    [Senate Hearing 108-185]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-185

     TRANSFORMING THE DEPARTMENT OF DEFENSE PERSONNEL SYSTEM: FINDING THE
                                 RIGHT APPROACH
    =======================================================================

                                    HEARING

                                   before the

                                  COMMITTEE ON
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  JUNE 4, 2003

                                   __________

          Printed for the use of the Committee on Governmental Affairs

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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
                      Ann C. Fisher, Deputy Staff Director
         Joyce Rechtschaffen, Minority Staff Director and Chief Counsel
                      Lawrence B. Novey, Minority Counsel
                         Darla D. Cassell, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Collins..............................................     1
        Senator Levin................................................     3
        Senator Voinovich............................................     5
        Senator Akaka................................................     7
        Senator Coleman..............................................     8
        Senator Fitzgerald...........................................     9
        Senator Lautenberg...........................................    10
        Senator Stevens..............................................    11
        Senator Carper...............................................    12
        Senator Sununu...............................................    13
        Senator Durbin...............................................    14
        Senator Pryor................................................    16

                                   WITNESSES
                            Wednesday, June 4, 2003

    Hon. Donald H. Rumsfeld, Secretary, U.S. Department of Defense;
      accompanied by General Richard B. Myers, Chairman of the Joint
      Chiefs of Staff, U.S. Department of Defense; David S.C. Chu,
      Ph.D., Under Secretary of Defense for Personnel and Readiness,
      U.S. Department of Defense; and Admiral Vern Clark, Chief of
      Naval Operations, U.S. Navy....................................    16
    Hon. David M. Walker, Comptroller General, U.S. General
      Accounting Office..............................................    35
    Bobby L. Harnage, Sr., National President, American Federation of
      Government Employees, AFL-CIO..................................    41
    Paul C. Light, Professor of Public Service, New York University..    45

                         Alphabetical List of Witnesses

    Harnage, Bobby L., Sr.:
        Testimony....................................................    41
        Prepared Statement...........................................    74
    Light, Paul C.:
        Testimony....................................................    45
        Prepared Statement with an attachment........................    95
    Rumsfeld, Hon. Donald H.:
        Testimony....................................................    16
        Prepared Statement...........................................    55
    Walker, Hon. David M.:
        Testimony....................................................    35
        Prepared Statement...........................................    60

                                    Appendix

    International Federation of Professional and Technical Engineers,
      prepared statement.............................................   130
    Letter dated June 3, 2003 to Senator Akaka from the Senior
      Executives Association, prepared statement.....................   134
    Susanne T. Marshall, Chairman, Merit Systems Protection Board,
      prepared statement with an attachment..........................   138
    Association of Civilian Technicians, Inc., prepared statement....   147
    Information from:
        Mr. Chu requested by Senator Levin...........................   156
        Mr. Rumsfeld requested by Senator Levin......................   157
        Admiral Clark requested by Senator Akaka.....................   158
    Questions and Responses for the Record from:
        Mr. Rumsfeld submitted by Senator Spector....................   164
        Mr. Chu submitted by Senator Voinovich.......................   167
        Mr. Rumsfeld submitted by Senator Shelby.....................   168
        Mr. Rumsfeld submitted by Senator Akaka......................   169
        Mr. Rumsfeld submitted by Senator Carper.....................   177
        Mr. Rumsfeld submitted by Senator Voinovich..................   179
        Mr. Rumsfeld submitted by Senator Lautenberg.................   180
        Mr. Walker submitted by Senator Voinovich and Carper.........   183
        Mr. Harnage submitted by Senator Voinovich...................   188
        Mr. Light submitted by Senator Voinovich.....................   192

     TRANSFORMING THE DEPARTMENT OF DEFENSE PERSONNEL SYSTEM: FINDING THE
                                 RIGHT APPROACH

                                  ----------

                            WEDNESDAY, JUNE 4, 2003

                                           U.S. Senate,
                             Committee on Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 9:37 a.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Susan M.
    Collins, Chairman of the Committee, presiding.
        Present: Senators Collins, Stevens, Voinovich, Coleman,
    Specter, Fitzgerald, Sununu, Levin, Akaka, Durbin, Carper,
    Lautenberg, and Pryor.

                 OPENING STATEMENT OF CHAIRMAN COLLINS

        Chairman Collins. The Committee will come to order.
        The primary goal of the Federal personnel system should be
    the recruitment and retention of the highest quality workforce
    to serve the people of the United States. Unfortunately, the
    antiquated system now in place does not always achieve that
    goal. Although there are many superb Federal employees,
    bureaucratic barriers make it hard to reward their efforts and
    it has become increasingly difficult for agencies to attract
    and retain employees with technical expertise or special
    skills.
        The Department of Defense has delivered to Congress a far-
    reaching proposal to grant the Secretary of Defense broad new
    authority to dramatically restructure the Department's civilian
    personnel system, a system that covers some 730,000 Federal
    workers. The Department contends its proposal will provide the
    flexibility and agility needed to respond effectively to
    changes in our national security environment.
        To accomplish this objective, the administration proposes
    giving the Secretary of Defense not only the significant
    personnel flexibilities that Congress granted to the Secretary
    of Homeland Security, but also additional authority to
    unilaterally waive several other personnel laws.
        Although the administration has submitted a bill that
    affects virtually every significant aspect of the personnel
    system, three personnel flexibilities are of particular
    importance to the Department.
        First, the Department seeks authority to replace the
    current general schedule 12-grade pay system with a
    performance-based system through which workers would be
    compensated according to merit, not longevity. Second, the
    Department wants the authority to conduct on-the-spot hiring
    for hard-to-fill positions. And third, the Department seeks the
    authority to raise collective bargaining to the national level
    rather than negotiating with approximately 1,300 local
    bargaining units.
        Over the past 4 weeks, Senator Voinovich, who has been a
    leader on human capital issues, and I have reached out to a
    wide variety of interested parties in an attempt to put
    together a proposal that would be both fair and effective. We
    have been joined in our efforts by Senator Sununu, who has long
    had an interest in our Federal workforce, and by Senator Levin,
    who as the ranking member of the Senate Armed Services
    Committee and as a senior Member of this Committee brings a
    wealth of knowledge and insight to this process. Their
    assistance and support have been invaluable and I want to thank
    them for their efforts.
        I had intended to offer our consensus proposal as an
    amendment to the Senate defense authorization bill. I was
    dismayed to learn, however, that our amendment was not deemed
    relevant by the Parliamentarian and, therefore, would be ruled
    out of order. The House, however, has included legislation
    similar to DoD's plan as part of its version of the defense
    authorization bill.
        Quite simply, I believe that civil service reform of this
    magnitude is far too important an issue for the Senate to
    remain silent. As the conference on the defense authorization
    bill begins, I hope that our efforts in this Committee, which,
    after all, has jurisdiction over the civil service laws, will
    help shape the outcome of the personnel provisions in the
    Department of Defense bill.
        Our legislation would, among other things, provide the
    Secretary of Defense with the three pillars of his personnel
    proposal and thus would allow for a much-needed overhaul of a
    cumbersome, unresponsive system. Our bill would grant the
    administration's request for a new pay system, on-the-spot
    hiring authority, and collective bargaining at the national
    level.
        In addition, our legislation would enable the Secretary to
    offer separation pay incentives for employees nearing
    retirement as well as to offer special pay rates for highly-
    qualified experts, such as scientists, engineers, and medical
    personnel. It would also help mobilized Federal civilian
    employees whose military pay is less than their Federal
    civilian salaries.
        But we would not propose to give the Secretary all that he
    asked for. Instead, we have attempted to strike the right
    balance between promoting a flexible system and protecting
    employee rights.
        For example, our bill takes a different approach to the
    issue of employee appeals. In contrast to the DoD proposal, our
    legislation does not grant the Secretary the authority to omit
    the Merit Systems Protection Board altogether from the appeals
    process. Instead, our legislation calls for a gradual
    transition from the MSPB to a new internal appeals process and
    requires the Department of Defense to consult with the MSPB
    before issuing the regulations creating the new process. In
    addition, our legislation retains the MSPB as an appellate body
    and gives the employee the option of judicial review if that
    employee is adversely affected by the final decision.
        Our purpose is to ensure that the civilian employees at the
    Department of Defense are entitled to safeguards similar to
    those afforded other employees in the Federal workforce.
        Another important difference is that our bill does not
    grant the authority to the Secretary to waive the collective
    bargaining rights of employees. The Department has repeatedly
    stated that it has no desire to do this. We take the Department
    at its word and, therefore, do not grant the broad authority it
    does not intend to use. Instead, our legislation places
    statutory deadlines of 180 days on the amount of time any one
    issue can be under consideration by one of the three components
    of the Federal Labor Relations Authority. This alone should
    improve the timeliness of the bargaining process and prevent
    the occasional case from dragging on for years.
        The bottom line is, I believe that our proposed legislation
    would give the authority to the Secretary that he needs to
    manage and sustain a vibrant civilian workforce of some 700,000
    strong. We are working hard to build a consensus on this
    legislation and to resolve these complicated issues in a fair
    and equitable manner. After all, the changes that we make in
    the Department's personnel system will affect more than one-
    quarter of the total Federal civilian workforce. We need to get
    this right.
        I welcome our witnesses today. I look forward to hearing
    their views and insights on this important issue. As our
    Committee Members can see, we have an extremely distinguished
    panel before us.
        Before I turn to our first panel of witnesses, I would like
    to call on my colleagues for opening statements. I would like
    to begin with Senator Levin, whose help has been invaluable in
    drafting the consensus legislation that we have introduced. He
    has a great deal of experience in Department of Defense issues
    as a result of his ranking member status on the Armed Services
    Committee and is actually the senior Member on this Committee,
    as well, so I am very appreciative of his efforts and I would
    like to call on him now for any opening remarks.

                   OPENING STATEMENT OF SENATOR LEVIN

        Senator Levin. Thank you, Madam Chairman. Thank you for
    calling today's hearing. With this Committee's jurisdiction
    over the Federal civil service system comes the responsibility
    for reviewing and considering proposed changes to the system,
    and I particularly appreciate our Chairman's determination to
    address this issue completely and fairly. This is the way she
    approaches all issues. She has used this approach, as expected,
    with this issue as well. This is an extremely complicated issue
    with a long history, but I commend her for her determination to
    look at this objectively and fairly and comprehensively.
        I also join her in welcoming this very distinguished panel.
    The importance of the issue before us is demonstrated by the
    fact that they are here today. In the midst of all their other
    extremely significant responsibilities, they are here today to
    talk about an issue which obviously, just by their presence,
    illustrates its significance.
        On April 11 of this year, the administration submitted a
    legislative proposal that would fundamentally alter the Federal
    civil service system by authorizing the Secretary of Defense to
    waive provisions of law governing employee performance, pay and
    allowances, labor relations, hiring and firing, training, pay
    administration, oversight, and appeals. The administration
    proposal did not include any specific legislative procedures or
    processes for the new civilian personnel system, however, other
    than the requirement that the new system be ``flexible and
    contemporary.''
        The Federal civil service system was established more than
    a century ago to replace a patronage system that was
    characterized by favoritism and abuse. As we contemplate the
    possible reform of that system, we must take care that we do
    not allow those abuses to resurface.
        The Defense Department proposal would give the Secretary of
    Defense extraordinarily broad license to hire and fire
    employees and to set employee compensation virtually without
    legislated restrictions or constraints. This would not only be
    the greatest shift of power to the Executive Branch in memory,
    it would also put us at risk of a return to some of the abuses
    of the past.
        While it is true that this proposal would preserve the
    merit system principles, it is not just the principles which
    are important, but also the processes and procedures by which
    these principles are implemented and enforced. If these
    processes and procedures are toothless, the merit system
    principles could become empty letters.
        In short, I believe that we need to build some protections
    into any new system to avoid a return to the patronage,
    political favoritism, and abuse that characterized Federal
    employment before the advent of the civil service system. It is
    our responsibility to counterbalance the natural temptation for
    future Department of Defense officials to reward loyalty over
    quality of performance and provide pay and promotions to those
    who tell senior officials what they want to hear. I join in
    Chairman Collins' proposal because I believe that it would go a
    long way towards building these critical protections into any
    new system.
        Department of Defense officials have stated that they need
    this new authority so that they can establish an expedited
    hiring process and institute a pay-for-performance system based
    on the pay banding approach used under several Department of
    Defense pilot programs. However, the administration's proposal
    does not even mention the words expedited hiring, pay for
    performance, or pay banding, let alone give any indication of
    how the new system would work.
        The current civil service system, as our Chairman has
    mentioned, is not perfect, and I agree with her and join with
    her in stating that it can be improved. Indeed, every serious
    review of the current system, including both the Clinton
    Administration's National Performance Review and the recent
    report of the Volcker Commission, has concluded that
    improvement is needed.
        For this reason, I supported a series of so-called
    demonstration programs, including the Defense Acquisition
    Workforce Pilot Program and the Defense Laboratory Pilot
    Programs, under which Congress has authorized the use of pay
    banding, rapid hire procedures, and other personnel
    flexibilities by the Department of Defense. Those demonstration
    projects are widely viewed as having been successful and have
    contributed to the Department's ability to attract and reward
    qualified personnel.
        On the basis of that experience, it is reasonable to
    consider extending similar authority to other areas of the
    Department of Defense's civilian workforce. If we are going to
    do so, however, we have a responsibility to go beyond slogans
    and to authorize specific changes to address specific problems.
    If we throw out the old system without saying what we are
    replacing it with, we will find ourselves revisiting this issue
    again and again, year after year, as we try to patch together
    answers to questions that we should have answered in the first
    place.
        That is again why I so appreciate the constructive approach
    that the Chairman has taken to this issue and have cosponsored
    the legislation which she has introduced. It does offer
    specific solutions to specific problems. Our bill would give
    the Department of Defense the flexibility that it seeks to
    establish pay banding, rapid hire authority, a streamlined
    appeal process, and national level bargaining, but it would do
    so without giving up the employee protections that are needed
    to prevent abuse and are needed to make the civil service
    system work. That is real reform. It is workable reform.
        Again, I want to thank our Chairman for her extraordinarily
    constructive, detailed, and involved effort here and I again
    welcome our witnesses.
        Chairman Collins. Thank you very much, Senator Levin.
        I would now like to call on Senator Voinovich, who is the
    Subcommittee Chairman with jurisdiction over the civil service
    laws and has been the Committee's leader on human capital
    issues. He has worked very hard on this issue, as I mentioned
    in my opening statement, and I am delighted to call on him for
    his opening remarks.

                 OPENING STATEMENT OF SENATOR VOINOVICH

        Senator Voinovich. Thank you, Madam Chairman. I thank you
    for holding this hearing on the proposed National Security
    Personnel System for the Department of Defense. I welcome all
    of our witnesses, and I am especially grateful that Secretary
    Rumsfeld, General Myers, Admiral Clark, and Under Secretary Chu
    are able to join us today.
        Mr. Secretary and General Myers, I commend you for your
    outstanding leadership during Operation Iraqi Freedom. Our
    world is a safer place because of the coalition you led to
    liberate the Iraq people and prevent a tyrant from using
    weapons of mass destruction.
        During Desert Storm, I was Governor of Ohio and Commander
    in Chief of the Ohio National Guard, and because of that, paid
    particular attention to the way we waged war. Unfortunately, we
    lost 19 Ohioans in that conflict. The advances in military
    capabilities over the last 12 years are incredible. When I
    recently visited Wright-Patterson Air Force Base in Dayton, I
    was impressed at how proud General Lyles and his staff were of
    the technology that was used in Operation Iraqi Freedom, such
    as the Global Hawk and Predator Drone.
        My discussions with General Lyles took place at a field
    hearing my Subcommittee conducted to examine the status of the
    civilian staff of the Department of Defense. It is hard to
    believe that there are 740,000 civilian workers at DoD. That is
    about 40 percent of our entire Federal workforce. And as I
    noted that day, we must ensure that DoD civilians have the
    tools and resources they need to perform their critical
    mission. I was pleased that Under Secretary Chu testified along
    with Comptroller General David Walker, and I am glad that they
    are with us again today.
        Madam Chairman, as you know, I have devoted a significant
    amount of my time to improving the culture of the Federal
    workforce. Over the last 4 years, my Subcommittee has held 13
    hearings on the Federal Government's human capital challenges.
    I have worked with some of the Nation's top experts on public
    management to determine what new flexibilities are necessary to
    create a world class 21st Century workforce. Some of these
    include at Brookings Institution, the National Academy of
    Public Administration, the Volcker Commission, Harvard's
    Kennedy School of Government, various Federal employee groups,
    and members of this administration.
        Four years ago, I was the primary sponsor of an amendment
    to the fiscal year 2000 defense authorization act that
    authorized 9,000 voluntary early retirement and voluntary
    separation incentive payments through this fiscal year. Of
    those 9,000 slots, 365 have been used at Wright-Patterson Air
    Force Base in Ohio to start reshaping their workforce. Even for
    such a modest reform proposal, I must tell you, it was like
    going through the Maginot Line to achieve this important
    authority for the Department of Defense. I will never forget
    the grief I went through just to get that little bitty change.
    [Laughter.]
        I am gratified at how far we have come since 1999 and I am
    pleased that workforce reshaping reforms have helped make a
    difference for the Department. However, I share the concern of
    the Chairman and Senator Levin that some of the provisions of
    the current proposal go too far.
        For example, the proposed removal of oversight authority
    and jurisdiction of the Office of Personnel Management and the
    Merit Systems Protection Board. I am also concerned, as Mr.
    Walker has observed at previous hearings, that DoD does not yet
    have the appraisal mechanisms in place to allow for a
    successful pay-for-performance system. Finally, as Dr. Chu
    knows, I am concerned about DoD's announced staffing
    reductions. These reductions are already impacting the
    Department's ability to reshape the civilian workforce, as was
    testified to by General Lyles at Wright-Patterson Air Force
    Base.
        Madam Chairman, on many occasions in the Governmental
    Affairs Committee hearings, I have referred to the observations
    of former Defense Secretary James Schlesinger, a member of the
    U.S. Commission on National Security in the 21st Century,
    concerning the importance of Federal employees in national
    security agencies. Secretary Schlesinger noted that, ``Fixing
    the personnel problem is a precondition for fixing virtually
    everything else that needs repair in the institutional edifice
    of the United States national security policy.''
        Mr. Secretary, I recognize we have different opinions on
    some of the key issues in your proposal, but I commend you for
    your zeal and your commitment. I know that because of your
    dedication to solving this problem, we will finally make some
    real progress in this area. While I have some reservations
    about the breadth and depth of DoD's initial proposal and the
    House bill, I am delighted you are here and that we are finally
    tackling the human capital challenges at the Department of
    Defense. It is long overdue. Your presence here and your
    efforts in the House indicate that the light bulb has gone on
    and substantial progress will be made as a result of your
    efforts.
        In that regard, Senators Collins, Levin, Sununu, and I have
    introduced S. 1166, the National Security Personnel System Act.
    We believe that our bipartisan legislation helps your efforts,
    although taking a different tack than your proposed National
    Security Personnel System. With the new threats of the post-
    September 11 world, it is appropriate that the Department of
    Defense is transforming its capabilities in force, and to
    achieve that goal, it is imperative the Department have the
    ability to reshape its workforce.
        As a former mayor and governor, I know effective human
    capital management requires communication, collaboration,
    patience, and time. I believe managers should work with
    employees to establish policies that can help an agency
    accomplish its mission. I am pleased that the Department of
    Homeland Security is working with its employees to establish
    its personnel system, and I am pleased that some of the
    provisions for mandatory interaction between management and
    labor are contained in your proposed personnel system. It is
    extremely important that the employees be involved in shaping
    the new system.
        Madam Chairman, I am sure that we are going to have a
    lively and engaging discussion with our distinguished witnesses
    today. Thank you for being here.
        Chairman Collins. Thank you, Senator Voinovich.
        I am now pleased to call on the Ranking Member of the
    Subcommittee, another long-time leader on civil service issues,
    Senator Akaka.

