[Senate Hearing 109-166]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-166
 
      EMPLOYING FEDERAL WORKFORCE FLEXIBILITIES: A PROGRESS REPORT

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

                                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

                               __________

                             APRIL 21, 2005

                               __________

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



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

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

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


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

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

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


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     3
    Senator Carper...............................................    13
    Senator Pryor................................................    34

                               WITNESSES
                        Thursday, April 21, 2005

Marta Brito Perez, Associate Director for Human Capital 
  Leadership and Merit System Accountability, U.S. Office of 
  Personnel Management...........................................     5
Eileen Larence, Director, Strategic Issues, U.S. Government 
  Accountability Office..........................................     7
Evelyn M. White, Principal Deputy and Acting Assistant Secretary 
  for Administration and Management, Department of Health and 
  Human Services.................................................    19
Jeffery K. Nulf, Deputy Assistant Secretary for Administration, 
  U.S. Department of Commerce....................................    21
Rafael Deleon, Director, Office of Human Resources, Environmental 
  Protection Agency..............................................    25
Vicki A. Novak, Assistant Administrator for Human Capital 
  Management and Chief Human Capital Officer, National 
  Aeronautics and Space Administration...........................    27

                     Alphabetical List of Witnesses

Deleon, Rafael:
    Testimony....................................................    25
    Prepared statement...........................................    86
Larence, Eileen:
    Testimony....................................................     7
    Prepared statement...........................................    53
Novak, Vicki A.:
    Testimony....................................................    27
    Prepared statement...........................................    91
Nulf, Jeffery K.:
    Testimony....................................................    21
    Prepared statement...........................................    77
Perez, Marta Brito:
    Testimony....................................................     5
    Prepared statement...........................................    43
White, Evelyn N.:
    Testimony....................................................    19
    Prepared statement...........................................    73

                                Appendix

Letter to Senators Voinovich and Akaka, dated April 25, 2005, 
  from Carol A. Bonosaro, President, and William Bransford, 
  General Counsel, Senior Executives Association.................    98
Questions and Responses for the Record from:
    Ms. Perez....................................................   101
    Ms. Larence..................................................   113
    Ms. White....................................................   119
    Mr. Nulf.....................................................   124
    Ms. DeLeon...................................................   133
    Ms. Novak....................................................   138


      EMPLOYING FEDERAL WORKFORCE FLEXIBILITIES: A PROGRESS REPORT

                              ----------                              


                        THURSDAY, APRIL 21, 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 10:35 a.m., in 
room SD-562, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Akaka, Carper, and Pryor.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. This hearing will please come to order.
    Good morning. Today's hearing, ``Employing Federal 
Workforce Flexibilities: A Progress Report,'' is one that I 
have been looking forward to.
    The purpose of today's hearing is to examine the 
implementation of a series of human capital reform bills that 
have been enacted over the last 2 years. All of these bills 
originated in our Subcommittee, and I am proud to say that 
working closely with Senator Akaka and other Members of this 
Committee, they have become law.
    Again I want to thank Senator Akaka, and his staff, for all 
the time and effort they have put into working on legislation 
that is so very important to our country's future. While 
passing these reforms was difficult, it is only the first of 
Congress's responsibilities.
    On July 20, 2004, we convened a hearing of the Subcommittee 
with a similar oversight agenda, and we will hold additional 
oversight hearings in the future. I want to let everybody know 
that I will be serving in the Senate for another at least 5\1/
2\ years. I intend to stay on top of this issue.
    I cannot emphasize enough the need for continued 
congressional oversight of these reforms. On November 25, 2002, 
the Homeland Security Act of 2002 became law. Included in that 
legislation were provisions that equaled the most significant 
reforms to the civil service in a quarter of a century. They 
included the establishment of agency Chief Human Capital 
Officers and a Chief Human Capital Officer's Council. The 
permanent authorization of the workforce reshaping authorities, 
voluntary early retirement authority, voluntary separation 
incentive payments, and a long overdue modification to the 
hiring process that allows Federal agencies to use category 
rating instead of the over 100 year-old ``rule of three.''
    On November 11, 2003, the Federal Employee Student Loan 
Assistance Act became law. The law raises to $10,000 from 
$6,000 and to $60,000 from $40,000 respectively, the annual and 
aggregate limits of student loan repayment Federal agencies may 
offer employees as recruitment and retention incentives. I am 
pleased to see that the Office of Personnel Management (OPM) 
has reported that for fiscal year 2003 agencies spent three 
times as much on student loan repayment than they did in fiscal 
year 2002. In total, 24 agencies provided more than $9.1 
million in student loan repayments to 2,077 Federal employees.
    On November 24, 2003, the purpose of the Senior Executive 
Service Reform Act was accomplished by a provision of the 
fiscal year 2004 Defense Authorization Bill. This provision 
relieves pay compression within the Senior Executive Service by 
allowing agencies to establish a pay-for-performance system for 
their senior executives. We are all familiar with the problem 
that 75 percent of our senior executives all received the same 
pay.
    Proper and effective implementation of a performance 
management system is imperative to the long-term ability of 
Federal departments and agencies to meet their mission. I look 
forward to the testimony regarding the certification process 
for the performance management systems for senior executives, 
and how implementation is proceeding.
    On February 24, 2004, the NASA Flexibility Act of 2004 
became law. The law provides several new flexibilities to the 
National Aeronautics and Space Administration to help that 
agency recruit and retain the best and brightest scientists and 
engineers for the agency's high technology mission. I know that 
the President has challenged NASA with a new mission and that 
NASA has been working to realign its workforce to meet the new 
mission. Unfortunately, there have been numerous reports of 
proposed actions by NASA that have raised concern as to whether 
or not the agency is using the flexibilities as Congress 
intended. I look forward to discussing this matter in greater 
detail.
    Last, but not least, the President signed into law on 
October 30, 2004, the Federal Workforce Flexibility Act. That 
legislation enacted such reforms as compensatory time for 
travel, enhanced leave for individuals who join public service 
mid career, and an increased focus on training within agencies. 
It has only been 6 months since enactment, but OPM has been 
working to implement these reforms, including the publication 
of interim regulations for the compensatory time off for travel 
provision on January 28 of this year. I look forward to 
learning how OPM has been working with agencies to assist the 
agencies understand these reforms and how agencies have begun 
to implement them.
    As I said earlier, I am proud of what we have accomplished 
and the changes we made in the civil service code. This 
Subcommittee has set aside partisan differences and worked 
together to modernize the Federal civil service. All of these 
changes have been carefully considered and have been sought to 
provide greater flexibility to the existing civil service 
framework.
    Through these hearings, I hope to establish a sense of what 
is working, what is not, and how lessons learned from 
implementation can assist other Federal departments and 
agencies as they work to implement their reforms.
    I would like to now yield to my Ranking Member of this 
Subcommittee, my good friend, Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Chairman Voinovich. I 
want to thank you for holding this hearing today which builds 
on the one that we held in July of last year.
    When I chaired the Postal Subcommittee, I continued the 
long-standing tradition of holding an annual hearing on the 
state of the U.S. Postal Service, and I am glad that we will 
continue to hold at least a yearly hearing on workforce 
flexibilities as we are doing now to review the implementation, 
use, and training for these new flexibilities.
    Mr. Chairman, I appreciate what you are doing as Chairman 
of this Subcommittee, and as a leader in the U.S. Senate. I 
want to thank your staff, as well as my staff, for all the work 
that they have been doing in this area.
    You and I have worked hard to ensure that agencies have the 
tools and resources needed to recruit, retain, and manage their 
workforce. As you noted, we joined together to add government-
wide flexibilities to the Homeland Security Act to give 
agencies increased authority to manage their workforce. Among 
these flexibilities were permanent use of Volunteering 
Separation Incentive Payments (VSIP) and Voluntary Early 
Retirement Authority (VERA); the use of categorical ratings 
instead of the rule of three for hiring; and the creation of 
Chief Human Capital Officers and the Chief Human Capital 
Officers Council.
    I was also pleased to join you, Mr. Chairman, as a 
cosponsor to the substitute amendment to the Federal Workforce 
Flexibility Act last year, which included my provision allowing 
employees to receive compensatory time off for time spent in 
travel outside of the normal work hours. Compensatory time for 
travel is a good work-life program, and it is one that I 
believe will help attract and retain quality employees.
    I would like to note that in 2002, the Government 
Accountability Office (GAO) reported on the government's 
flexibilities and said that those most effective in managing 
the workforce are work-life programs such as alternative work 
schedules, child care assistance, transit subsidies, cash, and 
time-off awards.
    Last year we heard that agencies were not using the 
flexibilities Congress granted them and that OPM had given 
little guidance in terms of training and general information 
about the flexibilities that were available.
    Despite OPM implementing a 45-day hiring process, 
applicants for Federal jobs still complain that it takes too 
long to get hired. We need to figure out why the tools 
currently available to agencies are not making a difference.
    However, judging from the President's Human Capital 
Scorecard, and the testimony submitted for today's hearing, it 
appears that some progress is being made in the use of VSIP and 
VERA for agency restructuring, the use of annual leave 
enhancements to recruit mid-level hires and provisional 
certification for participation in the Senior Executive Service 
(SES) pay-for-performance system.
    I am still concerned, however, that agencies continue to 
lack funds to implement these flexibilities. Similar to the 
questions over funding for the pay-for-performance system and 
employee training on flexibilities at the Department of Defense 
(DOD) and Department of Homeland Security (DHS), we need to 
know how agencies are paying for the government-wide 
flexibilities. Agencies need adequate funding to implement pay-
for-performance systems, award bonuses, utilize critical pay 
authority, provide academic degree training, and provide 
student loan repayment.
    With agencies still not making the most effective use of 
the workforce flexibilities granted by Congress, in addition to 
a lack of adequate funding, I find it premature to discuss at 
this time expanding the broad flexibilities granted to DHS and 
DOD to the rest of the Federal Government, especially in the 
areas of collective bargaining and appeals--which have never 
been tested.
    Mr. Chairman, we have with us a distinguished group of 
witnesses today, and I look forward to hearing from them on how 
their agencies are using these flexibilities, as well as any 
barriers they may have encountered relating to their use. Thank 
you so much, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Akaka. I agree with 
you. I am really glad that you are here; you are part of what I 
refer to as the A team. Your commitment is what gets the job 
done.
    Senator Akaka. I should add that the Chairman did mention 
to me that I am going to be surprised at what we are going to 
hear today, so I am looking to be surprised. [Laughter.]
    Senator Voinovich. How is that for putting the jacket on 
you? [Laughter.]
    I ask all the witnesses to stand and raise their right 
hand. It is the custom of this Subcommittee to swear in all 
witnesses.
    Do you swear that the testimony that you are about to give 
to this Subcommittee is the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Witnesses. I do.
    Senator Voinovich. Let the record show that all the 
witnesses answered in the affirmative.
    I would like to welcome Marta Perez, the Associate Director 
for Human Capital Leadership and Merit System Accountability at 
the Office of Personnel Management; and Eileen Larence, 
Director of Strategic Issues at the Government Accountability 
Office.
    Ms. Perez and Ms. Larence, I thank you for appearing before 
the Subcommittee, and we look forward to your testimony today. 
While oral statements traditionally are limited to 5 minutes, 
but if you go a bit longer, it is fine. Your written testimony 
will be included in the record. Also, if we do not ask all of 
our questions, we will submit them and ask you to respond in 
writing. Thank you. Ms. Perez, will you please proceed.

