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





   ESPRIT DE CORPS: RECRUITING AND RETAINING AMERICA'S BEST FOR THE 
        FEDERAL CIVIL SERVICE, H.R. 1601, S. 129, AND H.R. 3737

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON CIVIL SERVICE
                        AND AGENCY ORGANIZATION

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                                   ON

                          H.R. 1601 AND S. 129

  TO PROVIDE FOR REFORM RELATING TO FEDERAL EMPLOYMENT, AND FOR OTHER 
                                PURPOSES

                                 AND ON

                               H.R. 3737

   TO INCREASE THE MINIMUM AND MAXIMUM RATES OF BASIC PAY PAYABLE TO 
           ADMINISTRATIVE LAW JUDGES, AND FOR OTHER PURPOSES

                               __________

                           FEBRUARY 11, 2004

                               __________

                           Serial No. 108-163

                               __________

       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
94-772                      WASHINGTON : DC
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                     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
NATHAN DEAL, Georgia                 C.A. ``DUTCH'' RUPPERSBERGER, 
CANDICE S. MILLER, Michigan              Maryland
TIM MURPHY, Pennsylvania             ELEANOR HOLMES NORTON, District of 
MICHAEL R. TURNER, Ohio                  Columbia
JOHN R. CARTER, Texas                JIM COOPER, Tennessee
MARSHA BLACKBURN, Tennessee          ------ ------
------ ------                                    ------
------ ------                        BERNARD SANDERS, Vermont 
                                         (Independent)

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

         Subcommittee on Civil Service and Agency Organization

                   JO ANN DAVIS, Virginia, Chairwoman
TIM MURPHY, Pennsylvania             DANNY K. DAVIS, Illinois
JOHN L. MICA, Florida                MAJOR R. OWENS, New York
MARK E. SOUDER, Indiana              CHRIS VAN HOLLEN, Maryland
ADAH H. PUTNAM, Florida              ELEANOR HOLMES NORTON, District of 
NATHAN DEAL, Georgia                     Columbia
MARSHA BLACKBURN, Tennessee          JIM COOPER, Tennessee

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     Ron Martinson, Staff Director
                Chris Barkley, Professional Staff Member
                            Reid Voss, Clerk
            Tania Shand, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 11, 2004................................     1
Texts of:
        H.R. 1601................................................     5
        H.R. 3737................................................    39
        S. 129...................................................    42
Statement of:
    Dugan, Kevin, vice president, Association for Administrative 
      Law Judges; John Gage, national president, American 
      Federation of Government Employees; Colleen M. Kelley, 
      national president, National Treasury Employees Union; and 
      Carl DeMaio, president, the Performance Institute..........   117
    Sanders, Ronald P., Associate Director for Strategic Human 
      Resources Policy, Office of Personnel Management...........   101
Letters, statements, etc., submitted for the record by:
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, prepared statement of...................    98
    Davis, Hon. Jo Ann, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     3
    DeMaio, Carl, president, the Performance Institute, prepared 
      statement of...............................................   182
    Dugan, Kevin, vice president, Association for Administrative 
      Law Judges, prepared statement of..........................   119
    Gage, John, national president, American Federation of 
      Government Employees, prepared statement of................   132
    Kelley, Colleen M., national president, National Treasury 
      Employees Union, prepared statement of.....................   166
    Sanders, Ronald P., Associate Director for Strategic Human 
      Resources Policy, Office of Personnel Management, prepared 
      statement of...............................................   104

 
   ESPRIT DE CORPS: RECRUITING AND RETAINING AMERICA'S BEST FOR THE 
        FEDERAL CIVIL SERVICE, H.R. 1601, S. 129, AND H.R. 3737

                              ----------                              


                      WEDNESDAY, FEBRUARY 11, 2004

                  House of Representatives,
          Subcommittee on Civil Service and Agency 
                                      Organization,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:03 p.m., in 
room 2154, Rayburn House Office Building, Hon. Jo Ann Davis of 
Virginia (chairman of the subcommittee) presiding.
    Present: Representatives Jo Ann Davis of Virginia, Norton, 
Danny K. Davis of Illinois, and Van Hollen.
    Staff present: Ron Martinson, staff director; B. Chad 
Bungard, deputy staff director and chief counsel; Chris 
Barkley, professional staff member; John Landers, detailee; 
Reid Voss, clerk; Shannon Meade, legal intern; Michelle Ash, 
minority senior legislative counsel; Tania Shand, minority 
professional staff Member; and Teresa Coufal, minority 
assistant clerk.
    Ms. Davis of Virginia. The subcommittee on Civil Service 
and Agency Organization will come to order.
    Again I want to thank you all for joining us here today. We 
began the second term of the 108th Congress in much the same 
way that we did the first--with an exploration of what steps we 
can take to attract, motivate, and train the best qualified 
workers for the Federal Government. Last year this 
subcommittee's hearing focused on the broad subject of 
compensation reform. Today we will be looking at two specific 
legislative proposals. These legislative proposals, if enacted 
into law, would enhance management flexibilities to attract and 
retain the best and the brightest across the government and 
would alleviate the problem of pay compression for 
administrative law judges.
    Taken together, these two initiatives represent the major 
point of our recruitment and retention strategy--to address the 
very real pay, benefit, and personnel issues that keep 
potential employees from joining the Civil Service and 
sometimes drive our best employees and managers away.
    The first piece of legislation is H.R. 1601, the Federal 
Workforce Flexibility Act, which I introduced last year. This 
bill would do many things to improve the effectiveness of the 
Federal Government, including expanding agencies' abilities to 
offer recruitment, retention, and relocation bonuses, allowing 
agencies to offer enhanced annual leave benefits to new mid-
career hires, emphasizing training, streamlining, critical pay 
authority, and making it easier for agencies to establish 
personnel demonstration projects.
    A companion bill, Senate bill 129, has made its way through 
the Senate Governmental Affairs Committee with some changes.
    The second bill is H.R. 3737, the Administrative Law Judges 
Pay Reform Act, which I introduced earlier this year. This 
legislation addresses the large problem of pay compression 
among administrative law judges. The 1,400 ALJs across the 
government are responsible for hearing disputes over their 
agencies' decisions. Most of them work at the Social Security 
Administration, where they make judgments on citizens' appeals. 
They play a crucial role. Pay compression caused by a statutory 
cap on ALJ salaries is especially worrisome in high-cost areas 
such as Boston, Chicago, Los Angeles, New York, and San 
Francisco. This problem threatens the ability to hire and 
retain an appropriate number of administrative law judges. 
Until recently, members of the Senior Executive Service were 
subject to the same cap, but that problem was remedied for the 
SES last year. That legislation, however, failed to address the 
ALJ situation.
    I want to again thank our witnesses for being here today, 
and I look forward to hearing your thoughts on these pieces of 
legislation.
    I'm going to give my ranking minority member here a chance 
to get his breath, and then I am going to recognize him to see 
if he has any comments.
    [The prepared statement of Hon. Jo Ann Davis, and the texts 
of H.R. 1601, H.R. 3737, and S. 129 follow:]