                   OPENING STATEMENT OF SENATOR AKAKA

        Senator Akaka. Thank you very much, Madam Chairman. I want
    to thank you for your personal attention to this issue and for
    the work you have done in forging a bipartisan bill.
        I also want to thank Senator Levin and Senator Voinovich
    for your hard work and your efforts on this issue. The manner
    in which you have addressed the DoD personnel proposal is
    testament to the respect and commitment this Committee has for
    our Nation's Federal workforce.
        I also wish to join my colleagues in extending my welcome
    and appreciation to our very distinguished witnesses.
        About the same time that the Department unveiled its
    personnel proposals, the GAO reported that DoD's human capital
    strategic plans lacked key elements. Most of the Department and
    its components' human capital goals, objectives, and
    initiatives were not aligned with the overarching missions of
    the organization. In addition, the plans lacked information on
    skills and competencies needed to carry out the Department's
    missions. GAO found that the Department's civilian workforce
    shrank 38 percent from 1989 to 2002 and positions were
    eliminated without regard to the skills and competencies need
    to carry out agency mission. The lesson learned was that there
    must be strategic planning before taking major personnel
    actions.
        I just don't see how providing the Department the wide-
    ranging, broad authority it seeks without appropriate
    safeguards in place will appropriately address the shortcomings
    noted by GAO. I fear that approving DoD's proposal or the House
    provisions would give the Department of Defense the license to
    conduct surgical strikes on the civilian workforce.
        For example, DoD seeks to waive Chapter 75 and 77 of Title
    5 dealing with adverse actions and employee appeals. This would
    allow the Department to waive key employee rights, namely the
    right to a hearing on the record before an independent third
    party, current discovery rights, and the right to counsel.
        It is unclear why the Department needs the authority to
    waive such important employee protections. Congress guaranteed
    these safeguards to ensure that the Federal workforce is
    treated fairly, in an open and transparent manner, and free
    from political pressures. It is inappropriate to request such
    authority without specific guidelines, credible management
    plans, accountability to Congress, and transparency of
    decisions.
        As the ranking member of the Armed Services Readiness
    Subcommittee and co-chairman of the Senate Army Caucus, I am
    committed to a strong and viable military, and as the Ranking
    Member of the Governmental Affairs Subcommittee I am
    responsible for the Federal appeals process, and equally
    committed to protecting the rights of Federal employees.
        Madam Chairman, I appreciate you holding today's hearing
    and I look forward to the testimony and discussion that will
    follow. Thank you.
        Chairman Collins. Thank you, Senator.
        I am now pleased to call on Senator Coleman, who has a
    great deal of experience with public employees as a result of
    serving as mayor. Senator Coleman.

                  OPENING STATEMENT OF SENATOR COLEMAN

        Senator Coleman. Thank you, Madam Chairman. I want to join
    in thanking you for your leadership and your willingness to
    take on this tough issue.
        This is a tough issue. When I got elected mayor in 1993, I
    was told that the toughest, biggest problems I was going to
    have were going to be on the personnel side and the human
    resources side and folks were right. So I applaud you for your
    willingness.
        The reality is that we shouldn't be accepting a lesser
    standard of performance in government. It was very hard for me
    as a mayor to fire employees who weren't performing, and
    somehow this sense that we have a lesser standard that we will
    tolerate more insufficiency of performance on the public side
    shouldn't be.
        So the challenge, then, is how do we do that? How do we
    maximize the human capital? How do we provide, as Senator
    Voinovich talked about, a world class 21st Century workforce
    and at the same time provide the kind of balance that we need?
    I want to applaud the Secretary for taking this on.
        People talk about making change in government. It is not
    like a race car going around the track. It is like getting on
    an ocean liner and just kind of pointing in the right direction
    and hopefully it gets there. We have got to be able to move
    faster than that. We have got to be more efficient than that.
    We have got to be more capable than that. The American public
    deserves that.
        So I want to applaud the Secretary. We certainly need to
    retain safeguards against arbitrary management actions. I don't
    think there is any question about that. We need to increase
    hiring flexibility and allow managers to reward the best
    employees. The American economy runs on paying for performance
    and rewarding quality and we should expect no less from
    government.
        I look forward to hearing the testimony. I look forward to
    working with the Chairman in a bipartisan way, the other
    Members of the Committee, on the proposal the Chairman has set
    forth. I think we can provide that balance, we can provide that
    equilibrium, but we need to make changes. The current system is
    not one that Americans should accept. So again, I want to
    applaud the Secretary for bringing forth this proposal.
        Chairman Collins. Thank you, Senator Coleman.
        I am now delighted to call on the Senator from Illinois,
    Senator Fitzgerald.

                OPENING STATEMENT OF SENATOR FITZGERALD

        Senator Fitzgerald. Thank you, Madam Chairman. Mr.
    Secretary, General Myers, Admiral Clark, and Dr. Chu, I want to
    thank you for appearing here today and also congratulate you on
    the success in Iraq. It is an outstanding job and an important
    battle won in the longer war on terrorism.
        The subject of today's hearing is transforming the
    Department of Defense's personnel system for the 21st Century.
    This is a vital issue affecting our national security and I
    want to thank Chairman Collins for holding this timely and
    important hearing today.
        Mr. Secretary, you are to be commended for undertaking a
    monumental challenge at a challenging time in our Nation's
    history. That challenge is transforming our defense structure
    and bringing sound 21st Century management principles to a
    monolith of the Cold War. Our Nation is deeply engaged in the
    global war on terrorism. To fight and win this war, the
    Department of Defense needs sufficient flexibility in its
    civilian personnel system to expedite hiring, reward
    performance, and assign employees as necessary.
        The terrorists who operate from the caves and threaten our
    country are not mired in bureaucracy. We cannot allow our red
    tape to become an ally of the al Qaeda. Therefore, more needs
    to be done to make the Department of Defense as agile as
    possible to confront these emerging threats, and reforming the
    Department's personnel process is an important step in that
    direction.
        It is important for the Senate to have a healthy debate
    over the precise dimensions of the proposed National Security
    Personnel System. However, it is also important to recognize
    the main objectives the proposed system is designed to
    accomplish.
        First, the National Security Personnel System would provide
    the Department of Defense with flexibility to manage its
    employees. This will help the military to meet the rapidly
    changing security threats of the Nation by allowing managers to
    utilize employees' skills and services more effectively.
        Second, it would strengthen the Department's performance
    and improve its financial management by rooting out fraud and
    abuse. When former Secretary of Defense James Schlesinger and
    Admiral Henry Trane testified last year before Congress, they
    stated that fixing personnel problems would pave the way for
    needed reforms in U.S. national security policy.
        Third, it would provide for a swift and efficient defense
    support structure. The current civil service system uses a one-
    size-fits-all approach that does not suit the daily demands on
    the military for agility in today's security environment.
    Presently, it can take up to 3 months or longer for the
    Department to hire a civilian employee. The long hiring and
    promotion process discourages highly qualified candidates while
    at the same time impedes the mission of the Department.
        I look forward to working with this Committee on
    legislation that would provide much needed flexibility to the
    Department of Defense to organize its more than 700,000
    civilian employees.
        Thank you for being here today, Mr. Secretary, and I look
    forward to your testimony. Thank you, Madam Chairman.
        Chairman Collins. Thank you, Senator. Senator Lautenberg.

                OPENING STATEMENT OF SENATOR LAUTENBERG

        Senator Lautenberg. Thank you very much, Madam Chairman. I
    don't have a formal statement. I will just very quickly say
    that, before we get into the hard part of this exercise, I want
    to commend Secretary Rumsfeld, General Myers, and all those who
    served to accomplish the military objective that we had. Hats
    off to you. It was very well done. We are proud of those who
    did it. That doesn't mean I don't question what some of the
    outcomes have been, but I do salute all of you, to use the
    expression.
        But I do want to discuss in some detail this suggestion
    that we transfer this huge group of employees, over 750,000, I
    believe is the number, to a different kind of a system, because
    the one that is in place doesn't work perfectly. But Mr.
    Secretary, I think you know I had a long experience in the
    corporate world before I got here and the company I helped
    start many years ago today employs over 40,000 people. It is a
    nice American success story, three poor boys who started a
    company that succeeded.
        I found one thing, that the people who work for me in
    government now who are trying this a second time--the first 18
    years, I didn't fully learn my lesson, so I came back to learn
    more--but one of the things that I have found is that the
    dedication, the commitment of those who work under the Federal
    system is unmatched. And again, I take it from my corporate
    experience, one of America's immodestly most successful
    companies, and I have seen the kind of output, throughput,
    commitment that is hard to find, and especially since a
    relatively modest wage scale is the reward for that.
        The things that do supply some satisfaction, both psychic
    and real, are the benefits, so-called, and one of those
    benefits is the permanency of the employment, the ability to
    know that you have a job until retirement comes along.
        So thank you, Madam Chairman, for the opportunity to
    express that and I look forward to hearing from our witnesses.
        Chairman Collins. Thank you. Senator Stevens.

                  OPENING STATEMENT OF SENATOR STEVENS

        Senator Stevens. Thank you, Madam Chairman. I welcome all
    of you after a job well done and I consider you to be personal
    friends. I don't think there is a stronger supporter of the
    defense establishment in the Congress than I am.
        I have served in the Executive Branch, both in civil
    service and as Presidential appointee twice, and I have been
    here through the periods of time of crisis in the past, from
    Vietnam, in particular during the Nixon fiasco. I believe that
    you are on the right track to modernize the concepts of dealing
    with personnel, civilian personnel for the Department of
    Defense, but I have got to ask you, what is the rush?
        This bill came to us right after a success in the field. To
    some people, it implies that, somehow or other, civilian
    employees were responsible for some of the things that might
    have gone wrong in that period. I don't believe that is the
    case, but those are comments I got from home.
        Beyond that, I am part of a group that was the author of
    creating a new executive civil service. The executive civil
    service concepts were to get us people trained and committed to
    public service who agreed upon request to transfer to any
    agency, including the Department of Defense, and I believe
    there have been those people in civil service who transferred
    to and from the Department of Defense. I find nothing in this
    bill that authorizes that.
        There are some laws in this bill that I don't understand. I
    do believe that management should have greater ability to hire,
    particularly in times of stress, such as wars and emergencies,
    but I do believe there is an absolute necessity for a committed
    group of people who have decided to make civil service and the
    Department of Defense their careers, who can be protected
    against political change and personnel change above them, and
    can know that we value them as civil servants. Had we not had
    such a group during the period after the Nixon resignation and
    the changes that took place then, I don't think we would have
    had a stable government. They were the backbone of our society.
        I think in this bill, there is a hint of discouragement to
    someone who is just out of college to think that he or she can
    set a goal to be a career civil servant in the Department of
    Defense. Instead, the emphasis seems to be that right now, we
    should hire the best and the brightest to do whatever job there
    is without looking anywhere to see who is in the Department
    that ought to be qualified for that job first.
        I want to work with you, Madam Chairman, as a former
    Chairman of this Committee, and I want to work with the
    Department for the change that has been recommended to the
    Appropriations Committee as to how to handle money for all
    personnel, both civilian and military. These are sweeping
    changes and I don't think there is any rush.
        I remember so well when I came here when someone told me,
    Mr. Secretary, that the Senate is sort of like the saucer in a
    cup of coffee. You pour it a little bit, what comes over from
    the House, in that saucer and see how it tastes after it has
    cooled a little bit.
        So I hope you will understand, as far as I am concerned,
    you have got a lot of great work in this bill that you
    suggested, but it is going to take some time to digest and it
    is going to take some time to hear those people who are going
    to be affected most, and they are the people who are mid-career
    right now who, I hope, some of them, at least, will make a
    decision to become career civil servants.
        I congratulate you for what you have done and I
    particularly congratulate the command of the uniformed
    services. Mr. Secretary, you and your people have just done
    such an admirable job. I told someone the other night that my
    generation was called the greatest generation. This generation
    is all volunteers. Most of us were draftees. Every single one
    of the people you commanded was there because he or she chose
    to be there. That is what I would like to see for the whole
    Department, a Department of people who choose to be there and
    know that we will protect them once they make their decision.
        I have got to go to another hearing. I thank you very much.
        Chairman Collins. Thank you very much, Senator Stevens.
        I would ask my remaining colleagues if they could give very
    brief statements, since the Secretary's schedule is tight, and
    I would call now on Senator Carper.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. Why did you say that just before I spoke?
        Chairman Collins. I apologize, Senator.
        Senator Carper. My reputation precedes me. [Laughter.]
        Mr. Secretary, it is very good to see you, and Admiral
    Clark, welcome. It is always nice to have a Navy man in the
    room. General Myers, we have seen a lot of you. We welcome you.
    And Dr. Chu, thank you for coming.
        Mr. Secretary, your back has been covered by former
    Congressman Pete Geren. He is an old colleague and we are
    delighted to see him, and we are watching carefully to see if
    his lips move when you speak, so we will see how that goes.
    [Laughter.]
        I have a prepared statement I would like to offer for the
    record, if I could, Madam Chairman.
        Chairman Collins. Without objection.
        [The prepared statement of Senator Carper follows:]
                  PREPARED OPENING STATEMENT OF SENATOR CARPER
        Thank you, Madam Chairman. I am pleased that this Committee is
    holding a hearing today on proposed changes to the Defense Department's
    civilian personnel system. As my colleagues know, these are very
    difficult issues. Those of us who served on this Committee during the
    107th Congress when we considered the Homeland Security Act should be
    especially aware of that.
        The Federal civil service was created in part to separate from the
    political process those workers who provide essential services to the
    American people. The old system, in which employees were often thrown
    out with every change in administration, bred nepotism, bribery and
    poor government service. I am concerned, then, that the Defense
    Department proposal we are considering today essentially allows the
    Secretary of Defense to remove 700,000 civilian employees from the
    civil service and put them under new work rules which can be changed at
    any time without any input from Congress.
        That said, none of us should pretend that work rules at the Defense
    Department and a number of other departments and agencies do not need
    to be studied or changed. That is why I commend Chairman Collins for
    working with Senator Levin and others to develop S. 1166, a bipartisan
    bill that allows for change within the Defense Department's civilian
    workforce but does not give the Secretary of Defense the sweeping
    authority he seeks.
        S. 1166 is far from perfect, however. In addition, the Defense
    Department has yet to demonstrate to my satisfaction the need for the
    kinds of dramatic changes they ask for. Our armed forces just finished
    fighting two very successful wars in the Middle East. The 2,000
    civilian employees at the Dover Air Force Base in Delaware who I
    represent played a significant role in both conflicts in providing the
    strategic airlift capability that brought supplies, equipment and
    personnel to the battlefield. I know of no personnel problem occurring
    at Dover or anywhere else during the conflicts in Afghanistan and Iraq
    that threatened our national security or hindered the military's
    ability to fight.
        It might well be best, in my belief, if any attempt to reform the
    civil service were a government-wide initiative. Any department--or
    agency--specific measures should be narrowly tailored to address
    specific agency needs. Unfortunately, what the Defense Department is
    asking for is far from being narrowly tailored. It is my hope that this
    Committee can continue to work in a bipartisan fashion to study what
    needs to be changed at the Defense Department and develop legislation
    that accomplishes the Department's goals in a way that is fair to
    employees. The Chairman's legislation is an excellent start and I
    commend her again for her efforts.

