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





     DECISION TIME: A NEW HUMAN RESOURCES MANAGEMENT SYSTEM AT THE 
                    DEPARTMENT OF HOMELAND SECURITY

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON CIVIL SERVICE
                        AND AGENCY ORGANIZATION

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 29, 2003

                               __________

                           Serial No. 108-162

                               __________

       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
94-775                      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
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

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

         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
                    Ronald Martinson, Staff Director
         Chad Bungard, Deputy Staff Director and Senior Counsel
                          Chris Barkley, Clerk
            Tania Shand, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 29, 2003.................................     1
Statement of:
    Hannah S. Sistare, executive director, National Commission on 
      the Public Service; John Gage, national president, American 
      Federation of Government Employees; Colleen M. Kelley, 
      national president, National Treasury Employees Union; and 
      George Nesterczuk, president, Nesterczuk & Associates......    36
    James, Ronald L., Chief Human Capital Officer, Department of 
      Homeland Security; and Steven R. Cohen, Senior Adviser, 
      Homeland Security, Office of Personnel Management..........    10
Letters, statements, etc., submitted for the record by:
    Cohen, Steven R., Senior Adviser, Homeland Security, Office 
      of Personnel Management, prepared statement of.............    21
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, prepared statement of...................     6
    Davis, Hon. Jo Ann, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     3
    Gage, John, national president, American Federation of 
      Government Employees, prepared statement of................    47
    James, Ronald L., Chief Human Capital Officer, Department of 
      Homeland Security, prepared statement of...................    13
    Kelley, Colleen M., national president, National Treasury 
      Employees Union, prepared statement of.....................    79
    Nesterczuk, George, president, Nesterczuk & Associates, 
      prepared statement of......................................   101
    Sistare, Hannah S., executive director, National Commission 
      on the Public Service, prepared statement of...............    39

 
     DECISION TIME: A NEW HUMAN RESOURCES MANAGEMENT SYSTEM AT THE 
                    DEPARTMENT OF HOMELAND SECURITY

                              ----------                              


                      WEDNESDAY, OCTOBER 29, 2003

                  House of Representatives,
          Subcommittee on Civil Service and Agency 
                                      Organization,
                           Committeee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.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, Murphy, 
Blackburn, Mica, Danny K. Davis of Illinois, Norton, and Van 
Hollen.
    Staff present: Ronald Martinson, staff director; B. Chad 
Bungard, deputy staff director & senior counsel; Robert White, 
director of communications; Vaughn Murphy, legislative counsel; 
John Landers, detailee; Christopher Barkley, legislative 
assistant/clerk; Tania Shand, minority professional staff 
member; Earley Green, minority chief clerk; and Jean Gosa, 
minority clerk.
    Mrs. Davis of Virginia. The Subcommittee on Civil Service 
and Agency Organization will come to order.
    Thank you all for joining us today at this important 
hearing. When Congress created the new Homeland Security 
Department last year, we included in the legislation a 
directive to the Secretary and the head of the Office of 
Personnel Management to develop a new, modern system of 
personnel management that would fit the unique needs of the new 
department. We hold this hearing today at a point in time when 
the establishment of that system is nearing.
    Last week, a Senior Review Committee, made up of officials 
from DHS and OPM the employee unions and outside experts, met 
for 3 days in public to discuss the many options, 52 in total, 
that are on the table. These proposals would affect pay, 
classification, employee appeals, adverse actions, and labor 
management relations, every major element of a human resources 
system.
    I applaud the design team and the Senior Review Committee 
for the many months of work on this issue. We gave you an 
important task and you have taken it very seriously. That was 
illustrated very clearly by the sessions last week.
    We are holding this hearing now, while the decisionmaking 
progress is ongoing, due to the significance of this process. I 
think all of us are aware that the choices made by Secretary 
Ridge and Director James are likely to reverberate throughout 
the Federal Government. Homeland Security is viewed as a test 
to see how the principles of performance-based management work 
when put into practice on a large scale, how it will work. If 
the new department does indeed move away from the General 
Schedule and some of the statutory Civil Service provisions of 
Title 5, its success or failure in doing so will be a lesson 
for other departments and agencies.
    So it is important that we get this right. And I hope I can 
make it through this hearing and keep my voice going, so you 
will have to bear with me. I say ``we'' because, after all, 
Congress gave the department this authority to waive several 
provisions of Title 5, and we specifically required the 
department to develop a new personnel system. We have a lot 
invested in this process, too. We want this to be a success. We 
want the department to have the flexibility it needs to meet 
its critical mission, and we want it to do so while creating a 
workplace environment where good workers are rewarded and poor 
performers are rehabilitated or removed.
    One of the interesting items to emerge from last week's 
public review sessions, I believe, was the wide agreement that 
poor performers have no business working for the Federal 
Government. I think this issue really gets at the essence of 
creating a real, credible, performance-based management system 
and an effective pay-for-performance plan.
    Such a system begins with an effective way to measure 
performance. Managers must be accustomed to giving real 
performance ratings, not simple pass/fail marks, to their 
employees, and these ratings must have a direct relation to 
duties and responsibilities of each employee. This takes 
training, to be sure, but it also requires a willingness to 
make hard choices, and it demands that managers are held 
accountable for their decisions.
    Once you have a credible tool for measuring performance, 
and managers who understand the system and want to implement 
it, it is fairly logical to have a system that rewards the best 
performers and does not coddle the worst. I hope and expect 
that this is the direction the Department of Homeland Security 
is heading. I look forward to our discussion today, and I thank 
you all for being here.
    [The prepared statement of Hon. Jo Ann Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.001
    
    [GRAPHIC] [TIFF OMITTED] T4775.002
    
    Mrs. Davis of Virginia. I would now like to recognize the 
ranking minority member of this subcommittee, Mr. Danny Davis, 
for an opening statement.
    Mr. Davis of Illinois. Madam Chairwoman, I think your voice 
is going to be fine, and I want to thank you for calling this 
hearing.
    The process that agency officials at the Department of 
Homeland Security and the Office of Personnel Management 
designed to help develop the new personnel rules at DHS has 
been hailed as being very collaborative and inclusive.
    A local columnist in last Sunday's paper described a recent 
personnel development working session as, ``Bush administration 
appointees and Federal union leaders gathered around a table 
and tried to step outside their adversarial relationship. For 3 
days, officials from the Department of Homeland Security and 
Federal unions took stock of one another as they discussed how 
best to overhaul pay and work force rules affecting 180,000 
Civil Service employees.''
    I am pleased that DHS' human resources development process 
has been collaborative and inclusive, as called for in the 
Homeland Security Act. However, the act also expresses the 
``Sense of Congress'' that the ``human resources management 
system envisioned for the Department should be one that 
benefits from the input of its employees.''
    It is not enough only to solicit the ideas of DHS employees 
and union officials. Their ideas and proposals must be 
considered and reflected in the proposed personnel system.
    It is my understanding that the 52 personnel system options 
that have now been forwarded to the Secretary of DHS and the 
Director of OPM for consideration range from keeping the 
current General Schedule pay system to implementing a new 
performance-based pay system. In the area of collective 
bargaining, some options increase management rights by limiting 
the issues that can be bargained over, and other options 
increase union rights by expanding the scope of bargaining.
    The Secretary of DHS and the Director of OPM have a 
difficult but congressionally stated responsibility to design a 
system that reflects the ideas and concerns of the employees 
who are the bread and butter of this agency. I hope that the 
much touted collaborative design process results in a human 
resources system that reflects the views of all those involved 
in the design process itself. Collaboration requires a 
tremendous amount of give and take. It also requires a great 
deal and a high level of sensitivity. I trust that process can 
in fact be implemented, and it can be done successfully.
    I look forward to hearing from the witnesses and learning 
where they believe there is room for consensus and compromise 
in design of a new personnel system at DHS.
    And again, Madam Chairwoman, I thank you for holding this 
hearing and look forward to the discussion which will ensue.
    [The prepared statement of Hon. Danny K. Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.003
    
    [GRAPHIC] [TIFF OMITTED] T4775.004
    
    Mrs. Davis of Virginia. Thank you, Mr. Davis.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairwoman. I just want to add 
my hopes too that throughout these hearings we will hear 
certainly some great ideas for moving the Department of 
Homeland Security forward as a model for helping Government run 
more efficiently and to do what you had said, to make sure that 
good workers get rewarded and those who are not working, we 
find other ways of either helping to improve their performance 
or helping them move on.
    But above all, I want to make sure that all the parties 
involved, we hear from them, whether they are representing the 
workers or representing administration on this. I want to hear 
how people are working together to resolve any issues or, in 
the future, how they will do so. Those are some of the things 
that I hope, as we hear testimony, I will hear some elaboration 
on.
    Thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Mr. Mica.
    Mr. Mica. Thank you, Chairman Davis. Good to be with you 
this morning. I think this is an appropriate and long overdue 
hearing, but timely in that we need to make decisions on new 
human resource management system at Homeland Security.
    Homeland Security is a unique consolidation of many 
agencies, and I know that there has been an air of uncertainty 
among the work force because of the nature of the consolidation 
and some of the reorganization of activities within one of our 
largest agencies of the Federal Government.
    I wanted to speak for just a second, and, again, I think 
this is very important. I think that we have to respect the 
service and the loyalty of many of those who serve the country 
in Civil Service positions, but also keep in mind that no one 
is entitled to a position forever in the Federal Government, 
and times do change and responsibilities change and 
organizations change.
    Having chaired the Civil Service Subcommittee, I watched in 
awe some of the transition of the Department of Defense and the 
downsizing that it faced in the post-cold war period, and they 
did it, for the most part, without a whimper. Maybe that is the 
nature of the Department of Defense. And many of the positions, 
too, were represented by organized labor. But I think folks 
have to realize that the purpose of Civil Service was to make 
certain that there was not political interference, that there 
wasn't the hiring of folks on nepotism basis, and that people 
weren't dislodged from their positions solely on the basis of 
political convenience, transition, and patronage.
    So we have to keep in mind that the private sector does 
make these transitions, that the Defense Department and others 
have made these transitions, and that there will be 
consolidations and new experience. We live in a different era.
    All that said, we need to do our best again to properly 
retrain, to reassign, and to place those who have been loyal in 
their service to the Federal Government; I respect that. My 
folks were both lowly paid State civil servants at one time, so 
I have a great respect for that.
    The final point that I wanted to make is on one of the 
largest components of Homeland Security, and that is the 
Transportation Security Administration. It was created with a 
core of some existing Department of Transportation, and other 
security-related transportation employees. It expanded and grew 
to 55,000 plus, I am told. And one of the things in helping to 
create and establish that agency, we wanted to make certain 
that we did, because of the nature of their responsibility, 
also the importance of accountability in a security system of 
that sort, was not to have that agency as part of Title 5. And 
I think that is important that we continue to respect that 
decision. Most of the folks who are employed are screeners.
    We converted the airline screening responsibility to 
Federal responsibility, but I may remind the subcommittee and 
Members of Congress and others that we do have a transition 
provision which we put in the legislation to allow for private 
screening, all with Federal supervision and Federal 
responsibility and oversight audit, and that will continue. We 
now have five demonstration projects that are working very 
successfully, but I think that airports will soon be demanding 
to opt out, and they have that right, 1 year from this month. I 
have asked TSA to ensure a smooth transition, and I think that 
it is important that the uniqueness of the creation and the 
responsibility of this new agency, and particularly the 
screening responsibilities, be recognized with both the past 
intent and the current operations and the future conduct of 
this important responsibility, and it will transition. This is 
not unlike the European transition of that screening 
responsibility, but it does involve a large portion of the 
number of people who are now under the purview of Homeland 
Security.
    So a lengthy opening statement, but willing to work, as 
chairman of the Aviation Subcommittee and with the Civil 
Service Subcommittee, I am proud to be a member of the 
committee. I, again, appreciate your fulfilling your 
responsibilities and taking up this issue, and look forward to 
hearing the witnesses.
    And thank you again, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Mr. Mica, and we 
certainly appreciate your experience and expertise on the Civil 
Service Committee and all that you have done with Homeland 
Security and the TSA.
    Ms. Holmes Norton, do you have an opening statement?
    Ms. Norton. I don't have a formal opening statement, Madam 
Chairwoman. I appreciate this hearing and thank you for this 
hearing. I just want to say as we begin this process with the 
Department of Homeland Security, and I am a member of the 
Select Committee on Homeland Security, that we don't go through 
another very polarizing process of the kind we have just 
finished on the Department of Defense. That was not a model of 
how to go about dealing with the interests of efficiency and 
the justifiable interest of the people who work in the 
Department. You can't organize a department around the people 
who work there, and it is time the Government, if it is going 
to reorganize these functions, took their cue from the way in 
which the Fortune 500 does it. I served on the board of three 
Fortune 500 companies, and I watched how companies had to be 
elastic and flexible and change, particularly as the economy 
changes. I have never seen anything like the DOD process. Any 
company that went through that would be throwing its best 
people out the window and telling them to go search for other 
jobs, because people are not going to stand for changes that 
don't take them into account; and I hope that is the kind of 
process we are about to embark upon here, or I think we are 
going to have the same kind of polarized response that we had 
with respect to the Department of Defense.
    And I thank you very much, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Ms. Norton.
    I ask unanimous consent that all Members have 5 legislative 
days to submit their 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, 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 the two key 
agencies making the final decision about the new personnel 
system. First today will be Ronald L. James, the Chief Human 
Capital Officer at the Department of Homeland Security. He will 
surely have a lot to say on this topic. Next will be Mr. Steven 
R. Cohen, Senior Advisor for Homeland Security Issues at the 
Office of Personnel Management. Joining him behind the table 
will be Ronald P. Sanders, Associate Director for Strategic 
Human Resources Policy at OPM.
    We have also asked the Merit Systems Protection Board to 
submit a written testimony for the record, which they are happy 
to do. The MSPB has also played a significant role in the 
development of the new personnel system at DHS.
    It is standard practice for this committee to administer 
the oath to all witnesses, so I am going to ask, if everyone is 
here from the second panel as well as the first panel, we will 
just swear everybody in at one time. If you will please stand, 
I will administer the oath.
    [Witnesses sworn.]
    Mrs. Davis of Virginia. Let the record reflect that the 
witnesses have answered in the affirmative, and please be 
seated.
    Mr. James, we will begin with you. We have your full 
written statement in the record, and if you would just like to 
give a summary or say whatever you would like to say, you have 
5 minutes.

