[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\
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    \1\ The information from Mr. Chu appears in the Appendix on page 
156.
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    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.
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    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\
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    \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.
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    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.
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    \1\ The prepared statement of Mr. Harnage appears in the Appendix 
on page 74.
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    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.]
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    \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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