[Senate Hearing 109-41]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 109-41

    UNLOCKING THE POTENTIAL WITHIN HOMELAND SECURITY: THE NEW HUMAN 
                            RESOURCES SYSTEM

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

                                HEARING

                               before the

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

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 10, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND 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
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk


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

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                       Tara E. Baird, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     4
    Senator Lautenberg...........................................     6
    Senator Pryor................................................    18

                               WITNESSES
                      Thursday, February 10, 2005

Hon. David M. Walker, Comptroller General, U.S. Government 
  Accountability Office..........................................     8
Ronald J. James, Chief Human Capital Officer, U.S. Department of 
  Homeland Security..............................................    10
Dr. Ronald P. Sanders, Associate Director for Strategic Human 
  Resources Policy, U.S. Office of Personnel Management..........    12
Darryl A. Perkinson, National Vice President, Federal Managers 
  Association....................................................    26
Colleen M. Kelley, President, National Treasury Employees Union..    28
John Gage, National President, American Federation of Government 
  Employees......................................................    30
Richard N. Brown, President, National Federation of Federal 
  Employees......................................................    32
Kim Mann, on behalf of the National Association of Agriculture 
  Employees......................................................    34

                     Alphabetical List of Witnesses

Brown, Richard N.:
    Testimony....................................................    32
    Prepared statement...........................................   142
Gage, John:
    Testimony....................................................    30
    Prepared statement...........................................   122
James, Ronald J.:
    Testimony....................................................    10
    Prepared statement...........................................    74
Kelley, Colleen M.:
    Testimony....................................................    28
    Prepared statement...........................................   110
Mann, Kim:
    Testimony....................................................    34
    Prepared statement...........................................   152
Perkinson, Darryl A.:
    Testimony....................................................    26
    Prepared statement...........................................    94
Sanders, Dr. Ronald P.:
    Testimony....................................................    12
    Prepared statement...........................................    80
Walker, Hon. David M.:
    Testimony....................................................     8
    Prepared statement...........................................    45

                                Appendix

Copy of Section 2301 of Title 5 submitted by Senator Akaka.......    43
Neil A.G. McPhie, Chairman, U.S. Merit Systems Protection Board, 
  prepared statement.............................................   162
Post-hearing comments from United DOD Workers' Coalition.........   165
Questions and responses for the Record from:
    Mr. Walker...................................................   303
    Mr. James....................................................   309
    Dr. Sanders..................................................   322
    Mr. Perkinson................................................   332
    Ms. Kelley and Richard Brown.................................   335
    Mr. Gage.....................................................   342
    Mr. Mann.....................................................   346

 
                     UNLOCKING THE POTENTIAL WITHIN
                           HOMELAND SECURITY:
                     THE NEW HUMAN RESOURCES SYSTEM

                              ----------                              


                      THURSDAY, FEBRUARY 10, 2005

                                       U.S. Senate,
          Oversight of Government Management, the Federal  
           Workforce, and the District of Columbia Subcommittee,   
                        of the Committee on Homeland Security and  
                                            Governmental Affairs,  
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Akaka, Lautenberg, and Pryor.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The hearing will please come to order. I 
want to thank all of you for coming.
    Almost 1 year ago on February 25, 2004, this Subcommittee 
convened a hearing entitled ``The Key to Homeland Security: The 
New Human Resources System.'' The purpose of that hearing was 
to consider the Department of Homeland Security's proposed 
regulations for their new human resources system.
    Today's hearing, ``Unlocking the Potential Within Homeland 
Security: The New Human Resources System,'' will consider the 
final regulations.
    Before we proceed I want to say that I understand there are 
many strong feelings about these regulations. However, I would 
like to ask those here today to respect the decorum that is 
customary in the U.S. Senate. I am asking the audience not to 
respond to the witnesses' testimony, the questions Senators 
will be asking, or the answers of the witnesses to questions.
    I commend the Department of Homeland Security, the Office 
of Personnel Management, Department employees, and 
representatives of Homeland Security employees for the time 
they have invested in developing this new human resources 
management system. I personally want to thank former Secretary 
of Homeland Security, Tom Ridge, and former Director of the 
Office of Personnel Management, Kay Coles James, for their 
commitment to this process. I know that they were both engaged 
in this personally, and I admire their dedication.
    The 2-year process, the development of the regulations has 
gone through is a relief to me. Many of us were concerned that 
these regulations would be rapidly developed and implemented. 
However, that has not been the case. The Homeland Security Act 
of 2002 was signed by the President on November 25, 2002. 
Proposed regulations were published in the Federal Register on 
February 20, 2004. The final regulations, the topic of today's 
hearing, were published only 9 days ago on February 1.
    It is clear that there has been a very deliberate and 
collaborative process, and I thank the Administration for this. 
For example, DHS and OPM used the statutory authority to enlist 
the assistance of the Federal Mediation and Conciliation 
Service to facilitate the dialog with labor organizations and 
extended that process beyond the 30-day requirement in law.
    It is clear to me when comparing the final regulations to 
the proposed regulations that DHS and OPM have made some 
significant changes. For example, the new system will establish 
a Compensation Committee to gather input from multiple sources, 
including employee unions, in determining employee pay. In 
addition, the final regulations now allow employee input in 
determining members of the Homeland Security Labor Relations 
Board.
    Another significant change in the final regulations is a 
requirement for post-implementation bargaining on management 
actions for employees adversely impacted for more than 60 days. 
Some of you may recall that I raised the importance of post-
implementation bargaining at the hearing that we had last 
February.
    These examples represent an increase in union involvement 
from the proposed regulations. In addition, some changes like 
the Compensation Committee create a role for unions unique to 
the Federal Government.
    These new regulations represent historic changes to the 
Federal civil service. I would like to remind my colleagues of 
the enormous changes the legislative proposal authorizing these 
regulations underwent in Congress.
    My colleagues may remember that the original legislative 
proposal offered almost a blanket exemption, a blanket 
exemption from Title 5 for the Department, similar to what was 
authorized for the Transportation Security Administration.
    Many of us were very concerned with this proposal including 
my good friend in the House of Representations, Rob Portman. As 
a result, the enacted legislation included far less flexibility 
than initially sought by the Bush Administration.
    I understand that all parties are not satisfied with the 
final regulations, and they will have an opportunity today to 
explain their concerns to the Subcommittee.
    When the Senate was considering the Homeland Security Act, 
I suggested to my colleagues that the law allow for binding 
arbitration over the six chapters of Title 5 that were waived. 
Based on my experience working with employees unions as Mayor 
of Cleveland and Governor of Ohio, I thought that the process 
would have brought all parties to an agreement on the 
regulations more quickly and with less friction.
    Having an independent third party make final decisions on 
points of contention would have fostered, I believe, additional 
collaboration over the regulations and given more credibility 
to the process. However, this suggestion was not well received 
by my colleagues or the Administration.
    So as a part of the largest government reorganization in 
half a century we have the new personnel system authorized by 
Congress. Regarding this, I have this observation for both the 
Administration and union representatives here today: Nothing 
less than the security of our Nation is at stake. That is why 
we created the Department, to secure the homeland and protect 
us from terrorism. We must find a way to work together. The 
people of this country no less.
    To the Administration I say it is your obligation to 
continue to collaborate with the Department's employees and 
their unions and to do right by them in this new system. They 
must be treated equitably. The merit principles of the civil 
service that have served our country so well must be upheld. 
Managers must receive excellent training so that they can make 
fair judgments regarding employee performance. This point will 
be discussed in greater detail by the Controller General. 
Employees must receive the training and resources they need to 
make the most of his or her God-given talent.
    To the union leaders, I say it is your duty to roll up your 
sleeves and work with the Department of Homeland Security and 
the Office of Personnel Management to make this new system work 
well.
    It is my hope that the collaboration and dialog the 
Department and its employees have engaged in over the past 2 
years will continue into the future. I expressed this sentiment 
to the President's nominee for the Secretary of Homeland 
Security, Judge Chertoff, when I met with him 2 weeks ago. I 
suggested to Judge Chertoff that one of the first actions that 
he takes is to bring in the representatives of the employee 
unions and visit. I encouraged him to initiate a personal 
dialog with them so they know that he, too, is very much 
concerned about the Department's human resources system.
    As I stated a year ago there is no doubt in my mind that 
the only way any organization can be successful is to have the 
best and brightest minds focused on the important task at hand.
    I know the employees of the Department of Homeland Security 
are hard-working and dedicated. It is my hope that the new 
human resources management system will assist the Department in 
fostering a high-performing culture that empowers these 
workers, encourages innovation, and supports and rewards them.
    It is because of my unwavering commitment to the employees 
of the Department of Homeland Security and its mission that I 
have called this hearing today. I understand the ramifications 
the system will have in the Department itself and the rest of 
the Federal service. I am committed to ensuring its success, 
and I know the Members of this Subcommittee are committed to 
that.
    I look forward to hearing the testimony of our witnesses 
today and a continued dialog over these important reforms.
    I now yield to my good friend, the Senator from Hawaii. 
This is the first hearing in which Senator Akaka is my 
Subcommittee's Ranking Member. Senator Akaka and I have spent 
many years working together on Federal personnel issues. We 
have gotten to know each other a lot better through our Bible 
study group. I treasure Senator Akaka's friendship, and I 
appreciate his leadership and commitment to the human capital 
issue. Senator, I look forward to working with you in your new 
capacity as Ranking Member of this Subcommittee. Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you, Mr. Chairman. I am especially 
pleased to join you as the Ranking Member of this Subcommittee 
and to join you as the leader of human capital issues here in 
the Senate. As we all know, you and I have enjoyed a long and 
successful partnership, and I look forward to that partnership 
continuing in working with you on this Subcommittee.
    I also want to welcome our panelists, Comptroller General 
Walker, Mr. James, and Dr. Sanders to our hearing this morning. 
We certainly are grateful and have appreciated the work of 
Secretary Tom Ridge as he developed the Homeland Security 
office here in our country. We have much to do and we are 
starting to do it.
    Our hearing this morning marks the first public forum on 
the final personnel rules issued jointly by the Department of 
Homeland Security and the Office of Personnel Management. I 
know there is strong disagreement over these final regulations. 
Many who join us today believe their input was not valued and 
their views were not fully addressed.
    However, I want to commend DHS and OPM for the 
collaborative and open manner in which employee groups and 
stakeholders were involved in the development of these 
regulations. All agencies should undertake organizational 
change in a similar cooperative and inclusive manner.
    I, too, participated in the consultation process by 
submitting detailed comments on the proposed regulations last 
year which discussed the preservation of employee rights and 
protections. I am pleased that some of my suggestions were 
included in the final regulations, which are an improvement 
over those proposed a year ago. The rules retain protections 
found in current law that permit judicial review, use of 
preponderance of evidence standard for employee appeals, 
provide for employee grievances, and govern the awarding of 
attorney fees.
    However, the regulations fall short of our common goal of 
protecting the merit principles on which our country's Federal 
civil service have been developed and which serve as a model 
throughout the world. The principles of merit and fitness call 
for fair and equitable treatment of employees, and protection 
from arbitrary action, personal favoritism, and coercion for 
political purposes. We must avoid undermining the merit system, 
and we do not want to return to the spoils system.
    Mr. Chairman, I ask unanimous consent that Section 2301 of 
Title 5, which contains the merit systems principles be 
included in the hearing record.\1\
---------------------------------------------------------------------------
    \1\ The copy of Section 2301 of Title 5 appears in the Appendix on 
page 43.
---------------------------------------------------------------------------
    Senator Voinovich. Without objection.
    Senator Akaka. Without adhering to this provision of law we 
may put at risk the government's ability to attract skilled new 
workers and retain experienced employees who have already 
chosen Federal service. The intent of allowing the Department 
of Homeland Security to implement a new personnel system to 
ensure an effective and efficient workforce to meet the 
challenges and fulfill the missions of the Department. As such, 
it is essential that this and any human resources system be 
both fair and perceived as fair in order to be credible. I 
believe that DHS regulations fall short of this goal.
    The final rules will bring dramatic changes in the way DHS 
hires, fires, classifies and pays employees. It will also 
seriously diminish collective bargaining rights of employees. 
The rules eliminate bargaining for a majority of routine issues 
and deny union input on policy implementation.
    The creation of an internal Homeland Security Labor 
Relations Board and International Mandatory Removal Panel, 
coupled with the restrictions on the Merit System's Protection 
Board and the Federal Labor Relations Authority to review DHS 
cases undermines the effectiveness and credibility of these 
procedures. These regulations will curtail employee bargaining 
rights and deny opportunities for front-line employees to 
provide critical input on departmental programs and directives.
    A well-managed organization values employee input, and its 
senior managers understand the critical role front-line workers 
have in protecting mismanagement. I am concerned that these 
changes could be detrimental to carrying out the Department's 
programs and directive successfully.
    Mr. Chairman, you and I believe that the government's most 
important asset is the Federal workforce, whose dedication, 
commitment, and courage are demonstrated every day. We should 
value the work performed by these men and women, which requires 
our unwavering effort to make sure that any government 
reorganization is done right the first time. Nor should we 
ignore employee morale, which plays a significant role in 
maintaining the DHS workforce.
    Congress was told that DHS and Department of Defense, which 
will release its proposed personnel system next week, needed 
``flexible and contemporary'' personnel systems to meet their 
national security missions because Title 5 was outdated and 
inflexible.
    We know from the President's fiscal year 2006 budget 
proposal that the Administration wants to let all Federal 
agencies use these new regulations to modify existing personnel 
systems. It is premature and shortsighted to open the door to 
untried and untested regulations for the entire Federal 
Government given the lack of employee protection in the DHS 
rules. I support modernizing and strengthening civil service 
laws which is one reason why I have worked with Senator 
Voinovich over the years to enact legislation such as 
categorical ranking and compensatory time for travel. 
Unfortunately, many agencies fail to use existing flexibilities 
and most agencies lack funds to train managers on measuring 
performance and disciplining problem employees.
    As long as these regulations and the soon-to-be released 
DOD rules are seen as a template for civil service reform, we 
need to be sure that the concerns expressed today are 
addressed. I want to make sure that there is a process by which 
employees have a real voice in policy decisions and Agency 
missions, and I am ready to work with DHS to: Provide increased 
opportunities for employees to bargain over issues such as 
scheduling and posting of employees; increase employee input in 
Department programs; provide opportunities for meaningful and 
independent oversight; and develop fair, credible and 
transparent performance criteria, and training programs.
    I thank you for the time, Mr. Chairman. I look forward to 
hearing from our distinguished panelists, and I thank all of 
you for being with us today. Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Akaka.
    Senator Lautenberg, thank you very much for being here.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. I am delighted to be here with you, Mr. 
Chairman. Unfortunately, I have a time commitment that will not 
permit me to stay, but I do want to make my opening statement. 
I congratulate you for convening this hearing. I want to say 
one thing at the start, Mr. Chairman. I have great personal 
respect for you. I know that you care about people. You have 
done it in your public service as mayor, governor, Senator, and 
in private conversations that we have had. I have seen you 
evidence concern about what we do with health care and things 
of that nature, and I know that you want to be fair with people 
and will do whatever you can to make sure that happens.
    We are in disagreement I think perhaps on some of the 
policy changes that are anticipated here, but I say it with all 
due respect to you, Mr. Chairman.
    Senator Voinovich. Thank you.
    Senator Lautenberg. Despite your admonition that the quorum 
had to be preserved. [Laughter.]
    Senator Voinovich. Senator Lautenberg, one of the things 
that I welcome in your participation on this Committee is your 
success in the business community. You are a great leader, and 
you appreciate probably as much as anyone how important good 
people are to an organization.
    Senator Lautenberg. Thank you very much.
    In case it was not obvious, I have to say that I was not in 
the Senate when Homeland Security Act of 2002 was passed into 
law. I think I am in the record as having been the oldest 
freshman that ever came to the U.S. Senate. [Laughter.]
    If I had been here I would have objected to the personnel 
provisions included in the bill which denied the employees of 
the Department of Homeland Security the same rights to bargain 
and to appeal personnel decisions afforded to other Federal 
employees. The notion that collective bargaining rights somehow 
threaten national security, that Federal employees who belong 
to a union are somehow suspect, I find offensive. Frankly, I am 
appalled by the attacks on organized labor.
    I have been around long enough to remember a period of time 
in America when jobs were so precious, and I remember a story 
from my father who worked in the silk mills in Patterson, New 
Jersey, when he and a good friend of his stood hat in hand--
they wore hats in those days--waiting for the factory owner to 
pass out of his office so that they could appeal the decision 
by their foreman that if they took a religious holiday off that 
their jobs were terminated. That would have been like a death 
knell for my father, and he trembled when he told me this story 
about it. The owner was a much kinder man and things went 
along.
    But we cannot ever forget what it was that created the need 
for working people to organize, and when we see working people 
in jobs today that are only guaranteed $206 a week, it tells 
you that there have to be voices out there that speak to the 
needs of people, that $206 a week barely can take care of one 
person, and in many cases it is supposed to take care of a 
family. So we see that and we are reminded that people need 
attention in developing their own strength of voice.
    So the first responders I recall who rushed into the 
emergency stairwells in the Trade Center on September 11, while 
civilians were filing past them on the way down, belonged to 
unions. I had an office in that building when I was a member of 
the Port Authority of New York and New Jersey before I came to 
the Senate, and it was an entire city included in those few 
buildings there. But when you saw the heroism and the price 
paid by so many people who were union members, it says that it 
cannot be a bad thing for people to be able to express 
themselves in a collective fashion.
    I am a strong believer in protecting the Federal workforce. 
I have great respect for people in the Federal workforce, and 
though I ran a company the Chairman was kind enough to mention, 
a very successful company, today employs 40,000 people, and I 
was one of three young kids out of college who started that 
company so many years ago. But what I have seen of the public 
sector, if I can call it that, compared to the private sector 
is that there is no match, that the habits are the same in the 
private side. There are not a lot of perfect people around, not 
even here in the Senate, surprise to many, but the fact is that 
people who are in the Federal workforce are usually committed 
to jobs that are not competitive in the pay scales with jobs in 
the outside world. And if there was a change, we made it. When 
we took the screeners out of the private sector because we 
could not get a decent day's work done and never had security, 
the knowledge that things were safe, we put them on the Federal 
payroll. That was a huge decision. At the same time we are 
saying we cannot permit them to have an organized voice.
    I am concerned that the plan, as proposed, could be subject 
to political manipulation. Doing away with the General Schedule 
system which has served Federal employees and the American 
people well, probably creates more problems than it solves. The 
new system would set wages according to the results of annual 
surveys, salary surveys of private sector workers, but private 
sector wages vary widely or fluctuate due to market changes. 
Given the importance of the DHS mission, we need to attract the 
best and the brightest to work here. Beating people down, 
taking away their rights to collective bargaining and other 
union protections is not going to create the DHS workforce with 
the morale that we need to help keep America safe.
    Mr. Chairman, I hope that we can work together to fix the 
problems with this new plan. I welcome our panels of witnesses, 
and apologize for not being able to be here during their 
testimony. I would ask that the record be kept open for any 
questions that I might submit.
    Senator Voinovich. Without objection, Senator Lautenberg.
    Senator Lautenberg. Thank you.
    Senator Voinovich. If the witnesses would please stand, it 
is the custom of this Subcommittee to swear in our witnesses. 
Do you swear that the testimony you are about to give is the 
truth, the whole truth and nothing but the truth, so help you, 
God?
    Mr. Walker. I do.
    Mr. James. I do.
    Dr. Sanders. I do.
    Senator Voinovich. Let the record show that the witnesses 
answered in the affirmative.
    As is the custom with this Subcommittee, I would ask the 
witnesses to limit their testimony to 5 minutes. Your complete 
written testimony will be printed in the hearing record.
    I first would like to welcome David Walker, Comptroller 
General of the United States. I have worked often and closely 
with Mr. Walker on issues dealing with human capital. I would 
like to publicly say that without his help, input, and 
collaboration, we would not have been able to make the most 
significant changes in the civil service since 1978.
    I remember when I first met you we talked about this. I 
think we have come a long way since that day. I look forward to 
your insight today on the Department's final regulations. Mr. 
Walker.