[GRAPHIC] [TIFF OMITTED] T4772.001

[GRAPHIC] [TIFF OMITTED] T4772.002

[GRAPHIC] [TIFF OMITTED] T4772.068

[GRAPHIC] [TIFF OMITTED] T4772.069

[GRAPHIC] [TIFF OMITTED] T4772.070

[GRAPHIC] [TIFF OMITTED] T4772.071

[GRAPHIC] [TIFF OMITTED] T4772.072

[GRAPHIC] [TIFF OMITTED] T4772.073

[GRAPHIC] [TIFF OMITTED] T4772.074

[GRAPHIC] [TIFF OMITTED] T4772.075

[GRAPHIC] [TIFF OMITTED] T4772.076

[GRAPHIC] [TIFF OMITTED] T4772.077

[GRAPHIC] [TIFF OMITTED] T4772.078

[GRAPHIC] [TIFF OMITTED] T4772.079

[GRAPHIC] [TIFF OMITTED] T4772.080

[GRAPHIC] [TIFF OMITTED] T4772.081

[GRAPHIC] [TIFF OMITTED] T4772.082

[GRAPHIC] [TIFF OMITTED] T4772.083

[GRAPHIC] [TIFF OMITTED] T4772.084

[GRAPHIC] [TIFF OMITTED] T4772.085

[GRAPHIC] [TIFF OMITTED] T4772.086

[GRAPHIC] [TIFF OMITTED] T4772.087

[GRAPHIC] [TIFF OMITTED] T4772.088

[GRAPHIC] [TIFF OMITTED] T4772.089

[GRAPHIC] [TIFF OMITTED] T4772.090

[GRAPHIC] [TIFF OMITTED] T4772.091

[GRAPHIC] [TIFF OMITTED] T4772.092

[GRAPHIC] [TIFF OMITTED] T4772.093

[GRAPHIC] [TIFF OMITTED] T4772.094

[GRAPHIC] [TIFF OMITTED] T4772.095

[GRAPHIC] [TIFF OMITTED] T4772.096

[GRAPHIC] [TIFF OMITTED] T4772.097

[GRAPHIC] [TIFF OMITTED] T4772.098

[GRAPHIC] [TIFF OMITTED] T4772.099

[GRAPHIC] [TIFF OMITTED] T4772.100

[GRAPHIC] [TIFF OMITTED] T4772.101

[GRAPHIC] [TIFF OMITTED] T4772.102

[GRAPHIC] [TIFF OMITTED] T4772.103

[GRAPHIC] [TIFF OMITTED] T4772.104

[GRAPHIC] [TIFF OMITTED] T4772.105

[GRAPHIC] [TIFF OMITTED] T4772.106

[GRAPHIC] [TIFF OMITTED] T4772.107

[GRAPHIC] [TIFF OMITTED] T4772.108

[GRAPHIC] [TIFF OMITTED] T4772.109

[GRAPHIC] [TIFF OMITTED] T4772.110

[GRAPHIC] [TIFF OMITTED] T4772.111

[GRAPHIC] [TIFF OMITTED] T4772.112

[GRAPHIC] [TIFF OMITTED] T4772.113

[GRAPHIC] [TIFF OMITTED] T4772.114

[GRAPHIC] [TIFF OMITTED] T4772.115

[GRAPHIC] [TIFF OMITTED] T4772.116

[GRAPHIC] [TIFF OMITTED] T4772.117

[GRAPHIC] [TIFF OMITTED] T4772.118

[GRAPHIC] [TIFF OMITTED] T4772.119

[GRAPHIC] [TIFF OMITTED] T4772.120

[GRAPHIC] [TIFF OMITTED] T4772.121

[GRAPHIC] [TIFF OMITTED] T4772.122

[GRAPHIC] [TIFF OMITTED] T4772.123

[GRAPHIC] [TIFF OMITTED] T4772.124

[GRAPHIC] [TIFF OMITTED] T4772.125

[GRAPHIC] [TIFF OMITTED] T4772.126

[GRAPHIC] [TIFF OMITTED] T4772.127

[GRAPHIC] [TIFF OMITTED] T4772.128

[GRAPHIC] [TIFF OMITTED] T4772.129

[GRAPHIC] [TIFF OMITTED] T4772.130

[GRAPHIC] [TIFF OMITTED] T4772.131

[GRAPHIC] [TIFF OMITTED] T4772.132

[GRAPHIC] [TIFF OMITTED] T4772.133

[GRAPHIC] [TIFF OMITTED] T4772.134

[GRAPHIC] [TIFF OMITTED] T4772.135

[GRAPHIC] [TIFF OMITTED] T4772.136

[GRAPHIC] [TIFF OMITTED] T4772.137

[GRAPHIC] [TIFF OMITTED] T4772.138

[GRAPHIC] [TIFF OMITTED] T4772.139

[GRAPHIC] [TIFF OMITTED] T4772.140

[GRAPHIC] [TIFF OMITTED] T4772.141

[GRAPHIC] [TIFF OMITTED] T4772.142

[GRAPHIC] [TIFF OMITTED] T4772.143

[GRAPHIC] [TIFF OMITTED] T4772.144

[GRAPHIC] [TIFF OMITTED] T4772.145

[GRAPHIC] [TIFF OMITTED] T4772.146

[GRAPHIC] [TIFF OMITTED] T4772.147

[GRAPHIC] [TIFF OMITTED] T4772.148

[GRAPHIC] [TIFF OMITTED] T4772.149

[GRAPHIC] [TIFF OMITTED] T4772.150

[GRAPHIC] [TIFF OMITTED] T4772.151

[GRAPHIC] [TIFF OMITTED] T4772.152

[GRAPHIC] [TIFF OMITTED] T4772.153

[GRAPHIC] [TIFF OMITTED] T4772.154

[GRAPHIC] [TIFF OMITTED] T4772.155

[GRAPHIC] [TIFF OMITTED] T4772.156

[GRAPHIC] [TIFF OMITTED] T4772.157

[GRAPHIC] [TIFF OMITTED] T4772.158

[GRAPHIC] [TIFF OMITTED] T4772.159

    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman. I'm pleased to join with you in convening this 
hearing and in welcoming our witnesses today.
    Given the increased demand by Federal agencies and some 
Members of Congress for human capital flexibilities in the 
Civil Service system, I'm not surprised that the first hearing 
of this session is to consider legislation that would give 
Federal agencies flexibilities for recruitment and retention 
bonuses, relocation allowances, personnel management 
demonstration projects, training, and direct hire authority.
    This hearing is timely. Last week we began to see the 
results of granting Federal agencies human capital 
flexibilities that do not address the problems the 
flexibilities portend to correct. Federal Aviation 
Administration received exemptions from Title 5 in 1995 so it 
could establish its own personnel system. Though the 1995 
legislation initially exempted FAA from Chapter 71 of Title 5, 
which sets forth the rules for collective bargaining and labor/
management relations, in 1995 Congress restored FAA's coverage 
under Chapter 71.
    For reasons my staff is researching and trying to 
comprehend, Congress has also created a separate bargaining 
procedure whereby if the FAA labor and management reach an 
impasse in their negotiations, matters being negotiated must be 
transmitted to Congress for a final determination. Last month 
the FAA transmitted their unresolved labor/management issues to 
Congress. If Congress does not act within 60 days, management's 
proposal for its personnel system is implemented. Members of 
Congress and staff must get into the minutia of the labor/
management agreement and do so within 60 days or management 
automatically gets what it wants. This process clearly creates 
more problems than it solves.
    Last year congressional Democrats and employee 
organizations saw the wolf in sheep's clothing and fought the 
human capital provisions in the Department of Defense 
reauthorization bill, but to no avail. Last week DOD briefed 
our staff on the draft proposal for its new personnel system. 
It was an outrage. Under the draft proposal, DOD employees 
could still join unions, but under a new fee-for-service 
arrangement. Employees would pay a fee to contract with Union 
representation. DOD argued it needed broad exemptions from 
existing personnel laws for national security reasons. What 
impact do union dues have on national security?
    The proposal also calls for excluding additional groups of 
employees from collective bargaining. No reasonable explanation 
was given for the exclusions.
    Granting Federal agencies flexibilities that do not address 
well documented problems are not clear solutions to these 
problems and a disservice to Federal employees and the 
taxpayers. We can and should do better by Federal employees who 
have devoted their lives to serving the American public.
    Again, Madam Chairwoman, I thank you for holding this 
hearing and look forward to the testimony of our witnesses.
    [The prepared statement of Hon. Danny K. Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.003
    
    [GRAPHIC] [TIFF OMITTED] T4772.004
    
    Ms. Davis of Virginia. Thank you, Mr. Davis. It is always a 
pleasure to have you here as our ranking minority member, and 
you always bring so much to the table.
    I would like to ask Ms. Norton if you have an opening 
statement.
    Ms. Norton. Thank you very much, Madam Chairwoman. I 
appreciate the bipartisan way in which you have worked with us 
on this committee. When I saw the name of this hearing, I am 
sure we--and, indeed, I'm sure that it is your intent that we 
deal with a major problem in the Federal work force. As it 
says, ``Esprit de Corps: Recruiting and Retaining America's 
Best Civil Service,`` yet when I came to the hearing and saw 
people lined outside, Madam Chairwoman, I wondered if we were 
giving away money the way you see people lined outside the 
Appropriations Committee. No, we are not giving away money. It 
looks like the administration is taking away rights. And the 
walls are lined, as well they should be.
    We had a very troublesome full committee set of events on 
both DOD and the new Homeland Security Committee, and it looks 
like we are in for another set of troublesome hearings. I don't 
stoop to the pejorative very often, but the notion of saying to 
a union that it has to receive the votes of ``X'' number--in 
this case 50 percent--in order to qualify to represent workers 
must be unprecedented in the history of labor/management 
relations in the United States of America.
    I recognize that this is only a proposal, but I think we 
ought to send a shot across the bow back from where this 
proposal came that it is high time to sit down with the people 
who represent the people who work for the Federal Government 
and try to get proposals that have some bipartisan content 
before you make your way to the Congress. I haven't seen the 
proposal, but it has already been leaked and aired in the paper 
and the workers know about the proposal and are absolutely 
outraged at the proposal, and I just hope that as we now are in 
the beginning of a new hearing year that we can dispose of 
matters like this by sending them home and telling them to try 
again.
    Thank you very much, Madam Chairwoman.
    Ms. Davis of Virginia. Thank you, Ms. Norton.
    I ask unanimous consent that all Members have 5 legislative 
days to submit written statements and questions for the hearing 
record, and that any answers to written questions provided by 
the witnesses also be included in the record.
    Without objection, it is so ordered.
    I ask unanimous consent that all exhibits, documents, and 
other materials referred to by Members and the witnesses may be 
included in the hearing record, and that all Members be 
permitted to revise and extend their remarks.
    Without objection, it is so ordered.
    On the first panel we are going to hear from Mr. Ronald 
Sanders, Associate Director for Strategic Resources Policy at 
the Office of Personnel Management.
    It is standard practice for this committee to administer 
the oath to all witnesses. If all the witnesses could please 
stand, I will administer the oath. I'm going to go ahead and do 
it for both panels so that we can just take care of it all at 
one time.
    Raise your right hands.
    [Witnesses sworn.]
    Ms. Davis of Virginia. Let the record reflect that the 
witnesses have answered in the affirmative.
    You may be seated.
    Mr. Sanders, we have your written testimony in the record, 
and I will ask you if you'd like to summarize it. We will 
recognize you for 5 minutes.

    STATEMENT OF RONALD P. SANDERS, ASSOCIATE DIRECTOR FOR 
     STRATEGIC HUMAN RESOURCES POLICY, OFFICE OF PERSONNEL 
                           MANAGEMENT

    Mr. Sanders. Yes, ma'am. Thank you. Madam Chairwoman, I 
appreciate the opportunity to appear before you today to 
address H.R. 1601, the Federal Workforce Flexibility Act of 
2004. It has also been introduced in the Senate, with certain 
differences that I will address, as S. 129. I will also speak 
to H.R. 3737, the Administrative Law Judges Pay Reform Act.
    I propose to discuss each of the specific provisions of 
these bills, providing OPM's views on each. I'll begin with 
those that are common to the House and Senate bills, address 
those that are unique, and then treat H.R. 3737 last.
    Both House and Senate versions of the bill provide Federal 
agencies additional flexibility in offering financial 
incentives to recruit, retain, and relocate top talent. We 
strongly support these flexibilities. By allowing agencies to 
pay larger incentives and to provide them in different ways--
for example, in lump sums or installments--the proposed 
legislation would materially improve our ability to compete for 
the best and brightest, one of Director James' top priorities. 
In fact, she specifically mentioned the use of incentives in 
this regard as part of her top 10 list of things agencies can 
do to improve hiring issued just yesterday.
    Except for its extension of these authorities to political 
appointees, we would prefer the House version of the bill, 
which simply replaces existing flexibilities with new ones 
without adding any new reporting requirements. OPM strongly 
supports most other provisions that are common to both House 
and Senate versions of the bill. Both bills would provide OPM 
with the responsibility for granting and reporting individual 
agency requests for critical pay for their superstars. The 
bills also establish a higher annual leave accrual rate for 
senior executives and professionals, and allow agencies to 
credit non-Federal work experience to establish a higher annual 
leave accrual rate for new mid-career entrants.
    Finally, both bills would eliminate potentially anomalous 
annuity computations that disadvantage employees when part-time 
service is involved.
    However, we do not believe it necessary at this time for 
the bill to require that agencies establish and appoint a 
training officer, especially since the Chief Human Capital 
Officers Act of 2002 is relatively new. According to that act, 
training and development are among a Chief Human Capital 
Officer's principal responsibilities, and on the merits we 
believe that that is exactly right. That's the only way to 
achieve an integrated approach to strategic management of an 
agency's human capital, and CHCOs should be given time to 
tackle this very important issue.
    The House includes a number of very complicated technical 
provisions that would correct anomalies that have resulted from 
the implementation of locality pay under the Federal Employees 
Pay Comparability Act. These anomalies have to do with complex 
inter-relationships between locality pay and special rates--
that's an under-statement--and the impact on pay retention when 
employees are covered by one or both. These provisions were in 
the President's original Managerial Flexibility Act and we urge 
their passage. We also thank you for your leadership in 
continuing to champion them.
    The House bill also includes streamlined personnel 
demonstration project authority. Madam Chairwoman, that 
authority is fine as far as it goes. It is based on a strategy 
for making incremental improvements in our Civil Service system 
that can be traced back to the late 1970's. While we always 
appreciate more flexibility to deal with outmoded personnel 
rules, a new model has also emerged. First embodied in the 
Homeland Security Act and since continued in DOD's National 
Security Personnel System, that model sets forth the principles 
and process for modernizing our Civil Service system without 
compromising any of the core rights and protections that make 
it so great.
    Madam Chairwoman, you have been one of the architects of 
this new approach, and we thank you for your leadership in that 
endeavor. We urge you to continue to work with us to explore 
making our Civil Service system the best in the world.
    The Senate version of the bill would provide Federal 
employees with additional compensatory time off for each hour 
spent in travel status away from their duty station. We do not 
support this proposal. At present there are provisions in Title 
5 U.S. Code and case law under the Fair Labor Standards Act to 
require compensation for Federal employees in travel status 
under certain circumstances, and there is no compelling 
business case to provide additional compensatory time off in 
this regard.
    We do support the technical amendments to S. 129 that 
confirm the longstanding practice of interpreting the term 
``military service'' to include service as a cadet or 
midshipman at the Air Force, Army, Coast Guard, and Naval 
Academies. This practice has been brought into question by 
appeals court decisions, and we believe this legislation is 
necessary to leave no doubt.
    Finally, let me address the stand-alone provisions of H.R. 
3737, which would reform the pay system for administrative law 
judges by increasing the minimum and maximum pay rates. The 
statutory minimum and maximum rates of basic pay would be 
linked to the rates for level III of the executive schedule 
instead of level IV. More importantly, the maximum rate of 
locality adjusted basic pay would be increased from the rate 
for level III to the rate for level II of the executive 
schedule, which is the rate payable to Federal district court 
judges. We oppose this bill.
    While the impetus behind this legislation is to provide 
parity with the new Senior Executive Service pay for 
performance system, comparisons with that new system are just 
not appropriate. The new SES system is exclusively performance 
based. There are no more automatic or across-the-board 
increases, and in that light it would be unfair to do so for 
ALJs.
    Moreover, while there is compression, there is no 
compelling evidence of a recruiting or retention problem 
amongst ALJs sufficient to warrant such extraordinary 
treatment.
    We sincerely value the contributions of the ALJ corps, but 
for the reasons set forth above and in my written statement we 
must oppose H.R. 3737.
    Madam Chairwoman, thank you for the opportunity to testify 
on these important matters. I would be happy to answer any 
questions.
    Ms. Davis of Virginia. Thank you, Mr. Sanders. It is always 
a pleasure to have you here as one of our witnesses.
    [The prepared statement of Mr. Sanders follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.005
    