  STATEMENTS OF RONALD L. JAMES, CHIEF HUMAN CAPITAL OFFICER, 
 DEPARTMENT OF HOMELAND SECURITY; AND STEVEN R. COHEN, SENIOR 
   ADVISER, HOMELAND SECURITY, OFFICE OF PERSONNEL MANAGEMENT

    Mr. James. Good morning, Chairwoman Davis and distinguished 
members of the subcommittee. I am Ron James, Chief Human 
Capital Officer at DHS. Thank you for the opportunity to appear 
before you today.
    DHS was created with the overriding mission of protecting 
the Nation against future terrorist attacks. Component agencies 
analyze threats and intelligence, guard our borders and 
airports, protect our critical infrastructure, and coordinate 
the response of our Nation for future emergencies. DHS is also 
committed to and being sensitive to protecting the rights of 
American citizens and enhancing public services such as natural 
disaster assistance by dedicating specific teams to these 
important missions.
    In creating the Department, Congress provided a historic 
opportunity to design a 21st century human resource management 
system that is fair, effective, and flexible. We, and I, take 
this very personally, have a responsibility to create an 
innovative system, while at the same time preserving basic 
Civil Service principles for our DHS loyal, effective, and 
hard-working employees.
    Our Department has an incredibly important mission. 
Whatever system we develop must be mission-centered first and 
foremost. Day in and day out, our mission is preventing 
terrorist attacks within the United States, reducing the 
vulnerability of the United States to terrorism, and minimizing 
the damage and assisting in the recovery from terrorist attacks 
that do occur within the United States. The design must 
facilitate our ability to perform this mission. In order for us 
to achieve this mission, the system created must be 
performance-focused, contemporary, and excellent. The system 
must generate respect and trust and be based on merit 
principles and fairness.
    We have a responsibility to put into place a human 
resources management system that meets employees needs, while 
at the same time creates a high performing organization, one 
which will effectively help us fight the war on terrorism. The 
American public is depending on us to create such a system.
    The bottom line: the world has changed, jobs have changed, 
missions have changed, and our human resources system needs to 
change as well to support this new environment. The current 
system, while it has many positive features, is insufficient to 
meet our needs and the different circumstances that we have 
faced since September 11.
    In order to successfully lead implementation of the 
national strategy for Homeland Security, the Department must 
excel at the management of its most precious resource: its 
people.
    We are and have been following a process, and are committed 
to following a process that ensures maximum collaboration with 
our employees and their representatives, stakeholders, and 
subject matter experts. We created a Design Team of DHS front-
line employees and managers, union representatives, and HR 
professionals from OPM and DHS. This team began its research 
and design work in early April and presented to a Senior Review 
Committee a wide range of options for pay, performance 
management, classifications, labor relations, adverse actions 
and appeals at the end of September. Their commitment and hard 
work have been absolutely exceptional, and we owe all of them a 
big and a gigantic thank you.
    The SRC met last week for 3 days to deliberate the options 
developed by the HR Design Team, and, as others have mentioned, 
the team and the committee is very diverse. The committee had a 
very candid and thorough and thoughtful discussion about the 
options and key issues related to them. Committee members 
openly shared their individual perspectives, and although there 
was and will continue to be disagreement at times, the dialog 
created new possibilities for a fair, credible HR system 
through listening and mutual understanding.
    One thing was clear: each and every SRC member agreed upon 
the need for the HR system to support the vital mission of the 
Department of Homeland Security and its employees. All SRC 
members agree they wanted to develop a system that is fair, 
credible, and transparent, and one that creates an environment 
for openness, inclusiveness, and accountability.
    Based on the discussions from the meeting, the SRC will 
produce a summary report over the next 2 weeks. The report will 
be available to members of this committee as well as the 
general public. The report will be forwarded to Secretary Ridge 
and OPM Director James, no relation. The Secretary and Director 
will issue proposed new personnel rules for the Department 
early next year. The proposed regulations will be available for 
public comment for a 30-day period, and the issuance of the 
regulations will also trigger the congressionally mandated 
collaboration period with our employees' representatives, which 
includes notice of the proposals. And I might add that even 
though that is just being triggered now, the ongoing dialog has 
been continuing with our employee representatives and employees 
since April of this year.
    We know change is difficult, but change is inherent in the 
creation of the Department of Homeland Security. It is 
incumbent on us to realize that changes which may result from 
this process will need time to design in detail. We will need 
to train our employees and managers, as we will need to assess 
the effectiveness of these changes and continue to make 
improvements. We are up to the challenge.
    Thank you, and I welcome any questions you may have.
    [The prepared statement of Mr. James follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.005
    
    [GRAPHIC] [TIFF OMITTED] T4775.006
    
    [GRAPHIC] [TIFF OMITTED] T4775.007
    
    [GRAPHIC] [TIFF OMITTED] T4775.008
    
    [GRAPHIC] [TIFF OMITTED] T4775.009
    
    [GRAPHIC] [TIFF OMITTED] T4775.010
    
    Mrs. Davis of Virginia. Thank you, Mr. James.
    Mr. Cohen, we have your complete statement, but you are 
recognized for 5 minutes to either summarize or whatever. Thank 
you.
    Mr. Cohen. Thank you, Madam Chairwoman. Good morning, 
members of the committee. I am Steve Cohen, and I serve as 
Senior Advisor for Homeland Security at the Office of Personnel 
Management, and I thank you for the opportunity to testify on 
the design of a modern, merit-based human resources management 
system for the Department of Homeland Security. As you have 
indicated, Madam Chairwoman, I have with me Dr. Ronald Sanders, 
who serves as Associate Director for our Division of Strategic 
Human Resources Policy at OPM.
    For well over a century, our Civil Service system has 
served this country and its citizens well. Most importantly, it 
has served as a source of strength and continuity during 
periods of crisis in our history, and as a model for the rest 
of the world.
    Today, as never before, our basic Civil Service system is 
facing a major challenge to its very existence. A system that 
has served us so well in the past has grown out of date and 
unresponsive to the needs of today and the likely needs of the 
future.
    The Homeland Security Act of 2002, which was signed by 
President Bush just last November, presented to the Secretary 
of the Department of Homeland Security, Tom Ridge, and to the 
Director of the Office of Personnel Management, Kay Coles 
James, an unprecedented opportunity to address that challenge 
and, by so doing, to demonstrate to the world that what was 
created 120 years ago can be updated once again to reflect the 
needs of a new era while still holding true to those ideals 
that we all value so very deeply: merit, veterans preference, 
due process, and protections against prohibited personnel 
practices, discrimination, and reprisal for whistle blowing.
    Secretary Ridge and Director James addressed this challenge 
to our Civil Service system by creating a Department of 
Homeland Security human resources management design process 
that has been, at their direction, inclusive, collaborative, 
thorough, and timely. It has won the praise of the General 
Accounting Office in a recent study entitled ``DHS Personnel 
Design Effort Provides for Collaboration and Employee 
Participation.'' It has won the praise of top managers of the 
Department of Homeland Security and the presidents of the three 
major employee unions within the Department: the American 
Federation of Government Employees, the National Treasury 
Employees Union, and the National Association of Agriculture 
Employees.
    The design process has demonstrated that an atmosphere of 
mutual respect and trust can be created within which labor and 
management can work effectively together, even when that 
atmosphere was originally one of distrust and animosity, and 
even when disagreements continue to exist. It also will shortly 
demonstrate that human resource systems can be developed to 
meet the unique needs of any organization and its employees, 
and at the same time serve well the American people and our 
obligation to preserve the world's greatest Civil Service 
system and the core values I mentioned previously.
    At the heart of the DHS human resources design process was 
an outstanding design team, as was indicated by Mr. James, a 
team made up of managers and employees from DHS, technical 
experts from OPM and DHS, and professional staff 
representatives from the Department's three major employee 
unions, those that I mentioned previously. The nature of this 
highly collaborative design effort has been recognized as being 
the first of its kind and as a model for others to follow in 
the future.
    To meet the charge of Director James, the team cast a wide 
net in its research efforts, examining HR policies and 
practices in private sector companies, non-profit 
organizations, State and local governments, and other Federal 
agencies. The team met with highly regarded human resources 
experts, academics, and practitioners, and with over 2,000 
front-line DHS employees, managers, and supervisors at town 
hall meetings and focus group interviews.
    Relying on that broad approach as its foundation, the team 
created the 52 human resources options in the areas of pay, 
classification, performance management, labor management 
relations, adverse actions, and appeals that were the subject 
of 3 days of intense discussion just last week by a highly 
select Senior Review Committee. I was honored to serve as co-
chair of that committee, along with Janet Hale, Under Secretary 
of Management for DHS.
    The report of that committee's deliberations is scheduled 
to be submitted to Secretary Ridge and to Director James within 
the next 2 weeks. That report will serve as the foundation for 
the subsequent decisions of the Secretary and the Director that 
will ultimately result in a human resources management system 
for the Department that is both responsive to the uniquely 
critical mission of the Department and to the need to protect 
the basic Civil Service rights of its employees, and that will 
also serve as a model for the rest of the Government.
    Thank you again for the opportunity to testify. I will be 
happy to answer any questions the committee may have.
    [The prepared statement of Mr. Cohen follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.011
    
