just sum this up into two points. First, managers 
have to be trained in how to use the system. We teach a course, 
my law firm does, for the Senior Executives Association on how 
to use the performance appraisal system to deal with poorly 
performing employees and for every manager that attends that 
course, it is mind boggling. They cannot imagine that they have 
got this authority, and the reason they cannot use it is 
because HR people and lawyers have taken it away from them. And 
it is not the ones at OPM or OMB, it is the ones in their 
agencies, because power is the ability to say, ``No, you cannot 
do that. We know more than you do.''
    And the second thing is that the agencies do it to 
themselves. Most of the problems in dealing with under-
performers is not the OPM regulations, it is not OMB, it is not 
the law, it is not MSPB, it is the agencies. They have grown a 
culture on their own that you have to do five times more than 
what the law requires you to do to handle a poor performer, and 
it is tragic.
    The system that is there now, in fact, if anything, gives 
too much authority to a Federal manager and we very much feared 
that there would be abuses of that. Instead, what has happened 
is everybody says, oh, we do not want to use that system. It is 
too complicated. We will use this conduct system. Well, the 
conduct system can be tough. I mean, you have really got a high 
burden of proof. The performance system, you do not have hardly 
any burden of proof, substantial evidence, which is negligible.
    Go ahead, sir, and make it 15 days. It does not make any 
difference. Unless these people are taught how to use the 
system, it is never going to work.
    Senator Akaka. Let me ask Mr. Harnage and Ms. Kelley to add 
to this discussion, if you wish.
    Mr. Harnage. Well, I think Mr. Shaw really hit the nail on 
the head. It has more to do with the agency culture than 
anything else and it is the full employment act for the HR 
people and the attorneys that work for the agencies. They have 
simply developed a culture that makes their job more 
significant, more important, and it prevents the managers from 
being able to manage.
    I think our biggest problem in performance and in 
disciplinary situations is simply that the managers are not 
adequately trained. They are not adequately trained on how to 
handle the situation and then they are not allowed to handle 
the situation as they should and I think we have got to get the 
HR people out of that business and allow the managers again to 
be managers.
    One other factor that has played a role into that possibly 
in the last few years is a manager is faced with a situation 
where, if it is a marginal employee, do I get rid of this 
individual and totally do without anybody because I have got an 
FTE ceiling and I am going to lose that slot, or do I try to 
make it do and hopefully this employee will do better? When you 
do not have any control over whether or not you will continue 
to have that position, managers will tend to try to hold on as 
long as they can. At least 20, 30, or 40 percent performance is 
better than zero. So I think that plays a very important role 
in our problem.
    Senator Akaka. Ms. Kelley.
    Ms. Kelley. The issues identified as HR and legal issues, I 
agree exist in all agencies, but I have concerns about the 
discussion concerning under-performers and the performance 
improvement period. I would hope that it is very consistently 
believed that managers have their goal and that their 
responsibility is to try to turn around and help an employee 
who is having performance problems, not just to jump through 
the hoops of some stated time frame to move them out the door.
    There surely are employees whose employment will be 
terminated at the end because they cannot or will not turn 
around their performance, cannot improve it. But I believe that 
managers, most managers I know, have an interest in trying to 
figure out how to turn a marginal employee into a better-than-
average and even an outstanding employee with the right 
mentoring, with the right information, with the right support, 
with the right training, and that takes training for the 
managers. Managers need to be trained on how to do that, how to 
know when and what to provide in order to help an employee to 
become better than marginal and also, then, on how to move 
forward if, in fact, the process requires that the employee be 
terminated.
    But I would hope that as much energy goes into this process 
as it should, I believe, in the private sector, not just in the 
government, into supporting and trying to turn around 
performance before an individual is terminated.
    Senator Akaka. I have more questions, but let me yield to 
Senator Voinovich for his questions.
    Senator Voinovich. I could not help but smile, as I 
listened to you. Mr. Priolo, I am so glad you are here, and 
that is not to take anything away from our union leaders here 
and Mr. Shaw. But I believe in quality management and 
empowering the people closest to the problem, and I think your 
testimony this morning talks about the practical problems that 
you encounter in your agency.
    Mr. Shaw, I smiled as you were talking about the 
performance evaluation process. I will never forget when I 
became Mayor of the City of Cleveland, and a lot of my 
directors were complaining that they could not get rid of poor 
performers. So I talked with the head of the Civil Service 
Commission and she said, ``The problem, Mayor, is they do not 
know what they are doing and if they would use the system, they 
could get rid of poor performers.'' So I went back to the 
directors and said, ``You are going to go to school to find out 
just how the system works,'' and they did that and things 
improved substantially. We were not trying to run people out. 
If somebody has a problem, you try to help them deal with it.
    But so much of the problem we have is that people are not 
getting the training that they need, and I was impressed with 
Kay James' testimony about the fact that they are training 500 
people. They have a massive training program underway in the 
Federal Government so people understand just what their 
responsibilities are and what they can or cannot do.
    I look at the problems that are there and it just seems 
that for so long, they have been neglected. You are talking 
about replacing people. One of the things that this legislation 
allows is in the shaping of an agency, we are going to allow 
the managers to give early separation or early retirement 
without eliminating the position, so that they can fill that 
position. It is something that it took me 3 years to do in the 
Defense Department. Today, the Defense Department has this 
workforce reshaping authority for 9,000 slots, and they are 
starting to use it.
    I suspect you think that is a good provision?
    Mr. Priolo. Absolutely.
    Senator Voinovich. And then the issue is, how do you fund 
that? It took me 2 years to get it through to the appropriators 
to fund it, and we were only talking about $82 million over 10 
years. But it is so much easier to buy a F-22 or some----
    Mr. Priolo. Piece of hardware.
    Senator Voinovich [continuing]. Piece of hardware than it 
is to concentrate on the people that you have.
    I was just commenting to my staff, we have not had too many 
people that have been talking about some of the flexibilities 
that we try to provide in this legislation. You are all doing a 
good job of representing your concerns, but underlying all of 
this is the need to have more competitive pay than we have 
today. And we need to allocate more resources if we expect to 
be an operation that can retain people.
    Mr. Shaw, 70 percent of the Federal Government's senior 
executives receive the same salary due to pay compression we 
could have, by 2005, 70 percent of them retiring. They receive 
a greater cost of living adjustment on their annuities than the 
pay increase they receive by staying in the Federal Government.
    Mr. Shaw. They lose a percent and a half a year off their 
retirement annuity.
    Senator Voinovich. So those kinds of things just do not 
make sense and we need to address those issues. At the same 
time, understanding the pay, understanding the issue of health 
care--and I can understand the issue of health care, although I 
will say to you that the private sector today is moving toward 
increased employee participation than they did before because 
of the high cost. In fact, I see that across the country, 
although I will say this, that in terms of the Federal 
contribution to health care benefits, it is a lot lower than in 
the private sector and many other agencies. I know in the State 
of Ohio, the employee contributes 10 percent, which is far 
different than, what is it for Federal employees?
    Ms. Kelley. Twenty-eight percent.
    Senator Voinovich. Twenty-eight percent. So those are 
things that we need to look at.
    But that being said, I would really like your opinion on 
the flexibilities that we have tried to provide in this 
legislation. Are you supportive of what we are trying to do 
with this legislation?
    Ms. Kelley. Other than the specifics that I noted in my 
testimony, where I would hope there would be more discussion, 
such as on the critical pay area, I guess where I always come 
down on this issue of flexibility, Senator, is that 
flexibilities without the resources will not make a difference. 
I think that unless the agencies are given the resources and 
are supported in their use of them, it is not going to make a 
difference, and that is my hesitancy in supporting the 
legislation. I wish it would go further in the area of Federal 
pay, addressing pay as one of the largest issues that is 
affecting recruiting and retention, and then saying, not only 
do agencies have these flexibilities, but resources will be 
provided to enable them to have the staffing they need and to 
be able to use the flexibilities.
    Senator Voinovich. I can understand that. I am interested 
in the white paper that OPM Director James is going to be 
coming out with on compensation.
    Mr. Harnage.
    Mr. Harnage. Well, as I said at the beginning of my 
testimony, I really appreciate the changes that you have made 
to the draft proposal that eliminated a lot of our objections. 
Of course, in looking at the draft proposal, there is not a lot 
in there that we see that is very favorable for the employees 
that we represent, but there is not any harm there either at 
current, with the exception of the 15 days. We do not think 15 
days shorter in a 6- to 9-month process makes that much 
difference, and the problem is not the amount of time the 
employee has, it is the amount of time on the other side that 
is required because of the bureaucracy.
    Senator Voinovich. Do you agree with Mr. Shaw that a lot of 
the people who are supposed to be doing this process do not 
really know what they are doing?
    Mr. Harnage. I will agree with that, yes, I do, and I 
prefer your bill as opposed to the Managerial Flexibilities 
Act, because I think following that act there ought to be a 
parentheses that says, ``as long as you do it the way I say to 
do it.'' There is not a lot of flexibility there when you look 
at the controls and the approval up the line that it takes and 
I think that is where you are trying to get to, is to get it 
more closely down to the worksite where the manager that is 
doing the job can be better managers, and we saw that act as 
really, even though it talks about flexibility, it was still a 
lot of checks and balances and controls at the OPM and OMB 
level that I do not think that was going to amount to a lot of 
flexibility.
    Training, I think, is the main thing that will make it 
work, and one of our concerns is when we talk about management 
flexibilities, and we certainly believe that the managers ought 
to be allowed to manage and they ought to be trained, not any 
disrespect to the current managers. It is not their fault. The 
government has diverted training funds in other directions and 
people have not been able to keep up with current practices.
    But one of our concerns is when you say flexibilities, we 
are not sure what role does the employee or the employee 
representative play in these flexibilities----
    Senator Voinovich. Mr. Chairman, when I got started with 
this, the concept was to change the culture of the Federal 
workforce. I came to the Senate with that idea. I tried to do 
that when I was mayor and then as governor, and changing the 
culture has a lot to do with empowering the people who work in 
the agencies. And that is what you are raising here--the issue 
of flexibility.
    The hardest problem we had was to get middle managers, who 
had come up in a command and control environment, to give up 
some of their power and empower the people working for them to 
come up with solutions on how they could do a better job. It 
was very difficult.
    But I ultimately think, regardless of what we do in 
legislation, that if we do not have more of that quality 
management, that empowerment, the participation of the people 
that are actually doing the work, we are not going to see the 
improvement that all of us would like to see in the Federal 
workforce. And I think it also contributes to an environment 
where people get excited about the job that they are doing, and 
if they are excited about their work, then they stay there. The 
word gets out around the country that this is a great place to 
come to work.
    I have had more people tell me they have come to Federal 
agencies, and after a couple of years, they leave because they 
do not receive any training, it is not exciting, and what they 
expected did not occur. We will be hearing from some panelists 
tomorrow in terms of that outreach that we are going to need to 
change the perception of Federal employment. We can do all we 
want to publicize the opportunities in the Federal Government, 
but there are some fundamental changes that we have to make if 
we are really going to have the kind of environment that is 
going to attract people and keep them.
    On the issue of eliminating the link between senior 
executive compensation to Members of Congress get paid, you 
would support eliminating that, would you not, Mr. Shaw?
    Mr. Shaw. Yes, sir, we would. If I can go down your list, 
on the phased retirement Section 204, SEA supports that. We 
think that is a great idea. We think it can help managers 
transition out and new managers transition in and still have 
the benefit of the one who is retiring to work part-time for a 
period of time and help them become accustomed to the job.
    On requiring OPM to provide approval or disapproval on the 
qualification review boards for SESers, we would prefer 25 work 
days, Around holiday time, they get people from all the 
different Federal agencies, a number of them to serve on a 
qualifications review board that an SESer's qualifications have 
to go before and be approved, so that could be a little 
problem. But the 30 days is not a problem, but 25 work days 
would be a little bit better.
    On the recertification elimination, recertification of the 
SES system, we support that. We think that it has not added any 
value to the current performance appraisal.
    Your proposal on training, we think is excellent. It opens 
up a lot of opportunities for a lot of people.
    And on the annual leave provision, if the agencies say they 
have trouble bringing people in from outside because they do 
not have any leave when they come in, we do not have any 
objection to it. We support it for managers, and if it works 
for managers, it may work for some employees in specific 
situations. But it is good authority and flexibility for 
agencies to have.
    Just one more thing. I want to reassure Ms. Kelley and you 
that when we handle performance, under-performer cases, the 
only way that we can be successful in keeping a non-performer 
from being removed from their position is work with them during 
the performance improvement period to bring them up to the 
standards required by the agency. We have been very successful 
in doing that. We supplement what training they have. We 
actually sit down with them and go over the papers they are 
preparing and that kind of stuff, so long as it is not 
classified, obviously, and we assist them and are firm and that 
is how we win cases in our law firm on non-performers is we 
help make them performers, and that, in most cases, is the 
answer.
    Sometimes people just cannot do the job, and that happens 
and they have to be removed. But we work first to make sure we 
help them meet the requirements of the job and then the whole 
thing goes away.
    Senator Voinovich. That is interesting, because many people 
wring their hands and say, well, you cannot get rid of a poor 
performer. But the fact of the matter is that you can if you 
know what you are doing and that person is truly a poor 
performer.
    Mr. Shaw. Right.
    Senator Voinovich. There are a lot of stereotypes out there 
today.
    So, again, the provision of eliminating the link between 
senior executive pay with the pay of Congress would----
    Mr. Shaw. What we are proposing, and what both Senator 
Warner and Congressman Davis's bill would do--as you know, 
there are five levels of the executive schedule and Members of 
Congress are tied to level two. What we are proposing is that 
SES base pay be raised from the current cap, which is level 
four, to level three and that they be able to earn their 
locality pay on top of that. So, in effect, depending upon the 
locality that the employee is in, some of them could wind up 
making more than Members of Congress, but there is still a 
level between them on their base pay and their other, but that 
is going to depend on the locality they are in. In Los Angeles 
and Houston, what locality pays the highest, they could be 
making a little more than a Member of Congress.
    But we are not committed to ritual suicide of trying to 
break the tie between Members of Congress and career executives 
because----
    Senator Voinovich. But overall, from a good personnel point 
of view, de-linking salaries to artificial barriers is a----
    Mr. Shaw. We support that.
    Senator Voinovich. It is a good public policy.
    Mr. Shaw. It is a good public policy, and it is one that, 
in fact, has happened in many agencies already. At the Senior 
Biomedical Research Service, a number of programs over at HHS, 
the SESers there make more. The law enforcement community, the 
FAA, SEC, a whole bunch of agencies have broken loose from the 
pay cap through necessity. They cannot keep the people that 
they need and they cannot get the people that they have to 
have, and that is going to be governmentwide soon.
    Senator Voinovich. Are you familiar at all with the IRS and 
the program that they put in place several years ago to bring 
in outside people who had special expertise that they needed in 
order to get the job done?
    Mr. Shaw. Yes, sir.
    Senator Voinovich. This legislation allows that kind of 
flexibility in other agencies. There has been a lot of 
controversy about whether that works or does not work, and it 
is not intended to respond to the issue of pay compression that 
senior executives experience, but the fact is that there are 
certain agencies that do need to bring in people on a short-
term basis for mission-critical tasks. I would be interested in 
your appraisal of that.
    Mr. Shaw. SEA has--it is probably one of the most debated 
issues within our board of directors, which are SESers from all 
different agencies. But we think a limited critical pay program 
could be useful in some agencies. We are absolutely opposed to 
it if it would result in bringing in people from the private 
sector and used to relieve pay compression for a selected few 
and for the pay compression problem that we have not addressed 
first. So if our pay compression problem was dealt with, even 
though it would not be a complete solution, then we would be 
supportive with certain safeguards.
    One of the things, though, is that we should be able to 
allow career executives to compete for those positions because 
they may be available in other agencies.
    Senator Voinovich. Are they not allowed right now?
    Mr. Shaw. No.
    Senator Voinovich. They are not?
    Mr. Shaw. No. They have to come from outside government 
now. They are term appointments for 4-year terms. Career 
executives should be allowed to go into those positions. They 
would have a 4-year term and they would have to come out of the 
positions. We would want career SES employees to be able to go 
back into the SES if that is where they had come from.
    Senator Voinovich. By the way, we got into that when I was 
governor. We had people who wanted to move up, but when they 
moved from a covered position into one that was not covered, 
they could not move back later. So some of them were not 
willing to move because they said, ``Well, at the end of that 
time, I am finished.''
    Mr. Shaw. In the current SES system, if they do that, if 
they go into a political appointment, they have fallback rights 
to the SES. It is not unusual at all for people who have been 
given Presidential appointments or non-career appointments in 
one administration at the end of that administration to fall 
back into the SES as a career employee, if that is where they 
came from. But it has to be where they came from.
    The other thing, though, is we think that use of critical 
pay should be justified on the basis that the skill that they 
are seeking or the experience that they are seeking does not 
exist in the agency or in the government. It should be confined 
to specific skill sets, for example, in the IT community, that 
we do not have in the government because of the rapid 
progression of change, and that may exist on the outside.
    But the use of it to bring someone in to handle public 
relations or something else like that is problematic, first, 
and second, when we look at the problems in the government, 
most of the critical issues, even in the IT community, it is 
not like these career executives have only been talking to 
themselves. They have hired and paid for some of the best 
consultants in the whole world who sold them a bill of goods on 
what they needed to do to get this IT system to work. Maybe 
they would have been better, having more knowledge, knowing 
that they are being sold a bill of goods, but they certainly 
are not lacking in the ability to have people come in and give 
them advice on particular challenges that they face.
    Senator Voinovich. We have an example of that in the IRS. 
You think, overall, they have used it for the intended purpose, 
or do you think that they abused it? How would you rate that on 
a scale of one to ten?
    Mr. Shaw. The only basis I have got for that is the----
    Senator Voinovich. One being the best.
    Mr. Shaw [continuing]. One study that was done by Tax 
Notes, I think they call it, and discussions with two or three 
executives at IRS that are very knowledgeable about it. There 
have been a number of pluses. There have been a number of 
failures, some people who left very quickly.
    Senator Voinovich. Well, the point is that when they bring 
them in, they get a 4-year contract but it is not a guaranteed 
contract. And if they do not meet the muster or have some bad 
interpersonal skills, they have asked them to leave, I think.
    Mr. Shaw. Right.
    Senator Voinovich. So the fact that they leave maybe is not 
a bad thing, but maybe it shows that the system works. What 
would worry me is that you have people sitting there for 4 
years that really are not getting the job done and are really 
causing problems with the team.
    Mr. Shaw. That is why if career executives went into it 
from whatever agency they must be able to be removed from that 
critical pay job at any time, the same as anybody else.
    I guess where we come down is we think OPM has that 
authority now, or OMB has it now, that critical pay authority 
should be delegated to OPM, that agencies should come to OPM, 
justify that they need this many critical pay employees for 
these positions, and then go out and hire them. We would not 
have a problem with a system like that, again, so long as 
someone was looking at it and saying, yes, you do not have that 
skill, go buy it.
    Senator Voinovich. Basically, it is just using common sense 
to shape an agency and get the job done----
    Mr. Shaw. Yes, sir.
    Senator Voinovich [continuing]. The way it ought to be 
done, understanding that we need to have more money in those 
agencies in order to take advantage of the flexibilities that 
we would like to give the agencies.
    Senator Akaka, one of the jobs we have is working with the 
appropriators, and I am going to talk to the administration, 
also, about the issue. They put a budget together and in the 
budget, I think there should be some reconsideration of how 
resources are allocated. I mean, we have the issue of homeland 
security, and so often when the budgets are put together, the 
focus is on hardware and not enough attention is given to human 
beings.
    You win with people, and I will never forget our March 2001 
hearing, where former Defense Secretary Jim Schlesinger said, 
``fixing the personnel problem is a precondition to repairing 
everything else in our national security edifice.'' That is it. 
And somehow, we have to get people to understand that human 
element, that good people really make the difference, and if we 
have them at Federal agencies, a lot of these other problems--
even national security problems--might be a lot less prevalent 
than they are today.
    Mr. Shaw. That is true. I agree.
    Senator Akaka. Thank you for that discussion.
    Mr. Harnage, in talking about flexibilities, you point out 
in your remarks that these bills offer incentives and bonuses 
to upper management without focusing on the majority of the 
Federal workforce. You note that the human capital crisis is as 
severe for those in the skill trades who are paid under the 
Federal wage system as those under the general schedule. How 
can a wider range of Federal workers be better served by these 
flexibilities?
    Mr. Harnage. Well, in the first place, we have to fix both 
pay systems, the wage grade pay as well as the GS or the white 
collar pay. But our concern with the bonuses is it appears to 
us to be more of a band-aid fix where we are providing bonuses 
because our pay system is not sufficient. If we fixed the pay 
system, there would still be places for bonuses, but it would 
not be a band-aid fix, it would really be an incentive to 
either stay with the government, come to work with the 
government, or do a better job. But a bonus over a 4-year 
period is looking for a transit employee rather than a career 
employee, in our opinion, and that was the reason that we were 
concerned about the bonuses. We are not so much in opposition 
to a bonus. We are saying, but you have got to fix the pay 
before the bonus has any significance to the entire workforce, 
to fixing the problem.
    Last year when there was a change in for the SES, I raised 
a little objection to it, but not because of what was done but 
because it was a band-aid approach. I think we need to fix 
everybody's pay, and I am certainly in favor of raising the 
cap, eliminating the cap on the SES, as well as the cap on 
Congress. I think it is just a bad way of doing business.
    The pay ought to be based on a formula that decides it from 
year to year rather than it having to be voted on every year by 
Congress. It puts you in an embarrassing situation where you 
are voting on your own pay. I think you need to find a way out 
of that and you will find a way out of the SES, as well. So we 
are in favor of raising those caps or eliminating the caps 
altogether.
    Senator Akaka. Thank you for that.
    Mr. Shaw, you and I have talked about pay compression 
within the ranks of the senior executives before and I believe 
your testimony provides a strong case in support of legislation 
to fix this problem. In addition, your statement notes that 
within 5 years, 70 percent of all senior executives will be 
eligible to retire.
    Mr. Shaw. Yes, sir.
    Senator Akaka. I found it interesting that Mr. Priolo 
recommends in his testimony that there needs to be a program to 
mentor new managers. He also suggests the need for a structured 
senior executive development program to identify and train 
potential SES candidates. Both seem like necessary components 
of any strategic human capital program. How are prospective SES 
candidates identified and what arrangements currently exist 
between SES and Federal managers to foster promotion?
    Mr. Shaw. The SES members that are in our Association do 
mentor. They have to be very careful, however. If they are 
mentoring someone, it might look like you are picking out one 
or two people that you are going to help along, then other 
people are concerned that they are not going to be helped 
along. That is something that they have to be careful of. One 
or two agencies have formal mentoring programs. Everyone 
should.
    There are two types of career development programs, 
executive development programs in the government today. There 
is the one such as the IRS, where the agency, through a very 
rigorous process, selects a number of managers to go through a 
6-month training program and some on-the-job training, (and 
these selectees come from both outside and inside government). 
They look at all government agencies, and private companies to 
solicit applicants. Those who are selected and successfully 
complete the program are going to become senior executives and 
that is an excellent system, in my judgment, for two reasons.
    One, you have gotten all of the requirements out of the way 
going into the system so that the people who graduate from the 
system, know they are going to become executives. You give them 
development, etc., as they go along.
    The other system is the one that just about every other 
agency has, which in our judgment and experience is not a good 
system. What it does is they advertise that they are going to 
have a career development program or an executive development 
program. People apply for it and come into the program. They 
take just about everybody who is interested, unless they 
believe the applicants are not able to make it at all. They run 
them through the program and then they send them back to their 
old jobs and they are called executive development potentials; 
or something like that. And then whenever an SES vacancy comes 
up, they look at those people in the program, but they also 
look at people who have never gone through the program, and in 
many instances, they select people who have not gone through 
that program.
    So the people in the program have said, ``What did I waste 
my life for, for a year going through this program, and I have 
got nothing except I feel good and I feel like I accomplished 
something, but I am not going to get these jobs, so that does 
not do anything.'' That is how most of the agencies' programs 
work.
    They have been a failure, in my view, other than the 
candidates who have gone through them have learned something 
and been trained in a variety of skills. But because of that, a 
lot of people have given up on the executive development 
program just because so many people who have gone through it 
have not been selected.
    So we strongly recommend that there be executive 
development programs, and they do as in the IRS, and that is a 
track all the way up from GS-13, up that. All know what they 
have got to do to qualify for it. They get selected for the 
training, and it means they are going to be an executive. That 
means a lot of things, good things and bad things. For example, 
you have got to be mobile, etc. We would suggest if you are 
going to set up a program or require agencies to have a 
program, that it be a program that when you complete it, you 
are going to be selected for an executive position in the near 
future.
    Senator Akaka. I thank you very much for your responses. I 
have additional questions that I would ask for the record and I 
would appreciate your timely responses.
    I wish to thank you for being with us this morning, and I 
feel we had an extremely engaging discussion. We heard where 
there is agreement and where there is disagreement.
    One thing is very clear. We should not create new 
flexibilities today that will become the constraints of 
tomorrow. It is the responsibility of us all to work together 
to ensure that the Federal Government has the workforce that is 
needed to carry out government services.
    I would like to call on my friend, Senator Voinovich, do 
you have any closing remarks or any further questions?
    Senator Voinovich. No, I have not, except to say I really 
appreciate your being here today and look forward to continuing 
to work for you as we shape this legislation up so that it gets 
the job done. Again, I do understand that we need to do some 
serious work in some other areas if this is going to be 
successful.
    Senator Akaka. Your responses will be useful to this 
Subcommittee.
    Again, I thank everyone for attending the first day of our 
2-day hearing. I invite you to join us tomorrow morning at 10 
a.m. when we will hear from Dr. Paul Light, Dr. Carolyn Ban, 
Max Stier, and Dr. Steven Kelman. We will look forward to that 
hearing.
    I again thank you very much. This hearing is adjourned.
    [Whereupon, at 12:09 p.m., the Subcommittee was adjourned.]


