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


                                                         S. Hrg. 108-91

 
 THE HUMAN CAPITAL CHALLENGE: OFFERING SOLUTIONS AND DELIVERING RESULTS

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

                             JOINT HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
    THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                                and the

         SUBCOMMITTEE ON CIVIL SERVICE AND AGENCY ORGANIZATION

                                 OF THE

                     COMMITTEE ON GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 8, 2003

                               __________

                           Serial No. 108-28

                               __________

 Printed for the use of the Committee on Governmental Affairs and the 
                     Committee on Government Reform


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


                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
87-717 PDF

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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

           Michael D. Bopp, Staff Director and Chief Counsel
     Joyce Rechtschaffen, Minority Staff Director and Chief Counsel
                     Darla D. Cassell, Chief Clerk

                                 ------                                

   OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  RICHARD J. DURBIN, Illinois
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        FRANK LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire        MARK PRYOR, Arkansas

                   Andrew Richardson, Staff Director
             Michael D. Dovilla, Professional Staff Member
   Marianne Clifford Upton, Minority Staff Director and Chief Counsel
                      Cynthia Simmons, Chief Clerk



                     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
          B. Chad Bungard, Deputy Staff Director/Chief Counsel
                          Chris Barkley, Clerk
            Tania Shand, Minority Professional Staff Member



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Representative Jo Ann Davis from the State of Virginia.......     2
    Representative Danny K. Davis from the State of Illinois.....     4
    Eleanor Holmes Norton, a Delegate in Congress from the 
      District of Columbia.......................................     5
    Representative Tom Davis from the State of Virginia and 
      Chairman of the House Committee on Government Reform.......     6
    Senator Carper...............................................    16
    Representative Chris Van Hollen from the State of Maryland...    17
    Senator Lautenberg...........................................    19
    Senator Durbin...............................................    63

                               WITNESSES

                         Tuesday, April 8, 2003

Hon. David M. Walker, Comptroller General of the United States, 
  General Accounting Office......................................     7
Hon. Dan G. Blair, Deputy Director, Office of Personnel 
  Management.....................................................    21
Bobby L. Harnage, Sr., National President, American Federation of 
  Government Employees, AFL-CIO..................................    33
Colleen M. Kelley, National President, National Treasury 
  Employees Union................................................    34
Carol A. Bonosaro, President, Senior Executives Association......    36
Karen Heiser, Treasurer, Chapter 88, Federal Managers Association    38
Hannah S. Sistare, Executive Director, National Commission on the 
  Public Service.................................................    49
Steven J. Kelman, Ph.D., Weatherhead Professor of Public 
  Management, John F. Kennedy School of Government, Harvard 
  University.....................................................    51
Max Stier, President and Chief Executive Officer, Partnership for 
  Public Service.................................................    53
Jeff Taylor, Founder and Chairman, Monster.......................    55
Major General Robert A. McIntosh, USAFR (Ret.), Executive 
  Director, Reserve Officers Association of the United States....    57

                     Alphabetical List of Witnesses

Blair, Hon. Dan G.:
    Testimony....................................................    21
    Prepared statement with an attachment........................    97
Bonosaro, Carol A.:
    Testimony....................................................    36
    Prepared statement with attachments..........................   155
Harnage, Bobby L., Sr.:
    Testimony....................................................    33
    Prepared statement...........................................   113
Heiser, Karen:
    Testimony....................................................    38
    Prepared statement...........................................   190
Kelley, Colleen M.:
    Testimony....................................................    34
    Prepared statement...........................................   144
Kelman, Steven J., Ph.D.:
    Testimony....................................................    51
    Prepared statement...........................................   229
McIntosh, Major General Robert A., USAFR (Ret.):
    Testimony....................................................    57
    Prepared statement...........................................   259
Sistare, Hannah S.:
    Testimony....................................................    49
    Prepared statement...........................................   218
Stier, Max:
    Testimony....................................................    53
    Prepared statement...........................................   239
Taylor, Jeff:
    Testimony....................................................    55
    Prepared statement...........................................   254
Walker, Hon. David M.:
    Testimony....................................................     7
    Prepared statement...........................................    71

                                Appendix

Daniel J. Finnigan, Senior Vice President, YAHOO!, and Executive 
  Vice President and General Manager, Hot Jobs, prepared 
  statement......................................................   262
Responses to questions submitted for the record from:
    Mr. Walker...................................................   265
    Mr. Blair....................................................   276
    Mr. Harnage..................................................   292
    Ms. Kelley...................................................   296
    Ms. Bonosaro.................................................   299
    Ms. Heiser...................................................   304
    Ms. Sistare..................................................   308
    Mr. Kelman...................................................   313
    Mr. Stier....................................................   316
    Mr. Taylor...................................................   320


 THE HUMAN CAPITAL CHALLENGE: OFFERING SOLUTIONS AND DELIVERING RESULTS

                              ----------                              


                         TUESDAY, APRIL 8, 2003

                                       U.S. Senate,
        Oversight of Government Management, the Federal 
            Workforce and the District of Columbia 
            Subcommittee, of the Committee on Governmental 
            Affairs, joint with the Committee on Civil 
            Service and Agency Organization, Committee on 
            Government Reform,
                                                    Washington, DC.
    The Committees met, pursuant to notice, at 9:38 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Committee on Governmental Affairs, 
presiding.
    Present: Senators Voinovich, Durbin, Carper, and 
Lautenberg; Representatives Jo Ann Davis of Virginia, Tom Davis 
of Virginia, Chairman of the House Committee on Government 
Reform, Danny Davis of Illinois, Chris Van Hollen of Maryland, 
and Eleanor Holmes Norton, a Delegate in Congress from the 
District of Columbia.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The hearing will come to order.
    Good morning, and thank you all for coming. Today the 
Senate Subcommittee on Oversight of Government Management and 
the Federal Workforce and the House Subcommittee on Civil 
Service and Agency Organization are meeting to examine the 
Federal Government's human capital challenges. This is the OGM 
Subcommittee's 12th hearing on this issue over the last several 
years.
    I am very pleased that Representative Jo Ann Davis is co-
chairing this hearing. Her presence here today represents an 
ongoing partnership that we have forged as counterpart 
Subcommittee Chairmen since the beginning of this Congress. I 
believe that the 108th Congress represents a real opportunity 
to enact major personnel reform for the Federal Government. I 
am also pleased that Senator Susan Collins and Representative 
Tom Davis, the Chairmen of our respective full Committees, have 
expressed a strong interest in moving these important issues 
forward this year. I think this could be a great year.
    Today's hearing represents an ongoing Subcommittee effort 
that is now in its 5th year. One of the reasons I ran for the 
U.S. Senate was to transform the culture of the Federal 
workforce, something I conscientiously undertook with the city 
and State workforces when I was Mayor of Cleveland and Governor 
of Ohio. Having worked with the Federal Government as an 
``outside force''--as president of the National League of 
Cities and chairman of the National Governors Association--I 
observed that investing in personnel was not a priority in the 
Federal Government. As GAO Comptroller General Walker has 
observed--and we are very happy to have you here with us--for 
too long Federal employees have been seen as ``costs to be cut 
rather than assets to be valued.''
    By pursuing a strategy of legislative reform and outreach, 
we have made considerable progress in raising the profile of 
strategic human capital management for the Federal Government.
    Last November, as part of the Homeland Security Act, 
Congress enacted key elements of our legislation, the Federal 
Workforce Improvement Act of 2002. This was the first major 
governmentwide human capital reform legislation since the Civil 
Service Reform Act of 1978, a quarter century ago. Our bill 
reflected the consensus of a wide variety of public, private, 
and nonprofit stakeholders.
    In the homeland security debate, we took the first step to 
address the pervasive problem by discussing some of the 
critical personnel issues in the Federal workforce. Now it is 
time to build on that debate and continue working with the 
General Accounting Office and the Bush Administration on the 
issue. GAO's High-Risk List and the President's Management 
Agenda both recognize strategic human capital management as 
their No. 1 priority.
    This year, Chairwoman Davis and I have introduced 
legislation that will advance our reform agenda. We introduced 
the Federal Workforce Flexibility Act, the Senior Executive 
Service Reform Act, and the Presidential Appointments 
Improvement Act in the Senate and the House. These bills will 
help provide the tools the Federal Government desperately needs 
to maximize the effectiveness of its workforce.
    At a press conference in this room last Wednesday, 
Representative Davis and I outlined in greater detail the 
provisions of these bills. Today, we are eager to receive the 
input of an array of witnesses on our legislation and other 
reforms that they might recommend. I thank our four panels of 
witnesses for joining us today. They represent some of the 
Nation's foremost experts on personnel management, and I look 
forward to their testimony.
    I now yield to the Co-Chair of this hearing, Chairwoman 
Davis, for an opening statement.

 STATEMENT OF JO ANN DAVIS, A REPRESENTATIVE IN CONGRESS FROM 
                     THE STATE OF VIRGINIA

    Mrs. Davis. Thank you, Chairman.
    I want to begin by thanking Senator Voinovich for hosting 
this important joint hearing and our invited guests for joining 
us here today. Many words have been spoken over the last few 
years about the Federal Government's human capital crisis. In 
fact, it is now unusual to hear the phrase ``human capital'' 
not followed by the word ``crisis'' when discussing the Federal 
workforce.
    This problem takes many forms: There is the potential wave 
of retirements as the workforce ages; the struggle for many 
agencies to recruit, hire, and retain talented employees, 
particularly in technical or scientific fields; the lack of 
training and career development; and as we will hear today, the 
concern of employees that their work is not valued.
    The Federal Government simply cannot function properly 
without good employees and managers who have the necessary 
tools to do their jobs for the American people. Meeting the 
Federal Government's workforce challenges is critical to the 
success of the Federal Government's core mission today and in 
the future.
    Just last week, as Senator Voinovich said, he and I stood 
in this very same room and announced that we were introducing 
several pieces of legislation that begin to address some of 
these challenges by giving managers more flexibility to manage 
their agencies, streamlining the cumbersome Presidential 
appointments process, and relieving pay compression at the 
senior levels.
    Allow me to highlight some aspects of the bills.
    The Presidential Appointments Improvement Act streamlines 
but does not weaken the financial disclosure requirements, puts 
a process in place to reduce the number of political 
appointees, and enlists the Office of Government Ethics in an 
attempt to find a balance between necessary ethics requirements 
and unnecessarily intrusive ones.
    The Federal Workforce Flexibility Act provides agencies 
with enhanced abilities to undertake management demonstration 
projects, permits agencies to pay out larger recruitment, 
retention, and relocation bonuses under certain circumstances, 
and enhances training by requiring agencies to link employee 
training programs with performance plans and strategic goals.
    Finally, the Senior Executive Service Reform Act not only 
alleviates pay compression for senior executives, 
administrative law judges, Board of Contract Appeals members, 
and other senior government workers, but it also moves the SES 
to a broader pay for performance system and simplifies some 
hiring provisions.
    I also want to repeat what I said last week. The Senator 
and I fully intend to work with the employee groups and the 
administration in shaping these bills as we move forward. That 
is why we are here today, to listen to and to gather ideas from 
our witnesses. I look forward to hearing your comments, and I 
thank you for coming.
    [The prepared statement of Mrs. Davis follows:]
                    PREPARED STATEMENT OF MRS. DAVIS
    I want to begin by thanking Senator Voinovich for hosting this 
important joint hearing, and our invited guests for joining us today. 
Many words have been spoken over the last few years about the Federal 
Government's human capital crisis--in fact, it is now unusual to hear 
the phrase ``human capital'' not followed by the word ``crisis'' when 
discussing the Federal workforce.
    This problem takes many forms. There's the potential wave of 
retirements as the workforce ages, the struggle for many agencies to 
recruit, hire and retain talented employees--particularly in technical 
or scientific fields--the lack of training and career development, and, 
as we will hear today, the concern of employees that their work is not 
valued.
    The Federal Government simply cannot function properly without good 
employees and managers who have the necessary tools to do their jobs 
for the American people. Meeting the Federal Government's workforce 
challenges is critical to the success of the Federal Government's core 
mission, today and in the future.
    Just last week, Senator Voinovich and I stood in this very same 
room and announced we were introducing several pieces of legislation 
that begin to address some of these challenges--by giving managers more 
flexibility to manage their agencies, streamlining the cumbersome 
presidential appointments process and relieving pay compression at the 
senior levels.
    Allow me to highlight some aspects of the bills:

     LThe Presidential Appointments Improvement Act 
streamlines--but does not weaken--the financial disclosure 
requirements, puts a process in place to reduce the number of political 
appointees, and enlists the Office of Government Ethics in an attempt 
to find a balance between necessary ethics requirements and 
unnecessarily intrusive ones.

     LThe Federal Workforce Flexibility Act provides agencies 
with enhanced abilities to undertake management demonstration projects, 
permits agencies to pay out larger recruitment, retention and 
relocation bonuses under certain circumstances, and enhances training 
by requiring agencies to link employee training programs with 
performance plans and strategic goals.

     LFinally, the Senior Executive Service Reform Act not only 
alleviates pay compression for senior executives, administrative law 
judges, Board of Contract appeals members, and other senior government 
workers, but it also moves the SES to a broader pay-for-performance 
system and simplifies some hiring provisions.

    I also want to repeat what I said last week: The Senator and I 
fully intend to work with the employee groups and the Administration in 
shaping these bills as we move forward. That is why we are here today, 
to listen to and gather ideas from our witnesses. I look forward to 
hearing your comments. Thank you.

    Senator Voinovich. Thank you.
    I now yield to Danny Davis, ranking member of the Civil 
Service and Agency Organization Subcommittee, for an opening 
statement.

STATEMENT OF DANNY K. DAVIS, A REPRESENTATIVE IN CONGRESS FROM 
                     THE STATE OF ILLINOIS

    Mr. Danny Davis. Thank you very much, Senator Voinovich, 
Chairwoman Davis--a lot of Davises in this particular group--
Chairman Davis, and Ranking Member Durbin. It is a pleasure to 
be here today at a joint hearing to consider civil service 
reform and the General Accounting Office's designation of the 
Federal Government's human capital as high risk.
    Over the last several years, the Senate Subcommittee on 
Oversight of Government Management and the Federal Workforce 
has held numerous hearings on civil service reform. I am 
pleased that this session the House Civil Service and Agency 
Organization Subcommittee will be equally vigorous in examining 
civil service reform issues.
    What is emerging from these hearings on civil service 
reform proposals is once again that the devil is indeed in the 
detail. To effectively reformed Federal operations and the 
workforce, we must first understand the logic and reasoning 
behind the outdated and outmoded rules and regulations. If not, 
we are destined to reform everything and improve nothing.
    For example, if the current system is to be reformed to 
give managers more flexibility, how can we ensure that a new 
system will be fair and equitable and free from political 
influence?
    Efforts to reform civil service that are based on the need 
for more flexibility may indeed be valid, but offering more 
flexibility without accountability is simply something that we 
cannot afford to do.
    Legislation that offers flexibility without accountability 
should not be considered unless it specifies how decisionmakers 
in the government will be held accountable for their actions 
and the decisions they make.
    I look forward to working with my counterparts in the 
Senate, Federal employee unions, research organizations, and 
others as we work together to improve the efficiency and 
effectiveness of the Federal Government and to place a higher 
premium on civil service.
    Thank you so much, Senator, and I yield back the balance of 
my time.
    Senator Voinovich. Thank you very much.
    We welcome Eleanor Holmes Norton. Eleanor, it is nice to 
have you here with us. Do you have an opening statement that 
you would like to make.

   OPENING STATEMENT OF ELEANOR HOLMES NORTON, A DELEGATE IN 
             CONGRESS FROM THE DISTRICT OF COLUMBIA

    Ms. Norton. Thank you very much, Senator Voinovich. I would 
like to say just a few words.
    First of all, I would like to thank you and Chairman Davis 
for this joint hearing. I remember, Senator Voinovich, your 
calling just such a joint hearing, perhaps a couple years ago 
when you chaired this Subcommittee, and beginning perhaps a 
tradition of our working together on this really huge problem 
of human capital in our Federal workforce. Beginning with that 
flexibility in the SES makes some sense. I am concerned with 
human capital up and down the Federal workforce, including, of 
course, those who manage the system.
    I believe that the Federal Government has rested on its 
human capital laurels now for decades. The Federal Government 
was a natural magnet for the smartest people in the society, 
for the management jobs, and all up and down the line. From the 
New Deal on, government was exciting. But the Federal 
Government over the past two decades has failed to wake up to 
the fact that it now has become competitive with other 
employers. And the real indication of that is if you go into 
the public schools of the United States and ask people what 
they want to be, you will have a hard time finding somebody 
that says, ``I want to work for the Federal Government,'' or 
``I want to have a job that is associated with the Federal 
Government.'' That is a problem. That is a problem whether you 
are talking about the SES or the line worker, and some of us 
happen to be at least as interested in the line workers who 
deliver the service and who are evaporating, having been 
trained by us and now going to market their skills elsewhere.
    I could not be more empathetic with the notion to have 
managers who have the flexibility to do what needs to be done 
because I ran a very troubled agency and had to reconstruct it 
from the ground up, the Equal Employment Opportunity 
Commission, who had a humongous backlog and literally had to 
change everything within the agency. I have a keen appreciation 
for what managers have to do.
    What I think we have to look at is a discipline that we 
have in the Federal Government that no other workforce has, and 
that is that you have to work within a civil service merit 
system. And how do you get the flexibility that is necessary to 
manage the system while being true to merit system principles? 
That is the challenge, and that is the challenge I think we 
should ourselves be accountable to. Thank you very much, Mr. 
Chairman.
    Senator Voinovich. Thank you, Eleanor.
    I would like to welcome the Chairman of the House 
Government Reform Committee, Representative Tom Davis. Tom, it 
is very nice that you came this morning. Would you like to 
share some opening remarks.

 STATEMENT OF TOM DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE 
     STATE OF VIRGINIA, CHAIRMAN OF THE HOUSE COMMITTEE ON 
                       GOVERNMENT REFORM

    Mr. Tom Davis of Virginia. Senator, just very briefly. I am 
just here because this is real important to our Committee, and 
we are just pleased at your interest in this, and we are hoping 
maybe this is the session that we can get some things moving. 
This is a huge problem that faces the Federal Government in the 
out-years. We are going to hear a lot from our witnesses today. 
I used to work for a company out in the Beltway, a billion-
dollar IT company, and our most important asset wasn't our 
computers, wasn't our buildings, and it wasn't our patents. It 
was our people. They walked out the door every night, and we 
prayed they came back the next day. That was our asset, and how 
we rewarded and retained those people was very important to our 
staying competitive and staying ahead of the curve.
    It is the same with the Federal Government. That is our 
most important asset, and I think it is sometimes 
underutilized. And I think we will hear some great ideas today 
on some of the things we need to do in a proactive manner so 
that this human capital crisis that we face in the out-years 
perhaps doesn't come to pass.
    So thanks for your leadership; thanks to Mrs. Davis for 
hers. And I am just glad to be here.
    [The prepared statement of Hon. Tom Davis of Virginia 
follows:]

PREPARED STATEMENT OF CHAIRMAN TOM DAVIS, HOUSE COMMITTEE ON GOVERNMENT 
                                 REFORM
    Despite best intentions, reform of the civil service system is a 
long debated topic with very little progress to show for it. With the 
exception of a few minor steps forward, there is surprisingly little 
difference between today's civil service system and the original system 
created fifty years ago. Unfortunately, the job market outside of 
government has changed drastically over the last half century, 
necessitating that Congress and the Administration take a careful look 
at the civil service system to determine what changes can and should be 
made in order to recruit and retain the best and the brightest civil 
servants.
    The Administration has already taken the first step on this issue, 
assigning ``strategic management of human capital'' as one of five 
government-wide initiatives in the FY 2002 President's Management 
Agenda. More specifically, the President's Management Agenda calls upon 
agencies to (1) establish performance-oriented compensation systems, 
(2) adopt information systems that will minimize the ``brain drain'' 
should a wave of retirements occur in the next decade, and (3) take 
full advantage of existing personnel flexibilities in order to 
determine what statutory changes are necessary.
    The recently issued final report by the National Commission on the 
Public Service (the ``Volcker Commission'') iterated the importance 
that the Bush Administration has placed on the strategic management of 
human capital. The Volcker Commission recommended that (1) the Federal 
workforce be rooted in new personnel management principles that rely 
more heavily on government performance, (2) a more flexible personnel 
system be adopted, in terms of rewarding effective employees and 
disciplining underperformers, (3) the process of recruiting new hires 
be streamlined, and (4) agency managers be given the flexibility to 
more closely tie compensation to current market comparisons. We held a 
hearing with several of the members of the Commission (Volcker, 
Carlucci and Shalala) who all told us the importance of a new system.
    The Congress must work to determine which civil service system 
improvements must be accomplished in the coming years and legislate 
such improvements.

    Senator Voinovich. Well, thanks very much.
    Will the witnesses that are going to be testifying today 
stand? It is the custom of this Subcommittee that we swear in 
all witnesses. If you will, raise your right hand. Do you swear 
that the testimony you are about to give before this 
Subcommittee is the truth, the whole truth, and nothing but the 
truth?
    Let the record note that the witnesses have answered in the 
affirmative.
    The sole witness of our first panel is the Hon. David M. 
Walker, Comptroller General of the United States of America. It 
is a pleasure that Comptroller General Walker's mother and 
father are here with us. We welcome you to this hearing.
    Two years ago, Mr. Walker appeared before the Subcommittee 
to discuss the designation of strategic human capital 
management as a new item on GAO's government high-risk list. 
Today, the Subcommittee is interested in learning what progress 
has been made on this issue and to receive Mr. Walker's 
recommendation for strengthening human capital management so 
that it can be removed from the high-risk list.
    I would ask all witnesses, if possible, to limit their oral 
statements to 5 minutes each, and I remind you that your 
complete statements will be entered into the record.
    Mr. Walker, we would like to hear from you this morning. 
Thank you for being here.

