[Senate Hearing 109-575]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-575

  FROM PROPOSED TO FINAL: EVALUATING THE REGULATIONS FOR THE NATIONAL 
                       SECURITY PERSONNEL SYSTEM

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION


                               __________

                           NOVEMBER 17, 2005

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

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

           Michael D. Bopp, Staff Director and Chief Counsel
            Jennifer A. Hemingway, Professional Staff Member
 Theresa M. Prych, Professional Staff Member, Oversight of Government 
    Management, the Federal Workforce, and the District of Columbia 
                              Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
               Lawrence B. Novey, Minority Senior Counsel
     Jennifer L. Tyree, Minority Counsel, Oversight of Government 
    Management, the Federal Workforce, and the District of Columbia 
                              Subcommittee
                  Trina Driessnack Tyrer, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Akaka................................................     3
    Senator Voinovich............................................     6
    Senator Levin................................................    11
    Senator Warner...............................................    34

Prepared statements:
    Senator Carper...............................................    37
    Senator Lautenberg...........................................    37

                               WITNESSES
                      Thursday, November 17, 2005

Hon. Gordon R. England, Acting Deputy Secretary of Defense, U.S. 
  Department of Defense, accompanied by Brad Bunn, Deputy Program 
  Executive Officer, National Security Personnel System..........     8

Hon. Linda M. Springer, Director, U.S. Office of Personnel 
  Management, accompanied by George Nesterczuk, Senior Advisor on 
  Department of Defense, Office of Personnel Management..........    13

Hon. David M. Walker, Comptroller General, U.S. Government 
  Accountability Office..........................................    16

Michael B. Styles, National President, Federal Managers 
  Association....................................................    26

John Gage, National President, American Federation of Government 
  Employees, AFL-CIO, accompanied by Dan Schember, Counsel, 
  Association of Civilian Techicians.............................    29

Ronald Ault, President, Metal Trades Department, AFL-CIO.........    31

                     Alphabetical List of Witnesses

Ault, Ronald:
    Testimony....................................................    31
    Prepared statement...........................................   148

England, Hon. Gordon R.:
    Testimony....................................................     8
    Prepared statement...........................................    39

Gage, John:
    Testimony....................................................    29
    Prepared statement...........................................   118

Springer, Hon. Linda M.:
    Testimony....................................................    13
    Prepared statement...........................................    50

Styles, Michael B.:
    Testimony....................................................    26
    Prepared statement...........................................    94

Walker, Hon. David M.:
    Testimony....................................................    16
    Prepared statement with attachments..........................    60

                                APPENDIX

Richard N. Brown, National President of National Federation of 
  Federal Employees Affiliated with the IAMAW, AFL-CIO, prepared 
  statement......................................................   161
Responses to Post-Hearing Questions for the Record from:
    Mr. England..................................................   169
    Ms. Springer.................................................   202
    Mr. Walker...................................................   212
    Mr. Styles...................................................   223
    Mr. Gage.....................................................   230
    Mr. Ault.....................................................   237

 
                   FROM PROPOSED TO FINAL: EVALUATING
                    THE REGULATIONS FOR THE NATIONAL
                       SECURITY PERSONNEL SYSTEM

                              ----------                              


                      THURSDAY, NOVEMBER 17, 2005

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, the Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Voinovich, Warner, Levin, and 
Akaka.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. Good morning. Today, the Committee will 
examine the final regulations for the National Security 
Personnel System.
    When fully implemented, this system will cover 
approximately 650,000 civilian employees of the Department of 
Defense. In 2003, the Department sought legislation to 
establish a new personnel system. The Department's initial 
proposal, however, went too far and did not include important 
provisions to protect good employees.
    I worked hard with Senator Levin, Senator Voinovich, and 
other Members of this Committee to craft an alternative that 
addressed many of these concerns. In the end, Congress adopted 
a third version, a compromise that granted the Department 
considerable authority to craft a system to meet its national 
security mission while protecting the fundamental rights of the 
Department's civilian employees.
    Our witnesses today will help the Committee understand 
whether or not the system set forth in the final regulations is 
consistent with congressional intent and whether it will 
achieve our goal of helping the Department of Defense recruit, 
reward, and retain the highest quality workforce.
    The civilian workforce of the Department is one of its most 
important assets. It is critical that the National Security 
Personnel System recognize that employees are vital to the 
accomplishment of the Pentagon's mission. I have always 
maintained that the Department must work in partnership with 
its employees and their elected representatives for the NSPS to 
succeed.
    If the new system is to be ``a win for employees,'' as 
Secretary England clearly hopes, employees must see it as fair 
and based on merit principles. Some employees have told me that 
they continue to be frustrated by the lack of detail in the 
regulations. Until these employees have the information that 
enables them to fully understand how NSPS will work, they are 
likely to remain skeptical.
    While I understand that many details are under development 
and will be provided in the coming weeks, it is difficult to 
provide employees with the reassurances that they are seeking 
when much of the new system remains subject to further 
development. In many instances, the final regulations provide 
only a framework for the new system.
    It appears that the Department and the Office of Personnel 
Management appreciate the need to establish processes for a 
number of areas and the need to provide employees with 
additional guidance on how the system will work in practice. 
Transparent implementation and the active participation of 
employees in the development of these details will help ensure 
the efficacy and fairness of the new system. I look forward to 
hearing what actions the employee representatives recommend 
should be taken to ensure a smooth transition to the new 
system.
    During the formal comment period, I expressed my concerns 
concerning some of the provisions of the proposed regulations, 
such as the scope of collective bargaining and the new system 
for employee appeals. The Department, to its credit, did make 
some changes in response to the concerns that I and others 
raised. The final regulations, for example, now appropriately 
reflect the standard for review for employee appeals of adverse 
actions by the full Merit Systems Protection Board that was 
included in the authorizing legislation.
    After reviewing the final regulations, however, I believe 
that there is still room for continued improvement. For 
example, the current proposal gives the Secretary of Defense 
sole discretion to appoint the members of the Homeland Security 
Labor Relations Board with input from the labor unions. I 
believe that it would be wise to actually designate one of the 
slots for an employee representative.
    Despite the Department's efforts to reach out to the unions 
during the meet and confer period, the coalition of employee 
representatives appears to have rejected pretty flatly the 
final regulations. I hope that as we continue to move forward, 
some common ground can be found.
    While there are real differences of opinion at this time 
over several of the provisions, shutting down the collaborative 
process is not the solution. Ultimately, the success of the new 
system will depend on the acceptance by the workforce. I hope 
that the employee representatives will continue to work with 
the Department and with OPM to strengthen the system and to 
build confidence in it.
    Implementation of the new system will be dependent on good 
management, proper execution, and robust training. I need to 
hear more from the Administration on how the Administration is 
going to assure that there are adequate resources to ensure 
that we have good management, proper execution, and robust 
training. This is an issue that I have talked with Secretary 
England about. I know that he is very committed to the training 
of managers as well, as is Ms. Springer.
    As the Department moves forward, the Committee will look 
for tangible evidence of the system's success. There is no 
better guarantor of the success of any new personnel system 
than acceptance by the employees.
    I am very pleased that we have the two leaders on civilian 
workforce issues with us today. And indeed, Senator Voinovich 
is going to be taking over the gavel at some point. He has been 
such a leader in workforce areas. We have talked many times 
that it really comes down to having the right people 
understanding their responsibilities, supported by management, 
and able to carry out their mission.
    Similarly, Senator Akaka is such a leader and cares so 
deeply about these issues. So now I will turn to Senator Akaka 
for his opening statement.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you. Thank you very much, Madam 
Chairman.
    It is a pleasure working with you. As you know, I enjoy 
working with you and also with Senator Lieberman and Senator 
Voinovich on these important human capital issues, as well as 
Senators Warner and Levin, whose leadership on this Committee 
and the Armed Services Committee has been invaluable.
    Before I give my statement, I want to add my welcome to the 
panelists. I look upon you as good friends, and I enjoy working 
with you. I really appreciate what you are doing for our 
country.
    Today's hearing provides us an opportunity to review the 
final regulations crafted by the Department of Defense and 
Office of Personnel Management for the National Security 
Personnel System. Since the enactment of legislation providing 
for NSPS, it has been my hope that DOD and OPM would engage in 
meaningful discussions with employee representatives to produce 
a personnel system that would be mutually agreeable.
    Although I voted against the creation of NSPS because I 
believed employee rights and protections would be greatly 
diminished, I kept open the possibility that I would be wrong. 
Sadly, the final regulations, mirroring most of the provisions 
in the proposed regulations, do great harm I feel to the 
civilian DOD workforce.
    I am extremely disappointed by the failure of DOD to comply 
with congressional intent and by the Department's disregard for 
the welfare of the civilian employees. We should never forget 
that the civilian workforce at DOD is critical to our national 
security.
    The Department has taken the broad flexibility granted by 
Congress to create a system that eliminates employee collective 
bargaining rights, creates an unfair appeals process, and 
permits DOD to act without accountability. For example, 
Congress clearly stated that under NSPS, collective bargaining 
would be preserved and that Chapter 71 of Title 5 could not be 
waived.
    However, the Department has gone out of its way to erode 
the collective bargaining rights of employees. Under the 
regulations, collective bargaining is authorized at the 
discretion of the Secretary with no single issue immune from 
being eliminated from collective bargaining.
    The regulations also fail to provide a fair appeals 
process. Under NSPS, the independent Merit Systems Protection 
Board has limited review of DOD cases, and decisions by MSPB 
administrative judges will be reviewed by certain Department 
employees. Moreover, the regulations fail to identify the 
employees or list the qualifications of the individuals who 
will second-guess the findings of the independent AJ.
    I question how this change strengthens national security 
and why DOD alone, without a meaningful review by the agency 
charged with protecting merit system principles, is best able 
to determine the most appropriate penalty for misconduct or 
unacceptable performance.
    Last, the regulations provide few details as to how DOD 
will establish its compensation and performance management 
systems. While the current general schedule pay system is not 
perfect, there are clear rules on how employees are paid and 
under what circumstances pay increases are awarded. Without a 
detailed, transparent, accountable, and employee-supported 
system, which has adequate funding and training for employees, 
I am not convinced that the NSPS pay system will be an 
improvement.
    DOD has significant management challenges and has more 
programs on the GAO high-risk list than any other Federal 
agency. I am pleased to work with Senator Voinovich on 
addressing these issues. But I fear that given the limited 
checks on the Department under the final regulations, NSPS will 
become just another item on the high-risk list.
    Employees throughout the Federal Government, especially 
those charged with defending the Nation, deserve compensation, 
appraisal, labor management, and appeals systems that are fair. 
NSPS, I believe, is not fair. It gives DOD significant 
flexibility and authority without any real accountability. DOD 
employees deserve better.
    Thank you, Madam Chairman. I look forward to hearing our 
witnesses. I ask that my full statement be included in the 
record.
    Chairman Collins. Without objection.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    Thank you, Madam Chairman. It is a pleasure working with you, 
Senator Lieberman, and Senator Voinovich on these important human 
capital issues. I also wish to express my appreciation to Senators 
Warner and Levin whose leadership on this Committee and the Armed 
Services Committee has been invaluable.
    Today's hearing offers an opportunity to review with the Department 
of Defense (DOD) and the Office of Personnel Management (OPM) the final 
regulations they crafted which will serve as the framework for the 
National Security Personnel System (NSPS). I am pleased that we'll also 
hear from Comptroller General Walker, two union leaders, and the 
president of the Federal Managers Association.
    This hearing is the third hearing I've attended on NSPS in the past 
year. Since the enactment of legislation providing for NSPS, it has 
been my hope that DOD and OPM would engage in meaningful discussions 
with employee representatives to produce a personnel system that would 
be mutually agreeable. Although I voted against the creation of NSPS 
because I believed employee rights and protections would be greatly 
diminished, I kept open the possibility that I would be wrong.
    Sadly, the final regulations do great harm to the civilian DOD 
workforce. I am extremely disappointed by the failure of DOD to comply 
with congressional intent and by the Department's disregard for the 
welfare of its civilian employees. We should never forget that the 
civilian workforce at DOD is critical to our national security.
    The Department has taken the broad flexibility granted by Congress 
to create a system that:

      Eliminates employee collective bargaining rights;
      Creates an unfair appeals process; and
      Permits DOD to act without accountability.

