[Senate Hearing 109-415]
[From the U.S. Government Publishing Office]
S. Hrg. 109-415
IMPLEMENTATION BY THE DEPARTMENT OF
DEFENSE OF THE NATIONAL SECURITY
PERSONNEL SYSTEM
=======================================================================
HEARING
before the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 14, 2005
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN WARNER, Virginia, Chairman
JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JOHN ENSIGN, Nevada DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina EVAN BAYH, Indiana
JOHN CORNYN, Texas HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota
Judith A. Ansley, Staff Director
Richard D. DeBobes, Democratic Staff Director
(ii)
?
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
Implementation by the Department of Defense of the National Security
Personnel System
april 14, 2005
Page
England, Hon. Gordon R., Secretary of the Navy................... 10
Blair, Dan G., Acting Director, Office of Personnel Management... 18
Stewart, Derek B., Director, Military and Department of Defense
Civilian Personnel Issues, Government Accountability Office.... 44
Gage, John, National President, American Federation of Government
Employees...................................................... 56
Sistare, Hannah S., Director, Human Resources Management
Consortium; Executive Director, National Commission on the
Public Service Implementation Initiative, National Academy of
Public Administration.......................................... 69
(iii)
IMPLEMENTATION BY THE DEPARTMENT OF DEFENSE OF THE NATIONAL SECURITY
PERSONNEL SYSTEM
----------
THURSDAY, APRIL 14, 2005
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to notice, at 9:37 a.m., room
325, the Caucus Room, Russell Senate Office Building, Senator
John Warner (chairman) presiding.
Committee members present: Senators Warner, McCain, Inhofe,
Collins, Talent, Levin, Kennedy, Lieberman, Reed, Akaka, Bill
Nelson, and Clinton.
Committee staff member present: Judith A. Ansley, staff
director.
Majority staff members present: David M. Morriss, counsel;
and Diana G. Tabler, professional staff member.
Minority staff members present: Richard D. DeBobes,
Democratic staff director; Creighton Greene, professional staff
member; Peter K. Levine, minority counsel; and Arun A.
Seraphin, professional staff member.
Staff assistants present: Benjamin L. Rubin and Pendred K.
Wilson.
Committee members' assistants present: John A. Bonsell,
assistant to Senator Inhofe; Arch Galloway II, assistant to
Senator Sessions; Mackenzie M. Eaglen, assistant to Senator
Collins; Lindsey R. Neas, assistant to Senator Talent; Mieke Y.
Eoyang, assistant to Senator Kennedy; Frederick M. Downey,
assistant to Senator Lieberman; Darcie Tokioka, assistant to
Senator Akaka; William K. Sutey, assistant to Senator Bill
Nelson; Eric Pierce, assistant to Senator Ben Nelson; and
Andrew Shapiro, assistant to Senator Clinton.
OPENING STATEMENT OF SENATOR JOHN WARNER, CHAIRMAN
Chairman Warner. Good morning, everyone. We welcome
everyone for a very important subject. A number of my
colleagues have urged that this hearing be held, and indeed
that Secretary England urged that this be handled, so we're
delighted to do it.
I must say if I may by reference I have been privileged to
be a part of the Federal workforce for many years in many jobs
over my lifetime. I have always felt I have a special interest
and responsibility to the Federal workers and therefore I'm
delighted to be here this morning with my colleagues.
We meet to receive the testimony on the implementation of
the National Security Personnel System (NSPS), a system which
impacts nearly 700,000 men and women of the Department of
Defense (DOD) civilian workforce, throughout the world.
We welcome our first panel, the Honorable Gordon England,
currently Secretary of the United States Navy, and Daniel G.
Blair, the acting Director of the Office of Personnel
Management (OPM). We will also hear from the second panel, and
I will introduce them as they approach.
Congress enacted the NSPS as part of the National Defense
Authorization Act in 2004. This was a challenge. But in my
view, a very necessary piece of legislation giving DOD broad
new authorities and flexibilities to manage the civilian
workforce, at a time when the Defense Department is undergoing
some of the most dramatic changes in its entire history, given
the extraordinary challenges facing our United States security
system.
The Department has now begun to take the first important
step to implement the new system. I wish to acknowledge the
hard work of Senators Collins and Lieberman, who as chairman
and ranking member of the Committee on Homeland Security and
Government Affairs have played a key role in the adoption of
this legislation.
Also, it's appropriate at this time to acknowledge the many
contributions of the civilian workforce of the DOD, the men and
women who have served tirelessly over years with our military
personnel in the defense of our Nation.
As I have said, I was privileged to have at one time, when
I was Secretary of the Navy, just in the Navy Department alone,
over 600,000 civilian employees. At that time, of course, the
overall Department was much, much larger.
Our civilian employees are scientists and engineers,
medical personnel, technicians, teachers, and some of the
finest senior executives in the Nation. They are also the
welders and the electricians who daily risk their lives to
maintain some of the most powerful technology and sophisticated
weapons systems in the world.
The Nation owes all of those employees a great debt of
gratitude, and we desperately need their services and their
successors in the years to come. It comes as no surprise that
the committee's concern about the transformation of the DOD's
civilian personnel system which is now underway. The DOD sought
flexibility and that flexibility has been granted. It's now our
responsibility to work with the Department and OPM and with the
representatives of the civilian workforce to make sure we get
it right, and it works right.
[The prepared statement of Senator Warner follows:]
Prepared Statement by Senator John Warner
Good morning and welcome to this historic room of the United States
Senate.
The committee meets today to receive testimony on the
implementation of the National Security Personnel System--a system
which impacts nearly 700,000 men and women of the Department of Defense
civilian work force.
We welcome our first panel, the Honorable Gordon R. England,
Secretary of the Navy, and the Honorable Daniel G. Blair, Acting
Director of the Office of Personnel Management.
The committee will also hear from a second panel of experts. I will
introduce the witnesses on the second panel later in this hearing.
Congress enacted the National Security Personnel System as part of
the National Defense Authorization Act for 2004. This was a challenge
but--in my view--necessary legislation which gave the Department of
Defense broad new authorities and flexibilities to manage the civilian
workforce again, this was a challenge to meet the Nation's rapidly
changing national security demands. The Department has now begun to
take the important first step to implement this new personnel system.
I wish to acknowledge the hard work of Senators Collins and
Lieberman who, as chairman and ranking member of the Committee on
Homeland Security and Government Affairs, have played a key role in
passing the legislation covering the civilian personnel changes in the
Department of Defense.
It is also appropriate at this time to also acknowledge the many
contributions of the civilian workforce of the Department of Defense--
men and women who have served tirelessly over the years with our
military personnel in the defense of this great nation. As Secretary of
the Navy in the 1970s, I had the privilege of serving with a civilian
workforce in the Department of the Navy of over 600,000. It gave me
great confidence to know that our sailors and marines worked side by
side with their fine civilian counterparts as a team.
Our civilian employees are scientists and engineers, medical
personnel and technicians, teachers and some of the finest senior
executives in the Nation. They are also the welders and electricians
who daily risk their lives to maintain some of the most powerful,
technologically sophisticated weapon systems in the world, and
firefighters and security personnel who also risk their lives for our
safety. The Nation owes those who have dedicated a career to civilian
service in the Department of Defense a great debt of gratitude, and as
our military leaders have testified before this committee, we simply
cannot get the job done without this fine civilian work force.
It should come as no surprise that this committee is concerned
about the transformation of the DOD civilian personnel system which is
now underway. The Department of Defense sought flexibility, and that
flexibility has been granted. It is now our responsibility to work with
the Department of Defense, with OPM, and with representatives of the
civilian workforce to see that we get it right.
DOD must keep faith with its work force, by rewarding their
achievements and protecting their basic rights. The regulation jointly
issued by the Department of Defense and the Office of Personnel
Management on February 14, 2005 raises these issues:
How will pay be determined for each of the pay bands
which replace the civil service general schedule?
How will performance be evaluated?
What issues are still on the table for collective
bargaining with local and national unions?
How can labor be assured of independent review and
resolution of disputes?
During the course of this hearing, we will explore issues related
to pay, evaluation and recognition of performance, employee rights in
the appeal of adverse actions and the new labor relations system which
the Department intends to put in place.
The decision made, almost 2 years ago, to move forward with the
National Security Personnel System, was supported by final vote
strongly in favor of reform.
As the ``meet and confer'' period which was required by law
commences on April 18, 2005, the Department has an opportunity to work
with all parties on whether or how to proceed on matters needing
clarification. The committee expects to see progress when a final rule
is presented to Congress for review in accordance with the law.
Chairman Warner. Senator Levin.
STATEMENT OF SENATOR CARL LEVIN
Senator Levin. Mr. Chairman, first let me thank you for
calling this hearing. The proposed NSPS will have a direct
impact, as you pointed out, on hundreds of thousands of
employees at the Department of Defense.
It will define how they are hired, how they are promoted,
how much they are paid, how they are disciplined, and what
rights they will have or not have to challenge any of the
decisions.
I recognize the tremendous amount of work that went into
this proposal. I also would like to thank Secretary England in
particular for the positive contribution that he has made in
both the tone and substance of the discussion.
Mr. Chairman, the first test of any new personnel system is
how it's received by the employees who must live under it. The
proposed NSPS is less likely to be successful if it doesn't
have the broad support of the DOD employees who must live with
it.
The NSPS is unlikely to gain such acceptance unless the
Department's employees have confidence that the proposed system
will treat them fairly and will respect the important
contribution that they make to the DOD and to the security of
our Nation.
The new system must do more than provide flexibility to
Department of Defense managers. It must also provide standards,
establish expectations, and incorporate mechanisms to ensure
transparency and accountability for decisions that these
managers will make.
In this regard, I am deeply troubled by a number of aspects
of the draft regulation, which appear to send a message to the
Department employees that the leadership of the Department of
Defense is not interested in ensuring that they are treated
with the fairness or equity that they deserve.
Last month I sent a memorandum to Secretary England
outlining my concerns about four items: the exemption of all
DOD issuances, so-called, from the collective bargaining
requirement; the standard of review for adverse personnel
actions; the ratification of national level bargaining
agreements; and the composition of the National Security Labor
Relations Board. I don't have time to go into all of these
issues now. I'll explore a few more of them during my
questions.
But I would like to just focus on one specific area as an
example of what my concerns are. That area is the standard of
review and appeals of adverse personnel actions against DOD
employees. The relevant section of the draft regulation says
that a proposed penalty against the Department of Defense
employee may not be reduced on appeal unless ``the penalty is
so disproportionate to the basis for the action it has to be
wholly without justification.''
In those cases where the penalty is reduced, listen to
this, the draft regulation says that ``maximum justifiable
penalty must be applied.'' That's unfair. It's harsh. It's
extreme on its face. Instead of words like a fair penalty or an
appropriate penalty will be substituted on appeal where the
penalty is reduced, you have maximum penalty that can be
justified. Why not the minimum penalty that can be justified?
Equally important is what the draft regulation does not
say. It does not require either DOD officials or reviewing
authorities to take into account any of the many factors that
might justify a reduced penalty, such as employees' past
record, whether the offense is intentional or advertent, the
extent to which the employee was on notice or warned about the
conduct in question, and the consistency of the penalty with
those imposed on other employees for the same or similar
offenses. Instead, the regulation says that in every case, the
Merit System's Protection Board (MSPB) must apply the ``maximum
justifiable penalty.''
The message that that provision sends is that the
Department is concerned only about discipline, and not
interested in fairness. Even convicted criminals are not always
subjected to the maximum permissible penalty. I don't believe
that that standard of review is consistent with the standard of
review which we set out in the NSPS legislation 2 years ago
when we enacted it. I also believe that the Department is going
to have difficulty convincing its employees that this new
system will treat them fairly as long as it continues to insist
that the appropriate penalty in adverse action cases is always
the severest penalty that is not so disproportionate to the
basis for the action as to be wholly without justification.
I believe, Mr. Chairman, that our witnesses here today are
seeking to establish a fair and effective new personnel system
for the Department of Defense. I believe that they are open to
rethinking issues like the ones that we are going to raise here
today. It's critically important that they be open. That way, I
assume that the goals of our legislation can be achieved. Thank
you, Mr. Chairman.
Chairman Warner. Thank you, Senator Levin. Other colleagues
wish to make an opening statement?
Senator Kennedy.
Senator Kennedy. If I could, Mr. Chairman, and you're
typically gracious to permit those of us who are very
interested in making a comment. I want to thank you very much,
and Senator Levin, for having this hearing. This is a matter
that we have talked about and you had agreed to have this
hearing so that we would have a chance to go into some of the
issues which are involved, so I'm very, very grateful.
I just want to underline a couple of points here, Mr.
Chairman. As has been pointed out, the Civil Service Personnel
System was first put in place over 40 years ago by President
Kennedy, and later amended under President Carter in 1978.
The changes being made today are the most sweeping changes
in the personnel system ever. I support the modernization but
it can and must be done without gutting vital workers' rights
and protections.
This system is going to have a very dramatic effect and
impact on some 6,400 Defense civilian employees in my State of
Massachusetts. The eradication of the collective bargaining
rights will affect all of those workers, the new untested
subjective pay processes, and weakened due process rights will
affect will nearly 3,000 Massachusetts workers in the first
round of implementation. These include employees at the Air
Force base at Hanscom, the electronic systems center and the
Air Force research labs, Boston Navy Yard, the Air Force police
at Westover, the Army Defense Reserve Forces, and the Otis Air
National Guard.
I believe that the workers deserve better. They deserve to
be able to maintain bargaining rights over their schedules,
safety, and health in deployments outside of the regular work
locations. They deserve a just appeals process when they have
been treated unfairly and they deserve to have their salary and
pay increases depend on fair, transparent criteria, not
subjective judgment.
Mr. Chairman, just finally, I have reviewed in preparation
the statements that were made by Secretary Rumsfeld before the
Committee and I'll have a chance to quote those briefly during
the questioning period. But as many of us remember, the Civil
Service programs were put in to avoid political patronage, and
to create a system that was going to be based on merit and
performance, which for all the reasons that we don't have to go
into today was a very desirable objective and one which in any
kind of modernization is certainly one that I hope we can help
continue.
We may have to modernize the system, but the idea of having
a transparent merit system is one that I would think that we
could all agree on. I don't think that's 19th century, what
might have been. That ought to be a 21st century way of
proceeding. Because it wasn't in the 19th century way, but it
was a system of patronage and we got away from that. That was
the great need that was essential, so that there was going to
be pay based on merit. I think these pay bands that are
outlined in this, move us in a direction that's much more
subject to the subjective.
Second, on the issue of collective bargaining, most modern
managers welcome the opportunity to get input from their
workers. That's basically the collective bargaining system, so
that they know what is happening out there and they have a good
way of exchanging ideas.
That enhances productivity and also health and safety and
other issues which you raised. So it seems to me that all of us
want to see the modernization and adaptability, those are good
words, but we also don't want to throw the baby out with the
bath water on some tried and true principles which I think have
served the country well in terms of the future. I thank the
chair.
[The prepared statement of Senator Kennedy follows:]
Prepared Statement by Senator Edward M. Kennedy
While I strongly support modernization, I am deeply concerned by
the Department's proposal to change the rules governing the civilian
defense workforce. The proposal--which was developed without meaningful
input by affected workers or their representatives--seems a calculated
attempt to deny our invaluable defense employees their basic rights.
Rather than bringing us into the 21st century, the National Security
Personnel System (NSPS) would set workers' rights back to the 19th
century, and that is unacceptable.
First, the NSPS would unlawfully undermine workers' collective
bargaining rights. Under current law, the Department is required to
negotiate with employee representatives over important workplace
issues, including overtime policy and other scheduling issues, safety
and health programs, and deployment away from regular work locations. A
neutral third party steps in to adjudicate when there are disputes
between labor and management. Under NSPS, however, the Department could
prohibit bargaining on any subject, and could wipe out existing
collective bargaining agreement provisions on any subject, merely by
issuing a regulation, directive or policy on those subjects. In
addition, labor disputes would be adjudicated by a new board within the
Department--clearly not an impartial third party. This is not
collective bargaining by any stretch of the imagination--it is an
unlawful and unfair stripping of employees' collective bargaining
rights.
Second, NSPS would effectively eliminate an individual employee's
right to a fair appeals process. Under current law, an employee who
suffers an adverse employment action can pursue an appeal through the
Merit Systems Protection Board (MSPB), an independent agency
established to protect workers in the civil service against potential
abuses by agency management. Under NSPS, employees lose their right to
a fair appeals process, because the Department of Defense has given
itself the authority to remand, modify, affirm, or reverse decisions by
judges at the MSPB. MSPB would have extremely limited authority to
review or change any decisions imposed by the Department. This system
is clearly unfair to employees, allowing the fox to guard the
proverbial henhouse of employee rights.
Finally, under current law civilian employees benefit from a clear,
transparent, objective pay system--the same general schedule that
applies to all Federal employees. While NSPS does not spell out the
details of the new pay system the Department would impose, what we do
know suggests that civilian defense employees will be vulnerable to
their supervisors' whims, rather than congressional action, to
determine whether and how much of a pay raise they will receive. NSPS
replaces the objective statutory pay system with subjective
performance-based pay systems without clear, established performance
criteria. The new pay system will ultimately lead to lower salaries and
slower salary growth for the vast majority of hard-working Defense
employees.
The changes will hurt 700,000 workers nationwide, including 6,400
in Massachusetts. These patriotic Americans are protecting us around
the world, and we owe it to them to protect their rights. They take
pride in their work, they love their country, and they've served it
with distinction, often for decades. They build command and control
systems at Hanscom Air Force Base. They design ships at the Boston Navy
Yard, and they protect our military installations at bases across
Massachusetts.
These men and women deserve better. They deserve the right to
bargain over important issues such as the safety and health of their
workplaces, and when they're required to work overtime hours. They
deserve a fair appeals process when they've been wronged. They deserve
pay increases that depend on fair criteria, not the bias of their
managers. I hope the outcome of to day's hearing will convince the
Department to go back to the drawing board and submit a lawful plan for
reform that protects workers' basic rights.
Chairman Warner. Thank you, Senator. Any of my other
colleagues?
Senator Nelson.
Senator Bill Nelson. Mr. Chairman, I was thinking about--
the Secretary of the Navy is here--and the NSPS with the
necessity for having a carrier in Japan. I'll just defer that
discussion.
Chairman Warner. That will give him a few moments to
reflect what answer he is going to provide.
Senator Akaka.
Senator Akaka. Mr. Chairman, thank you for calling today's
hearing on the NSPS as proposed by the DOD and OPM. I want to
take the time to share some of the information that I have
received from folks in Hawaii, as well as in other places.
Of course, I join you, Mr. Chairman, in welcoming Secretary
England back to the committee along with Director Blair and our
other distinguished witnesses, who will share with us their
views on NSPS.
As the ranking member of this committee's Readiness and
Management Support Subcommittee, as well as the Senate's
Federal Service Subcommittee, I have heard from many Department
of Defense employees across the Nation who do not support the
implementation of these regulations as drafted.
Mr. Chairman, I cannot recall a single issue in my 28 years
in Congress that has generated more anxiety among Federal
workers in Hawaii than NSPS. Now, this is especially true of
the more than 16,000 civilian DOD employees, many of whom work
at Pearl Harbor Naval shipyard.
I believe that government's most important asset is the
Federal workforce, whose dedication, commitment, and courage
are demonstrated every day. Any reorganization such as NSPS
will fail if the concerns of employees go unanswered. Congress
was told the DOD needed a new personnel system that was
``flexible and contemporary,'' to meet it's national security
mission. However, NSPS should not reduce current rights and
protections of the Civil Service in its aspirations for
flexibility.
I used a recent public comment period to lay out my
concerns in a 16-page letter and focus on the areas of pay,
performance and staffing, labor relations, veterans'
preference, and adverse actions and appeals. Although I feel
that all of these areas pose serious challenges to maintaining
a fair and impartial Civil Service, I believe the limitations
and the scope of collective bargaining are particularly
egregious.
In testimony before the Government Affairs Committee 2
years ago, Secretary Rumsfeld testified that the labor
management provisions in chapter 71 of title 5 which governs
the Federal workforce would not be repealed.
However, the NSPS proposal effectively eliminates
collective bargaining by restricting bargaining over
approximately 75 percent of current bargaining issues. The
regulations permit DOD to issue a regulation directive or
policy that trumps provisions of existing collective bargaining
agreements.
The proposed regulations would eliminate negotiation of
overtime policy, shift location, safety and health programs,
flex-time compressed work schedules, and deployments. If such
restrictions are implemented, it is no wonder that DOD
employees are voicing concern. By restricting the ability of
employees to bring their concerns to the table and essentially
eliminating collective bargaining, the changes proposed in NSPS
will undermine the agency mission, lower employee morale, and
make the Department an employer of last resort.
Let me be clear that the concerns being relayed to me are
not just on rank and file employees. I am also hearing from
Federal managers, the men and women who must execute NSPS and
be accountable for its success. Just yesterday I was asked by a
manager how he was to implement the new plan on July 1 without
any information or guidance from DOD. He said he was told by a
superior that, and I quote him, ``implementation is a
journey.'' Then he was referred to the NSPS Web site.
Mr. Chairman, NSPS appears to be, after hearing all of
these folks, a trip without a destination or without a compass
and without a map. I urge that implementation of NSPS be done
in a manner that respects the rights and protection of the DOD
workforce, provides adequate transparency, resources, and
training, maintains fair and credible appeals systems, sustains
an environment in which labor and management coexist, and
provides all workers, both managers and employees alike,
opportunities to provide meaningful input on agency policies.
Thank you very much, Mr. Chairman. I look forward to the
hearing.
[The prepared statement of Senator Akaka follows:]
Prepared Statement by Senator Daniel K. Akaka
Mr. Chairman, thank you for calling today's hearing on the National
Security Personnel System (NSPS) as proposed by the Department of
Defense (DOD) and the Office of Personnel Management (OPM).
I join you in welcoming Secretary England back to our committee,
along with Director Blair and our other distinguished witnesses who
will share with us their views on NSPS.
As the ranking member of this committee's Readiness and Management
Support Subcommittee, as well as the Senate's Federal civil service
subcommittee, I have heard from many Department of Defense employees
across the Nation who do not support implementation of these new
regulations, as drafted. Mr. Chairman, I cannot recall a single issue
in my 28 years in Congress that has generated more anxiety among
Federal workers in Hawaii than the NSPS. This is especially true of the
more than 16,000 civilian DOD employees, many of whom work at the Pearl
Harbor Naval Shipyard.
I believe the government's most important asset is the Federal
workforce, whose dedication, commitment, and courage are demonstrated
every day. Any reorganization, such as NSPS, will fail if the concerns
of employees go unanswered. Congress was told that DOD needed a new
personnel system that was, ``flexible and contemporary'' to meet its
national security mission. However, NSPS should not reduce current
rights and protections of the civil service in its aspirations for
flexibility.
I used the recent public comment period to layout my concerns in a
16-page letter and focused in the areas of pay, performance, and
staffing; labor relations; veterans preference; and adverse actions and
appeals. Although I feel that all these areas pose serious challenges
to maintaining a fair and impartial civil service, I believe the
limitations on the scope of collective bargaining are particularly
egregious.
In testimony before the Governmental Affairs Committee 2 years ago,
Secretary Rumsfeld testified that the labor-management provisions in
chapter 71 of title 5, which governs the Federal workforce, would not
be repealed.
However, the NSPS proposal effectively eliminates collective
bargaining by restricting bargaining over approximately 75 percent of
current bargaining issues. The regulations permit DOD to issue a
regulation, directive, or policy that trumps provisions of existing
collective bargaining agreements.
The proposed regulations would eliminate negotiation on overtime
policy, shift rotation, safety and health programs, flex time and
compressed work schedules, and deployments. If such restrictions are
implemented, it is no wonder that DOD employees are voicing concern. By
restricting the ability of employees to bring their concerns to the
table and essentially eliminating collective bargaining, the changes
proposed in NSPS will undermine agency mission, lower employee morale,
and make the Department an employer of last resort.
Let me be clear that the concerns being relayed to me are not just
from rank and file employees. I am also hearing from Federal managers--
the men and women who must execute NSPS and be accountable for its
success.
Just yesterday I was asked by a manager how he was to implement the
new plan on July 1 without any information or guidance from DOD. He
said he was told by a superior that ``implementation is a journey,''
and then he was referred to the NSPS Web site.
Mr. Chairman, NSPS appears to be a trip without a destination
without a compass--and without a map. I urge that implementation of
NSPS be done in a manner that respects the rights and protections of
the DOD workforce, provides adequate resources and training, maintains
fair and credible appeals systems, sustains an environment in which
labor and management coexist, and provide all workers both managers and
employees alike--opportunities to provide meaningful input on agency
policies.
Thank you Mr. Chairman. I look forward to our hearing today.
Chairman Warner. Thank you, Senator Akaka. We note the
presence of the chairman of the committee that was working on
the issue before and made a significant contribution to this
legislation. Would you like to say a few words, Madam Chairman?
Senator Collins.
Senator Collins. Thank you, Mr. Chairman. I do have an
opening statement, but in the interest of time, I'll submit it
for the record. I would note, as the Senator has indicated,
that the Homeland Security and Governmental Affairs Committee
has a great deal of jurisdiction in this area over the rules
for the civilian workforce at DOD, and that Senator Levin and I
worked very hard to craft an alternative to the plan that the
Department first presented 2 years ago.
I have followed the implementation very closely, along with
Senator Voinovich, who chairs the appropriate subcommittee and
who has held hearings on this matter. A month ago, I wrote to
our two witnesses to express some specific concerns about the
proposed regulations. I have not yet received a reply to that
letter. I understand one is being worked upon, but I hope to
bring up some of those issues today. Thank you, Mr. Chairman,
and thank you for holding this hearing.
[The prepared statement of Senator Collins follows:]
Prepared Statement by Senator Susan Collins
Senator Warner, thank you for holding this hearing as part of our
joint efforts to ensure the Department of Defense creates a new
personnel system in collaboration with its workforce that supports the
Department's national security mission while, at the same time, treats
workers fairly and protects their fundamental rights. As Chairman of
the Homeland Security and Governmental Affairs Committee and a member
of the Armed Services Committee, I take the responsibility of Federal
workforce policy very seriously.
Two years ago, the Department of Defense delivered to Congress a
far-reaching proposal to restructure the Department's civilian
personnel system. Unfortunately, the proposal lacked important
safeguards to protect good employees. To strike a better balance, I
worked hard with several of my colleagues, in particular Senator Levin,
to craft an alternative that would give the Department the authority
that it needed to create a more responsive system, while providing
appropriate employee protections.
Secretary England, I want to thank you for your continued
involvement in the progression of NSPS, and acknowledge your efforts to
make key modifications in the initial development stages in response to
my previous concerns. I hope that you will set a tone of inclusiveness
for the upcoming meet and confer process. Similar to the personnel
system it is designed to produce, the meet and confer period must treat
the employees and their elected representatives as full participants in
the process.
Many have been frustrated by the lack of detail during the
development of the proposal. The recent publication of the proposed
regulations has provided Congress as well as the DOD civilian workforce
an outline of the new personnel system.
After reviewing the proposed regulations, I believe there is room
for improvement. For example, additional details must be provided to
avoid confusion within the pay-for-performance system. The move to a
new compensation system represents both a fundamental and cultural
shift for the Department's civilian workforce. Defining the details
within the final regulations will help ensure fairness and allow
employees to understand how their individual performance is linked to
the Department's overall mission and ensure consistency across
occupational groups.
In addition, the ``wholly without justification'' standard of
review proposed for appeals of adverse actions must be modified to
conform to the evidentiary standard required by the statute.
During debate on the authorizing measure, the Department repeatedly
claimed that it had no desire to waive the collective bargaining rights
of its employees. Thus, I fully expect that the final labor relations
system developed by the Department, OPM, and the employee unions will
abide by existing labor-management principles, such as the duty to
bargain in good faith.
As the meet and confer period begins, I remain confident that both
sides can craft a system that demonstrates its support for employees
who perform the essential services that the Department depends on every
day. While there are real differences of opinion at this time over many
of the proposed changes, meeting in good-faith and carefully balancing
the needs of the Department and its workforce can only improve the
final regulations. For the new system to succeed, employees' voices
must be heard and their specific suggestions and concerns, whether
provided in written comments or raised during the meet and confer
process, must be addressed.
Striking the appropriate balance among the numerous options
available, though not easy, will be imperative to ensuring the
Department has the dedicated civilian workforce it needs to ensure its
long-term success and to support our men and women in uniform.
Chairman Warner. Thank you. Gentlemen, we will proceed
formally as each member does have extensive very well prepared
statements, which will be placed in the record in their
entirety. So you may proceed as you wish on your abbreviated
remarks as you would like to make.
STATEMENT OF HON. GORDON R. ENGLAND, SECRETARY OF THE NAVY
Secretary England. Mr. Chairman and members of the
committee, thanks very much. Thanks for the opportunity to be
here today with my partner from OPM, Dan Blair, to discuss the
proposed design of NSPS, and I emphasize it's still a proposed
design.
The timing of this hearing is very opportune as a 30-day
public comment period to the proposed broad enabling
regulations just ended. The meet and confer period with our
unions will begin next week. We respect our unions and we look
forward to that upcoming dialogue. Thus the detailed design
phase of NSPS is just now starting, so your questions,
comments, and suggestions will be most helpful as we go forward
into the detail design phase.
Let me first assure this committee that the DOD is
absolutely committed to implementing NSPS in a fair, credible,
and transparent manner. Broad participation is the cornerstone
of our development process. To date there have been more than
100 focus groups, more than 50 townhall meetings, and an open
Web site to gain input.
Literally tens of thousands of suggestions and comments
have been received from employees, local and national union
representatives, supervisors, managers, human resource
practitioners, and the public at large. Additionally, the DOD
and OPM have conducted 10 meetings with officials of the unions
that represent DOD employees.
Other stakeholder groups such as the National Academy of
Public Administration, the Coalition for Effective Change, the
Partnership for Public Service, Veterans' Service
Organizations, the Federal Manager's Association, and other
nonunion employee advocacy groups have all been solicited.
DOD and OPM have also met with the Government
Accountability Office (GAO), the Office of Management and
Budget (OMB), and the Department of Homeland Security (DHS) to
receive their input and to keep them apprised of the NSPS
progress.
NSPS is all about people, DOD's most valuable resource. The
NSPS team is dedicated to make NSPS a win for the employees and
a win for national security. Recognizing the importance of
people, Mr. Chairman, I do want to introduce to you today Mary
Lacey, who is here. She is one of our most important NSPS
leaders, she serves as the program executive officer.
Mrs. Lacey has over 30 years experience with DOD. She
started as an intern, recently ran some of the demonstration
projects that were a forerunner to the NSPS system, so she is
knowledgeable and experienced about designing and implementing
NSPS and she fully understands the absolute necessity for
adequate training before implementation.
Now, although NSPS will not begin until after the meet and
confer, after the 30-day congressional notification period, and
after publishing the final regulations in the Federal Register,
I can tell you with certainty that current Civil Service
protections of merit and fairness will not change in the new
NSPS.
NSPS will not remove whistle blowing protections. It will
not eliminate or alter access of DOD employees to the equal
opportunity complaint process. It will not remove prohibitions
on the nepotism or political favoritism. It will not in any way
diminish veterans' preference. It will not end collective
bargaining. It will not result in a loss of Civil Service jobs
or opportunities. We hope just the opposite. It will not give
DOD unilateral authority to change the Civil Service system,
that is leave, benefits, training, travel, allowances. The list
goes on. All those are unaffected by NSPS.
What NSPS will do is to put in place a modern flexible
human resources management system, appeals system, and labor
system to replace a cumbersome framework of rules and processes
designed for a different time. So, Mr. Chairman, let me first
thank you, and thank the entire Congress for this very
important legislation that enabled the development of NSPS,
enables what we are doing today for DOD and the opportunity to
have these discussions with you today. Again, I thank you for
scheduling this hearing at this very opportune time. Thank you,
Mr. Chairman.
[The prepared statement of Secretary England follows:]
Prepared Statement by Hon. Gordon R. England
Mr. Chairman and members of the committee. Thank you for the
opportunity to appear before you to discuss the proposed design of the
National Security Personnel System (NSPS). Dan Blair, Acting Director
of the Office of Personnel Management (OPM), our partner in developing
NSPS, joins me today. We are pleased to appear before you to discuss
the recently published proposed regulations for NSPS. We wish to
formally thank the entire Congress for granting the Department of
Defense (DOD) the authority to establish, in partnership with OPM, a
new civilian human resources management system to support our critical
national security mission. DOD and OPM take this task seriously and
recognize the responsibility to balance our vital national security
mission with protecting the interests of our most valuable resource,
our people.
In November 2003, Congress granted the DOD the authority to
establish a new human resources management system, appeals system, and
labor relations system to replace a framework of rules and processes
designed for a different time. The world has changed, jobs have
changed, missions have changed--and our Human Resource (HR) systems
need to change as well to support a new and unpredictable national
security environment. Our civilians are being asked to assume new and
different responsibilities, to be more innovative, agile and
accountable than ever before. It is critical that DOD sustains its
entire civilian workforce with modern processes and practices,
particularly a human resources management system that supports and
protects our employees' critical role in DOD's total force
effectiveness.
NSPS gives DOD that opportunity--an opportunity to establish a more
flexible civilian personnel management system and to make the
Department a more competitive and progressive employer at a time when
the country's national security demands a highly responsive civilian
workforce. The NSPS is a transformation lever to enhance the
Department's ability to execute its national security mission. It's a
key pillar in the Department's transformation--a new way to manage its
civilian workforce. NSPS is essential to the Department's efforts to
create an environment in which the total force functions and operates
as one cohesive unit.
NSPS has unprecedented potential to greatly enhance the way DOD
manages its civilian workforce, but it is also critical that we take
care of our most valuable asset--our people. The proposed NSPS design
follows a set of guiding principles that act as a compass to direct our
efforts throughout all phases of NSPS development. ``Mission First''
and support of our national security goals and strategic objectives
have been and remain paramount, but while also respecting the
individual and protecting workers' rights guaranteed by law, including
the laws pertaining to veterans in the civil service. The new system
emphasizes performance, and it values talent, leadership and commitment
to public service. Accountability at all levels--our employees,
supervisors and senior leadership--will be critical and all will be
held accountable for their respective roles in a performance-based
system. In keeping faith with our employees and the public we serve,
NSPS is based on the principles of merit and fairness embodied in the
statutory merit system principles, and it will comply with all other
applicable provisions of the law.
THE COLLABORATIVE PROCESS
In addition to the opportunities that NSPS offers, it presents
great challenges. Shortly after enactment of the NSPS statute, we
contacted union leaders to solicit their input. In January and February
2004, joint meetings were held to exchange ideas and interests on a new
labor relations system for DOD. During this time, many stakeholders,
including members of this Committee, voiced concerns about our plans
and process.
In response, the Department engaged in a broad, comprehensive
review of our design and implementation strategy. In April 2004, senior
DOD leadership approved a new collaborative process that the Department
has since been using to design and implement NSPS. This process was
designed by senior leaders and experts representing various elements
within DOD, OPM, and the Office of Management and Budget. Using a bold,
innovative approach, the senior leaders adopted the Defense Acquisition
Management model as a way to establish the requirements for the design
and implementation of NSPS. These senior leaders recommended Guiding
Principles and Key Performance Parameters (KPPs), which defined the
minimum requirements for NSPS. They also recommended establishing a
Senior Executive and Program Executive Office (PEO), modeled after the
Department's acquisition process. Shortly thereafter, an NSPS PEO was
chartered as the central DOD program office to conduct the design,
planning and development, deployment, assessment, and full
implementation of NSPS. Mrs. Mary Lacey was appointed as the NSPS
Program Executive Officer to provide direction to and oversight of the
PEO office, a joint program office staffed with representatives from
across the Department, including component program managers who are
dual-hatted under their parent component. At OPM, the Director
designated George Nesterczuk, the Senior Advisor to the Director on
Defense issues, to lead OPM activities in the joint development of the
NSPS.
An integrated executive management team composed of senior DOD and
OPM leaders provides overall policy and strategic guidance to the PEO
and advises the NSPS Senior Executive. The PEO meets and consults with
this team, the Overarching Integrated Product Team (OIPT), 8 to 10
times a month. Charles Abell, Principal Deputy Under Secretary of
Defense for Personnel and Readiness, co-chairs this OIPT along with Mr.
Nesterczuk of OPM. The Senior Executive meets with the PEO and OIPT at
least twice a month to direct the process and to measure progress to
plan.
Following the April 2004 decision to revise our design and
implementation process, a series of additional meetings with the union
leaders was initiated. Beginning in the spring of 2004 and continuing
over the course of several months, the PEO sponsored a series of
meetings with union leadership to discuss design elements of NSPS.
Officials from DOD and OPM met throughout the summer and fall with
union officials representing DOD civilians who are bargaining unit
employees. These sessions provided the opportunity to discuss the
design elements, options, and proposals under consideration for NSPS
and solicit union feedback. A number of these meetings were facilitated
by the Federal Mediation and Conciliation Service to ensure open and
meaningful communication.
Since April 2004, DOD and OPM have conducted l0 meetings with
officials of the unions that represent DOD employees, including the
nine largest unions that currently have national consultation rights.
These union officials represent over 1,500 separate bargaining units
covering about 445,000 employees. These meetings involved as many as 80
union representatives from the national and local level at any one
time, and addressed a variety of topics, including:
(1) the reasons change is needed and the Department's
interests;
(2) the results of Department-wide focus group sessions held
with a broad cross-section of DOD employees;
(3) the proposed NSPS implementation schedule;
(4) employee communications; and
(5) proposed design options in the areas of labor relations
and collective bargaining, adverse actions and appeals, and pay
and performance management.
In keeping with DOD's commitment to provide employees and managers
an opportunity to participate in the development of NSPS, the PEO
sponsored a number of focus group sessions and town hall meetings at
various sites across DOD. Focus group sessions began in mid-July 2004,
and continued for approximately 3 weeks. A total of 106 focus groups
were held throughout DOD, including at several overseas locations.
There were over 1,000 participants, including employees, local union
representatives, supervisors, managers, and human resources
practitioners. Focus group participants were asked what they thought
worked well in the current human resources systems and what they
thought should be changed. Over 10,000 comments, ideas and suggestions
were received during the focus groups session. These inputs were
summarized and provided to NSPS working groups for use in developing
options for the labor relations, appeals, adverse actions, and human
resources design elements of NSPS.