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

    Mr. Walker. Thank you, Chairman Voinovich, Chairwoman 
Davis, Chairman Davis, Ranking Member Davis, Ms. Norton--you 
are right; there are a lot of Davises here today. It makes it a 
lot easier, though, quite frankly. And as you noted for the 
record, Chairman Voinovich, my parents are here today, and for 
the record I want to thank them for all that they have done to 
help me be where I am today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 71.
---------------------------------------------------------------------------
    It is a great pleasure to appear before you today to 
discuss the Federal Government's greatest asset: Its people. 
Since GAO designated strategic human capital management as a 
governmentwide high-risk area in January 2001, Congress, the 
administration, and the agencies have taken a number of steps 
to address the Federal Government's human capital shortfalls. 
In fact, my major point today is, I believe, that we have made 
more progress in addressing the government's longstanding human 
capital challenges in the past 2 years than in the last 20. And 
I am confident that we will make even more progress in the next 
2 years than the past 2 years.
    Despite the building momentum for comprehensive and 
systematic reforms, it remains clear that today's Federal human 
capital strategies are not yet appropriately constituted to 
meet current and emerging challenges or to drive the needed 
transformation across the Federal Government. Committed and 
sustained leadership and persistent attention on behalf of all 
interested parties will continue to be necessary to build on 
the progress that has been made and is being made if lasting 
reforms are to be successfully implemented.
    Congress has had and will need to continue to have a 
central role in improving agencies' human capital approaches. 
As part of the oversight and appropriations process, Congress 
can continue to examine whether agencies are managing their 
human capital to improve programmatic effectiveness and to 
encourage agencies to use the range of appropriate 
flexibilities available under current law--and, yes, Mr. Davis, 
in fact, to hold them accountable, to make sure that they are 
using the flexibilities in a reasonable manner and a manner 
that does not result in abuse.
    Congress will also play a critical role in determining the 
nature and scope of any additional human capital flexibilities 
that will be made available to agencies while assuring that 
adequate safeguards are incorporated to prevent abuse. Congress 
also has the responsibility to ensure the reasonableness and 
adequacy of financial resources that are made available to 
agencies for their most valuable asset, namely, their people.
    Congress is currently considering several pieces of 
legislation to help agencies address their current and emerging 
human capital challenges. I believe that the basic principles 
underlying these legislative proposals have merit, and 
collectively they would make a positive contribution to 
addressing high-risk human capital issues and advancing the 
needed cultural transformation across the Federal Government.
    I also believe that certain additional safeguards and 
provisions should be considered by the Congress, and we look 
forward to working with this Subcommittee and the Congress in 
that regard.
    Mr. Chairman, as you know, I have a lengthy statement which 
I would like to have included in the record, and it includes a 
number of specific examples about additional safeguards and 
possibly other provisions that this Subcommittee may want to 
consider.
    For example, in our view, the SES needs to lead the way in 
the Federal Government's effort to better link pay to 
performance. However, in our view, agencies should be required 
to have modern, effective, credible, and, as appropriate, 
validated performance management systems in place before they 
are granted authority to significantly link pay to performance 
for broad-based employee groups. In this regard, the Congress 
should consider providing specific statutory standards that 
agencies' performance management systems would be required to 
meet before OPM could approve any such pay-for-performance 
effort. Our own experience at GAO in implementing such reforms 
and the practices of other leading organizations, which was the 
subject of a report issued by the two Chairs last week, could 
serve as a starting point for such consideration.
    We, at GAO, believe that it is our responsibility to lead 
by example. We seek to be in the vanguard of the Federal 
Government's overall transformation efforts, including in the 
critically important human capital area. We are clearly in the 
lead at the present time, and we are committed to staying in 
the lead.
    We have identified and made use of a variety of tools and 
flexibilities, some of which were made available to us in the 
GAO Personnel Act of 1980, and some of which were made 
available by the Congress in 2000. But many of the 
flexibilities we have are available to every Federal agency. 
Overall, we have implemented a number of human capital 
initiatives, including a number outlined in my testimony, some 
of which are recent, some of which are longstanding, and others 
of which are planned or in progress.
    Many of these required one-time investments to make them a 
reality. We worked with Congress to present a business case for 
funding a number of these initiatives, and fortunately the 
Congress has supported these and other GAO transformation 
efforts.
    In that regard, as you know, we expect in the coming weeks 
to be formally approaching Congress with recommendations to 
provide GAO with additional statutory flexibilities in order to 
help us better manage our people. The legislation we are 
planning to recommend would, among other things, facilitate 
GAO's continuing efforts to recruit and retain top talent; 
develop a more performance-based compensation system; help 
better align our workforce; and facilitate our succession 
planning and knowledge transfer efforts. We believe that these 
authorities will strengthen our efforts to serve the Congress 
and the American people.
    As has been the case in the past, we also expect that the 
use of our authorities will provide valuable lessons for the 
Congress and other agencies on how human capital flexibilities 
can be used in a way that provides reasonable flexibility but 
incorporates appropriate safeguards to prevent abuse, including 
reasonable transparency and appropriate accountability 
mechanisms.
    Mr. Chairman, Ms. Chairman, all other Members present here 
today, that concludes my oral statement. I would be more than 
happy to answer any questions you may have. Thank you.
    Senator Voinovich. Thank you very much, Mr. Walker.
    Your testimony discusses the need to reform the current 
Federal pay system to reflect the knowledge-based workforce of 
the 21st Century versus the heavy clerical workforce of the 
1950's. To that end, the Bush Administration included in the 
2004 budget a $500 million pay-for-performance fund to 
complement the annual cost of living adjustment.
    This proposal has not been that well received. I have a 
concern about it, and that is, whether agencies have the 
infrastructure to fairly administer a pay-for-performance 
system. Now, you alluded to that in your testimony, but would 
you comment on what steps agencies need to take to effectively 
implement such a system?
    Mr. Walker. Senator, I believe a vast majority of Federal 
agencies do not have the infrastructure in place in order to 
effectively and fairly move to a more performance-based 
compensation structure. I think we ought to start with the SES, 
and I think that agencies need to, with regard to the broad-
based workforce, develop modern, effective, credible, and as 
appropriate, validate performance appraisal systems that are 
based on key competencies, linked to their strategic plan, tied 
to the desired outcomes and the core values of their respective 
agencies. We have done that at GAO.
    I also believe that it is important to be able to 
supplement that new modern, effective, and credible performance 
appraisal system with such other safeguards as paneling 
processes comprised primarily of career executives to try to 
assure equity and consistency in application. I believe it is 
also important to make sure that offices of opportunity and 
inclusiveness such as ours and human capital offices are 
involved up front before final decisions are made on 
performance appraisals, pay, and promotion decisions, to make 
sure that they are being applied, as much as is humanly 
possible, consistently, in an equitable manner and in a manner 
that prevents discrimination or abuse.
    These are some of the things that I believe it is important 
to have in place. Conceptually, I believe that the 
administration is right that we need to move more towards pay 
for performance, but I think agencies need to have the 
infrastructure in place before they operationalize related 
authories. I also question the adequacy of the amount of 
performance based pay they are proposing in addition to the 2-
percent base.
    Thank you.
    Senator Voinovich. Would you be willing to share with us 
some statutory language that could be a precondition to 
proceeding with such a system? We would be very interested in 
having that.
    Mr. Walker. We would be happy to provide technical 
assistance to these Subcommittees in that regard, Mr. Chairman.
    Senator Voinovich. Congressman Davis.
    Mrs. Davis. Thank you, Mr. Chairman. Which Congressman, him 
or me?
    Senator Voinovich. Mr. Chairman Davis.
    Mr. Tom Davis of Virginia. I will just be brief. Let me 
ask----
    Senator Voinovich. I am glad they worked that out.
    Mr. Tom Davis of Virginia. The administration's proposal 
right now, your concerns about it are, first, we don't have the 
infrastructure really to move this ahead in an appropriate 
fashion. Second, I am concerned about pay parity issues. When 
you start giving military one and the civilian branch another, 
it just makes it look like this is the raise that we would have 
gotten and now you are going to have to earn it. And I think it 
creates a whole difficulty in implementing it.
    Let me just get your comments. You have expressed some 
concern about it, and I wonder if you could elaborate.
    Mr. Walker. I think pay parity is an important issue. My 
view is there is no question that we need to move more towards 
a performance-oriented compensation system and a more market-
oriented compensation system. The pay parity system that we 
have right now, quite frankly, treats everybody the same, 
virtually. It assumes that the pay gap, for example, is the 
same for every position, every locality, every skill and 
occupation, and that is just not true. That is factually wrong.
    And so I think that clearly we need to move more towards a 
system that pays more based upon skills, knowledge, position, 
and performance rather than the one that we have which is 
basically largely a one-size-fits-all approach, so I agree that 
we need to move that way, but I think that one of the 
safeguards needs to be that before agencies would be allowed to 
do that for a broad cross-section of their workforce, they need 
to demonstrate that they have the infrastructure in place to be 
able to implement pay for performance in a fair, equitable, and 
reasonable manner.
    Mr. Tom Davis of Virginia. Do you think they need some 
additional legislation to do that, or could that be done 
administratively?
    Mr. Walker. I think that you could do that as part of 
legislation that would provide specific statutory safeguards 
that would say, for example, in order for OPM to approve an 
agency being able to use more performance-based compensation, 
they would have to meet these certain statutory standards that 
they could then administer.
    Mr. Tom Davis of Virginia. Also, isn't it a fact, I mean, 
in some areas every time there is a vacancy, there are hundreds 
of applications and there is no problem getting people at a 
certain pay level, and in other areas, we have difficulty 
getting people. We train them a little bit and we lose them. So 
there is disparity throughout the Federal system, and we don't 
treat the system that way. We seem to have a one-size-fits-all. 
Is that accurate?
    Mr. Walker. That is correct. There are certain critical 
occupations where you need to be able to use additional tools 
in order to attract and retain people, and I think that our 
system needs to recognize that. It does to a certain extent. 
Agencies have the ability to pay recruiting bonuses and 
retention bonuses, and I know that one of the provisions in the 
legislation under consideration would enhance that with regard 
to certain critical occupations. I think that has intellectual 
merit as long as you have adequate safeguards to make sure that 
people are using the authority when it is justified and not 
doing it in situations where it is not.
    Mr. Tom Davis of Virginia. I also am concerned about so 
much work is being outsourced simply because we don't have an 
in-house capacity. We don't have any in-house check and it is 
going out the door because of a capacity issue. And we are 
having difficulty particularly in some technical areas 
recruiting, training, and retaining people in some of these 
areas.
    Mr. Walker. Well, the sourcing issue is a very important 
issue. As you know, I chaired a panel last year, the Commercial 
Activities Panel, that make some recommendations on sourcing 
strategy. There are several contracting areas in the Federal 
Government that have been on our high-risk list for years--
NASA, IRS, DOD, DOE, just as an example, where they have 
contracted out a significant amount of activities without 
providing an adequate number of Federal workers who have the 
skills and knowledge, to be able to manage cost, quality, and 
performance. It is critically important that the Congress adopt 
the recommendations of the Commercial Activities Panel, that 
the administration follow them, and that we have an adequate 
number of people to be able to manage whatever we decide to 
contract out.
    Mr. Tom Davis of Virginia. Thank you, and I am proud to 
claim you as a constituent.
    Mr. Walker. Thank you, Mr. Chairman.
    Senator Voinovich. Representative Davis.
    Mrs. Davis. Thank you, Mr. Chairman. Thank you, Mr. 
Chairman.
    Mr. Walker, the Homeland Security Act of 2002 which was 
enacted on November 25 requires the appointment of chief human 
capital officers in the major agencies. The chief human capital 
officers are to advise and assist the agency head and other 
agency officials in carrying out the agency's responsibility 
for selecting, developing, training, and managing a high-
quality, productive workforce, as well as implementing the 
rules and regulations of the President and OPM and the laws 
governing the civil service within the agency.
    These chief human capital officers are to be appointed by 
the agency head within 180 days of the enactment of the 
Homeland Security Act, which would be May 24, 2003.
    Do you know how that process is coming along?
    Mr. Walker. I am going to be meeting with OPM Director Kay 
Coles James this afternoon on several topics. That is one of 
the issues that I plan to discuss with her. I believe it is 
critically important that we get this right rather than do it 
quick. These positions need to be filled with the right type of 
people. This is a strategic position. It is one that is 
fundamentally different from many of the types of personnel or 
human resource positions that we have had in the Federal 
Government in the past. And I think it is important that we 
have a governmentwide approach that assures some consistency in 
how we are filling these jobs. In other words, I think it is 
important, and hopefully OPM is playing an active role in 
working with the agency heads, to make sure that the type of 
people that they are proposing to appoint in fact are the type 
of people that are necessary to get the job done. And I will be 
making that inquiry this afternoon. But in the final analysis, 
I think it is much more important to do it right than to do it 
quick.
    Mrs. Davis. Could you, after you meet with OPM, get back to 
us with a report on where they stand on these appointments?
    Mr. Walker. I would be happy to do that.
    Mrs. Davis. Thank you, Mr. Chairman.
    Senator Voinovich. Would you now like to call on your 
Ranking Member?
    Mrs. Davis. Yes. Now I will call on my Ranking Member, 
Danny Davis.
    Mr. Danny Davis. Thank you very much, Madam Chairman.
    Mr. Walker, it is good to see you again. I want to thank 
you so much, and especially I want to thank you for the 
responsiveness of your agency to inquiries and requests that I 
have made for information, analysis, and studies. We really 
appreciate that.
    I appreciated your comments relative to emphasis on 
leadership and accountability as well as the idea that 
financial resources must be available in order to have the kind 
of capital structure that we need in terms of the ability to 
take care of the human elements that must be employed.
    I also appreciated the idea that the Federal Government has 
to be and should, in fact, be the leader, and that leadership 
has to go in the areas of recruitment, development, and 
especially inclusivity, that is, being able to reach out 
throughout the breadth and depth of America and make sure that 
our workforce seriously looks like America in a real kind of 
way.
    It is my understanding that the Managing Director of the 
Office of Opportunity and Inclusiveness reports directly to 
you. Could you tell us what the value of having this person or 
this office report to you is?
    Mr. Walker. Thank you, Mr. Davis. We are happy to support 
your requests. You have had some very good ones
    Ron Stroman, who is our Managing Director for Opportunity 
and Inclusiveness, reports directly to me. He is directly 
responsible for trying to make sure that our agency is taking 
affirmative steps to reach out to hire a diverse workforce, 
that we have appropriate policies, procedures, systems, and 
safeguards in place to maximize opportunity for all of our 
employees and to prevent discrimination. It has helped 
tremendously because, first, Ron is a first-class professional. 
He is one of the top people in his field in the country, not 
just in the Federal Government. Second, by having him report 
directly to me and by having us work together on an ongoing 
basis, it demonstrates clear commitment from the top of the 
agency to this important element of human capital strategy. And 
we have made considerable progress in the recent past, in part 
as a result of the efforts of Ron and his team.
    Mr. Danny Davis. Does each agency or government unit have 
such an individual internally?
    Mr. Walker. Well, my understanding is there are a number of 
offices that have Offices of Civil Rights. My view is those 
terms are somewhat outdated. It is really about what you said. 
It is about opportunity, equal opportunity, and inclusiveness, 
and it is taking affirmative steps to try to achieve that while 
at the same point in time not compromising standards and 
assuring reverse discrimination.
    And so the answer is no, I do not believe that each agency 
has something like we do. And to the extent that they have an 
office, it may not be approaching its duties and 
responsibilities in the same way that we are. I am not saying 
that ours is right or necessarily even the best, but it is 
fundamentally different from what I saw when I headed two 
Executive Branch agencies.
    Mr. Danny Davis. And, finally, Mr. Chairman, if I might, 
following up on a line of questioning by Chairman Davis 
relative to outsourcing, and privatizing, I have always 
wondered whether much of our activity in outsourcing is 
philosophical or is it based upon need, or do we have the 
ability to develop the competencies that are needed in certain 
lines of activity? And do we have enough call for that 
internally so that our own workforce would be able to provide 
those services effectively and efficiently and if there aren't 
some areas where we really don't use the talent as effectively 
as we could?
    Mr. Walker. Several answers. First, I think at times it has 
been philosophical. For example, in the Eisenhower 
administration, the policy was if it could be done by the 
private sector, it should be done by the private sector. 
Sometimes it is political because of campaign promises that are 
made that deal with this issue. But there are market factors as 
well. The fact of the matter is that the government, even if it 
wanted to be able to attract and retain people to perform 
certain functions, if because of its compensation policies or 
practices or whatever else, it can't attract and retain an 
adequate number of people, then you have to go to the private 
sector. You don't have a choice but to do that.
    And sometimes the government hasn't adequately invested in 
its human capital, in its own people, and that has served to 
undercut its capabilities, and there is an opportunity cost 
there. So I think it is multidimensional.
    Mr. Danny Davis. Thank you very much, Mr. Chairman.
    Senator Voinovich. Madam Chairman.
    Mrs. Davis. Now I would like to call on Ms. Norton for 
questions.
    Ms. Norton. Thank you, Madam Chairman.
    Mr. Walker, I appreciate your testimony. I myself perhaps 
by training, particularly when embarked on a new adventure, I 
am impressed by the power of precedent. You spoke in your 
testimony of existing flexibilities that the Federal Government 
has had. I would be most interested in how those existing 
flexibilities might inform this far more contentious notion of 
pay for performance.
    For example, you even say in your GAO report that the GAO 
has been leading by example, and you cite examples of that--
broadbanding, voluntary early retirement, recruiting, and a 
number of other examples.
    Of course, those are not nearly as contentious as telling 
people they are going to be paid by what somehow somebody says 
they have performed, especially when we were told in a prior 
hearing that this is really a case study for use on the entire 
workforce.
    So I would like to know what you have done to look at the 
flexibilities that the government already has, whether they 
have been evaluated, and what they tell us already about 
flexibility and how it is working in the Federal Government.
    Mr. Walker. Well, first, I do not believe that agencies are 
coming close to using all the flexibilities that are available 
to them, but there are various reasons why they may not. In 
some cases, they may not understand them. In some cases, they 
may not have the funding.
    For example, student loan repayment, which Congress passed, 
GAO has the second largest student loan repayment program in 
the Federal Government, yet we only have 3,200 employees, which 
is very small as compared to most departments and agencies. 
Yet, we have the second largest student loan repayment program 
in the Federal Government.
    In addition to that, we have done a number of things in the 
recruiting area to use some of the flexibilities with regard to 
retention bonuses, recruiting bonuses, things of that nature 
that are available to others, and others may not have done 
that.
    We have broadbanding. That is something that we were 
granted in 1980. Most agencies don't have that. I think that is 
something that----
    Ms. Norton. Mr. Walker, has anybody looked at anybody's 
version of the flexibilities for outcomes to see whether they 
work or not? I recognize what you are saying, that agencies for 
various reasons haven't always implemented them. But we have 
got flexibility. We are now going to even greater flexibility. 
I am trying to find out whether GAO or anybody else has looked 
at what flexibility has done for us already.
    Mr. Walker. We are doing some work in that regard, and I 
imagine that OPM can probably comment on what they are doing. 
There are case studies out there. There are case studies where 
there have been demonstration projects in the past, where 
people have been granted certain flexibilities and have used 
them, and I think it is important that they help to inform the 
Congresss' decision going forward.
    Ms. Norton. Should this be a demonstration project? You 
certainly start with the SES at the smaller and top element of 
the government. Again, going back to my own experience, when I 
had to undertake huge changes in an agency, the reason I think 
it succeeded was that we didn't do it all at one time, that we 
did what we called a pilot project, in this case in various 
regions, learned from that project, kept from making the 
mistakes writ large.
    Is it your recommendation that pay for performance be 
implemented straight out throughout the SES or that some 
smaller version or pilot project which would allow us to 
discover mistakes be started once we have the appraisal system 
that you think is the prerequisite for starting it all?
    Mr. Walker. Well, first, I think that we need to learn from 
the demonstration projects we have already had, and that is one 
of the things that we are looking at, and hopefully OPM as 
well--those that have been given some flexibilities, what have 
they done?
    Ms. Norton. I am talking about pay for performance.
    Mr. Walker. I understand that. I am talking about that, 
too. There are situations where others have been given 
flexibility in that regard, and we ought to study that.
    Ms. Norton. And we have no outcome from that that has 
already been evaluated?
    Mr. Walker. We are doing some more evaluation, but some has 
already been done. I think the SES is the logical place to 
start.
    Ms. Norton. With the whole SES?
    Mr. Walker. I think it is also important that you have 
modern, effective, and credible performance appraisal systems 
for the SES before you implement it as well. And I am not 
convinced that many Federal agencies have that.
    My view is that if you can end up incorporating statutory 
safeguards that must be considered by OPM before they could 
approve an agency being able to use it either for their SES but 
especially for the rank-and-file, if you could do that as a 
condition of being able to operationalize additional pay for 
performance authority. It would be very substantive.
    Ms. Norton. Now, you said certified--I think you used the 
word ``certified''--appraisal systems or performance management 
systems. What do you mean by ``certified''?
    Mr. Walker. I mean that OPM would have to certify that in 
their view the statutory conditions have been met. Let me give 
you an example in the case of GAO. For us, we have developed a 
modern, effective, and credible performance appraisal system 
that is based on competencies, tied to our strategic plan, and 
for our broad-based workforce, the competencies were validated 
by the employees before we implemented it.
    It is not perfect. It is a huge change from the last prior 
system. But our employees actively participated. They validated 
the competencies, and, therefore, I think that is something 
that is desirable and a best practice.
    Ms. Norton. The validation, the notion of validation 
studies and validation seems to me is going to be absolutely 
critical, or else this system--we know what this workforce is. 
It is highly educated. It is conscious of its rights. And one 
of the first outcomes could be a whole bunch of grievances in 
court suits if, in fact, there is not a validated system put in 
place.
    Thank you very much, Madam Chairman.
    Senator Voinovich. Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    To General Walker, welcome. Good to see you again. Thank 
you for joining us.
    To our House colleagues, to Representative Davis and to 
Representative Davis and each of the other Representatives, we 
welcome you and thank you for coming to this end of the 
Capitol.
    As an old Governor, I was one who was interested in trying 
to introduce pay for performance for our State employees in 
Delaware. I suspect former Governor Voinovich had some interest 
in Ohio along those lines as well.
    Interestingly enough, it was our legislature which 
generally blocked our efforts. We made some progress but not to 
the extent that we wanted to.
    There are some States and probably some cities that did 
better than we did in the 8 years I was Delaware's chief 
executive. Delegate Norton was talking about pilot projects and 
that sort of thing. I wonder if there are some pilot projects 
out there that you might be aware of within State or local 
governments so we can almost use them as a pilot project 
because of their role as laboratories of democracy. Are you 
aware of any that are especially----
    Mr. Walker. Not off the top of my head, Senator, but I will 
tell you that is something that we can look into, if we are not 
already. One of the things that we are doing increasingly at 
GAO is trying to partner with State and local officials, 
especially the auditor generals, State auditors and county and 
city auditors, to try to share knowledge and information. And 
this is one I could follow up on.
    Senator Carper. You may know, there is an organization of 
State budget directors and State personnel directors as well 
who have a lot of interest in these kinds of issues.
    Let me just ask, to back up a little bit, if you could give 
us a road map of sorts.
    What might be the appropriate next steps for us as 
legislators as we consider pay for performance, something that 
actually rewards good performance but something that tries to 
provide safeguards for employees?
    Mr. Walker. My view is start with the SES with some type of 
standards that would even have to be met within the SES. Look 
to some demonstration projects, and provide for additional 
demonstration projects for broad cross-sections of the 
workforce within the Executive Branch, and also the Legislative 
Branch, GAO specifically. But, again, they should have to 
demonstrate that they have these safeguards before they end up 
implementing the pay-for-performance system.
    We have done that at GAO. We have them for most of our 
workforce. It is not a promise. We believe in the Missouri 
principle, ``Show me,'' and we can show you.
    And so I think if you do that, what will happen is that we 
will see what works and what doesn't work. We will learn some 
valuable lessons. One of the concerns that I have is if you go 
too fast on pay for performance before people have their 
systems in place, then you can end up having a bunch of 
disastrous experiences which could taint the whole concept. And 
I believe the concept is right. I believe we need to place 
increased emphasis on pay based on skills, knowledge, position, 
and performance, but we need to be careful how we do it, or 
else we are going to get off to a bad start, and that is not 
going to be in anybody's interest.
    Senator Carper. Last year, we debated and voted on some 
proposals by Senator Voinovich and Senator Akaka with respect 
to flexibility for Federal agencies, in the context of the 
creation of a new Department of Homeland Security.
    Could you make some comments on what we did legislatively, 
what kind of extra flexibility that gives to Federal agencies 
and how that might be used?
    Mr. Walker. Well, as you know, Senator, not only did you 
provide certain additional flexibility to the Department of 
Homeland Security, which was controversial and contentious. If 
you will recall, that was kind of the last thing that got 
resolved in the legislation.
    Senator Carper. I recall that.
    Mr. Walker. Yes, I am sure. I didn't have much hair that I 
could lose, but some may have lost some as a result of that.
    But, in any event, in addition to that there were 
provisions that Chairman Voinovich proposed that were adopted 
governmentwide and they provided additional flexibilities.
    I might note for the record that some of those were ones 
that GAO had already demonstrated could be successfully 
implemented, such as the ability to provide voluntary early-
outs and buyouts to realign the workforce rather than to 
downsize the workforce. So I think it was a positive step 
forward.
    Senator Carper. All right. Good. Thanks very much.
    Senator Voinovich. Congressman Davis, do you want to call 
on your next witness?
    Mrs. Davis. Yes. Mr. Van Hollen.