        Senator Carper. I am delighted that you and, I think,
    Senator Levin and others on both sides of the aisle, have
    offered legislation that deals with some of the issues that are
    going to be spoken to at today's hearing and I think this is
    especially timely, coming at the end of the war in Iraq and not
    long after military action in Afghanistan, where we can
    actually look at how the current rules with respect to
    personnel, civilian personnel, have helped or hindered our
    ability to extend our military might around the world, protect
    our security, and to make sure that our interests around the
    world are addressed.
        So this is very timely and we look forward to hearing what
    you have to say. I also want to look at it in the context of
    the authorization we provided for the new Department of
    Homeland Security, whether what they have is working well, and
    if so, how that might be extended to the Department of Defense.
        Again, Madam Chairman, most timely, and I think I did that
    in a minute.
        Chairman Collins. You did. Thank you so much.
        Senator Sununu is a cosponsor of the legislation. I
    appreciate his support and I would call upon him now.

                  OPENING STATEMENT OF SENATOR SUNUNU

        Senator Sununu. Thank you. Welcome, Mr. Secretary. No one
    will ever say of Secretary of Defense Donald Rumsfeld, he
    feared change. [Laughter.]
        But I think it is appropriate and important that that is
    the case because we have a whole new set of national security
    challenges and that has already required and will continue to
    require new organizational structures, new priorities, and new
    sets of initiatives to protect our country. I think, I believe
    most of the Committee Members recognize that and I hope they
    embrace that need for change, as well, and I think that is what
    we are here to talk about today.
        I am pleased to have supported the Chairman in working to
    craft legislation that does accomplish the goals of change and
    modernization within the DoD civil service. As you well know,
    the proposal that she has crafted is not 100 percent of what
    Defense was looking for, and we are going to talk about that
    today. But I don't for a minute believe that is because the
    motives of Defense in putting forward this proposal were bad or
    were weak in the least. This isn't about surgical strikes on
    any employees. It is not about retribution. It is not about
    blame. It is about creating a defense system that does
    transform and modernize the Pentagon and that ensures that we
    can face these new national security challenges.
        The proposal that has been offered protects their rights of
    collective bargaining and mediation and so forth, but at the
    same time, it does accomplish what I hope, I believe some of
    the principal goals of your proposal has been, and that is to
    establish a pay for performance, to establish much greater
    flexibility in hiring, which I don't think is a bad thing and I
    think will only strengthen the opportunity that the Pentagon
    creates for new entrants and, of course, move toward national
    level bargaining, which only makes common sense.
        I am excited that these changes are occurring. I think
    there is going to be a lot of work to be done, and I am sure a
    lot of give and take in making this proposal, legislation, as
    strong as it can be. I look forward to working with you and
    with Madam Chairman.
        I would finally just ask unanimous consent that I might be
    able to submit some testimony from the Federation of
    Professional and Technical Engineers, being a former engineer
    and maybe being an engineer again someday. I have appreciated
    working with the IFPTE and would ask unanimous consent to
    submit their testimony for the record.\1\
    ---------------------------------------------------------------------------
        \1\The prepared statement of the International Federation of
    Professional and Technical Engineers appears in the Appendix on page
    130.
    ---------------------------------------------------------------------------
        Chairman Collins. Without objection.
        Senator Sununu. Thank you very much.
        Chairman Collins. Thank you, Senator. Senator Durbin.

                  OPENING STATEMENT OF SENATOR DURBIN

        Senator Durbin. Thank you, Madam Chairman for this hearing,
    and I thank the Secretary and those who have gathered with him.
        Mr. Secretary, I don't know if you are aware that General
    Myers recently visited Chicago. If I am not mistaken, he was at
    the Memorial Day parade. I am sorry I couldn't join you, but I
    am happy to have had you there.
        General Myers. It was a great day. Thank you.
        Senator Durbin. I am going to submit my statement for the
    record in the interest of giving you the chance to make your
    statement. But I do believe that what is at issue here at this
    hearing is fairly fundamental. We have to answer the following
    questions. Is collective bargaining inconsistent with quality
    performance? Is membership in a union inconsistent with
    pursuing the goals of national security? Is our existing
    Federal workforce incapable of meeting the challenges of the
    21st Century?
        I think those are all fundamental questions. We debated
    some of them in the course of creating the Department of
    Homeland Security. We will debate them again today.
        I think those who view collective bargaining in a negative
    context see it as part of bureaucracy, featherbedding, a
    contentious work atmosphere. But there are positive sides to
    this which I think we must not overlook. It really does, in a
    way, give us a chance to create professional employees who are
    rewarded without fear of political retribution and unfair
    treatment by their superiors. It also dignifies work. It says
    to people, you will have a voice in your destiny. You are not
    just a pawn to be moved on a board, taken off when necessary,
    put back on when necessary. You have a place. You have a voice.
    And I think that is what is at the heart of this debate.
        I want to salute the Chairman and Senator Levin and Senator
    Voinovich in particular, because he has devoted more of his
    time as a U.S. Senator to professionalize the Federal workforce
    than any one of us. I have been to many of those hearings.
    George, you have led the way on this and I am glad that you are
    part of this conversation today.
        Thank you for being here, Mr. Secretary.
        [The prepared statement of Senator Durbin follows:]
                  PREPARED OPENING STATEMENT OF SENATOR DURBIN
        Thank you, Senator Collins, for scheduling this hearing to examine
    the Department of Defense's proposed civilian personnel reforms.
        I know that you, Senator Levin, Senator Voinovich, and many others
    from our Committee, have worked tirelessly over the past several weeks
    to respond to the Department of Defense's personnel reform proposal.
    You have developed legislation that provides many of the Department's
    requested personnel flexibilities. However, you have done this while
    making sincere efforts to balance these new flexibilities with the
    continued responsibility to protect the rights of the Department's vast
    civilian workforce. Let me take this opportunity to say that I
    appreciate your efforts.
        I would also like to thank each of the witnesses appearing before
    this Committee today. I look forward to hearing your testimony and hope
    to gain further insight into the issues surrounding the proposed
    reforms.
        The civil service system in this country as we know it today was
    developed over the past century. The laws governing the system were
    created to ensure that Federal jobs were awarded on the basis of merit
    and competence, and not on the basis of political patronage. This
    system has provided, and continues to provide, vital protections to
    Federal employees.
        Last year, Congress passed the Homeland Security Act which provided
    various waivers to personnel protections created as part of our civil
    service system. The rationale behind this decision was that more than
    20 different Federal agencies operating under different personnel
    systems were coming together to form a new department, and the
    Secretary of Homeland Security needed the ability to efficiently
    organize the workforce.
        Now the Department of Defense has requested similar personnel
    reforms to those given to the Department of Homeland Security. However,
    the Department of Defense's proposal will affect approximately 700,000
    civilian employees, which is almost one-third of the Federal civilian
    workforce. This is over four times the number of employees affected by
    the Homeland Security Act. Also, unlike with the Department of Homeland
    Security, the Department of Defense has failed to provide a reasonable
    justification for its requested personnel reforms.
        Because of the quantity of employees affected, and because these
    personnel reforms, if enacted, could serve as precedent for reform for
    the rest of the Federal Government, we must be cautious and deliberate
    about the type of personnel system we are willing to authorize for DoD.
    This is especially true when we consider that we do not yet know the
    outcome of the personnel reforms provided to the Department of Homeland
    Security last year.
        First and foremost, we must ensure that any new personnel system
    protects the rights of Federal employees. Employees must have
    meaningful due process and appeal rights. If pay and hiring
    flexibilities are incorporated, DoD must have management systems in
    place to ensure any new personnel system operates with equity and
    minimizes the chances for political abuse. Finally, collective
    bargaining rights for employees must be preserved so that every
    employee has a voice in the personnel system affecting him or her. I
    believe Senator Collins has made significant strides toward
    successfully addressing each of these issues.
        I am anxious to learn more from Secretary Rumsfeld and the other
    witnesses from the Department of Defense about the apparent urgent need
    for such sweeping personnel reforms, especially when the current
    personnel system appeared in no way to hinder efforts during the war in
    Iraq. I hope you are prepared to provide us with a justification for
    the proposed reforms and will detail DoD's use of current statutory
    personnel flexibilities.
        Once again, I want to thank Senator Collins for calling this timely
    hearing. I look forward to continuing my work with you on this issue.

        Chairman Collins. Thank you. Senator Pryor.

                   OPENING STATEMENT OF SENATOR PRYOR

        Senator Pryor. Thank you, Madam Chairman I wasn't going to
    say anything other than thank you for having this hearing
    today. It is very important and it is very important for our
    long-term security. It is also very important for the Senate to
    hear these matters and try to have our oversight responsibility
    fulfilled. So thank you for doing this.
        Chairman Collins. Thank you.
        Well, at long last, we now will move to our first panel of
    witnesses. I want to thank you for your patience. As you can
    see, this issue is of great importance to many Members who were
    eager to express their views on it.
        I want to welcome our Secretary of Defense, Donald
    Rumsfeld. I want to join my colleagues in commending you for
    your outstanding leadership of the war against terrorism. We
    are very pleased to have you take the time today to be with us
    to present the Department's views.
        Accompanying the Secretary are General Richard B. Myers,
    the Chairman of the Joint Chiefs of Staff; Admiral Vern Clark,
    the Chief of Naval Operations; and Dr. David Chu, the Under
    Secretary of Defense for Personnel and Readiness. Welcome.
        Secretary Rumsfeld, you may proceed.

       TESTIMONY OF HON. DONALD H. RUMSFELD,\1\ SECRETARY, U.S.
    DEPARTMENT OF DEFENSE; ACCOMPANIED BY GENERAL RICHARD B. MYERS,
       CHAIRMAN OF THE JOINT CHIEFS OF STAFF, U.S. DEPARTMENT OF
    DEFENSE; DAVID S.C. CHU, PH.D., UNDER SECRETARY OF DEFENSE FOR
       PERSONNEL AND READINESS, U.S. DEPARTMENT OF DEFENSE; AND
        ADMIRAL VERN CLARK, CHIEF OF NAVAL OPERATIONS, U.S. NAVY

