[Senate Hearing 109-85]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 109-85

    CRITICAL MISSION: ENSURING THE SUCCESS OF THE NATIONAL SECURITY 
                            PERSONNEL 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

                               __________

                             MARCH 15, 2005

                               __________

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


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                            WASHINGTON : 2005
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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................................................     3
    Senator Coburn...............................................     7
    Senator Levin................................................    19
    Senator Pryor................................................    21
    Senator Warner...............................................    32
Prepared statement:
    Senator Lautenberg...........................................    39

                               WITNESSES
                        Tuesday, March 15, 2005

Hon. David M. Walker, Comptroller General, U.S. Government 
  Accountability Office..........................................     8
Hon. Charles S. Abell, Principal Deputy Under Secretary for 
  Personnel and Readiness, U.S. Department of Defense............    10
George Nesterczuk, Senior Advisor to the Director on Department 
  of Defense, Office of Personnel Management.....................    12
Richard Oppedisano, National Secretary, Federal Managers 
  Association....................................................    26
John Gage, President, American Federal of Government Employees...    28
Gregory J. Junemann, President, International Federation of 
  Professional and Technical Engineers...........................    30

                     Alphabetical List of Witnesses

Abell, Hon. Charles S.:
    Testimony....................................................    10
    Prepared statement...........................................    72
Gage, John:
    Testimony....................................................    28
    Prepared statement...........................................   124
Junemann, Gregory J.:
    Testimony....................................................    30
    Prepared statement...........................................   138
Nesterzuk, George:
    Testimony....................................................    12
    Prepared statement...........................................    87
Oppedisano, Richard:
    Testimony....................................................    26
    Prepared statement...........................................   104
Walker, Hon. David:
    Testimony....................................................     8
    Prepared statement...........................................    40

                                Appendix

Elmer L. Harmon, President, AFGE Local 2635, NCTAMS LANT DET, 
  Cutler, Maine, prepared statement..............................   148
Questions and responses for the Record from:
    Mr. Walker...................................................   149
    Mr. Abell....................................................   153
    Mr. Nesterczuk...............................................   174
    Mr. Oppedisano...............................................   180
    Mr. Gage.....................................................   183

 
    CRITICAL MISSION: ENSURING THE SUCCESS OF THE NATIONAL SECURITY 
                            PERSONNEL SYSTEM

                              ----------                              


                        TUESDAY, MARCH 15, 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 Subcommittee met, pursuant to notice, at 10:05 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Coburn, Warner, Akaka, Levin, 
and Pryor.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The hearing will come to order.
    Good morning and thank you for coming. Today, this 
Subcommittee convenes a hearing entitled, ``A Critical Mission: 
Ensuring the Success of the National Security Personnel 
System.'' The purpose of this hearing is to examine the 
proposed regulations of the National Security Personnel System 
and to continue the dialogue over its design.
    When thinking about the Department of Defense, we often 
visualize the over 2 million active duty and reserve men and 
women in the Armed Forces. We are grateful to them for their 
heroic service to our country, but we must not forget that 
working alongside them are approximately 650,000 civilians who 
can be found working across the globe in support of our 
military.
    These hardworking and dedicated individuals, including the 
20,000 in my home State of Ohio, understand that the work that 
they do every day is instrumental to our national security. 
What responsibility could be more important than that? In April 
2003, the Department of Defense presented to Congress a 
proposal for new personnel flexibilities. In essence, Defense 
sought similar and additional authorities to what was 
authorized for the Department of Homeland Security to develop a 
system that is able to respond to current and future workforce 
and mission needs.
    Through the National Defense Authorization Act for fiscal 
year 2004, Congress granted the Department the authority to 
design the National Security Personnel System (NSPS). The 
proposed regulations for NSPS were published in the Federal 
Register on Monday, February 14, 2005. The proposed regulations 
have a 30-day public comment period. It closes tomorrow. Next, 
the Department of Defense is required, by law, to enter into a 
meet-and-confer process with its employee organizations that 
must last a minimum of 30 days.
    I understand that the process leading up to the publication 
of the proposed regulations was not always smooth. I encourage 
both sides to make the most of the meet-and-confer process, to 
have a constructive dialogue on what is needed for the new 
system. As with the Department of Homeland Security, I know 
many employees and their union representatives at the 
Department of Defense are concerned about the content of the 
proposal and the subsequent implementation of NSPS.
    Several Defense employees in Ohio will transition into NSPS 
in a Spiral 1.1. Many of my constituents have taken the time to 
phone or to E-mail me. They are uncertain what changes they 
will see and unsure where to go to find the answers. One woman 
who works for the Defense Finance and Accounting Service in 
Columbus shared these thoughts with me in an E-mail:
    ``I understand that pay raises will be based on the 
discretion of your supervisor. This causes me great concern, as 
we have supervisors in our office who cannot take the time to 
do quarterly appraisals and awards let alone write appraisals 
to give them a raise. Also, we have asked management many 
questions about NSPS, and it appears that nothing has really 
been settled because they are unable to answer our questions.''
    To the administration, I would say it is your obligation to 
continue an open dialogue and maintain a collaborative process 
with your employees as you refine the proposal regulations for 
NSPS. It seems to me that the consensus of outside observers is 
that the labor-management collaboration process at DOD was not 
as open as the process at DHS, and I would invite all of 
today's witnesses to share their thoughts on this point.
    The Defense Department must recognize that while the new 
personnel system is intended to assist it in responding to its 
national security mission, it, also, must provide employees the 
tools and structure to encourage, support and reward them. 
Defense leaders must recognize that despite the Department's 
experience with alternative personnel systems, the changes put 
forth at NSPS are new for the majority of the employees at the 
Department. It will take time to gain understanding.
    The proposed regulations will impact the most fundamental 
concerns of an employee: Will my contributions be recognized? 
What are my opportunities for advancement and promotion? How 
will I be paid? What recourse do I have if unfairly treated?
    Employees must be able to see that they have a valued role 
in shaping NSPS.
    To employee organizations, it is your duty to roll up your 
sleeves and work with the Department of Defense and the Office 
of Personnel Management. It is not enough to say you do not 
like the system. I ask you to continue to offer constructive 
suggestions to improve the proposed regulations.
    I want to assure all of you that I am committed to ensuring 
the success of NSPS. The regulations are not finalized. The 
publication of proposed regulation is only one of the many 
milestones leading up to full implementation of NSPS. I know 
there are many interested parties that have suggestions for 
improvements. I am certain the Comptroller General, who I am 
pleased to welcome back to the Subcommittee today, has some 
thoughtful observations.
    At times, I have had my own concerns with aspects of NSPS. 
For example, this time last year, I learned the Department was 
rushing to implement the system by October 2004. I thought this 
was simply unrealistic. I was so concerned that I went over to 
the Pentagon on March 30, 2004, and met with Deputy Secretary 
Paul Wolfowitz, Secretary of the Navy Gordon England, and 
Principal Deputy Undersecretary Charlie Abell, who I am pleased 
is here today. I conveyed to them my concerns that the 
Department was proceeding much too rapidly and that the massive 
change envisioned by NSPS would take years to implement 
properly. I was pleased to learn that they agreed and that 
after a hasty start, implementation was to proceed with much 
greater deliberation.
    Secretary England was given a lead role and I had the 
chance to meet with him yesterday to discuss his progress. For 
the sake of continuity I am pleased that he is committed to 
leading the initial implementation of NSPS regardless of what 
secretariat he holds in the Defense Department.
    I suspect there is room for improving the regulations in 
the days ahead, and I have my own recommendations. For example, 
there are differences between the final regulations for the 
Department of Homeland Security and the proposed regulations 
for the Department of Defense in areas such as labor 
participation. I am interested to learn why DOD has chosen a 
different path in some of those instances. I am certain my 
colleagues here today have similar observations and 
suggestions. I know the witnesses here today, representing 
employees of the Department, have their own concerns and 
suggestions for improvement. I look forward to discussing these 
regulations and their responses with them.
    I now yield to my good friend, the Senator from Hawaii, 
Senator Akaka, and I want to thank you publicly for your 
commitment to human capital issues of the Federal Government, 
Senator.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I, too, 
am happy to work with you, my good friend and a champion 
leading this movement.
    I welcome our distinguished panelists this morning.
    DOD had a rocky start when first rolling out NSPS last 
year. I am pleased the Department started over after listening 
to concerns expressed by many of us. Although there is wide 
disagreement over the regulations, I very much appreciate the 
time and effort that has gone into working with employees and 
their unions and their representatives.
    As the Ranking Member on this Subcommittee and the Armed 
Services Readiness Subcommittee, I am disappointed with this 
proposal, which I believe strips meaningful employee rights and 
protections and raises serious questions of fairness and 
collective bargaining and employee appeals. My concerns today 
are the concerns I voiced in 2003, when I was one of three 
Senators voting against NSPS. I am not alone in my concerns 
and, Mr. Chairman, I do not recall a single issue in my 28 
years in Congress that has generated more anxiety among Federal 
workers in Hawaii than NSPS.
    There are nearly 16,000 civilian DOD employees in Hawaii, 
many of whom work at Pearl Harbor Naval Shipyard. I was 
particularly moved by one shipyard worker's letter that 
detailed how union and Metal Trades Council representatives 
completed successful negotiations on a number of occasions, 
resulting in improved efficiency and furthering labor 
management relations. His fear of NSPS was stated clearly when 
he wrote, ``The respect and trust developed and nurtured over 
the years through formal discussions will be thrown out and 
discarded.''
    I know DOD and OPM are listening to these concerns, and I 
am pleased that coalition meetings are continuing. These 
meetings should be more than just exchanging concepts around 
vague and general policy statements. NSPS will bring 
significant changes. For example, collective bargaining on many 
issues, such as deployment, will be curtailed. I find this 
particularly egregious because DOD failed to prove during 
congressional testimony that bargaining over deployment was a 
problem. I know of no instance where union members have refused 
reassignment of deployment; rather, the opposite is true. At 
Pearl Harbor, the unions negotiated a long time ago on an 
orderly process for job site mobilization. There are no 
grievances over assignments, but there are grievances over not 
going.
    I am concerned with internal review boards, such as the 
National Security Labor Relations Board, which are 
fundamentally inconsistent with needed checks and balances on 
government decisionmaking. Such boards lack credibility, blur 
the relationship between the career civil service and elected 
and appointed officials and could foster a back-door patronage 
system.
    The NSPS was intended to provide managers with workforce 
flexibility not reduce the rights and protections of the civil 
service. I have other very fundamental problems with the 
proposed regulations, the first of which is the lack of detail. 
In congressional testimony, David Chu noted, ``It is often said 
that the devil is in the details, that best intentions may be 
overcome by wrong-headed implementation. We--`that is DOD'--
welcome scrutiny of the details of our implementation.''
    I agree the devil is in the details, but the proposed 
regulations lack details especially in critical areas like the 
compensation system.
    My second concern is DOD's inability to assess accurately 
the workforce needs. As the Chairman knows from last month's 
hearing on the GAO High-Risk List, DOD has more programs on the 
list than any other agency. The Department does not have a 
Strategic Human Capital Plan in place, and no single document 
identifies DOD's recruitment and retention strategy or goals 
for its future workforce.
    My third concern is over how DOD will implement the policy 
directives embodied in the proposed rules especially when this 
country is at war. The need to develop and fund the many 
implementation programs, especially the training of managers 
and employees, is a costly undertaking. Without a meaningful 
and fully funded process, no policy directive can be effective. 
GAO took almost 15 years to bring all of its employees under a 
pay-for-performance system. DOD plans to do it in 3 to 4 years 
without increasing the training budget or funds to reward good 
performance. NSPS will require managers to make meaningful 
distinctions when making appraisals and evaluations. Without 
adequate training, this process is doomed.
    DOD must also provide for transparency, accountability, and 
fairness in its pay system. There is no process for challenging 
a performance pay decision. I also urge DOD to reconsider the 
virtual wholesale elimination of employee union bargaining 
rights and the inability of DOD employees to have their appeals 
impartially adjudicated.
    Last, I urge flexibility and communication in carrying out 
these regulations. DOD, by its organizational nature, operates 
in a command and control environment. Employee input is 
critical to the success of NSPS. And without union 
participation, not just consultation, there will be no winners. 
Limiting opportunities for employees to join unions and 
minimizing or curtailing the ability of labor unions to 
organize and bargain over issues that will have a direct and 
sometimes adverse impact on how employees will do their jobs 
guarantees failure.
    Mr. Chairman, we have much to learn from today's hearing 
and, again, I thank our witnesses and look forward to their 
testimony.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    Thank you, Chairman Voinovich. Today's hearing focuses on the 
regulations for the National Security Personnel System (NSPS) proposed 
by the Department of Defense (DOD) and the Office of Personnel 
Management (OPM). I join our Chairman in welcoming our panelists. Given 
the rocky start that DOD had when first rolling out the NSPS a little 
more than a year ago, I am pleased that the Department began anew after 
heeding the concerns that I and other members of Congress expressed, 
along with those voiced by employees and OPM. Although there is wide 
disagreement over how successful the process turned out, I very much 
appreciate the time and effort that has gone into working with 
employees and their union representatives.
    As the ranking member on this Subcommittee, as well as the ranking 
Democrat on the Armed Services Readiness Subcommittee, I am 
disappointed with the proposed regulations, which I believe 
significantly strip key rights and protections of employees and raise 
serious questions of fairness in collective bargaining and employee 
appeals. The concerns I have today are the concerns I voiced in 2003 
when I was one of three Senators who voted against the underlying bill 
creating the NSPS.
    I am not alone in my concerns, and Mr. Chairman, I do not recall a 
single issue in my 28 years in Congress that has generated more anxiety 
among federal workers in Hawaii than the NSPS. My state is home to over 
16,000 civilian DOD employees, many of whom work at the Pearl Harbor 
Naval Shipyard. I was particularly moved by one shipyard employee's 
letter that detailed how union and Metal Trades Council representatives 
in the Shipyard completed successful negotiations on a number of 
occasions that resulted in improved efficiency and furthered labor-
management relations. His fear of the NSPS was simply stated when he 
wrote, ``The respect and trust developed and nurtured over the years 
through formal discussions will be thrown out and discarded.''
    I know that DOD and OPM are listening to the concerns voiced by 
employees, and I am pleased that the meetings with the United DOD 
Workers Coalition are continuing. However, these meetings must be more 
than the exchange of concepts developed around vague and general policy 
statements. I know everyone who is providing input on the final 
regulations understands just how significantly the NSPS will change the 
way DOD hires--fires--pays --assigns--and works with employees.
    As examples, the regulations would create an internal panel to 
adjudicate labor-management disputes. Panel members would be appointed 
and removed solely by the Secretary of Defense. Collective bargaining 
on a number of issues, such as deployment, which has great impact on 
employees and their families, will be curtailed.
    --MORE--I find these examples particularly egregious because DOD 
failed to prove during congressional testimony that such new 
flexibilities were needed. I know of no instance where union members 
have refused reassignment or deployment. Rather, the opposite is true. 
Approximately 5,000 federal civilian workers have been mobilized and 
serve in Afghanistan and Iraq. At Pearl Harbor, the unions negotiated a 
long time ago on an orderly process for mobilization to a job site. 
There are no grievances over assignments--but there are grievances over 
not going! Deployments are all-volunteers. The Shipyard boasts an all-
volunteer fly away team that is able to change out nuclear submarine 
batteries in seven days, a job that normally takes anywhere from 15 to 
21 days.
    I also know of repeated instances where DOD has refused to consider 
transfer applications by civilian employees because they did not live 
in the geographic area of the opening.
    The creation of internal review boards is fundamentally 
inconsistent with the Federal Government's long-held practice of 
providing checks and balances in ensuring the integrity of government 
decision-making. The Federal Labor Relations Authority (FLRA) was 
created in 1978 by the Civil Service Reform Act (CSRA) to separate the 
adjudication of labor-management disputes from the entity charged with 
managing the federal workforce. It provides a stable and independent 
forum to ensure an efficient and effective government. In my mind, 
internal adjudication panels do not foster independence. They lack 
credibility, blur the relationship between the career civil service and 
elected and appointed officials, and could foster a backdoor patronage 
system.
    The NSPS was intended to provide managers with workforce 
flexibility, not reduce the rights and protections of the civil 
service. The NSPS is required to be based on federal merit principles 
and provide for collective bargaining. Recombining the responsibilities 
of employee protections and program management within DOD, while 
limiting the power of independent agencies that oversee the 
Department's activities, brings the Department's policies in direct 
conflict with the fundamental principles of the federal civil service 
and could substantially erode the rights and protections of federal 
employees--both DOD and non-DOD employees.
    For example, the regulations place time limits on the MSPB to 
adjudicate cases which--given the size of DOD--will have a significant 
and substantial adverse impact on MSPB's ability to timely adjudicate 
the cases of non-DOD employees.
    In addition, the regulations severely limit the discretion of MSPB 
judges to mitigate penalties or award attorney fees, and requires 
decisions to made in deference to DOD's national security mission. Even 
more shocking is the fact that the regulations provide DOD with wide 
discretion to review and reverse a MSPB administrative judge's initial 
findings of fact. Therefore, the NSPS is comparable to a system that 
would allow prosecutors to overturn the factual findings of a jury or a 
district court, replace it with the prosecutor's determination of 
facts, and require the appellate courts to be deferential to that 
finding. The proposed changes undermine the MSPB's effectiveness for 
serving as a neutral decision maker.
    How credible can a system be that allows the employee's agency to 
reverse the findings of a neutral decision maker?
    These proposed NSPS rules will only lower employee morale, impair 
DOD's recruitment and retention efforts, and impede--not aid--agency 
mission.
    I want our first panel to explain why they believe the regulations 
are both fair and perceived as fair by employees, which is a stated 
goal of DOD, and will promote agency mission.
    I have other very fundamental problems with the proposed 
regulations, the first of which is the lack of detail. In congressional 
testimony, David Chu, Under Secretary of Defense for Personnel and 
Readiness, noted, ``It is often said that the devil is in the details, 
that best intentions may be overcome by wrongheaded implementation. We 
welcome scrutiny of the details of our implementation.'' I agree the 
devil is in the details, but the proposed regulations lack details. 
Modern organizations recruit and retain employees through pay, 
benefits, and improvements in work-life conditions. One of the most 
important benefits to all employees is pay, which is why I am troubled 
by the lack of detail given to the proposed NSPS compensation system.
    My second concern is DOD's inability to assess accurately its 
workforce needs. As the Chairman knows from our hearing last month on 
the GAO High-Risk List, DOD has more programs on the list than any 
other agency. The Department does not have a strategic human capital 
plan in place. No single document identifies DOD's recruitment and 
retention strategy or goals for its future workforce.
    My third concern is over how DOD will implement the policy 
directives embodied in the proposed rules, especially when this country 
is at war. The need to develop and fund the myriad of implementation 
programs, especially the training of managers and employees, is a 
costly undertaking. Without a meaningful and fully-funded process, no 
policy directive can be effective. GAO took almost 15 years to bring 
all of its employees under a pay for performance system. DOD is 
planning to do it in three to 4 years without increasing the training 
budget or funds to reward good performers.
    The NSPS is a performance-based system that will depend on managers 
making meaningful distinctions when making appraisal evaluations. 
Without adequate training, this process is doomed. Employees will be 
grouped into occupational pay clusters that will be based on market 
based compensation surveys. Getting these surveys and performance 
appraisals right the first time is critical and not cheap. Given the 
fact that most agencies fail to adequately fund training programs to 
begin with, I question the decision by DOD not to increase resources 
dedicated to training.
    In addition, I believe that in order to be successful, DOD must 
ensure that any pay for performance system has adequate funding. A 
zero-sum reallocation of salaries and salary adjustments will guarantee 
failure by rewarding a select few at the expense of the majority of 
employees who do good work, thereby creating an atmosphere of distrust 
among the workforce and lowering morale.
    DOD must also provide for transparency, accountability, and 
fairness in the system. The current regulations provide for an internal 
process to challenge a performance evaluation and no process for 
challenging a performance pay decision. Given the wide flexibility 
granted to the Department to establish this new system, it imperative 
that DOD uses this authority responsibly. Providing fair and 
transparent systems to make pay and performance decision-makers 
accountable is necessary.
    I also urge DOD to reconsider the virtual wholesale elimination of 
employee union bargaining rights and the inability of DOD employees to 
have their appeals impartially adjudicated.
    Last, I urge flexibility and communication in carrying out these 
regulations. DOD, by its organizational nature, operates in a command 
and control environment. Employee input is critical to the success of 
the NSPS, and without union participation--not just consultation--there 
will be no success. Limiting opportunities for employees to join unions 
and minimizing or curtailing the ability of labor unions to organize 
and bargain over issues that will have a direct and sometimes adverse 
impact on how employees will do their jobs will guarantee failure. 
There must also be defined roles for managers who under the NSPS will 
be more accountable for agency performance.
    Mr. Chairman, I believe we have much to learn from today's hearing. 
I look forward to hearing from our distinguished witnesses who I hope 
will rejoin us for future hearings as we continue our oversight 
responsibilities of the NSPS.