  STATEMENT OF CHRIS VAN HOLLEN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF MARYLAND

    Mr. Van Hollen. Thank you, Chairman Davis, Senator 
Voinovich. Welcome, Mr. Walker, It is great to have you with us 
today. As you may know, I represent an area of the Washington 
suburbs where we have lots of Federal employees, and so this 
whole topic is, of course, of great interest to them and to 
myself.
    Just to follow up on Congresswoman Norton's comments with 
respect to demonstration projects and phasing this in, we had a 
hearing on our Subcommittee recently where we got into the pay-
for-performance issue, and one of the things that came out, as 
I understood it, was that even now we are talking about phasing 
in these new performance standards and linking them, obviously 
pay to performance. But there is really not any set of sort of 
uniform standards now that we can apply. Is that right?
    Mr. Walker. That is correct. I think the one thing that 
agencies need to do that doesn't require any legislation at all 
is to develop modern, effective, and credible performance 
management systems and to put them in place. There is no 
legislative action necessary for that to happen.
    Mr. Van Hollen. And that is my point. Why not as a first 
step at least get the standards in place before we establish 
the next link, which is to tie it to pay? I mean, let's at 
least get these performance measures in place on a uniform 
basis. That in itself is going to be a large task. I appreciate 
the fact that you have done it at GAO. I think that is 
terrific. But I think we should begin to do it in the agencies, 
give that time, give people time to adjust to those performance 
standards before you take the next step. And I wonder if you 
could respond to that.
    Mr. Walker. Well, and my point on that is I think you can 
do that reasonably expeditiously among the SES, and I think 
that it would make sense for you to be able to allow for some 
additional demonstration projects with appropriate statutory 
safeguards that would have to be met. For other agencies to do 
it as a test, for a broad cross-section of their workforce, I 
do think that would be appropriate.
    But, again, I think that the agency should have to 
demonstrate that they have these systems and controls in place 
before they should be allowed to implement any additional pay 
flexibility. But ultimately I think this flexibility should be 
broad-based throughout the government.
    Mr. Van Hollen. I guess my point is, the administration has 
introduced legislation on this issue, but they have got a lot 
of freedom right now to do a lot of things without the 
legislation that they have not done. And it just seems to me to 
make sense to allow people to become comfortable with the 
standards before you begin the linkage.
    Mr. Walker. They do, but in fairness, Congress last year, 
for example, passed a 4.1-percent pay raise, but only funded 
3.1 percent. There was a 1-percent unfunded mandate which 
somehow has to be made up. And in addition to that, that 4.1 
percent was given to every Federal worker, no matter what their 
skills, knowledge, performance, and position was, even people 
that were unacceptable performers, which is a very small 
percentage. Unacceptable performers got the same thing as the 
top person in the agency. That is just wrong.
    And so ultimately we need to move towards a more modern, 
effective, and credible system, but we need to be careful how 
we do it.
    Mr. Van Hollen. Right. Well, I am not sure the fact that 
the full 4 percent wasn't originally provided is the reason the 
administration can provide for not going forward. After all, 
they never requested the 4.1 percent for the civil service. 
And, in fact, in this year's appropriation, they have only 
requested 2 percent. So I think it is difficult for them to 
point to that as a reason they are not moving forward.
    Let me just ask you one other question with respect to the 
Senior Executive Service because, on the one hand, I understand 
the reasons for moving forward with the Senior Executive 
Service first. On the other hand, sometimes with other jobs in 
the Federal Civil Service, it is easier to measure performance. 
Sometimes at higher levels, certain types of jobs--Deputy 
Assistant Secretary for the Near East or South Asia--it is 
harder to measure the performance, more difficult than, for 
example, if you are measuring against a procurement contract 
and savings in that kind of area.
    What do you think the dangers--and this is true of a 
Republican or a Democratic administration. But obviously, in 
the Senior Executive Service you have much more interaction 
between the political appointees and the members of the Senior 
Executive Service. How do you analyze the dangers of really 
just compensating people based on willingness to support a 
particular political position within an administration? This is 
a danger in either administration. I just would like you to 
evaluate that.
    Mr. Walker. I would recommend that you do it using a 
competency-based approach, which actively involves employees 
and their unions as appropriate in developing what those 
competencies ought to be. I think you also have to not only 
have an appropriate performance appraisal system, I think you 
have to have things like paneling processes, which are 
comprised primarily, if not exclusively, of career officials 
that will end up taking that information and others to try to 
make recommendations on pay, promotions, and other types of 
human capital issues.
    So I think there are a number of things that can and should 
be done. In most cases, we have already done them at GAO, and 
selected other people may have as well.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    Senator Voinovich. I would like to point out to Members of 
the House and Senate here this morning that Mr. Walker has to 
be at a hearing on the House side at 10:30.
    Mr. Walker. And I do not believe in cloning. [Laughter.]
    Senator Voinovich. Senator Lautenberg, would it be all 
right with you if we excused him, or would you like----

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Yes, if he agrees with us, absolutely. 
[Laughter.]
    I understand that Mr. Walker takes a somewhat cautious view 
of the quick conversion to commercial or to the private sector 
side. And I will just say, Mr. Chairman--I commend you for 
holding this hearing--that I have spent much of my life in the 
corporate world and I built a large company and saw people hard 
at work. I then came here and saw people work for a lot less 
money, who were equally committed, dedicated folks. I think we 
have to keep that in mind before we arbitrarily decide that we 
can put out everything on the cheap and hire the lowest-cost 
labor that we can find. That is no way to do things.
    So I concur, Mr. Chairman, as long as I can put my 
statement in the record as if read.

                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Mr. Chairman, I commend you for holding this hearing and for your 
recognition of the looming human capital crisis in the Federal 
Government.
    Today's joint hearing is about people. Civil servants are the 
backbone of our government and we should remember that the skills, 
talent, and professionalism of the men and women in the Federal 
workplace are the best in the world.
    The overwhelming majority of civil servants are dedicated to their 
jobs. Many of them could make more money in the private sector but they 
work in the government because they see public service as a higher 
calling.
    It's crucial that we all hold civil servants accountable for the 
jobs they do. But it's also important that we avoid demeaning and 
denigrating them. Too often, administration officials, political 
appointees, and Members of Congress take potshots at career Federal 
employees who can't defend themselves and that does nothing but lower 
morale.
    As a former businessman, I appreciate the administration's need for 
flexible recruiting, hiring, and retention policies.
    But as a public official I am equally aware of the fact that 
``flexibility'' should not mean undermining basic civil service job 
protections. The Civil Service was created as a remedy to the rampant 
political excesses and abuses of the previous system. While the Civil 
Service may need to be modernized, at its core it has served this 
country well over the years.
    I must say that I am very concerned about the administration's 
announced intention to ``complete'' 127,500 Federal jobs by September 
30, 2003.
    I am particularly concerned about the administration setting an 
arbitrary quota and an impossible deadline for privatization, and then 
deliberately withholding from agencies the financial resources they 
need to conduct the public/public competitions.
    I get the impression that the administration has determined in 
advance the way these competitions should go, and that's to the private 
sector.
    We need to address the way in which we plan to balance 
privatization--the contracting out of Federal jobs--with Federal 
employee recruitment, retention, and morale.
    Beyond the issue of deciding what to contract out, there is 
something even more fundamental: That's giving agencies the personnel 
and the other resources they need to do their jobs. If we don't do 
that, we are just setting them up to fail.
    I'll give you an example of what I mean: We have created the 
Department of Homeland Security (DHS) but the administration has 
repeatedly submitted appropriation requests that are--frankly--
insufficient to enable DHS to achieve its mission to protect Americans 
here at home.
    Government should be as efficient as possible but we simply can't 
expect government to do its job ``on the cheap.''
    There is an old saying, ``You get what you pay for.'' To continue 
recruiting and retaining skilled and dedicated civil servants, the 
Federal Government needs to offer competitive wages, health benefits, 
and retirement plans.
    Many people correctly point out that taxpayers are the owners of 
the Federal Government and deserve the most effective and efficient 
government possible. I agree, but I would also point out that Federal 
employees are taxpayers, too, and they have ``invested'' even more than 
their taxes--they have invested their working lives. They deserve to be 
treated fairly and with respect. Doing so will maximize all taxpayers' 
value.

    Mr. Walker. Mr. Chairman, I am happy to answer any 
questions for the record or meet with any Member on this issue 
if they so desire. And I appreciate your understanding.
    Senator Voinovich. Thank you very much, and I think Senator 
Lautenberg is very valuable in this because of his experience 
in the private sector. He has some insight into it that a lot 
of us don't have.
    Thanks for being here again.
    Mr. Walker. Thank you. My pleasure.
    Senator Voinovich. Our next witness is the Hon. Dan G. 
Blair, Deputy Director of the Office of Personnel Management. 
Dan, I want to welcome you back to the Senate.
    Prior to his appointment with the Bush Administration, Mr. 
Blair served as senior counsel to Senator Fred Thompson, former 
Chairman of the Governmental Affairs Committee. He brings 
nearly two decades of experience in personnel and government 
management to his position, and we are glad to have you here 
this morning. Dan, you may proceed with your statement.