        THE FEDERAL WORKFORCE: LEGISLATIVE PROPOSALS FOR CHANGE

                              ----------                              


                        TUESDAY, MARCH 19, 2002

                                     U.S. Senate,  
                Subcommittee on International Security,    
                     Proliferation, and Federal Services,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka, Chairman of the Subcommittee, presiding.
    Present: Senators Akaka and Voinovich.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Good morning. This hearing will come to 
order.
    Today is the second day of our hearing on the Federal 
workforce and legislative proposals offered by Senator George 
Voinovich and Senator Fred Thompson.
    For those lucky enough to have been with us yesterday, like 
Dr. Ban, you know that we had a stimulating discussion which 
was enhanced by the diverse views expressed on how we should 
proceed with civil service reform.
    I am pleased to have with us this morning a panel of 
distinguished witnesses who have had years of experience 
working with the issues we are grappling with today, and I am 
equally pleased to be joined by my friend, Senator Voinovich. 
Again, I thank you and I had a great hearing yesterday, and you 
had some great questions yesterday, too.
    With about half the Federal workforce eligible for 
retirement within a few years, there is no question that we 
must look toward new employees. Unless we are able to convince 
sufficient numbers of young people to seek careers in public 
service, our government will be unable to meet the needs of the 
American people.
    At the same time, we must ensure that the current Federal 
workforce has the tools they need to perform their jobs. There 
must be adequate resources devoted to training and enhancement 
of skills, better utilization of institutional knowledge, and a 
commitment from the highest levels of government to honor 
Federal employees for their contributions to our great Nation.
    Yesterday's witnesses differed in their approaches to the 
problems we face. However, they agreed that the pay gap, lack 
of funding, performance appraisals, better training for 
managers, and outsourcing quotas were issues that must be 
addressed in order to strengthen the Federal workforce and make 
Federal service more attractive.
    Because you all have held positions in the Federal 
Government, your recommendations are grounded in practice and 
offer unique perspectives on how to best recruit, retain, and 
motivate the Federal workforce.
    Every administration comes into office with a specific 
agenda, and I am convinced that we must separate policy from 
politics. Therefore, I want to know how we can best achieve 
balanced reform of the civil service system without imposing 
changes dictated by political considerations.
    Again, we look forward to your statements. I now want to 
yield to my good friend and colleague, Senator Voinovich, for 
his opening statement.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Mr. Chairman. I would like to 
thank you again for convening this hearing. I thought 
yesterday's hearing was very worthwhile.
    I welcome our witnesses and thank them for being here 
today.
    As I indicated at yesterday's hearing, the human capital 
legislation being considered by the Subcommittee is extremely 
important to the Nation, and every day we hear more and more 
examples of why there is real urgency to get this legislation 
passed.
    I mentioned yesterday that I was at a hearing last week 
with FEMA Director Joe Allbaugh and after his presentation on 
his agency's new role in dealing with first responders, I asked 
him what was going on in terms of FEMA's staffing, and he said 
he is in panic over it. He said, ``I think we are going to lose 
55 to 60 percent of our top people.'' One of his concerns was 
that after September 11, many of the people in FEMA--which is a 
very high-pressure operation--indicated that they were going to 
retire, that they were looking at life a little differently 
than they did before September 11. I suspect we will be seeing 
more of that in some of the other agencies, so that adds an 
additional dimension to the challenge that we have.
    Today I am looking forward to learning our witnesses' views 
and recommendations on the legislation that is before the 
Subcommittee, S. 1603 and S. 1639, particularly the draft 
managers' amendment which we are developing. The focus of these 
bills is, of course, management flexibility. While compensation 
is important--and we certainly got into that yesterday--it is 
only half the picture. The other things that we are talking 
about are also significant, I think, if we are going to have a 
competitive total employment package that is going to change 
the situation.
    Our witnesses today bring a wealth of experience in the 
area of Federal personnel management, and I want to thank each 
of you for taking time out of your very busy schedules to be 
with us.
    Paul Light's name has been synonymous with civil service 
reform for many years; it is great that he is again playing a 
central role in the work of the National Commission on Public 
Service, chaired by former Federal Reserve Chairman Volcker. I 
look forward to a productive relationship with that panel and 
have read in your testimony what you expect to accomplish with 
Mr. Volcker.
    While Max Stier's organization, the Partnership for Public 
Service, is fairly new to the Federal scene, Max is not. Having 
served in all three branches of the Federal Government 
throughout his career, he brings a great deal to the table in 
our ongoing conversation on reforming the civil service.
    I think it is wonderful that the Partnership's benefactor, 
Sam Heyman, has chosen to give back to our Nation by founding 
this organization. It has come at absolutely the right time as 
far as I am concerned.
    Harvard University's Kennedy School of Government, one of 
the premier public affairs institutions in the world, has also 
taken a lead role in addressing the human capital crisis. Under 
the leadership of Dean Joseph Nye and with the assistance of 
Professors Steve Kelman and Elaine Kamark, the Kennedy School 
has convened a series of executive sessions on the future of 
public service that are proving valuable in the discussion of 
how to fix these pervasive governmentwide problems.
    These sessions have yielded a wealth of information and 
provided many excellent recommendations for improving our 
legislation, resulting in a number of positive changes of the 
bill--and Steve, I am very grateful to you and Dean Nye for 
your contributions.
    I am also pleased that you are here today because as a 
former Clinton Administration official, I think you demonstrate 
that our work together on this issue is a truly bipartisan 
effort.
    Finally, it is great that Carolyn Ban is on this panel of 
expert witnesses. I was so honored last October to address the 
National Association of Schools of Public Affairs and 
Administration, the organization that Dr. Ban leads, and to 
receive an honorary national membership in Alpha Alpha, the 
public affairs and administration honorary society.
    The involvement of our colleges and universities is a 
critical element in our campaign to attract our Nation's best 
and brightest young people to public service. I recently sent a 
pair of letters to the public affairs departments of Ohio's 
NASPAA institutions and to the presidents of all major colleges 
and universities in the State, encouraging them to proudly 
advertise careers in public service as great opportunities for 
their students.
    I think the future of our Nation depends on the kind of job 
that you are going to be doing. We are going to try to 
straighten this situation out to make it a lot more attractive, 
and we have to go out and take advantage of opportunities to 
attract these young people who are so important to the future 
of our country.
    Again, Mr. Chairman, I thank you for holding these 
hearings, and I really look forward to the witnesses' testimony 
today and to our discussion.
    Senator Akaka. Thank you very much, Senator Voinovich.
    Now we will hear from our panelists. I ask that you limit 
your oral statements to 5 minutes. When you see the red light 
come on in front of you, please try to wrap up. Be assured, 
however, that your complete and full statement will be made 
part of the record.
    Our first witness is Dr. Paul Light, and I will refrain 
from saying more about each of you, because Senator Voinovich 
has done a good job of that.
    So Dr. Light, please proceed.