    Senator Voinovich. Thank you, Senator Akaka. Senator 
Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Mr. Chairman, thank you for holding the 
hearing. I want to welcome our guests. I look forward to 
hearing your comments. I am excited about putting better 
management into every level of the Federal Government. That has 
two basic principles: One is it accomplishes the tasks that the 
Congress has set out for the bureaucracies and, two, that it 
treats employees the way they would want to be treated. I 
think, if we follow those two guidelines, we are going to have 
effective management and effective Federal employees.
    And with that, I would yield back.
    Senator Voinovich. As is the custom before this 
Subcommittee, I am going to ask the witnesses to stand up and 
be sworn in.
    [Witnesses sworn en masse.]
    Let the record show that the witnesses answered in the 
affirmative.
    I would like to ask all the witnesses to limit your oral 
statement to 5 minutes and remind you that your entire written 
statement will be entered into the record.
    I would like to welcome the Hon. David Walker, Comptroller 
General of the United States. Joining Mr. Walker on the first 
panel are the Hon. Charles Abell, Principal Deputy 
Undersecretary for Personnel and Readiness, Department of 
Defense, and George Nesterczuk, Senior Advisor to the Director, 
Office of Personnel Management.
    Also, available for questions are Mary Lacey, Program 
Executive Officer for the National Security Personnel System, 
and Dr. Ronald Sanders, Associate Director for Strategic Human 
Resource Policy, Office of Personnel Management.
    Would Ms. Lacey and Mr. Sanders identify themselves.
    Mr. Sanders, thank you.
    Ms. Lacey, I had a nice talk yesterday with Secretary 
England, and he tells me that you are doing a yeoman's job on 
this whole issue. He is relying on you for a lot of good work. 
I am sure that Mr. Abell is appreciative of all the effort and 
time that you have put into this. I understand you are a 31-
year employee of the Department. It is reassuring to know you 
are there.
    Thank you all for the time you have invested in developing 
the system. I commend you for your dedication to this important 
job, and I know you have much to talk about.
    We will start with Mr. Walker, who has been here time and 
time again. David, nice to see you, again.