        Secretary Rumsfeld. Thank you very much. Madam Chairman,
    Members of the Committee, I thank you for your statements and
    comments and interest and also for the opportunity for us to
    discuss this proposal by the President for the National
    Security Personnel System.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Secretary Rumsfeld appears in the
    Appendix on page 55.
    ---------------------------------------------------------------------------
        As was mentioned, it is extremely important to the
    Department of Defense. That is clear by the presence of the
    Chairman of the Joint Chiefs of Staff, by the Chief of Naval
    Operation, by Under Secretary Chu, who has spent much of his
    life and leads the Pentagon effort with respect to these
    matters.
        As the Members well know, we are in a new security
    environment, an unprecedented global war on terror, and we need
    to be able to deal with the emerging new threats with a
    Department of Defense that is fashioned for the information age
    and the 21st Century. The threats we are facing are notably
    different, as each of the Senators here know well. And to deal
    with the new threats, we believe we not only need new military
    capabilities that are flexible, light, and agile so we can
    respond quickly and deal with surprise, but we also need a
    Department that operates in a way that enables it to
    demonstrate flexibility, as well, so that it can respond
    skillfully.
        Today, we just simply don't have that kind of agility. In
    an age when terrorists move information at the speed of an E-
    mail or money at the speed of a wire transfer and fly around in
    commercial jetliners, we still do have bureaucratic processes
    of the industrial age as opposed to the information age.
    Consider a few examples.
        Today we have, I am told by Dr. Chu, some 300,000 to
    320,000 uniformed personnel, men and women in uniform, who
    volunteered to serve in a military capacity performing non-
    military jobs. Now, there is something wrong with that picture.
    I suspect we also have some very large number of contractors
    performing tasks that ought to be performed by career civil
    service personnel.
        Three-hundred-and-twenty-thousand military people
    performing civilian functions is more than two-and-a-half times
    the number of troops that were on the ground in Iraq when
    Baghdad fell, and why is that? Well, it is because managers are
    rational. They have a task, they are going to be held
    accountable for that task, and they are asked to do it.
        So they go out and they reach for somebody that can help
    them do that and they reach for military people because they
    know they can bring them in, they can calibrate them, they can
    move them, transfer them someplace else when the time comes,
    and they give them the flexibility to do the job that they are
    being held accountable to perform. Or they reach for civilian
    contractors because they know they can do the same thing. They
    can bring them in, ask them to do a job, stop them from doing
    the job, move them where the job needs to be done. And they
    avoid reaching for the career civil service.
        That is why we have 320,000 military people doing civilian
    jobs, because managers are rational. They can do those things
    in the contracting world and in the military world without a
    lot of delays or bureaucratic obstacles. But they can't do that
    with the civil service, unfortunately.
        The unwillingness to put civilians into hundreds of
    thousands of jobs that do not need to be performed by the
    uniform or by contractors really puts a strain on our system.
    It is not right, especially at a time when we are calling up
    the Guard and Reserve and asking them to serve, it is not right
    to have that many military personnel doing civilian functions
    at a time when we have stop loss imposed and we are not letting
    people out who have completed their tours and are asking to be
    released from the military and we are preventing that because
    we need them on active duty.
        It has to be also demoralizing for the civilian personnel
    themselves. These are patriotic, terrific people, and we all
    know that and you have mentioned that. They come into
    government because they want to make a contribution, and when a
    challenge arises or a crisis and their skills and talents are
    needed, they want the phone to ring. But if the phone doesn't
    ring, the phone rings for the military or the phone rings for
    contractors but not for the civilian personnel, it has to be
    demoralizing.
        Consider this. In Operation Iraqi Freedom, 83 percent of
    the civilians that were deployed into the theater of central
    demand were contractors. Only 17 percent were civilian Federal
    workers. Why would that be the case? Well, it is because in
    most cases, the complex web of rules and regulation prevents
    the Department managers from moving DoD civilians to new tasks
    quickly. As a natural result, the managers turn to the military
    or the private contractors. Because of these rules, we have to
    cope with that we are losing talented young people to private
    sector competitors.
        When the DoD recruiters go to a job fair at a college and
    they walk in and the person sitting next to them is from a
    corporation, the corporation can offer that young person
    looking for a job a job. They can say, here is what your salary
    will be. Here is what the bonus will be. Here is where you will
    work. Say yes, no, or maybe.
        What does the government person from DoD do? They walk into
    the job fair and all they can do, sitting right next to a
    corporation, all they can do is hand them a ream of paper to
    fill out and tell them, sorry, we can't offer you a job. Fill
    all this out. It will take months before we will know. And I
    guess it should come as no surprise that many talented young
    people are working somewhere other than the Department.
        This is a problem that will grow more acute every year as
    the baby boomer generation employees start to retire. As
    Members of this Committee, you have been told, as I have, that
    it is estimated that up to 50 percent of the Federal employees
    will be eligible to retire over the next 5-plus years.
    According to one institute, a recent survey of college students
    found that most would not consider a career in government
    because, among other things, the hiring process is byzantine.
        I served on the first Volcker Commission on public service
    and I was over with Paul Volcker yesterday and he was
    discussing this problem as a very serious one, and some studies
    they have done of young people's attitude about government
    service. The future of our national security depends on our
    ability to make it less byzantine and less burdensome on the
    employees.
        In addition, the current system prevents us from dealing
    effectively with fraud. I am told that the recent scandals you
    have read about regarding the abuse of government purchasing
    cards, that with respect to military--they were being used to
    buy cameras and various things that they shouldn't have been
    used to buy for. With DoD personnel, uniformed personnel, if
    abuse like that occurs, we have the ability to garnish their
    wages and we can recover the stolen funds, but not so with
    civilian personnel. In fact, Dr. Chu tells me that DoD has been
    negotiating now for more than 2 years with more than 1,300
    union locals for the right to garnish wages in the event that
    there is fraud in the use of purchasing cards, and we still
    have 30 more unions to go.
        Now, I think it is unacceptable that it takes us years to
    try to deal responsibly with employees that are stealing the
    taxpayers' money. If a private company ran its affairs that
    way, it would go broke and it ought to go broke.
        There are other such examples that the Chief of Naval
    Operations, Vern Clark, and others can mention.
        I would like to interrupt my comments for a moment and let
    Admiral Clark, who has invested an enormous amount of time on
    this subject--and I know Dick Myers has a statement after Vern
    Clark and I complete my remarks, but I think, Vern, you might
    want to comment on some of the things you are wrestling with.
        Admiral Clark. Thank you, Mr. Secretary and Madam Chairman.
    It is great to be with you this morning.
        Let me just cut right to the chase. I am encouraged by the
    support of all the Members of this Committee and the
    recognition that we need to reform the system. I have a
    responsibility given to me by law, Title 10, that lays out what
    Vern Clark is responsible for, and it is straightforward. The
    law says, organize, train, and equip the force. And then I turn
    it over to guys like Tommy Franks, who go and command and lead
    and fight the Nation's wars.
        The fact of the matter is, and I wrote down some of the
    things that were said here, we do have to recruit and retain
    the right people to have the kind of fighting force that will
    win tomorrow's wars. I couldn't agree more with, Madam
    Chairman, your comment that the system today is not responsive,
    and that is the problem. I also couldn't agree more, Senator
    Voinovich, your comment that James Schlesinger said that you
    have to fix the personnel system before any of the other pieces
    are really going to be whole.
        And I would like to testify, and many of you have heard me
    testify in other committees--this is the first time I have been
    to this Committee--but in the military committees that on the
    military side, I believe that in the Navy, we have proven that.
    For 3 years, we have had as our No. 1 priority the battle for
    people, and what happened in Operation Iraqi Freedom and
    Enduring Freedom happened because our personnel readiness is
    better than it has ever been before.
        But my whole personnel system is not just the uniformed
    piece, and the Secretary talked about 300,000 uniformed
    members, and so forth. It is, and this is the thing that I have
    learned since I have been in this position, that it is the
    combination of the military structure, it is my reserve
    structure, it is the 200,000 civilians that I have, and
    Secretary England gave me the number when we were researching
    this that I have fundamentally 234,000 contractors in the
    system and they are in the system because of the principles and
    the faults with the civilian personnel system that the
    Secretary is outlining.
        I can give you case after case where the lack of
    responsiveness that we have in our civilian personnel system is
    preventing us from having the right kind of system to make our
    Navy and the rest of our military what it needs to be. If the
    rest of the Chiefs were sitting here, and fundamentally, I am
    here as one of them, they all have the same kinds of problems.
    They would tell you that we--and my belief is that no navy is
    going to go toe-to-toe with me in the future, with our Navy.
    They are not going to do that. Our Navy is too strong. What
    they are going to do is that they are going to come at us with
    asymmetric methods.
        Our asymmetric advantage is our people. Our advantage is
    the ability to bring the genius of the American citizen, sons
    and daughters of America, to the task. And I have case after
    case that shows that the system that I have today is preventing
    me from executing my Title 10 responsibility to provide,
    organize, train, and equip in the most efficient manner and to
    produce the fighting capability that I am being called upon to
    deliver for this Nation.
        So, Madam Chairman, that is why I have spoken everywhere I
    get a chance to speak to the requirement for us to transform
    this system, and I appreciate, Mr. Secretary, you giving me the
    chance to come and speak here today. Thank you.
        Secretary Rumsfeld. Madam Chairman, if I could just
    proceed, we find that it is currently taking us about 5 months
    to hire a new Federal worker and it takes 18 months to fire a
    Federal worker. Pay raises are based on longevity, not
    performance, in large measure.
        Over the past several months, we have worked with the
    Congress and tried to fashion language that would give us the
    needed flexibility. A portion of that proposal we made was
    approved by the House, as you mentioned. These proposals did
    not come out of mid-air. These are based on personnel
    management systems that Congress approved last year for
    Homeland Security and many years of experience with a number of
    successful congressionally authorized programs, including the
    China Lake program, which went back two decades.
        So a lot of the things that we are talking about here have
    been tested and proven out. The pilot programs, which now
    involve over 30,000 DoD employees, tested many of those
    reforms, including pay banding systems, simplified job
    classifications, pay for performance, recruiting and staffing
    reforms, scholastic achievement appointments, and enhanced
    training and development opportunities. In each of those
    demonstration programs, when measured, employee satisfaction
    has been high and the employers are retaining more of their top
    performers.
        Our objective is to take those successful congressionally
    approved pilot programs and expand them throughout DoD so that
    more civil service employees can benefit from the increased
    opportunities that they have created, and so that their greater
    effectiveness can be applied across the Department.
        Let me also say, I have watched this debate and I know that
    there is resistance to this change, and Senator Sununu
    mentioned how tough change is, and it is hard. But there has
    been a good deal of misinformation circulating about these
    proposals, and let me put a couple of the myths to rest.
        Here is what the National Security Personnel System we are
    proposing will not do, contrary to what you may have read or
    heard. It will not remove whistleblowing protections. Those who
    report management, mismanagement, fraud, other abuses, will
    have the same protections that they have today. It will not
    eliminate or alter access of DoD employees to the Equal
    Opportunity complaint process.
        Nothing in this proposal affects the rights of DoD
    employees under our country's civil rights laws. I was in
    Congress in the 1960's. I voted for all the civil rights
    legislation and I can tell you that is a red herring.
        Notwithstanding the allegations to the contrary, these
    proposals will not remove prohibitions on nepotism or political
    favoritism, as has been charged. Those things will properly
    continue to be prohibited. It will not eliminate veterans'
    preference. That also is a false charge.
        It will not end collective bargaining, as has been
    suggested. To the contrary, the right of defense employees to
    bargain collectively would be continued. What it would do is
    bring collective bargaining to the national level so that the
    Department could negotiate with national unions instead of
    dealing with more than 1,300 different union locals, a process
    that is inefficient. It simply is grossly inefficient.
        It will not give the Department a blank check to change the
    civil service system unilaterally. Like the system Congress
    approved for the Department of Homeland Security, before any
    changes are made to the civil service system, the employees'
    unions must be consulted. The Office of Personnel Management is
    involved in design and any disagreements would have to be
    reported to Congress.
        What it would do would be to give the President a national
    security waiver that would allow him to give DoD flexibility to
    respond in the event our national security requires us to
    respond and act quickly. Congress has regularly approved such
    national security waivers and various laws involving defense
    and foreign policy matters, recognizing the need of the
    Commander in Chief to deal with unforseen threats and
    circumstances.
        The National Security Personnel System will not result in
    the loss of job opportunities for civil service employees. That
    is a charge that has been made. To the contrary, it is the
    current system that limits opportunities for DoD civilians by
    creating perverse incentives for managers to give civilian
    tasks to the military personnel and to give civilian tasks to
    contractors. We believe that the transforming initiatives we
    are proposing would most likely generate more opportunities for
    DoD civilians, not less.
        I can assure you, I do not want 300,000 or 320,000 men and
    women in uniform doing jobs that are not the responsibilities
    of uniformed personnel. We don't. We want them doing military
    tasks, and that is why they joined the military in the first
    place.
        Members of the Committee, we need a performance-based
    promotion system for our civilian workforce. We need a system
    that rewards excellence, similar to the one Congress insisted
    on for the men and women in uniform.
        Congress has granted the Department of Defense the
    flexibility to manage the Nation's largest workforce, the
    uniformed military personnel. It works. The results are there
    for all to see. They are disciplined, they are well trained,
    they are highly effective, they are successful, and I would add
    they are also a model of equal opportunity employment. We are
    simply asking that Congress extend the kinds of flexibilities
    they need to give us in managing the men and women in uniform,
    also to manage the civilians.
        As Paul Volcker put it yesterday when he supported our
    approach, he said we have an opportunity to make real and
    constructive change in the way the civil service is managed in
    the United States. If the Department of Defense is to stay
    prepared for security challenges in the 21st Century, we have
    to transform not just our defense strategies, not just our
    military capabilities, but we have to also transform the way we
    conduct our business.
        One thing we know from the recent conflicts in Afghanistan
    and Iraq. The enemy is watching us and they are going to school
    on us. They are studying how we were successfully attacked.
    They are studying how we responded and how we might be
    vulnerable again. And in doing so, they are developing new ways
    to harm our people, new ways that they can attack to kill
    innocent men, women, and children. And as was mentioned
    earlier, they are not burdened or struggling with massive
    bureaucratic red tape fashioned in the last century.
        What this means is that we need to work together to ensure
    that the Department has the flexibility to keep up with these
    new emerging threats. The lives of the men and women in uniform
    and, indeed, the American people depend on it. I hope that you
    will help us try to bring this Department into the 21st
    Century, and I thank you, Madam Chairman, for the opportunity
    to testify on this important national security issue.
        Chairman Collins. Thank you. General Myers.
        General Myers. Thank you, Madam Chairman and Members of the
    Committee. I have just a short statement and I thank you for
    the opportunity to be able to be before you today and to
    reiterate Secretary Rumsfeld's and Admiral Clark's requests for
    your support of this important initiative.
        First, let me begin by focusing on our soldiers, sailors,
    airmen, Marines, Coast Guardsmen, and DoD civilians. As Senator
    Stevens said, our success in Operation Iraqi Freedom and the
    war on terrorism in general are really a testament to their
    dedication and their professionalism and I thank all of you for
    supporting all our efforts.
        With regard to transformation, we have got to transform if
    we are going to continue to be successful in the 21st Century.
    We must continue our emphasis on more agile forces, on improved
    command and control systems, on more precise combat power, on
    better integrated joint team from the planning through
    execution.
        But our vital civilian workforce must also be part of this
    transformation. My calculations show that of our active duty
    workforce, the folks that show up every day, excluding the
    reserve component, about 36 percent of that workforce are
    civilians. So they have got to transform, as well. We have got
    to transform that system so they are more agile and responsive
    in terms of hiring, in terms of the task management, the
    ability to assign different tasks, and, of course, in rewarding
    performance.
        As you heard from Vern Clark and the Secretary, taking care
    of our people, whether in uniform or not, is a responsibility
    we take very seriously, and we are obviously dedicated to the
    best practices that benefit the workforce as well as the
    Department of Defense. Clearly, fair, ethical treatment of
    employees, employee safeguards are essential to all that and
    are part of these proposals.
        As Vern Clark told you, the Joint Chiefs of Staff have been
    working on this issue with Secretary Rumsfeld and his staff now
    for many months and all services are just as concerned as the
    U.S. Navy, represented by Admiral Clark, and frankly, we need
    your help. As Vern said, we need your help to be able to do our
    job.
        As the Secretary said, we don't know what the crisis or
    contingency is really going to look like. It will probably not
    look like the operation we just saw in Iraq. And so what we
    need is your support so we can be responsive to whatever
    challenge we face here in this 21st Century, and we thank you
    for your support and your continued support. Thank you.
        Chairman Collins. Thank you, General Myers.
        Dr. Chu, do you have a statement?
        Mr. Chu. No, ma'am. I have nothing to add.
        Chairman Collins. Thank you.
        Secretary Rumsfeld. He has the answers to all the
    questions, Madam Chairman. [Laughter.]
        Chairman Collins. Mr. Secretary, many of us will direct
    them to you, but you do have the right to be able to ask others
    to answer. We now will turn to 6-minute rounds of questioning.
        Mr. Secretary, as you are well aware, just last year, the
    Congress granted to the Department of Homeland Security
    unprecedented authority to develop a modern, flexible personnel
    system for its 170,000 employees. Now, many people have argued
    that it would make more sense to wait until that major
    undertaking were complete to learn from DHS's experience before
    undertaking another wholesale revamping of the personnel system
    for hundreds of thousands of additional Federal workers. What
    is your response to that concern?
        Secretary Rumsfeld. I would make a couple of comments. My
    understanding is that the kinds of flexibilities we are
    requesting, some are very similar to the Department of Homeland
    Security. Others are things that have been granted to other
    departments and agencies previously. Indeed, there are a number
    of agencies that have a number of the flexibilities that we are
    requesting.
        I would also say that a number of the things that we are
    proposing date back as far as 20 years to the China Lake
    effort. In other words, Congress authorized the experiments and
    the pilot programs. We have done them. We have tested them. It
    is not as though these things are new, in many respects.
        I would also say that there is always a fair argument about
    changing anything, that is ``Let us wait,'' and my problem with
    it is that we have enormous challenges in the world and that we
    could look at the outcomes, and we know the outcomes are wrong.
    The outcomes are unhappy outcomes. The fact that we have got
    300,000-plus military people doing civilian jobs did not just
    happen. It happened because people looked at what they needed
    done and they went right to the military or they went right to
    contractors and they stayed away from the military service and
    they did it because they are rational, because they were being
    held accountable for performing important national security
    responsibilities and they made a judgment. They voted with
    their feet. They said, ``I am going to do that.''
        I think the evidence is so overwhelming that the changes
    need to be made, my feeling is that while it would be nice to
    test any conceivable change, and I don't disagree with that and
    I see the logic to it, I think that we are well past that point
    in our circumstance.
        Chairman Collins. Mr. Secretary, one of the major
    differences between our approaches concerns the appeals process
    for employees. Now, I agree with you that the current system is
    too slow, it is too complicated, and it is too inflexible, but
    in designing a new system, we need to ensure that it is not
    only fair, but that it is perceived as fair by Federal
    employees. That means that there has to be adequate due process
    and there has to be an independent decision maker, in my view.
        The Department has proposed doing away with the role of the
    Merit Systems Protection Board altogether and instead coming up
    with an appeals process that would be internal to DoD. If the
    Department essentially sets up an appeals process whereby
    Department employees will be judging the action of the
    Department's own supervisors, my concern is, will you be able
    to assure employees that the decisions that are rendered are
    fair and impartial? If there is no appeal of adverse decisions
    to an outside, independent entity, other than going to Federal
    Court with all the problems that entails, how will your
    employees be assured of a truly independent and unbiased review
    and decision?
        Secretary Rumsfeld. I would like to ask Dr. Chu to answer
    that question, and it is because I am plucky, but I am not
    stupid. I know this is a very complicated area and I agree
    completely with you that it is important that any process be
    seen as fair if you are going to be able to attract and retain
    the people you need. You have to have that element of perceived
    fairness. My reading of the process that Dr. Chu has proposed
    here and that we are proposing is that it would have that
    perception of fairness.
        Do you want to comment on it, Mr. Chu?
        Chairman Collins. Dr. Chu.
        Mr. Chu. I would be delighted to. First, let me emphasize
    that our proposal envisages working with the Merit Systems
    Protection Board in designing an alternative appeals process
    under the construct that we have advanced.
        Second, I want to emphasize that we are not the only
    critics of the appeal process. There is a very good GAO report,
    testimony from 1996 to the Congress on this issue, and it says,
    ``Its protracted processes and requirements,'' referring to the
    appeals process, ``divert managers from more productive
    activities and inhibit some of them from taking legitimate
    actions in response to performance or conduct problems.''
        And that is, indeed, our experience. We have a nice list
    of--unfortunately, I should emphasize--a list of cases where
    employees, in our judgment, misbehaved very substantially--
    sexual harassment, or trying to run over your supervisor with
    your own vehicle. The Department's sanction, as would be in the
    military, would be to fire the individual. The appeal to the
    external review party, in this case the Merit Systems
    Protection Board, led to substantial downgrading to only
    suspension, and I think you have too much divergence in the
    current system between the immediacy of the facts that we
    confront and the remoteness of the appeal authority.
        The use of the internal appeal process--we would have an
    appeal process if Congress would grant us the authority we are
    seeking in this statute, but it would be internal to the
    Department of Defense. I think there is ample precedent to
    demonstrate the Department can handle that in a responsible
    fashion. That is true of military crimes already, the Court of
    Military Appeals inside the Department of Defense. It is true
    of contract disputes with the Board of Contract Appeals.
        So I think there is plenty of history, evidence, structure,
    and analogy within the Department that would allow an internal
    process to be more expeditious and, I think, more fair
    ultimately to all the employees who do perform well, who do
    exemplify high standards of behavior. They don't want, in my
    judgment, and I think survey evidence supports this, they don't
    want the rotten apples in their midst, either, and they resent
    it when the outcome is a slap on the wrist for what everyone
    sees as a horrendous offense.
        Chairman Collins. My time has expired, but let me just make
    one quick point. One of the key differences between our two
    proposals is you would eliminate the role of the Merit Systems
    Protection Board altogether other than having a consulting role
    as you are setting up your new internal appeals process. We
    would change the role of the Merit Systems Protection Board by
    changing it to an appellate body. It would no longer do a de
    novo review of the case. So you could solve a lot of the
    timeliness problems, a lot of the cumbersome, complicated
    process, but you would still have the ability for an employee
    to appeal an adverse decision outside of the Department, and I
    think that is an important protection.
        Senator Levin.
        Senator Levin. Thank you, Madam Chairman.
        Mr. Secretary, you have stated that the Department
    currently has 300,000 positions occupied by military personnel
    that could be performed by civilians. Has the Department made a
    formal study to lead you to that conclusion? Where does that
    number come from?
        Secretary Rumsfeld. From Dr. Chu. [Laughter.]
        Mr. Chu. It comes originally from the Task Force on Defense
    Reform that the previous administration constituted. We
    maintain a series of inventories of government, of all our
    positions against this issue of what is inherently
    governmental, what can be considered commercial activity, etc.
        Senator Levin. Can you give us that inventory, share that
    with the Committee?
        Mr. Chu. We will be delighted to provide that
    information.\1\
    ---------------------------------------------------------------------------
        \1\ The information from Mr. Chu appears in the Appendix on page
    156.
    ---------------------------------------------------------------------------
        Senator Levin. And that inventory totals 320,000?
        Mr. Chu. Our conclusion is there are as many as 320,000
    military positions that could conceivably be performed by
    civilian personnel, yes, sir.
        Senator Levin. My question, though, is does the inventory
    that you referred to total 320,000?
        Mr. Chu. There are several inventories, to be precise about
    this----
        Senator Levin. Does any inventory total 320,000?
        Mr. Chu. The short answer is yes, sir.
        Senator Levin. Thank you. One of the most important rules
    that precludes the--and if you will get us all the inventories,
    I would appreciate it.
        One of the most important rules that precludes the
    Department of Defense from hiring civilian employees to perform
    new functions is the limit on the number of civilian employees,
    the so-called full-time equivalent or FTE ceiling that is
    imposed by OMB. I am wondering whether the administration has
    any plan to eliminate that FTE ceiling, Mr. Secretary.
        Mr. Chu. If I may, sir, this is one of the many red
    herrings the Secretary has referred to. I have signed more than
    one memorandum within the Department emphasizing, as Congress
    has directed, we are not to manage by FTEs. We manage by money
    as far as civilians are concerned.
