    [House Hearing, 108 Congress]
    [From the U.S. Government Publishing Office]

        INSTILLING AGILITY, FLEXIBILITY AND A CULTURE OF ACHIEVEMENT IN
    CRITICAL FEDERAL AGENCIES: A REVIEW OF H.R. 1836, THE CIVIL SERVICE AND
              NATIONAL SECURITY PERSONNEL IMPROVEMENT ACT OF 2003

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 1836

    TO MAKE CHANGES TO CERTAIN AREAS OF THE FEDERAL CIVIL SERVICE IN ORDER
        TO IMPROVE THE FLEXIBILITY AND COMPETITIVENESS OF FEDERAL HUMAN
                              RESOURCES MANAGEMENT

                                   __________

                                  MAY 6, 2003

                                   __________

                               Serial No. 108-25

                                   __________

           Printed for the use of the Committee on Government Reform

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

                                     ______

                         U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    87-869 PDF

    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512-1800
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                         COMMITTEE ON GOVERNMENT REFORM

                         TOM DAVIS, Virginia, Chairman
    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
    CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
    MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
    RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
    JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
    TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
    CHRIS CANNON, Utah                   DIANE E. WATSON, California
    ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
    EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
    JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
    JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER,
    NATHAN DEAL, Georgia                     Maryland
    CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of
    TIM MURPHY, Pennsylvania                 Columbia
    MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
    JOHN R. CARTER, Texas                CHRIS BELL, Texas
    WILLIAM J. JANKLOW, South Dakota                 ------
    MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont
                                             (Independent)

                           Peter Sirh, Staff Director
                     Melissa Wojciak, Deputy Staff Director
                          Rob Borden, Parliamentarian
                           Teresa Austin, Chief Clerk
                  Philip M. Schiliro, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 6, 2003......................................     1
    Text of H.R. 1836................................................     6
    Statement of:
        Light, Paul, director, Center for Public Services, the
          Brookings Institution; Bobby Harnage, Sr., national
          president, American Federation of Government Employees;
          Colleen Kelley, president, National Treasury Employees
          Union; and Mildred L. Turner, member, U.S. Department of
          Agriculture Federal Managers Association...................   222
        O'Keefe, Sean, Administrator, National Aeronautics and Space
          Administration; and William H. Donaldson, chairman,
          Securities and Exchange Commission.........................   188
        Wolfowitz, Paul, Deputy Secretary, Department of Defense;
          General Peter Pace, vice chairman of the Joint Chiefs of
          Staff, Department of Defense; David Chu, Undersecretary of
          Defense; Admiral Vern Clark, Chief of Naval Operations,
          USN; and Kay Coles James, Director, Office of Personnel
          Management.................................................   100
    Letters, statements, etc., submitted for the record by:
        Davis, Chairman Tom, a Representative in Congress from the
          State of Virginia, prepared statement of...................     4
        Davis, Hon. Danny K., a Representative in Congress from the
          State of Illinois, prepared statement of...................   183
        Donaldson, William H., chairman, Securities and Exchange
          Commission, prepared statement of..........................   208
        Harnage, Bobby, Sr., national president, American Federation
          of Government Employees, prepared statement of.............   239
        Hoyer, Hon. Steny, a Representative in Congress from the
          State of Maryland, prepared statement of...................   118
        James, Kay Coles, Director, Office of Personnel Management,
          prepared statement of......................................   111
        Kelley, Colleen, president, National Treasury Employees
          Union, prepared statement of...............................   264
        Light, Paul, director, Center for Public Services, the
          Brookings Institution, prepared statement of...............   225
        Maloney, Hon. Carolyn B., a Representative in Congress from
          the State of Maryland:
            Article dated May 6, 2003................................   162
            Followup questions and responses.........................   169
            Prepared statement of....................................   166
        O'Keefe, Sean, Administrator, National Aeronautics and Space
          Administration, prepared statement of......................   191
        Ruppersberger, Hon. C.A. Dutch, a Representative in Congress
          from the State of Maryland, prepared statement of..........   314
        Turner, Mildred L., member, U.S. Department of Agriculture
          Federal Managers Association, prepared statement of........   282
        Waxman, Hon. Henry A., a Representative in Congress from the
          State of California, prepared statement of.................    95
        Wolfowitz, Paul, Deputy Secretary, Department of Defense:
            Followup questions and responses............ 127, 134, 140, 149
            Prepared statement of....................................   104

        INSTILLING AGILITY, FLEXIBILITY AND A CULTURE OF ACHIEVEMENT IN
    CRITICAL FEDERAL AGENCIES: A REVIEW OF H.R. 1836, THE CIVIL SERVICE AND
              NATIONAL SECURITY PERSONNEL IMPROVEMENT ACT OF 2003

                                  ----------

                              TUESDAY, MAY 6, 2003

                              House of Representatives,
                                Committee on Government Reform,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10 a.m., in room
    2154, Rayburn House Office Building, Hon. Tom Davis (chairman
    of the committee) presiding.
        Present: Representatives Tom Davis of Virginia, Jo Ann
    Davis of Virginia, Platts, Miller of Michigan, Murphy, Turner
    of Ohio, Janklow, Blackburn, Waxman, Kanjorski, Maloney,
    Kucinich, Davis of Illinois, Tierney, Clay, Watson, Van Hollen,
    Ruppersberger, Norton, and Cooper.
        Also present: Representative Hoyer.
        Staff present: Peter Sirh, staff director; Melissa Wojciak,
    deputy staff director; Keith Ausbrook, chief counsel; Ellen
    Brown, legislative director and senior policy counsel; Robert
    Borden, counsel/parliamentarian; David Marin, director of
    communications; Scott Kopple, deputy director of
    communications; Mason Alinger, Drew Crockett, and Edward Kidd,
    professional staff members; Teresa Austin, chief clerk; Joshua
    E. Gillespie, deputy clerk; Jason Chung, legislative assistant;
    Brien Beattie, staff assistant; Phil Barnett, minority chief
    counsel; Christopher Lu, minority deputy chief counsel; Tania
    Shand and Denise Wilson, minority professional staff members;
    Earley Green, minority chief clerk; Jean Gosa, minority
    assistant clerk; and Cecelia Morton, minority office manager.
        Chairman Tom Davis. The committee will come to order. Good
    morning, and thank you for coming.
        The purpose of today's hearing is to discuss H.R. 1836, the
    Civil Service and National Security Personnel Improvement Act,
    which includes civil service reform proposals that have been
    put forward by the Department of Defense, the National
    Aeronautics and Space Administration, and the Securities and
    Exchange Commission, several governmentwide civil service
    provisions and language authorizing the creation of a human
    capital performance fund.
        Last month, Armed Services Committee Chairman Duncan Hunter
    and I introduced H.R. 1836, the Civil Service and National
    Security Personnel Improvement Act, which pulls together these
    personnel flexibility proposals that have been circulating for
    some time into one comprehensive civil service reform package.
        The purpose of today's discussion is to evaluate this
    legislation and identify possible areas of concern that we can
    address in moving forward with this legislation in committee.
        As you know, the committee is scheduled to meet again
    tomorrow morning to consider this legislation, so it is
    particularly important that Members address their questions and
    concerns at this time.
        One of the most significant elements of this legislation is
    the National Security Personnel System proposal for the
    Department of Defense. This proposal authorizes the Secretary
    of Defense, jointly with the Director of the Office of
    Personnel Management to establish a human resources management
    system that is flexible, contemporary, and in conformance with
    the public employment principles of merit and fitness set forth
    in Title 5 of the United States Code.
        However, the legislation would provide the Secretary of
    Defense the flexibility to create a system that is not confined
    by some of the more prescriptive provisions of Federal
    personnel policy that have been built up over the years. Last
    year's debate on the creation of a Department of Homeland
    Security made it clear that the decades old system of hiring,
    firing, evaluating, promoting, paying and retiring employees
    was not appropriate for the new Department of 170,000 civilian
    personnel.
        To name just a few examples, it takes an average of 5
    months to hire a new Federal employee, 18 months to fire a
    Federal employee. Pay raises are based on longevity rather than
    performance, and the protracted collective bargaining process
    set up in Title 5 can delay crucial action for months, and in
    some cases years.
        On top of all of that, the vast majority of Federal
    employees themselves recognize that dealing with poor
    performers is a serious problem in their agencies. If this
    decades old civil service system is inadequate for a department
    of 170,000 employees, whose mission is to protect the Nation
    against attacks, it hardly makes sense to confine a Department
    of over 600,000 civilian employees, whose mission is to protect
    the national security of this country, to a civil service
    system that was put in place in the 1950's.
        To make matters worse, it appears that the Department of
    Defense has determined it's military and contract work forces
    are more agile, effective and reliable than its 600,000-strong
    civilian work force. In fact, as of a week ago, there were
    8,700 contractor employees supporting Operation Iraqi Freedom,
    as opposed to 1,700 Federal civilian employees. In other words,
    contractors represented 83 percent of the work force in Iraq.
    To me, that is unacceptable.
        The legislative proposal that was put forth by the
    administration to establish a new civil service system for the
    DOD is mirrored closely on the language that Congress provided
    to the Department of Homeland Security in establishing its
    human resources management system. I believe it is ambitious,
    it is a reasonable proposal for DOD, a Department that has
    decades worth of experience in personnel and work force policy,
    and has had a number of trial policies that they have put in
    place.
        In addition to the almost year-long debate in Congress over
    the same human resources management system proposal during
    Homeland Security debate last year, this legislation has been
    the subject of hearings over the past 2 weeks, and Members have
    raised a number of important issues that we hope to address in
    today's hearing.
        H.R. 1836 also includes several governmentwide civil
    service reforms, ranging from a modification of the student
    loan repayment authority to a change in the frequency of
    cabinet secretary pay periods. The most significant provision
    in this section, in my opinion, is language from the
    administration that would correct a long-standing issue
    regarding overtime pay for Federal employees.
        In addition, the legislation includes language that the
    Financial Services Committee marked up earlier this year and
    would streamline the hiring process for accountants,
    economists, and examiners at the Commission.
        Hiring has been a longstanding problem at the Commission.
    And with the growth of the SEC that is mandated by the
    Sarbanes-Oxley Act, the SEC is faced with hiring close to 1,000
    new staffers in the coming years. Both the SEC and the National
    Treasury Employees Union support this provision. I have asked
    them both to come before us today to discuss this issue.
        The bill also provides a number of personnel flexibilities
    for National Aeronautics and Space Administration, provided
    that OPM approves the work force plan developed by the NASA
    Administrator.
        This language would provide the flexibility to NASA in
    recruiting and retaining a top-notch work force that will help
    shape the future of space exploration; coordinating with the
    private sector in advancing new technology and ideas, and in
    attracting the best and brightest in crafting its Federal work
    force.
        Finally, the legislation includes an authorization of a
    ``human capital performance fund,'' which is based on the
    proposal by the President in his fiscal year 2004 budget
    submission to Congress. The purpose of the funds is to offer
    Federal managers a tool to ``incentivize'' agencies' highest
    performing and most valuable employees. Coming up with new and
    innovative ways with which to motivate employees will forever
    be a challenge for a bureaucracy as large as the Federal
    Government, and I applaud the administration's efforts to
    attempt to address the issue.
        I look forward to a meaningful and substantive debate on
    the civil service issue that is raised by the proposed
    legislation. We have assembled before us today an excellent
    panel of witnesses. I look forward to working with them and the
    Members of this committee, from both sides as we move forward
    with this legislation. I welcome all of the witnesses to
    today's hearing. I look forward to their testimony.
        [The prepared statement of Chairman Tom Davis and the text
    of H.R. 1836 folows:]

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        Chairman Tom Davis. I would now recognize the distinguished
    ranking member, Mr. Waxman, for his opening statement.
        Mr. Waxman. Thank you very much, Mr. Chairman. I would like
    to thank you for holding this hearing. And I too am looking
    forward to the testimony of our witnesses.
        The Bush administration's proposal to rewrite the rules for
    civilian employees at the Department of Defense is breathtaking
    in its scope and implications.
        We have delayed the markup of the proposal twice, and that
    has been helpful for Members, staff and outside groups to try
    to understand this proposal.
        Nevertheless, we are working at a breakneck pace on a bill
    that will directly affect almost 700,000 civilian employees at
    the Defense Department.
        Now, why, you might ask, are we doing this? No one seems to
    know. At a subcommittee hearing last week, I asked
    Undersecretary of Defense, David Chu, how the current personnel
    system had hindered DOD's war efforts in Iraq. He wasn't able
    to give me any examples.
        When Dr. Chu was asked whether Secretary Rumsfeld would
    consider delaying consideration of the bill, Dr. Chu pointed
    to, ``the 3 weeks it took our troops to get from the Kuwait
    border to Baghdad.''
        Dr. Chu added that the Secretary, ``is not someone who is
    patient with a long indecisive process.''
        In other words, now that the Defense Department has marched
    through Iraq in 3 weeks, it intends to do the same with
    Congress.
        I might understand this better if we at least knew what DOD
    was going to do with the enormous flexibilities that it is
    seeking, but we have virtually no idea.
        Basically, the DOD proposal is nothing more than a blank
    check. DOD is asking to be exempted from 100 years of civil
    service law, laws enacted specifically to prevent a patronage
    system. Yet, the Department isn't telling us how it is going to
    replace these laws. That is not the right way to deal with one
    of the most sweeping civil service reforms in history.
        When David Walker, the Comptroller General, testified last
    week, he said he had serious concerns about giving DOD this
    broad authority. He explained, ``unfortunately based on GAO's
    past work, most existing Federal performance appraisal systems,
    including a vast majority of DOD's systems are not currently
    designed to support a meaningful perform-based based pay
    system.'' That hardly inspires confidence for what DOD might do
    if we give them this authority.
        At the last hearing, I read a quote from Tom Freidman, a
    columnist with the New York Times. And Mr. Friedman said, ``Our
    Federal bureaucrats are to capitalism what the New York Police
    and Fire Departments were to 9/11, the unsung guardians of
    America's civic religion, the religion that says if you work
    hard and play by the rules, you get rewarded and you won't get
    ripped off. . . So much of America's moral authority to lead
    the world derives from the decency of our government and its
    bureaucrats, and the example we set for others. . . They are
    things to be cherished, strengthened, and praised every single
    day.''
        Mr. Friedman is right. We should be praising Federal civil
    servants, not attacking them. But, from day 1, this
    administration has sought to characterize loyal Federal
    employees as inept and inefficient bureaucrats. Federal jobs
    have been given to private contractors. Attempts have been made
    to slash annual pay increases. Financial bonuses have been
    given to political appointees instead of career employees.
        It is incredible that the group of employees who the
    administration has chosen to target this time, are Defense
    Department employees. These are the same employees who saw
    terrorists crash an airplane into their headquarters. These are
    the same employees who made enormous sacrifices to support the
    military effort in Iraq.
        I am willing to work on a bipartisan basis to make changes
    to the civil service laws where there is a need for new
    authorities or new flexibility. But we shouldn't destroy 100
    years of civil service laws with a sledge hammer.
        I urge my colleagues to slow down this runaway legislative
    train.
        [The prepared statement of Hon. Henry A. Waxman follows:]
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        Chairman Tom Davis. Thank you very much. Mrs. Davis, do you
    have an opening statement? We have our Civil Service
    Subcommittee chairwoman and ranking member. All of their
    statements will be put in the record.
        Mrs. Davis.
        Mrs. Davis of Virginia. Thank you, Mr. Chairman. I want to
    thank you for holding this hearing and continuing the
    discussion on this important piece of legislation.
        And I thank our witnesses for being here today,
    particularly those representing the executive branch. It is a
    distinguished group, and their presence here today illustrates
    the administration's commitment to meaningful and significant
    civil service reform.
        This legislation is before us because a growing number of
    agencies are seeking relief from the rigidity of the General
    Schedule. This is not surprising. The General Schedule, adopted
    decades ago, has evolved into a tool for rewarding longevity
    and finding ways to reward performance and encourage our most
    talented employees is clearly the direction the Federal
    Government is heading.
        Many observers, most recently and most notably the Volker
    Commission, have recognized the General Schedule as out of date
    and in need of major overhaul. But that is a long-term issue.
    In the hearing now, we have some personnel problems that must
    be addressed.
        The Defense Department, NASA and the Securities and
    Exchange Commission are seeking to work within the constraints
    of Title 5 of the U.S. Code, which covers civil service law, to
    gain some of these flexibilities. Collectively and
    individually, these agencies are responsible for some of the
    most important, and in some cases, dangerous work of the
    Federal Government.
        The National Security Personnel System sought by the
    Defense Department has received the most attention. And it is
    by far the largest of the proposals, both in terms of size and
    scope. My Civil Service Subcommittee held a hearing last week
    on the legislation, as did the Armed Services Committee.
        It is evident that the Defense Department needs a more
    agile civilian work force to work side by side with the men and
    women in uniform. There have been concerns about the
    legislation raised at both hearings. But, Mr. Chairman, I am
    confident that with working with you, Chairman Duncan Hunter of
    Armed Services, our friends on the minority side, and the White
    House, we will be able to produce a good bill, one that
    advances the meaningful personnel reforms sought by the
    Pentagon, while also maintaining the important safeguards and
    protections that are an integral part of the civil service
    employment.
        Thank you again, Mr. Chairman, for holding this hearing.
        Chairman Tom Davis. Thank you very much.
        We will put all of the other statements in the record at
    this point. We have moved to our first panel. We have the
    Honorable Paul Wolfowitz, Deputy Secretary of the Department of
    Defense, accompanied by General Peter Pace, from USMC, vice
    chairman of the Joint Chiefs of Staff, and Admiral Vern Clark,
    Chief of Naval Operations, and the Honorable Kay Coles James,
    the Director of the Office of Personnel Management.
        It is the policy of the committee that all witnesses be
    sworn before their testimony. If you would rise with me and
    raise your right hands.
        [Witnesses sworn.]
        Chairman Tom Davis. Your total statement will be put in the
    record. Admiral Clark, are you testifying or is just Secretary
    Wolfowitz going to testify, and are you here for questions and
    answers?
        Mr. Wolfowitz. I have an opening statement. I think Admiral
    Clark has a brief additional statement. And I think he and
    General Pace will then answer questions. And Director James, I
    think, has an opening statement.
        Chairman Tom Davis. We have a clock. We try to be fairly
    loose with the first panel. But, you have a green light. After
    4 minutes, it turns yellow. At the end of 5, it is red. If you
    can move to try to sum up, your whole statement is in the
    record. I think we have questions based on the total statement.
    So just in the interests of time and making sure we can get
    questions.
        Also, Mr. Hoyer is going to drop by. At that point, we will
    allow him to speak and leave. He has other business as well,
    but he has an interest in this. And Mr. Waxman and I have
    agreed to let him speak as well.
        We will start with you, Mr. Secretary, and then go to
    Admiral Clark and General Pace and then to Ms. James.

     STATEMENTS OF PAUL WOLFOWITZ, DEPUTY SECRETARY, DEPARTMENT OF
    DEFENSE; GENERAL PETER PACE, VICE CHAIRMAN OF THE JOINT CHIEFS
     OF STAFF, DEPARTMENT OF DEFENSE; DAVID CHU, UNDERSECRETARY OF
     DEFENSE; ADMIRAL VERN CLARK, CHIEF OF NAVAL OPERATIONS, USN;
     AND KAY COLES JAMES, DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT

        Mr. Wolfowitz. Thank you, Mr. Chairman, and thank you for
    holding this hearing on what is an extremely important subject
    for our national security.
        I will try to briefly go through since you have the
    prepared statement. I will put it all in the record.
        We witnessed in Iraq another magnificent effort by our men
    and women in uniform. They can claim a great achievement on
    behalf of freedom for America, and for Iraqis who were victims
    of a vicious regime. They performed their missions with
    incredible courage and skill, and the whole country is
    enormously proud of them and grateful to them.
        Along with those qualities, much of the success we
    witnessed came from some transformational changes that are the
    product of extraordinary work in recent years. Our unparalleled
    ability to conduct night operations has allowed us to virtually
    own the night. The close integration of our forces has resulted
    in an order of magnitude change in how precise we are in
    finding and hitting targets from just a decade ago, to name
    just two dramatic examples.
        But, as we continue to wage the war against terrorism, it
    is imperative that we continue to take stock of how we can
    further transform the Department of Defense to deal with a
    world that changed so dramatically on September 11th. As we
    have seen so vividly in recent days, lives depend not just on
    technology, but on a culture that fosters leadership,
    flexibility, agility and adaptability.
        One of the key areas in which we need Congress's help is in
    transforming our system of personnel management so that we can
    gain more flexibility and agility in how we utilize the more
    than 700,000 civilians that provide the Department such vital
    support, or to deal efficiently with those few who don't.
        And let me, if I might, depart from the prepared text. This
    is not an attack on our civil service employees. To the
    contrary, they are a critical and extremely valuable part of
    our defense establishment. I speak as someone who was a career
    civil servant at one point in my career, and someone who has
    worked with literally hundreds of career civil servants. We
    could not do what we do without them. We believe that the
    reforms we are proposing are actually going to make more
    opportunities for people to join that civil service work force,
    and for those who are in it to be rewarded for performance,
    which everyone I know wants to be able to do.
        But, it is also a national security requirement, because it
    goes straight to how well we are able to defend our country in
    the years to come. This is not a new issue. It is not a
    partisan issue. No fewer than three administrations have tried
    to fix a system that is by almost all accounts seriously
    outmoded. In an age when terrorists move information at the
    speed of an e-mail, the Defense Department is still bogged down
    in bureaucratic processes of the industrial age.
        The Defense Information Systems Agency, for example, finds
    it difficult to recruit candidates so critical to this
    information age. The telecommunications, IT and professional
    engineering and science candidates who are so attracted to
    industry are critical to our performance, but because of
    inflexible and time-consuming laws that govern recruiting, we
    are at a big competitive disadvantage. When industry can offer
    the best and brightest jobs on the spot at job fairs, we have
    to compete for these same individuals using a hiring process
    that can take months. If this system is slow in bringing
    promising talent on board, it is sometimes equally slow to
    separate people with proven problems. In one case at the
    Defense Logistics Agency, it took 9 months to fire an employee
    with previous suspensions and corrective actions who had
    repeatedly been found sleeping on the job. That kind of
    practice is demoralizing to the great majority of the work
    force who are getting the job done.
        Our legislative proposal, the Defense Transformation Act
    for the 21st Century, would be a big step forward in addressing
    such obvious shortfalls in the current system. The bill before
    you will also give the Armed Forces the flexibility to more
    efficiently react to changing events by moving resources,
    shifting people and bringing new weapons systems on line.
        We have proposed a process for moving a number of
    nonmilitary functions to more appropriate departments. We have
    proposed more flexible rules for the flow of money through the
    Department.
        We have proposed elimination of onerous regulations that
    make it difficult or virtually impossible for many small
    businesses to do business with the Department of Defense.
        And, we have proposed measures that would protect our
    military training ranges so that our men and woman will be able
    to continue to train as they fight while honoring our steadfast
    commitment to protecting the environment.
        As you work through the details of this bill, you will
    inevitably find that almost every regulation had some plausible
    rationale behind it. But it is important to keep in mind what
    the sum total of these industrial age bureaucratic processes
    does to our ability to develop an information age military. The
    cumulative effect of the old processes impacts not just on
    small details, but on our ability to defend our Nation and to
    provide the brave men and women who perform that task with the
    absolutely best support they deserve.
        First, the inability to put civilians in hundreds of
    thousands of jobs, by our estimate over 300,000, that do not
    need to be performed by men and women in uniform puts
    unnecessary strain on our most precious resource, our uniformed
    personnel. Today we have uniformed military personnel doing
    essentially nonmilitary jobs, and yet we are calling up
    Reserves to help deal with the global war on terror.
        Second, the overall inefficiency of our management system
    means that taxpayers are not getting the value that they could
    get from their defense dollars. And perhaps more important, the
    men and women whose lives depend on the support that those
    dollars deliver are also being shortchanged. Despite 128
    different acquisition reform studies, we still have a system in
    the Defense Department that, since 1975 has doubled the time
    that it takes to produce a new weapons system, in an era when
    technologies in the private sector arrive in years and months,
    not in decades.
        Third, the encroachment on our ability to train adequately
    in an era when training increasingly represents the most
    qualitative edge that the U.S. military enjoys, threatens a
    collision that could endanger the lives of our servicemen and
    women.
        Fourth, our limited flexibility to manage our civilian work
    force will make it increasingly difficult to compete with the
    private sector for the specialized skills that an information
    age military needs for its support, but that will be in
    increasingly high demand throughout our economy.
        And finally, and perhaps most important, our slowness in
    moving new ideas through that cumbersome process to the
    battlefield means that our remarkable men and women are making
    use of systems and processes that are still a generation or two
    behind where they ought to be. As we have seen in both
    Afghanistan and Iraq, we want to have every bit of qualitative
    superiority that we can achieve because that saves lives and
    allows us to more rapidly and precisely defeat the people who
    threaten the security of the United States. Our objective is
    not merely to achieve victories, but to have the kind of
    decisive superiority that can help us to prevent wars in the
    first place, or, if they must be fought, that can enable us to
    win as quickly as possible with as little loss of life as
    possible.
        Mr. Chairman, the Department has already engaged in
    substantial transformation. We have reduced management and
    headquarters staffs by 11 percent. We have streamlined the
    acquisition process by eliminating hundreds of pages of
    unnecessary rules and self-imposed red tape. And we have
    implemented a new financial structure.
        But these internal changes are not enough. DOD needs
    legislative relief to achieve authentic transformation. The
    bill before you represents many months, indeed years of work
    inside and outside the Department of Defense. Congress, over
    the years, has authorized us some flexibility in small
    experimental projects to implement the kinds of personnel
    reform that we would now like to introduce for the whole
    Department.
        More than 30,000 DOD employees have participated in
    demonstration projects that other congressional committees
    helped to pioneer. It is a fact, in other U.S. Government
    agencies, major portions of the national work force have
    already been freed from archaic rules and regulations. We need
    similar relief.
        Mr. Chairman and members of the committee, the Department
    of Defense must transform for the 21st century, not just the
    way we fight, but also the way we conduct our daily business.
    And we need to get this done right now.
        The world changed dramatically on September 11th. The laws
    and regulations governing the Department of Defense must keep
    pace. Thank you very much.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Mr. Wolfowitz follows:]
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        Chairman Tom Davis. Admiral Clark, thanks for being with
    us.
        Admiral Clark. Thank you.
        Mr. Chairman, Mr. Waxman, Mrs. Davis, members of the
    committee. I appreciate the opportunity to appear before this
    committee.
        I have been on the Hill frequently this spring talking
    about transformation. This year we introduced Sea Power 21, our
    vision for the future, about transforming our Navy and creating
    the Navy for the 21st century. I have said repeatedly on the
    Hill that transformation is more than just buying new and
    different ships and airplanes and submarines and weapons.
        Transformation is also about transforming our
    organizational processes in a way that maintains our total and
    qualitative advantage. Another thing I talk about
    transformation is it starts with people. People are our
    asymmetric advantage. They are wonderful. They are doing a
    great job. It starts in the hearts and minds of our people.
        Our people are doing a great job in OIF and OEF. As a
    Service Chief, it is clear to me that we have to be able to
    continue to attract the very best people that we can get to
    build the military of the 21st century. I have a sense of
    urgency about this, and I look forward to talking to you today
    about the specific challenges that I face in trying to create
    that future.
        In my mind, what is required is an agile, flexible
    personnel and business process that can recruit and train and
    reward the kind of dedicated men and women, men and women who
    can speed innovation. And the 21st century capability that this
    Nation requires, men and women who can improve the way we
    manage resources for the Nation, and to ensure that the
    taxpayers of the United States of America are getting a fair
    shake.
        If we do that, we will be able to attract and retain the
    right people with the right capabilities and the right
    management skills to the benefit of our Nation. Now, some
    people see this legislation in the light of negatives. I
    believe that there is great goodness in this bill. I believe
    that the goodness is about, and points out the importance of,
    our civilian work force. I want to be on record that we can't
    make it without them. They are a key part of our Navy team.
        This bill will strengthen our human resource force, and I
    support wholly the principles that are embodied in this
    legislation.
        Mr. Chairman, I look forward to your questions, thank you.
        Chairman Tom Davis. Thank you very much.
        General Pace.
        General Pace. Mr. Chairman, Mr. Waxman, members of the
    committee, thank you very much for this opportunity. It is my
    distinct honor to be able to thank you on behalf of all of the
    men and women in the Armed Forces, Active, Reserve, Guard and
    civilian, for your sustained bipartisan support.
        And I would say that the tremendous accomplishments of our
    forces in battle recently is directly attributable to the
    reforms that started with the enactment of Goldwater-Nichols
    Act back in 1986. Our forces now are able to adapt very quickly
    in battle, and we need that same adaptability and flexibility
    in our DOD civilian personnel system. We also need to be able
    to recruit effectively.
        About one-third of our civilian force, and in my service we
    call them civilian Marines, because they are such an integral
    and important part. About one-third of our civilian military
    members are over the age of 50. That means over a short period
    of time, we are going to have to replace this enormously
    talented force. To sustain the current quality and to be able
    to replace in those kinds of numbers, we are going to need a
    recruiting system that is able to go out, market, be funded and
    find the quality folks that we need.
        Second, we need to be able to hire them very quickly. We
    must be able to go to the same counter, to the same job fair,
    as civilian corporations, and be able to hire on the spot if
    necessary, rather than hand someone a form and say, ``We will
    talk to you in about 3 months once we process it.''
        Last, we need to be able to pay our dedicated professionals
    based on merit. We should not make them wait some defined
    period of time before they become eligible to be considered for
    the kind of pay raises they deserve based on their own
    performance.
        I am very enthusiastic about the opportunity that this
    proposed legislation has for expanding the number of available
    jobs to our civilian Armed Forces members. Each of us, Admiral
    Clark, myself and the rest of the Joint Chiefs have been deeply
    embedded in the discussions that have led to this proposed
    legislation. We all strongly support it. We believe it will
    help us successfully benefit to our civilian force, it will be
    a benefit to the Department, and, over time, we will be able to
    sustain the very superior civilian members of our Armed Forces
    that we have now.
        Thank you, sir.
        Chairman Tom Davis. Thank you very much.
        Ms. James, thanks for being with us.
        Ms. James. Thank you, Mr. Chairman. Good morning. Chairman
    Davis, Congressman Waxman, I want to thank you for the
    opportunity to testify today on these very important pieces of
    legislation.
        I will summarize my statement and ask that it would be
    entered into the record, and look forward to answering
    questions.
        Chairman Tom Davis. Without objection.
        Ms. James. On October 15, 2001, President Bush spoke to
    members of the Senior Executive Service and said, ``I hope you
    will never take the honor of public service for granted. Some
    of us will serve in government for a season, others will spend
    an entire career here. But all of us should dedicate ourselves
    to great goals. We are not here to mark time but to make
    progress, to achieve results, and to lead a record of
    excellence.''
        After that speech, I went back to my office and thought
    about what is it that we could do at the Office of Personnel
    Management to leave a record of excellence as this President
    had challenged us to do. I think it is important to note that
    our discussions today are happening against the backdrop of
    National Public Service Recognition Week, where public servants
    at the Federal, State and local level are all being recognized
    for their contribution to our country.
        The American civil service comes out of a proud tradition
    of 120 years, coming out of the Pendleton Act, and then the
    Civil Service Commission, and now OPM.
        That proud tradition embodies the Merit System Principles,
    the Prohibited Personal Practices, Whistle Blower Protections
    and Veterans Preference.
        I think that while we look at the legislation that is
    before us today, that we need to understand and recognize that
    all of us, everyone who is here at this table and who will
    testify later today, recognizes the value and the importance of
    these particular principles and the extraordinary service that
    we have.
        However, within that service, within the American civil
    service, our antiquated, outdated, overly bureaucratic systems
    have challenged and stifled managers and workers for years. I
    don't think by attacking some of the systems that are in place
    that managers have to work with, one needs to believe that we
    are here to attack Federal workers, be they managers or
    lineworkers. All of us recognize the value of the American
    civil service and the work that those important citizens do.
        Having said that, we will hear from, as we have already and
    we will later today, some absolutely extraordinary leaders.
    Leaders that have been asked to raise to extraordinary crises
    and challenges.
        And those leaders, working within the overly burdensome and
    bureaucratic systems that they have, have been challenged
    beyond all measure. I certainly recognize their impatience and
    the desire to correct a system that is woefully inadequate and
    wrong. And so I am delighted to be here today to offer support
    for the Department of Defense and the changes that they seek as
    they look to transform their institution.
        The challenge for America is to attract the best and
    brightest to Federal service. Our challenge is to reward
    America's best and brightest once we hire them, so that they
    can be rewarded for the profound and the absolutely
    extraordinary work that they do.
        We have, in working with the Department of Defense, been
    assured that those things that are very dear to the American
    civil service are and will be protected as we look at how we
    change the systems, the American civil servants deserve better
    systems within which to operate.
        So with that, I would like to close and be available for
    any questions that you may have.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Ms. James follows:]
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        Chairman Tom Davis. We also, I see our distinguished
    Minority Whip has come into the room. And I would invite Mr.
    Hoyer to come up at this point and testify at this point.
        Steny, thank you very much for making yourself available,
    and welcome.
        Mr. Hoyer. Thank you very much, Mr. Chairman. Admiral,
    Clark and General Pace, Secretary Wolfowitz, Kay Coles James, I
    was not here to hear the testimony of the first three, or are
    you first?
        Ms. James. No, I am last.
        Mr. Hoyer. In my book, she is first. She covers most of the
    people that--a lot of the people that live in my district.
        Mr. Chairman, I thank you for this opportunity to present
    to you my views on the Civil Service and National Security
    Personnel Improvement Act.
        I appreciate your decision to schedule an additional
    hearing prior to marking up this measure. I am dismayed,
    however, by the manner in which a civil service reform of this
    magnitude is being rushed through the legislative process.
        It is shameful, in my opinion, that we will give no more
    than cursory consideration to legislation that will strip from
    more than a third of our Federal civilian employees their most
    basic worker protections.
        Mr. Chairman, as you know, when the Clinton administration
    pursued similar proposals, I opposed rushing to judgment on
    those. I was not convinced either by party or partisanship to
    move too quickly. I share Mrs. Davis' views on that expressed
    last week.
        The last piece of legislation to affect this many Federal
    employees was the 1978 Civil Service Reform Act, and the
    process by which it was developed and considered could not be
    more different than that which is proposed today.
        Months prior to submitting his proposal to the Congress,
    President Carter established a working group to study personnel
    policies. The group heard from more than 7,000 individuals,
    held 17 public hearings, and scores of meetings and issued a
    three-volume report.
        Upon subsequent introduction of the legislation, House and
    Senate committees held 25 days of hearings, receiving testimony
    from 289 witnesses. And a written statement from more than 90
    organizations.
        When the House committee marked up the legislation, it took
    10 days and 42 roll call votes to consider 77 amendments. This
    thorough, open, and fair process resulted in civil service
    reform legislation that garnered near unanimous bipartisan
    support from both Chambers.
        The contrast to the current process could not be more
    clear. This measure was conceived, as I understand it, by a
    handful of the President's closest advisors in the Defense
    Department, and perhaps in the White House as well, without any
    public input. Without any public input.
        Regrettably, not a single Federal employee group was
    consulted, not one. Since introduction of the legislation last
    week, the House has scheduled a couple of hearings. A handful
    of witnesses will provide testimony, and will likely be
    attached to the Defense Authorization Bill and approved by the
    full House prior to the Memorial Day recess. At least that is
    what I am told. I don't know it. But that is the schedule that
    I understand this legislation has been put on.
        Why the urgency to enact such sweeping reforms in such
    haste? Just 5 days ago aboard the aircraft carrier USS Abraham
    Lincoln, President Bush said, correctly, ``I have a special
    word for Secretary Rumsfeld, for General Franks, and for all of
    the men and women who wear the uniform of the United States.
    America is grateful for a job well done.''
        The President was right. The Admiral, the General, the
    Secretary, and all of us are extraordinarily proud of what they
    have done. The military campaign in Iraq was a tremendous
    achievement made possible not only by the planning of our
    military leaders and the bravery and skill of our soldiers,
    sailors, airmen and marines, but also by the active support,
    the critical involvement, the expertise, and the talent of the
    commitment of nearly 700,000 Department of Defense civilian
    employees.
        How can it be? My colleagues, how can it be that just days
    after the completion of such an immensely successful endeavor,
    that the Pentagon's personnel system is so fundamentally flawed
    that it needs such immediate and drastic overhaul? How can it
    be?
        To be sure there are problems in the Federal personnel
    system, including inadequate performance appraisal systems and
    inflexibilities in hiring. Director James and I have discussed
    these. We need to make reforms in this area. I agree with that.
    And I am sure those of us who advocate on behalf of Federal
    employees would also agree.
        Paying and disciplining employees needs to be reviewed, but
    it seems clear that there is time for the administration,
    Congress, and the affected employees to review the current
    system and explore solutions to these and any other problems
    that exist in a fashion that gives all parties affected,
    including the American people, the opportunity to participate
    in this process.
        Not only that, we have an opportunity to learn from the
    experience of the Secretary of Homeland Security and Gordon
    England, Deputy Secretary, an extraordinary administrator, our
    former Secretary of the Navy, my friend and an outstanding
    individual, he and Secretary Ridge are going to pursue adopting
    policies that work.
        We have 170,000. This is not a small sample. This is not
    China Lake. This is 170,000 people. A third--excuse me, 10
    percent of our Federal civilian work force are going to be
    affected. Wouldn't it make sense to see how they do it and what
    successes they have and what problems they confront? Wouldn't
    that be rationale to do, rather than to rush to judgment?
        But this bill is even more objectionable for what it does
    than how it is being processed. This proposal will have the
    chilling effect of undoing decades of some of the most
    important worker protections enacted by Congress and signed by
    President. Among its most egregious provisions the legislation
    grants the Secretary of Defense the authority to strip Federal
    workers of their collective bargaining rights, deny employees
    their right to appeal unfair treatment, grants supervisors
    complete discretion in setting salaries and determining raises,
    and abolishes rules that require that reductions in force be
    based on seniority and job performance.
        Let me state as emphatically as I can, I believe in pay for
    performance, period. We ought not be giving raises to, and, in
    fact, we ought not to be paying employees who do not perform at
    acceptable levels for the American taxpayer, and for our
    government, period.
        I think all of us agree on that. Let me close, Mr.
    Chairman, by saying that I believe that this proposal is the
    last example, frankly, of this administration's hostility
    toward the right of American workers to organize and bargain
    collectively.
        It also sends a terrible message to the Federal employees
    who help protect our Nation every day, the protections adopted
    by Congress and the President over the years will be abandoned.
    I acknowledge the fact that this is a substantive proposal. It
    has meritorious suggestions contained in it. The people
    proposing it are good people. But if it is a substantive
    proposal, I suggest to them it is worthy of substantive
    consideration, not 10 days between introduction and inclusion
    in the Defense Authorization Bill that doesn't have
    jurisdiction over this subject, this committee does, which is
    why you are having your hearing.
        Mr. Chairman, shock and awe, that was a successful
    stratagem adopted, one which I think we can all respect. We
    acted with great force and we acted quickly. We got the enemy
    off balance. As a result, they did not have their defenses in
    order, and we had a victory of very substantial proportion.
    What outstanding planning. Mr. Secretary, I congratulate you.
    Admiral Clark, I congratulate you. I congratulate Secretary
    Rumsfeld as well, and the President who endorsed the plan.
        But, ladies and gentlemen of this committee, we ought not
    adopt a strategy of shock and awe dealing with the 700,000
    civilian employees at the Pentagon. We ought not to act
    massively, we ought not to act massively in a very substantial
    bill and then move extraordinary quickly so that we keep them
    off balance and unable to effectively respond.
        Mr. Chairman, I would hope that you would exercise your
    leadership, as an advocate of Federal employees, not to prevent
    reform, because we need reform. Not because this bill is bad,
    per se, although there are things in it which I will oppose,
    and there are things in it that I will support, but because
    they deserve, and America deserves an opportunity to
    thoughtfully and completely consider this very substantial
    significant change in existing law passed by Congress, signed
    by Presidents, protecting our employees and promoting their
    best interests and the best interests of the American taxpayer.
        Thank you very much for this opportunity.
        Chairman Tom Davis. Thank you, Steny.
        [The prepared statement of Mr. Hoyer follows:]
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        Chairman Tom Davis. The Chair is not going to allow the
    audience to applaud or boo or hiss. I know this went on in the
    Civil Service Subcommittee. If you want to do that, you can go
    outside, and we welcome you going out into the hall and doing
    that, but we are trying to conduct a hearing today to allow
    Members to have an exchange, a substantive exchange on issues.
        So if you would obey these rules, we would be happy to have
    you here as our guests today.
        Ms. James.
        Ms. Watson. Can you yield a second for an inquiry?
        Chairman Tom Davis. I would be happy to.
        Ms. Watson. Is the bill ready? Could we get a copy of the
    bill?
        Chairman Tom Davis. The bill has been printed. And I would
    be happy to get you a copy of it.
        This is, as you know, it is a draft bill. This bill is--
    there are going to be a number of amendments. And we will try
    to get you, in fact, some of what are now being considered as
    manager's amendments. There will be more.
        Ms. Watson. We would like to have it in front of us.
        Chairman Tom Davis. We will see if we can get an original
    to everybody. Thank you.
        Let me start the questioning, and then I will go to Mr.
    Waxman. We will try to do in 5-minute increments to get around.
        Mr. Wolfowitz, let me just ask you, you just heard Mr.
    Hoyer talk about, this came in without any public input and the
    like. How would you react to that?
        Mr. Wolfowitz. First of all, we have had, I think by our
    count, some hundred briefings with Members of Congress, both
    House and Senate and staff, in developing this proposal.
        One of the reasons it came to you in April instead of in
    February, is because we, in fact, wanted the benefit of that
    consultation.
        Chairman Tom Davis. How about with employees and managers
    in DOD?
        Mr. Wolfowitz. With respect to the American Federation of
    Government Employees, AFGE was briefed on a number of occasions
    about our demonstration project best practices and our plan to
    use the result of those experiments in a new personnel system
    for the Department. Those briefings started in January. Eight
    out of the nine demonstration projects that are the basis of
    this proposal, have union participation. So the unions have
    helped to shape the personnel practices currently employed that
    were reviewed under the best practices study.
        And, as in the Department of Homeland Security, the unions
    with national consultation rights will be asked to participate
    in the establishment of the policies that implement the new
    personnel system. We value our employees. We value the unions.
    We are working closely with the unions.
        Chairman Tom Davis. Let me ask you, you noted in your
    comments that there were now 300,000 uniformed personnel that,
    in some cases, were not doing active-duty status, but were
    behind desks and like. I take it they are there because you
    have flexibilities over uniformed personnel you don't have with
    some civilian personnel. And what I noted is that the
    Department, in some cases, has gone to contractors who you have
    flexibility to move and deal with, as opposed to employees who
    sometimes have limitations on what you can do with them?
        If this legislation were to pass, roughly as written and as
    proposed, would you see an increase, do you think, in the
    number of civilian personnel that would be hired by Department
    of Defense as a result of that, by being able to move around
    and having greater flexibility?
        Mr. Wolfowitz. I think so, Mr. Chairman. I think under any
    given system, this flexibility in hiring and management will
    allow us to have a larger relative percent of civilian
    personnel and to use the uniformed people for uniform tasks.
        And as you said also, it will allow us to bring our
    civilian personnel into the regular civil service system,
    instead of all of the kinds of work-arounds that you rightly
    noted have been the product of all of the years of the
    inflexibility we have dealt with.
        And so, rather than this being an attack on the civilian
    work force, I think it is basically an opportunity to increase
    it, to make it more competitive, to make conditions in the
    civilian work force more attractive to people in general.
        So, I very much hope that this will not be presented as
    something that does not appreciate the enormous value we
    already get from our civilian work force. We would like to have
    the flexibility to expand it.
        Chairman Tom Davis. One of the arguments against the
    proposal that the Defense Department has come forward with, is
    that you are going to be taking away collective bargaining
    rights of civilian employees through this legislation.
        That, in point of fact, you will continue to meet with
    them, you will continue to confer with them, they will continue
    to be part of the solution, but if an impasse is reached
    between management and the bargaining unit, the resolution
    would be on the part of the employer. That is my understanding,
    and my reading on that, which is more a meet and confer than a
    collective bargaining type of approach to this.
        Can you clarify the intent of your proposal for collective
    bargaining? How you would resolve these impasses, and how
    elected union officials and shops that have elected to go union
    would be involved in this process, and how impasses would be
    involved? Can you clarify this a little bit?
        Mr. Wolfowitz. My understanding is that collective
    bargaining will still be an essential part of the process. We
    are trying to make it somewhat more efficient, and as you say
    ultimately, the managers have certain authority. The unions
    would not have a veto.
        But, the unions are a crucial part of managing this. In
    fact, Director James, do you want to comment further on that?
        Ms. James. No.
        Chairman Tom Davis. Let me ask you. Right now, if there is
    an impasse between--you have an arbitrator, you have a dispute
    resolution, which in any opinion, you know it, is a very
    lengthy, very bureaucratic and probably hinders the flow. If
    there were a way of getting a quicker decision out of this, I
    think I can feel a lot more comfortable. But to get a decision,
    I think, right now, the shift on the part of some of the
    unions, understandably, they are concerned, because they see a
    marked shift in terms of the bargaining authority if management
    can sit there and listen, and at the end of the day not have to
    budge or give.
        You understand what I am saying.
        Ms. James. Yes, sir. I think the bane of the existence of
    some managers in the Federal Government is so many duplicative
    appeals processes that are often times very lengthy and, go on,
    on dual tracks at many times. And it will sometimes even
    discourage a manager from disciplining an employee because they
    don't want to get involved in that process, and so they
    tolerate poor performance as a result of that.
        And I think what you see in the Defense Department is a
    desire to build a system where you can take action, you can
    take action quickly, but without getting rid of due process. I
    am sure that there will be due processes in place, and I am
    sure that they have a plan for doing that. So I feel confident
    and----
        Mr. Wolfowitz. The way I understand the collective
    bargaining provisions is that it would be done at a national
    level, that there would be 30 days on issues of consultations
    with unions. Where there are differences, those differences
    would be reported to Congress. There would then be 30 days to
    resolve the problems, and the Federal Mediation Service could
    be called in to do that.
        And I guess ultimately the decision would be with the
    managers. But, that decision would be reported to Congress. So
    it seems to me it is a process that allows multiple points for
    the unions to have their voices heard, and for Congress for
    that matter to intervene. Someone has to make a decision at the
    end of day.
        There is 20 years of inability to move in areas that almost
    everyone agrees we should be able to move.
        Chairman Tom Davis. Well, my time is up. I see Mr. Hoyer
    chomping at the bit. If the committee would indulge me just a
    minute, Steny.
        Mr. Hoyer. Thank you, Mr. Chairman. And I don't want to--I
    have not read the bill. Let me make it clear that I have not
    had the time to read the bill.
        But, my understanding of the legislation, and having read
    some of the comments of some of the members of this committee,
    that Secretary Wolfowitz is correct. In the final analysis, it
    is at the manager's discretion. So that while there may well be
    a noblesse oblige willingness to talk to people, which is very
    nice, there seems to be no requirement to do that, because
    ultimately management has total flexibility, as I understand
    the thrust of the bill.
        Again, let me stress, and then I have to leave, Mr.
    Chairman, let me stress that I believe we ought to take action
    to facilitate a number of the things that the military is
    concerned about, that you and I have discussed, Mr. Chairman,
    that--and Ms. James, Director James and I have discussed,
    clearly we need to facilitate management's ability to run an
    effective, efficient shop, whether it is 10 people or 100,000
    people.
        But, my point is, that we need to do that in a considered
    way. And very frankly, I want to tell Secretary Wolfowitz, Mr.
    Secretary, I don't obviously know who you have talked to. I can
    say that as I think I am correct in saying, that I am perceived
    as one of the principal Federal employee advocates in the
    Congress of the United States. Nobody has talked to me about
    this legislation, except in the most general terms when we met
    with Secretary Rumsfeld about Iraq, with the Speaker and the
    leadership in very general terms, no specifics, nor was the
    timing of this ever discussed with me.
        So while--and obviously you don't have to discuss it with
    me, but I will tell you that in my discussions, Mr. Chairman,
    with Federal employee unions and representatives, they do not
    believe that they were consulted on this piece of legislation.
    I think the Secretary is accurate in saying that there were
    discussions, preliminary in terms of some of the samples of
    practices that you referred to.
        However, there certainly was not the consultation that I
    referenced that occurred in 1978 when we passed, by very heavy
    margins in both parties, substantial civil service reforms.
        Thank you, Mr. Chairman.
        Chairman Tom Davis. Thank you. I'm sure we can arrange that
    briefing for you.
        Mr. Wolfowitz. I will be delighted to go through it. I
    think you will find it is quite reassuring in important
    respects that concern you.
        Mr. Hoyer. I will look forward to that. It would be my
    understanding that it is approximately 36 hours before it would
    be included in the bill.
        Chairman Tom Davis. Steny, you are a quick thinker. You are
    good on your feet.
        Mr. Hoyer. I appreciate that analysis.
        Chairman Tom Davis. Thank you for being with us, Mr. Hoyer.
        Mr. Waxman.
        Mr. Waxman. Thank you, Mr. Chairman. I just want to point
    out, Mr. Wolfowitz, that you said that the hundreds of meetings
    with Members of Congress and their staffs--on the Democratic
    side of the aisle of this committee, which has primary
    jurisdiction over the civil service issues, we never had any
    consultation with anyone until the proposal was laid out before
    us and certainly no input into the development of the proposal.
        We also heard last week from the unions that they were not
    consulted about it, either. The Comptroller General, David
    Walker, testified that DOD does not have a good track record in
    reaching out to key stakeholders. So I just put out there as a
    contrary view.
        But I do want to get into some of the specifics. Because,
    from my point of view, I think we ought to be as constructive
    and bipartisan as we can be and give you the tools that you
    will need but not do it at the expense of over 100 years of
    civil service protections.
        Now, our civil service laws as I see it in this bill are
    thrown out the windows. You pointed out that you don't think
    you are eliminating collective bargaining rights, but Chapter
    71 of Title 5 provides that DOD could waive the right of
    Federal employees to join unions, protection against
    discrimination in hiring and promotion due to union membership,
    the protection from agency retaliation for filing complaints.
    These are such basic rights that I have a hard time
    understanding why anyone would want to revoke them.
        When Undersecretary Chu testified last week before the
    subcommittee, he said the Department was only seeking
    flexibility to conduct collective bargaining at the national
    level instead of the local level. He said that, because of the
    large number of local unions involved, national level
    bargaining is viewed by DOD as more efficient. You just made
    reference to that fact as well.
        But the provision in the legislation goes well beyond
    fixing that narrow problem. Instead, it completely strips
    Federal employees of their collective bargaining rights. If DOD
    is simply interested in national level bargaining, why wouldn't
    Congress just permit this type of bargaining without waiving
    all of Chapter 71?
        Mr. Wolfowitz. My understanding, Congressman Waxman, is
    that the powers we are seeking in that regard are basically the
    same as those that have already been granted to the Department
    of Homeland Security and I think in fact less extensive than I
    believe have been granted to the Transportation Security
    Agency. So we are not talking about stripping all of those
    basic protections of civil service. In fact, we are very much