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

    Mr. Walker. Good to see you, Mr. Chairman. Mr. Chairman, 
Senator Akaka, and Senator Coburn, it is a pleasure to be back 
with you. Thank you for entering my entire statement into the 
record, and I will hit some highlights for you.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 42.
---------------------------------------------------------------------------
    As you know, Mr. Chairman, Senators, I, as well as GAO, as 
an organization, have been longstanding proponents of 
modernizing our human capital policies and practices in the 
Federal Government and are strong believers in the fact that 
you need to have reasonable flexibility, at the same point in 
time, appropriate safeguards to prevent abuse of employees.
    The NSPS is of critical importance not just for the 
Department of Defense, but, also, for the overall civil service 
reform process. It is critically important they get it right 
not just for the benefit of DOD and its employees, as well as 
our Nation's national security, but, also, to try to make sure 
that we can continue to modernize our human capital policies 
and practices consistent with that balancing of interests 
throughout the Federal Government.
    As you mentioned, Mr. Chairman, the NSPS did not get off to 
a great start. It did not represent a model process of 
collaboration with the Congress, initially, nor at the initial 
stages of attempted design and implementation. I must, however, 
state that, in my opinion, there has been significant change 
that occurred in the tone, the tenor, and the approach that the 
Department of Defense has taken on this issue since Secretary 
of the Navy Gordon England was designated as the point person 
by Secretary Rumsfeld. I believe that Secretary England is a 
capable and caring individual who wants to do the right thing.
    I think we all need to recognize that the NSPS is now the 
law of the land and, as a result, it is important that all 
parties work together to try to help assure that it is 
implemented both effectively and fairly. To do so, both 
management and labor must work together in a good-faith manner. 
Reasonable people can, and will, differ with regard to the 
individual proposals under NSPS, but it is absolutely critical 
that meaningful communications and consultations take place in 
order to maximize the chance of success and minimize the 
possibility of disruption.
    These communications and consultations are a two-way 
street, and we are entering a particularly important period, as 
you mentioned, Mr. Chairman and the other Senators, namely the 
meet-and-confer period, which will begin in the very near 
future. It is very important that all parties take that 
seriously and act constructively.
    In my view, Mr. Chairman, both management leaders and labor 
leaders will need to possess three key characteristics in order 
for this to be successful:
    Firest, they will have to have the courage to speak the 
truth and to do the right thing, even though it may not be 
popular;
    Second, they will have to have the integrity to lead by 
example and practice what they preach;
    And third, they will have to be innovative enough to think 
outside the box and help others see the way forward.
    Both labor leaders and management leaders will have to 
possess these three critical attributes. We at GAO, as you 
mentioned, have been in this business for many years. We have 
had broadbanding since 1989. We have had pay-for-performance 
since 1989, although, as Senator Akaka mentioned, we brought it 
out in phases. Now all but about 10 of our employees in GAO are 
subject to broadbanding and pay-for-performance. We are happy 
to share our knowledge and experiences. Our way is not the way, 
but it is a way, and we do believe that we can help others see 
their way forward here and, hopefully, avoid some pitfalls.
    Now, I would like to mention one positive, one concern and 
one point on the way forward.
    The framework, I believe, that relates to these proposed 
regulations does provide for a more flexible and modern human 
capital system, and that part is a step in the right direction.
    Second, an area of concern, there are many details that 
have not been defined. The details matter. How these details 
are defined can have a direct bearing on whether or not the 
ultimate system is both reasoned and reasonable. And the meet-
and-confer period is critically important to try to help make 
sure that both parties recognize that and come to the table in 
good faith to try to deal with some of these details--details 
in the areas of performance management, compensation, 
reductions in force, appeal rights, transparency provisions, 
training aspects, these are all critically important details.
    And last, but not least, as I have said before, and as 
Senator Akaka mentioned, DOD has 14 of 25 high-risk areas, up 2 
from 2 years ago. DOD does many things right, including 
fighting and winning armed conflicts, where it is unparalleled. 
Nobody is even close. DOD is a ``D'' on economy, efficiency, 
transparency, and accountability. It needs a chief management 
officer or a chief operating officer to be in charge of the 
overall business transformation effort, to take a strategic, 
integrated, and persistent approach to a whole range of 
business transformation issues, of which NSPS is but one, but a 
critically important one.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Mr. Walker. Mr. Abell.

 TESTIMONY OF HON. CHARLES S. ABELL,\1\ PRINCIPAL DEPUTY UNDER 
   SECRETARY FOR PERSONNEL AND READINESS, U.S. DEPARTMENT OF 
                            DEFENSE

    Mr. Abell. Thank you, Mr. Chairman, and Members of the 
Subcommittee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Abell appears in the Appendix on 
page 74.
---------------------------------------------------------------------------
    The National Security Personnel System is a key part of a 
DOD transformation. We will create a total force, uniformed 
military and civilian employees, who share a common vision, who 
recognize common strategic and organizational objectives and 
who operate as one cohesive unit. DOD civilians are unique in 
government in that they are an integral part of an organization 
that has a military mission, a national security mission. DOD 
civilians are at work side-by-side with our uniformed military 
personnel around the world in every time zone every day. NSPS 
will bring 21st Century human resource management to these 
dedicated public servants.
    NSPS has been designed to meet a number of essential 
requirements. Our guiding principles, as we designed this, were 
mission first; respect the individual; protect the rights 
guaranteed by law; value talent, performance and leadership, 
and commitment to public service; be flexible, understandable, 
credible, responsive, and executable; to balance the HR system 
interoperability with the unique mission requirements; and to 
be competitive and cost effective. We have key performance 
parameters that implement these guiding principles with 
measurable metrics.
    As you noted, Mr. Chairman, NSPS was enacted on November 
24, 2003. And since January 2004, we have been engaged in a 
process to design the HR appeals and labor relations system in 
an open, collaborative environment, in consultation with our 
employees, the unions, and other interest groups.
    Since January 2004, we have met face-to-face with 
employees, unions, and interest groups in many settings, as 
well as maintaining two-way communications via written 
correspondence, conversations and exchanges of documents. Based 
on feedback from the unions and congressional committees in 
March 2004, as you noted. Sir, the Department adjusted the 
process, established a different governance and enhanced our 
partnership with OPM.
    The proposed regulations published in the Federal Register 
on February 14, 2005, reflect the result of this adjusted 
process. We are currently in the public comment phase, which 
will formally close tomorrow, March 16. We anticipate comments 
will come in after the March 16 deadline, and we will certainly 
review those comments as well. The Federal Register notice is 
the formal notice required by the statute. Following the 30-day 
comment period, we will review the comments, and then we will 
engage in a meet-and-confer process for a minimum of 30 days.
    Mr. Chairman, I stress the word ``minimum.'' We will devote 
the time necessary to adequately discuss and confer on every 
issue raised during the comment period, and this is where the 
details that so many long for will begin to emerge. We have 
asked the Federal Mediation and Conciliation Service to assist 
us in this meet-and-confer process. At the conclusion of the 
meet-and-confer period, we will report the results to our 
congressional oversight committees.
    I suspect that we will spend some time today talking about 
what NSPS does, but let me take a minute to talk about what 
NSPS does not do. It does not change the merit system 
principles that are the foundation of the civil service system. 
It does not change prohibited personnel practice rules. It does 
not change whistleblower protections nor anti-discrimination 
laws. It does not modify or diminish veterans preference. It 
does not change employee benefits, such as health care, life 
insurance, retirement and so forth. It does preserve due 
process for employees, and it does not reduce opportunities for 
training and professional development.
    On the other hand, the National Security Personnel System 
will provide a streamlined, more responsive hiring process, 
simplified pay banding structure, which will allow us 
flexibility in assigning work, performance-based management 
that is linked to strategic and organizational goals and 
includes accountability at all levels, pay increases based on 
performance rather than longevity, efficient, faster procedures 
for addressing performance and disciplinary issues, while 
protecting due process rights, and a labor relations system 
that recognizes our national security mission, while preserving 
collective bargaining rights of employees.
    Although we plan to implement the labor relations system 
DOD-wide, we intend to phase in the HR system beginning as 
early as July of this year. We expect full implementation by 
late 2007 or perhaps early into 2008.
    We recognize that the National Security Personnel System is 
a significant change, but these are necessary changes. We will 
meet the challenge of change and change management willingly.
    Senator Akaka talked to the value of training. We agree. We 
are committed to training employees, managers, supervisors. We 
are committed to the collaborative approach that we have used 
to get to this point. We understand the concern and the anxiety 
of our employees. It would be unnatural if they were not 
concerned or anxious. We will address those concerns.
    NSPS is the right system, based on the right philosophy, at 
the right time in our history. The Department, in partnership 
with the Office of Personnel Management, the unions, interest 
groups, and our employees will implement it with efficiency, 
effectiveness, transparency, and sensitivity.
    Mr. Chairman, before I close, I would like to recognize the 
great contributions of my partner, George Nesterczuk, Dr. Ron 
Sanders and Mary Lacey. As you mentioned, they have been 
invaluable in helping us get to where we are, and they are 
going to be part of the team that takes us all the way home.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Mr. Abell. Mr. Nesterczuk.

   TESTIMONY OF GEORGE NESTERCZUK,\1\ SENIOR ADVISOR TO THE 
    DIRECTOR ON DEPARTMENT OF DEFENSE, OFFICE OF PERSONNEL 
                           MANAGEMENT