In addition, town hall meetings were held in DOD facilities around
the world during the summer and fall of 2004. These meetings provided
an opportunity to communicate with the workforce, provide the status of
the design and development of NSPS, respond to questions, and listen to
their thoughts and ideas. I conducted the first town hall meeting at
the Pentagon on July 7, 2004.
In July 2004, the PEO established working groups to begin the NSPS
design process. Over 120 employees representing the military
departments and other DOD activities and OPM began the process of
identifying and developing options and alternatives for consideration
in the design of NSPS. The working group members included
representatives from the DOD human resources community, DOD military
and civilian line managers, representatives from OPM, the legal
community, and subject matter experts in equal employment opportunity,
information technology, and financial management.
The working groups were functionally aligned to cover the six
program areas:
(1) compensation (classification and pay banding);
(2) performance management;
(3) hiring, assignment, pay setting, and workforce shaping;
(4) employee engagement;
(5) adverse actions and appeals; and
(6) labor relations.
Each group was co-chaired by an OPM and DOD subject matter expert.
Working groups were provided with available information and input from
the focus groups and town hall sessions, union consultation meetings,
data review and analysis from alternative personnel systems and
laboratory and acquisition demonstration projects, the NSPS statute,
the Guiding Principles and Key Performance Parameters. Additionally,
subject matter experts briefed the working groups on a variety of
topics, such as pay-for-performance systems, alternative personnel
systems, pay pool management, and market sensitive compensation
systems.
I personally addressed these individuals as they were about to
embark on this process to ensure they understood the critical
responsibility they were undertaking and the impact their work would
have on the ability of the Department to more effectively accomplish
its mission. Briefings and updates on progress and on the multitude of
options developed were regularly received. You can be assured that
these dedicated individuals took this task seriously and left no stone
unturned as they reviewed and analyzed the multitude of ideas, options,
and lessons learned that were all considered in this process.
In addition to reaching out to DOD employees and labor
organizations, DOD and OPM met with other groups interested in the
design of a new HR system for DOD. DOD and OPM invited selected
stakeholders to participate in briefings held at OPM in August and
September 2004. Stakeholder groups included the National Academy of
Public Administration (NAPA), Coalition for Effective Change,
Partnership for Public Service, veterans' service organizations,
Federal Managers Association, and other non-union employee advocacy
groups.
Before and after these stakeholder briefings, DOD and OPM responded
to dozens of requests for special briefings. DOD and OPM also met with
the Government Accountability Office, Office of Management and Budget,
and Department of Homeland Security to keep them up to date on the
team's activities.
DOD and OPM have worked hard to obtain the input of our employees
and their representatives, managers and supervisors, and other
stakeholders. A human resources system is being developed that has
taken their concerns into consideration and that will create a work
environment for our people to foster excellence and innovation and to
reward our people accordingly. NSPS will provide our leaders and
supervisors with flexibilities to better manage our people, while at
the same time it will expand opportunities for our employees. It will
mandate greater communication between managers and employees so that
each and every employee will know what is expected and how their work
supports the organization's mission.
THE PROPOSED REGULATIONS
The Secretary of Defense and the Director of OPM jointly issued the
proposed regulations that were published in the Federal Register on
February 14, 2005. This initiated a 30-day public comment period and
provided another opportunity for input on the design of the system. The
public comment period closed on March 16, 2005 and we are currently
reviewing the thousands of comments we received from individual
employees, interested citizens, professional organizations, employee
unions, Members of Congress, and advocacy groups. Many of the comments
are thoughtful, genuine, and raise legitimate points for evaluation. We
will give full consideration to these public comments as we move
forward in finalizing the NSPS regulations.
The Federal Register notice also served as the formal written
proposal of the system for review and comment by our employee unions,
as required by the NSPS statute. We encouraged them to participate in
the public comment period as well. Comments were received from 12
national labor organizations representing DOD employees, including the
United DOD Workers Coalition, which represents most of the DOD labor
organizations. DOD and OPM have analyzed these recommendations, have
given them serious consideration and we are about to begin discussions
with the unions regarding their recommendations.
In recognition of the union's special status as our employee
representatives, the NSPS statute provides for a ``meet and confer''
process with them for a minimum of 30 days. As required by the statute,
we formally notified Congress on March 28, 2005 that we will begin the
meet and confer process with employee representatives on April 18,
2005. We look forward to continuing our dialogue with our unions and,
with the help of the Federal Mediation and Conciliation Service (FMCS),
find common ground. Upon completion of the meet and confer process, the
results and outcomes will be reported to Congress.
NSPS will not be implemented until after the meet and confer
process, after the 30-day Congressional notification of the
Department's intent to implement these systems, and after publishing
the final regulations in the Federal Register.
Before describing the proposed design, here is what will not
change:
It does not remove whistle-blowing protections--
employees will have the same protections they have today.
It does not eliminate or alter access of DOD employees
to the equal opportunity complaint process--again, nothing in
NSPS will change the current protections employees have today.
It does not remove prohibitions on nepotism or
political favoritism--both will remain prohibited personnel
practices and will not change under NSPS.
It does not eliminate veterans' preference--veterans
will retain their special status under NSPS.
It does not end collective bargaining--while there
will be changes, collective bargaining will not end. Bargaining
unit employees continue to have the right to organize and
bargain collectively.
It does not give us a ``blank check'' to change the
civil service system unilaterally--there are many areas that
are unaffected by NSPS--leave, benefits, training, travel
allowances--the list goes on.
It will not result in a loss of jobs or opportunities
for civil service employees--to the contrary, NSPS will create
incentives for managers to turn to civilians first, not last,
when many vital tasks must be done. This will ease the burden
on our valuable men and women in uniform to do only those tasks
that are uniquely military.
What NSPS will do is put a modern, flexible personnel system in
place that is also credible, transparent, and fair to our employees.
DOD will be able to hire the right people in a more timely manner, and
to pay and reward our employees properly, adequately recognizing their
contribution to the mission. Managers will be held accountable for
making the right decisions and for managing their employees--all of
their employees. Specifically, NSPS will provide for:
A simplified pay banding structure, allowing
flexibility in assigning work and a move toward market
sensitive pay.
A performance management system that requires
supervisors to set clear expectations (linked to DOD's
strategic plan) and employees to be accountable.
Pay increases based on performance, rather than
longevity.
Streamlined and more responsive hiring processes.
More efficient, faster procedures for addressing
disciplinary and performance problems, while protecting
employee due process rights.
A labor relations system that recognizes our national
security mission and the need to act swiftly to execute that
mission, while preserving collective bargaining rights of
employees as provided for in the NSPS statute.
The proposals for performance management are designed to foster
high levels of performance and to ensure that excellent performance is
recognized, rewarded, and reinforced. NSPS is designed to make
meaningful distinctions in levels of performance and to hold employees
at all levels accountable. Employees will be under the performance
management system for an adequate evaluation period before making any
performance-based adjustments to their pay. No employee will have their
pay reduced when they are converted into NSPS.
One of the most important changes the proposed system offers is a
stronger correlation between performance and pay plus greater
consideration of local market conditions in setting pay rates. Our
proposal would eliminate the General Schedule pay system in favor of a
new performance-based, market-sensitive pay system that includes three
major features. First, NSPS emphasizes performance over tenure. Open
pay ranges eliminate the ``step increases'' in the current system,
which are tied to longevity. Second, pay will be adjusted by occupation
or career group in each market, rather than a one-size-fits-all
approach currently in practice. Third, performance pay pools will be
established to ensure that employees will receive increases based on
their performance.
Our proposed appeals system focuses on simplifying a complex,
legalistic and often sluggish process that often disrupts operations.
At the same time, the proposed system will ensure that employees
receive fair treatment and that they are afforded the full protections
of due process.
The proposed regulations were developed in consultation with staff
of the Merit Systems Protection Board (MSPB), with extensive
discussions over appellate options and alternatives. MSPB officials
were particularly constructive and many of their suggestions are
reflected in our proposed appellate procedures, including the retention
of MSPB administrative judges (AJs) as the initial adjudicators of
employee appeals of adverse actions. Although the NSPS law allowed DOD
to establish an internal appeals process, we concluded that the
potential advantages of creating a new infrastructure--greater
efficiency of decisionmaking and deference to agency mission and
operations, among them--could be achieved if MSPB administrative judges
were retained but with procedural modifications. The modifications we
propose will streamline the process without sacrificing employee
protections.
Among those changes is a proposal to allow the Department to review
initial decisions of the Administrative Judges to ensure that MSPB
interprets NSPS and these regulations in a way that recognizes the
critical mission of the Department and to ensure that MSPB gives proper
deference to such interpretation. After review, the Department may
affirm the decision, remand the case to the AJ for further
adjudication, modify or reverse the decision, but only based on
stringent criteria. In all adverse action cases, final Department
decisions may be appealed to the MSPB, which retains limited review
authority established in the NSPS statute. Ultimately, an employee or
the Secretary may seek judicial review if still not satisfied with the
appeal decision.
To balance some of the proposed changes, the Department will
establish a single burden of proof standard. Currently, the evidentiary
standards for performance and conduct actions differ, with performance-
based actions requiring a lower standard of proof. That will no longer
be the case--the Department's adverse action decision will be subject
to a single standard--the preponderance of the evidence--for all
adverse actions, whether based on conduct or performance. To address
concerns that the current system fails to adequately consider DOD's
critical national security mission, the proposed regulations also make
it more difficult for administrative judges to substitute their
judgment in mitigating penalties; however, the Department will ensure
that managers consider a variety of important factors in each situation
before determining an appropriate penalty.
The development process has been cognizant of the need to provide
protections guaranteed by law to our employees. We were also mindful of
a basic tenet of the civil service--preserving merit system
principles--treating employees fairly and equitably and protecting them
from arbitrary actions, coercion for partisan political purposes and
personal favoritism, and protecting them against reprisal. The proposed
appeals system will continue to provide our employees with these all-
important protections.
The proposed labor relations construct balances our operational
needs while providing for collective bargaining and consultation with
employee representatives. In the face of a committed and unpredictable
enemy, DOD needs to have authority to move quickly to prepare for and
confront threats to national security. As such, the Department will not
bargain over the exercise of rights impacting operations and mission
accomplishment. NSPS will provide for consultation with employee
representatives both before and after implementation when circumstances
permit. Bargaining obligations will be retained concerning the exercise
of the remaining management rights, such as certain personnel
procedures. Although we are proposing to limit situations in which
bargaining takes place, there will continue to be meaningful local
bargaining over important matters. Because the new labor relations
system is a critical, enabling component of NSPS, DOD plans to make the
new labor relations provisions effective across the entire Department
after the issuance of final regulations, and after notification to
Congress as required by law.
The Department also proposes to create a National Security Labor
Relations Board (NSLRB) to hear and resolve labor disputes. The NSLRB
would be composed of at least three members appointed to fixed terms.
In evaluating the merits of a separate NSLRB that would largely replace
the Federal Labor Relations Authority, with its Government-wide
responsibilities, DOD and OPM put a high premium on the opportunity to
establish an independent body whose members would have a deep
understanding of and appreciation for the unique challenges the
Department faces in carrying out its national security mission. The
NSLRB will issue binding decisions on unfair labor practice (ULP)
cases, to include scope of bargaining, duty to bargain in good faith,
and information requests; certain arbitration exceptions; negotiation
impasses; and questions regarding national consultation rights. FLRA
will continue to determine appropriate bargaining units and supervise
and conduct union elections as well as review NSLRB decisions using
appellate standards. FLRA decisions will be reviewable by various
Federal Circuit Courts of Appeals as occurs today.
IMPLEMENTATION--A PHASED APPROACH
Transformation is a process. The spiral concept will implement NSPS
in successive waves--initially deploying the new personnel system to a
number of well-chosen organizations for effective management of
implementation, and to troubleshoot, evaluate, and report on the
results in a timely manner. As with any new system, especially one with
the size and complexity of NSPS, refinements will likely be necessary
as the rest of the workforce is incorporated.
Although DOD will implement the labor relations system DOD-wide,
the human resources system will be phased in, starting perhaps as early
as July 2005. In the first spiral, up to 300,000 General Schedule (GS
and GM), Acquisition Demonstration Project, and certain alternative
personnel system employees will be brought into the system through
incremental deployments over 18 months, with the first increment
covering 60,000 employees. After an assessment cycle and the
certification of the performance management system required by the NSPS
statute are completed, the second spiral will be deployed. Spiral two,
consisting of Federal Wage System employees, overseas employees, and
all other eligible employees, will be phased in over a 3-year period,
with full implementation achieved by 2007/2008.
Training is one of the most critical elements for a smooth and
successful transition to NSPS. The Department is fully committed to a
comprehensive training program for our managers, supervisors and
employees. All employees will be trained to understand the system, how
it works, and how it will affect them. The Department has a robust
training infrastructure already in place to train and educate its
personnel and we will leverage that infrastructure as we implement NSPS
specific training. We have a dual training strategy to provide
functional training on all elements of the NSPS system, as well as
behavioral training, with the focus on the skills, attitudes and
behaviors necessary to successfully adapt to NSPS. Some of the
component behavior-based training has already begun. Other courses are
in development and will be available to train all affected employees in
advance of NSPS implementation.
SUMMARY
NSPS involves significant changes. While change is always
difficult, it is necessary for the Department to carry out its mission
and to create a 21st century system that is flexible and contemporary,
will help attract skilled, talented and motivated people, and will also
help us to retain and improve the skills of the existing workforce.
NSPS will make it possible to hire critical skills more quickly so that
DOD is better equipped to meet challenges such as those in the days
immediately following September 11. NSPS will facilitate our ability to
quickly deploy new technology to ensure that our military and civilians
have the best equipment without delay. NSPS will eliminate limitations
on managers that often result in the use of military and contract
personnel to do jobs that could have and should have been performed by
civilians, freeing up uniformed personnel to focus on matters unique to
the military.
NSPS will provide our civilian employees with greater opportunities
for career growth within the Department. Limitations imposed by
classification standards will no longer preclude employees from
expanding their scope of work so they will be able to broaden their
career paths. NSPS will promote a performance-based culture and
employees will be rewarded for individual performance and contribution
to mission as well as teamwork. Managers will be able to offer
competitive salaries to new and existing personnel so that we can
attract and retain the best and brightest in our workforce.
DOD has over 20 years of successful experience with testing similar
personnel flexibilities, namely in our personnel demonstration
projects, at our laboratories and with our acquisition workforce--it is
now time to expand those flexibilities to the rest of the Department.
NSPS will modernize a 50-year old, outdated civil service system, and
allow us to attract, recruit, retain, compensate, reward, and manage
our employees, with a focus on performance, flexibility, and
accountability.
NSPS proposals have been developed with extensive input from our
employees and their representatives. We look forward to reviewing and
analyzing the comments on the proposed regulations and to the meet and
confer process with our employee labor representatives. DOD is
committed to the collaborative approach taken in the development of
NSPS and will continue to encourage a dialogue as we proceed through
the writing and development of the implementing issuances.
Thank you for the opportunity to address this important committee
and to briefly describe the proposed National Security Personnel
System.
Chairman Warner. Thank you very much, Mr. Secretary.
Mr. Blair.
STATEMENT OF DAN G. BLAIR, ACTING DIRECTOR, OFFICE OF PERSONNEL
MANAGEMENT
Mr. Blair. Mr. Chairman and members of the committee, good
morning. I appreciate the opportunity to be here this morning
to highlight OPM's role in the development of the NSPS. I'm
pleased to appear with Secretary England.
I'd like to recognize two members of the OPM team who are
here today who have been critical players in the development of
the proposed regulations. George Nesterchuck, senior advisor on
the DOD, and Ron Sanders, associate director for strategic
human resources policies.
I have a lengthy statement for the record detailing the
process that led to the proposed regulations, and I'm happy to
summarize. With the passage of the National Defense
Authorization Act of 2004, Congress set in motion----
Chairman Warner. I'm going to ask you to pull that mic and
just raise your voice a bit. The acoustics in this room leave a
little bit to be desired.
Mr. Blair. How is that, sir?
Chairman Warner. The people in the back are quite anxious
to hear you.
Mr. Blair. Thank you for that. With the passage of the
National Defense Authorization Act of 2004, Congress set in
motion a process to establish a new human resources system that
would fit into the DOD's vital mission, while ensuring the
preservation of the core principles of due process, merit, and
fairness that make the American Civil Service unique.
The legislation forged a partnership between DOD and OPM
which we believe has enabled us to produce a system that's
flexible, modern, and responsive. OPM was assigned an important
role in the development of NSPS, one which we took very
seriously. We believe we have brought together wide expertise
that was a critical addition to DOD mission-specific
experience. We are very proud of the collaboration we have
achieved.
Through this process we have sought to identify the
critical balance between a modern flexible system and the core
values of the Civil Service. I submit the proposed regulations
strike that balance. We are very pleased with the cooperation
from and the collaboration with the DOD, particularly Secretary
England's office.
Since April 2004, the Department has made great strides in
ensuring a transparent and constructive process for developing
NSPS in collaboration with employee representatives and other
key stakeholders.
We have been working on this for over a year and we are in
the process of reviewing the 60,000 comments received. We will
officially begin the meet and confer process with the DOD
unions on April 18 and have already had two premeetings to work
out details, such as the meeting schedule.
We are looking forward to several weeks of productive
meetings. Our partnership will continue as the regulations are
finalized and implementation begins. DOD has developed a
careful and systematic implementation plan supported by
extensive training. We believe it's an excellent strategy.
As the transformation to a new system occurs, we will
continue to focus on core values of the Civil Service,
maintaining merit service principles, barring prohibited
personnel practices, and continuing collaboration with employee
unions. We will make certain that veterans' preference is never
diminished.
Mr. Chairman, I'd like to highlight some key features of
the proposed regulations. The proposed new pay system supported
by a reworked classification system is designed to
fundamentally change the way DOD employees are paid, and place
far more emphasis on performance and the labor market in
setting or adjusting rates of pay.
Staffing and reduction-in-force flexibilities are another
critical component. New flexibilities in the proposed
regulations will provide options to expedite hiring and improve
workforce shaping, while preserving merit and veterans'
preference.
Mr. Chairman, the proposed changes in the DOD will benefit
the hard working men and women of the Department. The
classification system and pay structure have been simplified to
enhance career growth and provide higher earnings potential for
qualified, talented, and motivated employees.
The performance system will better serve the security of
our Nation because it better links individual performance and
the Department's mission, goals, and objectives. I see the NSPS
as an important step in modernizing the Civil Service. We
realize the process is ongoing and we look forward to working
with this committee as we move the proposed regulation to final
and to implementation. I'd be happy to answer any of your
questions.
[The prepared statement of Mr. Blair follows:]
Prepared Statement by Dan G. Blair
INTRODUCTION
Mr. Chairman, it is my pleasure to appear before you today to
discuss the proposed regulations implementing the National Security
Personnel System (NSPS) at the Department of Defense (DOD) and the
process of collaboration and cooperation that has brought us to this
point. The regulations as proposed, will establish a new human
resources (HR) management system that we believe is flexible, modern,
and responsive thus fulfilling the vision of the President and
Congress. The proposed regulations are the result of an intense
collaborative process that has taken over a year, and we are still only
halfway. There is much to do before the NSPS proposal can be finalized,
beginning with the ongoing review of the extensive comments we have
received. Beyond that will be the official meet and confer process with
DOD unions. It has been a privilege for me and the team at OPM to work
with the dedicated men and women of DOD, its employees and senior
leadership in the development of this system. This monumental task has
been challenging and rewarding. We owe you our appreciation and respect
for your efforts to make it possible and I appreciate your continued
interest and support as we work through the development and
implementation process.
Mr. Chairman, with passage of the National Defense Authorization
Act of 2004 (Public Law 108-136), you and other Members of Congress
granted the Secretary of Defense and the Director of OPM broad
authority to establish a new human resources management system
befitting the Department's vital mission while ensuring the
preservation of the core principles of due process, merit, and fairness
that make the American civil service unique. Striking the measured and
delicate balance, between modernization on one hand and protecting core
values on the other, is the essence of the transformation process that
you established in the statute. We believe the regulations jointly
proposed by DOD and OPM strike that balance in all of the key
components of the system: performance-based pay, staffing flexibility,
employee accountability with due process, and labor-management
relations. In each case we sought to strike a careful balance between
operational imperatives and employee interests, without compromising
either mission or merit.
Mr. Chairman, in your invitation to this hearing you asked we
address the process employed to gather employee input, the proposed
regulations that have resulted from this process, and how OPM will
continue to work with DOD to ensure employees have meaningful input in
the remaining design and implementation process. I will address the
important points regarding the process first and then address some key
highlights of the proposed regulations.
Before that discussion, let me say that we are well aware of the
intense interest in the proposed regulations. We very much appreciate
the comments we have received from employees, employee representatives,
and the advice we have received from Members of Congress. We would like
to acknowledge the continuing interest from Senator Collins, the
special concerns raised by Senator Levin, and the indepth commentary
from Senator Akaka. We are reviewing their recommendations very
carefully and they will be most helpful during this meet and confer
process. While we believe that we have developed a balanced proposal
that is faithful to the fundamental principles of the civil service, we
do not view our proposals as necessarily the last word and look forward
to addressing each of the issues raised by these Members.
COLLABORATION: OUTREACH AND EMPLOYEE INVOLVEMENT
The NSPS development process has been a broad based collaboration
involving a multitude of DOD employees, managers, supervisors, labor
union partners and key stakeholders. Over the course of the last year,
DOD held over 50 Town Hall meetings in locations throughout the world.
Over 100 Focus Groups were convened separately with employees
(including bargaining unit representatives), managers, and HR
professionals and practitioners. Briefings were initiated with a host
of public interest groups, employee advocacy groups, and other
stakeholders including veterans' service organizations. All along the
way, OPM and DOD have worked as partners to fulfill the spirit and
letter of the law as well as the trust Congress and the President have
placed in us.
This extensive development process, which continues, is not a
laboratory of mere compromise, but rather the critical place where
perspectives are weighed and considered to ensure the best possible
system is developed for NSPS. Through this process, we sought to
identify the critical balance between a modern flexible system and the
core values of the civil service.
OPM is no stranger to this unique process or the challenges of
building trust, respect, and cooperation with managers, employees and
their representatives. Our recent experience with the Department of
Homeland Security (DHS), though different in many respects, has
provided lessons and tools to improve our efforts with NSPS. The NSPS
working groups were well served by the extensive research that had been
compiled by similar teams who worked on the DHS personnel system some
months earlier.
In following the legislative direction, we also have the benefit of
DOD's extensive experience with alternative pay and personnel systems
going back nearly 25 years. The employee evaluations and comments
amassed through studies of these demonstration projects were part of
the information base provided to our working groups. OPM has done an
extensive analysis of the DOD demonstration projects and generated a
comprehensive report. Copies of all of these compilations and reports
were provided to DOD unions as an aid in our discussions and
deliberations.
We also launched a special effort to engage the Department's 43
unions in meaningful discussions over key components of the NSPS.
Beginning in April of last year until early December, we held 10
meetings with the unions. In an attempt to address each other's
priorities, OPM and DOD set the agenda for some of the meetings, while
the unions set the agenda for others. We developed presentations of
possible NSPS design options in order to better focus discussion in
specific issue areas. The meeting format was plenary in nature, with 25
to 30 unions from their coalition participating in most of the
sessions. We even held separate meetings with the smaller number of
non-coalition unions. From this series of meetings, we received what we
consider useful input, particularly as the unions shared experiences of
past practices that had worked or failed in DOD and other government
agencies.
Permit me to emphasize that this process is far from over. The
formal ``meet and confer'' process established in the NSPS statute is
scheduled to begin April 18. Two pre-meetings have already been held
with the unions to work out details such as the meeting schedule and to
accommodate other concerns raised by the unions such as the assurance
of adequate access to documents. We are looking forward to several
weeks of productive meetings and are very interested in receiving their
views on the proposed regulations through this formal process. Later in
my testimony, I will address several areas where I believe it is
critically important to engage in an honest, meaningful and productive
dialogue as we move forward to ensure the ultimate success of NSPS.
You also asked us to address the role of OPM throughout
implementation of the NSPS, and the process that will be in place to
coordinate and resolve policy differences between DOD and OPM.
This is an important issue, and I appreciate your raising it. In
the interests of transparency, we believe a continuing process of
coordination needs to be in place and we defined this process in the
proposed regulations. Congress mandated a specific approach to ensuring
a balanced process for developing NSPS. That process calls for the
heads of DOD and OPM to jointly prescribe the system, after a period of
collaboration with employee representatives and notification to
Congress. As a key partner, we are very pleased with the cooperation
from and collaboration with the Department of Defense. Since April
2004, the Department has made great strides in ensuring a transparent
and constructive process for developing NSPS with employee input and
collaboration with employee representatives. DOD and OPM together have
championed an open, collaborative, and constructive process and
environment for raising, discussing and resolving critical issues.
However, the effort does not end with jointly prescribing NSPS. OPM
and DOD have agreed that OPM must have a role of close and continuing
coordination--the regulations refer to this as ``pre-decisional
coordination''--as policies for implementing NSPS are developed. This
process of coordination recognizes the Secretary's authority to direct
the operations of DOD as well as the Director's institutional
responsibility to oversee the Federal civil service system. Based on
our experience thus far, the combination of OPM's Government-wide
expertise and DOD's mission specific experience, the joint efforts have
been very fruitful. Our agencies have reinforced each other's
capabilities during NSPS development in a very positive and
constructive manner. I have every expectation that our respective views
during implementation will be equally complementary and constructive.
CONTINUED COLLABORATION
OPM is committed to work with DOD to ensure the continued
involvement of employees in the development and implementation process.
Together we addressed this specific issue in our proposed regulations
and suggested a process that will ensure employee representatives are
provided the opportunity to discuss their views with DOD officials. The
proposal specifically identifies conceptual design and implementation
issues as subject to discussion. Unions will be provided access to
important information to make their participation productive, including
review of draft recommendations or alternatives.
The proposed collaboration process draws on our experience over the
past several months. While we value the participation of all DOD unions
in the NSPS development process, it is at times impractical to convene
a full plenary session of all 43 unions to discuss or review a
particular initiative or proposal. So we propose to provide the
Secretary the flexibility to convene smaller working groups of unions
or to deal with review of written materials or solicit written comments
for consideration, as appropriate. Some matters may involve development
of concepts; others may consist of review of issuances before they are
published. The best approach is to permit the Secretary to tailor the
interaction and communications with DOD unions to the circumstances at
hand.
We also propose to have the Secretary develop procedures to allow
continuing collaboration with organizations that represent the
interests of substantial numbers of nonbargaining unit employees. We
believe this process will allow the Department to maintain a broad
outreach to its stakeholder community during the continuing evolution
of the NSPS.
PAY, PERFORMANCE, AND ACCOUNTABILITY
Mr. Chairman, I would now like to address key highlights of the
proposed regulations. As I mentioned earlier, these important
components of the proposal are still being reviewed and discussed
through the formal comments we have received and also through the
upcoming ``meet and confer'' process.
The new pay system, proposed in the regulations, was designed to
fundamentally change the way DOD employees are paid, to place far more
emphasis on performance and the labor market in setting and adjusting
rates of pay. Instead of an outmoded ``one size fits all'' pay system
based on tenure, we have proposed a system that bases all individual
pay adjustments on performance. No longer will employees who are rated
as unacceptable performers receive annual across-the-board pay
adjustments, as they do today. No longer will annual pay adjustments
apply to all occupations and levels of responsibility, regardless of
market or mission value. Instead, adjustments will be strategically
based on national and local labor market trends, recruiting and
retention patterns, and other key employment factors. No longer will
employees who merely meet time-in-grade requirements receive virtually
automatic pay increases, as they do today. Instead, individual pay
raises will be determined by an employee's annual performance rating.
Unlike where our current system falls short, this proposed system
is entirely consistent with the merit system principles that are so
fundamental to our civil service. One of those principles states that
Federal employees should be compensated ``. . . with appropriate
consideration of both national and local rates paid by employers . . .
and appropriate incentives and recognition . . . for excellence in
performance.'' See 5 U.S.C. 2301(b)(3). The current system falls short
because it has minimal ability to encourage and reward achievement and
results. Over 75 percent of the increase in pay under the current
system bears no relationship to individual achievement or competence.
However, some have argued that by placing so much emphasis on
performance, we risk ``politicizing'' DOD and its employees. Such
``politicization'' would constitute a prohibited personnel practice,
something expressly forbidden by Congress in giving DOD and OPM
authority to jointly prescribe the NSPS. Moreover, it would tear at the
very fabric of our civil service system.
The merit system principles provide that Federal employees should
be ``. . . protected against arbitrary action, personal favoritism, or
coercion for partisan political purposes.'' See 5 U.S.C. 2301(b)(8)(A).
They are. Section 2302(b)(3) of title 5, United States Code, makes it a
prohibited personnel practice to ``coerce the political activity of any
person . . . or take any action against any employee'' for such
activity. Those laws remain unchanged, intact and binding on DOD. The
law forbids coercion for partisan political purposes in taking any
personnel action with respect to covered positions, and it most
certainly applies to making individual pay determinations. The proposed
NSPS regulations did not dilute these prohibitions in any way. A close
examination of the proposed regulations reveals that they include
considerable protection against such practices--and no less than every
other Federal employee enjoys today.
For example, if a DOD employee believes that decisions regarding
his or her pay have been influenced by political considerations, he or
she has a right to raise such allegations with the Office of Special
Counsel (OSC), to have OSC investigate and where appropriate,
prosecute, and to be absolutely protected from reprisal and retaliation
in so doing. These rights have not been diminished in any way
whatsoever. Moreover, supervisors have no discretion with regard to the
actual amount of performance pay an employee receives. That amount is
driven strictly by mathematical formula. Of the four variables in the
formula--the employee's annual performance rating; the ``value'' of
that rating, expressed as a number of points or shares; the amount of
money in the performance pay pool; and the distribution of ratings--
only the annual rating is determined by an employee's immediate
supervisor, and it is subject to review and approval by the employee's
second-level manager. Once that rating is approved, an employee can
still challenge it before it is final through an administrative process
if he or she does not think it is fair.
Finally, the other factors governing performance pay are also
shielded from any sort of manipulation. As far as the distribution of
ratings is concerned, the Department has unequivocally stated it will
not use any sort of quota or forced distribution.
Ultimately there is no better guarantor of compliance to laws and
standards than transparency and access to information. The rules and
procedures governing the translation of employee ratings into pay
adjustments will be available to all DOD employees, and will be part of
the training everyone will receive. Unless employees readily understand
how their pay adjustments are arrived at they will harbor suspicions
and generate skepticism which would adversely impact the acceptance of
pay for performance.
Of course, DOD managers will receive intensive training in the new
system, a further safeguard against abuse. Many of them too will be
covered by it, with their pay determined by, among other performance
criteria, how effectively they administer this system. The same is true
of their executives, now covered by the new Senior Executive Service
pay-for-performance system--indeed, OPM regulations governing that
system establish clear chain-of-command accountability in this regard.
With these considerable protections in place, we believe ample
safeguards will exist to prevent the pay of individual DOD employees
from becoming ``politicized'' in a performance-based environment. To
the contrary, we believe the American people expect that performance
should influence the pay of public sector employees. That is exactly
what the NSPS pay system is intended to do.
The institution of a modern performance culture is no easy task,
but neither is it a partisan issue. Performance based accountability is
widely recognized as the most effective way to manage employees whether
in the private or public sector, in a large or small organization,
whether by a Republican or Democrat administration. The proposed NSPS
pay system incorporates the essential elements of good government:
accountability, due process, transparency, and fairness. The dedicated
and hard working employees of the Department of Defense will flourish
in a system that finally sets clear expectations, and rewards employees
accordingly, for accomplishing results. The best and brightest demand a
performance culture that rewards excellence. DOD must have a modern pay
system to be a competitive employer in the 21st century.
STAFFING FLEXIBILITIES
To fulfill its mission requirements, the Department needs a
workforce suited to the complex tasks of a dynamic national security
environment. The key to aligning and shaping a workforce lies in
greater flexibility to attract, recruit, shape and retain high quality
employees. The proposed regulations provide DOD with a set of flexible
hiring tools to respond to continuing changes in mission and
priorities. New flexibilities will provide options to target
recruitment, expedite hiring, and adjust for the nature and duration of
the work while preserving merit and veterans' preference.
Under NSPS, employees will be either career, serving without time
limit in competitive or excepted service positions, or they will be
time-limited, serving for a specific period (term) or for an
unspecified but limited duration (temporary). The Secretary, in
coordination with the Director of OPM, will have the authority to
prescribe the duration of time-limited appointments, advertising
requirements, examining procedures, and appropriate uses of time-
limited employees.
To expedite recruitment and hiring, DOD will continue to use
direct-hire authority for severe shortage or critical hiring needs
subject to the same criteria OPM currently uses to make these
determinations. In addition, the Director and the Secretary may jointly
establish new appointing authorities subject to public notice and
comment.
The proposed rules provide recruitment flexibilities allowing DOD
to target recruitment efforts consistent with merit system principles
and complying fully with veterans' preference requirements. The
Department will provide public notice in filling positions and will
accept applications from all qualified applicants; however, DOD may
initially consider, at a minimum, only applicants in the local
commuting area. If the minimum area of consideration does not provide
sufficient qualified candidates, then DOD may expand consideration more
broadly or nationally.
The proposed regulations would permit DOD to more effectively shape
competitive areas during reductions in force (RIF) to better fit the
circumstances driving the reduction and to minimize disruption to
employees and their organizations. The competitive area may be based on
one or more factors such as geographical location, lines of business,
product lines, organizational units, and/or funding lines. Retention
lists will be based on the traditional four retention factors of
tenure, veterans' preference, performance and seniority. Veterans'
preference remains untouched under NSPS RIF actions, but performance
and seniority are reversed in priority. Within tenure and veterans'
status groupings, retention lists place high performers at the top and
low performers at the bottom. Within performance categories, employees
are grouped by seniority with longer years of service at the top of the
category and lesser seniority at the bottom. The performance based
retention inherent in this proposal is entirely consistent with the
greater emphasis on performance throughout the NSPS, including the pay
system.
Accountability and Due Process
The Department of Defense is unique among Cabinet departments in
both its size and organizational complexity. It also carries the
awesome responsibility of protecting our national security--a vital
mission that requires a high level of workplace accountability.
Congress recognized this fact when it gave DOD and OPM the authority to
waive those chapters of title 5, United States Code, which deal with
adverse actions and appeals. However, in so doing, Congress also
assured DOD employees that they would continue to be afforded the
protections of due process. We believe the proposed NSPS regulations
strike this balance. They assure far greater individual accountability,
but without compromising the protections Congress guaranteed.
In this regard, DOD employees will still be guaranteed notice of a
proposed adverse action. While the proposed regulations provide for a
shorter, 15-day minimum notice period (compared to a 30-day notice
under current law), this fundamental element of due process is
preserved. Employees also have a right to be heard before a proposed
adverse action is taken against them. This too is a fundamental element
of due process, and the regulations also provide an employee a minimum
of 10 days to respond to the charges specified in that notice--compared
to 7 days today. In addition, the proposed regulations continue to
guarantee an employee the right to appeal an adverse action to the
Merit Systems Protection Board (MSPB). The proposed regulations also
provide bargaining unit employees the option of contesting an adverse
action through a negotiated grievance procedure all the way to a
neutral private arbitrator, if their union invokes arbitration.
In adjudicating employee appeals, regardless of forum, the proposed
NSPS regulations place a heavy burden on the agency to prove its case
against an employee. Indeed, we propose to establish a higher burden of
proof: a ``preponderance of the evidence'' standard for all adverse
actions, whether based on misconduct or performance. While this is the
standard that applies to conduct-based adverse actions under current
law, it is greater than the ``substantial evidence'' standard presently
required to sustain a performance-based action. Incidentally, in
addition to being a consistent element of DOD's new performance
culture, this is an excellent example of where the collaborative
process with employees and stakeholders made a substantial impact on
the proposed regulations.
Finally, the proposed regulations authorize MSPB (as well as
arbitrators) to mitigate penalties in adverse action cases, but only
under limited circumstances. Thus, the proposed regulations provide
that when the agency proves its case against an employee by a
preponderance of the evidence, MSPB (or a private arbitrator) may
reduce the penalty involved only when it is ``so disproportionate to
the basis for the action that it is wholly without justification.''
Although it is admittedly tougher than the standards MSPB and private
arbitrators apply to penalties in conduct cases today, it provides
those adjudicators considerably more authority than they presently have
in performance cases. Currently, the law (chapter 43 of title 5)
literally precludes them from mitigating a penalty in a performance-
based action taken under that chapter. Moreover, MSPB's current
mitigation standards basically allow it (and private arbitrators) to
second-guess the reasonableness of the agency's penalty in a misconduct
case, without giving any special deference or consideration to an
agency's unique mission.
The President, Congress, and the American public all hold the
Department accountable for accomplishing its national security mission.
MSPB is not accountable for that mission, nor are private arbitrators.
Given the extraordinary powers entrusted to the Department and its
employees, and the potential consequences of poor performance or
misconduct to that mission, DOD should be entitled to the benefit of
any doubt in determining the most appropriate penalty for misconduct or
poor performance on the job. There is a presumption that DOD officials
will exercise that judgment in good faith. If they do not, however,
providing MSPB (and private arbitrators) with limited authority to
mitigate is a significant check on the Department's imposition of
penalties. That is the intention of the new mitigation standard, which
is balanced by the higher standard of proof that must first be met.
CRITICAL MISSIONS AND LABOR RELATIONS
As I stated before, the Department is a large and complex
organization, with widely dispersed components and commands, and varied
mission elements mixing both military and civilian workforces. With
lives literally at stake, the Department's commanders cannot afford
mission failure. The chain of command depends on an ethos of
accountability, and this goes to the heart of some of the most
important provisions of the proposed regulations: labor relations.
Accountability must be matched by authority, and here, the current law
governing relations between labor and management is out of balance. Its
cumbersome requirements can impede the Department's ability to act, and
that cannot be allowed to happen. The proposed regulations ensure that
the Department can meet its mission, but in a way that still takes
union and employee interests into account.
Critics of these proposed changes will argue that current law
already allows the agency to do whatever it needs to do in an
emergency. However, that statement, while true, explains why the
current law is inadequate when it comes to national security matters.
The Department needs the ability to move quickly on matters before they
become an emergency. Current law simply does not allow DOD to take
action quickly to prevent an emergency, to prepare or practice for
dealing with an emergency, or to implement new technology to deter a
potential threat. Rather, before taking any of those actions, the
current law requires agencies to first negotiate with unions over the
implementation, impact, procedures and arrangements. By the time an
``emergency'' has arisen, it is literally too late. OPM recognizes that
this simply cannot continue.