    keeping the basic prohibitions on prohibitive personnel
    practices. We are keeping appeals processes in place. We are
    simply making it easier to hire people that ought to be hired,
    easier to reward people that ought to be rewarded.
        Mr. Waxman. I want us to do that, Mr. Wolfowitz, but I am
    concerned about this broad, sledgehammer approach. The
    Department of Homeland Security had some provisions that we
    wanted to try out on an experimental basis. Now you are coming
    in and saying, whatever they have, we want the same. I think
    every other agency of government is going to want the same
    thing, as well.
        Dr. Chu testified that, and I am quoting from page 55 of
    the hearing transcript, ``There is no proposal here for anyone
    to lose his or her collective bargaining rights. The proposal
    is designed to facilitate bargaining at the national level.
    That is the proposal.''
        If that is the proposal, and I assume you believe
    collective bargaining is an important right for Federal
    employees, the problem I have with your bill is it does away
    with these important rights. It specifically states that if the
    Secretary disagrees with any suggestion made by any union, the
    Secretary may do whatever he wants in the Secretary's sole and
    unreviewable discretion.
        If you give the Secretary sole and unreviewable discretion,
    that is not collective bargaining, it is a formulation that
    gives all power to the Secretary. If what you are trying to do
    is have collective bargaining at the national level, why don't
    we spell that out and still keep all the protections that are
    in the existing law that have been in the law for 100 years or
    so in place, so you can do what you feel you need to do without
    going beyond that?
        Mr. Wolfowitz. I believe those recommendations of the
    Secretary will end up being reviewable by the Congress,
    ultimately.
        Mr. Waxman. Everything is reviewable by Congress, but if
    the Secretary has power to make all the decisions, that is not
    collective bargaining. Congress cannot step in in every
    situation.
        We find under existing law where there is collective
    bargaining or an individual employee has a grievance they can
    take it to a third party, for example, somebody accused of
    making an accusation of sexual harassment or racial
    discrimination. The Secretary does not decide these things. It
    goes to an impartial panel to review it. Those are all now out.
        Mr. Wolfowitz. But I believe, Congressman, that the
    reference to ``the Secretary's sole discretion'' was just sole
    discretion with respect to administrative procedures, not with
    respect to the collective bargaining. It is a different part of
    the act that you are reading from. I would check that on the
    record, but I believe that is it.
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        Mr. Waxman. Then you agree with what we are trying to
    accomplish, then. If I am wrong, I apologize, but I read it
    differently, and maybe we should restore it to what we think it
    ought to provide. The law says, ``If the Secretary determines
    that in the Secretary's sole and unreviewable discretion that
    further consultation and mediation is unlikely to produce
    agreement, the Secretary may implement any or all of such
    parts, including any modifications made in response to the
    recommendations, as the Secretary determines advisable.''
        If I had to negotiate and bargaining with someone who had
    the power to say no and mean it, that is not collective
    bargaining. Perhaps we could work on the language to make sure
    we don't have such broad discretion.
        Mr. Wolfowitz. OK. I appreciate the opportunity to do that.
    But, if I might say, we are talking about personnel reforms
    that are not, for us, something that we are going to try out.
    We have been around longer than the Department of Homeland
    Security. Congress has given us an opportunity to experiment
    with some of these procedures.
        I might note, for example, that the results we are getting
    back from the experiment that was done at Redstone Arsenal had
    a union leader saying, ``By far the majority of the employees
    have indicated to me, both privately and in called meetings at
    Redstone Arsenal, that they wanted the experiment renewed. I am
    talking about 98 percent of them did. Only 1 out of 50 opposed
    it.''
        So we are dealing with a process, with procedures that are
    not completely new, procedures that we have tested in some
    important experiments and where I think the reaction of the
    workers has been a very positive one. That is the spirit in
    which we are approaching this.
        Mr. Waxman. We disagree about what your bill in fact says.
        Chairman Tom Davis. Thank you. The gentleman's time has
    expired.
        Mrs. Davis of Virginia. Thank you, Mr. Chairman. I would
    like to thank our distinguished witnesses for being here today.
        Admiral, let me just say that you stated that you agreed
    with the principles embodied in the legislation, and I would
    like to make it very clear that I agree with the principles. It
    is the details that I am concerned with.
        Mr. Secretary, I think it was you that said that you have
    roughly about 300,000 military personnel doing jobs now that
    you would like to put nonmilitary personnel in. Do you feel you
    need all the flexibility that is embodied in this legislation
    in order to fill those jobs with civilian personnel, or
    wouldn't what we gave the Department of Homeland Security do
    the trick?
        Mr. Wolfowitz. Well, some of what we are asking for is not
    that different from what you did give the Department of
    Homeland Security. But, basically, what we are seeking with
    respect to the issue you just raised is the ability to hire
    people more flexibly and not to be in a position where we are
    competing for skilled workers with private industry that can
    offer them jobs on the spot and all we can say to them is, give
    us an application, we will get back to you in 90 days. You
    don't hire people that way. You don't compete that way.
        Our procedures are from a different era when hiring
    practices were different, private industry was slower, and we
    were still competitive. There is a real danger now that we are
    not going to be competitive in precisely those areas that are
    most important for keeping up with a very rapidly changing
    world that we live in.
        Mrs. Davis of Virginia. Director James, if we gave the
    Department of Defense the same flexibility we gave the
    Department of Homeland Security, would they be able to do what
    the Secretary wants to do?
        Ms. James. They certainly would.
        I just want to say for the record that, given what we have
    seen from the military side of the Department of Defense, we
    want the civilian side to have the tools so they can be
    flexible and nimble. There is nothing more that I want than for
    the Secretary to go to a college campus, find a bright,
    aspiring civil servant and have the opportunity to offer them a
    job on the spot. We want them to have the direct hire authority
    and the flexibility. Our government needs to attract those
    kinds of individuals, so we are very supportive of the
    Department of Defense having that kind of authority to do the
    job they have been asked to do.
        Mrs. Davis of Virginia. Thank you.
        Mr. Secretary, I sit on the Committee on Armed Services as
    well, and there is nothing that I have been more of an advocate
    for than our defense and our men and women in uniform. I want
    to be able to give the Department of Defense what they need,
    but we need to do it in a way that we do not harm our civilian
    work force.
        I know you all have brought it out very clearly, that our
    civilian work force is very important to you. I know you feel
    that way. I just don't want us to rush into something, because
    I think every other agency in the Federal Government will be
    lining up at our door for us to give them whatever we give the
    Department of Defense to do.
        A couple of quick questions about reemployment of retirees.
    The current law allows you to reemploy retirees and, if
    justified, in special cases to get approval from OPM to waive
    the usual requirement that their salary be reduced by the
    amount of their annuity.
        First, does the Department need the ability to employ
    retirees and to pay them their full salary along with their
    full annuity without seeking prior OPM approval because getting
    OPM's approval takes too long or because OPM is overly strict
    or what?
        Second, don't you think we should have some sort of
    limitation that would show NASA, for example--and I have NASA
    Langley in my district--and other agencies that DOD would not
    use its special authority to attract the best and brightest
    people who are eligible for retirement and working in those
    other agencies?
        If you would prefer to defer to Director James, that is OK
    with me.
        Mr. Wolfowitz. I would certainly like to hear what she
    says.
        Let me say that it seems to me--I cannot comment on the
    situation in NASA or other agencies, but I can comment on DOD
    as part of the Federal Government, that we are losing people to
    the private sector because they get their full retirement and
    probably a better salary working in the private sector. A lot
    of them are public-spirited and would be happy to continue
    working for the Federal Government if it did not cost them so
    much. We are trying to address that for DOD, and I certainly
    could not object to addressing it for other agencies, but that
    is outside my purview.
        Chairman Tom Davis. Excuse me, Mr. Secretary. What you are
    trying to do in the legislation is bypass OPM, if I read it
    correctly, in bringing back these retirees. My question is, are
    you doing it because you think OPM takes too long in
    responding, or what?
        Mr. Wolfowitz. I am not aware of trying to bypass OPM. What
    I am aware of is trying to be able to give people their full
    retirement instead of having them basically work for 25 cents
    on the dollar if they choose to stay working for the Federal
    Government now.
        Chairman Tom Davis. I think you have the right to do that
    now with OPM's approval. That is what I am asking. You are
    trying to waive getting OPM's approval, is that not correct?
        Mr. Wolfowitz. Since September 11th, we have had a
    provision, an emergency provision, that allows us to bring back
    civil service people to do specific tasks without sacrificing
    their retirement pay. What we are seeking is a continuation of
    that provision.
        I don't know what OPM's role is, to be honest, in the
    emergency provision. I know that we have found that provision
    very useful and want to continue it.
        Ms. James. We did grant that authority to the Department of
    Defense; and I feel confident that, given that authority on a
    permanent basis, that they would oversee that program in a
    responsible manner and would use it to attract employees that
    may have retired to come back and work for the Department.
        I feel confident that they would, in implementing that, put
    appropriate safeguards in place so that it would be a useful
    tool in their tool belt for the strategic management of human
    capital.
        Chairman Tom Davis. The gentlewoman's time has expired.
        Let me just follow quickly. You have a lot of people
    retiring now, getting their full retirement and coming back as
    contractors and really cleaning up. This could actually save
    money if you could keep them on as Federal employees.
        Mr. Wolfowitz. That is absolutely right.
        Chairman Tom Davis. Mr. Van Hollen.
        Mr. Van Hollen. Thank you, Mr. Chairman. I want to thank
    all the witnesses for being here, and their testimony. A number
    of you, including Dr. Chu when he testified before the
    subcommittee last night, made a point in saying that our
    civilian employees of the Department of Defense worked as one,
    as a team with the military, and that support that our
    civilians provided was absolutely critical to our success in
    Iraq, a success of which we are all very proud of our military,
    including the civilian support they were given.
        I do, as Mr. Hoyer and Mr. Waxman say, find it
    extraordinary that just a short time after that great success
    we take an action which really will deprive many civil servants
    within the Department of Defense of some of their very basic
    rights and protections.
        We talk about the importance of flexibility and agility.
    Those are great buzzwords and we all want it, but we could get
    rid of the ethics code in the Congress. It would make it all
    more flexible around here. It would not be a good thing. A lot
    of the provisions that have been built into law over time were
    to provide basic protections. We could get rid of restrictions
    on sex or racial discrimination. Those are all things that
    restrain the exercise of power and management under certain
    circumstances. That would make it more flexible, but I think we
    would all agree that does not make it better.
        You, Mr. Secretary, have raised a number of good points
    about changes we need to make that would allow us to hire
    people more quickly, maybe to retain and make more permanent
    some authority to bring back people. But we don't need to make
    these sweeping changes in order to address those very concrete
    things that you have raised today.
        We had before the subcommittee last week the head of the
    GAO, David Walker, who said, and I want to say, ``There is very
    serious concerns about this problem.'' He said that the DOD
    system, like many in the government today, is currently not
    designed to support a meaningful performance-based system at
    this time.
        You have raised some of the small programs where you have
    experimented with this at DOD, but my question is, and this
    seemed to be the sense we got from Mr. Walker, why not take the
    time within DOD--there is nothing in the current law that
    prohibits DOD right now from developing a good performance-
    based system, put it into practice, look at the standards now,
    before we move and take away the merit pay system we have in
    effect.
        So my first question is, why not just wait until you get it
    right, until the GAO and other independent groups that have
    looked at these things say that you get it right before we move
    ahead with this particular proposal?
        Mr. Wolfowitz. I'm sorry, I don't believe the current law
    does allow us to make or do pay banding of the kind that we are
    talking about here or of the kind we have successfully
    implemented in some of our experiments. And we are not talking
    about stripping people of fundamental protections or removing
    the basic provisions of civil service, but there is something
    wrong, I think, with a grievance procedure that--excuse me, a
    separation procedure that requires that you have three strikes
    on exactly the same item before you can terminate someone, like
    that employee I mentioned who was found sleeping on the job not
    once but finally three times. It is demoralizing to the other
    employees.
        I believe, and the experiments we have had at China Lake
    and Redstone Arsenal and other places bear it out, that these
    changes will be positive for the great, great majority of our
    civilian work force. It will make them better motivated, better
    compensated, and they will not have to deal with that 1 percent
    of poor performers that should not be so difficult to separate.
        So we are not talking about removing the basic rights.
    There are grievance procedures throughout.
        Mr. Van Hollen. I think what Mr. Walker was saying with
    respect to the pay for performance was that you don't have in
    place now the kind of standards upon which you could base a
    fair pay for performance. He didn't say you don't have the
    authority, but he said the DOD has not laid the groundwork in
    terms of its personnel evaluation system that would allow us to
    do it in a meaningful way.
        And this is true of Republican and Democratic
    administrations. There is always the danger of political
    favoritism within the system. I think we all know that is a
    real danger; and it is important, again, regardless of the
    party in power, that we have those protections.
        One thing I think we should all look at is whether it
    doesn't make sense to wait until we have a good performance
    evaluation system in place across the board before we move
    quickly with that.
        Just to followup on the point you raised with respect to
    retaining the basic protections of rights, as part as this
    proposal DOD is seeking a waiver from Chapter 77, which ensures
    that there is an objective third party, like the Merit Systems
    Protection Board or the Equal Employment Opportunity
    Commission, to review agency disciplinary actions. Those I
    think are especially important, to have an independent
    evaluation in the case of racial discrimination actions or
    sexual harassment actions.
        My question is, why do you want to waive Chapter 77 with
    respect to those protections?
        Mr. Wolfowitz. My understanding is that all those basic
    things that you mentioned--that certainly we are not trying to
    eliminate any prohibitions on racial discrimination. I think it
    has to do with the fact that some of those provisions appear at
    multiple places in the statute.
        If I can go back to pay for performance, we have a best
    practices model. It has been implemented in these experiments.
    In fact, it was published in the April 2nd Federal Register. I
    think it is a couple of hundred pages in length. That is the
    system we would like to institute more broadly. It has been
    tried; it works; it is reviewable. It is not something that
    leaves everything arbitrarily to the kind of manipulation that
    you are rightly concerned about. We would be concerned about it
    ourselves.
        I think if we look at what happened at China Lake, at what
    happened at Redstone, we have been able to get some of the best
    people in this country working for the Federal Government in
    conditions where they might very well have gone off to the
    private sector if we didn't have that flexibility.
        Mr. Van Hollen. One last followup.
        Chairman Tom Davis. The gentleman's time has expired. I'll
    give you a quick followup.
        Mr. Van Hollen. Thank you.
        Just on the issue of having the pay-for-performance
    evaluation system in place, we also asked the Deputy Director
    of OPM a short time ago in a hearing to name some of the
    Federal agencies that had a basis for that kind of system in
    place, and DOD was not among them.
        The last point I would like to make is that, with respect
    to--I am trying to understand your response with respect to the
    rights of employees. Are you saying you would not oppose having
    an agency outside of DOD like the Merit System Review Board or
    the Equal Employment Opportunity Commission review decisions,
    claims that are based on racial discrimination or sexual
    discrimination?
        Mr. Wolfowitz. Certainly I don't think so. I would like to
    confirm that for the record. Those are fundamental protections.
    We are certainly not trying to change anything in the way that
    people are protected against that kind of discrimination. If we
    are doing so,
    we would fix that. But I believe all the basic provisions of
    EEO review remain in place. I would be unhappy if they did not.
    I will try to confirm that for the record. I agree with you
    emphatically on that.
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        Chairman Tom Davis. I thank the gentleman for the question.
    I tried to raise it in a little different angle at the same
    time. I think it is something we need to ensure is protected as
    we move through this.
        One other thing before I recognize Mr. Murphy.
        A lot has been said about we just won this war under the
    current system, but the fact is that about 80 percent of your
    people on the ground were contractors, not employees, in Iraq?
        Mr. Wolfowitz. I think that is about the right number.
        Chairman Tom Davis. There is something wrong with that.
        Mr. Wolfowitz. We didn't sort of come up with the idea--the
    notion is that somehow we won the war and now we are sweeping
    in with this. I think it was more correctly observed by
    Congressman Hoyer earlier that some of these provisions have
    been proposed for years.
        I wish he had said yes to some of the things the Clinton
    administration had proposed in this area. They are long
    overdue, and the fact that we did so well in Iraq should not be
    a reason for saying, therefore, we are perfect.
        Chairman Tom Davis. I think you said earlier that there are
    more opportunities for Federal employees for this, because a
    lot of the things that are being outsourced now and done by
    uniformed personnel could be done by Federal civilian
    employees. You have said that under oath and on the record, and
    that needs to be reiterated. That is one of the purposes of
    doing this.
        Mr. Wolfowitz. It is one of the main purposes of doing
    this.
        Chairman Tom Davis. Mr. Murphy.
        Mr. Murphy. I thank the chairman, and I thank the
    distinguished panel.
        I'm thinking when one reviews the biographies of Theodore
    Roosevelt--I believe at one time he was head of the Civil
    Service Commission and spoke about the headaches he had and the
    problems he saw with what proceeded him with regard to hiring
    of people based upon political rather than personal merits, and
    relatives.
        Certainly the issues you are bringing up here are ones the
    government has tried to deal with for a long time. Some are
    quite commendable. Any mayor in any town has recognized they
    could put a lot more police uniforms on the street by taking
    them out from behind desks, just as you said with the military.
    I think everyone here is in favor of that.
        There are a couple of things that I go back to and some
    concerns that have to do with some of the due process
    procedures and who has ultimate authority here.
        Let me read here from a page of the bill. The printed
    version I have is on page 11. It talks about, for any
    bargaining unit, ``the Secretary at his sole and exclusive
    discretion may bargain at an organizational level above the
    level of exclusive recognition. It is binding on all
    subordinate bargaining units. It supercedes all other
    collective bargaining agreements, including collective
    bargaining agreements negotiated with an exclusive
    representative. It is not subject to further negotiations for
    any purpose, including bargaining at the level of recognition
    except as provided by the Secretary; and any bargaining
    completed pursuant to this subsection with labor organizations
    not otherwise having national consultation rights shall not
    create any obligation on the Department of Defense or
    subcomponents to confer,'' and it goes on and on.
        It sounds to me like it is putting a lot of power in the
    Secretary of Defense that would supercede other negotiations
    and discussions. Am I reading that correctly?
        Mr. Wolfowitz. I believe what it is designed to do is to
    consolidate what could otherwise be an enormous and cumbersome
    proliferation of individual, inconsistent bargaining procedures
    with bargaining at the national level. I think that is the
    intent of it. I think that ultimate discretion, according to
    the Secretary, I think is the same discretion that is accorded
    to the Secretary of the Department of Homeland Security.
        But the intent of that provision, and I think it is
    particularly important in a department as large as ours, is to
    enable us to come to consistent decisions across the Department
    and do so with some degree of expedition.
        Mr. Murphy. Again, that makes sense, that you don't want to
    be negotiating on hundreds of little agreements if you can
    expedite that and deal with it on a higher level. I just
    wonder, does that mean that the Secretary has the authority to
    strike out a lot of things that had been negotiated that may be
    good procedures as well?
        Let me jump to another point here. There is another section
    preceding that in the bill which talks about provisions to
    collaboration with employee representatives. I am reading here
    from page 9. Essentially a number of recommendations are made
    from this group.
        It says, ``Any part of the proposal as to which the
    representatives do not make a recommendation or as to which the
    recommendations are accepted by the Secretary and the Director
    may be implemented immediately.'' So in other words, if they
    recommend it and you like it, the Secretary can go along with
    it. If nobody says anything, he or she can still come up with
    some guidelines or binding issues.
        Does that seem to also perhaps bypass a lot of the
    negotiations which we have been hearing about that would be
    taking place with some of the labor?
        Mr. Wolfowitz. I didn't read it that way. I read it as,
    again, making it possible to move more quickly on something
    where a consensus has been reached.
        Mr. Murphy. We will go back over that.
        I want to just say something here, too. This is some
    testimony which will come later, but I thought that you won't
    have an opportunity to respond to it otherwise, so I thought I
    would quote from this. This is from Bobby Harnage, Sr.,
    national president of the American Federation of Government
    Employees, in a document they passed on to us.
        It says that ``One of the most shocking authorities DOD is
    seeking for the Defense Secretary is the power to waive
    Chapters 31 and 33 of Title 5. This effectively grants the
    authority to hire relatives.''
        Is that true?
        Mr. Wolfowitz. My understanding is that all the
    prohibitions on nepotism that are in current civil service law
    remain in this bill. It may be that it is not repeated as many
    times as it was in the original chapter, but it is there.
        Believe me, this is a proposal to have a more effective
    civilian work force, not to open it to that kind of destructive
    practice at all.
        Mr. Murphy. Thank you. I'll just close by commending you
    not only for the job all of you have done with the situation in
    Iraq and Afghanistan but your continued work and incredible
    dedication to make sure that not only our fighting force but
    our civilian force remains the best in the world.
        Mr. Wolfowitz. Thank you, and I thank other Members of
    Congress for the great support you have given our Armed Forces.
    It is magnificent.
        Chairman Tom Davis. Thank you. Mr. Ruppersberger.
        Mr. Ruppersberger. I, too, want to congratulate the
    Department of Defense. You have made us all proud and I think
    also not only with respect to the wars that we have been
    involved with but also working very closely with the other
    agencies in the war against terrorism.
        Sitting here listening to the questions and the answers, it
    seems to me that the issue here before us is, No. 1, the speed
    in which this bill is moving forward through Congress.
        I think Congressman Hoyer made the comment that we are in
    favor of accountability. We are in favor of giving flexibility
    to do the right thing. We are in favor of managing and being
    able to set the goals and hold the work force accountable for
    performance. But when you are dealing with a large government,
    as we have, there needs to be a rule, a guideline for
    employees. The reason unions were created years ago was because
    management was abusive. It seems to me we have to keep seeking
    that balance between management and unions.
        I want to ask this question. Rather than asking Congress to
    approve the details of a new civilian personnel system, you are
    asking for sweeping authority, in my opinion, at least, to
    waive existing laws and create a new system by the
    administration. I think right now that the work force does not
    have the confidence at this point, based on a long-established
    system, that this is anything more than a move to be extremely
    arbitrary and controlling as it relates to their issues of
    security within their job employment.
        Mr. Wolfowitz. I think maybe part of what is involved,
    then, is a lack of understanding of how much work has gone on
    over the course of actually a couple of decades with
    experiments like the China Lake experiment and, more recently,
    Redstone Arsenal to develop more flexible practices that are
    better for the Department as a whole and better for the work
    force and that we are not talking about stripping away
    everything that has ever been done. In fact, we are basing it
    on that experience, as I think I mentioned earlier.
        I think the new regulations that have been published in the
    Federal Register for expanding that authority to the 170,000
    positions that Congress has given us the opportunity to do
    constitutes some 200-plus pages.
        So it is not a good thing if people are trying to--I don't
    mean trying to, but I think people should be careful not to
    start scaring people that suddenly this means that all jobs are
    arbitrarily at the discretion of unchecked management. The
    basic practices we talked about on prohibitions of
    discrimination of various kinds have not changed at all. The
    due process people would have if their jobs were in question
    are not changed fundamentally.
        I think the most important provisions are provisions that
    will allow us to hire more people in the civilian work force.
    As Chairman Davis has said and I have said now a couple of
    times, I think it is an opportunity to expand the Federal work
    force over what it would otherwise be. It is definitely
    something we are proposing out of a sense of how important that
    work force is to us.
        Mr. Ruppersberger. I think it is a matter of how we get
    there. I don't think anyone disagrees that we need to do
    better. A lot of individuals are concerned about change. But as
    I read the bill, and this is the concern, Chapter 71 seeks a
    complete waiver of collective bargaining. Do you read it that
    way?
        Mr. Wolfowitz. I don't read it that way. I read it as
    consolidating collective bargaining at the national level.
    Collective bargaining will still be very much a part of the
    process. I believe it has been a part of China Lake. It has
    definitely been part of the experiments we are referring to,
    including, as I say, China Lake.
        Let me say a word. China Lake is this amazing research and
    development facility the Navy operates out in the desert in
    California. It has produced some of the most spectacular
    weapons systems we have. It was recognized some years ago that
    if we were going to retain that kind of a work force in those
    conditions that you had to be able to institute a different
    kind of management practice. It has been operated over many
    years. It includes collective bargaining. It includes basic
    protections.
        As I said, when some of those same experimental procedures
    were instituted at Redstone, I was quoting earlier the union
    leader at Redstone was saying that 98 percent of the work force
    wanted it continued.
        Mr. Ruppersberger. It is with the protections in place. The
    issue that I see here today is that we are pushing through this
    bill in a rapid manner, and I think there is a lot of agreement
    that we could all come together and maybe get the same goal.
        The perception of this bill is that--because it is being
    pushed through quickly, the perception is that, because we are
    at war, because of the fact that right now the Department of
    Defense needs the resources--and, believe me, in my opinion you
    are getting the resources--that the timing is not correct.
        China Lake is a good experiment. There is a need for you to
    be able to hire and compete with the private sector. There is
    no question. But we still have a lot of employees that have a
    basic system that they rely on. You are only as good as the
    people that work with you. You have said that here today, and
    you know that is the case.
        I just think we could probably pull this together and get
    what both sides want if in fact we could have the time to do
    it. Because from our perspective on this side we have not
    received much information or had the ability to really sit down
    and negotiate some of these issues.
        Mr. Wolfowitz. If I might, for the record, Mr. Chairman,
    submit what I believe is a very substantial body of protections
    that the Federal work force, the DOD work force would continue
    to enjoy under this bill, maybe in part we are dealing with a
    lack of understanding.
        Chairman Tom Davis. Without objection, that will be put in
    the record.
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        Chairman Tom Davis. Mr. Secretary, I understand you need to
    be out of here at 10 after 12. I want to move through and give
    everyone their 5 minutes.
        Mrs. Blackburn.
        Mrs. Blackburn. Thank you very much, and I thank the
    committee and those of you here to testify to us also for being
    here and providing an explanation. I certainly feel like I have
    a better understanding of what is before us. Thank you for your
    time and explanations today. I did not realize until today that
    basically you all have been working toward this for 20 years. I
    think that is noteworthy.
        Ms. James, if you will address for the record the number of
    people that are in the pilot project that has been at DOD?
        Ms. James. Are you referring to the pilot projects within
    the Department of Defense?
        Mrs. Blackburn. Yes.
        Ms. James. I think about 30,000.
        Mrs. Blackburn. The total work force is 700,000, am I
    correct on that?
        Ms. James. That's correct.
        Mrs. Blackburn. If you run pilot projects in other parts of
    the Federal Government, what percentage of the work force is
    generally in that project?
        Ms. James. It can vary, but that is fairly typical, what
    you see in the Department of Defense.
        Mrs. Blackburn. That is a pretty typical sampling of the
    ones that are there.
        In the pilot project, Mr. Wolfowitz, and this may come to
    you, what kind of buy-in have you had from the employees that
    have been in those pilot projects and what type of buy-in would
    you anticipate from the work force in general?
        Mr. Wolfowitz. I would like to ask Admiral Clark to address
    China Lake, because he has dealt with that for many years.
        I would just go back again and quote what the president of
    the AFGE local at Redstone said after that experiment had been
    under way, ``by far, the majority of employees have indicated
    to me, both privately and in called meetings at Redstone
    Arsenal, that they had wanted it renewed. I am talking about 98
    percent of them did. Only 1 out of 50 opposed it.''
        A majority of the AFGE employees at Local 1904 voted last
    month to be involved with the civilian personnel demonstration
    project at Fort Monmouth, NJ. I would say that the record is
    one of strong satisfaction, but I would like Admiral Clark, who
    knows the China Lake project much better than I do, to address
    it.
        Admiral Clark. Thank you, Mr. Secretary.
        The China Lake program has--and one of the reasons, Mrs.
    Blackburn, I talked about the principles of this--the China
    Lake program has brought out the principles that we have seen
    best motivate and stimulate our work force. They greatly
    appreciate being rewarded for their performance.
        I was in Panama City, FL, yesterday. They went to this
    program in 1999, exactly the same response. I met with a number
    of the employees yesterday and talked about how this works for
    them. So the response we are getting from our people has been
    overwhelmingly supportive.
        To be sure, when you step out in something new, people have
    some uncertainty about how it is going to work. The China Lake
    process is our best example of why we believe so strongly that
    these principles are correct.
        Mrs. Blackburn. So the employees like being rewarded on
    their performance, and they have moved toward requesting that
    from you.
        Admiral Clark. Let me just say there is a tendency to paint
    this kind of discussion in terms of a government employee who
    may perhaps not be measuring up and the effect of that. They
    also greatly appreciate the fact that the system is dealing in
    an accountable way with regard to remuneration. So it cuts both
    ways.
        Mrs. Blackburn. OK.
        Mr. Wolfowitz, quickly, a couple of questions. Speaking to
    the process, how long do you anticipate this change to take
    place where you would completely change your program in the
    Department of Defense?
        Mr. Wolfowitz. Our estimate is it would take about 2 years
    to fully implement what we are talking about, which is another
    reason--I understand it always sounds good to take more time to
    study something, but this has been studied for a long time. It
    is going to take a long time even if we get it at the end of
    this year to implement it.
        Admiral Clark, do you want to speak to this issue of
    urgency? You have been around this block longer than I have.
        Mrs. Blackburn. If I may add one more thing to that, during
    this process of 2 years, what is going to be your process for
    employee input during that? Admiral Clark, if you would address
    that in with your response.
        Admiral Clark. This gets back to the whole issue of the
    bargaining process and what things are going to be national and
    what things are going to be local and the development of the
    processes and procedures for review. That has been done in a
    very collaborative way in the China Lake model and also in what
    I saw yesterday in Panama City. That is the way it is done. It
    is done in a collaborative way.
        Here is the part--several people have said, why now? We
    have not gotten to this part of the discussion. I very much, if
    I could, I would like to, Mr. Chairman, speak to this point for
    a moment.
        In my view, I am the guy that by Title 10 I am given the
    responsibility to recommend up the chain to the Secretary the
    proposals to organize and train and equip this force. We have
    just completed a fantastic operation. No doubt about it. I want
    to tell you, we are not resting on our laurels. We are working
    5, 8, 10 years out how it is going to be even better.
        But from the position of the civilian personnel structure,
    I am in a sense of extremis. When I go to the field, here is
    what I'm getting. When I go to the non-China Lakes and with
    this business of over half of the employees are going to be
    retirement-eligible in 5 years--and, as Ms. James said, the
    issue about the bureaucracy that has grown over time in
    government, the layers of bureaucracy--one of you mentioned
    Gordon England. He was my boss when he went to homeland
    defense. Our task was to figure out how to improve the
    effectiveness and efficiency of this organization so we can
    redirect dollars--I am spending 60 percent of my budget paying
    salaries--so that I have the resources to transform the
    military.
        The point is this: in effect, we have a set of laws that
    precludes me from being efficient and creating efficiencies
    inside my structure and replacing these employees that are
    going to retire.
        If I go in someplace and seek to create new hires while I
    am trying to create efficiencies under the current set of
    rules, the people I have to let go are the ones that we just
    hired. I am in a position that the law--the way it really works
    in real practice is: Vern, you can't make the Navy more
    efficient. Vern, you can't hire more people in these places
    where you have all kinds of people retirement-eligible in the
    next few years.
        I want the committee to understand that I have a set of
    circumstances here that are keeping me from doing my job. I
    have a sense of urgency about this because this civilian work
    force is vital to equipping and enabling the young men and
    women of my Navy that are going to have to go out and do the
    next one and the next one and the next one.
        Chairman Tom Davis. Admiral Clark, let me ask quickly, what
    about the employee who has worked there doing, at least in
    their mind, a great job, is a couple of years from retirement,
    there is a RIF----
        Admiral Clark. Thank you for that. Mr. Waxman used a quote,
    and I couldn't agree with him more, Tom Freedman's quote: The
    guardians that work hard, those people who are productive and
    effective, efficient, they are not going to be in question.
    That is not what anybody is talking about.
        Chairman Tom Davis. But if someone is close to retirement,
    shouldn't their years of service be given some consideration if
    you are doing a RIF? You don't want to get someone 2 years
    short and, all of a sudden, everything they have worked hard
    for, their retirement--maybe they have given up other jobs--
    shouldn't that be a factor?
        Admiral Clark. There is a process that includes all of the
    variables that should be in a performance system; and it should
    not be slanted the way it is now, which is almost predominantly
    the other way.
        Mr. Wolfowitz. But it would be a factor. I think it is the
    third in order.
        Chairman Tom Davis. Thank you.
        Mr. Cooper.