    [GRAPHIC] [TIFF OMITTED] T4772.006
    
    [GRAPHIC] [TIFF OMITTED] T4772.007
    
    [GRAPHIC] [TIFF OMITTED] T4772.008
    
    [GRAPHIC] [TIFF OMITTED] T4772.009
    
    [GRAPHIC] [TIFF OMITTED] T4772.010
    
    Ms. Davis of Virginia. I'd like to now move to the question 
and answer period, and I will yield first to our Civil Service 
Subcommittee ranking member, Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Mr. Sanders, based upon the briefing that DOD has given to 
us, it has been pretty clear that there was no real 
collaboration with OPM. I didn't get the impression that there 
was. As Federal agencies receive more flexibilities from Title 
5, how does OPM see itself maintaining or holding on to some 
oversight authority or responsibility?
    Mr. Sanders. I think the Congress, Mr. Davis, in both 
cases--Homeland Security and DOD--has provided OPM a central 
and pivotal role in that regard. I will only hearken back to 
something that Mrs. Davis said. This process is just now 
beginning, and OPM and DOD have begun their internal 
collaborations, and then DOD and OPM will begin their 
collaborations with labor unions and other employee 
organizations, so while this was preliminary and was briefed as 
such, I think there is a long way to go.
    Mr. Davis of Illinois. I don't want to appear that I've got 
more confidence in OPM than I do some of the agencies, but I 
guess I really do. I'm wondering, do you think that maybe we 
need to provide OPM with more authority as a part of its role 
and mission--that is, if we are going to be able to 
comprehensively develop approaches to dealing with the entire 
Federal system, as opposed to some agencies operating perhaps 
one way and other agencies operating another way, which means 
that employees would not across the board have the same system 
that they're working under.
    Mr. Sanders. I know that Director James takes her 
responsibility under both the Homeland Security Act and the 
National Security Personnel System authorizing legislation very 
seriously. That role is virtually identical. It provides in 
both cases for the Cabinet Secretary and the OPM Director to 
jointly prescribe the establishing regulations. That's a pretty 
important and pretty powerful role and, as I said, I think 
Director James understands the charge she has been given both 
by the President and by the Congress to ensure that those 
rights that are enumerated in both pieces of legislation are 
protected and preserved, at the same time ensuring and 
affording those agencies the flexibility they need to deal with 
their particular missions. It is that balance that I think OPM 
has been charged with striking, and I think the role that the 
statute provides for the Director strikes that right balance.
    Mr. Davis of Illinois. In his written testimony Mr. DeMaio, 
president of the Performance Institute, suggests that Congress 
should wait until the Department of Homeland Security and 
Department of Defense implement their new systems before 
granting Federal agencies additional pay flexibilities. Do you 
agree or disagree with that? Or do you think that it might be 
prudent for us to get a look at what happens? I've always been 
told that seeing is believing, and that sometimes having 
experience to base a decision upon--do you think it might be 
helpful if we were to wait and see what happens there before 
moving further ahead?
    Mr. Sanders. That is certainly Congress' prerogative, but, 
with all due respect, I think we have had lots of experience 
with at least various models of, for example, pay reform, and 
literally about a quarter century worth, and there has been 
lots of fine tuning. You mentioned FAA. There are a number of 
other agencies that have been experimenting with this, that 
have been perfecting this, and to the extent that those two 
efforts build on that experience--and I believe they have and 
will--then I'm not sure that it is necessary to wait to simply 
add more to what we already know. I think we have known now for 
some time that the General Schedule needs to be reformed.
    Mr. Davis of Illinois. Ms. Norton mentioned in her opening 
statement the fact that there were so many people here, and 
more than we are accustomed to seeing. What do you attribute 
this to, or would you attribute anything about this particular 
hearing and the numbers of people that have expressed an 
interest?
    Mr. Sanders. I know this is AFGE's annual legislative 
conference, so I suspect they are in town and want to see our 
congressional process at work.
    Mr. Davis of Illinois. Thank you very much. [Laughter.]
    Ms. Davis of Virginia. We will have order, please.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman. Thank you, Mr. Sanders.
    Ms. Davis of Virginia. Thank you, Mr. Davis.
    I would like to remind the Members and the witnesses, that 
this hearing is on H.R. 1601 and H.R. 3737, which actually has 
nothing to do, as such, with pay for performance. It is looking 
at ways to recruit and retain.
    Mr. Sanders, in that regard, how many recruitment, 
retention, and relocation bonuses are paid per year under 
current law? Do you have any idea?
    Mr. Sanders. I don't have that number off the top of my 
head. We can provide it for the record.
    I can tell you that it is not many. For a variety of 
reasons--and I think generally good ones--they are used 
sparingly. There are funding constraints, but I think that is 
generally a good thing because when they are used they are used 
for critical purposes. I've had experience in a couple of 
agencies where we've used them, where we have managed to find 
the money because the job or the individual was that important 
to us, and I think the situation the way it exists today with 
these added flexibilities would provide just the right tools we 
need to compete.
    Ms. Davis of Virginia. Do you believe that we will see 
expanded use of recruitment, retention, and relocation bonuses 
under the new authority that is in H.R. 1601 and if funding may 
be a major obstacle? Do you think it would be used? And do you 
think it is necessary to recruit and retain?
    Mr. Sanders. I think it is necessary. I think it will be 
used. Again, I don't think it is going to be used so much in 
such a widespread way that someone would suggest abuse. Again, 
where there is a will there is a way, and when the job is 
important enough and the individual is talented enough to 
recruit, retain, or relocate, these incentives have been used. 
I think what this bill will do is provide a lot more room for 
creativity in their use.
    Let me underscore one thing. As the Congress has done in 
the bill, there is a service payback commitment, so the 
Government is going to get a return on that investment, either 
through the individual's service, or if the individual leaves 
prematurely under certain circumstances, through a payback 
requirement. So I think that is the right balance there, as 
well.
    Ms. Davis of Virginia. How does OPM view the merits of the 
payment of bonuses as opposed to increasing the pay grade?
    Mr. Sanders. I think the two have to be looked at together, 
because increases in grade or permanent promotions or pay 
adjustments to base salary are permanent. I mean, the typical 
strategy is to reward high performance with a bonus 1, 2, or 3 
years until it is clear that the individual is going to sustain 
that high level, and then award that individual a base pay 
adjustment--I think that's the way it has worked for many 
years--so that we can, in fact, recognize high performers for 
one-time acts and over a sustained period. I think that 
combination will work very well.
    Ms. Davis of Virginia. So OPM prefers the bonuses as 
opposed to raising the scale, pay grade?
    Mr. Sanders. I think certainly the flexibilities here will 
help complement base pay adjustments, as opposed to sort of 
playing games with the classification process and raising 
grades artificially. This certainly would be preferable.
    Ms. Davis of Virginia. I think I've got another minute or 
two. Let me go to--I heard you say in Senate bill S. 129 that 
OPM opposes the amendment that they put in there with regard to 
compensation for travel. I'm not so sure I'm in agreement with 
OPM on this one. It sounds like a good proposal to me. It is my 
understanding that if an employee were to be able to get 
compensated for traveling early in the morning for that time 
for travel, that maybe they would not then go the night before 
and incur hotel costs, meals, etc. So why would it not be 
better to give them time off for having to leave early in the 
morning and go? I'm just trying to see why you oppose it.
    Mr. Sanders. Madam Chairwoman, let me say this. This issue 
has recently been raised with Director James. She's willing to 
take a fresh look, and in so doing she is going to reach out to 
all of the interested stakeholders, including this 
subcommittee, so stay tuned.
    Ms. Davis of Virginia. If you could ask her to take a close 
look at it and just get back to me with exactly why you would 
oppose it, because just at first glance it sounds like a 
reasonable amendment to me and I tend to agree with it.
    I am going to yield now to Ms. Norton.
    Ms. Norton. Thank you, Madam Chairwoman.
    I have a question on the ALJs. I'm really trying to 
understand the role of OPM since the restructuring of Federal 
agencies began, and that is the context in which I look at 
everything now because increasingly it sounds to me as though 
they may be downsizing agencies in their personnel, but it 
looks like OPM is being downsized in its mission.
    I would like to know the nature of the collaboration you 
have had, very specifically what role you have played in the 
proposed DOD proposal--``you'' meaning OPM.
    Mr. Sanders. As I said, that process is just now beginning. 
To be quite candid about it, our attentions have been focused 
principally on bringing the Homeland Security system home, 
which I believe is imminent. That has absorbed the attentions 
of my staff and myself for many, many months, and we are just 
now beginning to turn our attention to DOD.
    I can tell you that in this bill OPM's role is pretty clear 
and pretty firm. In every case, the Congress has authorized the 
Director to issue implementing regulations, and in many cases 
that authority is very, very broad, and we appreciate that 
because some of the problems addressed here are so complex that 
legislation would be problematic. So I see nothing in the 
Workforce Flexibility Act that diminishes OPM's role in any way 
whatsoever.
    Ms. Norton. I appreciate your answer on the Workforce 
Flexibility Act, but my question was about the DOD proposal, 
and your answer was that you have been so busy with Homeland 
Security that you have had zero role in that proposal. Let me 
tell you why that--you know, if you want to revise that 
answer--you changed the subject from the question I asked. If 
you want to revise that answer, I'm pleased to hear it.
    Mr. Sanders. As I said, we----
    Ms. Norton. Did you play any role--were you in any meetings 
with the DOD when they prepared the proposal that has been 
leaked to the press and that is now in the newspapers?
    Mr. Sanders. We have seen the proposal, yes, ma'am.
    Ms. Norton. You know, I saw it, too, but that was not my 
question.
    Mr. Sanders. As I indicated----
    Ms. Norton. Let me tell you why I----
    Mr. Sanders [continuing]. We have just now begun----
    Ms. Norton [continuing]. Am asking the question. I'm not 
trying to embarrass you. I'm sorry you weren't in it, frankly. 
But when we are restructuring huge parts of the Federal 