Permit me to elaborate on one other related issue. The proposed
National Security Labor Relations Board (NSLRB), will be an independent
Board appointed by the Secretary to resolve collective bargaining
disputes in the Department. The NSLRB is expressly designed to ensure
that those who adjudicate labor disputes in the Department have
expertise in its mission. Its members are every bit as independent as
any of the many other Boards or Panels in the Department, or any
agency's Administrative Law Judges (ALJs). Just as an agency's ALJs
operate outside the chain of command, so too will NSLRB's members. Just
as ALJ decisions are binding on the agency that employs them, so too
will NSLRB's decisions be binding. However, the proposed regulations
make it clear that the NSLRB's decisions will be subject to at least
two levels of outside review through appeal by either party to the
Federal Labor Relations Authority and the Federal courts of appeals.
While I believe this approach is well balanced, we are open to
exploring options to enhance this proposed process and this will very
likely be an area of consideration in the ``meet and confer'' process.
CONCLUSION
If DOD is to be held accountable for national security, it must
have the authority and flexibility essential to that mission. That is
why Congress gave the Department and OPM the authority to waive and
modify the laws governing staffing, classification, pay, performance
management, labor relations, adverse actions, and appeals. In
developing the proposed regulations, we believe that we have succeeded
in striking a better balance--between union and employee interests on
one hand and the Department's mission imperatives on the other. At the
same time, all along the way, we made sure the core principles of the
civil service were preserved.
Mr. Chairman, as the development and implementation process moves
forward I ask for your continued support as we work to refine NSPS to
ensure DOD has the flexible, modern, and responsive personnel system
that the President and Congress expect. Thank you for the opportunity
to appear before this committee. I would be pleased to respond to any
questions you and members of the committee may have.
Chairman Warner. Thank you. We will proceed now to a 6-
minute round. The concept of Civil Service is well-embedded in
our system of government. It goes back many years. Yet from
time to time, there comes a juncture when a department or
departments, as the case may be, because of the extraordinary
mission that they are performing, and particularly as it
relates to national security, I think that's the central
mission of both the DOD and the DHS, that you must deviate from
the practices, the balances between management and the employee
that are elsewhere in the Federal Government.
I think that we should lay out for this record what were
the elements of the expanding responsibilities of DOD in this
most extraordinary chapter of our history, particularly as we
face terrorism, that justify departing from some of the old
systems, and now perhaps I think it merits some changing of the
balance and the equities between the management and the
employee.
Secretary England. Senator, I believe that was the debate
in Congress before the bill was passed.
Chairman Warner. That is correct. I think we should revisit
it here in this hearing. I'll address the same question to Mr.
Blair because he looks over the entire Federal system.
Secretary England. Senator, it is based on exactly what you
said. It is about the mission of the DOD and the ability of the
DOD to effectively carry out its mission.
That means that we have to be quicker, more agile, and more
flexible because frankly that's the kind of threat we face
today. We no longer have the long timelines. We have to be very
responsive. We have to be able to recruit and retrain and
retain the very best people in the workforce of the Federal
Government. It's absolutely essential that we have the highest
quality people we can, and that we are able to hire them
quickly because when we cannot hire them quickly like in our
current system, we lose them to other enterprises.
So we have to have better hiring practice. We have to be
able to retain. We have to have the flexibility for people to
be assigned jobs that need to be done more quickly. So today we
have very narrow ranges, and if we want to assign people a
different job sometimes in the same office it's many times very
difficult.
So this is all about flexibility. It's also about pay for
performance, which is a very mission-oriented approach. We want
to pay people for the job they do and not strictly for their
longevity. So mission first means that pay is for performance,
we will have specific objectives to be accomplished, and they
will flow literally from the President to the Secretary of
Defense. In the case of the Department of the Navy, they will
flow through me and every worker down in the deck plate, in
Navy parlance, will know their objectives are tied to the
objectives of this country.
So we will be able to flow objectives down, measure against
those objectives and pay accordingly. So this is all a mission
focused system. But let me point out, we maintain all the
protections, all the fairness that's in the current Civil
Service system. We are not doing away with any of those, as I
said in my opening statement. So this is a more modern,
flexible system for DOD to accomplish its mission.
Chairman Warner. Thank you, and same basic question to you,
Mr. Blair.
Mr. Blair. As you remember, Mr. Chairman, when NSPS was
first considered, it was followed along on the heels of
congressional action that enabled the DHS Secretary and the OPM
Director to develop a new personnel system for the DHS.
This is part of a larger modernization process for the
entire Civil Service. Beginning in the late 1990s, we've heard
reports from a number of stakeholders on the crisis that was
pending in the Civil Service. Apart from impending retirements
that were taking place because of an aging workforce, we also
saw that our systems were not able to adapt to a changing
workplace and changing environment.
Our General Schedule system, which was up to date in 1949,
was no longer responsive to the needs of the 21st century
workforce. Most of the pay systems that we had for employees,
while contemporary at the time that they were developed, were
performance insensitive, and most were based on longevity and
position rather than on performance, hence the need for changes
in the Civil Service.
You saw that with the war on terror, and DOD's unique
mission, that we needed to go forward and modernize in the way
that they managed their workforce. That laid the foundation for
the NSPS.
Chairman Warner. Let's look at one specific, I'll address
first to the Secretary and then let you respond. For nearly
three decades the Merit System's Protection Board (MSPB) has
served as an important protection for civilian employees
against unfair, arbitrary treatment, in case of actions that
adversely affect that employee.
The proposed regulation is a change in that role which
appears to allow the DOD to override the MSPB administrative
decisions. What are the criteria from which you justify the
Department in overruling an MSPB decision, Mr. Secretary?
Secretary England. I don't believe we overrule the MSPB's
decisions. I believe when it goes to the MSPB, that is the last
board. My understanding, I stand to be corrected here, but I
believe the next recourse frankly is to the courts after that.
The MSPB, however, is different under the NSPS. The statute
actually provides new standards for review for the MSPB and
thus specifically any area concerning the mission of DOD. We
did decide to keep the administrative judges in the system
which was not required by statute.
So I believe, Senator, we are following the statute in this
regard, and we are changing the standard for the MSPB, but that
is in accordance with the statute and we have I believe
mitigated that some by still having the administrative judges
in place.
Chairman Warner. All right.
Mr. Blair.
Mr. Blair. Mr. Chairman, the MSPB was consulted and a
partner during this process in developing these proposed
regulations. What we have done is to attempt to customize these
procedures to the DOD. As Secretary England pointed out, MSPB
administrative judges will be the initial hearing examiners to
review the DOD's actions. The Department does have the ability
to review an administrative judge's decision to reverse under
specific circumstances. But this was done with an eye towards
mission and an eye towards customizing these procedures to
recognize the Department's important mission in maintaining the
national security.
Chairman Warner. I thank you. That same question will be
put to the next panel to get their views.
Senator Levin.
Senator Levin. Thank you, Mr. Chairman. When we adopted the
NSPS statute, we said that the right of collective bargaining
would continue. However, we said in implementing and in
adjusting the new system that the Department would be allowed
to follow a certain specific approach with notice, with comment
on the proposed rule or regulation, but also with an employee
collaboration process. It was one or the other. This was very
carefully worked out.
I believe Senator Collins deserves the lion's share of the
credit because her work on this was tremendous. It took a lot
of effort to come to a conclusion as we did, which was a
carefully crafted result in the NSPS.
Collective bargaining is protected. But in implementing the
new system and in adjusting it, we could go through
publication, comment, and an employee collaboration process.
Now, you come up with this regulation which just says
management may not be involved in the collective bargaining and
you list a whole bunch of things where you just can't be
involved in collective bargaining. But you don't go through the
process which we set forth, where we asked that of the NSPS.
You bypassed that. So my direct question to you is, was that
your intent, number one.
For instance, do you believe that overtime policy, shift
rotation policy----
Secretary England. Sir, I can't hear the question.
Senator Levin. Let me give it to you one at a time. Was
that your intention?
Secretary England. Senator, I'm not sure I understand your
whole statement to answer it directly. I can tell you this.
What we have tried to do is strike a balance in our collective
bargaining. We still have a long list of collective bargaining,
but we have also tried to strike a balance between
accomplishing our mission and collective bargaining. So as
something that is very mission specific involving the entire
Department in terms of prompt response, we cannot put ourselves
in the position of bargaining 1,500 times or so with every
local union.
Senator Levin. We took care of that when we passed the law.
You don't have to collectively bargain 1,500 times. You put in
place a process as an alternative to that. We talked about
notice and comment, publication, notice, comment and then an
employee collaboration process. That's in the law.
Secretary England. That continues, Senator.
Senator Levin. Let me ask you specifically, do you believe
that you would continue to need to collectively bargain on
overtime policy if this regulation goes into effect?
Secretary England. I don't believe I can answer that
question today because I don't believe that question has been
answered yet, Senator. We are going into the meet and confer
period now and we will decide during this process exactly what
the particulars will be.
I can tell you the policy will be to not negotiate on those
issues that are department-wide and affect the mission,
accomplishing the mission of the Department. So where we have a
specific mission need and we cannot accomplish that if we have
a detailed bargaining that we would not do that. So I believe
the policy is in place in broad regulations. The specifics is
what will be worked out during this meet and confer period.
Senator Levin. I'm going to list five areas and if you can
tell me if this proposed regulation becomes effective, whether
or not there is a requirement that you collectively bargain in
these five areas. Overtime policy?
Secretary England. Senator, I don't know if I can answer.
Overtime policy--there is a Federal law regarding overtime and
overtime policy. In terms of people getting paid. I don't know
how I can answer such a broad question. Obviously people
continue to get paid for overtime. People still schedule
overtime, so I don't know what aspect of how to address that.
I'm sorry, Senator. I don't----
Senator Levin. Shift rotation policy. Will there be a
requirement that you continue to collectively bargain on shift
rotation policy, if this draft regulation becomes permanent?
Secretary England. Again, Senator, I believe that's
something we will discuss during the meet and confer period.
That's something that will be discussed. It's a specific
question in terms of does that fit the mission need. That may
very well vary depending on the circumstance, frankly. I don't
believe there is an answer to each of these specific questions
until we actually have an opportunity to develop the specific
guidance and detail that will be in NSPS. We have not gotten to
that point, Senator.
Senator Levin. The draft says that management is prohibited
from bargaining over ``the procedures that it will observe in
exercising management rights to hire, assign, and compensate
employees.'' Now, those matters were previously negotiable.
They are subject to the law which we passed relative to
employee collaboration. We have to know whether you're
attempting to change that requirement or eliminate collective
bargaining with this regulation that you've drafted.
Secretary England. Senator, we are not eliminating
collective bargaining. We are trying to streamline the system
so we can do our mission and be able to do the broad across the
Department tasks that we need to accomplish.
So we are not eliminating collective bargaining. By the
way, also in that regulation, it says we will continue to have
employee collaboration, so that does not go away. The fact is
we have tried very hard to have dialogue with our employees, so
that does not go away. That will continue throughout, and I
hope as a continued basis, forever in that regard.
Senator Levin. Thank you, my time is up. Thank you, Mr.
Chairman.
Chairman Warner. Senator Collins.
Senator Collins. Thank you, Mr. Chairman. Secretary
England, I'm going to follow up on the questions just posed to
you by Senator Levin and the chairman.
In my letter, I raised exactly the same concern that the
Ranking Member has just brought up. As I read the regulations,
they grant the Secretary of Defense sole, exclusive, and
unreviewable discretion to promulgate issuances without
employee involvement related to overtime pay and several other
important issues. That does seem to me to be inconsistent with
the intent and the letter of the law.
I want to go on to talk about two other issues. One is
following up on the chairman's question about the role of the
MSPB. The preamble to the proposed regulations states that the
intent is to explicitly restrict the authority of the MSPB to
modify penalties when there is an adverse action to situations
where there is simply no justification for the penalty.
The regulations impose an extraordinarily high standard
that the board cannot act unless the penalty is so
disproportionate to the basis for the action as to be ``wholly
without justification.'' That's not what the law says and is
not the standard that is set out very clearly in the underlying
law for the standard of review for the MSPB.
In fact, the underlying law says that the board may order
corrective action if it determines that the decision was
arbitrary, capricious, an abuse of discretion, and otherwise
not in accordance with law obtained without procedures required
by law, having been followed, or unsupported by substantial
evidence. That is a far different standard than ``wholly
without justification.''
How can the Department proceed to limit the role of the
MSPB in a way that does not conform with the standard in the
underlying law?
Secretary England. Senator, we will obviously do it in
accordance with the underlying law. If we have this wrong, then
obviously we will go back and look at this. So we are looking
at your letter, we owe you an answer. It is a valid input and I
appreciate the input.
We will go work this, Senator, and we will get back with
you on this. Again, we are still in the process of developing
the system so it's a valid input. It's a good input. We accept
it and we will get back with you on this issue. But we really
appreciate the input, it's valid input and I appreciate it.
Senator Collins. I do hope that will be remedied. The
second issue I want to raise is the National Security Labor
Relations Board. Under the proposed regulations, the Secretary
of Defense would have the exclusive authority to appoint the
members of this board to hear disputes arising in labor
management relations, so this is an important entity.
The Secretary would have one member selected from the list
that is developed in consultation with the Director of OPM. The
other members would just simply be appointed by the Secretary.
Now, I want to contrast that with the approach taken by the DHS
in its proposed rules.
The DHS would have a similar labor relations board to
resolve disputes, but the regulations for the DHS personnel
system require the Secretary of Homeland Security to consider
candidates submitted by employee representatives, the labor
organizations for two of the three board positions.
I think that makes sense. If you're going to have a board
hear labor/management disputes, in order for it to have
credibility, it needs to have representatives that understand
the views of employees. It shouldn't just be stacked with
management appointees. That's really a bad approach, because it
heightens this feeling that it's management versus labor, which
we are trying to get away from.
I think DHS took the right approach by asking in its
regulations for involvement by the employee organizations. I
would urge you to reconsider this as well and to follow the
motto that DHS has put forth.
Secretary England. We will, Senator. That's again valid
input, one that we have already considered. So we will go--we
will definitely take that advice seriously. It's not a
management board, however, just let me correct the one thing.
It is an independent board. It is independent and they have
independence once they are on the board. However, who you name
in the process to get there is a valid issue. So again, I
accept your input, Senator. It's a good suggestion and we will
certainly discuss that as we work towards our final
regulations.
Senator Collins. Thank you. I recognize that it is an
independent board--but it's not going to be perceived as being
an independent board if the Secretary is making all of the
appointments with no input from the employees of DOD. I know
from your considerable experience working with unions and
employee representatives in the past, and you've had a lot of
success, that you should be sensitive to the appearance here as
well. I hope this will be changed in the final regulations and
I thank the chairman.
Secretary England. Senator, thanks for the constructive
comments. They are appreciated. Thank you.
Senator Collins. Thank you.
Chairman Warner. I thank you, Senator Collins, your
contribution and your continuing participation are very
important to this legislation.
Senator Kennedy.
Senator Kennedy. Thank you very much, Mr. Chairman. I join
in urging you, Mr. Secretary, to pay close attention to what
Senator Collins and Senator Levin have brought out because they
are very much so much involved in the drafting.
The Secretary claimed that he wanted the national level
bargaining and speedier labor management dispute resolution.
But I think the regulations that you put out restricts the
collective bargaining well beyond the scope of what he claimed
the intent was.
Now, in the legislation itself, on nonwaiverable
provisions, it has chapter 71, nonwaiverable provisions.
Chapter 71 of title 5 is collective bargaining and specifically
in the law says that it cannot be waived. That is written in
the law.
On the previous page, it outlines ``to ensure that
employees may organize bargaining collectively is provided for
in this chapter and participate through labor organizations of
their choosing in decisions which affect them subject of the
provisions of this chapter, and any exclusion from coverage or
limitation on negotiability established pursuant to law.''
There is a whole body of case law in those provisions. Now,
if you read what is outlined in the law and then look at your
regulations, we find that under the management rights, you will
find in section 9901.910, we find in section (b) that
management is prohibited from bargaining over the exercise of
any authority under this paragraph A in this section,
procedures that it will observe and exercise the authority set
forth in the paragraphs. That technically as we read it
prohibits DOD managers from bargaining over the procedures,
included in that is overtime, also working out overseas
assignment and the rest.
I direct your attention as well to 9901.910(e)(2)(i), which
says that ``appropriate arrangements for employees adversely
affected by the exercise of any authority under this section,''
and then it lists the various things that are not included such
as overtime, routine work, routine assignments and specific
duties, work on a regular overtime basis. It talks about the
various kinds of areas that are currently protected in
collective bargaining.
I just say that our counsel is looking at your regulations
and also looking at the law, come to two entirely different
conclusions. He is going to be challenged.
We hope in the spirit which you outlined earlier to the
chairman and others that you be able--this is a far reach from
what the Secretary had indicated to us as being the question,
to being able to negotiate with a number of different unions
and be able to make administrative decisions.
I would hope that--I don't know whether these have been
brought to your attention by other legal authority or not,
whether they are under review or not, but we would be glad to
at least give you our view about exactly what the law says and
how these regulations are inconsistent. That would be helpful
whether Mr. Blair wants to make a comment on those particular
provisions.
Mr. Blair. Thank you, Senator. We thought we were acting
within the scope of our authority and continue to believe we
are doing so. However, it is the subject of a lawsuit. A number
of unions have filed suit against Secretary Rumsfeld and OPM
over this very matter. I think these matters will be resolved
in the courts as this lawsuit progresses.
Senator Kennedy. If it says specifically that chapter 71
that deals with collective bargaining can't be waived, how do
you go ahead and waive it in your regulations and get by with
it? What is your quick answer to that?
Mr. Blair. I would say that we have not waived all the
regulations, that we were modifying them. I'm being told by my
lawyers I need to----
Senator Kennedy. It doesn't say just some. It says the
nonwaiverable provisions, it says chapter 71. It doesn't say
some of chapter 71. The provisions, as we understood, were
national collective bargaining and also that dealt with third
party review, who is going to adjudicate the differences for
the areas that most of us thought were the exceptions. But as I
hear you respond to my question, saying we are going to take
what in parts of chapter 71 we like and what parts we don't
like.
Secretary England. Senator, you offered to give us your
input so that we can get back to you. It would be better if we
did that. We would appreciate it if you just provide us your
input, and then let us respond to you later rather than here
today, we would appreciate that, sir.
Chairman Warner. I think, Mr. Blair, you need more time to
respond to the questioning. I want to give both of you such
time as you require now. Then of course, the option to put
something in the record.
Mr. Blair. I was responding.
Chairman Warner. I beg your pardon?
Mr. Blair. I appreciate Senator Kennedy's strong advocacy
on this behalf. At this point, the Justice Department and
others are directing us to say as little as possible on this in
case this debate is carried over to the courts. I respect the
Senator's opinion on this, and I think this will be something
that we work through the process.
Senator Kennedy. Just regulations on the 9901.910
specifically prohibits where you've proposed management from
negotiating over the procedures to exercise rights to assign
work, determine the personnel by which agency operations are
conducted. So agency officials could move employees
arbitrarily, or force a prolonged assignment anywhere in the
world without regard to any hardship.
Of course, employees--see, my read on this is a very simple
one. That is, if you make a management policy, you're going to
be able to override anything that exists in there, because it
is a management policy. Management policy's going to override
overtime. It's going to override all of these. Because you're
going to say, oh, it's a management policy question.
That's the only way you can explain it. It's almost exactly
what it says at least in the regulations. That is a far reach
from what the language is in, in this--in the legislation. But
I thank you. My time is up. But I will look forward to the
opportunity to have further exchange on that. Thank you, Mr.
Chairman.
Chairman Warner. Have you had an opportunity to reply to
the Senator's questions?
Mr. Blair. Yes, sir. We have.
Chairman Warner. Senator Talent.
Senator Talent. Thank you, Mr. Chairman. One brief one.
This is an issue, of course, in any properly run management
system, but what have you thought about in terms of in order to
ensure that the individual managers, the supervisors who do
employee reviews and performance reviews, are acting fair and
impartial manner. One of the objections that is raised in that
kind of a system is that, well, they will take out vendettas,
they will do personal things. I'm sure you anticipated that and
you have something in mind. Maybe you can share with us what
safeguards you have in place?
Mr. Blair. The performance reviews will be subject to at
least two levels of review by the reviewing employee's
supervisor, and also by the payroll manager who will be
administering the pay increases.
But at the same time, prohibited personnel practices--which
means cronyism and politics--cannot come into play. The Office
of Special Counsel ensures that oversight and enforcement of
personnel protections are all in play in all of this.
The bottom line is that we have attempted to craft a fair,
credible, and transparent pay for performance system that will
still be flexible to the needs of the DOD. I think it's
important that employees understand that they have recourse
when they feel that there is a decision regarding the
performance that they don't agree with. We think that we have
provided that. Again, this will be part of the meet and confer
process. We think we have developed a fair and credible system.
Secretary England. Senator, your question really gets to
the heart of the whole pay for performance system, frankly,
because you have to make sure that it's fair and equitable and
not biased for any reason whatsoever.
So as Mr. Blair said, we will have two levels of review,
and by the way, the managers and supervisors are on the same
standard, that is, part of their measure of performance is to
make sure that they have a fair and equitable system that they
are exercising. So that will be part of their measurement
criteria.
So there are two levels of review and we will during meet
and confer be discussing that there are other avenues that we
should have open to employees in terms of being able to be
assured that they are getting fair and honest review.
But this is at the heart of the matter. All of our
employees obviously have to be comfortable that this is a fair
and equitable system. So we are very sensitive to this, and we
will be working this for the coming weeks to get to the
detailed regulations. Input in this area is appreciated because
this is the heart of the system. We are working very hard to
make sure we have a very credible system that our employees
believe in.
Senator Talent. I would congratulate you on the intention.
This is the key, to have both the positive and negative in
place. They know what they are graded on and what they are not
supposed to be graded on. Both are very important so that when
something happens, they know, well, because I had this standard
that I knew I was supposed to meet and I either got there, in
which case it's great, or I did not, in which case I understand
why I'm not getting what I'm supposed to get.
Then by the way, if I suspect cronyism or something, I have
an appeal. The other thing that's crucial for both you all and
the employees is that these review levels need to be quick.
What you don't want in a good personnel policy are disputes or
concerns hanging around for months and months and months making
people angry. You need to move through it pretty quickly, with
enough time for everybody to have their point of view but then
get it done, and get it out of the way.
Secretary England. Absolutely. Senator, by the way,
criteria are discussed with the employee in advance, literally
written down and it has to be a measurable criteria. So there
has to be a measure and a metric that the employee and the
supervisor agree on in terms of performance. So this is not
abstract.
The value of the system is that we will cascade down
throughout the organization objectives so there will be written
objectives with schedules, with criteria. It has to be
measurable.
One of the strengths of this system is we now manage the
entire enterprise with an objective, measurable system. So
there will be a standard for every employee, different in terms
of what is to be accomplished but there is a standard in terms
of knowing what that is. This doesn't just happen at the end of
the year. The objective is to set this early, to review this
during the year, so there are not surprised at the end of the
year. You have to have the training.
Senator Talent. Also, they have to see the commitment from
the top. It doesn't mean that you and the Secretary and the
others have to be doing a lot. But they have to see that this
is a priority for you and you have to see that reflected in the
training dollars for the managers and the rewards given to the
managers who do this well. This has to be a key thing. Because
if they suspect a commitment isn't there at the top, it won't
work. I used to practice labor and personnel law which is why
I'm feeling so free to tell you how to do this.
Secretary England. Thank you, sir.
Mr. Blair. A couple of points, Senator, on that, is that
managers and supervisors will actually be held accountable for
how well they perform their jobs and their pay will be
reflected in that.
Second, you touched upon training. Training is going to be
a key component in making this system successful. The DOD has a
robust training program planned, based on the man-hours of
training. Supervisors will get 18 hours of training, HR
specialists will receive a minimum of 40 hours of training,
employees will receive a minimum number of hours of training as
well. I think that this shows a commitment on the part of the
DOD to making sure that employees understand and recognize the
working aspects of this new system in order to better
understand it and not fear it.
Secretary England. We will, Senator--we have 1 million
training hours planned for 1.1. So when we go into 1.1 we will
accomplish 1 million hours of training.
Senator Talent. Thank you.
Chairman Warner. Thank you very much, Senator.
Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman. I'm
always delighted to see my good friend, Secretary England.
Secretary England. Thank you, Senator.
Senator Akaka. I want to thank you and Director Blair, for
your testimony and I know the hard work you are all doing on
NSPS.
My questions are to try to bring clarity to these many
questions that have come to me. I am interested, Secretary
England, in the costs associated with NSPS related to training,
creating new labor/management and appeals boards. Also paying
employees for their performance.
As you may know, DHS is requesting additional funding to
help pay for the implementation of MAX HR , it's a new
personnel system. Will the new pay system be budget neutral or
do you anticipate increasing overall funding for civilian
salaries in light of the performance element?
Secretary England. Senator, it will be neutral, I believe
that's required by statute. It will be neutral in terms of the
pay itself, so we can distribute the money differently but the
net is the same. Money obviously is appropriated by Congress
and what's appropriated for increases in salaries, obviously
that is the increment we will deal with. So it will be neutral.
We do have some costs. For example, we have $38 million for
our program office and for specific things that need to be
accomplished. We also have within our own budgets training,
because you know, all of our training is in our own in-house
budgets.
I will comment here that training is a core competency of
the DOD. One thing we do very well is to train our people and
we will use our existing infrastructure for training to train
our people in NSPS. But I can tell you, we are very sensitive
to this whole area of training. I know you mentioned that in
your opening statement. We are very sensitive.
We know that we don't send our people to the front lines
without training. We also don't put people behind the lines
without training, so that's a very sensitive area to us. We
will not be proceeding unless all of our people are trained.
This is not scheduled training. This is to make sure we are
ready first before we proceed with the next step. So I can
assure you our people will be well trained before we enter into
this system.
Senator Akaka. At this point, will you know how much money
will be dedicated for training, to training for performance
management systems?
Secretary England. I do not know if I can break it out that
way because it shows up throughout our budget. We have asked
each of our command elements to just include that in their
budgets. So it shows up in a lot of different places in our
budget, in our process. Like I had said, I believe the only
identifiable line item is the $38 million that's for our
program office across the board and I believe putting the
training together. But the actual training is part of our own
in-house budgets.
Senator Akaka. Secretary England, as I noted in my opening
remarks, Secretary Rumsfeld testified in 2003 that NSPS would
not end collective bargaining, yet the proposed regulations
override collective bargaining agreements through Department
directives and severely restricting matters subject to
collective bargaining. In response to Senator Levin, you said
that DOD would have collaboration. Would you please explain how
you believe collective bargaining is retained?
Secretary England. We still retain collective bargaining
for items other than what I call broad mission items within the
Department. So there is still a whole range of bargaining
issues. We are not doing away with collective bargaining, but
we are trying to balance the mission of DOD with our collective
bargaining, so that's what we have put forward as the
fundamental policy.
I believe as we go forward in this meet and confer, we will
get down to the specifics of how that's implemented. I would
comment, also, if I could, Senator, that I know a lot of our
employees and everybody wants to know all the detail of the
program, but we don't have the detail of this program yet, and
will not have this detail end until the end of the meet and
confer process.
You indicated there is some stress in the workplace. I
understand that. There is stress everywhere until--personal
stress, because it is a lot of change. But it will be stressful
now because we don't know all the detail, and everybody would
like to know the detail today. But we are still in the process
of developing that detail within the broad proposed
regulations. So again, a lot of the questions that are being
asked, even some at this hearing, we don't have the answers for
because we are not in that part of our development program yet.
Mr. Blair. If I could supplement Secretary England's
statement, post implementation bargaining is retained in broad
categories, as well as bargaining over certain procedures like
personnel procedure, as an attempt to strike the right balance
given the legislative framework in which these new regulations
were developed.
Senator Akaka. Thank you very much. Mr. Chairman, my time
has expired.
Secretary England. Thank you, Senator.
Chairman Warner. Senator Clinton.
Senator Clinton. Thank you, Mr. Chairman, and thank you,
gentlemen. Of course, part of the dilemma and confusion that we
are confronting here is that the devil is in the details. There
are many unanswered questions and it's very difficult for us to
reach conclusions as to whether or not the proposed regulation
complies with the law as intended and written.
I think the cautionary statements and questions by
particularly Chairman Warner and Ranking Member Levin and
Senator Collins since they were intimately involved in this
process are a big yellow caution light, because it seems clear
that there is some more questioning and answers to be obtained.
You just said that the new pay system will be budget
neutral. Now, that raises a question for me because most of the
demonstration projects that I'm familiar with, when it comes to
pay for performance, have added additional money for salaries.
So in effect, with a budget neutral system and an attempt to
move toward pay for performance, there will definitely be
increasing pay disparities.
So it's understandable that many of the key questions that
employees are wondering about are not answered yet in this
draft regulation. We don't have specific career groups and pay
bands established. We don't have maximum and minimum pay
levels. We don't have procedures for assigning pay to
individual employees, rules for overtime, compensatory time, or
other premium pay.
It is a very troubling change when there is so little
guidance being given, and when there are these serious
questions being raised about whether the regulation complies
with the underlying law.
I think that what Congress attempted to do, as I understand
the NSPS, was to give more authority within parameters to DOD.
What we are concerned about is that those parameters which we
thought were established in the law may not be determining what
this proposal really is. That is why I think you're getting a
lot of these inquiries.
I'm particularly concerned because all of these issues
about pay which goes to the heart of employees' concerns--are
being left to ``implementing issuances'' to be provided at some
unspecified time in the future. I don't see how you can expect
the DOD civilian employee workforce to have confidence in this
new system when there is so much that is left unanswered. It's
a great big trust-me theory.
I don't think that's in the best interests of either the
management of DOD, the employees of DOD, or more importantly,
the national security mission at DOD. We do not need to be
breeding insecurity and confusion amongst the civilian employee
workforce. So I would hope that both Secretary England and Mr.
Blair, you would take these questions very seriously because
there is a great deal of concern on this panel.
I want to ask a more general question because I am by no
means an expert in all of the personnel questions. I'll leave
that to my friend, Senator Akaka, and others. But Mr. Blair, in
your testimony, you state that current law in labor relations
is inadequate when it comes to national security matters
because ``DOD needs the ability to move quickly on matters
before they become an emergency and current law simply doesn't
allow you to do so.'' I think that we understand the need for
quick and flexible action. I think that the real underlying
reason behind the law was to give you more flexibility for
being able to move quickly if necessary.
But I think that a rational response to these problems
might be to give you the authority, which is I thought what we
were doing in the law, so that when national security is at
stake, you can move but then you bargain over the impact of the
implementation after the fact. However, that is not what your
draft regulation does.
Instead, it exempts those issues, procedures, and
arrangements from collective bargaining all together regardless
of whether the situation is urgent or whether there is a
national security need to proceed with action and without any
bargaining, even after the fact.
So let me ask, if the reason for altering collective
bargaining requirements is DOD's need to act quickly on urgent
national security matters without bargaining first, why didn't
you tailor your regulation to this narrow specific need instead
of carving out these large categorical exemptions to collective
bargaining requirements?
Mr. Blair. I think the intent was, Senator Clinton, to make
sure the Department could move quickly. In doing so, we thought
that we developed a good framework in carving out these
exceptions.
Keep in mind, however, that these exceptions are in a
proposed form, and will be going through a meet and confer
process in the statutory period. Congress specified that when
we did these proposed regulations we must allow 30-days notice
and comment, and a minimum 30-day meet and confer period. Then
with a 30-day statutory period for congressional review.
We are about to embark on the second stage. Comments such
as yours will help us further frame the debate and further
raise discussions as we move into this period. These
regulations are not final. They are subject to change and
comments like yours will help us as we further refine and draft
these.
Senator Clinton. I'm very glad to hear that and I know that
other members of this committee are as well. Let me just
perhaps put this into a broader context and I'll just speak on
my own behalf, but I am increasingly concerned about the
erosion of checks and balances in our Government.
I think that the genius of our founders as they created
these checks and balances and we have done very well as a
Nation for more than 200 years, so that if people got too
powerful there was an independent judiciary, there was
collective bargaining, there were ways of reining in unchecked
power.
I just offer a cautionary note that I understand the
urgency. I understand the great sense of mission at DOD, but
human nature has not changed. As Lord Acton said: ``Power tends
to corrupt and absolute power corrupts absolutely.'' You're not
just making changes for the short term, but ones that will last
for some time.
I think one of the real benefits of our system is there are
all these different voices and sometimes it's annoying and
sometimes it slows you down and sometimes you wish you didn't
have to deal with people who are saying, wait a minute, I'm a
welder at this military facility that's not safe any more. We
need to do something about it.
I would hope that not only on the specifics, but on the
larger issue just be sure that we are not throwing the baby out
with the bathwater here. That we are not changing a system that
has served this country very, very well. Yes, if you're a
manager you always want free action. If you're an employee, you
always want some kind of bargaining power. So creating that
balance is what we should be doing and just based on a review
of these regulations I'm afraid we are tilting the balance too
far in that direction.
Secretary England. Senator, first of all, what you just
said, I will tell you I have already agreed with. I just had
this conversation with Senator Levin a few moments ago. If you
want something very clean and easy, dictatorships, that's their
characteristic. Democracies are obviously messy and lots of
voices and that's what is very important in our system and God
bless America, it's what makes America, and so I recognize
that.
I will tell you we are trying to strike a balance here. We
have gotten 10,000 inputs from our employees. We have been with
every organization, every service organization, veterans'
organization. We have solicited everyone we know to provide
input into the system.
Our objective is to make this fair, transparent, and as
broad based as we can, to make sure we end up with an equitable
system. It has to be equitable. This is our most critical
resource in the DOD, I can assure you. Our whole objective is
to make sure that this is more beneficial for our employees.
We are determined to make this a win for our employees and
a win for national security. I'm convinced we can do that. We
are all in this discussion to get there, but we are not at the
end of this yet. We are about a third of the way through in
terms of the detail of the system.
So I understand without the detail, that's where the devil
is in the detail, we are working our way through this. There is
opportunity for more dialogue or--a lot of opportunity. We are
just entering that real dialogue period in terms of legislated
dialogue with our unions, but there is opportunity again to
interface with Congress on this subject.
So we do want a system that works appropriately. That
given, we are going to change the system that we have today
because it is not responsive to what we need to do. So we need
to make sure that we do change those things that give us the
flexibilities that we need, but we do not in any way eliminate
anything of the protections and fairness that's in the current
system.
So I can just give you my personal commitment, we will
continue to work this. This is the way we've been working it
for the last year. We will continue that way, and we will make
it work out for all the employees. That is in the interest of
DOD to make sure this works out well for our employees.
Chairman Warner. Thank you very much, Senator. Thank you,
witnesses. The chair, together with the ranking member, to try
and complete this round of questions, so that we have--in a
timely manner we can now entertain the very important remarks
of our second panel. So at this time, I turn to my two
colleagues on the left. I believe, Senator Reed, you might have
a minute or two.
Senator Reed. Thank you, Mr. Chairman, thank you,
gentlemen. This morning's hearing has raised a host of issues.
I'm most particularly concerned about the application of these
rules to the national defense laboratories, to DOD labs,
specifically and obviously the Naval Undersea Warfare Center in
Newport. As I understand the legislation, new rules would not
be applied to the laboratories until October 1, 2008, yet I
also understand there is a discussion of applying across DOD
totally these rules in 2005. Can you clarify that, Secretary
England?
Secretary England. Yes. Senator Reed, the human resources
part does not apply to the laboratories until 2008. Labor
relations does apply across the board because you have to have
a consistent labor relations process. But all the pay and all
the things that are human resources part does not apply until
October 2008. Then it applies, I believe, as long as we have a
system better than a demonstration system so it's a decision to
make that point. But that's the earliest point it does apply.
So you're right, sir.
Senator Reed. Thank you, Mr. Secretary. That's the legal
issue and policy issue you have alluded to in your answer which
is the system that they are using now. I can only speak from
the knowledge of Newport, in which they are already using pay
for performance incentives. They are looking at pay bands
versus the GS system, where you have increased flexibility. So
all of that has been worked out through what I think you assume
will happen DOD-wide, the collaboration, discussion with both
management and employees. I guess initially, my goal would be
if it's not broken, don't fix it as you go forward. What is
your inclination?
Secretary England. These demonstration projects have been
very useful to us, Senator. We've had years of experience, and
that's the foundation, that's really what led up to the NSPS.
So that whole experience base is very valuable as we go
forward. You're right. Everything that we are bringing forward,
that was our learning process. As indicated later, Mrs. Lacey
who is now running this program office ran a number of those
demonstrations, so that's been very helpful to us.
Senator Reed. Have you conducted a formal assessment, Mr.
Secretary, of those demonstration programs so that you can
evaluate them and not only use them as a benchmark for what you
are doing prospectively, but also within the Navy lab
community? At the present moment, have you done that formal
evaluation?
Secretary England. We have. We had a formal evaluation of
all the programs and a lot of informal evaluation. Mind you,
that all happened frankly before I became involved with the
system. But my understanding at that time was that we had--we
went back through all those demonstration projects, had a lot
of lessons learned out of all those projects as a foundation
and an understanding of where we are today.
Senator Reed. Could you share that information with us, Mr.
Secretary? I think it would be very useful, since that's really
the laboratory for this largest personnel----
Secretary England. You're absolutely right, no, we can
share that data.
Mr. Blair. Senator, I just want to say that DOD's
evaluating, OPM has evaluated, I believe GAO has evaluated, and
Congress has evaluated it several times. They've been the basis
for many of the proposed changes, not just with NSPS, but also
with DHS.
Senator Reed. Thank you, Mr. Blair. Let me raise another
issue in response to Senator Kennedy's questions about what he
would argue are clear departures from the black letter of the
law, you indicated that the Justice Department has advised you
that you're appropriately leading down the right path. Do you
have a written legal opinion from the Department of Justice
(DOJ)?
Mr. Blair. I'm sorry. I didn't mean to imply that we were
going down the right path, but what I wanted to communicate to
you was that, since this is the subject of a lawsuit, we are
not at liberty to discuss the merits of the case or the
specifics of the case. We believe we are going down the right
path, however.
Senator Reed. It seems from listening to Senator Kennedy's
discussion that this is not one of these things where it's
nuanced. It's pretty clear.
But I just make a general comment and I think it resonates
with what Senator Clinton said also. We are seeing legal
opinions coming out of the DOJ that seem to be deficient in
real good legal analysis. This is particularly the case, I
think, in the discussion--the issue of detainees. Secretary
England, one of his other hats, if you're familiar with that.