        Mr. Cooper. Thank you, Mr. Chairman.
        I think we all appreciate the terrific leadership of the
    Pentagon in Iraq and Afghanistan. I think we want to work on a
    bipartisan basis to make these reforms work. But I am deeply
    worried, and I have been to all the hearings, that we are
    talking past each other.
        For example, it was my understanding from Dr. Chu's prior
    testimony that the Pentagon has current legal authority to have
    demonstration programs or other flexibility for up to about
    120,000 of its current employees. But we just heard a few
    moments ago that the Pentagon is unclear on that, at least from
    some of the other witnesses.
        I would like to know for the record whether the Pentagon
    has that current authority to experiment with up to 120,000
    employees. Because that was prior testimony.
        Second, even though this is the third of the hearings, we
    have asked written questions from the Pentagon and at least as
    of 10 a.m. no one has received answers to those questions, not
    even folks far more important than I am, folks like your
    chairman and ranking members of the committees. This is a
    problem we need to overcome, especially if the markup is
    tomorrow.
        Chairman Tom Davis. Excuse me. I'd just like to ask the
    gentleman, were these questions at the Hask hearing? They
    weren't to us, right?
        Mr. Cooper. At the Hask hearing, I know they weren't
    answered. But I know these go back to the first Civil Service
    Subcommittee hearing.
        When we are asked to repeal broad sections of law, such as
    the law that currently requires DOD to bargain in good faith,
    that causes us some concern. I think while many of us trust the
    current leadership of the Pentagon, we are also being asked to
    repeal this requirement for all future Secretaries of Defense
    and all future Undersecretaries and Deputy Secretaries. So that
    should be of great concern.
        To avoid this continuing problem of us talking past each
    other, would it be possible for us to agree today to go ahead
    and amend the Pentagon proposal in a way satisfactory to both
    sides of the aisle here, to preserve the obligation to bargain
    in good faith, to preserve the obligation to endorse collective
    bargaining rights, to preserve the obligation to prevent
    discrimination or harassment of employees, things that I think
    people of good will should be able to agree on easily?
        But those, as currently drafted--and maybe your lawyers got
    the best of you--those safeguards are not part of the
    Pentagon's proposal. That is a concern, because, while we might
    trust current management, this law could apply forever.
        Could we have agreement from the witnesses that those
    safeguards should be preserved?
        Mr. Wolfowitz. Certainly the safeguards against harassing--
    harassment--against discrimination, against mistreatment of
    whistleblowers I am assured are in there. If they are not in
    there, we would be happy to look at the explanation of where
    what is there is inadequate.
        On the issue of collective bargaining, I think we are
    asking for changes; we are not asking for dismantling the whole
    system. Most importantly, what I do understand is we are asking
    to do things at a national level so we can move more quickly.
    When there is an agreement, that we can move that agreement
    forward more quickly.
        I would be hesitant to say right away that--we think that
    what we have come up with, which is in fact the product of a
    lot of consultation, is a pretty good outcome. If there is a
    different proposal, obviously, we would look at it. It is an
    important issue. But it is a little different from these very
    basic protections, about which there can be no doubt
    whatsoever.
        Mr. Cooper. There has even been massive disagreement on the
    subject of consultation. I don't want to belabor this too much,
    but Dr. Chu testified that earlier organized labor was not part
    of the design phase of these regulations.
        I want to give the Pentagon the benefit of the doubt, but,
    according to the study which summarizes your eight or nine
    demonstration programs today, they say that a key part of the
    success of pay for performance at China Lake, at Redstone, all
    these other facilities you have been bragging about, is
    involvement of organized labor early on in the process.
        So how can you have consultation if the other side doesn't
    even know they were consulted? There is some disconnect here
    that the committee after three hearings has not been able to
    overcome--a couple of hearings by this committee, Government
    Reform, and by the Committee on Armed Forces.
        So we are not improving our information here. Questions
    have not been answered by the Pentagon that were posed in
    writing. We have to get to a common agreement on the facts
    before we can possibly mark up a bill intelligently. Otherwise,
    we are just giving you a blank check. Maybe some folks want to
    do that, but our job as a Congress is to try and do our job in
    a responsible and fair fashion that is strong on national
    defense and also preserves basic rights for our citizens.
        Mr. Wolfowitz. I appreciate that spirit very much. I will
    do everything that I can to make sure that we answer the
    questions fast.
        I am told that the questions for the record that we got
    from the House Committee on Armed Services were sent over to
    that committee this morning; and I am told, Chairman Davis,
    that the ones for the Subcommittee on Civil Service and Agency
    Reorganization are on the way. Now, ``on the way'' is a magic
    three words in government.
        Chairman Tom Davis. Thank you.
        Mr. Waxman.
        Mr. Waxman. I want to point out, Mr. Secretary, if you feel
    you need flexibility in a certain area, we are happy to look at
    it. We want to accommodate you.
        On these other areas where you think you have protections,
    we read it; and our lawyers say the protections aren't there.
        It shouldn't be that we submit to you why it's not there
    and you look at it. We're the committee of Congress. Give us
    what you want us to look at and let us collaboratively work on
    this problem. We feel that this bill, maybe inadvertently,
    repeals huge sections of the law and protections for workers.
    Maybe it was not intended, but it is nevertheless the law, if
    we pass your proposal.
        So please consider this an invitation not just for us to
    give you our ideas but for you to give us what you need. We
    will try to accommodate what you need without going beyond
    that.
        Over and over again, you have said, well, you want what the
    homeland security agency has. What they have is an experiment.
    We ought to see how that works before we start applying it all
    across the government. I don't think we are prepared to do
    that. I hope not, because we went pretty far in that with a lot
    of theories that have not been tested, based on the idea we are
    going to test those theories.
        I just make this not as a question but a statement that I
    hope we will collaborate and find out from you what
    recommendations you really feel you need, not just this bill
    modeled on Homeland Security but what you really need. For that
    we ought to accommodate you.
        Chairman Tom Davis. Thank you.
        Mr. Wolfowitz. Thank you. I will be very happy--it is not a
    question. I will submit for the record a very clear statement
    of where we feel that basic protections that people on both
    sides of the table agree are essential are covered. Some of
    them may be in redundant provisions in the bill so it may look
    as though you are taking something out, but it remains
    somewhere else.
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        Mr. Waxman. If we think they are not covered, you wouldn't
    mind our making sure they're covered?
        Mr. Wolfowitz. Right, with the important provision that we
    have some disagreement about the extent of the collective
    bargaining.
        Chairman Tom Davis. Clearly, there are some issues. You
    want more flexibility. Right now, there are too many things
    bargained that are really minutiae that you think don't belong
    under the formal procedures you have today that ought to be
    resolved in a faster, more efficient way.
        Mr. Wolfowitz. Absolutely.
        Chairman Tom Davis. We understand that. But there are some
    basic rights that, Mr. Waxman, you feel should be protected,
    and I take it that on those issues there ought to be some
    protections, and the question is, where do we draw the line? We
    may have some philosophical disagreement on that.
        I am trying to narrow the issues. We will work with them
    this afternoon and this morning to see if we can resolve it.
        Mr. Wolfowitz. Thank you, sir.
        Chairman Tom Davis. Mr. Platts.
        Mr. Platts. Thank you, Mr. Chairman. I appreciate all of
    the witnesses here today. My apologies for being late.
        General Pace, you will be glad to know I am coming from
    Parris Island. I was up at 5:30 a.m. at the Crucible seeing
    your recruits get great training.
        I wanted to touch on two issues here, if I can, in my time.
    One is that the concern from some of my union Federal employees
    back home and here in the Washington area that this legislation
    is going to result in more outsourcing of defense work, so a
    smaller civilian work force.
        Dr. Chu, I think, has referenced in previous testimony
    before us that a significant number of uniformed jobs that are
    currently done by uniformed personnel could be civilian, which
    I would think would mean we would need more employees.
        The chairman referenced in his opening statement the
    difficulty of dealing with the complex labor-management
    regulations we have now which often causes more outsourcing
    instead of using civilian employees.
        So I guess what I am looking for, Mr. Secretary, is your
    best assessment of where you see the Federal civilian work
    force in numbers, if this so happens. Is it greater because you
    don't have to outsource more? Is it going to result in more
    outsourcing than we already are seeing?
        Mr. Wolfowitz. That is a fair question. This bill does not
    address the issue of outsourcing. It is a major concern. There
    is obviously--in separate actions in legislation we are seeking
    authority to outsource those things that are not appropriate
    for Federal employees, either uniformed or nonmilitary.
        I have learned over the past years it is an incredibly
    complicated issue. I think there are efficiencies that can be
    achieved for the government, for the taxpayer by outsourcing.
    There are clearly important functions that have to be done by
    people who are permanent employees of the Federal Government. I
    think the flexibility this bill will give us is the ability to
    put much more of that into regular members of the civilian work
    force, instead of either going to contractors, which is a work-
    around we engage in too often because we don't have the
    flexibility, or in having uniformed military perform those
    functions, when in fact we have an enormous stress on our
    manpower as it is today.
        Admiral, do you want to add to that?
        Admiral Clark. We are across every front. I look at my
    whole human resource, the whole force structure as the active
    duty military, the Reserves. I have 381,000 in the first group
    and 85,000 in the second group, 200,000 civilians in the GS
    area, and a couple hundred thousand contractors.
        Across this whole front, the challenge that we are laying
    on our whole Navy, every aspect of it, is, help us be more
    effective. Help us be more efficient. That is for every element
    of this structure.
        It is my conviction--and having observed the way we have to
    work around--that one of the things we need to do is reclaim
    work for government civilians that we have now out in the
    contractor world.
        We have living proof that we are unable to do that with the
    inflexibility of the system. The inflexibility gets to the time
    factor, first and foremost. While this is being discussed, I
    have people calling me: Hey, boss, if you get a chance to
    testify there, tell them it took me a year and a half to get my
    person hired. These are real-world cases. They are not
    mythology. That is the issue.
        With the number that has been used about how many people we
    have that are wearing uniforms that are doing things that are
    fundamentally nonmilitary in terms of having to--they are
    associated to defense, it is very clear to us that we need to
    move part of the work force into another segment, our four-
    element segment of our whole human resource pool. I am
    convinced that this legislation will allow us to do that in a
    much more effective way.
        At the end of the day, no bones about it, what I am looking
    for, I want to send proposals up through the Secretary of
    Defense and to the President to come to the Congress to allow
    me to transform the military.
        Yes, we won big. We want, in every fight with a potential
    enemy in the future--we are not looking for fair fights. We
    want to apply the technology. We want the blinding speed that
    we saw in the last one. We want them to see it again.
        We want our kids to have the tools. To do that, we have to
    have the very best people we can bring to bear to provide for
    the national defense.
        General Pace. Sir, if I may--I realize we are over time,
    Mr. Chairman--there is nothing more important than the
    obligation that I and each of the Joint Chiefs has than taking
    care of those in the Armed Forces. That is our sacred trust, to
    ensure we do the right thing by our people as we accomplish our
    mission.
        My personal background is one where my father came to this
    country as a young man. He grew up in New York City. He joined
    the International Brotherhood of Electrical Workers, Local No.
    3 in New York City. Everything my family has, and my mom's
    current quality of life, has to do with things that my family
    got through collective bargaining.
        When I looked at the proposals that were coming over here,
    one of the main things I looked at was to ensure that we were
    doing right by our civilian force while we were doing right by
    our mission.
        The specific words may be wordsmithed to make sure that we
    have not inadvertently done damage to someone that we did not
    mean to. But, clearly, the intent of this legislation is to
    take a superb civilian work force and to ensure that we can
    recruit it, that we can hire it, and that we can pay for it
    properly in the future so that they are treated properly as
    essential members of the team, just like everybody else in the
    Department of Defense. Thank you, sir.
        Chairman Tom Davis. The gentleman's time has expired.
        Thank you very much.
        Ms. Norton. Thanks for bearing with us.
        Ms. Norton. Thank you very much, Mr. Chairman. I appreciate
    that you have afforded us at least one further hearing on the
    most complicated proposal, I think, that has ever been
    presented to this committee with respect to the civil service
    system.
        Before I ask my question, I would like to say to all of you
    at the table, I am a former chair of the Equal Employment
    Opportunity Commission. I could not be more outraged at the
    kind of discrimination that could arise from this proposal. You
    have high-profile sexual harassment in the Air Force Academy as
    I speak. Racial discrimination is the ugly scar still present
    in our country, and you have a proposal here that would deprive
    Federal employees who already don't have the same equal
    employment rights that civilian employees have already--you
    would deprive them of any third-party review, which would mean
    they would be reviewed by their own agency for discrimination
    by their own agency. You would even eliminate or make waivable
    the right to file a complaint of discrimination before the
    Equal Employment Opportunity Commission.
        Sir and Lady, the Equal Employment Opportunity Commission
    is the only expert agency on discrimination in the Federal
    Government. The notion that a third of the work force can't
    even file anymore at the instance of the agency head is
    disgraceful.
        Now, let me go on to ask another question, having put that
    on the table and others having raised it. I appreciate that the
    witnesses have come forward. I want to congratulate the
    Department on the way in which it is carrying out its military
    mission.
        I want to say to you that you are carrying out that mission
    from the way you have done the bombing to the compassionate way
    in which you are now carrying out the renewal in a way that
    makes me proud. But employees have approached us such that one
    would think that you were trying to imitate aspects of the
    regime you have just defeated in the way this proposal reads.
        And I just want to tell you why that is the impression that
    you have given. OPM has been neutered, just as well bowed out,
    genuflected, not in it, pay for performance. But, according to
    GAO, no performance appraisal system is in place, so employees
    don't know what in the world is going to happen.
        Imagine yourself one of the one-third of the work force
    that is reading what is proposed to happen to them. Imagine how
    you would feel: no consultation with representatives of the
    employees who, by the way, have to make this system work if
    human capital means anything in your department; abolition or
    waivers of almost the entire civil service system.
        And, finally, the part that outrages me most, to the
    general public we say to you, no notice and comment. All of
    this can be internal to us. That is why I think my comments
    about imitating aspects of the regime you have just eliminated
    were appropriate.
        Now, I am concerned that if you are going to do this, there
    ought to be some real emergency that makes us rush to the
    table, to discard all that we have done as wrong and perceived
    quickly without scrutiny or the kind of review we give even
    lesser proposals.
        As I understand it, Secretary Rumsfeld wants to transform
    the entire Defense Department. I commend him for that. It
    needed to be done before September 11th. Since September 11th
    it is imperative and indispensable. But if that is to be done,
    as I recognize the Department, there are three parts of it that
    are major.
        There is the military part, and I thought the whole point
    was to match the civilian and the contractors to the military
    part so that it all runs smoothly. But as I read what the GAO
    said, there is a criticism that goes to the heart of what is
    proposed here, because according to the GAO, in order to
    improve human capital strategic planning for the DOD civilian
    work force, GAO recommended that the Secretary of Defense
    direct the Under Secretary of Defense, Personnel and Readiness,
    to assign a high priority to and set a target date for
    developing a department-wide human capital strategic plan that
    integrates both military and civilian work forces and takes
    into account contractor roles and sourcing initiatives.
        We are given no plan for integrating anything. In fact, the
    Department's response was simply not to concur that kind of
    integration was necessary. So how are we to know that we are
    putting the cart before the horse? How are we to know that
    whatever you do to the civilian side is really going to match
    up with the military side and the contractor side?
        Chairman Tom Davis. Thank you.
        Mr. Wolfowitz. Mr. Chairman, I have said I would like to
    submit something for the record. But I think it is important to
    state clearly that this legislation leaves completely intact,
    as I understand it, merit system protections, it leaves
    completely intact prohibitions on prohibited personnel
    practices, it leaves intact equal employment opportunity
    provisions, it leaves intact veterans' preferences.
        Ms. Norton. Excuse me. I want to read to you what in fact
    the bill says.
        Relating to the sense of the Congress, the sense--what you
    downgrade, you downgrade the rights of these employees because
    you make it a sense of the Congress that employees are entitled
    to fair treatment in any appeals.
        You do not in fact make it enforceable as it now is, but in
    fact it is waivable.
        Chairman Tom Davis. The gentlelady's time has expired.
        Ms. Watson.
        Mr. Wolfowitz. If I might respond, we have worked closely
    with Kay Coles James and her people in OPM to try to make sure
    that in fact those protections are included in the bill. I
    think we achieved it.
        I would like to ask Director James if that is her view.
        Ms. James. That is, in fact, my view. I would also like to
    say for the record that OPM does not feel neutered through this
    process. As a matter of fact, the legislation states clearly
    that the Secretary, working in conjunction with the Director,
    will implement the new systems within the Department. And we
    know, in close consultation with the Department of Defense,
    that it is not their intention in any way to water down those
    civil service protections.
        Chairman Tom Davis. Thank you.
        Ms. Watson.
        Ms. Watson. I want to thank the Chair and the witnesses. We
    appreciate your bringing those issues to us.
        Can I get a yes or no answer, Mr. Wolfowitz, to these
    questions?
        As I understand the bill in front of us--and I asked for it
    so I can read the wording. I am not used to working in the
    dark; I am used to looking at each word of a legislative
    document, because that then will become the law.
        Yes or no, are you eliminating employees' collective
    bargaining rights which are set forth in Chapter 71 of Title 5,
    yes or no?
        Mr. Wolfowitz. My understanding is, we are amending those,
    we are not eliminating them.
        Ms. Watson. Amending or eliminating. I will ask staff to
    check the language to see if you amend or you eliminate.
        As I understand, this bill completely strips Federal
    employees of their collective bargaining rights. Yes or no?
        Mr. Wolfowitz. I believe that is wrong. It changes the way
    in which it is done. It consolidates collective bargaining at
    the national level. I do not believe it is correct to describe
    it as stripping them of their collective bargaining rights.
        Ms. Watson. Does the bill waive Chapters 75 and 77? Does it
    waive?
        Mr. Wolfowitz. It gives the Secretary authority to waive
    those chapters.
        Ms. Watson. All right. The Secretary is part of the
    executive branch?
        Mr. Wolfowitz. Yes.
        Ms. Watson. The Congress is the legislative branch. So do
    we have a constitutional issue here? If the Secretary then
    makes those decisions, we make policy. So if I understand,
    Chapters 75 and 77 are waived by the Secretary if he or she
    chooses; therefore the policy will be made with the Secretary
    and not with the Congress?
        Mr. Wolfowitz. Obviously that waiver would require
    legislation. But I think, more importantly, if the Secretary
    would waive some of those provisions, that would be something
    that is reviewable by the Congress. And if----
        Ms. Watson. After the fact, as I understand from the bill;
    is that correct? I am reading the words of the bill itself. So
    we can prepare pertinent and relevant amendments. But from the
    way I read the bill, the decision would be in the hands of the
    Secretary to change policy.
        Mr. Wolfowitz. Mr. Chairman, could I ask Mr. Chu to address
    that?
        Chairman Tom Davis. You may.
        [Witness sworn.]
        Mr. Chu. The proposal, which parallels what was given to
    Homeland Security, does put the power to waive in the
    Secretary's hands.
        I think you need to look, in my judgment, at the
    relationship between the Department of Defense and the Congress
    on matters of this sort. It is a close and collaborative
    relationship. The Congress gives extensive direction, both in
    statute and its report language, as to how it expects the
    Department to carry out provisions of the law.
        Ms. Watson. But am I correct that by reading the
    legislation--you see, you should not let us see the legislation
    if you are going to give those kinds of answers.
        But am I correct that the Secretary can make the policy and
    then inform the Congress after it is made, confer with the
    Congress?
        Mr. Chu. I think that is typical of the grants of authority
    Congress has given to the Secretary of Defense.
        Ms. Watson. No, no, no. I am talking about the legal
    language in the bill. Would you agree?
        Mr. Chu. The proposed bill does give the Secretary power to
    waive those chapters in order to reach the results Dr.
    Wolfowitz described.
        Ms. Watson. Thank you.
        I understand that when national security is involved,
    already currently law specifically allows the Department to
    fire someone immediately. I have listened intently to the
    witnesses. And I agree you need to have the flexibility,
    particularly in hiring. Particularly in hiring we need experts.
    We need people with the information, we need people who are
    trained for the 21st century. I couldn't agree with you more.
        What I am having problems with is the way we are going to
    get rid of a lot of people who have been working within
    government under some protections. So I understand that in
    terms of the Department, DOD, there are already provisions
    within the law to let that person who has been sleeping on the
    job three different times go immediately. Is that correct?
        Mr. Wolfowitz. No. My understanding in that specific case,
    because you had to wait until it was three different times, you
    couldn't just do it once. Even though that particular employee
    already had been counseled on other aspects of misbehavior, it
    took a year to get rid of that particular employee. So my
    understanding is, you do not have that kind of flexibility.
        The goal here is not to have large-scale RIFs of Federal
    employees. As Admiral Clark has said, we face a problem that
    large, very large numbers of our work force are going to be
    eligible for retirement in the next few years, and we need the
    ability to hire the right people in the right places to replace
    them. If we don't have that, we are going to end up with more
    of these contractor work-arounds and more people who are not in
    the regular civil service when they should be, and more people
    who are not in unions when they should be, a less motivated
    work force and a less protected work force.
        Chairman Tom Davis. The gentlelady's time has expired. If
    you have additional questions, if you can get them----
        Ms. Watson. I will put them in writing.
        Thank you, Mr. Wolfowitz.
        Chairman Tom Davis. Mr. Wolfowitz, I will try to get Mr.
    Kucinich very quickly. I know that he has a question. Then I
    will dismiss the panel.
        Mr. Kucinich. I want to thank the Chair, and thank Mr.
    Wolfowitz for remaining for this.
        Every fair analysis indicates that this legislation would
    have very serious negative effects on whistleblowers. The
    transformation plan would eliminate the statutes that
    established due process and appeal rights for disciplinary
    actions; 75 and 77 of Title 5, which would provide that an
    employee against whom a disciplinary action is proposed is
    entitled to advance written notice of the disciplinary action,
    reasonable time to respond, to be represented by an attorney,
    and a written decision by the agency listing the specific
    reasons for the disciplinary action.
        The transformation plan really doesn't offer a replacement
    for Chapters 75 and 77. It basically allows DOD to rewrite
    those chapters to the satisfaction of management.
        Let me tell you why this becomes very significant. We have
    a case that on or about April 28, 2003, investigators from the
    Office of Inspector General disclosed the identity of a key
    civilian informant to his superiors at the Defense Finance
    Administration in Cleveland.
        Mr. Dan Drost, who is a financial systems specialist in the
    Active Duty Navy pay division of DFAS, has been a key informant
    in the Department of Defense's Inspector General's
    investigation, into the causes of an erroneous privatization
    that resulted in the waste of $31 million in taxpayers' money.
    And as you may know, the Department of Defense Inspector
    General has reported that the privatization of military retired
    and annuitant pay functions were erroneously awarded to a
    private contractor, whose bid exceeded the in-house bid.
        The Department of Defense Inspector General's investigation
    was significantly aided by the information given by this
    whistleblower. Over the past 2 years, when the IG's
    investigators desired face-to-face discussions with the
    whistleblower, they made arrangements directly with him. They
    met outside of the office. Their contact with him was
    confidential.
        For some reason this time, the IG investigators approached
    upper management to schedule an interview with the
    whistleblower at the recent visit. Upper management informed
    Mr. Drost that they had scheduled a meeting with him to be
    interviewed by the IG at the IG's request. Indeed, the IG
    investigator went so far as to ask the whistleblower if he
    would allow a representative from the DFAS headquarters to be
    present at the interview.
        The IG identified this whistleblower to his upper
    management. The same whistleblower has been in contact with my
    office in my capacity as the ranking Democrat on the oversight
    subcommittee that has jurisdiction over the Department of
    Defense. He has been in contact with my office for over 2 years
    about this erroneous privatization of the military retired and
    annuitant pay functions. He brought this case of abuse of
    taxpayers' funds to my attention, was very helpful in providing
    our office with materials that I used to press the Inspector
    General for the above-mentioned investigation.
        So, Mr. Secretary, this Mr. Drost provided information that
    led to the identification of $31 million in abuse and waste of
    taxpayers' funds. Now, because of the malfeasance of the IG's
    office, this whistleblower has been exposed, and I am asking
    you to give your assurance to this committee, notwithstanding
    this matter of Chapter 75 and 77, that Mr. Drost will face no
    retaliation, direct or indirect, that there will be no
    reprisals, that you will be watching to see what happens and
    there will be harsh consequences for anyone who tries to
    retaliate against him, and that he should be thanked for
    serving his nation.
        Mr. Wolfowitz. Congressman, I agree that he should be
    thanked. Whistleblower protections are not to protect the
    whistleblower, but also the taxpayer so that we can get that
    kind of information.
        I am going to try to find out whether we have the wrong
    regulations or the regulations that we have weren't followed
    properly. But we have contacted the whistleblower in question.
    We have given him both office and cell phone numbers of two
    senior managers within the DOD-IG.
        I will hold those people responsible to make sure that
    there is no retaliation against him, and we owe you an answer
    to your letter, which I think we got yesterday.
        This is an important case, but as I have said over and over
    again, there is nothing in this bill that is intended to reduce
    protection for whistleblowers. I think it is an important part
    of functioning effectively.
        Mr. Kucinich. I appreciate the Secretary's responsiveness.
    But there are provisions in this bill that would make
    whistleblowers much weaker. And this case in Cleveland is a
    graphic example of what happens, Mr. Chairman, if Federal
    employees who are conscientiously doing their job to protect
    the taxpayers are put at risk and are exposed. So I am asking
    this case to be in the consideration of your Department when
    you are looking at what happens to whistleblowers, because the
    whistleblowers are the ones that save the taxpayers money.
        We must protect them. And, frankly, Mr. Secretary, this
    rewrite of these chapters does not accomplish that.
        And I appreciate the Secretary's, Mr. Chairman, going on
    record and stating that Mr. Drost will not only be appreciated,
    but will be protected from any kind of reprisals by his
    superiors.
        Chairman Tom Davis. The gentleman's time has expired.
        The whistleblower protections are not waived under this
    act, to my knowledge. If the gentleman can cite me a section, I
    will be happy to look at it and correct it. But we have
    checked; I don't think they are not waived, but I appreciate
    the gentleman bringing this up to our attention.
        Mr. Kucinich. I thank the Chair.
        I just want to respond that this transformation plan
    doesn't offer replacement for Chapters 75 and 77. It would
    allow DOD to rewrite those chapters to the satisfaction of
    management. That is really going to be little comfort to
    whistleblowers, because their right to protect the public and
    blow the whistle might be protected, but their due process and
    appeal rights, which are necessary to defend whistleblowers
    against retaliatory actions will be eliminated in favor of
    whatever replacement process that they want to come up with.
        So that is the point I am making. I appreciate the kindness
    of the Chair in making sure I had the chance to make that
    point. Thank you.
        Chairman Tom Davis. Thank you very much. I think I can
    assuage the gentleman's concerns.
        Secretary Wolfowitz, thank you very much. I think what I
    would like to do is--I know other Members have questions of the
    panel. I know you have to leave. I don't know if the Admiral
    and General have to leave as well. But if we have Dr. Chu up
    here, he can answer some additional questions on this panel, if
    that is all right with you, Mr. Secretary?
        Mr. Wolfowitz. Yes, it is. And if I might just, before
    leaving, first of all, thank you, Mr. Chairman and the members
    of this committee for helping us to look at this very important
    legislation in an expeditious manner.
        I would also like to affirm that we have worked closely
    with Kay James and OPM, will continue to do so to ensure that
    the protections that this committee and the Department of
    Defense hold dear are fully protected and preserved.
        I want to thank Director James for her partnership in that.
    And I will make sure myself that these issues that have been
    raised here with respect to whistleblower protection and EEO
    protection are properly taken care of in this bill. I have been
    assured that they are. I will make doubly sure.
        Chairman Tom Davis. Thank you very much.
        Dr. Chu, you have been sworn so you can get up here and--we
    are going to move with Mr. Janklow for questions. Then I have
    Mrs. Maloney next, Mr. Clay after that, and then Mr. Davis.
        Mr. Janklow. Thank you very much, Mr. Chairman.
        If I could, and I would like to ask you, Ms. James, if I
    could--first of all, just a comment. Many of us in America have
    felt that the Department of Defense's primary function is to
    defend this country and, when necessary, deal with offensive
    actions on behalf of this country and, when necessary, deal
    with defensive actions on behalf of this country. And the best
    team to put together to do that isn't always known in advance
    all of the time.
        If I could ask you--and, first, let me ask you, General, if
    I could--in the Armed Forces, when you decide to make a change
    in somebody running an operation on the military side, how long
    does it take you to do it?
        General Pace. Usually a commander takes his time to make
    the proper leadership decision. Once he has decided on a course
    of action, he directs it immediately, sir.
        Mr. Janklow. When the defense--sometimes maybe even the
    survival of this country or some of its people are at stake,
    you can move very quickly, because you have to move very
    quickly.
        What is the difference between the civilian side and the
    military side, if there is one, when it comes to the real
    defense of this country? I realize some rare--they carry
    weapons and, you know, engage in combat operations.
        But why should the civilian side--you don't have any reason
    why the civilian side should be any different in the Defense
    Department?
        General Pace. Sir, from my perspective, the civilian side
    is very much an embedded part of the Defense Department, and is
    very much a part of our team. They provided invaluable support
    to our Armed Forces during recent combat operations. We should
    have the same rights for all members of the Armed Forces,
    whether they are wearing uniforms or not.
        Mr. Janklow. Ms. James, if I could ask you, ma'am, one of
    the statements made, if somebody were to sleep three times on
    the job, then they could be fired. I don't know what the rules
    are in the Defense Department right now. Can you sleep three
    times before you get fired?
        Ms. James. Well, there may be managers out there who would
    hesitate to take action because of the burdensome processes
    that are in place. But those processes are there to protect
    employees from what may be overly zealous managers or for
    retaliation or those sorts of things.
        Our desire is to improve and shorten the appeals processes,
    not to strip them away. So we are not implying that person
    should have no rights or no rights of appeal or process. But
    certainly the ones that are in place are overly burdensome and
    cumbersome.
        Mr. Janklow. I realize this has grown up over a long period
    of time. We start out everything, like we do in America, small;
    and then we never subtract, we just keep adding all of the
    time. So things become cumulative.
        But recognizing that they become cumulative--and I also
    recognize that there would be very significant changes in the
    Department of Defense--one, could you give me an example of any
    administration, be it my party or the other party, that would
    not want the best possible people at the moment being employed
    in the Department of Defense at any level, in any capacity?
        Ms. James. I can't give you an example of anyone in any
    administration, this or previous, that does not feel the same
    level of frustration with the outdated and antiquated systems
    in which they have to operate.
        I have often said that if you take America's most creative
    and innovative CEO, that is known as a ``turnaround artist,''
    that can go in and make a company turn a profit and produce
    results, hire that person and put them in a Federal agency and
    say, you must operate within the confines of these systems,
    they would be very frustrated in a very short period of time.
        And so our challenge is to try to figure out how to save
    the best of the American civil service, all of those
    protections that we talked about, but at the same time reform
    the systems that are in place under that service.
        There has been a huge cry in this country for civil service
    reform for a very long time.
        Mr. Janklow. Ma'am, before this committee we had Paul
    Volcker, Mr. Carlucci and Ms. Shalala testify on behalf of a
    commission that they are all members of, all expressing the
    frustration that they have had in trying to administer the
    Federal agencies.
        Using the Department of Defense, the Securities and
    Exchange Commission and NASA as really a pilot project, really
    three crucial agencies, all three of which have had unique
    trauma over the last 3 years--clearly within NASA, clearly
    within the SEC in terms of protecting shareholder and investors
    in America, and the Department of Defense upon which this
    country's absolute survival, within which it rests--this is
    just a comment, Mr. Chairman, but I can't imagine any place
    that is more ripe for pilot project restructuring than these
    particular agencies.
        Thank you.
        Mrs. Davis of Virginia [presiding]. Thank you, Mr. Janklow.
        Mrs. Maloney.
        Mrs. Maloney. Thank you very much.
        And thank you all for your service. Mr. Wolfowitz in his
    opening comments said that one of the reasons that we need this
    massive change is September 11th; and as one who represents New
    York City--I lost 300 constituents on that fatal day--September
    11th changed many things.
        But, certainly, the professional employees on the city,
    State and Federal levels, by all accounts, were heros and
    heroines, many of whom gave their lives volunteering, they
    weren't even supposed to be in the office, rushing in to be
    part of the bucket brigade in the effort to save others.
        And I would say the military's success that we have seen in
    Iraq is again testimony of the flexible, responsive, hard-
    working civilian forces that were there supporting them.
        So my question is, where is the problem? And when you talk
    to the head of the General Accounting Office, Comptroller
    Walker in his testimony, he urges against these massive,
    sweeping changes, and urges us to go forward statutorily with
    the changes that we need. And I would like to put in the record
    an article that was in the Washington Post today, entitled,
    ``Hill Should Heed GAO's Chief's Cautions on Civil Service
    Changes at the Pentagon.''
        [The information referred to follows:]
        [GRAPHIC] [TIFF OMITTED] T7869.025