    Because a Federal judge has enjoined DHS from implementing the 
labor-management provisions of MaxHR, I expected to see significant 
changes from DOD's proposed regulations. However, the introduction to 
the final NSPS regulations state that there are only 36 written changes 
from the proposed regulations and 14 clarifications which were a result 
of the meet and confer process.
    One area that saw little change is the labor-management relations 
provisions. Congress clearly stated that under NSPS collective 
bargaining would be preserved and that chapter 71 of Title 5 could not 
be waived. However, the Department has gone out of its way to erode the 
collective bargaining rights of employees. Under the regulations, 
collective bargaining is authorized at the discretion of the Secretary 
and no single issue is immune from being eliminated from collective 
bargaining.
    Moreover, NSPS drastically limits the matters open to collective 
bargaining--subject to further limits placed on this category by the 
Secretary--and provides for review of any labor-management issue by an 
internal board that I believe will not be independent and impartial.
    Although employee representatives may make suggestions to improve 
agency action or recommendations for membership on the National 
Security Labor Relations Board under NSPS. I fear that employee input 
will have little impact. The reliance on implementing issuances to 
flush out the details of this system makes it essential that employees 
have meaningful collective bargaining rights.
    Employees also deserve a fair appeals process. According to the 
final regulations, it is essential to the success of NSPS to ensure 
that employees perceive the system as fair. However, DOD is given broad 
authority to make adverse personnel actions without any accountability. 
The independent Merit Systems Protection Board (MSPB) has limited 
review of DOD cases and will only be able to mitigate penalties imposed 
by the Department when the penalty is totally unwarranted without any 
justification.
    Furthermore, decisions by MSPB administrative judges will be 
subject to review by certain Department employees, although the 
regulations fail to identify the employees or list the qualifications 
of the individuals who will second-guess the findings of the 
independent administrative judge (AJ). I question how this change 
strengthens national security and why DOD alone, without a meaningful 
review by the agency charged with protecting merit system principles, 
is best able to determine the most appropriate penalty for misconduct 
or unacceptable performance.
    By increasing the mitigation standard to such a high burden and 
allowing Departmental employees to overturn AJ decisions, the 
Department is creating an appeals system that is unfair and further 
erodes any substantive review of its actions for inappropriate conduct.
    Lastly, the regulations provide few details as to how DOD will 
establish its compensation and performance management systems. Although 
the regulations state that employees will be involved in the design and 
implementation of the performance management system, it is still 
unclear how this will be accomplished.
    While the current General Schedule (GS) pay system is not perfect, 
there are clear rules on how employees are paid and under what 
circumstances pay increases are awarded. Unfortunately, the GS system 
has not lived up to its potential as envisioned under the Federal 
Employees Pay Comparability Act. And yet I do not see how a new 
performance-based pay system will be an improvement given the lack of 
details on the new system, the lack of meaningful employee involvement 
in designing the new system, and the limitations on employees' ability 
to challenge performance reviews and pay decisions.
    Training is a key to employee understanding and acceptance. I am 
further concerned about how the adequacy of training envisioned by DOD 
for managers and employees on the new pay-for-performance system will 
ensure fairness when 25 years under a performance-based system, the 
Civil Service Reform Act, has done nothing in the opinion of DOD to 
encourage strong performance.
    DOD has significant management challenges and has more programs on 
the Government Accountability Office (GAO) high-risk list than any 
other Federal agency. I am pleased to work with Senator Voinovich on 
addressing these issues, but I fear that given the limited checks on 
the Department under the final regulations, NSPS will become just 
another item on the GAO high-risk list.
    Employees throughout the Federal Government, especially those 
charged with defending the nation, deserve compensation, appraisal, 
labor-management, and appeals systems that are fair. NSPS is not fair. 
It gives the Department significant flexibility and authority without 
any real accountability. DOD employees deserve better.
    Thank you, Madam Chairman. I look forward to hearing from our 
witnesses.

    Chairman Collins. Senator Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Madam Chairman, for calling 
today's hearing. First of all, I want to thank you for your 
continued support and partnership in understanding and 
addressing the needs of the Federal workforce in our human 
capital crisis.
    We are here today to discuss the human capital reforms 
underway at the Department of Defense. They are the result of 
2\1/2\ years of work by the Department of Defense, the Office 
of Personnel Management, Department employees, and their 
representative organizations to develop a ``flexible and 
contemporary'' personnel system that will assist the Department 
in meeting its national security mission.
    My Subcommittee held a hearing on March 15 to evaluate the 
proposed regulations for the National Security Personnel 
System. During that hearing, I expressed many concerns about 
the regulations to the Department and OPM. After reviewing the 
final regulations, I have to say I have mixed feelings.
    First, Secretary England, I congratulate you on the 
leadership that you have demonstrated throughout this process. 
You have really given this everything that you said you would 
give it.
    As you know, I have been concerned with the development of 
NSPS since the beginning. I know Secretary England will recall 
that I was so concerned that I went over to the Pentagon in 
March of last year and met with him, Deputy Secretary 
Wolfowitz, and Deputy Undersecretary Abell to convey to them my 
concerns that the Department was proceeding much too rapidly 
and that the massive change envisioned by NSPS would take years 
to properly implement.
    I was pleased to learn they agreed. After a hasty start, 
they decided to proceed with much greater deliberation. At that 
time, Secretary England was given a lead role in implementing 
NSPS. I think things improved tremendously because of your 
involvement, Secretary.
    Director Springer, you assumed your position at OPM as this 
process was well underway. You have taken over at a tough time. 
During our meetings and conversations, I have been impressed 
with your understanding of the issues and am pleased to hear 
your reassurances that, as Director of OPM, you will continue 
to be a partner in NSPS.
    Madam Chairman, I am pleased to see that the Department has 
made many revisions to the final regulations to address some of 
the concerns raised by employees and Members of this Committee. 
I appreciate the openness of DOD and OPM to make those changes.
    But Secretary England, as you and I have discussed, writing 
these regulations was the easy part and only the beginning. 
Implementation of what you have put on paper is going to be a 
lot more challenging. I remain concerned that the NSPS still 
does not possess a key element needed for successful reform, 
and I think I just underscore you, Madam Chairman, about 
employee participation and support.
    Furthermore, I cannot stress enough how important effective 
training will be as implementation begins, and that includes 
comprehensive training of supervisors in performance 
management, not just the nuts and bolts of NSPS, but the 
related soft skills that are needed. And I intend to spend some 
time with DOD employees in Ohio to see firsthand the type of 
training employees are receiving. Also crucial is continued 
open communication with all employees.
    Now that the regulations are final, I look forward to 
learning from the Federal employee unions their views on the 
new system and how they intend to work with DOD and OPM going 
forward. I hope there are some aspects of the system that 
unions see as positive.
    The changes embodied in the National Security Personnel 
System are vast and their impact great. As I have said before, 
failure is not an option. And Senator Akaka, you sent a shiver 
down my spine when you said that you thought this was going to 
ultimately end up on the high-risk list. We have got to make 
sure that doesn't happen.
    We must continue working together to ensure success, and I 
do mean ``we.'' Today, I restate my commitment to working with 
the Department and employee organizations toward that end. This 
is important to me as Chairman of the Federal Workforce 
Subcommittee and as a Senator who represents approximately 
12,000 Department employees scheduled to transition into NSPS 
in Spiral One.
    The next 6 months to a year are crucial. This Committee 
will be watching. I anticipate knowing within that time whether 
or not we are on the road to success. I look forward to a 
continued dialogue with DOD, OPM, and employees as 
implementation commences, which continues with the testimony 
that we are going to hear today.
    And Mr. Walker, I also would like to spend some time with 
you as you monitor what is going on. I think that is very 
important.
    I just want to mention, Madam Chairman, that one of the 
things that I have been really pleased with in the last 6 
months is the work that we are doing on DOD supply chain 
management. The Office of Budget and Management has come up 
with a wonderful plan. DOD has participated in it, and Mr. 
Walker has participated in it. There is a meeting of the minds. 
They are working on metrics that determine the progress that is 
being made, and we are doing the same thing with the security 
personnel clearance that is on the high-risk list.
    In these cases, we have laid out a plan. The Department, 
OPM, and Mr. Walker, are all involved. And so, there is a 
coordination here. And I think the more that they work together 
and the more they agree upon the milestones and benchmarks of 
success, the better off all of us are going to be.
    I think the same is true for the National Security 
Personnel System. I would hate to have a hearing 6 months from 
now and then have GAO say, what DOD is saying about their 
accomplishments is not true. I think there should be some 
meeting of the minds about how we are going to judge our 
progress in NSPS implementation.
    And we are going to be looking to Mr. Walker's organization 
to give us their perspective. It would be really nice if 
everyone agreed on what it is that we were going to use to 
judge whether we are making the progress that we all would like 
to make.
    Thank you, Madam Chairman.
    Chairman Collins. Thank you, Senator.
    Our witnesses today are no strangers to this Committee, nor 
to the development of the National Security Personnel System. 
Our first witness is the Hon. Gordon England, the Deputy 
Secretary of the Department of Defense.
    Secretary England, your personal involvement in the 
personnel system set a tone of inclusiveness for which I 
commend you, and it led to a far more collaborative process 
than otherwise would have been the case. I look forward to 
hearing your testimony today.
    We will then hear from Linda Springer, who is the Director 
of the Office of Personnel Management. Director Springer, you 
will continue to play an absolutely critical role in ensuring 
that the implementation of the new system is consistent with 
employees' fundamental rights and to the merit system on which 
our civil service is based.
    We will then hear from the Comptroller General, David 
Walker. Mr. Walker, you have been a leader in personnel reform, 
both within the GAO and also across the Federal Government. We 
very much appreciate your efforts to ensure that government 
manages its human capital effectively.
    I notice that our witnesses have brought advisors with 
them, and I will have you each introduce them, mainly because I 
always mispronounce George's last name. Secretary England, 
please proceed.