Government, when we are changing the 100-year-old Civil Service 
system, I think the very least the public and the Congress has 
a right to expect is that somebody who has been in touch with 
that system be in on the ground floor when you change that 
system. I don't know how--I mean, when the Homeland Security 
Department was set up, they were given the authority to go out 
and look for their own buildings. You know what they did? They 
quickly came back to the GSA because they said, ``You know, we 
don't know anything about finding space and GSA does,`` and 
even though we have our own authority they asked the GSA to 
help them. Now, the DOD doesn't know squat about Civil Service, 
about what protects Federal workers, about what the Federal 
Government is entitled to, and yet without any experts from the 
OPM in the room they sit down and they write a proposal and 
they say, ``Look, you take a look at this.`` It seems to me it 
might have been the other way around. You write the proposal 
and you say, ``You take a look at this and adjust this to your 
needs.`` If we don't go on record saying that now, we are going 
to have another whole year where agencies write their 
proposals, strip workers of their rights, come in with asinine 
proposals even relating to their own efficiencies, and we're 
not going to stand for it. You know, you've done it twice. 
We're not going to stand for it.
    [Applause.]
    Ms. Davis of Virginia. I will say once again this is a 
hearing and it will be conducted that way. There will be no 
outbreaks of applause. Thank you.
    Ms. Norton. Let me ask something about the ALJs. I just 
think you ought to carry back to OPM that I am not speaking 
just for myself. Let me ask a word about ALJs. I chaired the 
EOC. I have the greatest respect for ALJs and what they do. I 
take it--let me ask you, do you agree that the ALJ is a judge?
    Mr. Sanders. I think the title is appropriate. It is an 
administrative law judge. They are different from judges in the 
judicial branch of our Government.
    Ms. Norton. Do you care to elaborate on that?
    Mr. Sanders. Administrative law judges do exactly what 
their title says they do--they interpret administrative rules 
and statutes as part of----
    Ms. Norton. No. I mean the difference is that one 
interprets administrative rules and statutes and the other 
interprets law. OK. But the reason we have a system, a special 
system for them--and we do have a special system. Civil 
servants, of course, can be disciplined in an entirely 
different way from an ALJ. Everything has to be on the record. 
Because, after all, these people handle administrative law 
decisions in the same way that a district court judge handles 
legal decisions. One thing that we're trying to let everybody--
and they're bringing it all around the world--know is we have 
an independent judiciary. One of the ways in which we make them 
independent is we do not mess with their pay. I'll tell you 
something. There are some judges whose pay I would like to 
compress and mess with. But we have an independent system, and 
so do we in the administrative system have an independent 
system.
    I want to know how you would reconcile the pay compression 
which you concede does exist with ALJs with the notion of an 
independent judiciary within the administrative process.
    Mr. Sanders. All you're doing, Ms. Norton, is changing the 
point of compression, and in so doing you have created a 
fundamental unfairness with the SES pay for performance system 
and members of the Senior Executive Service, that system now 
just being implemented, because what will happen with the ALJ 
reform bill is that, with the capping raised to executive level 
III plus locality pay, the vast majority of judges will go to 
the base pay limit of level III, they'll get locality pay on 
top of that, and most of them will move to level II. They'll 
move to level II automatically without any regard to 
performance or quality or anything else.
    Contrast that with the SES pay for performance system. 
There are two very difficult steps for members of the Senior 
Executive Service to get anywhere near level II. First, 
agencies have to be certified as having performance appraisal 
systems that make meaningful distinctions. Those are Congress' 
words. We are about to issue the certification criteria. Not 
every agency is going to be certified. That is a high bar. And 
even when agencies pass that bar it doesn't mean that every SES 
member is going to go from level III to level II. It is only 
for the few that earn it. It is performance based, no more 
automatic, no more across the board. And it is that fundamental 
unfairness that I think is the principal opposition to the ALJ 
bill, that ALJs will suddenly move to that level without any 
regard to performance, and we're telling Senior Executive 
Service members, ``You can't, you won't, you have to earn it.''
    Ms. Norton. And are you saying you believe that the ALJ 
system should be performance based in that sense?
    Mr. Sanders. I think there has to be a way to find an 
analog.
    Ms. Norton. And so what is the--given the independence that 
an ALJ needs, what is the appropriate analog? I mean, I'd like 
to find a way into the Federal judiciary, as well, but I don't 
think I deserve a way into that through the pay system.
    Mr. Sanders. I don't know what the analog is at this time. 
I do know that independence and performance are not mutually 
exclusive.
    Ms. Norton. But pay and judicial independence have been 
exclusive in our independent system.
    Let me just--I'm very worried that we will not be able to 
recruit ALJs of the quality we have been able to recruit in the 
past. For example, in this new bill you assert that you've had 
no problems recruiting ALJs. In the new Medicare prescription 
bill that has just been passed by the Congress, we are informed 
we will need 350 ALJs simply to adjudicate Medicare benefit 
appeals. I can tell you, given this bill, you are going to need 
a whole lot more ALJs, because you are going to get all kinds 
of difficulties from this bill.
    Are you wiling to sit there this afternoon and tell me you 
think that there will be no recruitment problems whatsoever 
given the unhappiness of the present roster of ALJs and given 
the recruitment and retention problems we already have in the 
Federal Government where you can take that skill and go to the 
private sector today and earn often a great deal more money? 
Are you willing to say that you are going to have no trouble 
getting 350 ALJs for the Medicare prescription drug bill and 
that the status of ALJs would have no effect upon retention and 
maintenance? And let me add, 91 percent of your ALJs are 
already at retirement age. With that context, I'd like your 
answer.
    Mr. Sanders. I am willing to say that, as far as the data 
has shown to date, there are no recruiting or retention 
difficulties.
    Ms. Norton. But, of course, the role of the OPM is to 
prepare for recruitment. Recruitment, by definition, means you 
are looking into the future in order to be able to draw people 
in. Let me ask you then very specifically, you know about the 
new Medicare prescription drug bill. Have you looked into the 
question of whether or not you will be able to recruit ALJs to 
administer that bill?
    Mr. Sanders. I can tell you that my testimony was 
circulated to all agencies, including those that employ ALJs, 
and they concurred with the testimony.
    Ms. Norton. With the testimony that what? Answer my 
question, sir.
    Mr. Sanders. That we oppose the ALJ pay reform bill as it 
is currently structured.
    Ms. Norton. You know, I just want to say this. You're not 
going to get away with not answering my questions by answering 
some other question. My question again is: has the OPM, whose 
job is recruitment and maintenance, looked to see whether or 
not it will be able to recruit ALJs knowing that a whole new 
body of ALJs is necessary for the prescription drug bill? Have 
you looked at that yet? And I'd like you to answer that 
question, not some other question that you have decided to 
answer.
    Mr. Sanders. That is our job, and we have, and we base the 
conclusion on two pieces of data. One, historically there are 
no recruiting or retention problems. They, in fact, are less 
than for the Senior Executive Service. Two, we have to ask the 
agencies that actually employ ALJs. They are in a far better 
position than we are to make those judgments. They, too, have 
concurred that the way as it is currently written, the ALJ pay 
reform bill is not something that we can support.
    Ms. Norton. That bill was written--I understand my time is 
up, Madam Chairwoman--that bill was written before the 
prescription drug bill was passed, and I am going to ask you to 
go back to the OPM and ask them to do a specific planning and 
recruitment study to make sure that, in fact, there are enough 
ALJs at the HHS to administer this new bill. Could I get that 
promise from you?
    Mr. Sanders. If you require us to do that, we will 
certainly comply.
    Ms. Norton. I'm requiring you to do it, sir.
    Ms. Davis of Virginia. If you would take that back to 
Director James and ask her to get it back to us, we will make 
sure that the members of the committee have the answer to it.
    Let me just clarify one thing. You were comparing ALJs to 
SESers. The SESers do have performance based but ALJs do not, 
correct?
    Mr. Sanders. Yes, ma'am.
    Ms. Davis of Virginia. I just wanted to clarify that.
    And let me just say one thing, because we tend to keep 
going to something other than what is the issue of this hearing 
today. You know, any of you who were here when we had--most of 
you probably were--when we had the hearings on the DOD 
personnel transformation, many of us, including the Chair, were 
not happy with the way the bill came down, and I cannot 
honestly say I am 100 percent happy with the bill as it passed; 
however, we will--and I will tell you, Ms. Norton, that we will 
do everything in our power before any other changes are made 
with our Federal workers, that we will continue to fight to 
make sure that it comes to the jurisdiction of this committee 
and that we have fair and open hearings so that we know both 
sides of the issue, and we will do our best to fight and make 
sure it is done in a fair manner.
    Ms. Norton. Thank you, Madam Chairwoman.
    Ms. Davis of Virginia. Again, I thank you, Mr. Sanders, and 
I appreciate your being here today.
    With that, we will go to the second panel.
    Mr. Sanders. Thank you.
    Ms. Davis of Virginia. I would like to point out, to those 
of you who are interested in the DOD personnel transformation, 
which I think is probably 99.9 percent of you in the room here, 
I have spoken to the Secretary of the Navy, Secretary Gordon 
England, and he has been charged with working with the unions 
to make sure that this transition, this transformation, is done 
in a way that is fair and open to the unions, so if he has not 
been in touch with you yet, be assured that he will be. He has 
been appointed as the point man by the Secretary of Defense. 
His name is Gordon England, by the way.
    If the second panel will come forward--I'd like to thank 
our second panel of witnesses. The record will show that I have 
sworn you in previously, so we will first hear today an opening 
statement from Judge Kevin Dugan, vice president of the 
Association for Administrative Law Judges.
    Judge Dugan, thank you for being here. Again, for all of 
you we have your written statements in the record, so I would 
ask you to summarize your statements in 5 minutes.