 TESTIMONY OF HON. DAN G. BLAIR,\1\ DEPUTY DIRECTOR, OFFICE OF 
                      PERSONNEL MANAGEMENT

    Mr. Blair. Thank you, Mr. Chairman, Madam Chairman, Members 
of the Subcommittees. Thank you very much for the invitation to 
testify this morning.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Blair appears in the Appendix on 
page 97.
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    On behalf of OPM Director Kay Coles James, I am pleased to 
provide the Subcommittees with an overall assessment of the 
state of the Federal workforce. I have a rather lengthy written 
statement, and with your indulgence, I will gladly summarize.
    So, where do things stand today, some 2 years after GAO 
first put the Federal workforce on its high-risk list? Back 
then, almost all the news was bad. We saw an impending 
retirement wave which threatened a debilitating brain drain as 
well as the risk of outstripping the capacity of agencies to 
find skilled applicants to take their place.
    Now there is some good news to report. While the number of 
retirement-eligible employees remains high, we haven't seen the 
mass exodus that was predicted. Indeed, separation rates have 
declined. Further, our recent human capital survey showed that 
over 90 percent of our employees think that their work is 
vitally important, and a similar percentage said they believed 
their work contributes to their agency missions. Hence, the 
importance of the President's Management Agenda and its 
priority in placing the strategic management of human capital 
as first on the list.
    The President directed OPM to take the lead responsibility 
for assessing how well the departments and agencies managed 
their most vital asset--their people. We measure our success by 
the progress agencies make in placing the right people in the 
right jobs and managing them in ways that help achieve mission 
goals.
    OPM, the Office of Management and Budget, and GAO 
collaborated this past year in adopting the ``Human Capital 
Standards for Success'' \2\ to help agencies address their 
human capital management more strategically. These are the 
standards we use to score agency performance each quarter, and 
the scoring process has eliminated agency efforts to better 
manage their workforces. As a result, most agencies recognize 
the need to assess the strategic value of their position and 
the competencies required to perform that function. Managing 
the workforce effectively is recognized as a means to achieving 
mission goals.
---------------------------------------------------------------------------
    \2\ The information referred to submitted by Mr. Blair appears in 
the Appendix on page 109.
---------------------------------------------------------------------------
    To aid the agencies, OPM developed a human capital and 
accountability framework to help agencies better understand 
exactly what we are looking for when we are assessing them. We 
use it as a tool in assessing the agencies as well as making it 
widely available as a self-assessment tool. This shared 
framework has made our discussions more focused and more 
productive.
    While red scores still predominate on the scorecard, the 
scores reflect the need for agencies to operate better. 
Agencies spent their first years concentrating on linking human 
capital practices to mission results. Workforce planning 
strategies are being used to identify and anticipate skills 
gaps, and agency leadership is taking ownership of the 
initiative. Aligning human capital strategies with departmental 
mission goals has been challenging, yet progress has been made.
    While green is the ultimate goal, achieving yellow status 
indicates significant progress. Agencies that have shown 
progress include the Department of Energy and the Department of 
Labor for successfully linking performance expectations for 
managers to agencies' strategic plans and mission objectives. 
Their performance appraisal systems are designed to make 
meaningful distinctions by rewarding high performance. Other 
agencies have also shown improvement in workforce planning, 
identifying competencies for mission-critical occupations, and 
other human capital strategies.
    Just as the GPRA, Government Performance and Results Act, 
directs agencies to track organizational performance, we 
believe the government must adopt compensation practices 
designed to spur and measure individual employee performance. 
Indeed, performance-oriented pay is embraced by the merit 
system principles which call for appropriate incentives and 
recognition for excellence in performance.
    To bolster these efforts, the administration has proposed 
allocating $500 million to the new Human Capital Performance 
Fund to allow agencies to give extra pay raises based on an 
employee's superior performance or possession of skills 
critical to the agency's mission. The Fund provides an 
incentive for agencies to begin making meaningful distinctions 
in and rewarding superior individual performance.
    While progress is needed in developing robust performance 
appraisal systems, the Departments of Energy and Labor show it 
can be done. Further signs of progress can be found in last 
year's Homeland Security Act, which included a number of 
significant governmentwide human capital reforms. Thank you, 
Mr. Chairman and Members of the Subcommittees, for work that 
you performed in obtaining enactment of those very important 
legislative initiatives.
    Included in these reforms were the ability for agencies to 
replace the rule of three with category ranking and hiring 
assessment and for limited direct hire ability for critical and 
shortage occupations. Further, the workforce shaping tools of 
voluntary early retirement and governmentwide buyout authority 
will help agencies address skills and balances.
    The most attention, however, will be paid to the actions of 
the OPM Director and the Department of Homeland Security 
Secretary in designing new pay and personnel systems to bring 
together the employees of the 22 agencies that now make up the 
Department of Homeland Security.
    Your letter of invitation also asked that we address 
specific legislative proposals. First, I am pleased to report 
that OPM supports many of the provisions of the Federal 
Workforce Flexibility Act of 2003, S. 129 and H.R. 1601. We 
recognize that the proposal builds on the Managerial 
Flexibility Act from the last Congress, and we look forward to 
working with you in the Congress on this important legislation.
    We also look forward to working with you to refine the 
proposed Senior Executive Service Reform Act of 2003, noting 
that the basic features of the proposal were included in the 
President's budget for fiscal year 2004.
    Again, thank you for your leadership and the opportunity to 
address these important issues. I am pleased to answer any of 
your questions.
    Senator Voinovich. Thank you very much, Mr. Blair.
    OPM's recent human capital survey of Federal employees 
pointed out something that was rather astonishing to me, and 
that is that only 27 percent of Federal employees feel that 
poor performers are dealt with. As you know, S. 129 and H.R. 
1601, the Federal Workforce Flexibility Act of 2003, includes a 
provision to provide special training to managers to help them 
deal with poor performers. I suspect, however, that legislation 
alone will not solve the problem.
    I would like to know what you have done across the board to 
provide managers with the tools, resources and knowledge to 
effectively handle poor performers.
    Mr. Blair. Well, I think training, as you recognize, is a 
very important component of any performance management system, 
and training in government oftentimes has lagged behind what 
our expectations should be.
    Given that, the Director is very committed and has put 
forth in the scorecard efforts ways of rating and ranking the 
agencies--not ranking, but rating the agencies in terms of what 
they are doing in performance and what they are doing to train 
managers to perform better.
    This is extremely important if we are going to have a 
successful performance management system.
    Senator Voinovich. Well, you heard the testimony from David 
Walker. The administration is talking about going forward, and 
if you have only 27 percent of Federal employees that feel that 
poor performers are being handled properly, how in the world 
can you possibly go to a new system that is going to provide 
pay for performance across the Federal Government?
    Mr. Blair. Well, let's recognize that right now our pay 
systems have very little performance component to it. There is 
very little incentive for agencies or for managers to exercise 
vigorous performance management because we don't back it up 
with real money or real dollars. The creation of the Human 
Capital Performance Fund actually puts real dollars behind what 
our efforts will be and says that we want you to rank your 
employees, we want you to look at individual performance and 
assess it accordingly, and if you are performing in a superior 
manner, we are going to pay you for it. Our systems don't allow 
us to do it right. There is no incentive to do so.
    Senator Voinovich. Well, you heard the testimony from David 
Walker talking about the effort that they made in GAO to get 
ready for pay for performance, and then his comments about the 
posibility of conducting some demonstration projects to test 
this concept in other agencies. And we were just talking about 
the Senior Executive Service. The general opinion is that 
across the board, apart from the SES, there is no 
infrastructure in place to really do pay for performance. And 
what I just heard from you is that if we simply provide this 
additional money, all of a sudden, voila, we are going to have 
a pay-for-performance system because there will be incentive 
for it.
    The President has announced this initiative. I would like 
to know specifically what do you have in place to handle this 
system in the event that it would become a reality.
    Mr. Blair. Well, we have this scorecard process in place in 
which we are assessing agencies on how well they perform 
performance management. It is a key component in an agency's 
effort to get from red to green. We are in the process of doing 
that.
    In addition, the Homeland Security Department last year, in 
order for agencies to raise the total aggregate compensation 
cap, they were asked to--OPM and OMB were asked to develop 
regulations in order to certify the agencies can make those 
meaningful distinctions. So processes are already beginning to 
be in place, but you have to remember that in order to move to 
a system like this, you have to provide the incentive.
    The Human Capital Performance Fund doesn't jettison the 
General Schedule. The General Schedule remains in place. Step 
increases remain in place. And the President has also provided 
2 percent across the board. And so it builds on the present 
General Schedule system.
    However, we strongly believe that we need to put more than 
just words behind our efforts at better performance management, 
and that is why we say let's dedicate some real dollars to it. 
And that is what the Human Capital Performance Fund would do.
    Senator Voinovich. Well, I would like to see the letters 
and recommendations to the departments. I would like to see the 
standards that you have set for whether or not agencies have 
pay-for-performance systems in place and whatever else you have 
done to prepare for this, because this is a major undertaking 
to go forward with it. I have been through it. And unless you 
have had some real significant training for people in that 
process, you are setting it up for failures. I guess the 
suggestion here, and you might carry it back to Director James, 
is that a lot of us believe--and this is in a bipartisan 
basis--that we are not prepared to go forward with this system, 
perhaps even in the Senior Executive Service. We might have to 
just pick out certain areas in the Senior Executive Service 
where we have really validated that they do have a real 
performance-based pay system in place before we would move 
forward with it.
    Mrs. Davis. Thank you, Mr. Chairman. I have to agree with 
you. I almost feel like we are getting the cart before the 
horse. And I may be wrong on that, but I am anxious to see what 
you do have in place. And I have a lot of questions here with 
regard to the $500 million Human Capital Performance Plan, and 
I am going to submit them for the record because I don't have 
time to ask them all. But just for instance, the compensation 
that OPM would allot to the different agencies would depend on 
the strength of the plan that the agency puts forth, which to 
me is contrary to the whole performance-based merit system that 
you are talking about for the individual's work because it 
wouldn't have anything to do with the individual's work. It has 
got to do with the plan, the strength of the plan that the 
agency comes forward with.
    And you heard me ask the question to Mr. Walker about the 
chief human capital officers, and I would be curious if you 
could get back to us on what OPM has done for guidance, if you 
have been involved at all with the guidance, and when you 
expect them to come out.
    Mr. Blair. We will be putting out further guidance on that. 
In addition, the legislation calls for the council to be up and 
running by May 24, I believe, and we are on schedule to meet 
that deadline.
    Mrs. Davis. You are. As far as the SES goes, in our hearing 
last week we heard testimony that they would prefer that--the 
SES would prefer that we not do a one-band pay schedule, but 
they would prefer to see something like a three-band. Is it the 
administration's policy--do you believe that they would be 
looking at reducing the pay of some of the SES with that one--
--
    Mr. Blair. Well, under the proposal as it is written, no 
member of the SES would receive a reduction in pay the first 
year. And we certainly are not about in our proposal stripping 
or taking away current safeguards. We want to make sure that 
there are safeguards in place, and we believe that we can do so 
by regulation to ensure against arbitrary and capricious 
behavior on the part of agency managers.
    But let's remember the context in which this proposal is 
being made. We are talking about pay compression, and we are 
talking about giving significant raises to members of the 
Senior Executive Service. The quid pro quo here is that the 
raises are going to be based on performance and merit, and we 
need to tell it to the American people that, yes, in order to 
justify these raises, we can justify them based upon the good 
performance and that these executives are helping their 
agencies meet their critical mission goals, and we think that 
is very important. It shouldn't be across-the-board pay raises.
    Mrs. Davis. Let me get to an issue that I don't know if you 
can answer or not, but on the monster.com website, there is a 
very interesting section on diversity and inclusion. It 
mentions that in 2001 women earned 76 percent of what men 
earned, according to the Bureau of Labor Statistics. Further, 
it mentions that though the gap has been closing, it is still a 
reality in the American workplace. This has been attributed to 
the fact that most women do not negotiate their compensation, 
though they are better at negotiating for others than they are 
for themselves.
    Does the Federal sector have as abysmal a record as the 
private sector in the pay gap area for women? And if not, has 
this been indicated in the recruiting materials that are 
available to potential hires, not just the equal opportunity 
information that you have to give?
    Mr. Blair. I believe GAO may have done some work on this 
issue back in the late 1980's and early 1990's in looking at 
female-dominated occupations. I can't exactly remember the work 
they did in this area.
    I do know that in the Federal Government we have an 
abundance of what we call internal equity within our system, 
and that means that we look at the job and we pay the job 
according to not who you are but on what you do. And so we can 
provide for the record information on what the pay gap--if it 
exists in the Federal Government, what that would be, and for 
possible reasons for that.
    Mrs. Davis. I would like to see that diversity across the 
board, not just women but diversity totally, because I do hear 
from folks that we just don't have enough in the Federal 
workforce, and I haven't seen any reports on it so I can't 
speak to it.
    Thank you, Mr. Chairman.
    Senator Voinovich. Congressman Davis.
    Mr. Danny Davis. Thank you, Mr. Chairman.
    Mr. Blair, you began your testimony with the good news that 
there had been a decline in separation from what was projected 
2 years ago. Has there been any effort to determine why this 
declination is occurring beyond the fact--I mean, you did 
mention that the economy had been flat and that may have had 
some impact. But has there been any effort to determine other 
factors that may have attributed to this decline?
    Mr. Blair. Well, I think we can look at the events of 
September 11 and people realizing the work that they were doing 
was important, and it contributed to the agency's mission. We 
saw in the human capital survey that overwhelming numbers, 
large numbers of Federal employees believe that the work that 
they did contributed immensely to the work of their agencies.
    So I think that is good news, and projecting retirement 
rates in the future always has an element of chance to it. A 
flat economy means that there aren't the opportunities out 
there. However, the flip side of that is that once the economy 
starts to become robust again, are we going to find ourselves 
facing a huge retirement wave? And one of the things we did 
also find out in our human capital survey is that we don't do a 
good job in government of rewarding good performance. And so 
those are some of the things that we are trying to change in 
government.
    I think things have improved for the better over the last 2 
years. The attention that the House and Senate have paid to 
this issue, the attention that GAO has paid to this issue, the 
President's Management Agenda listing the strategic management 
of human capital as first on the list, I think all put together 
it spells good fortune for us.
    That said, we have a long ways to go, and we are working 
hard making sure that we have further improvements.
    Mr. Danny Davis. Mr. Walker in his testimony stated that 
OPM plays a central role in helping agencies tackle the broad 
range of human capital challenges. Are the agencies coming to 
OPM seeking guidance and really asking for your assistance, 
help, and direction?
    Mr. Blair. We are going out there and giving it. We 
recently restructured at the Office of Personnel Management, 
and effective March 1, we have an OPM which is structured with 
the intent to more effectively deliver our goods and services 
to our customers. And we view chief among our customers as the 
agencies and departments that we serve.
    We have a new division for Human Capital Leadership and 
Merit System Accountability which is the driver of the 
President's scorecard. At the same time, they are also the ones 
out advising agencies who are seeking help on better ways to 
effectively manage their human capital.
    Mr. Danny Davis. So you are saying you are going out to 
them more than they are coming to you?
    Mr. Blair. We are going out to them and they are coming to 
us. As a matter of fact, we have had requests in over the past 
year to the Director from different agencies on specific HR 
issues, and we have sent out strike forces to the agencies to 
help them address those in terms of hiring or in terms of 
performance management. And so it is a two-way street. We see 
the communications as improving, and that is what we are there 
for, is to help them improve, to better improve their 
performance.
    Mr. Danny Davis. Does OPM have its own performance 
management system in place?
    Mr. Blair. Yes, we do. We have a performance management 
system in which we evaluate our executives. In addition, I am 
the second-level review on a number of employees' evaluations, 
and so employees are given their expectations at the beginning 
of the year; mid-year, managers get back with them to tell how 
they are doing. Keep in mind, however, that managers and 
supervisors and front-line employees are constantly in 
communication, and so if there is a particular problem or a 
particular success, that may be followed up in writing. In 
addition, at the end of the year, evaluations are given at that 
time.
    Mr. Danny Davis. Let me just ask you, the administration 
indicated that it wanted to contract out 850,000 Federal 
employee jobs and diminish collective bargaining in some 
instances.
    Do you see this impacting one way or the other the ability 
to recruit the human capital that we need?
    Mr. Blair. Well, I think to perform effective outsourcing, 
you are going to need to have in place good contract managers. 
If you are going to be involved in labor negotiations and labor 
relations, you need to have people who are skilled in labor-
management, skilled in backgrounds associated with labor-
management relations.
    We are open for employment at the Federal Government. As 
far as competitive sourcing is concerned, those are issues that 
are best addressed by my colleagues at the Office of Management 
and Budget. However, I know that is being done pursuant to the 
FAIR Act, which asks that agencies identify those jobs which 
are not inherently governmental. And so this is the atmosphere 
in which we are operating, and I think that we are doing a good 
job. We are doing a good job of making improvements, and we 
want to keep on that track.
    Mr. Danny Davis. Thank you very much.
    Senator Voinovich. Delegate Norton.
    Ms. Norton. Thank you very much, Mr. Chairman.
    Mr. Blair, I need to know where you come down on the GAO 
testimony that we have just heard. You heard Mr. Walker--and I 
am going to look directly now at his testimony and report--that 
he apparently agrees with the administration, and I am quoting 
from him, ``We must move beyond this outdated, one-size-fits-
all approach to paying Federal employees,'' etc.
    Then he says, ``However, agencies should be required to 
demonstrate to OPM's satisfaction that they have modern, 
effective, credible, and validated performance management 
systems before being able to adopt broader pay-for-performance 
systems for non-SES personnel.''
    Now, do you agree that should also be the case for SES 
personnel as he testified?
    Mr. Blair. Well, we have performance management to a better 
degree in the SES, but what the President proposes to do is to 
say that future pay raises for the SES will be performance-
based. Remember, the Senior Executive Service is comprised of 
approximately 7,000 individuals in a workforce of 1.8 million 
people. It gives us a better laboratory, if you want to use a 
better word, so to speak, in which we can really implement a 
pay-for-performance system.
    Ms. Norton. But you agree there should be a validated 
system of accountability before pay for performance?
    Mr. Blair. I am not sure what we mean by ``validated.'' Is 
that certified or----
    Ms. Norton. I asked him what ``validated'' meant. Were you 
here when I asked him what ``certified'' meant? And he is going 
to leave it to you, if you listened to him, to indicate what 
``certified'' is. So if you don't know what it means, that 
really makes me wonder whether or not we are going to be----
    Mr. Blair. Well, that is why I wasn't using those terms. 
Let me just----
    Ms. Norton. What terms would you use, Mr. Blair?
    Mr. Blair. Well, I would say that we can certainly develop 
within a regulatory scheme a performance management system 
which can effectively guide agencies in the way that they 
evaluate and compensate their Senior Executive Service.
    Ms. Norton. But you are using this system as a kind of 
demonstration project for the entire Federal workforce. You are 
seeing if it works here, and then you are going to take as much 
of it as you can and apply it to the Federal Civil Service 
System if you can.
    Mr. Blair. Well, I would almost say--I would be stronger 
than that in saying that if we can't effectively do it for our 
senior executives, then it doesn't bode well for the rest of 
the workforce in applying performance management principles.
    Ms. Norton. So it is a test case, it is your pilot project.
    Mr. Blair. It is a foundation.
    Ms. Norton. Given the state of the Federal workforce today, 
my colleague just indicated we had to fight--the Chairman has 
talked about pay for parity, had to fight to get it in the last 
budget, the retirements, the difficulties with recruitment. If 
you look at the Civil Service Reform Act of 2003, in order of 
priority which do you think should come first: Increasing the 
pay gap, dealing with the pay range, or pay for performance?
    Mr. Blair. I kind of feel like you are asking which of our 
children is our most favorite. It is----
    Ms. Norton. In other words, you regard them as of equal 
importance to do----
    Mr. Blair. I think that they are all equal at this point. 
We want to be able to work with the Committees in both the 
House and the Senate to see that we can work towards these 
reforms. I am not prepared at this point to identify a priority 
because things may change in the next few months. But I think 
that it shows--the introduction of this legislation at the 
hearing today and hopefully continued progress on this front 
shows Congress' continued commitment to improving the way that 
we effectively manage our workforce.
    Ms. Norton. Well, one of the things you have to do is put 
yourself in the place of the workforce you are talking about, 
and if you are talking about taking the pay cap off, before you 
even talk about that, you are talking about giving increased 
pay to only a relatively small number of people. One might want 
to consider the effects on the workforce itself, not simply 
what----
    Mr. Blair. Well, let's remember the context in which that 
is being proposed though: That executive pay has been linked to 
congressional pay over the years, and when Congress has denied 
itself a pay raise, it has effectively capped the top rates for 
the SES. The result has been over the years that the six levels 
have been compressed, and in a number of the localities around 
the country many levels are being paid at the same rate despite 
varying degrees of difficulty and responsibility.
    That is the reason for the SES pay proposal, is to more 
effectively manage the SES through the use of pay, and by 
making those distinctions.
    Ms. Norton. I can understand that, and, of course, that is 
a real problem that we have to deal with, and I couldn't agree 
with you more.
    I am going to ask you if you would write to the Chairman, 
considering your answer to me, on a certified performance 
management system, what the OPM regards as certification so we 
can be clearer on validation and certification.
    Mr. Blair. Certainly.
    Ms. Norton. Finally, let me just say, Madam Chairman, I am 
on the Select Committee on Homeland Security, and I see you 
have at page 13 of your testimony, I think quite appropriately, 
a discussion of what you are having to go through to design a 
new pay and personnel system, as you say, to bring together the 
employees of the 22 agencies that now make up the Department of 
Homeland Security. I do not envy you.
    Let me ask you, in light of that, wouldn't you at least 
recommend that you put off dealing with SES pay on top of all 
the pay problems you are going to have to deal with in bringing 
22 agencies together. Do you think all of this should be taken 
on at one time plus pay for performance in this new agency?
    Mr. Blair. I think it is incredibly important that we take 
on the two proposals that I mentioned, and we will meet all our 
statutory obligations required under the Homeland Security Act.
    We can't allow other pressing issues to remain an excuse 
for the status quo, and the status quo is that we, in the past 
year, have awarded over $5 billion in an across-the-board pay 
adjustment of which performance was not a component at all. I 
think that is inexcusable, and I don't find a way to justify 
it. Neither does the administration. And so that is why we are 
proposing to move aggressively in incorporating pay-for-
performance proposals across the board. We would like to do it 
for the SES, and we would like to do it by virtue of enactment 
of the Human Capital Performance Fund.
    At the same time, we are moving aggressively forward in 
meeting our responsibilities in homeland security. As I said, 
as we meet today our design team is meeting at OPM in hammering 
out these very important issues.
    Ms. Norton. Thank you, Madam Chairman.
    Mr. Blair. Thank you.
    Mrs. Davis. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Madam Chairman.
    Just to follow up on this issue of to what extent the 
Executive Branch is prepared to move forward with pay for 
performance in terms of performance appraisal and evaluation 
systems, you single out in your testimony two departments--the 
Department of Energy and Department of Labor. Getting back to 
Congresswoman Norton's question about validation, are those two 
performance systems that you have evaluated them and you 
determined that they meet whatever criteria you set forth? Is 
that right?
    Mr. Blair. We have looked at the Department of Labor, and 
they have done a good job at better linking performance 
expectations for their managers to the strategic plans. This is 
really a follow-on to the efforts that were first identified in 
the Government Performance and Results Act in which we asked 
agencies to identify their mission goals and to evaluate how 
well they are doing it.
    Really, the next step in this is to have that cascade down 
through an agency and making agencies link their senior 
executives and have them link their goals to the overall agency 
mission and strategies, and from there to carry that down to 
the front-line agencies as well.
    Mr. Van Hollen. Right.
    Mr. Blair. And to evaluate that, and that is what we would 
like to do. That is our intent, and we see some agencies making 
progress in that area, specifically the Department of Labor and 
the Department of Energy.
    Mr. Van Hollen. OK. But as I understand it, you singled 
them out really for that first part then, linking their agency 
mission with different personnel decisions.
    Mr. Blair. Exactly.
    Mr. Van Hollen. Not the next step, which is the individual 
performance pay appraisals. Is that right?
    Mr. Blair. They appear to have done a good job of linking 
their senior executives, but the front-line managers, they are 
still in the process of doing that.
    But remember that under the current system we don't have 
incentives for agencies to do that, and we talked earlier about 
are we putting the cart before the horse. Well, you need to put 
the carrot before the horse in order to get the horse to move, 
and that is what we are trying to do with the Human Capital 
Performance Fund.
    Right now, if an agency doesn't have an incentive, if there 
is no incentive existing to have a robust performance 
management system, then why will agencies do it other than 
being told that they have to do it? One of the best ways of 
incentivizing organizations like this is to put real money with 
real results and real actions behind it, and that is what we 
are trying to do. Again, we didn't jettison the current pay 
structure for Federal employees. The General Schedule remains 
in place. Step increases remain in place. Given that, however, 
we are saying if you possess skills of immense value to your 
agency, if you perform admirably at your job in a superior 
fashion, the current structure of classification doesn't allow 
you to move from a GS-14 to a GS-15 because what you are doing 
is still at the skills level of a GS-14, but you are doing it 
in a very exemplary way, why don't we reward you? And our 
current system doesn't allow us that flexibility. The Human 
Capital Performance Fund would.
    Mr. Van Hollen. Let me just follow up, Mr. Chairman, then I 
will finish. It seems to me we would want to have at least in 
place the performance criteria for everyone to look at, to 
become comfortable with before you take the next step, which is 
to make the linkage between the pay, and I think you said that 
it is a terrible thing we haven't moved in this direction, but 
it seems to me the administration has a lot of flexibility and 
leeway to do a lot of this on its own without passing 
legislation. If you wouldn't mind, if the Chairman wouldn't 
mind requesting, I would be very interested in you providing 
the Committee information as to what performance criteria the 
Department of Labor and the Department of Energy have in place 
that you think provide a model, as I understand it, for the 
rest of the Federal agencies.
    Mr. Blair. We will be happy to provide that.
    Mr. Van Hollen. I would be very interested in seeing that, 
if you wouldn't mind, Mr. Chairman. That is all. Thank you.
    Mr. Blair. Thank you.
    Senator Voinovich. Mr. Blair, you, I think, heard from all 
of us that there is a little skepticism about going forward 
with pay for performance, and I think that it would be wise for 
you to carry that message back. In fact, I am going to be 
sending a letter off or calling Kay and talking to her about 
this. Unless there is some major effort made to identify next 
steps and a more complete plan, this is not going to happen 
this year. I hope that came across to you, and I know that you 
have got this goal in mind, but we don't think agencies are 
ready. And I think at this stage of the game it would be good 
to drop back and put together what the plan is. Even for the 
Senior Executive Service, there is some issue about whether or 
not they have a verifiable system in place. What are there, 
8,000 or 9,000 members in the Senior Executive Service?
    Mr. Blair. Roughly 7,000.
    Senator Voinovich. Yes, that they in some instances in some 
of those agencies there are not real pay-for-performance 
systems in place. So it is a question of identifying agencies 
that are ready. Maybe we need to conduct some demonstration 
projects on this. If you feel that the Department of Labor and 
some others have a good system in place and they are ready to 
do this, perhaps those could be appropriate demonstration 
projects. That is just a little humble recommendation that you 
ought to fall back and regroup the troops on this and maybe 
come back with a different proposal.
    Mr. Blair. Well, I want to emphasize that our concern is 
that we don't maintain the status quo, that the status quo is 
unacceptable in terms of awarding $5 billion in pay raises, 
none of which are performance-based, or that you have your top 
executives all making the same amount of money and you can't 
use your most strategic tool, which is pay, in order to 
recognize differentiations in performance levels. I think we 
are all on the same scorecard--not scorecard--song sheet there, 
and we will work with you. But I can't overemphasize that we 
think that more progress needs to be made on the human capital 
front. I know that you agree with us on that, and that we want 
to begin taking the next steps of incorporating performance as 
a key element in the way we pay our employees.
    Senator Voinovich. Well, one of the provisions of the bills 
that we have creates broadbanding of the Senior Executive 
Service which would provide a lot more flexibility and enhance 
the whole concept of pay for performance. But I think the worst 
thing that could happen is to get started with this thing, and 
then have it become a disaster to which everybody points and 
says, ``I told you so, it wouldn't work.'' For those of us that 
have been through the mill--and I have on a couple of occasions 
as mayor and governor--this is something you really have to 
spend a lot of time on to do it right.
    Thank you very much for coming here today.
    Mr. Blair. Well, thank you, sir.
    Mrs. Davis. Mr. Chairman.
    Senator Voinovich. Yes, I am sorry.
    Mrs. Davis. I would just like to make a comment. Being a 
horsewoman myself, if you give that horse the carrot and you 
don't hook the cart up properly, you have a problem. 
[Laughter.]
    Senator Voinovich. OK. Thank you very much.
    Mr. Blair. Thank you very much.
    Senator Voinovich. Our third panel of witnesses is composed 
of four individuals who represent the interests of Federal 
employees at a variety of levels. During the past few years, I 
have worked closely with these and other Federal employee 
groups to ensure that their voices are heard in the debate over 
personnel reform. During my 18 years as Mayor of Cleveland and 
Governor of Ohio, I developed a firm belief that in order to 
have reform truly take root in any organization, the front-line 
employees must be involved in the decisionmaking process. This 
kind of employee empowerment is essential at the Federal level 
as well.
    Our witnesses are Bobby Harnage, National President of the 
American Federation of Government Employees; Ms. Colleen 
Kelley, President, National Treasury Employees Union; Ms. Carol 
Bonosaro, President of the Senior Executives Association; and 
Ms. Karen Heiser, Treasurer, Chapter 88, of the Federal 
Managers Association.
    We are pleased to have all of you here today. I think you 
have all been here to hear the other witnesses' testimony, and 
my feeling is that, in terms of pay for performance, we have 
really given it a whole lot of attention. If in your testimony 
you want to mention it, that's fine, but I sure would like to 
hear what you think about these three pieces of legislation 
that we have introduced, because we have pretty much spent all 
of our time on pay for performance.
    I will now call on Bobby Harnage. Bobby, we are glad to 
have you here with us today.

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

    Mr. Harnage. Thank you. It is my pleasure. I appreciate the 
invitation. On behalf of the more than 600,000 Federal 
employees represented by AFGE, I thank you for the opportunity 
to testify today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Harnage appears in the Appendix 
on page 113.
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    I will focus my remarks on two items. The written 
testimony, as it goes quite in detail on your question, so I 
will deal with two items, the provisions of the bills providing 
various expansions and managerial authorities, and the larger 
issue of how to resolve the government human capital crisis.
    Federal employees will view these legislative proposals 
from the vantage point of a workforce under siege. The 
administration is pursuing an aggressive policy of mandatory 
privatization quotas aimed at up to 850,000 jobs. It is not 
only ignored but constantly criticized for principles of 
comparability that is supposed to go in Federal pay. It has 
tried to define the traditional civilian/military pay parity 
three times at the same time that it has reintroduced big 
bonuses for political appointees and proposed letting 
management spend 20 percent of the meager amount set aside for 
salary adjustments any way it wants.
    The administration has stripped various Federal workers of 
their collective bargaining rights, and insisted on taking away 
five chapters of Title 5 from the law that covers Homeland 
Security. Finally, they have questioned the patriotism, 
loyalty, and love of country of the members of my union. Will 
the authority to pay slightly bigger recruitment and retention 
bonuses to a few lucky employees and embark on a huge 
demonstration project undo these unmistakable messages of 
hostility and encourage new people to come build a career at 
Federal agencies? Not likely.
    Allowing larger bonuses and demos and streamlined critical 
pay is not objectionable unless one considers the proposals in 
the context of either solving the self-inflicted human capital 
crisis or the more pressing needs of Federal employees and 
agencies. We believe that the financial incentives for 
recruitment and retention in the legislation are at best 
incomplete and at worst misplaced. Salaries are too low, not 
just for prospective employees or for employees who threaten to 
leave if they do not get a bonus. Salaries are too low for all 
Federal employees.
    There is a law on the books that will solve the pay 
problem. It merely has to be enforced and funded. FEPCA, passed 
just over a decade ago, introduced a very long list of pay 
flexibilities--and I list those in my testimony--in spite of 
the insistence of today's would-be reformers that it is a rigid 
or inflexible system. Indeed, FEPCA introduced the existing 
recruitment and retention bonus authority that has almost never 
been used because it has never been funded. The legislation 
also takes the limits off the number of workers covered by 
demos. AFGE strongly opposed this measure. It effectively 
allows entire agencies to be under alternative to Title 5. It 
has taken away congressional right to approve such changes. It 
also undermines the very idea of demos, since without limits on 
the number of workers they cover, there will not be an adequate 
baseline against which to compare the outcome of the demos.
    We support the provisions of the legislation that provide 
training for managers and other employees. We applaud the 
recognition that failure to deal with poor performers is not a 
matter of any absence of authority, but rather a problem of 
either reluctance or poor training. Further, it recognizes 
dealing with poor performers as a management problem and a 
discipline problem, not a pay system problem.
    It is well known that DOD is shopping legislation that will 
allow it to waiver parts of Title 5 and impose a pay-for-
performance system on its workforce. They are eager to get 
these authorities before the outcome of the grand experiment at 
DHS is done. Federal employees recognize these efforts as 
hostile to their interest and understand that DOD pay-for-
performance schemes will require substantial financial 
sacrifice for them and their families. The government human 
capital crisis is not like the weather. It did not just happen. 
It was a result of misguided policies, and a reversal of those 
policies is what is necessary to solve it.
    To that end, AFGE recommends the following: Require full 
funding and implementation of FEPCA's comparability provisions 
as a trigger for the exercise of the expanded bonus authority 
in the proposed legislation; enact legislation that would put 
an end to privatization quotas that would guarantee Federal 
employees the chance to compete in defense of their jobs, and 
that would prohibit OMB's controversial rewrite of A-76 to go 
forward; pass legislation already introduced in the House and 
the Senate to improve the funding formula for Federal 
employees' health insurance; resist the temptation to jump onto 
anti-employee pay-for-performance bandwagon whether for DOD, 
DHS, or any other Federal agencies or department. Pay for 
performance is a recipe for mismanagement, discord and 
discrimination, and will undermine the merit system principles.
    This concludes my testimony, and I would be glad to answer 
any questions you might have.
    Senator Voinovich. Thank you. Ms. Kelley.