        [GRAPHIC] [TIFF OMITTED] T7869.026

        Mrs. Maloney. Likewise, the GAO, the independent body, came
    out with a list of violations, challenges, questions, whatever
    you want to call it, questioning DOD's strategic plan. So
    before we go in and throw out a system that worked tremendously
    well on September 11th, tremendously well in the current
    challenge that we just went through, to put in what?
        And we don't even know what we are going to put in, because
    you haven't come out with it; and I find that tremendously
    troubling. If there is a problem, let's fix it. I don't think
    anyone thinks that someone should have a Federal job and sleep
    on it. If that is the problem, fire the person or create a
    system where you can fire the person. But don't go in with a
    sweeping change that we don't even know what it means.
        And GAO serves a purpose. One of the arguments that was
    made is that the elected officials come and go, the appointed
    officials come and go--the appointed officials are here roughly
    18 months--but that it serves a purpose to have a professional
    work force that is there through many administrations, who
    knows how to get things done, and whose sole purpose is to
    serve the citizens of this country and not necessarily a
    particular party. They are supposed to be independent and
    serving whoever is there.
        Now, GAO came out with a recent history of DOD. And in it,
    the Comptroller General gave the Department a D-plus, as being
    poorly managed. And they then cited that DOD had over $1
    trillion worth of transactions that were unaccounted for last
    year.
        So before we turn over sweeping changes that we seem to
    disagree on what they are, I would like to know what happened
    to that $1 trillion? I think that is a good first start to find
    what happened to $1 trillion the DOD says is missing. And they
    further say that DOD is responsible for 9 of the 25 highest
    risk areas in Federal Government, including decades-old
    financial problems.
        Now, why should we change this? Many of my colleagues have
    pointed out questions, and you--the panel seem to disagree.
    They say that certain protections are not there, and they cite
    from the law that they are not there. You say that they are
    there.
        I think at the very least, before we move forward in 10
    days, which is what is planned to pass this, we agree on what
    is in it. And if it is such a good bill, then why are you
    rushing so quickly to push it through before we have a clear
    understanding of what is in there?
        My colleague raised sexual harassment, that in the law that
    you are changing, that you then appeal to your supervisor. To
    the contrary, you have to have an independent person supervise,
    look at this. It could be the supervisor that is causing that
    problem; and if it is, if you say you are going to manage it so
    well indeed. DOD is saying that you are not, that there is $1
    trillion missing, you have no plan in place--you are changing
    everything. And my question is, why--if it is such a great
    plan, why can't we work through what is exactly in this bill
    and understand it in a bipartisan way?
        One of my colleagues said we are talking past each other;
    people are reading lines of the bill, and you are saying it is
    not true. And I go back also to the comment of Comptroller
    General Walker. If there is a problem, we all want to correct
    it. Let's correct it statutorily.
        But to take everything that has been put in basically to
    protect taxpayers' dollars, to protect a work force that is not
    political cronyism, but is hired on merit to perform work
    through whatever party is in power, that all of these
    safeguards shouldn't be removed.
        So my question is, if it is such a great bill, why are we
    moving so quickly before we decide together what is in it? The
    testimony has really, quoting line by line, been refuted back
    and forth today.
        And second, why not follow what the Comptroller suggested.
    If there is something wrong, then let's statutorily correct it,
    but not give sweeping control of a massive area of government
    to an agency, by professional accounts, in its financial
    management--I would consider losing $1 trillion a serious
    situation.
        I would consider getting a D-plus on your management
    serious. I would consider having a--GAO called it nine of the
    highest risk areas in the whole Federal Government for
    mismanagement are in DOD. Why in the world should we then turn
    around and give you sweeping powers to totally change
    everything when you haven't run it well to begin with,
    according to DOD and management--excuse me, according to GAO.
        [The prepared statement of Hon. Carolyn B. Maloney
    follows:]
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        Chairman Tom Davis. The gentlelady's time has expired. I
    think that is why they are asking for changes so they can bring
    that D-plus up.
        Dr. Chu, do you want to respond to that?
        Mr. Chu. Absolutely. Let me try to respond very briefly to
    your question and to your concern with the sense of urgency
    here.
        First of all, we, like you, greatly admire the performance
    of the civilian employees of the Federal Government. Especially
    those at the Department of Defense, and likewise at the
    Pentagon, September 11th, performed heroically. In many
    instances, I fear, it is our conclusion that they performed so
    well despite, not because of, the rules under which we must
    operate. It is those rules that we seek to modify.
        Mrs. Maloney. Excuse me, sir. What specific rules made it
    impossible for our civil servants, those that ran to--September
    11th to save lives, those that worked so brilliantly to support
    our military, what specific rules made it impossible for them
    to perform their job?
        Chairman Tom Davis. Mrs. Maloney, your time has expired. He
    is trying to answer the last question. But we have got to stop
    it, so we can move on.
        Mrs. Maloney. Mr. Chairman, I have a few written questions,
    and I would like to put them before the panel and have them
    answered before you move forward.
        And I would like to know where that missing $1 trillion is.
        [The information referred to follows:]
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        Mr. Chu. If I can just briefly address your concern with
    urgency.
        Dr. Wolfowitz testified to our need to move post's from
    military to civil status. We also are in the process, as the
    military leadership would say, of resetting the force.
        You have heard General Jones in Europe talk to a different
    position there, units coming out of Europe. We have announced
    that the operations are coming out of Saudi Arabia. We are
    moving our forces in Korea to a better position. A great deal
    is changing right here and now in the months immediately ahead
    of us.
        We would like to be able, in many instances, to use civil
    servants for some of the new positions being created. That is
    the essence of the urgency in front of this department.
        Mr. Janklow pointed to the long history of other experts
    who have likewise urged that we modernize these rules. We are
    seeking to do so in a way that is timely to the immediate needs
    of the Department of Defense in the future--the near future
    security--of the United States.
        Mrs. Maloney. Well, the GAO says you don't have a plan in
    place. They are calling for you to move statutorily and not to
    go forward until you have a plan in place. That is the
    independent GAO talking.
        Chairman Tom Davis. The gentlelady's time has expired.
        They also support the concept of doing this. They have
    asked for the same powers for their own agency.
        Mr. Turner.
        Mr. Turner. Thank you, Mr. Chairman.
        Well, first off, I want to congratulate our chairman on his
    leadership in addressing this issue. We have all known that
    this has for a long time been a significant issue for the
    Department of Defense, an issue that has impacted our military
    on the issue of flexibility.
        It has also been an issue that has been a considerable
    amount of frustration for the employees that will be affected
    by this as they have seen others who are working with them that
    have not been able to--where management has not been able to
    have the flexibility that is needed in order to get a project
    done or to achieve team goals.
        I have a couple of questions concerning the language that--
    as to what is before us, though. In looking on page 22 of the
    bill, we have the goal that is stated in subsection 9904 of the
    Employment of Older Americans; and this, of course, is intended
    to give you an ability to have the full market of potential
    employees available to you as you look to fill positions. A
    provision in that section talks about individuals who take
    these positions would not be penalized in current pensions,
    annuity, Social Security or other similar payments they receive
    as a result of prior employment in conjunction with this
    employment.
        Can you talk a bit about the problem that is associated
    with this and how this language will help?
        Mr. Chu. Yes, sir.
        As Dr. Wolfowitz testified, we have in front of us a wave
    of retirements over the next 5 to 10 years. We are very eager
    to bring back some of those with expertise to serve as mentors,
    to help with the transition.
        We recognize that to do so now they face a significant
    financial penalty. We would like to remove that penalty. I
    believe the specific provision you talked to would have a term
    limit on it of 2 years, with an option to renew for 2 years. So
    it is intended to help us move through the human capital
    replacement--some call it a crisis, I know that has been GAO's
    phrase--in a manner that allows us to benefit from the
    experience of, as you might put it, the ``old hands.''
        Mr. Turner. Many times when people implement these types of
    provisions where someone can retire and then return in another
    position, they have a waiting period to avoid people day 1
    retiring, day 2, immediately being back on the payroll again,
    and causing therefore an incentive for increased costs, not a
    reduction in costs.
        I notice that you don't appear to have a waiting period. Is
    that something that you considered? And, if so, why is it not
    included?
        Mr. Chu. I think our approach to this, and I think you are
    specifically speaking to the provision affecting Federal
    annuitants, our approach in that regard is to recognize that
    many of those people are going to go out and work,
    alternatively, for the private sector. So it is not as if they
    are not going to collect their annuities.
        The issue is, if they are the best person for us, and it
    may be someone who has retired from another agency, maybe
    someone who has retired from our own agency, should we have
    authority to take advantage of their talent? That is the import
    of this provision.
        We are very sensitive. We monitor this issue, particularly
    with high-grade employees. I look at those numbers myself in
    terms of what we do. We want to be very careful not to go where
    I think you are warning we have to be cautious about. We don't
    want to give people the opportunity just to switch titles and
    take advantage of the system, but we want to be realistic.
    These people are going to retire anyway.
        The issue is, can we continue in specific cases to
    advantage ourselves with their experience?
        Mr. Turner. The language, that many people on the committee
    have focused on, that is of concern--which is unusual language
    in a statute--is when the Secretary receives sole, absolute and
    unreviewable discretion. That language is certainly incredibly
    broad, and is one that is not commonly found in a statute that
    is empowering someone in the Federal Government.
        My concern with the unreviewable discretion is that we have
    the issue of Congress providing that authority. And the fact
    that Congress, of course, would want to retain its oversight
    authority throughout this process.
        Obviously, since we would be enacting this, we would want
    to monitor it to make certain that it is being implemented
    effectively and that if there are any changes that need to be
    made, that those changes be made. I have not seen anything that
    would ensure that there wouldn't subsequently be an argument
    made that Congress, by giving unreviewable discretion, was
    somehow pushing aside its oversight authority.
        Mr. Chu. It is my understanding, sir, that this does not
    override the powers of Congress to review and conduct
    oversight, to come back and take whatever action it thinks in
    its best judgment is necessary in the instant case. This does
    not affect the powers of the Congress.
        Mr. Turner. I think that is the part that is the most
    important, because this is an experiment. We are looking to see
    the benefits occur; and as we monitor it to determine whether
    or not those benefits are being realized, we can know if we are
    going in the right direction or if it needs to be modified.
        Mr. Chu. Absolutely, sir.
        Chairman Tom Davis. The gentleman's time has expired. Thank
    you very much.
        Mr. Davis, the ranking member on the subcommittee, thanks
    for being with us.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I
    want to thank the witnesses for testifying and for their
    patience.
        Dr. Chu, let me just ask you, from 1883 when the civil
    service system first began, it has been undergoing change; and,
    I think, the changes are designed basically to make the system
    more effective and to protect the rights of workers and to give
    them a voice in decisions.
        And now we are proposing, in one action, to take away or
    seriously diminish, undercut, many of those provisions which it
    has taken us years to arrive at.
        We have just gone through a rather successful military
    action; and we have had other activity in which the Department
    of Defense has been greatly involved without any serious
    impediment, to my knowledge, to its ability to do its job, to
    carry out its functions.
        Can you tell me what is so threatening at the moment or
    what great need exists for us to move with so much haste and
    dispatch to put a new system in place--and I might add, a new
    system which takes away all of those years of struggle and
    progress that have resulted in a better work force and greater
    protection for our civilians? Could you share with me what this
    great need is?
        Mr. Chu. Would be delighted to, sir, but first let me speak
    to this issue of protections.
        I think some of the quotations this morning or this
    afternoon have been to the sections that could be waived. I
    think it is important to look at the provisions in the proposed
    legislation that list the nonwaivable sections. It is there, in
    particular, Section 2302, for example, 2302(b), where much of
    the employee protections that I believe are your sincere
    concern can be found.
        As to the urgency, as Dr. Wolfowitz testified, we are about
    to undertake a major review of military slots where, in our
    judgment, the same positions could be filled equally well by
    civilians, perhaps as many as 320,000. We would like to have
    civil servants considered for those opportunities. It would be
    very difficult in many cases to do that under the present
    structure, and hence the urgency to seek new powers from the
    Congress.
        Likewise, as I indicated, we are in the process of, as the
    military leadership would say, resetting this force,
    repositioning this force. It is affecting our forward-stationed
    forces around the globe. That is going to have an effect on the
    civilian positions we will need. Again, we would like civil
    servants to be considered as one option for some of the changes
    that are under way or soon to be undertaken.
        Mr. Davis of Illinois. OK. So you are going to say that you
    are going to be able to shift some of the work from military to
    civilians, and that is one of the reasons. Then let me just
    move on, because my time is going to end up expiring.
        Director James, let me ask you, I mean, you have made it a
    point during your tenure--I must add, with high marks of
    seriously reaching out and involving stakeholders, unions,
    professional societies, associations and other groups in
    proposed changes or decisions that have to be made--this
    legislation, unfortunately, shows no such action on the part of
    the Department of Defense. And so my question is, how do we
    reconcile your approach to that which has been taken by the
    Department of Defense with these proposed changes and with this
    legislation?
        Ms. James. I have spoken to Dr. Chu as well as to Secretary
    Wolfowitz. And as we look at this important legislation that
    DOD certainly needs and needs now, it is my understanding that
    as they move forward, it is absolutely their intention to be
    inclusive, to involve stakeholders, to have the appropriate
    people at the table as we move forward and develop the systems
    that will--are so necessary and so important for the civilian
    employees in the Department of Defense right now.
        Mr. Davis of Illinois. So you would expect also to be
    involved, as the Director of OPM, in further development of the
    implementation of this activity?
        Ms. James. Absolutely.
        Mr. Davis of Illinois. Mr. Chairman, if I may--Admiral,
    there has been some discussion about restrictive civil service
    laws and how they might prevent contracting out, or the ability
    to move that. Isn't it true that there is an administrative
    mandate, that 15 percent of the work of DOD has to be
    contracted out this year and 30 percent next year? And if there
    are any difficulties, could it not be coming from the
    administrative mandate rather than any civil service
    restrictions?
        Mr. Chu. No. I believe what you are speaking to is a
    requirement that we review various areas in the Department to
    determine what is the best source of the work.
        What we are going to do here is make it possible for civil
    servants to benefit from the shifts from military to civil
    positions, from the shifts coming out from our forces overseas.
    The alternative, in too many cases with the current rules of
    the game, which are the rules we are seeking to amend, the
    alternative is, it goes to a contractor because it is easier,
    it is more flexible, it is more responsive.
        We would like to make the civil service competitive in that
    regard.
        Mr. Davis of Illinois. But we have no mandates that we
    contract out at least 15 percent?
        Mr. Chu. No. We have a mandate to review.
        Chairman Tom Davis. It is a competitive sourcing. It is a
    15 percent competitive sourcing mandate, one which myself and
    Mr. Davis and the House voted against, but survived the
    conference.
        But competitive sourcing doesn't mean it goes out, it just
    means that work that is currently within government is then
    reviewed to see if it should go out. In more than half of the
    situations the government wins, as a matter of fact.
        Mr. Chu. Yes, sir.
        Chairman Tom Davis. The A-76 circular on which this is
    based is being revised. We are watching it very, very
    carefully, Mr. Davis. I look forward to working with you on
    that. But there is no quote on work that should be outsourced.
        I think one of the purposes of this legislation, and we
    have heard Mr. Wolfowitz, Secretary Wolfowitz, today under oath
    say that there would be more Federal--civilian Federal
    employees as a result of this, because of the 300,000 personnel
    that are uniformed that are behind desks, and the contractors
    that are being used to get around some of the rules. So we have
    that on the record.
        But I appreciate the thought.
        Mr. Davis of Illinois. Thank you, Mr. Chairman. And I
    appreciate your position relative to this issue.
        [The prepared statement of Hon. Danny K. Davis follows:]
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        Chairman Tom Davis. The gentleman's time has expired.
        This panel has been great. You have drawn a lot of fire. We
    have our panel who has been waiting patiently in the back. I
    want to thank all of you for being here today. I think there is
    some supplemental work.
        Dr. Chu, we are going to want to work with you. Today, I
    have talked to Mr. Waxman about getting us together and
    addressing some of the issues that we can answer and maybe
    write some amendments too. But we appreciate everybody--General
    Pace, Admiral Clark, Ms. James, thank you all very much for
    your patience. I call our next panel, give just a brief recess,
    because they are on a time schedule. They have been sitting
    waiting in the back.
        We are just pleased to have the Honorable Sean O'Keefe, the
    Administrator of the National Aeronautics and Space
    Administration, and the Honorable William Donaldson, the
    chairman of the Securities and Exchange Commission.
        The good news is, I think the first panel drew most of the
    fire. So maybe this panel will not be as lengthy and we can
    move quickly.
        Gentlemen, if you would just raise your right hands, I can
    swear you in.
        [Witnesses sworn.]
        Chairman Tom Davis. I understand you are each under some
    time restrictions. So I will let you get comfortable.
        Mr. O'Keefe, when you are ready, you can start. We have a
    red light in front. It will turn orange after 4 minutes, red
    after 5. You can sum up there.
        The same with you, Mr. Donaldson. We will go to questions
    and try to get you out of here in a timely manner.
        Thank you both. I apologize. Obviously, the proposal here
    has drawn a lot of support and concern among Members, a lot of
    clarifications; and I think the first panel answered most of
    that. Both of the proposals on your agency have been vetted,
    too, through their authorizing committees as well. And why
    don't we go ahead and testify when you are ready?