        So I don't want to be naive about this. There is a large
    culture out there that in terms of convenience in management
    still thinks about itself in terms of FTEs, but we are trying
    to get the Department off this outdated concept.
        Senator Levin. Is there an FTE ceiling imposed by OMB?
        Mr. Chu. Not that I am aware of.
        Senator Levin. Next, Mr. Secretary, you have referred to
    the high percentage of civilians in the Iraq theater who are
    contractors. Many of these civilians are performing short-term
    surge-type functions----
        Secretary Rumsfeld. That is true.
        Senator Levin [continuing]. Such as responding to oil well
    problems, rebuilding bridges, port facilities, and the like.
    Are you suggesting that the Department of Defense should hire
    civilian employees on a short-term basis to perform functions
    like those?
        Secretary Rumsfeld. No, I am really not. You are quite
    right. The number of civilians in the theater are involved in a
    full spectrum of activities, some of which are undoubtedly not
    appropriate for permanent employees. On the other hand, the 83
    percent to 17 percent seemed to me like a disproportionately
    large number.
        Senator Levin. Well, it might be useful if you could----
        Secretary Rumsfeld. What it ought to be, I don't know, and
    no one would know. You would have to go down and try to look at
    all those functions and disaggregate it, but----
        Senator Levin. Well, you might give us an estimate and
    disaggregate it, because when you use that testimony, that 83
    percent of the civilians deployed in the theater are
    contractors, you are suggesting that a significant percentage
    of those civilians should be Department of Defense civilian
    employees instead and it would be interesting if you could have
    somebody just give us an estimate as to what part of the 83
    percent you believe, if the rules were different, would be
    Department of Defense civilian employees, for the record, if
    you could supply that.\1\
    ---------------------------------------------------------------------------
        \1\ The information provided by Mr. Rumsfeld appears in the
    Appendix on page 157.
    ---------------------------------------------------------------------------
        Secretary Rumsfeld. I will try.
        Senator Levin. Well, you have given the testimony----
        Secretary Rumsfeld. Right.
        Senator Levin [continuing]. And it seems to me you ought to
    back it up with some kind of an estimate.
        Secretary Rumsfeld. We will try to take the total and see
    if we can't come up with some number that might logically fit.
    I would, for example, cite things like linguists might be
    people that would be internal as opposed to external----
        Senator Levin. You have tried to hire----
        Secretary Rumsfeld [continuing]. As opposed to someone
    putting out an oil well fire. That would be much more likely,
    obviously, to be a contractor, and I understand that.
        Senator Levin. That would be helpful, and to give us the
    groups, the types of employment and about how many are in each
    group.
        Dr. Chu, you have testified the Department needs authority
    to bargain with unions at the national level because it is
    impractical, and I think the Secretary also testified to this
    effect, to continue bargaining with 1,400 separate bargaining
    units. I think that more accurately is the Secretary's
    testimony.
        The legislative proposal would specifically authorize
    bargaining at a national level. It seems to me that is one
    issue. That is one important point that you are making. But you
    are going way beyond that, because you are also authorizing, or
    would seek to authorize the total waiver of Chapter 71 of Title
    5, and that is the part of the U.S. Code that addresses
    bargaining rights in general.
        Does the Department intend to modify provisions, if you
    were given this authority, regarding unfair labor practices and
    the duty to bargain in good faith, for instance? Is that your
    intention if we gave you the authority you seek to waive
    Chapter 71 of Title 5?
        Mr. Chu. We don't intend to engage in unfair practices, no,
    sir. We do seek to----
        Senator Levin. No.
        Mr. Chu. I am sorry.
        Senator Levin. That is not my question.
        Mr. Chu. I am sorry, sir.
        Senator Levin. The question is, do you intend to modify the
    provisions of Chapter 71 of Title 5 relative to unfair labor
    practices.
        Mr. Chu. We don't have such an intent, sir.
        Senator Levin. Then my question----
        Mr. Chu. I should emphasize, this is a power, the waiver of
    Chapter 71, already granted Homeland Security.
        Senator Levin. Now, my question is this. Why isn't the
    authority to bargain at the national level sufficient, just
    that authority, given your argument about having to deal with
    1,400 separate bargaining units? Why wouldn't the authority to
    bargain at a national level be sufficient? Why do you need the
    authority to waive the requirements of Chapter 71 in their
    entirety given your immediate statement that you have no intent
    to exercise that waiver?
        Mr. Chu. Because you have to get the bargaining to come to
    a conclusion, sir. Our experience is, many bargaining efforts
    don't come to a conclusion. I would cite an Air Force
    installation which is still bargaining since 1990 over the
    issue of----
        Senator Levin. That is the authority to bargain at a
    national level.
        Mr. Chu. The bargaining process needs to have a conclusion
    for it.
        Senator Levin. We agree obviously on that. But is the
    waiver of those other protections in Chapter 71 necessary to
    get bargaining to a conclusion?
        Mr. Chu. We think so, sir. I would point out that the
    spirit of that is in the provisions that apply to a large list
    of other agencies--the General Accounting Office, the FBI, the
    CIA, the National Security Agency, TVA, and the Federal Labor
    Relations Authority itself. So this is not an unprecedented
    proposal.
        Senator Levin. That is not my question, but thanks anyway.
        Chairman Collins. Thank you, Senator Levin.
        Dr. Chu, before I call on Senator Voinovich, I would point
    out, following up on Senator Levin's point, that we put within
    the bill a deadline for how long disputes can be before any one
    component of the FLRA and we put a 180-day limit so that issues
    would come to conclusion. They would not hang on for years and
    years, as occasionally cases do now. So I think there are other
    ways to ensure that bargaining comes to a conclusion than
    having the authority to waive the entire chapter governing
    collective bargaining.
        Senator Voinovich.
        Senator Voinovich. First of all, I would like to make a
    comment before I ask a question, and that is that I think
    everyone should understand your proposal, Mr. Secretary, didn't
    happen overnight. Dr. Chu and I talked about flexibility for
    the Department of Defense over a year and a half ago when we
    were up at Harvard at one of our executive sessions, so I think
    that is important.
        It was also mentioned that it takes 5 months to hire
    someone, Admiral, and I had hearings and brought in some
    college students in Dayton to gauge whether they were
    interested in going to work for the Federal Government. I will
    never forget that the military person that was there said to
    one of the young men, we want to hire you. You are just what we
    need. We have this work-study program. And the kid's face was
    just this big smile. And I asked the military person, how long
    will it take for him to find out whether he is hired? Six
    months.
        Now, that really doesn't have to do, I don't think, with
    this legislation. I think that deals with streamlining the
    process in terms of hiring that could be done. I am not sure
    you need legislation in order to take care of a 5-month delay.
    It seems to me that could be handled through more efficient
    internal management systems.
        My question, Mr. Secretary, is related to the proposed
    National Security Personnel System, which would waive
    significant portions of Title 5. My staff has attended several
    briefings over the past few months in which the Department has
    offered its rationale for these flexibilities. In some cases,
    it seems that DoD has requested waivers, as mentioned by
    Senator Levin and our Chairman, that are significantly broader
    than necessary to make the desired reforms to its personnel
    system.
        For example, the NSPS would include consultation with OPM.
    However, it would allow the Secretary to break a tie when there
    is a disagreement between DoD and OPM. The bill that Senator
    Levin and the Chairman have introduced would retain OPM's
    oversight role as an equal partner instead of granting the
    Secretary, ``sole and exclusive authority to make personnel
    decisions.''
        Title 5 was waived for the Transportation Security Agency,
    and I must tell you, it has not been as successful as intended
    in the personnel area. In fact, there is probably going to be,
    in the next day or so, a disclosure that some of the people
    that were hired were on the FBI's ``do not hire'' list. So I am
    concerned about putting OPM aside in terms of their traditional
    role that they played with Federal agencies.
        Another concern deals with Senator Levin's comments, and
    that is the issue of your request for authority to bargain
    collectively at the national level. That seems to make a great
    deal of sense. But at the same time you want this extraordinary
    new power, you seek to opt out of Chapter 71. Our bill would
    provide that you would remain in Chapter 71, as explained by
    our Chairman.
        So I would like you to explain some more about the
    Department's thinking behind these proposed waivers. Why remove
    DoD completely from OPM oversight and change the relationship
    between the Defense Department and OPM as it has not been
    changed for most of the other agencies in the Federal
    Government? And second of all, if you get this broad authority
    to bargain collectively, and that is a big deal, why not
    preserve the other labor-management rights under Chapter 71?
        Mr. Chu. Sir, to this issue of the OPM role, I think we, in
    the legislation, tabled and that was further, on this point
    strengthened by the House mark, we proposed that the
    regulations would be jointly developed. What we did add, as you
    indicated, sir, is a national security waiver, as the Secretary
    testified, that would say, if it is a national security issue,
    the Secretary reached the conclusion that it is not going to
    work for this Department. He may take a different course than
    might be true from other cabinet departments. It is subject to
    the President's ultimate decision in the way the House has
    worded that language.
        Second--so we look forward to partnership with OPM. In
    fact, we have used OPM's excellent studies in the last several
    years as our guide to how we should be designing the structure
    of this system.
        In terms of Chapter 71, what I would reiterate, sir, that
    is the step that Congress already took with the Homeland
    Security Department. That statute does waive Chapter 71. We are
    merely being more explicit, I think, than that statute is as to
    what we intend to do with that authority. That is to say, we
    would like, broad cross-cutting human resource issues, to move
    to national bargaining as opposed to local bargaining. It is
    too slow, too cumbersome, doesn't get to a consistent result
    for the Department in a timely fashion.
        Let me come back, if I may just a minute, to the OPM role.
    The Congress has already given this Department in certain
    targeted areas authority outside of strict joint development.
    The laboratory community is an example of that authority. The
    Senate's recent decision in the armed services bill on
    expanding the Acquisition Workforce Demonstration Project has
    some of the same flavor to it.
        We think it would be in partnership with OPM under these
    kinds of broader authorities, but we do think it is important,
    and I think the Congress has agreed over the years with that
    principle, to preserve the notion that there is often a
    difference when national security is involved and that
    difference needs to be respected.
        Senator Voinovich. What it really boils down to, though, is
    that you would remove an enormous number of people from OPM
    oversight. We will wake up one day and God only knows what we
    will have all over the Federal system, and I think that there
    needs to be some consistency across the board and it seems that
    there is a difference of opinion on this issue. I think that
    somebody also ought to be looking at the big picture,
    particularly if you are given all of the other flexibilities
    that you are asking for in your proposed legislation.
        Secretary Rumsfeld. Senator, if you think about it, the
    Department of Defense is in 91 countries in various ways. We
    are in every time zone. We have working conditions often that
    are harsh and dangerous. We have a circumstance that is, I
    think, notably different than other departments and agencies.
    And yet for the most part, what Dr. Chu has been testifying to
    is a reflection of, for the most part, authorities and
    flexibilities that, possibly not in total but in part, have
    been given to a variety of other departments and agencies for
    some time, a set of flexibilities which have been tested in the
    Department of Defense under authorizations by Congress for many
    years.
        I think that it is--you are right, it does involve a lot of
    people because the Department of Defense is a big Department,
    but it also goes to the kinds of things that Admiral Clark and
    General Myers are talking about, that we do have a
    responsibility for national security and that they are having
    trouble managing to meet those responsibilities in a way that
    is appropriate and that the Congress, with its oversight
    responsibilities, would want to know that they could do so that
    they could hold people accountable for their performance.
        Senator Voinovich. It seems to me, though, that among those
    widely varied categories of employees, you might restrict it to
    those categories of employees who are the kind of people that
    you are talking to and not the vast number of people that are
    working in the Department in a lot of jobs, for example, in the
    State of Ohio at DFAS and some of the other facilities that we
    have and maybe distinguish between them. It is the same thing
    with the issue of performance evaluation and pay for
    performance. I have been through this. This is tough stuff.
        Secretary Rumsfeld. It is.
        Senator Voinovich. And if you don't have the people that
    have the training and the skills to get the job done, it can be
    a big disaster, and it seems to me if you are going to get
    started on something like that, you would cascade it by
    designating certain areas where you are going to initiate
    reforms, but not just in one fell swoop go forward and start
    the system.
        Secretary Rumsfeld. Let me make two comments. One is, we
    kind of have done what you are suggesting over a period of time
    by these pilot programs which have involved tens of thousands
    of people. And second, one of the complaints I hear from
    managers is that they have to manage to a variety of different
    personnel systems. Is this something you want to comment on?
        Mr. Chu. Yes, sir. We have units where there are fewer than
    100 employees under a single overall supervisor, which operate
    under as many as five or so different personnel systems. At
    that level, it is a nightmare for the supervisor. You have
    employees who are working side by side, who are governed by
    different rules as to how you can reward them, how you
    discipline them, how you counsel them, what you must do to
    advance their careers. We need a cohesive system for the
    Department as a whole, very much, I think, as General Myers and
    Admiral Clark have testified. It is all part of the same----
        Senator Voinovich. We have no problem with that. It is the
    same thing we are trying to do in the Homeland Security
    Department, that is, to try and have a system that is
    understandable and consistent across the board. So we have no
    problem with that. There are just some of these things that
    cause concern in terms of how far do you go and how fast do you
    go in an enormous undertaking that you are making. We are
    trying to be helpful, not harmful, to what you are trying to
    accomplish.
        Chairman Collins. Thank you. Senator Akaka.
        Senator Akaka. Thank you very much, Madam Chairman.
        Secretary Rumsfeld, you are seeking to waive Chapter 53 of
    Title 5 which governs the Federal wage system that pays Federal
    blue collar employees. DoD employs over half of the
    government's blue collar workers and nearly half of those
    employees are veterans. As DoD moves to a pay-for-performance
    system from the GS-based system, which includes guaranteed
    annual pay increases, my question is, what happens to the cap
    on blue collar pay?
        Mr. Chu. We are seeking, sir--you are accurately
    summarizing our preferences. We are seeking to bring
    essentially the entire Department under a pay banding system.
    That is why we are seeking to waive those parts of Chapter 53
    that would otherwise restrain the inclusion of blue collar
    employees in such a system.
        We do, of course, set blue collar wages based upon wage
    surveys, and that would continue to be the practice that we
    would use in the future. I think we have precedent here in how
    we handle our non-appropriated fund employees. I don't think
    there should be a big issue here.
        Senator Akaka. Let me ask another part to that. If you
    decide to retain the Federal wage system for the Department's
    blue collar workers, will you abide by the Monroney amendment
    which Congress specifically required the Department to follow
    in 2001? The Monroney amendment requires that when the
    government had a dominant industry in a particular area, the
    private sector wage data had to come from the same industry. So
    my question is, would you abide by that amendment?
        Mr. Chu. We will abide by whatever law the Congress enacts,
    yes, sir.
        Senator Akaka. The Department wants to waive Chapter 77 of
    Title 5 relating to employee appeals. Such a waiver would
    eliminate employee access to the Merit Systems Protection
    Board. What are the specific problems DoD has encountered with
    the MSPB?
        Mr. Chu. Let me, in fact, if I may, use my props, sir. I
    think you can see the problem with MSPB by the thickness of the
    manual that guides--it is the purple volume I am holding in my
    hand--that guides MSPB decisionmaking, and that is not a set of
    histories and individual cases. This is the principles MSPB is
    supposed to follow.
        I think there are two central problems with the current
    process. One is, it takes far too long to come to resolution.
    Second, in too many cases where there has been, at least in our
    judgment, serious employee misconduct, and I don't mean just
    minor spats and differences, this is sexual discrimination,
    this is a supervisor who backed a woman into a closet and made
    what we thought were improper advances. The MSPB decision was,
    in the words of the Administrative Law Judge, that it was
    simply romantic expressions by the supervisor and our efforts
    to have the employee terminated were, in fact, reduced to a
    suspension.
        So I think there is a failure, frankly, to deal with the
    realities in the same way that we need in a cohesive force to
    deal with people who misbehave, the same cohesive force to
    which Admiral Clark spoke. It undercuts discipline in the
    system as a whole. It leads, in my judgment, to severe morale
    problems for the other employees of the agency who see the bad
    apples, see us try to take action on these people and fail.
    Worse, it leads supervisors to give up, to feel, just as
    Senator Coleman indicated, that it ain't going to make any
    difference. Why should I bother to try? And that leads
    ultimately to what Admiral Clark and General Myers cannot
    stand, and that is a denigrated level of performance.
        Admiral Clark. May I give an example, Senator?
        Senator Akaka. Absolutely.
        Admiral Clark. January 2003, we had an employee, a GS
    middle grade employee who had been under performance review and
    observation for a number of months and the employee was
    terminated. The removal notice cited the unsatisfactory
    performance. The Merit Systems Protection Board judge
    discounted this performance assessment in the judgment, and the
    judge made the decision that because in a period of time the
    employee had been injured, that the observations and the
    documented performance that was required by law and that had
    been done for months and months discounted it, and then went on
    to cite the age of the individual and the years of service
    which are specifically not to be considered in performance
    cases. Now, this is January. This is what happens.
        And so then what happens to, just as Dr. Chu has said, the
    supervisor has now worked months with an employee who we have
    been having difficulty with. He has spent months in the process
    and the judgment is made, and at the end of the day, I
    commented when I was with Secretary Rumsfeld over here on the
    Hill talking about this subject, and I made this comment. This
    is not about us standing up and asking for some system that
    doesn't hold us accountable. The U.S. military, at the heart of
    everything that we believe in is accountability. If we don't do
    something right, hold us accountable. But give us a chance to
    manage this workforce in a way that then allows us to maintain
    the morale of the workforce.
        The vast majority of this workforce that are heroes, that
    are helping us produce the military capability that will then
    give the President of the United States of America options when
    we have to go on and prosecute this global war on terrorism.
        Senator Akaka. Thank you for that response. Could you get
    back to us on what MSPB case law or regulations impact DoD the
    most? Can you provide that?
        Admiral Clark. Absolutely. I would be happy to.\1\
    ---------------------------------------------------------------------------
        \1\ The information provided by Admiral Clark appears in the
    Appendix on page 158.
    ---------------------------------------------------------------------------
        Senator Akaka. Madam Chairman, my time has expired, but I
    would like to make a brief statement. There are those who say
    that the MSPB process takes too long. However, nearly 80
    percent of cases at the MSPB are resolved within 90 days. This
    is better than the EEOC or the NLRB.
        According to the Senior Executives Association, there is no
    known government judicial or administrative operation that
    issues initial decisions faster than the MSPB. Madam Chairman,
    I ask unanimous consent to include in the record a letter from
    the Senior Executives Association in support of MSPB appeal
    rights.\2\
    ---------------------------------------------------------------------------
        \2\ The letter sent to Senator Akaka from the Senior Executives
    Association appears in the Appendix on page 134.
    ---------------------------------------------------------------------------
        Chairman Collins. Without objection.
        Senator Akaka, you brought up a very good point and I want
    to clarify for our panel once again that the bipartisan bill
    that we have introduced specifically allows DoD to disregard
    the Merit Systems Protection Board case law that you have cited
    today as troubling, and I would encourage you again to take a
    look at the provisions in our bill because I think they
    specifically deal with the issue that you have raised.
        Senator Fitzgerald.
        Senator Fitzgerald. Thank you, Madam Chairman.
        Dr. Chu, I was very interested in your testimony about the
    process you have had to go through to get the right to garnish,
    or maybe it was Secretary Rumsfeld, who mentioned trying to
    garnish wages of DoD employees who had actually, in effect,
    stolen money by using their credit cards perhaps for personal
    use or some other impermissible use. Dr. Chu, you said you had
    to negotiate separately with how many different locals, 1,300?
        Mr. Chu. We have, if you include the non-appropriated fund
    locals, we have, I believe, 1,366 locals in the Department of
    Defense.
        Senator Fitzgerald. Thirteen-hundred?
        Mr. Chu. Thirteen-hundred-and-sixty-six.
        Senator Fitzgerald. Thirteen-hundred-and-sixty-six, and you
    have been undertaking that for how long?
        Mr. Chu. The travel card negotiations which the Secretary
    was referring to have been going on for the better part of 2
    years. It may even have started in the last administration. I
    would have to check.
        Senator Fitzgerald. During that time, I seem to recall
    several Congressional hearings where DoD was called before and
    beaten up about the misuse of credit cards. But, in fact, your
    inability to address that problem perhaps stems from the laws
    that are on the books. So you are getting beaten up by us on
    the one hand, and on the other hand, we are hampering your
    efforts to solve that problem.
        You are probably, incidentally, the only employer in the
    country that wouldn't have the right to offset money that the
    employee owed. I think employers have a common law right of
    offset in a case like that.
        Now, Senator Levin was asking questions that indicated that
    he perhaps doesn't have any objection to DoD having the right
    to bargain nationally on national issues, and I understand
    Senator Collins' bill would allow national bargaining except if
    there is a case with a specific local. And, in fact, if there
    is more than one local involved, then they could bargain
    nationally.
        But Senator Levin was raising objections to your request to
    waive Chapter 71 of the Labor Management Relations Act. I had
    my staff get me a copy of this law, and it looks like it was
    passed in 1978, does that sound right? That would be during the
    Carter Administration. I noted that right at the outset, it
    starts out by exempting the GAO, the FBI, the Central
    Intelligence Agency, and the National Security Agency. Then, as
    you pointed out, the TVA and the Federal Labor Relations
    Authority itself are exempted, and the Federal Service Impasses
    Panel, and the Central Imagery Office are all exempted. It
    seems like everybody who has a national security function is
    exempted from this requirement except the DoD.
        Aren't you really just trying to get the flexibility that
    other agencies that are involved in protecting this country
    have?
        Mr. Chu. Absolutely, sir.
        Senator Fitzgerald. To me, it seems appropriate that they
    have that flexibility. I think the one indisputably legitimate
    function, the most important function of our Federal Government
    is to provide for the common defense, and I would like to see
    them have that authority.
        I know this isn't the subject per se of the legislation you
    are proposing, but I noticed that Secretary Rumsfeld wrote an
    op-ed in the Washington Post a week or so ago that referenced
    800 reports that the DoD has to submit annually to Congress.
    That number caught my attention because I don't recall ever
    reading one of those. I don't know if those reports are sent to
    my mail room. I am not even aware if any of my staff members
    are reading those. I imagine those requirements go back a long
    way in the law. How many people do you have to put----
        Secretary Rumsfeld. Think of how many trees we have to kill
    just to make the paper.
        Senator Fitzgerald. Enormous.
        Secretary Rumsfeld. Yes. I mean, it is, and what happens is
    frequently there will be a--just for the sake of argument, let
    us assume that the Pentagon does something wrong 20 years ago,
    wrong meaning people in Congress didn't agree with it. An
    amendment is proposed and the Pentagon resists the amendment,
    saying that that is too burdensome, and they say, all right,
    submit a report every year and tell us, assure us that you are
    not doing something that we feel you shouldn't have been doing.
    It is a perfectly legitimate beginning of this process.
        And then what happens is it goes on and on and it goes for
    10 or 15 years. There is no sunshine--no sunset rule, I should
    say on it. Our hope is that people will take a look at these
    things and say, fair enough. Let us discontinue half or three-
    quarters of these reports.
        I notice you read off a list of agencies that do not have a
    requirement for third-party intervention. I noticed that on the
    list also were the Botanical Gardens, the Office of Architect
    of the Capitol--a whole bunch of agencies are exempted from
    this. It goes on, Administrative Office of the U.S. Courts. It
    is a list of--I don't know how long it is.
        Senator Fitzgerald. Not to mention our own Senate offices.
        Mr. Chu. We won't go there. [Laughter.]
        Senator Fitzgerald. I would like to help you address the
    huge number of reports that you have to file. Some of these
    could go way back. They could go back to the Korean War, the
    Vietnam War, something that happened at that time that should
    have been addressed but the circumstances have long since
    changed, perhaps, to obviate the need for that report. I see no
    reason not to add it in whatever bill this Committee works out,
    even though it is on a slightly different issue. We have to
    start the ball rolling to give you the flexibility to meet your
    needs.
        I congratulate you on undertaking this task, Secretary
    Rumsfeld. We are lucky to have someone of your caliber who is
    not willing to put up with the kind of nonsense you have to put
    up with in Washington to manage a Department of your size. It
    is a great challenge, and we thank you for doing what you are
    doing and contributing your services here. Thank you.
        Secretary Rumsfeld. Thank you very much.
        Chairman Collins. I want to thank our panel for being with
    us this morning. Your presence here is testimony to how
    important this issue is to the Department and we appreciate
    your testimony and your insights. We will be working further in
    the hope of coming up with a bipartisan plan that we will
    either move as a separate bill or take up in the DoD
    conference, which Senator Levin, Senator Akaka, and several of
    us fortunately serve on both committees. So thank you very much
    for your testimony this morning.
        Secretary Rumsfeld. Thank you very much, Madam Chairman.
        Chairman Collins. I should note Senator Pryor is also a
    Member of both committees, too. Thank you.
        I am pleased to welcome our next witness, who is U.S.
    Comptroller General David Walker. As Comptroller General, Mr.
    Walker is the Nation's chief accountability officer and the
    head of the U.S. General Accounting Office.
        I want to note that Mr. Walker made a special effort to be
    here today. He was previously scheduled to be in California, I
    believe it was, and I very much appreciate his rearranging his
    schedule.
        I also want to extend my personal apologies to Senator
    Pryor for letting our panel go before he had a chance to
    question. I very much apologize and we will call on you first
    for Mr. Walker. Thank you.
        Mr. Walker, you may proceed with your statement.