  TESTIMONY OF DAVID M. WALKER,\1\ COMPTROLLER GENERAL, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Thank you, Mr. Chairman, and Senator Akaka. It 
is a pleasure to be here and it is a continuing pleasure to 
work with both of you in this and other areas of mutual 
interest and concern. I appreciate the opportunity to provide 
our preliminary observations on the Department of Homeland 
Security's final regulations. I might note that it is my 
understanding that the Department of Defense may issue their 
proposed regulations as soon as this afternoon, and so this is 
a momentous day, not only from the standpoint of this important 
hearing, the DHS regulations, but also I expect there will be a 
lot of interest in whatever the Department of Defense proposes.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 45.
---------------------------------------------------------------------------
    What I would like to do, Mr. Chairman, if I can, is to 
summarize by commenting on three positive aspects, three areas 
of concern, and three comments on the way forward, and 
obviously make myself available for any questions after the 
other co-panelists have a chance to go.
    First from a positive standpoint. We believe that the 
proposed regulations provide a flexible, contemporary, 
performance-oriented and marked-based compensation system at 
least with regard to the theoretical framework. Second, we 
believe it is important, as the regulations note, to have 
continued employee, union, and key stakeholder involvement in 
developing the details--and the details do matter, there are a 
lot of details that are not addressed here--and also in being 
active participants during the implementation phases. That 
involvement must be meaningful, not just pro forma. That is 
critical in order to achieve credibility and success.
    Third, we believe that the regulations are positive in 
providing a basis to evaluate the implementation of the 
regulations and to involve employee representatives in 
designing the evaluation criteria and reviewing the findings of 
recommendations that result therefrom. So those are several 
positive comments.
    Areas of concern. Obviously, one major area of concern, 
which is currently subject to litigation, and therefore I won't 
get into much detail on it, is the proposed scope of collective 
bargaining and whether and to what extent collective bargaining 
should be broader than as proposed under the regulations. But 
other than that, it is difficult to determine the overall 
impact of the changes on potential adverse actions, appeals and 
labor relation processes because there are a lot of details 
that are yet to be defined.
    I think it is very important that they be defined, and how 
they are defined can have a significant impact on whether or 
not they are likely to be effective and credible. We believe it 
is critically important that employees have access to an 
independent, qualified and adequately resourced external appeal 
body in appropriate circumstances in order to ensure the 
consistency, the equity of actions while preventing abuse of 
employees.
    In addition we are concerned that the performance 
management system does not provide a core set of key 
competencies that can help to provide reasonable consistency 
and clearly communicate to employees what is expected of them, 
which competencies hopefully would be validated by the 
employees in order to gain acceptance, credibility and minimize 
adverse actions.
    And last, we are concerned that a pass/fail or three-level 
rating scale system that might be implemented would not provide 
for meaningful differentiation in performance in order to be 
able to make the most informed pay and other human capital 
decisions.
    As far as moving forward, we think it is critically 
important that in order to be successful here, because it is 
going to take the combined efforts of a number of key parties 
over an extended period of time, that there be committed and 
sustained leadership at the top. While we believe that a COO, 
Chief Management Officer concept is absolutely essential to the 
Department of Defense, we believe it might have merit at the 
Department of Homeland Security, not only with regard to human 
capital issues but also the overall business process 
transformation and integration.
    Second, we believe that there has to be an overall 
consultation and communication strategy that provides for 
meaningful two-way communication, creates shared expectations 
among managers, employees and all key stakeholders, and in fact 
provides for meaningful and ongoing two-way interaction. 
Reasonable people will differ. They obviously do in many cases 
here, but it is important that all sides be heard and 
considered seriously.
    Last, we are very concerned that the necessary 
infrastructure be in place in order to successfully implement 
the system. At a minimum that means a clearly-defined strategic 
human capital plan, and the capabilities to use these new 
authorities both effectively and fairly. Among other things the 
need for a modern, effective, credible integrated and hopefully 
validated performance management system that provides for a 
clear linkage between institutional, unit and individual 
performance-oriented outcomes, and also as appropriate, 
considers the core values and other aspects of the organization 
that should not change over a period of time, is a matter of 
critical importance.
    So in summary, Mr. Chairman, we think there are a number of 
positive things here. We have some areas of concern, and there 
are a few key points that we think will be critical on the way 
forward in order to achieve a positive outcome while minimizing 
the possibility of abuse.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Mr. Walker.
    We also have with us today Ron James, the Chief Human 
Capital Officer for the Department of Homeland Security, and 
Ron Sanders, Associate Director for Strategic Human Resources 
Policy, Office of Personnel Management.
    I know both of you have invested an incredible amount of 
time and energy in developing these regulations. I thank you 
for all the time and effort that you have put into this task, 
and I appreciate the cooperation that has existed between the 
Department of Homeland Security and the Office of Personnel 
Management. I had some concerns that communication would not be 
forthcoming. It has been, and I applaud Secretary Tom Ridge and 
Director Kay Coles James for the job that they have done. Of 
course, I understand you are the ones who put in all the work.
    Mr. James.