    [GRAPHIC] [TIFF OMITTED] T4775.012
    
    [GRAPHIC] [TIFF OMITTED] T4775.013
    
    Mrs. Davis of Virginia. Thank you, Mr. Cohen. I would like 
to thank you and Mr. James both for agreeing to testify here 
before us today.
    I would like to now yield to our Civil Service Subcommittee 
ranking member, Mr. Danny Davis. You have the floor.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Mr. Cohen, you just testified that Secretary Ridge and 
Director James will have 52 options in terms of development of 
a system. Would both of you comment on how you think they will 
go through the process of ferreting out and making use of those 
options to arrive at a conclusion?
    Mr. Cohen. I would be happy to, sir. I think, first of all, 
it is important to note that the 52 options were presented or 
were developed as a way of, one, categorizing all of the 
different possibilities, or at least most of the different 
possibilities that could be considered in a broad range. When 
we are looking at performance management, labor relations, 
appeals, and the others, they covered as broad a range as they 
could of possible actions to take. Those options were 
considered very carefully, as indicated previously, by the 
Senior Review Committee, and the report of that Senior Review 
Committee, that which will go to the Secretary and the 
Director, will basically summarize the discussion, the sense of 
where the committee members were coming as they deliberated not 
option by option, but the parts of the various programs that we 
are considering. So the report will not, as I say, go from 
option 1 to option 52, but, rather, it will cover all of the 
significant parts of those various programs and will present to 
the Director the various views of the committee members.
    As the Secretary and the Director then review the materials 
before them, they will have the options themselves, and they 
will also have the summary of those deliberations, that is, all 
of that material that we hope will be helpful to them as they 
go about their thought processes.
    Mr. Davis of Illinois. So they will be summarized and 
grouped together.
    Mr. Cohen. That is correct.
    Mr. Davis of Illinois. Mr. James.
    Mr. James. I would just echo Steve's comments and maybe 
just give an example. For example, among the first five 
options, one essential element is that they basically say the 
status quo, release simply variations of the status quo. And I 
would echo Steve's comments, that is, if there is some desire 
to mix and match, that could be one element, that some portion 
of what is current could come out of those first five options. 
So I think the Secretary will get a document that will point to 
him like options and will basically say these are the status 
quo, these options have this element of fairness with regard to 
due process that was a concern of the committee, and this 
seemed to be the sense of this group of individuals or this 
seemed to be the sense of this one individual.
    As to the second part of your question, the Secretary does 
plan to consult with the senior staff, obviously. He also plans 
to meet once again, probably at the end of the first week of 
November or the beginning of the second week of November, with 
at least, at a minimum, the presidents of the three largest 
unions who represent our employees. So there will be ongoing 
dialog and ongoing collaboration and ongoing requests for input 
and ongoing requests for feedback from a number of sources.
    Mr. Davis of Illinois. It is my understanding that a Booze, 
Allen, Hamilton report prepared for the administration noted 
that Homeland Security employees who participated in focus 
groups during the summer voiced reservations about pay banding 
and other performance-based alternatives. Do any of the pay-
related personnel options reflect the concerns that were raised 
by employee groups in the focus activity?
    Mr. James. Mr. Davis, not only was that expressed at the 
town meetings and in the focus group, it was also expressed at 
the Senior Review Committee. And while I don't want to pretend 
to summarize any consensus that came out of the committee, 
there were individuals who spoke eloquently to the issue of if 
you want to do pay banding, you really need to build 
credibility and fairness and accountability in the performance 
system, and it was said time and time again that a critical 
condition precedent to any pay banding would be training of 
managers, getting an understanding and getting a buy-in. And it 
is my belief, again, I have not seen the report and I am not 
sure it will be written, that those kind of elements that were 
articulated at the Senior Review Committee will in fact go 
forward and the Secretary will have those kind of words, those 
kind of concerns in front of him.
    Mr. Cohen. If I may add to that, sir. I agree totally. In 
addition to that, as was indicated earlier, the options do 
obviously contain a broad range of possibilities, and the 
status quo is always one of them, and that is in fact reflected 
in one of the options. When we talk about the General Schedule, 
for example, that is there as it presently exists, and it is 
there also with modification. So my point simply is that we do 
believe that the design options that were put together reflect 
this broad range, that which would indeed reflect the concerns 
of the employees and others who feel they like the 
predictability of the system that presently exists, along with 
others who believe that this is really the time for change.
    Mr. Davis of Illinois. Thank you, gentlemen, very much.
    And thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Mr. Davis.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairwoman.
    And thank you, panelists. I appreciate your being here. And 
clearly as I read through many of these options, there is a lot 
of work that has gone behind them, and I am sure a lot yet to 
be understood, because they appear so complex. But let me ask, 
in this process I think both of you alluded to the 
inclusiveness issue here, working with groups along the way. 
Can you elaborate on the extent that employee groups have been 
involved in working on these plans, because obviously having 
the early buy-in and working together is going to be 
instrumental in maintaining that along the way?
    Mr. Cohen. I would be happy to, sir. Our basic design team 
consisted of employees and managers from the Department of 
Homeland Security. It also consisted of a field review team 
that had a large number of individuals, field employees and 
managers, from the Department of Homeland Security who reacted 
to where we were heading. As we indicated earlier, we met with 
over 2,000 of the DHS employees and managers in our various 
visits across the country to major locations of DHS employment. 
These visits included town hall meetings as well as the focus 
group meetings that we alluded to earlier. And their thoughts, 
of course, were very much considered.
    Also a major portion of this design effort and what made 
it, I think, so unique is that part of the basic team itself 
included professional staff from the three major unions that we 
referred to earlier. So they worked with us, the union 
representatives I am referring to, worked with us from day one 
up through to today, and, of course, members of the Senior 
Review Committee included the presidents of those unions. So we 
really do believe that as part of this process we did the best 
that we could to assure that employee views and the views of 
their representatives were well represented.
    Mr. Murphy. As you continue on with this and looking at 
these many options, you are not going to be using all of them, 
obviously, but could you describe the next steps in terms of 
selecting the options that will be put into place? Will there 
be a mixture of these depending upon people's job 
classifications? Sometimes it appears least confusing if there 
are multiple levels. Could you clarify what you are going to do 
and how you are going to do that?
    Mr. Cohen. Yes. The next step will be for a report to go to 
Secretary Ridge and Director James that will include the 
summary of the discussions of the Senior Review Committee along 
with the options themselves. As Mr. James indicated earlier, 
the Secretary and the Director will then not only obviously 
carefully review with their staff all of those materials, but 
they will be consulting with MSPB, they will be meeting with 
the union presidents we mentioned earlier.
    Mr. Murphy. Are you going to present all the options to 
them or recommend certain ones proceed forward?
    Mr. Cohen. I'm sorry?
    Mr. Murphy. Are you going to be presenting all the options 
to them or recommend that certain ones be put forward?
    Mr. Cohen. To the Secretary and to the Director?
    Mr. Murphy. Yes.
    Mr. Cohen. They will be getting all of the options, 
basically, which is a result of the product of the design team, 
along with the results of the discussion on those options that 
was held by the Senior Review Committee members.
    Mr. Murphy. I am just wondering at this point if there were 
some recommendations for certain ones to be implemented; that 
there was some agreement among all the parties who have been 
discussing this to say these are the ones that you think are 
the most workable, fair, clear, transparent, etc.
    Mr. Cohen. The discussion didn't go that way in terms of 
the Senior Review Committee process, and that was rather 
deliberate. We did not start with option 1 and go through to 
option 52. Frankly, we thought it would be much more 
productive, rather than doing it in that manner, to talk about 
the major elements of the programs that we were talking about, 
and when it was appropriate or when it seemed to fit properly, 
many of the individual members would refer back to option 32 or 
33 or option 4 or what have you. But we didn't either 
discussion, nor will we present the report option by option.
    What I think is important to keep in mind is that these 
options really are intended to be conceptual in nature; I mean, 
we could have added more. When you look at a pay banding 
system, for example, there are a variety of different 
approaches that could be used, and we certainly didn't make an 
attempt to identify each and every one and present them that 
way. So they are intended to be conceptual, and what we fully 
expect is that when the Director and the Secretary sit down and 
ultimately design what they believe would make most sense for 
the Department, they will be looking at broad program elements 
as opposed to specific options per se.
    Mr. Murphy. All right, thank you.
    Thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Mr. Murphy.
    Ms. Holmes Norton.
    Ms. Norton. Thank you very much, Madam Chairwoman.
    Do you see what you are doing as a model for other 
agencies? We have been trying to figure out how the 
administration is going about this management reform involving 
human resources. We didn't know whether DOD was the template. 
We noted some differences. It seemed to be even more severe 
than the statute setting up the Department of Homeland 
Security.
    I suppose I should be asking Mr. Cohen. Are you doing this 
on an agency-by-agency basis? What are you doing?
    Mr. Cohen. There are many who have asked the same question. 
What we are doing, of course, is in response to really the 
unprecedented authority that the Congress gave to the Secretary 
and to the Director to develop a new personnel system for the 
Department in the six areas that we talked about earlier. 
Without that congressional authority, we wouldn't be able to 
propose the design of the system as we are doing it.
    Ms. Norton. Well, wait a minute. I don't recall that it was 
specific authority for the DOD at the time they proceeded.
    Mr. Cohen. No, this was contained within the Homeland 
Security Act.
    Ms. Norton. I understand that. But you said without this 
authority you implied there is nothing you would be doing or 
could do.
    Mr. Cohen. We couldn't be basically reshaping all of those 
chapters within Title 5 as we presently have the authority to 
do.
    Ms. Norton. Are you reshaping those because you regard 
these functions that have been placed in the new Department to 
be essentially different from the functions when they were 
spread out among the other departments? And if so, how is that?
    Mr. Cohen. Not that the functions are different, but I 
think there are two issues here. One is the critical mission of 
the Department of Homeland Security, which in many respects 
makes the outmoded Civil Service system all the more outmoded. 
The other is, as I was alluding to earlier in my statement, the 
basic concern that we have for our entire Civil Service system, 
and that, indeed, it needs to be updated and made more 
responsive to the needs of today and the needs of the future. 
We are looking at this opportunity to shape a personnel system 
for Homeland Security that is indeed mission-oriented and is 
reflective of the unique needs of the Department, but at the 
same time one that can be used as a model for the rest of the 
Government.
    Ms. Norton. Well, of course, that is why we are going to 
look at it very closely.
    Mr. Cohen. Yes, ma'am.
    Ms. Norton. This, in a real sense, is not like the rest of 
the Government. That is why you were given the statutory 
authority to do something very different, because the agency is 
very different. The whole notion of defending the homeland with 
an agency within the merit system is very different, I suppose, 
from what DHS does or what the Department of Labor does and the 
rest.
    I found your testimony very thin, and I think the reason is 
that we have called you as we had to, because we are about to 
adjourn, I hope. We called you at a point before this report 
was issued. Do I recall in this testimony you said there would 
be a report in 2 weeks?
    Mr. Cohen. Within 2 weeks, yes, ma'am.
    Ms. Norton. So this is a kind of, we are going to try to do 
everything right testimony, and I suppose without the report or 
your willingness to talk about the report at this time, it is 
difficult to get to what is really happening with respect to 
this process. Therefore, I must ask you what you regard as the 
major differences between you and employees that have arisen 
thus far in the process, since we get no sense of anything but 
a broad process from your testimony?
    Mr. James.
    Mr. James. Can I have the question repeated?
    Ms. Norton. I would like to know what are the major issues 
between the Department and its employees at this time.
    Mr. James. The major issue is one of trust and lack of 
confidence in the current performance appraisal system.
    Ms. Norton. Mr. James, you misunderstand me. By issue I 
mean substantive issues.
    Mr. James. Well, I will try to repeat what I heard and the 
concerns I heard raised, and the concerns I heard raised were 
about trust.
    Ms. Norton. Trust is not a substantive issue.
    Mr. James. Well, I don't know how to answer the question.
    Ms. Norton. It is a relationship issue. You know, this is a 
congressional committee. I am trying to find out what are the 
major issues. Let me put it this way. What are the major issues 
that you have been discussing with employees? You are very 
proud of this design system. All I am trying to find out is how 
it works. What are you talking about?
    Mr. James. The major issues have been the ones that have 
been outlined: pay, labor relations, the appeals process, 
employee scale.
    Ms. Norton. So what have been the major differences on 
those issues?
    Mr. James. Well I will give you the kind of concerns I have 
heard echoed. The question is like if you have an internal 
panel, will we still have due process; will you have union 
participation; will there be employee involvement in that 
process. But with all due respect, that goes to an issue of 
trust, and that is a substantive issue.
    Ms. Norton. Well, they seem to be very specific issues that 
can be answered yes, you will or no, you won't, or let us work 
it out.
    Mr. James. And that has been the process, it is like let us 
talk about how can we balance the agency's mission and actually 
talking to people about what the mission is and talking about 
how do you in fact still have due process and at the same time 
get to a faster resolution. Because it is unfair to employees, 
it is unfair to the agencies to have an interminable process 
that goes on where employees are in limbo for 2 or 3 years. 
Those are concerns that were raised by employees, those were 
concerns that were raised by managers; and, in fact, on that 
issue, what I heard, and this is my individual I heard, was 
agreement. And I come from the experience of dealing with the 
Teamsters, and I am just absolutely amazed that people are 
talking, because that is the first major issue, is getting the 
people to the table and talking about the issues and saying we 
disagree about this. You know, what is the level of due 
process? If you change pay, how can I be assured that I can 
trust my manager not to do the old boy system or the old girl 
system?
    Ms. Norton. Madam Chairwoman, I see my time is expired.
    Mr. James, I just want to say, in closing, that the issue 
is not trust. What did Ronald Reagan say? Don't trust, just 
verify? I don't think the employees can ever know whether 
management, with changes from administration to administration 
or from person to person, is somebody you can trust. The 
question is does the system work. So I have great problems with 
your framing these notions in a way that does not allow the 
committee or the employees to know whether it is working 
because of systems that are in place that would enable us to 
know, and I tell you trust isn't one of them. I don't know what 
that means as an approach to a system.
    Mr. James. If you install new systems in response to 
concerns being raised by employees, one issue discussed is how 
do we measure that we in fact have done what we promised to do, 
that we are being fair, that we are being effective; and part 
of that is initially the commitment of continued talk. I come 
from a private sector experience, 25 years mergers and 
acquisitions, and the reason that 50 percent of the private 
sector acquisitions fail is because they fail to involve their 
employees; they fail to develop their trust, they keep them in 
the dark, they don't let them know what is going on. And I see 
that issue as fundamental to building any kind of platform in 
terms of talking about issues.
    Mrs. Davis of Virginia. Thank you, Mr. James.
    Thank you, Ms. Norton. We may have time for a second round.
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Madam Chairwoman, and thank you 
for holding this hearing at this particular juncture; I think 
it is important that we get an update before the 
recommendations are forwarded to the Secretary and the 
Director.
    And I thank both of you gentlemen for being here today. And 
I have read ahead to some of the testimony from some of the 
others who were involved in this process, Mr. Gage of AFGE, and 
Ms. Kelley of NTEU, and both of them have strongly praised the 
process you have gone through as being a collaborative process 
that did bring people together, it was inclusive, and so I 
congratulate you on that. But I want to get to this question of 
credibility and trust, because now as I understood your answers 
to Mr. Murphy's questions, these 52 options are now being 
forwarded without being further condensed, really, they are 
being forwarded to the Secretary and the Director, is that 
correct?