    Mr. Nesterczuk. Thank you, Mr. Chairman, and Members of the 
Subcommittee. I want to thank you for holding this hearing at 
this particular time. It comes at a critical time in the 
process of developing the NSPS regulations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Nesterczuk appears in the 
Appendix on page 89.
---------------------------------------------------------------------------
    As you mentioned, we recently published the proposed 
regulations, and we are coming to conclusion on an initial 30-
day comment period. It is an important part of our regulatory 
process, getting input from various constituencies, employees, 
and the general public, as well as the employee representatives 
of the Department. We are looking forward to analyzing, and 
assessing those inputs as we proceed in developing final 
regulations over the coming weeks and months.
    I would like to thank DOD for the collaboration that we 
have engaged in. After an initial rough start, as you 
mentioned, we have had a year's worth of excellent cooperation, 
leading to what I think is a fairly decent proposal in our 
initial stab at the regulations.
    As we developed the proposal, we kept in mind the 
importance of keeping balance before everyone; balancing the 
interests of the Department, the vital mission that it has to 
accomplish, while, at the same time, not compromising the core 
principles of the civil service, and that is the principles of 
merit and fairness to our employees. That is the backbone of 
having the type of democracy and respect for government that we 
enjoy.
    We have, also, had to maintain a balance between the 
operational imperatives and employee interests in all of the 
specific components of the NSPS: Performance-based pay, 
staffing flexibilities, employee accountability and due 
process, as well as the reforms in labor-management relations.
    In striking those balances, we paid particular attention, 
as Mr. Abell mentioned, to protecting merit system principles, 
making sure that prohibited personnel practices are adhered to, 
that due process for employees is guaranteed, veterans 
preference is fully protected, and that employees do enjoy the 
right to representation and collective bargaining. I believe we 
have achieved those balances properly in our proposal.
    As we have mentioned, the outreach that we engaged in over 
the past year has been very instrumental in promoting 
credibility and acceptance, ultimately, of the NSPS 
regulations. DOD arranged a number of focus groups and town 
hall meetings throughout its installations around the world. 
Thousands of employees were directly engaged. DOD created an 
interactive website which provided access to a far greater 
audience, interactive in that questions could be raised and 
responded to while information was disseminated about the 
process.
    We were, also, well-informed by the DHS experience, the 
Department of Homeland Security, which was ongoing at the time 
and which provided some valuable input on labor-management 
relations and the perspectives of unions on some of these 
proposals. We were able to feed that into our development 
process.
    DOD, also, brought 25 years' worth of direct hands-on 
experience with alternative personnel systems and alternative 
pay systems through their demonstrations that they have been 
running. OPM has done extensive analysis of those. We provided 
that analysis to the working groups and teams and shared those 
with the unions in the course of our engagement.
    The meet-and-confer process that is upcoming is critical to 
the continued development process. There are a number of issues 
that have not been defined in great detail, specifically, 
because we are looking for the input from the unions on ways to 
go. Some of the proposals are necessarily general to provide 
DOD with the flexibilities that they will need at the 
implementation level and subsequent evolution of the pay 
systems and the performance systems. So we have left those as 
enabling regulations purposely.
    There is a level of detail that we can still get to for 
clarification in the meet-and-confer process. And we recently 
met with the unions to try to start to define that process, and 
to coordinate schedules. We do look forward to constructive 
comment from the unions. Should we fail to reach those, that 
would be a lost opportunity, and I think the members of the 
unions would be shortchanged in the process. We have reached 
out, and we will continue to reach out, and the meet-and-confer 
process, I think, will be the proof of the pudding in that. 
Thank you.
    Senator Voinovich. Thank you very much. We will have 6-
minute rounds of questions. I will begin.
    DOD has laid out an aggressive implementation strategy. It 
is my understanding that implementation will occur in 3 phases, 
or spirals, and that Spiral 1 will take approximately 18 
months. According to Secretary England, DOD will begin 
implementation with 60,000 employees. How did the Department 
decide which organizations will be in that first spiral? What 
steps has the Department taken thus far to prepare employees 
transitioning into NSPS this summer? And as Senator Akaka 
mentioned, I share his concern regarding training of managers 
and the Department's communication strategy with employees?
    The biggest issue is employee training and budget. How do 
you anticipate initiating implementation of this new system?
    Mr. Abell. Yes, sir. I will try to address those in the 
order that you asked them, sir.
    First, how did we identify the folks to be in Spiral 1. We 
went out to the services and to the Defense agencies and asked 
for those who felt they were ready, those organizations that 
had a desire to move to NSPS, but, also, with a caveat that 
these ought to be organizations that we would evaluate these 
organizations who volunteered as to where were they in 
performance management, did they have a strategy where their 
work could be linked to the organizational and, ultimately, 
strategic goals of the organization.
    So we asked for input from the units themselves, from the 
major commands and the units. We also said that at the end of 
Spiral 1 we wanted an organization to be--we wanted it to be an 
entire organization it was in. For instance, Air Force Materiel 
Command or an Army unit or a Navy systems command, so that we 
did not have people everywhere.
    We exempted in Spiral 1 wage grade and NAF employees 
because they present unique challenges, and we did not want to 
try and take on all of those challenges in the first round. So 
the units came in, the organizations came in volunteered at the 
service and OSD level, we evaluated against our criteria, and 
that is how they were selected.
    The transition is one that will be managed. It is a change 
management process. It involves training. It involves mock 
payouts, if you will, so that we can tell whether or not our 
training has taken effect.
    Senator Voinovich. Have you included in your budget funding 
for training? Will it be conducted in house or with contractor 
assistance?
    Mr. Abell. The answer is, yes, sir. We are going to do 
both. The PEO's office has a modest budget and is doing 
training development. The actual execution will be done in the 
services. It is difficult to look at a budget and see the 
training lines in there because there is money in those budgets 
every year for training, and it is an O&M account, which is a 
fungible account, as you know well. So the components will pay 
for that. There is not an NSPS training line, per se.
    Senator Voinovich. Well, I would like to see in writing 
what you allocated in the budget for the training of these 
individuals.
    Mr. Abell. OK, sir. We will send that to you,
    You mentioned a communication strategy--we have also begun 
that. Ms. Lacey hosted a meeting for the commanders and the 
senior leaders of the organizations that are going to be in 
Spiral 1. Secretary England came down and spent a day with 
those folks. This began the orientation process. We have done, 
as you have heard reported here, focus groups, nd town hall 
meetings. We intend to continue that. We have command 
information programs. We have informal e-mails from the PEO's 
office out to the commands that keep them up-to-date, and we 
have a very active website that keeps everyone up-to-date.
    Senator Voinovich. What I hear is that the Department has 
not done well with that. However, once the meet and confer 
process is over, you will have more details to answer the 
questions of the employees.
    Mr. Abell. Yes, sir. We see two types of training: First, 
what we call the soft skills, which is management, change 
management, and performance management, how one does that. And 
then the second type of training does follow the more--once the 
regulations have been fluffed up with the details, that is when 
the specific HR management training can occur. So it is a two-
sided training system. We are already in the first part.
    I am just about out of my time. I think what I will do is I 
will turn this over to--well, Mr. Walker, you are probably 
going to have to answer these questions from some of the other 
Senators here. In past hearings, you highlighted the importance 
of an internal DOD infrastructure to incorporate human capital 
planning process that is integrated with its mission, develop 
the internal workforce capable to develop and implement a human 
resource system and a validated performance appraisal system. 
The real issue is, yes or no, have you watched the system 
enough that you can answer these three questions?
    Mr. Walker. What I have said, Mr. Chairman, is that we 
believe it is critically important that an adequate 
infrastructure be in place that has been designed, tested and 
where appropriate training has been provided with regard to 
that system before the additional flexibility should be 
operationalized.
    I would imagine that the Department of Defense plans to do 
that. I think it is critical that they do, if they do not, it 
will likely not be successful. But there is a lot of work that 
is going to have to be done to get them to that point. I don't 
know who their Spiral 1 entities are, but I think the other 
thing they ought to think about is there are two ways to look 
at roll-out.
    One way to look at roll-out is by organization, which is 
very vertical, and that is, obviously, relevant to consider. 
But another way to look at roll-out is horizontal, which is by 
functional area of responsibility, which cuts across a bunch of 
silos, many of which are hardened at DOD, silos such as the 
various services and other functional units, and I would hope 
they would think about the horizontal dimension as well. When 
you develop core competencies many times you will find that 
there are some that go throughout the organization, but there 
are others that very much lend themselves toward horizontal 
application across many different organizations.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Undersecretary Abell, it is good to see you again. I want 
to sincerely thank you and Mr. Nesterczuk for your efforts in 
developing a new personnel system for the Department of 
Defense.
    And, Mr. Walker, it is good to have you with us again. GAO 
has had a great deal of experience in developing and reporting 
on best practices and implementing new personnel flexibilities, 
and I truly value your input.
    Undersecretary Abell and Mr. Nesterczuk, George Washington 
said, ``The willingness with which our young people are likely 
to serve in any war, no matter how justified, shall be directly 
proportional to how they perceive the veterans of earlier wars 
were treated and appreciated by their Nation.''
    This is especially true for veterans preference in Federal 
employment. However, DOD's proposed regulations do not 
guarantee veterans preference rights in regard to the bump and 
retreat options that preference-eligible employees have.
    Is it DOD's intent to circumvent veterans preference under 
bump and retreat by offering temporary employment that is not 
guaranteed and not an appropriate intermediate step before 
subjecting a veteran to separation through a reduction in 
force?
    Mr. Nesterczuk. Senator, the veterans preference was always 
foremost in our minds in the staffing area, both on RIF and on 
the intake side in the hiring flexibilities we provided, where 
veterans preference has been fully protected. There are no 
changes to that.
    On the RIF side, we also make no changes to the 
hierarchical retention of veterans in a reduction in force. 
They get exactly the same protections that they currently do. 
The one change that we have implemented or are proposing to 
implement is to build the retention registers within each of 
these categories, veterans preference eligibles, the disabled 
veterans, and the nonveterans, within each of those categories, 
retention lists would be done on the basis of performance first 
and then seniority within the performance groupings. That is 
the one change.
    But otherwise the veterans protections are the same.
    Senator Akaka. Thank you.
    Mr. Nesterczuk, Congress intended OPM to be a full partner 
in the development and implementation of the NSPS. However, the 
regulations state that OPM may review and comment on proposed 
DOD implementing issuances, but that in cases where the 
Director of OPM does not concur with the proposed action of 
DOD, the Department may implement it anyway.
    What recourse does the Director of OPM have in cases where 
OPM does not concur with the actions of the DOD?
    Mr. Nesterczuk. On implementing issuances, we have 
permitted the Department a great deal of flexibility so that 
they can tailor the issuances to the various structures and 
organizational components of DOD. DOD is a complex 
organization.
    That is why we consciously regulated, in the areas of pay 
and performance, at the level of enabling regulations, to give 
DOD those flexibilities. We will be maintaining oversight on a 
regular basis. We do on a government-wide basis and NSPS is not 
precluded from the same oversight in the future.
    So we will be working with DOD in its application of its 
internal regulations to make sure that they comport with 
government-wide standards and the mission requirements of the 
Department. We do not anticipate any difficulties, as there is 
nothing here that we do not currently deal with in civil 
service.
    Senator Akaka. Mr. Walker, the proposed regulations allow 
pay pool managers to make final decisions for performance pay 
allocations, but there is no process to challenge this 
decision. What is your opinion of the lack of appeals? And what 
does GAO do to ensure fairness and transparency in the 
allocation of performance awards?
    Mr. Walker. First, I think any system that provides for 
additional flexibility has got to have adequate safeguards to 
prevent abuse. I think part of that includes having a 
reasonable degree of transparency with regard to the results of 
key decisions, whether it be pay, whether it be promotions or 
other types of actions, while protecting personal privacy.
    Another aspect of it is to be able to have both informal 
and formal appeal mechanisms within the organization and 
outside the organization if individuals feel that there has 
been an abuse or a violation of the policies and procedures or 
otherwise the protected rights of the individual.
    I believe that it's important, when you are talking about 
performance management, that you not just have the supervisor 
dealing with it. You have to have a reviewer look at it. You 
also have to have other institutional mechanisms within the 
department or agency. For example, the Human Capital Office, 
which is not a line organization, is a supplement, not a 
substitute, for the line, the Office of Opportunity and 
Inclusiveness, to be able to look to try to provide reasonable 
assurance that there has been consistency and 
nondiscrimination.
    And then in the end, to have reasonable transparency and 
appropriate appeal rights if people believe they have been 
aggrieved in some way.
    Mr. Nesterczuk. Can I add to that? Because it is an 
important consideration for us, too, transparency and making 
sure that there is a sense of fairness and employee buy-in. If 
employees do not think that it is fair, they are not going to 
buy in, particularly in the performance appraisal area. They 
have to buy in.
    We did build in an appeal process. There is a built-in 
administrative review, a departmental review, proposed. That is 
something that we are willing to flesh out in the course of 
meet and confer. If that is not sufficiently credible, we are 
willing to talk about that. But the idea is to have an appeal 
process in there, a review process, that lends credibility to 
the system.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Senator Voinovich. Senator Coburn.
    Senator Coburn. Thank you, Mr. Chairman.
    My questions really go back to what you have been talking 
about, and I would ask the Secretary and Mr. Nesterczuk to just 
outline--the whole basis for controversy over this is the lack 
of confidence that it is going to be handed out fairly, that it 
is trustworthy, that there will not be individual bias in the 
management above somebody, that they will use something other 
than a standard of performance and work to measure somebody's 
performance in the long run, which, i.e., will become their 
basis for earning a living--outline for me, both in a positive 
sense and a negative sense, the steps that are in the 
implementation of this that will assure the employees of DOD 
that you are going to build the confidence into the system, so 
that they know that their questions and their openness to abuse 
is going to be answered.
    I would like for you to just detail that. I think that will 
give us--and thinking, put their hat on for a minute, and if 
you were in that position, what would you like to see in terms 
of fairness. And I would like for you just to summarize 
quickly, if you would. I will not have any other question. Here 
are the positive things that we are doing to assure that. Here 
are the penalties if somebody violates that. In other words, 
just go through it, if you would, in a systematic fashion, to 
list both the positive and negative incentives that are in this 
system that will assure people who work for DOD that they are 
going to have a fair system.
    Mr. Abell. I will start, sir, and then I will defer to my 
colleague.
    This whole system, as many have said, is predicated on 
being credible and being respected. And we will demonstrate, 
through communications, and our actions, and our regulations, 
to the workforce that all the safeguards that they would want 
are there. They are going to participate in the training. They 
are going to participate in the setting of their goals, their 
performance standards, and they will participate in the 
quarterly or semi-annual evaluations with their supervisors.
    The supervisor's decision is not one of total discretion. 
It is reviewed by a board of the supervisor's peers. The 
supervisor's pay raises are contingent upon the success of the 
work unit and not his personal production or performance, so it 
is the supervisor's incentive to have his work unit do well. 
Thus, he would be incentivized to reward those who perform. And 
the overriding thing I think is that the Department of Defense 
is an institution that values, cherishes, demands success, and 
success only comes from a cohesive workforce. So those are the 
positives.
    The negative incentives, if you will, there will be, there 
is, accountability at all levels. Our commanders watch our 
supervisors. Our supervisors watch those managers below them. 
It is an open process. It is transparent. There are avenues for 
those who feel they have not been treated fairly, and our union 
partners are, also, watching, helping us identify areas where 
we need to do better.
    Mr. Nesterczuk. Although the proposal for the NSPS is a new 
personnel system, and there is a lot of newness about it in the 
pay-for-performance system and some of the classification 
system changes. Yet from an employee's perspective, their 
rights, their rights to contest any of the processes or 
procedures really don't change. The prohibited personnel 
practices have not changed. So, if there are any decisions that 
are arrived at in the course of NSPS on pay, on performance, on 
adverse actions that an employee feels are not fair or not 
right, whether it is nepotism, favoritism, political 
performance, whatever, none of those have changed.
    So the safety net, from an employee's standpoint, is that 
the avenues for appeal are still the same, and those are 
familiar to them.
    Senator Coburn. So that means, if I am an employee at DOD, 
and I outperform and I produce, I am going to make more?
    Mr. Nesterczuk. Yes.
    Senator Coburn. I am going to hold you all to that because 
that is the only way this works for those employees. You cannot 
say here is the carrot and not give the carrot.
    Mr. Walker.
    Mr. Walker. Senator, a couple of comments.
    First, if the system is not credible, it won't be 
effective. You have properly pointed out the need to balance 
flexibility with safeguards to prevent abuse.
    The other thing I think we have to keep in mind is there is 
nothing probably more complex and controversial in the human 
capital area as classification and compensation issues. These 
are the closest to the bone you are ever going to get in any 
organization. We have to keep in mind where we are coming from 
as well.
    Right now, we have an overly complex, very hierarchical 
classification system that also includes compensation ranges 
that, in many cases, are not reflective of the current market.
    Second, we have a system whereby, for a typical Executive 
Branch agency, 85 percent-plus of the pay raises have nothing 
to do with skills, knowledge, and performance.
    They are on autopilot. So, by definition, that means to the 
extent that you end up moving to a system that is more market 
based and performance oriented, that is a huge change. And to 