  STATEMENTS OF KEVIN DUGAN, VICE PRESIDENT, ASSOCIATION FOR 
   ADMINISTRATIVE LAW JUDGES; JOHN GAGE, NATIONAL PRESIDENT, 
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES; COLLEEN M. KELLEY, 
NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION; AND CARL 
         DE MAIO, PRESIDENT, THE PERFORMANCE INSTITUTE

    Mr. Dugan. Thank you. Good morning, Chairwoman Davis and 
members of the subcommittee. I am Kevin Dugan, Association of 
Administrative Law Judges vice president. I currently am an 
administrative law judge in the Office of Hearing Appeals in 
Charlotte, NC, with the Social Security Administration.
    The Association of Administrative Law Judges represents the 
professional interests and concerns of approximately 1,000 
administrative law judges in the Social Security Administration 
and the Department of Health and Human Services. On behalf of 
the administrative law judge community and the ALJ-related 
associations that join in support of my testimony, let me 
extend our appreciation, Chairwoman Davis, for today's hearing 
and this opportunity to testify.
    My association and all other Federal ALJ groups strongly 
supports your legislation, H.R. 3737, which would address ALJ 
pay compression problems that diminish the capacity of the 
Federal Government to recruit and retain the finest candidates 
and incumbents in the administrative law judiciary. There are 
approximately 1,300 administrative law judges in 28 Federal 
agencies and departments. They conduct trial-type hearings for 
cases brought under Federal statutes. In fact, the Supreme 
Court has declared that Federal administrative law judges are 
functionally similar to Federal trial judges.
    The impact of ALJ decisions is considerable. Their 
jurisdiction includes a wide range of significant and diverse 
regulatory matters, including areas from anti-trust to banking 
practices to environmental matters, food and drug safety, and 
so on. These cases may involve millions or even billions of 
dollars and have considerable impact on the national economy.
    Equally important, ALJs also adjudicate hundreds of 
thousands of individual cases each year that determine personal 
entitlement to recompense or benefits. These cases, more 
personal in nature, are of considerable and equal importance to 
the millions of Americans involved. For many, this is the first 
and only contact they will have with the adjudicatory authority 
of the Federal Government.
    I think it important to realize that the SSA disability 
adjudication system is the largest legal system in America--
over half a million cases a year. Despite the importance of the 
administrative legal system to the American public, a 
significant problem exists with ALJ pay. The ALJ pay system was 
changed in 1991 when the basic pay levels were tied to specific 
percentages of executive schedule level IV. Because of the 
linkage, administrative law judges failed to receive annual 
cost of living adjustments for four straight years, and ALJ pay 
fell considerably behind that of other Federal employees.
    Further, we must also recognize that ALJ locality pay is 
capped at the pay level for executive level III, impacting many 
current ALJs.
    A very telling point is that in 1991 entry level pay for an 
ALJ was equal to a GS-15, step 5/6. Today that is at a GS-14 
step 7/8 level, a virtual--almost a full grade pay cut. And 
this does not even take into account bonuses and awards 
available to GS employees which properly are not authorized for 
ALJs.
    As a result of these pay compression problems, the Federal 
Government is at a distinct competitive recruiting 
disadvantage. It is well recognized that the pay for Federal 
administrative law judges has not kept pace with salaries in 
the private sector. Now we see that they have not even kept 
pace with the Government's own GS pay schedule.
    The problem has become so extreme that Federal Energy 
regulatory chairman Pat Wood wrote to President Bush that we 
are having difficulty attracting and retaining the high quality 
of administrative law judges that we need to handle our 
challenging case load. That is why we are so pleased to speak 
on behalf of this bill. H.R. 3737 would respond to these pay 
problems by revising the minimum and maximum levels of pay. You 
may wish to refer to Chart B. The availability of locality pay 
adjustments would also be assured.
    In view of the benefits and reasonableness of this 
approach, we urge the subcommittee to approve H.R. 3737.
    This concludes my statement. Once again, Madam Chairwoman, 
on behalf of the ALJ community we thank you for your continued 
interest and support.
    Ms. Davis of Virginia. Thank you, Judge. You have my vote. 
You did it in less than your 5 minutes.
    [The prepared statement of Mr. Dugan follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.011
    
    [GRAPHIC] [TIFF OMITTED] T4772.012
    
    [GRAPHIC] [TIFF OMITTED] T4772.013
    
    [GRAPHIC] [TIFF OMITTED] T4772.014
    
    [GRAPHIC] [TIFF OMITTED] T4772.015
    
    [GRAPHIC] [TIFF OMITTED] T4772.016
    
    [GRAPHIC] [TIFF OMITTED] T4772.017
    
    [GRAPHIC] [TIFF OMITTED] T4772.018
    
    [GRAPHIC] [TIFF OMITTED] T4772.019
    
    [GRAPHIC] [TIFF OMITTED] T4772.020
    
    Ms. Davis of Virginia. Next we will hear from two of our 
very popular today, I believe, employee groups, Mr. John Gage, 
the national president of the American Federation of Government 
Employees, and after him will be Ms. Colleen Kelley, national 
president of the National Treasury Employees Union. As always, 
it is a pleasure to have both of you back before this 
subcommittee.
    Mr. Gage, we have your written testimony in the record, so 
if you could summarize your testimony in 5 minutes it would be 
appreciated.
    Mr. Gage. Thank you, Madam Chairwoman. On behalf of the 
600,000 Federal employees represented by AFGE, I thank you for 
the opportunity to testify today.
    In my written statement I have explained our union's views 
of the bills under consideration today. AFGE strongly prefers 
Senate bill 129 as marked up because the broad demonstration 
project authorities that remain in the House bill have been 
eliminated. I urge the committee to take similar action with 
regard to the House bill. At a minimum, we consider expansions 
in demonstration project authority unnecessary in light of the 
enormous and radical experiments being undertaken at the 
Department of Homeland Security and Department of Defense.
    Last Friday the DOD put forth its plans for the so-called 
``National Security Personnel System.'' It is a deceitful 
document from top to bottom, starting with its name, since it 
has nothing whatsoever to do with national security. As you 
know, AFGE strongly opposed the legislation that gave the 
Secretary of Defense the authority to rewrite the pay and labor 
relations system in the agency. And, Madam Chairwoman, you no 
doubt recall that when Dr. David Chu testified before your 
committees to argue his case, he insisted that Secretary 
Rumsfeld had no intention of eliminating collective bargaining 
and replacing it with something inferior. He promised that all 
we wanted to do, all we needed was efficiency, national 
bargaining instead of local bargaining over 1,300 contracts 
when the issue was one that affected the entire agency.
    It is my understanding, Madam Chairwoman, that you 
specifically intended for collective bargaining to be protected 
under the statute. While we disagreed over the exact 
legislative language, I believe that your goals and our goals 
with regard to protecting collective bargaining were the same.
    During the debate over the legislation, AFGE repeatedly 
warned that if Congress gave Secretary Rumsfeld the authority 
sought that he would abuse that power, and indeed he has. His 
proposal states that bargaining will be accomplished through a 
form of consultation both at the local and national level, but 
bargaining cannot be accomplished through consultation. It can 
only be replaced by it. Consultation merely allows employees to 
present comments to the agency and presumes the agency's right 
to ignore them. They'll talk to us, and then they'll implement. 
Bargaining, on the other hand, requires the change of good 
faith proposals that may differ, and when agreement or 
compromise is not achieved the impasse is resolved through a 
neutral third party.
    In his bill or in his proposal he puts a thing out there 
that he calls ``We'll talk with you when it is a significant 
change to the bargaining unit.'' I have been down this road 
before. So when a working condition change applies to a smaller 
group within a large bargaining unit--and some of our bases 
have very large bargaining units, but when it affects maybe 100 
electricians or whatever he'll say, ``No, we're not going to 
talk about that because it doesn't significantly affect the 
whole bargaining unit.'' I've seen it before, and that's 
exactly what is contained in this proposal.
    Mr. Rumsfeld would replace collective bargaining and 
collective bargaining agreements with regulations that he 
issues unilaterally. In his blueprint, he decrees that 
management issuances, whatever that is, will supersede 
contracts, as well as past practice. That is, there will be no 
contracts. He further decrees, ``The new labor relations system 
will not employ any provisions of 5 U.S.C. Chapter 71,'' which 
is the section of the law that grants union rights, collective 
bargaining rights, and the right to have grievances heard by a 
neutral third party.
    This proposal treats the men and women who serve this 
Nation as civilian employees of the Defense Department as 
errant children who don't deserve anything more than, ``Because 
I said so'' as justification for decisions made by management. 
This management is not infallible. The pillars of this system 
outlined by DOD will be management by fear, intimidation, and 
coercion, and the resulting loss to the public's interest will 
be discrimination, crony-ism, favoritism, and patronage.
    I have been talking to a lot of DOD employees recently, and 
this is already--the horse is out of the barn. Jobs that they 
have been working for and trying to compete for, promotions are 
already being filled by people who are brought in, and as you 
investigate it you see a little connection here on the crony-
ism type of basis. I think that's something that has to be 
stopped immediately.
    We submit that there is no national security rationale for 
eliminating collective bargaining and neutral third party 
oversight, but Mr. Rumsfeld has thrown up an additional set of 
proposals for which no conceivable connection to national 
security could ever be asserted. He wants to dictate the number 
of people who have to vote in union elections before he will 
declare them valid. He wants to immunize DOD from any 
responsibility for failure to process union dues payments. He 
has ruled out restitution as a remedy for employees if DOD 
should ever find itself in violation of its own regulations. To 
top it off, he has decided to exclude whole categories of 
employees from the benefits of union representation, including 
anyone whose job requires certification, such as fire fighters, 
electricians, contracting officers, and attorneys, all of whom 
would be eligible for union membership if they worked for any 
other employer in the United States, public or private.
    The very human impact of a negotiated contract achieved 
through collective bargaining is that employees will be able to 
have their benefits, their working conditions, their 
opportunities for promotions, flexible working conditions, and 
the standards for discipline encapsulated in a written document 
that has been agreed to by the employee representatives, as 
well as management. This document, precisely because it is in 
writing, is transparent to the workers, but most of all it is 
enforceable.
    Ms. Davis of Virginia. Mr. Gage, I don't mean to interrupt 
you, but you are about 1 minute over your 5 minutes already, 
and I've heard you speak on the bills. Did you have anything 
else that you wanted to say on the two bills that are the 
subject of this hearing?
    Mr. Gage. Well, I think if we are talking about retaining 
and recruiting employees, I think we really have to look at the 
road we are going down, Madam Chairwoman. Something has to be 
done about this. You can't let a personnel system be based on 
this type of union busting, and that is what is happening here. 
None of these provisions result in any type of safeguard to 
national security. But I appreciate the time and I appreciate 
the opportunity to testify.
    Ms. Davis of Virginia. And I don't mean to interrupt you, 
but we do have your full statement in the record, and I would 
assume all the Members have read it, but we do have other 
witnesses that we want to testify, and we wanted to be able to 
get to the questions, because I'm sure many of the Members want 
to ask questions.
    [The prepared statement of Mr. Gage follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.021
    