    STATEMENTS OF SEAN O'KEEFE, ADMINISTRATOR, NATIONAL AERONAUTICS
     AND SPACE ADMINISTRATION; AND WILLIAM H. DONALDSON, CHAIRMAN,
                   SECURITIES AND EXCHANGE COMMISSION

        Mr. O'Keefe. Thank you, Mr. Chairman. I appreciate your
    introductions and certainly your willingness to be patient to
    hear from us. I have just returned last night from Russia,
    where we witnessed the landing of the Soyez capsule with two
    American astronauts and one cosmonaut aboard. They were safely
    recovered after a considerable search-and-rescue operation that
    had us all rather tense.
        But all of the folks who were associated with that, both in
    Moscow at the NASA facilities there, as well as at the Johnson
    Space Center in Houston, and across the agency who were engaged
    in that activity, are engineers and technical folks who fit the
    composite sketch that very much is agency-wide; that is, in all
    likelihood, of all of the people helping in that recovery
    operation, there were three times as many folks engaged in this
    activity who were over 60 as under 30. They were all with
    experience levels of 25 to 30 years in large measure.
        They are, most of them--a good quarter of them are facing
    or are eligible to retire within the next 3 to 5 years, and at
    present, a good 20 percent of them are eligible immediately.
        So, as a consequence, the efforts and the extraordinary
    diligence that was expressed and demonstrated over the course
    of that harrowing few days, and certainly a harrowing few
    hours, was exerted by a number of folks, who in all likelihood,
    will not be part of the agency in the next few years.
        There is very little likelihood we are going to have a
    strong prospect of recruiting comparable competent
    professionals of their caliber unless the kind of authorities
    and the opportunities that we have requested as part of this
    particular package are made available.
        The challenge that we face is again probably not
    substantially unlike what we see across most Federal agencies
    and departments. Nonetheless, there are some rather unique and
    peculiar circumstances that require our attention now before it
    becomes of crisis proportion.
        There are 19 separate reports and studies over the course
    of the last 2 years alone that have reported to this committee,
    and others of oversight across the Congress, identifying this
    peculiar set of circumstances in which the better part of two-
    thirds of our work force are in the science and engineering
    communities and, as a consequence, are of higher rates of
    eligibility for retirement in the course of that time, to be
    capstoned, I guess, by the observation of the Comptroller
    General that this is the No. 1 challenge that we face in the
    strategic management of human capital.
        This is not a crisis today, no question about that. We are
    not alerting this as a specific red flag at the moment. It will
    be, though, in fairly short order. It is right on the horizon.
        The President's proposal was submitted just a year ago to
    the Congress, is largely embodied in the language that is part
    of your bill, Mr. Chairman. And we thank you again for the
    diligence that you, your colleague, Mr. Boehlert, on the
    Science Committee, and the colleague on the other side, Senator
    Voinovich, have demonstrated to initiate the action on this
    particular effort, following the legislative proposal that the
    President advanced just last June.
        So the action and the movement on the part of both the
    House and the Senate at this particular time is not only
    welcome, we are most impressed and pleased to see that there is
    specific attention to this set of concerns that again shows a
    diligence and responsibility to get ahead of this particular
    challenge at this time, rather than waiting until it becomes a
    crisis circumstance.
        Our problem, and I would suggest this simply in closing,
    is, again, in forecasting the likelihood of where we are in
    terms of overall work force composition in the years ahead is
    not only the age variable--and that, again, is attenuated by
    the fact that there are more folks eligible for retirement
    today, and growing, than what we have seen in the recent past.
        So our challenge is not only recruitment for those now in
    order to make sure there is some experience base that will be
    trained and mentored by those folks during the course of their
    experience, but also to retain as many of the really
    extraordinary, skilled folks that may be confronting or
    weighing the alternatives of retirement in the years ahead.
        Moreover, we have a very limited pool of cohorts to choose
    from and to recruit from, given the fact that the number of
    science- and engineering-related kinds of graduate degrees has
    declined in the last decade by the better part of 20 to 25
    percent in very selective fields. As a consequence, there are
    fewer folks who are eligible and interested in this range of
    activity. So we need to get ahead of that to recruit, retain,
    and to look at mid-level entry from a variety of different
    opportunities. And this bill covers all of those fronts.
        We thank you again for your leadership in moving this
    forward, sir. Thank you.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Mr. O'Keefe follows:]
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        Chairman Tom Davis. Mr. Donaldson, thanks for being with
    us.
        Mr. Donaldson. Chairman Davis, Ranking Member Waxman,
    members of the committee, thank you very much for holding this
    very timely hearing on civil service issues facing several
    agencies. You have my written statement for the record, so I
    will briefly outline the very specific problem we are facing at
    the SEC and how the chairman's bill offers a solution to that
    problem.
        You may be aware that dramatic changes have occurred in the
    Commission's personnel environment during the past year. Thanks
    in part to the efforts of this committee, the Commission has
    been granted the authority to pay higher salaries and provide
    additional benefits and has received increased appropriations
    to fill over 800 new positions this fiscal year.
        However, while the new pay authority and increased
    appropriations have eased the Commission's crisis in hiring and
    retaining attorneys, substantial difficulties remain in our
    ability to hire accountants, economists and securities
    compliance examiners.
        The reason for this distinction between attorney hiring and
    the hiring of other securities industry professionals is clear.
    Attorney hiring is excepted from civil service posting and
    competitive requirements, whereas the hiring of Commission
    accountants and economists and security compliance examiners is
    not.
        When we are filling a vacancy under the competitive
    service, the process can take months to complete. Under
    excepted service authority, the hiring process can be completed
    in a few weeks. The procedures required for hiring under the
    competitive service system have proven unduly time-consuming
    and inefficient. Let me just elaborate a little on that.
        A position is usually posted for 2 weeks, and then several
    days are allowed to elapse in order to be certain that all
    applications have arrived in our Office of Administrative and
    Personnel Management. After OAPM sifts out the obvious
    incomplete and unqualified applications, a rating panel comes
    in from the division or office that is seeking to hire and must
    first review and rate qualified applicants based solely on
    their written applications.
        The rating panel in the division is made up of three or
    more professional staff who are at or above the grade level of
    the position being filled. These professional staff, often
    managers, must set aside the regular duties of their jobs and
    spend up to 2 days at a time rating applicants' resumes.
        After the division's work in this phase, the file of the
    applicants goes back to the OAPM where, based on the ratings
    given by the division staff members, they check the work and
    then send the top three to five candidates back. Then yet
    another panel of selecting officials in the division or office
    may begin the process of setting up interviews of these
    candidates.
        Beyond the cumbersomeness of the process, managers hiring
    for these positions have found that the rating process often
    favors not the best candidates, but those most familiar with
    how to fill out the relevant application with key words and
    phrases used by the various panels in rating the candidates
    against specific criteria.
        Also, because the hiring panel only sees the three to five
    candidates identified by the rating panel, they may never see
    candidates who are otherwise highly qualified and perhaps
    better suited for the job, but who were not rated among the top
    candidates under the ground rules of the competitive service
    process.
        This process, even when it works well, can take several
    months to complete. But, if none of the top-ranked candidates
    proves satisfactory, the position is often reposted and the
    selection process starts all over again. Given our task of
    implementing the Sarbanes-Oxley Act, our mission in overseeing
    the financial markets and our role in restoring investor
    confidence during these very difficult times, putting
    additional cops on the beat more quickly to accomplish our
    goals is absolutely vital.
        Mr. Chairman, your bill, H.R. 1836, will do just that. The
    provisions of your bill are substantially similar to H.R. 658,
    which was introduced in February by Congressman Richard Baker
    of the Financial Services Committee. On March 26th, Congressman
    Baker's bill passed out of the Financial Services Committee
    with bipartisan support.
        I would like to take a brief moment to thank Mr. Kanjorski,
    the ranking member of our authorizing subcommittee, for his
    work and support in that process. At the urging of both Mr.
    Baker and Mr. Kanjorski at their subcommittee hearing, we went
    back and worked diligently with our union, the National
    Treasury Employees Union, as well as with the Financial
    Services Committee staff from both sides of the aisle, until we
    reached a compromise that accomplishes the Commission's hiring
    objectives without loss of any civil service protection of the
    employees in the competitive service.
        I want to stress my deep appreciation that the SEC
    provisions of your bill respect this compromise and keep intact
    those provisions we worked hard to craft in a way that all
    parties now support. The bottom line is that the Commission
    strongly supports the SEC provisions of your bill and hopes
    that they will be adopted at the soonest possible time and
    signed into law by the President.
        Without expedited hiring authority, the Commission will not
    be able to hire these additional staff it desperately needs,
    and which Sarbanes-Oxley contemplates, in any responsive
    timeframe.
        Thanks very much for your consideration of these issues
    and, again, for respecting the compromise we reached with our
    union and our authorizing committee members.
        I, of course, would be happy to answer any questions you
    may have.
        Chairman Tom Davis. Thank you.
        [The prepared statement of Mr. Donaldson follows:]
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        Chairman Tom Davis. Thank you both.
        Mr. O'Keefe, thank you for flying all of the way back. You
    probably have some jet lag in coming back. I appreciate this.
    You were lumped in with DOD, simply because that was the
    vehicle.
        In a perfect world, we would examine all of government and
    try to do this in a very systematic way. But sometimes the
    clock and other legislative vehicles get the better. That is
    why the clock--it is not driven by this committee; it is driven
    by others and leadership, and we are trying our best to take a
    deep breath and make sure that there is a level of
    understanding.
        I think the fact that, Mr. Donaldson, in your case, you
    were able to go back with the NTEU and work those issues out--I
    think that gives us a higher level of confidence, even if it
    comes back before our committee.
        SEC is a very attractive place for a young lawyer. You come
    in there. You hire people. The difficulty is retaining them,
    isn't it? After a while, they spend 2 or 3 years of experience,
    they are pretty hot commodities out there in the market. That
    is a pretty hot space for a young attorney to be working, at
    the SEC, and the difficulty is retaining some of the talent,
    isn't it?
        Mr. Donaldson. Well, we do have a lot of very talented
    people. We have a lot of demand out there in private industry
    for those people who have gained the experience of working at
    the SEC. So there is a turnover rate there.
        Chairman Tom Davis. I mean, they go work for you for 2 or 3
    years, they can go out in the private market and double, triple
    their salaries with what they have gotten.
        Mr. Donaldson. We have attended to that with the recent
    authorization in terms of pay parity and so forth.
        Chairman Tom Davis. Never be parity; you won't be really
    close. But it is--and you found that you made additional
    concessions when you sat down with the NTEU?
        Mr. Donaldson. No, we basically have provided all of the
    guarantees under----
        Chairman Tom Davis. But you were flexible when you sat down
    with them, and were able to satisfy each others' concerns?
        Mr. Donaldson. Right, we were, very much so.
        Chairman Tom Davis. Why is hiring accountants and
    economists different from attorneys?
        Mr. Donaldson. Well, the role of an accountant at the SEC
    is considerably different from that at most other agencies.
    Most agencies hiring accountants are hiring them to operate
    within the agency in an accounting capacity, a managerial
    capacity, as opposed to our accountants who are investigative
    and analytical accountants out in corporate America.
        Chairman Tom Davis. Mr. O'Keefe, let me ask you, in your
    testimony you note that NASA has not historically suffered from
    high attrition rates, but now retention is a much more relevant
    issue. Is that the aging work force to some extent?
        Mr. O'Keefe. Yes, sir, that is precisely it.
        Chairman Tom Davis. NASA's legacy for space exploration and
    aeronautical innovation is unmatched. In recruiting, hiring and
    keeping top talent, it seems that NASA's name speaks for
    itself.
        So why do you need additional changes in the way you hire
    and fire?
        Mr. O'Keefe. Sure. Well, it is a draw card to be sure.
    There is no doubt that the attractiveness to a range of
    engineering and scientific disciplines coming out of
    undergraduate and, principally, graduate and doctoral levels is
    very attractive to go to a place like NASA.
        But there are two challenges that we are dealing with. The
    first one is that there are fewer and fewer folks who have the
    kind of skill qualification mix that we are seeking.
        Various universities and colleges around the country in
    these disciplines have graduated about 20 percent fewer folks
    with these skills in the last decade than we have seen before.
    So, as a consequence, there is a smaller, diminishing cohort.
        At the same time, we are seeing the same kind of phenomenon
    that the Commission on Aerospace, for example, that Mr. Walker
    chaired, is observing, that there is going to be a hiring
    surge. At the same time, we are experiencing a challenge in
    that direction.
        The second problem is that the kinds of tools that we have
    available, that are extant today, while they are competitive
    for the purpose of bringing in graduate students, doctoral
    students, or those with some degree of experience from
    industry, it nonetheless turns sometimes on the very smaller
    intangibles, like the capacity to provide moving expenses,
    forgiveness of loans for graduate education programs that most
    companies would otherwise provide. Those are the kinds of
    things that we don't have or we have the capacity to get only
    after a long period of time, in which case they have made a
    decision to go somewhere else.
        So we have got a very attractive high-end kind of first,
    initial response from many folks with the kind of skill mix
    that we are looking for. They eventually weary of the length of
    the process that it takes, or our inability to come even
    vaguely close to matching the kinds of opportunities they may
    see elsewhere.
        Chairman Tom Davis. OK. Thank you.
        Mr. Davis.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    Let me thank you gentlemen for coming and for testifying and
    sharing with us.
        Mr. O'Keefe, I understand that the Columbia space shuttle
    accident is currently being investigated by a panel headed by
    Retired Admiral Harold Gehman. One of the issues being
    investigated is whether work force issues at NASA may have
    contributed to the accident. It seems to me that it might be
    premature to give NASA additional flexibilities at the same
    time that an independent commission is studying the same
    issues.
        Is there a reason why Congress shouldn't wait until after
    the Gehman Commission releases its report before we consider
    this proposal for additional flexibility?
        Mr. O'Keefe. I don't believe that your statement of the
    facts is exactly right. Admiral Gehman and the board are
    examining--among many, many aspects or factors that may have
    contributed to the accident, looking at the overall management
    process, the work force competencies, as well as our
    organizational procedures in terms of how this process goes.
        And inasmuch as I think all of those issues will be covered
    as part of their final review here in the next couple of
    months, nonetheless, I don't think there will be a specific
    focus to this area that will be any more comprehensive than the
    19 separate studies that have been released in the last 2 years
    alone. Pointing to what is an actuarial fact, we are going to
    see a higher rate of retirements in the years ahead; we are
    already seeing at least a growing attrition rate among the kind
    of skilled mixes that are most important for the purpose of
    launch services, space science kinds of activities.
        I am not sure those findings are going to be materially
    different in this report than they have been in the last
    succession of repetitive observations made, that are exactly
    the same, by every other commission, by the General Accounting
    Office, by our inspector general, by external commissions.
    Everyone has noted the work force phenomenon that has been
    occurring very, very uniquely at NASA just by dint of the way
    the numbers have been running.
        So I suspect that there will be a further reinforcement of
    that view, at least by Admiral Gehman's group, as well as, I
    suspect, at least an endorsement of looking at how to get ahead
    of that curve now in order to have an experience base that will
    be not just new entrants coming in at the same time that you
    have a very experienced cohort leaving. How do you find an
    opportunity for them to learn and to be mentored during the
    course of this time?
        The second observation that I get, a sense from Admiral
    Gehman and his board members in their public statements, is
    that there will be and should be an opportunity for more
    attractiveness of mid-level entry from other comparable kinds
    of engineering experiences that would really add to the way
    that we view the nature of our challenge that we confront at
    NASA every day.
        So my bet is, and it could be wrong, but my bet is, it is
    going to be a reaffirmation of what we have seen repetitively
    stated in the last couple of years.
        Mr. Davis of Illinois. Is it possible that we might reach
    the point, though, where the critical need does not continue to
    exist? And if such, would the flexibilities continue to be
    required?
        Mr. O'Keefe. If anything, the bow wave we are about to see
    will begin in the next 3 years. we are looking at about a 15
    percent eligibility for retirement right now. That will grow to
    25 in the next 3 years. It becomes superannuated, really
    exacerbated, in certain career fields. In astronomy and
    astrophysics, in nuclear engineering, in space physics and
    remote sensing technologies it approaches as high as half.
        Now, that is not going to get any better as time progresses
    along. And, if anything, it simply then shifts to other
    competencies that become more dramatically affected by the
    capacity of individuals who may decide they want to do
    something else with the rest of their lives after having
    dedicated 30 to 40 years of it having worked for NASA.
        So, if anything, what we will see is--the scenery will
    shift, if you will, to different kinds of skill competencies,
    to different professional series over the course of the next 10
    years. But the trend is irrefutable. Unless we find some way to
    arrest aging in the next couple of years, it is going to be an
    actuarial fact.
        Mr. Davis of Illinois. Mr. Donaldson, I understand that the
    SEC is seeking flexibility in order to implement the Sarbanes-
    Oxley Act. Could it be then that those flexibilities might be
    required up to a point, but then after that point would not be
    required further?
        Mr. Donaldson. Well, I think that the job of hiring the 800
    professionals within this fiscal year is going to be very
    difficult to accomplish; and I think that it will extend beyond
    this fiscal year even if we get the increased flexibility that
    we are seeking. So I see it as a multiyear problem here.
        Beyond that, you know, only time will tell.
        Mr. Davis of Illinois. Let me also then just compliment you
    on your ability to work, or the decision to work cooperatively
    with the National Treasury Employees Union. That seemed to be a
    model that worked for you in order to arrive at some good
    legislation.
        Would you recommend it for other agencies?
        Mr. Donaldson. Well, I thank you for your nice words. I
    think that the credit goes to a number of people in our
    organization who have tried very hard to work positively with
    the union. The union has been terrifically cooperative. I think
    they recognize the problem that we have, and they have been
    very, very helpful.
        Mr. Davis of Illinois. Thank you very much.
        I thank you, Mr. Chairman.
        Chairman Tom Davis. Thank you much.
        Mrs. Davis.
        Mrs. Davis of Virginia. Thank you, Mr. Chairman, and thank
    you, gentlemen, both for being so patient in waiting.
        And, Administrator, if you find a way to arrest aging, I
    want to be the first to try it out.
        Administrator O'Keefe, NASA has come to Congress to bolster
    its scientific and engineering work force, yet some of the
    flexibilities that you are requesting could be extended to
    managerial and administrative personnel as well.
        Suggestions have been made that the amount of money that
    NASA could use to pay or reward administrative employees should
    be capped so that the bulk of the funds could be spent on
    attracting high-quality scientists and engineers. Could NASA
    benefit from its new flexibilities if such a cap were put in
    place?
        Mr. O'Keefe. To be sure, the flexibilities would address
    the specific science and engineering challenges we have right
    now. Having said that, I think by trying to force a caste
    system, if you will, which is what such a proposal would do,
    that would really motivate folks who are very, very good
    engineers, who could manage lots of things and lots of
    programs, to think in terms of not being engaged in that
    activity and moving away from it, because it would mean
    administrative and management-level kind of activities would
    then become capped as a result of that and not attractive.
        So we would create more and more of a stovepiping
    philosophy in which certain skills, or professional or
    technical skills, would be accented, emphasized, and valued
    greater than that of management.
        And management is one of our challenges as well. We have
    the constant issue of wrestling with resources, costs, the
    extraordinary effort that has gone into developing a human
    resources strategic plan, which our Assistant Administrator for
    Human Resources has done to the astonishment of OPM and OMB, to
    develop this kind of an approach.
        Those are the kinds of fields that are going to be equally
    challenged in the years ahead. And if we were to do something
    like a cap on the science and engineering side at the expense
    of administration and management, we would eventually pay the
    price for that in time, in a very short time.
        Mrs. Davis of Virginia. Administrator O'Keefe, I asked you
    earlier, and I wanted to ask you again to have it on record,
    having NASA Langley in my district and hearing from them how
    important it is to be able to attract workers, because they are
    struggling, as a lot of our Federal work force is, for
    attracting our really good, expert types.
        In the civil service portion of this bill, it allows DOD to
    offer retirement-eligible staff an opportunity to retire with
    their full pension and come to work with DOD with full salary
    in addition to their pension.
        Are you concerned that you may lose valuable employees
    under this bill?
        Mr. O'Keefe. I don't believe so. I think the challenge that
    both the Defense Department and we at NASA confront is more of
    a generational issue that is occurring right now. I think it is
    a more a phenomenon of this generation that has recently come
    out of graduate and undergraduate schools.
        In the last 5 years, for example, we have seen folks
    leaving in much larger numbers in the fields of aerospace
    engineering, electronics engineering, electrical engineering,
    in all of those sectors, because mobility is a key factor among
    this age corps, more than anything else.
        So, as a consequence, they are experiencing the same
    challenges that we are. If anything, there is a zero-sum kind
    of opportunity between the Defense Department activities that
    are very close to the centers that we operate and NASA in terms
    of exchanging ideas as well as different approaches to things.
    It is not any more or less of an attenuation in that regard.
        Mrs. Davis of Virginia. You understand what I am asking?
    They can get their full retirement plus salary?
        Mr. O'Keefe. I just don't see that as being a real
    challenge.
        Mrs. Davis of Virginia. Would you favor including a
    provision in the legislation that would give employees an
    opportunity to submit comments and suggestions on the work
    force plan before it is presented to OPM for approval?
        Mr. O'Keefe. Sure.
        Mrs. Davis of Virginia. We have heard a lot here about how
    employees are not being brought into the particular bill for
    the civil service workers over in DOD.
        Mr. O'Keefe. I would be more than happy. It just confirms
    what it is we are already doing.
        Our largest employee union is the International Federation
    of Professional and Technical Engineers. Greg Junemann, the
    president of that union, and I have met, as well as all of the
    individual center representatives of that union, with each
    center director of the 10 centers that we have.
        Similarly, I have met with Bobby Harnage, my friend who is
    here today. He is part of the next panel. He and I have chatted
    and talked about this proposal as well. And all of his
    respective union leadership folks at each of the centers have
    been contacted by our center director, too. So the opportunity
    to have the employees comment on this and look at how we would
    implement various elements of this before OPM, as requested, is
    not an unreasonable proposition at all, and one we follow
    independent of the question of whether it is law or not.
        Mrs. Davis of Virginia. Thank you, Administrator O'Keefe.
        And thank you, Chairman Donaldson.
        Chairman Tom Davis. Thank you.
        Mr. Janklow.
        Mr. Janklow. Thank you very much, Mr. Chairman.
        If I could, Mr. McDonald, could you tell us--or excuse me,
    Mr. Donaldson, I apologize. Who do you know that is against
    this proposal with respect to your agency? Who is against it?
        Mr. Donaldson. I don't think that anybody is opposed to it.
        Mr. Janklow. You haven't heard of anybody at this point in
    time?
        Mr. Donaldson. Not really.
        Mr. Janklow. Mr. O'Keefe, who is against it, at least with
    respect to your agency?
        Mr. O'Keefe. None that I am aware of. There have been
    concerns voiced. I think at the earliest point when the
    President submitted last June's legislation, certainly the AFGE
    representatives testified as well, but again most of those
    concerns in the course of this past year have been worked on
    and discussed and so forth, the various bills that Mr. Davis
    has introduced, as well as Mr. Boehlert and Senator Voinovich.
        Mr. Janklow. As far as you both know, we are not dealing
    with a bill that is very controversial, but terribly
    substantive for each of your agencies?
        Mr. O'Keefe. I don't think so. But I would certainly defer
    to those who might otherwise express a contrary view.
        Mr. Janklow. Do you agree, Mr. Donaldson?
        Mr. Donaldson. Yes.
        Mr. Janklow. Mr. O'Keefe, in your testimony earlier you
    said that--and also in your written testimony you talk about
    the fact that about 15 percent of your staff are eligible--your
    employees are eligible for retirement, that it grows to 25
    percent. I believe you used the words ``50 percent within 5
    years.'' And then you said, it doesn't get any better after
    that.
        How can you have an employee labor force that you know now
    is going to be 50 percent retire-eligible every year from now
    on after 5 years from now? That just doesn't make sense to me.
        Mr. O'Keefe. I apologize. I was inarticulate in using the
    term 50 percent. It was applied to very specific areas.
        You may recall, I precursed with the statement that in
    astronomy and astrophysics, in space science, and nuclear
    engineering, in those particular fields, it grows as high as,
    if you just look at those particular professions----
        Mr. Janklow. Up to 50. But then depending on how many
    retire and don't, that number changes.
        Mr. O'Keefe. Then that changes. So, as a consequence, then
    the scene shifts to other competency fields that get serious;
    and so, as a result, it is on average in that 15 to 20 percent
    range in the next few years. But in certain areas it is very,
    very serious, and then simply moves along into different venues
    over the course of that time.
        Mr. Janklow. Mr. Donaldson, with respect to the SEC--and I
    am not talking about the top-level managerial folks; now I am
    talking about your line economists and accountants, especially
    those, and your lawyers--how often do you find that the people
    that have very successful, good positions in the private sector
    in the accounting field, in the economic field as an economist,
    or in the legal field are willing to quit those to come to work
    for the SEC with all of your rules, all of your regulations,
    all of your policies and your pay structure?
        Mr. Donaldson. Well, I think, to a degree this depends upon
    the opportunities that are available in the economy, and the
    general condition of the economy. Certainly, in the years of
    the 1990's when markets were booming and so forth, the
    opportunities in the private sector were considerable.
        I think we are seeing----
        Mr. Janklow. It didn't hurt the SEC at all, did it?
        Mr. Donaldson. No. But I think you are seeing a reverse of
    that now. I think you are seeing, in terms of the opportunities
    we now have, they are considerable. We have a lot of
    applicants. I think people are anxious to come to work for the
    SEC.
        Mr. Janklow. And then when the economy gets better again,
    which it will at some point, then they will leave you again.
        Mr. Donaldson. Well, we are constantly working at keeping
    the environment in the SEC and, thanks to legislation, keeping
    our salaries and compensation as competitive as they can be.
    And, you know, we like to see lower turnover. And, in fact,
    with the pay comparability, early observations are that our
    turnover is slowing down. It's hard to differentiate whether
    that comes from a reduction in opportunities out in the private
    sector or better pay with us.
        Mr. Janklow. Mr. Chairman, given the fact that there
    doesn't appear to be any opposition, I'm not going to waste any
    time with questions.
        Chairman Tom Davis. That is fine with me. The good news is
    that you had to wait. But I notice Mr. Janklow did not ask Mr.
    Wolfowitz if anybody opposed his proposal. We would still be
    waiting for the list as it works its way through. But thank you
    both very much.
        Mr. Janklow. I only had 5 minutes.
        Chairman Tom Davis. Thank you both very much. I appreciate
    you working with the employees involved. We're going to hear
    from our next panel in terms of if they have any views on this
    as well, but we appreciate it.
        I'm going to take about a 6- or 7-minute recess, come back
    at 1:30, where we will convene our next panel if that is OK
    with everybody. We will be in recess for about 7 minutes.
        [Recess.]
        Chairman Tom Davis. Thank you very much. We have saved the
    best for last here, just for the record. Thank you all very
    much for your patience through this. I think we had a lot of
    questions and a lot of concerns, and I think a lot of us still
    have some confusion as we go back and forth. But you heard the
    testimony, and hopefully it will help you be crisper, and we
    have some questions. We appreciate you being with us and
    staying to the end.
        We have a very distinguished panel. Dr. Paul Light, the
    Director for the Center for Public Services at Brookings
    Institution; Bobby Harnage, Sr., the National Federation of
    Government Employees; Colleen Kelley, National Treasury
    Employees Union; and Mildred Turner, Federal Managers
    Association of the Department of Agriculture.
        Thank you for your patience. It is our policy that we swear
    you in, if you would rise with me.
        [Witnesses sworn.]
        Chairman Tom Davis. We got the cameras going. We have to
    keep people here now as we go through. Focus in. Thank you
    again. Thanks for staying with us.
        Dr. Light, we will start with you and move straight
    through.