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

        Mr. Walker. Thank you, Madam Chairman. It is a pleasure to
    be here, Senator Voinovich, other Senators. I might note for
    the record that I came back on the red eye last night, so
    hopefully I will arrive this morning and I won't fall asleep
    during my own testimony.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Walker appears in the Appendix on
    page 60.
    ---------------------------------------------------------------------------
        I also would like to note for the record that our son,
    Andy, who is a Marine Corps company commander, came back from
    Iraq on Sunday night, so we are pleased to have him back and
    very proud of what he and his colleagues were able to
    accomplish in Iraq.
        I am pleased to be here today to discuss legislative
    proposals to help the Department of Defense address its current
    and emerging human capital challenges. We strongly support the
    need for government transformation and the concept of
    modernizing Federal human capital policies, both within DoD and
    the Federal Government at large. As I have said on many
    occasions, human capital reform will be a key element of any
    government transformation effort.
        The Federal employee system is clearly broken in a number
    of critical respects, designed for a time and workforce of an
    earlier era and not able to meet the needs and challenges of
    our current, rapidly changing, and knowledge-based environment.
    The human capital authorities being considered for DoD have
    far-reaching implications for the way DoD is managed, as well
    as significant precedent-setting implications for the Federal
    Government at large and OPM in particular.
        We are fast approaching the point in time where standard
    government-wide human capital policies and procedures are
    neither standard nor government-wide. In this environment, we
    believe that the Congress should pursue government-wide reforms
    and flexibilities that can be used by many government agencies,
    including DoD, subject to those agencies having appropriate
    infrastructures in place before such authorities are
    operationalized.
        Considering certain proposed DoD reforms in the context of
    the need for government-wide reform could serve to accelerate
    progress across the government while at the same point in time
    incorporating appropriate safeguards to maximize the chances of
    ultimate success and minimize the potential abuse and prevent a
    further fragmentation of the civil service.
        More directly, agency-specific human capital reforms should
    be enacted to the extent that problems being addressed and
    solutions offered are specific to a particular agency, such as
    military personnel for DoD. Several of the proposed DoD reforms
    clearly meet this test. Importantly, relevant sections of the
    House of Representatives version of the National Defense
    Authorization Act for fiscal year 2004 and the National
    Security Personnel System Act cosponsored by Chairman Collins,
    Senator Levin, Senator Voinovich, and Senator Sununu, in our
    view, contain a number of important improvements over the
    initial DoD legislative proposal.
        Moving forward, as I mentioned previously, we believe it
    would be preferable to employ a government-wide approach to
    address selected human capital issues and the need for certain
    flexibilities that have broad-based application throughout the
    Federal Government. We believe that a number of the reforms
    that DoD is proposing fall into this category, such as broad
    banding, pay for performance, reemployment rights, pension
    offset provisions. In these situations, we believe it would be
    both prudent and preferable for Congress to provide such
    authorities government-wide, if possible, and to ensure that
    appropriate safeguards are in place before they are
    operationalized by the respective agencies.
        We also believe, in summary, Madam Chairman, that since we
    designated strategic human capital management as a high-risk
    area on a government-wide basis in January 2001, the Congress,
    the administration, and the agencies have taken steps to
    address the Federal human capital shortfall and we have more
    progress in the last 2 years than the last 20, and I am
    confident with your dedicated efforts we will have more in the
    next two years than the past two years.
        I have made a number of statements over this past 2 years
    in order to help facilitate transformation, and Senator
    Voinovich clearly has been on the point and has dedicated a lot
    of his time and effort as a U.S. Senator to this, and I know,
    Madam Chairman, you have been very actively involved, as well,
    and I appreciate that. But I think it is important to note that
    we believe that DoD and other Federal agencies clearly need
    additional flexibility in the area of human capital. At the
    same time, appropriate safeguards need to be incorporated in
    order to maximize the chance for success and minimize the
    possibility for abuse. I am pleased to say that the National
    Security Personnel System Act incorporates many of these needed
    safeguards and is a significant improvement over what the DoD
    initially proposed.
        At the same time, we hope that if Congress does act on this
    legislation this year, and obviously conference is going to be
    key with regard to this matter, we hope that Congress will
    seriously consider not only addressing DoD-specific needs, but
    also potentially providing additional flexibilities to not only
    DoD but other Federal agencies in an area where there is not
    only a need, but an application much beyond DoD.
        By employing this approach, we believe that you can
    accelerate needed human capital reform throughout the Federal
    Government while helping to assure that appropriate protections
    are in place to prevent abuse of civil servants. You would help
    to provide a level playing field within the Federal Government
    in the critical war for talent while helping to avoid the
    further Balkanization of the Executive Branch civil service
    system, which was championed by Teddy Roosevelt over 100 years
    ago.
        Thank you, Madam Chairman, and I would be happy to answer
    any questions you might have.
        Chairman Collins. Thank you very much for your excellent
    testimony.
        Mr. Walker, you raise a question that I have been thinking
    about throughout this hearing this morning, and that is should
    Federal employees have different rights depending on for whom
    they are working? Are we risking creating personnel systems
    that impede the transfer of employees from department to
    department, that mean that you get paid better if you work for
    the Department of Homeland Security or the Department of
    Defense than if you work at the Department of Agriculture or
    the Department of Education, that give you different appeal
    rights if you are subject to a personnel action depending on
    where you work? Are those issues that we need to take a look
    at, and does that trouble you that where you work would
    determine what your rights are as a Federal employee?
        Mr. Walker. Well, I think there are certain things that,
    clearly, it shouldn't matter where you work. You need to have
    substantive protections. There need to be independent appeal
    rights beyond the individual agency.
        I might note the two examples that were mentioned by the
    prior panelists, one being the court system and the GAO, the
    reason that they are separate is because they are involved in
    separate branches of the government under the Constitution.
    There are independence issues associated with that and there
    are good reasons why they have separate systems.
        I might also note that the GAO has something called the
    Personnel Appeals Board, which is an independent body that our
    employees have the authority to go to in lieu of the Federal
    courts if they so desire, but they still have the avenue to go
    to the Federal courts should they choose to do so.
        I also would commend your bill because I believe that by
    incorporating a number of critical safeguards dealing with
    performance management, dealing with special hiring authority
    and certain other areas, those concepts should be applied
    throughout the Federal Government. There are certain things
    that should have no boundaries, and I think pursuing that type
    of principle-based approach that includes incorporating certain
    safeguards is the right way forward.
        Chairman Collins. Could you share with us more about the
    GAO's own experience in moving toward a more flexible personnel
    system, because you have really led the way and I want to
    commend you for your leadership.
        Mr. Walker. Thank you. As you know, Congress has given us
    some flexibilities in the past and we also are going to be
    requesting additional ones in the near future.
        As far as the past, in 1980, Congress gave us our own
    personnel act. It exempted us from portions of Title 5 but not
    all of Title 5. The biggest thing that we did with that initial
    authority back in 1980 were two things. First, we implemented
    broad banding, which is a more flexible classification system
    that provides for a more flexible pay system. It also allows us
    to implement pay for performance, additional pay for
    performance than otherwise might be the case in the typical GS
    system. We also had the authority to hire a certain number of
    critical individuals for up to 3 years on a non-competitive
    basis on the CG's authority. Those two things have been very
    helpful.
        In the year 2000, Congress gave us the ability to have
    early-out and buy-out authority to realign the agency rather
    than to downsize the agency, to create senior level positions
    equal to the Senior Executive Service, but for technical and
    scientific individuals, so we could progress those people up
    compensation-wise and responsibility-wise without--while
    recognizing that they are not the type of individuals that the
    Senior Executive Service was envisioned for. And, you also gave
    us authority to modify our reduction in force rules whereby we
    did not reduce veterans' preference and we were able to
    consider performance more than length of service, but we still
    had to consider length of service.
        We are going to be asking for some new reforms in the near
    future, by the end of June, that will come before this
    Committee and I hope can be considered this year.
        I will say this. When you are talking about making the type
    of changes that the Department of Defense is talking about,
    while they are very much needed, how you do it, when you do it,
    and on what basis you do it matters. And from a practical
    standpoint, you have a phased-in implementation approach that
    is required in your legislation. No matter what the Secretary
    and others at DoD might want to do, from a practical
    standpoint, they will not be able to adopt this new system in
    anything other than a phased approach, and from a practical
    standpoint, I don't think that the limits that you are
    proposing would represent any significant constraint on their
    real ability to effectuate the type of reforms that they are
    going to need. You have to do it in phases to do it right, and
    that is what we have done at GAO.
        Chairman Collins. Thank you. One final question from me,
    and that is DoD has asked to exclude OPM from much of the
    review of its new system, other than a small but minor
    requirement to consult with OPM in the design. Could you tell
    us whether you think OPM, as with the Department of Homeland
    Security, should be involved virtually every step of the way?
        Mr. Walker. I do believe that OPM has to play an important
    role to provide the type of checks and balances that you need
    to prevent abuse and maximize the chance for success.
        I would also note I have tremendous respect for Secretary
    Rumsfeld. He and I are both Teddy Roosevelt fans, among other
    things, who, as you know, was the champion of the civil service
    system. But I will tell you that I was extremely disappointed
    in the process that DoD employed to come up with this proposal.
    There was basically no consultation--of unions, of employees,
    of their executives, and so, therefore, when I see a provision
    that says that they will consult with somebody, with the track
    record that they employed in coming up with this proposal, that
    doesn't give me great comfort.
        I think it is important that you either have the provision
    that you have in your bill, which would require that it be a
    joint effort with OPM and DoD, and I think it is fine if you so
    desire to do what the House did, that if there is a stalemate
    between OPM and DoD on a truly national security issue, to take
    it up to the President. But you need to have an independent
    third party involved and you can't know going into that
    discussion that you have the trump card before you have entered
    into consultations and negotiations. There is a fundamental
    conflict of interest. That would not represent adequate checks
    and balances, in my view.
        Chairman Collins. Thank you. Senator Voinovich.
        Senator Voinovich. Thank you, Madam Chairman.
        First of all, Mr. Walker, thanks very much for coming back
    on the red eye. I again want to thank you publicly for coming
    to Dayton for the hearing that the Subcommittee held there on
    this very important new endeavor by the Department of Defense
    to have their own personnel system.
        I am interested in your comments about looking beyond the
    Defense and Homeland Security Departments at the broad range of
    reforms that we ought to be implementing government-wide. The
    Chairman and I have talked about this issue on several
    occasions, and I would really be interested in getting your
    recommendations as you look at what we have done in Homeland
    Security and what we are considering doing in the Department of
    Defense. I know the Securities and Exchange Commission is
    coming in as well with requests. NASA is pining away to have
    changes in their personnel system which are long overdue and,
    as a matter of fact, have been on your high-risk list now for
    several years.
        But to look at the general application of some of these
    things across the board so that we don't have these
    inconsistencies and give these people some of the same
    flexibilities that some of these agencies now have and others
    want to have. You don't have to launch into them right now, but
    I would really, and I am sure that, Madam Chairman, you would
    appreciate having those, also.
        The pay-for-performance system, I mentioned that when
    Secretary Rumsfeld was here. You looked at the provisions of
    our bill. Do you think that the criteria that we have
    established for performance management in our bill respond to
    some of the concerns that you have had about the rapid advance
    toward pay-for-performance in the Department of Defense?
        Mr. Walker. I do. I definitely believe they are a
    significant improvement.
        Senator Voinovich. Would you like to share just a minute
    with us how difficult that is?
        Mr. Walker. Sure. Let me mention a couple of things. First,
    the hearing in Dayton, by the way, it turned out setting a
    record. There were more hits on our website for a copy of my
    testimony in that hearing in Dayton, Ohio, than any other
    document in GAO's history, which was interesting. I just found
    that out.
        Second, I do think it is important that for certain areas
    like hiring for critical occupations, broad banding, pay for
    performance, reemployment rights, pension offset, to consider
    doing that on a government-wide basis, not to slow things down,
    but to recognize that DoD is, first, not the only entity
    involved in national security, and second, not the only entity
    in the civilian part of the Federal Government that needs these
    types of flexibilities. We are all in a war for talent and we
    all want to try to win that war and we don't want to try to
    create unlevel playing fields.
        We are talking about huge cultural transformation here,
    transformation that is needed, transformation that is long
    overdue, transformation that if your legislation becomes law
    will be facilitated, because in the final analysis, you can't
    transform how government does business unless you transform the
    government's human capital policies and practices. And while a
    lot can and should be done within the context of current law,
    quite frankly, neither DoD or most Federal agencies have nearly
    done what they should have done under currently law, they do
    need your help because there are certain areas where there are
    practical constraints under current law.
        But it will take years for them to effectively design these
    systems for their entire civilian workforce. They will have to
    do it on an installment basis and they need to involve the key
    stakeholders to a much greater extent than they did in
    connection with this legislation.
        Senator Voinovich. And you also concur, just to underscore,
    that it is very important that OPM continue to be involved
    here?
        Mr. Walker. I think it is. I think they provide a certain
    degree of consistency. They provide an independent set of eyes
    to be able to try to help maximize the chance of consistency
    where there ought to be consistency, minimize the possibility
    of abuse and of further Balkanization of the system.
        I do, however, believe that OPM needs to act expeditiously,
    that they need to be able to rule on issues within prescribed
    time frames, and I think that OPM, frankly, has its own
    cultural transformation challenge, because for many years, OPM
    was primarily a compliance organization. It needs to become
    more of a consulting organization, figure out how to get things
    done rather than necessarily saying no.
        Senator Voinovich. Thank you.
        Chairman Collins. Thank you very much.
        Again, I want to thank you, Mr. Walker, for your efforts to
    be here today. I also want to acknowledge that you and your
    staff have been extremely helpful to us as we drafted our bill.
    We did consult very closely with you and looked at previous
    statements, your experience, your recommendations, and that was
    very valuable. So we look forward to continuing to work with
    you.
        Mr. Walker. Thank you. We have great people and I am proud
    to lead them. Thank you.
        Chairman Collins. Thank you.
        I would now like to call forward the third and final panel
    this morning. I would like to welcome Bobby Harnage, the
    National President of the American Federation of Government
    Employees, AFL-CIO. As National President of AFGE, Mr. Harnage
    leads the Nation's largest union, representing approximately
    600,000 Federal and District of Columbia Government employees
    belonging to over 1,100 local units in the United States and
    overseas.
        It is also a great pleasure to welcome back to the
    Committee today Paul Light, who is Professor of Public Service
    at New York University. He also has a distinguished career that
    includes serving as a senior staff member on this very
    Committee. So he has a great deal of expertise in the areas of
    government, bureaucracy, civil service, Congress, entitlement
    programs, government reform, and we welcome him back to the
    Committee today.
        Mr. Harnage, I am going to ask you to come forward with
    your testimony first, and thank you both for being with us.