TESTIMONY OF MARTA BRITO PEREZ,\1\ ASSOCIATE DIRECTOR FOR HUMAN 
CAPITAL LEADERSHIP AND MERIT SYSTEM ACCOUNTABILITY, U.S. OFFICE 
                    OF PERSONNEL MANAGEMENT

    Ms. Perez. Very good. Thank you, Mr. Chairman. Good morning 
to everyone. Thank you for having me here today. I am pleased 
to appear on behalf of the Office of Personnel Management and 
share this panel with Eileen Larence. I have a written 
statement and I ask that it be included for the record, and I 
am happy to summarize for the Subcommittee as well.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Perez appears in the Appendix on 
page 43.
---------------------------------------------------------------------------
    I am equally pleased to be here with my colleagues from the 
Department of Commerce, the Environmental Protection Agency, 
the Department of Health and Human Services, and the National 
Aeronautics and Space Administration. OPM is honored that the 
President has given us a responsibility to lead the 
transformation of human capital management in the Federal 
Government. Through our technical assistance and compliance 
programs, we work very closely with the agencies to ensure 
their progress. When they succeed, the American people benefit. 
I am grateful for the support and the partnership agencies have 
had with OPM over the last 3 years.
    Today, my testimony will focus on three areas: First, the 
development and implementation of the pay-for-performance 
regulations for the Senior Executive Service; next, the 
training and education OPM has done to encourage the agencies 
to make use of workforce flexibilities; and third, I will 
comment on the use of workforce flexibilities at NASA and what 
OPM has done to ensure they are implemented consistent with 
congressional intent and OPM-approved workforce plans.
    The Senior Executive Service Reform Act pay-for-performance 
legislation gives opportunities to ensure that accountability 
for performance management resides at the highest level of 
government. How we are getting there is as important as the 
results we are achieving.
    The law provides broad flexibility, clear objective, and a 
strict accountability. OPM matched the statutory framework with 
a regulatory framework that features clear and rigorous 
criteria, close consultation with agencies in implementing 
those criteria, and provisional and full certification of 
agencies' plans.
    The result of this effort is a system of Federal executive 
compensation featuring an open pay range while ensuring 
agencies have a system in place for making meaningful 
distinctions in performance, and basing all compensation 
adjustments on performance. In fiscal year 2004, 32 agencies 
received full or provisional certification for the SES or 
equivalent performance management plans which held executives 
and managers accountable for results, and based compensation on 
the outcomes. To date, 15 agencies have received certification 
for fiscal year 2005, with another 12 requests undergoing 
review.
    In general, for the agencies that are requesting second 
year certification, we are seeing fiscal year 2004 data that 
shows agencies are making distinctions in levels of 
performance, pay adjustments, and awards, and where we see 
weaknesses in their programs, we require them to take 
corrective action. Rating distributions are more closely 
aligned to the performance of the organization, and 
organizational performance has become a key factor in pay 
distinctions.
    As you have so accurately pointed out in the past, Mr. 
Chairman, strategic human capital management must become 
institutionalized in the executive agencies. OPM strategically 
restructured and created the position of Human Capital Officers 
in our agency to work with the agencies across the Federal 
Government, one Human Capital Officer per agency. OPM provides 
technical assistance to the agencies and monitors the 
implementation of requirements that were laid out in the human 
capital initiative of the President's Management Agenda, Mr. 
Chairman, including the implementation of your flexibilities.
    Additionally, OPM is proactive in providing agencies with 
guidance and training after it publishes regulations. This 
includes memoranda for implementing and administering new 
provisions, briefings for the Chief Human Capital Officers 
Council, forums and symposiums for human resources directors 
and human resources practitioners, and follow-up technical 
assistance and individual attention by our Chief Human Capital 
Officers.
    A review of agencies' efforts suggests they have improved 
in their management of human capital, that the fundamental 
concepts of workforce planning, succession planning, 
performance management for results and leadership development 
are integral parts of agencies' human capital management 
planning process. Nearly one-third of the executive agencies, 
nine in all, have achieved the green status on their human 
capital management efforts, and almost all are making some use 
of many of the flexibilities available to them.
    But we, at OPM, believe in flexibility with accountability. 
The additional human resources flexibilities being given to 
agencies reinforce the need for stronger agency internal 
accountability systems that hold executives and managers 
responsible for the effective management of their workforce. 
This evolution places a greater responsibility for 
accountability at the level within each agency where 
authorities are delegated and where decisions are being made. 
Strengthening accountability government-wide ensures adherence 
to merit system principles and results in efficient, effective, 
and responsible administration of government services. OPM 
takes its responsibility for accountability very seriously, and 
expects the same from the agencies.
    We work closely with the Chief Human Capital Officers 
Council and their representatives across the agencies. Mr. 
Chairman, your leadership and authoring the legislation 
establishing these important positions is already having a 
substantial impact on Federal human capital management. In 
addition, the CHCO Council is playing a major role in the 
administration's efforts to modernize the civil service.
    Mr. Chairman, you asked OPM to comment on NASA's use of 
workforce flexibilities, and you asked what have we done to 
ensure NASA's implementation is consistent with congressional 
intent and the agency's workforce plan.
    Senator Voinovich. Ms. Perez, your time has expired. I will 
ask you to respond to that question during the question-and-
answer period.
    Ms. Perez. Very good.
    I would only say that we feel they are meeting the 
expectations of the Congress in their use of their flexibility.
    Because of the work of the Subcommittee, agencies now have 
the additional flexibilities which are being used to recruit 
and retain employees. These flexibilities, however, we feel 
strongly, cannot mask the deficiency of a personnel system that 
is still not well suited to meet the mission critical goals of 
today's Federal workforce. I will be glad to answer any 
questions that you have.
    Thank you.
    Senator Voinovich. Thank you very much. Ms. Larence, please 
proceed.