So deficient, in fact, that they have had to be repudiated. I
would just say it would be nice if we could avoid lawsuits and
it might be impossible. It might be avoided by just a more
faithful reading of the legislation. Thank you.
Chairman Warner. Senator Lieberman.
Senator Lieberman. Mr. Chairman, I'm going to be very brief
because I know you want to move on to the second panel. In
fact, I'm going to make a statement, not ask a question unless
the witnesses are moved to respond. That will be fine with me.
Because the one point I did want to focus on was along the
lines that Senator Clinton asked, which is the extent to which
you've issued on the proposed pay and performance regulations
essentially a skeletal outline, maybe a little more than that,
but as you acknowledge, more details to follow.
The concern about this is that we have a process. The
process is aimed at encouraging maximum disclosure and feedback
in a timely way. So to the extent that regulations are
published in the Federal Register, for instance, and they are
available not only to Members of Congress and employee groups,
but to the general public if they want to comment one way or
the other.
To the extent that the details are added later on which are
quite important, that people may be deprived of that
opportunity. So I just pick up on what you said and I really
urge you to try the best you can to go out of your way as you
develop more of the details of this process to make sure that
both we in Congress are informed and have the opportunity to
respond, and certainly that the employees themselves before
there is a finality as the details are added have an
opportunity to respond. So there is a sense of involvement and
ultimately shared interest, mutuality, as we go forward. If you
want to respond to that, that's great. If not, I will feel that
I have spoken my peace.
Secretary England. Senator, I do not disagree with you. My
comment is this is a collaborative effort. I believe we have
reached out to everyone we can possibly reach out to. We are
open, accepting inputs. Our objective is to put the best system
together we can for the DOD and for the Nation and for the
employees.
So I don't disagree. That's what we are trying to do. There
is always going to be disagreement, but again, welcome to
America. That's our system, but at the end of the day, I
believe we will end up with a system that's fair and equitable
and meets the mission of the DOD.
Senator Lieberman. Thank you. Thanks, Mr. Chairman.
Chairman Warner. Thank you very much. Senator Levin, you
had one or two matters. We'll let the Senator just have the
questions. Ordinarily, we would have time permitted to ask, and
we ask you to provide your responses to the record in a timely
way.
Senator Levin. Mr. Chairman, I do appreciate that.
Secretary England, the new personnel regulations that have been
issued by the DHS expressly allow for procedures to file
grievances with independent arbitrators if the employee
disagrees with the performance rating. The draft NSPS
regulation does not contain a similar right for the DOD
employees. Was that intentional, they do not have the same
right provided for your DOD employees as DHS does?
Secretary England. No. That's something we will still
discuss in the meet and confer. Senator, it's vitally important
that the employees be comfortable in their evaluations and we
understand if there is an issue, there has to be some mechanism
for review, in addition to supervisory review so that's an area
that's still open for discussion, sir.
Senator Levin. Mr. Secretary, when we enacted the
legislation, we understood that the Department wanted to give
some greater weight to performance instead of just looking at
seniority in its procedures.
As I read your draft regulations, however, it appears as
though you want to give absolute priority to performance over
seniority in every case, and then base your assessment of
performance exclusively on the employee's most recent rating.
If that meaning is correct, I would hope that you would
reconsider that because it seems to me that an employee, for
instance, who has received a single outstanding rating in the
most recent year should not necessarily be preferred over
somebody whose ratings have been terrific over the prior years,
but at a somewhat lesser rating in that most recent year.
Secretary England. We agree.
Senator Levin. Finally, for Mr. Blair, the statute provided
that when it came to establishing and adjusting the new system,
it would be through regulations prescribed jointly--key word
there jointly--by the Secretary of Defense and the Director of
Office of Personnel Management.
A year ago, when the DOD sought to exclude OPM from the
development of a new system, Senator Collins and I and others
insisted that the law be followed, that the Department comply
with the statutory requirement that OPM be involved.
I understand you were a full partner in the drafting of
these regulations and that's how it should be. However, there
are certain provisions in the draft regulation which provide
that critical elements of the new system, such as the basic
parameters for hiring, promoting, assigning employees, setting
and adjusting pay, evaluating performance, and appeal of
performance ratings, will be established in future implementing
issuances, which would be put out solely by the Secretary of
Defense.
In a few cases, the draft regulation provides for
significant decisions about the new system, such as the
establishment of mandatory removal offenses, to be made at the
``sole, exclusive, and unreviewable discretion of the Secretary
of Defense.'' That's not what our law provided for.
I'm wondering whether or not you are going to take a look
at this, and if you agree that our law provided that as a
matter of fact, regulations be prescribed jointly, both in the
establishment and the adjustment of the system, that you will
make that OPM position clear.
Mr. Blair. With your help, Senator, we have had an
outstanding partnership between DOD and OPM, especially since
Secretary Rumsfeld took part in the process. We anticipate that
continuing.
Senator Levin. Does that mean that you will insist that the
legislative language that's in the law be complied with?
Mr. Blair. We will look at that legislative language.
However, I anticipate OPM's role will continue to be as it was.
We will be involved intricately with the Department throughout
every step in implementing this. As far as internal regulations
go, I think we will take a look at that, to see to what extent
OPM should be involved, but we certainly appreciate your
interest in OPM's prerogatives in this.
Senator Levin. I want to just add my thanks to both of you.
You are both open to suggestions, and that's the way it must
be. We have a long way to go and I was happy to hear from you,
Mr. Secretary, that you think we are just perhaps a third of
the way down that road. It's a long road. It's an important
road for all of us and your participation in it is essential. I
want to thank you for your openness.
Secretary England. Thank you. By the way, Senator, just a
comment, even when we start this 1.1, that continues. We don't
actually pay anyone under this spiral system until January
2007. So there is a period here where we will continue to learn
and adjust as we go through the system, to make sure we have it
right before any employees' salary is actually on the line. So
there is--we have time. We are not going to rush. We are going
to make sure we do it right.
Chairman Warner. That's very reassuring, Mr. Secretary. You
made a good presentation and response to our questions by both
of you. As I said, we'll assume that further questions will be
provided for the record. As long as this is viewed as an
ongoing process, with all voices and perspectives carefully
considered, I hope that you can assure us that that's going to
be the case, both of you.
Secretary England. I can assure you that's the case,
Senator, that's what we will continue.
Chairman Warner. Drawing on my own experience with the
Department, I was privileged to be there over 5 years and I had
a magnificent working relationship with my civilian side and my
military side.
For those of us who had that wonderful opportunity to serve
in that great Department, we know it's a team between that
uniformed individual and that civilian. They're often side by
side, and it has to remain that teamwork. So it's unlike any
other Department, our agency, in the Federal Government. So you
have a special challenge. I thank both of you. I recognize that
both of you have to depart but I would hope the representatives
of your offices can remain to hear the important testimony of
our next panel.
Secretary England. Yes. I'm going to stay myself, sir.
Chairman Warner. I think that's a great courtesy.
Mr. Blair. Thank you very much, Senator.
Chairman Warner. Thank you very much, Mr. Blair. So we will
now have a second panel: Derek Stewart, Director of Military
and DOD Civilian Personnel Issues, GAO; John Gage, National
President, American Federation of Government Employees; and
Hannah Sistare, Director, Human Resources Management
Consortium, Executive Director, National Commission on the
Public Service Implementation Initiative, the National Academy
of Public Administration. We welcome you, and is there an order
of presentation that you would prefer?
Mr. Stewart. Yes, sir. We were talking with your staff, I
think it was agreed that GAO----
Chairman Warner. I simply want to say to my old friend, Mr.
Gage, I have worked with him many years. He came into the
office to see me. I said, now, look here, what can you do to
just focus on those main things that you feel that require the
attention of the Senate at this time. I judge from your opening
statement, you have done exactly that. I thank you, Mr. Gage.
All right, Mr. Stewart, lead off. Your statements in their
entirety, the written statements will be included as part of
the record and if you will give us your presentation at this
time.
STATEMENT OF DEREK B. STEWART, DIRECTOR, MILITARY AND
DEPARTMENT OF DEFENSE CIVILIAN PERSONNEL ISSUES, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Stewart. Thank you, Mr. Chairman. I am pleased to be
here today and this is a very important topic that affects not
only the 700,000 Defense civilian employees at the DOD, but it
has critical implications for the rest of the Government,
future government-wide reform. So it is important that the
proposed NSPS regulations be properly defined and effectively
implemented. So we are pleased to be here to participate in
this hearing.
I am going to truncate my statement somewhat because a
number of issues I had planned to touch on have been discussed.
Chairman Warner. I thank you for that. I wonder if you
could make it 5 minutes apiece. Be assured that the Senators
and the staff of the committee are going to review these
statements in their entirety.
Mr. Stewart. Yes, sir. I can probably be less than 5
minutes.
Chairman Warner. No. I want to you take the full 5 minutes.
Mr. Stewart. Yes, sir. Regarding labor relations, our
preliminary work shows that the proposed regulations would
reduce the number of bargaining areas, including those
procedures affecting how employees are deployed, assigned work,
and use of technology. But the regulations clearly say that.
In addition, the National Security Labor Relations Board
that was discussed earlier would largely replace the Federal
Labor Relations Authority.
Senator Collins brought up the fact that the Secretary of
Defense has authority to appoint the members of that board.
Another point that I would like to make is not only does the
Secretary of Defense have the authority to appoint the members
of that board, he also has the authority to remove the members
of the board. That's a different model from that of several
other agencies.
On adverse actions and employee appeals, the proposed
regulations shorten the adverse action process by removing the
requirement to allow the employees an opportunity to improve
their performance. So there is no longer a requirement, if
these proposed regulations become final, that would afford
employees an improvement opportunity as currently exists.
Also, while the regulations generally preserve the
employees' right to appeal adverse actions to the MSPB, the
regulations also would permit DOD to modify or reverse the
initial MSPB made decisions based on internal DOD review.
The regulations do not spell out what this internal review
process is, who will conduct the process, or how it will be
conducted. These are very important details. An internal agency
review process of this importance should be spelled out in the
regulations.
DOD proposed regulations also would permit DOD to identify
specific offenses for which removal is mandatory. The
regulations state that employees will be made aware of the
mandatory removal offenses. We believe that the process for
determining and communicating these offenses should be explicit
and transparent and involve a number of stakeholders, including
Congress and employee representatives.
Lastly, Mr. Chairman, on pay and performance management,
there are a number of issues there: how DOD will align
individual performance with organizational goals, how
performance expectations will be communicated to employees, and
the criteria DOD will use to promote employees from one band to
another. There are a plethora of issues that really need to be
worked out in detail.
The one thing that I heard from DOD on the first panel
that's a little different to what the GAO has been advocating
is that there should be predecisional, internal safeguards so
that the agency is prospectively looking at what is happening
with performance ratings, and what is happening with
promotions. It should not be a retrospective look where the
employees complain and then there are all of these processes to
take care of employees' complaints.
At the GAO, we have predecisional, internal safeguards
where the Office of Opportunity and Inclusiveness is looking at
Equal Employment Opportunity (EEO) issues, discrimination
issues, and promotion and pay issues before the employee
receives his or her rating. So these predecisional safeguards--
and I didn't hear the DOD official mention those--are a concern
for us. Mr. Chairman, this completes my prepared remarks and
I'd be happy to entertain any questions you may have.
Chairman Warner. Thank you. I think it would be important
for the record if you just give us a short description of your
career and association with the Federal workforce.
Mr. Stewart. I have been an employee of the GAO since 1974,
so I guess that's about 31 years now. I received my degree from
Morgan State University, I also attended the National Defense
University for a year and received a Master's degree there in
National Military Strategy.
I have had a host of positions within the GAO looking at a
number of issues to include a 3-year assignment in what we call
operations, where I actually had to deal with EEO complaints
and helping to develop personnel policies.
Unfortunately, I was actually part of the major reduction
in force in the GAO from 1995 to 1997 where we had reduced the
number of employees by 3,000 people, that was probably the most
difficult thing that I have done in my life. So I have a little
bit of experience with personnel issues and as an agency, we're
very concerned about DOD's new personnel system because it has
government-wide impact. Thank you, Mr. Chairman.
[The prepared statement of Mr. Stewart follows:]
Prepared Statement by Derek B. Stewart
Chairman Warner and members of the committee: I appreciate the
opportunity to be here today to provide our preliminary observations on
the Department of Defense's (DOD) proposed National Security Personnel
System (NSPS) regulations, which the Secretary of Defense and the
acting Director of the Office of Personnel Management (OPM) jointly
released for public comment on February 14, 2005.\1\ The National
Defense Authorization Act for Fiscal Year 2004 \2\ gave DOD significant
authorities to redesign the rules, regulations, and processes that
govern the way that defense civilian employees are hired, compensated,
promoted, and disciplined. The proposed regulations, which according to
DOD will ultimately affect more than 700,000 defense civilian
employees, are especially critical because of their implications for
governmentwide reform.
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\1\ National Security Personnel System, 70 Fed. Reg. 7552 (Feb. 14,
2005).
\2\ Pub. L. No. 108-136 Sec. 1101 (Nov. 24, 2003).
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NSPS represents a huge undertaking for DOD, given its massive size
and geographically and culturally diverse workforce. In addition, DOD's
new human resources management system will have far-reaching
implications for the management of the department and for civil service
reform across the Federal Government. NSPS could, if designed and
implemented properly, serve as a model for governmentwide
transformation in human capital management. However, if not properly
designed and implemented, NSPS could impede progress toward a more
performance- and results-based system for the Federal Government as a
whole.
We raised several issues regarding DOD's civilian workforce in a
recently released report on the fiscal challenges the Federal
Government faces in the 21st century, including whether DOD is pursuing
the design and implementation of NSPS in a manner that maximizes the
chance of success.\3\ In recent testimony on DOD's business
transformation efforts, we indicated that DOD is challenged in its
efforts to effect fundamental business management reform, such as NSPS,
and indicated that our ongoing work continues to raise questions about
DOD's chances of success.\4\ There is general recognition that the
government needs a framework to guide the kind of large-scale human
capital reform occurring at DOD and the Department of Homeland Security
(DHS), a framework that Congress and the administration can implement
to enhance performance, ensure accountability, and position the Nation
for the future. Implementing large-scale change management initiatives
is a complex endeavor, and failure to address a wide variety of
personnel and cultural issues, in particular, has been at the heart of
unsuccessful organizational transformations. Strategic human capital
management, which we continue to designate as a high-risk area
governmentwide,\5\ can help agencies marshal, manage, and maintain the
workforce they need to accomplish their missions.
---------------------------------------------------------------------------
\3\ GAO, 21st Century Challenges: Reexamining the Base of the
Federal Government, GAO-05-325SP (Washington, DC: February 2005).
\4\ GAO, Department of Defense: Further Actions Are Needed to
Effectively Address Business Management Problems and Overcome Key
Business Transformation Challenges, GAO-05-140T (Washington, DC: Nov.
18, 2004).
\5\ GAO, High-Risk Series: An Update, GAO-05-207 (Washington, DC:
January 2005).
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SUMMARY
Let me begin by summarizing three positive features and several
areas of concern. The first positive feature is that the proposed
regulations provide for many elements of a flexible and contemporary
human resources management system--such as pay bands and pay for
performance. The second positive feature is that the proposed
regulations will allow DOD to rightsize its workforce when implementing
reduction-in-force (RIF) orders. For example, DOD will be able to give
greater priority to employee performance in RIF decisions and take more
factors into consideration when defining the areas in which employees
will compete for retention. The third positive feature is that DOD has
pledged to engage in a continuing collaboration with employee
representatives. On March 16, 2005, the 30-day public comment period on
the proposed regulations ended. On March 28, 2005, DOD and OPM notified
Congress that they are about to begin the meet and confer process with
employee representatives who provided comments on the proposed
regulations. (It should be noted that 10 Federal labor unions have
filed suit alleging that DOD failed to abide by the statutory
requirements to include employee representatives in the development of
DOD's new labor relations system authorized as part of NSPS.)
However, in addition to the litigation referenced above, our
initial work indicates several areas of concern. First, DOD has
considerable work ahead to define the details of the implementation of
its system, including such issues as adequate safeguards to help ensure
fairness and guard against abuse. Second, in setting performance
expectations, the proposed regulations would allow the use of core
competencies to communicate to employees what is expected of them on
the job, but the proposed regulations do not require the use of these
core competencies. Requiring such use can help provide consistency and
clarity in performance management. Third, the proposed regulations do
not identify a process for the continuing involvement of employees in
the planning, development, and implementation of NSPS.
GAO believes that DOD would benefit if it develops a comprehensive
communications strategy that provides for ongoing, meaningful two-way
communication that creates shared expectations among employees,
employee representatives, managers, customers, and stakeholders. In
addition, DOD should complete an implementation plan for NSPS,
including an information technology plan and a training plan. Until DOD
completes such a plan, the full extent of the resources needed to
implement NSPS may not be well understood.
DOD's proposed regulations are intended to provide a broad outline
of its new human resources management system. While they are not, nor
were they intended to be, a detailed presentation of how the new system
will be implemented, the details of the proposed regulations do matter.
Although we continue to review the DOD's extensive regulations, today I
will provide some preliminary observations on selected provisions of
the proposed regulations.
PRELIMINARY OBSERVATIONS ON PROPOSED REGULATIONS FOR DOD'S NATIONAL
SECURITY PERSONNEL SYSTEM
DOD and OPM's proposed NSPS regulations would establish a new human
resources management system within DOD that governs basic pay,
staffing, classification, performance management, labor relations,
adverse actions, and employee appeals. We believe that many of the
basic principles underlying the proposed DOD regulations are generally
consistent with proven approaches to strategic human capital
management. Today, I will provide our preliminary observations on
selected elements of the proposed regulations in the areas of pay and
performance management, staffing and employment, workforce shaping,
adverse actions and appeals, and labor-management relations.
Pay and Performance Management
In January 2004, we released a report on pay for performance for
selected OPM personnel demonstration projects that shows the variety of
approaches taken in these projects to design and implement pay-for-
performance systems.\6\ Many of these personnel demonstration projects
were conducted within DOD. The experiences of these demonstration
projects provide insights into how some organizations in the Federal
Government are implementing pay for performance, and thus can guide DOD
as it develops and implements its own approach. These demonstration
projects illustrate that understanding how to link pay to performance
is very much a work in progress in the Federal Government and that
additional work is needed to ensure that performance management systems
are tools to help agencies manage on a day-to-day basis and achieve
external results.
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\6\ GAO, Human Capital: Implementing Pay for Performance at
Selected Personnel Demonstration Projects, GAO-04-83 (Washington, DC:
Jan. 23, 2004).
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When DOD first proposed its new civilian personnel reform, we
strongly supported the need to expand pay for performance in the
Federal Government.\7\ Establishing a clear link between individual pay
and performance is essential for maximizing performance and ensuring
the accountability of the Federal Government to the American people. As
we have stated before, how pay for performance is done, when it is
done, and the basis on which it is done can make all the difference in
whether such efforts are successful.\8\ DOD's proposed regulations
reflect a growing understanding that the Federal Government needs to
fundamentally rethink its current approach to pay and better link pay
to individual and organizational performance. To this end, the DOD
proposal takes another valuable step toward a modern performance
management system as well as a market-based, results-oriented
compensation system. My comments on specific provisions of pay and
performance management follow.
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\7\ GAO, Defense Transformation: Preliminary Observations on DOD's
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, DC: Apr.
29, 2003).
\8\ GAO, Human Capital: Preliminary Observations on Proposed DHS
Human Capital Regulations, GAO-04-479T (Washington, DC: Feb. 25, 2004).
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Aligning Individual Performance to Organizational Goals
Under the proposed regulations, the DOD performance management
system would, among other things, align individual performance
expectations with the department's overall mission and strategic goals,
organizational program and policy objectives, annual performance plans,
and other measures of performance. However, the proposed regulations do
not detail how to achieve such an alignment, which is a vital issue
that will need to be addressed as DOD's efforts in designing and
implementing a new personnel system move forward. Our work on public
sector performance management efforts in the United States and abroad
has underscored the importance of aligning daily operations and
activities with organizational results.\9\ We have found that
organizations often struggle with clearly understanding how what they
do on a day-to-day basis contributes to overall organizational results,
while high-performing organizations demonstrate their understanding of
how the products and services they deliver contribute to results by
aligning the performance expectations of top leadership with the
organization's goals and then cascading those expectations to lower
levels.
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\9\ GAO-04-479T.
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A performance management system is critical to successful
organizational transformation. As an organization undergoing
transformation, DOD can use its proposed performance management system
as a vital tool for aligning the organization with desired results and
creating a ``line of sight'' to show how team, unit, and individual
performance can contribute to overall organizational results. To help
Federal agencies transform their culture to be more results oriented,
customer focused, and collaborative in nature, we have reported on how
a performance management system that defines responsibility and ensures
accountability for change can be key to a successful merger and
transformation.\10\
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\10\GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington, DC:
July 2, 2003).
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Establishing Pay Bands
Under the proposed regulations, DOD would create pay bands for most
of its civilian workforce that would replace the 15-grade General
Schedule (GS) system now in place for most civil service employees.
Specifically, DOD (in coordination with OPM) would establish broad
occupational career groups by grouping occupations and positions that
are similar in type of work, mission, developmental or career paths,
and competencies. Within career groups, DOD would establish pay bands.
The proposed regulations do not provide details on the number of career
groups or the number of pay bands per career group. The regulations
also do not provide details on the criteria that DOD will use to
promote individuals from one band to another. These important issues
will need to be addressed as DOD moves forward. Pay banding and
movement to broader occupational career groups can both facilitate
DOD's movement to a pay-for-performance system and help DOD better
define career groups, which in turn can improve the hiring process. In
our prior work, we have reported that the current GS system, as defined
in the Classification Act of 1949,\11\ is a key barrier to
comprehensive human capital reform and that the creation of broader
occupational job clusters and pay bands would aid other agencies as
they seek to modernize their personnel systems.\12\ The standards and
process of the current classification system are key problems in
Federal hiring efforts because they are outdated and thus not
applicable to today's occupations and work.
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\11\ 5 U.S.C. Sec. Sec. 5101-5115.
\12\ GAO, Human Capital: Opportunities to Improve Executive
Agencies' Hiring Processes, GAO-03-450 (Washington, DC: May 30, 2003).
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Under the proposed regulations, DOD could not reduce employees'
basic rates of pay when converting to pay bands. In addition, the
proposed regulations would allow DOD to establish a ``control point''
within a band that limits increases in the rate of basic pay and may
require certain criteria to be met for increases above the control
point.\13\ The use of control points to manage employees' progression
through the bands can help to ensure that their performance coincides
with their salaries and that only the highest performers move into the
upper half of the pay band, thereby controlling salary costs. The OPM
personnel demonstration projects at China Lake and the Naval Sea
Systems Command Warfare Center's Dahlgren Division have incorporated
checkpoints or ``speed bumps'' in their pay bands. For example, when an
employee's salary at China Lake reaches the midpoint of the pay band,
the employee must receive a performance rating that is equivalent to
exceeding expectations before he or she can receive additional salary
increases.
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\13\ Because movement through the pay band is based on performance,
employees could progress through the pay band more quickly than they
could receive similar increases under the GS system. One method of
preventing employees from eventually migrating to the top of the pay
band, and thus increasing salary costs, is to establish control points
within each band.
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Setting and Communicating Employee Performance Expectations
Under the proposed regulations, DOD's performance management system
would promote individual accountability by setting performance
expectations and communicating them to employees, holding employees
responsible for accomplishing them, and making supervisors and managers
responsible for effectively managing the performance of employees under
their supervision. While supervisors are supposed to involve employees,
insofar as practicable, in setting performance expectations, the final
decisions regarding performance expectations are within the sole and
exclusive discretion of management.
Under the proposed regulations, performance expectations may take
several different forms. These include, among others, goals or
objectives that set general or specific performance targets at the
individual, team, or organizational level; a particular work
assignment, including characteristics such as quality, quantity,
accuracy, or timeliness; core competencies that an employee is expected
to demonstrate on the job; or the contributions that an employee is
expected to make. As DOD's human resources management system design
efforts move forward, DOD will need to define, in more detail than is
currently provided, how performance expectations will be set, including
the degree to which DOD components, managers, and supervisors will have
flexibility in setting those expectations.
The range of expectations that DOD would consider in setting
individual employee performance expectations are generally consistent
with those used by high-performing organizations. DOD appropriately
recognizes that given the vast diversity of work done in the
department, managers and employees need flexibility in crafting
specific expectations. However, the experiences of high-performing
organizations suggest that DOD should require the use of core
competencies as a central feature of its performance management
effort.\14\ Based on our review of other agency efforts and our own
experience at GAO, we have found that core competencies can help
reinforce employee behaviors and actions that support the department's
mission, goals, and values, and can provide a consistent message to
employees about how they are expected to achieve results. By including
such competencies as change management, cultural sensitivity, teamwork
and collaboration, and information sharing, DOD would create a shared
responsibility for organizational success and help ensure
accountability for the transformation process.
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\14\ GAO, Results-Oriented Cultures: Creating a Clear Linkage
between Individual Performance and Organizational Success, GAO-03-488
(Washington, DC: Mar. 14, 2003).
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Making Meaningful Distinctions in Employee Performance
High-performing organizations seek to create pay, incentive, and
reward systems that clearly link employee knowledge, skills, and
contributions to organizational results. These organizations make
meaningful distinctions between acceptable and outstanding performance
of individuals and appropriately reward those who perform at the
highest level. DOD's proposed regulations state that supervisors and
managers would be held accountable for making meaningful distinctions
among employees based on performance and contribution, fostering and
rewarding excellent performance, and addressing poor performance.
Under the proposed regulations, DOD is expected to have at least
three rating levels for evaluating employee performance. We urge DOD to
consider using at least four summary rating levels to allow for greater
performance-rating and pay differentiation. This approach is in the
spirit of the new governmentwide performance-based pay system for the
Senior Executive Service (SES), which requires at least four rating
levels to provide a clear and direct link between SES performance and
pay as well as to make meaningful distinctions based on relative
performance. Cascading this approach to other levels of employees can
help DOD recognize and reward employee contributions and achieve the
highest levels of individual performance.\15\
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\15\ GAO, Human Capital: Observations on Final DHS Human Capital
Regulations, GAO-05-391T (Washington, DC: Mar. 2, 2005).
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Providing Adequate Safeguards to Ensure Fairness and Guard Against
Abuse
Although DOD's proposed regulations provide for some safeguards to
ensure fairness and guard against abuse, additional safeguards should
be developed. For example, as required by the authorizing legislation,
the proposed regulations indicate that DOD's performance management
system must comply with merit system principles and avoid prohibited
personnel practices; provide a means for employee involvement in the
design and implementation of the system; and, overall, be fair,
credible, and transparent. However, the proposed regulations do not
offer details on how DOD would: (1) promote consistency and provide
general oversight of the performance management system to help ensure
it is administered in a fair, credible, and transparent manner; and (2)
incorporate predecisional internal safeguards that are implemented to
help achieve consistency and equity, and ensure nondiscrimination and
nonpoliticization of the performance management process. Last month,
during testimony, we stated that additional flexibility should have
adequate safeguards, including a reasonable degree of transparency with
regard to the results of key decisions, whether it be pay, promotions,
or other types of actions, while protecting personal privacy. We also
suggested that there should be both informal and formal appeal
mechanisms within and outside of the organization if individuals feel
that there has been abuse or a violation of the policies, procedures,
or protected rights of the individual. Internal mechanisms could
include independent human capital office and office of opportunity and
inclusiveness reviews that provide reasonable assurances that there
would be consistency and nondiscrimination. Furthermore, it is of
critical importance that the external appeal process be independent,
efficient, effective, and credible.
In April 2003, when commenting on DOD civilian personnel reforms,
we testified that Congress should consider establishing statutory
standards that an agency must have in place before it can implement a
more performance-based pay program, and we developed an initial list of
possible safeguards to help ensure that pay-for-performance systems in
the government are fair, effective, and credible.\16\ For example, we
have noted that agencies need to ensure reasonable transparency and
provide appropriate accountability mechanisms in connection with the
results of the performance management process.\17\ This can be done by
publishing the overall results of performance management and individual
pay decisions while protecting individual confidentiality and by
reporting periodically on internal assessments and employee survey
results relating to the performance management system. DOD needs to
commit itself to publishing the results of performance management
decisions. By publishing the results in a manner that protects
individual confidentiality, DOD could provide employees with the
information they need to better understand their performance and the
performance management system. Several of the demonstration projects
have been publishing information about performance appraisal and pay
decisions, such as the average performance rating, the average pay
increase, and the average award for the organization and for each
individual unit, on internal Web sites for use by employees. As DOD's
human resources management system design efforts move forward, DOD will
need to define, in more detail than is currently provided, how it plans
to review such matters as the establishment and implementation of the
performance appraisal system--and, subsequently, performance rating
decisions, pay determinations, and promotion actions--before these
actions are finalized, to ensure they are merit based.
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\16\ GAO-03-717T.
\17\ GAO-04-479T.
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Staffing and Employment
The authorizing legislation allows DOD to implement additional
hiring flexibilities that would allow it to: (1) determine that there
is a severe shortage of candidates or a critical hiring need; and (2)
use direct-hire procedures for these positions. Under current law, OPM,
rather than the agency, determines whether there is a severe shortage
of candidates or a critical hiring need. DOD's authorizing legislation
permits that DOD merely document the basis for the severe shortage or
critical hiring need and then notify OPM of these direct-hire
determinations. Direct-hire authority allows an agency to appoint
people to positions without adherence to certain competitive
examination requirements (such as applying veterans' preference or
numerically rating and ranking candidates based on their experience,
training, and education) when there is a severe shortage of qualified
candidates or a critical hiring need. In the section containing DOD's
proposed hiring flexibilities, the proposed regulations state that the
department will adhere to veterans' preference principles as well as
comply with merit principles and the title 5 provision dealing with
prohibited personnel practices.
While we strongly endorse providing agencies with additional tools
and flexibilities to attract and retain needed talent, additional
analysis may be needed to ensure that any new hiring authorities are
consistent with a focus on the protection of employee rights, on merit
principles--and on results. Hiring flexibilities alone will not enable
Federal agencies to bring on board the personnel that are needed to
accomplish their missions. Agencies must first conduct gap analyses of
the critical skills and competencies needed in their workforces now and
in the future, or they may not be able to effectively design strategies
to hire, develop, and retain the best possible workforces.
Workforce Shaping
The proposed regulations would allow DOD to reduce, realign, and
reorganize the department's workforce through revised RIF procedures.
For example, employees would be placed on a retention list in the
following order: tenure group (i.e., permanent or temporary
appointment), veterans' preference eligibility (disabled veterans will
be given additional priority), level of performance, and length of
service; under current regulations, length of service is considered
ahead of performance. We have previously testified, prior to the
enactment of NSPS, in support of revised RIF procedures that would
require much greater consideration of an employee's performance.\18\
Although we support greater consideration of an employee's performance
in RIF procedures, agencies must have modern, effective, and credible
performance management systems in place to properly implement such
authorities.
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\18\ GAO-03-717T; GAO, Defense Transformation: DOD's Proposed
Civilian Personnel System and Government-wide Human Capital Reform,
GAO-03-741T (Washington, DC: May 1, 2003); and Human Capital: Building
on DOD's Reform Effort to Foster Governmentwide Improvements, GAO-03-
851T (Washington, DC: June 4, 2003).
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An agency's approach to workforce shaping should be oriented toward
strategically reducing, realigning, and reorganizing the makeup of its
workforce to ensure the orderly transfer of institutional knowledge and
achieve mission results. DOD's proposed regulations include some
changes that would allow the department to rightsize the workforce more
carefully through greater precision in defining competitive areas, and
by reducing the disruption associated with RIF orders as their impact
ripples through an organization. For example, under the current
regulations, the minimum RIF competitive area is broadly defined as an
organization under separate administration in a local commuting area.
Under the proposed regulations, DOD would be able to establish a
minimum RIF competitive area on a more targeted basis, using one or
more of the following factors: geographical location, line of business,
product line, organizational unit, and funding line. The proposed
regulations also provide DOD with the flexibility to develop additional
competitive groupings on the basis of career group, occupational series
or specialty, and pay band. At present, DOD can use competitive groups
based on employees: (1) in the excepted and competitive service, (2)
under different excepted service appointment authorities, (3) with
different work schedules,\19\ (4) pay schedule, or (5) trainee status.
These reforms could help DOD approach rightsizing more carefully;
however, as I have stated, agencies first need to identify the critical
skills and competencies needed in their workforce if they are to
effectively implement their new human capital flexibilities.
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\19\ For example, employees who work full time, part time,
seasonally, or intermittently.
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Adverse Actions and Appeals
As with DHS's final regulations,\20\ DOD's proposed regulations are
intended to streamline the rules and procedures for taking adverse
actions, while ensuring that employees receive due process and fair
treatment. The proposed regulations establish a single process for both
performance-based and conduct-based actions, and shorten the adverse
action process by removing the requirement for a performance
improvement plan. In addition, the proposed regulations streamline the
appeals process at the Merit Systems Protection Board (MSPB) by
shortening the time for filing and processing appeals.
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\20\ Department of Homeland Security Human Resources Management
System, 70 Fed. Reg. 5272 (Feb. 1, 2005).
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Similar to DHS, DOD's proposed regulations also adopt a higher
standard of proof for adverse actions in DOD, requiring the department
to meet a ``preponderance of the evidence'' standard in place of the
current ``substantial evidence'' standard. For performance issues,
while this higher standard of evidence means that DOD would face a
greater burden of proof than most agencies to pursue these actions, DOD
managers are not required to provide employees with performance
improvement periods, as is the case for other Federal employees. For
conduct issues, DOD would face the same burden of proof as most
agencies.
DOD's proposed regulations generally preserve the employee's basic
right to appeal decisions to an independent body--the MSPB. However, in
contrast to DHS's final regulations, DOD's proposed regulations permit
an internal DOD review of the initial decisions issued by MSPB
adjudicating officials. Under this internal review, DOD can modify or
reverse an initial decision or remand the matter back to the
adjudicating official for further consideration. Unlike other criteria
for review of initial decisions, DOD can modify or reverse an initial
MSPB adjudicating official's decision where the department determines
that the decision has a direct and substantial adverse impact on the
department's national security mission.\21\ According to DOD, the
department needs the authority to review initial MSPB decisions and
correct such decisions as appropriate, to ensure that the MSPB
interprets NSPS and the proposed regulations in a way that recognizes
the critical mission of the department and to ensure that MSPB gives
proper deference to such interpretation. However, the proposed
regulations do not offer additional details on the department's
internal review process, such as how the review will be conducted and
who will conduct them. An internal agency review process this important
should be addressed in the regulations rather than in an implementing
directive to ensure adequate transparency and employee confidence in
the process.
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\21\ Any final DOD decision under this review process may be
further appealed to the full MSPB. Further, the Secretary of Defense or
an employee adversely affected by a final order or decision of the full
MSPB may seek judicial review.
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Similar to DHS's final regulations, DOD's proposed regulations
would shorten the notification period before an adverse action can
become effective and provide an accelerated MSPB adjudication process.
In addition, MSPB would no longer be able to modify a penalty for an
adverse action that is imposed on an employee by DOD unless such
penalty is so disproportionate to the basis of the action as to be
``wholly without justification.'' In other words, MSPB has less
latitude to modify agency-imposed penalties than under current
practice. The DOD proposed regulations also stipulate that MSPB could
no longer require that parties enter into settlement discussions,
although either party may propose doing so. DOD, like DHS, expressed
concerns that settlement should be a completely voluntary decision made
by parties on their own initiative. However, settling cases has been an
important tool in the past at MSPB, and promotion of settlement at this
stage should be encouraged.
Similar to DHS's final regulations, DOD's proposed regulations
would permit the Secretary of Defense to identify specific offenses for
which removal is mandatory. Employees alleged to have committed these
offenses may receive a written notice only after the Secretary of
Defense's review and approval. These employees will have the same right
to a review by an MSPB adjudicating official as is provided to other
employees against whom appealable adverse actions are taken. DOD's
proposed regulations only indicate that its employees will be made
aware of the mandatory removal offenses. In contrast, the final DHS
regulations explicitly provide for publishing a list of the mandatory
removal offenses in the Federal Register. We believe that the process
for determining and communicating which types of offenses require
mandatory removal should be explicit and transparent and involve
relevant congressional stakeholders, employees, and employee
representatives. Moreover, we suggest that DOD exercise caution when
identifying specific removable offenses and the specific punishment.
When developing these proposed regulations, DOD should learn from the
experience of the Internal Revenue Service's (IRS) implementation of
its mandatory removal provisions.\22\ (IRS employees feared that they
would be falsely accused by taxpayers and investigated, and had little
confidence that they would not be disciplined for making an honest
mistake.) We reported that IRS officials believed this provision had a
negative impact on employee morale and effectiveness and had a
``chilling'' effect on IRS frontline enforcement employees, who were
afraid to take certain appropriate enforcement actions.\23\ Careful
drafting of each removable offense is critical to ensure that the
provision does not have unintended consequences.
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\22\ Section 1203 of the IRS Restructuring and Reform Act of 1998
outlines conditions for firing of IRS employees for any of 10 actions
of misconduct.
\23\ GAO, Tax Administration: IRS and TIGTA Should Evaluate Their
Processes of Employee Misconduct Under Section 1203, GAO-03-394
(Washington, DC: Feb. 14, 2003).
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DOD's proposed regulations also would encourage the use of
alternative dispute resolution and provide that this approach be
subject to collective bargaining to the extent permitted by the
proposed labor relations regulations. To resolve disputes in a more
efficient, timely, and less adversarial manner, Federal agencies have
been expanding their human capital programs to include alternative
dispute resolution approaches. These approaches include mediation,
dispute resolution boards, and ombudsmen. Ombudsmen typically are used
to provide an informal alternative to addressing conflicts. We
previously reported on common approaches used in ombudsmen offices,
including (1) broad responsibility and authority to address almost any
workplace issue, (2) their ability to bring systemic issues to
management's attention, and (3) the manner in which they work with
other agency offices in providing assistance to employees.\24\
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\24\ GAO-01-479T.