    [GRAPHIC] [TIFF OMITTED] T4772.022
    
    [GRAPHIC] [TIFF OMITTED] T4772.023
    
    [GRAPHIC] [TIFF OMITTED] T4772.024
    
    [GRAPHIC] [TIFF OMITTED] T4772.025
    
    [GRAPHIC] [TIFF OMITTED] T4772.026
    
    [GRAPHIC] [TIFF OMITTED] T4772.027
    
    [GRAPHIC] [TIFF OMITTED] T4772.028
    
    [GRAPHIC] [TIFF OMITTED] T4772.029
    
    [GRAPHIC] [TIFF OMITTED] T4772.030
    
    [GRAPHIC] [TIFF OMITTED] T4772.031
    
    [GRAPHIC] [TIFF OMITTED] T4772.032
    
    [GRAPHIC] [TIFF OMITTED] T4772.033
    
    [GRAPHIC] [TIFF OMITTED] T4772.034
    
    [GRAPHIC] [TIFF OMITTED] T4772.035
    
    [GRAPHIC] [TIFF OMITTED] T4772.036
    
    [GRAPHIC] [TIFF OMITTED] T4772.037
    
    [GRAPHIC] [TIFF OMITTED] T4772.038
    
    [GRAPHIC] [TIFF OMITTED] T4772.039
    
    [GRAPHIC] [TIFF OMITTED] T4772.040
    
    [GRAPHIC] [TIFF OMITTED] T4772.041
    
    [GRAPHIC] [TIFF OMITTED] T4772.042
    
    [GRAPHIC] [TIFF OMITTED] T4772.043
    
    [GRAPHIC] [TIFF OMITTED] T4772.044
    
    [GRAPHIC] [TIFF OMITTED] T4772.045
    
    [GRAPHIC] [TIFF OMITTED] T4772.046
    
    [GRAPHIC] [TIFF OMITTED] T4772.047
    
    [GRAPHIC] [TIFF OMITTED] T4772.048
    
    [GRAPHIC] [TIFF OMITTED] T4772.049
    
    [GRAPHIC] [TIFF OMITTED] T4772.050
    
    [GRAPHIC] [TIFF OMITTED] T4772.051
    
    Ms. Davis of Virginia. The one thing I would urge you to do 
is to make sure that you talk to Secretary England, the 
Secretary of the Navy. I spoke to him on the phone not too long 
ago, maybe 1\1/2\ hours or 2 hours ago, and he is very 
interested in working with the unions. The only thing I would 
ask you to do is to talk to him, work with him, and if you have 
problems report back to me and we'll try to take it from there.
    Mr. Gage. Well, we have been trying. We have been calling 
and trying to talk to anyone in the Department of Defense and 
we have been shut out.
    Ms. Davis of Virginia. Now you have a name. Secretary of 
the Navy is the point man, and he, with his own words, said to 
me on the phone that he is willing to work with the members of 
the unions. So if you would just make sure that you get with 
him and get back to us on how it goes, I'd certainly appreciate 
it.
    Mr. Gage. Thank you, Madam Chairwoman.
    Ms. Davis of Virginia. Ms. Kelley, as always it is a 
pleasure to have you back before this committee. We have your 
written testimony in the record, so if you would summarize your 
testimony we'll recognize you for 5 minutes.
    Ms. Kelley. Thank you. On behalf of the 150,000 employees 
represented by NTEU, I appreciate the invitation and the 
opportunity to be here today. I must, however, begin by saying 
how disappointed NTEU is at the proposed new National Security 
Personnel System that was unveiled by the Department for this 
reason that is focused on this hearing: if implemented as 
written, this will have a negative impact on the ability to 
recruit and retain employees in the Department of Defense based 
on the environment that it would create for those employees.
    When the legislation was debated, NTEU questioned the need 
for such broad discretion and we raised concerns as to whether 
it would be exercised fairly. It is now clear that our fears 
were well founded. The proposal severely limits collective 
bargaining, but it also sets up a fox guarding the hen house 
approach to due process for employees. Probably most 
interestingly, it establishes a system for union elections 
that, if it were applied to current elected Federal officials 
today, most could not meet the test.
    It was never clear what the problem was that the 
legislation sought to address, but what is clear is that this 
committee needs to revisit this matter. I appreciate your 
interest in the issue and your commitment to ensure the unions' 
involvement in the process.
    Let me say on another note how much we appreciate, Madam 
Chairwoman, your commitment to agencies having the proper tools 
to allow them to hire and to inspire the best work force. An 
honest process for setting Federal pay is a key first step, and 
we thank you for your support of pay parity and for all of the 
members in attendance at this hearing on this important issue. 
Unfortunately, because the President did not act in accordance 
with the bipartisan will of Congress, just as they did in 2003, 
Federal civilian employees must again wait for the full amount 
of their 2004 pay raise, the raise that their uniformed 
counterparts have already received.
    Health insurance is another consideration for prospective 
employees. Premiums for FEHB plans have risen 45 percent since 
2001, alone. The Government pays 72 percent of the premium. 
Most employers pay 80 percent. NTEU supports bipartisan 
legislation to increase the Government's share of the premium 
to 80 percent. I understand that you, Madam Chairwoman, are 
planning to hold hearings later this year on the FEHB plan, and 
NTEU looks forward to working with you on this.
    A disincentive to Federal employment today is the 
administration's march to contract out as much work as 
possible. Family friendly programs and new rewards and 
incentives will do little to attract employees if we cannot 
convince them that we are interested in their commitment to a 
career in public service. NTEU members tell me that contracting 
out has eroded morale, disrupted agency operations, and 
discouraged prospective employees from applying. Employees are 
appalled at the lack of oversight and accountability in 
contracting out. Congressman Van Hollen's amendment to the 2004 
Treasury appropriations bill tried to bring order to the 
Government's contracting process. I want to personally thank 
you, Chairwoman Davis, and all Members who are here today for 
your support of that amendment.
    NTEU worked closely with Senators Voinovich and Akaka on S. 
129, the Federal Workforce Flexibility Act. We are pleased that 
you plan to move H.R. 1601, as well. Federal employees are 
increasingly required to conduct business travel on their own 
time and can only be compensated in limited circumstances, so I 
was very pleased to hear your question of OPM and their 
commitment to take a re-look at this.
    Let me give you two examples. An IRS employee is assigned a 
case over 150 miles away. The taxpayer would like to meet at 
1:30 p.m., and the employee is unable to complete their work by 
the end of the business day. However, they stay an extra hour 
or two to complete the assignment. As you noted, they would be 
paid hotel expenses and per diem if they stayed, but instead 
most employees would choose to travel home, in effect donating 
several hours of work and travel time to the Federal 
Government. These employees cannot be compensated for travel 
under current law. They cannot be. However, had the employee 
elected to stay, the Government would have paid these other 
expenses.
    Here's another example. An employee in Missouri reports his 
work often goes beyond a normal working day, and his 
alternative is to leave early and have to come back the next 
day and risk leaving an undesirable impression on the taxpayer 
and the taxpayer's attorney and to make the IRS appear 
unprofessional, something he has too much pride in his work to 
allow to happen.
    So in these cases, the employees cannot keep the best 
interest of the Government in mind, present a professional 
appearance, and avoid lodging and per diem costs for the 
Government. The provision added to S. 129 authorizes 
compensatory time for travel to perform work assignments. It 
does not apply to normal commuting travel or any time that 
would be for commuting, and it could not be converted to money. 
It would purely be compensatory time for time spent on the job.
    NTEU is very pleased that the legislation discussed today 
draws attention to the Government's need to train employees, 
also. NTEU hopes that you will work to ensure that agency 
training budgets are properly funded. The bills also propose 
additional flexibilities in the use of recruitment, relocation, 
and retention bonuses. Limited funding is what hampers most 
agencies' ability to put these bonuses to better use, and NTEU 
hopes that a dedicated stream of funding can be found for this 
purpose.
    I thank you again for the opportunity to appear today and 
would welcome any questions you might have.
    Ms. Davis of Virginia. Thank you, Ms. Kelley.
    [The prepared statement of Ms. Kelley follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.052
    