 TESTIMONY OF RONALD J. JAMES,\1\ CHIEF HUMAN CAPITAL OFFICER, 
              U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. James. Thank you, Mr. Chairman, and I will pass along 
your kind words to the people who did the heavy lifting, my 
staff and OPM's staff.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. James appears in the Appendix on 
page 74.
---------------------------------------------------------------------------
    Senator Akaka, Senator Pryor, it is a privilege to appear 
before the Subcommittee.
    As Congress recognized in creating the Department, we need 
the ability to act swiftly and decisively in response to 
critical homeland security threats and our mission needs. We 
must continue to attract and retain highly-talented and 
motivated employees who are committed to excellence, the most 
dedicated and skilled people our country has to offer.
    The current human resources system is too cumbersome to 
achieve this. Following the publications of our proposal almost 
a year ago, we received over 3,800 comments from the public, 
our employees, their representatives, and Members of Congress. 
After taking some time to examine those comments, we followed 
the congressional direction to ``meet and confer'' with 
employee representatives over the summer.
    In early September we invited the National Presidents of 
the NTEU and the AFGE to meet with the Secretary and the 
Director of OPM to present their remaining concerns. While 
these discussions further informed the development of final 
regulations, there remain several areas where we have 
fundamental disagreement. We believe those issues, such as 
using performance rather than longevity as the basis for pay 
increases and providing for increased flexibilities to respond 
to mission-driven operational needs while balancing our 
collective bargaining operations go to the very core of what 
Congress intended.
    We are creating open pay bands, pay progression within 
those bands will be based on performance, not longevity. We are 
also changing how market conditions impact pay. Under the new 
system pay may be adjusted differently by job types in each 
market. We are creating performance pools where all employees 
who meet performance expectations will receive performance-
based increases.
    The system will make meaningful distinctions in performance 
and hold employees and managers accountable at all levels. With 
some important modifications, as noted below, this is the 
proposal we made last year.
    The unions pressed for a meaningful role in the design of 
further details in the pay-for-performance system. We provide 
that through a process called continuing collaboration, and 
through providing four seats for unions on the Compensation 
Committee. None of these provisions were in the original 
regulations. During the meet and confer labor unions voiced 
strong concerns that the implementation schedule did not allow 
adequate time to train managers and evaluate its effectiveness. 
We have significantly modified our schedule. We will have 
extensive training this summer. Training is the core of what we 
should be about. We will be introducing our new performance 
management system this fall. We are converting employees to the 
new pay system over the next 3 years. We will be making 
adjustments to their pay based on performance over the next 4 
years, not 2 years.
    Until employees are converted to the new pay system they 
will continue to see adjustments to their pay under the GS 
system. The vast majority of DHS employees will have two to 
three full cycles under the new performance management system 
before performance is used to distinguish levels of pay. We 
hope this will allow greater time to create employee 
understanding and confidence regarding how pay will be 
administered fairly going forward.
    At the request of the unions we also provided a role for 
the employees and their representatives in the formal 
evaluation of whether the new system is having its intended 
effects. Congress granted the authority to modify our adverse 
action and appeals procedure. We believe we have done that 
while still protecting due process. In fact, we have shortened 
the time frames, minimum notice period has been shortened from 
30 days to 15 days, but we have expanded the minimum reply time 
to 10 days. We have provided one unitary system for dealing 
with performance and conduct, which will make the appeals 
process easier to understand, particularly for those employees 
who are affected.
    At the request of labor representatives we have retained 
the efficiency of the service standard for taking adverse 
actions. We have also retained the Merit Systems Protection 
Board to hear the vast majority of cases, and we have worked 
with them, conferred with them, to get to that decision.
    We have changed our proposed regulations to adopt at the 
union's suggestion the preponderance of the evidence standard 
for all adverse actions. We are also persuaded by our labor 
unions to provide bargaining employees the option of grieving 
and arbitrating adverse actions. These are significant changes 
from last year's proposals. Arbitrators and the MSPB will use 
the same rules and standards, the same burden of proof. We were 
convinced by the labor organizations that our proposed bar on 
mitigation should be modified, and it was. At a future date, 
after consultation with the Department of Justice, the 
Secretary will identify mandatory removal offenses that have a 
direct and substantial impact on our ability to perform our 
mission. We will again, thanks to union input, provide for 
those offenses, when identified to be published in the Federal 
Register and will ensure they are made known annually to all 
employees. I think, sir, that the process is a lot better for 
the union's involvement. I think they brought constructive 
suggestions. Our regrets are that we could not accommodate all 
of them.
    Our regulations do require in the last area that we confer, 
not negotiate, with labor unions over the procedures we will 
follow in taking management actions, such as the critical 
issues of assignment of work or deployment or personnel. And 
the final regulations now require bargaining over the adverse 
impact of management actions on employees when that impact is 
significant and substantial and the action is expected to 
exceed 60 days.
    We also, lastly, altered our proposed regulations to 
provide for mid-term bargaining over personal policies, 
practice and matters affecting working conditions. We also 
agreed to provide binding resolution of mid-term impasses by 
the Homeland Security Labor Board. The FLRA will continue to 
hear matters including bargaining unit determinations, union 
elections, individual employees, ULPs and exception to 
arbitration awards.
    Mr. Chairman, we developed these regulations with extensive 
input from our employees and from their representatives. We 
listened and we will continue to listen. I pledge that to you 
personally. We made changes as a result of their comments. We 
believe that we have achieved the right balance between core 
civil service principles and mission essential flexibilities. 
Thank you.
    Senator Voinovich. Dr. Sanders.

   TESTIMONY OF RONALD P. SANDERS,\1\ ASSOCIATE DIRECTOR FOR 
  STRATEGIC HUMAN RESOURCES POLICY, U.S. OFFICE OF PERSONNEL 
                           MANAGEMENT