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

        Mr. Harnage. Thank you. At the beginning, on behalf of the
    600,000 Federal and D.C. employees that AFGE represents and
    including the 200,000 at the Department of Defense, let me
    thank you, Madam Chairman, as well as Senators Levin,
    Voinovich, and Sununu for the numerous changes you have made to
    the House-passed version of the Defense Department's systems
    proposal.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Harnage appears in the Appendix
    on page 74.
    ---------------------------------------------------------------------------
        Present at this hearing this morning are a large number of
    AFGE local leaders, but also present is the entire National
    Executive Council of AFGE to show their thanks for the work
    this Committee has done on this legislation and your
    leadership.
        While AFGE remains profoundly concerned about both the
    fairness and the negative economic impact of a pay-for-
    performance system, we are grateful for your willingness to
    consider our concerns closely and for you taking the time to
    write legislation that substantially restrains the Department's
    desire for a blank check authority to create a new personnel
    system. Thank you, Madam Chairman and your Committee, for not
    abrogating your constitutional responsibilities.
        The authorities sought by the Pentagon are very broad and
    have profound implications for the merit principle-based civil
    service system, including its replacement with a yet-to-be-seen
    system, designed, implemented, and adjudicated by a political
    appointee and every single one of his future replacements. The
    risk that this system will be politicized and characterized by
    cronyism in hiring, firing, pay, promotion, and discipline are
    immense. They are predictable, and the ability to mitigate that
    risk would be minuscule.
        Madam Chairman, I know that my written testimony has been
    entered for the record and it expresses in detail our
    opposition to the DoD legislation, so I will summarize on some
    key points where your bill differs from the House version and
    hopefully still have some time to respond to some of DoD's
    comments here this morning.
        Due process--the House lets DoD decide whether or not DoD
    civilian employees will have due process protection and appeal
    rights. It lets managers suspend, demote, or fire employees,
    but it doesn't let them go to the MSPB or the EEOC if they have
    evidence that these decisions were based on prejudice,
    politics, or distortion of the facts. The Senate effectively
    retains these rights and we think the Senate is right to keep
    the third party review. It will go a long way in making sure
    that hiring and firing in DoD is based on merit rather than
    cronyism and politics.
        On collective bargaining, the House lets DoD decide whether
    DoD civilian employees will be able to have union
    representation and collective bargaining. Even if the employees
    hold an election and decide to have a union, under the House-
    passed legislation, the Defense Secretary can effectively
    negate this election by refusing to allow collective
    bargaining, even when contractor employees performing the same
    job not only have the right to union representation, but have
    the right to strike. Contractors who have taken civilian
    Federal employee jobs and those yet to be privatized, their
    employees will have more rights, more protections than
    government employees. This is not about national security and
    it is not about flexibility.
        The Senate maintains these basic democratic rights for DoD
    employees and we commend the Senate for recognizing that
    hostility to employees' rights is the most basic evidence of
    mismanagement. That employees desire to have a meaningful
    communication and enforceable collective bargaining agreement
    goes hand-in-hand with our Nation's democratic traditions and
    the standards of good government.
        Pay for performance--although the Senate has proposed some
    parameters for a pay-for-performance system and the House has
    proposed virtually none, AFGE strongly opposes the imposition
    of individualized pay-for-performance plans. Any way you slice
    it, pay-for-performance plans create more problems than they
    solve, if it can be said that they solve anything.
        Madam Chairman, most of the rationale given by DoD for
    these radical and sweeping changes is a failure to accept their
    management responsibilities. The poor performers they like to
    refer to are nothing more than the results of not providing
    proper pay under FEPCA and not properly training managers to be
    managers of people and not letting managers be managers. Their
    reference to the problem of hiring is nothing more than the
    failure to let managers manage and bureaucratic systems
    requiring higher levels of approval. It is not the law and it
    is not the regulation that is the problem.
        The argument that it takes too long to fire someone is
    sheer rhetoric. It only takes 30 days, at most. The appeals
    process is long, but that is caused by budget restraints, not
    by the law and not by the regulation. The employee is off the
    rolls during this process and certainly would like very much
    for it to be a shorter period of time.
        The flexibilities that they beg for is a failure to
    recognize the flexibilities they already have. Every example
    they have given for the need of flexibility is a
    misrepresentation of the facts. They already have them.
        On the comments that I heard this morning, Madam Chairman,
    sometimes if I hear DoD talking, I am reminded about the story
    of the individual that killed their parents and then threw
    themselves on the mercy of the court because they were an
    orphan. That is very similar to DoD.
        This is not a national security personnel system. National
    security is added to the title to give it more importance than
    what it deserves. It is nothing but a DoD personnel system.
        So why did we attach it to the authorization bill where it
    was not germane? They attached it to the authorization bill
    because it couldn't stand on its own merits and they were
    hoping it would be rushed through Congress before Congress took
    a good look at it, and I thank you, Madam Chairman, for
    ensuring that the Senate took its responsibility seriously,
    where I think the House failed to do so.
        On the 300,000 to 320,000 military individuals that should
    be performing civilian jobs, we don't argue with that point at
    all and we don't see why there is any problem of identifying
    those 320,000 people because they were civilian employees
    first. They changed into military positions not because they
    couldn't get the job done with civilians, but because they
    wanted to build up the military. When you put a military person
    in a civilian position, it is not more efficient, it is less
    efficient because that military person has more obligations
    than the job to which they are assigned--mess check, CQ, drill
    procedures, training that the civilian employee doesn't have.
    So it is not more efficient, it is less efficient, but they did
    it because they were building up the military strength at that
    time, converting civilian jobs to military jobs for that sole
    purpose of career development of the military people, not
    because the civilians couldn't or wouldn't do the job.
        And I question how they are going to do this since they
    claim they don't manage by FTEs, but every time we talk about
    bringing new work in-house instead of automatically privatizing
    it, they can't bring it back in-house because they don't have
    the slots. If that is not managing by FTEs, I don't know what
    it is.
        I just recently came from a trip out West where I was at
    Kirkland Air Force Base in the science and laboratory research
    for the military. A head of the science department was telling
    me that he wanted to enlarge his laboratory and he was going to
    build an annex to it that would basically double the size of
    his workforce. He had the money, he had the land, but he
    couldn't get it through because he didn't have the
    authorization for the positions. He could contract it out
    tomorrow, but he couldn't hire the civilian workforce that he
    wanted to match and mirror his current workforce simply because
    he couldn't get the authorization. It wasn't the delay in the
    hiring process, it was the delay in the approval to do it that
    caused the delay, and he is still waiting today. He has been
    waiting for almost a year now.
        Eighty-three percent of contractors deployed in the war in
    Iraq, I think we need to take a closer look at that. They have
    a habit of just throwing out numbers to you without giving you
    the substance of those numbers. Thank goodness Senator Levin
    asked for some specific numbers, and I think they are going to
    be surprised that that percentage is going to greatly reduce.
        But that wasn't about the civilian workforce not being able
    to be deployed. That was about money. That was about
    contractors who have indirect contacts to the DoD, making
    millions and millions of dollars by going over there instead of
    civilians going over there. The only complaints that I know of
    that happened during this war were two complaints of civilians
    not being allowed to be deployed rather than not wanting to be
    deployed, and let us look at the number of civilians that were
    deployed in the Gulf War and the number of contractors versus
    the number that were deployed in this war on Iraq and see if
    the number isn't a tremendously expanded number and, therefore,
    having to be more contractors and, therefore, raising that
    percentage point. It hasn't anything to do with the war or
    anything to do with the flexibility of the civilian workforce.
    It has to do with the circumstances of the war.
        And they keep talking about garnishing wages and they are
    taking 2 years or 10 years about negotiating that. They could
    have negotiated that at the national level had they wanted to.
    They chose not to, and now they want to use that as an excuse.
        But Madam Chairman, there is something basically wrong with
    that example, and that is they have access currently to the
    Federal Service Impasse Panel. Why haven't they used that? They
    have access to bring this to a head, to a closure at every one
    of those locations and they fail to do that, and the
    implications are they know they are wrong, their case is weak,
    and, therefore, they won't take it forward to a third party to
    get a ruling on it, but yet they want to blame the system as
    the purpose of it. Basically to summarize, they say, we are
    right and we don't want anybody to question that. Let us make
    the decision.
        Even in their complaints about the MSPB, where 85 percent
    of the cases are sustained, they only lose 15 percent of them,
    they want to argue about that, and let us look at what that
    says. Maybe we ought to do away with the appeals court system.
    Maybe we ought to do away with the Supreme Court system and
    just try somebody in an initial court and then hang them
    without any appeals process. That is what DoD wants to do with
    its civilian workforce. Remember, termination is capital
    punishment in the administrative field.
        So we don't want to give these people that authority. It
    doesn't take 5 months to hire anybody. It doesn't take 18
    months to fire anybody by regulation or law. It is the
    bureaucracy that has created that.
        I appreciate Senator Voinovich referring to TSA, the
    Transportation Security Agency. The chaos that is there now,
    they can't blame that on the union. They left us out of that
    picture. We could have been in there helping them, telling
    them, warning them, cautioning them about mistakes that they
    were making, but we weren't given that ability. But you don't
    want to do that with the civilian events when it is four or
    five times the size of the workforce of TSA.
        I thank you very much for this opportunity to testify
    before this Committee and I appreciate you and your Committee's
    willingness to look very carefully at this legislation and do
    some of the things that are right for the civilian workforce,
    and I will answer any questions you might have.
        Chairman Collins. Thank you. Professor Light.