    Mr. Cohen. That is correct, along with an analysis of their 
evaluation by the Senior Review Committee and others.
    Mr. Van Hollen. But among those 52 options are obviously 
very different routes that can be taken on each of these 
issues, like employee rights, grievance process, and all that, 
isn't that correct?
    Mr. Cohen. That is correct, sir.
    Mr. Van Hollen. Right. So the credibility that you have 
gained by making this an inclusive process, and that will 
disappear tomorrow if what happens is those 52 recommendations 
are forwarded to the Directors and all of a sudden they come 
out with conclusions, it would seem as if this whole process 
had been wasted time because they are the conclusions that are 
most diametrically opposed to the interests and rights of 
employees. It will all be seen as a big sham if that is the 
final result. So I am a little troubled by the fact that this 
collaborative process, this group is not, and I don't know if 
Mr. Murphy was suggesting this, but in listening to your 
answers, I thought it would be a good idea, if the people who 
spent the most time looking at these issues maybe narrowed the 
options a little more so that out of this process didn't come 
recommendations in the final form from the Secretary and the 
Director that were least beneficial to the employees, because 
that trust that you said is a little bit shaky, but I think you 
have gained some trust in this collaborative process, but it 
will be gone tomorrow if this all looks like the books were 
cooked from the beginning with a predetermined answer.
    I would like you to respond to that.
    Mr. Cohen. I would be happy to, sir. I indicated that we 
didn't specifically eliminate options, but maybe I ought to put 
it a little bit differently and better. The result of the 
discussion will show what was discussed and obviously, 
therefore, what wasn't discussed, and it will make it clear, or 
we will make sure that it makes it clear, those options that 
really were not discussed by the committee and, therefore, by 
definition, were not considered to be significant enough or 
important enough or did not get the support of various members 
of the committee where that exists; and that will be made 
clear.
    But beyond that, the process will not end with the report 
of the committee and the options going to the Secretary and the 
Director. There will be discussions with the union presidents. 
There will be further consultation. There will be consultation 
with MSPB and others. And there has been a commitment made by 
the Secretary and others throughout the Department of Homeland 
Security and certainly echoed, to the extent that we can, at 
OPM, that there will be collaboration and involvement with the 
unions and the employees and representatives in the development 
and implementation of whatever it is that ultimately is 
resolved or developed.
    Mr. James talked about trust, and that is really important. 
The other, I think, major aspect here to consider is the unique 
mission of the Department of Homeland Security, and why that 
unique mission, we believe, creates the need for different 
systems. It creates the need to look at, for example, in the 
labor relations area, the scope of bargaining and the timing of 
that bargaining when critical conditions develop; or the 
appellate process or whatever. It is that unique nature in that 
organization that is responsible for keeping this country safe 
that forces us to take a look at how these processes work that 
were really developed for a totally different age.
    Mr. Van Hollen. Just to very quickly followup. I appreciate 
that. As I read the testimony, there is a recognition of that 
on all sides, that we need to make sure that the system is 
consistent with the mission. But even within those parameters, 
as your report shows, there are lots of different options. I 
mean, let us just take the issue of having an independent 
appellate board. I mean, it may be true that you need to have 
an expedited procedure. I think the critical issue, as one 
example, is the independence of the board that is resolving 
disputes. Because if it is a body that is clearly answerable 
primarily to the Secretary or the Director only, and doesn't 
have independence, it is not going to have any credibility with 
the employees going forward. That is just one example. There is 
a big difference between negotiations and consultation when it 
comes to bargaining rights.
    So within your 52 options there is lots of room for 
maneuverability, and what I am suggesting is if you forward 52 
options to the Secretary and Director, and they end up with a 
proposal that is at the end of the spectrum that is least 
favorable to the rights of the employees, then I think the 
whole process, which currently has credibility, will become 
discredited.
    And I thank you, Mr. Chairman.
    Mr. Murphy [assuming Chair]. Thank you. I guess it is back 
to me for some questions here.
    And a lot of this comes down to, I guess, what is going to 
be in the reports. Let me ask, first of all, is there going to 
be a draft of this or are you going to be releasing the whole 
report in its final form when you come up with this?
    Mr. James. One of the things that the Secretary has decided 
is that in order to make sure that the report fairly and 
accurately reflects the views of the members, he has decided to 
extend the process slightly so that the report can go in draft 
form to every single member of the Senior Review Committee so 
they can make comments, edits, criticisms, and the like. So the 
answer to the question is no, there are not going to be a 
public draft, but the Secretary has committed to making sure 
that while people may disagree with what was said, that their 
views were accurately reflected. And that is why it is going to 
be at least probably another week or two.
    Mr. Murphy. When you say not a public draft, does that mean 
we are included in the public, members of this committee?
    Mr. James. No. Congress will be one of the first after the 
members get their views in, and then the report is considered 
final, absolutely.
    Mr. Murphy. It is critical that the DHS' new human capital 
system is linked to the DHS strategic plan. But has DHS 
implemented a strategic plan? Does the Department plan on 
implementing a personal management system that supports and 
facilitates the strategic goals outlined in the strategic plan? 
Is there a strategic plan?
    Mr. James. There is a strategic plan in progress that is 
being staffed currently, and that plan will obviously be 
impacted by the elements from the various options that the 
Secretary and Director James decide that will go in the 
regulations; and that will further determine the balance of the 
strategic plan.
    Mr. Murphy. And I would think that these two have to be 
working together.
    Mr. James. Pardon for the interruption, but they are 
inextricably intertwined. The answer is yes.
    Mr. Murphy. So we can expect those reports to be paralleled 
reports? I am just curious what the timeframe is and knowing 
what the strategic plan is, along with the human capital plan, 
timeframe-wise.
    Mr. James. If I can get back to you on that, but let me 
sort of walk at it this way. Hopefully, after consultation by 
the Secretary and with Director James, the regs will hopefully 
be published early next year. There will be a comment period 
that is required, so we are probably talking about early next 
year before we have final published regulations. And we are 
going to need what are going to be the final regulations, the 
final published regulations before we can complete our 
strategic plan and begin that process. So I think my best guess 
is that we are talking about the spring or late winter of next 
year.
    Mr. Murphy. OK. One other line I want to ask about, and 
that is as people from Homeland Security are working here, 
there inevitably will be times when this clashes with the 
public, as they try, for example, at airports or aspects of 
interfacing directly with the public and the public may feel 
inconvenienced as luggage is taken and reviewed, etc. How will 
these plans work in terms of making sure that if public does 
raise some complaints about employees, that those are going to 
be handled in a fair way? I mean, there obviously will be some 
disagreements in terms of what really happened, and as someone 
is inconvenienced, tempers may flare and they may say things 
which may not always be accurate. We want to be fair for 
employees here but obviously protect security. What are the 
mechanisms in place for this to make sure that those are 
appropriately weighted and handled to protect the needs of our 
Nation as well as the employee rights here?
    Mr. James. There are a couple of processes, and I am not 
qualified to speak to one, but just as an overview, the 
Department has hired an ombudsman. Part of the responsibility 
of that office, which is independent of the Secretary, is to in 
fact investigate, interview, inquire about complaints, for 
example, of passengers who feel they have been abused or feel 
they have been mistreated. So there is that separate, 
independent component. And there is, within TSA, a review 
process by supervisors and managers that is part of their 
personnel process to in fact respond to inquiries, complaints, 
and to do interviews and do investigations.
    Mr. Murphy. Well, I know probably every member of this 
panel has probably been stopped at airports checks, so I know 
they certainly are thorough and fair about those things as 
well.
    Thank you.
    Mr. Davis.
    Mr. Davis of Illinois. No further questions.
    Mr. Murphy. No further questions? Then I will just keep 
going, then. Thank you, Mr. Davis.
    I want to go back to some of these questions about what we 
may expect here in terms of this. It is hard to guess right 
now, because you are coming up with this report, the 52 
options, etc., but it seems to me that a tremendous amount of 
work has gone through this panel. And I know as I read through 
these options, without having been to many of these meetings, 
they are pretty difficult to understand in terms of what are 
all the specific meanings of these phrases in here, etc., but 
surely something must have come out of this in discussions with 
the many partners at the table of seeing what are some of the 
more efficient mechanisms to use. So let me ask about what you 
may see as efficient mechanisms to use in evaluating employee 
performance and meeting the strategic needs of DHS.
    As part of this, have you reviewed what has worked outside 
of the Government sector, what has worked in private industry, 
what has worked with other labor management issues in terms of 
implementing some of these options?
    Mr. Cohen. Yes, sir, we have. That was a very important 
aspect. In fact, more than half of the time spent with the 
design team that started around April 1st or April 2nd was in 
research and data gathering, that form, indeed, the bulk of the 
time of the members design team. We did look at what other 
governments were doing, State and local; we did look at what 
the subject matter experts told us would make most sense, and 
academics, as well as the literature search and all that we 
could really do to see what was going on and what worked best; 
and we think that the options reflect that. So, yes, that very 
much was taken into account.
    Mr. Murphy. So given that, I am just curious, then, because 
I thought the idea was, when you are going to present this 
information to the Secretary, that there is not going to be any 
particular recommendations that come through all this. I mean, 
I just would think that there would be something out of all 
these options. You are saying this appears like it might work 
for these kinds of jobs and this mechanism might work for these 
job descriptions.
    Mr. Cohen. Yes. What the Secretary and the Director will 
get, of course, are the best thoughts of the members of the 
Senior Review Committee and their staff, and further 
consultation. So, sure, they are going to be getting 
recommendations based on what the discussions told us and what 
our literature search has revealed and everything else, so 
certainly. But it is not going to be in terms of a specific 
option, necessary, but rather in terms of a system. There are, 
for example, when we talk about pay for performance or 
performance management based systems, we look at those that are 
time-based, that are basically the systems that exist today, 
the General Schedule. You know, how long you have served in a 
particular job is the basic determinant as to whether or not 
you are going to get a next increase. We look at that. We look, 
rather, at results-oriented, which is really where we believe 
we should be going, with results-oriented systems, those that 
focus on performance, those that focus on competency, those 
that focus on the results of individuals, on teams, on 
organizations. That is the type of change that we are talking 
about; that is the type of thing that we think will be 
important for the Department.
    Mr. Murphy. Thank you, Mr. Cohen.
    Ms. Holmes Norton, you have further questions?
    Ms. Norton. Thank you very much, Mr. Chairman. I just have 
one question about the process.
    Look, I fully appreciate that when you are putting a new 
human resources system in place, somebody has to do that, 
management has to do that. You can't have that system put in 
place by a group; that is not the point. I ran an agency when 
it was very, very troubled, the Equal Employment Opportunity 
Commission, so I know something about what management faces 
when a system is completely up in the air and you are trying to 
change everything; and, in a real sense, that is what I was 
trying to do, reorganize from top to bottom. So everybody is 
concerned about what is going to happen with her job, and that 
is natural, but the buck stops with management. The question 
then becomes how management deals with that buck.
    Now, as far as I am concerned, you are already way ahead of 
the game. I remember sitting here when the DOD reorganization 
was before us, and there were bitter complaints from employees 
that the consultation was a sham, that they hadn't been 
consulted on many things, and I thought the whole process was a 
total disaster; and you are having just the opposite being said 
by your own unions, and that I want to say puts you way ahead 
of the game, as far as I am concerned.
    I also think you are in a quandary. It is true that there 
is this long list of options and everybody would like to see 
those options winnowed down, but at the same time management 
has to understand what all those options are. I note a 30-day 
period, I think it is in your testimony, after management has 
chosen its version of the options, and I would like to ask you 
about that period. I don't expect that during that period 
everything is open for discussion and we can start all over 
again, but I am wondering how you see that period being used by 
all who want to comment, but especially employees, who are most 
directly affected.
    Mr. Cohen. As you indicate, there is a 30-day public period 
comment that follows the issuance of the proposed regulations, 
and then there is yet another 30 days. There is a basic 60-day, 
minimum 60-day period reconciliation, consultation, and the 
like that was written into the law itself. But that is minimum. 
And I am certain that if there is the need for further 
discussion felt by the Secretary and by the Director, further 
discussion with the union leadership and whomever else that 
they feel it might be necessary to consult with, I am certain 
that 60-day period will be extended to the extent that it is 
necessary.
    No one is going to, I am sure, and I can't speak for them, 
but I certainly feel comfortable in saying no one is going to 
rush to judgment. As you indicated earlier, and has been 
indicated, this is a very, very critical issue that we are 
dealing with here; it involves the lives of all of the 
employees of the Department, it involves our security, it 
involves other aspects of the Federal Government. So these 
issues are not going to be taken lightly, I am certain.
    Ms. Norton. When I came to the EOC, I found out that the 
APA, the Administrative Procedure Act, didn't have to be 
followed. I, indeed, insisted upon following it in the way you, 
of course, under the statute are doing, which is to say to put 
everything out for comment and to receive comment. And I can't 
say enough about how important comments were in keeping us from 
making mistakes. You live only in your own brain and your own 
head. The notion that comments are necessary is a fool's 
errand.
    Mr. Cohen, I must say I was pleased by your answer 
regarding the period of time and that there is no rush here. It 
is a whole great big agency you are dealing with. No one has 
done it before. If the public is commenting, of course, what 
they will do is they will write comments and you look very 
closely at those comments.
    Mr. Cohen. Yes, ma'am.
    Ms. Norton. Is it possible that employees could have face-
to-face meetings, understanding that the parameters are limited 
and that people are not negotiating? But assuming that comments 
in fact help to improve a system, do you envision that the 
comment period could involve face-to-face discussions and 
meetings with employees about the final option or the proposed 
option that is on the table?
    Mr. Cohen. I don't want to preclude anything in terms of 
the Secretary and the Director; that will ultimately be their 
decision. They certainly are committed to meeting with and will 
indeed be meeting with the employee representatives, without 
any question. Whether they will subsequently feel that another 
round of town hall meetings or something might be desirable, I 
really can't speculate; I honestly don't know.
    Ms. Norton. I appreciate your response.
    Thank you, Mr. Chairman.
    Mr. Murphy. Thank you, Ms. Norton.
    Just as a reminder, members of the committee will have 5 
legislative days to submit other questions, so if any members 
will have questions, I hope you will get back to us in a timely 
response.
    I would like to thank this panel for participating, and we 
will move on to the next panel now. Thank you.
    I would like to invite our second panel of witnesses to 
please come forward to the witness table. And first off we will 
hear from two employee groups. I will go ahead and introduce 
them as they come forward. John Gage, the national president of 
the American Federation of Government Employees, making his 
first appearance before this subcommittee. Welcome, Mr. Gage.
    Beside him will be Ms. Colleen Kelley, national president 
of the National Treasury Employees Union, who is also with us 
today. Next we have Hannah Sistare, the executive director of 
the National Commission on the Public Service, also called the 
Vocal Commission. The bipartisan Vocal Commission has been 
instrumental in making far-reaching recommendations to improve 
the Civil Service. And last we will hear from George 
Nesterczuk, president of Nesterczuk & Associates, who has a 
long history of expertise in Civil Service reform.
    I believe you all took the oath before. Am I correct? Thank 
you very much. The panel will now be recognized for an opening 
statement. We will ask you to summarize your testimony in 5 
minutes time, and any fuller statement you may wish to make 
will be included in the record.
    I would like to welcome you, Ms. Sistare. Thank you for 
being with us today. You are recognized for the first 5 
minutes, if you are ready.