  TESTIMONY OF EILEEN LARENCE,\1\ DIRECTOR, STRATEGIC ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Larence. Thank you. Mr. Chairman, and Senator Akaka, I 
am pleased to be here today to discuss GAO's work on how 
agencies are using recent human capital flexibilities Congress 
has provided.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Larence appears in the Appendix 
on page 53.
---------------------------------------------------------------------------
    We agree that the Subcommittee's investment in this 
oversight is important and timely. We continue to propose that 
if agencies want to take full advantage of new flexibilities to 
help them hire, develop, retain, and reward their talent, they 
must first have in place committed leadership and the necessary 
supporting infrastructure, including a strategic planning 
process that links human capital policies and programs to 
achieving organizational results; the capabilities to develop 
and implement these new flexibilities; and a modern, effective 
and credible performance management system with key safeguards 
built in.
    Our work at various agencies shows that we do not yet have 
all these pieces in place, but we are making progress. I would 
now like to focus on several of these elements.
    First, for reforms to work, senior executives must lead the 
way and cascade successful practices down through their 
agencies. OPM and GAO have recognized this and called on 
agencies to develop rigorous performance management systems for 
their executives, ones that link their day-to-day activities 
with organizational results and make clear distinctions in 
their performance. Such systems provide individuals the 
feedback they need to drive their performance toward agency 
goals, and provide management with objective information to 
reward those who have made the greatest contributions.
    Agencies must demonstrate they have such a performance 
management system in place to take advantage of the new higher 
pay caps for SES that became effective January 2004. Our prior 
work for your Subcommittee, Mr. Chairman, indicates that while 
select agencies have begun to incorporate some of the needed 
elements into their systems, such as a link between individual 
and organizational results, their appraisal systems were not 
distinguishing their highest performers.
    As you already acknowledged, recently released government-
wide data on SES ratings for Fiscal Year 2003, the most current 
available, show similar results government-wide. OPM will have 
to carefully monitor agencies' SES performance management 
systems to ensure they are functioning as intended and driving 
organizational change. This is especially important if these 
systems are to be cascaded down through their agencies.
    One other point on leadership, our ongoing work continues 
to show that agencies want to coordinate on how they are 
implementing the flexibilities, including problems, innovative 
solutions, and ideas for more efficiency. OPM and the Chief 
Human Capital Officers Council could serve as the catalyst for 
this coordination.
    Second, turning to the critical infrastructure needed, we 
have found that agencies can make the best use of flexibilities 
if they are implemented in the context of a strategic human 
capital planning process. Recent work shows some agencies still 
face challenges in designing their process. For example, this 
past March, we reported on NASA's struggles to devise a long-
term strategy for its space shuttle workforce, given that the 
shuttle may retire at the end of the decade. To help agencies, 
we offer a planning model that includes basic fundamental 
steps--identify the workforce competencies you need, your 
critical gaps, and those flexibilities that will best help you 
close the gaps. Agencies must also evaluate whether the 
flexibilities are achieving the intended results, or in other 
words, are they worth the investment?
    Third, agencies must have the capability to effectively use 
new tools and consequently should practice some fundamentals--
they have an implementation plan, they educate their managers 
and staff on these flexibilities, and they streamline their 
processes to make it as easy as possible to use those 
flexibilities. These practices could help in the government's 
efforts to improve the Federal hiring process. As you have 
already acknowledged, Mr. Chairman, there is considerable 
frustration that it takes too long and it is too hard to bring 
top talent on board. OPM, its external partners, and agencies 
have been hard at work redesigning parts of the process.
    Congress also provided agencies direct hiring and category 
rating authorities to help agencies more quickly hire the 
talent they need for critical positions. Senator Akaka, as you 
pointed out, our work last showed that few agencies were using 
the flexibilities, mainly because the agencies were not ready. 
They did not have guidance or policies in place or understand 
how to use the tools. Since then, OPM has been taking steps to 
better educate agencies on these flexibilities, but it must 
continue to monitor and encourage their use.
    I just wanted to point out that we currently have work 
under way on two other flexibilities that the Congress has 
provided, the use of the early-out and buy-out authorities, as 
well as the use of the student loan repayment program, and we 
hope to report the results of that work later this year.
    In closing, Mr. Chairman, it will be important to continue 
assessing, supporting and making adjustments to the 
flexibilities provided. In addition, as Congress considers 
future reforms, it will be equally important to make sure 
agencies have built a business case for the tools and have the 
leadership and infrastructure to implement them before the 
agencies are given these additional flexibilities.
    Finally, GAO, working with a number of external partners, 
has developed a framework, a set of principles, criteria, and 
processes, that could help guide decisions about future 
reforms.
    Mr. Chairman, that concludes my prepared remarks, and I 
would be happy to answer any questions.
    Thank you.
    Senator Voinovich. Thank you very much.
    When Harvard University's John F. Kennedy School of 
Government hosted an executive session on the issue of Federal 
human capital management, one idea that everyone seemed to 
agree on was a need for agency Chief Human Capital Officers.
    I would like to ask both of you how effective do you think 
they and the Chief Human Capital Officers' Council has been? 
The concept was that they would be sharing ideas, and increase 
coordination, and elevate the issue of human capital management 
in the Federal Government. Is it working?
    Ms. Perez. Thank you, Mr. Chairman. I will say yes to all 
of the above. We meet regularly, on a monthly basis. They bring 
issues to the table and to OPM they think require attention.
    In addition to that, we use the Council as an opportunity 
to share policies as they are being developed, and regulations 
as they are being considered, and to provide an opportunity for 
sharing lessons learned, and best practices, so that we do not 
have to reinvent the wheel throughout the agencies.
    So I would say yes, the Council is absolutely working, and 
it has elevated the interest of human capital to the highest 
level of the agencies, so they exercise important leadership in 
the organizations.
    Senator Voinovich. Have all the agencies, in your opinion, 
designated Chief Human Capital Officers as required by 
legislation? Contributing to the problem was the downsizing 
during the previous decade. Human resources was viewed as 
important, I believe we need to elevate it and recognize its 
importance. I do not know if you read Jack Welch's book, but he 
spent more than half of his time on recruiting people. He 
understood that human capital is the backbone of any successful 
organization.
    Are you seeing this recognition in the Federal Government?
    Ms. Perez. Absolutely. I have the opportunity to work very 
specifically with agencies, each one of them. I visit with them 
regularly. I interact with the Chief Human Capital Officers. I 
interact with their HR directors. I am pleased to say there is 
absolutely no push-back or no sense in any one of the agencies 
that we deal with that human capital is not important or that 
they should not be taking proactive steps to deal with human 
capital issues.
    So, absolutely, there is a clear understanding on the part 
of the agencies of the importance of managing people in the 
organizations.
    Senator Voinovich. Have you officially or unofficially 
evaluated the people in these agencies?
    Ms. Perez. We officially rate the Agency's programs. I do 
not officially or unofficially rate the individuals, but I 
would say, by and large, they are all very committed to the 
programs across the board. Everybody is working on implementing 
programs, and nine of the agencies already have programs in 
place, and by being ``green'' that suggests that they can 
demonstrate results as well.
    Senator Voinovich. Perhaps OPM should consider a peer 
review process for these individuals. Well, my suggestion would 
be that you ought to do it. Each agency hires it own human 
resources professionals, but the fact of the matter is, with 
such a group of individuals, professionals could offer 
important professional development opportunities to each other.
    Ms. Perez. Thank you. Well, actually, we do provide that 
kind of feedback to the agencies, and to the individual CHCO 
Council members. I thought you meant a formal rating, that it 
was somehow akin to what agencies use in terms of evaluating 
their individuals' performance. That job is left to the 
leadership of the Agency, but we do provide feedback.
    Most importantly, we do raise issues or concerns when we 
see that CHCO is not leading the human capital initiative as 
they should. Just as importantly, we provide a lot of training 
and developmental opportunities. We hold an academy for the 
CHCO's that is limited to principals only, where they have an 
opportunity to bring concerns, and where we have an opportunity 
to raise concerns with them as well. They are scheduled on a 
monthly basis, and they provide good opportunities for saying, 
``Hey, this is going really well'' or ``not so well.''
    Senator Voinovich. Good. Another opportunity in the CHCO 
Council is for members to offer their personal experiences as 
lessons for the others.
    Do you want to comment on the CHCO Council, Ms. Larence?
    Ms. Larence. I just wanted to make three observations. 
First, GAO continues to encourage the Council to think about 
developing a strategic plan. There are so many human capital 
flexibilities and issues out there we believe the Council 
should try to set some priorities for where they should focus.
    Second, on our ongoing work we continue to----
    Senator Voinovich. Pardon me. Would you clasify if you are 
referring to individual agencies or the Chief Human Capital 
Officers Council.
    Ms. Larence. We encourage the Council to set some 
priorities.
    Or where they are going to focus their attentions and what 
they want to achieve over certain time frames.
    We continue to see that agencies really want to, quite 
frankly, talk to each other about how they are using these 
flexibilities, but it is difficult for them to figure out how 
to make the necessary logistics happen, and we think that the 
CHCO Council and OPM can serve as a facilitator for that 
conversation. The sharing of best practices has been very 
helpful, and agencies are doing some of that but there is 
probably a lot more opportunity to do that.
    And finally, when we last reviewed the CHCO Council, we did 
encourage them to also think about some of the strategic issues 
facing them, including the next set of reforms, more 
comprehensive reforms and what is the state of human capital 
strategic planning and performance management systems across 
the government.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    I want to thank both of you for your testimony.
    I also want to thank you, Ms. Perez, for visiting Hawaii in 
August 2003 in an official capacity. You are welcome to Hawaii 
whether it is in an official capacity or not.
    Ms. Perez. Thank you.
    Senator Akaka. And I just hope you enjoyed your visit to 
Hawaii.
    This is to both of you. Congress has authorized a number of 
workforce flexibilities, all of which are designed to retain 
and recruit the people the Federal Government will need for the 
future. Agencies now can offer a range of incentives such as 
bonuses, child care subsidies, student loan repayment, just to 
name a few, and yet agencies do not have the resources to fund 
these flexibilities.
    What impact has the lack of resources had on the ability of 
Federal agencies to take advantage of these flexibilities? Ms. 
Perez.
    Ms. Perez. Thank you, Senator. What we ask of agencies is 
that they look at the flexibilities strategically, so that 
while resources are limited in terms of what they can afford, 
we think that if they are used wisely and that if they look at 
the resources across the entire organization and prioritize, 
that they can identify resources.
    It is clear that as we continue to face challenging 
budgetary times, agencies will have some challenges, but that 
is where strategic planning becomes a real asset. But, if you 
plan well in advance, if you identify what your needs are going 
to be, short term and long term, it is easier to then allocate 
resources based on those needs.
    So, I think that while it is difficult at times, I think 
that strategic planning or planning well in advance helps the 
agencies to make not only good people decisions but also to 
allocate resources, financial and otherwise, appropriately.
    Ms. Larence. We agree that it is critical that the agencies 
really think about this strategically and what tools are going 
to work most effectively for them, and we think that the fiscal 
constraints help them to do that. What we are beginning to see 
is they are making tradeoff decisions. They are determining 
whether they have a retention problem or a recruitment problem, 
and if so, what is the best tool to use? Is it student loan 
repayments or maybe it is using the retention and relocation 
bonuses.
    So instead of trying to use all the flexibilities because 
they are there, we are encouraging agencies to really think 
hard about what it is that they have to address and what 
flexibilities work best, and to make those fiscal tradeoffs.
    Senator Akaka. Ms. Perez, last year, OPM implemented a 45-
day hiring model for the Federal Government. OPM also announced 
that it would begin scoring agencies in its use of the 45-day 
model for the strategic human capital management portion of the 
President's Management Agenda, beginning in the fourth quarter 
of fiscal year 2004.
    Has OPM started scoring agencies on meeting this goal? And 
if so, how are the agencies doing and what barriers are there, 
if any, to meeting the 45-day model?
    Ms. Perez. Yes, sir, we did begin, as promised. We began 
the evaluation or the review of agencies' hiring processes in 
terms of meeting a 45-day standard that we had laid out. And 
about 73 percent of the agencies are now meeting the 45-day 
time-frames.
    Have we fixed the hiring problems in the Federal 
Government? No. Have we made progress in terms of making sure 
that agencies are paying attention to their hiring processes, 
eliminating unnecessary burdens and administrative layers? I 
think we made a great deal of progress, but much work remains 
to be done still, sir, so that applicants feel like our 
processes are inviting processes.
    Senator Akaka. Ms. Perez, over the past several years 
Congress has made several significant changes in the Federal 
hiring process in order to speed up hiring for Federal 
positions. Category rating gave agencies the ability to 
consider a broader group of candidates for open positions, and 
a direct hire authority allows agencies to make on-the-spot 
offers for hard-to-fill jobs.
    However, GAO testified that while agencies are improving, 
they are not using all available flexibilities to speed up the 
hiring process. On a scale of 1 to 10, with 10 being the most 
effective use of the hiring flexibilities, how are agencies 
doing?
    Ms. Perez. I think, sir, it varies. Not to be evasive, but 
it really varies with the flexibility. And as we alluded to in 
your earlier question about fiscal constraints in the Federal 
Government, agencies are using the flexibilities as they see 
appropriate or as it meets their organizational needs.
    For the most part, for instance, we are seeing a great deal 
of use of the VSIPs and the VERAs, of the early buyouts and 
early retirement provisions. We are seeing increased use of 
student loan repayments.
    But we track agencies' efforts, and we are seeing their use 
of flexibilities throughout the organizations varies depending 
on their needs. There are some areas where we think they still 
need to use them more widely, and for that, OPM is working 
closely with the agencies and providing a great deal of 
training. We held 27 sessions last year throughout the country, 
where we provided training on the use of flexibilities. We 
provide a lot of technical assistance to individual agencies. 
We have done hiring makeovers where we go in and review their 
hiring efforts and then make recommendations as to what 
flexibilities might be appropriate.
    So, I think we have made a great deal of progress. I think 
OPM continues to develop better tools to help the agencies as 
well. On a scale of 1 to 10, I think it varies with the 
flexibility. Overall, I would say that we are probably a 6 or a 
7.
    Senator Akaka. Would you have any comment on that, Ms. 
Larence?
    Ms. Larence. I think for some of the flexibilities, we are 
seeing the agencies roll them out a little more slowly than we 
would have expected. For example, in looking at student loan 
repayment programs, most of the loans have been let by five 
agencies at this point.
    So, we have seen OPM and the CHCO Council really doing a 
lot of outreach and education, and we think that is key to 
helping agencies use flexibilities.
    The one thing we also have learned, though, is that you 