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

    Ms. Kelley. Thank you, Chairman Voinovich, Chairwoman Davis 
and Members. On behalf of the 150,000 Federal employees 
represented by NTEU, I appreciate the opportunity to appear 
before you today.
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    \1\ The prepared statement of Ms. Kelley appears in the Appendix on 
page 144.
---------------------------------------------------------------------------
    The message often received by today's workforce is that 
they are not valued. Many believe their pay is inadequate, but 
they do not see a fair pay setting process on the horizon. 
Based on experience, they believe their agencies will not 
receive sufficient funding for training. They also know that on 
any day their jobs may be contracted out from under them. It is 
no wonder the government has a hard time recruiting and 
retaining employees.
    Although the fiscal year 2003 Federal pay raise was 
recently settled, it came only after a very long and public 
fight that again sent the wrong message to the Federal 
workforce. Today is April 8, 2003, and the full 4.1 percent pay 
raise that employees should have received in January has still 
not arrived in Federal employee paychecks. There is no question 
again as to what message this sends.
    In its 2004 budget, the administration continues to show a 
lack of concern for what failure to properly compensate public 
employees means for the future of public service. Ignoring 
bipartisan calls for pay parity, the administration recommended 
a 2 percent Federal pay raise. The message again that this 
sends to civilian employees, even to those on the front lines 
of securing our Nation's borders, is that their work is not as 
important, not as valued, and not as vital as that of their 
military counterparts.
    Instead of pay parity, the administration proposes a $500 
million human capital performance fund. Funding for this 
gimmick comes at the expense of the 2004 Federal pay raise, and 
would give managers unfettered discretion to give incentive pay 
to a fraction of the Federal workforce. Benefits, too, are key 
to the government's ability to attract and retain the 
workforce.
    The Federal health program is in crisis. This year's 11 
percent premium increase marked the fifth year in a row of 
steep rate increases. Many employees have been forced to give 
up their health insurance and those considering employment with 
the Federal Government are turned off. Private sector employees 
continue to pay on average less for their health insurance in 
terms of percent of premium and in terms of cost.
    Employee training is another critical piece of the pie. 
Unrealistic funding levels have restricted the ability of 
agencies to adequately train their employees to perform their 
missions effectively. Without proper training everyone loses. 
Customers do not receive the best service and employees do not 
find their work rewarding or challenging.
    The administration's march to contract out 850,000 Federal 
jobs through arbitrary quotas is another disincentive to 
Federal employment. One-size-fits-all quotas are being forced 
down agencies' throats without thought to their impact on the 
government's ability to recruit and retain employees. Employees 
have told me that the message their agencies convey is this: We 
may hire you; we may train you; we may even promote you; but 
when it comes time to meet our contracting out quotas, we may 
eliminate your job in order to meet our targets. These blind 
quotas erode the morale of the Federal workforce and disrupt 
agency operations.
    With regard to S. 129, the Federal Workforce Flexibility 
Act of 2003, NTEU is not opposed to the use of demonstration 
projects. We believe, however, that the collective bargaining 
process must be used to ensure that both management and 
employees understand the nature of the project and are 
committed to its success. The legislation also proposes the 
expanded use of bonuses. Expanding the availability of these 
incentives makes little sense without the resources to 
accomplish the goal, and, NTEU has concern about expanding 
critical pay authority. NTEU believes that properly 
compensating the Federal workforce would make further critical 
pay authority unnecessary.
    We welcome provisions drawing attention to the government's 
need to properly train its employees. Again, however, the bill 
does not address the resource problems that have prevented 
agencies from providing training to their employees. Proposals 
to enhance annual leave for certain new Federal employees need 
further review. If Congress believes that annual leave limits 
are a barrier to hiring, then the system should be reformed for 
all employees.
    In summary, NTEU thinks the messages we must send employees 
are these. We want you to come to work for the Federal 
Government. We want you to be successful. We want to 
appropriately compensate you for what you do. We value what you 
do every day for the American public, and we want to treat you 
with the dignity and the respect that you deserve. I, and all 
of NTEU look forward to working with all of you in the House 
and the Senate toward this end.
    I thank you again for the opportunity to appear today, and 
would be glad to answer any questions you might have.
    Senator Voinovich. Thank you. Ms. Bonosaro.

TESTIMONY OF CAROL A. BONOSARO,\1\ PRESIDENT, SENIOR EXECUTIVES 
                          ASSOCIATION

    Ms. Bonosaro. The Senior Executives Association appreciates 
both the invitation to testify and the Subcommittee's interest 
in and concern for Federal human capital management. We are 
especially grateful to Senator Voinovich and Representative Tom 
Davis for their legislative efforts to address civil service 
issues, both in this and the last session.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Bonosaro with attachments appears 
in the Appendix on page 155.
---------------------------------------------------------------------------
    We welcome the proposal contained in the President's budget 
with regard to SES compensation because this is the first time 
in 10 years that an administration has addressed this issue. 
That proposal and the Senators' bill can alleviate pay 
compression which has reached the point, as you know, where 70 
percent of all career executives are now paid the same. We look 
forward to resolving this issue indeed after many years of 
effort.
    What we seek, however, with regard to executive pay, is 
stability, so we need not keep returning to this issue as we 
have over 20 years, and due process rights for career 
executives to ensure that the merit system is protected. Thus 
we recommend some tweaking, if you will, to ensure that the 
administration's and the Senators' proposals meet these 
objections. I think particularly because of the view of the SES 
as a proving ground, it is especially important that we 
maximize the possibility, the likelihood of success of pay for 
performance, and minimize the possibility of, for example, 
politicizing the career executive corps. The safeguards must be 
in the statute, not just in regulations.
    Specifically we recommend that you eliminate the cap on 
locality pay so that executives can receive the full locality 
pay adjustments and we prevent further pay compression based 
upon the new locality cap; that you reform the Homeland 
Security Act language which calls for certified performance 
systems so that only OPM and not OMB promulgate the 
implementing regulations; that once certified, certifications 
cannot be removed for a 4-year period; that if an agency loses 
its certification, pay that was set while the system was 
certified will not be reduced; and the certified system cannot 
force a distribution of performance ratings. I think that is 
especially important. It is only fair that each individual 
executive be evaluated on his or her merits and 
accomplishments, and not on the basis of some normal curve.
    We recommend that you include all bonuses and awards for 
executives in the high-3 computation for retirement annuities, 
thus creating a true pay-for-performance system; provide that 
SES and all equivalent executives automatically receive the 
same annual increase to base pay that the General Schedule 
receives each year regardless of the cap. Such annual increases 
should not be at the sole discretion of supervisors. Raise the 
base pay cap each year by the amount of the annual 
comparability increase, irrespective of what Congress does for 
its own pay or that of the Executive Schedule; replace the wide 
proposed SES pay range with three overlapping pay bands; the 
lowest base pay within band one would be the current minimum 
for ES-1, an amount sufficient to give a reasonable pay raise 
to a GS-15/10 promoted into the SES. And executives would 
receive promotions to pay bands two and three based on 
demonstrated capabilities, attained executive experience and 
level of responsibility. Pay band three would be set so that 
its highest base salary is Executive Schedule 3.
    Finally, we would like you to require the following 
safeguards on SES pay: Establish a minimum pay increase of at 
least 5 percent for those promoted from the General Schedule 
into the SES--that would then become the executive salary 
floor; provide executives denied a salary increase for 
performance reasons the opportunity to appeal to their agency 
Performance Review Board under the same process used currently 
for appealing performance appraisals--the boards would be 
required to have a majority of career members; limit any 
reduction in pay within a pay band only to reasons related to 
conduct or performance, and to an amount not more than 3 
percent of base pay in any calendar year; provide executives 
the opportunity to appeal pay reductions based upon performance 
to the agency's Performance Review Board, and those based upon 
conduct to the MSPB; finally, provide an executive who is 
demoted to a lower pay band the right to an MSPB appeal.
    Even with these recommendations, however, we have one 
overriding concern. That is, if agencies have total flexibility 
to set base pay, pay rates may inevitably be influenced by 
budgetary considerations, namely insufficient funds for 
appropriate raises. FAA executives have already experienced 
that situation. In tight budget times their performance based 
system has not been funded and awards not paid, while annual 
increases in awards remain funded for lower-level employees. 
What will you do to ensure that result is not repeated across 
the entire Senior Executive Service corps?
    In closing, we hope to work with the Subcommittees and the 
administration to implement these recommendations. We surveyed 
our members about the administration proposal and provided the 
Subcommittee with a compilation of those comments which I will 
appreciate being placed in the record along with my full 
statement.\1\ Those observations from the government's highest 
ranking career employees express substantial concerns with 
regard to the administration's proposal, concerns which we 
think can be addressed with the reasonable changes we 
recommend.
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    \1\ The survey referred to appears as Attachment II of Ms. 
Bonosaro's prepared statement in the Appendix on page 172.
---------------------------------------------------------------------------
    And finally, we also hope to work with the Subcommittees 
for full consideration of our other proposals which are 
detailed in my full testimony. Thank you.
    Senator Voinovich. Thank you very much for being here. Ms. 
Heiser.

