[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

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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.''
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    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:]
[GRAPHIC] [TIFF OMITTED] T7869.027

[GRAPHIC] [TIFF OMITTED] T7869.028

    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.
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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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