really can not tell the story by the numbers, just by looking 
at how many agencies and how frequently they are using these 
flexibilities, because sometimes it is a strategic decision not 
to use them. So, you really have to go into the agencies and 
ask them to talk about how they have taken a comprehensive 
approach to using these tools. For example, direct hire. 
Agencies may not have critical occupations that they need to 
fill at that point. So, we have learned to be careful with 
using just the numbers.
    Senator Voinovich. Thank you.
    Senator Akaka. Mr. Chairman, before I yield, I just want to 
say that you and I understand that agencies' budgets are 
stretched. While asking agencies to do their best to develop 
good strategies to stretch these budgets, and Ms. Perez did 
mention that strategic planning does help to do this, you and I 
can work together to educate our colleagues on this problem. 
Thank you, Mr. Chairman.
    Senator Voinovich. We are very fortunate to have Senator 
Carper with us this morning.
    And Senator Carper, you did not have an opportunity to make 
an opening statement, and I would welcome you to do that, and 
ask questions.
    Senator Carper. Thank you, Mr. Chairman. I will not make an 
opening statement. I would like to ask a direct question to Ms. 
Perez though, if I could.
    I understand that you have been to Hawaii?
    Ms. Perez. Yes, sir. [Laughter.]
    Senator Carper. Did you enjoy the hospitality that was 
extended to you there?
    Ms. Perez. I did.
    Senator Carper. Have you been to Ohio?
    Ms. Perez. Yes, sir.
    Senator Carper. Delaware?
    Ms. Perez. Yes, sir.
    Senator Carper. You have?
    Ms. Perez. To Delaware?
    Senator Carper. Yes.
    Ms. Perez. Yes, sir.
    Senator Carper. Have you been to Delaware, Ohio?
    Ms. Perez. No. There I have not been. [Laughter.]
    Senator Carper. When I was a student at Ohio State 
University, used to think that Delaware was a little town about 
30 miles north of Columbus, where I went to school. And later 
on, when I was getting out of the Navy, I found out there was a 
whole State. [Laughter.]
    And that Ohio probably was not a big enough State for both 
George Voinovich and me to be governor in, so I had to move to 
Delaware to find my fortune. Well, find my fame, but not my 
fortune. [Laughter.]
    My wife is hoping I will find my fortune, but not yet.
    We thank you for being here today, and we welcome your 
testimony, and your help. As you know, the President has 
proposed giving, I think, basically all Federal agencies the 
same kind of significant new personnel flexibility that has 
been afforded to the Department of Defense and our new Homeland 
Security Department.
    Do you think we ought to slow down a little bit and wait to 
see how those two big agencies are using this flexibility 
before we expand them?
    Second part of that question, do you believe that other 
agencies, other than the two that I have mentioned, are fully 
utilizing the flexibilities that are already afforded to them 
under current law?
    Ms. Perez. If I may, sir, with regard to whether we should 
move forward with additional flexibilities of government-wide 
reforms, I am of the opinion, after having worked for 3 years 
now with our agencies, that we absolutely should. What 
specifically we move forward with in terms of what are the 
features of the government-wide effort, I do not know. But I do 
think that there is absolutely no need to wait to see what 
happens in the Department of Homeland Security and what happens 
at the Department of Defense. I think with regard to the 
provisions on compensation and some other provisions that are 
at present in those two personnel reforms, these are 
flexibilities that have been in place in government for a very 
long time. The Department of Defense has had a number of 
demonstration projects that have been very successful, and we 
have good data, evaluation data, to look at.
    I think with regard to your other question, ``should 
agencies be ready to assume the additional responsibilities?'' 
I agree with you completely, that that should be the case. I 
think that through the work over the last 3 years, and the work 
of OPM and the agencies specifically, they are continuing to 
build their infrastructures to assume the additional 
responsibilities. We need to be cautious as we move forward, 
but we think we can provide the flexibilities in an environment 
where there is a great deal of accountability, where we review 
the Agency's efforts. We laid out criteria as to what 
constitutes the right infrastructure to support the additional 
flexibilities, and then we support them and monitor their 
progress. If they do not use it correctly, then we can take 
corrective actions to address that.
    But I do not think, sir, that it is necessary to wait until 
DHS and DOD are implemented. Indeed, the fact that they are 
implemented well in one organization will not determine that 
they will be implemented well in other parts of the government.
    So, I think we are ready. I think we need to move 
cautiously and make sure they have the right infrastructure, 
and the right accountability systems in place. I do believe 
that there has to be flexibility with accountability.
    Senator Carper. Why do you believe that some agencies take 
better flexibilities that are extended to them than do others?
    Ms. Perez. I think that the use of flexibilities--and 
Senator Akaka asked the question of constraints, fiscal 
constraints and so forth--I think that their use needs to be 
really in the context of the operational needs of that 
organization, and while all the flexibilities make good sense, 
they may not necessarily make good sense for a particular 
organization.
    I also think that the training that is required to make 
sure that they are implemented well takes time. Our 
organizations are complex, they are large. Three years in the 
scheme of things, and in the life of an organization, is not a 
whole lot of time.
    So, I think that training is a good thing to do, and I 
think agencies are training their employees to make sure they 
are used correctly.
    So, I think that they are making progress, but I think they 
are using them as they see appropriate. So it is not 
necessarily, as Eileen suggested, it is not how many they are 
using, it is how are they using them that I think ultimately 
matters most, sir.
    Senator Carper. Eileen, is she putting words in your mouth?
    Ms. Larence. Well, as you all know, the Comptroller General 
is very passionate about transforming the Federal Government's 
human capital system and making it a more modern and credible 
and effective system. He is also equally cautious about not 
moving forward before agencies are ready and about phasing it 
in. So, maybe we have learned a lesson with the SES regulations 
in that in some cases agencies that received provisional 
authority still are not showing that their systems are where 
they need to be to use those authorities, and they are not 
making clear distinctions among the performance.
    So, the Comptroller General firmly believes that agencies 
should be able to----
    Senator Carper. What do you call him? Do you call him Mr. 
Comptroller General, do you call him Mr. General, or do you 
call him General Walker?
    Ms. Larence. We call him Comptroller General Walker.
    Senator Carper. I call him ``His Excellency.'' [Laughter.]
    He seems to like that.
    Ms. Larence. Yes, I would agree. [Laughter.]
    He would say that we need to make sure that the agencies 
demonstrate they can use the flexibilities and not promise that 
they can use them. I think that if the Congress decides it 
wants to wait and see how DOD and DHS play out, we could use 
the time to make sure that the agencies have their performance 
management systems and their plans in place to be able to use 
the flexibilities, especially if we are going to implement more 
performance and market-based compensation systems.
    Senator Carper. Are there any questions you have in mind 
that we ought to be asking you that we are not?
    Ms. Perez. No, personally, I think you are hitting on the 
right questions.
    Senator Carper. The question about Delaware kind of threw 
you though, didn't it?
    Ms. Perez. Yes, that definitely threw me off there for a 
while. I did not have it in my notes.
    Senator Carper. I thought you responded well.
    Anything we ought to be asking that we have not?
    Ms. Larence. I think the fact that you are asking the 
questions is what is important, quite frankly.
    Senator Carper. Thanks. Thanks to you for being here.
    Senator Voinovich. Thank you, Senator Carper.
    I would like another 3-minute round of questions. We do 
have three other witnesses, but there are a couple of things I 
and my colleagues would like to ask.
    Does the GAO develop metrics to evaluate whether or not 
agencies are using the flexibilities the way they should?
    Ms. Larence. What do you mean by metrics?
    Senator Voinovich. Congress has aksed GAO to evaluate 
agency use of these flexibilities, and we will be asking you to 
do more. So, before GAO constructs these evaluations, they must 
develop a system to evaluate whether or not agencies are 
utilizing the flexibilities.
    Ms. Larence. Yes.
    Senator Voinovich. Does GAO work with OMB in developing the 
metrics?
    Ms. Larence. Yes.
    Senator Voinovich. So as GAO works, you know OMB's 
perspective so that you would both be on the same page.
    Ms. Perez. If I may, actually, I think that is an excellent 
point. In fact, 3 years ago, when we were developing the 
standards of what constitutes good human capital practices in 
the Federal Government, OPM, OMB, and GAO met and came out with 
the current expectations that, in fact, they reflect the 
thinking of the three organizations.
    With regard to looking at the agencies and evaluating the 
agencies' use of flexibilities, the agencies come to OPM in 
advance of implementing or executing their flexibilities, and 
we look at their request in the context of their human capital 
practices. So we do have metrics or ways to review their 
requests with regards to a more strategic long term-view of 
human resources management.
    Certainly, we have not worked specifically with the GAO on 
the use of flexibilities, but we can consider that.
    Senator Voinovich. I just suggested that it might be 
beneficial to have the two working from the same evaluation 
criteria.
    Do you look at agency budgets for training? Does GAO have a 
training budget? In other words, right now we have every reason 
to believe that Homeland Security has budgeted to conduct 
appropriate training for the new performance management system. 
We have real reservations about whether or not the Department 
of Defense is doing the same thing.
    Have either of your agencies looked at these Department's 
budgets for training or discussed this with OMB.
    Ms. Perez. In fact, with the Office of Management and 
Budget, we look very closely at the agencies' overall human 
capital efforts because they are a partner in the evaluation of 
the agencies' efforts with regard to the President's Management 
Agenda. And specifically with training, about a year or so ago 
we began to do data calls and require the agencies to report 
how much they are actually investing in training, and found 
that agencies are not collecting a lot of the information. So, 
we are paying a lot of attention to training.
    We are evaluating, and incorporating into the score card, 
Mr. Chairman, which is the tool that we use to stay very close 
to the agencies on a quarterly basis, very specific 
requirements with regard to, not so much the dollar amount, but 
investing in training, and requiring agencies to train their 
managers in the competencies they need to identify gaps that 
may exist, and then to take corrective actions to close those 
gaps. So, those requirements are in place.
    Senator Voinovich. The issue is money?
    Ms. Perez. Yes.
    Senator Voinovich. I would be interested in again surveying 
agencies on training budgets. I did this when I first came to 
the Senate--I want to know what agencies are spending on 
training and how it is reflected in the budget. The last time I 
did this, of the 12 agenceis that responded to my request, 11 
said they did not know and one said they knew but would not 
share.
    Ms. Larence. Mr. Chairman, we do have an ongoing job right 
now looking at the Department of Homeland Security's strategic 
plan for training, and we are looking at their max HR human 
capital project as one of our case studies, and we are looking 
at to what extent they are funding that up front.
    Senator Voinovich. Thank you. Senator Akaka
    Senator Akaka. Thank you, Mr. Chairman.
    Ms. Perez, as you know, 84 percent of SES members have 
received their Agency's highest performance rating over the 
past few years. As agencies strive to make meaningful 
distinctions in performance when measuring the performance of 
the SES, I am concerned that some agencies will apply quotas 
rather than actually making meaningful distinctions.
    What efforts will OPM take to ensure that agencies do not 
apply quotas, which limit the number of high performance 
ratings and salary increases above the executive schedule level 
three?
    Ms. Perez. Sir, the regulations that OPM promulgated with 
regard to the SES new pay-for-performance system are very 
specific in not allowing agencies to set any kind of forced 
distribution or quotas, for the appropriate number of 
executives rated at the highest level. It is prohibited.
    When we see or have indications that an agency may have, or 
that a manager may have, inappropriately sent any guidance or 
anything else may be taking place, we take corrective action 
and immediately work with the agencies. So, it is not allowed. 
We monitor it closely, and we work closely with the agencies, 
so in the event that there is any sense out there that this is 
happening, that it is addressed immediately. It is not allowed, 
period, end of conversation.
    Senator Akaka. Ms. Larence, GAO reported last year that 
agencies were not using their management flexibilities because 
of a lack of policy and guidance from OPM. Since that time OPM 
has held several training sessions for agencies. How would you 
rate the training that OPM has provided, and is more needed?
    Ms. Larence. We have not participated in that training or 
really done an evaluation of that, but we have seen several 
things that the agency has done. First of all, they did issue 
fairly clear regulations on direct hiring and category rating 
authorities. They gave some good examples in those regulations 
of how human capital personnel could use those flexibilities. 
They gave scenarios.
    Second, they have done a lot to their Website to make it 
much more user-friendly and much more helpful for Human Capital 
Officers to be able to use these flexibilities.
    So, we did see a number of signs where they are outreaching 
to the agencies. What we have not done, though, is we have not 
gone back in to see to what extent these agencies have used 
these flexibilities, since our last review. So we do not know 
what effect OPM's action have had yet.
    Senator Akaka. Thank you for your responses.
    Mr. Chairman, as your Ranking Member, I would like to join 
you in that letter asking about the agencies' training program 
budgets.
    Senator Voinovich. Thank you.
    Senator Akaka. Thank you.
    Senator Voinovich. Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman.
    I know most of the questions I had have been asked, but I 
just thought, Ms. Perez, I may ask you one about the category 
rating system flexibility. It is intended to maintain veterans 
preference by listing veterans ahead of nonpreference eligible 
individuals.
    Ms. Perez. Yes, sir.
    Senator Pryor. What effect has category rating had on 
veterans preference?
    Ms. Perez. We have done careful analyses of the impact of 
category rating in the hiring of veterans when we did a 
government-wide review of veterans' issues, an audit probably 
about 2 years ago, sir, and we found absolutely no adverse 
impact. And, in fact, we have a report that we would be happy 
to share with you that suggests that is the case. When we go 
out and do our training, we are very specific in terms of how 
veterans' preference applies in all of the flexibilities, and 
have made a commitment in the last 3 years, a very strong 
commitment not only to making sure that veterans preference 
provisions are adhered to, but also that we make outreach, that 
we reach out to the veterans to make sure that we make every 
opportunity available to them to come into government, and to 
educate them about the opportunities that are available in 
government. So we take that very seriously.
    Senator Pryor. So, it has had no adverse impact?
    Ms. Perez. No, sir.
    Senator Pryor. Thank you, Mr. Chairman. That is all I have.
    Senator Voinovich. Thank you.
    I want to say that I really appreciate you being here 
today. A thought came to me, if we had not spent all this time 
on these legislative reforms, most of the things that you 
talked about would not be happening? So, I know we still have 
lots of challenges, but I must say to you that I have been 
impressed with what you have shared with us today. Ms. Perez, 
if this is your first hearing, it was a home run.
    Ms. Perez. Thank you. Thank you very much, sir.
    Senator Voinovich. I am reassured that we have people like 
you, Ms. Larence, in our working agencies, because you really 
do make a difference. I can tell from your testimony that you 
are fired up about this, and you are motivated. Thank you.
    Ms. Perez. Thank you.
    Senator Voinovich. Testifying on our second panel today is 
Evelyn White from the Department of Health and Human Services; 
Jeffery Nulf from the Department of Commerce; and Rafael DeLeon 
from the Environmental Protection Agency; and Vicki Novak from 
the National Aeronautics and Space Administration.
    It is interesting. As my colleague, Senator Pryor, said all 
four of these agencies have new leadership. Thank God we have 
experienced folks working so that they can help the transition 
from one new director or administrator to another.
    Ms. White, we are going to give you an opportunity to 
testify first, and we again thank you for being here.