 TESTIMONY OF KAREN HEISER,\2\ TREASURER, CHAPTER 88, FEDERAL 
                      MANAGERS ASSOCIATION

    Ms. Heiser. Thank you, sir. Chairman Voinovich, Chairwoman 
Davis, Members of the Subcommittees, my name is Karen Heiser. 
On behalf of the 200,000 managers and supervisors in the 
Federal Government whose interests are represented by the 
Federal Mangers Association, thank you for inviting us to 
present our views at this very important joint hearing 
regarding the human capital challenges facing the Federal 
Government.
---------------------------------------------------------------------------
    \2\ The prepared statement of Ms. Heiser appears in the Appendix on 
page 190.
---------------------------------------------------------------------------
    I am currently the Organizational Development Manager at 
Watervliet Arsenal in New York, the U.S. Department of the 
Army. My statements are my own in my capacity as a member of 
FMA, and do not represent the official views of the Department 
of Defense or the Army.
    The inability to make public sector more attractive has 
made it increasingly hard for the Federal Government to recruit 
and retain the high-caliber workers it needs to sustain a 
strong civil service. One such deterrent is the scrutiny of 
Federal functions and the lack thereof for contractor work. 
While previous administrations have taken credit for creating 
the smallest Federal Government, the illusive nature of the 
government's less visible and less accountable shadow workforce 
of contractors makes it nearly impossible for policy makers to 
know if the current course of downsizing and contracting out is 
in the Nation's best interest.
    The General Accounting Office listed strategic human 
capital management across government to its list of ``high-
risk'' areas over 2 years ago. In a recent update GAO noted 
``Importantly, although strategic human capital management 
remains high risk governmentwide, Federal employees are not the 
problem.''
    As part of legislation creating the Department of Homeland 
Security, several positive reforms were enacted governmentwide 
that will help agency recruitment and retention efforts while 
highlighting the critical nature of human capital planning. On 
behalf of FMA, I would like to thank you, Chairman Voinovich in 
particular, for your hard work on the inclusion of these 
important provisions.
    Two specific notes of concern to FMA. It is worth noting 
that the provision to provide Federal employees compensatory 
time off for official travel was left out of the final bill. 
OPM regulations do not permit comp time for credit hours unless 
travel occurs during working hours. Given that most meetings 
are scheduled during work hours, and travel to and from those 
meetings often takes place outside working hours, FMA asks for 
reconsideration of this provision.
    Another issue of particular concern to FMA is the current 
statutory cap on overtime pay for managers. Between 1994 and 
2001 the nonpostal Executive Branch civilian workforce was 
reduced by more than 452,000 positions. Much of the reduction 
was arbitrary and not related to workload. One result of this 
is overtime. The current cap is outdated and serves as a 
disincentive to potential and current managers, as those above 
GS-12, Step 6 are paid less for overtime than for regular work 
hours, and managers and supervisors often earn less on overtime 
than the employees they are supervising.
    Mr. Chairman and Madam Chairman, you have introduced 
legislation that would allow managers to use a variety of 
compensation tools such as recruitment, relocation and 
retention bonuses, and give agencies streamlined critical pay 
authority to fill key positions. These are sensible reforms 
that would begin to address the workforce problems that will 
only worsen with the forthcoming retirement wave. As an 
expansion of the direct hiring authority granted to agencies, 
FMA recommends that full-time equivalent ceilings be made more 
flexible for agencies to fill highly-needed positions without 
the burden of arbitrary FTE caps.
    Student-loan repayment has long been identified as a 
recruitment and retention bonus that would help attract and 
retain high performing employees. FMA would like to see this 
benefit also extended to those seeking graduate degrees. The 
``GOFEDS'' legislation would increase the student loan 
forgiveness benefit by relieving Federal employees of the 
obligation to pay income tax on the money provided by their 
agency. Thank you again, Mr. Chairman, for your leadership in 
introducing this bill.
    In terms of managing this new approach to human capital, 
whatever it looks like in its finished version, the numbers and 
roles of Federal human resources professionals needs to be 
assessed. Additional training may be necessary to prepare these 
HR experts to chart future human resources needs and steer 
personnel and funding accordingly. Often times, however, 
agencies do not have adequate funding for such incentives, even 
those that currently exist. Annual appropriations should 
include additional line items for recruitment and training. The 
public sector should ``walk the talk'' in appreciating that the 
most valuable organizational asset is the workforce itself, and 
in recognizing that ``you get what you pay for.''
    Agencies must also be prepared to invest in their employees 
by offering skill training throughout their career. FMA has 
long recognized the need to prepare career-minded Federal 
employees for the demand of the 21st Century workplace through 
its establishment of the Federal Management Institute, FMA's 
educational arm which sponsors valuable professional 
development seminars and workshops. FMA recently teamed with 
Management Concepts to offer the Federal Managers Practicum, a 
professional certificate program designed for Federal managers, 
and as the official development program for FMA, the Practicum 
helps managers develop critical skills and enhance their 
capabilities.
    History has shown that training dollars have been a low 
priority in many agency budgets. In fact, in the rare event 
that training is available, those monies are often usurped to 
pay for other agency priorities. Toward the end of reversing 
this ideology, FMA supports including a separate line item for 
training and agency budgets, to allow Congress to better 
identify the allocation of annual training funds.
    The Federal Government must once and for all take the issue 
of continuous learning seriously. There needs to be a 
developmental component for every position to facilitate 
performance management and effective succession planning. For 
agencies to perform at optimum levels, employees must have 
clearly defined performance standards. These standards should 
be directly linked to the agency's mission, customer service 
goals, and its annual performance plan and/or strategic plan. 
FMA supports implementing a more comprehensive governmentwide 
appraisal system, with a pay-for-performance component. Any 
system adopted must be rooted in long-held merit principles and 
should not be used to undercut fair and appropriate annual 
increases for Federal employees.
    In conclusion, ``do more with less'' when less has been 
based on numbers and not efficiency has eroded the remaining 
employees' morale and dedication, and the reputation of the 
Federal Government as an employer. And again, simply put, there 
are fundamental services that should be deemed core to the 
government. While calls are heard daily to further examine the 
performance of employees of the Federal Government, there 
continues to be silence in response to suggestions that the 
same level of oversight be focused on its contractors.
    Government leaders must now take the side of the Federal 
employee.
    Senator Voinovich. Your time is up, Ms. Heiser.
    Ms. Heiser. Thank you, sir. I will be available for 
questions if you wish.
    Senator Voinovich. Thank you.
    Have we made any progress? Most of you talked about FEPCA 
and outsourcing. The administration has announced its goal of 
850,000 jobs for public-private competition, and I suspect that 
a figure was arrived at by taking the percentages that were 
originally announced. I was under the impression that there had 
been some backing off from those percentages, and that the 
secretaries of the departments were basically told that they 
ought to shape their workforce without first looking to 
competition.
    Health insurance is another issue that we have talked 
about. From my observations of the private sector, the cost for 
employees has gone up a lot more because the Nation's whole 
health insurance system is out of control. That is a whole 
other subject, that the system is not working. I know in my 
State, when we went to HMOs and to another system, we reduced 
the employee contribution from 12 to 10, and now the governor's 
talking about increasing it to 20. So that is going on around 
the country.
    The impression that I get is some of the things in this 
legislation you think are good, but you are kind of reluctant 
to be supportive of some of it because of what you perceive the 
administration's attitude is toward Federal employees. Is that 
it in a nutshell? Does anybody want to comment on that?
    Ms. Kelley. I thought it interesting, sir, that Mr. Blair--
--
    Senator Voinovich. What things do you think that they could 
do rapidly to--besides having honest to goodness dialogue with 
you on the new Homeland Security Department--help create an 
environment where you might be more supportive of some of this 
legislation.
    Ms. Kelley. Well, that would be a good start, and we would 
welcome the conversation on Homeland Security. But in addition 
to that, fully funding pay raises, proposing an appropriate pay 
raise for civilian employees. Just right out of the box that 
would send a very different message than what has been received 
recently.
    The issue around the human resource performance fund and 
regardless of what they say, that money is money that can and 
should have been part of the civilian pay raise that was 
proposed for January 2004, and the idea that for a change, 
funding is being provided for a flexibility like this, because 
that of course is usually the issue, the flexibilities are 
provided but no funding. So this time the funding is provided 
at the expense of the civilian workforce and with no criteria 
or rules around how that money will be distributed.
    One of the things that amazes me is they say they need this 
to reward performance for those who are performing above the 
acceptable level. They have a lot of other processes in place 
to do that, that are not used today, one of which is high 
quality increases or quality step increases, whatever you call 
them in your agency, HQIs or QSIs. These are raises that every 
agency has the authority to use. They do not need legislation 
to do it. They can give these to as many or as few employees as 
are meeting the criteria, and most agencies are not even using 
them at the average rate they are being used average across the 
government, which I understand now is at between 4 and 5 
percent of the workforce. And the agencies that NTEU works 
with, we are working with them to try to get them up to the 4 
and 5 percent range.
    So they have this tool, and they do not use it, and I have 
never heard them say it is because it is not funded, although I 
guess they could say that. But now to see this human resource 
performance fund created with no rules, and to have money just 
being able to be delivered by managers with no criteria, no 
credible performance appraisal system, no infrastructure, no 
nothing, really adds insult to injury, when regardless of what 
they say, it was at the expense of the proposed January 1 pay 
raise.
    Senator Voinovich. Carol, you commented that the 
legislation would address the problem of SES pay compression.
    Ms. Bonosaro. Well, with the kinds of recommendations we 
have made as safeguards, we would be, obviously, a lot more 
comfortable with it. As the administration has noted it would 
not deal with compression suffered by every executive within 
the current system, which did not occur because of performance, 
but rather because of congressional freezes, nonetheless, we 
are prepared to support that, provided those safeguards are 
indeed part of it.
    Senator Voinovich. Do you believe that from your 
observation over the years, there are adequate, credible 
performance evaluation systems across the board? On a scale of 
1 to 10, if you looked at them for the 7,000 SES employees, 
where would you say agencies stand in terms of having adequate 
performance evaluation systems in place?
    Ms. Bonosaro. I would point a couple of things out, I 
suppose. First, there are a lot of differences across agencies 
that we are familiar with. That the IRS has gone through the 
most elaborate process of trying to develop something that is 
very clear, that relates to levels of responsibility, levels of 
effort, and that is shared up front with their executives, so 
they know in the end what they have to do vis-a-vis the bonus 
system, which is part of SES compensation right now. I 
understand other agencies, such as VA, for example, have gone 
through a fair amount of work with regard to their performance 
systems.
    On the other hand we do have just a couple of levels within 
some of the agency performance management systems, and their 
appraisals and rating levels are not automatic indicators of 
how bonuses will be paid. There are separate systems in place.
    So it is very different across government, and I think it 
is very hard to come down and give you a precise answer about 
where we stand.
    Senator Voinovich. It would be interesting for me if you 
would contact your membership at various agencies and provide 
me with their opinions about where they think agencies stand in 
terms of managing performance evaluations.
    Ms. Bonosaro. We will be happy to do that. We will do a 
quick survey and turn that around and get that back to you.
    Senator Voinovich. Thank you. Congresswoman Davis.
    Mrs. Davis. Ms. Bonosaro, you stated in your written 
statement I think that you would not support a certified 
performance appraisal system as a condition for increasing the 
salary caps unless the bonuses and awards were made a part of 
the annuity computation, and that without this treatment of the 
bonuses and awards it would not be, ``true pay for performance 
compensation system.'' Since awards and bonuses have never been 
made a part of the retirement computation for employees in or 
out of the general schedule, why do you believe so strongly 
that they must be included in the retirement pay to go to pay 
for performance?
    Ms. Bonosaro. We are now placing base pay in the situation 
that bonuses and awards were previously, in saying it is not 
going to be automatic that you are going to have an annual 
adjustment each year. Adjustments have not been automatic in 
any event, given the caps within the SES, as we know. Their 
base pay will be at jeopardy and therefore, arguably, I think 
it is reasonable to say that the work that folks do that 
enables them to in fact go even beyond that and earn bonuses 
and awards, would demonstrate that we are really taking the 
performance business seriously and it will have real meaning to 
you, and not just in terms of this year, but in terms of your 
annuity.
    Mrs. Davis. You also said in your testimony that the 
regulations on the pay-for-performance process must not come 
from OMB but must come from OPM. I was just curious what the 
reasoning is behind this, because do you believe that the 
President should not have any control in his administration? If 
you are concerned about political influence at OMB, I think you 
would probably have the same thing at OPM. So I am just curious 
as to why.
    Ms. Bonosaro. Yes, we are concerned about that, to be 
frank. But on the other hand, OPM has certainly got the 
personnel expertise, and we think they should be left to that 
job. Certainly the President has exercised authority up until 
now, it is true, with regard to the pay rates for the SES. But 
in any event, we think that this is a function that 
appropriately belongs to OPM and should stay there.
    Mrs. Davis. Just another quick one, and your testimony led 
me to a few questions. That is why I am coming to you with so 
much. You said that if we put this appraisal system, if it is 
approved, that it needs to be in there for 4 years regardless? 
I think I heard you right on that. So what if OPM comes back 
and says that the agency is not implementing it correctly, 
there is problems. Does that mean that OPM, that we are stuck 
for 4 years and nothing can be changed?
    Ms. Bonosaro. What we are concerned about, I think 
obviously there is the opportunity for OPM to go to the agency, 
and given the fact that you have presidential appointees in 
that agency as well as OPM, presumably they should have some 
influence to get the system running properly. But in any event, 
what we are concerned about is that an agency might be viewed 
as having given too many outstanding ratings in a given year, 
and see their certification evaporate for that reason alone, to 
be frank.
    Our primary concern is that each executive be indeed judged 
on his or her merits, and that we do not have that kind of 
driver. So our view is also that, with the 4 years, that might 
span administrations from time to time as well.
    Mrs. Davis. Thank you. I am going to go to my colleague. 
Ms. Norton.
    Ms. Norton. Thank you very much, Madam Chairman.
    I think listening certainly to the GAO and to your 
testimony, and especially reading it closely, that we should 
put aside any notion that the employee organizations are simply 
opposed to any change. Indeed, many of the employee 
organizations have raised the issue of a human capital crisis 
generally in the workforce with retirements and early 
retirements, with problems in recruitment, quite apart from the 
clear problems with the existing workforce and its own 
anxieties.
    I think the problem we are faced with is how to use an 
approach that avoids worsening a problem we are trying to fix, 
and perhaps doing what successful reform generally requires, 
and that is looking at a win-win approach. The reason I asked 
Mr. Blair, for example, whether he saw any order of priority in 
the SES 2003 act, was because I was looking for some 
sensitivity that employees would be looking perhaps at one part 
of the act and maybe management, meaning the administration, at 
another part of the act, and maybe if you looked at both of 
them you could develop a win-win approach. But instead he said, 
well they are all the same and they have equal priority.
    We just heard testimony from Ms. Bonosaro, for example, 
that there is great concern, as anyone would expect, in pay 
compression, the pay cap. But clearly the administration's 
priority is pay for performance. One begins to wonder if you 
can get what you want if you do not look at what this huge 
workforce wants and try to find some way to get a win-win.
    I am looking at your testimony. Sometimes they are rather 
small things. Sometimes they are clearly larger things. For 
example, Chairman Voinovich mentioned health insurance. One 
begins to wonder if in fact there was some movement on what is 
a critical problem, which is the increasing amount of one's pay 
in effect that goes to health insurance, whether or not the 
workforce would be more open to changes that the administration 
may want. Or they can be smaller problems. He mentioned that 
one. It can be things that may seem smaller such as the one 
that was just discussed, OMB as the agency that looks at pay 
for performance, and not OPM. Well, any Federal worker will 
tell you that is a big no-no. OMB is a White House agency, is a 
political agency. OPM comes out of the old civil service 
system, and its job is to look at everything in light of merit 
principles.
    So if you are trying to find some way to ease the anxieties 
of the workforce, after all you have appointed the OPM Director 
just as much as you have appointed the OMB Director, there is 
administration policy. One might look, if you are looking for a 
win-win, at the agency whose job it is to put into play 
something that is a complete departure, and break away in the 
merit system which is pay for performance. I am just trying to 
go off of your testimony. Now I am looking at Mr. Harnage's 
testimony.
    Says on page 4, ``Does not find the provisions highly 
objectionable in and of themselves,'' and then goes on to say, 
``unless one considers them in the context of far more pressing 
needs of Federal employees and agencies, again, a suggestion 
that there may be some way to make these proposals less 
objectionable if they are too objectionable.'' I have already 
indicated to Mr. Walker, that all you are going to get is a 
blizzard of grievances and court suits and the rest, so what 
have you accomplished with all of the lowered, with all of the 
problems that brings for employees and for employers.
    So I am looking at Ms. Kelley's testimony in which she says 
that the NTEU is not opposed to the use of demonstration 
projects, and in fact, continues to believe that demonstration 
projects are a valuable method of experimenting with new pay 
and work arrangements. Again, it looks like we are not dealing 
with black and white here, but we are dealing with something 
that says, hey, in order to do particularly massive reform, you 
have got to look at all the parties and they all have to think 
they are getting something out of it. Or let's take the problem 
of new employees, where your testimony indicates that you have 
difficulty with these new employees getting all of these 
bonuses, all of these incentives, while employees who have been 
waiting in line do not get anything.
    There has been testimony here about training and the 
failure to offer training. If existing employees thought they 
were getting training, even as one was trying to deal with the 
fact that 40 percent of the government can retire in 5 years, 
maybe one could come to some kind of understanding that 
everybody is getting something out of personnel reform and even 
pay for performance.
    I must say for the record, about the last way I would begin 
pay for performance is giving $25,000 bonuses to political 
appointees. It is all down hill from there. You have to begin 
from the ground up. People who are political employees, they 
come at lower pay than they may get in the private sector, but 
then they leverage that to humongous pay within a year or two.
    So I guess my question really goes to approach.
    Mrs. Davis. Ms. Norton's time has expired about 2\1/2\ 
minutes ago.
    Ms. Norton. Yes, but other people went over their time, 
Madam Chairman, and I would like an answer. I finished my 
question. My question was not a series of small questions about 
this and that. I am looking for an approach that gets us to 
something other than what we have here, which is apples and 
oranges, and nobody is going to eat them together. So I would 
like to know whether there is an approach that can bring you 
together with the administration, that focuses on win-win.
    Ms. Bonosaro. I would like to respond to that just because 
it also will enable me to follow up on something Mrs. Davis 
asked.
    I think you are quite right, and I was reminded as you were 
talking of the start of the Senior Executive Service, when 
those of us who were in the old Super Grade system were enticed 
in, if you will, because the SES was a system that, while it 
indeed had far greater risk than the system we were in, also 
carried the potential for a greater reward. And that is the 
reason why we are suggesting, for example, if you are going to 
eliminate all the ranks within the SES and really change the 
structure and create pay bands, let us entice in folks and say, 
but gee whiz, there is going to be an additional reward, and 
that is that the bonuses, the awards you get, can count towards 
your high-3, for example.
    If we are going to move in to the pay-for-performance 
system, let us at least adopt the kind of safeguards that we 
have talked about so that people can feel more assured that 
merit principles indeed will still apply. So I think there is a 
way to have a win-win.
    Mrs. Davis. If the others would like to respond?
    Mr. Harnage. Yes. I have not had the opportunity to read 
Carol's entire statement, but her oral statement, I certainly 
think we can embrace. There are three matters that Chairman 
Voinovich touched on that I think deals with where you are 
coming from. One is the administration has not slowed down on 
its quotas for privatization, and 850,000 jobs comes from the 
FAIR Act, the FAIR list and the percentage of jobs that have to 
be competed under this administration's quota system and their 
de-rewrite of the A-76 has currently taken place in OMB.
    He made a very good point that on the health insurance in 
his State they have gone from 8 percent to 12 percent, and then 
they might be going to ask the employees now to make a 20 
percent contribution. Federal employees have been making 28 
percent contributions for years, so that is just an indicator 
that this would be an incentive for recruitment and retention. 
Even if the State increased it to 20 percent, the legislation 
we have asked for just brings the Federal employee to that same 
level.
    Then finally in the $500 million slush fund that is being 
created by the administration--and the Subcommittee needs to 
understand that in 1997 NTEU and AFGE wrote to the then 
administration asking to sit down and work on pay with what the 
problems were, identify the problems and find the solutions. We 
never got around to that. We went from year-to-year battles 
here in Congress to try to get pay to what it should be. Same 
thing with this administration. Within a month of taking 
office, Colleen and I wrote to this administration, asking to 
sit down and work on pay. Their response was more or less they 
were too busy.
    We are more than willing to sit down and work with anybody.
    I prefer working with Congress, and I will tell you why. I 
am still looking for $200 million. When the administration came 
up with a 2 percent across-the-board increase and a $500 
million slush fund, the figure is 2.7 percent. Therefore there 
is $200 million missing somewhere. So if they are going to 
treat pay that way, I am not too sure sitting down with them 
would be too fruitful, but they in effect, even with their 
slush fund, where some employees are going to get that $500 
million and some employees are just going to get the 2 percent 
increase. There is $200 million that should be in that--
somewhere in that pay scheme it should be 2.2 percent or it 
should be a $700 million slush fund.
    But we are more than willing to work with anybody that will 
work with us on coming up with a solution to the pay, and my 
concern is that FEPCA never has been fully implemented and so 
we do not know whether it would work until we first tried it. 
As both of us pointed out in our testimony, there is all kinds 
of incentives and managerial flexibilities in FEPCA that have 
yet to be fully utilized, such as the step increase, the step 
increase as both a penalty and a reward. You can withhold a 
step increase if an employee's performance is not of an 
acceptable level. That is rarely done, but nevertheless, that 
is a tool. In the same token if you have a high performer you 
can give them a quality step increase. That is a step increase 
in addition or sooner than they would have otherwise gotten on. 
Rarely used today.
    Senator Voinovich. Thank you. We have another panel here, 
and it is 12 o'clock. Representative Van Hollen.
    Mr. Van Hollen. Thank you, Senator. I will be very brief. I 
just want to make an observation, get a quick reaction.
    It is striking, as all of you in your comments have said, 
you do not oppose to use of financial incentives and bonuses to 
award for performance. I mean Mr. Harnage has made that clear, 
so I think it is important that no one is dragging their feet. 
What is striking--and I appreciate all your testimony, and look 
forward to going through it in more detail--is the amount of 
flexibility and a lot of the opportunities that already exist 
under the law to provide rewards. Ms. Bonosaro, in your 
testimony you say not only does the Senior Executive Service 
have a performance system, that it is currently a model pay-
for-performance system.
    So the question really is the question of resources. It is 
not that they do not have the ability, the administration does 
not have the ability to provide bonuses right now. It is a 
question of whether or not the funds are separately provided 
for this purpose. With respect to the SES, it is a question not 
of performance measures being in place and the system being in 
place, it is just the fact that you have these caps in place.
    I would just like to get a very quick response from all of 
you to that observation, that it is not a question of lack of 
flexibility and the ability to provide bonuses. It has been a 
lack of resources to make the system work
    Ms. Bonosaro. I think that the one thing that we know is 
yes, indeed, there are a lot of flexibilities within government 
right now. I have not heard anyone really satisfactorily 
explain yet why they are not all used. We know in some cases 
they are not always--personnel do not always know about them. 
Certainly they are not always funded. Sometimes there is simply 
a lack of will, so that there are a whole variety of reasons.
    The one thing I think we would be concerned about is, if 
because of the view of the lack of performance management 
systems being at the rate they should be, that therefore we do 
not resolve the issue of pay compression within the SES. I 
really think that cannot wait.
    Ms. Kelley. I would say, Congressman Van Hollen, it 
absolutely is an issue of resources. In fact, Senator Voinovich 
and I have had this conversation many times, where I have said, 
``Please do not provide any more flexibilities to the agencies 
until the resources are provided because all it does is make 
the list longer and longer of things that are not being used by 
the agencies.''
    As far as setting priorities--and I think this goes to 
Delegate Norton's question about process, how we prioritize, in 
order to do that, you have to have a two-way conversation, an 
ongoing conversation. We do not have that with the 
administration. Therefore, our discussions take place at these 
forums and in the media because there is not an ongoing 
conversation to try to figure out the really tough questions 
about priorities and how to create a potentially win-win 
situation, which is very different from working through all of 
the flexibilities we have with you, Chairman Voinovich, because 
we have these conversations one-on-one, over and over 
throughout the year before legislation is ever introduced, 
because you are interested in working with us to figure out 
what the employee issues are and how they can be addressed. 
That is the way that I think we can make much more progress on 
behalf of the employees, the American public, and the agencies, 
not the way that we do business today, but that is how we do it 
today.
    Mr. Harnage. I think you are right on target. OPM's own 
survey indicated that less than 1 percent of the current 
workforce received incentives, cash awards, and the reason for 
that is that they were not funded. The agency, in order to give 
one employee a cash award, had to take money away from other 
employees or simply not fill a position. So that is the first 
problem. It is not an incentive and it is not a reward for 
performance if you are not receiving the pay that you are 
entitled to to begin with, and as we have said, we have got to 
bring FEPCA up to par, and then any incentive that you give is 
in fact a performance award.
    The second thing that you have to watch out for, if you 
recall,just a couple of years ago we had to get a legislative 
change in the VA system on nurses' pay because we found 
hospital directors were balancing their budget on the backs of 
the nurses. Instead of giving them the pay increases they were 
entitled to, they were diverting that money to other parts of 
the budget. So we changed the pay system of the nurses just 2 
years ago. Let's not create a monster here of all civil 
service.
    Ms. Heiser. I would concur with my colleagues that the 
incentive awards program as it currently exists needs some 
further examination in terms of the tools that are available 
and the effect that it could have were it properly funded. But 
I would put to you that first and foremost, as we have said, 
the appraisal systems really do need to be revised. Pass/fail 
does not accomplish our objectives--we have to look at why 
performance appraisals are done. Pass/fail should not be kept--
the carrot before the horse is not a good example in this case 
because hay is not going to be the motivator for people to do a 
good job of performance management. The driver for performance 
management needs to be organizational improvement and employee 
development. That is the way to start with this whole program.
    I would also take some umbrage with the idea that a $5 
billion annual increase is wasted because it is not based on 
performance, and I would put to you that if we assume safely 
Federal employees are performing, then it certainly is based on 
performance and not wasted money. Thank you.
    Senator Voinovich. We thank the panel very much for your 
testimony this morning, and we will take it into consideration. 
Obviously we have some systemic problems that we have had for 
several years.
    Senator Voinovich. Our fourth panel of witnesses includes 
some of the Nation's top experts from the public, private, and 
non-profit sectors, academia, and the military. I am pleased to 
have met many of you at Harvard's Executive Sessions on the 
Future of Public Service and that you agreed to serve on my 
Washington-based human capital working group. Hannah Sistare is 
the Executive Director of the National Commission on Public 
Service. Hannah, I want to welcome you back to the Senate. I 
enjoyed working with you during your time as Senator Thompson's 
Governmental Affairs Committee Staff Director.
    Again, I apologize to the fourth panel for the delay. I 
hope you have enjoyed the testimony of the witnesses. It 
certainly gives you a little perspective for your clean-up 
role.
    Dr. Steven Kelman is the Weatherhead Professor of Public 
Management at the John F. Kennedy School of Government, Harvard 
University. Steve, glad to have you here. Steve has had a 
lifetime of public policy work, both as an educator and as a 
public servant, most recently as Director of the Office of 
Federal Procurement Policy at OMB during the Clinton 
Administration.
    Max Stier is the President and CEO of the Partnership for 
Public Service. Max, I want to congratulate you on the good job 
that you are doing with the Partnership. It looks to me like we 
have to do a few other things to attract and retain good people 
of public service, if we have listened carefully to what the 
other witnesses had to say.
    Jeff Taylor is the President and CEO of Monster. It was 
good to meet with you, Jeff, up at the Kennedy School, and I am 
eager to hear what you are doing to improve the ``USA Jobs'' 
website.
    We are fortunate to have Major General Robert McIntosh, 
U.S. Air Force Reserve (Retired), Executive Director of the 
Federal Officers Association of the United States, and 
appreciate you being here today.
    We will start off with Ms. Sistare.

TESTIMONY OF HANNAH S. SISTARE,\1\ EXECUTIVE DIRECTOR, NATIONAL 
                COMMISSION ON THE PUBLIC SERVICE

    Ms. Sistare. Thank you very much, Chairman Voinovich, 
Delegate Norton and Representative Van Hollen. The National 
Commission on the Public Service, and our Chairman Paul 
Volcker, thank you for your interest in their recommendations 
for the reform and the renewal of the public service. They are 
encouraged by action in the House and the Senate to tackle this 
critical challenge.
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    \1\ The prepared statement of Ms. Sistare appears in the Appendix 
on page 218.
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    The title of the Commission report,\2\ ``Urgent Business 
for America'' reflects their conviction that we must seize the 
opportunity at hand for reform. Our 13 commissioners are of all 
political persuasions and from both political parties. They 
came together with a shared concern about the declining level 
of public trust in government and its correlation to the 
public's negative view of government performance. They were 
troubled by surveys indicating that Federal workers are 
frustrated in their efforts to get the job done and have 
difficulty seeing how their efforts contribute to the 
government's critical missions.
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    \2\ The Commission report entitled ``Urgent Business for America, 
Revitalizing the Federal Government for the 21st Century,'' report of 
the National Commission on the Public Service, January 2003, submitted 
by Ms. Sistare, is retained in the files of the Subcommittee.
---------------------------------------------------------------------------
    The Commission began its work examining the challenges 
confronting Federal employees and the difficulty in attracting 
and retaining the Skilled Workforce 21st Century government 
demands. Soon, though, they were convinced that to be fully 
effective, Federal workforce reforms must take place within a 
modernized government structure.
    The Commission's vision is greater consolidation of related 
and overlapping agencies into mission-centered departments 
brought together in an environment of more administrative and 
personnel flexibility, but with strong political leadership.
    The commissioners were convinced that organizational 
cohesion and mission clarity would enhance the morale of the 
Federal workforce and improve government performance. The goal 
was not smaller government, but government that works better.
    The Commission does not take lightly what it will require 
to make this work. Some critical ingredients are: An Office of 
Personnel Management and OMB with the resources to support 
these systems; strong leadership from well-qualified and well-
trained political leaders, career executives and managers; and 
as Paul Volcker repeatedly stresses, strong oversight by the 
Executive and the Congress.
    To optimize Congressional oversight, the Commission 
recommends that Congress itself reorganize its own committees 
around the key missions of the reformed Executive Branch 
structure. Recognizing that this reorganization will be the 
work of years, the Commission recommended that Congress pass 
legislation reauthorizing the Executive reorganization 
authority that Presidents had, in one form or another, from 
1930 to 1984.
    Now, the Commission anticipated this authority would be 
exercised within a framework established by the Congress. They 
recommended including the requirement that personnel systems be 
governed by the established merit principles of government 
employment. They also envisioned significant consultation in 
the development of reorganization plans with Congress, Federal 
workers and other affected parties.
    The purpose of the expedited consideration, once a proposal 
reaches Congress, is to protect a broadly and well-considered 
reorganization plan from being pulled apart by partisan or 
individual turf battles.
    On the issue of pay, the Commission recommends that the 
government pay reflect current market conditions so government 
can retract and retain talent it critically needs. The market 
for the workforce, generally, was seen to be the private 
sector. The market for government's senior leadership was seen 
to be the nonprofit workforce, and this latter group includes 
Federal judges, political appointees and Members of Congress. 
The Commission was particularly concerned with the damaging 
impact of declining real pay for Federal judges.
    As I indicated, the Commission was concerned about the 
perception and reality of government performance and was 
critical of the current GS system under which time on the job 
becomes the major determinant of pay.
    Some, including Members and witnesses here today, have 
voiced concern that a pay-for-performance system is beyond the 
capabilities of the Federal Government and will be abused by 
managers.
    In response, Paul Volcker would point out that clarity and 
cohesion of mission is what gives managers the ability to 
establish performance objectives and measures. Once agencies 
have credible performance measures, it is possible to judge 
individual and group performance in a transparent, 
nonsubjective way. The whole process becomes much less daunting 
and visibly fair.
    I believe the Commission would applaud the administration 
for getting the ball rolling and would also agree with the 
Comptroller General on how to proceed. Furthermore, as 
Secretary Donna Shalala--former Secretary Donna Shalala--noted 
in her recent testimony before the House Government Reform 
Committee, you have to have credible people in both political 
and career management positions for the system to work. And 
here again, ongoing, effective training plays a critical role.
    The Commission had completed its work prior to the 
introduction of the legislative reforms before the 
Subcommittees. However, the members of the Commission would 
enthusiastically applaud the proposals' goals of enhancing 
recruitment, retention and training, linking training to 
performance plans and strategic goals, encouraging flexibility 
in personnel systems, alleviating pay compression for the SES 
and other senior-level employees, encouraging mid-career 
entrants, and improving the presidential appointments process. 
The Commission would add, act with urgency. Thank you.
    Senator Voinovich. Thank you. Mr. Kelman.