TESTIMONY OF HON. GORDON R. ENGLAND,\1\ ACTING DEPUTY SECRETARY 
  OF DEFENSE, U.S. DEPARTMENT OF DEFENSE, ACCOMPANIED BY BRAD 
   BUNN, DEPUTY PROGRAM EXECUTIVE OFFICER, NATIONAL SECURITY 
                        PERSONNEL SYSTEM

    Secretary England. Madam Chairman and Members of the 
Committee, thanks very much.
---------------------------------------------------------------------------
    \1\ The prepared statement of Secretary England appears in the 
Appendix on page 39.
---------------------------------------------------------------------------
    First, I want to tell you I do appreciate the hearing and 
the opportunity to be here. I will tell you the hearings that 
we have had have been very beneficial to us, and our 
discussions with the members privately, with your staffs, have 
been very beneficial in formulating the NSPS system. And I do 
thank you, and I thank you again today because, once again, 
this will be helpful to us as we move forward.
    You will, I believe, be impressed with the final 
regulations. I disagree, obviously, with Senator Akaka in terms 
of the final regulations. I believe they are very broad based, 
and they balance very well the needs of our employees, the 
needs of our Department, and frankly, the needs of our Nation. 
So we have worked very hard on this collaborative, open process 
to do the very best job we can for our employees, for the 
Department, and for the Nation.
    I am pleased that Linda Springer is here. She is our 
partner. OPM has been our partner since the very beginning, 
will continue to be so. And I appreciate the cooperation. We 
could not have done this without that partnership with OPM.
    I also appreciate the fact that David Walker is here. The 
General Accountability Office actually started this process 
well before us in their own organization. So they have a lot of 
experience and lessons learned, and that has been very 
beneficial to us. Professionally, David and his staff have been 
most helpful.
    I do have with me Brad Bunn, who is on my left. He is the 
Deputy Program Executive Officer for NSPS in the Department of 
Defense. And George Nesterczuk, who I also mispronounce his 
name, but he has gotten used to it from me. He is the principal 
advisor at OPM and has worked with us on a daily basis, and 
they have, frankly, a lot of the detailed knowledge and are 
here and available to answer detailed questions of the 
Committee.
    I thought it would be appropriate to give everyone an 
update of where we are on the NSPS system because it has been a 
rather dynamic event. The final regulations, as you know, Madam 
Chairman, were published in the Federal Register on November 1. 
And that publication initiated a 30-day period that the act 
prescribed for congressional review prior to implementation.
    As you probably also know, several unions recently filed a 
lawsuit challenging some aspects of NSPS. Yesterday, the DOD, 
OPM, Department of Justice, and the unions announced an 
agreement. That agreement is a timeline for the legal actions 
and how NSPS will proceed as the lawsuit is adjudicated. Again, 
I believe it is indicative of this collaborative process we 
have to work together.
    So, for example, while the lawsuit is in process, we have 
all agreed that DOD will continue the training on NSPS and will 
continue collaboration with them on implementation details. So 
we will continue some aspects of this as we move through the 
legal process. And working together, hopefully, we will get 
through that process quickly.
    We have agreed at DOD to delay implementing the NSPS until 
February 1, 2006--so, basically, 2\1/2\ months--and again, with 
the understanding that we would continue this collaborative 
process in terms of implementation details, and that can start 
any time after December 1, 2005, those collaborative 
discussions.
    Also those implementing details, the issuances which 
everybody, of course, is anxious to hear about, they would not 
be effective until after February 1 also. So we have basically 
moved the program to the right while we work our way through 
the legal processes but, in the meantime, have agreed on 
certain things to work together regarding implementation.
    So, frankly, I feel that is a step forward in terms of 
proceeding with the program and not just being stopped by the 
courts. So I believe that is a beneficial move for both of us.
    Now, importantly, by the way, I will also say when Senator 
Voinovich came over and discussed the program with us, that was 
about 18 months ago--we said then this would be an event-driven 
and not a schedule-driven program. So while we have schedules 
on the programs, we do not proceed until we have completed all 
of the events.
    And this is the same situation. When we get through the 
lawsuit, we will be ready to go in February. So it is event-
driven. We are not just forcing dates on the program. And that 
will continue to be fundamental premise of the program. When we 
are ready, we continue to proceed to the next step.
    I am not going to repeat all of the collaborative 
processes. We have had those discussions in the past. I mean, 
literally, all of the town hall meetings and everything. And I 
am not going to go through all of the benefits of NSPS. Rather, 
I will just wait for the discussion and the questions.
    But I do want to comment to the Members of the Committee 
that the Department has over 20 years of experience with these 
transformational personnel demonstration projects, and that has 
covered almost 45,000 employees. So this is not something that 
is new for us. We do have a significant background and 
experience in bringing about these kinds of personnel changes.
    Now those projects have clearly shown that the fundamental 
workforce changes being implemented will have positive results 
on the individual career growth and opportunities of our people 
on the workforce responsiveness and innovation. It will have a 
multiplier effect on mission effectiveness, and it will be good 
for our employees.
    It is a performance-based culture, and in that kind of a 
culture, the contributions of the workforce, frankly, are more 
fully recognized and rewarded, which is very important in terms 
of motivation of our people.
    Now let me mention one major incentive that the Congress 
has in the act, and I would like to mention it because, 
frankly, I believe it is very important in all of these 
discussions. The Congress wisely included in the NSPS enabling 
statute that in November 2009 the authority for the labor 
relations provisions expires, unless it is extended by the 
Congress. So all of the pressure, frankly, is on the Department 
of Defense to perform.
    I mean the consequence is that, frankly, the Department has 
4 years to demonstrate to the Congress that we can exercise the 
authorities you have given us and the flexibilities you have 
given us in a very responsible manner or the labor relations 
portion will revert back to the current Chapter 71 rules. So 
there is a very large check and balance in this system.
    And as I said before, it is a huge incentive. I mean, it 
puts the pressure on the Department of Defense to do this 
right. And we intend to demonstrate to you on an ongoing basis, 
we are pleased to do this in this open environment that we have 
fostered, that we will demonstrate to you, effectiveness and 
fairness, of the new system over the next 4 years.
    Now there is still much work to do. As everyone has 
mentioned, it has been hard work getting to where we are with 
the final regulations. But frankly, that has been the easy 
part. The hard part is still to come, and that is the 
implementation, and we know that. We know all of the challenges 
lie ahead, and we are preparing for that.
    But again, we have had pilot programs that have helped us 
over the past 2 decades. I am confident. I am also convinced 
that this is a win-win-win program. I mean, this is a win for 
DOD. It is a win for our employees, and it is a win for our 
Nation. And I am just pleased to have been able to have had a 
role in bringing this about.
    So, Madam Chairman and Members of the Committee, again I 
thank you for the opportunity to be here today. We do look 
forward to this continuing dialogue. You will find us 
completely open, completely responsive. Our sole objective is 
to have a system that is better for the Nation.
    So, again, I thank you for the opportunity to be here. I 
look forward to your questions today, and also I look forward 
to this continuing relationship as we all go forward on this 
journey.
    Thank you very much.
    Chairman Collins. Thank you, Mr. Secretary.
    Before calling on Director Springer, I would like to turn 
to Senator Levin, who has joined us. As I mentioned in my 
opening statement, Senator Levin worked extremely hard on these 
personnel issues, and we collaborated on a bill in 2003. 
Senator Levin brings a great deal of expertise to this issue, 
and I would like to call on him for some opening remarks.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Madam Chairman, thank you for your 
extraordinary leadership in this area. I may have collaborated 
with you, and I did so and do so proudly. But you are truly the 
one who has played the instrumental role in shaping what we had 
hoped would be a positive advance.
    I am afraid that it has not yet turned out that way. And 
despite hard work over many months devoted to this project by 
so many people, I just don't believe the Department has met the 
challenge which we laid out for it.
    And I am also afraid that when we look back over the years 
ahead, the chances are real that we are going to find the 
Congress and the Department scrambling to try to patch up the 
problems that are arising out of the flawed implementation of 
the National Security Personnel System.
    The final regulation, so called, published by the 
Department of Defense earlier this month is very incomplete. It 
states that a long list of critical issues will be addressed in 
future so-called implementing issuances. These issues include 
the establishment of specific career groups and pay bands, the 
procedures for assigning pay to individuals, the procedures for 
the assignment, reassignment, reinstatement, detail, transfer, 
and promotion of employees within the personnel system.
    We were told as long ago as last May that the Department 
had prepared a huge package of implementing issuances, which 
would be made available in the near future. That was the near 
future back in May. Now, more than 6 months later, the 
Department is preparing to implement the system in a matter of 
weeks, and these implementing issuances are yet to be 
published.
    The Department's approach of waiting until the last minute 
to release the nuts and bolts of how the system will work is 
not a sensible or a rational approach. These issuances are an 
essential part of the establishment of the system. That is the 
bottom line.
    And in my judgment, this is not consistent with the 
statutory requirement that the new system be planned, 
developed, and implemented ``in collaboration with and in a 
manner that ensures the participation of employee 
representatives.'' And it is going to make it difficult also 
for the Department, in my judgment, to train the thousands of 
managers and the tens of thousands of employees who are going 
to need to operate under a new system in just a matter of a few 
weeks.
    The first test, as a number of us have said over the years, 
of any new personnel system is how it is going to be received 
by the people who live under it and who have to operate it. And 
I just don't believe the proposed system is likely to be 
successful without the broad support of the employees of the 
Department.
    The Department has insisted on including new rules that 
would deprive its civilian employees and their representatives 
of many of the rights that they enjoy today. And the first 
thing that happened when the Department issued its final 
regulation implementing this system is that it was sued by its 
own employees. That is not much of an indication that the new 
system has the broad support that it is going to need.
    The lawsuit challenging similar regulations issued by the 
Department of Homeland Security has resulted in a court order 
enjoining the Department from implementing its proposed new 
labor relations system. And despite some cosmetic changes in 
the final regulation, the Department of Defense's regulation 
contained that same flaw.
    Even if the District Court's order is overturned on appeal, 
the District Court judge's words, I am afraid, speak volumes 
about both the Department of Homeland Security's regulations as 
well as the Department of Defense's regulations, and this is 
what the District Court judge wrote.
    ``The regulations fail because any collective bargaining 
negotiations pursuant to its terms are illusory. The Secretary 
retains numerous avenues by which he can unilaterally declare 
contract terms null and void without prior notice to the unions 
or employees and without bargaining or recourse. A contract 
that is not mutually binding is not a contract,'' she wrote.
    ``Negotiations that lead to a contract that is not mutually 
binding are not true negotiations,'' she said. ``A system of 
collective bargaining that permits the unilateral repudiation 
of agreements by one party is not collective bargaining at 
all.'' That was Judge Collyer.
    So regardless of whether the Department's regulations are 
ultimately upheld or overturned in the courts, I think it would 
be a mistake to believe that a system that deprives employees 
and representatives of those employees of that kind of 
meaningful participation, as described by Judge Collyer, will 
succeed in gaining the widespread acceptance which is so 
important to a successful personnel system.
    Again, I am very sorry that I arrived late, Madam Chairman, 
and I appreciate your allowing me to insert this opening 
statement in the middle of the other presentations. And I do 
want to, though, say that I think the people who have been 
involved in this process have personally been open. And I 
appreciate, for instance, Secretary England's willingness to 
have a long dialogue, and he has done that. I commend him for 
it.
    Even though the product is not one that I think is 
acceptable, I think I would be the first to acknowledge that 
there has been a spirit at least of openness in the process, 
although the product is not one that I find acceptable.
    Thank you.
    Chairman Collins. Thank you.
    We will now proceed to Director Springer's testimony.

 TESTIMONY OF HON. LINDA M. SPRINGER,\1\ DIRECTOR, U.S. OFFICE 
  OF PERSONNEL MANAGEMENT, ACCOMPANIED BY GEORGE NESTERCZUK, 
 SENIOR ADVISOR ON DEPARTMENT OF DEFENSE, OFFICE OF PERSONNEL 
                           MANAGEMENT