    TESTIMONY OF PAUL C. LIGHT,\1\ SENIOR ADVISOR, NATIONAL 
   COMMISSION ON THE PUBLIC SERVICE, AND VICE PRESIDENT AND 
  DIRECTOR OF GOVERNMENTAL STUDIES, THE BROOKINGS INSTITUTION

    Mr. Light. I am pleased to be here this morning 
representing The Brookings Institution and the Center for 
Public Service. I am also a senior advisor to the Second 
National Commission on the Public Service which is chaired by 
Paul Volcker.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Light appears in the Appendix on 
page 191.
---------------------------------------------------------------------------
    We had a meeting of the Volcker Commission last week and 
discussed specifically the question of the Volcker Commission's 
use as a possible impediment to forward motion on reform. The 
Commission does not want to play a role here as being anything 
but supportive of activities in forward motion on improving the 
public service, be they incremental or comprehensive.
    We talked about the issues pending before this Subcommittee 
and the full Committee, before Congress and the administration, 
and the Volcker Commission wants to be clear that it does not 
want the comprehensive to be the enemy of the incremental. I 
would just put that on the record in behalf of the Commission. 
It does not have a position on any of the legislation pending 
before this Subcommittee. We have not had an opportunity to 
discuss these issues--we are just getting under way--but the 
chairman and the members of the Commission who were at the 
first meeting last week were clear that they support all good 
faith efforts to improve the public service, be they 
incremental or comprehensive, and they do not wish to be seen 
as in any way, shape, or form acting as an obstacle or hoping 
for a delay in action pending our final report next October or 
November/December, whenever we actually bring this report to 
completion. We have a term limit on the Commission of about 12 
months, and we hope to be done by December.
    I would say personally that we have before ourselves on 
this Subcommittee and in Congress and the administration a 
pile-up of distress that we see in hearings like the one you 
held yesterday. There are a ton of issues to be addressed on 
public service reform, from pay to career structuring to the 
flattening of the hierarchy to Presidential appointee reform. I 
personally believe that we ought to have a moratorium on 
further outsourcing until the Comptroller General and his panel 
complete their work, but we cannot allow ourselves to fall into 
the trap of doing reform once every 25 years and then leaving 
it to the next generation of legislators to repair what we did 
a quarter century ago. If we look at the tide of legislative 
reform over the past half-century, we have done civil service 
reform twice--in 1946 with classification reform; and in 1978 
with the Civil Service Reform Act--and then we have done a 
little bit of tinkering around the edges in 1990 with FEPCA and 
occasionally other legislation. But we have converted the civil 
service reform issue into a once-ever-25-year affair.
    There are three reasons for that. One is a lack of 
systematic data that we can use to track and adjust in real 
time. Senator Voinovich knows the story very well about the 
lack of meaningful data within the agencies on training. We do 
not know what is being spent, and therefore, we cannot track 
it, therefore, we cannot adjust appropriately.
    We have also had a long-term belief that one size fits all 
as far as Federal reform goes. We need to struggle a little bit 
more with decentralization as an issue, and the Volcker 
Commission is most certainly going to do so.
    There has also been a search for the perfect reform. Let me 
tell you there is no such thing. Whatever reform we try is 
going to need to be adjusted; we are going to need to fine-
tune; we are going to find agencies where it does work and 
agencies where it does not work. We have got to stop searching 
for the perfect reform, and we cannot allow the perfect to be 
the enemy of the good.
    The impact is clear, as I write in my testimony, in the 
anti-terrorism workforce. We have a terrific workforce in the 
Departments of State, Justice, Treasury, and Defense. We have a 
terrific workforce at FEMA. We have employees who want to do 
better at INS and in the Border Patrol and in Customs. The 
motivation is good. The recruitment is lousy. The resourcing is 
shameful. The rewarding is casual, and the trust is declining.
    I do not believe the recent reports on INS will do anything 
but weaken public support and public confidence in the war on 
terrorism and public confidence in the battle for homeland 
security.
    What are you to do as a Subcommittee? As I said before, 
there are lots of areas for work. The Chairman has his own 
history on the human resource issue. We would not find a single 
private corporation in America that waited 25 years to adjust 
its human resource policies, especially in a labor market like 
the one we have currently. I wish I had a nickel for every time 
a Federal recruiter told me last fall that the best thing for 
the Federal Government workforce recruitment effort would be 
furtherance and a deepening of the recession; that is how we 
operate in this town.
    I believe that practically everything this Subcommittee 
will do in terms of legislation pending before it will help. I 
believe the key is to get started on reform and to make forward 
motion as soon as possible. We need to show the Federal 
workforce and the labor market that the Federal Government 
means business about being a more effective recruiter. The best 
way to do that is to start passing legislation. It will not be 
perfect, but it can be very good.
    Thank you very much.
    Senator Akaka. Thank you very much, Dr. Light, for your 
comments and your advice to all of us.
    Senator Akaka. Our next panelist is Dr. Carolyn Ban. Please 
proceed, Dr. Ban.

 TESTIMONY OF CAROLYN BAN,\1\ DEAN, GRADUATE SCHOOL OF PUBLIC 
   AND INTERNATIONAL AFFAIRS, UNIVERSITY OF PITTSBURGH, AND 
 PRESIDENT, NATIONAL ASSOCIATION OF SCHOOLS OF PUBLIC AFFAIRS 
                       AND ADMINISTRATION

    Ms. Ban. Good morning, Mr. Chairman, and good morning, 
Senator Voinovich.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Ban appears in the Appendix on 
page 207.
---------------------------------------------------------------------------
    I am delighted to be here. As the Senator pointed out, I am 
the dean of one of the major schools that is training people 
for public service. I am also president of NASPAA, the National 
Association of Schools of Public Affairs and Administration, 
which represents over 250 programs offering degrees in this 
area. I am a scholar who has studied the Federal civil service 
for over 20 years, and I am very proud to be a former career 
civil servant.
    I am not going to read my written testimony; I appreciate 
the Chairman telling us it will be in the record.
    I think all of us share a common value here. I think we are 
all concerned with reforming our human resources systems with 
the goal of improving government capacity, but we may disagree 
on some of the specific proposals. I also appreciate very much 
Senator Voinovich's statement because this should not be a 
partisan issue. I am very hopeful that we are at a point where 
meaningful change is possible. So I applaud you, Senator 
Voinovich, and all of the Senators who have sponsored this 
legislation.
    I do not think this is the major reform, but it is an 
incremental process, and I think most of the reforms in this 
bill are things that I support very strongly. I do want to 
spend my time talking about the bill itself and some of the 
provisions within the bill, both those that I support and those 
that I have some concerns about, because I think now is the 
time that we can perhaps make some adjustments. And I am going 
to focus my remarks initially on three areas--on the area of 
hiring, on the area of training and education, and on the 
general issue of dealing with problem performers.
    In terms of hiring, I think this bill contains a potential 
reform that is a very important and significant one, and that 
is allowing agencies to use what is called ``category rating.'' 
Category rating in some other jurisdictions is called ``zone 
scoring'' or ``band scoring.'' Whatever we call it, it is a 
little bit in academic terms like giving people an A or an A-
minus rather than a 95 versus a 94. Even when we are using 
valid selection methods, I think even the folks who develop the 
tests and the selection methods would agree that our methods 
are not so precise that we can really tell a manager that 
somebody who gets a 95 on a selection procedure is going to be 
a better employee than somebody who gets a 94.
    The way the Rule of Three currently works in the Federal 
system, if you have 10 people who score a perfect 100 on this 
selection procedure, whether it is a written or what is called 
an ``unassembled examination,'' the HR office can only give the 
manager a list of three people. Now, how do they get down from 
10 to 3 when these people are all equally qualified and have 
identical scores?
    First, they use veterans preference, and I think that is 
legitimate. Second, if the manager tells the HR office, ``I am 
interested in seeing a certain person on the list of people,'' 
and there is a tie-breaker, that recommendation by the manager 
might break the tie.
    Absent those, we use a random selection process. They use a 
table of random numbers. It is like pulling people's names out 
of a hat. This is not an equitable way to make those kinds of 
decisions, and there is no reason why the manager should not be 
allowed, even under the current Rule of Three, to see all of 
the people who got the top score. But I think that moving to a 
carefully drawn category ranking system is a far fairer, more 
equitable system that gives managers reasonable choices but 
still upholds a concept of merit.
    I would recommend that you look at State Governments that 
have done this as a model. One of them is New York State, which 
has moved effectively to band scoring, and the director of the 
Department of Civil Service there, George Sennet, who is a 
Pataki appointee, has been very successful not only in doing 
this but in getting the unions to buy into it. The unions 
initially opposed it, but when the system was made a little 
more carefully drawn, unions did go along with this. So I think 
we need to look at how to allay the concerns of the unions in 
this area.
    The second area is training, and I applaud the reforms that 
both require agencies to develop training programs in the areas 
of training managers and dealing with poor performers; I 
applaud and strongly support allowing agencies to pay for 
people to get a college education or a graduate degree when it 
is in the interest of the agency; and I strongly support the 
emphasis on training.
    My time has run out, but when we have time during the Q and 
A, I would like to be able to go back to the issue of dealing 
with poor performers.
    Senator Akaka. Thank you very much, Dr. Ban. I now call on 
Max Stier. You may proceed with your statement.