 TESTIMONY OF EVELYN M. WHITE,\1\ PRINCIPAL DEPUTY AND ACTING 
    ASSISTANT SECRETARY FOR ADMINISTRATION AND MANAGEMENT, 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Ms. White. Thank you. Good morning, Chairman Voinovich and 
Members.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. White appears in the Appendix on 
page 73.
---------------------------------------------------------------------------
    My name is Evelyn White, and I am the Acting Assistant 
Secretary for Administration and Management for the Department 
of Health and Human Services. On behalf of Secretary Michael 
Leavitt, I appreciate the opportunity to appear before you to 
discuss HHS's accomplishments in the area of human capital 
management, and how the legislative flexibilities provided by 
the Congress have been incorporated into our human capital 
strategy.
    I want to thank Chairman Voinovich and the entire 
Subcommittee for your leadership and foresight in shepherding 
the various legislative initiatives that have led to increased 
efficiencies and strategic management of the Department's Human 
Resources.
    Much has happened since we were here last to discuss human 
capital. As we reported out last year, the Department was 
aggressively pursuing a strategy to achieve green status in the 
President's Management Agenda for Strategic Management of Human 
capital, and I am pleased to announce that HHS is one of the 
first Federal agencies to achieve green status and has remained 
green through the last reporting period.
    Senator Voinovich. Congratulations.
    Ms. White. Thank you.
    In 2004 HHS submitted for certification to the Office of 
Personnel Management and the Office of Management and Budget, a 
new senior executive service performance based management 
system. HHS was one of the first Federal agencies to submit its 
SES performance system and receive approval. A centerpiece of 
our new SES performance system is the linkage between 
organizational achievement and the individual accomplishments 
of our SES members. Recently, OPM cited our approach as a best 
practice, and our SES performance management system has been 
recertified for calendar year 2005.
    Senator Voinovich. I want to interrupt you. It just came to 
me that your former director was a former governor.
    Ms. White. That is absolutely right.
    Senator Voinovich. Tommy Thompson. I worked with Tommy when 
I was Governor of Ohio. He was my mentor. I followed him 
through the Midwestern Governors Association, Republican 
Governors Association, and the National Governors Association. 
This is an editorial comment, but I believe the fact that he 
was a former governor gave him a lot more insight into how 
important human capital management is for the success of an 
agency.
    Ms. White. It is wonderful to note that you know the kind 
of energy that Secretary Thompson had at the Department of 
Health and Human Services.
    Senator Voinovich. You are lucky to have Mike Leavitt.
    Ms. White. Absolutely.
    Senator Voinovich. Mike Leavitt followed me through the 
various governors associations. Tommy was my mentor. Then I was 
Mike's mentor. This is great. [Laughter.]
    Ms. White. It is wonderful. I hope you are adding those 
seconds to my time here. [Laughter.]
    Thank you very much.
    Also, in 2005, we will be implementing a new departmental 
performance management system for non-SES and nonbargaining 
employees, moving away from the pass/fail system. This new 
system will add greater granularity in evaluating performance, 
better align performance with organizational achievement, 
establish cleaner linkages with the SES performance management 
system, and position the Department for future linkages between 
performance and individual pay decisions.
    In 2005, each operating and staff division throughout the 
Department developed and submitted leadership succession and 
overall workforce plans. Each identified human capital needs as 
well as any gaps between current employment and future needs 
and mission critical positions. These plans provide a map for 
the Department's future human capital needs tied to a strategic 
mission and direction for the Department.
    To meet our human capital needs, we continue to use and 
expand the use of flexible employment authorities. Our highly 
successfully emerging leaders program which brings the best and 
brightest recent graduates to work for HHS has entered its 
fourth year. Our SES candidate develop program has placed 
nearly 40 percent of the first graduating class in SES 
positions.
    HHS is reshaping our workforce, using authority approved in 
the Federal Workforce Improvement Act of 2002, authorizing with 
OPM and OMB approval voluntary separation incentive payments 
and early-outs.
    Using the Federal Employee Student Assistance Act and 
separate authority granted to the National Institutes of 
Health, the Department has made extensive use of student loan 
repayment programs with over 1,500 employees having been 
approved. The Department has crafted additional implementing 
guidance to expand employee coverage and use by the various HHS 
organizations, and implementation of this policy is expected in 
this fiscal year.
    In addition, the Department has piloted the use of category 
rating. This method for selecting new employees has provided 
for--in the Chief Human Capital Officers Act of 2002. I can 
report our pilot has been successful in demonstrating its use 
in expanding the pool of candidates for selection, and the 
Department will issue implementing guidance for use in this 
approach throughout the Department by the end of this fiscal 
year.
    The future for HHS's human capital program is bright, and 
HHS will continue to be a leader in the Federal workforce.
    In 2004, the Department was selected by OMB as one of five 
candidates to be a Human Resources line of business service 
provider. The Department will offer to other agencies across 
the government end-to-end solutions that take advantage of 
state-of-the-art information technology applications. HHS will 
also be the first Federal department to implement a fully 
electronic official personnel folder, integrated with our 
enterprise Human Resources system which will allow employees 
access to their personnel folder anywhere, any place, and any 
time.
    Also, the Department is implementing a learning management 
system that provides a set of electronic tools to manage and 
support employee training and development activities.
    As for recently enacted human resources flexibilities, HHS 
continues to adopt these flexibilities as guidance as issued by 
OPM. The Department is thoughtfully and strategically 
implementing these flexibilities and has developed the 
appropriate internal implementing guidance. We look forward to 
receiving OPM's guidance on recruitment, relocation and 
retention bonuses, as well as the guidance on the annual leave 
enhancement provisions of the act.
    In conclusion, we appreciate the flexibilities that 
Congress has provided as they have enabled the Department to 
improve our effectiveness in managing our human capital 
initiatives across a broad spectrum of these occupations. 
Nothing is more important than to ensure that we have the right 
people in the right place at the right time to meet the human 
capital service needs of all Americans.
    Thank you, and I will be happy to answer any questions.
    Senator Voinovich. Thank you very much. I think you know 
that Dr. McClellan was before this Subcommittee and did a very 
good job. I found it reassuring, as I am sure Senator Akaka and 
the other Members of the Subcommittee did, that they have used 
the hiring flexibilities. To date, they have hired about 400 
new employees, and they plan to hire another 100 more. If it 
was not for the flexibilities, CMS would not be able to get the 
agency ready to implement the new prescription drug. So, that 
is great.
    Ms. White. That is absolutely great.
    Senator Voinovich. Thank you. Mr. Nulf.