    Ms. Springer. Thank you, Madam Chairman and Members of the 
Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Springer appears in the Appendix 
on page 50.
---------------------------------------------------------------------------
    I am pleased to be here this morning to discuss the 
development of the final regulations that would establish the 
National Security Personnel System (NSPS) at the Department of 
Defense (DOD) and the continuing role of the Office of 
Personnel Management (OPM).
    Our collaboration with the Department has been a joint 
effort, and I do thank Secretary England and his staff for his 
leadership during this undertaking. As many have mentioned, it 
really was a turning point in the process and in the openness.
    I also want to acknowledge and thank OPM's principal 
participant in that process, George Nesterczuk. He joins me 
here today, and his work on this effort really has been, I 
think, instrumental in leading to a product that OPM feels 
preserves the protections that the employees deserve.
    I would also like to express my gratitude, Madam Chairman, 
to you, to Senators Voinovich, Lieberman, and Akaka, as well, 
for your continued interest and involvement in this process. 
And we will look forward to an ongoing involvement to help 
ensure that this contemporary and flexible human resources (HR) 
system maintains the proper balance between the mission 
requirements of the Department and the needs of the workforce.
    From the outset, OPM has been interested in using an open 
and inclusive process to develop these regulations, and we 
joined the Department of Defense in reaching out to a broad 
community of interests. Before the regulations were even 
proposed, we met extensively with labor organizations to 
solicit their views.
    The Department held extensive town hall meetings with 
employees. They had over 100 focus groups with both bargaining 
and nonbargaining unit employees, with representative groups of 
managers and supervisors, and with various subsets of human 
resources practitioners and labor and employee relations 
specialists.
    When the NSPS proposal was published, we received over 
58,000 public comments. We had in-depth meetings with the DOD 
unions, and OPM participated in all of those for nearly 2 
months, about twice the amount of time provided for the meet-
and-confer period of 30 days in the statute.
    We held numerous meetings and briefings with congressional 
staff, and we have met with veterans groups, public interest 
groups, and other stakeholders. All of these meetings and 
sources of input were of great benefit as the final changes 
were crafted to the regulations.
    The NSPS authorizing statute called for the creation of a 
contemporary and flexible system to support the DOD mission. 
Putting mission first is a fundamental guiding principle 
inherent in the design of NSPS. But at the same time, OPM's 
role was to make sure that there was a proper balance between 
that requirement and the needs of the workforce. After all, it 
is the people in government who make the government work.
    We also recognize that the government's HR system must 
protect and promote fairness and transparency and guarantee 
equal access for all. In modernizing the HR system for the 
Department, we made sure that these core values are sustained.
    So, in that regard, NSPS not only guards against prohibited 
personnel practices, it continues to protect whistleblowers 
from recriminations. It maintains all of the safeguards against 
discrimination. It fully ensures employee rights to due 
process, and it maintains their right to representation and to 
bargain collectively. Finally, the NSPS honors and promotes 
veterans' preference, a privilege that has been dearly earned 
through personal sacrifice by our men and women in uniform.
    The enabling legislation also seeks to ensure that the NSPS 
supports the DOD mission and does so with a pay-for-performance 
system that meets a number of objectives. I think we have 
accomplished these objectives.
    NSPS promotes accountability. It does so through a 
performance management system that is linked to the agency 
mission that encourages excellence and rewards achievement. 
NSPS streamlines staffing and workforce-shaping rules that put 
the right person in the right place at the right time. NSPS 
promotes compensation based on market-sensitive means to pay-
setting and adjustments that reflect performance and reward 
results.
    NSPS is flexible. It allows the Department to compete for 
talent, and it provides greater latitude in making changes as 
mission priorities evolve. With DOD, we have blended these 
features into NSPS while fully preserving, and I say this 
again, the due process rights of the employees. It achieves the 
balance of employees' rights to representation and collective 
bargaining with the mission requirements of the Department.
    Secretary England mentioned earlier that many of these 
concepts and elements crafted into the regulations have come 
from previously tried and true ideas. In crafting the NSPS, we 
were mindful of the challenges inherent in transforming a new 
organization the size of the Department of Defense, and to help 
mitigate that, we turned to many of the ideas that have already 
been used for decades, in some cases, in the Department.
    DOD has been a laboratory, in effect, for testing new 
concepts in personnel management for years. Over 45,000 DOD 
employees have been covered under various alternative personnel 
systems. Many of the lessons that we have learned from those 
experiences helped to inform the NSPS regulations. OPM has 
documented many of those lessons, and we have recently 
commented on those at hearings, and that document is available 
publicly.
    As we move into the implementation phase for NSPS, we are 
anxious for DOD to succeed. Implementing it is a huge 
undertaking, and the Department civilian staff comprises 
roughly 40 percent of the Federal employee workforce. But in 
light of DOD's years of experience, we are confident the 
Department will succeed.
    Many of the elements already necessary for success are in 
place. In effect, they have a running start on this process. 
Training is of the utmost importance, and ultimately, it will 
be a major key to success.
    DOD is well versed in developing training strategies and 
training methodology. They probably do it as well, if not 
better, than almost any other Cabinet agency. They do it 
routinely. They do it well. And they have a robust existing 
training infrastructure.
    Furthermore, they are uniquely situated in being able to 
draw on the in-house expertise that they have developed during 
those previously established alternative personnel systems. 
They don't have to go out and just buy expertise. It is already 
in place.
    OPM will support the Department in every way, throughout 
the entire process. Our job didn't stop with the issuance of 
regulations. It has just begun. And we will make sure that this 
implementation occurs smoothly and fairly in the coming months 
and years.
    While we are enthusiastic and supportive of DOD, we are 
nevertheless mindful at OPM of our broader responsibilities as 
the central human resources management agency in the Federal 
Government. Accordingly, we stipulated in the regulations a 
number of specific matters that are subject to continuing 
coordination between us and the Department in such areas as 
classification, establishing qualification standards, creating 
new appointing authorities, and in setting and adjusting pay, 
just to cite a few examples. The complete list is actually 
found in Section 105 of the regulations.
    Furthermore, the statute restricts initial coverage of the 
NSPS to no more than 300,000 Department employees. That is the 
first spiral. Before that can be extended, the regulations 
require the Department to coordinate with OPM on certification 
that the Department is, in fact, ready to continue to extend 
that. OPM's role as a guarantor of the merit system will never 
change. That is an assurance role that we have and that you 
look to us for, and we take it very seriously.
    Our partnership with DOD has given OPM a valuable 
experience as we learned firsthand what aspects of our current 
human resources management systems may not be in the best 
interests of the men and women of the Federal workforce. The 
enhancements gained by the Department of Defense will be 
sought, we believe, by many other agencies and members both at 
the leadership level and the employee level. They deserve the 
same benefits, and we believe that there are many benefits for 
employees in this new system. We believe that other agencies 
will look to us to extend those, and we are ready to help to do 
just that.
    We look forward to working with the Congress to help ensure 
that all Federal workers will have the same advantages of a 
contemporary personnel system that the DOD employees will have.
    That concludes my remarks, and I look forward to your 
questions, Madam Chairman.
    Chairman Collins. Thank you very much.
    I am now going to turn the gavel over to Senator Voinovich, 
who will be the Chair for the remainder of the hearing.
    I want to apologize to Mr. Walker and also to the second 
panel that I am going to have to leave now. I do want to assure 
all of the remaining witnesses that I have read your written 
testimony.
    And I also want to tell my friends in the audience from the 
Portsmouth Naval Shipyard in Kittery, Maine, that I have 
spotted you out there, and I am very aware of your deep 
interest in this issue and in this hearing. So thank you for 
coming down from Maine to be here today as well.
    Senator Voinovich [presiding.] Thank you, Madam Chairman.
    Mr. Walker.