    [GRAPHIC] [TIFF OMITTED] T4772.053
    
    [GRAPHIC] [TIFF OMITTED] T4772.054
    
    [GRAPHIC] [TIFF OMITTED] T4772.055
    
    [GRAPHIC] [TIFF OMITTED] T4772.056
    
    [GRAPHIC] [TIFF OMITTED] T4772.057
    
    [GRAPHIC] [TIFF OMITTED] T4772.058
    
    [GRAPHIC] [TIFF OMITTED] T4772.059
    
    [GRAPHIC] [TIFF OMITTED] T4772.060
    
    [GRAPHIC] [TIFF OMITTED] T4772.061
    
    [GRAPHIC] [TIFF OMITTED] T4772.062
    
    [GRAPHIC] [TIFF OMITTED] T4772.063
    
    [GRAPHIC] [TIFF OMITTED] T4772.064
    
    Ms. Davis of Virginia. I'll just use this moment to say 
that in our manager's amendment we already plan to take the 
demo project out of H.R. 1601, and we plan on adding in the 
compensatory time that the Senate has added in, so that will be 
in our manager's amendment before it ever goes before the floor 
for a vote.
    Ms. Kelley. I thank the Chair.
    Mr. Van Hollen. Madam Chairwoman, if I may----
    Ms. Davis of Virginia. Yes.
    Mr. Van Hollen. Unfortunately, I've got to run to another 
hearing, but I wanted to commend you on your initiative in the 
legislation before us and also lend myself to some of the 
remarks that have been made. It is important to move forward 
without, at the same time, taking two steps back. Your 
legislation is a step forward. I think some of the other things 
we are seeing going on with respect to the implementation of 
the Defense Department of the legislation we passed, which, 
while there were differences, I think that the way it has been 
implemented is really contrary to how either side would have 
interpreted. So I hope we'll have ongoing oversight with 
respect to that in this committee.
    I thank you, and I apologize for having to leave.
    Ms. Davis of Virginia. That's OK, Mr. Van Hollen. We 
certainly appreciate your input.
    Let me just clarify one thing, and I did check with staff 
to make sure. It hasn't been implemented yet. As I understand 
it, when DOD met with the staff, they met with them with 
strictly concepts. It is not a done deal. It is strictly 
concepts. It is what they're thinking. So now is the time to 
speak up to them and get them to correct or work with you. 
That's why I said please talk to the Secretary of the Navy, 
because he has been appointed as the point man, if you will, 
and is willing to work with you, so let him know your 
frustrations and what you are unhappy with.
    Again, it is just a concept is what I have been told. It's 
just concepts, it isn't in stone yet, so now is the time to fix 
it before it gets in stone.
    Thank you, Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Madam Chairwoman.
    Ms. Davis of Virginia. Sorry to keep you waiting, Mr. 
DeMaio.
    We have the pleasure to hear from Mr. Carl DeMaio, 
president of patient, and last but not least.
    You have been recognized for 5 minutes. Again, we have your 
written testimony in the record, so if you would summarize your 
testimony in 5 minutes.
    Mr. DeMaio. Madam Chairwoman, members of the subcommittee, 
I appreciate the opportunity to be here this morning. I am 
president of the Performance Institute, a private think tank 
that focuses on reforming government through the principles of 
performance, accountability, transparency, and competition. We 
have extensive expertise in the area of Federal human resources 
management and recent reforms.
    Last year the Institute surveyed all major Federal agencies 
to catalog best practices in recruitment and retention. We 
compiled those best practices in a report entitled, ``Strategic 
Recruitment for Government: Ten Innovative Practices for 
Designing, Implementing, and Measuring Recruitment Initiatives 
in Government.'' As noted in our report and has been shown to 
the leadership of this subcommittee, the Federal Government has 
a major human capital crisis on its hands, and it is not just 
an issue of recruitment and retention, it is a crisis of 
getting the right people with the right skills in the right 
position at the right time to perform the right function with 
the right compensation, all to be reviewed by the right 
employee performance evaluation.
    Now, that's a lot of rights to get right, and many agencies 
are still struggling in getting those rights right. But no 
matter how it is spun, the reality is that more than half of 
all Federal employees are now or in the next 5 years will be 
eligible to retire. Something to note is that we have been 
talking about the human capital crisis for many years, and GAO 
Comptroller General David Walker has shown amazing leadership 
in this regard. We have not yet seen the crisis materialize 
because of the downturn in the labor market. As the economy 
recovers, the Federal Government will be facing a monumental 
challenge in recruitment and retention.
    This subcommittee has shown exemplary leadership on these 
issues. I do hope that the focus on retention, recruitment, and 
relocation bonuses, the subject of the legislation, will not 
get overwhelmed by other H.R. issues facing the Federal 
Government. These issues are very important for this committee 
to act on and to deliberate over.
    The subcommittee is considering legislation, H.R. 1601 and 
S. 129, to provide Federal agencies more flexibility in setting 
pay rates for employees, providing bonuses for recruitment and 
retention and relocation, and improving the management of 
Federal training. Proposed legislation has noble and worthy 
objectives; however, it addresses only 2 of the 10 innovative 
practices for recruitment or retention.
    Now, no legislation has to touch on all issues, but we do 
want to propose several refinements to the legislation that we 
do support.
    First, emphasize performance, not across-the-board pay 
increases. We are very supportive of the flexibilities for 
recruitment, retention, and relocation bonuses for this very 
reason, but this subcommittee really should set as one of its 
objectives that through its work Federal employees will start 
talking about my pay increase rather than the pay increase. 
Across-the-board increases in Federal salaries does nothing to 
recognize individual contributions to agency success. And if we 
are going to recruit and retain, we are going to do it one 
individual at a time by valuing each individual's contribution 
to agency mission.
    For this very reason, I encourage this subcommittee to 
explore other legislative vehicles to improve pay for 
performance. The committee could also look to the human capital 
performance fund as an example. The President proposed a $300 
million human capital performance fund in his fiscal year 2005 
budget, and we encourage members of the committee to work to 
ensure that this funding survives the appropriations process 
intact.
    We would urge the committee to consider alternatives to the 
General Schedule system. Proposed legislation only provides 
flexibility within the existing GS system of pay grades. Many, 
including our organization, argue that a one-size-fits-all pay 
system with rigid pay grades is not conducive to winning the 
war for talent. For example, the Department of Defense wants to 
abandon the GS schedule in favor of universal pay banding, the 
proposal that we've talked about several times this morning, 
and it wants to give managers the ability to hire candidates on 
the spot for hard-to-fill positions.
    We consider this proposal a first step in moving toward 
customized pay systems for each Federal agency reflective of 
their agency's mission, reflective of the labor market each 
individually face.
    Also, the subcommittee should consider market-based pay 
formulas. Again, currently in the Federal Government we ask OPM 
to look at pay and look at locality adjustments and they apply 
a one-size-fits-all schedule. Merely raising the pay grades can 
increase the government's overall cost without a clear return 
on investment. It is worth pointing out here that employee 
recruitment and retention battles we are going to face aren't 
really going to be with the private sector for most positions 
in most agencies. What we are going to have to do is be ready 
to battle with the nonprofit center and academics for our 
talent.
    There is a different type of individual who comes into 
government--people who want to serve their community. They want 
to help with social problems and have a sense of accomplishment 
or purpose, whereas in the private sector there really is a 
profit or bottom line basis. The only other area that these 
candidates or these individuals can go to are the nonprofit 
world and academics, so we have encouraged benchmarking pay 
against those two sectors of society.
    Finally--and this is very important to consider for this 
legislation--we need to link all HR initiatives to a 
fundamental strategic human capital plan for each agency. We 
need accountability, and we also need a set number of 
strategies that agencies need to pursue for winning the war for 
talent, and so we encourage you to adopt language in the bill 
that would require each agency, when providing a recruitment, 
retention, or relocation bonus, to measure the effectiveness 
and the impact of those bonuses on recruitment and retention 
and to tie that to skills gaps identified in the human capital 
plan.
    If the committee can act on these issues, you can 
strengthen this bill which is already addressing very important 
issues.
    Ms. Davis of Virginia. Thank you, Mr. DeMaio.
    [The prepared statement of Mr. DeMaio follows:]