    STATEMENTS OF PAUL LIGHT, DIRECTOR, CENTER FOR PUBLIC SERVICES,
        THE BROOKINGS INSTITUTION; BOBBY HARNAGE, SR., NATIONAL
    PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES; COLLEEN
       KELLEY, PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION; AND
       MILDRED L. TURNER, MEMBER, U.S. DEPARTMENT OF AGRICULTURE
                      FEDERAL MANAGERS ASSOCIATION

        Mr. Light. Great. Terrific. It is a pleasure to be here. I
    should say to Governor Janklow that I was a former resident,
    born and raised in South Dakota.
        Mr. Janklow. A great place to be from, isn't it?
        Mr. Light. I'm afraid so, but I do get back from time to
    time.
        I think my job in testifying here today is to look at the
    empirical evidence on behalf of reform. I've read the bill.
    I've tried to penetrate it. I'm not a lawyer, so I can't
    comment on the ``notwithstandings'' and ``wherewithals,'' but I
    can comment on the desperate need for reform of the Civil
    Service as it currently exists, and I can speak to you from the
    perspective of people who want to serve their country, who want
    to be in Federal jobs, and who are in Federal jobs and find it
    extraordinarily frustrating to be waiting for jobs to be filled
    for 4 to 6 months, to be trapped in the system and unable to
    get the resources they need to do their jobs.
        We survey all levels of the Federal work force, look at the
    conditions or the health of the Federal work force, and there
    isn't a single level of the Federal work force that is not
    currently in distress. At the entry level our surveys of
    college seniors show low interest, perceptions of significant
    delay. There is even a sense that the Federal Government is
    arrogant in its attitude toward potential employees; that it's
    up to you to wait for us to make a job offer, and if you can't
    wait for 4 to 6 months, then basically go someplace else.
        At the middle level we see crowding, we see overlayering.
    We see extraordinary perceptions of distance between the top
    and the bottom of government. I recommend in my testimony that
    the DOD bill, in terms of improving it, might well tackle the
    issue of the overlayering at the middle and higher levels of
    the defense bureaucracy. Between the period before September
    11th and after September 11th, the number of DOD employees who
    perceived more layers in their agencies than necessary actually
    went up. The perception of layering, the perception of
    bureaucracy at DOD have increased post-September 11th because
    the pressure on the agency is so great and the embrace of
    mission is so great.
        I don't need to review the problems of the Presidential
    appointee level. We've been through that.
        There is legislation pending in the Senate that started 2
    years ago that would be nice to have as part of any reform.
        My particular concern here today is with the frontline.
    Looking at the frontline of the DOD work force, or look at the
    frontline of the Federal work force, what you see is that the
    frontline employees are the most dissatisfied with the current
    system. They are the most likely to report, for example, that
    there are too many layers between themselves and top
    management. That makes perfect sense. They are the most likely
    to complain that the hiring process is slow and confusing
    rather than fast and simple. They are also surprisingly likely
    to say that the hiring process is not fair as opposed to fair,
    although the vast majority of Federal employees think the
    current system is fair.
        I think the reason why we find high pride and hard work on
    the frontlines is that Federal frontline employees are deeply
    committed to the mission of their agencies, and that's
    obviously the case at Defense. We asked Defense employees in
    the spring of 2002 whether there was a greater sense of mission
    in their agencies because of the events of September 11th.
    Sixty-five percent of DOD employees said there was more of a
    sense of mission in 2002 than there had been compared to just
    35 percent of Federal employees in other agencies.
        But what we also see on the frontlines of the Federal
    Government is the impact of vacancies, the impact of turnover,
    the impact of hiring delays. It is the worst thing we can do
    for a frontline employee to hold positions open for 4 to 6
    months before you fill them. That just increases the burden on
    all employees.
        It's also at the frontline where you see the most concerns
    about the problems in disciplining poor performers, because
    poor performance has its greatest impacts on the frontline. I
    talk in my testimony about DOD in specific.
        I'd like to wrap up here about the issue of reform. The
    Civil Service Reform Act is about to celebrate its 25th
    anniversary, and embedded in that act were many of the calls
    for experimentation that we see now coming to fruition in this
    bill. I view this particular proposal as the logical
    consequence of the 1978 act, not as a conflict with the act,
    but as the outgrowth of many of the reforms that were put in
    place under the Carter-Mondale administration.
        I look forward to your questions. I appreciate your
    interest in this issue. The opportunity for reform rolls around
    on its own timetable. My experience has been that we ought to
    take advantage of it when it appears. Thank you very much.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Mr. Light follows:]
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        Chairman Tom Davis. Mr. Harnage, thanks for being with us.
        Mr. Harnage. Thank you, Mr. Chairman and members of the
    committee, for the opportunity to testify today on DOD's
    sweeping legislative request. This bill rips out the heart of
    the Civil Service and virtually guarantees a Department of
    Defense that will be corrupted by politics and cronyism.
        There is one phrase in DOD's legislation that appears over
    and over again. That phrase is ``the Secretary determines in
    the Secretary's sole and unreviewable discretion.'' That's it.
    Each Secretary of Defense will have sole and unreviewable
    discretion to do whatever he wants, whether it is hiring and
    firing the civilian work force, listening to Congress, or
    recognizing the elected representatives of the employees.
        AFG represents over 200,000 civilian DOD employees who have
    worked around the clock in a huge number of support and
    maintenance jobs to ready our uniform troops, their equipment,
    and their weapons, for combat in the Iraq war. They have barely
    come up for air, and they found out that the Pentagon has now
    declared war on them. We secured our military installations
    after September 11th, prepared to do battle with anyone that
    threatened our security and freedom, and we have gone to war
    with Iraq. The President just thanked all of our troops,
    military and civilians alike, for a very successful operation.
    What did not work? What is it that posed a problem that now
    suggests that we must throw all of these laws of employees's
    protection and merits out? What is so broken that requires you
    to abrogate your responsibilities? Have you been given one
    example; and if so, what did it have to do with national
    security?
        When you consider this legislation, I urge you to please
    make note that it does not ask Congress to vote on a new
    personnel system for the Department. It does not ask Congress
    to vote on a new pay system, new RIF rules, new overtime rules,
    new hazard pay standards, whether unions can operate, or
    whether anyone can go to the MSPB. It asks you to hand over
    your authority for protecting and approving laws and
    regulations in all those areas and more to each and every
    Secretary of Defense.
        The rhetoric is that this is some kind of modernization,
    but there is nothing modern about cronyism or patronage systems
    in government. When they ask for the authority to waiver the
    heart and soul of Title 5, what they are doing is waiving all
    the progress made in the 20th century. Whatever their
    intentions, they will be moving the Civil Service backward
    about 100 years; not forward, but back to the 19th century when
    to the victor went the spoils, and there were no rules to
    prevent government corruption.
        DOD is not asking for authority so they won't have to
    contract out and privatize everything. Their privatization
    agenda and their agenda to dismantle the Federal service are
    two sides of the same coin. It is all about cronyism and moving
    money to political favorites, in some cases possibly their own
    pockets.
        It is also not true that the pay system we have now has no
    link between pay and performance. High performers get their
    due, but at same time there are protections that keep the
    system honest so that corrupt officials cannot hide behind
    rhetoric about performance to get away with discrimination and
    political favoritism. DOD's proposal allows every Secretary of
    Defense, without congressional input to impose a new flavor of
    the week pay and personnel system of his own design, and
    employees will have nothing whatsoever to say about it, and
    neither will you.
        DOD's own survey of its workers, both in and out of pay-
    for-performance demonstrations, tells the story. They say they
    know what the employees want. If they do, they are ignoring it.
    They ask workers whether they thought their performance rating
    was an accurate picture of their actual performance. The news
    is that confidence in the accuracy of these evaluations has
    gone down fast for both whites and minorities who are in the
    demos, while at the same time it has gone up for those in the
    GS system. Less than one-half of the minorities thought their
    evaluation in the demo was fair, and less than 60 percent of
    the whites thought so. In the GS pay system, the confidence
    went up in both categories.
        In a survey by OPM, more than 50 percent of the employees
    did not trust their supervisors, yet DOD says it is ready to
    impose its flawed system on everyone. Remember also that the
    new plan that this administration wants to impose has only been
    tried on about 4 percent of the DOD work force, and that 4
    percent mostly is in scientific labs, hardly a cross-section of
    the DOD civilian work force.
        Everyone, even the Secretary of Defense, needs to be held
    accountable and have his power in balance. No Secretary should
    be above the law. They shouldn't be allowed to decide which
    laws and which regulations they'd rather do without. I urge you
    in the strongest possible terms to think twice before you vote
    to hand over this power.
        Government agencies operate under laws and regulations set
    by Congress to specifically make sure that taxpayers and
    government employees are guaranteed freedom from coercion and
    corruption. DOD's proposal takes away that freedom. Most of
    these issues are negotiable in the private sector, but in the
    Federal sector we have laws passed by Congress, so most of
    these issues are not negotiable. Take away the laws, abrogate
    your responsibilities, and leave these issues still not
    negotiable, and you put Federal employees in a category that no
    other employee in the Nation has experienced. You will truly
    create a two-class system where Federal employees, the ones
    just bragged about, are second-class citizens, less rights,
    less protections, less merit, less due process, second-class in
    every way. Please slow down and do this right.
        This concludes my testimony.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Mr. Harnage follows:]
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        Chairman Tom Davis. Ms. Kelley, thanks for staying and
    being with us.
        Ms. Kelley. Thank you, Chairman Davis and Members. I very
    much appreciate the opportunity to appear before you on behalf
    of the more than 150,000 Federal employees who are represented
    by NTEU.
        NTEU is very concerned by the scope of the legislation
    before the committee and as well as by its timing. We're at a
    loss as to exactly what the problem is in the Defense
    Department that they are attempting to fix.
        The Department is coming off a stunning victory in the war
    with Iraq. The Secretary as well as both military and civilian
    Defense Department employees who engaged in that battle deserve
    nothing but praise for their quick and skilled response. Yet it
    seems the thanks that both the soldiers and the civilians are
    about to get is to have their jobs contracted out and their
    Civil Service rights and protections eliminated.
        The pay-for-performance scheme this legislation would
    permit the Defense Secretary to implement would be based on a
    performance appraisal system which has come under intense
    criticism by employees as well as by independent experts like
    the GAO. NTEU questions where in the Federal Government or for
    that matter in the private sector pay for performance is
    working.
        The proposed legislation also seeks authority for the
    Secretary of Defense to reclassify, discipline, suspend, demote
    or dismiss employees outside the tested and constitutionally
    sound procedures that are set up under current law. Defense
    employees would be stripped of their most important Civil
    Service rights and protections.
        The legislation also limits the Department's obligations to
    collectively bargain with its unions. This unprecedented
    proposal goes far beyond even the flexibilities included in the
    recent Department of Homeland Security legislation.
        It is particularly important to point out that the
    flexibilities the Secretary of Defense seeks would not be
    constant or set. Each new Secretary could change them. In the
    last decade our Nation has had five Secretaries of Defense.
    Does this committee think it is appropriate that every one of
    them should have been able to change the human capital
    management system for employees of the Department? Regardless
    of the reasons the current Defense Secretary may espouse for
    requiring this unprecedented level of flexibility, there is
    absolutely no justification for giving the current or future
    Defense Secretaries the ability to constantly change the rules
    under which their employees operate.
        NTEU also has serious concerns with several provisions in
    the legislation that are aimed at privatizing thousands of
    Federal jobs. The bill seeks to privatize firefighting and
    security jobs at military facilities and to open up to
    contractors thousands of other civilian and military uniformed
    positions. And perhaps the most dangerous contracting out
    change in the bill is aimed at promoting the departmentwide use
    of an untested procurement process known as best value.
        As a member of the commercial activities panel charged with
    developing recommendations for improving government procurement
    policies, one of the issues that divided the panel was the best
    value contracting issue. Under best value, contracts are
    subjectively awarded based on arbitrary criteria. If the
    prohibition on the use of best value at the Department of
    Defense is repealed, billions of taxpayer dollars will be sent
    out the door to unaccountable contractors for gold-plated
    services that the government doesn't need.
        Before privatizing more Federal jobs, Congress should act
    to clean up the waste, fraud and abuse in government
    contracting by requiring more accountability in oversight of
    contractors and requiring fair public-private competitions
    before government work is privatized.
        NTEU has concerns about the inclusion in this legislation
    of the administration's proposal to create a $500 million human
    capital performance fund. It is hard not to view funding for
    this new gimmick coming at the expense of an appropriate 2004
    pay raise. The administration would give managers broad
    discretion to give incentive pay to a fraction of the Federal
    work force. The only thing this is likely to accomplish is a
    further decline in employee morale.
        As this committee knows, the Securities and Exchange
    Commission provisions included in the DOD legislation are the
    product of NTEU working with representatives of the SEC along
    with the appropriate congressional representatives to reach an
    agreement that no one finds objectionable. There is no reason
    why the DOD bill cannot be handled in the same manner, and I
    urge this committee to slow this train down and work with both
    DOD and the Federal employee unions to determine exactly what
    flexibilities the Department needs, why it requires those
    flexibilities, and how the agency, Congress, and the unions
    involved can best reach agreement on those changes.
        I thank you again for the opportunity to testify and look
    forward to any questions you might have.
        Chairman Tom Davis. Thank you very much.
        [The prepared statement of Ms. Kelley follows:]
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        Chairman Tom Davis. Ms. Turner.
        Ms. Turner. Chairman Davis and members of the committee, my
    name is Mildred Turner. On behalf of the 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 us to present our views before the
    Committee on Government Reform regarding H.R. 1836.
        I am currently a farm loan manager for USDA's Farm Service
    Agency. My statements, however, are my own in my capacity as a
    member of FMA and do not represent the official views of FSA or
    USDA.
        As those who are responsible for the daily management and
    supervision of government programs and personnel, our members
    possess a wide breadth of experience and expertise that we hope
    will be helpful as we collectively seek to address the human
    capital crisis that Civil Service employees have been forced to
    endure with no future plan in place. We at FMA have grave
    concerns about the rushed nature in which these potentially
    precedent-setting changes to Civil Service statutes are being
    moved through what is supposed to be a fair and deliberative
    legislative process. While we appreciate the opportunity to
    offer our perspective here today, you should be informed, Mr.
    Chairman, that FMA has not been afforded the same opportunity
    by the Department of Defense before, during or since the
    drafting of its bill.
        The new Department of Homeland Security was granted broad
    authority to develop an alternative personnel system, which is
    only in the preliminary stages of design. DHS was supposed to
    be used as a potential model for the rest of the Federal
    Government. Why, then, is DOD so anxious to do the same when we
    have not seen the effects of the DHS system?
        We at FMA believe that we need to slow down this runaway
    train immediately and instead carefully consider major reform
    proposals that will impact the lives of one-third of the
    Federal work force--and eventually could affect all remaining
    civil servants.
        Between 1994 and 2001, the nonpostal executive branch
    civilian work force was reduced by 452,000 positions. One of
    the side effects of this downsizing is that overtime is
    becoming increasingly common. Under current law, overtime pay
    for Federal managers, supervisors, and Fair Labor Standards
    Act-exempt employees is limited to that of a GS-10, step 1
    employee. This means that employees paid at GS-12, step 6 and
    above earn less than their normal hourly rate of pay for
    overtime work. The overtime cap also causes managers and
    supervisors to earn substantially less for overtime than the
    employees they supervise.
        The first grade-based overtime cap enacted in 1954 set the
    base at GS-9, step 1. Twelve years later in 1966, it was
    increased to GS-10, step 1. In the 37 years since that time,
    however, nothing has been done to keep pace with the changing
    work force realities.
        Increasing overtime pay would represent an important step
    toward addressing overtime problems that increasingly serve as
    disincentives to hard-working civil servants contemplating
    accepting promotions into the ranks of management. In fact,
    some have turned down promotions and even taken downgrades to
    be eligible to receive real overtime pay.
        Mr. Chairman, I have been personally affected by this
    overtime problem. My ordeal has to do with the current
    interpretation of rules outlined in section 5 CFR 551.208 with
    respect to FLSA-exempt Farm Service Agency personnel assigned
    to what the Agency refers to as consent decree action teams
    [CDAT]. Since June 1999, FSA has been assigning FLSA-exempt and
    nonexempt employees to CDAT and directing those employees,
    including myself, to work a large number of overtime hours.
    While working on CDAT, FLSA-exempt employees had the same
    duties, responsibilities, and authorities as did the FLSA-
    nonexempt employees. Exempt and nonexempt employees are working
    side by side and are performing identical tasks with the same
    amount of authority and responsibility. Many of these employees
    have been on 2-week rotations, including Saturdays, while
    working on CDAT. Overtime pay for FLSA-exempt employees is
    capped at GS-10, step 1, while nonexempt employees receive one
    and a half times their normal salary for overtime hours, which
    in some cases is twice the rate of FLSA-exempt employees.
        To date there have been more than 300 exempt individuals,
    many of whom are FMA members, who have worked on the CDAT
    project without the benefit of being compensated equally for
    overtime earned while performing identical job responsibilities
    as FLSA-nonexempt employees.
        There continues to be considerable confusion concerning the
    implementation of FLSA as related to the USDA FSA employees who
    have been detailed to CDAT. It is FMA's belief that the
    criteria set forth in 5 CFR 551.208 have been met.
    Specifically, we understand it to mean that individuals who
    worked for more than a total 30 days on the CDAT project will
    be properly designated as nonexempt during the time they spend
    on CDAT. This matter continues to affect many employees who
    perform a wide range of functions for FSA.
        When we at FMA requested OPM's assistance concerning the
    classification of the CDAT project and employees' exempt and
    nonexempt statuses, the response was that if an employee is
    assigned to a series of three or more 2-week periods without an
    intervening break, it may be necessary to change the employee's
    FLSA status.
        Unfortunately, this is not how we interpret the statute, as
    there is no specific reference to the 30 days being
    consecutive. As a result, to this day I, along with other
    affected members on CDAT, have not received equitable pay for
    mandatory overtime work.
        While private sector employers are not required to pay
    overtime to FLSA-exempt employees, private sector managers and
    supervisors do not face the same type of pay compression
    prevalent in the Federal sector which makes leaving management
    to earn uncapped overtime so attractive.
        At a bare minimum FMA would like to ensure that Federal
    managers, supervisors, and FLSA-exempt employees receive at
    least the regular rate of pay for overtime work as supported by
    OPM in the past and proposed in H.R. 1836. We would like to
    thank you, Mr. Chairman, for including this provision as part
    of the legislation we are discussing today. Although we would
    prefer to see the overtime cap raised to a fair but reasonable
    level, this provision pro-
    vides a good first step in addressing overtime pay as we seek
    to remove obstacles to our government's ability to recruit and
    retain a highly motivated cadre of managers and supervisors.
    Thank you very much.
        [The prepared statement of Ms. Turner follows:]
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        Chairman Tom Davis. This bill is a hodgepodge. It has some
    good things and some bad things. That is the way we deal with
    it. Taking care of this was something that the previous
    administration had wanted to tackle before they left, so we
    picked up where they took off and moved from there.
        Let me start questioning. First of all, it is my
    understanding that this bill--notwithstanding other things that
    DOD is doing, but this bill doesn't get to the outsourcing
    issue at all. If anything, it is good for employees because by
    giving more flexibility--we heard Mr. Wolfowitz under oath
    today say that some of the jobs that are currently being
    outsourced and performed by uniformed services members could be
    done by civilian employees, and I believe that. And if you can
    show me something that is otherwise in there, we will change
    it. That is our intent here in this case.
        There are other outsourcing proposals at DOD that I think
    we can join forces on. One is this percentage that they have
    for competitive sourcing and the like, and I have never felt
    comfortable with that. But this bill doesn't get to the
    outsourcing per se. If anything, this will create more Federal
    employees.
        What it does do, and what our concern is and where we draw
    the line, is that things that are currently subject to
    collective bargaining are not going to be subject to the same
    rules, and therein lies the nub of how we handle this. I happen
    to believe that it takes too long to hire somebody right now,
    and maybe you agree with that.
        Let me ask, Dr. Light, do you think it takes too long to
    hire someone in the Federal Government today?
        Mr. Light. Absolutely, even in a down economy. It is a
    ridiculous situation.
        Chairman Tom Davis. Mr. Harnage, do you think it takes too
    long to hire somebody?
        Mr. Harnage. I agree with that, but I don't necessarily
    agree with the cause.
        Chairman Tom Davis. I'm not asking you to agree with the
    remedy. I'm not trying to trick you. I'm trying to get
    agreement on some things, and then we can approach how we get
    there.
        Ms. Kelley, you agree as well?
        Ms. Kelley. I think in general that is true, and
    specifically it was true with the SEC. They made a case that
    hiring restrictoins were impacting their ability to deliver on
    their mission. We agreed with the goal to try to correct that,
    and as the language that we agreed to is what you see included
    in this bill.
        Chairman Tom Davis. NASA, they gave their examples. They
    interview people, and they got tired of waiting in the queue
    for months and months. Do you agree?
        Ms. Turner. Yes.
        Chairman Tom Davis. The problem is not that we shouldn't
    have safeguards. We need safeguards, and we want to write this
    bill so that we have safeguards. But sometimes you have so many
    safeguards that you can't get anything done. What is the right
    balance? We are trying to wrestle with this. We introduced the
    DOD bill because we thought we ought to introduce the bill as
    they wanted. That is not going to be the bill that comes out of
    here or out of conference, but they had to put their marker
    down, and so Mr. Hunter and I put up our names and threw it out
    there. We immediately started to try to work with groups to
    make changes and find what the right balance is. Reasonable
    people will disagree over what that right balance might be.
        We looked up some of the litigation on issues like whether
    a restroom should be gender-neutral or whether it should be a
    men's room. Two years it took to litigate that. That is
    ridiculous. There has got to be a way to resolve that issue.
    Now, DOD's way of resolving it, they will listen to you, and
    they will make the decision. I think from the employees'
    standpoint you want a neutral arbitrator to make that decision.
        But the current system that calls for 2 years to take this
    up is ways too long, and it is stupid and wasting time and
    money and everything else. That is what we are wrestling with.
        I don't know where I come down. We will keep talking and
    keep meeting. This is a dynamic process, but it is something
    that I think needs fixing. I think it takes too long in some
    cases to terminate people. You can terminate someone without
    them losing their rights, because if they litigate it, you can
    come back and restore all the pay, but you can get them out of
    the work force sometimes where they are a distraction to other
    people. And so we don't want them to lose their rights, but at
    same time, should they be successful, they can restore. But
    that is also something about how do we get to the right balance
    on that.
        Bottom line is this is a system that has been built up
    protection after protection after protection, and sometimes I
    think we have more layers than we need. That's my opinion. I've
    talked to a lot of employees about this, some union, some
    nonunion. But the question is how do you fix it? That is what
    this is all about, and that is why we are soliciting your
    opinions. We are finding some place where reasonable people can
    disagree about.
        I don't see the opportunity for the cronyism and the
    political favorites in the hiring. That isn't really touched.
    You can hire people faster, but it is still Civil Service. You
    will still not have Donald Rumsfeld be able to hire anybody
    that he couldn't today. If he wants to hire his brother-in-law
    or his best friend or his grand uncle or whatever, I don't see
    that opportunity opening up here in terms of dropping that as
    well.
        And, finally, if we were to put a rule in here, and I'm not
    advocating we do that--if the rules that the Department of
    Defense promulgates were to come back before Congress, a la
    BRAC, we would either--if both Houses voted them down, they
    would not take effect. Would that give a greater comfort level?
    Where we say to DOD, we are not sure exactly what you want to
    do, we have given you some criteria, but come back to us, would
    you feel more comfortable then? Could you support it under
    those circumstances, or is that too much a burden?
        Let me start with Dr. Light and ask that last question.
        Mr. Light. I have been a strong supporter of reorganization
    authority under those conditions. I can take a guess as how the
    rest of the panel would go on that.
        Chairman Tom Davis. But that would be something that would
    be fine?
        Mr. Light. Yes.
        Chairman Tom Davis. Mr. Harnage.
        Mr. Harnage. Well, if I understand the question, you are
    saying that DOD would come back to Congress with how they would
    to do it.
        Chairman Tom Davis. You would have to have both Houses--
    under the BRAC, both Houses have to defeat it. If one House
    defeated it and the other did not, it would go into effect. You
    have to do that to get along with the separation of powers and
    Constitutional provision.
        Mr. Harnage. In this process, are the employees'
    representatives going to play a role?
        Chairman Tom Davis. Absolutely play a role. We would hold
    hearings and everything else. But, you know, again, we are
    still giving them the authority to do this, and you may not
    like what they come back with, and you have to beat it again.