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

    Mr. Walker. Madam Chairman, Senator Voinovich, Senator 
Levin, and Senator Akaka, it is a pleasure to be back before 
you again, this time to talk about the final regulations for 
the Department of Defense's National Security Personnel System.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker with attachments appears 
in the Appendix on page 60.
---------------------------------------------------------------------------
    I would note at the outset that DOD has made a number of 
positive changes from the proposed regulations. We believe that 
DOD's final regulations contain many of the basic principles 
that are consistent with proven approaches to effective and 
modern human capital management practices. For instance, the 
final regulations provide for a flexible, contemporary, market-
based, and performance-oriented compensation system, such as 
pay bands and pay-for-performance approaches.
    They also give greater priority to employee performance in 
retention decisions in connection with workforce right-sizing 
and reductions-in-force. They also provide for the involvement 
of employee representatives throughout the implementation 
process, such as having opportunities to participate in the 
development of implementing issuances. However, as we all know, 
future actions will determine whether such labor relations 
efforts will be meaningful, effective, and credible.
    Despite these positive aspects of the regulations, there 
are several areas of concern that I would bring to the 
Committee's attention. First and foremost, DOD has significant 
work ahead of itself to define the important details necessary 
for effectively implementing this new system, such as how 
employee performance expectations will be aligned with the 
Department's overall mission and goals and other measures of 
performance.
    Also what safeguards DOD will incorporate into the new 
system in order to assure consistency and provide general 
oversight of the performance management and pay-for-performance 
systems to assure that they are implemented in a fair and 
transparent manner. These and other critically important 
details must be defined in conjunction with key stakeholders.
    Second, the regulations merely allow, rather than require, 
the use of core competencies that can help to provide 
consistency and clearly communicate to employees what is 
expected of them.
    Third, although the regulations do provide for continuing 
collaboration with employee representatives, they do not 
identify a process for continuing involvement of and feedback 
from individual employees in the implementation of NSPS.
    Going forward, GAO believes that the Department of Defense 
would benefit from developing a comprehensive communication 
strategy. We also believe that DOD should assure that it has 
the necessary institutional infrastructure in place, including 
adequate safeguards to assure the fair, equitable, and 
nondiscriminatory implementation of the program, before this 
new authority is operationalized.
    We believe that DOD should develop procedures and methods 
to initiate implementation efforts relating to the NSPS on an 
installment basis. And, in fact, it is my understanding they 
plan to do so through a so-called spiral process.
    We do, however, believe that it would be prudent for 
certain of the key implementation issuances to be subject to 
notice and comment. There are a lot of very important details 
that have yet to be defined. We have gone through this process, 
Mr. Chairman, and I can tell you that while not every important 
issue should be subject to notice and comment, there are a 
number of significant gaps here that I believe should be 
subject to notice and comment rather than just consultation.
    While GAO strongly supports human capital reform in the 
Federal Government, how it is done, when it is done, and the 
basis on which it is done can make all the difference as to 
whether or not such efforts are successful. DOD's regulations 
are especially critical and need to be implemented properly 
because of the potential implications for related government-
wide reform.
    In this regard, as I have testified before, in our view, 
classification, compensation, critical hiring, and workforce 
restructuring reforms should be pursued on a government-wide 
basis both before and separate from any broad-based labor 
management or due process reforms.
    Thank you, Mr. Chairman. And I am happy to answer any 
questions that you and the other Senators may have.
    Senator Voinovich. Thank you very much, Mr. Walker.
    One thing I would like to point out is that this Committee 
had real concern that OPM would not be involved with the NSPS. 
Just to refresh everyone's memory, when the NSPS system was 
considered by Congress, it went through the Armed Services 
Committee, went to the floor, and there was a great deal of 
concern on the part of this Committee that we didn't have an 
opportunity to participate in developing the legislation.
    We did have a hearing and made some revisions. Senator 
Akaka, I don't know whether you were on the conference 
committee or not, but I know that our Chairman was, and she 
really worked hard to make sure that our input was folded into 
the final legislation. I just want to say that our concern of 
OPM not being involved didn't happen.
    I think everyone should understand that the regulations 
being discussed today have been published by the Department of 
Defense and the Office of Personnel Management.
    Second, I think I should underscore the point that 
Secretary England made today, that if in November 2009, the 
labor-management system is not working, it will revert back to 
Title 5. So there is going to be a great deal of pressure, I 
think, on the Department of Defense to make sure that this is a 
successful endeavor.
    I think I should underscore also that you have the ball, 
Secretary England. But the fact is that whether this is a 
success or failure is going to really rest upon your shoulders 
and on the shoulders of the Office of Personnel Management.
    Secretary England, monitoring of the NSPS by DOD and OPM 
from the initial stages of implementation is imperative. We 
must identify and address any deficiencies in the system before 
they become actual problems. In other words, problems will 
occur. We know that, and changes will have to be made. Being 
prepared to make adjustments will have a major impact on the 
receptivity of the employees to the new system. And early on, 
it is going to be very important.
    I tell folks that you never get a chance in this business 
to make a second impression. So the first impression about how 
this is going to work is going to have a lot to do with how 
successful you are, particularly about some of the concerns 
that have been expressed by Senator Akaka in his opening 
statement. I am sure we are going to be hearing a lot more 
concerns when the union representatives come to the table.
    I would like to know how you are going to monitor the 
implementation to make sure that you have got a finger on the 
pulse as it moves on. I would also like to hear from Linda 
Springer on the same issue.
    Secretary England. Senator, it is a very key point, and I 
thank you for the opportunity to discuss it because, 
recognizing that the implementation, we do have to make sure 
that this works when we pull the trigger. We put together a 
spiral implementation program, and that spiral program is 
designed for feedback. I agree with Mr. Walker in this case. 
Employee feedback is very valuable.
    So we are going through a spiral process specifically to 
get feedback so that we can make that a learning experience, 
and we will do that throughout 2006. And we do not then 
actually implement like pay-for-performance, the HR system, 
until the following year. So if we have issues as we proceed, 
again, we will listen to our employees. I mean, we will get 
that feedback, and we will plug it into the system.
    Now also you mentioned the soft skills. And frankly, to me 
it is always the ``soft stuff'' is the ``hard stuff.'' Now 
recognizing that, we have been training people in the soft 
skills literally for the last year and a half, and we are now 
in training of the trainers to be ready for this.
    So we have had extensive training programs to be ready. We 
have spiral programs designed for feedback, and we are looking 
forward and expecting to get feedback from employees that we 
can then use to modify the system appropriately. So we have 
those checks and balances built into the system.
    We also have vehicles for employees to communicate with us. 
And we have Web sites. We have training tools on the Web. So we 
have opportunities for them to feed back directly into the 
system.
    And as Ms. Springer commented earlier, we received 58,000 
comments just during our preliminary regulations, which we 
evaluated and considered at that time. So this whole system has 
literally been put together for collaboration and feedback 
because we know that we need to learn as we go. And I just want 
to tell you, we are very receptive to do that. We want this 
system to work, and those venues are built into the program, 
Senator.
    Senator Voinovich. Have you sat down with the employee 
representatives to talk about a formalized consultation so that 
not only do you get feedback from the employees, but also from 
the folks that represent them?
    Secretary England. I don't know how formalized because, 
again, we will be in the issuances. We have a collaboration 
period between now and February 1 that we have agreed to in 
terms of the issuances to collaborate on that.
    Senator, I will comment, I am not sure that ever in the 
history of the Department we have had the kind of collaboration 
and discussion between the leadership of the Department and the 
leadership of our unions that we have had during the past 2 
years. We have had open channels of communication at every 
level, and our plan is to continue that. So, we will continue 
this program the way we have been doing it for the past 2 
years, which is open dialogue.
    Senator Voinovich. I would just like to ask one more 
question to follow up with Mr. Walker. You have led GAO through 
this. I don't know whether you have unionized employees at the 
Government Accountability Office, but do you have a formalized 
process for communication so that you get regular feedback, 
particularly in the initial stages when you implemented the new 
system?
    Mr. Walker. Senator, none of our employees are covered by a 
collective bargaining agreement. However, we have a very 
inclusive process for determining what our policies are going 
to be. We have a very rigorous employee feedback and evaluation 
process with regard to these types of changes.
    Candidly, one of the concerns that I have is there are a 
lot of very important details that have not been defined in 
these regulations. For example, the nature of the performance 
appraisal and management system and what type of safeguards 
will be put in place to make sure that it is fairly, equitably, 
and credibly implemented.
    Second, how the performance-based compensation system will 
work, what type of methodology will be used? If these issues 
haven't been addressed, it is hard to really get a sense for 
this full program. Furthermore, if they are not going to be 
subject to notice and comment, then I have a little bit of 
concern about whether or not you are going to have as much 
input as is appropriate to make informed judgments.
    I note that not all of the individuals who will be subject 
to this new system are covered by collective bargaining 
agreements. My understanding is, a fairly significant 
percentage of DOD employees are not covered by collective 
bargaining agreements. How are their views going to be 
considered if there is not going to be a notice and comment 
period?
    Importantly, irrespective of what you finally decide to 
do--it is not going to be universally popular. I can tell you 
that right now; ultimately, you have to do what you think is 
right, not what is popular. You need to have feedback 
mechanisms to understand how it is being received and to try to 
continue to make improvements in future cycles.
    Senator Voinovich. I would like to know what programs that 
you are going to put in place to get feedback. What mechanisms 
are in place for those in the initial stages?
    And it would be interesting also to have you review what 
Mr. Walker has done. I am interested in metrics and determining 
whether or not NSPS is really working.
    Secretary England. We agree. Could I have Brad Bunn discuss 
a little bit some of the specifics in place? I think it might 
be useful.
    Senator Voinovich. I am way beyond my time here.
    Secretary England. OK. So, Senator, we will follow up----
    Senator Voinovich. No, Senator Akaka says it is OK. Why 
don't you do that? And then Senator Akaka, you will have 15 
minutes or so.
    Mr. Bunn. Mr. Chairman, I will be brief. My name is Brad 
Bunn. I am the Deputy Program Executive Officer for the 
National Security Personnel Program.
    In my role as the deputy PEO, we have a formalized program 
evaluation process that we are standing up as we speak that 
will formalize how we are going to assess, evaluate how the 
NSPS is implemented and whether it is meeting the requirements 
set out both in statute as well as set out in our requirements 
document that we developed as part of the design process.
    And that will include feedback mechanisms that are more 
formal than simply doing employee feedback sessions. It is also 
doing formal employee surveys, statistically valid surveys. It 
is monitoring the data systems so that we can monitor how the 
performance appraisal system is actually working out there, 
whether there is consistency, whether there are trends that are 
troubling. And we are standing that up as we speak.
    We are also working with the Office of Personnel 
Management. They have a lot of experience in that area, as they 
did the evaluations for our demonstration projects. We are 
using a lot of the same methodologies that they used in 
evaluating those programs.
    Thank you.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Yes, thank you very much, Mr. Chairman.
    Secretary England, it seems as though employee feedback 
certainly plays a part in this. Secretary England, Director 
Springer, and Mr. Walker, I have the deepest respect for you, 
and I look forward to continuing to work with you on this. I 
just want to speak my mind here on this particular subject.
    Secretary England, I have been receiving feedback from 
constituents as well. And I know you have mentioned, and I 
thank you for this, that there are opportunities to receive 
feedback from employees. My question to you, after considering 
the kind of feedback I have received, is why is there a strong 
opposition to NSPS by so many employees?
    Secretary England. Senator, I am not sure there is all that 
opposition from so many employees. I mean, there may be a small 
vocal number. But frankly, I find in my discussions with 
employees that a lot of employees are very excited about this.
    This is an opportunity for us to, frankly, streamline the 
system. We have pay for performance, which is very positive. We 
can hire people, frankly, at more competitive rates. We can do 
it faster. There are a lot of attributes of this system, which 
is a very modern personnel system.
    I mean, frankly, change is difficult. And no matter what 
this system was, no matter how we did it, frankly, people would 
be worried and concerned because it is a change to the system, 
and we understand that. So it will take a lot of interface with 
our employees for them to truly appreciate the benefits of this 
program.
    But I am convinced this is a program that is good for all 
of the employees. We would not proceed if this was not good for 
our employees. At the end of the day, it is not about NSPS. 
NSPS is merely a means to an end. The end is to have a better, 
more highly motivated workforce, and NSPS is merely the vehicle 
to get there.
    So, I mean, it is not really about NSPS. It is all about 
providing a personnel system that results in improved 
performance for the Department and better remuneration for our 
employees when they perform well.
    So I will tell you, I am convinced that our employees will 
find this system very beneficial as it is rolled out and 
implemented.
    Senator Akaka. I thank you for your response, Mr. 
Secretary. You mentioned that this is from a limited group, but 
I just wanted you to know that I have been receiving feedback 
from a large group of Federal workers.
    Secretary England, witnesses on our second panel state in 
their written testimony that under the regulations, DOD could 
institute a RIF, reduction in force, of a work unit and limit 
the RIF solely to employees with veterans' preference.
    If this is true, it is an affront to the veterans the 
regulations claim to protect. Will you give us your assurance 
that the Department will not limit RIFs to employees with 
veterans' preference nor target veterans under the NSPS RIF 
process?
    Secretary England. Brad, I think you are more familiar with 
the specifics as that has been negotiated to conclusion. If I 
could have Brad answer that, Senator?
    Mr. Bunn. Senator Akaka, we do have changes in our 
regulations with regard to the reduction in force procedures 
that we absolutely protect veterans' preference in both 
reduction in force and hiring. Veterans' preference is not 
diminished at all.
    And in fact, if there was a situation where veterans were 
targeted in such a fashion, we would consider that to be a 
prohibited personnel practice, which remains illegal. So we 
have taken great pains to ensure that veterans' preference 
rights are preserved as they are today.
    Senator Akaka. Thank you so much for that. You know I am 
the ranking member on the Veterans Affairs. So I am hearing 
from that sector as well. Thank you.
    Mr. Bunn. Yes, sir. I understand and appreciate that.
    Senator Akaka. Director Springer, DOD employees have 
discussed with me the need to recognize and reward teamwork in 
any pay-for-performance system. Teamwork is an integral part of 
the success of the employees working at any shipyard, 
especially Pearl Harbor Naval Shipyard.
    I understand that the final regulations will recognize 
teamwork under NSPS. Can you explain how teamwork will be 
rewarded under NSPS and how outstanding members or poor-
performing members of the team are appropriately awarded?
    Ms. Springer. Senator Akaka, I am going to address that at 
one level and maybe ask Mr. Nesterczuk to give you some 
details.
    But let me just say I have been in systems where not just 
my performance increase, my salary increase, but my actual 
compensation and significant portions of it were affected by 
the performance of a team of which I was a part. It was not 
just my own performance. It was the whole team. And the result 
of that was that the whole team performed at a higher level 
than it otherwise would have because we had skin in the game, 
if you will.
    And we worked better collaboratively. We had more 
communication than we ever would have. We had common goals. 
They were in writing, which was one of the enhancements, 
incidentally, as a result of our meet and confer. We listened 
to the requests of the union representatives about having 
performance requirements in writing that would be done as a 
team, in this case, as opposed to on an individual basis.
    The reward, at the end of the day, was a function of close 
collaboration within the team structure. And it worked. And I 
think that in this case, it will as well.
    Now I am going to ask Mr. Nesterczuk if he could comment 
just a bit further on the details?
    Mr. Nesterczuk. The regulations envision team activities on 
the part of employees, although the performance evaluation is 
directed at an individual's performance. If the activity is a 
group activity, that is dealt with in the regulations. It is 
not a problem. It is recognized as a valid way to do business.
    Senator Akaka. My time has expired, Mr. Chairman. Thank 
you.
    Senator Voinovich. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    Pay for performance is required by the law, which we have 
approved. But it could be a backward step instead of a forward 
step unless the Department is able to make distinctions in 
employee performance that are fair and meaningful. This system 
is vulnerable, bottom line.
    It is vulnerable to those who would use it to reward 
loyalty over quality of performance, if it is used to provide 
pay and promotions to those who tell senior officials what they 
want to hear rather than what they need to know. So this is a 
system which can work either way. It can be a step forward, or 
it could be a step backward, depending on how it is 
implemented.
    The track record of the Department of Defense has not been 
particularly good relative to pay for performance, which has 
been already in law established. The General Accountability 
Office said the following, that, ``Most existing Federal 
performance appraisal systems, including a vast majority of the 
Department of Defense's systems, are not currently designed to 
support a meaningful performance-based pay system.''
    In other words, we haven't done that well with existing 
systems where performance is supposed to be rewarded, and the 
Department of Defense did not successfully implement a 
performance management system which was established for senior 
executives, which is just a few thousand people. Congress had 
to step in earlier this year, enact special legislation barring 
the Department from automatically giving higher raises and 
bonuses to political appointees rather than to career civil 
servants.
    I think you may remember this, Secretary England, where 
there was an automatic pay increase for political appointees. 
For everybody else, it wasn't automatic. Political appointees 
got it automatically. We had to step in and reverse that. That 
was a misuse of a performance-based system. So trying to 
implement a performance management system for half a million 
civil servants is exponentially more difficult than what was 
permitted there.
    So let me first ask you, Mr. Walker, what is the likelihood 
that the Department of Defense is going to be able to institute 
a system that makes meaningful distinctions in employee 
performance and is accepted as fair by the Department's 
employees in time, and this is a timing question now, for the 
projected launch of the new system in the next few months?
    Mr. Walker. It is possible to do that, Senator, and it can 
and has been done. I have not seen the performance appraisal 
systems that are associated with the Spiral 1 process. We would 
be happy to take a quick look at them to be able to provide an 
informed comment on it.
    I will tell you this, if you don't have modern, effective, 
and credible and, hopefully, validated performance appraisal 
systems that provide meaningful feedback to employees to help 
them maximize their potential, that result in meaningful 
distinctions in performance, then you shouldn't implement pay 
for performance unless and until you have that.
    I can't comment on the specific ones here because I haven't 
seen them. However, I believe it is critically important that 
they be in place before pay for performance is implemented.
    Senator Levin. How long before?
    Mr. Walker. We have had a notice and comment period for our 
employees and at least, in the case of our analysts, used our 
new performance appraisal system at least one time before we 
went to a more pay for performance oriented approach.
    They may be talking about using the current system they 
have. I don't know. Importantly, I don't know whether or not 
the current system would meet those criteria, but I would be 
happy to take a look.
    Senator Levin. Let us ask Secretary England. Will that be 
shared with the GAO?
    Secretary England. Certainly, it will be shared. Everything 
we do is shared, Senator.
    Senator Levin. No, but I mean in advance of them being 
issued?
    Secretary England. Certainly. All the time. And they are 
always welcome to deal with us, and we have an open dialogue 
with GAO and OPM and everyone, Senator. But let me comment----
    Senator Levin. Well, no. You are going to be free to 
comment. I will assure you of that. But I want to get back to 
what I think is a specific comment that was made by Mr. Walker, 
which is that they would be willing to critique those 
issuances, providing they get them. My question is will they 
get them before you drop them on the employees?
    Secretary England. Certainly. We would be happy to consult 
and have them help us in any way they can. We have already had 
those consultations.
    Senator Levin. Now I interrupted you. So you go ahead.
    Secretary England. OK. Senator, I just wanted to clarify, 
we do not start pay for performance right away. Pay for 
performance will go through a 1-year spiral process. That is, 
there is no pay for performance sort of ``for keeps'' until 
literally 1 year.
    So we will go through a spiral process. We will go through 
a mock process, so to speak. That is, we will have people go 
through it with employees so we make sure we have this system 
proven before we start it.
    I also want to comment, we do have a requirement--and your 
comment about the prior system. You are absolutely right. It 
did not work. That is part of the reason that we are going to 
this new system because the old system was fundamentally 
flawed.
    Senator Levin. I was talking about the performance-based 
part of the old system.
    Secretary England. Fundamentally flawed. I mean, there is 
no question about it. We were using old rules and trying to 
implement pay for performance. It didn't work, which is one of 
the reason we had to modify that system.
    But, Senator, we will have a specific criteria. Each 
employee sits down with their supervisor and discusses specific 
criteria and how that will be measured. So there are both 
measurements and criteria to be agreed upon in advance, and 
then that becomes the basis for decisions later. So it is a 
quantitative approach, and there is also appeals built into the 
system.
    So just for clarification, Senator, I do believe we have 
thought this out. And again, we will work closely with the 
Government Accountability Office in this regard.
    Senator Levin. I just had one more question. Are you going 
to have a second round for this panel?
    Senator Voinovich. No, I am not.
    Senator Levin. Would it be all right if I add one question? 
I am over my time.
    Senator Voinovich. Yes, why don't you? Sure.
    Senator Levin. The DOD's final regulation provides that, 
``Any provision of a collective bargaining agreement that is 
inconsistent with implementing issuances is unenforceable on 
the effective date of those issuances.'' And according to your 
Web site, the term ``issuances'' includes Department 
directives, directive-type memorandum, DOD instructions, 
administrative instructions, and publications including 
catalogues, directories, guides, handbooks, indexes, 
inventories, lists, manuals, modules, pamphlets, plans, 
regulations, and standards.
    Now, Judge Collyer--who, by the way, was an appointee of 
President Bush, current President Bush--who is an expert on 
labor law, served as general counsel to the National Labor 
Relations Board in the Reagan Administration, struck down a 
similar provision in the regulations of the Homeland Security 
Department last summer. I have read some of what she said in my 
opening statement.
    But I am just wondering, Secretary England, why you are 
retaining in your regulations a provision which specifically 
was held by Judge Collyer to make collective bargaining 
negotiations pursuant to its terms ``illusory.'' I am wondering 
if you could comment on that, or your lawyer?
    Mr. Bunn. I would be happy to. I am not an attorney.
    Senator Levin. It says ``counsel.'' But you are not?
    Mr. Bunn. Yes. It is more like consigliere maybe.
    Senator Levin. I think we owe you an apology for labeling. 
I am a lawyer. So I can say this. [Laughter.]
    Mr. Bunn. I accept your apology, and I am flattered as 
well.
    Senator Levin, the implementing issuances are those 
instructions and directives that actually implement the 
National Security Personnel System. So they are limited to 
implementing the provisions of the regulation.
    They are actually extensions of the regulations that will 
go through the continuing collaboration process that is 
actually based in the statute that says that there is an 
exclusive process for collaborating with employee 
representatives in the development, further development, and 
implementation of the system.
    In addition, it was necessary to exclude those issuances 
from provisions of collective bargaining agreements in order to 
have a comprehensive uniform approach to implementing the 
system. So that is the purpose of giving that status to 
implementing issuances.
    We did hear the concerns during the meet and confer process 
about unilaterally overturning collective bargaining 
agreements, and what we have done in the final regulation is we 
have limited the authority for issuing those kinds of 
directives and instructions to very few people in the 
Department, for example, the Secretary of Defense, the Deputy 
Secretary of Defense, principal staff assistants, and the 
secretaries of the military Departments.
    So it is a very short list of people who actually have the 
authority to issue, promulgate those kinds of issuances that 
will have the effect of overturning provisions of collective 
bargaining agreements.
    Senator Levin. I don't think it cures the problem. But 
nonetheless, thank you for you answer. Thank you, Mr. Chairman.
    Senator Voinovich. My final comment would be that there is 
a lot of apprehension surrounding implementing issuances. I 
think Mr. Walker raised a couple of very good questions. The 
sooner that we see those, I think the better we will all feel. 
I think it is real important that in the process of finalizing 
the issuances, you touch base with some of the folks that are 
representing the unions.
    I want to thank you very much. I still have many more 
questions I would like to ask. I am going to submit them to you 
in writing. But I think in fairness to the next panel, we 
should bring them forward. We also have a vote, Senator Akaka, 
at 11:45.
    I really appreciate your being here today. I appreciate all 
of the time you have put in. We are looking forward to a 
successful implementation.
    And Mr. Walker, we are going to be looking to you to 
continue oversight and to give feedback to us about how you 
view things are progressing. The more dialogue we can get 
between GAO and DOD, I think, the better. Thank you very much.
    Secretary England. Senator, thank you, sir.
    Senator Voinovich. Testifying on our second panel today is 
Michael Styles, National President of the Federal Managers 
Association. Testifying on behalf of the United DOD Workers 
Coalition are John Gage, President of the American Federation 
for Government Employees, and Ron Ault, President of the Metal 
Trades Department of the AFL-CIO.
    We are very pleased to have you appear today. And Mr. 
Schember is here to act as counsel for Mr. Gage.
    Mr. Schember. Senator, thank you. I am here on behalf of 
the United DOD Workers Coalition and, in particular, my long-
time client, a member of that coalition, the Association of 
Civilian Technicians.
    Senator Voinovich. Thank you very much. And thank you for 
coming today. Mr. Styles, we will start with your testimony.