Labor-Management Relations
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The DOD proposed regulations recognize the right of employees to
organize and bargain collectively.\25\ However, similar to DHS's final
regulations, the proposed regulations would reduce the scope of
bargaining by (1) removing the requirement to bargain on matters
traditionally referred to as ``impact and implementation'' (which
include the processes used to deploy personnel, assign work, and use
technology) and (2) narrowing the scope of issues subject to collective
bargaining. A National Security Labor Relations Board would be created
that would largely replace the Federal Labor Relations Authority. The
proposed board would have at least three members selected by the
Secretary of Defense, with one member selected from a list developed in
consultation with the Director of OPM. The proposed board would be
similar to the internal Homeland Security Labor Relations Board
established by the DHS final regulations, except that the Secretary of
Defense would not be required to consult with the employee
representatives in selecting its members. The proposed board would be
responsible for resolving matters related to negotiation disputes, to
include the scope of bargaining and the obligation to bargain in good
faith, resolving impasses, and questions regarding national
consultation rights.
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\25\ Under current law, the rights of employees to bargain may be
suspended for reasons of national security. See title 5 U.S.C.
Sec. Sec. 7103(b) and 7112(b)(6).
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Under the proposed regulations, the Secretary of Defense is
authorized to appoint and remove individuals who serve on the board.
Similar to DHS's final regulations establishing the Homeland Security
Labor Relations Board, DOD's proposed regulations provide for board
member qualification requirements, which emphasize integrity and
impartiality. DOD's proposed regulations, however, do not provide an
avenue for any employee representative input into the appointment of
board members. DHS regulations do so by requiring that for the
appointment of two board members, the Secretary of Homeland Security
must consider candidates submitted by labor organizations. Employee
perception concerning the independence of this board is critical to the
resolution of issues raised over labor relations policies and disputes.
Our previous work on individual agencies' human capital systems has
not directly addressed the scope of specific issues that should or
should not be subject to collective bargaining and negotiations. At a
forum we co-hosted in April 2004 exploring the concept of a
governmentwide framework for human capital reform, participants
generally agreed that the ability to organize, bargain collectively,
and participate in labor organizations is an important principle to be
retained in any framework for reform. It also was suggested at the
forum that unions must be both willing and able to actively collaborate
and coordinate with management if unions are to be effective
representatives of their members and real participants in any human
capital reform.
DOD FACES MULTIPLE IMPLEMENTATION CHALLENGES
Once DOD issues its final regulations for its human resources
management system, the department will face multiple implementation
challenges that include establishing an overall communications
strategy, providing adequate resources for the implementation of the
new system, involving employees in designing the system, and evaluating
DOD's new human resources management system after it has been
implemented. For information on related human capital issues that could
potentially affect the implementation of NSPS, see the ``Highlights''
pages from previous GAO products on DOD civilian personnel issues in
appendix I.
Establishing an Overall Communications Strategy
A significant challenge for DOD is to ensure an effective and
ongoing two-way communications strategy, given its size, geographically
and culturally diverse audiences, and different command structures
across DOD organizations. We have reported that a communications
strategy that creates shared expectations about, and reports related
progress on, the implementation of the new system is a key practice of
a change management initiative.\26\ This communications strategy must
involve a number of key players, including the Secretary of Defense,
and a variety of communication means and mediums. DOD acknowledges that
a comprehensive outreach and communications strategy is essential for
designing and implementing its new human resources management system,
but the proposed regulations do not identify a process for the
continuing involvement of employees in the planning, development, and
implementation of NSPS.
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\26\ GAO-03-669.
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Because the NSPS design process and proposed regulations have
received considerable attention,\27\ we believe one of the most
relevant implementation steps is for DOD to enhance two-way
communication between employees, employee representatives, and
management. Communication is not only about ``pushing the message
out,'' but also using two-way communication to build effective internal
and external partnerships that are vital to the success of any
organization. By providing employees with opportunities to communicate
concerns and experiences about any change management initiative,
management allows employees to feel that their input is acknowledged
and important. As it makes plans for implementing NSPS, DOD should
facilitate a two-way honest exchange with, and allow for feedback from,
employees and other stakeholders. Once it receives this feedback,
management needs to consider and use this solicited employee feedback
to make any appropriate changes to its implementation. In addition,
management needs to close the loop by providing employees with
information on why key recommendations were not adopted.
---------------------------------------------------------------------------
\27\ DOD's efforts to date to involve labor unions have not been
without controversy. Ten Federal labor unions have filed suit alleging
that DOD failed to abide by the statutory requirements to include
employee representatives in the development of DOD's new labor
relations system authorized as part of NSPS. See American Federation of
Government Employees, AFL-CIO et al v. Rumsfeld et al, No. 1:05cv00367
(D.D.C. filed Feb. 23, 2005).
---------------------------------------------------------------------------
Providing Adequate Resources for Implementing the New System
Experience has shown that additional resources are necessary to
ensure sufficient planning, implementation, training, and evaluation
for human capital reform. According to DOD, the implementation of NSPS
will result in costs for, among other things, developing and delivering
training, modifying automated human resources information systems, and
starting up and sustaining the National Security Labor Relations Board.
We have found that, based on the data provided by selected OPM
personnel demonstration projects, the major cost drivers in
implementing pay-for-performance systems are the direct costs
associated with salaries and training.
DOD estimates that the overall cost associated with implementing
NSPS will be approximately $158 million through fiscal year 2008.
According to DOD, it has not completed an implementation plan for NSPS,
including an information technology plan and a training plan; thus, the
full extent of the resources needed to implement NSPS may not be well
understood at this time. According to OPM, the increased costs of
implementing alternative personnel systems should be acknowledged and
budgeted up front.\28\ Certain costs, such as those for initial
training on the new system, are onetime in nature and should not be
built into the base of DOD's budget. Other costs, such as employees'
salaries, are recurring and thus would be built into the base of DOD's
budget for future years. Therefore, funding for NSPS will warrant close
scrutiny by Congress as DOD's implementation plan evolves.
---------------------------------------------------------------------------
\28\ OPM, Demonstration Projects and Alternative Personnel Systems:
HR Flexibilities and Lessons Learned (Washington, DC: September 2001).
---------------------------------------------------------------------------
Involving Employees and Other Stakeholders in Implementing the System
The proposed regulations do not identify a process for the
continuing involvement of employees in the planning, development, and
implementation of NSPS. However, DOD's proposed regulations do provide
for continuing collaboration with employee representatives. According
to DOD, almost two-thirds of its 700,000 civilian employees are
represented by 41 different labor unions, including over 1,500 separate
bargaining units. In contrast, according to OPM, just under one-third
of DHS's 110,000 Federal employees are represented by 16 different
labor unions, including 75 separate bargaining units. Similar to DHS's
final regulations, DOD's proposed regulations about the collaboration
process, among other things, would permit the Secretary of Defense to
determine (1) the number of employee representatives allowed to engage
in the collaboration process, and (2) the extent to which employee
representatives are given an opportunity to discuss their views with
and submit written comments to DOD officials. In addition, DOD's
proposed regulations indicate that nothing in the continuing
collaboration process will affect the right of the Secretary of Defense
to determine the content of implementing guidance and to make this
guidance effective at any time. DOD's proposed regulations also will
give designated employee representatives an opportunity to be briefed
and to comment on the design and results of the new system's
implementation. DHS's final regulations, however, provide for more
extensive involvement of employee representatives. For example, DHS's
final regulations provide for the involvement of employee
representatives in identifying the scope, objectives, and methodology
to be used in evaluating the new DHS system.
The active involvement of employees and employee representatives
will be critical to the success of NSPS. We have reported that the
involvement of employees and employee representatives both directly and
indirectly is crucial to the success of new initiatives, including
implementing a pay-for-performance system. High-performing
organizations have found that actively involving employees and
stakeholders, such as unions or other employee associations, when
developing results-oriented performance management systems helps
improve employees' confidence and belief in the fairness of the system
and increases their understanding and ownership of organizational goals
and objectives. This involvement must be early, active, and continuing
if employees are to gain a sense of understanding and ownership of the
changes that are being made. The 30-day public comment period on the
proposed regulations ended March 16, 2005. DOD and OPM notified
Congress that they are preparing to begin the meet and confer process
with employee representatives who provided comments on the proposed
regulations. Last month, during testimony, we stated that DOD is at the
beginning of a long road, and the meet and confer process has to be
meaningful and is critically important because there are many details
of the proposed regulations that have not been defined. These details
do matter, and how they are defined can have a direct bearing on
whether or not the ultimate new human resources management system is
both reasoned and reasonable.
Evaluating DOD's New Human Resources Management System
Evaluating the impact of NSPS will be an ongoing challenge for DOD.
This is especially important because DOD's proposed regulations would
give managers more authority and responsibility for managing the new
human resources management system. High-performing organizations
continually review and revise their human capital management systems
based on data-driven lessons learned and changing needs in the work
environment. Collecting and analyzing data will be the fundamental
building block for measuring the effectiveness of these approaches in
support of the mission and goals of the department.
DOD's proposed regulations indicate that DOD will establish
procedures for evaluating the regulations and their implementation. We
believe that DOD should consider conducting evaluations that are
broadly modeled on the evaluation requirements of the OPM demonstration
projects. Under the demonstration project authority, agencies must
evaluate and periodically report on results, implementation of the
demonstration project, cost and benefits, impacts on veterans and other
equal employment opportunity groups, adherence to merit system
principles, and the extent to which the lessons from the project can be
applied governmentwide. A set of balanced measures addressing a range
of results, and customer, employee, and external partner issues may
also prove beneficial. An evaluation such as this would facilitate
congressional oversight; allow for any midcourse corrections; assist
DOD in benchmarking its progress with other efforts; and provide for
documenting best practices and sharing lessons learned with employees,
stakeholders, other Federal agencies, and the public.
We have work underway to assess DOD's efforts to design its new
human resources management system, including further details on some of
the significant challenges, and we expect to issue a report on the
results of our work sometime this summer.
CONCLUDING OBSERVATIONS
As we testified previously on the DOD and DHS civilian personnel
reforms, an agency should have to demonstrate that it has a modern,
effective, credible, and, as appropriate, validated performance
management system in place with adequate safeguards, including
reasonable transparency and appropriate accountability mechanisms, to
ensure fairness and prevent politicization of the system and abuse of
employees before any related flexibilities are operationalized. DOD's
proposed NSPS regulations take a valuable step toward a modern
performance management system as well as a more market-based, results-
oriented compensation system. DOD's proposed performance management
system is intended to align individual performance and pay with the
department's critical mission requirements; hold employees responsible
for accomplishing performance expectations; and provide meaningful
distinctions in performance. However, the experiences of high-
performing organizations suggest that DOD should require core
competencies in its performance management system. The core
competencies can serve to reinforce employee behaviors and actions that
support the DOD mission, goals, and values and to set expectations for
individuals' roles in DOD's transformation, creating a shared
responsibility for organizational success and ensuring accountability
for change.
DOD's overall effort to design and implement a strategic human
resources management system--along with the similar effort of DHS--can
be particularly instructive for future human capital management,
reorganization, and transformation efforts in other Federal agencies.
Mr. Chairman and members of the committee, this concludes my
prepared statement. I would be pleased to respond to any questions that
you may have at this time.
CONTACTS AND ACKNOWLEDGMENTS
For further information, please contact Derek B. Stewart, Director,
Defense Capabilities and Management, at (202) 512-5559 or
stewartd@gao.gov. For further information on governmentwide human
capital issues, please contact Eileen R. Larence, Director, Strategic
Issues, at (202) 512-6512 or larencee@gao.gov. Major contributors to
this testimony include Sandra F. Bell, Renee S. Brown, K. Scott
Derrick, William J. Doherty, Clifton G. Douglas, Jr., Barbara L. Joyce,
Julia C. Matta, Mark A. Pross, William J. Rigazio, John S. Townes, and
Susan K. Woodward.
Chairman Warner. I thank you very much for your appearance
today and for your representation of your constituency, as we
say in Congress. Mr. Gage, a little bit about your
distinguished career in Federal service?
Mr. Gage. I was a Social Security worker and disability
examiner, in fact, I came into the government as a disability
examiner. I got involved in the union as the editor of a
newspaper and became local president for 22 years of American
Federation of Government Employees' (AFGE) largest local, and
did a lot of contracts, especially on the performance
management side in VA and Social Security. Even one with Mrs.
Lacey in the Navy, so--and I was elected national president of
AFGE just about 2 years ago.
Chairman Warner. Thank you. We are happy to receive your
comments at this time.
STATEMENT OF JOHN GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION
OF GOVERNMENT EMPLOYEES
Mr. Gage. Mr. Chairman, thank you very much for having me
here. I'm representing AFGE and also the United DOD Workers
Coalition, which represents 36 unions covering 600,000 workers
in the Department. Again, I'm very happy to be able to share
our views on the NSPS.
We have numerous concerns with the draft regulations which
are cited in both my written statement as well as the comments
submitted by the coalition. But, the following concerns are
those that we see as most serious needing correction.
First, DOD has proposed radically reducing the scope of
collective bargaining. The proposal effectively eliminates
collective bargaining by greatly expanding the management
rights clause as compared to current law, thereby rendering
what was previously negotiable issues to be off the table. Such
issues include procedures and arrangements for overtime, shift
rotation, flexible and compressed work schedules, safety and
health programs, and deployment away from regular worksite.
In addition, DOD will be able to unilaterally override
provisions of collective bargaining simply by sending out
issuances. The scope of bargaining must be restored so that
meaningful employee participation can continue to exist in DOD.
The proposed regulations do not follow the authorizing legal
mandates to safeguard collective bargaining rights to DOD
employees.
When the legislation authorizing NSPS was under
consideration, Secretary Rumsfeld assured Congress that his
only intent with regard to collective bargaining was to
establish national level bargaining over most issues. We can
live with that. We can make that work. But we can't live with
the NSPS draft because it reduces the scope of bargaining to
virtually nothing, far beyond any real or imagined national
security concerns.
Second, the board that hears labor management disputes
arising from NSPS must be independent of DOD management. In the
proposed regulations, DOD would establish an internal board
made up entirely of individuals appointed by the Secretary.
This board would be paid by and beholden to DOD management. It
would have no attendance or credibility with the workforce.
Secretary Rumsfeld again promised Congress prior to the
enactment of the law authorizing NSPS that any board
established to hear labor management disputes would be
independent. First, there is no good reason for DOD to have an
internal labor board which duplicates the functions and costs
of the Federal Labor Relations Authority. But if it must exist,
then as a safeguard, it must be entirely separate and distinct
from DOD management.
Third, and one that particularly rankles me, is the
standard for mitigation in discipline and adverse action cases
under NSPS in the proposed regulation is virtually impossible
to meet, and effectively removes the possibility of litigation.
DOD must change the standard from wholly without
justification to the court-imposed standard established years
ago of unreasonable. Employees must have meaningful due
process, and we have to restore a reasonable standard for
mitigation to safeguard against arbitrary and capricious
actions. DOD must really just stop the game of playing with
these long-established legally recognized standards.
Further in contrast to current law, the proposed NSPS adds
additional bureaucratic delay by declaring that adverse action
and arbitrations will no longer be final and binding. Instead,
they will have to be reviewed by the MSPB, thereby reducing the
authority of arbitrators. This is entirely unsupportable and
contrary to congressional intent. It again weakens an important
safeguard for employees.
Fourth, under the NSPS, employee performance appraisals
will be a crucial determinant to salary, salary adjustment and
job security. Yet under the proposed regulations, there is no
requirement for management to present written standards against
which performance will be measured.
In addition, employees are denied the right available to
all current Federal employees, including those under the new
Homeland Security personnel system, to use a negotiated
grievance and arbitration system to present evidence to an
impartial body as a critical safeguard for fairness and
transparency.
Fifth, the proposed pay regulations open the door for a
general reduction in salaries for DOD as a whole compared to
rates they would have been paid under current statutory
systems. An ability to reduce entry level salaries in addition
to an ability to refuse annual adjustments of salaries for
those who perform satisfactorily as permitted in the draft
regulations will by definition conspire to reduce DOD salaries.
Strong and unambiguous safeguards must be in place to
prevent lowering of pay for the DOD civilian workforce. There
must be constraints on the ability of DOD to lower salaries or
withhold salary adjustments across the board. These safeguards
must be established not only to protect the living standards of
the civilian DOD workforce relative to the rest of the Federal
workforce, but also to guarantee the ongoing economic vitality
of communities with DOD installations.
Finally, procedures for deciding who will be affected by
reduction in force must be based on more than a worker's most
recent performance appraisal. Incredibly, the proposed NSPS
regulation will allow an employee with 1 year of service and an
outstanding rate to have superior retention rights to an
employee with 10 years of outstanding appraisals and 1 year of
having being rated merely above average. Such rules are
patently unfair and must not be allowed to stand.
In conclusion, Mr. Chairman, it cannot be emphasized
strongly enough that the approach DOD has taken thus far
exhibited by the above examples has been profoundly
demoralizing for its civilian workforce. These dedicated and
patriotic Americans are extremely unsettled by the harsh
prospects set forth in the proposed regulations, because they
are not fooled by words like modern, flexible, and market-
based.
Instead, they see fundamental rights stripped away and a
pay system leading to lower overall DOD pay. We strongly urge
the Committee to take action either legislatively or through
oversight to require DOD to correct the many problems with the
draft regulations and provide the safeguards I've mentioned.
Unless substantial changes are made to the regulations, the
NSPS will become a recruitment and retention problem rather
than a solution that will deflect the agency from its important
mission for years. Thank you, Mr. Chairman. I'd be happy to
answer any questions.
[The prepared statement of Mr. Gage follows:]
Prepared Statement by John Gage
Mr. Chairman and members of the committee: My name is John Gage,
and I am the National President of the American Federation of
Government Employees, AFL-CIO (AFGE). On behalf of the more than
200,000 civilian employees of the Department of Defense (DOD)
represented by AFGE, I thank you for the opportunity to testify today.
I am also pleased to appear on behalf of the 700,000 employees
represented by the 36 unions of the United DOD Workers Coalition.
AFGE has numerous serious concerns with the draft regulations that
DOD published on February 14 to create the National Security Personnel
System (NSPS). The comments that AFGE submitted during the public
comment period that ended in March, through our participation in the
United DOD Workers Coalition, are attached to this statement for your
review. They contain our detailed critique of the Department's
proposals with regard to collective bargaining, employee appeals of
adverse actions, and the establishment of a pay for performance system
to replace existing statutory pay systems.
Today I will focus my statement on some of the most urgent
practical issues related to the proposed DOD regulations that demand
immediate attention. Although our union strongly opposes the
replacement of objective, statutory pay systems with inherently
subjective and nominally performance-based pay systems, the revocation
of employee appeal rights, and the evisceration of collective
bargaining; my purpose here is to spell out what we and others who have
closely followed DOD's efforts on NSPS believe needs to be done to
avoid a disaster that will have enormous financial and national
security ramifications.
It is important to recall the stated objectives of the NSPS as well
as the language of the law that established the Defense Secretary's
authority to create it. On June 4, 2003, Defense Secretary Donald
Rumsfeld testified before the Senate Governmental Affairs Committee
regarding the NSPS. In that testimony, he claimed that NSPS was
necessary ``so our country will be better prepared to deal with the
emerging 21st century threats'' and promised Congress that ``here is
what the National Security Personal System will not do, contrary to
what you may have read: . . . It will not end collective bargaining. To
the contrary, the right of Defense employees to bargain collectively
would be continued. What it would do is to bring collective bargaining
to the national level, so that the Department could negotiate with
national unions instead of dealing with more than 1,300 different union
locals--a process that is grossly inefficient.'' (Emphasis in
original).
But Secretary Rumsfeld's promises have not been kept. Nothing in
the proposed NSPS regulations is perceptibly connected to ``21st
century threats.'' His Department has issued draft regulations that do
effectively end collective bargaining by prohibiting bargaining on
almost all previously negotiable issues, and granting the agency the
authority to unilaterally void any and all provisions of collective
bargaining agreements via the issuance of internal regulations and
issuances. That is only one aspect of the NSPS that is wholly
insupportable to DOD's workforce. Furthermore, regarding his claimed
urgency national level bargaining: National level bargaining became
effective upon the passage of the act in 2003. In spite of this fact,
the Secretary has not yet invoked national level bargaining even once.
At this stage, the goal of NSPS should be the development of a
system that both adheres to the law and can be successfully
implemented. In spite of the fact that DOD's proposed regulations are
so extreme and so punitive, we remain hopeful that DOD will reconsider
its approach in the context of a realization that the nuts and bolts of
implementation require more sober calculations than those exhibited in
the draft regulations.
It cannot be emphasized strongly enough that the approach DOD has
taken thus far has been profoundly demoralizing for its civilian
workforce. This dedicated and patriotic workforce is extremely
unsettled by both the inaccurate information conveyed by the Secretary,
and by the harsh prospects set forth in the proposed NSPS regulations.
This state of affairs is neither desirable nor inevitable. But
alleviating it is in DOD's hands.
It is not too late for DOD to decide to work with its unionized
employees, rather than against us, so that the implementation of a new
system and its procedures is smooth, and conducive to high morale and
continued focus on the Department's national security mission.
SIX ``FLASHPOINT'' ISSUES
To that end, I have highlighted six ``flashpoint'' issues that
constitute only the most egregious examples of areas where the draft
regulations for NSPS have deviated from both the law and the stated
objectives of Secretary Rumsfeld when he testified in 2003 that NSPS
would be merely a source of freedom from the ``bureaucratic processes
of the industrial age'' to meet the ``security challenges of the 21st
century.''
1. DOD has proposed radically reducing the scope of
collective bargaining in the proposed regulations. The scope of
bargaining must be restored so that the very institution of
collective bargaining can continue to exist in DOD. In fact,
the proposed NSPS effectively eliminates collective bargaining
by greatly expanding the management rights clause as compared
to current law, thereby rendering most previously negotiable
issues to be ``off the table.'' When the legislation
authorizing NSPS was under consideration by Congress, Defense
Secretary Rumsfeld assured Congress that his only intent with
regard to collective bargaining was to establish national-level
bargaining over most issues. The proposed regulations do not
follow the law with respect to its instructions to maintain
collective bargaining rights for affected DOD employees. In
addition, DOD must not be permitted to unilaterally override
provisions of collective bargaining agreements by issuing
either component-wide or Department-wide ``issuances.'' This
makes a mockery of collective bargaining and the resulting
agreements.
2. The board that hears labor-management disputes arising
from NSPS must be independent of DOD management. In the
proposed NSPS regulations, DOD would establish an internal
board made up entirely of individuals appointed by the
Secretary. Such a board would have no independence or
credibility, and would therefore fail to meet the standards set
forth by the Comptroller General for transparency, fairness,
and credibility. In addition, Secretary Rumsfeld promised
Congress prior to the enactment of the law authorizing the
establishment of NSPS that any board established to hear
disputes arising from NSPS would be independent. Although there
is no rationale for DOD to have an internal labor board which
duplicates the functions and costs of the Federal Labor
Relations Authority; if it must exist, it is absolutely
critical that it be entirely separate and distinct from DOD
management.
3. The standard for mitigation by the Merit Systems
Protection Board (MSPB) of discipline and penalties imposed on
employees under NSPS in the proposed regulations is virtually
impossible to meet and effectively removes the possibility of
mitigation. DOD must change the standard from ``wholly
unjustified'' to ``unreasonable,'' the court imposed standard
established over 25 years ago, in order for employees to have a
meaningful right to have adverse actions mitigated by the MSPB.
Further and in contrast to current law, the proposed NSPS adds
additional bureaucratic delay by declaring that adverse action
arbitrations will no longer be final and binding. Instead, they
will have to be reviewed by the MSPB, thereby reducing the rule
and power of arbitrators, which is entirely insupportable and
contrary to congressional intent. Since DOD wins close to 90
percent of its current MSPB cases, there is simply no
justification for eliminating a fair adjudicative process for
employee appeals.
4. Performance appraisals will be the crucial determinant of
salary, salary adjustment, and job security under NSPS. Yet
under the proposed regulations, not only is there no
requirement for management to present written standards against
which performance will be measured, but employees are also
denied the right, available to all current Federal employees,
including those under the new Homeland Security Personnel
System, to use a negotiated grievance and arbitration system to
present evidence to an impartial body that their performance
appraisals are inaccurate. These inequities must be rectified
in order for NSPS to meet the principle affirmed by Congress,
the Comptroller General, and several experts that the
performance management systems that underlie ``performance-
based'' personnel systems be ``transparent,'' ``accountable,''
and perceived as fair and credible by employees.
5. Strong and unambiguous safeguards must be in place to
prevent a general lowering of pay for the DOD civilian
workforce. The proposed regulations permit a general reduction
in salaries for all DOD personnel compared to rates they would
have been paid under statutory systems. An ability to reduce
entry level salaries, in addition to an ability to refuse
annual adjustment of salaries for those who perform
satisfactorily, as permitted in the draft regulations, will by
definition conspire to reduce DOD salaries generally.
Consequently, there must be constraints on the ability of DOD
to lower salaries or withhold salary adjustments generally.
These safeguards must be established not only to protect the
living standards of the civilian DOD workforce relative to the
rest of the Federal workforce, but also to guarantee the
ongoing economic vitality of communities with DOD
installations.
6. Procedures for deciding who will be affected by a
Reduction in Force (RIF) must be based on more than a worker's
most recent performance appraisal. The proposed NSPS regulation
would allow an employee with 1 year of service and an
outstanding rating to have superior retention rights to an
employee with 30 years of outstanding appraisals and 1 year of
having been rated merely ``above average.'' Such RIF rules are
patently unfair and must not be allowed to stand.
SALARY DETERMINATION AND PERFORMANCE MANAGEMENT
Pay and Classification
DOD's proposed regulations indicate its desire for radical change
to pay and classification systems, and, as the law requires, creation
of a pay-for-performance system ``to better link individual pay to
performance, and provide an equitable method for appraising and
compensating employees.'' No objective data or reliable information
exists to show that such a system will enhance the efficiency of DOD
operations or promote national security and defense. As with the
proposed system at the Department of Homeland Security, most of the key
components of the system have yet to be determined.
One thing, however, is clear. The design, creation and
administration of the concept DOD has proposed will be complex and
costly. A new level of bureaucracy would have to be created, and given
DOD's ideology and proclivities, it is highly likely that this costly
new bureaucracy would be outsourced to provide some lucky private
consultants with large and lucrative contracts. This private consultant
would then make the myriad, and yet-to-be identified, pay-related
decisions that the new system would require. Although the contractors
who anticipate obtaining this new ``make-work'' project are undoubtedly
salivating over the prospect, our country would be better served if the
resources associated with implementing and administering these
regulations were dedicated more directly to protecting national
security and defense.
The unions told DOD during our meetings last year that until these
and other important details of the new system have been determined and
piloted, the undefined changes cannot be evaluated in any meaningful
way. Unfortunately, we are now forced to exercise our statutory
collaboration rights on vague outlines, with no fair opportunity to
consult on the ``real'' features of the new classifications, pay and
performance system. This circumvents the congressional intent for union
involvement in the development of any new systems, as expressed in
Public Law 108-13.
Accordingly, we have recommended to DOD that the pay, performance,
and classification concepts be withdrawn in their entirety and
published for comment and recommendations only when: 1) the Agencies
are willing to disclose the entire system to DOD employees, affected
unions, Congress, and the American public; and 2) the Agencies devise a
more reasonable approach to testing any radical new designs before they
are implemented on any widespread basis. It is simply wrong to ask us
to accept systems that establish so few rules and leave so much to the
discretion of current and future officials. As the representatives of
DOD employees, it is our responsibility to protect them from vague
systems, built on discretionary authority that is subject to abuse.
Regardless of the ultimate configuration of the pay proposal, we
believe that any proposed system must contain the transparency and
objectivity of the General Schedule. Critical decisions on pay rates
for each band, annual adjustments to these bands and locality pay
supplements and adjustments must be made in public forums like the U.S.
Congress or the Federal Salary Council, where employees and their
representatives can witness the process and have the opportunity to
influence its outcome through collective bargaining. We are concerned
that these decisions would now be made behind closed doors by a group
of DOD managers (sometimes in coordination with OPM) and their
consultants. Not only will employees be unable to participate in or
influence the process, there is not even any guarantee that these
decisions will be driven primarily by credible data, or that any data
used in the decisionmaking process will be available for public review
and accountability, as the data from the Bureau of Labor Statistics is
today.
If the system DOD/OPM has proposed is implemented, employees will
have no basis on which to predict their salaries from year to year.
They will have no way of knowing how much of an annual increase they
will receive, or whether they will receive any annual increase at all,
despite having met or exceeded all performance expectations identified
by DOD. The ``pay-for-performance'' element of the proposal will pit
employees against one another for allegedly performance-based
increases.\2\ Making DOD employees compete among themselves for pay
increases will undermine the spirit of cooperation and teamwork needed
to keep our country safe at home and abroad.
---------------------------------------------------------------------------
\2\ This element of the proposal does not really qualify as a ``pay
for performance'' system. Employees performing at an outstanding level
could not, under the proposal, ever be certain that they would actually
receive pay commensurate with their level of performance.
---------------------------------------------------------------------------
It is also unclear from the current state of the deficit that funds
will be made available for performance-based increases to become a
plausible reality, one of many facts that has DOD employees concerned
and skeptical about this proposal. As a practical matter, the Coalition
has voiced its concern that DOD's ambitious goal to link pay for
occupational clusters to market conditions fails to address the reality
that pay for DOD employees is tied to Congressional funding, not market
conditions. Indeed the Federal Employees Pay Comparability Act (FEPCA),
the law that added a market-based locality component to the market-
based General Schedule has never been fully funded, for budgetary
reasons. That is, the size of the salary adjustments paid under FEPCA
to GS employees has, except for once in 1994, reflected budget politics
rather than the market data collected by the Bureau of Labor Statistics
(BLS) to support the system.
Since the draft NSPS regulations were published, they have received
important practical criticism from several sources, including
Comptroller General David Walker who has testified twice regarding the
DOD's readiness to implement any part of its proposed NSPS. We cite his
testimony at length because it makes the case so forcefully that DOD
has failed to prepare for implementation by failing to fully elaborate
its design, collaborate with unions representing affected employees, or
train its managers and bargaining unit employees; all of which are
well-known prerequisites for any measure of success. In his testimony,
he cites the Government Accountability Office's (GAO) previous reports
and testimony regarding the management of ``human capital'' in Federal
agencies, including GAO.
On March 15, 2005, Mr. Walker described his views on the strengths
and weaknesses in DOD's attempt at ``strategic human capital
management'' as embodied in the agency's proposed NSPS, using as
reference the advice he gave to the House Committee on Government
Reform's Subcommittee on Civil Service and Agency Organization on April
23, 2003 as it considered the NSPS legislation as well as a March 2003
GAO publication that listed nine attributes GAO thought needed to be
present in order to create ``clear linkage between individual
performance and organizational success.''
In April 2003, when the legislation granting the Defense Secretary
the authority to establish NSPS was still under consideration, Mr.
Walker testified that ``the bottom line is that in order to receive any
performance-based pay flexibility for broad based employee groups,
agencies should have to demonstrate that they have modern, effective,
credible, and as appropriate, validated performance management systems
in place with adequate safeguards, including reasonable transparency
and appropriate accountability mechanisms, to ensure fairness and
prevent politicalization and abuse.'' Later he elaborated on this set
of prerequisites as follows, calling them ``statutory safeguards'':
``Assure that the agency's performance management
systems (1) link to the agency's strategic plan, related goals,
and desired outcomes, and (2) result in meaningful distinctions
in individual employee performance. This should include
consideration of critical competencies and achievement of
concrete results.
Involve employees, their representatives, and other
stakeholders in the design of the system, including having
employees directly involved in validating any related
competencies, as appropriate.
Assure that certain predecisional internal safeguards
exist to help achieve the consistency, equity,
nondiscrimination, and nonpoliticization of the performance
management process (e.g., independent reasonableness reviews by
Human Capital Offices and/or Offices of Opportunity and
Inclusiveness or their equivalent in connection with the
establishment and implementation of a performance appraisal
system, as well as reviews of performance rating decisions, pay
determinations, and promotion actions before they are finalized
to ensure that they are merit-based; internal grievance
processes to address employee complaints; and pay panels whose
membership is predominately made up of career officials who
would consider the results of the performance appraisal process
and other information in connection with final pay decisions).
Assure reasonable transparency and appropriate
accountability mechanisms in connection with the results of the
performance management process (e.g., publish overall results
of performance management and pay decisions while protecting
individual confidentiality and report periodically on internal
assessments and employee survey results). (Emphasis added)
The Comptroller General's March 2005 testimony listed six areas
where the proposed NSPS regulations either fell short of the GAO's
principles, or where too little detail or information was provided to
make an evaluation. The six were as follows:
(1) ``DOD has considerable work ahead to define the details
of the implementation of its system, including such issues as
adequate safeguards to help ensure fairness and guard against
abuse.'' (emphasis added)
(2) Although the proposed NSPS regulations would ``allow the
use of core competencies to communicate to employees what is
expected of them on the job'' (emphasis added), it does not
require this. It should be noted that the 2003 GAO statement
does not suggest requiring the use of core competencies, only
allowing them. Now GAO says that requiring the use of core
competencies helps create ``consistency and clarity in
performance management.''
(3) The NSPS proposed regulations contain no ``process for
continuing involvement of employees in the planning,
development, and implementation of NSPS.''
(4) DOD needs a Chief Management Officer to oversee human
resources management in order to ``institutionalize
responsibility for the success of DOD's overall business
transformation efforts'' because they believe that this void is
partially responsible for the failure of previous DOD reform
efforts.
(5) An effective communications strategy that ``creates
shared expectations among employees, employee representatives,
managers, customers, and stakeholders'' would be beneficial.
DOD has no such communications strategy in place.
(6) Finally, GAO's testimony asserts that DOD does not have
an ``institutional infrastructure in place to make effective
use of its new authorities,'' by which it means that DOD needs
a ``human capital planning process that integrates DOD's human
capital policies, strategies, and programs with its program
goals and mission, and desired outcomes; the capabilities to
effectively develop and implement a new human capital system;
and importantly, a set of adequate safeguards, including
reasonable transparency and appropriate accountability
mechanisms, to help ensure the fair, effective, and credible
implementation and application of a new system.''
These six shortcomings are essentially identical in content to the
four ``statutory safeguards'' the Comptroller General said in 2003 had
to be present for a system to be successful in furthering an agency's
mission and preventing politicization and abuse. As such, it is fair to
say that GAO appears to agree with us that DOD has failed thus far to
design a system that is either workable or that adheres to the
principles GAO has identified for performance-based systems that
protect the merit system.
The Partnership for Public Service, an organization dedicated to
the restoration of the good name of Federal employment, has also
weighed in on the issue of what makes for a successful performance-
based management and pay system for public employees. The Partnership
echoes many of the arguments advanced by the GAO, but warns that pay
for performance systems are not ends in themselves, but rather ``one
means toward the end of creating a high performance culture'' linked to
the goal of ``boosting government effectiveness.'' This is significant
because although the stated rationale for the establishment of the NSPS
was supposed to be an enhanced ability to meet emerging ``21st century
security challenges'' DOD has thus far refused an approach that makes
use of explicit, objective, written performance standards tied to
agency mission.
The Partnership cautions that differences between the private and
public sectors must be at the forefront when designing pay for
performance systems because of the unique attributes and challenges
that Federal agencies face. In particular, the Partnership identifies
``three unique challenges: 1) performance metrics can be harder to
develop and measure for organizations with a public mission, as
compared to companies focused simply on maximizing profits, 2) workers
may be less motivated by cash rewards and more by the ability to make a
difference, which can lessen the impact of monetary incentives, and 3)
the greater power and flexibility given to managers can complicate
civil service protections against inappropriate political
interference.''
Nowhere in the proposed NSPS regulations is there any evidence that
DOD has acknowledged the unique challenges posed by the fact that it is
a Federal agency with a public mission. No concession has been made to
the special importance of accountability for the distribution of public
funds, or the impact of draconian treatment on the accomplishment of a
national security mission.
The Partnership's work on the subject of pay for performance
systems in the Federal Government also stresses the importance of
``extensive training of supervisors so they have the skills needed to
make accurate assessments of individual performance.'' The
implementation or ``spiral'' schedule DOD has set neglects entirely the
importance of such training. This factor as much as any other that will
decide whether the NSPS pay for performance turns into a costly scandal
resulting in vast quantities of litigation and confusion.
The Partnership's final caution is that unless Congress provides
adequate additional resources to allow ``meaningful'' financial rewards
to high performers that distinguish them not only from ``low
performers'' but also from what they would have received under a
statutory system, pay for performance will not be successful as a
motivator of higher performance. Of course, such additional resources
should not be granted to DOD management unless and until a fair,
transparent, and accountable ``performance appraisal'' process is in
place so that taxpayers can know that their precious tax dollars are
not being distributed on the basis of politics or other non-merit
factors.
LABOR RELATIONS
Notwithstanding the substantive arguments in our attached comments,
our Union Coalition believes that the procedures for generating changes
in the Labor Management Relations system have, thus far, been contrary
to the statutory scheme proscribed in the National Defense
Authorization Act for Fiscal Year 2004, Section 9902(m), Labor
Management Relations in the Department of Defense.
This portion of the law describes a very specific manner of
statutory collaboration with time lines, which has not been followed.
The law requires that employee representatives participate in, not
simply be notified of, the development of the system. We ask that the
subcommittee investigate DOD's failure to enforce or observe this
aspect of the law.
Public Law 108-136 protects the right of employees to organize,
bargain collectively, and to participate through labor organizations of
their own choosing in decisions that affect them. Specifically, the
coalition has reiterated that Congress intended to have the NSPS
preserve the protections of title 5, chapter 71, which DOD's proposals
attempt to eliminate. DOD's position, made manifest in its proposed
regulations, is that chapter 71 rights interfere with the operation of
the new human resources management system it envisions and hopes to
implement. Despite this congressional mandate to preserve the
protections of chapter 71, DOD's proposed regulations will:
1. Eliminate bargaining over procedures and appropriate
arrangements for employees adversely affected by the exercise
of core operational management rights.
2. Eliminate bargaining over otherwise negotiable matters
that do not significantly affect a substantial portion of the
bargaining unit.
3. Eliminate a union's right to participate in formal
discussions between bargaining unit employees and managers.
4. Drastically restrict the situations during which an
employee may request the presence of a union representative
during an investigatory examination.
5. Eliminate mid-term impasse resolution procedures, which
would allow agencies to unilaterally implement changes to
conditions of employment.
6. Set and change conditions of employment and void
collectively bargained provisions through the issuance of non-
negotiable departmental or component regulations.
7. Assign authority for resolving many labor-management
disputes to an internal Labor Relations Board, composed
exclusively of members appointed by the Secretary.
8. Grant broad new authority to establish an entirely new pay
system, and to determine each employee's base pay and locality
pay, and each employee's annual increase in pay, without
requiring any bargaining with the exclusive representative.