    Dr. Sanders. Thank you, Mr. Chairman, Senator Akaka, and 
Senator Pryor. It is my privilege to appear before you today to 
discuss the final regulations implementing a new human 
resources (HR) system for the Department of Homeland Security 
(DHS), a system that we truly believe is as flexible, 
contemporary and excellent as the President and the Congress 
envisioned. It is the result of an intensely collaborative 
process that has taken almost 2 years, and I want to express 
our appreciation to you for your leadership and that of the 
Subcommittee in this historic effort. Without that leadership, 
we wouldn't be here today, and we look forward to it in the 
future.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Sanders appears in the Appendix 
on page 80.
---------------------------------------------------------------------------
    Mr. Chairman, with the Homeland Security Act of 2002, you 
and other Members of Congress gave the Secretary of DHS and the 
Director of the Office of Personnel Management (OPM) 
extraordinary authority, and with it a grand trust to establish 
a 21st Century human resource management system that fully 
supports the Department's vital mission without compromising 
the core principles of merit and fitness that ground the 
Federal civil service. Striking the right balance between 
transformation and tradition, between operational imperatives 
and employing union interest is an essential part of that 
trust, and we believe we have lived up to it in the final 
regulations.
    I would like to address that balance this morning with a 
particular focus on performance-based pay, employee 
accountability, and labor relations.
    First, pay-for-performance. The new pay system established 
by the regulations is designed to fundamentally change the way 
DHS employees are paid, to place far more emphasis on 
performance and market in setting and adjusting rates.
    But will it inevitably lead to politicization, as some have 
argued? Absolutely not. All Federal employees are ``protected 
against arbitrary action, personal favoritism or coercion for 
partisan political purposes.'' Those statutory protections are 
still in place and still binding on DHS, and they most 
certainly apply to decisions regarding an employee's pay.
    If a DHS employee believes that such decisions have been 
influenced by political considerations, he or she has the right 
to raise such allegations with the Office of Special Counsel 
(OSC), to have OSC investigate and where appropriate prosecute, 
and to be absolutely protected from reprisal and retaliation in 
so doing. These rights have not been diminished in DHS in any 
way whatsoever. The new system also provides for additional 
protections that guard against any sort of political favoritism 
in individual pay decisions.
    Under the new system, supervisors have no discretion with 
regard to the actual amount of performance pay an employee 
receives. That amount is driven strictly by a mathematical 
formula, an approach recommended by the DHS unions during the 
meet and confer process. With one exception, the factors in 
that formula cannot be affected by an employee's supervisor. 
Rather, they are set at higher headquarters with union input 
and oversight through a new Compensation Committee, another 
product of the meet and confer process, that gives them far 
more say in such matters than they have today. The one 
exception is the employee's annual performance rating. That is 
the only element of the system within the direct control of an 
employee's immediate supervisor, and that is subject to higher-
level approval.
    The regulations allow an employee to challenge their rating 
if he or she doesn't believe it is fair, and if it is a 
unionized employee, all the way to a neutral arbitrator if 
their union permits. That is another product of the meet and 
confer process.
    Mr. Chairman, with these statutory and regulatory 
protections providing the necessary balance, as well as 
intensive training in a phased implementation schedule to make 
sure DHS gets it right, we are confident that the new pay-for-
performance system will reward excellence without compromising 
merit.
    Let us take a similar look at employee accountability and 
due process. DHS has a special responsibility to American 
citizens. Many of its employees have the authority to search, 
seize, enforce, arrest, even use deadly force in the 
performance of their duties. Their application of those powers 
must be beyond question. By its very nature, the DHS mission 
requires a high level of workplace accountability. We believe 
the regulations ensure this accountability but without 
compromising any of the due process protections Congress 
guaranteed.
    In this regard, DHS employees are still guaranteed notice 
of a proposed adverse action, the right to reply before any 
final decision is made, and the right to representation. The 
final regulations continue to guarantee an employee the right 
to appeal an adverse action to the Merit System Protection 
Board (MSPB) or to arbitration, except those involving a 
mandatory removal offense, and I hope we have a chance to talk 
about that later this morning.
    Further, in adjudicating employee appeals, regardless of 
forum, including the Mandatory Removal Panel, the final 
regulations place a heavy burden on the Agency to prove its 
case. Indeed, in another change resulting from the meet and 
confer process, the regulations actually establish a higher 
overall burden of proof, a preponderance of evidence standard 
for all adverse actions, whether based on conduct or 
performance. While this standard currently applies to conduct-
based adverse actions today, it is greater than the substantial 
evidence presently required in performance-based actions. In 
DHS, it's now required for both.
    Finally, the regulations authorize MSPB, as well as 
arbitrators, to mitigate penalties in adverse actions. The 
proposed regulations precluded such mitigation, as does current 
law, in performance-based adverse actions. However, the final 
regulations allow mitigation when the Agency proves its case 
against the employee by a preponderance of evidence. The 
standard in the regulations is admittedly tougher than those 
the MSPB and private arbitrators apply, but far more stringent 
in performance cases where mitigation today is not even 
permitted.
    However, given the extraordinary powers entrusted to the 
Department and its employees and the potential consequences of 
poor performance or misconduct to its mission, DHS should be 
entitled to the benefit of any doubt in determining the most 
appropriate penalty. That is what the new mitigation standard 
is intended to do, but it is balanced by the higher standard of 
proof overall.
    Finally, let's look at labor relations. Accountability must 
be matched by authority, and here the current law governing 
relations between labor and management is out of balance. Its 
requirements potentially impede the Department's ability to 
act, and that cannot be allowed to happen.
    Now, you will hear that the current law already allows the 
Agency to do whatever it needs to do in an emergency. That is 
true. However, that same law does not allow DHS to prepare or 
practice for an emergency, to take action to prevent an 
emergency, or to reassign or deploy personnel and new 
technology to deter a threat, not without first negotiating 
with unions over implementation, impact, procedures, and 
arrangements. On balance, the regulations ensure that the 
Department can meet its most critical missions, but in a way 
that still take union and employee interests into account.
    Mr. Chairman, if DHS is to be held accountable for homeland 
security, it must have the authority and flexibility essential 
to that mission. That is why Congress gave the Department and 
OPM the ability to create this new system, and that is why we 
have made the changes that we did. In so doing, we believe we 
have succeeded in striking an appropriate balance between union 
and employee interests on one hand and the Department's mission 
imperatives on the other.
    Mr. Chairman, that concludes my statement. I would be happy 
to answer any questions.
    Senator Voinovich. Thank you very much. We will have 5 
minute rounds of questions by Members of the Subcommittee.
    To both Mr. James and Dr. Sanders, are there any Federal 
agencies successfully using pay-for-performance that you intend 
to use as benchmarks in going forward with the program?
    Dr. Sanders. Mr. Chairman, you know how much time we spent, 
not required by law, before we even began drafting the proposed 
regulations with a joint labor-management design team. That 
design team went all over the country looking at, among other 
things, pay-for-performance systems, including those that have 
been tried and tested in the Federal Government. We looked at 
all of them, visited many of them. There are benchmarks out 
there. This is not uncharted territory. There are between 
70,000 and 80,000 Federal employees under pay-for-performance 
systems today. We have learned from them. One of the things we 
learned, for example, was to build your performance appraisal 
system first before you apply it to pay-for-performance. That 
is something that has now been incorporated into the Homeland 
Security implementation schedule. We have also learned from 
mistakes, for example, the Federal Aviation Administration's 
current internal equity problems with its collectively-
bargained pay system on one hand and its administratively-
established system on the other. I hope we get a chance to talk 
about that.
    But there are benchmarks. There is experience. This is not 
uncharted territory, and we are confident that we have learned 
both the good lessons and the bad from others and will be able 
to proceed and not repeat some of the mistakes.
    Senator Voinovich. Mr. James, would you like to comment?
    Mr. James. I think, Senator, as you know, I am from outside 
the government, and so I find that we sort of look at this pay-
for-performance issue like it is in fact a new issue. In my 25 
years of practice I do not personally know of any Fortune 500 
company that bases pay on longevity, and the answer is that we 
do plan to benchmark against what is out there, what is 
happening at some of the other agencies in government, but we 
also plan to draw on the experience and expertise of what has 
happened in the private sector.
    I think it is analogous. And I think we are not going to 
just look at what is going on in the private sector when it 
comes to, for example, the pay issue. We are going to look at 
those folks against who we compete, and that could be State 
Governments who hire law enforcement or local governments that 
hire law enforcement people or the like.
    So we are open to exploring what is the best most effective 
way to in fact get to pay-for-performance, get to performance 
management, get to market surveys.
    Senator Voinovich. Are you planning on implementing this 
system in an incremental basis or will you try to implement it 
all at once?
    Mr. James. Absolutely and unequivocally we are not going to 
do this all at once. Our original plan was to roll this out in 
basically 2 years after the meet and confer. We had push back 
from the union, and I would suggest appropriately so, that this 
was a heavy lift, that we were not going to have a chance for 
input, evaluation, for tinkering, for adjustments, for focus 
groups with employees, for getting sustained feedback from all 
of our stakeholders. We have now--our first actual impact in 
the pay-for-performance arena, which will be for about 8,000 
people in 2007. The majority of our employees will not be 
impacted in terms of having the performance management, that is 
how they do under the performance management system, impact 
their pay until 2009.
    I think that was an excellent suggestion by the union. We 
had colleagues who said that is the right way to do it, get it 
right, take it slow. We clearly are not going to do this quick 
and fast, and we may have to make other adjustments along the 
way, sir. I mean I think the data is going to drive, and it 
should drive, how we make the corrections and how fast we 
continue to roll this out.
    Senator Voinovich. Mr. Walker, do you have any comments on 
the difficulty of implementing an effective pay-for-performance 
and performance management system? One issue we talked about 
using a pass/fail rating system.
    Mr. Walker. Right.
    Senator Voinovich. What is your opinion of a pass/fail 
system? Do you think that the pass/fail system is appropriate 
for DHS at the entry-level band?
    Mr. Walker. I do not like pass/fail systems under any 
scenario. I do not think they can result in meaningful 
differentiation in performance levels.
    I think a three standard system is going to be difficult to 
create meaningful distinctions in performance. Time will tell, 
but I have my doubts about that. I think it is important to get 
it fair rather than fast. I would compliment the Department in 
recognizing the need to move on an installment basis and to 
employ a phased implementation approach. I also would 
compliment them in recognizing that you have to have the 
infrastructure in place which means a modern, effective, 
credible, and hopefully validated performance appraisal system, 
that you go through at least one full cycle before you think 
about tying it to pay. So I think they clearly have made a 
number of changes, but as the old saying goes, the devil is in 
the details and a lot of the details are not known yet. So we 
look forward to seeing those details.
    Mr. James. Senator, if I could just comment on the pass/
fail and try to bring some clarity to that issue, we are going 
to walk at this very slow. As a generic proposition we do not 
see pass/fail as the right way to go in terms of across the 
board. We only wanted to preserve the right to talk about pass/
fail in the context of entry-level development employees. For 
example, we have employees who are in school for 6 to 9 months. 
We have employees who if they do not pass a certain course in 
terms of technology have to go back. We have employees who if 
they do not pass marksmanship, they are not certified to carry 
a gun, they have to go back. They cannot go forward.
    So a lot of what happens, at least in our law enforcement 
community and our folks at the border in their developmental 
stages, is in fact benchmarked or determined by a pass/fail. So 
we wanted to have the option available at that level and at 
that level only to be able to use that as a mechanism because 
in some instances individuals will not even have a supervisor 
for 9 months, and in some instances they may not have a 
supervisor for a year because if they do not get certified to 
carry a gun, they may in fact be pass/fail--up or out. That is 
the limitation.
    So when we talk about pass/fail our notion is, and my 
personal professional judgment is, coming from the private 
sector, is that we do not want to use pass/fail anywhere beyond 
the entry level, the training level, and the school level.
    Senator Voinovich. Thank you for your clarification. 
Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. James and Dr. Sanders, I would be remiss if I did not 
thank you and your respective staff for the hard work that was 
done on these regulations, and I also thank you for your 
testimony today.
    Let me begin my time with an observation. Although the 
regulations are not specific about the new pay-for-performance 
system, I believe that given the obvious anxiety employees are 
feeling in the Administration's proposal to expand DHS like 
flexibilities to other agencies, it would have been advisable 
for DHS and OPM to be more specific about pay-for-performance.
    Understanding the complexity of the issue, I trust that you 
will provide detailed information on the new pay-for-
performance system to our Committee and this Subcommittee well 
before implementation, and I look forward to that.
    I also would like to say to Mr. Walker that it is always 
good to have you with us, and I have enjoyed working with you, 
and you know how much I value your opinion. Throughout your 
tenure as Comptroller General you have done much to foster 
accountabilities, transparency and employee involvement in the 
Federal Government. I know that the Governmental Accountability 
Office has a great deal of experience in implementing a pay-
for-performance program. Would you discuss the amount and the 
type of training GAO employees have received and will receive 
on this system?
    Mr. Walker. Thank you, Senator Akaka. First, GAO has had 
broad banding since the late 1980's, so this is not a new 
concept to us. We have years of experience dealing with broad 
banding. We have had some form of pay-for-performance for a 
significant majority of our workforce since the late 1980's, 
but as a result of the latest round of legislation that 
Congress gave us in 2004, we now have the additional 
flexibility to be decoupled from the Executive Branch and to be 
able to have a more market based and performance oriented 
compensation system going forward than we had in the past.
    We now have a situation where all but less than 10 of our 
employees are covered by broad banding. That is out of 3,250. 
All but about 10 will be covered by pay-for-performance. We are 
doing this in phases or installments. We are conducting market-
based compensation studies in order to be able to ascertain 
what the appropriate compensation ranges are for the different 
career streams or occupations and the different levels of 
responsibility and authority. We have completed that with 
regard to about 80 percent of our workforce, and we are about 
to undertake it for the balance of our workforce.
    Importantly, before we ended up implementing any new 
performance based compensation flexibilities we had designed 
new competency based performance appraisal systems that were 
developed in conjunction with our employees, that were 
validated by our employees. We also incorporated a number of 
safeguards to help assure consistency and protect against abuse 
as a supplement to the external appeal rights that our 
employees have though the Personnel Appeals Board, which is an 
independent body relating to GAO. There was a variety of 
training that was provided at each of the major key points in 
time in order to try to help people understand the various 
elements that were necessary to make it successful.
    I guess the last thing I would say on this is I personally 
spent a tremendous amount of time on this. I personally 
communicated with our employees through live closed circuit 
television and other mechanisms on numerous occasions and I 
will continue to do that. These so-called CG charts are 
designed to address what we are doing, why we are doing it, how 
and when we will do it. We also have a GAO Employee Advisory 
Council lead, which is a democratically elected group that 
represents our employees. We treat them the same as our top 
executives as to consultation on key issues. EAC members have 
and do ask me questions in front of all of our employees on a 
recurring basis about these and other matters of mutual 
interest and concern.
    But training is critically important, and we have done a 
lot of it, but you can always do more.
    Senator Voinovich. Senator Pryor, thank you very much for 
joining us today.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Mr. Chairman, and again, thank 
you for your leadership on this issue. I know you are 
passionate about trying to make government run more efficiently 
and make sense, so thank you for your leadership once again.
    Let me, if I may, start with Dr. Sanders. I guess I do not 
have a copy of your statement in my packet, but the last 
sentence you said during your prepared remarks, you said 
something about needing to find the appropriate balance 
between--tell me what you said again.
    Dr. Sanders. The appropriate balance between the 
Department's mission imperatives and employee and union 
interests.
    Senator Pryor. You are confident that we found that 
balance?
    Dr. Sanders. Yes, sir.
    Senator Pryor. Mr. James, you said in your statement a few 
moments ago that when you look at Fortune 500 companies you are 
not aware of any company that ties pay to longevity?
    Mr. James. Yes, sir. I think I indicated that in my 
experience of 25 years of litigating and representing Fortune 
500 companies, I am not personally aware of any company that is 
a Fortune 500 company that ties pay to longevity. Yes, that is 
what I said.
    Senator Pryor. Is it not true in our economy in most 
instances that the longer a person is with a company the more 
he or she is paid; is that not generally true?
    Mr. James. In the law firm, sir, that is not true. There 
are people who go up or out, and that is private sector. I 
think there is sometimes a great correlation between experience 
and your pay, but when I look at the civil service system, for 
example, I think it actually discriminates against people who 
are older, more experienced, because it assumes that your first 
years that you learn at a faster rate and you will get a pay 
increase every year. Then when you get to be in your 6th or 
your 10th year, it assumes that you only get a pay increase 
based on the longevity of 3 years.