TESTIMONY OF MICHAEL B. STYLES,\1\ NATIONAL PRESIDENT, FEDERAL 
                      MANAGERS ASSOCIATION

    Mr. Styles. Thank you, Mr. Chairman.
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    \1\ The prepared statement of Mr. Styles appears in the Appendix on 
page 94.
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    As we begin, I would like to echo Madam Chairwoman's 
remarks regarding your leadership, and your leadership also, 
Senator Akaka. Both of you have been staunch supporters of the 
Federal employee, and we certainly appreciate your dedicated 
work on our behalf.
    I thank you for this opportunity to come before you today 
to present the views of managers and supervisors in the 
Department of Defense who will be subject to the final 
regulations for the National Security Personnel System. I am 
the National President of the Federal Managers Association. Our 
organization represents a preponderance of managers and 
supervisors at agencies throughout the Department, including 
naval shipyards, Air Force materiel commands, naval aviation 
depots, Marine Corps logistics bases, Army depots and arsenals, 
and so on.
    The premise for creating any new HR system should be based 
on a mission-oriented approach which enhances the agency's 
overall operational capabilities. Too often we dwell on the 
negative aspects of why we need a new personnel system. Poor 
performance of employees or managers. Even the statement that 
we have to get the drunks out of the Federal workforce in an 
appropriate fashion.
    I have traveled around the country and observed the men and 
women of America's workforce. They are an incredibly talented 
group of individuals who are doing a great job of supporting 
our war fighters. These individuals are fully engaged in 
fighting the war against tyranny in Afghanistan, Iraq, and many 
other locations throughout the world.
    We talk often about hiring the best and the brightest. 
Quite frankly, just looking around this room, you can see that 
many of the best and brightest are represented here. My thanks 
to them for the work that they do for America on a daily basis. 
To keep knocking them all of the time is rhetoric we don't 
need. It only serves to undermine the morale of our employees 
and the good work that is being done throughout the Department 
of Defense and the Federal Government.
    Our mission should not only be to hire the best and 
brightest, but to retain them as well. Market-based pay and pay 
banding lend themselves to these goals. One of the false 
assumptions in the critique of the current system is that 
employees receive an automatic increase in pay whether they are 
performing well or not. This simply is not the case.
    Any supervisor who has an employee whose performance is not 
up to standard has the ability to deny that person a pay 
increase. We also have a process of rewarding high-performing 
employees. However, if there is not enough money in the budget, 
you can't adequately reward deserving individuals in any 
system.
    The anticipation of the release of the final regulations 
that will govern the management system for human capital in DOD 
is over. The National Security Personnel System has finally 
been outlined, with many details yet to come. As the 
regulations even stipulate, detailed accounts of the 
classification, pay and pay administration, performance 
management, staffing and employment, and workforce shaping or 
reductions in force remain to be seen.
    However, we remain concerned with two key additional 
components that could make or break the new system, training 
and funding. Developing a human resources system from the macro 
view provides a good framework for analyzing the final 
regulations. But successful implementation comes from providing 
managers and employees with the skills necessary to manage the 
new system. In order to do this, we need a comprehensive 
ongoing training program that is funded at appropriate levels.
    While the training plan is in place and we have been 
assured that funding is available for that training, given our 
current state of affairs, we are still apprehensive about the 
availability of those funds. Even this year, Congress cut DHS's 
request for the personnel system funding by $20 million, 
despite the efforts of many Members of this Committee.
    Further, we must stress the fact that this must be an 
ongoing training and not just a one-time hit. Managers and 
employees must be aware of their new responsibilities, and the 
leadership within agencies and from Congress must reassure the 
men and women on the ground that they support their efforts 
through adequate funding.
    When we talk about funding, we are talking about the entire 
budget. We want to ensure that the dollars allocated for HR 
training are not diverted for other purposes, such as skills or 
vocational training and vice versa.
    We support the idea of pay for performance. We always have 
and always will. Employees and managers should be compensated 
properly for their performance. Nonperformers should not 
receive any pay increase for their lack of performance, and 
high performers should be rewarded accordingly.
    The DOD has long been a proponent of total quality 
processes throughout all agencies. All stakeholders must work 
in a collaborative manner in order to ensure that we create the 
most efficient organization and provide the American public 
with the finest goods and services.
    Managers and employees must work together in determining 
what mission-oriented goals and objectives an employee is 
responsible for. By working together on these objectives, you 
have included the people closest to the process and the 
strategic vision--our employees and our managers.
    Managers have also been given greater authorities in the 
performance review process that more directly links employees' 
pay to their performance. We believe that transparency leads to 
transportability. And interdepartment job transfers could be 
complicated by the lack of a consistent and uniform methodology 
for performance reviews.
    Evaluations must be objective in nature and utilized as a 
positive tool in increasing the effectiveness and efficiency of 
the organization. We support the Administration's proposal 
under job classification for positions to be grouped in broad 
career clusters and pay schedules based on the nature of work, 
career patterns, and competencies.
    We are especially pleased with the design of pay bands, 
specifically for managers and supervisors, and a separate pay 
band for science and technical professions. Too often people 
move into management ranks from highly technical arenas for the 
sake of upward mobility. Within this system, however, we will 
be able to reward high achievers in those fields to prevent a 
worst-case scenario of creating an ineffective manager and 
losing a highly competent technician in the field.
    However, if we just combine two GS levels into one pay 
band, that can be helpful for initial hiring, but it doesn't 
allow us to compete at the highest levels, nor is it true 
market-based pay if you don't raise the levels of funding. We 
cannot compete with companies like Hughes Aircraft, General 
Dynamics, McDonnell Douglas, or Lockheed Martin for exceptional 
talent unless we are willing to raise our own bar.
    According to the Bureau of Labor Statistics, the average 
pay gap still remains at 32 percent between public and private 
sector. While we recognize that some jobs in the Federal sector 
may exceed the private sector wage, the majority of Federal 
sector jobs does not. Market-based pay should compare like 
occupations in order to combat this.
    FMA supports an open and fair labor relations process that 
protects the rights of employees and creates a work environment 
that allows employees and managers to do their jobs without 
fear of retaliation or abuse. In fact, we have met with our 
union counterparts on numerous occasions to discuss common 
areas of concern regarding the proposed regulations. We have 
shared those concerns with OPM, DOD, and in testimony presented 
before Congress.
    The new system has relegated the authority for determining 
collective bargaining rights to the Secretary. Toward this end, 
recognition of management organizations such as FMA is a 
fundamental part of maintaining a collaborative and congenial 
work environment.
    Title 5 CFR 251 allows FMA, as an example, to come to the 
table with DOD leadership and discuss issues that affect 
managers and supervisors like these regulations. While this 
process is not binding arbitration, the ability for managers 
and supervisors to have a voice in the policy development 
within the Department is crucial to its long-term vitality.
    There has also been a commitment on the part of OPM and DOD 
to hold close the merit system principles and allow for 
employees and managers to seek out the independent third-party 
review of grievances in cases. We cannot stress adherence to 
and the importance of these time-tested standards and the Merit 
Systems Protection Board enough.
    We, at FMA, are cautiously optimistic that the new 
personnel system will be dynamic, flexible, and helpful in 
allowing DOD to respond to emerging threats when it needs to. 
While we remain concerned with some areas at the dawn of the 
system's rollout, the willingness of OPM and DOD to reach out 
to employee organizations such as FMA is a positive indicator 
of collaboration and transparency.
    We look forward to continuing to work closely with OPM, 
department and agency officials, union representatives, and 
Members of Congress.
    Thank you again, Mr. Chairman, for the opportunity to 
testify before your Committee and for your time and attention 
to this important matter. Should you need any additional 
feedback or have any questions, we would be glad to provide 
assistance.
    Senator Voinovich. Thank you, Mr. Styles. Mr. Gage.