 TESTIMONY OF MAX STIER,\1\ PRESIDENT, PARTNERSHIP FOR PUBLIC 
                            SERVICE

    Mr. Stier. Thank you, Chairman Akaka and Senator Voinovich. 
Thank you for inviting me to testify here today, and thank you, 
most importantly, for your leadership on these critical issues.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Stier appears in the Appendix on 
page 215.
---------------------------------------------------------------------------
    I appreciate the opportunity to discuss the challenges 
facing the Federal workforce, and I will offer the Partnership 
for Public Service's perspective on the Federal Human Capital 
Act and the Managerial Flexibilities Act.
    The Partnership was founded just under 1 year ago in 
response to the very issues that the Subcommittee is examining 
today. Skills gaps created during the downsizing of the 
nineties are soon to be exacerbated by a wave of retirements, 
and at the same time, very few talented Americans see Federal 
jobs as good jobs.
    All of the government activities that are so vital to us, 
from protecting our country to regulating our markets, will 
soon be severely threatened unless we improve the government's 
management of its most important asset--its people.
    I would like to use my time here today to focus on the 
importance of the Chief Human Capital Officer position that is 
created by the Federal Human Capital Act. The Partnership has 
worked very closely with congressional staff in developing this 
proposal, and we believe it is vitally important not only for 
the success of the measures you are considering today, but also 
for the success of subsequent civil service reforms that this 
Subcommittee may be asked to consider in the coming years.
    Simply put, the Chief Human Capital Officer proposal is the 
logical continuation of a long process begun under the first 
President Bush to require agencies to manage for results. In 
1990, Congress passed the Chief Financial Officers Act in order 
to improve the financial management of the Federal Government. 
The Act required each Federal agency to designate a person to 
serve as its chief financial officer and to oversee all of the 
agency's financial management activities.
    Although much remains to be done, the CFO Act has sparked 
substantial improvements in government financial management 
practices. We have financial standards, we have financial 
auditing, and we have reporting on these measures--something 
that did not exist previously.
    Six years ago, Congress enacted similar provisions with 
respect to agency information practices, including the 
requirement that all agencies designated a Chief Information 
Officer. The Government Performance and Results Act has also 
required agencies to track and report on the results they are 
able to achieve.
    These reforms, taken together, have put in place most of 
the structures that are needed to manage a high-performing 
organization with one notable exception, and that is human 
capital management.
    The top corporations in this country uniformly acknowledge 
the importance of having a human capital officer in a position 
of top responsibility--a position that is equal to other vice 
presidents responsible for the organization's performance and 
success. Each of the top 10 corporations on the Fortune 100 
list has such a position. I think we need to look to the 
private sector and learn from the example that we have there. 
Jack Welch, the former CEO of GE, emphasized the importance of 
human capital management. As he bluntly put it: ``We spend all 
our time on people. The day we screw up the people thing, this 
company is over.''
    Both the Federal Human Capital Act and the Managerial 
Flexibilities Act propose to grant agencies new flexibilities 
and authorities in the hope of improving the government's 
ability to recruit and retain the talent and skills that it 
desperately needs. I would urge the Members of this 
Subcommittee to think of a chief human capital officer as an 
indispensable agent of change, acting under the direction of 
the political leadership but not being political themselves 
within each agency, who will be equipped with the authority and 
the expertise to ensure that these new tools are deployed 
efficiently, strategically, and to maximum effect.
    In order for the chief human capital officer to play this 
role, we believe that the current legislative proposal could be 
strengthened even further, and we are eager to work with the 
Subcommittee to accomplish this. Our suggestions focus on two 
areas. First, we must use competencies to select the right 
people for these positions--a point that Comptroller General 
Walker made. This bill is not simply about putting a new label 
on positions currently held by HR directors across the 
government but about transforming the very nature of the job.
    Second is to ensure that these officers have a clear 
mandate to develop, use, and report to Congress on meaningful 
measures of their agencies' human capital performance, a point 
that Dr. Light made earlier.
    In our view, the most critical management tool is 
information. If you can measure it, it can change. The chief 
human capital officer should be required to develop specific 
groups of metrics that are aligned by the agency's strategic 
plan, with special emphasis on such areas as time to hire, 
success of recruitment efforts, and employee development. 
Again, this is akin to the training positions that are already 
in the bill.
    There are many other positive steps being proposed in these 
bills--the category ranking system proposed in the Federal 
Human Capital Act, for example, has been proven to be a fair 
and effective way of selecting qualified applicants that gives 
managers better choices and still preserves the important merit 
principles of fairness, diversity, and respect for veterans 
preference, a point which Dr. Ban made very well. And the 
Partnership generally supports the enactment of both sets of 
legislative proposals with a few caveats which are set out in 
the written testimony.
    Thank you very much. I look forward to further discussion 
during the question time.
    Senator Akaka. Thank you very much, Mr. Stier. Our last 
panelist is Dr. Steven Kelman. We look forward to your 
testimony. Please proceed.

     TESTIMONY OF STEVEN J. KELMAN,\1\ PROFESSOR OF PUBLIC 
   MANAGEMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD 
                           UNIVERSITY