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

    Mr. Kelman. Chairman Voinovich, Chairman Davis, Senator 
Durbin, and Congresswoman Norton, I am not going to talk about 
pay for performance. I will talk briefly about both attracting 
talented young people into government--as a teacher of young 
people considering careers in public service, I am interested 
in that--and creating workplaces for those people to come into 
government that will help us retain them and also workplaces 
that deliver results for the American people.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kelman appears in the Appendix on 
page 229.
---------------------------------------------------------------------------
    First of all, I want to assure you I do have some good 
news, Senator Voinovich. The government still retains an 
ability to recruit and attract talented young people. This 
year, half of our graduating students in the Master of Public 
Policy program at the Kennedy School at Harvard have applied 
for the Presidential Management Internship program, and 
recently we were very happy to find out that 40 of our 
students, out of a graduating class of 180, have been accepted 
into the Presidential Management Internship program.
    One more piece of good news, a student of mine, who has 
been accepted into that program, Amy Dain, came by my office 
last week to tell me that within 1 week of her receiving her 
PMI notification, she had received communication from three 
government agencies, three different agencies, seeking to 
recruit her and find out if she was interested. So I think that 
is a real tribute to your efforts to create interest in human 
capital issues, to those of the Comptroller General, to 
Director James and her team at OPM that we are making some 
progress in that area.
    Amy said to me that the three communications she got 
included agencies she might not have thought of working for 
otherwise. It has opened up some new opportunities for her.
    Senator Voinovich. You had out of how many?
    Mr. Kelman. Out of 180 students, about 90 applied to the 
PMI and 40 have been accepted.
    Senator Voinovich. And the fact is they moved very quickly. 
Once they were designated, the agencies did not wait around. 
They were after them right away.
    Mr. Kelman. Correct. So good news.
    Let me briefly comment on some of the provisions of the 
proposed legislation. I essentially support everything in S. 
129. The one provision I wanted to call particular attention to 
is the provision in Section 302, allowing using non-Federal 
service time as a base for annual leave. The idea behind this, 
this is one small step in making it easier for people to enter 
the Federal Government in mid-career.
    Hannah pointed this out, the Partnership for Public Service 
has been very interested in this. Young people no longer see 
themselves as working in one place throughout their careers, 
and we need to make it easier. A source of talent for the 
Federal Government is people wanting to come in, maybe only for 
a few years, mid-career, as one of several jobs. We make that 
much too hard now in the government.
    Another student of mine who is graduating this year, who 
was a Teach for America person before he came to the Kennedy 
School, was looking at a job in intelligence at the FBI that he 
wanted to apply for. The job said, ``Open to current or formal 
Federal employees only.'' He cannot apply for that job. I think 
that is bad news, from the perspective of the public. I think 
he would have been a very good person for that job.
    The Partnership for Public Service has made a number of 
excellent proposals in this area. One is to set up a mid-career 
Presidential Management Internship program. I think that is a 
great idea.
    Let me, finally, with regard to hiring good talent, make 
one suggestion for an additional provision for S. 129, that the 
bill include a provision to amend Title 5, which currently 
states that hiring and promotion decisions should be made on 
``knowledge, skills and abilities,'' and add the word 
``accomplishments.''
    Right now the current language is too bureaucratic, too 
formulaic, time served, things like that. I think we send a 
good signal about an orientation toward results by adding that 
word ``accomplishments''--knowledge, skills, abilities and 
accomplishments--into the statute.
    Last, just a word about the other thing, once we get these 
people into the workforce, creating workplaces that inspire 
them, continue their commitment to public service. The kinds of 
things that you did, actually, Senator, as Mayor of Cleveland, 
with your work on total quality management, I think that a lot 
of the work here is going to have to be done at the agency 
level. I think there are some contributions the Hill can make--
oversight hearings, looking at ways that agencies are 
developing nonbureaucratic, more empowering ways of doing 
business for their employees.
    I would urge you to urge OPM to establish a Presidential 
Management Internship Advisory Council to the President's 
Management Council, to allow young, talented employees to 
interact with deputy secretaries and give them ideas for how to 
improve the Federal workplace.
    Finally, in terms of creating good workplaces, never forget 
the Hippocratic adage ``Do no harm.'' Because I think that 
probably one of the biggest sources of counterproductive agency 
practices that create too much bureaucracy, too much hierarchy, 
is the kind of what I call ``management by scandal'' approach 
that, unfortunately, a lot of current congressional oversight 
encourages.
    So I would urge you, as elected officials, to realize that 
every time the pursuit of scandal creates more rules, more 
bureaucracy and so forth, you are really decreasing the 
attractiveness of Federal service to young people.
    My student, Amy Dain, describes what she is looking for in 
a Federal job as follows:
    ``I am looking for a job where I will be able to learn, 
where I will be challenged, where I will find mentors who will 
show me the ropes, introduce me to decisionmakers and open 
doors and opportunities for me, where I will be able to work in 
a team to seek solutions to complicated problems, where I will 
be supported in taking risks, where I will have a sense of 
making a meaningful contributions to issues I find important 
and relevant and where I will find a warm community.''
    Let us work towards a situation where she will not be 
disappointed. Thank you.
    Senator Voinovich. That is wonderful. Thank you very much. 
Mr. Stier.

   TESTIMONY OF MAX STIER,\1\ PRESIDENT AND CHIEF EXECUTIVE 
            OFFICER, PARTNERSHIP FOR PUBLIC SERVICE

    Mr. Stier. Thank you very much, Mr. Chairman, Madam 
Chairwoman Davis, Senator Durbin, and Congresswoman Norton. It 
is a pleasure being here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Stier appears in the Appendix on 
page 239.
---------------------------------------------------------------------------
    We have heard all morning, and now coming into the 
afternoon, about the human capital crisis. It is truly, I 
think, best viewed as a multi-tiered problem that is going to 
need a multi-tiered set of solutions. One approach that we 
would propose to organize these sets of problems is to see them 
as a succession of three major barriers:
    The first barrier literally being lack of information, lack 
of information about government jobs, public service, and the 
value of those jobs and government service;
    The second being a broken hiring process, which right now 
takes too long, is too difficult and is nontransparent;
    And the third, as Steve mentioned, are the jobs themselves, 
which are not always representative of a high-performing work 
environment which is so critical on the retention side and on 
the recruitment side.
    So I would like to talk, in my oral remarks, about some of 
the things that can be done in each one of those barriers to 
address them.
    The first piece is what we have learned from our polling is 
that the most effective way of telling the story of government 
is through the story of Federal workers, individual workers. 
And in that light, we have created the program called the 
Service to America Medals, which recognizes excellence in the 
Federal service. Eight Federal workers were honored last year. 
This is done in conjunction with the Atlantic Media Group, and 
we are doing the same this year.
    You will notice, and hopefully--I am sure many of you take 
the Metro--you will see the ad campaign that we have up. I also 
have one of the brochures here from the ``Service to America 
Medals,''\2\ and I cannot help but take this time as an 
opportunity to ask all of you to find great Federal workers to 
nominate for this program, either in your district or otherwise 
in your experience.
---------------------------------------------------------------------------
    \2\ The brochure entitled ``Service to America Medals,'' submitted 
by Mr. Stier is retained in the files of the Subcommittee.
---------------------------------------------------------------------------
    Last year, we had a nomination from a member. It is a 
fabulous program that really makes a difference both for the 
workers themselves, but also, most importantly, for telling the 
American people the story of the Federal Government and public 
service.
    The second piece I would like to highlight is the fact 
that, by and large, the relationship between the Federal 
Government and our college and universities has been broken. To 
respond to that, we started a program with the Office of 
Personnel Management called ``A Call to Serve.'' To date, there 
are 400 universities that have signed on, 60 Federal agencies, 
to raise the profile of the Federal workforce on college and 
university campuses.
    One of the productions that we have created for that 
network is this ``Red, White and Blue Jobs'' handbook, again, 
to address the real inadequacy right now. Most young people 
know a lot about private-sector options, but not about public-
sector options. And if I could, I would ask that both of these 
brochures be added to the record.\1\
---------------------------------------------------------------------------
    \1\ The brochure entitled ``Red White & Blue Jobs, Finding a Great 
Job in the Federal Government,'' submitted by Mr. Stier is retained in 
the files of the Subcommittee.
---------------------------------------------------------------------------
    The third piece on the first barrier, the lack of 
information on the recruitment side that I would like to focus 
on, is the issue of student debt. Obviously, Chairman 
Voinovich, Senator Durbin, your leadership with the GO FEDS 
legislation, I think, is very important.
    What we know today is that two-thirds of graduates from our 
colleges and universities have student debt. The size of those 
debts have increased exponentially. And even where there is 
interest in public service, oftentimes, young people do not 
have the choice to pursue it because of those debts, and I 
think the GO FEDS legislation is an important step in 
addressing that problem.
    The second barrier of the broken hiring process is one that 
has, again, multiple components. There is a pledge to 
applicants that we have designed in conjunction with the Office 
of Personnel Management which I think is very important to see 
enforced that includes making sure that job vacancy 
announcements are in plain English and that the process is an 
easier one.
    I would also note that there are many very quick things 
that could be done: Internships, for example--the private 
sector uses them as a critical talent pipeline into their 
organizations. The Federal Government does not do a very good 
job about that. In fact, it is very difficult to convert superb 
interns into full-time employees. There is a distinction made 
between interns that are brought in under a government program 
versus a nonprofit program like by the Hispanic Association of 
Colleges and Universities, and those kind of changes could be 
made very easily and would result in a lot of good talent and, 
in particular, diverse talent coming into the Federal 
Government.
    I am rushing here, and so I will jump into the third 
barrier, which is fundamental and, in many ways, the hardest 
nut to crack, which is the job themselves. Here, again, I would 
suggest that the starting point ought to be with the management 
and leadership.
    We can note, from the OPM survey, which was very well done, 
that only 43 percent of Federal employees hold their managers 
and leaders in high regard. That is a problem. Your suggestion 
on starting with the SES, I think, is the right one, and we 
strongly support the proposal that is before these 
Subcommittees.
    We would also suggest that an additional element that ought 
to be included is a requirement that agencies conduct regular 
employee surveys, and this can be done agency-by-agency, with 
some joint element, so that you can do governmentwide work, but 
we believe that is absolutely essential.
    And then, finally, I would note that it is very important 
for us to focus on the flexibilities and the improvements that 
have already been passed, in particular, the Chief Human 
Capital Officer Act--wonderful legislation. Implementation is 
really the name of the game right now, and we need to make sure 
that it is done right.
    Thank you very much.
    Senator Voinovich. Thank you, Max. Mr. Taylor.

   TESTIMONY OF JEFF TAYLOR,\1\ FOUNDER AND CHAIRMAN, MONSTER

    Mr. Taylor. Chairman Voinovich and your esteemed team, I 
want to thank you for an opportunity to come here today. I have 
a mission to help people love their jobs, and a big part of 
this for me has been to try to educate to the government about 
the window of opportunity that I see, and this is really 
competing with the private sector for talent.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Taylor appears in the Appendix on 
page 254.
---------------------------------------------------------------------------
    I decided I would do kind of time line because I think it 
shows where the opportunities are. And with the advent of the 
Internet and the worldwide web and the invention in 1993, we 
really launched our next mass media, radio, television and now 
the Internet and, for the first time, a reason for a PC on 
every desk top, and maybe more importantly, an affordable 
medium to communicate.
    The result, when you overlaid that on top of a tech boom 
and a telecommunications boom, was 1999 tech and dot-com 
euphoria, and with that, a booming economy, entrepreneurial 
fever, unprecedented venture capital and IPOs, so advantaged 
private-sector businesses. You ended up with 3.9-percent 
unemployment, rapid pay acceleration and stock options, as 
currency, which then gave the advantage to the job-seeker or 
the employee.
    So I look at this. In fact, there is a measurable shift in 
1999 and the beginning of 2000, where employees really started, 
for the first time in 100 years, to take control of their own 
lives and companies were in a panic.
    Then, we have April 2001. We have the dot-com and the tech 
bubble is really exposed. I talk about the ``Emperor has no 
Clothes,'' and by summer of 2001, we had dot-coma. I know we 
are not supposed to laugh in this, but that is kind of funny, 
come on. [Laughter.]
    So here we are today, it is 2003. The treadmill has slowed. 
I call it ``the eye of the storm.'' This is kind of the calm. 
It is the reprieve in business and for government that you 
never really get--6 percent unemployment, give or take 8.5 
million people out of work.
    Recently, President Harry Truman--well, maybe in relevant 
form--said, ``If your friends are out of work, it is a 
recession. If you are out of work, it is a depression.''
    And I think that what we have now is longer job search 
cycles, extended benefits that we have provided, which are 
running out. A stable job is in fashion maybe for the first 
time in 10 years.
    Employee or talent attitudes are more realistic than they 
have been, and I look at employers momentarily are regaining 
control, but there is very little dry powder. The economy has 
basically put us in a position where the private-sector 
companies do not have much to go on.
    So here is the opportunity. I think the government needs to 
capitalize on the economic slowdown to seize talent in the 
private sector. You have e-Gov initiatives right now, very 
positive. You have new initiatives with TSA and Homeland 
Security. I look at the positives. There are many new jobs that 
are going to be created.
    Go USA sentiments from the tragedy and terrorism of 
September 11 comes the pride of America, and for the first time 
in recent memory, for me, an opportunity to think about working 
for the government and some of the stability factors that are 
there in a new way.
    Candidates have an open mind. A recent Monster survey of 
51,000 job-seekers on Monster, 80 percent indicated that they 
would consider working for the government. In a Monster survey 
of our campuses--we partner with over 1,400 campuses--86 
percent of students said they would think about working for the 
government.
    So I look at the Internet as a new mass medium. It is 
inexpensive distribution. It is fast adoption by the target 
groups for the government, and I look at early successes as a 
way to prove this. Through a partnership with Monster, through 
NCS Pearson, TSA needed security people fast. We posted the 
jobs on Monster. We had over 6 million job-seekers view those 
jobs, 1.7 million applicants, 417,000 went through assessment. 
They hired 61,000 people through the Monster interface in a 
very short window of time. We have 66,000 people that are 
placed in the ready pool.
    So what I am trying to show is it is not just the Internet, 
but your new partners in the private sector can actually be an 
answer for some of these recruiting challenges.
    I look at the challenges that you have ahead are equally 
daunting. The aging workforce, it has been well-covered. But it 
is not just the talent, it is the knowledge that is going to 
leave your ranks and your agencies. Insular recruiting, which 
has been a dynamic way that you have recruited, is really going 
to fail because there are not enough candidates.
    Your outside systems, and what I will call ``old habits,'' 
I have got to challenge, I guess. According to a recent survey 
done by MSPB, it is just being printed now, 300 Federal human 
resource specialists were interviewed. Ninety-six percent used 
the USAJOBS site to recruit, 30 percent used agency bulletin 
boards, 6 percent used the newspaper, zero used the Internet 
job boards that are out there.
    Monster, for one, had 20 million unique visitors in our 
highest month, which was in January, coming 54 million times a 
month. This is the private sector that is ready to go to work 
for the government.
    Thirty percent of government agencies still do not accept 
electronic applications. Many agencies have no staffing 
automation, and this can create 4- to 6-month backlogs. 
Ultimately, the vacancy announcement, the description itself is 
daunting. And if you would share, this is a description--could 
you bring that up here into the light, just so you see--this is 
a description on Monster for the Army for one position, and you 
can see that it is a little longer than your average private-
sector position.
    So two last things: The brand and culture concerns, 
although I am amazed at the war kind of power of the United 
States, and the spirit, and the branding that is going on right 
now, I think we have to transfer that to a new war which is 
happening, which is the war for talent. And I look at the 
window closeing. In 2008, the private-sector competition will 
reenergize. Economists predict 4-percent unemployment by 2010. 
The Bureau of Labor says 10 million jobs will go unfilled by 
2010. Private-sector fuel, it will go back to venture capital, 
rapid pay acceleration. The window will close.
    I am predicting the worst labor shortage ever in our 
lifetime that will start in 2008. If we do not act on some of 
the things I have talked about, in my judgment, baby boomer 
exit, 10-year shortening, broadened skill shortages, e-commerce 
to e-business transition, where all businesses will change, and 
ultimately the free agent world is going to create an 
incredible scenario for the government, and it is going to be 
very difficult to hire.
    The window from 2002 to 2005 is where I am suggesting that 
we look. We have already burned 1 year.
    Senator Voinovich. Thanks very much. General McIntosh.

TESTIMONY OF MAJOR GENERAL ROBERT A. McINTOSH, USAFR [RET.],\1\ 
EXECUTIVE DIRECTOR, RESERVE OFFICERS ASSOCIATION OF THE UNITED 
                             STATES

    General McIntosh. Chairman Voinovich, Chairwoman Davis, 
Senator Durbin, and Delegate Norton, it is certainly a pleasure 
and an honor for me to be here representing the 80,000 members 
of the Reserve Officers Association. I am going to shorten my 
5-minute remarks in the interest of time, but I do have a 
couple of things I need to cover.
---------------------------------------------------------------------------
    \1\ The prepared statement of General McIntosh appears in the 
Appendix on page 259.
---------------------------------------------------------------------------
    S. 593, the Reservists Pay Security Act of 2003, is a 
significant step toward resolving the pay hardship issue for a 
portion of the Reservists who have been mobilized to support 
Operation Iraqi Freedom. The bill would entitle any employee of 
the Federal Government who is called to perform service as a 
member of the uniformed services to receive civilian pay in the 
amount, which taken together with his military pay, would be no 
less than the basic pay he would then be receiving if no 
interruption in his civilian employment had occurred.
    Simply put, the bill would ensure that, at least 
financially, no harm would be done to a mobilized Federal 
employee. There are approximately 120,000 Federal employees who 
serve as members of the Reserve components. A significant 
number of these, between 12,000 and 13,000, are currently 
mobilized, and of course that is of the total number being 
mobilized of 220,000 Guardsmen and Reservists for Iraqi 
Freedom.
    As we noted, we predict there will be more Reservists and 
Guardsmen activated over time in many contingency operations in 
the future, and certainly we look toward several over the few 
years in the part of the world we are now engaged.
    More importantly, however, this bill is an opportunity for 
the Federal Government to lead the way and to set the example 
for other employers of members of the Guard and Reserves. There 
are already many employers--city, State and private--who pay 
all or some part of the difference between their employees' 
civilian salaries and their military compensation. There could 
be more.
    If we are to encourage employers to help protect their 
employees' financial well-being when they are serving their 
country, the Federal Government must lead the way and set the 
example. If the Federal Government does not do the right thing, 
what kind of a message does it send to those employers whose 
connection is more tenuous?
    The Federal Government, whose actions in this regard can 
only be legislated, must lead by example and encourage the 
private sector to do what cannot, and ought not, to be 
legislated in the private sector.
    There is more to this issue than Federal mobilized 
employees and their families, but we must start here, now at 
home, as it were. This provision is a first step in 
demonstrating a practical and meaningful way that the 
contributions of our Reserve forces are fully recognized and 
appreciated by the Nation. Thank you.
    Senator Voinovich. Thank you very much.
    It is interesting that my staff director for this 
Subcommittee was mobilized with the U.S. Navy for the conflict 
in Iraq. I just inquired about what his leave situation is, and 
what he is going to receive. I think he has cobbled together 
some vacation time and some other things, but after that is 
over, he will be getting his lieutenant junior grade pay, which 
is substantially less than he is making in his staff position 
here.
    You all were very patient to hear the testimony of the 
other witnesses, and it seems to me that there are some 
fundamental things that need to be addressed if we are going to 
capitalize on, as Mr. Taylor suggests, this window of 
opportunity that we have. At this stage of the game, it does 
not appear that pay comparability health care costs, or 
concerns about outsourcing have negatively impacted on our 
recruiting.
    Would anyone like to comment on that?
    In other words, Steve, your Harvard graduates are coming to 
work for the Federal Government. But I remember when I was up 
there talking to a couple of your students, one of the things 
they said to me was, when they looked at the Federal service 
they were wary about the outsourcing of Federal jobs. They were 
thinking about, instead of coming to work for the Federal 
Government, going to work for the companies that are getting 
the outsourced work.
    I would just like you to comment on that, if you would, or 
anybody else.
    Mr. Kelman. It is interesting that they said that to you. I 
actually have not heard that. When I talk to my students about 
why are you thinking why might you work in the government, why 
might you not work in the government, probably the two single 
biggest issues that come up again, and again, and again, one is 
student loan repayment because the students have very high debt 
burdens, and they are often getting job offers that are much 
higher in the private sector.
    So one is student loan repayment, and then the second is 
quality of work, and Max and I have both been talking about 
this.
    There is a not necessarily fully unjustified perception 
that too many jobs in the Federal Government are too bound up 
by rules, and procedures, and clearances, and so many things 
that make it harder for an individual to feel that he or she is 
making a difference. I almost hear that more than I hear even 
student loans. Student loans is a very big issue for our 
students, but what is the quality of the work going to be once 
I get on the job is a theme that comes up again, and again, and 
again.
    Ms. Sistare. The surveys that the Center for Public Service 
at Brookings has conducted confirm what Steve says. Even at the 
Schools of Public Administration, most of the students are 
looking to go perhaps to State and local government or more 
likely to the nonprofit sector and, again, it is the job that 
the students are primarily looking for. They are interested in 
pay and the other benefits, but the ability to make a 
difference really makes a difference for them.
    Senator Voinovich. That is really interesting because, over 
the years, the Federal Government was always more attractive 
than State and local government, and in the last decade or so 
there has been a shift to go to work for State and local 
governments.
    Mr. Stier. Chairman Voinovich.
    Senator Voinovich. Yes?
    Mr. Stier. I just wanted to add to that, though, that I 
think this, again, is a multi-tiered problem. Clearly, it is 
fabulous that people at the Kennedy School are coming to the 
government or are interested in the government in greater 
numbers, but you will expect that in a School of Public Policy.
    There are a lot of people out there that the government 
needs, whether it is IT workers or engineers or scientists, who 
simply are not informed about the opportunity to come to 
government or the value, and even when they are, you run into 
the student debt issue.
    Senator Durbin is a lawyer. We recently did a poll of 
third-year law students. Two-thirds said that they could not 
make the choice to go into public service or public interest 
because of their debts. It is extraordinary how big of an issue 
that is.
    And then once they are interested, and if their debts are 
not a problem, the hiring process is often an enormous 
deterrent. And so, again, this is a multi-tiered set of issues, 
and while all of these factors are going to influence it, even 
in this day talent is always going to have choices. Even when 
there is an economic slowdown, the real top talent has choices, 
and we need to make sure, obviously, that we get the very best, 
and therefore make sure that all of these elements line up in 
the way they need to for the government.
    Senator Voinovich. So the thing is, if you were going to 
really do something quickly to handle this problem, you would 
deal with the loan situation. I think there is legislation that 
would increase the aggregate maximum from $40,000 to $60,000 
and the annual cap from $6,000 to $10,000. Would that help?
    Mr. Stier. I think the loan situation would absolutely 
help. I think that working on making the hiring process a 
faster, easier system would absolutely help, and then making 
sure, once they get to those jobs, that high performers and 
innovators are supported, and then starting off with the 
outreach would do the trick.
    Senator Voinovich. Right. But the fact is right now, to 
take advantage of the situation we must address the loan 
situation, get OPM to really concentrate on this very 
complicated hiring process, shortening it up and making it 
easier to get people in. And then once we have done those 
things, we should consider the quality of the jobs.
    Mr. Stier. Correct.
    Senator Voinovich. But now the thing is you have to go out 
and land them.
    Mr. Taylor. Could I just make one comment here? Is that I 
do not think we are educating the general private-sector 
population about the possibilities. I think if you look at this 
like a funnel, we are about to open the funnel up, and we are 
letting too many employees out of the Federal Government, and 
we do not have enough input coming in. So we need to make that 
process easier, but we also need to work on our branding to 
position the organization, the Federal Government as a whole, 
all agencies, to bring new talent in. You do not have enough 
young workers coming in here to basically feed the system.
    We recently won the Federal contract to run USAJOBS, and we 
are able to take our back-end systems and basically start to 
fix some of the systems and make it so it will work, but we are 
still going to have to tell the general population that we have 
got jobs out there, and we are going to make it easier for them 
to go through that process.
    Senator Voinovich. Max is helping with branding it on the 
college campuses.
    Mr. Taylor. He sure is, right.
    Senator Voinovich. And a lot of people are cooperating with 
him. How long is it going to take you to launch that new 
website?
    Mr. Taylor. We are ready. So we need a formal announcement, 
probably about the end of this month. We really just got the 
contract at the end of January.
    Senator Voinovich. That is fast action.
    I have to say that I asked my staff in Cleveland to compile 
a list of Federal jobs, because people call, and ask, ``What 
jobs are available,'' and it is a nightmare. I do not know how 
many pages of information that we had, but in terms of being 
user friendly, it was awful, just awful.
    Mr. Kelman. One very operational suggestion to OPM, a big 
deterrent is that because of the traditional ``rule of three,'' 
which is now eliminated, students had to give an entire, not 
just a resume, but this enormous amount of information just to 
apply for a job. In the private sector, that does not happen. 
You apply for the job with a simple resume, and then if they 
are interested in you, you start getting more information.
    In the Federal Government, we have had to do everything up 
front, and students look at this and say, ``It is going to take 
me 20 hours just to apply for this job, where for a private-
sector job, I just give them a resume.'' I hope that OPM is 
going to be dealing with that and that the agencies will deal 
with that.
    Senator Voinovich. Jeff, are you dealing with that at all? 
Have you made the recommendation to them, that even when they 
get the website up, they still have to deal with that long list 
of stuff that you just showed us? Are they aware of that 
problem?
    Mr. Taylor. We are actually working with the OPM Office on 
a number of different dynamics. Obviously, as part of the 
process of putting a website up, we have had a chance to 
question some of the stuff that is going to actually be in the 
content of the website, but there is a fairly complex process 
surrounding this, and I think we are going to do it in phases.
    I think Ms. Norton likes that kind of ``pilot project'' 
approach, and I am looking at USAJOBS as our pilot project to 
try to help the Federal Government to attract the talented 
workers.
    I think what you will see is, just when we launch, there is 
going to be a whole new set of steps, and working with Max and 
the Partnership, we are actually trying to get a theme out 
there to really expedite the whole process of applying for a 
job and also how we respond back to them so they know what is 
happening in the process.
    Senator Voinovich. Great. I have taken too much of your 
time, Congresswoman Davis.
    Mrs. Davis. Thank you, Senator.
    Ms. Sistare, you said that, and I am not sure I have got 
your words exactly, but urgency to get with it on this pay for 
performance, I guess it is.
    Ms. Sistare. Well, urgency to address the problems of the 
public service.
    Mrs. Davis. But you said, if I heard you correctly, that 
you did agree with the Comptroller General that we should not 
just jump into it; we should have set things in place, and I 
forget what he called it.
    Ms. Sistare. The Commission's report is more of an 
architectural drawing than a blueprint, but the commissioners 
did feel strongly that performance needed to play more of a 
role in government and then the rewarding through pay, and I 
think they would applaud the administration's effort to get it 
going, but you do have to have a system in place. You do have 
to have measures. You have to have confidence in the system. As 
Secretary Shalala said, you have to have people trained to run 
the system.
    Mrs. Davis. So you agree we need to do a little bit of work 
before we jump into it.
    Mr. Stier, your organization is actively promoting 
Excellence in the Federal Workforce. Do you see any inherent 
contradiction in the President's proposed management reforms 
and his attempt to privatize more Federal jobs with what you 
are doing?
    Personally, if I was looking for a Federal job, I would be 
very nervous because of privatization.
    Mr. Stier. I think that one of the key issues right now is 
an informational one, to make sure that the American public, as 
Jeff said, really understands the value of public service and 
the opportunities that are there. We did a set of focus groups, 
and one of the things that we found was that, basically, people 
in the labor market had no idea about government jobs. When we 
gave them a list of government jobs, many of their perceptions 
about the government changed.
    You asked the question about privatization. The issue of 
privatization, in fact, has been an ongoing one for the 
government for many years. I believe that upwards over 300,000 
jobs were shed from the Federal workforce during the 1990's 
and, in fact, some of the workforce imbalances we are seeing 
today are a result of some of that privatization that occurred.
    I think that it is absolutely essential that the message go 
out that Federal Government jobs are incredibly valuable, that 
they offer not only something for the country, but for the 
individuals that are taking them, and that it is a chance to 
really make a difference.
    I believe that you can, in fact, have an environment in 
which the value of public service is maintained in the context 
of still allowing some jobs to be open for competition, and I 
think that the employee groups are open to that as well. I 
think where the difficulty comes is when you start seeing 
quotas that are set that are not really based on any particular 
jurisdiction, and it is also, I think, really essential to 
focus on the fact that where there are competitions, it does 
not mean that these jobs are being privatized.
    In fact, in many instances, public-sector workers win those 
competitions, and that is something that, I think, ought to be 
used as a demonstration of the great work that the public 
sector, in fact, is doing.
    So, again, I think that they do not necessarily have to be 
in contradiction. Unfortunately, currently, they are, at times, 
in contradiction.
    Mrs. Davis. General McIntosh, the administration is 
concerned about paying Federal Reservists their differential 
because many times they would be out, at least it is my 
understanding, many times they would be out in the field, and 
they would be making more than their commanding officer, and 
there is some concern that would be bad for morale and the 
like, and then they would be out there with other Reservists 
who are not getting the differential from the private sector. 
How do you address that?
    General McIntosh. Well, certainly, today we have those 
differences in individuals because we have people in the field 
whose companies are paying the differential because they are 
such strong supporters of the Guardsmen and Reservists. We had 
the same situation in Desert Shield and Desert Storm. And, of 
course, those who did not get differential pay or had their own 
businesses or were professionals, some of them lost their 
businesses.
    In Desert Shield/Desert Storm, where we had a little higher 
number mobilized than we do today, we had no negative feedback 
from the field, in terms of morale, and people talking in the 
foxhole about difference in pay. That did not come up. It was 
not an issue. The troops did not talk about it, and I would 
really question the logic of saying that would be a problem.
    Mrs. Davis. Well, serving on the House Armed Services 
Committee and last year on the Personnel Subcommittee, I heard 
that a lot, and I wish we could pay everybody, private sector 
and the works, but I thank you for your service.
    Thank you, Mr. Chairman.
    Senator Voinovich. Senator Durbin is the Ranking Member of 
our Subcommittee.