    What we are trying to do is, like Dr. Sanders said, is find 
parity, find a balance. And in the pay area, yes, people tend 
to get paid more the wiser and more they work. But the way the 
government system is now, in fact, is to the contrary. It 
assumes that older people cannot learn or at least it assumes 
older workers are not going to learn as fast.
    Senator Pryor. Is that not inconsistent with what you said 
a few moments ago, that you are not aware of any Fortune 500 
company where pay is tied to longevity? Is it not in some way 
at least loosely related to longevity?
    Mr. James. Sir, I would respectfully disagree. I would say 
in the law firm it is related to competencies.
    Senator Pryor. In a law firm?
    Mr. James. In the law firm I am saying is related to 
competencies----
    Senator Pryor. Law firms are not Fortune 500 companies and 
the government is not a law firm. So you said----
    Mr. James. I understand that, but if I could finish.
    Senator Pryor. You said in your statement that you are not 
aware of any Fortune 500 company that ties pay to longevity.
    Mr. James. In my experience, that is correct, sir.
    Senator Pryor. And now the example you are giving is the 
law firm.
    Mr. James. I was going to give some additional examples.
    Senator Pryor. I used to be in a law firm and I know how 
that works and I know that there are a lot of factors 
oftentimes that law firms consider in paying their employees 
and partners, etc. But go ahead.
    Mr. James. On the management side, for example, like with 
freight forwarders or with companies like airlines, managers 
are paid for delivering the results. It is results oriented 
business. That is my general observation.
    Senator Pryor. Look, again, in the private sector, 
oftentimes results mean profitability. And in the government 
results are not tied by profitability because the government is 
not there to make a profit. To me there have to be other 
standards in which you measure results in government. Do you 
agree with that?
    Mr. James. I would agree with that, sir, with the 
modification that the needs are the same for example. Perhaps 
such a concern about the retention of employees because if you 
do not it is expensive. The government should have that same 
concern. The private sector is concerned about the ability of 
employees to learn new skills, new competencies, as whatever 
field they are in changes. The government should have that very 
same concern. I cannot disagree with your comment that it is 
nonprofit, but I think that what we need to bring from the 
private sector is the attitude, is that people in the 
government are public servants and we need to get better each 
year. We need to raise the bar. We need to have concern about 
excellence.
    Senator Pryor. I agree with that 100 percent. I mean I am 
all about trying to bring the best private sector ideas into 
government, but I also understand, or I recognize at least that 
there is a material difference in government service versus 
working in the private sector.
    I am sorry. Mr. Walker, did you want to add something to 
that?
    Mr. Walker. When you are done, Senator.
    Senator Pryor. I am done, go ahead.
    Mr. Walker. Senator, clearly there are differences between 
the public sector and the private sector. I have 20 years of 
experience in the private sector and now about 12 years in the 
public sector. There are some compensation arrangements in the 
private sector that are primarily longevity based or heavily 
longevity based. They typically involve certain types of 
occupations and many times collective bargaining agreements.
    I think what is important is to recognize the fact that for 
many Executive Branch agencies that are covered by the General 
Schedule system, 85 percent plus of the annual pay raises that 
any individual will receive on average has nothing to do with 
skills, knowledge, or performance.
    Senator Pryor. But is not a lot of that the cost of living 
adjustment?
    Mr. Walker. It is several things. First, Senator, you are 
correct in saying that the annual across the board adjustment, 
which as you know is much more than cost of living because last 
year it was 3.5 percent, while cost of living was 2.1 to 2.3 
percent. But in addition to that you have step increases which 
are merely the passage of time, and furthermore, you can have 
merit step increases which should be performance related. 
However, I would also suggest that because of the poor 
performance appraisal and management systems in the government 
they do not always correlate as much with exceptional 
performance as they should.
    So a vast majority of annual compensation increases under 
the GS system have nothing to do with skills, knowledge and 
performance, and it needs to be more skills, knowledge and 
performance oriented while having safeguards to prevent abuse.
    Dr. Sanders. Senator, can I interject?
    Senator Pryor. Sure.
    Dr. Sanders. You may not know this, but today Federal 
employees whose performance is rated unacceptable still get the 
across the board adjustments and locality supplements, even 
though their performance is rated unacceptable.
    Senator Pryor. In fact, I agree with everything David 
Walker said a minute ago. I think that the government needs to 
do a better job--and I know I have heard Chairman Voinovich 
talk about this as well--the government needs to do a better 
job of managing itself. I think we all recognize that, and I 
think that we all have that common goal. I think the question 
is, what are the appropriate steps to get there?
    I think that you talked about, Mr. Walker, in your 
statement you said something to the effect that it is more 
important to get it fair rather than fast or something to that 
effect. I agree with you. I think we just need wisdom here as 
we pursue this course, to try to make government more efficient 
and more effective, but also I think that we do need to 
recognize the inherent difference in government and in 
business, and we should take the very best ideas that business 
has to offer, take them from corporate America or world models, 
whatever they may be, and try to incorporate them into 
government, but in my mind it is not a one-for-one proposition. 
We need to take elements of the very best and implant it in 
government. Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator.
    I would like to have a 3 minute round of questions for each 
of us. I think there are some other issues on people's minds.
    Mr. James, implementing the new personnel system will 
require a massive investment in training and retraining of the 
workforce. My question then, is the workforce large enough to 
participate in the training or will you need to bring in 
outside help, for example some float group so that front line 
employees can receive the training they need, without 
shortchanging the Department's day-to-day mission? Furthermore, 
do you have enough people in house to conduct the training or 
are you going to hire assistance? What are your thoughts as to 
how this will happen?
    Finally, the President's budget requested $53 million in 
fiscal year 2006 for implementation. Is this adequate? Do you 
have any idea of what the implementation cost will be for 
future years?
    Mr. James. Thank you, Senator. I cannot agree with you more 
that training and communications are at the very core of what 
we need to be about if we are going to make this work and if we 
are going to make it fair and if we are going to make it and 
get it right. I would like to thank Congress and the Senators 
who are assuring us that we had $10 million alone for training 
in our budget in this current fiscal year. We have asked for 
another $10 million. We are hopeful we will have that money 
because we do need to change the culture and we need to inform 
our employees, we need to inform our managers and we need to be 
able to train the trainers. I am convinced that with the $10 
million we have this year and hopefully with the $10 million we 
will have next year, that we will be able to get the training 
done. We will have to hire some outside experts. We will have 
to hire some people who have done this before.
    We have also talked, not about a float, sir, but we have 
talked about some other issues like through the Chief Human 
Capital Officer's Council, I have offered the opportunity for 
individuals and other agencies who anticipate they may be going 
down the same road as we are in 2 to 3 years, to send people 
over to work with us, to help us with some of the training, 
help us with some of what I would describe as getting a fresh 
set of eyes on this, both as to the training and as to the 
procedures or the regulations that we are writing.
    As to your last question, the $53 million, yes, that is 
adequate, and the reason it is adequate is because when we 
originally requested monies, we had anticipated rolling out the 
pay-for-performance in 2 years. We basically now have elongated 
that and we believe by elongating that we will in fact have 
sufficient monies to get this done and get it done right, get 
it done fair, and get it done with the kind of input that it 
will take.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Dr. Sanders, in addition to serving as Ranking Member on 
this Subcommittee I am proud to be the Ranking Member on the 
Senate Veterans' Affairs Committee and preserving veterans' 
preference is very important to me. Would you please explain 
how veterans' preference is protected under the DHS 
regulations, and do you know whether there are any changes to 
current veterans' preference regulations or statutes either in 
principle or in practice?
    Dr. Sanders. Sir, I can state unequivocally that veterans' 
preference has not been diminished at all in any way whatsoever 
in these final rules. In fact, while there were a number of 
options that considered that, both DHS and OPM said 
unequivocally, we are not going to touch veterans' preference.
    I will give you an example where in fact we have extended 
the privileges we accord our veterans and which they deserve. 
In the case of employees who first come to the Department, we 
have created something called an initial service period that 
can be up to 2 years, primarily to accommodate extended 
training and development cycles, some of the occupations that 
Mr. James mentioned. During that initial service period it is 
easier to remove those employees. In the case of veterans, we 
have retained the current 12 months probationary period. Once 
they complete 12 months they get full due process and hearing 
rights where non-preference eligibles do not until the 
conclusion of that initial service period.
    We have extended that same right to veterans in excepted 
service appointments. Where today a veteran, in an excepted 
service appointment, does not have any rights until after 2 
years, we have now given that veteran rights after 12 months, 
full appeal rights to MSPB if there is any adverse action 
taken. So we have not only protected what exists, but we have 
extended it.
    Mr. James. Could I just provide, sir, a footnote to that 
that may be of interest to you?
    Senator Akaka. Yes, Mr. James.
    Mr. James. Secretary Ridge and I met with a coalition of 
about 25 veterans' groups in the month of December, and at that 
meeting Secretary Ridge committed that he would reinforce his 
commitment to making sure that veterans' affairs and veterans' 
preference and veterans' issues were a primary concern to the 
Department, and he promised that group that he would issue a 
management directive.
    I am pleased to tell you that his very last act on his very 
last day was to issue a management directive on veterans' 
affairs and how important it is to the Department, and 
suggested some, what I would describe as some review procedures 
that were mandatory when veterans were being considered for 
jobs, and if the Subcommittee will permit, I will be happy to 
either share that with the Subcommittee or provide that to the 
Senator.
    Senator Akaka. Thank you. As you know, because of the 
situation today and the deployment of many reservists and 
National Guard troops, this question has become very important, 
and I thank you so much for your responses.
    Thank you, Mr. Chairman.
    Senator Voinovich. Senator Pryor.
    Senator Pryor. I will try to keep mine shorter this time 
because I went a little long last time. Sorry about that.
    But if I may, Dr. Sanders, in Washington they call this a 
``prebuttal'' but we are going to have a witness here in a 
little bit. I think he is on the next panel, John Gage, 
President of the AFGE, and I have looked through some of his 
testimony, and in his testimony he talks about actions that 
employees have taken to try to enhance security and improve how 
the various agencies have operated, and he goes through some 
policies that they have challenged and they think that on the 
grounds they have a better way to do things, etc. We will let 
him talk about that.
    But are you aware of any real concrete examples of where 
the existing personnel system that we have in place today has 
left America less protected than it should be?
    Dr. Sanders. I will let others judge whether America is 
less protected, but let me give you some examples of where we 
believe the current system, particularly the current collective 
bargaining system needs to be recalibrated, and that is what we 
have tried to do in the final regulations.
    Under current law, before management can exercise any of 
its essential operational rights, let us say, for example, the 
introduction of new search or surveillance technology, it must 
first bargain with the union over implementation, impact, 
procedures, and arrangements. It must delay acting until those 
negotiations are concluded.
    Senator Pryor. So it is too cumbersome, too slow?
    Dr. Sanders. Yes. Here is the balance we have tried to 
strike in the regulations, and there are examples: The 
introduction of personal radiation detectors, vehicle and 
container inspection systems, firearms policy, etc. All of 
those actions are reserved to management, but the law requires 
bargaining over implementation before management can institute 
them.
    What we have tried to do in the final regulations is say 
management can go ahead and institute them. In those cases, the 
one I have just given you, where there is literally a long-
lasting effect--we know those policies or technologies are 
going to be in place--management has to bargain over the impact 
of those new changes, and deal with appropriate arrangements 
for employees, but after they have acted. They do not delay 
action, but they still bargain afterwards.
    Similarly with work assignment and deployment procedures. 
There are examples, Senator, where the deployment of personnel 
within a commuting area from a seaport to an airport is delayed 
because of negotiated work rule procedures, or where those work 
rule procedures require you to send the most senior employee 
when the least senior would do or vice versa.
    Here is the balance we have tried to strike. Some 
procedures remain fully negotiable. Those procedures that deal 
with so-called personnel management rights, procedures that 
deal with discipline and promotion and performance management, 
those remain fully negotiable, as negotiable in the final rules 
as they are under current law. But those procedures that deal 
with operational matters, the assignment of personnel, the 
deployment of personnel, those are no longer subject to 
collective bargaining, but the final regulations obligate the 
Department to sit down and confer with the unions over those 
procedures for 30 days to try to reach agreement, to try to 
work out their differences, but ultimately they do not make 
them subject not to just collective bargaining, but resolution 
by some third party who has no accountability for the 
Department.
    The other thing that we added in the final regulation, 
Senator, is the ability of employees and the union to enforce 
whatever rules and regulations management may establish through 
the negotiated grievance and arbitration procedures. While we 
may have limited the union's right to negotiate some 
procedures, those procedures that deal with operational 
matters, we have retained an employee's right and the union's 
ability to try to enforce those procedures, make sure 
management is doing what it said it was going to do, through 
grievance and arbitration.
    So again, we have tried to strike a balance. It has not all 
gone away as some would allege.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Voinovich. I would like to thank the panel. I look 
forward to future oversight hearings that we will have. Mr. 
Walker, I appreciate your continued interest in what is 
happening in Homeland Security.
    I would like to add, Mr. James and Dr. Sanders, I am very 
much impressed with the detail that you have provided. You 
understand what you are doing, and that is very comforting to 
me. Often people are not as familiar with some of the details 
as you are, and I am impressed. I thank you for the time and 
effort you have put into it.
    In the future the Subcommittee will examine specific areas 
of the new human resources system, such as the transition from 
the General Schedule to pay banding, the fairness of training, 
both generally for the DHS workforce and specifically for the 
new personnel system, and whether employees' voices are heard 
and responded to as the personnel system is implemented.
    In addition we will evaluate the effectiveness of the top 
leadership of the Department and the thoroughness of DHS's 
communication strategy. For example, I am very impressed with 
what Mr. Walker has discussed regarding his involvement in 
communicating with GAO employees. So often things get started 
and then employees are not informed. As a result, rumors are 
circulated and people believe things that are not a fact.
    Thorough communication for the new personnel system is 
extremely important.
    Furthermore, the performance management system, including 
the Department's human capital plan, is something that this 
Subcommittee will continue to monitor. I want you to know that 
I want the new personnel system to be a success. I want it to 
be a success because we are depending on this Department for 
our security. I am very concerned about the stress that many 
Americans feel in terms of the potential of terrorism. I would 
like for my children and grandchildren to live in an America 
that they know is secure. I do not want them to have these 
worries with them every day as they go to and from work or to 
school. It is a heavy, heavy responsibility that you have.
    Another issue as you know, is on whether the similar 
reforms should be extended to the rest of the government. I 
have talked to the Chairman of this Committee about this issue. 
How well the Department of Homeland Security implements this 
system will heavily influence whether those of us in Congress 
are going to be receptive to that proposal.
    Thank you for being here.
    Mr. James. Senator, if I could just on a personal note, 
thank you, and I promise you personally that I heard your 
comments about the need to continue the collaboration, and 
whether it is performance management or labor relations, where 
we do have significant differences, we will continue. I will 
personally continue to keep the communication lines open 
because it is critical that we involve our employee 
representatives. I will take your advice, not as a criticism 
but just as a admonishment that I need to do better, that we 
will do better going forward. I thank you.
    Senator Voinovich. Thank you.
    We will take a 5-minute recess as the next panel comes to 
the table.
    [Recess.]
    Senator Voinovich. If our second panel will come to the 
witness table, I appreciate your patience.
    Do you swear that the testimony you are about to give is 
the truth, the whole truth, and nothing but the truth, so help 
you, God?
    Mr. Perkinson. I do.
    Ms. Kelley. I do.
    Mr. Gage. I do.
    Mr. Brown. I do.
    Mr. Mann. I do.
    Senator Voinovich. Let the record show that the witnesses 
answered in the affirmative.
    Our next panel consists of representatives of the employees 
at the Department of Homeland Security: Darryl Perkinson is the 
National Vice President for the Federal Managers Association; 
Colleen Kelley is President of the National Treasury Employees 
Union; John Gage is the National President of the American 
Federation of Government Employees; Richard Brown is President 
of the National Federation of Federal Employees; and Kim Mann 
is the General Counsel of the National Association of 
Agriculture Employees.
    I want to thank all of you for coming today. I know that 
you have spent the past 2 years working tirelessly with the 
Department of Homeland Security and the Office of Personnel 
Management on developing the new human resources management 
system. I also know that you have many concerns. Some of you 
have made them known to me privately, and we do look forward to 
hearing your testimony today.
    Mr. Perkinson, we will start with you. As I mentioned to 
the other panel, I would like you to try to limit your remarks 
to 5 minutes. Your complete statement will be printed in the 
record. Mr. Perkinson.