Our unions have expressed strong objections to DOD's total
abandonment of chapter 71, along with the law associated with the
statute's interpretation. We ask that the subcommittee join us in
reaffirming to DOD that Congress intended to have chapter 71 rights
upheld so that DOD cannot hide behind its false contention that
Congress' intent was unclear. Chapter 71 should be the ``floor'' of any
labor relations system DOD designs. However, the design of DOD's plan
is to minimize the influence of collective bargaining so as to
undermine the statutory right of employees to organize and bargain
collectively. We know that when Congress enacted provisions to protect
collective bargaining rights, it did not intend that those rights be
eviscerated in the manner that DOD's proposed regulations envision.
Indeed, any regulation reflecting any of the issues listed above will
be entirely unacceptable to us, and we strongly believe, unfounded in
either the legislation or the law.
RESTRICTIONS ON COLLECTIVE BARGAINING
The NSPS-imposed shift from statutory pay systems such as the
General Schedule and the Federal Wage System to an as yet undefined pay
for performance system will have profound consequences for the DOD
workforce, but the degree of its impact will vary from worker to worker
and depend upon numerous factors such as funding, training, and whether
accountability safeguards and procedures are attempted or prohibited.
In contrast, the proposed restrictions on collective bargaining
contained in DOD's proposed NSPS regulations would by definition harm
everyone in a bargaining unit equally because the proposals are
uniformly negative.
For this reason, it is useful to consider the effects of taking
five particular issues ``off the table'' that have been successfully
negotiated by Federal agencies including DOD:overtime policy, shift
rotation for employees, safety and health programs, flexitime and
alternative work schedules, and deployment away from regular work
locations.
Currently, title 5 U.S. Code, chapter 71 allows negotiation of
collective bargaining agreements, and negotiation of procedures and
appropriate arrangements for adversely affected employees in the
exercise of a management right. These allow management and the union to
bargain provisions that address the effects of management actions in
specific areas. Such bargaining can be either in negotiation of term
agreements or negotiations during the life of such agreements in
response to management-initiated changes. However, under the draft
regulations for NSPS, unions and management will no longer be permitted
to bargain over ``procedures and appropriate arrangements,'' including
over simple, daily, non-security related assignments of work.
The following are five examples of current DOD labor-management
contract provisions which would no longer be negotiable under NSPS.
1. Overtime Policy
In general, AFGE locals negotiate overtime policies using two
basic premises. First, the union's interest is in having
management assign overtime work to employees who are qualified
to perform the work and who normally perform the work. Second,
the union seeks a fair and consistent means of assigning or
ordering overtime, so it is not used as an arbitrary reward or
punishment. Prior to being able to negotiate the fair rotation
of overtime, it is significant to note that employees filed
hundreds of grievances over denial of overtime. Since
procedures have been negotiated, clear, transparent, and known;
these grievances have literally disappeared.
In negotiations, AFGE locals have requested that overtime
should be first offered, then ordered. By treating overtime
first as an opportunity, workers, based on their personal
circumstances, get an opportunity to perform extra work for
overtime pay (paid at time and a half) or compensatory time
(paid hour per hour).
Commonly, contract language requires overtime to be offered
to employees within specific work units, job descriptions or
occupational fields to ensure employees performing the work are
qualified. Additional contract language allows for the
assignment or ordering of overtime if a sufficient number of
employees do not volunteer to perform the necessary work.
Normally, employee seniority is applied in determining which
volunteers will receive the overtime (most senior) and reverse
seniority (least senior) in ordering overtime in the absence of
volunteers.
This basic contract language over the procedures to be used
in assigning overtime provides predictability for both
employees and management in dealing with workload surges that
force the use of overtime in organizations. Organizations that
frequently rely on overtime will usually adopt an overtime
scheduling roster.
Under current law, the agency has the right to ``assign
work'' which would include overtime assignments. However, the
statute requires bargaining over procedures and appropriate
arrangements for employees affected by the exercise of a
management right if requested by the union. In this way,
Federal employee representatives are permitted to bargain over
important issues dealing with overtime.
However, under the proposed NSPS regulations, both overtime
policies in current contracts, as well as the unions' right to
negotiate similar provisions in the future are undermined.
Specifically, management could issue a department or even a
component level policy or issuance that would negate current
contract language dealing with overtime procedures and preclude
further negotiations.
In addition, the new NSPS management rights section prohibits
DOD managers from bargaining over the procedures they will use
when exercising their management rights, which would include
assigning overtime.
2. Shift Rotation for Employees
In industrial DOD settings, shift work is common. Usually
there are three shifts: day, evening, and graveyard. Although
an evening or graveyard shift may appear unattractive to some,
others may prefer such shifts due to increased rates of pay, or
because they help the worker handle child or elder care
responsibilities with a spouse who works a day shift. Shift
work assignment is a frequent subject for bargaining, with the
union's primary focus on providing predictability and stability
in workers' family and personal lives and on equitable sharing
of any shift differentials (increased pay) or burdens of work
performed outside the normal day shift. Contract language often
calls for volunteers first, then the use of seniority when
making decisions about shift work, or provides for the
equitable rotation of shifts.
Under current law, management is permitted to negotiate over
the numbers, types and grades of employees or positions
assigned to a tour of duty and is required to bargain over the
procedures it uses to exercise its right to assign work,
including assignments to shift rotations.
However, under the proposed NSPS regulation, both shift work
policies in current contracts as well as the unions' right to
negotiate similar provisions in the future are undermined.
Specifically, management could issue a department or even
component level policy or issuance that would negate current
contract language dealing with shift work and preclude further
negotiations.
In addition, the new NSPS management rights section includes
assignment of work, and determining the employees or positions
assigned to a work project or tour of duty, making this no
longer a permissive subject of bargaining, but a prohibited
matter. The proposed regulation goes on to specifically
prohibit management from negotiating over the procedures used
to exercise such rights, including assignments to shift
rotations.
3. Safety and Health Programs
Worker safety and health has always been of paramount
importance to unions. Many AFGE locals representing DOD's blue
collar industrial workforce have negotiated, over many years,
comprehensive safety programs and often are involved in
negotiated workplace safety committees with the employer.
For example, today's state-of-the-art welding operations in
DOD's industrial operations exist as the result of years of
negotiation over workplace safety practices, personal
protective equipment, training, technologies and practices,
ventilation and moving to safer, newer welding practices. These
practices have not only protected employees, but have saved
countless DOD dollars in the elimination of on-the-job-
injuries, lost time due to accidents, improved work processes
and prevented financial losses as the result of destroyed or
damaged material and equipment.
Currently, safety and health matters are covered by a section
of the law which allows, at the election of the agency,
bargaining over issues dealing with technology, methods, and
means of performing work. In addition, negotiations are
required over appropriate arrangements for employees adversely
affected by the exercise of management's rights.
The proposed NSPS regulations threaten both safety and health
policies in current contracts, as well as the unions' right to
negotiate similar provisions in the future. Specifically,
management could issue a department or even component level
policy or issuance that would negate current contract language
dealing with safety and health policies and preclude further
negotiations.
In addition, the new NSPS management rights section includes
technology, methods, and means of performing work, making this
no longer a permissive subject of bargaining, but a prohibited
matter. The proposal limits severely the types of provisions
that could be negotiated as ``appropriate arrangements.''
4. Flexitime and Compressed Work Schedules
Under chapter 61 of title 5, U.S. Code, Federal employees may
work under flexitime and compressed schedules. Examples of
flexitime are 7 a.m. to 4 p.m. or 9:30 a.m. to 6:30 p.m.,
rather than the traditional 8 a.m. to 5 p.m. shift. Examples of
compressed work schedules are Monday through Thursday for 10
hours per day with Friday off, or Tuesday through Friday for 10
hours per day with Monday off, rather than 8 hours per day
Monday through Friday. Today's DOD installations often operate
daily on a 10 to 12 hour business day meeting customer demands
longer and faster than ever before in the department's history.
Legislation authorizing flexitime and compressed work
schedules was enacted to assist employees in handling job,
family and community responsibilities. In addition, Congress
recognized that such schedules would go a long way toward
improving commuting times in crowded metropolitan areas.
Ensuring sufficient choices for employees and protecting the
capability to perform the vital work of the department have
always been the two guiding principles used in bargaining these
arrangements. Currently, work schedule options include core
hours, permitted changes by employees, and protections for
management in ensuring completion of the agency mission.
Flexitime and compressed work schedules are negotiated under
provisions of title 5, chapters 61 and 71, which provide that
for employees in a unit represented by a union, establishment
and termination of such work schedules, ``shall be subject to
the provisions of the terms of . . . a collective bargaining
agreement between the agency and the exclusive
representative.''
In contrast, the proposed NSPS regulations threaten flexitime
and compressed work schedules in current contracts as well as
the unions' right to negotiate similar provisions in the
future. Specifically management could issue a department or
even a component level policy or issuance that would negate
current contract language dealing with flexitime and compressed
work schedules, and preclude further negotiations.
In addition, the new NSPS management rights section
specifically prohibits management from negotiating over the
procedures used to exercise its rights and limits severely the
types of provisions that could be negotiated as ``appropriate
arrangements.'' Both of these factors could further limit or
eliminate bargaining over alternative schedules.
5. Deployment Away From Regular Work Location
Today, DOD reshapes its workforce and makes assignments to
locations different from an employee's normal workplace using
reorganizations, transfers of function, details, and in the use
of designated positions requiring travel or deployment. In most
instances, the union and management deal with these instances
on a case-by-case basis. This allows bargaining for the
specific circumstance and avoids imposing a one-size-fits-all
agreement.
Collective bargaining agreement protections include such
things as the use of volunteers, then seniority, (as described
in other sections of this paper) coupled with requirements that
the work be performed by qualified employees. (Of course,
management has the right to set qualifications as it sees fit.)
In some cases, there are also provisions calling for advance
notice whenever possible.
Under current law, management has the right to ``assign work
. . . and to determine the personnel by which agency operations
shall be conducted.'' However management and unions can
negotiate the procedures management uses in exercising their
authority and appropriate arrangements for employees adversely
affected by such authority.
The proposed NSPS regulations specifically prohibit
management from negotiating over the procedures used to
exercise its rights to assign work and determine the personnel
by which agency operations are conducted. In addition, the
draft regulation limits severely the types of provisions that
could be negotiated as ``appropriate arrangements.'' This will
have the effect of erasing the current rules that the parties
have negotiated to preserve the rights of a employees to choose
where they work and live, and preclude further negotiations.
Under NSPS, agency officials could move employees arbitrarily
or force a prolonged assignment anywhere in the world without
regard to any hardship this could cause employees or their
families. They could deploy an employee whose family
obligations make absence an extreme hardship even if a
similarly qualified employee volunteered for the assignment.
In some cases, employees will be forced to make choices
between family and job. Management will be able to exercise its
right to assign employees and leave any collective bargaining
out of the process, including the limited procedural and
appropriate arrangement requirements now in current law.
The consequences of eliminating bargaining for dealing with
overtime policies, shift rotation, safety and health programs,
flexitime and compressed work schedules, deployment away from regular
work locations, and other important workplace issues will likely
include worker burnout, increased danger to workers in unsafe
situations, and strong feelings of unfairness within work units if
assignments and work schedules are not offered or ordered in a fair and
consistent manner. Ultimately, the inability of the employees'
representatives to resolve these matters through collective bargaining
will create recruitment and retention problems for the Department, as
employees find more stable positions in other Federal agencies, or with
state and local governments. Importantly, depriving DOD's operational
managers and unions of the right to negotiate mutually agreeable
arrangements over these issues is in no way connected to the
Secretary's stated goal of meeting ``the security challenges of the
21st century.''
EMPLOYEE APPEALS
Public Law 108-13 reflects Congress's clear determination that DOD
employees be afforded due process and be treated fairly in appeals they
bring with respect to their employment. When it mandated that employees
be treated fairly and afforded the protections of due process, and
authorized only limited changes to current appellate processes,
Congress could not have envisioned the drastic reductions in employee
rights that DOD's proposed regulations set forth.
No evidence has ever been produced to suggest, let alone
demonstrate, that current employee due process protections or the
decisions of an arbitrator or the MSPB have ever jeopardized national
security and defense in any way. While we believe in an expeditious
process for employee appeals, we will never be able to support biasing
the process in favor of management or otherwise reducing the likelihood
of fair and accurate decisions. DOD has provided absolutely no research
that shows that the drastic changes proposed to chapters 75 and 77 of
title 5 would further the agency mission.
CONCLUSION
We urge the committee to take action, either legislatively or
through oversight, to require DOD to address at least the six
``flashpoint'' issues described above. Performance appraisals must be
based upon written standards and be subject to negotiated grievance and
arbitration procedures. Strong and unambiguous safeguards must be
established to prevent either a general reduction or stagnation in DOD
salaries. The scope of collective bargaining must be fully restored,
and 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 MSPB mitigation need to be realistic. Finally, RIF
procedures must be based upon factors beyond a worker's most recent
performance appraisal. A failure on the part of DOD to address these
basic issues related to fairness, transparency, and accountability will
guarantee that NSPS becomes a source of corruption, scandal, and
mismanagement and will deflect the agency from its important national
security mission for years.
Chairman Warner. Thank you, Mr. Gage. Ms. Sistare, would
you be kind enough to describe your distinguished career
briefly.
Ms. Sistare. Thank you very much. Thank you for giving me
the opportunity to testify today. I'm the Director of the Human
Resources Management Consortium at the National Academy of
Public Administration (NAPA), which is a nonprofit,
independent, nonpartisan organization chartered by Congress.
I've also been Executive Director of the National Commission on
the Public Service, which was chaired by former Federal Reserve
Board Chairman Paul Volcker.
That Commission continues on at the Academy today with an
implementation initiative. I actually spent most of my career
as a staff member in the United States Senate, where I worked
for three Senators, most recently as staff director and counsel
for Chairman Fred Thompson on the Senate Governmental Affairs
Committee.
Chairman Warner. Thank you very much, and thank you
particularly for your service to the Senate. You are welcome to
return.
Ms. Sistare. Thank you very much.
Chairman Warner. If we don't get this thing straightened
out, I might draft you.
STATEMENT OF HANNAH S. SISTARE, DIRECTOR, HUMAN RESOURCES
MANAGEMENT CONSORTIUM; EXECUTIVE DIRECTOR, NATIONAL COMMISSION
ON THE PUBLIC SERVICE IMPLEMENTATION INITIATIVE, NATIONAL
ACADEMY OF PUBLIC ADMINISTRATION
Ms. Sistare. My testimony today addresses three parts of
the proposed regulations: performance management, appeals, and
labor. I'll raise suggestions for future action. Although I
quote several Academy studies, I'm speaking on my own and not
on behalf of the Academy as an institution.
On performance management, both the Volcker Commission and
panels of the Academy have concluded that pay for performance
within the performance management system can enhance employee
engagement and morale, organizational improvement, and program
results.
It can also help dispel some of the negative stereotypes
that Federal workers have to bear which undermine public
confidence in government. DOD is actually at an advantage
compared to other Federal departments in this respect. Research
shows that the workers at DOD have a much stronger sense of
mission and how their work relates to that mission than do
employees in other departments.
Among the experts there is certainly a broad consensus on
the elements that make a pay for performance system work. A
year and a half ago the Academy and the Volcker Commission co-
hosted a forum where we brought together stakeholders, public
administrators, and government leaders. The participants agreed
on four key factors that need to be recognized up front. It
takes time. It's complicated, it requires culture change. It
also requires adequate funding.
The participants also identified elements that they saw as
critical to making this kind of system work. They include
processes that are timely and linked to distinctions in pay,
committed and highly involved leadership, ongoing feedback from
everyone involved, a system that effectively deals with poor
performers, training and evaluation of managers and
supervisors, and accountability for how they run the system.
Appropriate and effective employee training and
organizationally integrated performance management system are
what the GAO calls a ``clear line of sight'' between what the
employee does and what the organization's mission is.
They also noted some safeguards: transparency,
accountability, internal checks and balances, peer review, and
ongoing communication. Managers in particular are key to the
success of this kind of system.
I met this week with attendees of the Federal Manager's
Association (FMA) week in Washington. Most of the participants
were from the DOD and were from all around the country.
They, really to a person, were interested, willing, and
ready to learn. They didn't feel they were there yet. They
wanted to know a lot. But they were ready to take the system
on.
On appeals, we addressed the Federal appeals system at
another Academy/Commission forum and our speakers were from
labor, from the administration, and others. We had a broad
range of people participating in the discussion.
When asked the question of what set of principles should
underlie any Federal employee system, the group very quickly
came to a consensus and they identified four key principles:
Fair, including the perception of being fair; fast and final
action with due process; protection of merit system principles;
and consideration to protecting the agency's mission.
As we have heard, OPM, DOD, and the employees' unions
disagree strongly about whether this new system is in fact
fair. So we have a problem certainly with perceptions. I
suggest several possible remedial steps that the parties could
take to collaborate right now in putting clear definition to
some of the significant aspects of the proposed system.
One is they could define the standards that the National
Security Labor Relations Board (NSLRB) will apply when they are
weighing the need to protect the Department's mission. Another
is to develop standards for the merit selection of the
individuals serving on the NSLRB and also to identify as my
colleague mentioned the mandatory removal offenses in
collaboration with the stakeholders in the system. I think that
kind of collaboration at this time could ease a lot of employee
concerns. Labor relations are certainly the key problem in this
area, area of greatest challenge. The Volcker Commission
recognized this.
The Volcker Commission met during the period when the
Department of Homeland Security legislation was being
developed. So they felt that labor relations would definitely
pose a challenge to Civil Service reform and they noted several
existing models at the local, State, and Federal level where
government leaders and employee unions really reached out to
work constructively to accomplish their mutual goals.
The common characteristic of these models is that they were
mutual efforts that went the extra mile to enhance
communication and consensus. In the end, it's important that
there be a mutual commitment to the goals of the NSPS when the
regulations become effective. It's important that everyone work
together to try to make them work.
I think these goals include a highly-engaged, well-
qualified workforce, working in concert with DOD leadership to
achieve the Department's important public mission.
In conclusion, one point I'll mention is the Volcker
Commission was very strong on the importance of congressional
oversight, and this hearing is just what they believed would be
necessary. I'm sure they would strongly support this
committee's continued and close involvement as the system is
rolled out and implemented. Thank you.
[The prepared statement of Ms. Sistare follows:]
Prepared Statement by Hannah S. Sistare
Mr. Chairman, members of the committee, I appreciate the
opportunity to testify on the design and implementation of the National
Security Personnel System at the Department of Defense.
I am the Director of the Human Resources Management Consortium at
the National Academy of Public Administration, an independent non-
partisan, non-profit organization chartered by Congress to provide
``trusted advice'' on governance and public management. The views I
present today are my own and do not necessarily represent those of the
Academy as an institution. I am also the Executive Director of the
National Commission on the Public Service Implementation Initiative at
the Academy. The National Commission, chaired by former Federal Reserve
Board Chairman Paul A. Volcker, made its recommendations for the reform
and renewal of the public service in January 2003.
We stand at the threshold of an exciting and challenging time in
the transformation of the human resource management systems of the
Federal Government--and nowhere is this more true than with respect to
the effort underway to modernize the civilian personnel systems of the
Department of Defense.
My testimony will address the proposed performance management,
appeals and labor relations systems for the Department, and raise some
possible approaches for the future.
PERFORMANCE MANAGEMENT/PERFORMANCE BASED PAY
The National Commission on the Public Service and panels of experts
at the National Academy of Public Administration have recommended that
the Federal Government adopt performance management systems.\1\
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\1\ Urgent Business for America: Revitalizing the Federal
Government for the 21st Century, Report of the National Commission on
the Public Service, January 2003.
Recommending Performance-Based Federal Pay, a report by the Human
Resources Management Panel at the National Academy of Public
Administration, May 2004.
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The Academy panels and the Volcker Commission have concluded that
pay for performance within a performance management system can enhance
employee engagement and morale, organizational improvement, and program
results. Pay for performance can have the added benefit of dispelling
some of the negative stereotypes that plague Federal workers and
undermine public confidence in government.
In one respect, DOD is at an advantage compared with other Federal
agencies. Research has shown that DOD civilian employees have a much
stronger sense both of mission and of how their work contributes to
that mission than do employees in other departments.\2\ This not only
boosts employee morale, but fosters a culture in which employees
already connect their work with organizational goals. This will be of
help to DOD as it implements its new performance management system.
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\2\ Paul C. Light, The Troubled State of the Federal Public
Service, Washington: Brookings Institution, June 27, 2002.
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Some important groundwork has been laid for the implementation of
performance based pay. The Government Performance and Results Act
helped agencies to clearly define their missions and goals and think
about what was required to achieve those missions.
The Government Accountability Office (GAO) certainly has led by
example in this area and DOD and other executive branch agencies can
learn a great deal by their experience and the lessons GAO continues to
draw from it. GAO began to lay the groundwork for its performance
management system more than 15 years ago when it adopted pay banding.
More recently, legislation enacted by Congress has empowered GAO to
take additional steps to put a performance based pay system into place.
Among experts, there is a broad consensus about the elements
necessary to make performance management systems work. In September
2003, Academy President C. Morgan Kinghorn and Paul Volcker convened a
forum titled ``Performance-Based Pay in the Federal Government: How do
we get there?'' The forum brought together stakeholders, public
administrators and government leaders, including OMB Deputy Director
for Management Clay Johnson, Deputy OPM Director Dan Blair, and GAO
Principal Deputy Gene Dodaro for the purpose of discussing and
articulating the elements of a successful system.
The participants agreed on several factors that had to be
recognized as central to the adoption of performance based pay in the
Federal Government:
It takes time.
It is complicated.
It will require a culture change.
It requires adequate funding to be fully effective.
The elements the presenters and participants identified as critical
to an agency's successful implementation of a performance based pay
system were:
appraisal processes that are timely, transparent, and
linked to meaningful distinctions in pay
committed and highly involved leadership
ongoing feedback from those who are involved and
affected
a system for effectively dealing with poor performers
training and evaluation of managers and supervisors
that holds them accountable for how well they manage for
performance
appropriate and effective employee training
an organizationally integrated performance management
system which aligns organizational goals with individual
performance
reasonable safeguards including:
transparency
accountability
internal checks and balances
peer review
ongoing communication and consultation among
all system stakeholders
I have provided the forum summary report: Performance Based Pay in
the Federal Government--How do we get there? for the committee's
information and for the hearing record. It also can be found on the
Academy's Web site.\3\
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\3\ The Academy's website is www.napawash.org. The report
Performance Based Pay in the Federal Government: How do we get there?,
additional information about the National Commission on the Public
Service and the Commission Implementation Initiative at the Academy can
be found under ``Special Initiatives.''
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There is broad and clear recognition that all stakeholders in a
performance based pay and performance management system must be well
trained, and repeatedly trained, for the new systems to be successful.
Managers especially will be key to the success of the new systems,
an issue that an Academy panel addressed in a series of five
comprehensive reports on The 21st Century Federal Manager published
between 2002 and 2004.\4\ These reports examine the new and growing
challenges that Federal managers face in the 21st century. They also
identify and address the new competencies that managers must have to
provide the leadership and direction critical to fulfilling
government's fast changing needs, and they spell out the price of poor
leadership.
---------------------------------------------------------------------------
\4\ The 21st Century Federal Manager, Volumes 1-5, Human Resources
Management Panel, National Academy of Public Administration, 2002-2004.
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The Office of Personnel Management is currently considering the new
competencies that 21st century leaders need to be successful, and this
will be an important step in the transformation of human resources
management at DOD and government-wide.
APPEALS
A key to the success of an appeals system is that it not only be
fair, but that those affected by it perceive it to be fair. We
addressed these issues at a forum on the Federal appeals system
convened by the Academy and the Commission Implementation Initiative in
September 2003. The speakers at this forum were Chuck Hobbie, Deputy
General Counsel of the American Federation of Government Employees; Ron
Sanders, OPM Associate Director; and Joe Swerdzewski, former General
Counsel of the Federal Labor Relations Authority. The forum
participants were a diverse group of Federal officials, congressional
staff, academics and other interested private sector stakeholders. As
moderator, I posed several questions to the group at the end of the
discussion. One was: ``What set of principles should underlie any
Federal employee appeals system?'' The expressed consensus of the group
was that there are four key principles:
fair, including the perception of being fair
fast and final action with due process
protection of merit system principles--to preserve the
core right so employees and of the general public interest
consideration of protecting the agency's mission \5\
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\5\ Conversations on the Public Service: Forum on the Federal
Appeals System, National Academy of Public Administration, National
Commission on the Public Service Implementation Initiative, February
2004.
Those who designed the proposed NSPS appeals system intend it to be
fast and final, and believe it preserves due process and merit system
principles. It clearly takes protection of the agency's mission into
account. Employee representatives, on the other hand, have raised
strong concerns about whether due process is appropriately preserved
and to what degree the mission of the Department will be given
deference versus the rights of the employees. They do not perceive the
proposed system as being fair.
One positive remedial step could be for the DOD, in collaboration
with its stakeholders, to clearly define the standards the National
Security Labor Relations Board (NSLRB) will apply when weighing the
need to fulfill the department's mission. Another would be for DOD to
develop standards for the merit selection of the individuals serving on
the NSLRB. The merit selection system under which Administrative Law
Judges are certified might serve as a model. Likewise, consulting with
employee representatives in determining how the mission needs of the
Department are to be taken into consideration by the NSLRB and the
identifying of Mandatory Removal Offenses could ease employee concerns
at this critical time, without undermining the needs of the Department.
LABOR RELATIONS
Labor relations have been the area of greatest challenge in the DOD
transformation. The legislation authorizing the NSPS anticipated this
dynamic and required ongoing consultation between those designing the
new personnel system and labor representatives.
The committee is hearing from the DOD, OPM, and union leadership on
the details of how this consultation process was carried out preceding
the issuance of the proposed regulations. The bottom line is that DOD
and OPM believe they met the requirements Congress set out, and the
employee unions believe otherwise.
As Senators Susan Collins and Carl Levin and other Members wrote to
Secretary England a year ago, ``the involvement of the civilian
workforce in the design of the new system is critical to its ultimate
acceptance and successful implementation.'' \6\ If DOD leadership is at
conflict with its own employees, implementation of the NSPS is at risk,
they recognized.
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\6\ Tim Kauffman, ``DOD Personnel Plan Under Fire from Lawmakers,
Unions,'' Federal Times, March 8, 2004.
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The ``meet and confer'' period required by the law is now underway.
This is an opportunity for all involved to consider how this next
period of interaction can be conducted so that all parties feel they
have made a committed effort, and that a committed effort has been made
in turn. Changing perceptions may well require going beyond the
specific requirements of the law.
The Volcker Commission made recommendations in this area that could
be of value for the future. The Commission wrote its report during the
creation of the Department of Homeland Security. Commission members
were concerned about the disagreement that accompanied the creation of
the Department and cautioned:
[This controversy] makes clear that labor-management
relations will pose a challenge to reform. . . . What is clear
is that a new level of labor-management discourse is necessary
if we are to achieve any serious reform in the civil service
system. . . . The commission believes that it is entirely
possible to modernize the public service without jeopardizing
the traditional and essential rights of public servants. . . .
Engaged and mutually respectful labor relations should be a
high Federal priority.
In calling for a ``new level of discourse'' the Volcker Commission
suggested that Congress, executive branch leaders and employee
representatives consider several existing models for public sector
labor management cooperation. These included collaboration by former
Governor, now Senator, George Voinovich and the Ohio American
Federation of State, County, and Municipal Employees. Former
Indianapolis Mayor Steven Goldsmith is noted for his successful
collaboration with city union leaders and has written about the lessons
he took away from that experience and similar situations. Former
President Clinton established labor-management councils in Federal
departments and IRS Commissioner Charles Rossotti used the 1998 IRS
reform legislation to forge a constructive labor-management
relationship at the IRS. Observers of labor-management practices at the
U.S. Postal Service believe that both relations and productivity at the
department have been enhanced by the management's inclusive approach to
working with its unionized employees.
The common characteristic of these examples is that they were
mutual efforts that went the extra mile to enhance communication and
consensus. They may provide some models that will enhance the
Department's ability to successfully implement the NSPS.
In the end, it is important that there be a common commitment to
the goals of the NSPS: a highly-engaged, well-qualified workforce,
working in concert with DOD leadership to achieve the Department's
important public mission.
LOOKING AHEAD
Employee representatives have expressed concern that many
additional details of the new system are undefined. The question is how
to balance DOD's desire to retain flexibility in implementing the new
system so that improvements can be made as it becomes operational, with
the employees' interest in participating in system elements that will
have a significant impact on their employment. One answer is for the
DOD and OPM to continue to collaborate with stakeholders in the design
of the pay for performance and other NSPS elements. As noted earlier,
there is a consensus that ongoing, regularized communication and
feedback among all stakeholders is critical to the successful operation
of a performance-based pay system.
The adoption of a government-wide framework for personnel reform
would help to address this issue for all Federal agencies, and for all
stakeholders.
Paul Volcker and Comptroller General David Walker co-hosted a forum
a year ago to explore this concept.\7\ The consensus of the
participants--a broad group representing employees at all levels,
policymakers, academics and nonprofit organizations--was that such a
framework should be established. As discussed at the forum, the
framework should include values, principles, and processes that must
underlie all Federal personnel systems. For example, the framework
could specify the processes that Congress believed should be part of
all Federal performance management systems. The Academy is continuing
to work on this concept, including a project to validate a model
framework developed by a working group.
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\7\ Human Capital: Principles, Criteria and Processes for
Government-wide Federal Human Capital Reform, U.S. Government
Accountability Office and the National Commission on the Public Service
Implementation Initiative, November 2004, GAO-05-69SP.
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Finally, one point repeatedly stressed by the members of the
Volcker Commission was the critical importance of congressional
oversight. This hearing is just what they believed would be necessary
and I am sure they would strongly encourage the committee to continue
to play an ongoing and close oversight role.
CONCLUSION
Implementation of these new systems necessarily goes hand in hand
with a maturing of the view of the Federal workforce and the
relationship among front-line workers, managers, executives and
political leadership. As one Academy study puts it:
Paternalistic cultures are giving way to values that reflect
greater equality and adult relationships in the workplace.
These changes require employees to take more responsibility for
their own competence, performance, and development. Meanwhile,
executives and managers at all levels must take responsibility
for providing challenging work opportunities and creating a
culture for learning, teamwork, and accountability for
results.\8\
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\8\ Summary of Human Resources Management Research by the National
Academy of Public Administration, Center for Human Resources
Management, for the National Commission on the Public Service, July
2002.
This change is challenging but is full of opportunity. It is widely
recognized as being necessary for the Federal Government to meet its
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21st century responsibilities.
Chairman Warner. Thank you very much. I can assure you that
this committee will do just that. Let me go back to my simple
analogy, it's a team between uniform and civilian forces in the
DOD, and we have equal responsibility here to fulfill. I see my
colleague--I intend to stay for a while, if you would like to
ask your questions and I'll follow with mine.
Senator Akaka. Thank you, Mr. Chairman. I want to thank our
witnesses for your testimony, your comments on the NSPS.
Because I know he's genuinely concerned, I'm so pleased that
Secretary England has remained to hear the views of the second
panel.
Mr. Gage, as author of legislation strengthening the
protections of Federal whistleblowers, I believe it is
essential that all Federal employees feel comfortable coming
forward to disclose government waste, fraud, and abuse. DOD and
OPM have stated repeatedly and again today that the DOD
civilian workforce will continue to have whistleblower
protection under NSPS. However, I have heard from employees who
question whether they will retain full whistleblower rights.
Mr. Gage, do you believe whistleblowers are adequately
protected under NSPS?
Mr. Gage. No, Senator, I don't. I want to thank you for
your involvement over the years in this important issue. But
when you weaken the grievance procedure, when you weaken
employee appeals, one of the big problems with whistleblowing
is the reprisal that comes after you blow the whistle. When you
weaken employee avenues of appeal, especially a strong
grievance procedure and arbitration, I think that hurts
whistleblower protection.
Senator Akaka. Ms. Sistare, I was privileged to testify
before the Volcker Commission in 2002, and I appreciate all the
Commission has done on the issue of human capital reform.
You noted in your written testimony that the Volcker
Commission's recommendations to improve labor/management
relations in particular, the need for employee involvement in
the development of any new personnel system like NSPS, based on
the Commission's recommendations and your work at NAPA, do you
believe the process laid out by DOD adequately involves
employees and unions?
Ms. Sistare. As I noted in my oral testimony and in my
written testimony, I think that further steps could be taken. I
think it's not just a matter of whether the letter of the law
was followed, but that people feel that the spirit of the law
is followed. Also, employees need to feel that Department
management and the people putting the system together have
taken the extra step. I think that will make a big difference
how they feel when they actually go into implementing the new
system.
Senator Akaka. Mr. Stewart, the GAO has reported that DOD
does not have comprehensive strategic workforce plans to guide
its human capital efforts, and noted that without such plans,
DOD will be unable to design effective strategies to hire,
develop, and retain a strong workforce. Given the absence of a
comprehensive workforce plan, how well do you believe NSPS will
address DOD's workforce needs?
Mr. Stewart. Thank you for the question, Senator Akaka.
You're absolutely right. We issued a report less than a year
ago that was less than complimentary of the Department's
strategic workforce planning. I guess the most egregious or
troubling situation that we found was that in looking at the
DOD components that employed at least 85 percent of all of the
civilian workforce, not one component had developed core
competencies.
We asked the question, have you identified current and
future competencies, and the answer was no across the board. I
might correct myself with the exception of the Marine Corps.
The Marine Corps had developed competencies.
This is a critical issue because this is the way that we
communicate to employees what is expected of them in terms of
their performance. DOD, in the proposed regulations, actually
allows for performance expectations but does not specify the
form which that will take. We are encouraging the DOD to
consider core competencies, because competencies are a set
behavior that includes knowledge, skills, and abilities that
are critical in getting the work done.
With the competencies brings uniformity and it's clear and
understandable what is expected. So without the competencies,
we have questions about how effective the NSPS will be in terms
of aligning performance, employee performance with the overall
mission and how that's communicated and how effective that's
going to be.
Senator Akaka. Thank you very much for your responses. Mr.
Chairman, I have questions that I'll submit for the record.
Chairman Warner. Senator, I'd like to advise our witnesses
and those in attendance that yesterday you and I as members of
the Committee on Homeland Security and Government Affairs
adopted a markup bill which goes to the floor.
Part of that bill contains your contribution in the area of
whistleblowers. On the assumption that hopefully that will
become eventually a legislative package, should not we ask our
witnesses to take cognizance of what that additional thinking
of protections toward this was currently and hopefully to be
passed by the Senate and then go on to the House until it
becomes legislation. But it seems to me that's a process that
should be following. Would you agree with me on that?
Senator Akaka. Yes. Mr. Chairman, we have been very
concerned about the workforce and would like to be able to work
together in reaching agreements, even compromises in some of
the concerns that we have on both sides.
I know there is an effort to try to set up a strategic kind
of planning by DOD and for NSPS, but we want it to be done in
such a way that there is an agreement and compromise, so that
the workforce can be at its optimum in working for our country.
Mr. Chairman, this is a whole new thing and I hope it can
continue, these efforts.
Chairman Warner. Thank you very much, Senator. I originally
intended to ask a question of each of you about the procedures
that have been followed quite apart from the merits or the
demerits of the legislation and so forth. But I understand that
that's a matter now in the Federal courts, so we will not ask
you about procedures but this committee will follow that case
with great interest.
First to you, Mr. Stewart, in your prepared testimony, you
state that the DOD's proposed regulations indicate that, and I
quote ``nothing in the continuing collaborative process with
employees will affect the right of the Secretary of Defense to
determine the content of implementing guidance and to make this
guidance effective at any time.''
Do you believe that the Department has gone too far?
Mr. Stewart. It certainly is a different model from some of
the other agencies. I really don't have a good answer for that,
Mr. Chairman.
Chairman Warner. You can take that for the record.
Mr. Stewart. The concern, Mr. Chairman, is that the
Secretary, the regulations would give the Secretary that
authority. But the question is how would that be used. So since
that hasn't played out yet, it's pretty difficult to answer the
question is that too much, has that gone too far. I think it
depends, I think it depends on how that authority would be
used.
Chairman Warner. The second part of the question was, we
would like to have the recommendations that you might have on
the involvement of employees in the content of implementing----
Mr. Stewart. The involvement of employees in implementing?
Chairman Warner. The issuances?
Mr. Stewart. Yes.
Chairman Warner. Thank you. Now, for Mr. Gage, your
concerns that the composition of the NSLRB as proposed are
understandable. The Secretary of Defense would appoint all
members without any requirement or input from employees. Do you
have a recommendation on how the proposed board should be
modified, constituted to ensure its independence and also to
ensure that in addition to understanding DOD's mission, it also
understands DOD employees?
Mr. Gage. I think the union should be able to recommend--
strongly recommend a member, a membership on the board. I think
that the fairer that the appointments of this board are, the
more credibility employees will have in the fairness of the
decisions of the board. If it's just a kangaroo court, we are
going to know it very quickly. I think starting out by having a
fair board with a composition that is made by DOD management,
as well as employee representatives, I think that is the best
way to assure that. Also, of course, to put a term on it.
Chairman Warner. I can't imagine there is any legal
impediment to your making a recommendation. You can certainly
forward them to the Secretary, could you not?
Mr. Gage. Did you have his address for me, Senator, that I
could talk to him?
Chairman Warner. I think that knowing the Secretary of
Defense, Mr. Rumsfeld, and indeed knowing the distinguished
Secretary of the Navy, these are men of reasonable mind and I'm
certain that if you were to forward recommendations, they would
review them.
Mr. Gage. Senator, this is an institutional thing, though.
It's not just asking him to appoint someone in his mind that is
fair, it's someone who has to be perceived as fair and having
our weight behind him, too, to make the institution of this
board fair.
So I understand what you are saying about reasonable
people, this is going to be around a long time and I think it's
just so important that the initial constitution of this board
and that it be constituted in the future with meaningful
employee participation.
Chairman Warner. Thank you very much. Ms. Sistare, if I
might ask of you, in your testimony, you indicate that former
Indianapolis Mayor Steven Goldsmith has written from lessons he
took away from collaboration with union leaders. Are there any
examples from that experience that you can share with the
committee and from which the Department and unions would
benefit?
Ms. Sistare. Yes. I would be glad to. Then Mayor Goldsmith
has written about the process that he used to right a very bad
labor/management relation system that existed when he took
office. He did two particularly important things at the
beginning.
One, he worked with the employees to identify the problem.