    TESTIMONY OF JOHN GAGE,\1\ NATIONAL PRESIDENT, AMERICAN 
FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, ACCOMPANIED BY DAN 
     SCHEMBER, COUNSEL, ASSOCIATION OF CIVILIAN TECHNICIANS

    Mr. Gage. Thank you, Mr. Chairman. It is a pleasure to 
appear before you again today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gage appears in the Appendix on 
page 118.
---------------------------------------------------------------------------
    Mr. Chairman, you have our written testimony.
    Senator Voinovich. And it will be made part of the record.
    Mr. Gage. And I would like to deviate from my remarks this 
morning to talk about some things that Secretary England said 
and especially with regard to an agreement that was made just 
yesterday. And I think it is illustrative of the frustration 
that the unions have, and also it is very illustrative of the 
assault on collective bargaining.
    I met with Secretary England and his staff the night before 
the regulationss were put into the Federal Register. We were 
told that there were minimal changes to the draft regulations. 
For instance, on the mitigation, the standard for mitigation 
was changed from ``wholly without justification'' to ``totally 
unwarranted.'' Clearly, a distinction between the two that my 
members don't understand.
    We were told that on December 7, the labor relations 
regulations would be implemented and our contracts would be 
void. I asked what parts of the contracts, and I received 
rather a flip answer that ``read the regs.'' Obviously, I 
objected to Secretary England and said that it would be much 
more collaborative if we could sit down and go through these 
contracts and decide what provisions would remain.
    Secretary England said that he thought that would be a good 
idea. Then we received our first issuance, which was the 
procedures for the new board, this board that is not set up 
yet. We were told that the board would be set up by December 7.
    These regulations were incredible. They say that, first of 
all, they turned the whole process into one that would just gut 
additional union rights, for instance, and contradicted even 
the final NSPS regulations. For instance, in the final 
regulations, it comes down that the unions have a 60-day period 
to receive management's declarations of things that are not 
negotiable and given within this period to try to make our 
contracts in conformance, whatever that means, with the new 
regulations.
    But then these competing issuances say that when the union 
is told that something is nonnegotiable right on December 7, 
they have 20 days to contest this to the new board. However, in 
the regulations, the whole idea of how negotiability is 
overturned. Under the FLRA right now, the union, when it is 
told that something is nonnegotiable, we put in a form, a 
filing with the FLRA, and then management is asked to deliver 
why the provision is nonnegotiable. This is completely turned 
on its head with these new issuances.
    The union has 20 days to submit a brief of why an issue is 
negotiable before even being told why it is not being 
negotiable. It turns the whole due process around. Plus, with 
357 locals, for us to respond in a 20-day period to really a 
large amount of issues that will be unclear and needing to be 
contested is simply impossible, and I believe the regulations 
were set up that way to make it impossible.
    So I called, specifically, over to Mr. Curry, who put out 
these regulations, and explained to him the controversy between 
the NSPS and these new board issuances. He could not explain 
it.
    We asked for an immediate meeting. We did not receive it. 
And finally, our attorneys had to go through the Justice 
Department attorneys handling the lawsuit to finally look at 
what the union was saying, and they agreed to move for a 
stipulation with the judge to postpone the implementation of 
the labor part from December 7 to February 1.
    Senator not only do the regulations reduce the scope of 
bargaining, the implementing regulations further cut into the 
unions to be able to make any type of collective bargaining 
approach with management. And with the 60-day provision in the 
NSPS, when it says you have only that period to bring your 
contracts into conformance and implies that if you don't, that 
issue is gone forever from collective bargaining.
    Senator this is a set-up. Our people are extremely 
concerned about it. There is no way for us to provide 
representation to our members in such a scheme. And I really 
resent Secretary England talking about collaboration when the 
regulations, the face of them, come down to a set-up to take 
away the unions' rights in the future. Not only are our future 
rights taken away, but agreements that we have will be wiped 
out with the stroke of a pen because of completely unreasonable 
timeframes.
    Senator we continue to urge this Committee to take 
legislative action to resolve our six flashpoint issues that we 
describe in our testimony. The scope of collective bargaining 
must be fully restored. DOD must not be permitted the ability 
to unilaterally void provisions of signed collective bargaining 
agreements. Any DOD specific labor management board must be 
independent from DOD management. Standards for mitigation of 
penalties need to be fair.
    Performance appraisals must be subject to grievance and 
arbitration in order to ensure fairness. Strong and unambiguous 
safeguards must be established to prevent either a general 
reduction or stagnation in DOD salaries. And finally, sir, RIF 
procedures must be based beyond factors of a worker's single 
performance appraisal.
    Senator, I wish I could relay to you the indignation of our 
members across the country because of these regulations and how 
they have been put out. The meet and confer, all the efforts we 
put into trying to make this process work have simply been 
discarded. I don't believe we have even been listened to.
    Yet we have put very strong, practical suggestions on how 
bargaining could be speeded up, how we could do post 
implementation bargaining, how we could speed up adverse 
actions and discipline issues, how we would sit down and work 
out a pay-for-performance system. And we simply, the final 
regulations do not indicate any of these suggestions and show 
that it was truly a waste of time for us to work and try to 
deal with the Department on these very important issues.
    Sir, again, we need congressional action. These regulations 
will hurt DOD. They will hurt employees. They will take away 
from the great mission in national security for years to come.
    Thank you, sir.
    Senator Voinovich. Thank you, Mr. Gage.
    The only comment I have is that, at least from my 
perspective, we will take your concerns and ask the Department 
to respond. It is too bad that in hearings we have these groups 
separate.
    Mr. Gage. I would appreciate that, Senator. It is a very 
immediate issue.
    Senator Voinovich. We will be glad to look into that. I 
know there is a great deal of apprehension surrounding the 
implementing of the issuances. So I just want to assure you 
that we will look into that.
    Mr. Gage. Thank you.
    Senator Voinovich. Mr. Ault.