    Mr. Kelman. Thank you, Chairman Akaka and Senator 
Voinovich. It is a privilege to have the opportunity to come 
before you today, and I am here to express my support for the 
managers' amendment and for other activities this Subcommittee 
might initiate to help the Federal Government win the war for 
talent.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kelman appears in the Appendix on 
page 221.
---------------------------------------------------------------------------
    For the last 22 years, I have been a professor of public 
management at Harvard and have devoted my professional life to 
working to improve the management of the Federal Government and 
to attract young people to public service. So I feel just like 
Dr. Ban--I am on the front lines of the war for talent in the 
Federal Government and trying to attract young people.
    As a citizen and as a teacher, I want to suggest that 
everybody here honor and applaud both of you, both Chairman 
Akaka and Senator Voinovich, for the commitment to the public 
good, really in the best tradition of the U.S. Senate, that 
both of you are demonstrating by your interest in this issue. 
This is not going to get headlines; no one is ever going to win 
an election on this. But this is the right thing to do. This is 
statesmanship.
    I have been to enough hearings so that I know what I am 
about to suggest is very unusual, but I am going to do it 
anyway, at the risk of being very unusual. I am going to ask 
that my fellow panelists and the people in the audience join in 
a round of applause for Chairman Akaka and Senator Voinovich 
for your work in this area.
    [Applause.]
    I hope that does not take away from my time.
    I want to just highlight a few of the features of my 
testimony. First, although today's hearing is not on S. 1800, 
the Homeland Security Federal Workforce Act, I would like to 
endorse the provisions of that bill establishing National 
Security Fellowships, a National Security Service Corps, and 
improvements in student loan repayment.
    Second, I want to agree with Professor Ban and Max Stier. I 
believe that one of the most important provisions of this bill 
is Section 202, which would establish a category ranking system 
as a replacement for the Rule of Three.
    Right now, the criteria that are used to set up the Rule of 
Three are for various reasons quite formulaic and bureaucratic, 
and there are lots of things that typically, the hiring 
manager, the person who actually has to deliver the results 
from the organization, does not get to look at--when they 
choose the top three--for example, community service, work 
ethic, things like that. Once the candidates get to the hiring 
manager, they can look at those things.
    So our goal should be to get a larger pool of people into 
the hands of the hiring managers so they can start looking at a 
broader range of criteria rather than just the formulaic, 
bureaucratic ones, and getting the three people who are 
established by the personnel folks who do not have a direct 
interest in the agency actually producing the results in the 
same way as the hiring manager does. So I think that is a very 
important provision of this legislation.
    Third, I would urge that the managers' amendment have an 
additional provision to amend Title 5, which currently states 
that hiring and promotion decisions should be based on ``the 
knowledge, skills and abilities of candidates,'' by adding to 
that list ``the knowledge, skills, abilities, and 
accomplishments.''
    The current language was written a long time ago at a time 
when we did not have the same focus on getting results out of 
the government. I saw a recent article in my home town 
newspaper, The Boston Globe, on how private sector firms 
evaluate resumes of people who are applying for jobs. There are 
a lot of quotes here, but the basic point of the article was 
that what people look at when looking at resumes is 
accomplishments. They quote a person as saying, ``If you just 
list responsibilities of previous jobs excluding 
accomplishments, an employment manager is like to say `So 
what?' and move on to the next resume.''
    I think Congress can send a real signal that we really care 
about a results-oriented Federal workforce by adding the word 
``accomplishments'' to the statute.
    Next, I want to briefly talk about things that the 
Subcommittee and Congress can do other than legislation to get 
a Federal workplace that is a workplace oriented toward results 
and oriented toward our employees, because a lot of the things 
that you can do do not have the words ``human capital'' or 
``civil service reform'' attached to them.
    For example, I think there is nothing this Subcommittee can 
do more than continue working on the Government Performance and 
Results Act as a way of expressing interest in this. Second, we 
should not forget the Hippocratic injunction, ``First, do no 
harm.'' We have a real habit in this town of doing what I call 
``management by scandal,'' where we create an overly 
bureaucratized Federal workforce and Federal workplace by 
focusing on a small number of scandals. We saw it last week in 
the hearings on the Federal credit card, where you take a small 
number of fraud examples, and that might be used as an excuse 
to destroy a very valuable program and create a more 
bureaucratic workplace. So, first, do no harm.
    I want to conclude with a message to the Subcommittee from 
one of my students, Michael Jung, from Ashland, Kentucky, who 
is representing the students in our executive sessions at the 
Kennedy School. I asked Mike what message I should give to 
Senator Akaka and Senator Voinovich, and his message is this: 
``Sirs, I take your deliberations very seriously because there 
are lots of people in my generation who are interested in 
service. But we need to have faith that the government will 
value our abilities and challenge us to realize our full 
potential as professionals.''
    So let us not disappoint Mike. Thank you.
    Senator Akaka. Thank you very much, Dr. Kelman.
    We usually do not have panelists who call for applause.
    Mr. Kelman. I know it is unusual, but I am so happy that 
both of you are taking an interest in this very important 
issue, because no one is every going to win an election on it.
    Senator Akaka. And I want to pass through you to Mike that 
there is no question that this government values the abilities 
of young people. We depend on them and their accomplishments.
    I appreciate your insightful and thoughtful comments, 
panel. Let me begin my questions by asking all of you, except 
Mr. Stier, whose statement focused on the need for a chief 
human capital officer, do you believe that the creation of 
these positions will ensure that human capital management is 
given equal priority across the agencies? What authority would 
this position need to make the strongest contribution?
    And finally, should this be an appointed position or one 
filled by a career employee?
    I will start by asking Dr. Light for his comments.
    Mr. Light. The first chief financial officer in the Federal 
Government was actually created in 1988 under the Department of 
Veterans Affairs Act, which came through the Governmental 
Affairs Committee. Senator Glenn at the time was the Chairman, 
Senator Roth was ranking. The notion was that a chief financial 
officer would create a presumption in favor of greater 
attention to financial management.
    Whether it has done so over the past 10 years is really in 
the eye of the beholder, but the notion of creating chief human 
capital officers, or CHCOs as they are called now at least in 
some quarters, creates a presumption in favor of paying greater 
attention to human capital issues. That by itself will not do 
it. The chief financial officers were given substantial 
authority. The Chief Financial Officers Act and the 1988 
veterans elevation required the chief financial officers to 
produce financial statements. It also required the chief 
financial officers to have those financial statements audited 
by the inspectors general or contractors selected by the 
inspectors general.
    In other words, you had an enforcement mechanism; you had 
something for the chief financial officers to do. We hear year 
after year that the audit statements are not quite right and 
that some of them are not coming in quite right, but they are 
working on the issue.
    If you create chief human capital officers in government 
and give them nothing to do by way of measurement, tracking, 
auditing, and so forth, then all of you have done is create a 
new title. And I think the legislation takes an important first 
step toward giving them substantial authority.
    I think they have got to be Presidential appointees. That 
is the coin of the realm. If you want them to sit at the table 
with CFOs and CIOs and chief operating officers, all of whom 
are political officers, you have got to make them Presidential 
appointees. Lord help us, we have not quite fixed the 
Presidential appointee process. You have a bill pending here in 
the Subcommittee that could easily be attached as part of this 
legislation to improve the process. But if they are career 
officials, they are not going to be invited to the table. We 
have to be blunt about it. They have to be Presidential 
appointees with the full Senate advice and consent function 
attached. That is the coin of the realm. And I have made that 
argument with regard to other officers in the Federal 
establishment.
    Senator Akaka. Dr. Ban.
    Ms. Ban. I do support the proposal to establish chief human 
capital officers. I do not think that simply creating the 
position will ensure that human capital will be given uniform 
attention, but I think it will help.
    I agree with Dr. Light's comment; there needs to be some 
oversight of this function and a clear sense of the difference 
between the human capital approach and the more traditional 
human resources approach.
    I just had an extended email exchange with the director of 
research of the Partnership last week on this very question of 
whether it should be political or career, and I took the 
position that Dr. Light does, that it should be a political 
appointee, because they will be given a seat at the table. But 
I need to at least acknowledge that there is another side to 
this. We all know that political appointees come and go, 
sometimes fairly quickly.
    The other side of the argument, the advantage of having a 
career person, is that you have a more stable, long-term 
leadership in this area.
    So I do recognize there are two sides to this question; 
however, if forced to come down on one side, I will say that I 
would prefer to go with the political appointee.
    I think the issue, however, is not just the chief human 
capital officer; it is the person who heads the agency--it is 
the secretary, it is the director. And when we confirm people 
in those positions, I do not think we necessarily emphasize 
their ability to manage their organizations. If they understand 
and value good management, they are going to be more likely to 
listen to their human capital officer.
    Senator Akaka. Dr. Kelman.
    Mr. Kelman. I think that both establishing a chief human 
capital officer and also, nobody has talked about a Chief Human 
Capital Officers' Council--I think both of them have some real 
potential advantages.
    In terms of the chief human capital officer within the 
agency, I would agree with the earlier speakers that getting an 
increased level of visibility and attention on these issues, 
particularly the strategic value of people, and talented 
people, in delivering results to the government, I think is a 
good thing, and it is a new focus.
    As Senator Voinovich mentioned, I served in the Clinton 
Administration, not in this area but in a related area, and I 
think that in the Clinton Administration, we did a number of 
good things in this area, but I think it is fair to say that 
the strategic approach toward human capital management that has 
come to the fore in the last few years just really had not come 
to the fore in the same way at that point. I think that having 
the chief human capital officer can help in that regard, 
assuming that the person either meets some competencies, as Max 
Stier suggested in his testimony, so it is not necessarily just 
the existing HR person or, worse, ``personnelist,'' to use the 
old phrase, from the Federal Government.
    I think the Council is important because more and more 
academic research on how organizations work well suggests that 
setting up networks of people to share knowledge, share best 
practices, share information, share approaches, is a very 
important thing in getting organizations to perform well.
    So I think that having a situation where the different 
human capital officers in the different parts of the Federal 
Government meet regularly, get to know each other, talk to each 
other, can be very valuable.
    I do not have a strong view one way or another, frankly, on 
the political versus senior career, and I am not sure there 
needs to be a one-size-fits-all. Some of the chief information 
officers in the Federal Government are political, but most of 
them are actually career. And one argument for career--and I 
recognize the arguments on the other side, but since everybody 
has come out on the political size, let me remind you of the 
argument on the career side--is that from a career progression 
point of view for a career civil servant, the higher the job 
that she or he can aspire to if they do a good job in their 
public service--that is, they start as a GS-5, the more they 
can have to look forward to--``Gee, if I really do a good job, 
someday, I might be the chief human capital officer of this 
agency.''
    That is an argument for making it career. I also recognize 
the arguments on the other side, and if the Subcommittee would 
like, I can talk to my colleagues at the Kennedy School and 
submit something additional for the record on this. I think 
there are arguments on both sides.
    Senator Akaka. Thank you very much, Dr. Kelman.
    Let me ask Mr. Stier, briefly, do you care to add anything 
in response to this question?
    Mr. Stier. I think the arguments have been well-presented 
here. I think from the Partnership's perspective, there clearly 
are arguments on both sides as to whether or not the position 
should be political or career. We come down on the side of 
career for the arguments that have been presented already. Dr. 
Ban suggested, and I think it is right, that you need 
continuity from administration to administration. What we 
really need here is focus on a set of issues that are not easy 
for political leadership to pay much attention to.
    So I would say that in the ideal world, you would have a 
chief human capital officer who was career and then have a 
political leadership in an agency that recognized the 
importance of the issue and relied on the career person to do 
their job and invest in the people part of the agency. That is 
the model that I think is the stronger model.
    I would say that the more important pieces are to ensure, 
again, as Dr. Light suggested, that there really are some 
substantial functions that officer is playing and there are 
measurements or metrics that are included at some point so we 
have some way of knowing what is happening inside the agencies 
and across agencies. I think that is going to be absolutely 
critical.
    Senator Akaka. Thank you so much.
    Today, some of our witnesses, along with Senator Voinovich 
and I, raised pay comparability as a critical issue in solving 
the recruiting problem. The National Commission on Public 
Service will examine nine areas of concern in the Federal 
Government, including the pay gap between private and public 
sector jobs for upper management employees.
    At yesterday's hearing, David Walker said there should be a 
study to develop more realistic and workable methods and 
solutions to Federal pay issues. What is the rationale for 
limiting the Commission's review to upper management employees, 
and do you personally believe that there should be a 
governmentwide study of pay issues similar to the one that was 
performed prior to the enactment of the Federal Employees Pay 
Comparability Act?
    Mr. Light. Let me respond in two ways. First, the number of 
issues that the Commission is considering now is up to 14. It 
seems to be an ever-expanding list. We are going to release on 
Friday of this week at Brookings a report on pay comparisons, 
compensation comparisons, between Presidential appointees and 
the private sector, and that is going to show an outrageous 
gap, the question being how much of a discount or price do you 
want Presidential appointees to pay to come into government.
    We think there is very good statistical evidence of pay 
compression at the top of the Federal hierarchy. We think there 
is less good evidence of pay gaps toward the middle and the 
bottom, which would argue for less of a comprehensive approach 
to compensation reform and more of a layered approach that 
might take on the Presidential appointee, the judges, and 
others who are trailing the private sector by significant 
margins, and try to understand a little bit better what is 
happening at the entry and middle level, where research by the 
RAND Corporation among others suggests that the pay gap in 
position is quite different between the pay gap in person--in 
other words, that we hire people in positions that are 
substantially less well-paid than the private sector, but we 
promote them rapidly, so that by the end of the second or third 
year, these individuals may no longer experience much of a pay 
gap at all.
    I guess what I would say to the Comptroller General is that 
if he can do the study quickly, let us get it done, but we 
cannot afford a 2- to 3-year analysis here. I believe the 
Director of OPM is working the pay issue, the compensation 
issue, and data will be coming out soon on some of these 
comparisons.
    Senator Akaka. Thank you very much, Dr. Light.
    Dr. Kelman, we appreciate you coming from Cambridge to be 
with us today.
    Mr. Kelman. It was snowing yesterday in Cambridge.
    Senator Akaka. The proposals that we are reviewing today 
are intended to allow agencies to better recruit and retain the 
people they need. Yesterday's discussion included outsourcing 
quotas and the negative effect that numerical quotas have on 
these essential human resource needs.
    Drawing on your tenure at the Office of Federal Procurement 
Policy, do you believe that outsourcing quotas are barriers to 
these objectives, and how would you convince your students to 
work for the government, knowing that some could lose their 
jobs to a contractor?
    Mr. Kelman. Well, of course, in the private sector as well 
there is, if anything, more outsourcing that goes on in private 
sector to private sector than goes on in the public sector 
toward the private sector. So any person going to work for a 
Fortune 500 company or whatever, there is some risk that for 
reasons of, in the case of the corporation, good corporate 
policy or in the case of the government, good taxpayer policy 
or good public policy, that some jobs might be outsourced. 
Those are things that are just part of the risk that any young 
person going into a job faces.
    Also, it should be noted that in A-76, if there is a 
public-private competition, and if the public side loses the 
competition, there is a right of first refusal in A-76 so the 
public sector workers are given an opportunity to go and work 
for the private sector contractor if they choose to. And in 
fact, in many of these competitions, they do end up going to 
work for the private sector contractor.
    My overall view, Senator, is that we should make decisions 
on what jobs are in-house and what jobs are outsourced based on 
what is going to produce the best result for the government, 
for the taxpayer, and for the mission of the agency, and those 
considerations end up sometimes favoring doing it in-house and 
sometimes favor contracting it out.
    I am inclined to be skeptical of trying to piggyback the 
politics of outsourcing onto the human capital crisis of the 
Federal Government. I think that those decisions about 
outsourcing--outsource or not outsource--should be made on 
their own merits based on what is in the interest of taxpayers, 
what is in the interest of good government performance, who can 
do the job better, government employees or contract employees. 
I am skeptical of trying to piggyback this onto the human 
capital crisis, frankly.
    Senator Akaka. Thank you very much, Mr. Kelman.
    I now yield to Senator Voinovich for his questions.
    Senator Voinovich. Dr. Light, in regard to the issue of pay 
comparability, I would be very interested to see what kind of 
methodology you would come up with to recommend how we can 
address this, because it is not an easy issue. I went through 
this when I was Mayor of the City of Cleveland, and it took us 
a year to look at all of the comparable positions. We have not 
looked at the classification system around here since 1949, and 
it has to be a giant mess right now. Finding some way to review 
the system so you do not get bogged down in years of analysis 
is very important, and I think that one of the things that 
needs to be understood straight out is that when you get into 
this issue, you are going to find people who are ``red-
circled.'' I think that in your testimony, you mention that. I 
think everybody should understand that if you do this review 
objectively, you are going to find that there are people who 
are substantially underpaid, and there are going to be some 
people who are overpaid. That is a real challenge.
    I had to look at some folks who had been in city government 
for years and say, ``You are red-circled,'' and some of them 
were very unhappy about it, and I said, ``The only thing I can 
say to you is that for the last several years, you have been 
paid more than what you really should have been paid for the 
job that you are doing.''
    I think there is a tendency to think that everybody is 
underpaid, and the fact of the matter is that we are going to 
find that there are people in the Federal Government who are 
overpaid in the positions they have when you compare them with 
jobs that their counterparts have in the private sector.
    Everybody should understand that when we go into this area.
    Another comment I would make is about the issue of the 
chief human capital officer, and whether these should be 
appointed or civil service positions. We are going to be 
marking up the Presidential appointments bill this week. But if 
you look at how slowly things have operated here in the last 
year, and you have a new administration trying to figure out 
where to find competent human resources people in the private 
sector who would be willing to come to work for the Federal 
Government, the process of finding those individuals, I think, 
is going to be very difficult. I think we would be better off 
with perhaps having the chief human capital officers be civil 
servants. That does not necessarily mean that the new political 
appointee coming in may be happy with the CHCO, but if he does 
not like that individual, he can look around and find someone 
who meets his requirements. And that even gets to the issue 
that David Walker brought up yesterday, that is, the issue of 
an agency chief operating officer in the Federal Government to 
provide some continuity on management issues from 
administration to administration.
    I have one other point about the appointment process. I 
mentioned yesterday that Donna Shalala said that when she came 
in for her confirmation hearing, nobody ever asked her about 
what management experience she had. And we tried to get at that 
with this administration, asking questions of the new 
appointees. We had a series of questions that David Walker 
actually put together that we asked them, and hopefully, that 
did some good to highlight the fact that when these people are 
hired, they ought to have some experience in the area of 
management, because they are taking on some enormous 
responsibilities. I just wanted to comment on those.
    I would like you, Dr. Ban, to explain to us how the 
categorical hiring would work in the same example that you gave 