the extent that it involves more management discretion and more 
meaningful performance appraisal systems, there is 
understandable apprehension. If there is not trust in 
management, if there is not an understanding of the system, if 
there are not adequate safeguards and transparency mechanisms, 
you are going to have big problems.
    They are at the beginning of a long road, and one of the 
things that has to happen is for the meet-and-confer process to 
be meaningful, for a lot of these details to be worked out 
because these details do matter. DOD needs to continue to take 
this in a phased approach, learning as they go along to be able 
to continuously improve as they move forward.
    Senator Coburn. Thank you, Mr. Chairman.
    Senator Voinovich. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you, Mr. Chairman.
    I would like to go right to that issue of employee 
confidence, credibility, acceptance, and apprehension. Before 
you have even gotten to the proposal in the draft regulation 
before us, we have a pay-for-performance issue which is very 
current.
    We have a law that says that performance has got to be the 
basis for pay increases, and yet on July 12 of this year the 
director of administration and management, in the Office of the 
Secretary of Defense, directed across-the-board pay raises of 
2.5 percent, which is the maximum increase allowable for senior 
executives who are political appointees. For nonpolitical 
senior executives who got the same performance rating, they get 
a 2-percent pay increase.
    Now, on February 4, Senators Warner, Collins, Lieberman, 
and I wrote Secretary Rumsfeld, pointing out that the decision 
to use the career or noncareer status of an employee as a 
factor in the awarding of a pay raise is inconsistent with the 
law and with the Department's stated intent to pay employees on 
the basis of performance. We asked the Secretary to take 
appropriate steps to ensure that the pay raise for DOD senior 
executives is implemented in a manner that is consistent with 
the requirement of law and policy, but the Department has not 
yet taken those steps.
    So, Mr. Abell, are you going to take those steps or not?
    Mr. Abell. Senator, we are going to take those steps. It is 
prospective at this point. We have a performance plan that is 
currently with our colleagues at OPM, SES performance plan with 
OPM, that will comport with the spirit and intent of the law 
for performance management for our Senior Executive Service 
going forward. We anticipate that we----
    Senator Levin. ``Going forward'' is not enough. We have a 
law that is in place now----
    Mr. Abell. Yes, sir.
    Senator Levin [continuing]. For current pay increases. Why 
is that law not being abided by? And why would employees have 
confidence in the future in your pay-for-performance proposal, 
when you have got a law now that says performance has got to be 
the basis for pay increases, but you have a 2.5-percent across 
the board for political senior executives and 2 percent for 
nonpolitical senior executives. Why does that engender 
confidence, and why is it legal?
    In other words, not just promises about what you are going 
to do in the future. You have got an existing law, why is that 
not being abided by? Why are not this year's pay increases 
based on that law and on the same premise and principle that 
you just laid out for the future?
    Mr. Abell. The January sequence of events, the performance 
evaluation was based on a legacy system, an old system, that 
was, essentially, a pass/fail system--is, essentially, a pass/
fail system. The DOD general counsel has reviewed the actions 
that were reported in the letter from the director of 
Administration and Management and has opined that they were 
legal. I am not a lawyer. I do not practice law in the 
Department of Defense, so I leave that to the general counsel, 
but that is a report from there.
    Senator Levin. Putting aside the law, is it a coincidence 
that every political appointee gets a 2.5-percent increase and 
the nonpolitical appointees get 2 percent? Is that a 
coincidence for the same performance improvements?
    Mr. Abell. Sir, as I recall, the director of Administration 
and Management letter, the noncareer folks could fall into a 
category of 2.5, 2.3, or 2--I am recalling that off the top of 
my head--depending, again, on how their performance was rated.
    The noncareer folks were rated as well. Their performance 
was evaluated, although not in the same system as the career 
SES, and that was the basis for those decisions.
    Senator Levin. Are you saying there was individualized 
appraisal of the noncareer employees? Mr. Abell, you are 
proposing a system here which is based on an important premise. 
You are not living by that premise right now, despite the law's 
requirement that you abide by the pay-for-performance rule now.
    There are a lot of other issues that these regulations 
raise, and my time is almost up, but I have to tell you it goes 
right to the heart of questions which have been raised here--
pay-for-performance. You are not abiding by the current law. 
Why would people have confidence that the discretion which is 
being given is going to be used fairly, when it is not being 
used fairly right now under current law? It is not being used 
individually. It is a pattern. It is based on your political or 
nonpolitical appointment status.
    I think, and this is a letter which the Chairman of this 
Subcommittee, the Ranking Member of this Subcommittee, Senator 
Warner and I have raised with the Department. It seems to me we 
are entitled, and more importantly the people of the United 
States and the employees are entitled to an answer on a very 
fundamental question which has been raised by this letter. And 
it is not good enough to simply say the lawyers have approved 
it.
    I hope you would reconsider it because it goes to the heart 
of what you are proposing here.
    My time is up, Mr. Chairman, unless he wants an opportunity 
to respond.
    Mr. Abell. Senator, I understand. I will report your 
concern about not responding to the letter. I am sure the 
Secretary will give you a comprehensive response.
    Senator Levin. Thank you.
    Mr. Walker. Senator Levin, we have not been asked to look 
at this issue from a legal standpoint, but as you know, 
yourself and others being lawyers, the law represents the 
minimum standard for acceptable behavior. You do not want to 
just do what is arguably legal, you want to do what is right, 
and, hopefully, you will get a response.
    Senator Voinovich. Senator Pryor.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Mr. Chairman.
    Mr. Walker, I want to ask you just a big-picture question. 
And that is, in the 107th Congress, we acted to create a new 
personnel system for the Department of Homeland Security, and 
that was created through legislation. Last year, Congress 
passed legislation that allowed fairly significant changes in 
the DOD personnel system. Are we getting to the point where it 
no longer makes sense to go through this agency-by-agency, that 
we ought to look more globally at our civil service system 
across the board? I would like to hear your comments on that.
    Mr. Walker. I do think that, ultimately, the Congress is 
going to want to look at the entire civil service system 
because what has happened over the years is that we now have a 
situation where, through the individual initiatives of various 
departments and agencies, and in the interest of full and fair 
disclosure, including GAO, over 50 percent of the Federal 
workforce is now covered by new systems, systems that provide 
for broadbanding, that provide for more market-based and 
performance-oriented compensation systems, that, also, provide 
for certain other flexibilities.
    I think over time we are going to need to try to make sure 
that there is more consistency throughout the Federal 
Government. By that I mean not that there should be one 
broadbanding system or one pay-for-performance system, but that 
these types of flexibilities apply broadly throughout 
government. I think it is very important that we make sure that 
certain values, certain principles, and certain safeguards 
should apply throughout the Federal Government in order to 
maximize the chance of success and minimize the possibility of 
abuse.
    Senator Pryor. So do you think we ought to continue going 
agency-by-agency or even department-by-department or is it time 
now to really look at the entire system collectively?
    Mr. Walker. I think, at a minimum, you need to look at what 
type of principles and safeguards should be in place throughout 
the Federal Government. These can serve to provide the glue 
that binds us together and can help to provide reasonable 
assurance that any flexibilities that exist would be both 
effective, credible, and nondiscriminatory.
    Senator Pryor. Mr. Abell, in your opening statement you 
said, ``We,'' meaning the Department of OPM, ``We take this 
task seriously and recognize the responsibility we have to 
balance our vital national security mission with protecting the 
interests of the people.''
    I am curious about that statement. Could you explain some 
specific instances in the past where you believe the 
``interests of the people'' have differed from the ``national 
security mission'' of the Department.
    Mr. Abell. Senator, as the many instances of testimony over 
the proposal to approve the National Security Personnel System, 
this type of question came up over and over again. And I think 
the answer is that, moving forward, we do not want to do that. 
We do not want to have one get out of balance with the other. I 
do not think that implies that it is currently out of balance--
--
    Senator Pryor. Or it has been out of balance in the past.
    Mr. Abell. Or it has been out of balance. As I said earlier 
to Senator Coburn, it is an organization that does succeed, the 
Department of Defense is. Failure is not an option, and so our 
employees, and our managers, and our commanders collaborate to 
make sure that occurs.
    Senator Pryor. Yes, I heard your answers to Senator 
Coburn's questions, which I thought were very good questions. 
Maybe I misunderstood that sentence or that phrase from your 
opening statement, but I wanted to just clarify, for the 
Subcommittee's purposes, that you are not saying that it has 
been out of balance in the past.
    Mr. Abell. No, sir, I am not implying that is a change.
    Senator Pryor. Now, Mr. Abell, my understanding is that 
performance expectations are not required to be put in writing; 
is that right?
    Mr. Abell. No, sir, that is not correct today, and it will 
not be correct in the new one. Supervisors and employees will 
sit down together. They will lay out at the beginning of a 
performance cycle, an evaluation cycle, what the objectives 
are, what the standards are. There will be periodic reviews 
during that cycle, and then at the end of the cycle will be the 
evaluation.
    Senator Pryor. I am just asking how is that going to be 
documented? Is all of this required to be in writing?
    Mr. Abell. Yes, sir. There will be instances during the 
evaluation period where changes occur, as mission changes, as 
production needs change. It depends on the organization. Not 
all of those may be necessarily in writing, but the initial one 
certainly would.
    Senator Pryor. Well, my experience in matters relating to 
personnel in my private law practice or as the attorney general 
of my State, is that it is important to be consistent. And you 
are probably much better off in the long term to take the time 
to get as much in writing as possible because people's memories 
get hazy over time, and they have different understandings of 
what was said or what was implied. So I would think that the 
Department needs to try to make sure they have a good, concise 
way to document this, otherwise I think you are asking for 
trouble.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Pryor.
    I am going to have a short 2-minute question period.
    I hope that you are tracking what the Department of 
Homeland Security is doing in designing their personnel system. 
Please clarify for me why some aspects of the NSPS rules will 
be different from those at the Department of Security. For 
example, the Homeland Security Labor Relations Board has a 
process for participation by the unions in selecting the 
members of the Board. From my pespective, the Defense 
Department needs a good reason for differences between its 
personnel system.
    The other question I have concerns certification of NSPS. 
For more than 300,000 employees to be covered by NSPS it has to 
be certified. Who is going to certify the system. Is that the 
Office of Personnel Management, Mr. Nesterczuk?
    Mr. Nesterczuk. We have talked to the Department about 
that. We will set up some evaluation criteria. The PEO is in 
the process of doing that, setting up an evaluation program as 
part of the implementation. We will work with them on that, and 
we will help them achieve that certification.
    Senator Voinovich. I am going to be very interested in 
making sure that process--I want to understand what it is, I 
want to know what the metrics are and so on because 300,000 is 
a lot of people, but at least we have got an opportunity then 
to go back and review how the system has worked.
    Senator Levin. Thank you, Mr. Chairman.
    Mr. Abell, as you know from your past experience, the 
Senate Armed Services Committee has had a lot of dealings with 
a broad range of actions that are taken in personnel actions 
involving military personnel. These issues come up in the 
context of confirmation hearings for senior officers, and we 
see cases that range from misuse of government property, abuse 
of authority, to drunken driving, to retaliation against 
whistleblowers. Nonetheless, even in those cases where there 
are shortfalls, human failings, we have officers that are 
recommended for promotion and, as far as I am concerned, 
rightly so.
    I do not need to tell you, because of your experience, just 
how many letters we get from the Department that will identify 
an offense committed by a nominee, but reach a conclusion that 
it was an isolated incident in that officer's career, and it 
should not preclude promotion to a higher rank. But the draft 
regulation provides that a proposed penalty against a DOD 
civilian employee may not be reduced on appeal unless ``the 
penalty is so disproportionate to the basis for the action as 
to be wholly without justification.''
    And even in those cases where the penalty is reduced, the 
draft regulation states that ``the maximum justifiable penalty 
must be applied.''
    That is pretty draconian, and it is not consistent with the 
promotion policy for our uniformed military officers. For 
instance, the draft regulation does not even allow the 
reviewing authorities to take into account a lot of factors 
that could reduce the penalty, such as the employee's past 
record, whether the offense was intentional or inadvertent, 
consistency of the penalty with those imposed on other 
employees for the same or similar offenses. Instead, it just 
simply says that the MSPB--the Appeal Board--should apply ``the 
maximum justifiable penalty.''
    Now, would it not make more sense to recognize, in the case 
of DOD, civilian employees, as we do for senior military 
officers, that there is a whole range of penalties that may be 
appropriate for a given offense, depending on its context? And 
should not the regulations reflect the full range of factors 
that could be considered in determining an appropriate remedy?
    Mr. Abell. Sir, I believe that you are referring to what 
prerogatives accrue to an administrative judge who is reviewing 
an appeal, MSPB administrative judge. And it is true that the 
proposed regulations would limit the administrative judge's 
ability to mitigate the punishment. He may--he or she--may 
recommend mitigation back to the Secretary of Defense, but does 
not have, under our proposed regulations, the ability to direct 
that mitigation.
    I think that is entirely consistent with the military side 
that you described in that the military side is done solely 
within the Department of Defense. All of those same leaders and 
those same concerns for due process exist prior to the case 
getting to the administrative judge, and then the 
administrative judge sends back his findings to the Secretary, 
who again can review it and take one of three actions, as I 
understand it.
    Senator Levin. Is the DOD allowed to consider those factors 
or must the maximum justifiable penalty be applied? This is not 
a question of whether it is a recommendation or not. This is a 
question of whether or not the maximum justifiable penalty has 
to be applied or whether you can take into consideration, 
whoever makes that final decision, the full range of factors 
which are normally considered in employment cases, whether it 
is promotion or punishment.
    Mr. Abell. Senator, my understanding of the regs is that 
they are not intended to direct a supervisor, manager or 
commander to employ the maximum penalty possible. If it says 
that, we will review it and look at it.
    Senator Levin. But the MSPB, on its decision, must do that.
    Mr. Abell. Yes, sir. The ability of the MSPB to change the 
finding of the leadership of the Department of Defense from the 
individual through the Secretary is limited, and that is to 
consider the national security mission and the impact on the 
national security mission, but that does not imply that the 
line of supervision from the individual through the Secretary 
is somehow limited.
    Mr. Nesterczuk. Let me make a comment here, if I may, 
Senator, since we had some input on this as well.
    Our concern was that the statute permits the Department to 
establish new standards in the area of appealing decisions. The 
reason is there are many instances of AJs second-guessing 
first-line managers who make a penalty decision in the context 
of mission, in the context of operational requirements. 
Managers are subsequently second-guessed in an entirely 
different context, may be based on the AJ's experience with an 
agency with a less-vital mission, where a similar transgression 
could call for a less-severe penalty.
    So this is an attempt to give more weight to the mission 
requirements of the Department, the operational needs of the 
Department, in achieving----
    Senator Levin. You can give presumptive weight. You do not 
have to direct that an appeal body apply the maximum 
justifiable penalty. You can give a presumption to a decision 
without being this inflexible, rigid and draconian on the 
appeal of that decision.
    Thank you, Mr. Chairman.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Senator Pryor can go first.
    Senator Voinovich. Any other questions, Senator Pryor?
    Senator Pryor. No questions.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Following on Senator Voinovich's question, and this is to 
Undersecretary Abell, the proposed regulations state that the 
internal National Security Labor Relations Board will 
consistent of members selected by the Secretary, except for one 
appointed by the Secretary upon consultation with OPM.
    Why have Federal employees been left out of this process?
    Mr. Abell. Senator, there are a number of ways that we 
could have done this. As Senator Voinovich points out, DHS used 
a different model. This is something that we can, and will, 
review during the meet-and-confer process, but this is the 
model that we selected to put in our proposed regulations.
    Senator Akaka. Undersecretary Abell, the regulations state 
that DOD will issue implementing issuances on premium pay and 
compensatory time, including compensatory time off for travel. 
As author of the new governmentwide compensatory time for 
travel provision, I am interested in learning what changes DOD 
plans to make to this provision, and what are some changes 
being considered to the compensatory time for travel provisions 
of Title 5?
    Mr. Abell. Senator, I do not know that we have any changes 
to that in mind at this point.
    Senator Akaka. Let me, also, follow up on the line of 
questioning of Senator Levin. Could you provide us with 
examples of AJs disregarding agency mission.
    Mr. Abell. Yes, sir. I have several here if you would like 
them or I can give them to you for the record, whichever way 
you choose.
    Senator Akaka. Thank you very much. For the record is fine. 
, Mr. Chairman, my time has expired.
    Senator Voinovich. Obviously, there are a lot more 
questions. We will submit them for the record and give you an 
opportunity to answer them.
    We thank you very much for the work that you have put into 
this. Mr. Walker, thank you for staying on top of this whole 
area. We hope that the period that the meet and confer process 
will be fruitful. I am glad, Mr. Abell, you said that you would 
be willing to extend it beyond the minimum 30 day requirement, 
as was the case with the Department of Homeland Security. It is 
really important that the regulations be vetted and everybody 
feels that they have had an opportunity to discuss concerns. So 
I hope you remain committed because I think the commitment of 
senior leadership will determine whether or not NSPS is going 
to be successful.
    Thanks very much.
    Mr. Walker. Thank you, Senator.
    Senator Voinovich. Testifying in our second panel is 
Richard Oppedisano, the National Secretary of the Federal 
Managers Association. Testifying on behalf of the United DOD 
Workers Coalition are John Gage, President of the American 
Federation of Government Employees, and Gregory Junemann, 
President of the International Federation of Professional and 
Technical Engineers.
    Thank you for coming. I know that all of you have invested 
much time and energy on this issue. I also know that you have 
many concerns, and I look forward to your testimony.
    If you will all stand, I will swear you in.
    [Witnesses sworn en masse.]
    The record will indicate that the witnesses answered in the 
affirmative.
    We will begin with Mr. Oppedisano.