TESTIMONY OF JEFFERY K. NULF,\1\ DEPUTY ASSISTANT SECRETARY FOR 
          ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

    Mr. Nulf. Good morning, Mr. Chairman and Members of the 
Subcommittee. My name is Jeffery Nulf, and I have the pleasure 
to serve President Bush as the Deputy Assistant Secretary for 
Administration at the Department of Commerce.
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    \1\ The prepared statement of Mr. Nulf appears in the Appendix on 
page 77.
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    Otto Wolfe, our Chief Financial Officer and Assistant 
Secretary of Administration, has asked me to convey his regrets 
at being unable to attend today due to a scheduling conflict. 
But on behalf of Secretary Gutierrez and----
    Senator Voinovich. I am glad you are here.
    Mr. Nulf. Thank you, sir. I am glad to be here. And 
Assistant Secretary Wolfe would like to thank you and thank 
this Subcommittee's leadership for providing seeking solutions 
to human capital issues affecting the entire Federal workforce.
    I appreciate the opportunity to discuss one of the most 
significant challenges facing Executive Branch agencies today--
how to compete successfully to recruit and retain a skilled and 
motivated workforce through human capital flexibilities. The 
potential benefits that these flexibilities offer have 
significant promise, and we welcome the chance to share our 
experience and learn from our colleagues here today.
    The Department of Commerce consists of 13 operating units 
with diverse and often highly technical portfolios, that 
together foster economic opportunity both domestically and 
abroad for all Americans. Congress faces dynamic challenges in 
recruiting and retaining individuals with the combination of 
skills and abilities needed to carry out its various missions. 
This is particularly true of individuals in highly technical 
fields such as physicists, chemists, statisticians and 
economists, as well as Senior Executive Service (SES) managers. 
We, like many other Federal agencies, must operate in a highly 
competitive labor market to fill increasingly specialized 
positions. This situation is exacerbated by the knowledge that 
over the next 5 years roughly one-half of the Commerce 
workforce will be eligible for retirement.
    The potential impact that such a loss of experience and 
institutional memory would have on program operations is 
staggering.
    Also during the next 5 years the Department faces the 
daunting challenge of recruiting and training upwards of 
500,000 employees needed to conduct the 2010 census.
    Senator Voinovich. How many did you say?
    Mr. Nulf. Half a million, 500,000, sir, Similar numbers to 
the last census, sir.
    Senator Voinovich. OK.
    Mr. Nulf. Within the context of recently enacted human 
resources flexibilities and the President's Management Agenda 
(PMA), Commerce employs a cohesive strategy in meeting these 
many challenges. In 2001, in collaboration with our operating 
units, we conducted a first-ever workforce assessment across 
the Department. Through this effort, we identified the three 
most significant human capital challenges facing the Department 
of Commerce: One, high turnover rates in mission critical 
occupations; two, a projected surge in retirement among Senior 
Executive Service managers; and three, the need to strengthen 
competencies to address mission changes, technological 
innovations resulting from E-government, and workforce changes 
caused by various factors, such as business re-engineering and 
competitive sourcing.
    To help us respond to these needs, a 5-year workforce 
restructuring plan was prepared with input from all Commerce 
operating units, and adopted. Regular meetings with our 
Principal Human Resources Managers Council, Chief Financial 
Officers Council, Chief Information Officers Council, as well 
as working groups at the staff level provided opportunities to 
track progress in implementing the initiatives, sharing 
experiences, and obtaining feedback on our common interest.
    Within this framework, Commerce employs a wide range of 
human resources flexibilities to meet the challenges that we 
face. For example, we continue to reshape the Department's 
workforce and correct skill imbalances using the new voluntary 
early retirement and separation incentives, authority 
provisions. To date approximately 250 employees in 7 operating 
units have taken advantage of these incentives. We are also in 
the process of identifying critical occupations where we will 
need to request direct hire authority under the Federal 
Workforce Improvement of Homeland Security Act of 2002.
    Additionally, our bureaus are using the expanded authority 
to pay for academic degrees as an effective tool to retain 
quality employees and close skill-gaps. We have implemented the 
Federal Employee Student Loan Repayment Program. Commerce 
managers can use this authority, as appropriate, to compete 
more effectively to recruit and retain high quality employees.
    The Department of Commerce has implemented several 
provisions of the Federal Workforce Flexibility Act of 2004, 
which also assists managers in recruiting and retaining the 
best and brightest candidates. By allowing the Department to 
grant 8 hours of annual leave, in lieu of 4 hours of annual 
leave, we believe our efforts to attract an elite executive 
corps will be greatly enhanced.
    In addition to these tools, the Commerce Demonstration 
Project plays a critical role in our efforts to effectively 
address current human resource challenges. Commerce has been 
managing pay-for-performance systems for 17 years, first under 
a demonstration project at the National Institute of Standards 
and Technology (NIST) beginning in 1988. Following the success 
of the China Lake experiment, this alternative personnel system 
was made permanent at NIST in 1996 and served as a model for 
the current Commerce Demonstration (Demo) Project.
    Currently, 4,200 employees from five of our operating units 
are managed through this Demo Project. The Demo Project 
provides pay-for-performance in a broadbanding framework, 
performance-based salary increases and bonuses, and supervisory 
pay differentials.
    Additionally, managers have authority to establish pay 
levels, classify positions, and utilize recruitment and 
retention allowances. The success of this initiative depends on 
accountability, training and communication, and ensuring that 
the fundamental precept of this initiative--linking pay to 
performance--is a reality. Accountability hinges on continual 
monitoring and evaluation. An oversight committee, the 
Departmental Demonstration Project Board, provides overall 
program and policy oversight to bureau-specific boards and 
ensures that annual evaluations--conducted by an independent 
contractor--meet OPM requirements.
    Continual training and communication between supervisors 
and employees on all aspects of these initiatives is crucial, 
particularly with respect to performance feedback and the 
mechanics of the pay-for-performance system. Our experience 
indicates that any changes to employee management structures, 
be they for pay or performance, are often met with a degree of 
apprehension by the effected workforce, including minorities. 
Concerns were expressed by some minority employees during the 
pay-for-performance system roll-out, that this would result in 
disparate treatment. To address these concerns, management 
fully engaged in discussions with the employees voicing this 
concern, as well as the affinity groups that represent their 
interests.
    To that end, we have enhanced monitoring mechanisms in 
place to track the actual results of the Demo Project across 
all affected demographics. The conversation with these 
employees and the affinity groups that represent them will 
continue as we collectively receive more detailed operational 
results.
    As a result of our most recent annual program evaluations, 
we have found that salary levels and bonuses are directly tied 
to performance, and that the Demo Project has had an extremely 
strong effect on retaining good performers.
    We are also involved in the government-wide effort to 
implement pay-for-performance for our SES managers. November 
17, 2004, the Department received provisional certification for 
its Senior Executive Service Performance Management System from 
OPM, with OMB concurrence for the last calendar year. In March 
2005, we received provisional certification for this calendar 
year.
    As part of our SES pay-for-performance initiative, we have 
instituted a rigorous performance monitoring process. At the 
end of fiscal year 2004 the Department adopted a new approach 
to assessing the performance of its SES managers in relation to 
the performance measures established under our annual 
performance plan. In meetings with the Deputy Secretary, each 
bureau was called on to provide self-assessment of their 
performance during the year in relation to program objective 
and performance measures. Bureau input was couples with input 
from the departmental staff offices. The results were used to 
ensure that meaningful distinctions in performance were made, 
and that performance awards and salary increases reflected 
those distinctions.
    In fiscal year 2004, the Department rated 49 percent of its 
SES managers at the outstanding level. This was down from 81 
percent in 2003; 44 percent at the commendable level, and this 
was up from 15 percent in 2003; and 7 percent at the fully 
successful level, up from 3 percent in 2003.
    During fiscal year 2005 we are broadening the Department's 
corporate focus on performance by holding quarterly reviews 
with senior managers from each of the bureaus. During these 
sessions--they are conducted by our Deputy Secretary--each 
bureau briefs on their progress relative to implementing 
management reforms under the PMA, as well as achieving their 
annual performance targets and priorities. The resulting 
dialogue is helping us to track performance and results on a 
routine basis, allowing adjustments as may be needed throughout 
the year, assuring that there are no surprises about 
organizational performance at year's end.
    Senator Voinovich. Mr. Nulf, would you wrap up your 
testimony?
    Mr. Nulf. Yes, sir. I would be happy to. I have some other 
information, I hope will come out in Q and A. I would be happy 
to share it, sir.
    Senator Voinovich. Make sure it does.
    Mr. Nulf. Yes, sir.
    In closing, these represent just a few of the management 
tools we are employing to meet human capital challenges. 
Through these and other efforts I am pleased to report that 
Commerce recently achieved a green score card for Strategic 
Human Capital Management initiative under the PMA. That 
accomplishment, which is the result of a lot of hard work by 
the human resources management team, as well as the leadership 
of Commerce, is very rewarding. We recognize, however, that 
this rating is clearly not an end in and of itself, and that 
continued improvement is not only possible but essential to 
ensuring that we are able to carry out our evolving missions 
through a skilled, knowledgeable and dedicated workforce.
    Again, I would like to thank the Chairman and this 
Subcommittee for their leadership in developing flexible and 
workable solutions for addressing current human capital 
concerns, and I would be happy to answer your questions, sir.
    Senator Voinovich. Thank you very much.
    Mr. Nulf. Thank you, sir.
    Senator Voinovich. Mr. DeLeon.