where you have 10 people, each of whom has a score of 100. How 
would it be different if we had categorical ranking procedure 
as contrasted with the Rule of Three? This is an area where we 
have some concern among our labor unions, and I think the 
Subcommittee would like to feel comfortable that if we go 
forward with this, which has been the practice at two agencies 
in the Department of Agriculture. We have some additional input 
on it.
    Would you explain how that would work?
    Ms. Ban. And it has worked well in the Department of 
Agriculture based on the evaluations that I have seen.
    As I understand it--and it does work slightly differently 
in different jurisdictions--depending on the size of the pool 
of applicants, you decide what the top tier will be. That might 
be everybody from 95 to 100 on your selection method. And the 
manager can look at all of those people.
    Senator Voinovich. So in this case, the manager would look 
at all 10 of them?
    Ms. Ban. In that case, it might be more than just the 10 
who got 100. You might also have some people who got 99, 98, 
97, depending on where you draw the line, maybe all the way 
down to 95, and you might get 30 or 40 people if you had a 
large applicant pool. If you have a small applicant pool, you 
might even want to drop the bottom line a little bit lower. But 
all of those people would be considered roughly equally 
qualified, and the assumption is that if you have gotten into 
that top tier, you have got what it takes in terms of the 
technical skills, you have passed that kind of hurdle; then, 
the manager gets to look at all of those people, bring them in 
for interviews, ask for additional information, and say which 
one is the better fit in terms of some of those more intangible 
qualities that really make a difference on the job.
    I have seen evaluations of category rating in other 
jurisdictions. If done right, it does not hurt veterans. In 
fact, veterans float to the top, and you have to pick them 
first if they are in that top category. So I do not think that 
veterans need to worry. And it does allow for a bit more 
diversity, because you can look at a wider range of candidates 
and maybe get a little bit more diverse workforce that way.
    So I have not seen it abused; I have not seen it used for 
political purposes or other kinds of abuse. When it is done 
well, what I have seen is managers happy to have a few more 
people to look at before they have to make a decision.
    Senator Voinovich. Would anybody else like to comment about 
it?
    Mr. Kelman. Yes, I would. Senators, imagine in your offices 
if you were hiring a legislative director, and the rule for 
hiring an LD or an AA was that a separate Senate Personnel 
Office looked at all the candidates and at how many years of 
experience they had had on the Hill, what courses they had 
taken, and that was basically what they looked at; and based on 
that, they came up with a ranking of only three people whom you 
could consider--they gave that to you and said, ``Here are the 
three who have the longest number of years of experience on the 
Hill, who have taken the right courses, whose job description 
looks good''--maybe they have been an LD already or something 
like that--``and those are the only three you can look at, and 
that is it.'' That is the Rule of Three that is imposed on 
Federal managers right now.
    I suggest you would never accept that as a way to hire an 
LD for your offices. You would like a larger list of people who 
are all qualified, whom you can look at and use your judgment 
about who is the best fit for the job.
    Mr. Stier. If I might, Senator, I would just add very 
quickly that, as Dr. Ban suggested, there is data out there 
that suggests that in the Federal Government, the system has 
worked quite well and that veterans have, if anything, been 
benefiting from the category ranking system. The study done by 
MSPB indicated that for those veterans who were selected or 
were considered to be qualified, many more of them were 
selected under the category ranking system than were done under 
the alternatives.
    I think that, as has been well presented by Dr. Kelman and 
Dr. Ban, it is a system that provides managers with the kind of 
flexibilities that we would be very supportive of.
    On the flip side, I think it is quite important, though, to 
remember that we need to ensure that government managers are 
given the training and support so that they can appropriately 
make these decisions, and I think that is again an area that 
the Federal Government needs to begin focusing on, investing 
in, ensuring that the mangers themselves have the tools they 
need to make these decisions in smart ways.
    Senator Voinovich. Yesterday the issue of training was 
raised. We were talking about performance evaluations and 
getting rid of poor performers, and there seemed to be a 
consensus that with better training and understanding of what 
the roles are, managers could do a lot better job. So often, 
managers are frustrated and say the system does not work, but 
they really do not have the training they need to use the 
system that currently exists.
    We focused on categorical ranking. What other provisions in 
this legislation do you think are really key things that will 
make a difference in terms of maintaining our Federal workforce 
and attracting others to it? I will open it up for the panel.
    Mr. Light. Carolyn, do you want to go ahead? [Laughter.]
    Ms. Ban. I would be glad to; it would be my pleasure.
    I am very supportive of recruitment, relocation and 
retention bonuses, and I think that making them more flexible 
is a very positive move. I am concerned--and this came up 
yesterday as well--that absent additional funding, managers are 
not going to use them, but I nonetheless think it is very 
appropriate to broaden that.
    I am supportive of phased retirement. As I was preparing my 
testimony, I talked to some senior people in HR offices in the 
Federal Government who said that would be a really important 
tool. Allowing people to do phased retirement would allow them 
to have the conversation with people about when they are 
planning to retire and would allow them to plan for succession 
planning in a way that they cannot do. So I think that one has 
strength.
    In the current version of the bill, it simply calls for a 
study of phased retirement, and I think that is OK, but we 
should probably move quickly to provide that as a tool.
    Senator Voinovich. Is it more important today than it may 
have been in the past because of the crisis that we have in 
terms of regular and early retirement----
    Ms. Ban. Yes.
    Senator Voinovich [continuing]. That if we do not take 
advantage of that, we would have this large gap of 
institutional knowledge that is walking out the door----
    Ms. Ban. Exactly.
    Senator Voinovich [continuing]. And the concept is that 
because we find ourselves in this very difficult situation, 
phasing it out would help with succession planning and be able 
to execute this transition in a more logical way.
    Ms. Ban. That is very well put, and I see the proposal for 
phased retirement as linked to the proposal for training for 
managers, managerial succession training.
    What we have in many agencies is a senior executive and a 
top management group ready to age out and not very many people 
standing behind them, ready to move into those positions.
    So phased retirement allows the new person moving in to be 
in essence mentored by the more senior person before he or she 
goes out the door, but at the same time, some management 
training to prepare people to move into the ranks is very 
important.
    The other option, of course, is hiring from the outside, 
and we have a system that traditionally does not hire very many 
people at mid-level management or senior management positions 
from the outside.
    Senator Voinovich. Well, there seems to be some controversy 
about the issue--and we have two groups that we are going 
after--one, we want to keep as many of our good people as 
possible, and two, we want to recruit ``the best and the 
brightest'' both in entry-level jobs and mid-level jobs. But 
there was some concern about the provision of the bill that 
would give individuals coming in at mid-management levels 
additional vacation. Do you want to comment on that?
    Ms. Ban. Yes, I do support that. I know that some of the 
folks yesterday from the unions were uncomfortable with that, 
and I do not think it is a huge issue, but as somebody who did 
come into the Federal Government in a mid-level management 
position, it is a deterrent to know that you can only have a 
very small vacation period. So it is a tool that I think would 
help government recruit from the outside. It is not as 
important, say, as raising the pay cap on the SES, but it is 
nonetheless one more tool.
    I think the streamlined critical pay authority is again not 
a huge tool--it is limited in the number of positions that are 
covered, but it is nonetheless an important tool that I 
support.
    Mr. Light. I think there is a general consensus that there 
is a lot to admire in this legislation, but that we need to 
make sure that there is a will to recruit. Let us say we give 
tax-exempt status to loans for Federal employees--the GOFEDS 
bill, which is a nice bill--but the tax exemption that you can 
take on a loan that is not given is zero. If we cannot get the 
administration to make basic investments in training and 
recruitment, if the administration, be it a Democratic or a 
Republican administration, focuses on hard outsourcing targets 
as they have that disincent and send the message that you would 
be better off looking at another employer, if your recruitment, 
retention and relocation expenses are never granted, there is 
no money in the budget to do so without cannibalizing your 
training, if you come in at the mid-level and you are punished 
for having made the boundary crossing from private or nonprofit 
into government by being denied adequate vacation and benefits, 
it just does not make sense to make the change.
    We have got to send a consistent signal both legislatively 
and administratively that we want talented people to apply, and 
that is part of what this whole reform effort is about.
    Mr. Stier. Senator, to echo what has been said a bit here, 
from the Partnership's perspective, there clearly are a number 
of very positive provisions in this bill. Obviously, it is 
incremental reform, and we are looking forward to working with 
you and with the Volcker Commission and others to talk about 
the comprehensive steps in addressing some of the larger 
problems like the compensation issues that clearly need to be 
done.
    I think it is important to realize that it is a system and 
not simply respond to individual problems, and I think that in 
order to do that, we do need to be thinking about how these 
different pieces play into each other. So on the compensation 
issues, that clearly relates to performance management, it 
relates to the issues about poor performers and how you reward 
top performers as well, and I think we need to be thinking 
about these things in an integrated fashion.
    The specifics in this bill, however, I think offer some 
important steps. The vacation time that you have raised and 
asked about I think is a positive step. We have issued a report 
on mid-career hiring in the government that I think 
demonstrates how few jobs are actually filled from the outside. 
Indeed, barely 50 percent of jobs are even advertised at the 
GS-12 and above level to folks outside the government, and only 
13 percent of GS-12 and above jobs are filled from outside the 
government.
    I do not think that is a situation that is good for the 
current workforce, who have expressed unhappiness with the 
system as it currently exists, and it is clearly not good for 
the system as a whole not to be drawing from as broad a range 
of talent as exists----
    Senator Voinovich. In other words, you are saying that for 
some of the top jobs, only 13 percent of them are being filled 
from the outside.
    Mr. Stier. And when you say ``top jobs,'' I am not talking 
top jobs. I am talking about GS-12 and above. That is 
essentially a third of the Federal jobs that are available, so 
approximately half a million jobs that are in the Federal 
Government that are GS-12 and above.
    I think we need to look at a variety of ways of expanding 
the reach that the Federal Government has, not only at the 
entry level with young people but with experienced workers. I 
think, though, that President Harnage and President Kelley 
raise some important points with respect to this issue. I do 
not see why it should be a benefit that is offered only to 
senior management and to SES. We should be looking to expand 
the ability of the government to reach out to needed people and 
offer the kind of incentives such as vacation time that are 
going to be market-based, and that may be for an SES person, it 
may be for a GS-12 person; it may be for a senior IT person who 
is not a manager.
    I think that really what we need to be looking at is a way 
of expanding the opportunities that the government has to 
attract new talent and to retain existing talent.
    Senator Voinovich. One of the things that was brought up 
was the critical pay authority that I think some of the Senior 
Executive folks are concerned about. Are we bringing in high-
paid outsiders to avoid the problem with pay compression? Is 
that the reason why we are doing it--that we have to get this 
talent, and the pay schedule that we have here is not realistic 
so we have got to bring them in from the outside at special 
rates? We tried in the bill to limit that to not too many 
individuals. I would like you to comment on that. Do you think 
that we have taken a realistic approach to that, and what do 
you say to the argument that perhaps this would just be another 
excuse for us not to face up to the fact that we need to do 
something about the caps on our senior executives' salaries?
    Mr. Stier. Frankly, I think this is in line with the 
discussion that we started with, with respect to Paul Light's 
comments, and that is that the incremental change is 
beneficial, but we cannot lose sight of the fact that what we 
are talking about here is a series of problems that have to be 
addressed in the very near term and that we need to be looking 
toward more comprehensive solutions, but in the meanwhile, let 
us move on what we can.
    On the critical pay authority issue, the IRS, despite some 
problems, has by and large been a successful model that we need 
to look to and learn from--but it also teaches us that these 
things need to be done in concert and as a plan. Critical pay 
authority to the extent it works in the IRS works because it is 
being done in conjunction with a lot of other changes to reform 
the whole system.
    Mr. Light. Having looked at the IRS critical pay issue, I 
think that to say it was done haphazardly is basically a good 
characterization.
    Critical pay authority is very difficult to do well. I 
think we ought to have critical pay authority. I embraced 
critical pay authority in the Tax Reform Act in 1997-1998. But 
it creates a new opportunity for the kind of story about 
dismantling that undermines public trust, and I think we have 
got to deal with the pay compression issue.
    Why not give critical pay authority for a set period of 
time in the hope that by the expiration of critical pay 
authority, we can get the pay compression problem solved in the 
Senior Executive Service?
    Senator Voinovich. And would you require that any 
permission to do that would have to come from OPM?
    Mr. Light. If OPM under the current restructuring proposals 
enhances its ability to respond quickly and considers the 
agencies its customers, yes.
    Ms. Ban. But critical pay authority is really designed for 
term-limited appointments, for people who are there for not 
more than 4 years. So it really is not a way around pay 
compression for the majority of people. It is a quick fix for 
bringing in a few people who have critical skills that you do 
not have. It certainly does not address the broader issue of 
pay compression, which is very serious, and I think you already 
know that.
    Senator Voinovich. Yes. The other thing that is very 
interesting on that issue is that there is a concern among both 
SEA and Kelley and Harnage that there is a tendency now that 
any time you need something done, you farm it out. And their 
feeling is that some of these things should be done in-house. 
This is another way of looking at this, that if you have 
critical pay, you bring in some key individuals that you need 
in your organization to provide leadership and perhaps even 
training and get it shaped up, and then they leave, as 
contrasted with I have a problem, I do not have the money, I do 
not have the talent, so call some outsource agency to have them 
take care of it.
    I do not think that some people are looking at it in that 
respect, but it could be part of the answer to just moving 
anything that they cannot take care of out to a third party.
    Mr. Light. The problem being that most of the outsourcing 
is not motivated, really, by a desire to find somebody who can 
come in quickly; it is motivated right now by the desire to 
meet an arbitrary target, which you raised yesterday and the 
Comptroller raised yesterday.
    The outsourcing pressure right now is driven just by a 
statistical head-count mentality, and I suspect into 2004 and 
2008, we will hear stories about how many jobs were converted 
as evidence that government is somehow smaller.
    Senator Voinovich. I think that one of the things that was 
brought out in one of our hearings was by Ms. Stiles, who is 
with the Department of Defense--it was interesting that she 
clarified what the administration's attitude was toward that, 
and I thought it was a very fine explanation, and hopefully, 
OMB Director Daniels and OPM will look at that and maybe soften 
it up a little bit, because it really does give the impression 
that you have just stated, that the emphasis will be on how do 
we figure out how we can outsource rather than looking at how 
do we shape our organization to get it to respond to the 
demands that we have and deal with the transition situation. 
Outsourcing may be one way of doing that--it is an option--but 
it should not be the driving factor so that every morning they 
get up and say, ``I have got to figure out how I am going to 
outsource `x' percentage of jobs.''
    I think that is really something that this administration 
can handle, depending on the messages that they are getting out 
to their people. But at least on the surface, the appearance is 
not, I think, conducive to what we are trying to accomplish.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Voinovich.
    I have a question to ask Mr. Stier, but before I do that, I 
want to ask Dr. Light if he has any comments on categorical 
rating.
    Mr. Light. I have none. I have a comment on political 
appointees if you are willing to ask the question.
    Senator Akaka. Thank you.
    Mr. Stier, the Partnership for Public Service conducted a 
survey last year which found strong public satisfaction with 
the Federal Government's response to the events of September 
11. However, your findings reveal that this change in public 
sentiment may not necessarily translate into greater interest 
in the Federal Government. Why is this the case, and how can we 
turn today's positive view of government service into 
tomorrow's recruitment strategies?
    Mr. Stier. Mr. Chairman, you are absolutely right about the 
survey results. Essentially, we found that the American people 
appreciated government workers more but did not want to be 
them, and I think that the reasoning is at least twofold. 
First, as data from Brookings has indicated, we are still at 
risk now of seeing that confidence in government go down.
    There is a window of opportunity that we do need to take 
advantage of, and in order to do that, we need to do a variety 
of different things, including what the Subcommittee is 
contemplating today.
    First, we need to create a situation where the Federal 
Government is actually reaching out and recruiting. By and 
large, it is not so much that the government does a bad job of 
recruiting--it does not do any job at all. And indeed, we are 
engaged in a process right now of a colleges and universities 
initiative that Senator Voinovich has been very supportive of 
and helpful in, trying to reconnect college campuses with the 
Federal Government. Today we have over 150 colleges and 
universities that have signed onto this initiative in the last 
3 or 4 weeks.
    So the first thing is in fact to inform the American people 
about the opportunities that exist in the Federal Government, 
because what the data shows is that people simply do not know 
what they can do in the government; they are not aware of the 
jobs themselves.
    Second, we need to reform the hiring process itself. It is 
one thing to interest folks in government jobs; it is a 
separate thing to get them actually into the government. They 
need to know how to get a government job, and the process needs 
to be transparent, it needs to be simple, and it needs to be 
quick, and unfortunately, it has none of those characteristics 
today.
    Then, finally--and this goes back to Professor Kelman's 
point regarding his study--the government jobs need to be 
supportive of high performers and innovators. When I talked 
earlier about this being a systemic issue and not simply a set 
of problems, I think we need to be working on all three 
levels--the outreach level, the intake level, and the jobs 
themselves. I think that if we do those three things, and we 
work on that now, we will in fact take advantage of the window 
that has been opened from changing attitudes on September 11, 
and I think we can actually make a very big difference.
    Senator Akaka. Thank you. Dr. Kelman, would you like to 
comment?
    Mr. Kelman. Yes. I would just like to second what Mr. Stier 
said with some examples. First, it is absolutely the case that 
what most inhibits our students from going to work for the 
Federal Government more than anything else is a perception that 
the government is too bureaucratic, too hierarchical, too 
rulebound, and does not emphasize performance and rules enough. 
That is why, when I said ``Do no harm''--some of that pressure 
that creates bureaucracy in government and creates too many 
rules, too many check-offs and so forth, frankly comes from 
Congress and comes from this management by scandal kind of 
approach that gets the headlines and gets members on the news, 
but it actually hurts the taxpayer and hurts good government.
    So when I try to persuade my students to go to work for the 
government, the biggest worry they have is what Mike Jung said. 
So I think we need to keep that in mind. Dr. Light has used the 
words ``Show me the work,'' and his surveys show that what 
young people want out of a job is responsibility, an ability to 
make a difference, an ability to be in a results-oriented 
workplace.
    Second, on the recruitment side, just to add two anecdotes 
from our executive sessions--we hope, by the way, Senator, that 
you will be able to join us at the next one. I know that you 
have not been able to make it to the last two, but hopefully, 
you will be able to come to the next one.
    Anyway, at the last one, my student, Mike Jung, is looking 
for a job after he graduates in Columbus, Ohio, because his new 
bride is a med student there. So he needs to find a job there, 
and he wanted to look at the Defense Logistics Agency, which 
has a big facility in Columbus. So he checked out their 
website, and he said what he was looking for was the website 
telling me why I would want to work at the Defense Logistics 
Agency, and what about this would make it an interesting job. 
The website gave him no clue to that.
    He then made a phone call to the Defense Logistics Agency 
in Columbus and said, ``I am about to graduate. Tell me why I 
should want to come to work for the Defense Logistics Agency.''
    And the person on the other end of the phone, as he put it 
to our group of people, treated him like a person to be 
processed--started asking him a bunch of questions like, ``Are 