 TESTIMONY OF DARRYL A. PERKINSON,\1\ NATIONAL VICE PRESIDENT, 
                  FEDERAL MANAGERS ASSOCIATION

    Mr. Perkinson. Chairman Voinovich, Ranking Member Akaka, 
and distinguished Members of the Subcommittee, I sit before you 
today as the National Vice President of the Federal Managers 
Association, which represents the interests of nearly 200,000 
managers, supervisors, and executives in the Federal 
Government, including those managers in the Department of 
Homeland Security. I am presently a supervisor training 
specialist at Norfolk Naval Shipyard in Portsmouth, Virginia, 
where I have been in management for nearly 20 years. Let me 
begin by thanking you for allowing me this opportunity to 
express FMA's views regarding the final personnel regulations 
at DHS.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Perkinson appears in the Appendix 
on page 94.
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    I hope that we can continue to have more opportunities in 
the future to engage in this dialogue about the best way of 
governing the most efficient and effective workforce to protect 
American soil. Managers and supervisors are in a unique 
position under these final regulations. Not only will they be 
responsible for the implementation of the Department's new 
personnel system, they will also be subjected to its same 
requirements. As such, managers and supervisors are pivotal to 
ensuring the success of this new system.
    We at FMA recognize that change does not happen overnight. 
We remain optimistic that the new personnel system may help 
bring together the mission and goals of the Department with the 
on-the-ground functions of the Homeland Security workforce.
    Two of the most important components to implementing a 
successful new personnel system are training and funding. 
Managers and employees need to see leadership from the 
Secretary on down that supports a collaborative training 
program and budget proposals that make room to do so. We also 
need the consistent oversight and appropriation of proper 
funding levels from Congress to ensure that both employees and 
managers receive sufficient training in order to do their jobs 
most effectively.
    As any Federal employee knows, the first item to get cut 
when budgets are tightened is training. Mr. Chairman, you have 
been stalwart in your efforts to highlight the importance of 
training across government. It is crucial that this happens in 
the implementation of these regulations. Training of managers 
and employees on their rights, responsibilities, and 
expectations through a collaborative and transparent process 
will help to allay concerns and create an environment focused 
on the mission at hand.
    Managers have also been given the authorities under the 
final regulations in the areas of performance review and pay-
for-performance. We must keep in mind that managers will also 
be reviewed on their performance and hopefully compensated 
accordingly. As a consequence, if there is not a proper 
training system in place and budgets that allow for adequate 
funding, the system is doomed to failure from the start. Our 
message is this: As managers and supervisors, we cannot do this 
alone. Collaboration between manager and employee must be 
encouraged in order to debunk the myths and create the 
performance- and results-oriented culture that is so desired by 
these final regulations.
    Managers have also been given greater authorities in the 
performance review process that more directly links employees' 
pay to their performance. We believe that transparency leads to 
transportability, as intra-department job transfers could be 
complicated by the lack of a consistent and uniform methodology 
for performance reviews.
    FMA supports an open and fair labor relations process that 
protects the rights of the employees and creates a work 
environment that allows employees and managers to do their jobs 
without fear of retaliation or abuse.
    The new system has relegated the authority for determining 
collective bargaining rights to the Secretary. Toward this end, 
the recognition of management organizations such as FMA is a 
fundamental part of a collaborative and congenial work 
environment. Title 5 CFR 251/252 allows FMA as an example to 
come to the table with DHS leadership and discuss issues that 
affect managers and supervisors. While this process is not 
binding arbitration, the ability for managers and supervisors 
to have a voice in the policy development within the Department 
is crucial to its long-term vitality.
    There has also been a commitment on the part of OPM, DHS, 
and DOD to hold close the Merit System principles, and we 
cannot stress adherence to those timely standards enough. 
However, we also believe there needs to be additional guiding 
principles that link all organizations of the Federal 
Government within the framework of a unique and single civil 
service.
    We, at FMA, are cautiously optimistic that the new 
personnel system at DHS will be as dynamic, flexible, and 
responsive to modern threats as it needs to be. While we remain 
concerned with some areas at the dawn of the system's rollout, 
the willingness of OPM and DHS to reach out to employee 
organizations, such as FMA, is a positive indicator of 
collaboration and transparency. We look forward to continuing 
to work closely with Department and Agency officials.
    Thank you again, Mr. Chairman, for the opportunity to 
testify before your Subcommittee and for your time and 
attention to this most important matter. Should you need 
additional feedback or have any questions, we would be glad to 
offer our assistance. Thank you.
    Senator Voinovich. Thank you, Mr. Perkinson.
    Colleen Kelley, welcome back. You have appeared before this 
Subcommittee on many occasions, and I am grateful for your 
commitment to open communication on these important issues. I 
know my staff appreciates the ongoing communication they have 
with your staff. Thank you for being here today.

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

    Ms. Kelley. Thank you very much, Senator. Chairman 
Voinovich, and Senator Pryor, I really appreciate the 
opportunity for NTEU to share its views with you on the new DHS 
personnel system. Fifteen thousand employees in the Department 
are represented by NTEU and will live under these regulations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Kelley appears in the Appendix on 
page 110.
---------------------------------------------------------------------------
    It is unfortunate that after 2 years of collaborating with 
DHS and OPM on this new system that I come before the 
Subcommittee today unable to support the final regulations.
    Because these regulations fall woefully short on a number 
of the Homeland Security Act's statutory mandates in the area 
of collective bargaining and employee appeal rights, NTEU, 
along with our fellow Federal employee unions, has filed a 
lawsuit in Federal court. The lawsuit seeks to prevent DHS and 
OPM from implementing these final regulations related to these 
areas and would order DHS and OPM to withdraw the regulations 
and issue new regulations that fully comply with the relevant 
statutes.
    The Homeland Security Act requires that any new human 
resource management system ``ensure that employees may 
organize, bargain collectively, and participate through labor 
organizations of their own choosing in decisions which affect 
them.'' NTEU believes that the final regulations do not meet 
this statutory requirement in the following ways:
    Under the final personnel regulations, the responsibility 
for deciding collective bargaining disputes will lie with a 
three-member DHS Labor Relations Board that is appointed by the 
Secretary with no Senate confirmation. A true system of 
collective bargaining demands independent, third-party 
determination of disputes. The final regulations do not provide 
for that.
    Second, under the final regulations, not only will 
management rights associated with operational matters, such as 
deployment of personnel, assignment of work, and the use of 
technology, be non-negotiable, but even the impact and 
implementation of most management actions will be non-
negotiable.
    Third, the final regulations further reduce DHS' obligation 
to collectively bargain over the already narrowed scope of 
negotiable matters by making department-wide regulations non-
negotiable. Bargaining is currently precluded only over 
government-wide regulations and Agency regulations for which a 
compelling need exists.
    A real-life example of the adverse impact of the 
negotiability limitations on both employees and the Agency will 
be in the area of determining work shifts, even when these 
shifts last for more than 60 days. The current system provides 
that employees have a transparent and explainable system. After 
management determines the qualifications needed for employees 
to staff shifts and assignments, negotiated processes provide 
opportunities for employees to select shifts that take into 
consideration important quality-of-life issues of individual 
employees, such as child care, elder care, the ability to work 
night shifts or rotating shifts. There will be no such 
negotiated process under the regulations as issued. The impact 
of these changes will have a huge impact on employees and be a 
huge detriment to Homeland Security's recruitment and retention 
efforts.
    One of the core statutory underpinnings of the Homeland 
Security Act was Congress' determination that DHS employees 
should be afforded due process in appeals they bring before the 
Department. The HSA clearly states that the DHS Secretary and 
OPM Director may modify the current appeals procedures of Title 
5 only in order to ``further the fair, efficient, and 
expeditious resolution of matters involving the employees of 
the department.'' Instead, the final regulations undermine this 
statutory provision by eliminating the Merit System Protection 
Board's current authority to modify unreasonable Agency-imposed 
penalties. The new regs authorize the MSPB to modify penalties 
only where they are ``wholly unjustified''. This ``wholly 
unjustified'' is a new standard that will be virtually 
impossible for DHS employees to meet.
    The final regulations also provide the Secretary with 
unfettered discretion to create a list of mandatory removal 
offenses that will only be appealable on the merits to an 
internal DHS Mandatory Removal Panel appointed by the 
Secretary.
    The President's 2006 budget again proposes that a similar 
proposal that exists in the IRS today should be dropped. It is 
known as the ``10 deadly sins,'' and the President's budget 
wants it removed from the IRS to allow the Agency more 
discretion. This draconian, inflexible provision should also be 
dropped from the DHS regulations.
    The final regulations as they relate to changes in the 
current pay, performance, and classification systems of DHS 
employees also remain woefully short on details. Currently, 
performance evaluations have little credibility among the 
workforce, but it appears that now these subjective measures 
will become the determinant of individual pay increases under 
the new system. This will lead to more recruitment and 
retention problems at DHS, not less. This kind of a system will 
be particularly problematic for the tens of thousands of DHS 
employees, such as CPB officers, who perform law enforcement 
duties where teamwork is critically important to their 
successful achievement of the Department's goals.
    Based on our serious concerns with regard to these 
regulations, NTEU urges both Congress and the Administration 
not to extend them throughout the Federal Government as 
proposed. As was already noted, the Homeland Security Act 
provided for these changes based on national security 
considerations. Those considerations do not apply to the rest 
of the government.
    I appreciate and agree with the comments made by several 
Senators on this Subcommittee that it would be premature to 
expand these rules until there is at least some sense of their 
impact in DHS. I look forward to continuing to work with this 
Subcommittee to help the Department of Homeland Security meet 
its critical mission. NTEU wants this Department to be 
successful, just as every American does, and I look forward to 
any questions you might have. Thank you.
    Senator Voinovich. Thank you.
    Mr. Gage, I had a fairly good working relationship with 
your predecessor, Bobby Harnage. Since you have been on board, 
you and I have not seen that much of each other, and I think 
that I would like to see more of you and your staff. As we move 
through this implementation process, talking about it would be 
very helpful to me. I just want you to know I would welcome 
your input, and thank you for being here today.

    TESTIMONY OF JOHN GAGE,\1\ NATIONAL PRESIDENT, AMERICAN 
               FEDERATION OF GOVERNMENT EMPLOYEES

    Mr. Gage. Thank you, Senator Voinovich and Senator Pryor, 
it is a pleasure to be here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gage appears in the Appendix on 
page 122.
---------------------------------------------------------------------------
    Mr. Chairman, DHS regulations usurp not only the rights and 
protections of our members, they also undermine the authority 
of the Congress to set the standards for a politically 
independent civil service. The DHS regulations rest upon a 
false premise: That carefully designed civil service procedures 
that have stood the test of time are an obstacle to homeland 
security, and that union representation interferes with the 
protection of the American public from terrorist threats. 
Neither of these premises has any validity, but now DHS has put 
forth a personnel system that undermines the integrity of the 
civil service, its political neutrality, its merit-based 
personnel management system, its market-based pay system, its 
public accountability, and its tolerance for democratically 
elected unions.
    In the year-long process of formal and informal 
consultation with those who would be directly affected by any 
new DHS systems, the unions participated in absolute good 
faith. We offered proposals that I describe in detail in my 
written statement that conceded the Agency's right to implement 
any action it considered necessary to protect homeland 
security. But the Agency's problems were process, and to take 
care of process problems they took away rights. And that is our 
objection.
    Our offers and our proposals were ignored in their 
entirety. The DHS internal review panels are also described in 
detail in my written statement. It is absurd to pretend that a 
panel consisting solely of management appointees can be a fair 
or disinterested arbiter of labor-management disputes. In 
addition, DHS has insulated this inevitably biased panel from 
outside review or accountability by dictating the MSPB 
standards for adjudication.
    Specifically, DHS has told the MSPB that in its review of 
the penalties and disciplinary actions taken against DHS 
employees, the MSPB may no longer consider the Douglas 
mitigating factors which were developed by the courts and have 
been successfully used by them for more than 25 years. These 
factors include the nature and seriousness of the offense, its 
relation to the worker's duties, position, and 
responsibilities, whether the offense was intentional or 
inadvertent, was committed maliciously or for personal gain, or 
whether it was repeated. By DHS edict, the MSPB or arbitrators 
can no longer consider a worker's past disciplinary record, 
work record, length of service, or performance. The MSPB or 
arbitrators may no longer check the consistency of the penalty 
with those imposed on others for the same offense.
    These are the kinds of considerations DHS has decided are 
either not modern or not consistent with homeland security, and 
these are the kinds of considerations that we think form the 
basis of a fair and rational and politically independent civil 
service system. We simply cannot understand how DHS can 
interpret its authority to include dictating to the MSPB in 
this way, and we cannot understand how anyone could connect 
consideration of these kinds of mitigating factors with 
exposing our Nation to an increased threat from terrorists.
    The DHS regulations narrow the scope of collective 
bargaining. In practice, neither management nor the affected 
workforce will be able to negotiate over work schedules, 
overtime, detailed selection methods, uniforms, dress codes, 
health and safety procedures, or travel. And the Agency has 
authorized itself without limitation to issue Agency-wide 
prohibitions on bargaining over the few issues that remain 
negotiable.
    Finally, DHS gave itself the right to invalidate any 
provision of an existing collective bargaining agreement. This 
is not flexible. This is not modern. This is not even credible. 
In the aftermath of the September 11 attacks, when the INS 
official line was that our Northern border was entirely safe 
and protected, two courageous front-line Border Patrol agents 
from Michigan stepped forward to tell Congress the truth about 
our Nation's vulnerabilities. As a direct response to these 
disclosures, the Congress voted to triple the number of Border 
Patrol agents, immigration inspectors, and Customs Service 
personnel along the Northern border. The INS management's 
direct response, however, was to release these Border Patrol 
agents for speaking out, and it was only through the 
intervention of their union and eventually the Congress that 
the retaliatory firings were avoided. Under the DHS 
regulations, the union will be unable to protect whistle-
blowers in cases like these, and all of us will be less secure 
as a result.
    The Agency likes to tout its rules as being mainly about 
transforming the pay system into one that will reward high 
performance. We wish that were so. The fact is that it is not a 
pay system at all. It is unbridled discretion to set salaries 
on an individual-by-individual basis. There will be no 
necessary consistencies between salaries of those with 
identical job duties or between salary adjustments for those 
subject to the same market forces.
    There is no extra funding to avoid having a zero-sum 
competition that makes anyone's gain someone else's loss, 
making a mockery of the kind of teamwork and cooperation that 
is crucial for successful law enforcement. There is nothing in 
place to hold managers accountable for pay decisions. There is 
nothing to prevent pay-for-performance from being used to 
depress overall Federal pay. And there is no doubt that it will 
be used to drop the bottom out of Federal pay scales. We 
predict chaos, litigation, and very low morale.
    We also predict that you and your colleagues will be 
hearing a lot from DHS employees. After all, Congress 
established several chapters of Title 5 so that employee 
concerns, whether individual or collective, could be raised and 
resolved in an open, balanced, and fair system. With a 
statutory system, no one promised that there would never be 
problems, only that they could be resolved in ways that would 
allow employees and their supervisors to get on with their work 
and their lives. Now DHS employees' only recourse will be their 
Representatives and Senators.
    In closing, Mr. Chairman, I would like to urge this 
Committee to initiate legislation that will restore the scope 
of collective bargaining for DHS and, in so doing, reinstitute 
checks and balances that are so necessary. We ask that you 
ensure that whatever DHS managers do with pay, employees at 
least be kept on par with the rest of the Federal workforce in 
terms of funding so that the Agency does not suffer constant 
turnover and the loss of experienced workers. We also ask you 
to step in and restore the mitigation power to neutral outside 
adjudicators and eliminate the internal Labor Relations Review 
Boards that will have no credibility either within or outside 
the Agency.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Mr. Gage. Mr. Brown.