TESTIMONY OF RICHARD OPPEDISANO,\1\ NATIONAL SECRETARY, FEDERAL 
                      MANAGERS ASSOCIATION

    Mr. Oppedisano. Thank you, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Oppedisano appears in the 
Appendix on page 106.
---------------------------------------------------------------------------
    Chairman Voinovich, Ranking Member Akaka, and Members of 
the Subcommittee, I sit before you today as the National 
Secretary of the Federal Managers Association, FMA. I was 
recently retired as the chief of staff and the operations 
officer for the U.S. Army Watervliet Arsenal in Watervliet, New 
York. I have been involved in human resource management and 
labor relations for the better part of my 30 years of Federal 
civil service before retiring last May. On behalf of the nearly 
200,000 managers, supervisors, and executives in the Federal 
Government whose interests are represented by FMA, I would like 
to thank you for allowing us to express our views regarding the 
proposed personnel regulations outlining the National Security 
Personnel System, NSPS, at the Department of Defense.
    Managers and supervisors are in a unique position under the 
final regulations. Not only will they be responsible for the 
implementation of the Department's new personnel system, but 
they will also be subjected to its requirements. As such, 
managers and supervisors are pivotal to ensuring the success of 
the 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 on-the-ground functions of the civilian DOD 
workforce.
    The proposed rules that were provided in the Federal 
Register were not all-inclusive. The proposal indicates that 
detailed instructions will be provided in DOD's implementing 
regulations. Without these detailed regulations, it is 
difficult to have a complete understanding of the regulatory 
requirements. Therefore, we recommend that the implementing 
regulations be made available for review and comment prior to 
being issued as final.
    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 an intensive training program 
and budget proposals that will lend credibility to the intent 
of the new personnel system. We, also, need the consistent 
oversight and appropriations 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 be 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 critical that this happens in 
the implementation of these regulations. Training of managers 
and employees on their rights, responsibilities and 
expectations, through a corroborative and transparent process, 
will help to allay concerns and create an environment focused 
on the mission at hand.
    Managers have often been given additional authority under 
the final regulations in the area 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 cannot do 
this alone, cooperation between management employees must be 
encouraged in order to debunk myths and create a performance 
and a results-oriented culture that is so desired by these 
final regulations. Managers have also been given greater 
authority in the performance review process that more directly 
links employees' pay to their performance. We believe that 
transparency leads to transportability, as interdepartment drop 
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 
regulated 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 
maintaining a cooperative and congenial work environment. Title 
5 CFR 251 and 252 allows FMA, as an example, to come to the 
table with DOD 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 
critical to its long-term vitality.
    There has also been a commitment on the part of OPM, DOD 
and DHS to hold close to merit systems principles, and we 
cannot stress adherence to these timely standards enough. 
However, we also believe that there is a need to be additional 
guiding principles that link all organizations of the Federal 
Government within a framework of a unique and a single civil 
service. OPM should take the current systems being implemented 
at DOD and DHS and create a set of public principles that can 
be guided for all other agencies and their efforts to develop 
new systems--systems that parallel one another to allow for 
cross-agency mobility and evaluation instead of disjointed ones 
that become runaway trains.
    We, at FMA, are cautiously optimistic that the new 
personnel system at DOD 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 systems roll-out, 
the willingness of OPM and DOD to reach out to employee 
organizations such a FMA is a positive indicator of cooperation 
and transparency.
    We look forward to continuing to work closely with the 
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 important 
matter. Should you need additional feedback or have any 
questions, we will be glad to offer our assistance.
    Senator Voinovich. Thank you very much. Mr. Gage, welcome 
back. It is nice to see you, again. I compliment you on 
developing a union coalition, on whose behalf you are 
testifying today. I understand there are 27 unions in the 
coalition?
    Mr. Gage. I think there are 36 unions.
    Senator Voinovich. I stand corrected. I thought that I had 
a lot when I was mayor of Cleveland. We had 27.
    Mr. Gage. That does not make it easier. That is for sure.
    Senator Voinovich. We look forward to your testimony.

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

    Mr. Gage. Thank you, Mr. Chairman and Members of the 
Subcommittee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gage appears in the Appendix on 
page 126.
---------------------------------------------------------------------------
    I want to focus my remarks on the broad outline of a pay-
for-performance scheme that was included in the proposed NSPS 
regulations. Our unions' objections are detailed in our written 
testimony and formal comments in response to the February 14, 
2005 Federal Register notice.
    Today, I want to emphasize that DOD's proposed pay system 
is nothing more than an elaborate and costly mechanism to 
reduce salaries and salary growth for the vast majority of DOD 
workers. It is interesting to note that in response to the 
outpouring of workforce opposition to NSPS, DOD has launched an 
effort to convince its employees that they will do better under 
the new system. They are trying to sell it as market-sensitive 
pay rather than performance pay. But our members seem to know 
that no matter what name is attached, the NSPS is no more about 
market sensitivity than it is about performance. It is not 
about improving their pay.
    After all, the general schedule and locality pay component 
are both supposed to be market-based system. The GS is supposed 
to combine periodic performance-based raises called within-
grade increases with market-based adjustments to the entire 
schedule. FEPCA's locality raises are, also, supposed to be 
entirely market-based. Likewise, blue-collar Federal employees 
are supposed to receive market-based prevailing rates, but 
neither the GS nor the blue collar FWS system ever actually 
uses the market data because of budget constraints.
    DOD's scheme, whether it is market sensitive or market 
based, does not even promise market rates on paper. Instead, it 
admits that budget neutrality will be the primary principle 
guiding pay raises. Despite the fact that DOD has not revealed 
anything close to the detail necessary to evaluate its plan 
properly, we know enough to be strongly opposed to it as both a 
tremendous waste of time and money and a guaranteed way to 
introduce corruption, cronyism and chaos into a workplace that 
should be focused on national security and troop support.
    First, no one whose performance is judged fully 
satisfactory will receive any raise at all unless DOD decides 
to adjust the bottom-most level of his or her pay bands. DOD 
will be able to use any one of numerous factors to justify a 
decision not to raise the bottom of the pay band, factors that 
will include, but not be limited to, its own interpretation of 
data it buys from consultants. One year it might refuse to 
adjust the bottom because its consultants say it is not 
necessary. Another year it might refuse to adjust the bottom 
because it is not recruiting at the entry level and, thus, 
there is no need to make any adjustment. Any reason will do.
    But in the meantime, when entry rate is frozen, every other 
rate in the band will be frozen as well. And it is my suspicion 
that the market rate will be used to lower entry rates rather 
than to raise them. Movement within a band, a so-called 
performance raise, will be worth less and less in terms of 
purchasing power if the rates are not adjusted due to a freeze 
on the entry level.
    These performance raises will also be a moving target. Even 
if your supervisor recommends you for a raise based on your 
performance, you end up competing against everyone else whose 
name is placed in that performance pay pool. Whether you are a 
winner or a loser in that contest has nothing to do with 
performance. It will be all about which component is a priority 
that year, and there will be no uniformity regarding the size 
of a performance raise. An employee rated outstanding in one 
place may get 2 percent, while another working elsewhere, with 
the identical job and an identical outstanding rating, might 
receive 1 percent or nothing at all.
    An individual's performance rating in the DOD scheme will 
be a crucial factor in deciding salary level, salary 
adjustments and vulnerability to reduction in force. However, 
in the proposed regulations, these evaluations will not be 
subject to challenge through the union's negotiated grievance 
and arbitration process. This last is perhaps the system's 
fatal flaw. DOD management has decided to base the two most 
critical aspects of an employee's job--his pay and whether he 
keeps his job in the face of RIFs--on his performance 
evaluation. Yet it is not willing to allow those evaluations to 
be held up to scrutiny by an impartial third party. It is not 
willing to require that the documentation justifying a 
performance evaluation be made available to the employee and 
not willing to let the employee have a real opportunity to 
challenge the evaluation. This absence of accountability on the 
very mechanism that DOD intends to place at the heart of its 
new personnel system makes a mockery of its promise to uphold 
the merit system principles and is simply not credible.
    If employees cannot appeal performance ratings to an 
impartial third party, how will they or the public know that 
salaries in the Defense Department are based upon factors other 
than politics? If employees cannot appeal performance ratings 
to an impartial third party, how will they or the public know 
that getting or keeping a job in the Defense Department is 
based upon who you know, rather than what you know. There will 
be no way to verify this. The hubris on the part of the DOD 
will doom its system. The only question is how much damage will 
be done before the scandals amount to such a level that 
Congress is forced to enact new legislation that constrains the 
power of the Agency to act without accountability to any 
outside authority.
    Pay-for-performance schemes, even those not plagued with 
the DOD's fatal flaws, have never been shown to deliver 
improved performance in either the public or the private 
sector. Indeed, they do not improve performance of either 
individual workers or organizations. And unless substantial 
additional resources are made available to fund pay-for-
performance, these schemes inevitably end up lowering pay for 
the majority of workers and diverting enormous resources to 
bureaucracies rather than mission.
    Professor Jeffrey Pfeffer of Stanford University's School 
of Business summed up the research on pay-for-performance by 
saying that it eats up enormous amounts of managerial resources 
and makes everyone unhappy. Thank you, Senator.
    Senator Voinovich. Thank you, Mr. Gage. Mr. Junemann.