   TESTIMONY OF RAFAEL DELEON,\1\ DIRECTOR, OFFICE OF HUMAN 
           RESOURCES, ENVIRONMENTAL PROTECTION AGENCY

    Mr. DeLeon. Chairman Voinovich and Members of the 
Subcommittee, I appreciate the opportunity to appear before you 
today to discuss EPA's efforts in utilizing the recently 
enacted flexibilities to address our human capital challenges. 
I will be summarizing my comments, and thank you for including 
them in the record.
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    \1\ The prepared statement of Mr. DeLeon appears in the Appendix on 
page 86.
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    Let me preface my specific comments by saying that we at 
EPA are extremely proud of all of our human capital efforts, 
many of which were under way even before the current 
President's Management Agenda. At EPA, we consider our 
employees our greatest resource, and we value their dedication 
and commitment to the Agency's work. It is only through our 
people and the skills and knowledge they possess that EPA is 
able to achieve its critical mission of protecting human health 
and the environment.
    EPA's senior leadership has a longstanding commitment to 
human resources and human capital initiatives. We also have a 
strong record of identifying, anticipating, and addressing 
workforce needs and challenges. To that end, EPA employees, 
managers and supervisors have been asked to thoughtfully focus 
not only on what environmental results must be achieved, but on 
how those results will be achieved through the talent that we 
recruit, retain and develop every day.
    At EPA we devote a lot of time and money to our most 
critical resource: The people who are responsible for the 
success of the Agency's efforts. For example, in 1999, EPA 
conducted a workforce assessment project which projected 
anticipated workforce needs out to the year 2020. EPA developed 
our first comprehensive human capital strategy in the year 
2000, and then we revised it in 2003. The Agency's 2003 through 
2008 strategic plan and our ``Strategy for Human Capital II,'' 
provides the basis for much of our human capital planning and 
decisionmaking.
    The pieces of legislation that you have championed and 
authored have helped EPA address workforce needs and challenges 
in several years. The Homeland Security Act of 2002, which 
provided for our current early-out and buyout authority, 
allowed EPA the ability to reshape and restructure our 
workforce. At EPA in 2003, and again in 2004, we made early-out 
and buyout offers to a number of GS-14s, GS-15s, SESers, and 
members of the administrative and clerical staff. The resultant 
early-out and buyout vacancies have been utilized to 
restructure positions at lower grades in different series, or 
to bring new talent in.
    In 2005, we will base our decisions on whether to offer 
additional early-outs and buyouts on local-level workforce 
plans, plans developed and tailored to meet specific program 
and regional needs. The early-out/buyout program has been a key 
tool of the flexibility provided by the 2002 Act, and 
represents just one of several strategies and solutions we are 
employing to address talent gaps.
    Other strategies have included our environmental intern 
program and our leadership development programs. Similarly, the 
Senior Executive Reform Act strengthened the relationship 
between performance and pay of senior employees. In July 2004, 
OPM issued regulations that established the criteria that an 
agency's performance appraisal system must meet in order to be 
certified to use higher pay limits.
    In August 2004, the Agency requested provisional 
certification of our SES appraisal system. I am pleased to 
report that EPA was among the first to submit such a request to 
OPM, and was one of only a handful of Federal agencies to 
receive approval in October 2004.
    We have submitted a request to OPM to renew EPA's 
provisional certification for the SES system in 2005. 
Meanwhile, with an eye towards full certification, we are 
making revisions to strengthen the SES performance system, and 
we are evaluating the results of the fiscal year 2004 appraisal 
and recognition process in an effort to improve it.
    We are also benchmarking the pay plans implemented by other 
Federal agencies to find best practices to incorporate into our 
pay plan as appropriate.
    We view strengthening the linkage between performance and 
pay as an important tool for recognizing and retaining high 
performing senior employees.
    The student loan repayment program allows agencies like EPA 
to repay certain federally insured student loans to recruit or 
retain highly qualified personnel. I am happy to report that 
EPA has used this act to attract and retain top employees. Of 
course, payments for this program come from EPA's PC and B 
accounts, so Agency supervisors and managers must carefully 
balance their responsibility to manage basic salary and benefit 
requirements with the opportunities provided by this program.
    In fiscal year 2004, the Agency repaid $51,000 in student 
loans for seven employees. In 2005, the Agency has 18 student 
loan repayment agreements in place.
    These flexibilities have also established numerous changes 
in pay and leave administration as well as benefits policies. 
Members of the Senior Executive Service and employees in senior 
level and scientific or professional positions became eligible 
to immediately accrue annual leave at the rate of 8 hours for 
each biweekly pay period. I am also happy to report that EPA 
has used this authority to attract and retain senior level 
employees.
    Finally, a new section 4121 has also been added to Title 5, 
requiring agencies like EPA to regularly evaluate their 
training programs. EPA has focused attention in this area. Each 
of our developmental programs is reviewed for effectiveness on 
an annual basis to assure the information shared is current and 
accurate. Full evaluations have been performed on EPA's SES 
candidate development program, selection and placement process, 
the mid-level development program, and the EPA intern program. 
All programs are evaluated at level one for immediate impact on 
the participants and for level two, level three, and four.
    In conclusion, we at EPA are pleased with our record of 
success in the human capital area, and we are continually 
striving to improve on that record.
    Thank you for allowing me the time to address you today. I 
am happy to take your questions.
    Senator Voinovich. Thank you very much. Ms. Novak.

  TESTIMONY OF VICKI A. NOVAK,\1\ ASSISTANT ADMINISTRATOR FOR 
   HUMAN CAPITAL MANAGEMENT AND CHIEF HUMAN CAPITAL OFFICER, 
         NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

    Ms. Novak. Good morning, Mr. Chairman and Members of the 
Subcommittee. I am Vicki Novak, the Assistant Administrator for 
Human Capital Management at NASA and NASA's Chief Human Capital 
Officer. I am delighted to represent NASA here this morning to 
discuss our use of new workforce flexibilities, senior 
executive pay-for-performance implementation, and the use of 
voluntary early retirement and voluntary separation incentive 
payment authorities. I have submitted a written statement for 
the record, which I will take a few minutes to summarize, if I 
may. Let me begin, however, by expressing our appreciation, as 
others have done here this morning, for your leadership and 
support in the area of Federal human capital management, both 
government-wide and on behalf of NASA. We appreciate all that 
you have done and look forward to continuing to work with you.
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    \1\ The prepared statement of Ms. Novak appears in the Appendix on 
page 91.
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    As I and others have testified in the past, NASA has 
recognized for some time the internal demographics and external 
drivers that present a challenge to our human capital 
management. Some of these, such as an aging workforce, a wave 
of pending retirements, and skills imbalances, we share with 
many other agencies. NASA's situation is exacerbated, however, 
because scientists and engineers (S&Es), make up approximately 
60 percent of our workforce, and we are competing for S&E 
talent in a labor market that studies reflect face declining 
numbers of S&E graduates while the demand for such talent in 
the public and private sector continues to increase. We have 
been actively engaged in a number of programs and initiatives 
at NASA to help us manage our human capital more strategically.
    We continue to enhance the Agency's competency management 
system as part of our overall workforce planning and analysis 
capability. The competency management system provides NASA our 
first ever Agency inventory of workforce competencies needed to 
accomplish our mission using a consistent set of competency 
definitions.
    To ensure that the Agency's workforce competencies are 
aligned with our mission requirements, we complete an annual 
assessment in connection with our strategic planning and budget 
process. Using the competency management system, we identify 
the competencies and full-time-equivalent levels needed for 
current and future program requirements. We identify the 
competencies available in the workforce, project the 
competencies that will be available in the future, and 
determine the difference or the gap. Using these analyses, we 
develop recruitment, retention, development, and realignment 
strategies to address actual or projected competency gaps and 
surpluses in specific areas. For example, we may find that in 
some areas we need to strengthen our student programs and build 
the pipeline of talent. In other areas, targeted training and 
development may be needed, and in yet other skill areas we may 
need to redeploy employees to programs in which their skills 
are better utilized.
    As an example, mindful of our need to maintain a pipeline 
of fresh talent, last year NASA's centers collaborated in 19 
recruitment events on college campuses as part of our corporate 
recruitment efforts. This resulted in 96 diverse hires using 
the Federal career intern program flexibility.
    The new SES pay-for-performance system has enabled us to 
recognize the contribution to the Agency's performance of our 
top-performing SES members while it provided needed relief from 
pay compression. Our SES system has been provisionally 
certified for 2005. In implementing the new pay regulations, we 
established strict ground rules to ensure that pay increases 
were based on contributions to Agency success and to ensure 
that increases were only given to the best performers.
    In addition, we have strengthened our SES performance 
appraisal system to be more results-oriented, to assure greater 
accountability, and to create an even better linkage to the 
NASA strategic plan.
    The workforce flexibilities recently enacted provide us 
with valuable and versatile tools to address NASA's workforce 
management needs. This versatility is vitally important since 
different solutions are needed to address the variety of human 
capital challenges facing our Agency, challenges that are 
shaped by each center's demographics, local labor market, and 
program project needs. As mentioned in my written testimony, 
under the NASA Flexibility Act of 2004, the use of enhanced 
recruitment and relocation bonuses, more substantial travel 
benefits, and enhanced annual leave flexibilities have been 
very useful incentives in attracting new talent. The 
distinguished scholar hiring authority, more flexible term 
appointments, and more flexible SES term authority provide for 
more streamlined and flexible hiring. Enhanced relocation and 
retention bonuses, qualifications pay, and the ability to 
convert term to permanent appointments have been valuable tools 
in retaining and leveraging existing talent.
    The Federal Workforce Flexibility Act offers many of the 
same or very similar tools as those provided in the NASA 
Flexibility Act. Many of these flexibilities are and will 
continue to be important to NASA in reshaping and realigning 
the workforce to support the new Vision for Space Exploration. 
For example, we are currently using the buyout and early-out 
authorities provided in the workforce improvement of the 
Homeland Security Act of 2002 to encourage voluntary attrition 
in areas in which the need for certain competencies has 
diminished. We are using these tools to address workforce 
rebalancing both within individual centers as well as across 
the Agency in a managed, strategic way, and we have developed 
our buyout/early-out plans very carefully and deliberately to 
ensure that we do not buy out competencies that we still need 
or will need. We will continue to use hiring authorities and 
other incentives strategically to attract high-quality 
employees, as I alluded in my written testimony, and relocation 
and retention bonuses will be increasingly important in 
addressing workforce reshaping objectives, including space 
shuttle transition and retirement in 2010.
    In conclusion, with the new Vision for Space Exploration 
comes an increased challenge to continue to be strategic and 
innovative in human capital management. NASA must implement a 
number of fundamental changes in how the Agency approaches 
space exploration and better align the workforce to achieve the 
new vision. The workforce flexibility tools being addressed 
today are essential to ensuring that we reshape and maintain a 
high-caliber workforce with the skills and competencies we 
need.
    Let me close by saying again we greatly appreciate the 
excellent support you have provided in Federal human capital 
management in the past, Senator Voinovich, and we welcome your 
leadership in the future. I am happy to answer any questions.
    Senator Voinovich. Thank you very much. It has been very 
educational to see what all of have you tried to do with the 
new flexibilities.
    All four of you have achieved a level of certification for 
your performance management system, the Senior Executive 
Service. What steps has your agency taken to include employees 
in development of the system? What has been done to educate 
employees on the new system? This is a real issue for the 
Members of this Subcommittee. We support pay for performance, 
but we want to make sure that it is done right. I think there 
are a lot of people who like to talk about this, but anyone who 
has had to complete performance evaluation, as I have over my 
career, know this is tough. It was one of the toughest things I 
had to do, and I would be interested in knowing how you went 
about implementing these new systems in your respective 
agencies and receptivity so far.
    Mr. Nulf. Mr. Chairman, I would be happy to speak to that. 
I think it gets back to what you were speaking with the first 
panel on and your commitment to training and your commitment to 
throwing the resources behind it that are necessary to make it 
effective. I think pay-for-performance--if I may say, I am a 
private sector guy that is down here learning in many different 
ways, but I come from a world of pay-for-performance, and what 
it has done is put us on a level playing field with the private 
sector and the recruitment and retention of valuable human 
capital. And what we have done is to make sure that the 
employees are involved in all aspects of pay for performance. 
If it is transparent, sir, and all parties are involved--that 
being the employee, management, and leadership--everyone is 
well served, including the taxpayer. Our commitment to that on 
the training side is, I believe, second to none.
    Senator Voinovich. Ms. White.
    Ms. White. I will be happy to answer as well. When we 
started in about 2001 looking at performance-based approaches 
to how we would have some accountability for our senior 
leadership at the Department, starting from the top all the way 
through SES, we brought a contractor in to help us to develop 
performance-based contracts for our SES members, and from that 
the employees were able to participate to talk about and 
describe what their work responsibilities were as related to 
their mission, so we wanted to make sure that mission 
criticality was of the utmost importance in the way that their 
performance plans were being developed.
    In addition to that, we have a structure at HHS that is 
called the Management Forum. It consists of the executive 
officers across all the agencies at HHS, and at that monthly 
meeting, the group has an opportunity to help weigh in, to help 
shape the policies in the direction with respect to as well as 
the education of rolling out our SES performance-based system. 
We meet annually also to develop the elements of what will go 
into the outcome-based measures that we will hold our SESers 
accountable for.
    In this year, we will be cascading this performance-based 
system to the non-SES employees and non-bargaining unit 
employees. We intend to use a similar approach for employee 
involvement, and management, and pushing the information out in 
a training environment to get people hands-on opportunity to 
learn what the new requirements will be.
    Senator Voinovich. Mr. DeLeon.
    Mr. DeLeon. Yes. I think the one thing I would like to add, 
along with my colleagues, is at EPA, when we talk about 
performance, we have always had a strong SES performance 
management system, and along with OPM's help this past year in 
reaching certification, we discussed the standards very closely 
with our senior managers, with boards like the Executive 
Resource Board or our Human Resource Council----
    Senator Voinovich. Let me understand this. Have you had a 
pay-for-performance system in the EPA for a long time?
    Mr. DeLeon. No. I believe we have had a strong system 
already.
    Senator Voinovich. You have a robust performance management 
system for a long time?
    Mr. DeLeon. Yes, and along with the----
    Senator Voinovich. But not linking pay with performance?
    Mr. DeLeon. No. And in this past year, along with OPM and 
receiving provisional certification, we ensured that our 
standards met the performance that we wanted our senior 
executives to meet, so we have had some strong internal 
discussions what those standards should look like, what are 
SESers' performance standards and the expected level of 
performance that they should meet. We have used boards 
internally, like the Executive Resource Board and others, to 
help develop those standards. I think if you look at results of 
our most recent performance cycle, you will notice that we have 
had some differentiation not only in the bonuses, but also in 
the performance and the pay raises that we were able to 
institute this past year.
    Senator Voinovich. Ms. Novak.
    Ms. Novak. Yes. I can say that we have done many of the 
same things at NASA, but we took kind of a top-down approach, 
making sure that the senior leadership of the Agency understood 
the new SES pay-for-performance system and what the 
expectations were and the accountability requirements. Then we 
basically rolled that out at our field centers, using senior 
management as well as a lot of involvement of the human capital 
officers at our field centers.
    Senator Voinovich. Have you conducted demonstration 
projects at NASA?
    Ms. Novak. No, not really. We pilot things and test things 
but not actually demonstration projects in the official sense 
of the word.
    Senator Voinovich. Did you have a performance management 
system for your engineers?
    Ms. Novak. Well, we have always had performance evaluation 
of our engineers, both at the senior executive levels, as well 
as at the non-senior executive levels. We have changed our 
performance appraisal approach from time to time, engaging the 
unions and engaging the employees. In fact, last year we 
changed from a pass-fail type of a system to a three-level 
performance appraisal system. But we engage the unions and get 
their help and support, and that helps us with all of these 
different new initiatives that we roll out.
    Senator Voinovich. This is my last comment. It came to me, 
Senator Akaka, and Senator Pryor, that right now DOD is 
developing the regulations for a new personal system. It might 
be interesting to have a summary of what these agencies have 
done to prepare effective performance management systems, to 
see how their experience might assist to the discussion between 
the unions and DOD. In other words, these agencies have 
actually done it. It seems to me that it would be in DOD's best 
interest to fully understand how these systems operate, so 
their regulations are responsive to the real world. I think it 
would help them right now. I know the unions are concerned and 
maybe sharing the experiences at these agencies would be 
beneficial.
    As a matter of fact, if you would identify in your 
testimony, the steps you have taken to allay the fears of 
individuals. Thank you.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman. The brief 
discussion here leads me to ask this question first. Ms. Novak, 
I am glad to hear that you have been engaging the unions in 
this. I have heard from employees at NASA that individuals 
hired under NASA's flexibilities have not been allowed to join 
a union even though they are clearly part of a bargaining unit 
where they work.
    Let me be clear. It was not the intent of Congress in 
granting NASA personnel flexibilities to bar NASA employees 
from joining unions or to erode employees' collective 
bargaining rights. Are employees hired under the NASA 
Flexibility Act barred from joining unions? And if so, why?
    Ms. Novak. Sir, I am shocked to hear that, to be very 
honest, and I am clearly going to look into that.
    No, absolutely not. Of course, we have bargaining unit 
positions and some that aren't, and depending on the nature of 
the position, and, of course, we have several different unions 
that we have union members representing. We are using some of 
the flexibilities to bring people on board, to hire people, and 
there should be no bar whatsoever to those individuals. If they 
are otherwise available to join a union, that should be no 
impact. So I will clearly check into that, and maybe we could 
talk or I could talk with your staff and get some more details.
    Senator Akaka. Thank you for your response.
    Ms. White, you testified that HHS has a pilot program using 
the category rating method for selecting new employees. I want 
to follow up on Senator Pryor's question to Ms. Perez as to how 
veterans have fared under the category rating at HHS. As 
ranking member of the Veterans' Committee, ensuring the rights 
of our veterans is very important to me. Category rating was 
used in demonstration projects for several years at USDA, and 
the impact on veterans was positive.
    How have veterans fared under category rating at HHS?
    Ms. White. I can tell you that the pilot that we ran was 
with National Institutes of Health and with the Centers for 
Medicare & Medicaid Services, and we thought if we could have a 
successful pilot in those two organizations, it will work 
anywhere. And I am proud to convey that the pilot was very 
successful. NIH ran its pilot from June 2004 to March 2005. 
They included eight different kinds of vacancies, and they are 
the one of the high scientific organizations at HHS. And CMS 
started its pilot in January 2005 to present. And while they 
have only offered up one vacancy up to this point, they yielded 
10 different hires from that process. The veterans float to the 
top of each qualifying category and, as such, would be selected 
in the category that they fall into. And we make sure that it 
is not only important to protect the rights of veterans but to 
make sure that the processes we have provide that same 
assurance.
    And so we are looking forward now to implementing the 
category rating process across the department.
    Senator Akaka. Thank you.
    Ms. Novak, among the flexibilities granted to NASA through 
the NASA Flexibility Act was the authority to implement a 
scholarship-for-service program. This program is similar to one 
I championed for national security positions that was included 
in the Intelligence Reform Act which became law in December. 
What is the status of NASA's scholarship-for-service program?
    Ms. Novak. Senator Akaka, thank you for asking that. We 
have an assistant administrator for education. Her folks are 
doing the staff work associated with that, but I can tell you 
what the status is. They are in the process of very shortly 
briefing our new administrator, Dr. Michael Griffin, on that 
and publishing some regulations. Hopefully the plan is to have 
an estimated 20 students on board in the program in the fall 
time frame. We are going to increase the numbers with each 
year, that is my understanding, but hopefully in the fall that 
will actually be kicked off.
    Senator Akaka. Thank you. Mr. Chairman, my time is almost 
up. I have a question for the rest of the witnesses, but I will 
be glad to ask it in a second round.
    Senator Voinovich. Why don't you go ahead and ask now.
    Senator Akaka. All right. Ms. White, Mr. Nulf, and Mr. 
DeLeon, I just discussed the scholarship-for-service program 
with Ms. Novak. Do you believe that a similar program would be 
helpful to recruit employees for your respective agencies 
provided there is adequate funding? Mr. Nulf.
    Mr. Nulf. Not knowing all the details of the program 
itself, sir, but I will speak at a level that I am comfortable 
with to say that first hearing of it and getting a better 
understanding of it, I might speak more to the details, but I 
would say this. We are such a diverse organization, Commerce, 
and our needs cross more spectrums and vocations than one can 
shake a stick at. And that being said, the more tools and the 
more flexibilities and the more capabilities we have to bring 
in via scholarship or grants or what have you the youth of 
America into the walls of Commerce, the better off certainly we 
will be served in the long run.
    So my short answer would be, yes, sir, it is something that 
we would be very open to and would be interested in discussing 
further.
    Senator Akaka. Thank you. Ms. White.
    Ms. White. I would be interested in knowing more about 
NASA's program, but we think at Health and Human Services we 
have a number of programs that fit that kind of model. Whether 
they are called service fellows or scholarship for service or 
things of the like, our health organizations and our National 
Institutes of Health use those kind of authorities very 
extensively.
    As you might well know, the importance of getting in people 
who have the top-level research that we need for National 
Institutes of Health and doctors that will help us carry out 
our mission requires us to be innovative in how we outreach to 
individuals who have the skill sets where we would have to 
offer some monetary incentive for them to not only come but to 
stay in our organizations. And sometimes being a part of 
premier scientific organization by itself isn't enough, and, 
therefore, I think one of the reasons that NIH is able to yield 
so many of their employees that were approved for the student 
loan repayment which represents the bulk of that 1,500 that I 
mentioned earlier. Their payment is roughly $49,000 per 
employee. I think this is similar to the model that NASA may 
have, but I would be happy to look into that to see if we could 
add another to the group of programs that we have currently.
    Senator Akaka. Thank you. Mr. DeLeon.
    Mr. DeLeon. Yes, similar to my colleague's comments, I am 
not familiar with the specific program for NASA, but we have 
talked about a similar program, an environmental fellows 
program, where people would come in for service, that type of 
program.
    And I would say that if we had the authority and certainly 
the resources to implement such a program, we would be very 
interested in pursuing something that was applicable to EPA. 
So, yes, thank you.
    Senator Akaka. Well, thank you for your responses. I know 
the Chairman and I look forward to the time--and maybe it is 
happening now--where different agencies will be able to talk to 
each other about some of these programs and share best 
practices instead of starting from zero so that we can all 
benefit from each agency's experiences.
    Thank you very much, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Akaka. Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Voinovich. Senator Pryor, I want to say thank you 
very much for coming. Senator Akaka and I usually hold down the 
fort. You are very nice to us to show up.
    So that people know, there are many Members of this 
Subcommittee concerned about this issue. The problem in the 
Senate today--and the public should know it--is we could all be 
at three different places at the same time and all of them 
justified. We are constantly prioritizing what we have to do. 
In my particular case, I am the Chairman of the Subcommittee. I 
have to be here.
    Senator Akaka, God bless you. He is here, and some of our 
other Members try to come in and help us out. And I don't want 
you to get the impression that people are not concerned about 
this, but that is the way it works here in the Senate.
    Senator Pryor.