TESTIMONY OF RICHARD N. BROWN,\1\ NATIONAL PRESIDENT, NATIONAL 
                FEDERATION OF FEDERAL EMPLOYEES

    Mr. Brown. Mr. Chairman, Ranking Member Akaka, and Senator 
Pryor, thank you for allowing this testimony today. Certainly 
the statement is longer than 5 minutes, but I will shorten that 
up to something that I believe needs to be stated here 
publicly.
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    \1\ The prepared statement of Mr. Brown appears in the Appendix on 
page 142.
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    As you know, the National Federation of Federal Employees 
is affiliated with the International Association of Machinists 
and Aerospace Workers, and we have also been designated by the 
National Association of Government Employees as well as the 
Metal Trades Department of the AFL-CIO to deal with DHS 
matters.
    One of NFFE's principal DHS bargaining units is the U.S. 
Coast Guard's Civil Engineering Unit of roughly 50 employees 
out of Providence, Rhode Island (CEU Providence). The employees 
at this facility serve the First Coast Guard District, the 
Northeast, including all of New England and parts of New York 
and New Jersey.
    The employees of CEU Providence, mostly architects, 
engineers, environmental specialists, planners, real property 
specialists, and contracting officers, provide facilities 
management and engineering services for the shore plan in the 
First District, which covers over 1,500 structures located in 
seven States. The shore plan consists of a variety of 
structures that enable the Coast Guard operations, such as 
piers, fueling facilities, aviation facilities, firing ranges, 
barracks, communications towers, and aids to navigation. In 
short, the employees of CEU Providence make sure our Coast 
Guard has the facilities necessary to protect this country.
    CEU Providence is a high-performing facility, with 
approximately 85 percent of its work being done in-house, using 
their own design professionals. The CEU Providence has received 
awards for their efficiency, honoring their ability to save 
millions in consulting fees and freeing those resources for 
actual construction projects.
    In April 2003, the employee representatives of the CEU 
Providence bargaining unit from NFFE Local 1164 went into 
contract negotiations with management. Keep in mind this took 
place after the establishment of the Department of Homeland 
Security.
    Contrary to what DHS might want you to think is the case, 
Department officials in contract negotiations had absolutely no 
proposals whatsoever regarding national security. Now, I would 
think that if labor unions and the work rules spelled out in 
collective bargaining agreements were truly hampering national 
security, the Agency certainly would have raised some concerns. 
The reason they did not raise any concerns is that the unions 
and the collective bargaining agreements do not impede national 
security in any way. Under prior law, the Agency had the 
ability to take ``whatever action may be necessary to carry out 
the Agency mission during emergencies,'' including the ability 
to remove an employee on his first offense or make unilateral 
changes to working conditions if needed by acting first and 
negotiating later. It is not just the CEU Providence 
installation that has been unable to come up with any rationale 
how unions might hamper national security. During the meet and 
confer process with DHS and OPM staff, management was unable to 
cite a single case where the union, or a collective bargaining 
agreement, for that matter, had in any way compromised national 
security nationwide.
    But let me tell you where the overhaul of the personnel 
system becomes problematic. I was telling you about the 
contract negotiations at CEU Providence bargaining unit. By 
July 16, 2003, the contract was agreed upon and signed. It was 
shortly thereafter approved by the Agency head, who again had 
no suggestions for changes related to national security. For 
over a year now, management and bargaining unit employees have 
lived happily under that contract.
    The CEU Providence installation is a good example of 
effective and productive labor-management relations at DHS. It 
is evident that the rules under Chapter 71 are working well for 
the Department. Under the newly issued regulations, I believe 
labor-management relations at DHS will experience significant 
breakdown, and success stories such as those at CEU Providence 
will be hard to come by. I predict moving into a new system 
will be a disaster for employees at the Department for two main 
reasons:
    One, under the new regulations, extensive questions will 
emerge as to whether many of the articles and provisions of our 
contract will be deemed negotiable under DHS rules. The parties 
will be compelled to go before the DHS Labor Relations Board, a 
board which does not currently exist, to answer questions under 
procedures that are currently unwritten. Both sides will spend 
a considerable amount of time preparing testimony, evidence, 
and arguments that support its position. Rather than prompt, 
efficient completion and execution of a collective bargaining 
agreement, we will be seeking third-party assistance to apply 
rules which have not been created. I ask you how these 
frustrations, this delay, and this expenditure enhance homeland 
security.
    Two, DHS employees on the whole are uneasy about the new 
personnel system. The uncurbed authority to impose severe 
disciplinary penalties for illegitimate reasons, the ability to 
significantly reduce the pay of employees without having to 
provide any justification, and the power to arbitrarily 
reassign employees anywhere in the country on a temporary or 
permanent basis will be demoralizing to Federal workers and 
will reduce the ability to recruit and retain quality 
employees. This will substantially hurt the Department's 
ability to carry out its mission.
    NFFE greatly appreciates the Subcommittee's decision to 
hold this hearing and to listen to the views of the DHS 
employee representatives. It is our opinion that the 
authorities granted to DHS under the new regulations are overly 
broad and excessive. More importantly, they are not in 
compliance with the Homeland Security Act on a number of 
accounts. The sum total of the new system as proposed is one 
that will be demoralizing to Department employees. Implementing 
this personnel system will certainly have harmful influence on 
the ability of the Department to carry out its mission, as I 
stated earlier.
    This concludes my statement. Once again I thank the 
Subcommittee for the opportunity to give my testimony.
    Senator Voinovich. Thank you, Mr. Brown. Mr. Mann.