 TESTIMONY OF GREGORY J. JUNEMANN,\1\ PRESIDENT, INTERNATIONAL 
       FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS

    Mr. Junemann. Thank you, Mr. Chairman. I would like to 
thank the Subcommittee of the Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
for holding today's hearing. I would also like to extend a 
special note of appreciation to Chairman Voinovich and Ranking 
Member Akaka for giving me the opportunity to testify here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Junemann appears in the Appendix 
on page 140.
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    Before I begin my personal remarks, I would like to join my 
good friend John Gage in submitting the official record of the 
comments of the United DOD Workers Coalition, the UDWC, of 
which IFPTE is a member. The document represents the official 
testimony of the UDWC, a coalition of 36 unions working 
together on this NSPS issue. I would like to directly associate 
myself with the UDWC document, which was delivered to this 
Subcommittee last week.
    Although I would be happy to engage in discussion on pay-
for-performance, I will restrict my remarks to the Department's 
regulation subparts on appeals and labor relations. The 
features of these two sections are critically important if we 
want to preserve fairness and equity for the civilian workforce 
of the Department of Defense and the accountability of 
management. The Department has insisted that it requires 
flexibility in its personnel system, and this is necessary to 
better our Nation's security. But so far we have seen no 
evidence that this system, despite its title, was developed 
with our national security in mind.
    DOD states that the current appellate system is complex, 
legalistic and slow. But gutting the current personnel system 
and effectively starting over simply will not work.
    First, it strikes at the heart of a system of justice that 
is crucial to assuring employees that they work in an 
environment where their side of the story can be heard and not 
ignored.
    Second, in some ways, it will not streamline the system, 
but will make it more complex.
    Finally, it will push good employees out of government 
service and discourage qualified employees from applying.
    At every juncture in these regulations, the Department is 
seeking to avoid being held to any objective standards. Even 
third parties, like the Merit System Protections Board, are 
required to afford DOD great deference in interpretation of 
these regulations. This creates an entirely new legal standard 
which an established body of law, under MSPB, already exists 
and is yet another loophole for managers to escape 
accountability for their actions.
    DOD has not even provided evidence as to why MSPB's 
authority to provide impartial review should be usurped. We do 
not think it is required to protect our Nation's security 
since, under the current personnel system, separation or 
removal already may be effective rapidly, if in the interests 
of national security.
    Finally, DOD claims that the complexity of the existing 
system deters managers from taking the necessary action against 
poor performers and those engaged in misconduct. We have long 
maintained that the proper training and resource management 
within the existing personnel system would allow managers to 
maintain discipline, ensure efficiency and good performance, 
while maintaining fairness and esprit de corps within the 
workforce. Certainly, it would be cheaper than creating an 
entirely new and untested system.
    As to the issue of labor relations provisions the goal of 
the Department says it seeks to accomplish may be achieved, as 
it has always been, by the continued adherence to the 
provisions of Chapter 71 of Title 5. The Department has not 
pointed to a single instance in which the Department has ever 
failed to carry out its mission swiftly and authoritatively due 
to the existence of Chapter 71 requirement.
    Congress provided the Department with new tools to increase 
efficiency, bargaining above the level of bargaining unit 
recognition and new, independent third-party review of 
decisions. The Department needs only to use these new tools 
properly and train managers and supervisors properly to use the 
authority that the current law provides.
    Despite the plain meaning of the statute, the Department is 
attempting to eradicate existing labor law protections. Again, 
the sole purpose appears to be avoid accountability not to 
protect national security. The regulations drastically limit 
the subjects of bargaining, expand management's right to act 
unilaterally and to restrict and/or eliminate the rights of 
employees.
    By far, the most outrageous feature of Subpart 1 of the 
regulations is the creation of what can only be described as a 
kangaroo labor board, the National Security Labor Relations 
Board. Board members are to be appointed by the Secretary and 
will essentially replace the Federal Labor Relations Authority, 
which just celebrated 25 years of success in the Federal labor 
relations business.
    In conclusion, every successful civil service system 
ensures a few basic critical concepts--flexibility, yes, but 
also fairness, consistency, and accountability. The Department 
has taken a straightforward mandate from Congress and abused 
it. It has reserved for itself a great deal of flexibility 
while shedding accountability and fairness.
    We strongly urge Congress to step in. Any new personnel 
system should preserve, at the very least, the following 
attributes:
    It should provide, as does the current system, for a choice 
between Merit Systems Protection Board and negotiated 
grievance/arbitration procedures for all serious adverse 
actions.
    It should provide impartial review of labor relations 
disputes by an independent entity like the Federal Labor 
Relations Authority. We recommend that the FLRA's current role 
be preserved in its entirety.
    It should, as the law requires, protect the due process 
rights of employees and provide them with fair treatment.
    Employees must have the right to a full and fair hearing of 
adverse actions appeals before an impartial and independent 
decisionmaker, such as an arbitrator or MSPB.
    DOD should be required to prove, by the preponderance of 
evidence, that adverse actions imposed against employees 
promote the efficiency of the service.
    An impartial and independent decisionmaker must have the 
authority to mitigate excessive penalties.
    This concludes my remarks, Mr. Chairman, and again thank 
you.
    Senator Voinovich. I would like to thank the panel for your 
testimony.
    Senator Warner. Mr. Chairman, would you indulge me, I have 
a remark or two?
    Senator Voinovich. Senator Warner, of course, I will.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. Thank you very much. I conducted a hearing 
of the Armed Services Committee this morning, otherwise I would 
have attended the session from the beginning.
    Mr. Chairman and Members of the Subcommittee, I was 
privileged to serve over 5 years, 4 months, and 3 days in the 
Department of the Navy during some of the most intense years of 
Vietnam, and I saw an almost seamless working relationship 
between a civilian component of the Department of the Navy and 
a uniform component of Naval and Marine Corps officer and men 
and women. And it was magnificent in that very stressful and 
difficult period in our history. And unlike other departments 
and agencies of the Federal Government, there is an 
extraordinary camaraderie between these two groups of 
individuals.
    And while I do not pretend to know all of the specifics of 
this, I would urge that this Subcommittee and, indeed, the 
Congress carefully evaluate the honest, forthright petitions 
that have been presented to us this morning by both panels and 
see whether or not we can reconcile the differences in such a 
way as to even make a stronger team--and certainly I will speak 
for the Department of Defense at this time--between the uniform 
and civilian individuals.
    I thank each of you for your contributions today.
    I might add, at that time, I had over 600,000 in the 
Department of the Navy, alone, of civilians, and many of them 
were taking risks commensurate with the men and women of the 
Armed Forces in the far-flung places of the world. I thank the 
Chairman.
    Senator Voinovich. Thank you, Senator Warner.
    Mr. Gage, I heard your testimony with respect to 
performance evaluations. You said that they do not make a 
difference. From my own personal experience, performance 
evaluations make a difference in the performance of employees. 
I was mayor of the City of Cleveland for 10 years, and I was 
governor of Ohio for 8 years, and I can assure you that it does 
make a difference if undertaken in a proper way. I think that 
Mr. Walker's testified that 85 percent of the employee pay 
currently is on auto pilot.
    For example, I will never forget having dinner one night 
with one of our ambassadors. His wife and I talked about 
Federal workforce issues. She told me that she had 15 workers. 
She had five superperformers, five that were pretty good, and 
five that are not performing. They all earned the same pay, and 
she saw how it was demoralizing to the people that are doing a 
better job.
    Second, Mr. Oppedisano discussed training. I agree with 
your concerns. I think you heard the question I asked of Mr. 
Abell regarding the Department's budget for training. I would 
like to hear your view of the Department's training budget. 
Also, the Defense Department has operated alternative personnel 
systems for 25 years.
    Are you familiar with any of those, Mr. Oppedisano?
    Mr. Oppedisano. You are probably referring to China Lake. 
More than likely you are talking about the Naval China Lake 
program.
    As you stated before, sir, the monies that are going to be 
necessary for training, we honestly feel that there should be 
an appropriate line item for actual NSPS training. If it is 
not, there is no guarantee that the individual installations 
are going to receive the monies to be able to do the training 
for their managers and their employees. And without that proper 
training, there is no way that the system is going to be 
successful. There is going to be no credibility on either side 
of the aisle, without both of those parties sitting down 
together and saying, ``OK. This is how we work it out.'' And 
without the proper funding, it is not going to happen, sir.
    Senator Voinovich. Do you believe that experts need to be 
brought in to help with training should it be conducted in 
house?
    Mr. Oppedisano. My personal experience is with the 
Department of Army right now. Over the past few years, since 
1997 or so, we have been under the Civilian Personnel 
Operations Center versus the Civilian Personnel Administrative 
Center. And I do not believe, at the present time, within the 
Department of Army at least, that there is enough sufficient 
resources at the installation level that will be able to give 
the training that is necessary.
    They are going to go out, and they are going to say, ``OK. 
We are going to train the trainers, and then go take it back to 
the site, and then they are going to train at the site level.'' 
The credibility is not going to be there.
    Senator Voinovich. In other words, the system right now is 
in-house. You train the trainers, and then the trainers go back 
and train the individuals to do performance evaluations.
    Mr. Oppedisano. That is correct. Now, also, the fact that 
they say the Human Resource Offices is the----
    Senator Voinovich. Who is going to train the trainers?
    Mr. Oppedisano. Well, that is the question. I do not have 
an answer for you. I do not know. I do not think that has been 
resolved yet, although, from what I am hearing, it is going to 
come from the Civilian Personnel Operations Center for the 
Department of Army folks.
    So I am not sure whether that is finalized yet, Mr. 
Chairman.
    Senator Voinovich. Then it is unclear?
    Mr. Oppedisano. I know there is going to be training. How 
much, to what degree, and who is going to be involved has not 
been specified yet, to my knowledge.
    Senator Voinovich. Then your recommendation is for a 
dedicated training line item in the budget? I have asked 
agencies for this, for the last several years. I will never 
forget when I first became a Senator, I asked all the 
departments how much money they spent on training. I think 11 
departments came back and said, ``We do not know what we spend 
for training,'' and one said, ``We know, but we will not tell 
you.''
    The point is for NSPS to be successful, the Departments 
needs additional money for training.
    Mr. Oppedisano. There is no question about that, Mr. 
Chairman.
    Also, the fact that it just cannot be a one-time 
application. It has got to be continuous as the system grows. 
Will the system work? It will work. We will make it work. That 
is the way we do things in the Department of Defense. And what 
will happen now is the fact that you just cannot do one set of 
training and expect that to just be it and go your merry way. 
It is not going to happen. You have to have a continuous 
training operation as the system is implemented.
    Senator Voinovich. Do you have experiene with demonstration 
projects?
    Mr. Oppedisano. I have not at my own installation, no, sir.
    Senator Voinovich. Are you aware of them?
    Mr. Oppedisano. Yes, I have, sir.
    Senator Voinovich. Do you think they offer appropriate 
benchmarks for NSPS?
    Mr. Oppedisano. I think there are some benchmarks, yes. Do 
I think they still need improvement? Yes, I do. I think there 
is always room for improvement in any system that we establish. 
I think some of the benchmarks are out there. I think some of 
the systems have some very good results, but there has been 
some dissatisfaction with them, also.
    So depending on how they are implemented, and the degree of 
implementation, and the degree of training that is given to the 
managers and the employees, that is what is going to make the 
system successful or not.
    Senator Voinovich. I can tell you this, it is a big job. 
Anybody that has done performance evaluation knows that it 
takes time, and supervisors and managers need to be trained.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Gage and Mr. Junemann, you heard my question to Mr. 
Nesterczuk about whether veterans preference is protected in 
the bump and retreat options during a reduction in force. Do 
you agree with Mr. Nesterczuk's response?
    Mr. Gage. I think that the performance, the weight on the 
performance, the last performance evaluation of an employee, 
overweighs or outweighs what currently veterans enjoy on their 
preference. I think, in that way, it lessens veterans 
preference.
    Senator Akaka. Do you have any comment, Mr. Junemann?
    Mr. Junemann. Essentially, I agree with what Mr. Gage is 
saying. But it just seems without knowing, because we heard 
this morning, and I am hearing this for the first time, that 