you a Section 11?'' and all of this bureaucratese, just to 
check off some things, and made no effort to say here is why 
the Defense Logistics Agency is an exciting place for a young 
person to work.
    Another example, again from the last executive session--Tom 
Tierney, who is the retired CEO of Bain and Company, the 
consulting organization, said that when he was CEO of the 
company, he spent 10 percent of his personal time as CEO 
interviewing college students and business school students and 
being on campus, because he felt that recruiting young people 
was part of his job description as CEO. I know the Comptroller 
General, David Walker, is spending some of his personal time 
recruiting people to the GAO, and I think that is one of the 
reasons why GAO is turning around and making a difference. He 
is probably the only person in the whole Federal Government who 
is going that route--I think--but I hope there are others.
    We do really need to attack these things comprehensively. 
Legislation cannot do it all, but for example, on some of these 
issues about senior officials caring about recruiting and 
having recruiting plans, what kind of workplace you are 
creating, in my view, that is the kind of constructive 
oversight that this Subcommittee and this Committee should be 
engaged in--far more constructive than some of the scandal-
mongering.
    Senator Akaka. Dr. Ban, do you wish to add?
    Ms. Ban. Yes, if I may add to that briefly--because I think 
this brings us back to category rating. It has been difficult 
for managers to go out and recruit in the Federal Government, 
because when they try to bring those candidates in, they run up 
against the Rule of Three.
    Category rating will make it easier when managers 
effectively recruit for them to actually get these outstanding 
candidates considered and be able to hire them. So I see those 
two as linked.
    Mr. Kelman. I strongly agree.
    Senator Voinovich. They go out and recruit the candidates, 
and then tell them, ``We want you to come to work for us; now 
apply, take the test, and we will see you in 6 months.''
    Mr. Kelman. And we hope you get on the list of three--or 
what they do----
    Ms. Ban. Exactly.
    Mr. Kelman. They do one of two things, and both of them are 
very damaging from the perspective of the Federal Government. 
One is they say, ``Apply, and we hope you get on the list of 
three.'' The other is they start gaming the system--how can we 
redo the position description so you can get on the list of 
three. And what are we doing then? What an awful message. The 
first message a young person gets from the Federal Government 
and from his potential employer is ``Here is how I am going to 
game the system so I can get you on this bureaucratic list of 
three.'' It is the most destructive, awful message we can give 
those young people.
    Ms. Ban. He is correct.
    Senator Akaka. Let me finally ask Dr. Light if you wish to 
comment about these questions, but in particular, I would like 
to go back to what you said and hear any comments you may have 
on political appointees. [Laughter.]
    Mr. Light. I would direct the Subcommittee to the Inspector 
General Act of 1978 to see whether or not there is embedded in 
that statute a way of getting a political appointee to take 
these jobs who is presumed to have a commitment to continuity.
    We have been through a lot of travail with the inspectors 
general over the years. We may be in the midst of a purging of 
the IGs even as I speak. But the presumption has always been in 
favor of that position which is politically appointed, it is 
confirmed on a sequential referral so that the authorizing 
committee does the first review, and then the Governmental 
Affairs Committee does the sequential, which gives the 
Governmental Affairs Committee an opportunity to really weigh 
in on the issues that the Senator from Ohio cares about. And 
the presumption in that statute is for continuity, and 
generally speaking, it has worked pretty well. That was my 
point about the political appointees.
    I have been against the proliferation of political layering 
for the better part of 20 years, but every once in a while, you 
see an opportunity where, if you really want these folks to be 
sitting at the table, I am not sure how you get them there 
unless they come through a process where they have the Senate 
advice and consent; I am just not sure about it.
    Mr. Kelman. May I just comment briefly?
    Senator Akaka. Yes, Dr. Kelman.
    Mr. Kelman. One way to get them to the table is--I think--
again through oversight and, during the confirmation process 
for Cabinet Secretaries or other political appointees, to 
emphasize the importance that you as Congress see in working 
with your senior career appointees. We should not give up--I 
think this is a defeatist attitude of saying there is no way 
that a senior SES person is ever going to ``be at the table'' 
with political appointees. That is awful. What about all the 
other SESers--are we in effect saying to them, ``You are mere 
SES, and you are never going to be at the table?''
    I will say that when I served as a political appointee in 
the Clinton Administration, the senior procurement people in 
the Federal Government were all career people. They were at my 
table every day, and I very much valued--extraordinarily 
valued--their input.
    Yes, there are some or many political appointees who have 
this attitude, but Paul, what are we saying to all the other 
SESers--``You are never going to be at the table?'' We are 
going to give up on that?
    Mr. Light. I think that what you are seeing here is the 
difference between an Article 1 person and an Article 2 person. 
I think that may be it--that if you bring them through the 
Senate, that increases the prestige attached to the position. 
But I can see how you could bring a careerist into it. I just 
feel that the human resource function has been so denigrated 
and disparaged over the past two decades, humiliated and 
eviscerated, that we need to do something to bring it up to 
grade and to say to the people involved in human capital work 
``You are important, your work is important,'' and the 
appointments issue is a small thing. The other pieces of the 
legislation are certainly much more important than whether this 
is career or political.
    Senator Akaka. Thank you very much for your responses. I 
have no further questions, although I may have some for the 
record.
    I would like to ask my colleague, Senator Voinovich, do you 
have any additional questions?
    Senator Voinovich. Yes. You have all been following this 
legislation and the managers' amendment and so forth. Are there 
any other controversial issues that I may have forgotten to 
bring up in my questions that you would like to get information 
on the table that would be helpful to me and to Senator Akaka?
    Ms. Ban. I would like to raise two. We have been talking 
about hiring and focusing on category rating. There is also a 
section in the bill that talks about noncompetitive hiring, and 
I am concerned about that section. It sets forth four criteria 
for when agencies can hire noncompetitively. I am concerned 
about how broad they are. They are: Severe shortage of 
candidates, need for expedited hiring, unique positions with 
unique hiring, and positions that are historically hard to 
fill.
    I have not seen final language of this section of the bill 
in the combined bill, but if we are still committed to a merit 
system, we have to look at where we draw the line and how 
appropriate it is to be quite this broad in allowing agencies 
to do noncompetitive hiring. I do not know a single manager who 
would not say that his or her position needs to be filled right 
now. So I am concerned about how many positions would not fall 
under one of these four categories and whether we need to be a 
little bit more constrained.
    I also want to agree with Ms. Kelley from the NTEU about 
reducing the notice period for poor performers from 30 days to 
15 days. We are under a constitutional requirement of due 
process. If you go back to the history of the Civil Service 
Reform Act and the original proposals that were being developed 
before that legislation was finalized, there were similar 
proposals to shorten the notice period and simplify the process 
for firing that fell out of the final legislation because 
people were not convinced that the courts would accept this.
    I think we have a question there about whether we meet our 
constitutional requirement for due process if we shorten that 
notice period. I frankly think that is not where the problem 
lie in dealing with poor performers. That is a very trivial 
change. The big delays are in how we prepare the case and then, 
after we take action, what the appeals process will be.
    I think this is one where I would not fight with the unions 
over it; I do not think it is worth it.
    Senator Voinovich. Are there any other comments about any 
provisions that you think might be controversial that you would 
like to get on the record?
    Mr. Kelman. Just two. One, I would endorse the buyout 
authority for restructuring without FTEs going down. And we 
were talking earlier about outsourcing; I think one of the 
benefits of this provision is that it more levels the playing 
field between the government and an outsourcer, because one of 
the reasons why agencies sometimes outsource is that they feel 
they do not have enough flexibility. If they at one time had 
hired a COBOL programmer, they are stuck with a COBOL 
programmer even if nobody is using COBOL anymore.
    Senator Voinovich. This is the provision on the early 
retirement, that is a good idea.
    Mr. Kelman. Yes, to allow it to be done--to do buyouts for 
restructuring the agency. That is to say, you can do a buyout 
because there are positions or job skills that are no longer 
needed at the agency. Under current law, you can get rid of 
those, but you lose the FTE, and therefore, the agencies are 
more skeptical about doing them.
    I would say allow the buyout authority for restructuring 
without losing the FTE. That will give agencies more 
flexibility to change their skill mixes as demands on them 
change, and it is one of the ways of leveling the playing field 
in terms of outsourcing.
    I would also urge--and this is not in the bill, but I urge 
that it be added to the bill--a provision to expand the 
Outstanding Scholars Program authority from the GS-7 to the GS-
9 level. That would basically allow us to use the Outstanding 
Scholars hiring authority which already exists to hire students 
who are graduates of master's programs and not just 
undergraduates. Master's programs in public administration, 
public policy, public health, international affairs are not now 
covered by Outstanding Scholar, and if you extend it to GS-9, 
it would allow them to be covered.
    Senator Voinovich. I just have one other question that I 
would like you to respond to, and it does not deal with the 
bill. There was a lot of talk about linking pay to performance. 
I think it was David Walker who said that 80 percent of Federal 
employees just get an automatic pay increase, and that is 
basically the way that people are compensated. It occurred to 
me that, first of all, if you have meager pay increases which 
are less than cost-of-living, there really is not any 
flexibility to do that kind of evaluation. A manager would just 
say, ``I have 1 percent,'' or whatever it is, and it is a 
little bit less than cost-of-living, and why bother, because 
they do not have any flexibility within that framework. I 
understand that if there is a cost-of-living adjustment, 
everybody gets it right across the board. The recommended cost-
of-living adjustment this year is 2.6 percent for civilians. So 
you start with that, and if that is all you have, well, there 
is nothing left to talk about performance-based increases. I do 
not know how they do it.
    My thought would be that perhaps we look at granting a pay 
increase and then, above that, providing money to an agency so 
that--let us say it is 2.6 percent, and we would go to 3.0 
percent, and say that the four-tenths of 1 percent is to be 
used to be linked to performance so that there is some money 
there that could be used for rewarding top performers or paying 
for bonuses that agencies do not have the money to pay for now.
    I have talked to State Department employees who regularly 
relied upon bonuses to subsidize their pay because they were 
locked into or could not get more money than ``x''--and then 
the money is not there for the bonuses, so they get nothing.
    I just wonder what you would think about possibly looking 
at something like that to see if it would help stimulate some 
of this performance evaluation that should be going on right 
now that is not going on because there is no reason to do it.
    Mr. Stier. Senator, I would suggest that clearly, there is 
a great need for greater investment in the human component of 
our government, and we need more resources devoted to providing 
for the existing workforce and recruiting new talent.
    I would also, though, comment that rather than simply 
increasing a pool of money for potential compensation, we need 
to also be looking at the performance appraisal system itself, 
because it is not simply the case that we have in place right 
now a management system that allows for identifying high 
performers and therefore supporting them through additional 
resources, but clearly in the interim, I think we need to be 
looking at ways to create a better system and putting in more 
resources both for compensation as well as paying for the 
authorities that currently exist.
    Dr. Light's comment about the loan forgiveness authority is 
quite apt. The government has that authority now. Very few 
agencies are using it. We have supported a bill that would make 
it a more effective measure, but the bottom line is there has 
to be money for the agencies to actually have in order to be 
able to make it a useful authority.
    Senator Voinovich. Dr. Light.
    Mr. Light. You know, there is really no more controversial 
issue than pay and performance, and put together, you are 
talking about nuclear-quality debate. The current performance 
appraisal system as you know is hyperinflated in part because 
Congress has restricted agencies from using a quota or curve 
system for allocating ratings, so everybody is rated above 
outstanding or above average, and we are well on the way to a 
government that is outstanding.
    I would not take it on in this particular bill, Senator.
    Senator Voinovich. No, I am not talking about taking it on 
in this bill, but I am talking about looking at the broad 
picture of how do we deal with this situation. And I guess even 
more important than that is the urgency to the security of the 
United States of America to really get at this issue of human 
capital and the resources that we need to have the ``best and 
brightest'' people stay in government and be attracted to 
government.
    Somehow we have to get that message across today. There 
seems to be a feeling--and we have had hearings in the 
Governmental Affairs Committee with Senator Lieberman--that, 
for example, we ought to revisit the issue of airport security. 
The amount of equipment and people that we are going to have to 
put on the payroll is just astronomical. If I were Osama bin 
Laden today and I looked around the United States and could see 
what he has wrought, he would have to be, if he is alive, as 
happy as anything, because he really has changed this country 
in terms of our attitudes. And also, we are about to spend 
ourselves into oblivion to try to secure the homeland.
    We have to get across that if we really want to secure the 
homeland, the No. 1 priority should be investing in human 
capital. That is the best way. And I am really worried that we 
are only going to invest in new technology and gizmos while 
neglecting the most important aspect of this issue, and that is 
people. We talked about this yesterday, September 11--there is 
another committee looking at why that happened. But my brain 
tells me that maybe Federal employees did not have enough 
people; they had materials in front of them that people could 
not read; they did not have people who spoke Arabic. What a 
ridiculous thing. After this happened, we asked for volunteers 
in the country--can anybody speak Farsi, Arabic? We do not have 
the people we need. This is incredible, and it is a reflection 
on the part of Congress that we have nobody who lobbies for 
people. Everybody lobbies for F-22s, for aircraft carriers, for 
submarines, and for all kinds of things, but nobody is out 
there hustling and promoting people.
    It is interesting--and you brought it up--Jack Welch--at GE 
and at all of the top companies in this country, the No. 1 
issue with them is people.
    Ms. Ban. I want to agree with your general point. The Hart-
Rudman Commission made this point long before September 11, 
that we could not address the national security challenges in 
the country without addressing the problems with the civil 
service system and with hiring.
    However, let me take the unpopular position of arguing 
against pay for performance. It sounds great. It is one of 
those things that has what we call ``face validity''--it makes 
sense that if you pay people and reward them, they will perform 
better. However, there is virtually no research over the past 
25 years that supports this actually making a positive 
difference. It has more negative effect on motivation than it 
has positive effects.
    The amounts have been very small, and you would have to 
budget a lot more than I think you can to give significant 
rewards that could make a difference--and it does not work. The 
bottom line is that it just has not had the effect we wanted it 
to. Even though we think it should, it does not work. So I 
would not go there.
    Senator Voinovich. Dr. Ban, with all due respect, when I 
was mayor and when I was governor, it worked. And I am talking 
about my top people, believe me. First of all, it lets them 
know that you care about what they are doing, and you pat some 
of them on the back, and others, you kind of give a little bit 
of a nudge. And one way that you get their attention is to let 
them know that, ``This time around, I am sorry, your 
performance is not what it should be.'' It made a big 
difference, and I was 10 years as mayor and 8 years as 
governor, and I fought to get that kind of authority when I was 
mayor of the city; we did not have it, and I got it.
    So I am not saying that it will work straight across the 
board, but I can tell you that in top management positions, at 
least from my experience, it has made a great deal of 
difference.
    Mr. Kelman. Senator, if I could come in on this dialogue 
for a second, I think definitely the sentiment behind pay for 
performance, which is let us focus on results in the work 
place, is a very good one.
    I think it is fair to say that the private sector evidence 
on pay for performance in the private sector is much--I do not 
want to say it does not work anywhere--but I think Dr. Ban is 
right that it is much more mixed than a lot of us would think.
    I think that if you are going to design the pay for 
performance systems for the middle- and lower-level people, you 
have to be careful. One of the pieces of evidence is that you 
probably want to give team rewards rather than individual 
rewards, because if you give too many individual rewards, 
people fight against each other rather than collaborating in 
the workplace.
    I guess where I would go--and I will give airline security 
as an example--maybe the first places to try to do real pay for 
performance are those agencies that have good, intelligent 
goals under the Government Performance and Results Act of 
delivering things. For example, on airport security workers, we 
could have a performance goal in there about what percentage of 
time does the ``mystery shopper'' who tries to get in not do 
it. What I would suggest, taking your example, is that we have 
genuine performance goals for those teams at the airport, and 
if the team meets the goal, the team should be rewarded. Again, 
the sentiment behind this, I am 100 percent in agreement with. 
It is not as straightforward or easy--Ford Motor Company last 
year eliminated a pay for performance system that they had set 
up 2 or 3 years ago because it led to too much fighting among 
individual employees, and they were sabotaging each other so 
they could be relatively one higher than another. It did not 
help the organization.
    It can work, but it should be, I think, in the first 
instance limited to where you have performance goals for the 
organization under the Government Performance and Results Act 
that make sense, and I would be inclined toward tying it to 
teams rather than individuals. But under those circumstances, I 
think we should be experimenting with some of the ideas that 
you suggest.
    Senator Voinovich. My response to that is that that fits in 
with quality management.
    Mr. Kelman. Absolutely.
    Ms. Ban. Yes.
    Senator Voinovich. One of the things that we did when we 
implemented our quality management initiative was to reward 
teams of individuals. We had a program where if someone came up 
with an idea that would save the State money, we would give out 
checks to individuals for $5,000. What we ended up doing at the 
end was rewarding teams of individuals because of the fact that 
they had come up with this idea and made it happen. That meant 
a lot more to them, because there was some concern when one 
individual ended up with a $5,000 or $10,000 check for a good 
idea, and a lot of them said, ``Well, gee, he would not have 
had that if I had not talked to him,'' and ``How did you figure 
that one out?''
    So that is a good point.
    Mr. Kelman. Yes, of course, you had one of the outstanding 
TQM programs in the public sector in Ohio, and I think you are 
absolutely right. One of the principles of TQM is to reward 
teams, not individuals; you do not want to have the individuals 
fighting with each other.
    Mr. Stier. And again, I think the point is to look at 
performance management and not necessarily pay for performance, 
and to look at it in the broader context.
    Ms. Ban. I would agree.
    Mr. Stier. And this is something that is not easy but is I 
think well worth investing in. One size does not fit all. We 
already have examples inside the government where there are 
mechanisms that are in place that are rewarding the high 
performers or productivity--PT&O is an example of that where 
they have been quite successful on the trademark side in terms 
of rewarding attorneys who produce a certain number of finished 
applications.
    Senator Akaka. Thank you very much. I wish to thank you all 
for being with us today.
    Over the past 2 days, we have had extremely engaging and 
productive discussions. The bills we reviewed are important 
because their introduction begins the dialogue on how to find 
legislative solutions to make sure the government has the right 
people with the right skills in the right place at the right 
time.
    Again, I wish to thank all of our witnesses for taking part 
in this important hearing. You may be assured that your 
contributions are appreciated.
    Finally, I want to thank Senator Voinovich. Thank you for 
being here with me to participate in this discussion.
    Senator Voinovich has brought these bills to fruition. I 
look forward to working with you to educate our colleagues on 
the need to address civil service reform. Thank you again for 
your commitment to this goal, Senator.
    Again I want to say thank you, and if there are no further 
comments----
    Senator Voinovich. I just want to thank you, Mr. Chairman. 
When I had hearings on this in the last couple of years, there 
was one individual who was always there, and that was Senator 
Akaka, and I was very impressed with that and will never forget 
it. I really appreciate the fact that he is taking the time to 
continue this effort on a bipartisan basis to make a difference 
for our country.
    I thank you, Senator.
    Senator Akaka. Thank you very much, and remember--human 
capital.
    We stand adjourned.
    [Whereupon, at 11:50 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              