 STATEMENTS OF HANNAH S. SISTARE, EXECUTIVE DIRECTOR, NATIONAL 
     COMMISSION ON THE PUBLIC SERVICE; JOHN GAGE, NATIONAL 
PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES; COLLEEN 
  M. KELLEY, NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES 
     UNION; AND GEORGE NESTERCZUK, PRESIDENT, NESTERCZUK & 
                           ASSOCIATES

    Ms. Sistare. Thank you very much. Mr. Chairman, Congressman 
Davis, and other members of the subcommittee, thank you for 
inviting me to testify on behalf of the National Commission on 
the Public Service on the performance management 
recommendations made by the Commission and how they relate to 
the pay system now being designed for the Department of 
Homeland Security.
    The Commission gave substantial weight to the role of 
performance in assuring the future health of the public 
service. Commission Chairman Paul Volcker introduced the 
Commission report writing: ``Disciplined policy direction, 
operational flexibility, and clear and high performance 
standards are the guiding objectives of our proposals.''
    The bipartisan group of public servants who made up this 
Commission was united by a deep concern about the level of 
public trust in Government. The decline in trust during the 
past 40 years deprives our Government and Government officials 
of the support they need, and it discourages talented Americans 
from joining the Federal service.
    Whatever the full range of causes, surveys have shown a 
strong correlation between public trust and Government 
performance.
    The Commission identified several barriers to improve 
Government performance, including: a system under which most 
pay increases are based on time on the job and geographic 
location; employee appraisal systems where nearly everyone is 
rated superior, surpassing even Lake Woebegone, where everyone 
is merely above average; pay caps, which in an ever-increasing 
number of cases make it impossible to reward strong 
performance; bonus systems that are so underfunded that they 
are spread around like peanut butter to give everyone a little 
taste; a conviction held by two-thirds of the Federal work 
force that management doesn't deal adequately with poor 
performance; and an organizational structure which produces 
duplication overlap and gaps in program application, and which 
is burdened with excessive numbers of political appointees.
    How would the Commission recommend that the Department of 
Homeland Security rectify such problems in its own HR system 
design?
    Organizationally, the Department's design is consistent 
with the Commission's vision of mission-centered departments 
with considerable operating flexibility. But also, to protect 
against abuse, the Commission recommended that the authorizing 
statute for each department specify the principles that would 
underlie any personnel system that was established.
    The Department of Homeland Security authorizing statute did 
set out important core principles, rights and responsibilities, 
but as Paul Volcker noted in speaking to this issue last week, 
the principles and protections spelled out in the statute have 
not been sufficient to assuage the concerns of many who will be 
affected by these new systems. Clearly, employees are still 
concerned about the assurance of fundamental fairness, 
objectivity, and due process protections in a pay-for-
performance system.
    In light of these concerns, the Commission and the National 
Academy of Public Administration jointly sponsored a public 
forum last week with the goal of informing and advancing the 
debate about performance-based pay. From this discussion, we 
were able to identify some lessons that have proven important 
in the successful adoption of pay for performance in the 
private sector, in GAO, and at the IRS.
    There was considerable agreement among the participants 
about the safeguards that were necessary for a pay-for-
performance system to be effective. The safeguards that most 
felt should be assured at DHS and elsewhere are: a credible 
appraisal methodology; a transparent system; a timely set of 
processes; consultation with those affected; peer review, 
possibly even by a neutral third party; ongoing communication, 
including feedback from all involved; training of managers and 
supervisors, who themselves would be evaluated how well they 
manage performance. And as former Secretary Donna Shalala noted 
in her testimony before this committee last March, you have to 
have credible people in both political and career management 
positions for such a system to work. And finally, of great 
importance, training of employees to participate in the system.
    To this list, Paul Volcker and his fellow Commissioners 
would add the protection of careful and ongoing oversight by 
the responsible leadership in the executive branch and by the 
Congress.
    Participants in the forum also identified several factors 
for which implementers must be prepared: one, adequate time for 
the adoption of such a system. GAO began laying its groundwork 
many years ago, and this may require a phased implementation 
starting with those agencies or units that are ready to do a 
good job. Verifiable performance systems, where individual 
performance is linked to organizational goals and sound 
performance management systems, including agreement and buy-in 
among all those who are part of the system; culture change, 
which also takes time. Adequate funding. There must be enough 
money to make meaningful rewards for a commendable performance. 
Careful assessment. Pay for performance is very complicated 
because it is difficult, once you get below the clear top 
performers, to really make meaningful distinctions.
    In conclusion, I thank the subcommittee again for its 
interest in the Commission's work, and the Commission and the 
National Academy of Public Administration hope these 
recommendations made by participants at the forum will be of 
value to the subcommittee in its work.
    Thank you.
    [The prepared statement of Ms. Sistare follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.014
    