there are some parameters set up on pay-for-performance and 
that there are some metrics that DOD has. So I do not know what 
is in them.
    Without knowing that, there may be something in there about 
veterans preference. There may not. Again, it would be nice to 
have them. We just met face-to-face last Thursday.
    So again, essentially I agree. It sort of seems up in the 
air. But they do not have, again because of this unilateral 
scrutiny by front-line management on an employee's performance, 
it does not seem that veterans rights are protected as much as 
they are now.
    Senator Akaka. Mr. Oppedisano.
    Mr. Oppedisano. Senator, can I respond to that question, 
also?
    I have had some experience in reductions in force. Over the 
period of a 10-year period from 1991 to 2001, I was a director 
of human resources and my office and my staff ran nine 
reductions in forces. So I know about reductions in force.
    Under the current system, there is a process where you do 
get certain amounts of time added for performance. It is over a 
3-year cycle. And that was more accepted by the unions at the 
time.
    And to sit back and say that 1 year of performance 
adequately shows how that individual will perform in the 
future, we do not necessarily agree with. There is something in 
the system already that establishes the fact that you do get 
recognition for a performance in the reduction in force 
process.
    To that matter, I am not too much in disagreement with our 
union counterparts.
    Senator Akaka. Mr. Oppedisano, you and Senator Voinovich 
discussed the importance of training. In your opinion, on how 
much money do you believe will be needed by DOD to adequately 
train employees on NSPS?
    Mr. Oppedisano. Senator, I do not have an answer for that 
because I really just don't have that kind of knowledge. But I 
know there has got to be a lot.
    Senator Akaka. This is something that we must pay attention 
to. Chairman Voinovich has been a champion of human capital 
because we know that in a few years we will be facing the 
retirement of the baby boomers. Without training, we are going 
to have a huge problem with employees and passing on 
institutional knowledge.
    Mr. Oppedisano, following up on your earlier comments, what 
about a manager who is specifically charged with overseeing 
training, just like a chief human capital officer?
    Mr. Oppedisano. Well, I do not see where it would hurt 
anything. I think it would give some credibility.
    However, it depends on how that position is actually 
written to say what their duties and responsibilities are. What 
influence will they have in Congress with the idea of funding 
and so on and so forth? How much influence are they going to 
have within the Department, would be another point.
    Do I think it is necessary? I do not think it would hurt 
anything. I think probably it would be a good point for us to 
be able to start.
    Senator Akaka. Mr. Gage and Mr. Junemann, the DOD Workers 
Coalition made suggestions to DOD and OPM for NSPS. Would you 
please describe some of the proposals that were offered to 
protect employees while still meeting the Department's national 
security mission.
    Mr. Oppedisano. Well, Senator, I think that we offered 
common-sense, realistic proposals for every concern that 
management had.
    But I want to say something to Senator Voinovich. I never 
said that performance evaluations were not necessary or good 
things. They are. My problem is with this particular pay-for-
performance scheme.
    Senator the one thing I would like you to watch is to make 
sure the bottom does not fall out of Federal pay where they can 
hire at localities for whatever they can get an applicant, 
money that they would take. That is the real concern I have on 
it, not at the top rewarding good employees. I am all for that.
    I am afraid with this scheme and the way they have it, they 
are going to drop the bottom out of Federal pay to reduce it 
across the board.
    Mr. Junemann. I would tell you that in the meetings that I 
attended with DOD and management, we talked specifically. Some 
of their problems are our problems, as well. Some of the 
current practices under current law are a bit cumbersome to us 
as well as they are to management. And, certainly, there needs 
to be continuous reform of these processes.
    So we offered ideas on streamlining the process under 
labor-management appeals, under such things as if decisions 
take too long, we can have expedited arbitrations. We can have 
expedited decisions where the arbiter is mandated by statute to 
say you will issue a decision within 30 days, 60 days, what 
have you. You can even issue bench decisions in cases where 
that is appropriate. So we offered these as some of the 
suggestions.
    Under pay-for-performance, we really never got past the 
title pay-for-performance. We never really got into a give and 
take on that. My union represents private sector and State, 
county and municipal workers as well as DOD and other Federal 
employees. So as Chairman Voinovich pointed out that he has 
experience, I have experience in this, as well.
    And I offered that. We have represented a lot of engineers 
and scientists, they are not new to pay-for-performance. We 
have a tremendous amount of experience, and when it works, when 
it does not work. Certainly training, not only on the front end 
but continuous ongoing training of front-line management as 
well as employees, is part of all of that.
    But employees have to have the assurance that it is going 
to work. Right now our local in Portsmouth, New Hampshire, at 
the shipyard up in Portsmouth, they are supposed to be reviewed 
annually, every employee within--we have a local up there of 
about 1,200 workers. They have not had an evaluation, a 
performance evaluation, in the year 2003 or the year 2004.
    So I cannot go to them and say I am confident that this new 
thing will work because they are saying to me we have not had 
an evaluation since 2002. How can this new system possibly 
work?
    And that is really the gist of it. No matter how much 
training you put into it, how much you put into the budget, if 
the employees are not confident that it is going to work, I 
think it is going to fail.
    Senator Akaka. Thank you. My time has expired.
    Senator Voinovich. Thank you, Senator Akaka.
    As I indicated in my opening statement, there are some 
elements of the DHS personnel system which are not included in 
NSPS. For example, the internal Homeland Security Labor 
Relations Board establishes a process whereby employee 
organizations may recommend nominees to the Secretary. This 
process has not been replicated for the National Security Labor 
Relations Board. The Department of Homeland Security 
establishes a process for employee involvement on matters such 
as pay. No similar process exists under NSPS.
    How do you feel about having consistency between the 
Department of Homeland Security and the Department of Defense?
    Mr. Gage. Well, as you said, or one of the panelists said, 
I do not see any reason why they would not be consistent, and I 
hope they would be consistently good.
    Senator Voinovich. You have got members in both 
organizations.
    Mr. Gage. We do. And, Senator, DOD went much farther than 
DHS. For instance, even on the pay-for-performance, on your 
evaluations, in DHS, you can arbitrate it. In DOD, you can only 
go to a board or some type of management review board, but even 
if they say, ``Yes, employee, you are right. Your evaluation 
should be higher,'' it still goes into the management chain so 
that they can say, ``But you do not get the commensurate money 
for that new review.''
    Now, there is no credibility with that type of system with 
employees, and I think they should just let us arbitrate these 
evaluations--they mean so much to an employee--and have an 
impartial third party. As DHS is saying, we can arbitrate 
employee evaluations in DHS, and I think DOD ought to follow 
that line.
    Senator Voinovich. Mr. Junemann.
    Mr. Junemann. We do not have employees within the 
Department of Homeland Security, but just looking at it, it 
makes nothing but sense that the board should be a compilation 
of some members appointed by management representatives, some 
members appointed by labor representatives. Otherwise what you 
have got is two parties meet and eventually reach disagreement, 
and you end up going to a board consisting of representatives 
from only one party to say who is correct in their argument. 
Well, obviously, it is going to be towards management in just 
about every case. I mean, that is just common sense.
    Senator Voinovich. Mr. Oppedisano, do you have any comment 
on that?
    Mr. Oppedisano. Again, we are talking a training issue, and 
we are talking a monetary issue. We are into the pockets of the 
employees at this particular time. And for the employees who 
will be dissatisfied with their ratings, it is going to happen, 
we know that right up front, but now it is going to be more 
adversarial than ever before because now you are talking actual 
money into my pocket for a day-to-day operation, my weekly 
salary. You are also talking my retirement entitlements, and so 
on and so forth.
    Should there be an appeal process in place somewhere that 
can be relied on as being fair? Yes, we do believe in that.
    Senator Voinovich. So you all agree that consistency would 
be beneficial?
    Mr. Junemann. Absolutely, sir.
    Mr. Gage. Senator, except in one area, of course, the 
mitigation of penalties. DHS is not much better than DOD when 
it comes down to restricting an arbitrator or a third party 
from mitigating a penalty. I think both of them have to be 
really liberalized on that point.
    Senator Voinovich. Well, you are all have an opportunity 
during meet-and-confer. I did speak to Secretary England 
yesterday. We spent a half an hour together because I wanted to 
find out who was going to be leading NSPS implementation. He 
assured me that he was going to continue to play a leadership 
role.
    I will say this, since Secretary England has taken over 
NSPS has progressed in a much better manner. He understands 
implementation will take a long time and that substantial 
resources are needed if it is going to be successful. But I 
would like to recommend that you take this period of time and 
sit down and come up with your top priorities.
    Because there are many unions within the Department of 
Defense, I think it would be in your best interest if you 
collaborated and prioritized your top concerns.
    I would like to be informed, as I am sure Senator Akaka 
would as well, on the progress of meet and confer. If you do 
not think it is going well--not just differing opinions but the 
process itself.
    NSPS must be done right. I want to make sure that your 
rights are preserved. As you know, I supported binding 
arbitration on developing the regulations. I think that if that 
had been the case, progress would be a lot further today. 
Everybody would have been forced to compromise.
    What happens at DOD is significance if the Administration 
wants Congress to consider extending these flexibilities 
governmentwide. My feeling is that we need a better sense of 
this process. It is easy to talk about this implementing an 
effective performance management system, but it is a lot more 
difficult to actually implement.
    I will confer with Senator Akaka, and some of our other 
colleagues to discuss NSPS funding, to guarantee that money is 
there to train the people.
    Senator Akaka, do you have anything else that you would 
like to say?
    Senator Akaka. Yes. Thank you, Mr. Chairman. I want to 
thank you for convening this hearing today. I am sorry that our 
witnesses from DOD and OPM were unable to stay to hear our 
exchange with our second panel. However, I would like to note 
how pleased I am that Dave Walker stayed until the very end of 
this hearing. And I want you to know I am with you on this. It 
is so important that we have a training program and have money 
for it.
    And in light of what we are expecting in the future, of 
retirements, we are really going to need training programs to 
take care of our Federal programs.
    So I thank you very much for this hearing.
    Senator Voinovich. Thank you very much. The meeting is 
adjourned.
    [Whereupon, at 12:13 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Mr. Chairman: Thank you for convening this Subcommittee hearing to 
review the recently published rules for the new personnel system of the 
Department of Defense--the National Security Personnel System (NSPS).
    Like the new personnel system of the Department of Homeland 
Security, the centerpiece of NSPS is ``pay-for-performance'' and the 
virtual elimination of Federal workers' right to bargain collectively.
    The Administration ``sold'' both personnel systems to Congress 
using the argument that the post 9-11 era somehow required senior 
executives and managers to disregard the concerns of rank-and-file 
workers.
    To this day, I fail to understand the Administration's reasoning. 
In fact, I believe that one of the most important lessons to be learned 
from the tragedy of 9-11 is that there must be better communication 
between the senior levels of management and the rank-and-file.
    The notion that the right to bargain collectively and to appeal 
personnel decisions somehow threaten national security, and that 
Federal employees who are members of a union are somehow suspect, is 
deeply offensive.
    Frankly, I have grown sick and tired of attacks on organized labor.
    The first responders who rushed up the emergency stairwells in the 
World Trade Center on 9/11--while civilians filed past them on the way 
down--were union workers.
    I challenge anyone to question the commitment, professionalism, or 
bravery of the union members who dies on 9/11 as they did their jobs 
and saved the lives of others.
    I'm a strong believer in treating our Federal workforce fairly. As 
someone with extensive experience in the private sector, I know that 
workers are most productive when they receive fair pay and benefits, 
and when they can make their ideas heard.
    I can also attest to the unique commitment, talent, and spirit of 
public service exhibited by our Federal employees.
    With regard to NSPS--the new DOD personnel proposal--I'm 
particularly concerned that the plan could be subject to political 
manipulation.
    Doing away with the normal General Schedule (GS) system--which has 
served Federal employees and the American people well--probably creates 
more problems than it solves.
    Given the importance of the Defense Department's mission, we need 
to attract the ``best and brightest'' to work in its civilian 
workforce. Beating people down and taking away their rights and union 
protections isn't going to create the DOD workforce we need to keep 
America safe.
    I hope we can work together to fix the problems with this new plan. 
I welcome our witnesses and look forward to hearing their testimony 
about it.
    Thank you, Mr. Chairman.

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