     TESTIMONY OF RONALD AULT,\1\ PRESIDENT, METAL TRADES 
                      DEPARTMENT, AFL-CIO

    Mr. Ault. Good morning, sir. Good morning, Senator Warner. 
It has been a long time since you and I have had the 
opportunity to say hello, since the days that I was the 
President of the Tidewater, Virginia, Federal Employees Metal 
Trades Council, and I appreciate you being here this morning.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ault appears in the Appendix on 
page 148.
---------------------------------------------------------------------------
    Senator Voinovich, the folks from Ross, Ohio, at the 
Fernald Atomic Trades and Labor Council told me this morning to 
make sure we passed along our greetings to you as well.
    Senator Akaka, Matt Hamilton, our president from Pearl 
Harbor, said the same. So it is good to be here.
    And Senator Voinovich, I want to just expound a little bit 
on what you just said a second ago, and it is a shame that 
there are just two completely different versions of events when 
you have a varied group of people testifying. And maybe some 
time in the future we could kind of have a debating society of 
actually what went on because I like their version a lot better 
than the version I was in for almost 2 years. [Laughter.]
    Mr. Ault. I have got a 5-year-old daughter, believe it or 
not. And she comes and sits in my lap at night, and she asks me 
to read her books. And one of the books I read the other night 
was ``The Emperor's New Clothes.'' And NSPS is the emperor's 
new clothes.
    And the version I hear put forth in all those great spin 
words--and I am just an old country boy from Arkansas, so you 
have to forgive me. I am not as smooth and polished as some of 
the other speakers, and I am pretty direct. And if I offend 
anyone, it is not on purpose.
    Senator Voinovich. May I interrupt you? The emperor's new 
clothes? That can describe a lot of stuff that we do here in 
Congress. [Laughter.]
    Senator Warner. But I have to say, Mr. Chairman, the NSPS 
may be taking off all your clothes with regard to pay. 
[Laughter.]
    Mr. Ault. I do feel somewhat naked, Senator Warner.
    But I do want to thank you folks for having an opportunity 
for the Department, the United Defense Workers to have an 
opportunity to address this Committee. We are a large and 
varied group of folks from 36 different labor organizations 
that are historic. I think the fact that DOD united 
organizations that have never been united before into a common 
cause is indicative of the way that we see things coming forth 
on NSPS.
    They had a spin on the 58,000 public comments that was kind 
of interesting, like there was an outreach program that they 
went out and talked to all these folks. But I think the 58,000 
public comments that I read, it was only 12 of them in favor of 
NSPS, and those 12 appeared to be from a group of retirees up 
in Columbia, Maryland, of all places. So the other 58,000 were 
people who were outraged that the system was being so radically 
changed from the present system that they know.
    One of the things that I think is interesting in all of 
this is the National Security Personnel System is not about 
security. It is about control. As you know, the blueprint for 
NSPS was written by the Heritage Foundation folks in January 
some 9 months before September 11. The principal architect is 
George Nesterczuk. It was proposed not as a result of anything 
having to do with national security, but it is social 
engineering, and we are seeing some of that happening in the 
Gulf Coast as we speak, when different groups are trying to 
socially re-engineer the rebuilding of New Orleans.
    There is a fundamental disconnect in the leadership of the 
Pentagon, embodied in the views of Secretary Rumsfeld, and the 
workers that we represent. Secretary Rumsfeld holds workers in 
disdain. He distrusts our motive. He demeans our knowledge and 
contribution. He clearly believes in command and control 
supervision. These are the views held widely within the 
Executive Branch, clearly articulated by Mr. Nesterczuk, the 
key architect of NSPS, reflecting a broad suspicion of unions--
us guys--as interlopers at the work site.
    Mr. Nesterczuk described unions in government, ``At worst, 
they represent the permanent government, acting on its own 
self-interest rather than the desires of the electorate.''
    We have heard Secretary England, Secretaries Chu and 
Rumsfeld repeatedly defend the NSPS by describing what it is 
not. But we have also had in their own words a description of 
what it is, and that description should give lawmakers and 
citizens alike a substantial cause for alarm.
    Again, in the words of Mr. Nesterczuk, ``The core Federal 
workforce would include expert, highly compensated individuals 
who serve as executives and managers. The spokes of the new 
system would be a new class of temporary employees to deal with 
increased workloads or changing priorities of government and 
the professional experts to do the specific jobs or projects 
in-house. The rim would be contractors performing the great 
majority of the work on the rim of Federal Government.''
    A new class of temporary employees? These are the folks 
that we are supposed to represent. There is no description in 
our unit recognition of those employees, and we believe that is 
exactly the objective, is to get rid of these career civil 
service employees.
    We strenuously disagree with the viewpoints. Giving voice 
to workers to both exercise their inherent rights and to 
express insight and experience about how work is accomplished 
can increase productivity and efficiency. Furthermore, and 
importantly, that attitude disparages the concept of freedom of 
association and representation as a fundamental workplace right 
and a significant element of a democratic society.
    The Metal Trades Department's experience in the 
collaborative work process within the Department of Defense 
supports our contention. For example, we have negotiated with 
the Navy to develop a wide-ranging cross-training program 
within Federal shipyards a few years ago to improve efficiency 
and reduce downtime.
    We collaborated with the Navy to establish an innovative 
safety and training program for crane operations, which 
standardized all crane operations Navy wide. We have also 
negotiated a highly regarded apprenticeship training program 
with the Navy to address the chronic problem of our aging 
workforce in the area of ship repair and maintenance.
    And let me just say something about that really quickly. We 
represent wage-grade expert craft and trades people who are 65 
percent ready to retire today. And I think that is something 
that needs to be looked at very carefully is you start messing 
with these folks' pay, and they can walk across the street to 
Newport News. They can go down the street to all these other 
shipyards that we represent, and we are 1,600 employees short 
right now at Avondale and Ingalls--you can quickly get yourself 
in lots of trouble when you start messing with people's money.
    Second, the institutions of collective bargaining and union 
representation present no threat to national security. 
Consequently, there is no reason to reduce or further limit the 
union representation for Defense Department personnel.
    Senator Warner. If you want to go ahead? Yes, we will do 
that. Sure. Why don't you announce how we are going to do this?
    We didn't mean to interrupt you, but given our vote, we 
only have but 7 minutes left to make it. Mr. Chairman, you are 
going to go now. I am going to remain a few minutes to receive 
his testimony, and then you will be back. Is that correct?
    Senator Voinovich. I think we are going to have to end the 
hearing.
    Senator Warner. Oh, I see.
    Senator Voinovich. Yes.
    Senator Warner. Well, I would like a few minutes, if I may, 
Mr. Ault? I don't want to invade your time.
    Mr. Ault. My time, we only get one shot at it. So I would 
like to finish.
    Senator Voinovich. Let me inform them. I am sorry about the 
time, and I really wished that I had even terminated the first 
panel earlier than we did.
    Mr. Ault. I like that term. [Laughter.]
    Senator Voinovich. Well, there is certainly a difference of 
opinion about this new system. So I would assure the witnesses 
that I am going to follow through on some of the points that 
you made here today.
    And Mr. Gage, I will get something back from them in 
writing.
    And what I would like to do then is turn the gavel over to 
Senator Warner.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner [presiding.] Well, I would just say a few 
words. But I would say to my friends here--and they are 
friends. I have known you, Mr. Ault, and I have spent many a 
day with John Gage, and I have the highest personal and 
professional regard for your leadership and what you are trying 
to do.
    But I would say about this Senator, when he makes a 
commitment, he keeps it. He is one of the most tenacious, hard-
working Members of this body. Now, with that, you can leave. 
[Laughter.]
    Mr. Ault. That is what Gene Branham says about him, from 
Ross, Ohio, too.
    Senator Warner. Yes, well, he is tough. Let me tell you.
    Senator Voinovich. I refer to Senator Warner as ``Squire.'' 
Thank you, Squire.
    Senator Warner. But you know, I have to draw on my own 
experiences in the Department of Defense, 1969 through 1974, 5 
years as Under Secretary and Secretary of the Navy. It might 
surprise you, I had over 600,000 civil servants in the 
Department of the Navy, just the Department of the Navy. And we 
had a real rough war going on. We have got a rough war going on 
now.
    I just remember, as I traveled through the halls of the 
Pentagon, that you would go into any office, and there is a 
uniformed person and a civilian. They are side by side. There 
were partnerships. They worked together as a team.
    And we cannot, as a consequence of NSPS or whatever we end 
up in the final phase of this, have that civilian feeling 
somewhat disenfranchised. Nor would the military person want 
that civilian to feel disenfranchised and not properly 
represented. And I can speak to the Department of Defense. I 
mean, I have devoted my life to it, and it is the greatest 
institution I have ever seen. Just magnificent. And we can't 
have that.
    So we have here in the Congress to weigh in on this 
situation. It is very important. I also take note, and I just 
left the floor giving a speech about Iraq with Senator Stevens. 
The two of us old-timers teamed up over there just now. Our 
military people are at one of the highest OPTEMPOs ever 
experienced with a substantially lower number in uniform. And I 
could foresee fewer uniformed people in those desks and, 
therefore, having more reliance on the civilian team to fill 
those gaps.
    So this is not a time to bring into the system any feeling 
that would result in a less than magnificent operation we have 
had all these years in the Department of Defense. So that is 
where I come from.
    I will submit my questions which I have for the record. 
What I am concerned about, this pay thing, and the law prevents 
this reduction in a way, and I don't want to see us circumvent 
that. We can't do that.
    I might add that the bill that we passed here, the Armed 
Services bill, which I have been working on with my colleagues 
on the Committee for a year, 98-0. That was a record vote in 
the history of the Senate. Every single senator supporting the 
men and women in the Armed Forces and their civilian partners 
of the Department of Defense. So let us take heart and see if 
we can't work this thing out and give us a shot at it.
    Thank you for coming today. Sorry I haven't had more time 
to be here. But the Senate and the Congress have a wonderful 
way of trying to do everything at once, and we are all trying 
to do everything at once this week.
    So this hearing stands in recess subject to the call of the 
Chair.
    [Whereupon, at 11:59 a.m., the Committee was recessed 
subject to the call of the Chair.]
                            A P P E N D I X

                              ----------                              


                  PREPARED STATEMENT OF SENATOR CARPER
    Thank you, Madam Chairman, for holding this hearing. It's important 
that we review this proposed new personnel system for the Department of 
Defense before it goes into effect. Like many of us on this Committee, 
I have major defense installations in my State and am eager to learn 
more about how the new system will affect my constituents.
    I'd like to start out by thanking everyone at the Department of 
Defense, OPM, GAO, and the various organizations and unions 
representing the employees who'll be working under the new system for 
all of the work they put into these regulations. I don't know that any 
of us up here think the regulations are perfect--I have some serious 
concerns about parts of them myself--but I appreciate the dedication on 
the part of everyone involved in this process to getting it right.
    I don't think I need to remind anyone in this room that the 
proposed regulations we're examining today represent a massive change 
in the way personnel at the Department of Defense are managed. Some of 
the changes may very well be worthwhile and could serve as an example 
for other departments and agencies.
    Based on the feedback my staff and I have heard from Delawareans 
working at the Dover Air Force Base and elsewhere, however, some key 
parts of the regulations don't appear to be very fair. Fear of their 
upcoming implementation appears to be creating significant morale 
problems among Department of Defense employees--at least those I've 
been in contact with.
    I mentioned the Dover Air Force Base, Madam Chairman. My colleagues 
and I from the Delaware Congressional delegation just spent months of 
our time keeping that base and the Delaware Air National Guard base in 
New Castle off of the final closing and realignment recommendations 
submitted by the BRAC commission. I know others on this Committee just 
finished similar work on behalf of defense installations in their 
States.
    During that time--and during my entire time in the Senate, 
frankly--I haven't heard about a single instance in which a provision 
or procedure enshrined in current personnel law has hindered the 
ability of the Delawareans working in Dover, New Castle, or elsewhere 
to carry out their important national security missions.
    This isn't to say that we don't need personnel reform at the 
Department of Defense. I'd be among the first to tell you that we'd be 
foolish not to look at how we can do things better government-wide as 
we look to recruit, retain, and effectively manage the most qualified 
Federal workforce we can find.
    Part of what I hope to hear then, Madam Chairman, is at least some 
solid justification for the more controversial parts of this new 
personnel system.
    Thank you again for holding this hearing. I look forward to hearing 
from our witnesses.
                                ------                                

                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Madam Chairman: Thank you for convening this Committee hearing to 
examine the final regulations for the new personnel system of the 
Department of Defense--the National Security Personnel System (NSPS).
    The centerpiece of NSPS is ``pay for performance'' and the virtual 
elimination of Federal workers' right to bargain collectively.
    The Administration ``sold'' this personnel system to Congress using 
the argument that the post September 11 period somehow required senior 
executives and managers to disregard the concerns of rank-and-file 
workers.
    To this day, I fail to understand the Administration's reasoning. 
In fact, I believe that one of the most important lessons to be learned 
from the tragedy of September 11 is that there must be better 
communication between the senior levels of management and the rank-and-
file.
    I also question the apparent prejudice against workers who belong 
to labor unions.
    Recall that the first responders who rushed up the emergency 
stairwells in the World Trade Center on September 11--while civilians 
filed past them on the way down--were union workers.
    I'm a strong believer in treating our Federal workforce fairly. As 
someone with extensive experience in the private sector, I know that 
workers are most productive when they receive fair pay and benefits, 
and when they can make their ideas heard.
    The GAO put out a report last summer stating that the Pentagon had 
not done enough to reach out to the 700,000 Defense civil service 
workers who would ultimately be affected by NSPS.
    Several member unions last week announced a lawsuit against the 
Pentagon for doing away with collective bargaining rights for workers.
    Given the importance of the Defense Department's mission, we need 
to attract the ``best and brightest'' to work in its civilian 
workforce.
    Beating people down and taking away their rights isn't going to 
build the DOD workforce--we need to keep America safe. I hope we can 
work together to fit the problems with this new plan.
    Finally, Madam Chairman, I believe that our current whistleblower 
protection system is not working.
    All too often, when devoted Federal employees make the hard choice 
to courageously report wrongdoing that threatens us all, they are 
viciously attacked by the bureaucracy and their careers are ruined.
    Retaliating against whistleblowers is illegal, but the current 
system is so rigged in favor of management that whistleblowers prevail 
less than 10 percent of the time. That is wrong, and I will soon 
introduce legislation to do something about it.
    I'm interested from hearing more from our witnesses on this issue 
as well. I welcome our witnesses and look forward to hearing their 
testimony about it. Thank you, Madam Chairman.


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