    [GRAPHIC] [TIFF OMITTED] T4775.015
    
    [GRAPHIC] [TIFF OMITTED] T4775.016
    
    [GRAPHIC] [TIFF OMITTED] T4775.017
    
    [GRAPHIC] [TIFF OMITTED] T4775.018
    
    Mr. Murphy. Thank you, Ms. Sistare.
    Now proceed on and recognize Mr. Gage. Thank you for being 
with us today. You may proceed with your opening statement for 
5 minutes.
    Mr. Gage. Thank you. You have my prepared comments and 
those reflecting the attitudes of our membership and employees 
in Homeland Security regarding this process. I am sorry if my 
remarks led many of you to believe that we were entirely 
pleased with the inclusion in the system in this process of 
developing these new personnel systems.
    My experience last week in the 3-day debate, if you will, 
left me with some mixed feelings. Much of the rhetoric and 
theory behind, for instance, pay for performance, is something 
that, as a negotiator of union contracts and someone who has 
really worked most of their adult life in trying to develop 
good performance plans that people have confidence in and also 
that recognize the important missions of the management of 
these agencies, I was a little bit lost in the lack of details 
that are being put forward in these options. I have seen this 
before, some high-sounding academic type plans, and I think the 
round file is full of them. It is for agencies, I think, and 
practical operational managers, and those are the ones myself 
and I think Colleen tried to talk to last week when we were 
there, that there really is a threat that some of these 
theories really are a black hole of resources and maybe full-
time employment for human resource specialists.
    Let me give you some examples. And, first of all, when you 
look at the research, and I have heard a lot said this morning 
about the research, not one of these pay-for-performance plans 
shows any increase in employee productivity. Not one. I was 
really struck by that when I looked at the research that was 
done. Second, they all are admitting that there are problems 
with employee acceptance of these systems. And I will give you 
a good reason, and just one, and that is this idea that is 
littered through the pay-for-performance options, and that is 
forced distributions. Now, what that means is going into a pay-
for-performance system someone has to pay for it. And the way 
these systems, the options are rigged is that there are a 
predetermined number or percentage of employees that is deemed 
up front that they will not get any money at all. That money 
will then be given to high performers, with a couple cuts in 
between.
    The problem I have with that is that it doesn't reflect a 
modern, and especially law enforcement type of work force. To 
say that hard working people are no longer being measured 
against a performance standard, but they are subject to a 
predetermined cut of whether they will receive base pay, I 
think that putting in a system like that will have no 
credibility with employees, and it is a basic flaw of the pay-
for-performance systems. The reams of material that are going 
to come down from some lucky consultant about all these 
performance standards and all these technical ways to judge 
performance are going to be a drain on resources, but they 
really are false because an employee is not really being 
compared to a performance standard and judged on what he does; 
he is being compared to a predetermined percentage of employees 
that, by definition, is being said that they will receive no 
money and that the performance is not acceptable.
    That is a cannibalism that I think destroys the type of 
unity and cohesiveness that is needed, especially in law 
enforcement. Most of our law enforcement people, in the border 
patrol, in customs, and INS, really scratch their heads when 
they look at how this system will be implemented. For instance, 
some of our law enforcement border patrol, some see their 
supervisors once a week, some once every 6 months. Others, for 
instance, our adjudicators in the legacy INS, right now the 
state of supervisor, and for a lot of reasons, is not good. We 
have, for instance, 57 employees who are adjudicators, some of 
them trainees, and they are supervised by two temporary 
supervisors who are located in a building 30 miles away. There 
has been a real problem in getting supervisors because of a 
test that has been imposed by OPM, which really limits 
management's judgment in determining who can be a supervisor.
    Now, we have some suggestions, and I hope this committee 
really interjects some practicality and some realism into what 
is going on. When I hear the theorists say that we have to go 
full speed ahead, we have to throw out the classification 
system, we have to throw out all performance management, we 
have to throw out the Federal pay system because the iron is 
hot, and don't worry, managers, you are going to get criticism, 
there is going to be disruption in the agencies, but take it 
all up front, now, that is irresponsible. That doesn't match 
the mission of this agency. That is HR theorists really 
imposing a system that they don't know that it will work, and I 
believe won't work.
    Now, many of the operational managers, and I think this was 
a good thing at the meeting that we had last week, after they 
heard kind of a debunking of some of this theory and really 
ideology, began to say, well, we can't judge whether it will 
take away collective bargaining rights or union rights; we 
haven't even seen this system, no one has seen this system. 
There are some conceptual options that are up.
    Now, I really think that before we decide on anything about 
this system, that we ought to get some real meat and potatoes, 
a little more chicken on the bone to take a look at this system 
that is being talked about in these conceptual means, because 
the harm this can do to an agency work force, especially one 
that is good, especially one that is a law enforcement type of 
work force, where that unity and that cohesiveness and that 
teamwork are essential to getting this mission done, to really 
drive a supervisory work force that is not equipped to do this 
and can't make these types of discussions I think is something 
that we ought to really take a look at, and I am hoping this 
committee will moderate.
    One thing that really irritates me, though, is to say that 
even though we don't know what the system is going to look 
like, the one thing we know is there can't be collective 
bargaining and there can't be independent employee rights, 
appeal rights. Now, that is a notion that I hope we debunked 
last week. We have put up recommendations here, practical 
recommendations. For instance, using our career ladder. We also 
think that adding a grade at the top for super achievers and 
solid techniques or leads would really go to solving the 
problem of people topping out in grade.
    Also at the bottom, Madam Chairwoman, on poor performers, 
we think we have some answers to that on poor performers. 
Nobody likes to see poor performers. I mean, our work force 
certainly doesn't like to see someone who is not pulling their 
fair share. But to determine that 20 percent of our people are 
going to be poor performers, that is wrong and theoretical, and 
can't be part of the system. I think that we can go into poor 
performers in a better way. We have agreed already with 
management, and I think that Colleen and I could sit down with 
the agency managers and work out some systems on collective 
bargaining and appeals in an hour; and that is to speed up 
collective bargaining, to speed up the time it takes for 
appeals. But this committee, and I think the American public, 
really should stop and slow down this headlong plunge into a 
new system that is based on some premise that there can be no 
collective bargaining and there can be no outside independent 
appeals.
    Wiping out employee rights before a new system is known or 
designed, implemented or tested, is just wrong. It will 
certainly not enhance our national security, and it will end up 
harming it, as morale plummets in the face of this confusion 
and anger. The stakes are high at DHS. The pay-for-performance 
ideas that appear to have found favor with some individuals in 
OPM are among the most indefensible and dangerous. The agency 
needs to slow down and think before it unleashes a program that 
will be a competition among those who must cooperate and an 
enormous strain on resources that are desperately needed for 
the urgent task of national security.
    I thank you for the opportunity to testify today, Madam 
Chairwoman, and I would be happy to answer any questions.
    [The prepared statement of Mr. Gage follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.019
    
    [GRAPHIC] [TIFF OMITTED] T4775.020
    
    [GRAPHIC] [TIFF OMITTED] T4775.021
    
    [GRAPHIC] [TIFF OMITTED] T4775.022
    
    [GRAPHIC] [TIFF OMITTED] T4775.023
    
    [GRAPHIC] [TIFF OMITTED] T4775.024
    
    [GRAPHIC] [TIFF OMITTED] T4775.025
    
    [GRAPHIC] [TIFF OMITTED] T4775.026
    
    [GRAPHIC] [TIFF OMITTED] T4775.027
    
    [GRAPHIC] [TIFF OMITTED] T4775.028
    
    [GRAPHIC] [TIFF OMITTED] T4775.029
    
    [GRAPHIC] [TIFF OMITTED] T4775.030
    
    [GRAPHIC] [TIFF OMITTED] T4775.031
    
    [GRAPHIC] [TIFF OMITTED] T4775.032
    
    [GRAPHIC] [TIFF OMITTED] T4775.033
    
    [GRAPHIC] [TIFF OMITTED] T4775.034
    
    [GRAPHIC] [TIFF OMITTED] T4775.035
    
    [GRAPHIC] [TIFF OMITTED] T4775.036
    
    [GRAPHIC] [TIFF OMITTED] T4775.037
    
    [GRAPHIC] [TIFF OMITTED] T4775.038
    
    [GRAPHIC] [TIFF OMITTED] T4775.039
    
    [GRAPHIC] [TIFF OMITTED] T4775.040
    
    [GRAPHIC] [TIFF OMITTED] T4775.041
    
    [GRAPHIC] [TIFF OMITTED] T4775.042
    
    [GRAPHIC] [TIFF OMITTED] T4775.043
    
    [GRAPHIC] [TIFF OMITTED] T4775.044
    
    [GRAPHIC] [TIFF OMITTED] T4775.045
    
    [GRAPHIC] [TIFF OMITTED] T4775.046
    
    [GRAPHIC] [TIFF OMITTED] T4775.047
    
    [GRAPHIC] [TIFF OMITTED] T4775.048
    
    Mrs. Davis of Virginia [resuming Chair]. Thank you, Mr. 
Gage.
    Ms. Kelley, it is always good to have you back here 
testifying. You are recognized for 5 minutes.
    Ms. Kelley. Thank you, Madam Chairwoman.
    Ranking Member Davis, distinguished members of the 
subcommittee, thank you very much for the opportunity to 
testify on the human resources management options that are 
being considered for the Department of Homeland Security.
    I have the honor of representing over 12,000 Federal 
employees who are now in the new Department, and I am proud to 
have served as the representative for NTEU last week on the 
Senior Review Committee. This committee was the most recent 
part of a process that, to date, has been OK. But the real test 
for this process, as Mr. Van Hollen mentioned earlier, is what 
final decisions are actually made by Secretary Ridge and 
Director James, and if they are reflective of this process.
    NTEU believes that in order for any new human resources 
management system to be accepted by employees as fair and 
ultimately to be successful, it is essential that it 
incorporate a number of basic Federal employee protections.
    Concerning labor relations, NTEU strongly believes that any 
labor relations systems must preserve the right to organize and 
to bargain collectively. The scope of bargaining and the 
bargaining process must allow meaningful negotiations over 
working conditions, and not simply consultation. It is also 
essential that any new labor relations system balance the 
agency's legitimate need to address national security matters 
against the Homeland Security Act's statutory guarantee of 
collective bargaining rights.
    In the area of adverse actions and appeals for Federal 
employees in the DHS, it is essential that any new DHS human 
resource management system includes an adverse action and 
appeal process that treats employees fairly and ensures that 
their due process rights are protected. Employees must be given 
reasonable notice and an opportunity to make a meaningful reply 
before disciplinary action is taken against them. Employees 
must be able to appeal agency actions to an independent 
adjudicator whose decisions are subject to judicial review and 
agencies should bear the burden or proving just cause for 
actions taken against employees. In a workplace without these 
bedrock protections, employee morale will suffer, which in turn 
will adversely affect performance.
    NTEU also strongly believes that in designing pay, 
classification, and performance management systems for DHS 
certain core principles must be honored and applied.
    First, any changes must be justified by mission needs and 
designed to minimize the burden on managers, on supervisors, 
and employees to administer and implement the systems so that 
all can remain focused on the mission to protect homeland 
security.
    NTEU does not believe that radical changes are needed in 
the pay, performance, and classification systems. More 
importantly, employees in Homeland Security consistently stated 
this in the town hall meetings and focus groups. The basic 
structure of these systems is sound, and they must be fair, 
credible, and transparent to employees, but also to provide 
opportunities to recognize and to reward superior performance.
    This is not to suggest that NTEU opposes any changes in the 
status quo. We believe some modifications could be made that 
would improve the HR systems for the benefit of DHS and its 
employees, as well as for the accomplishment of its mission. 
Options that provide fairness by ensuring that employees who 
meet all performance expectations identified by management must 
receive annual pay increases that at least include the amount 
of the General Schedule increase plus some reasonable amount to 
recognize an individual's successful performance or a step in 
the right direction.
    NTEU also does not support diverting all or part of the GS 
increase to fund a pay-for-performance fund, or trying to 
implement a pay-for-performance system on a cost-neutral basis. 
Many of the options prepared by the DHS design team would make 
fundamental changes to the basic pay system for DHS employees 
by eliminating the GS grade structure. NTEU does not support 
these options, as we believe they are unduly disruptive to 
employees, to the agency, and its mission, and are not 
justified by business or mission needs.
    The Homeland Security Act requires the Secretary and the 
Director to review pay and benefit plans that are applicable to 
DHS employees, and to recommend a plan to eliminate disparities 
in pay and benefits, especially among law enforcement 
personnel.
    Among the issues that must be considered is the need to 
provide 20-year law enforcement retirement to CBP officers. 
Recently, DHS announced its ``One Face at the Border'' 
initiative and the creation of a CBP officer position which 
combines the duties of three positions, customs inspectors, 
immigration inspectors, and agriculture inspectors, into one 
job. We have concerns about this initiatives impact on 
maintaining the expertise of legacy customs, INS, and APHIS 
inspectional personnel. We have written to Secretary Ridge and 
expressed NTEU's belief that inspectors and canine enforcement 
officers of the CBP should receive the same law enforcement 
retirement benefits as those received by other Federal law 
enforcement personnel.
    In conclusion, NTEU supports the mission and the personnel 
of the Department of Homeland Security. NTEU wants the same 
thing that I believe everyone wants who has had anything to do 
with the creation of this Department: we want a workplace 
environment where employees can be successful and do the 
quality work they want to do, and can be recognized and 
rewarded for doing that work, and can be treated with dignity 
and respect.
    It would be a mistake to underestimate the impact that a 
new human resources system at DHS could have on all employees. 
A human resource system that is fair, credible, and transparent 
not only can coexist with the mission of homeland security, but 
it must coexist if employees and the Department are to be 
successful.
    Thank you.
    [The prepared statement of Ms. Kelley follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.049
    