[GRAPHIC] [TIFF OMITTED] 79887.001

[GRAPHIC] [TIFF OMITTED] 79887.002

[GRAPHIC] [TIFF OMITTED] 79887.003

[GRAPHIC] [TIFF OMITTED] 79887.004

[GRAPHIC] [TIFF OMITTED] 79887.005

[GRAPHIC] [TIFF OMITTED] 79887.006

[GRAPHIC] [TIFF OMITTED] 79887.007

[GRAPHIC] [TIFF OMITTED] 79887.008

[GRAPHIC] [TIFF OMITTED] 79887.009

[GRAPHIC] [TIFF OMITTED] 79887.010

[GRAPHIC] [TIFF OMITTED] 79887.011

[GRAPHIC] [TIFF OMITTED] 79887.012

[GRAPHIC] [TIFF OMITTED] 79887.013

[GRAPHIC] [TIFF OMITTED] 79887.014

[GRAPHIC] [TIFF OMITTED] 79887.015

[GRAPHIC] [TIFF OMITTED] 79887.016

[GRAPHIC] [TIFF OMITTED] 79887.017

[GRAPHIC] [TIFF OMITTED] 79887.018

[GRAPHIC] [TIFF OMITTED] 79887.019

[GRAPHIC] [TIFF OMITTED] 79887.020

[GRAPHIC] [TIFF OMITTED] 79887.021

[GRAPHIC] [TIFF OMITTED] 79887.022

[GRAPHIC] [TIFF OMITTED] 79887.023

[GRAPHIC] [TIFF OMITTED] 79887.024

[GRAPHIC] [TIFF OMITTED] 79887.025

[GRAPHIC] [TIFF OMITTED] 79887.026

[GRAPHIC] [TIFF OMITTED] 79887.027

[GRAPHIC] [TIFF OMITTED] 79887.028

[GRAPHIC] [TIFF OMITTED] 79887.029

[GRAPHIC] [TIFF OMITTED] 79887.030

[GRAPHIC] [TIFF OMITTED] 79887.031

[GRAPHIC] [TIFF OMITTED] 79887.032

[GRAPHIC] [TIFF OMITTED] 79887.033

[GRAPHIC] [TIFF OMITTED] 79887.034

[GRAPHIC] [TIFF OMITTED] 79887.035

[GRAPHIC] [TIFF OMITTED] 79887.036

[GRAPHIC] [TIFF OMITTED] 79887.037

[GRAPHIC] [TIFF OMITTED] 79887.038

[GRAPHIC] [TIFF OMITTED] 79887.039

[GRAPHIC] [TIFF OMITTED] 79887.040

[GRAPHIC] [TIFF OMITTED] 79887.041

[GRAPHIC] [TIFF OMITTED] 79887.042

[GRAPHIC] [TIFF OMITTED] 79887.043

[GRAPHIC] [TIFF OMITTED] 79887.044

[GRAPHIC] [TIFF OMITTED] 79887.045

[GRAPHIC] [TIFF OMITTED] 79887.046

[GRAPHIC] [TIFF OMITTED] 79887.047

[GRAPHIC] [TIFF OMITTED] 79887.048

[GRAPHIC] [TIFF OMITTED] 79887.049

[GRAPHIC] [TIFF OMITTED] 79887.050

[GRAPHIC] [TIFF OMITTED] 79887.051

[GRAPHIC] [TIFF OMITTED] 79887.052

[GRAPHIC] [TIFF OMITTED] 79887.053

[GRAPHIC] [TIFF OMITTED] 79887.054

[GRAPHIC] [TIFF OMITTED] 79887.055

[GRAPHIC] [TIFF OMITTED] 79887.056

[GRAPHIC] [TIFF OMITTED] 79887.057

[GRAPHIC] [TIFF OMITTED] 79887.058

[GRAPHIC] [TIFF OMITTED] 79887.059

[GRAPHIC] [TIFF OMITTED] 79887.060

[GRAPHIC] [TIFF OMITTED] 79887.061

[GRAPHIC] [TIFF OMITTED] 79887.062

[GRAPHIC] [TIFF OMITTED] 79887.063

[GRAPHIC] [TIFF OMITTED] 79887.064

[GRAPHIC] [TIFF OMITTED] 79887.065

[GRAPHIC] [TIFF OMITTED] 79887.066

[GRAPHIC] [TIFF OMITTED] 79887.067

[GRAPHIC] [TIFF OMITTED] 79887.068

[GRAPHIC] [TIFF OMITTED] 79887.069

[GRAPHIC] [TIFF OMITTED] 79887.070

[GRAPHIC] [TIFF OMITTED] 79887.071

[GRAPHIC] [TIFF OMITTED] 79887.072

[GRAPHIC] [TIFF OMITTED] 79887.073

[GRAPHIC] [TIFF OMITTED] 79887.074

[GRAPHIC] [TIFF OMITTED] 79887.075

[GRAPHIC] [TIFF OMITTED] 79887.076

[GRAPHIC] [TIFF OMITTED] 79887.077

[GRAPHIC] [TIFF OMITTED] 79887.078

[GRAPHIC] [TIFF OMITTED] 79887.079

[GRAPHIC] [TIFF OMITTED] 79887.080

[GRAPHIC] [TIFF OMITTED] 79887.081

[GRAPHIC] [TIFF OMITTED] 79887.082

[GRAPHIC] [TIFF OMITTED] 79887.083

[GRAPHIC] [TIFF OMITTED] 79887.084

[GRAPHIC] [TIFF OMITTED] 79887.085

[GRAPHIC] [TIFF OMITTED] 79887.086

[GRAPHIC] [TIFF OMITTED] 79887.087

[GRAPHIC] [TIFF OMITTED] 79887.088

[GRAPHIC] [TIFF OMITTED] 79887.089

[GRAPHIC] [TIFF OMITTED] 79887.090

[GRAPHIC] [TIFF OMITTED] 79887.091

[GRAPHIC] [TIFF OMITTED] 79887.092

[GRAPHIC] [TIFF OMITTED] 79887.093

[GRAPHIC] [TIFF OMITTED] 79887.094

[GRAPHIC] [TIFF OMITTED] 79887.095

[GRAPHIC] [TIFF OMITTED] 79887.096

[GRAPHIC] [TIFF OMITTED] 79887.097

[GRAPHIC] [TIFF OMITTED] 79887.098

[GRAPHIC] [TIFF OMITTED] 79887.099

[GRAPHIC] [TIFF OMITTED] 79887.100

[GRAPHIC] [TIFF OMITTED] 79887.101

[GRAPHIC] [TIFF OMITTED] 79887.102

[GRAPHIC] [TIFF OMITTED] 79887.103

[GRAPHIC] [TIFF OMITTED] 79887.104

[GRAPHIC] [TIFF OMITTED] 79887.105

[GRAPHIC] [TIFF OMITTED] 79887.106

[GRAPHIC] [TIFF OMITTED] 79887.107

[GRAPHIC] [TIFF OMITTED] 79887.108

[GRAPHIC] [TIFF OMITTED] 79887.109

[GRAPHIC] [TIFF OMITTED] 79887.110

[GRAPHIC] [TIFF OMITTED] 79887.111

[GRAPHIC] [TIFF OMITTED] 79887.112

[GRAPHIC] [TIFF OMITTED] 79887.113

[GRAPHIC] [TIFF OMITTED] 79887.114

[GRAPHIC] [TIFF OMITTED] 79887.115

[GRAPHIC] [TIFF OMITTED] 79887.116

[GRAPHIC] [TIFF OMITTED] 79887.117

[GRAPHIC] [TIFF OMITTED] 79887.118

[GRAPHIC] [TIFF OMITTED] 79887.119

[GRAPHIC] [TIFF OMITTED] 79887.120

[GRAPHIC] [TIFF OMITTED] 79887.121

[GRAPHIC] [TIFF OMITTED] 79887.122

[GRAPHIC] [TIFF OMITTED] 79887.123

[GRAPHIC] [TIFF OMITTED] 79887.124

[GRAPHIC] [TIFF OMITTED] 79887.125

[GRAPHIC] [TIFF OMITTED] 79887.126

[GRAPHIC] [TIFF OMITTED] 79887.127

[GRAPHIC] [TIFF OMITTED] 79887.128

[GRAPHIC] [TIFF OMITTED] 79887.129

[GRAPHIC] [TIFF OMITTED] 79887.130

[GRAPHIC] [TIFF OMITTED] 79887.131

[GRAPHIC] [TIFF OMITTED] 79887.132

[GRAPHIC] [TIFF OMITTED] 79887.133

[GRAPHIC] [TIFF OMITTED] 79887.134

[GRAPHIC] [TIFF OMITTED] 79887.135

[GRAPHIC] [TIFF OMITTED] 79887.136

[GRAPHIC] [TIFF OMITTED] 79887.137

[GRAPHIC] [TIFF OMITTED] 79887.138

[GRAPHIC] [TIFF OMITTED] 79887.139

[GRAPHIC] [TIFF OMITTED] 79887.140

[GRAPHIC] [TIFF OMITTED] 79887.141

[GRAPHIC] [TIFF OMITTED] 79887.142

[GRAPHIC] [TIFF OMITTED] 79887.143

[GRAPHIC] [TIFF OMITTED] 79887.144

[GRAPHIC] [TIFF OMITTED] 79887.145

[GRAPHIC] [TIFF OMITTED] 79887.146

[GRAPHIC] [TIFF OMITTED] 79887.147

[GRAPHIC] [TIFF OMITTED] 79887.148

[GRAPHIC] [TIFF OMITTED] 79887.149

[GRAPHIC] [TIFF OMITTED] 79887.150

[GRAPHIC] [TIFF OMITTED] 79887.151

[GRAPHIC] [TIFF OMITTED] 79887.152

[GRAPHIC] [TIFF OMITTED] 79887.153

[GRAPHIC] [TIFF OMITTED] 79887.154

[GRAPHIC] [TIFF OMITTED] 79887.155

[GRAPHIC] [TIFF OMITTED] 79887.156

[GRAPHIC] [TIFF OMITTED] 79887.157

[GRAPHIC] [TIFF OMITTED] 79887.158

[GRAPHIC] [TIFF OMITTED] 79887.159

[GRAPHIC] [TIFF OMITTED] 79887.160

[GRAPHIC] [TIFF OMITTED] 79887.161

[GRAPHIC] [TIFF OMITTED] 79887.162

[GRAPHIC] [TIFF OMITTED] 79887.163

[GRAPHIC] [TIFF OMITTED] 79887.164

[GRAPHIC] [TIFF OMITTED] 79887.165

[GRAPHIC] [TIFF OMITTED] 79887.166

[GRAPHIC] [TIFF OMITTED] 79887.167

[GRAPHIC] [TIFF OMITTED] 79887.168

[GRAPHIC] [TIFF OMITTED] 79887.169

[GRAPHIC] [TIFF OMITTED] 79887.170

[GRAPHIC] [TIFF OMITTED] 79887.171

[GRAPHIC] [TIFF OMITTED] 79887.172

[GRAPHIC] [TIFF OMITTED] 79887.173

[GRAPHIC] [TIFF OMITTED] 79887.174

[GRAPHIC] [TIFF OMITTED] 79887.175

[GRAPHIC] [TIFF OMITTED] 79887.176

[GRAPHIC] [TIFF OMITTED] 79887.177

[GRAPHIC] [TIFF OMITTED] 79887.178

[GRAPHIC] [TIFF OMITTED] 79887.179

[GRAPHIC] [TIFF OMITTED] 79887.180

[GRAPHIC] [TIFF OMITTED] 79887.181

[GRAPHIC] [TIFF OMITTED] 79887.182

[GRAPHIC] [TIFF OMITTED] 79887.183

[GRAPHIC] [TIFF OMITTED] 79887.184

[GRAPHIC] [TIFF OMITTED] 79887.185

[GRAPHIC] [TIFF OMITTED] 79887.186

[GRAPHIC] [TIFF OMITTED] 79887.187

[GRAPHIC] [TIFF OMITTED] 79887.188

[GRAPHIC] [TIFF OMITTED] 79887.189

[GRAPHIC] [TIFF OMITTED] 79887.190

[GRAPHIC] [TIFF OMITTED] 79887.191

[GRAPHIC] [TIFF OMITTED] 79887.192

[GRAPHIC] [TIFF OMITTED] 79887.193

[GRAPHIC] [TIFF OMITTED] 79887.194

[GRAPHIC] [TIFF OMITTED] 79887.195

[GRAPHIC] [TIFF OMITTED] 79887.196

[GRAPHIC] [TIFF OMITTED] 79887.197

[GRAPHIC] [TIFF OMITTED] 79887.198

[GRAPHIC] [TIFF OMITTED] 79887.199

[GRAPHIC] [TIFF OMITTED] 79887.200

[GRAPHIC] [TIFF OMITTED] 79887.201

[GRAPHIC] [TIFF OMITTED] 79887.202

[GRAPHIC] [TIFF OMITTED] 79887.203

[GRAPHIC] [TIFF OMITTED] 79887.204

[GRAPHIC] [TIFF OMITTED] 79887.205

[GRAPHIC] [TIFF OMITTED] 79887.206

[GRAPHIC] [TIFF OMITTED] 79887.207

[GRAPHIC] [TIFF OMITTED] 79887.208

[GRAPHIC] [TIFF OMITTED] 79887.209

[GRAPHIC] [TIFF OMITTED] 79887.210

[GRAPHIC] [TIFF OMITTED] 79887.211

[GRAPHIC] [TIFF OMITTED] 79887.212

[GRAPHIC] [TIFF OMITTED] 79887.213

[GRAPHIC] [TIFF OMITTED] 79887.214

[GRAPHIC] [TIFF OMITTED] 79887.215

[GRAPHIC] [TIFF OMITTED] 79887.216

[GRAPHIC] [TIFF OMITTED] 79887.217

[GRAPHIC] [TIFF OMITTED] 79887.218

[GRAPHIC] [TIFF OMITTED] 79887.219

[GRAPHIC] [TIFF OMITTED] 79887.220

[GRAPHIC] [TIFF OMITTED] 79887.221

[GRAPHIC] [TIFF OMITTED] 79887.222

[GRAPHIC] [TIFF OMITTED] 79887.223

[GRAPHIC] [TIFF OMITTED] 79887.224

[GRAPHIC] [TIFF OMITTED] 79887.225

[GRAPHIC] [TIFF OMITTED] 79887.226

[GRAPHIC] [TIFF OMITTED] 79887.227

[GRAPHIC] [TIFF OMITTED] 79887.228

[GRAPHIC] [TIFF OMITTED] 79887.229

[GRAPHIC] [TIFF OMITTED] 79887.230

                                   - 