They had a common problem, which was that the city was nearly
broke, was losing a tax base, and was losing population. Then
working together they identified a common mission, which was to
make the city economically viable, to keep people from leaving,
to have clean streets, and give people the services they
needed.
He got to know the city workers by literally working with
them at their jobs. Through this process, he found out what
they were thinking about. But not just grievances. What he
found out was what it took to make their job work, what kind of
equipment worked better, what kind of supplies worked better.
This gave him a real firsthand knowledge of what was going on
and he built on that.
He said it was not easy. It took over 2 years to really get
it right but at the end of that time, they had instituted
performance management. Then over time, the city budget had a
surplus. They were able to give raises. They didn't fire any of
the unionized employees. It seems to be a very positive example
of what was done in at least one place.
Chairman Warner. Had you contemplated making
recommendations of nominees for the NSLRB?
Ms. Sistare. What I suggested in my written testimony was
that a merit system be established to pick them, and that the
procedures that they follow be set out clearly.
The Department would like these participants, members of
the board, to weigh the Department's needs. I think it should
spell out how the Department's need is and isn't really
affected and where an employee's well-being really is, and
maybe there should be one standard. So people know in advance.
I think I would be reticent to suggest that any of these people
actually represent someone, that they represent either
management or labor. I'd rather see that they be independent.
Chairman Warner. Mr. Stewart.
Mr. Stewart. Mr. Chairman, as I noted in my oral comment,
it's not just that the Secretary can appoint the board members,
it's that he can also remove them. If that were not true,
perhaps it would be okay if he could appoint the members.
But there is a question of independence when an individual
can be removed by the same person who appoints them. At the
GAO, we have a personnel appeals board, and the Comptroller
General has the authority to appoint the five members to that
board. But he does not have the authority to remove any one
member from that board. That is, that's an internal board
process. But he does not have that authority. So that would be
the caveat that I would offer for consideration.
Chairman Warner. Thank you. We will follow the manner in
which this board is constituted very carefully. I don't know
that it will require further legislation. But we will indeed
take to heart the observations that each of you made about the
importance of it. We will submit additional questions to you,
in hopes that you can respond in a timely way. Thank you for
your contribution. We have had an excellent hearing today.
Thank you very much.
The hearing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator James M. Inhofe
IMPLEMENTATION OF THE NATIONAL SECURITY PERSONNEL SYSTEM
1. Senator Inhofe. Secretary England, I'd like for you to share
what you discussed with me yesterday, regarding your implementation
plan or philosophy regarding the National Security Personnel System
(NSPS).
Secretary England. Senator Inhofe, I assured you that I would keep
a close watch on what was occurring during the meet and confer process.
I committed to you that I will ensure we take whatever time is
necessary to analyze and address issues raised by the unions on behalf
of our employees during this process.
2. Senator Inhofe. Mr. Blair, I would like to hear from you on any
significant implementation changes and what challenges there may be
with implementation of this new system.
Mr. Blair. We are working hard to ensure that the current timetable
moves the Department of Defense (DOD) forward at a pace that will
enable the Department to make appropriate adjustments in the event of
any unforeseen difficulties. I view the most significant implementation
challenge as maintaining effective lines of communication with the DOD
workforce. Effective and continuous communication across the Department
will help ensure that employees are aware, knowledgeable, and current
on the significant changes taking place with the NSPS.
We want to ensure DOD is well positioned to begin implementation.
Evidence of this can be found in its plans to implement in phases or
``spirals.''
3. Senator Inhofe. Secretary England, how much different is the
system being implemented at the DOD from the one implemented at the
Department of Homeland Security (DHS)? From that implementation, what
do you see as the areas of concern for DOD?
Secretary England. The Department benefited greatly from the
efforts of DHS when developing the proposed NSPS regulations. The DHS
regulations were analyzed by staff-level working groups, as well as
senior leadership, and where it made sense and was consistent with and
supported DOD's national security mission, operations, and statutory
authorities, we adopted many of the concepts and approaches, and even
much of the specific language set forth in the DHS regulations. At the
same time, where there were differences, such as in terms of scope,
mission, organizational culture, and human capital challenges, as well
as the statutes that authorize the respective HR systems--DOD and
Office of Personnel Management (OPM) have broken new ground, and these
proposed regulations are intended to stand on their own in that regard.
Accordingly, this proposed regulation should not be viewed (or judged)
in comparison to DHS, but rather as an independent effort, informed by
the DHS experience, yet focused on DOD's mission and requirements.
The primary statutory differences are:
NSPS law authorizes changes to staffing and reduction
in force policies; DHS has no such authority.
NSPS law provides for waiver of premium pay provisions
of title 5; DHS does not authorize such a waiver.
NSPS law sets requirements for NSPS, to include a pay
for performance evaluation system, then links coverage of
adverse actions and appeals flexibilities to only those
organizations under NSPS. DHS does not have this limitation.
NSPS law entitles employees to adverse action appeal
rights to the full Merit System Protection Board (MSPB), under
a limited standard of review; DHS does not have this
requirement.
NSPS labor relations provision does not authorize a
waiver of 5 U.S.C. chapter 71; rather it allows the
establishment of a new LR system notwithstanding chapter 71.
DHS may waive chapter 71.
NSPS labor relations authority expires on November 24,
2009, unless this authority is extended in law. DHS does not
have an equivalent sunset provision.
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
4. Senator Inhofe. Mr. Stewart, Mr. Gage, and Ms. Sistare, please
comment on each of the ``flashpoints'' that the AFGE has raised through
Mr. Gage's written statement:
``DOD has proposed radically reducing the scope of collective
bargaining in the proposed regulations. . . . The proposed
regulations do not follow the law with respect to its
instructions to maintain collective bargaining rights for
affected DOD employees.''
Mr. Stewart. Our previous work on individual agencies' human
capital systems has not directly addressed the scope of specific issues
that should or should not be subject to collective bargaining and
negotiations.
Mr. Gage. Public Law 108-136 protects the right of employees to
organize, bargain collectively, and to participate through a labor
organization of their own choosing in decisions that affect them. When
the National Defense Authorization Act (NDAA) was enacted in November
2003, the DOD was authorized to modify the personnel system, but was
prohibited by Congress from instituting any new procedures that could
eliminate fundamental labor rights. In hearings that preceded the
passage of the NDAA, DOD officials repeatedly stated that they were not
trying to eliminate collective bargaining rights. In fact, Defense
Secretary Rumsfeld assured Congress that the proposed regulations would
adhere to the law with respect to its instruction to maintain
collective bargaining rights for affected DOD employees, and that his
only intent with regard to collective bargaining was to establish
national-level bargaining. A majority of House and Senate members voted
for this bill based upon the false assurance that these fundamental
labor rights would be protected. Unfortunately, the NSPS does not
adhere to the law with regard to its instruction to maintain collective
bargaining rights for affected DOD employees, and goes clearly beyond
what Congress intended.
Ms. Sistare. The first relates to the scope of collective
bargaining in the proposed regulations and includes Mr. Gage's
assertion that the proposed regulations do not follow the law with
respect to its instructions to maintain collective bargaining rights
for affected DOD employees. Regrettably, the matter of the proposed
regulations compliance with the law--unless the regulations are altered
to the AFGE's satisfaction in the final regulations will be decided
through the judicial process. This is regrettable, as are other
instances where design of the new system will be determined in the
courts, rather than through the policymaking process. By its nature,
the policymaking process produces consensus and buy in, both of which I
believe are very important to the successful implementation of this new
personnel system.
5. Senator Inhofe.
``The board that hears labor-management disputes arising from
NSPS must be independent of DOD management. . . . In the
proposed NSPS regulations, DOD would establish an internal
board made up entirely of individuals appointed by the
Secretary.''
Mr. Stewart. In our previous testimonies on the proposed and final
DHS regulations, we stressed the importance of the actual and perceived
independence and impartiality of such boards.\1\ Members of these types
of boards should be, and appear to be, free from interference in the
legitimate performance of their duties and should adjudicate cases in
an impartial manner, free from initial bias and conflicts of interest.
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\1\ GAO, Human Capital: Preliminary Observations on Proposed DHS
Human Capital Regulations, GAO-04-479T (Washington, DC: Feb. 25, 2004)
and Human Capital: Preliminary Observations on Final Department of
Homeland Security Human Capital Regulations, GAO-05-320T (Washington,
DC: Feb. 10, 2005).
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Consistent with fostering board independence and impartiality,
DOD's proposed NSPS regulations provide for staggered-term appointments
for members of the proposed National Security Labor Relations Board
(NSLRB) and place some limited conditions on the removal of a member.
For example, members of the board would be appointed for terms of 3
years, except that the appointments of the initial board members will
be for terms of 1, 2, and 3 years. The Secretary of Defense may extend
the term of any member beyond 3 years when necessary to provide for an
orderly transition and/or appoint the member for up to two additional
1-year terms. DOD could further enhance the independence and
impartiality of the board through the appointment and removal process
of Board members. This could include such areas as: (1) a nomination
panel that reflects input from appropriate parties and a reasonable
degree of balance among differing views and interests in the
composition of the board to ensure credibility, and (2) appropriate
notification to interested parties in the event that a board member is
removed.
The proposed regulations allow the Secretary of Defense to appoint
and remove individual board members; however, this raises the question
of the independence of the board. If the proposed regulations were
modified to allow the Secretary of Defense to appoint but not remove
members, then this may help the credibility and independence of the
board.
Mr. Gage. In the proposed NSPS regulations, DOD would establish an
internal board made up entirely of individuals appointed by the
Secretary. Such a board would have no independence from management and
would therefore lead to unfair favoritism when hearing employee
appeals. Although DOD promises that the NSLRB would operate with
independence and autonomy within the Department, a body appointed
entirely by the employer is not a neutral third party, for either labor
relations or employee appeals. In order to create a more impartial
NSLRB we recommend creating a body that is entirely separate and
distinct from DOD management. We recommend that the three-member board
consist of one union member, one management official, and one member
jointly selected by two appointees of the union and the employer.
Although creating the NSLRB is unnecessary because it duplicates the
function of the already existing Federal Labor Relations Board, if the
NSLRB is designed in this manner it will create a more balanced and
less employer centered forum to resolve grievances.
Ms. Sistare. The second relates to the fact that the proposed
regulations establish ``an internal board made up entirely of
individuals appointed by the Secretary'' and thus, in the view of the
AFGE, not appropriately independent of DOD management. I agree that the
creation of an internal board can lead to the view that its decisions
will not be fair. As I noted in my written and oral testimony--the
perception of fairness matters very much in any appeals system. I urged
that criteria be established in advance, perhaps as part of the final
regulations, providing for the merit selection of the members of the
internal review board.
6. Senator Inhofe.
``The standard for mitigation by the MSPB of discipline and
penalties imposed on employees under NSPS in the proposed
regulations is virtually impossible to meet and effectively
removes the possibility of mitigation.''
Mr. Stewart. The U.S. Merit Systems Protection Board will not know
the actual impact until a number of cases are adjudicated.
Mr. Gage. Under the new appeals system, MSPB will not be able to
mitigate a performance-based adverse action unless the action taken by
the manager against an employee is deemed ``wholly unjustified.'' This
standard is far too high, and undermines the standard that the judicial
system established over 25 years ago, stating that employees must only
show that the actions are ``unreasonable.'' The new standard
essentially takes away the employee's right to have any meaningful
opportunity to have adverse actions mitigated by the MSPB. There is
simply no justification for eliminating an adjudicative process for
employee appeals that has fairly resolved employee-employer disputes
for so many years. The Department's decision to eliminate this process
is a blatant attack on the employee's right to fair representation.
Ms. Sistare. The third relates to Mr. Gage's comment that ``the
standard for mitigation by the Merit System Protection Board of
discipline and penalties imposed on employees under MSPB in the
proposed regulations is virtually impossible to meet and effectively
removes the possibility of mitigation.'' The standard is definitely
high, though, in my view not ``impossible'' to met. My own concern
focuses on the first levels of the appeals process, which I believe are
more critical to the reality and belief that employees will be treated
fairly. For example, I believe the selection of the review board
members should be based on merit and that the standards they will
apply--such as the specific offenses for which an employee may be
automatically terminated and the means by which the Department's
mission will be taken into consideration--should be spelled out
clearly, in advance of implementation of the system.
7. Senator Inhofe.
. . . ``under the proposed regulations, not only is there no
requirement for management to present written standards against
which performance will be measured, but employees are also
denied the right . . , to use negotiated grievance and
arbitration system. . .''
Mr. Stewart. On the basis of our previous work, we believe that
performance standards should be written. We also advocate the use of
competencies--the skills, knowledge, and abilities staff heed to
accomplish the work. We have found that competencies can help reinforce
employee behaviors and actions that support the Department's mission,
goals, and values, and can provide a consistent message to employees
about how they are expected to achieve results. These core competencies
must be in writing to assure that managers, supervisors, and employees
see and understand the criteria that will be used to manage and assess
employee performance.
Regarding grievance and arbitration systems, during testimony in
April 2005, we reaffirmed our position that there should be both
informal and formal appeal mechanisms within and outside of the
organization if individuals feel that there has been abuse or a
violation of the policies, procedures, and protected rights of the
individual. Internal mechanisms could include independent Human Capital
Office and Office of Opportunity and Inclusiveness reviews that provide
reasonable assurances that there would be consistency and
nondiscrimination.\2\ Furthermore, it is of critical importance that
the external appeal process be independent, efficient, effective, and
credible. As DOD's human resources management system efforts move
forward, DOD will need to define, in more detail than is currently
provided, how it plans to review such matters as the establishment and
implementation of the performance appraisal system--and, subsequently,
performance rating decisions, pay determinations, and promotion
actions--before these actions are finalized to ensure they are merit
based.
---------------------------------------------------------------------------
\2\ GAO, Human Capital: Preliminary Observations on Proposed
Department of Defense National Security Personnel System Regulations,
GAO-05-517T (Washington, DC: Apr. 12, 2005).
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Mr. Gage. Under NSPS, performance appraisals will be the crucial
determinant of salary, salary adjustment, and job security for Federal
employees. If management officials are not required to base salary
increases and adjustments on some transparent and concrete standard,
there will be no means to determine if these increases and adjustments,
or lack thereof, are fair or credible. Under the proposed NSPS, adverse
action arbitrations will no longer be final and binding either.
Reducing the role of arbitrators is not only contrary to congressional
intent, but takes away the employee's option to use negotiated
grievance and arbitration systems to present evidence that their
performance appraisals are inaccurate. Supervisors can use their own
arbitrary and subjective standards to monetarily award or punish
Federal employees and these employees, in turn, have no means to
contest these inequities because they ultimately have no recourse to
the law. If DOD insists on compensating and awarding employees on an
individualized basis, the agency must verify that renumeration is based
on an objective and non-discriminatory criteria.
Ms. Sistare. The fourth relates to the concern that under the
proposed regulations there is no requirement for management to present
written standards against which performance will be measured and that
these matters are not subject to negotiation. I believe that the
standards set out by the GAO for an effective performance based pay
system--which are mirrored in the work of the National Commission on
the Public Service (Volcker Commission) and study panels of the
National Academy of Public Administration--should be the guiding light
for the design and implementation of the system at DOD. These include a
clear understanding by all involved, following education, training, and
communication, of how the goals of the agency relate to the measures of
employee performance and how those measures will be applied.
8. Senator Inhofe.
``Strong and unambiguous safeguards must be in place to
prevent a general lowering of pay for DOD civilian workforce.
The proposed regulations permit a general reduction in salaries
for all DOD personnel compared to rates they would have been
paid under statutory systems.''
Mr. Stewart. Under the proposed regulations, DOD could not reduce
employees' basic rates of pay when converting to pay bands. However,
employees' compensation may increase at a rate higher or lower than
under the current compensation system because under NSPS compensation
is designed to be: (1) market sensitive, with consideration of local
market conditions to set pay rates; and (2) performance based.
Mr. Gage. Under the NSPS regulations, each agency head has the
ability to reduce entry level salaries, and an ability to refuse annual
adjustment of salaries for those who perform satisfactorily. Unlike the
NSPS system, the GS system and the pay adjustment process described in
FEPCA were established upon the principles of market adjustments. Base
salaries reflect job duties, and salary changes reflect changes in the
ECI and other market data from 1 year to the next. Under the NSPS
system, however, employees are paid according to the whim of their
superiors. Without a uniform system to promote workers fairly,
employees are often left feeling cheated and some of them will have
objective evidence of having been cheated. Safeguards must therefore be
established not only to protect the living standards of the civilian
DOD workforce relative to the rest of the Federal workforce and the
labor market, but also to guarantee the ongoing economic vitality of
communities within DOD installations.
Ms. Sistare. The fifth relates to the concern that the performance
based pay system under NSPS will result in a general lowering of pay
for DOD civilian employees. As articulated by the National Commission
on the Public Service, the purpose of performance based pay should be
to reward and encourage performance, not to save money. It may in fact
cost more to implement a performance based pay system--certainly there
are start up costs for training and other development and
implementation activities which will involve additional costs. Adequate
funding to allow the agency to make meaningful distinctions in pay is
very important.
9. Senator Inhofe.
``Procedures for deciding who will be affected by a reduction
in force must be based on more than a worker's most recent
performance appraisal. The proposed NSPS regulation would allow
an employee with 1 year of service and an outstanding rating to
have superior retention rights to an employee with 30 years of
outstanding appraisals and 1 year of having been rated merely
``above average.''
Mr. Stewart. Under DOD's proposed regulations, greater emphasis
will be given to job performance in the reduction-in-force process by
placing performance ahead of length of service. Under the proposed
regulations, employees will be placed on a competitive group's
retention list in the following order of precedence: (1) tenure group,
(2) veterans' preference, (3) individual performance rating, and (4)
length of service. DOD may also establish a minimum reduction-in-force
competitive area on the basis of one or more of the following factors:
geographic location(s), line(s) of business, product line(s),
organizational unit(s), and funding line(s). The proposed regulations
provide DOD with the flexibility to define competitive groups on the
basis of career group, pay schedule, occupational series or specialty,
pay band, and/or trainee status.
Mr. Gage. We are strongly opposed to such a stringent and blithe
methodology for determining retention status in the context of
Reductions in Force (RIF), as it undermines the longstanding veterans'
preference rule, as well as seniority. The method that is currently
used to determine RIFs is fair and reasonable because it takes into
account the many factors that should be considered when evaluating an
employee's contribution to the Department and the Department's mission.
Under the new proposals, veterans and other employees that have proven
their commitment and loyalty to the government through longevity and/or
service will be discounted based on one unaccountable performance
appraisal. This methodology is indefensible and dangerous, as it
essentially opens the door to arbitrarily eliminating employees based
on personal preferences rather than eliminating employees based on the
record.
Ms. Sistare. The sixth relates to the issue of whether RIF
decisions should be based on an employee's current performance rating,
as opposed to their ratings over a period of time. I believe that
retention, like pay, should be based on performance rather than
longevity. My own view is that it would make sense to consider an
employee's level of performance over time, rather than base it on one
specific year, no matter how recent.
______
Questions Submitted by Senator Edward M. Kennedy
COLLECTIVE BARGAINING PROCEDURES
10. Senator Kennedy. Secretary England, please explain what steps
you will take to ensure that the final regulation is revised to meet
the requirements of the statute regarding collective bargaining.
Secretary England. While some may disagree with the proposed
regulations, the proposed regulations are consistent with the
requirements of the statute regarding collective bargaining. The
proposed regulations attempt to strike a balance between employee
interests and DOD's need to accomplish its mission effectively and
expeditiously. For example, while the proposed regulations eliminate
bargaining on procedures regarding operational management rights, it
does not eliminate all bargaining on procedures. The regulations
continue to provide for bargaining on procedures for personnel
management rights. The proposed regulations also continue to provide
for bargaining on impact and appropriate arrangements for all
management rights. Finally, the proposed regulations provide for
consultation on procedures regarding the operational management rights,
which lie at the very core of how DOD carries out its mission.
11. Senator Kennedy. Secretary England, please explain your plans
to ensure that the NSPS does not severely restrict the scope of issues
that can be bargained.
Secretary England. The proposed regulations are consistent with the
requirements of the statute regarding collective bargaining. The
proposed regulations attempt to strike a balance between employee
interests and DOD's need to accomplish its mission effectively and
expeditiously. While the scope of bargaining is restricted compared to
what occurs today, the proposed regulations continue to provide many
opportunities for the unions to have a voice in workplace issues.
LABOR-MANAGEMENT DISPUTES
12. Senator Kennedy. Secretary England, how can employees and their
representatives expect a fair review when management has absorbed all
of the power and board members serve at the whim of the Secretary?
Secretary England. While the Secretary will establish the NSLRB,
safeguards are established in the proposed regulations to ensure that
the NSLRB operates with independence. The members are appointed to
fixed terms of 3 years, and can be extended for two additional 1-year
appointments. Members will be independent, distinguished citizens known
for their integrity, impartiality, and expertise in labor relations
and/or the DOD mission, and/or relevant national security matters. The
members are subject to the same stringent criteria for removing members
of the Federal Labor Relations Authority (FLRA) and Merit Systems
Protection Board, i.e. inefficiency, neglect of duty, or malfeasance.
Finally, all decisions of the NSLRB are reviewable by the FLRA and the
Federal circuit courts of appeals. All of these safeguards ensure that
a fair review of labor disputes will be made by the NSLRB without undue
influence by the Secretary or DOD management.
13. Senator Kennedy. Secretary England, how do you justify this
policy that is so clearly biased against workers?
Secretary England. This policy is not biased against workers. The
DOD civilian workforce plays a critical role in the successful
accomplishment of the Department's national security mission. In
authorizing the creation of the NSPS, Congress recognized that
maintaining the status quo with respect to labor-management relations
would not provide DOD with a workforce that is sufficiently agile and
flexible to execute the current and future national security mission.
The regulations continue to ensure the right of employees to organize,
bargain collectively, and participate through labor organizations of
their own choosing in decisions which affect them. In proposing these
changes, the Department is attempting to strike a balance between
employee interests and DOD's need to accomplish its mission effectively
and expeditiously.
NATICK SOLDIER CENTER'S DEMONSTRATION PROPOSAL
14. Senator Kennedy. Secretary England, please explain what steps
you will take to ensure that the demonstration proposal is approved.
Secretary England. The Office of the Secretary of Defense Personnel
and Readiness (OSD/P&R) is working with the Army to determine if Natick
is or is not covered by the NSPS. If Natick could be moved under NSPS
human resource (HR) provisions before 2008, we will advise you.
15. Senator Kennedy. Secretary England, do you intend to include
Natick in the NSPS human resources system before October 1, 2008, even
though under the statute, its parent organization is specifically
excluded?
Secretary England. The OSD/P&R is working with the Army to
determine if Natick is or is not covered by the NSPS. If Natick could
be moved under NSPS HR provisions before 2008, we will advise you.
______
Questions Submitted by Senator Joseph I. Lieberman
CURTAILMENT OF COLLECTIVE BARGAINING
16. Senator Lieberman. Secretary England and Mr. Blair, it is my
understanding that the proposed regulations would allow managers with
Department-wide authority, or with authority for any constituent
component of the Department, to prohibit collective bargaining on any
subject simply by issuing a policy or other kind of directive dealing
with the subject. I have heard concerns expressed that this authority
could even be used to invalidate provisions of collective bargaining
agreements that the managers do not want to comply with. Is my
understanding correct? If it is so, and if one party to the negotiation
can unilaterally take any or all subjects off the table, I do not see
how collective bargaining can achieve its intended purpose of enabling
the amicable and productive resolution of disagreements.
Secretary England. Your understanding is not correct. Only the
Secretary of Defense, the Deputy Secretary of Defense, the Principal
Staff Assistants (e.g. Under Secretaries), and the Secretaries of the
Military Departments will issue NSPS implementing issuances that
override provisions of collective bargaining agreements. This ensures
that the Department is able to implement a uniform and consistent
personnel system and emphasizes that only the highest level officials
in the Department would have the authority to impact collective
bargaining agreement provisions that conflict with NSPS implementing
issuances. DOD and Military Department-level issuances that may impact
collective bargaining agreements must be based on mission and business
related reasons. Unions at the national level are provided an
opportunity through continuing collaboration to be involved in NSPS
implementing issuances that will supersede a conflicting collective
bargaining agreement provision(s). We believe this is consistent with
the underlying NSPS statute.
Mr. Blair. The proposed regulations do not give managers unfettered
authority to issue a policy for the purpose of prohibiting bargaining
or invalidating provisions of a collective bargaining agreement that
they do not like. There are two distinct types of issuances and each is
treated differently with regard to union involvement in the proposed
regulations. The first is what is referred to as an implementing
issuance which would specifically carry out the provisions of the joint
DOD/OPM NSPS regulations. As proposed, these issuances would supercede
conflicting provisions of collective bargaining agreements to ensure
consistent application of NSPS rules throughout the Department.
However, the unions will have an opportunity to review and comment on
implementing issuances before they are promulgated, as provided for in
continuing collaboration procedures proposed in the regulations at
9901.106(a)(3)(i).
The second type of issuance as proposed in the draft regulation is
a DOD issuance. These are issuances that do not carry out the
provisions of NSPS regulations. DOD issuances do not immediately
override conflicting provisions of existing collective bargaining
agreements. However, upon expiration of a collective bargaining
agreement, the conflicting provision would have to be brought into
conformance with DOD or component issuances. Our interest in these
provisions is to provide for consistent, standard application of DOD
and component policies, instructions, and procedures. This manner of
dealing with conflicting provisions is in fact the same approach that
exists today with regard to governmentwide regulations.
In this respect, bargaining would occur over a wide variety of
issues related to any policy prescribed in an issuance to the extent
otherwise negotiable and not in conflict with the issuance. For
example, the Department might promulgate an issuance regarding certain
information required on all vacancy announcements. Issues related to
this policy that may be subject to bargaining might include the length
of time an announcement was open, how the announcement was communicated
to the workforce, posting a notice of available positions on bulletin
boards, advance notice of the announcement to the union, provisions for
sending announcements to employees activated for duty in the Reserves,
provisions for notifying employees away from the worksite on training,
etc.
As you can see, the proposed regulations strike a balance between
the need for consistent policies and collective bargaining. In striking
this balance, they do not give management unfettered authority to
override provisions of collective bargaining agreements.
17. Senator Lieberman. Secretary England and Mr. Blair, similarly,
if one side has the power to invalidate any or all provisions of an
agreement at will, I don't understand how collective bargaining
agreements can serve their intended purpose of establishing a reliable
framework for governing relationships between employees and managers.
Is my understanding correct?
Secretary England. Your understanding is not correct. An issuance
will not be for the sole purpose of overriding a collective bargaining
agreement. While DOD and military department-level issuances may impact
collective bargaining agreements, there will be mission and business
related reasons for these issuances. Finally, there are many issues
that occur locally that are not governed or specifically covered by a
DOD-level or military department-level issuance. These matters continue
to be covered by collective bargaining agreements.
Mr. Blair. As stated above, the proposed regulations do not give
management unfettered authority to override collective bargaining
agreements. In addition, should management attempt to exceed its
authority in this regard, the proposed regulations provide the unions
with the ability to seek enforcement of these regulatory requirements
with the National Security Labor Relations Board, with review by the
Federal Labor Relations Authority, and ultimately the courts. Finally,
there are many issues that occur locally that are not governed or
specifically covered by a DOD- or component-level issuance. They would
continue to be covered by collective bargaining agreements.
LACK OF SPECIFIC ELEMENTS IN PERFORMANCE-MANAGEMENT SYSTEM
18. Senator Lieberman. Secretary England and Mr. Blair, my
impression of the proposed pay and performance regulations is that they
are skeletal outlines of a program, but leave the specific policies and
procedures for subsequent development. For example, the statute
requires that any regulations must incorporate specific elements to
ensure fairness and guard against politicization and other abuse in
performance management. These must include, among other things, in the
words of the statute--``a fair, credible, and transparent employee
performance appraisal system,'' ``a means for ensuring employee
involvement in the design and implementation of the system,'' and
``effective safeguards to ensure that the management of the system is
fair and equitable and based on employee performance.'' The proposed
rules do restate these requirements and say that they must be met. But
I did not see specific policies or procedures that would actually show
how these requirements will be accomplished. Doesn't the governing law
require that these and other statutory elements be described in enough
detail in published proposed regulations, issued jointly by DOD and
OPM, that employees, Congress, and the public can evaluate these
proposed elements of the system and engage with DOD and OPM about any
concerns?
Secretary England. The Department's implementing issuances will
provide much more detail on the pay and performance systems. As
provided in the proposed regulations, employee representatives will
participate in the development of these implementing issuances through
the continuing collaboration process. Under continuing collaboration,
unions will have the opportunity to review proposals, submit comments,
and at the discretion of the Secretary, to meet and discuss their
views.
Mr. Blair. I agree that some aspects of these regulations are
relatively general in nature, providing broad policy parameters but
leaving much of the details to implementing directives. We believe that
this structure, patterned after the chapters in title 5 that they
replace, is appropriate. By providing for detailed implementing
directives, the regulations provide the Department with the flexibility
mandated by Congress, and they do so without compromising the
Department's commitment to substantive employee representative
involvement in the development of those directives.
TRAINING
19. Senator Lieberman. Secretary England and Mr. Blair, in his
testimony, Mr. Stewart of GAO recommends that DOD should complete a
plan for implementing NSPS that includes training for both supervisors
and employees. What planning have you done in developing a training
program to support the NSPS?
Secretary England. DOD recognizes that training for all our
employees on the behavioral and functional aspects of NSPS is key to
the success of NSPS. The NSPS training plan is a comprehensive, well-
planned learning strategy to prepare the DOD workforce for transition
to NSPS. The plan is grounded in the belief that participants need to
be informed and educated about NSPS and trust and value it as a system
that fosters accountability, respects the individual, and protects his
and her rights under the law. The plan incorporates a blended learning
approach featuring Web-based and classroom instruction supplemented by
a variety of learning products, informational materials, and workshops
to effectively reach intended audiences with engaging, accurate, and
timely content. All employees will be provided training that covers the
basics of the NSPS human resources management system including
information on career groups, the pay band structure, as well as
appeals procedures. A course on the performance management system will
train employees on how a performance-based system operates and help
them understand their roles and responsibilities. We estimate the
employee training will take approximately a day and a half or 12 hours.
Supervisors and managers will receive additional training so they can
fairly manage, appraise, and rate employees. This training is expected
to take a minimum of 18 hours and will include both web-based and
classroom training.
Mr. Blair. OPM defers to DOD on this question.
20. Senator Lieberman. Secretary England and Mr. Blair, how much
will the Department need to spend in order to train supervisors to
evaluate employees properly?
Secretary England. The Department's Program Executive Office (PEO)
allocated $2 million in fiscal year 2005 and plans to allocate another
$3 million in fiscal year 2006 to fund development of core NSPS
training modules and deliver ``train-the-trainer'' sessions.
The Office of the Secretary of Defense (OSD), the military
departments, and the defense agencies will fund the delivery of
training to their personnel. Funds for fiscal years 2005 and 2006 do
not currently have visibility as a discrete line item in their budgets.
However, the military departments and defense agencies recognize the
high priority of NSPS training, and are committed to funding delivery
of that training within existing resources.
Mr. Blair. OPM defers to DOD on this question.
PAY LEVELS
21. Senator Lieberman. Secretary England and Mr. Blair, in moving
away from pay levels defined in statute, what assurances can you give
that limited appropriations or other budget pressures will not result
in pay levels too low to truly pay for performance?
Secretary England. The Department views this as a basic covenant
issue with its employees. The need to protect pay pool money must be
balanced against the need for fiscal flexibility. The Department is
taking concrete steps to ensure achievement of the NSPS key performance
parameter to have a credible and trusted system. The Department is
taking action to protect pay pool funding through its internal
issuances. For example, the Department will mandate the minimum
composition and expenditure of pay pool funds. In addition, the
Department will require certification of the allocation and expenditure
of those pay pool funds by an appropriate senior official. Finally, the
Department will determine the appropriate mechanism(s) to ensure
compliance.
Mr. Blair. Every agency must live within the appropriations
Congress provides and, when appropriations are less than desired, must
make choices among spending priorities. Nonetheless, we believe there
is a strong incentive for DOD to pay its employees at competitive
levels to avoid staffing problems. Furthermore, the NSPS legislation
included a provision requiring DOD, to the maximum extent practicable,
to allocate an aggregate amount for NSPS employee compensation in
fiscal years 2004 through 2008 that is not less than the estimated
aggregate amount that would have been allocated for such employees
under existing pay systems. Beyond fiscal year 2008, DOD must provide a
formula for determining the aggregate amount of NSPS employee
compensation that ensures that ``in the aggregate, employees are not
disadvantaged'' as a result of conversion to NSPS. (See 5 U.S.C.
9902(e) (4) and (5). The proposed NSPS regulations restate these
statutory requirements in Sec. 9901.313.)
CIVILIAN PAY
22. Senator Lieberman. Mr. Stewart and Ms. Sistare, John Gage in
his testimony expressed concern that the NSPS will create downward
pressure on DOD civilian pay. Are there mechanisms that you could
suggest to assure that pay levels are adequate for employee recruitment
and retention and to truly reward good performance?
Mr. Stewart. We have observed that a competitive compensation
system can help organizations attract and retain a quality
workforce.\3\ To begin to develop such a system, organizations assess
the skills and knowledge they need; compare compensation against other
public, private, or nonprofit entities competing for the same talent in
a given locality; and classify positions along levels of
responsibility. While one size does not fit all, organizations
generally structure their competitive compensation systems to separate
base salary--which all employees receive--from other special
incentives, such as merit increases, performance awards, or bonuses,
which are provided based on performance and contributions to
organizational results.
---------------------------------------------------------------------------
\3\ GAO, Additional Posthearing Questions Related to Proposed
Department of Homeland Security (DHS) Human Capital Regulations, GAO-
04-617R (Washington, DC: Apr. 30, 2004).
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We have reported that direct costs associated with salaries were
one of the major cost drivers of implementing pay for performance
systems, based on the data provided us by selected OPM demonstration
projects.\4\ We found that some of the demonstration projects intended
to manage costs by providing a mix of one-time awards and permanent pay
increases. Rewarding an employee's performance with an award instead of
an equivalent increase to base pay can help contain salary costs in the
long run because the agency only has to pay the amount of the award one
time, rather than annually.
---------------------------------------------------------------------------
\4\ GAO, Human Capital: Implementing Pay for Performance at
Selected Personnel Demonstration Projects, GAO-04-83 (Washington, DC:
Jan. 23, 2004).
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This practice is consistent with modern compensation systems, which
typically include a mix of base pay increases plus other compensation
incentives, such as one-time performance awards or bonuses. In
developing pay for performance systems, agencies must consider what
percentage of performance-based pay should be awarded as base pay
increases versus one-time cash increases while still maintaining
fiscally sustainable compensation systems that reward performance. In
addition, to the costs associated with base pay increases, modern
compensation systems typically consider an employee's salary in
relation to a competitive range when determining the amount of
performance pay that should be provided as a base pay adjustment versus
a cash bonus amount. This base versus bonus concept differs from the
largely longevity driven base pay adjustments provided to employees
under the General Schedule. This new direction concerns employees,
especially those who are close to retirement, who see these regular
base pay increases as the foundation of future retirement benefits.
Ms. Sistare. As recommended by the National Commission on the
Public Service (Volcker Commission), the purpose of performance based
pay should be to reward and encourage performance, not to save money.
This view is consistent with the recommendations of panels of the
National Academy of Public Administration and of the GAO. It is broadly
recognized that it may well cost more to implement a performance based
pay system--certainly there are start up costs for training and other
development and implementation activities which will involve additional
costs. Congress, through setting the annual overall budget for DOD
civilian pay, will be able to assure that pay levels necessary to
assure recruitment and retention and to truly distinguish between
levels of performance are maintained.
COLLECTIVE BARGAINING
23. Senator Lieberman. Mr. Gage, you have discussed ways in which
the proposed NSPS rules would curtail collective bargaining. Could you
explain the difference between how you negotiate over these issues
under current law, compared with what you believe would occur under
NSPS?
Mr. Gage. NSPS would curtail collective bargaining because it would
dramatically reduce the union's ability to bargain over matters that
greatly affect Federal employees. NSPS essentially eviscerates the
union's right to bargain but greatly expands the management right to
make personnel changes without garnering the consent of the employees
themselves. This provision takes previously negotiable issues ``off the
table,'' and permits DOD to unilaterally override provisions of
collective bargaining agreements. The new regulations also eliminates a
union's right to participate in formal discussions between bargaining
unit employees and managers.
24. Senator Lieberman. Mr. Gage, although the proposed rules would
curtail collective bargaining, the rules provide for consultation
between unions and the Department. What will be the impact of a shift
from bargaining to consultation?
Mr. Gage. As the law currently exists, management is required to
come to the table to discuss certain mandatory subjects that are deemed
to significantly affect the employee and his or her willingness to
contribute in a positive way to the workforce and the Department's
mission. This legal mandate is very important because without it,
management could refuse to bargain on these issues at all if it were
not required. Under the Department's proposal, DOD is required only to
engage in perfunctory ``consultation'' with unions over personnel
changes and can unilaterally decide which personnel changes are
significant enough to be subject to collective bargaining. The clear
intention of Congress was to protect employees' rights, and both labor
and management's responsibility to bargain in good faith as described
in chapter 71 of title 5. This newly created right to unilaterally
supersede collective bargaining agreements is not consistent with
Congress' intention that employers and employees bargain in good faith.
Quite to the contrary, this new regulation eliminates the employees'
ability to voice their concerns about their working conditions
altogether.
URGENT NATIONAL SECURITY NEEDS
25. Senator Lieberman. Mr. Gage, the Defense Department argues that
the provisions in the proposed NSPS regulations are necessary to enable
the Department to respond to urgent national security needs and to
fulfill its mission. How would you respond to that argument?
Mr. Gage. NSPS was allegedly created to enable the Department to
respond to urgent national security needs and to fulfill its mission;
however, nothing in the proposed NSPS regulations is perceptibly
connected to ``21st century threats.'' If the government seeks to
address any national security threat it must do so with the support and
cooperation of hardworking Federal employees. Yet, NSPS does not
encourage cooperation, loyalty, or industriousness among employees, but
rather fosters a cut-throat and divisive atmosphere where employees are
more concerned about their own self-interest than the mission of the
agency they serve. Employees who actually work under ``pay for
performance'' systems generally feel cynical about their chances to
excel in the workforce because their advancement is dependent upon
their supervisor's arbitrary set of expectations and preferences. Yet,
when employees have confidence in their employer and the stability of
their incomes, they are willing to work hard and pull together for the
sake of accomplishing a common mission. Clearly, NSPS takes this
cooperative spirit out of the Federal workforce and therefore
compromises, instead of bolsters, the Department's ability to respond
to urgent national security needs.