    [GRAPHIC] [TIFF OMITTED] T4775.050
    
    [GRAPHIC] [TIFF OMITTED] T4775.051
    
    [GRAPHIC] [TIFF OMITTED] T4775.052
    
    [GRAPHIC] [TIFF OMITTED] T4775.053
    
    [GRAPHIC] [TIFF OMITTED] T4775.054
    
    [GRAPHIC] [TIFF OMITTED] T4775.055
    
    [GRAPHIC] [TIFF OMITTED] T4775.056
    
    [GRAPHIC] [TIFF OMITTED] T4775.057
    
    [GRAPHIC] [TIFF OMITTED] T4775.058
    
    [GRAPHIC] [TIFF OMITTED] T4775.059
    
    [GRAPHIC] [TIFF OMITTED] T4775.060
    
    [GRAPHIC] [TIFF OMITTED] T4775.061
    
    [GRAPHIC] [TIFF OMITTED] T4775.062
    
    [GRAPHIC] [TIFF OMITTED] T4775.063
    
    [GRAPHIC] [TIFF OMITTED] T4775.064
    
    [GRAPHIC] [TIFF OMITTED] T4775.065
    
    [GRAPHIC] [TIFF OMITTED] T4775.066
    
    [GRAPHIC] [TIFF OMITTED] T4775.067
    
    [GRAPHIC] [TIFF OMITTED] T4775.068
    
    Mrs. Davis of Virginia. Thank you, Ms. Kelley.
    Mr. Nesterczuk, you are recognized for 5 minutes.
    Mr. Nesterczuk. Thank you, Chairwoman Davis, Mr. Davis. I 
want to thank you for the opportunity to express my views here 
today on the issues that are before you. I was specifically 
asked to address the questions of adverse actions and the 
appeals process. Let me begin by making a comment about the 
Senior Review Advisory Committee. I have a full statement for 
the record. I just want to summarize the key points.
    I was an observer in that process last week, I sat through 
the public hearings, and it was a first-rate set of debates. 
The staff prepared the members, I think, very well, they 
briefed them very well; you saw the options packages that were 
prepared. And if nothing else, they will serve as a reference 
guide for other agencies around town who may be considering 
various types of modifications and reforms to their Civil 
Service rules. It doesn't mean that they would necessarily 
undertake as broad or vast a set of changes as DHS is facing; 
nevertheless, that compendium of options will be very, very 
useful to a large number of agencies.
    Let me address the questions on the adverse actions and 
appeals procedures. Just so that we stay focused on what that 
represents, it is a set of procedures that currently are fairly 
cumbersome, don't necessarily serve all agencies well, 
particularly an agency like Homeland Security, with a national 
security and law enforcement focus. It takes a lot of time to 
go through there, and there are cases that we have seen in the 
past that have taken months and even years to finally 
adjudicate.
    I would underscore that 98 to 99 percent of Federal 
employees will spend 20, 30, 40 years in their Federal careers 
without ever going through that process. Let us keep in mind 
that is a safety net for a very small number of employees that 
fall afoul of the system, either violating the rules or not 
meeting standards of performance.
    Now, one of the things that is really wrong with the 
current system, it creates a level playing field in effect 
between management and some of these problem employees. There 
is a great burden on managers to prove their case. There is a 
perception, in effect, that a poor performer's judgment is 
equal to that of the manager who wants to take the performance-
based action against him or her. In many cases managers have to 
spend more time dealing with problem performers than with good 
performers. That sends a wrong message to the system, to the 
entire work force, and it creates an entitlement paradigm, in 
effect, in the work force. That is one of the things that is 
important for DHS to change if they are going to be a 
performance-driven organization of excellence.
    Now, again, let me underscore 98 to 99 percent of Federal 
employees will spend 20, 30, or 40 years in their Federal 
career without ever having to resort to an appeal. We are 
talking about a very small statistical number of people. Now, 
what kinds of reforms might DHS undertake? There is a variety 
of options that are presented. I am not going to go through all 
of those. We don't know which ones are going to be ultimately 
recommended. What I found interesting was that in addition to 
the status quo options, there were options that provided for a 
little more of the status quo, a little less of the status quo, 
as well as some that provided real significant change to the 
current system; and those are the ones that I tended to focus 
on because I feel some radical changes do need to be 
entertained in the adverse action and appeals area.
    Specifically, on pay for performance and performance review 
situations, that should be the sole purview of management. None 
of those questions should be appealable. Any pay determination, 
any performance appraisal should be the responsibility of 
management; it is management's job to effectuate those actions. 
It should definitely be subject to review, higher level review 
to ensure that there is fairness and uniformity in application 
of the pay and performance systems across the organization, but 
the results of those actions should not be appealable.
    In the case of misconduct, I believe only removal actions 
or suspensions of 30 days or longer should go through the full 
appeal process. Those are very cumbersome. Those are the 
instances where significant harm can be afforded an employee if 
management makes a mistake; and management can and does make 
mistakes, they don't necessarily walk on water in all 
circumstances. So the appeal process should take that under 
consideration.
    Finally, what kind of adjudication? I think an external 
panel to handle appeals to maintain some credibility in that 
appeals process, when it is necessary to exercise it, is 
probably the appropriate way to go.
    Those are all options that are presented as part of the 
reviews for the Senior Review Advisory Committee, so I have 
touched on those. There are many others that are far closer to 
the current status quo.
    Let me make one final comment. We talk a great deal about 
good performers and the soundness of the Federal work force, 
and what a great work force it is, and I am a firm believer in 
that; I have had hands-on experience in the Federal work 
environment. When it comes to evaluating managers, however, 
very often the debate turns sour. One would think that there is 
a lack of competence in the management levels of the work 
force, that we can't trust them to do their jobs, including 
evaluating employees, and so we have to create all these 
special safeguards and procedures to review their work products 
and to second guess them.
    I would remind you that managers come out of that same 
Federal work force that we all think so highly of. It is not 
like, 1 day, when they are selected to be managers, they take 
dumb pills or stupid pills and all of a sudden lose all common 
sense. So as we get through this debate, let us keep that in 
mind. We are talking about basically the recruitment pool for 
the management work force, and it is a fairly decent work 
force. Thank you.
    [The prepared statement of Mr. Nesterczuk follows:]