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you. I will be very brief because I 
know Congresswoman Norton has been waiting too.
    Let me ask you this, Major General McIntosh. It is my 
understanding that 10 percent of the Guard and Reserve in the 
United States today are Federal employees.
    General McIntosh. The data we have looked at, our estimates 
built on estimates, show about that 120,000 of about a 1.1-
million force.
    Senator Durbin. So it is a significant portion.
    General McIntosh. Very significant.
    Senator Durbin. Second, it is my understanding that some 6 
or 7 percent of those who have been activated for Enduring 
Freedom in Iraq are also Federal employees.
    General McIntosh. That number is emerging, Senator, but it 
is approaching that percentage, that is correct.
    Senator Durbin. I think it goes back to an earlier point 
that has been made over and over again in different ways, and 
that is whether or not a career with the Federal Government is 
going to result in treatment comparable to other jobs in life. 
And the point that you made is that States, counties, cities 
and many private corporations have decided that if you are 
willing to make the sacrifice to serve your country in the 
Guard and Reserve, and you are activated, that they are going 
to make certain that your family does not suffer in the 
process.
    This just strikes me as a reaffirmation of the fact that 
Federal public service should not be a disincentive to serving 
our country in the Guard and Reserve. It should be consistent 
with it and an incentive. I understand, as you said, there are 
disparities in how troops are treated in the field. I hope that 
this notion that we have to play to the lowest common 
denominator instead of to the middle ground or higher common 
denominator does not argue against this.
    I have used the example of a friend of mine back in the 
Midwest, leaving a job with the FAA as an air traffic 
controller, facing the prospect of being activated and taking a 
position serving his country, that it would cost him roughly 
$30,000 a year.
    Now, that is a very dramatic hit, in terms of income, and 
he is going to do it one way or the other, but whether the 
person is working for Congress on Capitol Hill or working for 
the Federal Government, I hope that we will consider this 
Reserve pay security as a way to approach this, and I thank you 
for being here today to tell us about your support for that.
    General McIntosh. Thank you, Senator.
    I would like to make a comment. I have been in and out of 
the Reserve, going from reserve to active, and back and forth, 
for a 37-year career, and I have yet to hear one troop in the 
field talk about the difference in pay, relative to a Reservist 
serving side-by-side with an active component.
    The other thing I would say, these two gentlemen to my 
right, I was just handed a note, their companies pay 
differential. So, as a retired Reservist and someone who cares 
about our Guard and Reserve and the defense of the country, I 
would just like to personally thank you on the record.
    Senator Durbin. Thank you. Let me ask you, I have raised 
this question about student loans as long as I have been around 
this Subcommittee. I have not been as passionate an advocate as 
my colleague, Senator Voinovich, has been on the general human 
capital question. He has become our Senate expert, as he has 
devoted a major part of his public career to this issue. And we 
have managed to put some money into congressional 
appropriations to deal with the staff on the Senate side--I do 
not know, Congresswoman Norton, whether it is the same case on 
the House side yet--for student loan forgiveness.
    Let me just ask if any of you would like to comment on one 
of the quandaries and one of the difficulties. If you were 
putting student loan forgiveness into the package as part of an 
incentive for recruitment and retention, where do you draw the 
line? That has been the tough thing.
    We have had people on Capitol Hill in different offices who 
have said, ``Wait a minute. This employee has been with us for 
2 years, has a significant student loan, has a significant 
monthly payment. There is no talk about this employee 
leaving,'' but what would it take then for retention for me to 
provide student loan forgiveness? Do I give it to everyone who 
has a student loan who works in my office, only if they say 
they might leave, only if it is an incentive to bring them? 
Where would I draw this line? Because it is becoming 
ubiquitous. Student loans, as I know from my own family 
experience, turn out to be an issue that younger people face as 
a reality.
    Do you have any thoughts on that, Dr. Kelman?
    Mr. Kelman. I guess I would say this is not something that 
should be addressed in legislation. That is the thing I feel 
most strongly. This is a very workplace level, I mean, this is 
what we pay managers for, to make decisions like this. I guess 
I would say that we should maximize the flexibility that an 
organization has to use whatever limited pot of student loan 
forgiveness money to be used most effectively.
    My quick inclination is that the only thing that 
legislation should say is that it is up to the organization to 
determine how whatever limited pot is available is used.
    Senator Durbin. Mr. Stier, do you have any thoughts on 
that?
    Mr. Stier. I think that Steve is exactly right. It really 
is a management issue, and really it should be viewed, again, 
as a tool, and I think your emphasis that it is not only a 
recruitment tool, but a retention tool, is quite important. 
Because, indeed, they are really two sides of the same coin, 
and I think it is important for a manager to see the panoply of 
different benefits that they can give to get and keep the 
talent they need as good managers.
    Now, that said, one would hope that, particularly in the 
government context, that the managers would be held 
accountable, and one would hope that, as part of their own 
evaluation, you would look to how they are doing in terms of 
recruiting and retaining talent in their organizations. There 
are Federal entities that do that--the Bonneville Power 
Administration is one of them--to great success.
    And I think that is one of the really key elements, Mr. 
Chairman, that you had asked about earlier. If you have to 
start someplace, one of the key places is really starting on 
making sure we have a management and leadership corps here that 
can get the job done. There are a lot of things we could do 
with that.
    There is a Commission recommendation about creating a 
technical line, in addition to a managerial line, in the SES. 
That is something I think would be very valuable to explore, to 
make sure that you are actually selecting managers for their 
management competencies and not simply because you want to give 
them a raise, and in fact they deserve a raise. So make it an 
option so that people can get the money they deserve and still 
maintain the competencies that you need.
    Senator Durbin. I would just close with this. I think the 
student loan forgiveness issue is a generational issue that we 
have to deal with because I think many of us in Congress making 
the decisions on student loan forgiveness never lived through 
what kids are living through today.
    Mr. Stier. Right.
    Senator Durbin. Maybe we can identify with our children who 
are living through it. My daughter is, in just a few weeks, 
completing her 28-year educational training. [Laughter.]
    And it turns out that, and God bless her, she has done 
wonderful things, but it turns out the meter has been running, 
and when she finishes, as we discussed over the weekend, she 
has to think about a job she can take where she can pay back 
that student loan.
    Mr. Stier. Right.
    Senator Durbin. It is just a fact of life, and if you do 
not deal with it, then, frankly, you are going to deal the 
Federal Government out of the picture.
    Mr. Stier. Right.
    Senator Durbin. Thank you all for your testimony.
    Senator Voinovich. Thank you. Congresswoman Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    Just to you, General McIntosh, quite apart from issues of 
fairness, I am almost frightened by the extent to which the 
defense of the United States today is dependent upon the Guard 
and Reserves. So if, for no other reason, if we want to 
continue to recruit people to defend our country, we have got 
to begin to deal, in some way, with the questions you raise.
    One thing we have not faced is the extent to which the 
Reserves and the Guards are race- and class-based; people who 
have gone to get expertise, to get training opportunity that 
they did not have in this society. My son would not have gone 
into the Reserves or the Guard because he is a middle-class boy 
that went to college. There are such people who go into the 
Guard and Reserve.
    But one of these days we are going to look and see who goes 
and who does not go, and I think we will come particularly to 
understand that we owe them much more than the waving of the 
flag, and even in the bills that we put forward, and certainly 
we have got to begin to deal with this differential problem in 
some way.
    I have a question for Ms. Sistare and Dr. Kelman. I believe 
you were here and heard testimony of the previous panel that we 
are not using the flexibility we have. There may be a number of 
reasons for that, but one reason that clearly came out was the 
win-lose situation that the agency faces, that there is one pot 
of money, and if you go to reward employees, even with the 
existing flexibility, you are taking it out of that pot, and 
more often than not, taking it from other employees. And rather 
than do that, people simply do not move on the flexibility at 
all.
    I am asking you whether you think pay for performance and 
other changes involving pay would be better implemented and 
better received if, in fact, there were additional resources to 
accomplish this departure from what has been the norm in the 
merit system.
    Ms. Sistare. I think, definitely, the Commission definitely 
feels that adequate funding of any of these kinds of programs, 
including training, which has not been adequately or 
consistently funded over the years, is absolutely necessary to 
its being effective.
    Mr. Kelman. I very much appreciated what you said before 
about trying, as a general matter, during the earlier 
colloquies, to look for win-win solutions. It has been really 
tough in this area, and it has been very frustrating looked at 
from Boston to see all of the partisanship and so forth that 
has taken place here.
    I think, inevitably, money is not going to be unlimited. 
There, inevitably, are going to be some choices and sometimes 
tough choices. Obviously, more money greases things. I guess I 
am personally inclined partly to agree with Ms. Sistare that, 
for me, actually a priority for additional funds, in addition 
possibly to some versions of pay for performance--I do not want 
to go into great lengths of my own views on this, I have sort 
of mixed views, but be that as it may--I think more money for 
training, which our friends on the Appropriations Committees, 
both in the House and Senate, usually is the very first thing 
that gets taken out of any agency's budget I think is 
extraordinarily ``penny wise and pound foolish.''
    I guess we are in a tight budget environment, and, yes, it 
would be wonderful to have all of this money to give out and, 
yes, that would make things easier, but I also think we have to 
choose priorities, for whatever pot of money we have, what is 
going to do the most to create a public service that attracts 
and retains good people. I think, at the end of the day, there 
are going to be some tough choices. We are not simply going to 
be able to say let us give more to everybody.
    So I like the idea of trying to look for win-wins. I think 
we should do it to the maximum extent we can, but also funds 
are limited.
    Mr. Stier. Congresswoman, I think, bottom line, that the 
Federal Government has insufficiently prioritized the Federal 
workforce, and that includes not only resources, but clearly 
focusing on good management. I think we have dug ourselves very 
much into a hole that we need to fill in and to do better with, 
and that in the long term, those kinds of investments, as we 
have seen from a lot of private-sector data and public-sector 
exploration, pay off.
    And so I do believe that we do need to see more resources, 
and I think, ultimately, for pay for performance to work. A lot 
of the skepticism that was raised is the right skepticism, but 
it is the right goal for us to be trying to achieve, and we 
should be figuring out how to get there through a win-win 
strategy such as the one that you were suggesting we need to 
pursue.
    Ms. Norton. And, Dr. Kelman, when I said win-win, that does 
not mean that dollar-for-dollar you get as much here as you get 
there. Win-win also means lose-lose; that everybody loses 
something usually, as well. And I will tell you what win-lose 
is. If you are trying to do something in the workforce that has 
not been done in 100 years, and you begin by giving $25,000 to 
political appointees, that is win-big lose. Or you begin by 
saying pay for performance and no additional money, but it 
comes out of your pot, that is win-lose.
    Now, I am just looking for not--give me an equal amount of 
money here. If the world were so simple, that would not be win-
win, it would be an inexhaustible supply of resources, and we 
would have no problems.
    This takes deeper thinking than I am seeing come forward. 
And simply saying, ``well, you are not always going to get more 
money, gets us back to where they are.''
    Let me ask you a question, Dr. Kelman, further. I think you 
or somebody cited a very good example that brings to mind 
something that some of us are working on. Was it you, Dr. 
Kelman, that cited the example of a brochure that says ``only 
former and current employees''?
    Mr. Kelman. Yes, it is actually a job announcement.
    Ms. Norton. Let me try that one on win-win. Because I would 
agree, you see, I am looking for some way to streamline and 
modernize the gargantuan civil service system, while being fair 
enough to employees so that they are stakeholders also in that 
system, and I have never seen any system, particularly systems 
I know in the private sector, that worked any other way.
    I am still a professor of law at Georgetown, but when I was 
a free citizen, I was on the board of three Fortune 500 
companies, and I never saw them do anything except on a win-win 
basis. Some of those companies were unionized and some were 
not, but they did understand how to get personnel on-line with 
you, and if you did not, you did not have a system.
    So I agree that if you are a bright, young person, and you 
see you have to already have been a government employee, it 
makes you pretty cynical.
    Some of the employees that would be most valuable to us are 
people at mid level who have considerable expertise. Both of 
you, Mr. Taylor and Mr. Stier, in effect, are talking about 
some of those employees.
    One of the things some of us are considering is a bill that 
would invite people at mid level to apply, but it would be open 
to employees who are not Federal employees and to employees who 
are Federal employees.
    Mr. Kelman. You mean apply for like a Presidential 
Management Internship----
    Ms. Norton. Oh, no.
    Mr. Kelman. No. What are you thinking?
    Ms. Norton. Mid level. I am talking about attracting people 
at mid level. You know that some of those people are in the 
private sector. You know for sure some of them are in the 
private sector. You know some of them are kind of fed up with 
the private sector. They would like to do some public service 
work. You want to bring them in. You even want to bring them in 
at mid level.
    But the reason--and I have no idea--you have this brochure 
that says ``former and current employees only'' is because 
there is perceived to be a competition between these two kinds 
of employees. Why not eliminate the competition, and say those 
of you at mid level, whether you are in the government or out 
of the government, whether you are, I do not know, a GS-12 in 
the government or you come from Metropolitan Life Insurance 
Company, you can compete for this series of jobs; would that be 
something----
    Mr. Kelman. Oh, absolutely. No, I mean, it would make no 
more sense to exclude current Federal employees from competing 
for jobs than it is to limit it. So, no, obviously both groups 
should be there, and I guess the worry has been that with more 
and more people, younger people, are not looking any more in 
the same way as our generation did for one career your whole 
life, whatever, just stay in an organization, they are moving 
around a lot, that the government is cutting itself off from a 
potential source of talent.
    And some people who want to have, as you indicated, a 
period of doing public service, but maybe, for whatever reason, 
feel they cannot do it their whole career, give them a chance, 
but certainly not at the expense of saying we are going to 
exclude the existing Federal employees.
    Mr. Taylor. I would like to make the comment that on that 
7- or 8-foot-long job description, right near the bottom it 
says, ``Do not E-mail or fax or call on this position. Only 
mail your resume.''
    And so what happens at the mid level for talented 
individuals is, by the time that system works for that person, 
it could be 3 or 4 months, in some cases I have had Federal 
applicants come up to me at these different conferences and say 
9 or 10 months later they get a call back that says they are 
interested in talking to you. Well, you are 7 months into a new 
job when you get that request.
    So it is a balance here is that it is, for Federal 
employees, they understand the process and the expectation. So 
they are the perfect candidate for the job, which is why there 
is a lot of insular trading of employees back and forth between 
the agencies.
    To get somebody from the outside in the private sector, we 
are going to have to clean up some of these systems, get the 
momentum going, which is a lot of what Max has been working on 
with the Partnership, and working with Monster, so that we can 
get these candidates in, in a timely fashion, get them 
responded to so we keep them warm and ready to go to work.
    Mr. Kelman. I once actually asked Jeff what percentage of 
the jobs advertised on Monster are entry level versus nonentry 
level, and I think you told me it was like over 90 percent are 
nonentry-level jobs.
    Mr. Taylor. Entry-level jobs, like very senior executive 
jobs, are not listed, for the most part. Entry-level jobs, most 
companies, whether it is hubris or not, think that entry-level 
workers will come to them in droves anyway. That is really 
changing, as we speak, as more campus recruiting takes center 
stage.
    Ms. Norton. The Chairman has a vote.
    I want to say to General McIntosh and to the Chairman, one 
of the reasons why I am so attuned to what you had to say is 
that I have people in Iraq, people who are second per capita in 
Federal income taxes. They have nobody here in the Senate and 
only me in the House, and I do not intend to see one more 
denial to them.
    And I want to say to you, Mr. Taylor, there are some 
agencies where you can only apply on-line. So we have got to 
have the balance, too, because not everybody in the world is 
computer literate, and we are not only applying for those kinds 
of jobs. We need equity for those who are technically 
competent----
    Mr. Taylor. Absolutely.
    Ms. Norton [continuing]. And those who might be competent 
to come to the Federal Government, but are not on-line.
    Thank you very much, Madam Chairman.
    Mrs. Davis. Thank you, Ms. Norton.
    I thank you all. It has been a very long hearing, and thank 
you for your patience. If there are no further questions, there 
may be additional questions for the record, which we will 
submit to you in writing. And for the information of my 
colleagues, the hearing record will remain open until the close 
of business Thursday afternoon.
    With that, this hearing is adjourned.
    [Whereupon, at 1:09 p.m., the Subcommittees were 
adjourned.]
                            A P P E N D I X

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