    [GRAPHIC] [TIFF OMITTED] T4772.065
    
    [GRAPHIC] [TIFF OMITTED] T4772.066
    
    [GRAPHIC] [TIFF OMITTED] T4772.067
    
    Ms. Davis of Virginia. I just want to make sure that I 
understood you correctly when you said that these people would 
not--people who work for the Federal Government would not go to 
private organizations, they would go to nonprofits. Are you 
comparing pay grades there or what?
    Mr. DeMaio. We're looking at the types of individuals who 
consider government service, and we have seen some polling done 
by the Partnership for Public Service, Merit Systems Protection 
Board has done some survey of Federal workers, as has OPM, and 
to basically suggest that we need to compete directly for every 
single position with the private sector pay is not an 
appropriate comparison. There are some areas where certainly--
for example, an accountant at the Department of Treasury very 
well could go into the private sector and get an accountancy 
job, but in other areas like Health and Human Services their 
alternatives usually are going to be nonprofit organizations or 
academic organizations and institutions. So one-size-fits-all 
pay comparisons is not what we are suggesting. We would like to 
see, on each position that the agency is trying to recruit for, 
what is the competition offering, and sometimes that is going 
to be a set of nonprofit organizations.
    Ms. Davis of Virginia. I guess I will, No. 1, thank all 
four of you for your testimony, and I guess I will just yield 
to myself for questions.
    Judge Dugan, can I ask you what percentage of ALJs now are 
eligible for retirement and how many will be eligible in 5 
years? Do you have that?
    Mr. Dugan. Well, the figure we got--and we got it from 
OPM--is that 91 percent are eligible. Now, I don't--that's 
figures we got from OPM. I can't speak for them.
    Ms. Davis of Virginia. Eligible now?
    Mr. Dugan. That's what we were told. Yes, that's correct.
    Ms. Davis of Virginia. OK. I guess that answers my next 
question then.
    Mr. Dugan. And then I looked around my office, and there 
were a bunch of old people there. [Laughter.]
    Ms. Davis of Virginia. You were the youngest guy in the 
room, right?
    Mr. Dugan. Just about.
    Ms. Davis of Virginia. Have you heard from any other 
agencies or organizations? Have you heard any companies that 
ALJs decisions has declined because of recruiting and retention 
problems occasioned by the pay compression?
    Mr. Dugan. Well, I cited the FERC letter, but I don't think 
we have any particular studies that can quantify that. The 
problem is that the register, OPM register, has been closed for 
over 5 years, so when they talk about their views on 
recruitment it is a bunch--it is guesswork, because right now 
the register is still closed and they are right now creating a 
new test, so there really is no way to know the quality that 
we're going to get ultimately. The Commissioner of Social 
Security testified to Congress that she was light about 200 
ALJs because she hasn't been able to hire. OPM, at the urging 
of Congress----
    Ms. Davis of Virginia. She's short 200?
    Mr. Dugan. Right, short 200.
    Ms. Davis of Virginia. Which agency was that?
    Mr. Dugan. This was Commissioner Barnhart who testified 
before the Social Security Subcommittee in September, and they 
were asking about addressing the backlog, of course. But what 
been done now is OPM, through pressure from Congress, reopened 
the old register that they have been holding and said they 
would give her some names; however, she has expressed concerns 
about the quality of the remaining candidates and is only going 
to fill about 10 positions right now to fill that out.
    In addition to that, we also have some major hiring that's 
going to have to be done because of the Medicare Act that has 
been passed by Congress, so we're looking somewhere between 400 
to 500 ALJs we're going to be needing as soon as possible. I 
think the Medicare Act comes into effect in October 2005, the 
transfer to CPMS.
    Ms. Davis of Virginia. Do you know why the register was 
closed for 5 years?
    Mr. Dugan. Well, it started off because of litigation, the 
Azdel litigation, and there was a stay put on it by the Merit 
Systems Protection Board, but that ultimately was resolved and 
then OPM did not reopen it. I don't know why, but they said 
they were redoing the test and they were going to put out a 
whole new type of test for administrative law judges. So why 
they did not reopen it under the old test I don't know.
    Ms. Davis of Virginia. What do you hear from amongst your 
colleagues? Is pay a reason for them to leave and retire?
    Mr. Dugan. Well, the reason for the pay problem is more in 
the cities that you were announcing. I'm in Charlotte, so the 
compression is not hitting us there, but the entry level, the 
new ones that come in, we're having a problem because if you 
are a GS-15 attorney you're going to have to--you're not coming 
in at the level. It's a 14 step 7 or 8 now. It's almost a whole 
grade pay cut, so it has to hurt. Even though we don't have 
figures and OPM's was guess work, it just obviously has to hurt 
with recruitment.
    Ms. Davis of Virginia. Thank you, Judge Dugan. We'll do 
everything we can to work this bill through, but, as you heard, 
the administration is against this so it is an uphill battle.
    Mr. Gage, you mentioned the demo project that you didn't 
like. Besides that, are there any other provisions of the bill, 
because we want to be open with you and we want to know what 
you like and what you don't like.
    Mr. Gage. Well, in everything that I think we are going to 
be looking at--and I'm sorry to harp on this again, but we hear 
a lot of good-sounding cliches that end up in workers rights 
being abrogated, so we are going to go through everything that 
we hear with new personnel changes, new ideas, pay for 
performance, and we're going to be looking at things very hard 
with the idea that these can't be excuses or high-sounding 
names for taking away employee rights.
    Ms. Davis of Virginia. Well, if you'll take a good look at 
H.R. 1601 and compare it to S. 129 and let us know what you 
think before it is too late, I'd appreciate it.
    Ms. Kelley, have you received a lot of complaints about the 
problems now experienced by the Federal employees who must 
travel for work yet receive no compensation other than the two 
that you mentioned to me?
    Ms. Kelley. This is very far-reaching, particularly in the 
IRS. It has been a longstanding problem, and as the IRS has 
reorganized into business units so the taxpayers are served by 
specific business units, it has required even more travel by 
employees than ever before, so these instances are multiplying 
every day. They are not decreasing. And, as I said, I know OPM 
has said there are circumstances where they can be compensated. 
There are, but not these employees. There is no way under the 
current law that the employees who are doing this travel can be 
compensated for doing the work of the IRS, and that is what we 
were hoping to have made fair.
    Ms. Davis of Virginia. From the examples you gave me--I 
mean, I haven't studied it that closely, but just from hearing 
it it seems to me like we'd be saving taxpayer dollars if we 
reimbursed them for their time.
    In your written testimony, as I read it, you didn't say 
anything about objecting to the demo project in H.R. 1601. I've 
already told you I plan on taking it out of the manager's 
amendment because I'm not sure about it. Do I take it that you 
support it?
    Ms. Kelley. No. I wouldn't necessarily take that. We have 
been working with Senators Voinovich and Akaka on the many 
pieces that are in this bill, because there are a lot of moving 
parts in it, and there were, you know, things that we should 
have preferred not, but as part of the package we were trying 
to work together as we did with your office as you move toward 
the H.R. version, so it is fine with us if you make the manager 
amendment.
    Ms. Davis of Virginia. I'm going to charge you with the 
same thing I charged Mr. Gage with. I would ask you to go 
through the bill with a fine-toothed comb word by word, line by 
line, and if there is any provision that is objectionable to 
you and your employees, let us know before it is too late.
    Ms. Kelley. I will do that. Thank you.
    Ms. Davis of Virginia. Mr. DeMaio, in your view are there 
any flexibilities in H.R. 1601 that you believe that we 
shouldn't--I've heard that you believe there is more we should 
be enacting, but are there any provisions in there now that you 
think we should not be enacting?
    Mr. DeMaio. Well, we are for more flexibilities, but the 
flexibilities that you are offering in the bill need to be 
accountable. We have to show results with these recruitment, 
retention, relocation bonuses, and so we do suggest not only 
the basis for all the bonuses to be tied back to the strategic 
human capital plan, but tied to performance measures and 
evaluation, so if the agency is providing recruitment bonuses 
over a period of time for a specific position class in their 
agency and it is not working, then they need to look at other 
alternatives.
    We also suggest longer-term contracts for employees who get 
bonuses. In one respect for the recruitment bonus you do 
require a time of service contract, but for the retention bonus 
there is no time of service. We would like to see some of those 
accountability provisions woven into the flexibilities. It is 
OK to be flexible, but you have to show results, and that's 
what we are advocating.
    In terms of the demonstration projects, that really is the 
context that we place our recommendation that the committee may 
want to see the DOD and the Department of Homeland Security 
progress. We think what is going on at DOD and Department of 
Homeland Security is innovative, will provide substantial 
flexibility and substantial incentives for recruitment, 
retention, and employee management. That's why we are, as of 
right now, supportive of the proposals that we have seen. We 
think that they probably will offer a template to take 
governmentwide and to have an overall change in the Civil 
Service system based upon our experiences in those two 
agencies.
    Ms. Davis of Virginia. And, in my opinion, they may well do 
that. Had I had my way, I would rather have waited to see if it 
worked for DHS before we expanded it to the largest agency for 
Civil Service employees, but I didn't have my way.
    Mr. DeMaio. I think that's our--our position here today is 
consistent with that. Let's get these two massive 
restructurings under our belt, let's learn from them, and then 
let's see where they would apply elsewhere in the Federal 
Government. It may be that you would want to take those two 
systems governmentwide or it may be that you want to continue 
with the demonstration project route of allowing individual 
agencies to customize their own system. I in the past testified 
on our discomfort with having a choose-your-own adventure Civil 
Service system where each agency comes up with their own rules 
of the road.
    Ms. Davis of Virginia. You're not the only one 
uncomfortable with that. That's why I said that we will try to 
make sure that any agency that's wanting to make a change, that 
it's looked at very closely by this subcommittee, and I think 
I've said it in the past, and I know I've probably said it to 
you, Ms. Kelley, that I would like to see a model that we use 
agency-wide before we go willy-nilly here and there and do 
something where folks don't know what's hitting them tomorrow. 
But, again, I would hope that we don't do anything too quick. 
And I appreciate the comments that you've made.
    I will tell you that I don't think we can go any broader in 
scope with the bill that we have than what we have right now. 
We were biting off a little bit at a time, but trying not to do 
anything that damages or harms our----
    Mr. DeMaio. And I think that's a role of good government 
groups like ours. Our role is to try to present provocative 
ideas, knowing that Congress will probably have to moderate a 
number of interests and probably do something that moves us 
forward and gives us progress.
    Ms. Davis of Virginia. I'll give you a for instance. I 
didn't see anything wrong with the ALJ bill, but I've met with 
resistance within our Congress in great amounts, which 
surprised me.
    Mr. DeMaio. If I could point something out, also in 
response to the testimony on the administration's competitive 
sourcing initiative and contracting out, we have studied that 
initiative and----
    Ms. Davis of Virginia. You might not want to talk about 
that in this room right now.
    Mr. DeMaio. We have concluded that competitive sourcing 
actually is a tool for the human capital process, and if done 
properly can be used to redeploy agency workers to areas where 
we have a recruitment challenge, and so that's the way we look 
at competitive sourcing. Rather than looking at arbitrary 
targets for out-sourcing or privatization, which we do not 
support, we want to see competition as re-deploying agency 
work, human capital, to the area where it is needed.
    Ms. Kelley. Madam Chairwoman, if I could just comment, I'm 
glad you identified your suggestions as provocative. I don't 
want to start----
    Ms. Davis of Virginia. I don't think anybody is going to 
disagree with that.
    Ms. Kelley. This is try--my point, the suggestions that 
have come forth from Mr. DeMaio have to do with measuring, 
monitoring, ensuring that progress is made, that there are 
measures in place. There is not a strong track record of that 
within agencies on anything, whether it is on contracting out, 
and the list can go on and on. And so if the agencies proceed 
with these various implementations, assistance from other such 
as your group on insisting on the measuring, the monitoring, 
the moving slowly before implementing would be very much 
appreciated, because I know of no agency that has a good track 
record with doing this, and they just don't know how, and we 
all have to help to make sure that happens.
    Ms. Davis of Virginia. I totally agree with you, Ms. 
Kelley.
    Mr. DeMaio, one last question for you. Are there any 
weaknesses in the President's management agenda in the 
Government Performance and Results Act which call for strategic 
human capital planning that we should correct by legislation?
    Mr. DeMaio. Well, we believe that legislation exists, the 
entire management agenda exists in legislation, and that 
agencies have the statutory tools they need for effective 
management. The question now becomes: are we applying 
consequences for agencies that are not engaging in performance-
based management? I think the President's management agenda's 
big impact is in that area. The initiatives are not new. They 
have been in the Government for many, many years, competitive 
sourcing since the Eisenhower administration. But what is 
needed is accountability. What is needed is that results 
demonstration through performance evaluation, and so that is 
where we are focusing, is on the implementation of the 
President's management agenda within agencies.
    The Congress could formalize the development of strategic 
human capital plans in legislation. That has not happened. The 
creation of a human capital officer is certainly a very 
important step. What it does is it brings HR to the management 
table in a way that the chief financial officer and the chief 
information officer have been brought to the table, but, just 
like with the Clinger-Cohen Act, which does the IT plan, and 
the GPRA, which does the performance plan, the strategic plan, 
maybe that human capital officer should be responsible for 
developing in legislation, not just an administration 
initiative, a strategic human capital plan with specific goals 
based on a comprehensive work force assessment of how many 
employees do we have today, what are their skill sets like 
today, and what is our mission going to require we have in 5 
years, so it would encompass recruitment, retention, training, 
succession planning, developing the next generation of 
government leaders. All of these issues have to be spoken to in 
a formal way and in an accountable way through human capital 
plan. I think this committee could enact that in this bill and 
require that recruitment and retention, relocation 
flexibilities be tied to an analysis and a set of goals and 
strategies articulated in a comprehensive plan.
    We don't know whether the next administration will require 
human capital plans. We would like to see that formalized 
through congressional action.
    Ms. Davis of Virginia. Just so you know, we are having a 
hearing in May to address these issues and to see if we're 
doing right and what we need to do.
    There's a lot going on right now that affects all of our 
Federal employees, and if we're going to make the changes that 
apparently seems to be the will of many around here to do--not 
necessarily in this room--maybe this is the time to do it as we 
are having so many people retire, so we don't lose any of the 
current work force that we have. Rather than going in and doing 
away with everybody or anybody, just let people go by attrition 
and make our changes at that point. But in doing so I want to 
work with all of you to make sure that we do it right and that 
we don't harm the quality of life of our Federal employees, 
because you are a valuable asset to us and not one that we want 
to lose.
    I thank you all for being here today. Again, Judge Dugan, 
if you have any comments about the legislation for the ALJs, 
anything you want us to look at more closely?
    Mr. Dugan. I just wanted to add that the whole performance 
issue and the SES issue, that was all mixing apples and 
oranges.
    Ms. Davis of Virginia. That's why I tried to point it out.
    Mr. Dugan. It really, really wasn't getting to what we are 
dealing with, APA hearings and--I think you understand that.
    Ms. Davis of Virginia. That's why I tried to clarify with 
Mr. Sanders that SESers are performance based. ALJs are not 
even allowed to be.
    Mr. DeMaio. Madam Chairwoman, if I could indulge, we did 
not include our report in the committee record, but we include 
our Web site address, www.performanceweb.org, where agencies 
can download the report, suggestions on how to win the talent 
war. Ms. Tara Short is our director of human capital strategy 
at the Institute and is available for questions just by going 
to the Web site.
    Ms. Davis of Virginia. Thank you, Mr. DeMaio. Again, thank 
you all for being here.
    The hearing is adjourned.
    [Whereupon, at 1:03 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional information submitted for the hearing record 
follows:]

[GRAPHIC] [TIFF OMITTED] T4772.160

[GRAPHIC] [TIFF OMITTED] T4772.161

[GRAPHIC] [TIFF OMITTED] T4772.162

[GRAPHIC] [TIFF OMITTED] T4772.163

[GRAPHIC] [TIFF OMITTED] T4772.164

[GRAPHIC] [TIFF OMITTED] T4772.165

[GRAPHIC] [TIFF OMITTED] T4772.166

[GRAPHIC] [TIFF OMITTED] T4772.167

[GRAPHIC] [TIFF OMITTED] T4772.168

[GRAPHIC] [TIFF OMITTED] T4772.169

[GRAPHIC] [TIFF OMITTED] T4772.170

[GRAPHIC] [TIFF OMITTED] T4772.171

[GRAPHIC] [TIFF OMITTED] T4772.172

[GRAPHIC] [TIFF OMITTED] T4772.173

[GRAPHIC] [TIFF OMITTED] T4772.174

[GRAPHIC] [TIFF OMITTED] T4772.175

[GRAPHIC] [TIFF OMITTED] T4772.176

                                 