    [GRAPHIC] [TIFF OMITTED] T4775.069
    
    [GRAPHIC] [TIFF OMITTED] T4775.070
    
    [GRAPHIC] [TIFF OMITTED] T4775.071
    
    [GRAPHIC] [TIFF OMITTED] T4775.072
    
    Mrs. Davis of Virginia. Thank you, sir.
    And thank all of you for your patience and being willing to 
be here to testify today.
    I will yield now to our ranking member, Danny Davis. Mr. 
Davis, you have the floor for questions.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Ms. Kelley and Mr. Gage, am I to discern from your 
testimony that collective bargaining and independent appeal 
rights are two areas relative to options that you have some 
serious concerns about and have really drawn a place in the 
sand in terms of where you are probably willing to go with 
that?
    Ms. Kelley. Yes, Mr. Davis. Collective bargaining and 
appeal rights are two of the critical areas. In our discussions 
regarding collective bargaining, the idea of replacing 
collective bargaining with consultation is one that I think 
actually is totally opposite of what is intended by the act. 
There has been a lot of discussion about need for change in 
regard to the mission of the Department, and I think history 
has shown, since September 11th, that when incidents occurred, 
when changes need to be made in working conditions, that 
employees did what they needed to do in order to make the 
country safe and to help the Department be successful, and no 
one was waiving their collective bargaining agreement saying I 
don't have to do this or I don't want to do that because of 
this agreement.
    So I think the history and the recognition is there on the 
part of employees and the union that when there are issues that 
working conditions cannot be addressed before implementation 
because of whether they are national security issues or 
decisions that the Department feels it needs to make because of 
information it has, which we heard a lot about last week at the 
Senior Review Committee, was a lot of the information that the 
senior executives have from intelligence briefings, of course, 
are not available to and would not be available to the unions 
and to employees; and I accept that. I accept there will be 
those situations. But I believe that a framework can be 
designed that acknowledges those legitimate situations, and 
that they are not the rule for how we operate between the 
unions and the Department, but that there are those situations 
and that they may then have the need for what we would call 
post-implementation bargaining should a situation last for a 
long period of time.
    And I guess going to that issue as well as the adverse 
actions, one of the comments I would like to add to that Mr. 
Cohen made on the prior panel, when he talked about these 
options, he talked about them as conceptual; and there surely 
are some of them that are conceptual, but I would suggest that 
if you have looked at the 52 options, there are many of them 
that are very, very specific, and that is for a very valid 
reason. The options that NTEU helped to draft or support were 
specific because we were trying to be responsive to the 
legitimate business interests that we heard identified by OPM 
and the Department throughout the design process. So we have 
gone to great lengths to provide specifics that have been 
responsive, and see those options that we have put forth for 
support as much more than just conceptual.
    Mr. Gage. I would just like to add that every argument that 
was brought forth saying that some collective bargaining or 
employee appeals were damaging to the mission of this agency 
were debunked. Collective bargaining is the only checks and 
balances that exist, as well as an independent employee appeal 
for these personnel systems, and to get rid of them at a time 
when proposals are out there that a manager or superviser can 
determine an employee's base pay, to think that there won't be 
mistakes I think is an illusion. Good managers like checks and 
balances, good managers are not afraid of collective 
bargaining, and good managers certainly want a mistake in 
management down the chain to be able to be looked at and to be 
handled fairly. It is just incredible to me that before these 
systems are even devised, the first decision is that we can't 
have collective bargaining and we can't have independent 
employee appeals, and I think both of those statements are 
wrong and illogical, and will result in any system that 
management comes up with to have just no credibility in the 
work force.
    Mr. Davis of Illinois. Ms. Sistare and Mr. Nesterczuk, 
could you respond to the union's positions relative to the 
comments they have just made?
    Ms. Sistare. Speaking to the Commission's report on these 
issues, the Commission recognized the role for collective 
bargaining, certainly, in the Federal system, and the 
preservation, again, of the basic principles on which the 
Federal system is established.
    Mr. Nesterczuk. I think it will probably ultimately come 
down to looking at collective bargaining in the proper context; 
not isolated as an entity onto itself, but in the context of 
certain kinds of actions. They will probably reserve certain 
actions for management exclusively and will probably negotiate 
with representatives on other issues. It is just difficult for 
me to try to second-guess where that unity of thought might 
occur.
    Mr. Davis of Illinois. Thank you very much.
    Mrs. Davis of Virginia. Thank you, Mr. Davis.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairwoman.
    Mr. Gage, you had mentioned some things that really caught 
my interest. You talked about some of the employees really may 
not see their supervisor perhaps sometimes once a week, perhaps 
once in 6 months; they may not even be on the same site, and so 
it would be hard to evaluate them. You also brought up a point 
and I want to make sure I understand it. You talked about this 
20 percent issue, that 20 percent will not do well. Do you see 
the way that some of these evaluation systems go is much like a 
bell curve or something, some who will be at the very top will 
get big raises, some will be in the middle, and some, no matter 
how well they do, will not see any benefits from this?
    Mr. Gage. That is exactly it. I think the financing of many 
of these options that are neutral are based exactly on that, a 
bell curve where you take away from the bottom, even though 
they may be producing according to their performance standards, 
but just how the thing is defined and how it is set up, that 
they are not going to be eligible for pay raises and that money 
will be used to do the top. And that really is driving a round 
peg in a square hole, because our work force is not made up of 
these arbitrary percentages of poor performers and good 
performers.
    Mr. Murphy. I was struck by Ms. Sistare's comment before 
about the Lake Woebegone effect; sometimes evaluations is 
everybody is above average or superior. And I am sure you 
wouldn't want to see a system like that too, because that could 
be unfair in terms of rewarding people who are not performing. 
But let me ask you about ways we can do this.
    Is part of what you see in interference here, if there was 
a finite amount of dollars and say we can only reward people so 
much, so we are only going to reward those on top, that may be 
part of the problem. But another part I wonder about is this. 
When some of the organizations require teamwork, and some may 
not, depending upon the type of job description, but some of 
the organizations may require that. Do you see this as helping 
or interfering with developing teamwork if they recognize that 
some people are going to be getting the increase and some are 
not on the team?
    Mr. Gage. I think it is going to be terrible for trying to 
continue the teamwork that we have in our law enforcement; it 
just breaks away the entire unity and cohesiveness that law 
enforcement organizations have been trying to build. And it 
takes away from the mission. Most of these performance 
standards, and I have been doing this for years, they are 
gobbledygook; they really don't help a supervisor evaluate 
employee performance. And many of the good agencies have seen 
the time, effort, and the results of these type of really top-
down, heavily theoretical types of systems as just being a 
resource drain. So I think for a lot of reasons, but especially 
how these systems will break that cohesiveness in law 
enforcement, you have to go slow and really determine and test 
the effects this will have on employee morale.
    Mr. Murphy. Well, then in terms of going slow, not for the 
sake of going slow, but for the sake of being effective, I 
assume you mean on that, as these reports come out, will there 
be parts that you might be able to recommend and say that some 
of these options may work better with implementing now in terms 
of phasing them in, so some may work well with some 
departments, but not others, so that we can be most effective? 
Will there be some things you will be able to recommend?
    Mr. Gage. I hope so. We have already made some 
recommendations. For instance, on the whole collective 
bargaining and appeals, I think that we can sit down and really 
clean that up to make an efficient, speedy appeals and 
collective bargaining system and just take that right off the 
table. This delay and all that, we can take those straw men 
really right off the table. And I also think some existing 
systems we have, for instance, like career ladders, tinkering 
with those solves a big one of management's objectives, and 
that is let people move up according to their performance, and 
that is the basic pay banding. But using the career ladders is 
a system we already have; people know about. Just removing the 
time in grade, where you can't move up until you fulfill a time 
in grade, moving that out of it is certainly something we could 
support and I think would help the agency right now in 
recruiting and retaining some of these law enforcement 
personnel.
    Mr. Murphy. I might add, without having gone through all 
these options in detail, but I also recognize with some 
employees sometimes, in my own business that I ran or once when 
I worked in a Federal program, that sometimes a person who may 
not be getting the best rating, the answer is not that they are 
a bad person or bad worker, it is just that is not the best job 
for them. And I would hope that part of the options that might 
go with this is working with the people in a very proactive 
way, of saying, Mr. Smith or Ms. Doe, you are a great worker, 
but we have to find another place for you to show that 
greatness. And I hope that is part of the options that come 
through in these things.
    Unfortunately, I have to leave to go to some other 
meetings, but I would like to continue our discussion at some 
point about some of the issues you see about collective 
bargaining and how we might protect it in a way that helps DHS, 
helps the employees for all the mutual goals, as Ms. Kelley, 
you outlined so clearly. We have mutual goals in this, and I 
welcome the opportunity to continue those discussions with all 
of you. Thank you.
    Mr. Gage. Thank you.
    Mr. Murphy. Thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Mr. Murphy.
    Ms. Holmes Norton.
    Ms. Norton. Thank you, Madam Chairwoman.
    Mr. Sistare and Mr. Nesterczuk, I have a question for you 
about pay-for-performance, because, when it gets down to it, 
that seems to be what this is all about; that is the major 
concern. In fact, it seems to be the major push of the 
administration. One could argue that there is a structural flaw 
in pay-for-performance that has nothing to do with the agency, 
but originates with the Congress. Without adequate funding, 
which, of course, depends upon us, what is the key pay-for-
performance from simply redistributing the scarcity imposed by 
Congress? And agencies have seen what that means; that is 
nothing new. And if you can't predict what Congress will do 
each year, how can you know that pay-for-performance would 
work? I would like both of you take a stab at that.
    Mr. Nesterczuk. Well, I am a firm believer in the concept; 
I have seen it work back in the 1980's in the old PMRS, the 
Performance Management Recognition System, that we used to run 
for merit-pay managers. It suffered, as you said, from the 
funding scenario, the lack of funding, in that good performers 
were very happy because they moved right through the grade 
structure and up the steps, much faster than they would have 
otherwise; so there was a favorable comparison to where they 
might have been had they not gone into merit pay. The poorer 
performers, moving more slowly, still had the old General 
Schedule to say, well, at this point in this year or next year 
I will be earning such and such, and, yes, I am now behind the 
curve. And then some folks in the middle started to slip, so 
there was a very adverse comparison compared to the General 
Schedule, so that hurt. And that was a situation where you 
started with the same level of funding and you basically 
redistributed, reprogrammed available funds.
    The expectations for any pay-for-performance system have to 
be carefully managed to avoid that same pitfall in the future, 
and to get it started with credibility, I don't see how you can 
avoid adding more money, spending more in payroll than you 
currently do. Eventually, as things sort out, you will get 
redistributions that will start to mirror a status quo for a 
good part of the work force, accelerate the better ones and the 
slower ones will fall behind.
    One thing that I would recommend that DHS do now if they 
get serious about pay-for-performance, is to take the bottom 
end of performers and withhold the normal pay increases, the 
step increases within grades, etc., just withhold them as a 
signal that some component of pay today will now be evaluated 
on the basis of performance and awarded on the basis of 
performance.
    Ms. Norton. I am sorry, I don't know what you mean by 
withhold. What do you mean withhold them?
    Mr. Nesterczuk. Just don't provide the within grades or the 
step increases of a poor performer that currently is basically 
automatically awarded. There is a statutory requirement that 
says, yes, you can withhold that for less than adequate 
performance.
    Ms. Norton. So you mean if somebody gets a poor 
performance, at that point you would not allow.
    Mr. Nesterczuk. Yes. Correct.
    Ms. Norton. I see.
    Mr. Nesterczuk. It requires first promoting a performance 
management system, and then on the basis of that taking the pay 
actions. But at that point you could start to change the 
culture and get people to learn to accept the fact that, yes, 
pay will be awarded on the basis of performance without 
basically staying budget neutral at the beginning.
    Ms. Norton. Ms. Sistare.
    Ms. Sistare. The Volcker Commission felt that you did have 
to adequately fund these systems to have them work. You raised 
the issue if Congress did not. I think it is up to the 
administration and the Department in adopting and selling such 
a system to get buy-in, from Congress as well, that the system 
has to be funded to be effective.
    Ms. Norton. Well, of course. I mean, I just think you have 
demonstrated what I mean by a structural flaw. Congress 
couldn't if it wanted to bind itself to adequately fund any 
system. And as long as we have the form of Government we have, 
one has to wonder about a pay-for-performance system. I hope I 
don't have to go down the things we are not funding now that we 
promised employees. I see that as a fundamental question. Those 
of you who are for pay-for-performance, you have to tackle that 
question to be credible yourselves.
    I want to know how the employee representatives respond to 
Mr. Nesterczuk's notion that somebody gets a poor performance, 
and as a result of a poor performance. You are not dealing now 
with anybody except somebody who has been found to be a poor 
performer. A person hasn't been fired, now. How do you respond 
to the notion that you can withhold the in-step increases and 
the pay for increases for that person?
    Ms. Kelley. The current system provides for that today. 
There is no need for a new HR system to allow that to happen; 
it should be happening.
    Ms. Norton. Even the step increases?
    Ms. Kelley. Yes. That should be happening. If a manager is 
properly trained and supported in the work that they are doing, 
of evaluating their employees; and very often I think that is 
the problem, is that managers are not provided with the 
training or the support to make those distinctions about 
performance and, therefore, they don't step up to that. But 
that process exists today. If there is an employee who is not 
performing acceptably in their job, they should be identified, 
they should be given appropriate notice. What we call in our 
negotiated agreements a performance improvement period so that 
they can have every opportunity to bring their performance up 
to an acceptable level. But during that time their within grade 
is denied. So that is a process that exists today and should be 
implemented today, and there is no need for a new HR system to 
do that.
    Ms. Norton. Thank you very much, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Ms. Norton.
    We do have several votes, but we have a few minutes before 
we have to go, so I am going to ask a question to all of you. 
Should employees have a right of appeal on all performance 
appraisals if the Department creates a system where the 
appraisal determines the amount of each individual pay 
increase?
    Mr. Nesterczuk. I will start.
    Mrs. Davis of Virginia. Anybody can start.
    Mr. Nesterczuk. No, absolutely not.
    Mrs. Davis of Virginia. Ms. Sistare.
    Ms. Sistare. At our forum, that view was expressed, but the 
view that was held by a greater number of people was that there 
should be an independent perhaps peer review of the entire 
system so that there was an ongoing check to make sure it was 
working.
    Ms. Kelley. Yes, there definitely needs to be a process for 
employees to appeal. The idea that they would be harmed 
financially based on a decision that may not be based with ill 
intent. I am not even assuming that is the starting point from 
this, but everyone is human. Managers manage in different ways; 
they are provided with different training, they have different 
spans of control of the number of employees and the locations 
of employees that they supervise; they have different first-
hand knowledge of that. And there needs to be a process to 
ensure that there is credibility and transparency to the 
system, or it will not be accepted by employees.
    Mr. Gage. I would like to go even a little further. If you 
don't have an independent review, an independent appeal, this 
system will end up as one of patronage and basic unfairness, 
and it will be management by coercion, intimidation, and fear. 
But we are not talking about full-blown MSPB appeals. Most of 
our contracts have provisions called mini-arbitrations, where 
performance issues are worked out in an expedited type of 
hearing, which is informal by nature and fact-finding. So there 
is not a big time delay or a big resource issue involved with 
appealing these things. But if employees do not see an 
independent review, and if supervisors don't see an independent 
review, I think the decisions are starting to be made in a way 
that just doesn't go to judging performance, but is more toward 
some elements in a work site that I don't think anybody here 
wants to instill.
    Mrs. Davis of Virginia. To those of you who said that there 
should be an appeal on all performance appraisals, can you 
explain how the Department could operate efficiently if every 
appraisal or every performance-based increase or decrease, or 
what have you, would probably trigger an appeal? I mean, how 
could the Department operate efficiently under that system?
    Mr. Gage. Everyone doesn't generate an appeal; however, 
when one sees an organization this big, there are going to be 
those situations which are blatantly unfair. And to let a work 
force see that a supervisor can do something which is seen as 
blatantly unfair, with no avenue or recourse, just spreads 
through the work force and will just kill credibility in this 
system. Usually in the pay-for-performance area it is not the 
bottom-feeders that make the appeals, it is those people who 
see themselves as outstanding and have always been outstanding, 
have felt that way, and through arbitrary numbers they get 
dropped down a notch. The good workers are usually the ones 
that are upset by this type of forced distribution system.
    Ms. Kelley. I would just add that NTEU has some experience 
with agencies where they have pay systems that are different 
than the GS system because they are not funded through 
appropriated funds, and in our experience the assumption that 
the system would be clogged with appeals just is not true. 
Whether it is the FDIC or ATF or the SEC, there are a small 
number of employees who use that process, and it is, in my 
experience, as John described, those who are designated average 
because of whether it is a forced distribution or just a 
manager evaluation, that believes factors were not considered 
that would acknowledge their outstanding performance and thus 
would result in some additional pay for them.
    So I do not think that there is any experience out there 
that shows that it would bring the system to a halt. And if the 
system is built, one that is credible and transparent that lets 
employees know how they are being evaluated, that alone will 
eliminate many of the appeals and bring them to a realistic 
number.
    Mr. Nesterczuk. If I might make a comment. It is not just a 
question of efficiency or bringing the system to a halt; it is 
also the responsibility of management to issue those 
performance appraisals. They are not subject to debate; they 
are not a tit-for-tat. Those managers basically assign work, 
they evaluate that work throughout the course of the year. They 
are in the best position to make an ultimate judgment as to how 
the performance laid out for the course of the year. Plus they 
have the perspective of looking at peers, a cohort, and, with a 
second level review, an organizational perspective. To put that 
up for grabs in some appeal process makes absolutely no sense 
to me.
    Mrs. Davis of Virginia. I am going to have to cut you all 
off because I have to go vote. I do have some more questions, 
and if I could just impose upon each of you, I would like to 
send them to you in writing and get you to respond back for the 
record, if you don't mind. And I do apologize. I would let you 
stay here and come back and ask more questions, but it is just 
me, and I don't want to hold you up.
    But I do thank you all for being here today. And if any of 
the other Members have additional questions for our witnesses 
today, they can submit them for the record.
    In closing the second panel, I would like to again thank 
all of the witnesses for being here, and again I appreciate all 
your input and all your expertise, and wish I could just sit 
here and ask you a bunch more questions, but thank you all so 
much.
    The hearing is adjourned.
    [Whereupon, at 12:14 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]

                                 