        Mr. Harnage. Of course, I'm willing to work with anyone
    trying to find solutions to what DOD needs and other agencies
    need, but I have difficulty in signing any blank checks.
        Chairman Tom Davis. I'm not asking--it makes it more
    palatable, but it is still----
        Mr. Harnage. Look at what we're faced with today. We have a
    steamroller we can't even slow down, and I'm being asked if
    they come back with the same thing, if either House of Congress
    doesn't pass it, it goes into effect. It doesn't take both; it
    only takes one. You have cut my odds in half being able to deal
    with this. That's not good odds.
        Chairman Tom Davis. Cut it worse than that, because we
    wouldn't allow it to be filibustered. But you get a bite at it
    on the record, and to some extent DOD is saying, give us the
    authority; you're asking us to be more effective, and we need
    to change the rules to do that if you are going to hold us
    accountable. And no one knows what the final rules are going to
    look like.
        Mr. Harnage. I understand, and I hope you understand my
    concern.
        Chairman Tom Davis. I do.
        Mr. Harnage. We are dealing with an agency that did not
    even bother to talk to us in the past.
        Chairman Tom Davis. I do, and I respect that.
        Ms. Kelley.
        Ms. Kelley. I think the same problem still exists. You
    know, when you talk about the example of the restroom and the 2
    years, I think there are extreme examples out there that we
    could cite. But here's what I also believe. I believe at the
    core is the question of whether flexibilities and collective
    bargaining can coexist in the same arena successfully, and the
    answer to that, I believe, is yes from NTEU's perspective.
        Chairman Tom Davis. China Lake showed that you can do that.
        Ms. Kelley. And the work that we have done with other
    agencies outside the DOD, that we are living proof of that. The
    IRS, the Securities and Exchange Commission where we negotiated
    pay. Their pay is out from under Title 5. We worked with the
    SEC to make that happen, and we have full collective bargaining
    rights on that issue.
        So I think there are a lot of examples as to why a blank
    sheet of paper with no rules at the sole discretion of the
    Secretary is not the way to go.
        Chairman Tom Davis. OK. Thank you.
        Ms. Turner.
        Ms. Turner. Our preference is that we go through the
    legislative process with an overwhelming level of bipartisan
    support. We are dealing with 100 years of Civil Service law.
        Chairman Tom Davis. Mr. Davis.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman,
    and I would just assume either one of you might answer if you
    would. In your opinion, are you aware of any instance where DOD
    has been limited in a meaningful way by the Civil Service laws
    that exist? Anybody?
        Mr. Light. Yes. I mean, the employees themselves are
    telling us that. I mean, are you--I assume that embedded in the
    question is the notion that the law is not the problem, that it
    is the implementation at DOD. But I don't think that's the
    case. I think this is an encrusted statute that over the years
    has just become too dense and too difficult to manage. And I
    think that's why we see agencies tunnelling out all over the
    Federal Government to get away from it, and they are doing it
    in an entirely ad hoc fashion. So you have DOD going out 1 day,
    you have SEC going out another, IRS is headed out a different
    direction, FAA a few years ago dug out. Now we have the
    greatest breakout imagined in history.
        The agencies are saying we can't manage under this statute.
    It is too difficult to get the people in place and hold on to
    them.
        Mr. Davis of Illinois. And would you agree that additional
    flexibilities then would provide or take away some of the
    difficulty that they face?
        Mr. Light. All things being equal, I'd like to see Congress
    mandate a uniform template to govern the flexibilities of the
    kind that we saw developing in the homeland security
    legislation so that agencies operate with certain flexibilities
    but they are not given carte blanche to invent systems that are
    radically different or that subject their employees to
    radically different outcomes from other agencies. So I think
    it's letting them have flexibilities under certain conditions
    so that no employee is punished from having selected a job at
    agency X as opposed to agency Y.
        Mr. Davis of Illinois. The China Lake demonstration
    projects have been mentioned time and time and time again as an
    indication of what can happen. Mr. Harnage, have you studied
    those very much?
        Mr. Harnage. We have, and one that we have yet to look at
    is the one at GAO. The Comptroller, David Walker, has agreed
    for us to come in there and meet with the employees and talk
    about that system, see how satisfied the employees are.
        But, you know, there's a significant difference in the
    present demonstration projects and what's proposed in this
    legislation. The current demonstration projects can be
    expanded, providing the union agrees. Under this new proposed
    legislation, union wouldn't play any role in that. It would
    just be done. There is a significant difference.
        Where we have been asked to participate, we've been willing
    to do so. But most of the time it's simply, you can't play a
    role in deciding how this is going to be done. We just want
    your agreement that we can do it, and we don't write blank
    checks.
        Mr. Davis of Illinois. So, in your opinion, does this
    basically undercut the concept of collective bargaining, which
    is kind of a give and take, I'm saying a back and forth, as
    opposed to here it is?
        Mr. Harnage. Sure. And, you know, Mr. Davis, I don't agree
    that the current law is all the problem that it's made out to
    be. I believe if you asked the Director of OPM point blank:
    Does the law or the implementing regulations, is that the
    problem? And I believe she would tell you, no, that the problem
    is all of the bureaucracy that's involved in it such as filling
    a position that takes the approval of OMB rather than the
    approval of the supervisor who is charged with the mission that
    they've got to perform, that it takes approval all the way up
    the line to fill that position, that's the delay. It's not the
    law, and it's not the implementing regulation but the
    bureaucracy that these people have created.
        Now it's like the saying you kill your parents and then you
    throw yourself on the mercy of the court because you are an
    orphan. That's what DOD has done. They have created this
    bureaucracy that causes their problems, and now they are saying
    we are not responsible, the law is or the regulation is.
    Relieve us from all of this burden, and we'll do it right. They
    did not do it right the first time.
        Mr. Davis of Illinois. Thank you very much.
        Chairman Tom Davis. Thank you very much.
        Mrs. Davis.
        Mrs. Davis of Virginia. Thank you, Mr. Chairman.
        Dr. Light, you know, you said that there is time now for
    reform; and I think almost unanimously in this committee
    everybody has said there needs to be some reform. I don't think
    anyone is objecting to that. It's the way we go about the
    reform. And you said that the frontline employees are concerned
    about discipline, about poor performance, about filling
    positions. But is it necessary to give DOD every flexibility
    they've asked for in this bill for them to be able to handle
    disciplinary problems, poor performance and filling positions
    or could they not take care of those situations simply by
    having the flexibilities we gave DHS that we haven't had time
    to see how that works yet?
        Mr. Light. I think the answer is sort of a qualified yes. I
    don't think they need to have everything in that bill in order
    to get the job done. It is not the kind of blank check that you
    saw in DHS. We had all of two sentences in the original
    proposal coming over from the White House. It is a much more
    detailed statement. It's almost a ``damned if you do, damned if
    you don't.''
        Mrs. Davis of Virginia. It's more detailed but much broader
    than what left this House and was signed into law.
        Mr. Light. Absolutely, and I think passage of this bill
    coming on the heels of the homeland security would mark the end
    of the Civil Service system as we know it and the beginning of
    a new system. Whether you need to go that far on this bill is
    something for the committee to consider quite closely, but I
    don't think you can tinker your way out of this.
        I don't think it's the kind of thing--give the agency
    further instruction and go ahead and use those existing
    authorities. Those authorities are just not usable, so you have
    got to find some way between what we have currently got--and I
    don't know if it's the law or the bureaucracy, who knows which
    came first, but you have got to go beyond the kind of tinkering
    that we have seen over the last 12, 15 years in order to get
    the job done. It's just not working at the current level.
        Mrs. Davis of Virginia. I think you said a minute ago that
    what you would like to see is some sort of a blueprint that is
    used for all the agencies without giving them carte blanche to
    go out and do what they want to do, and I think that is
    probably what a lot of us would like to see. I've said it
    before and I'll say it again, once you pass this for DOD and
    you have it out there for DHS and you have it for TSA, HHS,
    Department of Education, all the other agencies are going to be
    lining up at our door; and we will have the same types of
    problems if we don't come up with something that is usable for
    the entire Federal Government as an outline of some sort.
        Mr. Light. Have you only noticed that we only deal with
    Civil Service reform for agencies that are in desperate trouble
    and that is the only time we help them out? It is an issue of
    thinking deliberatively about doing this and laying out a
    framework that will help agencies move ahead with the
    flexibilities that they do need.
        Mrs. Davis of Virginia. If, in fact, our Civil Service
    needs reform, then it needs reform throughout not just in
    certain agencies.
        Mr. Harnage, would you agree--I mean, we've heard--you have
    been in all the hearings I've been in here lately. We have
    heard the DOD say that they've had trouble with collective
    bargaining, with negotiating with the unions; and I think the
    example that they have given has been the one on the charge
    cards where the credit cards were used where they shouldn't
    have been and they had to negotiate with 2,200 local unions and
    that is why they want to go to national collective bargaining.
        Would that work for you all to give them the right to have
    national collective bargaining? Although we would probably
    disagree with them on what this bill does on national
    collective bargaining, would that be something that would
    satisfy the workers if there were national collective
    bargaining with the Secretary of Defense having the ability to
    negotiate locally if they felt it was something that was
    necessary?
        Mr. Harnage. If they were so agreeable to collective
    bargaining, we wouldn't be here today.
        Let's look at what we have really got. We've got collective
    bargaining at agency level at DLA, Defense logistics. We have
    it at DFAS, at DeCA, the commissaries. We've got it at the
    Marine Corps and at the command level in the Air Force, the Air
    Materiel Command. So we have experience at negotiating at the
    national level.
        But let me give you another experience. In Jacksonville,
    Florida, with the Navy command there which goes from Key West,
    FL, to Pax River, MD to Corpus Christi, TX--28 different
    unions, 28 different locals. We negotiated a contract, one
    contract, that covers all of those 28 people. In the last
    renegotiation we did it in less than 30 days, where previously
    all 28 took much longer to do individually.
        We are doing that because the admiral down there was
    willing to do it, and we agreed to the opportunity. It did not
    take national recognition. It did not take the Secretary of
    Defense to accomplish that. All it took was for them to stay
    out of the business of trying to operate the mission and let
    the admirals and the generals do their job.
        We can do that everywhere, but they have created an anti-
    union environment that causes us to have to work harder in
    order to move that recognition up. But when we move it up, it
    is the employees's choice, not the Secretary of Defense. And I
    think we have to listen very carefully to what he said: We are
    going to raise it up to the national level when we choose. We
    are going to talk about these things at the national level on
    subjects we choose to. And if we don't agree, I will make the
    decision.
        That's not collective bargaining. That is not even
    consultation.
        Mrs. Davis of Virginia. Thank you, Mr. Chairman. My time is
    up.
        Chairman Tom Davis. Thank you very much.
        Mr. Janklow.
        Mr. Janklow. Thank you very much, Mr. Chairman.
        I guess I come from a different part of the world. I'm like
    everybody else. We have a lot of good employees where I come
    from, a lot of very good employees. But if you ask them,
    they'll tell you that, too often, they're held up to public
    obloquy and ridicule, that the system is really stifling. The
    system is very adversarial. It's very structured. It lacks the
    ability to let one be creative. It's almost byzantine in terms
    of how people describe it. Yet, in spite of all that, the job
    gets done.
        What is it--and it isn't to me just a matter of the workers
    are right and management is wrong or management is wrong and
    the worker is right. Most management comes from the worker
    side. The vast majority of them do. Not the political
    appointees but the ones that are there day in and day out. And
    I just think we've won the most fabulous war activity that any
    nation could be engaged in, in spite of the system, not because
    it all works so well. I think in spite of the system, and part
    of it is the foe we were opposed to, and part of it is a lot of
    other things.
        And I don't want to minimize in any way shape or form the
    effort of anybody, because I don't do that. A lot of people had
    their lives on the line, and a lot of people had other people's
    lives in their hands every single day.
        Having said that, to you, Mr. Harnage, what is it that we
    need to do to fix what is broken in the Civil Service system?
    Unless you think it's not broke? I don't mean just a little off
    kilter, I mean broke. Do you think it's broke?
        Mr. Harnage. I think it certainly can use a considerable
    amount of improvement; and I would be most happy to work with
    any agency in making that improvement, including OPM.
        But the problem that I have is the examples that are given
    are usually hypothetical or extremes. For example, on the
    credit card, I'm scratching my head. The credit card grievance
    was used here as an example, national security?
        Mr. Janklow. Let me give you an example: promotion. Do you
    think it is inordinately long under normal circumstances to
    fill a slot by promotion?
        Mr. Harnage. No.
        Mr. Janklow. You don't?
        Mr. Harnage. No.
        Mr. Janklow. Do you, Ms. Kelley?
        Ms. Kelley. I do not. Under the agreements that we have
    negotiated with the agencies.
        Mr. Janklow. So where employees tell people like me that
    they think that is a real problem, apparently it doesn't fit
    the two unions that you two are involved in?
        Ms. Kelley. Well, I would suspect that some of those
    reports come from two other things. One is from a lack of
    funding that the agencies have. They announce promotions and
    then end up having to cancel them for budget reasons, and
    another is sometimes the lack of authority in the management
    chains who have the authority to make the decision on who gets
    the promotion. The processes take care of the rest.
        Mr. Janklow. Let's take the first one. I think the
    likelihood that there is going to be a lot more money or more
    money to take care of those problems isn't going to happen. I
    don't know what it's like for other Members of Congress, but
    every single group that I see that comes to my office, whether
    it is nutrition programs for children, prescription drugs for
    elderly, whether it is K-12 education, special education,
    higher education, whether it is people with Alzheimer's or
    muscular dystrophy, these are not screwy things. They are
    serious things that we deal with. All of them want more money.
    We are $400 billion in the hole this year at least. That is 40
    percent of $1 trillion in 1 year. I think the prospect of more
    money is not on anybody's radar, even advanced radar. I don't
    think it is.
        What is it, Mr. Light--the Volcker Commission, if I can
    call it that, how many are Democrats and how many are
    Republicans?
        Mr. Light. I think at the end it was five and five and
    Volcker.
        Mr. Janklow. That is the way it always is with him. Were
    they unanimous in their recommendations? Because these are all
    people that represent the broad spectrum of folks that have
    been in public life, very high-level, political hack appointees
    all of them.
        Mr. Light. I think that what they would say to you is that
    the report was an ``architectural rendering.'' That is Paul
    Volcker's favorite way of talking about it. It is up to you to
    put substance to it. That is punting the ball.
        Mr. Janklow. But they agree the system is broke.
        Mr. Light. Absolutely.
        And on pay for performance, pay banding, the Volcker
    Commission's position was that it should be the default
    position. If you could come up with something better, then
    prove it, but the default should be pay banding.
        Now I'd say on the China Lake experiment that never has
    such a small experiment launched so much enthusiasm. China Lake
    was a very small experiment, and I think we are pinning a lot
    of hope on it. But the Commission was convinced that the
    private sector experience with pay banding is robust enough so
    that it could work very well in the Federal Government, GAO
    being an example of a much more rigorous experiment.
        Mr. Janklow. Thank you, Mr. Chairman.
        Chairman Tom Davis. Thank you very much.
        Just a couple of comments, and then I will let you all
    react to this.
        E.J. Dionne in a Washington Post op-ed said former
    President Clinton was telling the Post's Dan Balz that he
    respected Rumsfeld's effort to modernize and streamline the
    military. He even said the Democrats seeking the Presidency
    might usefully be more like Rummy. I'd like to see our guys
    debate a lot about the structure of the military. I hope when
    the smoke clears from the Iraq some more attention would be
    give to Rumsfeld's ideas.
        Look, the J1 chief of plans for CENTCOM said the reason
    contractors are so heavily involved in Operation Iraqi Freedom
    were the concerns of getting civilians in a timely manner and
    concerns with having to deal with unions and restrictions
    unions place on management flexibility and conditions of
    employment. As a result, as of April 28th, there were 8,700
    contractor employees supporting Operation Iraqi Freedom, as
    opposed to 1,700 Federal civilian employees. In other words,
    the contractors represented 83 percent of that work force. That
    is not a good thing.
        We complain a lot about outsourcing, but we have to make
    the changes in the Civil Service if we are going to have that
    in-house capability as we do in SAIR. We created an in-house
    cadre in some of these areas where we could have some of that.
    We can't keep doing the same-old same-old. We have to make
    changes.
        Now we have set down a marker here. We are going to try to
    incorporate some of your concerns in this. But I would just
    honestly say for the average Federal employee looking for a
    future and the rewards and the kind of respect, pay that they
    deserve and that are appropriate, a Federal work force which
    shouldn't be 17 percent of the Operation Iraqi Freedom, that
    some place changes need to be made.
        We need to be positive about the things that could happen.
    We need to be positive, too, about some changes. Because the
    same-old same-old, we keep going straight down. That is the
    concern. We need to have an honest dialog.
        I will let you respond.
        Mr. Harnage. First, I'd say let's first agree on what the
    facts are, and then we can certainly deal with it. The example
    given by the first panel today on the ratio in the war is
    absolutely untrue. It's not true. They may have been that
    ratio, but during a time of national emergency, during a time
    of national security and during a time of war, there is no
    collective bargaining, and there is no collective bargaining
    agreement. There was nothing preventing them from using
    civilian employees except their own choosing because there was
    much more profit to be made by the contractors than there was
    by sending the civilians over there.
        The only complaint I got----
        Chairman Tom Davis. Why would they care about contractors
    making money?
        Mr. Harnage. I don't know? Why do they privatize so much
    without competition? Why do they fight us on accountability to
    show that they are not, in fact, making the savings that they
    claim they are?
        I don't know the answers to all of those questions, but I
    can tell you this the only complaint I got during the war in
    Iraq was for people not allowed to go. Not because they had to
    go, but because they weren't allowed to go. It is a very
    patriotic, dedicated civilian work force; and they are not the
    problem when it comes to war.
        Chairman Tom Davis. The work force is not the problem. The
    question is, are the rules the problem?
        Ms. Kelley. NTEU is not opposed to the need for change and
    to identify what those changes are. A blank piece of paper is
    not our idea of change that is going to be good for anybody.
        Some of the most, I think, creative things we have done in
    the collective bargaining arena we have done with the IRS. Now,
    interestingly, that happened I think for two reasons.
    Obviously, first, the IRS and NTEU were willing to do this,
    but, second, when the President rescinded the Executive order
    on partnership, just about every agency head took their lead
    from that and walked away from having day-to-day dealings with
    the unions.
        The IRS did not do that. The IRS Commissioner said, this
    makes good business sense; we have a lot of good work to do
    together, we are going to keep doing it. So we were working in
    partnership on the tough issues facing the agency.
        And then we agreed to do parallel bargaining at the same
    time and, in some cases, expedited bargaining on a 30-day
    schedule, for example, as Bobby had mentioned earlier.
        These are issues that we are more than willing to step up
    to, when the true problem can be identified, and the agency is
    willing to engage us in being a part of that solution. We are
    not only more than willing to do that, we want to do that.
        NTEU invites that opportunity so that employees can be
    involved and so that the solutions can then be embraced and
    rolled out and supported by everybody, for the good of the
    agency as well as the employees and the taxpayers.
        So we are not opposed to change. But I don't describe
    change as a blank piece of paper with sole authority.
        Mr. Burton. Thank you. Let me just respond.
        Staff was just saying that one of problems on the Sikorsky
    repairs, is an AFGE unit that they could not reach an agreement
    on in terms of repairing the helicopters out of Texas that
    needed to go, so they went private on that.
        They wanted to do that in-house. We will try to get to the
    bottom of that, and maybe you can help us get to the
    information. We have conflicting information between DOD and
    you. We want to get the facts.
        Mr. Harnage. I think we are going to find that there is
    very conflicting information on that. There is conflicting
    information where it takes--you know, the last hearing we took
    18 months to fire someone. Today, it only takes 9. The last
    hearing, it took 9 months to hire somebody, today it takes 18
    months. They need to get their--first, they need to get the
    facts, then they need to keep them straight.
        Mr. Burton. But it takes too long to hire people.
        Mr. Harnage. It takes too long, but it is not the law or
    the regulation. It doesn't take too long to fire somebody if
    anybody, easiest case scenario, can be fired in 30 days, not 9
    months.
        And I have been wondering where this poor performer was
    that they keep talking about. The day they identified him that
    manager that took 9 months to fire a poor performer is the poor
    performer.
        Mr. Light. I have got to disagree on this issue. Federal
    employees are telling us over and over again that there is some
    flaw in the disciplinary process. And it is the hard-working
    Federal employee who is being punished by this.
        They are looking at this and describing the disciplinary
    process as ineffective. Now, is this just an urban legend, or
    is there some fact behind it?
        And that is part of the issue that I think you see being
    debated here, that we have very little knowledge about our work
    force. But, I am telling you, it comes up over and over again
    in terms of the disparity between the Federal and the private
    and nonprofit sectors on ability to discipline or go forward.
        It could be a lack of guts among managers. Maybe they are
    just terrified to ever take a stand.
        Mr. Harnage. Let's get something straight. I realize--I was
    wondering what employees Mr. Light is talking to, since I
    represent 600,000 of them, and over 200,000 are the ones we are
    specifically talking about today.
        Now, I understand how he talks to them, through a survey. I
    had a problem with that survey too, when it talked about poor
    performance.
        First of all, it didn't identify who was complaining about
    a poor performer. Was it managers complaining about poor
    performers? Was it employees complaining about poor managers?
    And was it good old boys complaining about the diversity? It
    has allowed the potential of legitimizing discrimination.
        If I didn't like you, then I could complain about you being
    a poor performer. And I can get away with it, putting it in
    this survey; that survey had absolutely no credibility.
        Mr. Light. I don't think we are talking about the same
    survey. But I am telling you, the front-line employees, in
    terms of careful survey research, are reporting higher levels
    of poor performance than their managers and their supervisors.
    It is the supervisors and the higher SES and the higher-grade
    civil servants in the system who like the way things are. They
    are the ones with the resources. They are the ones with no
    vacancies.
        It is down at the bottom where you find the greatest
    frustration with this current system.
        Chairman Tom Davis. Needless to say, I represent a lot of
    the Federal employees. Really, attitudes are very split among
    civil servants on this issue. There is a fear on the one hand
    that things could get worse, but there is a yearning that they
    can get better.
        How we do split that and do the right thing is going to be
    what we are wrestling with over the next few weeks. But you all
    have added a lot to the debate. Is there anything else anyone
    wants to add before we conclude for the day?
        Ms. Turner. I just wanted to mention one thing.
        Of course, I am representing on the management side. I
    think one of our concerns is that performance appraisals and
    the pass-fail system really fail. It doesn't work well for a
    manager. It just allows for mediocrity.
        So in that respect, as far as having to relieve someone
    from duty, if you had a better performance appraisal system, it
    would be helpful. And also we all do recognize that there are
    barriers when you are having problems with hiring and firing.
    What we need to do is to get some flexibility in there before
    we overhaul the whole system.
        Ms. Kelley. Chairman Davis, I would just ask that this
    committee and the Congress think very, very seriously about the
    speed with which a change like this should even be considered
    or voted on. This is not a definable change. This is a huge,
    undefined change, the ramifications of which are unknown. And
    until there are results from a place like Homeland Security,
    which has not even started to use the flexibilities that they
    were given, I would urge that this be taken off of a fast track
    to provide adequate time to realize the impact that it could
    have.
        Chairman Tom Davis. Unfortunately, this committee doesn't
    set that agenda. We have a vehicle going through where we can
    either be part of it or we can sit back and let another
    committee take control of this. We elected not to do that.
        But let me assure you that however speed we run here,
    whether it is tomorrow or next week or whatever, and whatever
    we do on the floor, there is a conference after that. We are in
    constant touch with the Senate. I hope we will be in constant
    touch with you. And I think we will try to keep this better as
    it moves through the process.
        I don't want anyone to sit here, at the end of tomorrow if
    we should mark this up, thinking it is the end of the world or
    that I have lost flexibility of anything else. This is a
    dynamic process. We understand--at least my belief, I think the
    majority of the committee's belief--we need to make some
    changes. We share some of the concerns that you have
    articulated.
        We are not exactly sure how to get at that, or at what
    stage we do that. But I hope that we will continue to stay in
    touch as we move through this, because this is a dynamic
    process that will change drastically even when it leaves here.
    I just want to assure you of that and put that on the record as
    well.
        You all have added significantly, I think, to the debate on
    this and to our deliberations. I am sorry more members weren't
    here to hear all of this, but they will get it. We will digest
    it for them, and I am sure both sides will make sure that
    Members are aware of that.
        But you have been articulate spokespeople for your
    particular points of view. We appreciate it. I just again want
    to thank you for taking the time out of your busy schedules to
    appear before us today.
        And the committee stands adjourned.
        [Whereupon, at 2:40 p.m., the committee was adjourned.]
        [The prepared statement of Hon. C.A. Dutch Ruppersberger
    and additional information submitted for the hearing record
    follows:]
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