    TESTIMONY OF PAUL C. LIGHT,\1\ PROFESSOR OF PUBLIC SERVICE, NEW
                            YORK UNIVERSITY

        Mr. Light. Thank you for having me before the Committee. It
    is always a pleasure to be in this room. I sat in the back row
    for a long time. I think I did OK afterwards. I didn't become
    the Chairman of the Committee, as some staffers have done----
    [Laughter.]
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Light with an attachment entitled
    ``In Search of Public Service'' appears in the Appendix on page 95.
    ---------------------------------------------------------------------------
        But you never know.
        Let me start by saying that I support the Committee's
    effort here today to develop and perfect this legislation. I
    think we have before us a good bill. I think it is a very
    useful contribution to the debate.
        I am an Article I person. I happen to believe that we
    should have a Congress and that we should allow the legislative
    process to work its will. This one, this particular bill has
    been moving very rapidly and I appreciate how difficult it is
    for you to develop any sort of a consensus under this time
    frame and to develop a bipartisan consensus. It is very much in
    the tradition of this Committee.
        That is not how the House works. That is not how the House
    has ever worked under either party because it is the House,
    with very tight rules and a very large number of members. But
    this particular Committee has always aimed for bipartisanship.
    I always believed that when you are working on issues like
    financial management reform and prompt payment that if we
    couldn't find bipartisan agreement on these rather unglamorous
    issues, that we just couldn't get any traction on the floor.
    Senator Glenn believed that. Senator Roth believed that. I know
    that you believe that and I know that Senator Lieberman
    believes it, as do all of your Members.
        Let me talk about three reasons why I support this
    particular bill. First, it provides a template. It provides a
    set of instructions to other agencies that are now lining up. I
    mean, the line-up of agencies for these kinds of authorities is
    going to be equal to that of a summer blockbuster movie.
    Everyone wants out. Once Defense goes, it is everybody for the
    gates.
        We already know that agencies have been tunneling out of
    the system in this bill or that bill, and we know that most of
    them do so when they get into trouble. It is usually when an
    agency falters that they get the authorities they need or want
    to do a better job, and here we have an opportunity to say to
    the Executive Branch, here is a template. Much of this bill was
    developed through the Federal Register, near as I can tell,
    looking at what DoD wanted specifically.
        The second point is that this bill is bipartisan. That is
    so important for actually implementing the legislation once it
    moves forward. The notion of bipartisanship, as you are going
    out to talk to the workforce about these flexibilities, is an
    added advantage in actually securing implementation. Having
    another piece of legislation rolling forward that is divided by
    party, divided by party and sending a message to the workforce
    that one party supports it and the other doesn't, that is just
    not good for productivity and the embrace of the legislation at
    the actual front line where you do and deliver the services.
        The third point is that I think there are a number of
    useful provisions in this bill that should speed its
    implementation. I noted today that Charles Abel, who is
    Assistant Secretary for Personnel and Readiness, had said that
    this bill that the Committee, or that the House version of the
    bill was 75 percent of what they wanted. I think the better
    question for the Committee to ask is, what percentage of the
    bill do they really need? They are getting 75 percent of what
    they wanted, but perhaps 150 percent of what they need. I think
    what this Committee is trying to do is establish a template of
    needed flexibilities while maintaining safeguards so that
    employees have some rights of appeal beyond just the managerial
    dictate.
        I like the issues of managerial, putting the focus on
    managerial ability through the phasing. The China Lake
    experiment has launched a thousand dreams of being out of the
    current system. That is an experiment, actually, that has been
    very poorly understood and never deeply evaluated. If you have
    been to China Lake, you know it is a little bit of a distance
    from the sort of normal Federal facility. It is an unusual
    place filled with very talented and creative people.
        GAO is a good example of an agency that has taken advantage
    of pay banding and other authorities to really bring itself
    forward in terms of the war for talent quite effectively, but
    it took a long time. It didn't happen overnight. They actually
    started without some of the systems that they needed in order
    to move forward with pay banding and they worked at it year
    after year after year, and I think right now we would argue
    that it is a very successful example of pay banding
    implemented, but it took time.
        That is why I like the phasing idea here in the statute. I
    think it is going to be very difficult to do this quickly. I
    think doing it one cut at a time will give you an opportunity
    to see how it works and I support the phasing.
        There is also the scaling-up problem that I just talked
    about. You can't really imagine going from China Lake to
    750,000 employees overnight, nor from the 3,500 employees at
    GAO, who are all knowledge workers of a kind, to going to the
    full DoD workforce overnight.
        This said, I believe that the Committee's version of this
    legislation represents the kind of bold reform that we need. I
    believe that the choice today for America's young people is, in
    terms of public service, is clearly placing government in a
    distant second, at best, as an employer, and we need to
    reassure young people that we can, in fact, move quickly, that
    they will be rewarded for performance, that they will be
    allowed to advance.
        We also need to make sure that the managers who supervise
    them have the ability and the training and the tact to manage
    them well. I would like to say that the performance appraisal
    system, the hyper-inflated performance appraisal system that we
    see in department after department is a product of manager
    flexibilities to provide performance appraisals.
        All in all, I am going to summarize here in support of your
    effort. I think that having a bipartisan solution move forward
    at this particular point in time, in this particular climate,
    is the way to go. I am not the Secretary of Defense, either,
    but if I were the Secretary of Defense, I would compromise to
    get that bipartisanship. I just think it is worth everything
    when you are moving forward on implementation to be able to say
    that this was a bipartisan agreement rather than the product of
    one party, one administration. This is going to last for a long
    time, and to the extent it can be bipartisan, I think that is
    everything to successful implementation. Thank you very much.
        Chairman Collins. Thank you very much, Professor.
        I certainly agree with your comments and that has been my
    goal, to craft a bipartisan package.
        My memories of this Committee may even go back further than
    yours. I first started as a staffer here when Senator Percy and
    Senator Ribicoff were running the Committee, and they, too, had
    that bipartisan approach that has been the hallmark of this
    Committee's history and one that we are striving to continue to
    this day.
        One issue that we haven't discussed this morning that I
    would like your comments on is the fact that the Department of
    Defense is seeking to have for not only this Secretary of
    Defense, but future Secretaries of Defense as well have the
    authority to exercise very broad waivers of chapters in Title
    5. This may mean that Secretary Rumsfeld may come up with one
    personnel system, but that a future Secretary of Defense, using
    the same authority, could come up with one that is entirely
    different.
        To me, that argues for Congress spelling out more
    specifically in legislation the parameters of the system. It
    also, to me, argues for a role for OPM, rather than just
    granting unilateral, broad authority for this and any future
    Secretary to waive various chapters of Title 5. Could you
    comment on that issue?
        Mr. Light. Two things here. First, this should not be a
    referendum on Secretary Rumsfeld or Dr. Chu. I think the world
    of David Chu and I think that there is a great deal of research
    that he draws upon from his experience at RAND that is quite
    relevant to these issues at hand.
        But, in fact, there will be future Secretaries of Defense.
    One of the biggest problems among the seniors that we just
    finished interviewing at the Center for Public Service at
    Brookings, which I direct, is the confusion of the process.
    Young Americans would very much like to serve their country.
    They want to come into government, I believe. But they look at
    the process and the confusion involved in getting in and they
    just shy away. They see the Federal hiring process, or hiring
    process in government more generally, as both slow and
    confusing, and I am afraid that as we allow agencies to tunnel
    out without this general template in place, we are just going
    to add to the confusion.
        Young people do not believe they know how to get a job in
    government even if they want a job in government, and I think
    that you are sending a message to the agencies that here is the
    template. Go ahead and come back to Congress with your requests
    under this template, I think is extremely useful to the
    agencies and it is also a disciplining kind of force on the
    Department of Defense.
        I think OPM has made a good faith effort to improve and
    change its culture over the last 5 years, under both the
    Clinton Administration and under the Bush Administration, and I
    think that OPM can be trusted with this kind of joint custody,
    if you want to imagine it that way.
        I don't think, and I don't believe in unreviewable
    authorities for the Executive Branch. That could be just my
    instinct as a Title 1 person, given that Title 1 addresses the
    Legislative Branch, but I really don't think that the issue of
    unreviewable authority should be taken as a referendum on the
    Secretary. Frankly, I think this is a good piece of legislation
    in spelling out specifically what that Department has asked
    for.
        Chairman Collins. Thank you, Professor.
        Mr. Harnage, I know that you have expressed reservations
    about moving to pay banding and pay-for-performance systems.
    Are there any Federal pay-for-performance approaches that are
    now in use as pilot projects across the Federal Government that
    you believe have been successful and might be good models?
        Mr. Harnage. First of all, we think that the scheme should
    be supplement to a fully-funded regular pay system. The example
    is given by GAO, for example, that pay for performance,
    everybody gets the across-the-board pay increase annually. What
    is pooled for paying for higher performers is the bonus money
    and the step increases. But everybody gets it across the board.
    So we think that ought to be an element of any pay for
    performance, that Congress ought to continue ensuring that
    employees are paid fairly and then give the managers the
    provision to reward exceptional performance.
        But we also are opposed to pitting individual against
    individual. We think it should be more a team approach, and an
    example is Pacer Share, which was at McClellan Air Force Base,
    where that system rewarded everyone, not just a few individuals
    at the expense of someone else. But everybody, if they reached
    a certain level, if their performance was a certain level,
    everybody gained, everybody profited from that experience.
        But I don't see the GS system as a system that does not pay
    for performance. In fact, I think it is just the opposite and I
    believe it is given a bad name simply over rhetoric.
        Let us look at what the current system is. It is based on a
    classification system, it is based on a qualification system,
    and it is based on a performance system. The classification
    system and the qualification system makes sure that you meet
    these qualifications in order to get the job. The
    classification system is if you do this work, you receive this
    pay. That eliminates discrimination, helped eliminate the
    equal-pay-for-equal-work problem that we had. So it was a fair
    system.
        And then each step increase, and I think the public and
    maybe some Members of Congress have been led to believe that
    these step increases are annually and forever. It takes 18
    years to go through the step increase process, and if you get
    promoted, it takes even longer. But those step increases, every
    one of them is certified by the manager as that employee has
    met an acceptable level of competence. That is a performance-
    based step increase, and they can be denied.
        And what we see is now there is a government-wide policy
    that there has not been quality step increases for at least 10
    years that I am aware of where Federal employees who were high
    performers could be given a quality step increase. That is a
    step increase outside of the system, outside of the normal
    process, as a reward. They don't give those anymore. They quit
    giving them, and that is a bureaucratic policy and that is not
    a law.
        Chairman Collins. Thank you.
        Professor Light, could you answer that question, also? Are
    there particular pay-for-performance pilot projects that you
    think are good models and that have been effective?
        Mr. Light. I agree with Bobby Harnage on the issue of Pacer
    Share. Actually, Pacer Share was arguably the most successful
    of the experiments over the last 15 to 20 years. It was
    carefully evaluated. There were gains in productivity due to
    the gain sharing model that was used there in which employees
    kept part of the gains from productivity and part of the gain
    from productivity went back to the taxpayers.
        The politics of gain sharing, of course, is quite
    difficult. The notion is that 100 percent of the money should
    go to the taxpayers and that civil servants should always be
    giving up the good ideas for productivity improvement. But
    Pacer Share was a real success story and it is a unit-based, or
    was a unit-based pay-for-performance system.
        GAO is generally accorded great respect in this regard as
    having developed and implemented an effective pay-for-
    performance system. It has involved an incredible amount of
    training.
        I look to Senator Voinovich on this issue because we look
    at the training budgets in Federal agencies and we say, is
    there the money in the training budget to train the managers to
    use the systems or the flexibilities that we are now giving?
        Frankly, a lot of Federal managers cannot use these
    authorities at this particular moment in time. They need to be
    trained up on this. It is not the front-line employee who needs
    the training as much as the manager in order to give fair
    appraisals and to use the flexibilities that are being
    considered here thoughtfully and without abuse, and that is a
    training issue to me.
        Chairman Collins. Mr. Harnage, before turning to Senator
    Voinovich, I want to ask you one final question, and that is
    Secretary Rumsfeld testified today that some 320,000 military
    personnel are performing civilian jobs because the civilian
    personnel system is so rigid that managers at DoD turn to
    military personnel. Would you like to comment on that
    statement?
        Mr. Harnage. I think the Secretary has been badly
    misinformed and just repeated that bad information. First of
    all, as I said a while ago, I believe if you look in history,
    you will see that those 300,000 jobs were civilian jobs to
    begin with, and over the years, they were made military
    positions and it wasn't because the civilians wouldn't, or
    couldn't do the job. It was because it was career development
    of the military. They were building up the size of the military
    and it was for career development is how that happened. Don't
    quote me on this, it has been 25 years, but I believe it is
    1426.1 was the DoD directive that said you could not convert
    civilian positions to military, but they converted 300,000 of
    them.
        That is not a problem, but if you listen to all of this,
    not just today but what was said yesterday and the day before,
    they are not really saying these 300,000 positions will be
    Federal civilian positions. They may be contractors. They are
    just whetting your appetite with their comments. But if you
    look at some other comments that are made in other places, it
    could be contractors rather than Federal civilian workforce.
        And where they talk about contractors that are currently
    doing jobs that should be done by civilians, I think that is
    right. We have been saying that for the last 5 or 10 years,
    that that has happened. But when they try to do it, how do they
    get around the FTEs? They claim they don't--I heard Dr. Chu
    say, ``We don't manage by FTEs.'' I heard him deny that there
    was OMB control of FTEs.
        But how come Kirkland, the example I gave you a while ago,
    can't hire the scientists and the technicians and the engineers
    that they need to do that very important research when they
    already have the money and the land if they aren't controlling
    it by FTEs? That should have already been built. The employees
    should already be in place, but it is not.
        So you can't do that with maybe 50 to 80 employees, but he
    is baiting us for the 300,000. If he can't handle 80, how is he
    going to handle 300,000?
        Chairman Collins. Thank you. Senator Voinovich.
        Senator Voinovich. I apologize to you. I had to step out. I
    had a meeting that I just couldn't get out of and I apologize
    for not being here for your testimony and want to thank both of
    you for being here.
        Bobby, you and I worked a long time together and had some
    good days and bad days, but the thing is that we keep talking
    and I think we have made some progress.
        Paul, you and I have known each other for a while and we
    thank you for all of your input over the last several years on
    some of these issues that have been before us.
        Madam Chairman, I would like our witnesses to comment on
    some of the systemic things that are just not right. For
    example, Professor Light mentioned the issue of training. We
    talk about whole new personnel systems, but if you don't have
    the money for training, how can you really do the things that
    need to be done? Professor Light, maybe you might just like to
    comment on that for a minute or two.
        Mr. Light. Absolutely.
        Senator Voinovich. Let me just go on. Bobby, the issue of
    outsourcing. DoD can talk all they want about the 320,000
    military personnel positions that are going to be civilianized,
    and I would be interested in more detail on how they all became
    military people. That is interesting. That is a little
    different story than we got before. We turned them into
    military because of the fact that we didn't have the
    flexibility when they were civilians, so we moved them to
    military so we could move them around and have some
    flexibility.
        But we had a situation, Madam Chairman, in Cleveland at
    DFAS where they outsourced work and found out that it was all
    done incorrectly.
        I mentioned the Transportation Security Administration. I
    visited two of the facilities and spent a couple of hours, and
    the unhappiness of the employees who are there is tangible.
    They gave the human resource functions to a private company,
    which didn't even get employees their cards for
    hospitalization. The agency then fired the company that did it.
    The rumor is that there are almost 2,000 of those people that
    we hired that are on the FBI's ``do not hire'' list.
        This is what happens when you just let agencies do their
    own thing. So Professor, why don't you comment, and Bobby, I
    would be interested.
        Mr. Light. Let me make three quick comments. One is that I
    don't care who says that there is an employment ceiling in the
    Federal Government. I am a short person. That ceiling is very
    high, but there is a ceiling. Some agencies are operating well
    below ceiling, but when they get close to ceiling, OMB clamps
    down.
        That leads to a second point, which is that there are
    really two different administrations operating here and Federal
    employees are confused a little bit about who is saying what.
    OMB is saying one thing on outsourcing and competition, and
    competitive sourcing. DoD is saying another. Cabinet
    Secretaries like Secretary Rumsfeld, Secretary Powell, and
    Secretary Ridge say wonderful things about civil servants, and
    then sometimes you might not hear that same rhetoric elsewhere.
        I think the notion of bipartisanship here is important to
    send the signal that this is not a one party issue, that both
    parties recognize that there are needed improvements to be made
    in the current system.
        I talk to Federal Transportation baggage-passenger
    screeners all the time when I fly. Every time I ask them how
    happy they are, I get a full body search. [Laughter.]
        They stand me aside and--they are not a happy group of
    campers out there. If you talk to them one-to-one, there is a
    lot of issue out there about what they are getting, not getting
    by way of training, by way of hours, by way of the promises
    made. I mean, you hear that a lot from them one-to-one. The
    plural of anecdote is not data, but you see and you hear these
    stories over and over again and it starts to add up.
        I would say that the most serious issue in implementing
    these reforms is going to be training. A lot of Federal
    managers have been in the system for a good long time and they
    have learned how to game it. They have learned how to deal with
    problems of entry-level salary through quick promotion. They
    have learned how to manipulate the system to help develop and
    support the workforce in many cases. They are the ones who give
    the hyper-inflated performance appraisals that we often mock at
    the end of each year.
        They are going to need help implementing this system.
    Undeniably, this whole thing pivots not on political
    executives, but on what I would guess are about 90,000
    supervisors and managers and executives in the civil service
    workforce at DoD. Those are the people who are going to make
    this thing work or they are going to have it fail, and if we
    don't give them the proper training--if you look at GAO by
    example, the amount of money GAO invested in training its
    managers to do this well, and part of it is just training them
    to have the courage to give fair appraisals to their employees
    when that might not be the easiest thing to do. If you look at
    the training configuration here, that is a very serious
    obstacle and it really concentrates on the manager, not the
    front-line employee.
        Senator Voinovich. And that would argue, wouldn't it, that
    you would cascade this or do it incrementally rather than just
    rushing off and putting it in place all at once?
        Mr. Light. Right. The cascading is a reasonable approach. I
    also think the joint consultation with OPM is part of it. Let
    OPM develop--I think that DoD's human resource operation is
    pretty good and I think the Under Secretary for Personnel and
    Readiness is the best. But OPM has a lot of capacity at its
    disposal to deal with some of these issues I am talking about
    here, especially as other agencies proceed with their requests
    for these kinds of authorities.
        Senator Voinovich. Mr. Harnage.
        Mr. Harnage. Yes. Much of, I think, DoD's problem is the
    lack of training of its civilian workforce. At our executive
    committee at Harvard, I pointed out that the military, every
    one of them, the guy sitting here with the four stars on his
    shoulders came in at the entry level and he was trained and
    given the opportunity to develop over 20, 30 years to get to
    where he is at.
        The civilian workforce very often is hired to do a job and
    receives very little or no training to stay up with modern
    times, and that goes with managers. Managers need to be trained
    to be managers and people need to be trained on how you handle
    people. That is a part of a management responsibility, but not
    everybody has it when they are promoted to that level, and
    therefore we have got to have that training. You are a big
    advocate of training, and that needs to be more built into any
    legislation dealing with DoD.
        Most of our problems is the lack of training and the lack
    of funding. It is not people not wanting to do their job and
    people not dedicated. The resources that are used in
    outsourcing are tremendous numbers of dollars. If we just
    stopped that nonsense, the money we spent on studying and
    providing the outsourcing event, if just that money was used on
    training, we would be ten times better trained than what we are
    today.
        But there is one element that I do want to comment on that
    I want to caution the Committee to be careful of. I heard
    something this morning that seemed to be a contradiction, but
    it also was giving my fears some legitimacy. They said that
    they don't intend to get rid of unions, they don't intend to
    get rid of collective bargaining, they want to work with their
    unions, although they got this far without even talking to us,
    and they have no reason to get rid of you.
        But Senator Fitzgerald talked about those elements of the
    government that are excluded from the law that gives union
    recognition and asked Dr. Chu if that was all he was trying to
    do, was get what they already had, and his answer was yes. Now,
    we are talking about entities that are union-free environments,
    but yet they said they don't intend to do that. They intend to
    continue collective bargaining. Dr. Chu said they were merely
    trying to get the same.
        I don't ask that you use your valuable time in trying to
    clarify that. I ask that you use your valuable time to make
    sure that doesn't happen. Your legislation protects it. Hang in
    there strong on that. That is very important and it is the
    right thing to do.
        Senator Voinovich. Thank you. I just want to better
    understand that. The various agencies that Senator Fitzgerald
    mentioned when he read the statute that were excluded, you are
    saying that the situation in those agencies is what? And you
    don't----
        Mr. Harnage. They don't have access to union
    representation. They are excluded. It is waived in the law. And
    there are some, although I find it very hard to ever justify
    not having the right all Americans have except an excluded few
    to belong to a union if they choose, there are some conflicts
    of interest.
        I think there probably is a conflict of interest in the
    FLRA because they are making rulings involving both sides, the
    union and management, and so there would appear to be a
    conflict of interest. MSPB would be the same case, and some
    investigative fields. The FBI, I think, would have been a lot
    better off if they did have a union, but nevertheless, there is
    that conflict there that some people can see. GAO is an arm of
    Congress, and so Congress doesn't have a union so it is natural
    that they excluded GAO.
        But I am talking about those areas that the law initially
    said, we don't think this should apply to these agencies, and
    Senator Fitzgerald was pointing out those agencies and his
    question to Dr. Chu was, isn't that all you are asking, is to
    get the same thing they got, and his answer was yes.
        Senator Voinovich. I think that we ought to try and look
    into that. I would be interested in anything you could provide
    for us, and we can do some research here at the Committee.
        Mr. Harnage. Don't waste your valuable time doing that.
    Just make it impossible for it to happen. [Laughter.]
        Chairman Collins. Our bill does.
        I want to thank you very much for your testimony today and
    for the contributions that you have made to this very important
    debate.
        I again want to recognize Senator Voinovich's longstanding
    leadership in this area. He has worked harder than any Member
    of this Senate on human capital issues. He has always been on
    the forefront of these debates and it has been a great pleasure
    to work closely with him as we develop this legislation and go
    forward.
        We will be keeping the hearing record open for 15 days for
    the submission of any additional statements or questions.
        I want to thank all of our witnesses for their valuable
    testimony today and I also want to thank our staffs. Senator
    Voinovich and my staff and Senator Levin's staff have worked
    very hard to develop this legislation. On my staff in
    particular, I want to recognize the efforts of Ann Fisher, who
    has had countless discussions with AFGE and other people who
    are interested in this debate. We look forward to getting your
    future input as the Conference Committee for the Department of
    Defense bill goes forward.
        This hearing is now adjourned.
        [Whereupon, at 12:38 p.m., the Committee was adjourned.]

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