                OPEN STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Mr. Chairman, and once again I 
thank both of you for your leadership on these very important 
issues, and these are not issues that always make the 
headlines, but this is the nuts and bolts of government. And 
you are both very committed to try to improve government, make 
it run more efficiently and more effectively, and I join you in 
that, and thank you for having me today.
    Let me just jump right in, if I may, Ms. Novak, and ask you 
about NASA. Has NASA found the OPM 45-day hiring model to be 
realistic for all administrative positions?
    Ms. Novak. We have found the 45-day model to be realistic 
for a good number of our positions. We are fortunate we have an 
automated staffing and resume recruitment system, which allows 
us to run vacancy announcements and get through that whole 
process pretty quickly, most often meeting the 45-day 
requirement.
    Senator Pryor. When you say a good number, what type of 
positions does the 45-day model not work for?
    Ms. Novak. In some cases for those that are very technical 
and that require a wide search, looking for very specific 
technical qualifications, of which we have a good number.
    Senator Pryor. That is why I ask you the question. And I 
see a couple of heads nodding here on the panel. That is also 
your experience as well?
    Mr. DeLeon. Yes.
    Ms. White. Yes.
    Mr. Nulf. Yes.
    Senator Pryor. Sometimes, in some cases, the more technical 
or the more precise the requirements are, the 45-day 
requirement may not always work.
    Ms. Novak. One size doesn't always fit all.
    Senator Pryor. But, nonetheless, do you like the 45-day 
model?
    Ms. Novak. I think it works fairly well. I will go beyond 
that. I think it is a good model, and I think that is one of 
the complaints we get from individuals interested in the 
government, as well as from people within the government, that 
it takes too long to hire. I think we need to have some 
guidelines to strive for. If we can go through that process in 
45 days, for most cases we are doing very well.
    Senator Pryor. Good. And let me ask you this: I know NASA 
and others have had funding cuts. Have the funding cuts 
adversely impacted your ability to hire and train?
    Ms. Novak. Actually, at NASA, we have not had funding cuts 
per se in terms of our overall budget. We are doing some 
rebalancing and restructuring internally, which has created 
some challenges for us in the workforce where we have got some 
positions in certain areas where they are not attached to 
programs that are funded right now. We are working some 
rebalancing issues. We are working buyouts and early-outs, 
looking at the possibility of employees moving across field 
center geographic lines, if it is appropriate, if they want to 
go, to try to take care of our situation.
    Senator Pryor. Is that true with the rest of the panel?
    Mr. DeLeon. If I may, I would say in certain of our regions 
funding has been--or budget cuts have provided some challenges 
for the regional folks to meet their headquarters folks, but 
for the most part our training dollars have been OK. It has 
been more in the hiring with some budget cuts.
    Senator Pryor. OK.
    Mr. Nulf, over at Commerce, you talked about the 
Department's use of academic degree training. To what extent 
are these educational opportunities contributing to your 
strategic plan?
    Mr. Nulf. It is a bureau-by-bureau impact, sir, but for 
those that do require it and need the specific targeted 
recruitment and it is specialized towards particular academic 
background, the flexibilities that this Subcommittee has seen 
to and provided to Commerce has enhanced our capabilities.
    Senator Pryor. Let me ask the panel generally about the 
fear of lawsuits, the fear of litigation, especially when it 
comes to the direct hire piece of this, and I guess to some 
extent category rating flexibilities.
    What have your respective agencies done to overcome the 
fear of being sued in the direct hire context, and is that a 
legitimate concern? Have you seen lawsuits or the threat of 
litigation in your agencies? Why don't we start with you, Mr. 
Nulf.
    Mr. Nulf. Well, I think any good organization, which I 
believe Commerce to be, has an effective risk management 
program, and leadership, it should be one of the first things 
they think about from the standpoint of protecting the 
organization and making sure we are able to accomplish our 
mission.
    Having said that, I don't think that there is a hesitancy 
necessarily to do or to approach or evaluate any programs, 
whatever they are, category rating or direct hire authority. I 
think as Marta spoke to earlier, it is choosing those 
flexibilities, those tools that are in the toolbox that best 
position you to do your job. So I wouldn't say it is 
necessarily due to risk management perspective of avoiding 
lawsuits. It certainly is reality in today's environment that 
you have those considerations, yes, sir.
    Senator Pryor. Does the rest of the panel have anything to 
say on that?
    Ms. White. I would just like to say that I don't have any 
information that would point to any litigation or lawsuits with 
respect to direct hire category rating, but I think one of the 
fundamental things we have to bear in mind is that even though 
these flexibilities allow us to hire quickly, it does not 
relieve us of our responsibility of making sure that people are 
qualified who are coming through that review process, whether 
it is expedited or not, and that is the way we provide the 
assurances in both direct hire and any category rating.
    Senator Pryor. Thank you.
    Mr. DeLeon. And we haven't seen any increase in the 
litigation risk in either of those two areas, direct hire or 
category rating.
    Ms. Novak. Just to end that conversation, in terms of the 
use of the legislative provisions that we received in the NASA 
Flexibility Act, we have put in place safeguards to make sure 
that, in spite of the flexibilities, merit principles are being 
addressed and we are not violating prohibited personnel 
practices essentially. So I don't think we have a problem in 
that area at all.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Voinovich. Thank you. I would be remiss, Ms. Novak, 
not to ask you about NASA. I have written to the acting 
administrator, and I have talked to the new administrator. I am 
concerned with NASA attempting to reshape their workforce while 
moving away from aeronautics to fulfill the President's mission 
to Mars and the moon. I am concerned that at NASA's Glenn 
Research Center and Ames Research Center, notices have been 
sent to employees indicating they can take early retirement or 
a separation payment.
    It looks like NASA is projecting this will happen. I know 
many of us are going to work very hard to make sure that 
aeronatutics research is minimized at NASA. What bothers me is 
that NASA is anticipating Congress will agree with the new 
mission proposed by the President. However, if Congress funds 
aeronautics research these people will be needed.
    Ms. Novak. Right. Yes, sir, I expected that you might ask 
me this question, and it is a very important one. I saw just as 
I was coming up here today a newspaper article that came out 
this morning. Our Deputy Administrator, Fred Gregory, testified 
yesterday, and in the testimony I see that there has been a 
discussion about relooking at some of the aeronautics issues. I 
know our new Administrator has talked about we need a national 
aeronautics policy, much as we have a space exploration policy.
    So there may be some additional conversations about this, 
but I think what you are referring to, Senator, is we have used 
buyout and early-outs at the Ames Research Center and at Glenn 
Research Center and, in fact, throughout the Agency recently. 
It may appear as though that has been capricious and arbitrary 
and maybe we are stepping up prematurely, but there actually 
has been--and maybe it hasn't been communicated to the 
employees as effectively as it needs to be, but there has been 
a lot of analysis behind that and discussion between the 
centers and the mission director organizations in Washington, 
and there have been some programmatic changes. As a result of 
those programmatic changes, there have been identified some 
competencies, some areas or competencies where we believe we 
either need to diminish those or we won't need them in the 
future, and in some areas there are some we need to beef up.
    So what we are trying to do using the early-outs and 
buyouts is to do some rebalancing and restructuring in a smart, 
deliberate way as opposed to arbitrary and capriciously, and it 
is not supposed to be a signal at all that this means we are 
going out of business.
    Senator Voinovich. The only comfort I have is that I have 
seen projections on the number of people you expect to take 
advantage of the buyouts. And as a matter fact, less people 
have taken advantage than you anticipated.
    Ms. Novak. Yes, that is true.
    Senator Voinovich. So that part of it gives me some 
comfort, and we are going to be staying on top of this.
    Ms. Novak. Yes, sir, and I know NASA is going to be looking 
hard at that.
    Senator Voinovich. The other thing I would like to mention 
is that there are some Members of Congress who feel agencies 
need more workforce flexibilities. Do you believe at the 
present time you have the flexibilities that you need in order 
to retain and to attract the best and brightest people to the 
Federal Government?
    By the way, one of the enacted reforms that really 
interests me, Senator Akaka, is changes to annual leave. I 
looked at the statistics about why mid-career professionals 
from the private sector wouldn't work for the Federal 
Government. One of them is they have got to work 13 years 
before you get a month's vacation.
    Mr. Nulf. Yes, sir, that is correct.
    Senator Voinovich. Reforming this has made a difference, 
hasn't it? It is just amazing. It is just a simple thing, but 
it deals with the human aspects of a job. I think maybe it was 
you, Senator Akaka, who talked about the human things are the 
most important. Things like annual leave, family leave, and 
flexible time.
    Mr. Nulf. I guess I could start us off. We have the tools 
to do our job, sir. You have positioned us well. I think that 
there are certain flexibilities that are currently there that 
are not being fully utilized, that as the agencies--I will 
speak for mine--as the Agency and as the managers become better 
trained and more effective when to pull the trigger on certain 
things, the more you will see the numbers. I would agree with--
one of my colleagues earlier talked about the fact that the 
numbers are not necessarily the whole story. But the fact you 
have a number of things that you can go to to try to bring in 
that right person for that right job to fill it is absolutely 
invaluable, and I would go one step further. When you talk 
about the family things--and, again, I am one of these folks 
that came in and was wrestling with those things, of being away 
from family and things of that sort. And what you have done, 
again, there is you have put us on a level playing field, 
gentlemen. You have put us on a level playing field to compete 
with the private sector so that it is more than just being able 
to, which is extremely important, to serve the government and 
serve the taxpayer, but actually you are not having to have 
just one or the other. You can still have a family life and you 
can still carry on with things that are priorities in your 
life.
    Senator Voinovich. Thank you. Ms. White.
    Ms. White. We appreciate the flexibilities that you have 
championed under your leadership, and we are aggressively 
pursuing those. We also are going to pay a whole lot more 
attention to some of the processes that come with the 
flexibilities to ensure that they do not stand in the way of 
yielding the desired result that the flexibilities were 
intended to give. We are going to see if we can't match up the 
GS-5 and GS-7 hiring processes so they can be matched with 
those that we use for the career intern program for emerging 
leaders at GS-9 and GS-12.
    Mr. DeLeon. I think the short answer is yes from EPA's 
perspective. We appreciate all of the authorities that have 
been instituted lately. As my testimony shows, we have used 
quite a number of them to affect our workforce and to bring in 
new talent. So we appreciate all your effort and leadership and 
look forward to your continued----
    Senator Voinovich. Yes, but the issue is, is there 
something else that would make a big difference?
    Mr. DeLeon. Well, I think the one program that I would like 
to explore with my colleague from NASA is the program that she 
mentioned as an added flexibility that we can utilize at EPA.
    Senator Voinovich. By the way, I like the competencies 
assessment that you do. I would encourage all agencies not only 
to do this but incorporate it as part of their GPRA report.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman. Just to 
comment on what I said in terms of keeping workers happy, I was 
mentioning travel and how we provided compensatory time for 
employees traveling outside their normal work hours. So I think 
we need to continue to review all these policies and see where 
we can be more flexible on some of these that have been around 
for years. I look forward to doing that.
    Ms. White, you testified that HHS has over 1,500 employees 
approved for the student loan repayment program and will expand 
employee coverage for fiscal year 2005. In this regard, this is 
what we have been talking about. We are concerned about what is 
going to happen in a few years when the baby boomers retire. 
There will be a demand for workers. And, of course, we hope the 
demand is satisfied by the right people for the right jobs, but 
some of these people will require additional training or 
education.
    The student loan repayment program, I feel, will play a 
major role. I strongly support student loan repayment programs 
and believe them to be one of the most attractive recruitment 
incentive tools for the Federal Government.
    Also, as an aside, I believe that a student loan repayment 
program can help employees learn a foreign language for their 
work.
    So I am asking you, Ms. White, would you discuss the 
student loan repayment program at HHS, including the average 
award, the criteria for selection, and how HHS jumped from 38 
participants in fiscal year 2003 to 1,500 in fiscal year 2005?
    Ms. White. Well, we have the National Institutes of Health 
to thank for that. They have a separate authority, separate 
from the one that your numbers were derived, and I did not mean 
to imply that the 1,500 was across the entire department. It 
was my reason for indicating that NIH had a separate authority.
    Approximately 1,450 of the 1,500 do come from the NIH's 
special authority for student loan repayment, and they pay 
anywhere up to about $49,000 per employee under their special 
authority. They hire more doctors and research fellows and 
those in job categories with the higher student loan repayment 
balances than most other individuals who may come through, so 
they have separate authority.
    With respect to other organizations at HHS, they do have 
the authority to use their own repayment program, but we want 
to provide them additional guidance about how they might look 
at it from a strategic perspective, so they can expand their 
use beyond the small number that currently exists, but make it 
relevant to their organization.
    We have not had tremendous difficulty recruiting our 
talent. It is evident in our success with the emerging leaders 
program. The first year we ran that program we had 8,000 
applications. And every year beyond that we have had at least 
2,000 or 3,000 applications for the emerging leaders program. 
However, the incentive with respect to the student loan program 
would not have necessorily provided the incentive to generate 
applications at a similar magnitude.
    Once hired, what we look at is a way of trying to retain 
the individuals that have come through the emerging leader 
program, and paying a student loan is one of the most 
attractive ways that we can leverage to provide an incentive 
for them to stay and for us to have that high talent in our 
organization for time to come.
    Our employees sign a service agreement to stay employed 
with our Agency for every year of student loan repayment that 
we authorize.
    Senator Akaka. Thank you. Mr. Nulf, would you care to 
comment on that?
    Mr. Nulf. I will be very candid, sir. We do not have the 
numbers, as my colleagues do here at this table, in regard to 
student loan repayment. I would say this: That is something 
that we have turned our attention to and are focus and 
committed to having numbers that this Subcommittee would be 
proud of. We have a number of folks we are talking to in the 
recruitment, in the pipeline that I think will bear fruit 
shortly, but we have not effectively used it as the retention 
tool that it needs to be. We are going to do so and believe it 
is one of the stronger weapons you have given us to do our job. 
We need to focus more intently on it, sir.
    Senator Akaka. Ms. Novak, given the fact that NASA has and 
needs a highly trained workforce, I am curious why NASA only 
awarded student loan repayments to about 40 employees. Is that 
number correct?
    Ms. Novak. Yes, sir, that is the number I have also. 
Actually that is a good question. I guess I looked at it a 
little bit differently. We use our flexibilities, judiciously, 
when we really need them. We don't necessarily offer them 
across the board, but with the 40 we have identified a number 
of those--more than half of those are for contract acquisition 
and contract management type individuals, which have been 
identified as one of our critical competency areas. That is an 
area that we want to make sure that we recruit and develop and 
retain individuals in that particular area. So a good portion 
of those 40 have been in that particular competency area.
    I believe that we have used them, again, judiciously, when 
we have needed to use them.
    Senator Voinovich. Let me ask a question to follow up on 
this. Maybe there is process or something here we don't know. 
When using direct hire, you get permission to hire on college 
campuses?
    Ms. Novak. Well, I know that you can direct hire 
individuals in certain specified occupations. That is, if you 
have made a case that it is very difficult----
    Senator Voinovich. You have to ask OPM formally.
    Ms. Novak. Right. We don't have any of those per se at this 
point in time, but what we do is, in discussing people, we will 
go through another process as opposed to direct hire, but we 
will be talking with them early on about what are some of the 
things that we can offer you through the Flexibility Act or 
otherwise that would make coming to NASA a positive experience 
so that we can nab them and bring them in. The student loan 
repayment program clearly is one of those.
    Senator Akaka. Mr. DeLeon, you testified that in fiscal 
year 2005 EPA had 18 student loan repayment agreements in 
place. What is the criteria for selecting these individuals, 
and how much money will the 18 individuals receive?
    Mr. DeLeon. Let me start with the 18. We have a modest 
program in place, and as my colleagues have indicated, we will 
look at critical needs, look at is there a particular talent 
gap that we are trying to fill and offer it as an incentive. 
But as you alluded to, I think, in your opening statement and I 
have alluded to in my testimony, our managers have to balance 
some critical programmatic needs and some dollars challenges 
since it comes from the PC&B accounts. So we have used it 
judiciously. It is modest. Perhaps with some further assistance 
and guidance and resources we could expand that program, 
because I agree with you, Senator, that this is a great 
incentive to bring some young talent into the workforce, 
compete with our private sector competitors, and try to at 
least alleviate some of the disparity in pay that some of the 
college graduates face when faced with a salary from the 
Federal Government.
    But we are looking for every opportunity to expand our use 
of the student loan repayment program and have provided our 
managers guidance on using it judiciously, as we have so far.
    Senator Akaka. Well, thank you very much, Mr. Chairman, for 
giving me this additional time.
    Senator Voinovich. Certainly. One bill that Senator Akaka 
and I have introduced in previous sessions of Congress would 
not tax as income student loan repayment. It has not been able 
to pass through the Finance Committee. How much would that help 
this program?
    Ms. White. I believe it would be a tremendous help to the 
student who has to pay back the loan because then more of the 
money goes toward the loan rather than the portion that remains 
after taxes. It would do a lot to significantly begin to reduce 
a lot quicker the outstanding loan balance that the employee 
would have when they were a student.
    Senator Voinovich. It would give us the same benefit as 
universities.
    Ms. White. The same benefit, the same money comes out of 
the----
    Senator Voinovich. If a student goes to work for a 
nonprofit, universities can repay the loan and the students 
don't have to pay taxes on it. Do you think that would help?
    Mr. Nulf. Absolutely, sir. I think anytime you can stamp 
something tax free as a benefit, it packs a bigger punch, yes, 
sir. I would share with you that my wife and I recently were 
looking at one of the business publications, looking at the--
our children are only 2 years old at this point, and in 16 
years we will be wrestling with those college costs. And I 
think these types of flexibilities and these types of benefits 
speak to not just here and today. What we can do to have John 
Smith or Sally Smith fill a particular chair providing a 
certain function or value to an organization, but they speak to 
the generations to come that we are so worried about with the 
retirement and the institutional knowledge that is walking out 
of the door of the agencies.
    Senator Voinovich. Well, thank you very much. This has been 
great. We have good people on the front lines, and we are real 
impressed with what you are all doing in your respective 
agencies. Your work makes us feel good, and we will be seeing 
you again. Thank you.
    The hearing is adjourned.
    [Whereupon, at 12:53 p.m., the Subcommittee adjourned.]


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