TESTIMONY OF KIM MANN,\1\ ON BEHALF OF THE NATIONAL ASSOCIATION 
                    OF AGRICULTURE EMPLOYEES

    Mr. Mann. Mr. Chairman, and Senator Akaka, I represent the 
National Association of Agriculture Employees, by far the 
smallest union at the table, and we do appreciate an 
opportunity to address this Subcommittee. We certainly agree 
with the specific detailed critique given by Colleen Kelley, 
John Gage, and Richard Brown, and I am not going to try to 
repeat their comments here today. But I wanted to give you 
first a very brief glimpse as to what NAAE is and, more 
importantly, who we represent. We are unique. We want to 
express more than the details about the system which we believe 
is flawed. We want to express how that flawed system will 
impact the people it is intended to govern. And we believe that 
impact also is going to have a big impact on the mission of the 
Department of Homeland Security.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Mann appears in the Appendix on 
page 152.
---------------------------------------------------------------------------
    We represent 2,000 bargaining unit positions--and that is 
the key word, positions--that were transferred to the 
Department of Homeland Security in March 2002. These 2,000 
positions represent employees we call Agricultural Specialists 
and Agriculture Technicians, and they are unique. They have a 
unique mission. Their mission, not like these gentlemen, not 
like Ms. Kelley's people, but their mission is to protect 
American agriculture. That is one of the stated primary 
missions of the Department of Homeland Security, according to 
the Homeland Security Act. The 2,000 positions came over from 
the U.S. Department of Agriculture, from an Agency within USDA 
called Animal and Plant Health Inspection Service. The mission 
of these 2,000 transferred employees really is to protect 
American agriculture. They do that by performing agriculture 
quarantine inspection services, or what we call AQI services. 
No one else in CBP, Customs and Border Protection, has the 
education, the training, or the expertise to perform those 
services. NAAE, like NTEU and AFGE, participated actively in 
the DHS process that led to these regulations.
    We have a very simple, straightforward message that we 
would like to deliver to this Subcommittee this morning, and 
that is, if these regulations are allowed to go into effect as 
written, they will jeopardize American agriculture. Count on 
it.
    During the past 2 years, CBP has watched its cadre of 
Legacy Agriculture employees--that is what we call our 
Agriculture Specialists and Technicians--dwindle from 2,000-
plus positions, transferred in March 2003, to approximately 
1,300 people today. That is about a 40-percent decline in 
personnel. These are the trained, highly educated professionals 
who are charged with protecting American agriculture. The how 
and the why behind this dangerous decline is really the key to 
understanding why NAAE is so concerned about the adverse impact 
of these regulations upon U.S. agriculture.
    How has CBP precipitated this 40-percent decline? Well, it 
has consciously ignored the agriculture mission component of 
its overall mission. This is the principal mission of the 
Agriculture Specialists and Technicians. It has also done so by 
consciously disregarding the rights of Agriculture Specialists 
as valued employees. Unlike the Legacy Customs and Legacy 
Immigration colleagues with whom they work, the CBP Agriculture 
Specialists are college graduates with degrees in the 
biological sciences. Many have graduate degrees in the 
sciences. They are trained and experienced in detecting and 
eradicating plant and animal pests and diseases that threaten 
American agriculture. They are not law enforcement officers. 
They do not have arrest powers. They do not carry a gun. They 
are simply trained to detect pests and diseases that are likely 
to enter this country. And yet CBP in a proceeding pending 
before FLRA is challenging the status of these employees as 
professional employees. Why the decline has occurred in the 
past 2 years? Morale has been driven to a breaking point. And 
these CBP Agriculture Specialists in particular have responded 
by walking. They have bailed out of CBP at an alarming rate, 
quitting. Many of them have gone back to USDA and Animal and 
Plant Health Inspection Service where the agriculture mission 
is alive and well.
    The new DHS regulations codify in effect this unilateral 
power that CBP management already exercises over the Legacy 
Agriculture employees' rights and conditions of employment. 
These regulations as a practical matter eliminate negotiation 
rights and deprive third-party review boards of the power to 
mitigate. They install pay-for-performance schemes in which top 
performers are not assured of appropriate rewards for excellent 
performance.
    The regs virtually promise to widen the gap between the CBP 
staffing levels needed to protect American agriculture and 
those achievable under the personnel system. This threat to 
American agriculture is not theoretical. It has already led to 
unprecedented recalls of commodities found to have contained 
agriculture infested pests, primarily the long-horned beetle. I 
have detailed those recalls in my written testimony, and yet 
today--yesterday an APHIS newsletter reported another major 
outbreak of the Asian longhorned beetle in New Jersey. This 
comes from the solid wood packing material from China, and 
basically CBP has almost stopped inspecting for that particular 
commodity.
    My time is up, and I thank you very much for listening to 
our concerns, and we would be happy to answer any questions.
    Senator Voinovich. Thank you very much.
    All of you have been very critical of these regulations. Is 
there anything good? If you are not willing to share any 
thoughts on what is good, please discuss where the Department 
has been responsive to your concerns. There have been some 
changes in the regulations, and I mentioned several of them in 
my opening statement. The most important thing that I am 
interested in is whether there is any consensus on two or three 
reforms that could really make a significant difference for the 
new personnel system? I have heard from all sides concerns 
about retention and recruiting. Second, I have heard concerns 
that once people are hired, we may lose them because of reduced 
collective bargaining rights.
    Ms. Kelley, I would like to start out with you.
    Ms. Kelley. I would definitely say and acknowledge, as I 
have, that there are changes that were made as a result of the 
2 years we spent working with the Department and with OPM. You 
listed some of those. Some of them were listed by DHS and OPM. 
And we have acknowledged those.
    The problem is that at the core of the collective 
bargaining issue, that language has been gutted and just 
precludes union involvement on issues critical to the employees 
who we represent.
    I would say that there definitely were changes made that 
were positive as a result of our involvement, and if for no 
other reason, that was definitely worth it. It is very 
disappointing, though, that they did not listen to the very 
real solutions that we provided.
    For example, even in the comments that you made, Mr. 
Chairman, about if anything was going to last more than 60 
days, they had an obligation to bargain. That will rarely be 
the case because things as I described about shift assignments 
and selecting shifts and work assignments that today employees 
have a process that has rhyme and reason to it because of the 
negotiated system, that will not be required to be negotiated, 
even though it will last more than 60 days because the 
regulations define it as routine operational matters. And if 
the Department says it is a routine operational matter, they 
have no obligation to bargain regardless of how long it lasts. 
And we believe that the language in these regulations was 
written as it was in order to ensure that there are very narrow 
and limited situations where they have to engage the unions at 
all. That is the clear intent of the language of these 
regulations, and it should not be that way.
    Senator Voinovich. In terms of shift assignments, is that 
in the collective bargaining agreement?
    Ms. Kelley. It is.
    Senator Voinovich. For example, the longer you work for an 
agency, the more flexibility you have in terms of picking the 
shifts?
    Ms. Kelley. It would abrogate it. It would eliminate any 
negotiations of a process, and it would be up to management to 
unilaterally decide who would work and when, with no 
expectation on the part of employees that there will ever be an 
opportunity for that to change or for them to raise their hand 
and say I need to do this, I have a working spouse, I am a 
single parent, whatever. And there are processes today that 
allow employees to have that volunteer process. They were all 
negotiated and they work. For the Department to say that they 
get in the way of them delivering on their mission is just 
disingenuous.
    Senator Voinovich. Any other comments on changes to 
regulation would make a difference? I have got to be frank with 
you. Passing legislation is not going to be easy because the 
Administration will object to it. Furthermore for Congress, 
this is a political issue over which two campaigns were fought.
    Is it possible for you to get together and develop changes 
you think will make a difference for us to evaluate. The issue 
is what can we do that will make a difference for your 
membership and allow the Department to move forward? You have a 
lawsuit filed and I do not know how long it will take for that 
to be resolved. Has the Court granted an injunction preventing 
implementation?
    Ms. Kelley. We are asking for that, but I would say the 
issue of pay, Chairman Voinovich, is one where a lot of the 
decisions have not been made. I know no more about the pay 
system they want to put in place today than I did a year ago, 
even though there have been constant communications about----
    Senator Voinovich. You are talking about the pay-for-
performance?
    Ms. Kelley. Yes, pay-for-performance, performance 
management system, the whole compensation system. The last 
conversation I had with Secretary Ridge on his last day as the 
Secretary was on the issue of our future involvement in helping 
to develop a system that is fair, credible, and transparent. So 
that opportunity is still there before us, and NTEU is looking 
forward to the opportunity to really have----
    Senator Voinovich. So that is an action management may 
take.
    Ms. Kelley. Yes.
    Senator Voinovich. There are a series of things that 
management could do to respond to many of your concerns without 
additional legislation. It is important for us to know what 
those things are as well so that we can bring to bear on them 
through oversight things that facilitate participation. Next, 
there are areas where we need to continue with strong oversight 
to make sure the new personnel system is implemented 
successfully.
    Mr. Gage. Senator, one of the things that I liked that we 
convinced them to do was to go slow on the pay. The Agency is 
still--``growing pains'' is saying it----
    Senator Voinovich. Yes, the challenge is merging 180,000 
people. Mr. Mann, I am going to check into what you are saying. 
I am very concerned about losing good people. One of the most 
important people in this whole process--who I met her out in 
the hall--is retiring after 37 years. I became involved with 
Federal workforce issues 6 years ago because I was concerned 
about the looming human capital crisis. This was the year that 
70 percent of our Senior Executive Service would be eligible to 
retire.
    Mr. Gage, I am sorry. I interrupted you.
    Mr. Gage. Well, I was just going to make the point that I 
think that dropping this new personnel system and new pay on 
the Department of Homeland Security of all departments is 
really going to be a challenge. I have just great apprehension 
about what this type of system will do in law enforcement. It 
has never been shown to work in law enforcement. And I hear the 
human resource types talk about how they are going to be able 
to make this thing so far and objective, and I have been 
hearing that for years. But I am really concerned on that side 
that so many resources are going to go into the development of 
this system and into these personnel changes, and they would be 
much better spent for front-line employees and more people out 
there doing the job of homeland security.
    Senator Voinovich. Thank you. I want to make one point. I 
am beyond my 3 minutes here, but, Mr. Perkinson, I was really 
interested in your comments. You are more open than some of the 
other panelists here about this new system. To me that is 
important because it is your people who are going to be really 
involved in this.
    Mr. Perkinson. Exactly.
    Senator Voinovich. I really want you to know that I want to 
hear from you. I have been through this. I did this when I was 
mayor. I did this when I was Governor, and this is not easy. So 
you are very important here. Your members must be trained 
because they will influence how the system works.
    Would anybody like to comment? I have taken more time than 
I should.
    Mr. Mann. Mr. Chairman, if I could just follow up, I agree 
with Colleen Kelley and John Gage that pay is probably the most 
important ingredient, the one thing that we could do something 
about. Obviously, our people would like to be treated as the 
professionals they are, but I do not think we can legislate or 
regulate that to happen. But that is part of our problem. Pay 
is the other part.
    If they do not have a pay system that is fair and 
transparent--and by transparent, what I mean is one that is 
easy to understand by the employees it is intended to 
compensate the overall system is bound to fail. I have listened 
to the explanations that OPM and DHS staff have given as to 
what this pay system might look like. And I do not understand 
it myself, and I listened over and over again, and I think they 
had some rocket scientists in there trying to explain it to us, 
and they could not either. I am afraid that at the end of the 
day, that system is not going to be comprehended by the average 
person.
    I am also concerned that the Agriculture Specialists and 
Technicians who are excellent performers are not going to be 
assured of any meaningful reward for that top performance.
    Senator Voinovich. Well, can I make a suggestion to you?
    Mr. Mann. Yes.
    Senator Voinovich. If I were you, I would get a hold of 
David Walker and see what he has done in the Government 
Accountability Office. Their system is working, so it may 
provide a benchmark.
    Mr. Mann. I heard his remarks, and I took note of that as 
well.
    Senator Voinovich. What we are looking for here are 
benchmarks, exisiting systems for us to consider. They said 
there are 70,000 Federal employees that are involved in 
alternative personnel systems. I think maybe we need to talk to 
them.
    Again, thank you very much for your testimony here today. 
Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Taking it from the Chairman here, when he mentioned the 
lawsuit, in thinking back I think believe this is the first 
time unions have coordinated their efforts and filed a lawsuit 
against the government. And so I would like to ask a question 
to all of you about the lawsuit that was filed to stop the 
implementation of the DHS personnel regulations.
    I am interested in several of the issues raised in the 
filing, and I know there are many details that we can touch on, 
but I think your filing of the lawsuit and the reasons you did 
it are the basis of the problem. So I would ask each of you to 
elaborate just on the arguments made in the lawsuit, especially 
discussing judicial review and the limitations of independent, 
quasi-judicial agencies mandated by the regulations. I think 
these are important issues that will give us an idea of where 
you are and why you are doing this.
    Let's start with Mr. Perkinson on this. Will you elaborate 
on your arguments?
    Mr. Perkinson. I cannot elaborate on the lawsuit for you, 
Senator, but I will go to Ms. Kelley for that.
    Ms. Kelley. The lawsuit is focused on the collective 
bargaining and on the appeals issues. I would note that there 
is no subject in the lawsuit that affects the pay-for-
performance or compensation system today, perhaps in large part 
because we do not know a lot about it yet, but the lawsuit is 
only aimed at where we see the shortfalls in the collective 
bargaining and the appeals. And we believe they are in conflict 
with other statutes.
    On the appeals issues, I guess the way I would explain it 
is that everything that the Department has set up in these 
regulations allows for internal review by the Department rather 
than outside review, as exists today for other Federal 
employees. And we believe that is wrong, first and foremost.
    Second of all, it incorporates the FLRA and the MSPB into 
their regulatory processes, but defines their roles differently 
than those organizations. Those agencies have their own roles 
today defined by statute. The FLRA has its authority under 
statute. The MSPB has its authority. And these regulations 
choose to take those two agencies and narrow what it is they 
can do in the realm of the Department of Homeland Security. And 
we believe that they don't have the authority to do that. So 
that is what that part of the lawsuit is about.
    And as to collective bargaining, this Congress, the 
Congress that passed the Homeland Security Act, made it very 
clear that its intent was that collective bargaining would 
continue and those rights would continue for employees within 
the Department. And if you look at the language in these 
regulations, that does not comply with the intent of Congress, 
in our opinion, because it so narrowly restricts and in many 
cases eliminates those rights, that it is not collective 
bargaining as is defined in the law today.
    Senator Akaka. Mr. Gage.
    Mr. Gage. I would just like to make two points. The 
mitigation of penalties is over the top where an arbitrator or 
an MSPB examiner cannot mitigate a penalty.
    The second thing is on collective bargaining, and I heard 
Dr. Sanders here talk about how the union could stop 
implementation of a management initiative or a management 
exercise, and that is just not true. But the objections of the 
agencies to collective bargaining were on process, and we 
should have addressed it on how fast we can do bargaining, how 
management can set up a date when they had to act and they 
could complete their obligations to talk to employees before 
then. But to say that, well, sometimes this process went on too 
long and even though the unions have put up proposals to really 
shorten it, we think we will just take the right away 
altogether, and that is what we are concerned about, and that 
is why we are pursuing this in the courts as well as every 
other forum. It is just wrong to take away rights when the 
process could be fixed.
    Senator Akaka. Mr. Brown.
    Mr. Brown. Yes, my esteemed colleagues here stated it quite 
clearly. I am not going to go on about that. But you have to 
understand that our membership lives by a collective bargaining 
agreement. It defines their work rules, or part of them, 
anyway, a good majority of them. And one of the previous panel 
members stated, well, what if we had to have practice to defend 
the homeland, we had to do this, we had to do that? What would 
make better sense than regulations, i.e., a collective 
bargaining agreement where verbiage is such that everyone knows 
what they have to live by, that it would not impede the 
implementation because it would have already been dealt with 
and everyone would have known the parameters which they would 
work under and how that would affect them on the job?
    If you lose your voice in the workplace and do it because I 
said so and no other rationale, you will never have an employee 
workforce in any part of this country with the commitment that 
you have today. Thank you.
    Senator Akaka. Mr. Mann.
    Mr. Mann. Senator Akaka, NAAE was not a primary architect 
of that complaint. We fully support it and we support its 
objectives. But as a lawyer, one of the things that intrigued 
me personally about the complaint is the attack upon the 
impermissible delegation of authority that DHS made in those 
regulations to MSPB and to FLRA. DHS does not have the 
authority to do that. It not only attempted to delegate 
authority, it also attempted to control the procedures and the 
protocol by which that authority would be used. So that 
delegation provision in the DHS regulations is something that I 
think really deserves to be reversed.
    Senator Akaka. Mr. Chairman, if you would permit me, may I 
ask a question of Mr. Perkinson?
    Senator Voinovich. Yes.
    Senator Akaka. I strongly believe that for there to be any 
degree of success in carrying out the regulations, there must 
be continuous training--and the Chairman alluded to training--
on the implementation of the new human resources system at DHS. 
Will you please describe the training Federal Managers members 
routinely receive on measuring performance and disciplining 
employees under the current system?
    Mr. Perkinson. One of our concerns, Senator, has been that 
under the current system, when it comes to grading performance, 
of course, with us going to the pass/fail system of 
performance, there is not extensive training on how we approach 
that type of system. Most of our agencies that we deal with 
have gone to pass/fail so there is not an extensive effort.
    Where our concerns come from the Federal Managers 
Association is that with the move to pay-for-performance, we 
have to have transparency in some form of set pre-standards 
that the employee as well as the manager know what they are 
being measured against. That is going to be the difficulty. And 
when we look at Department of Homeland Security alone, we are 
looking at 22 disparate agencies that came together under one 
roof, and they all do not do the same type of work. So those 
measured performance levels that we would go measure people by 
in order to ensure that we are fair when we do pay-for-
performance on the manager level is going to be very difficult, 
and it will take a lot more extensive training in the pay-for-
performance area than we presently receive.
    Senator Akaka. If costs were not the issue, what further 
training would benefit managers?
    Mr. Perkinson. I think managers would need to have some 
type of understanding on how to rate personnel on an equitable 
basis, that we have to have a system in place and we have to 
have the measures in place, performance-based standards set for 
an employee when we sit down at the beginning of the year and 
say these are our expectations, not to steal a line from Mr. 
Covey, but win-win agreements or those types of things where 
you sit down with an employee. At our senior management level 
at some agencies, we have gone to win-win agreements where you 
know what your expectations are, and if you achieve them, those 
things will get you to the point where you receive your pay.
    Now, I think when we go to pay banding and those type of 
things, it is going to be even more complicated to the point of 
how you determine your No. 10 player versus your No. 1 player. 
And those are the things--that is going to be a difficult and 
challenging task for a first-line manager to have to execute in 
the workplace.
    Senator Akaka. Thank you, everyone. Thank you, Mr. 
Chairman.
    Senator Voinovich. Thank you.
    Again, I want to thank all of you. I assure you that this 
is not the last of our oversight hearings on the implementation 
of these regulations. I would like you to collectively get 
together and come back with a consensus on what changes would 
make the biggest difference for the new personnel system.
    Again, I want to emphasize that this is really important. 
The biggest threat we have in our country today will be tackled 
by this Department. We have to work together to make sure that 
we are secure.
    Thank you.
    [Whereupon, at 12:32 p.m., the Subcommittee was adjourned.]


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