SAFEGUARDS AGAINST ABUSE
26. Senator Lieberman. Mr. Stewart, in your testimony you expressed
concern that the proposed regulations do not contain adequate
safeguards to help ensure fairness and guard against abuse. Could you
elaborate on what kinds of safeguards you believe should be considered
in this context?
Mr. Stewart. As we noted in our statement, although DOD's proposed
regulations provide for some safeguards to ensure fairness and guard
against abuse, additional safeguards should be developed. We have
developed an initial list of possible safeguards to help ensure that
pay-for-performance systems in the government are fair, effective, and
credible.\5\ The safeguards include, among other things, the following.
---------------------------------------------------------------------------
\5\ GAO, Defense Transformation: Preliminary Observations on DOD's
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, DC: Apr.
29, 2003).
Assure that certain predecisional internal safeguards
exist to help achieve the consistency, equity,
nondiscrimination, and nonpoliticization of the performance
management process (e.g., independent reasonableness reviews by
Human Capital Offices and/or Offices of Opportunity and
Inclusiveness or their equivalent in connection with the
establishment and implementation of a performance appraisal
system, as well as reviews of performance rating decisions, pay
determinations, and promotion actions before they are finalized
to ensure that they are merit-based; internal grievance
processes to address employee complaints; and pay panels whose
membership is predominately made up of career officials who
would consider the results of the performance appraisal process
and other information in connection with final pay decisions).
Assure that there are reasonable transparency and
appropriate accountability mechanisms in connection with the
results of the performance management process. This includes
reporting periodically on internal assessments and employee
survey results relating to the performance management system
and publishing overall results of performance management and
individual pay decisions while protecting individual
confidentiality.
Assure that the agency's performance management
systems (1) link to the agency's strategic plan, related goals,
and desired outcomes and (2) result in meaningful distinctions
in individual employee performance. This should include
consideration of critical competencies and achievement of
concrete results.
Involve employees, their representatives, and other
stakeholders in the design of the system, including having
employees directly involved in validating any related
competencies, as appropriate.
27. Senator Lieberman. Mr. Stewart, do you know of agencies where
such mechanisms have proven effective to guard against unfairness and
abuse in a pay-for-performance system?
Mr. Stewart. The list of safeguards mentioned above are based on
our extensive body of work looking at the performance management
practices used by leading public sector organizations both in the
United States and in other countries. However, we previously reported
that DHS created a Homeland Security Compensation Committee that is to
provide oversight and transparency to the compensation process. The
committee--consisting of 14 members, including 4 officials of labor
organizations--is to develop recommendations and options for the
Secretary's consideration on compensation and performance management
matters, including the annual allocation of funds between market and
performance pay adjustments. We also reported that high performing
organizations seek to create pay, incentive, and reward systems based
on valid, reliable, and transparent performance, management systems
with adequate safeguards and link employee knowledge, skills, and
contributions to organizational results.\6\ To that end, we found that
the demonstration projects took a variety of approaches to designing
and implementing their pay for performance systems to meet the unique
needs of their cultures and organizational structures. For example, the
Department of Commerce uses a second-level review process as a
safeguard. In this review process, the pay pool manager is to review
recommended scores from subordinate supervisors and select a payout for
each employee. The pay pool manager is to present the decisions to the
next higher official for review if the pay pool manager is also a
supervisor. In addition, the department had a grievance procedure that
allowed employees to request reconsideration of performance decisions,
excluding awards, by the pay pool manager through the department's
Administrative Grievance Procedure or appropriate negotiated grievance
procedures.
---------------------------------------------------------------------------
\6\ GAO-04-83.
---------------------------------------------------------------------------
______
Questions Submitted by Senator Jack Reed
LAB EXEMPTION FROM NSPS AUTHORITIES
28. Senator Reed. Secretary England, Sec. 9902 of the authorizing
legislation for the NSPS specifically exempts a number of defense
laboratories from the NSPS until at least October 1, 2008. However, at
the hearing, you stated that the labor relations portion of NSPS could
be implemented on these same laboratories. It is my understanding that
you are proceeding with this action. Please identify the statutory
authority that enables the Department to implement any of the pieces of
NSPS on the organizations exempted by section 9902.
Secretary England. The NSPS statute in 9902(m) provides for the
establishment of a labor relations system for the DOD to address the
unique role that the DOD civilian workforce plays in supporting the
Department's national security mission. The statute states that the
labor relations system developed or adjusted under this subsection
shall be binding on all bargaining units within DOD, all employee
representatives of such units, and DOD and its subcomponents.
COMPARISON OF AUTHORITIES OF LAB DEMONSTRATION PROGRAMS AND NSPS
29. Senator Reed. Secretary England, you stated that the NSPS grew
in some form from the work done in existing and ongoing laboratory
demonstration programs. The NSPS legislation exempts a number of
defense laboratories from inclusion into NSPS until at least October 1,
2008, and then only includes them if the Secretary of Defense
determines that the flexibilities for laboratories are greater in NSPS
than under the demonstration programs. Until that determination is
made, is it your intention to allow the laboratories to continue to
modify their individual demonstration programs so that they can develop
the best workforce to accomplish their unique mission?
Secretary England. We will continue to monitor and learn from
existing laboratory personnel demonstration projects. The NSPS strategy
to preserve HR flexibilities via implementing issuances vice
regulations provides the opportunity to learn from the demonstration
projects and rapidly improve NSPS based on their experiences. We fully
expect that once the laboratories named in subsection 9902(c)(2) are
eligible for coverage under NSPS, the system will provide even greater
flexibilities than the current personnel demonstration project
authority, including the ability to modify the system faster to meet
mission requirements.
In the meantime, laboratories will operate their existing
demonstration projects. Additionally, the Department is developing a
plan for the effective utilization of personnel management authorities
in the defense laboratories, in accordance with section 1107 of the
NDAA for Fiscal Year 2005 (Public Law 108-375), October 28, 2004. The
Department will be able to determine the feasibility and
appropriateness of any modifications to individual demonstration
projects following the completion of the section 1107 plan.
30. Senator Reed. Secretary England, have you done any comparative
analysis of the personnel authorities of NSPS and the personnel
authorities possible under full implementation of the demonstration
program authorities, including their continual modification and
improvement by local laboratory directors, so as to be able to make a
determination as to whether NSPS is in fact more supportive of the lab
missions?
Secretary England. A comparative analysis and assessment cannot be
performed at this time, because final NSPS regulations have not yet
been issued. The Department is now proceeding to draft and issue the
final regulations in accordance with requirements of the NSPS statute.
NSPS is a comprehensive HR system that will be supportive of the many
different DOD missions. In general, the range of NSPS authorities
exceeds those applicable to DOD laboratories under their current
demonstration project authority. NSPS can make changes in the same
areas that are open to DOD laboratories, as well as in the areas of the
labor-management relations system and appeals process.
The Department will conduct a substantive comparison of NSPS and
laboratory demonstration project authorities in accordance with section
1107 of the NDAA for Fiscal Year 2005, concerning effective utilization
of personnel management authorities in DOD laboratories.
______
Questions Submitted by Senator Daniel K. Akaka
NSPS TRAINING AND EDUCATION
31. Senator Akaka. Secretary England, I have been contacted by
several Federal managers who state that they are not receiving, and
believe that they will not receive, sufficient information and training
on the implementation of the NSPS. Would you explain what the DOD is
doing and will do, in addition to posting information on the NSPS
website, to train and educate managers on the system that is coming
July 1, 2005?
Secretary England. The NSPS training plan is a comprehensive, well-
planned learning strategy to prepare the DOD workforce for the
transition to pay for performance. The plan is grounded in the belief
that participants need to be informed and educated about NSPS and trust
and value it as a system that fosters accountability, respects the
individual, and protects his and her rights under the law. The plan
incorporates a blended learning approach featuring Web-based and
classroom instruction supplemented by a variety of learning products,
informational materials, and workshops to effectively reach intended
audiences with engaging, accurate, and timely content. Employees will
receive training through three primary vehicles:
Print Materials--directed to various targeted audiences to
raise awareness and educate them on key NSPS elements and
performance management concepts.
Web-based Training--Two hour-long courses, ``Fundamentals of
NSPS'' and ``NSPS 101'' providing introductory, on-line
training delivered in a consistent manner in a self-paced, on-
demand format. The ``NSPS 101'' course serves as a prerequisite
for the classroom sessions.
Classroom Sessions--the primary vehicle to communicate
critical information, classroom sessions are under development
for employees, managers, and supervisors, and human resources
practitioners, and labor relations practitioners. The sessions
will provide key operational information on all NSPS systems
elements. Classroom training will be conducted using a train-
the-trainer strategy, with trainers who participate in a train-
the-trainer program leading all classroom training. Trainers
will be provided with fully scripted instructor guides and
include basic instructional content supplemented by video
vignettes and interactive exercises. Classroom training is
scheduled to occur approximately 4 to 6 weeks prior to NSPS
implementation.
THE VOLCKER COMMISSION
32. Senator Akaka. Secretary England, the Volcker Commission gave
several examples as models for labor-management reform, including the
use of labor-management councils. The Commission noted that in these
examples, both labor and management went the extra mile to work with
each other which led to enhancement in communication and consensus. Did
DOD consider the recommendations of the Volcker Commission in working
with labor unions?
Secretary England. Yes.
NATIONAL SECURITY LABOR RELATIONS BOARD
33. Senator Akaka. Secretary England, the law creating NSPS clearly
states that the labor relations system developed shall provide for
independent third-party review of decisions. However, the draft
regulations create a new labor board, the NSLRB, within the Department
with three members appointed by the Secretary who are not subject to
any external review. Please explain how the NSLRB is an independent
third-party review panel.
Secretary England. While the Secretary will establish the NSLRB,
safeguards are established in the proposed regulations to ensure that
the NSLRB operates with independence. The members are appointed to
fixed terms of 3 years, and can be extended for two additional 1-year
appointments. Members will be independent, distinguished citizens known
for their integrity, impartiality and expertise in labor relations and/
or the DOD mission, and/or relevant national security matters. The
members are subject to the same stringent criteria for removing members
of the Federal Labor Relations Authority (FLRA) and Merit Systems
Protection Board, i.e. inefficiency, neglect of duty, or malfeasance.
Finally, all decisions of the NSLRB are reviewable by the FLRA and the
Federal circuit courts of appeals. All of these safeguards ensure that
a fair review of labor disputes will be made by the NSLRB without undue
influence by the Secretary or DOD management.
PAY-FOR-PERFORMANCE
34. Senator Akaka. Secretary England, Iris Bohnet and Susan Eaton
of the Kennedy School of Government at Harvard University recently
published a paper titled ``Does Performance Pay Perform?'' The paper
states that pay-for-performance requires the existence of certain key
conditions to be an effective system for high motivation and outcomes.
These conditions include assumptions about the output desired, the
people providing the output, and the organizational context of the
workers. However, the report found that these conditions are often not
met in the public sector, in part because of the complexity of the
typical government product, the nature of public goods, the increasing
role of teamwork and cross-agency collaboration, and the social
comparisons and internal dynamics of employees, whether public or
private. What is your response to these findings in regards to NSPS?
Secretary England. In keeping with the statutory mandate of 5 USC
9902 to better link individual pay to performance, DOD is creating pay,
incentive, and reward systems that clearly link employee achievements,
contributions, knowledge, skills, and contributions to organizational
results. At the same time, the Department recognizes that valid,
reliable, and transparent performance management systems with adequate
safeguards for employees are the precondition to such an approach. As
it designs and implements NSPS the Department is taking the following
steps:
Training managers to provide candid and constructive
feedback to help employees maximize their contribution and
potential
Emphasizing the need for ongoing and meaningful
dialogue between managers and employees
Implementing a new competency-based performance
management system that is intended to create a clear linkage
between employee performance and our strategic plan and core
values
Increasing employee understanding and ownership of the
organizational goals and objectives
Adopting automation tools that facilitate ``best
practices'' in the pay for performance environment
Reinforcing the use of team and organizational rewards
Preserving non-cash rewards as tools to recognize
performance.
SAFETY AND HEALTH OF DOD EMPLOYEES
35. Senator Akaka. Secretary England, I am concerned that NSPS may
have an adverse impact on the safety and health of DOD employees. Under
the proposed regulations, unions are limited in their ability to
bargain over procedures and technology that can have an adverse impact
on the safety and health of DOD workers. In addition, a pay-for-
performance system could lead to a situation that rewards production
and timing over the quality of work or the ability of individuals to
carry out their duties with the utmost care and safety. What assurances
can you provide that the safety and health of DOD workers will not be
compromised by the implementation of NSPS?
Secretary England. The Department takes the health and safety of
its employees very seriously. While collective bargaining agreements
may provide for provisions regarding safety, these agreements cannot
conflict with the statutory safeguards regarding safety that already
exist for all of our employees. The Department regularly takes steps to
ensure the health and safety of its employees even for employees not
covered by collective bargaining agreements. These safeguards will not
go away due to NSPS. Also, the proposed regulations attempt to strike a
balance between employee interests and DOD's need to accomplish its
mission effectively and expeditiously. For example, while the proposed
regulations eliminate bargaining on procedures regarding operational
management rights (which cover safety and health matters), the proposed
regulations also continue to provide for bargaining on impact and
appropriate arrangements for all management rights (such as safety and
health issues). Finally, the proposed regulations provide for
consultation on procedures regarding the operational management rights,
which lie at the very core of how DOD carries out its mission. The
regulations continue to provide the unions a voice on safety issues
through bargaining or consultation.
A pay for performance system is not inconsistent with and, in fact,
can support the Department's concern for safety issues. Although
factors such as timing and levels of production are frequently key
elements of performance objectives, these objectives must also take
into account the need for adherence to safety guidelines and the
willingness to identify concerns about work practices that raise safety
issues. The Department's training for supervisors will include sessions
on how to write performance objectives that address health and safety.
RESTRUCTURING DOD'S PERSONNEL SYSTEM
36. Senator Akaka. Secretary England, one of the Department's
concerns when asking for authority to restructure DOD's personnel
system in August 2003, was the lengthy and complicated process required
for hiring people to fill critical skill areas, especially in areas
needed in support of the global war on terrorism. Other than the
ability of the Secretary to quickly hire individuals identified as
``qualified experts,'' what are some of the authorities that DOD will
use under NSPS in order to streamline the hiring process?
Secretary England. The proposed regulations give DOD the ability to
establish direct hiring authorities that can be used in situations
where there are critical needs or severe shortages. DOD will also be
able to create new authorities as necessary by publishing (jointly with
OPM) a notice for in the Federal Register. If a critical mission need
arises, DOD can implement new hiring authorities without a preceding
comment period. In these cases, a comment period would follow the
implementation of the authority and the authority could be modified
subsequently based on comments received. The proposed regulations also
give DOD the ability to streamline the process for examining
applicants. Any process developed by DOD must be consistent with merit
system principles and veterans' preference.
SPIRAL ONE
37. Senator Akaka. Secretary England, under the spiral
implementation plan for NSPS, Spiral One will begin around July 2005
covering some 60,000 employees. The second spiral will begin after the
Department has assessed Spiral One and after the Secretary of Defense
certifies DOD's performance management system. What is the process the
Department will follow for assessing Spiral One?
Secretary England. The Department's workforce composition is very
complex, and NSPS is intricate. We have adopted a spiral approach to
phase in NSPS employment, compensation, performance, and other
provisions besides labor relations. Spiral One will be white-collar
jobs, and will phase in units in three increments. The first, Spiral
1.1, will be robust in size and mix. The Department will conduct the
performance management system assessment based on Spiral 1.1 units,
upon completion of their first performance rating and payout cycle.
This assessment will enable the Secretary of Defense to determine if
the performance management system meets the statutory criteria so that
we can apply NSPS beyond the cap of 300,000 employees.
The Department has a second, separate assessment objective for
Spiral One: to determine if NSPS is operating within the Department's
key performance parameters, and if there are good practices to share or
systemic weaknesses that require correction. For this purpose, the
Program Executive Officer is developing a comprehensive, long-term
evaluation plan. It will include periodic activities like attitude
surveys and statistical analysis of human resource transactions under
NSPS; scheduled special studies of key practices and effects of NSPS;
and participant observation focus groups. We shall use existing sources
whenever possible, like the Defense Civilian Personnel Data System and
DOD Status of Forces Civilian opinion survey, and incorporate or
extract NSPS-related data. Once Spiral One is completed, we shall
prepare an interim NSPS assessment report that draws on the findings of
the preceding evaluation activities.
38. Senator Akaka. Secretary England, what criteria will the
Secretary use to certify DOD's performance management system?
Secretary England. The Department is developing the criteria. We
plan to use feature and outcome oriented criteria, calling on our
experience with demonstration project performance management systems
and recent OPM guidelines for certifying pay for performance systems.
For example, we can determine if the system features a process for
feedback and review timetables, and a means for assuring adequate
system resources, by looking at system design and policies. Once the
system is up and running, we can use outcome-oriented criteria, for
example, assessing adequate training in terms of positive participant
feedback, or effective safeguards in terms of comparative rating and
payout patterns and results of reconsideration processes.
PERSONNEL SYSTEM AT THE DEPARTMENT OF HOMELAND SECURITY
39. Senator Akaka. Mr. Blair, in response to a question I posed at
an Oversight of Government Management Subcommittee (Homeland Security
and Governmental Affairs Committee) hearing last month, the DOD
submitted several examples of cases where it believes MSPB
administrative judges did not take the Department's mission into
account in deciding cases. One example involved the Department's
proposed removal of an employee with 28 years of experience who took a
$5 piece of surplus tubing. The MSPB reduced the penalty to a 90-day
suspension. Is it the administration's intent to fire employees, with
otherwise outstanding service, for minor offenses under both the NSPS
at DOD or the new personnel system at the DHS?
Mr. Blair. No, the administration does not intend to remove
employees for minor offenses. Every case is of course unique and what
seems like a minor offense may, under certain circumstances have a
major impact on the mission of the agency. For example, sleeping at
one's desk may be a minor offense for a file clerk, but is a major
offense when committed by a security guard. The final DHS regulations
and the proposed NSPS regulations recognize the critical nature of
those agencies' missions and simply require that, prior to mitigating a
penalty, MSPB give due deference to the assessment made by the agency
of the impact the misconduct had on that mission.
ESTABLISHMENT OF CAREER GROUPS
40. Senator Akaka. Mr. Blair, under the proposed NSPS regulations,
DOD may establish career groups based on various factors such as
mission, nature of work, qualifications or competencies, and other
characteristics. The Department states that it will document in the
implementing issuances the criteria and rationale for grouping
occupations or positions into career groups. When will this criteria be
available for the Department's employee representatives?
Mr. Blair. As specified in the proposed NSPS regulations, the
career groups and the criteria for the groups will be provided in
implementing regulations. Proposed Sec. 9901.106(a)(3)(i) states that
``Within timeframes specified by the Secretary, employee
representatives will be provided with an opportunity to submit written
comments to, and to discuss their views with, DOD officials on any
proposed final draft implementing issuances.''
41. Senator Akaka. Mr. Blair, will they be provided the opportunity
to make comment or will the criteria be adopted without comment?
Mr. Blair. As stated in proposed Sec. 9901.106(a)(3)(i) ``Within
time frames specified by the Secretary, employee representatives will
be provided with an opportunity to submit written comments to, and to
discuss their views with, DOD officials on any proposed final draft
implementing issuances.''
WORKING CONDITIONS
42. Senator Akaka. Mr. Gage, you testified that the NSPS will
eliminate the ability of unions to negotiate over critical working
conditions. Will you please explain the differences between current law
and NSPS regarding bargaining over working conditions and the impact of
these changes will have on DOD workers?
Mr. Gage. The provisions in NSPS severely restrict the unions'
ability to bargain over working conditions, and thereby restrict the
unions' ability to ensure a healthy and encouraging working environment
for the employees they represent. The proposed restriction on
collective bargaining contained in DOD's proposed NSPS regulations
takes several very important issues that significantly effect working
conditions ``off the table,'' including: overtime, shift rotation,
flexi-time, alternative work schedules, and deployment away from
regular work locations. Although these issues greatly impact the
quality of work life for the employee, the proposed NSPS regulations
undermines the unions' right to negotiate over these provisions.
HIGHER STANDARD PROPOSED
43. Senator Akaka. Mr. Gage, I am deeply concerned about the higher
standard proposed by DOD under NSPS for the MSPB to meet in order to
mitigate penalties imposed by the Department. In your opinion, what
impact will this change have on the ability of employees to have their
cases fairly and justly adjudicated?
Mr. Gage. The standard for mitigation by the MSPB of discipline and
penalties imposed on employees under NSPS in the proposed regulations
is virtually impossible to meet and effectively removes the possibility
of mitigation. In a court of law, the standard of review to determine
if the penalty a Department imposes is to assess if the action was
``unreasonable.'' Under the new proposal the bar would be raised and
employees would have to prove that the adverse action is ``wholly
unjustified.'' This new standard will completely eviscerate the
employee's ability to have his or her cases fairly and justly
adjudicated. The new standard shifts a disproportionate amount of the
burden for proving any wrongdoing onto the employee while management
officials or any other person in a supervisory position will be given
an additional opportunity to treat workers unfairly without any fear of
reprisal. Determining if an adverse action is ``unreasonable'' is an
equitable standard of review, backed by 25 years of precedence upon
which decisionmakers can base their conclusions. The ``wholly
unjustified'' standard proposed by Secretary Rumsfeld is vaguely
defined and opens the door to arbitrary and capricious decisionmaking.
This type of adjudication defeats the purpose for which the MSPB was
originally established: to provide a fair and unbiased forum where
employees can appeal to have the merit system principles upheld.
NSPS APPEALS PROCESS
44. Senator Akaka. Ms. Sistare, you made several suggestions in
your written testimony as to how the DOD can improve the perception of
fairness in the NSPS appeals process. What specific suggestions do you
have regarding the proposed standard for the mitigation of penalties by
the MSPB and the ability of DOD to overturn a decision by a MSPB
administrative judge?
Ms. Sistare. It is my view that the first level of adjudication and
appeal is most critical to employees. It is difficult for an employee
to ``take on'' his or her employing agency, and employees should not
have to look to higher levels of appeal for fair resolution of their
cases. I believe it is appropriate to continue MSPB in its role as a
forum for appeals. If the written standards for MSPB's review are clear
and comprehensive, and take DOD's mission into consideration, the need
for reconsideration by DOD could be avoided.
EMPLOYEE TRAINING
45. Senator Akaka. Ms. Sistare and Mr. Stewart, an issue raised
repeatedly in discussions over the personnel changes at DOD and DHS is
the need for adequate training for all employees on the new personnel
system. Have you looked into this issue, and if so, what
recommendations do you have regarding the amount, type, or regularity
of personnel training that is needed to launch and sustain a new
personnel system?
Ms. Sistare. The recommendations of the National Commission on the
Public Service (Volcker Commission), panel reports by the National
Academy of Public Administration, and certainly the experience and
recommendations of the GAO have all emphasized the importance of early,
sustained, and ongoing training to the successful implementation of
performance based pay. In fact, the successful development and
implementation of any personnel change requires understanding, buy-in,
and ongoing communication--all of which require training. Some of this
training--that which is primarily introductory and informational or
describes processes--can be written or on-line. Those who have studied
and implemented such systems believe, however, that the ability to
interact and communicate that is required to implement a performance
based pay system must be taught in a direct and interactive setting. I
believe that to be fully successful, it will require the additional
steps of role playing and coaching.
Mr. Stewart. As we noted in our report, Human Capital: A Guide for
Assessing Strategic Training and Development Efforts in the Federal
Government,\7\ training and developing new and current staff to fill
new roles and work in different ways will be a crucial part of the
Federal Government's endeavors to meet its transformation challenges.
DOD and DHS are significant components of this transformation.
---------------------------------------------------------------------------
\7\ GAO, Human Capital: A Guide for Assessing Strategic Training
and Development Efforts in the Federal Government, GAO-04-546G
(Washington, DC: March 2004).
---------------------------------------------------------------------------
In April 2004, GAO and the National Commission on the Public
Service Implementation Initiative hosted a forum on whether there
should be a governmentwide framework for human capital reform and, if
so, what this framework should include. As part of the criteria that
agencies should have in place as they plan for and manage their new
human capital authorities, participants generally agreed that adequate
resources for planning, implementation, training, and evaluation were
needed. Additionally, they noted that agencies should ensure adequate
training as they implement new human capital authorities.
Selected OPM personnel demonstration projects trained employees on
the performance management system prior to implementation to make
employees aware of the new approach, as well as periodically after
implementation to refresh employee familiarity with the system. The
training was designed to help employees understand their applicable
competencies and performance standards; develop performance plans;
write self-appraisals; become familiar with how performance is
evaluated and how pay increases and awards decisions are made; and know
the roles and responsibilities of managers, supervisors, and employees
in the appraisal and payout processes. According to the DHS
regulations, its performance management system is designed to
incorporate adequate training and retraining for supervisors, managers,
and employees in the implementation and operation of the system.
GAO currently is reviewing training and development issues at DHS.
Our work includes a review of DHS's training efforts on its new
personnel system, MAXHR. Our report is scheduled to be released this
fall.
EMPLOYEE PERFORMANCE
46. Senator Akaka. Ms. Sistare and Mr. Stewart, both the DHS and
DOD personnel systems permit managers to convey performance
expectations to employees orally. I think this can put employees at a
disadvantage, especially as their pay will be more closely tied to
their performance. How can employees be held accountable for
performance expectations provided orally?
Ms. Sistare. I believe it is necessary to distinguish clearly
between performance standards and tasks. Performance standards, as the
term is used by GAO and others for the implementation of a performance
based pay system, need to be clearly aligned with the work expectations
of the employee and the agency's mission. This level of performance
standard should, in my view, be clearly communicated and written.
Individual tasks assigned pursuant to performance standards can be
oral, and it would in many cases be overly cumbersome to require that
they be written. In between these two standards, I would recommend
written as well as oral communication, when it is not unreasonably
burdensome, as clarity, communication, and the opportunity for
interaction are regarded as key to successful administration of
performance based pay.
Mr. Stewart. To help enhance credibility and fairness and avoid any
problems, some sort of written documentation of performance
expectations is appropriate, in addition to orally communicating
performance expectations. However, the means can vary.
GUARD AGAINST ABUSE
47. Senator Akaka. Mr. Stewart, you testified as to the lack of
details in the NSPS proposed regulations, including the absence of
adequate safeguards to ensure fairness and guard against abuse in
measuring performance and paying employees. What sort of oversight do
you believe is needed to promote consistency of the performance
management system and do you believe external review of pay and
performance decisions is necessary?
Mr. Stewart. In April 2003, when commenting on DOD civilian
personnel reforms, we testified that Congress should consider
establishing statutory standards that an agency must have in place
before it can implement a more performance-based pay program, and we
developed an initial list of possible safeguards to help ensure that
pay-for-performance systems in the government are fair, effective, and
credible.\8\ One of the safeguards we identified is to assure that
certain pre-decisional internal safeguards exist to help achieve the
consistency, equity, nondiscrimination, and nonpoliticization of the
performance management process. For example, independent reasonableness
reviews by Human Capital Offices and/or Offices of Opportunity and
Inclusiveness or their equivalent in connection with the establishment
and implementation of a performance appraisal system, as well as
reviews of performance rating decisions, pay determinations, and
promotion actions before they are finalized to ensure that they are
merit-based; internal grievance processes to address employee
complaints; and pay panels whose membership is predominately made up of
career officials who would consider the results of the performance
appraisal process and other information in connection with final pay
decisions.
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\8\ GAO-03-717T.
48. Senator Akaka. Mr. Stewart, what kind of external review would
you propose?
Mr. Stewart. We reported that independent reasonableness reviews by
Human Capital Offices and/or Offices of Opportunity and Inclusiveness
or their equivalent in connection with the establishment and
implementation of a performance appraisal system and the effective
implementation of a compensation committee similar to the Homeland
Security Compensation Committee are important to assuring that
predecisional internal safeguards exist to help achieve consistency and
equity and assure nondiscrimination and nonpoliticization of the
performance management process.\9\
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\9\ GAO-04-320T.
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In our report on implementing pay for performance at selected
personnel demonstration projects, we mentioned that some of the
demonstration projects implemented as safeguards a second-level review
and grievance process, as these examples illustrate.
Second-level review process:
Second-level supervisors are to review all
assessments. In addition, an overall assessment of ``highly
successful'' is to be sent to the appropriate department's
Performance Review Board for the assignment of an official
rating of ``1'' or ``2.'' The supervisor and reviewer are to
assign a ``4'' or ``5'' rating based on a problem-solving
team's findings and a personnel advisor's input.
Pay pool managers review recommended scores from
supervisors and select a payout for each employee. The pay pool
manager is to present the decisions to the next higher official
for review if the pay pool manager is also a supervisor.
Grievance process:
Employees may request reconsideration of their ratings
in writing to the third-level supervisor and indicate why a
higher rating is warranted and what rating is desired. The
third-level supervisor can either grant the request or request
that a recommending official outside of the immediate
organization or chain of authority be appointed. The employee
is to receive a final decision in writing within 21 calendar
days.
Employees may grieve their ratings and actions
affecting the general pay increase or performance pay
increases. An employee covered by a negotiated grievance
procedure is to use that procedure to grieve his or her score.
An employee not under a negotiated grievance procedure is to
submit the grievance first to the rating official, who will
submit a recommendation to the pay pool panel. The pay pool
panel may accept the rating official's recommendation or reach
an independent decision. The pay pool panel's decision is final
unless the employee requests reconsideration by the next higher
official to the pay pool manager. The official would then
render the final decision on the grievance.
EMPLOYEE APPEALS PROCESS
49. Senator Akaka. Mr. Stewart, the proposed regulations provide
for an accelerated MSPB adjudication process for employee appeals. I
have long been concerned about the impact a shortened processing time
for one agency may have on employees at other agencies with cases
pending before the MSPB. Do you believe the NSPS regulations will have
an adverse effect on employee appeals both at DOD and at other Federal
agencies?
Mr. Stewart. The U.S. Merit Systems Protection Board will not know
the actual impact until a number of cases are adjudicated.
______
QUESTIONS SUBMITTED BY SENATOR BILL NELSON
PERFORMANCE BASED PAY SYSTEM
50. Senator Bill Nelson. Secretary England and Mr. Blair, while the
GAO has been successful in implementing a pay for performance system,
the National Association of Public Administration's studies and the
GAO's own experiences illustrate several factors that need to be
addressed when adopting performance based pay in the Federal
Government. I am concerned that the lack of detail in the current
process fails to address these factors, and as a result will have a
significant impact on DOD's implementation plans and the ultimate
success of the NSPS. I would appreciate your assessment of DOD's
concept and plans for a performance based pay system, specifically with
regard to risk. Do you envision high, medium, or low risk for
successful implementation--and impact on mission accomplishment--in
terms of: Timeline for implementation? Complexity? Cultural change
required? Adequacy of funding levels? How do you intend to minimize or
mitigate risks?
Secretary England. NSPS represents a very significant change in the
DOD. However, the risk of potential negative impact on mission
accomplishment is minimal, and is far out-weighed by the advantages
that a modern human resources system and pay for performance culture
will bring to the Department. The Department and the components have
established a risk management process to identify, address, and manage
NSPS risks. After risks are identified, mitigation strategies are
proposed and evaluated. Each risk may have very different mitigation
options, and might include such things as: training, schedule changes,
increased funding, or policy changes. The risks associated with the
implementation timeline, implementation complexity, cultural change,
and adequacy of funding levels are address below.
Timeline For Implementation
The greatest risks associated with the NSPS implementation and
deployment timeline are associated with system and organizational
readiness. Therefore, the Department has determined that the NSPS
implementation and deployment schedule is event-driven. This means that
NSPS will only be deployed when it is ready--meaning all stakeholders
have been adequately trained, the IT systems and policies and
procedures have been developed and tested, and organizations are ready
to make the cultural change to NSPS.
Complexity
NSPS is a large and complex program, and therefore will take a
great deal of time and effort to deploy. However, managing large
projects is something that the Department of Defense does very well
every day. To address the implementation complexities of NSPS, along
with the NSPS Program Executive Officer (PEO), each component has
established a dedicated program manager and full-time staff to help
manage NSPS deployment. In addition, components have identified
implementation leads at several different levels within their
component, from the major command/claimant level down to the
installation and activity level. The PEO is also developing a Web-based
readiness tool that will help organizations and their chain of command
understand implementation tasks and monitor their readiness to
implement NSPS.
Cultural Change
NSPS brings with it a very significant cultural change, and as with
any change there exists the risk that a population will reject it. In
order to lessen this risk and better prepare the workforce for the
cultural change that comes with NSPS, each component has rolled out
change management training. In addition, the PEO and components have
kept the workforce informed about NSPS by communicating current and
pertinent information as soon as it is available, including a very
robust Web site. The PEO and components have also prepared information
packages for local commanders and encouraged them to share information,
such as what NSPS will and will not change, with their workforces.
Adequacy of Funding Levels
One of the key requirements of the NSPS performance management
system is to be able to provide meaningful financial rewards to good
performers. Without the proper funding, this requirement cannot be
realized. The NSPS statute requires that ``to the maximum extent
practicable, for fiscal years 2004 through 2008, the overall amount
allocated for compensation of the DOD civilian employees who are
included in the NSPS may not be less than the amount that would have
been allocated for compensation of such employees for such fiscal years
if they had not been converted to the NSPS.'' In order to
operationalize this requirement, an issuance will be developed to
provide fiscal guidance to the components. In addition to the financial
policy, funding requirements will also be reinforced through training.
Mr. Blair. Highly experienced and knowledgeable OPM subject-matter
experts have worked, and will continue to work, very closely with DOD
experts to develop the framework for the NSPS performance-based
compensation system. OPM has similar and recent experience with the DHS
and a long history of monitoring and evaluating demonstration projects
that employ similar pay systems. These experiences give me great
confidence in the jointly-developed NSPS framework.
One of the strongest features of NSPS is that a number of its
details will be developed within the context of a continuing
collaboration process with employee representatives. This, together
with DOD's decision to phase in the implementation of its pay-for-
performance system through a series of ``spirals,'' makes the overall
risk associated with implementation extremely low. Our experience and
research allow us to go forward with confidence that NSPS will enjoy
successful implementation. DOD also will mitigate any risk by investing
resources toward training of the workforce in all aspects of the new
system.
51. Senator Akaka. Mr. Stewart, Mr. Gage, and Ms. Sistare, what do
you recommend to minimize or mitigate risks?
Mr. Stewart. The key to a successful organizational transformation
is to implement strategies to help individuals maximize their full
potential in the new organization, while simultaneously managing the
risk of reduced productivity and effectiveness that often occurs as a
result of the changes. While there is no one right way to manage a
successful merger, acquisition, or transformation, the experiences of
both successful and unsuccessful efforts suggest that there are
practices that are key to their success. These key practices include
the following:
1. Ensure top leadership drives the transformation.
Leadership must set the direction, pace, and tone and provide a
clear, consistent rationale that brings everyone together
behind a single mission.
2. Focus on a key set of principles and priorities at the
outset of the transformation. A clear set of principles and
priorities serves as a framework to help the organization
create a new culture and drive employee behaviors.
3. Set implementation goals and a timeline to build momentum
and show progress from day one. Goals and a timeline are
essential because the transformation could take years to
complete.
4. Dedicate an implementation team to manage the
transformation process. A strong and stable team is important
to ensure that the transformation receives the needed attention
to be sustained and successful.
5. Establish a communication strategy to create shared
expectations and report related progress. The strategy must
reach out to employees, customers, and stakeholders and engage
them in a two-way exchange.\10\
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\10\ GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington, DC:
July 2, 2003).
Mr. Gage. The design and creation of NSPS has been a covert
maneuver from its very inception. DOD has released regulations but has
failed to concretely define them. We are deeply concerned that the
``pay for performance'' system may be twisted into a forced
distribution system where employees receive awards and pay adjustments
not based on their merit but based on a system of outright bias. We are
strongly opposed to this system not only because of the enormous
discretion it places in the hands of current and future officials but
because of the monumental risks associated with its implementation. In
order to minimize or mitigate these risks we strongly recommend that
employees and/or their representatives have a strong influence in the
implementation of this process. In order for the new pay system to be
as transparent and objective as the General Schedule system, we
recommend that decisions regarding pay be made in collective
bargaining, where employees and their representatives can be equal
partners in the process and have the opportunity to influence its
outcome.
Ms. Sistare. The National Academy of Public Administration and the
National Commission on the Public Service (Volcker Commission) hosted a
forum on successful implementation of performance based pay in the fall
of 2003. There was wide agreement among participants that while
implementing performance based pay is difficult, the results in terms
of mission performance and employee satisfaction are fully worth it.
The imperatives for successful implementation, as articulated in the
report on this forum, are as follows:
A credible appraisal methodology
A transparent system
A timely set of processes
Consultation with those affected
Peer review
Ongoing communications, including feedback from all
involved
Training of managers and supervisors, who themselves
are evaluated on how they manage performance
Training of employees to participate in the system
To this list, Paul Volcker added the importance of careful and
ongoing oversight by the responsible leadership in the executive branch
and by Congress.
Participants also identified several factors for which implementers
must be prepared:
Adequate time: adoption of pay for performance will
take time
Verifiable performance systems: individual performance
must be linked to organization goals and sound performance
management systems, including agreement and buy-in among all
those who are part of the system
Culture change
Adequate funding
Careful assessments: pay for performance is
complicated because it is difficult to make meaningful
distinctions in evaluating performance once one gets below the
top performers in an organization.
WHISTLEBLOWER PROTECTION
52. Senator Akaka. Secretary England and Mr. Blair, it is the
employees of agencies--the folks on the ground--who have the most
thorough knowledge of how our government operates on a day-to-day
basis. It is these government workers, when they see failures or
shortcomings who step up to the plate as a whistleblower.
Whistleblowers are key to good government. They point out waste, fraud,
abuse, and weaknesses in the operations of our agencies. In recent
years there have been several examples of rank-and-file government
employees who have pointed out problems with government systems that
subsequently were improved. If government workers fear for their jobs,
and don't trust the personnel systems to protect them, we lose our most
effective watchdogs. What assurances can you give employees that they
will be protected should they feel compelled to come forward with
information?
Secretary England. It is a common misconception that whistleblower
protection is changed or impacted by NSPS. Current law and policy
ensures management cannot take or threaten to take an action because
someone is a whistleblower. We do not want this to change and it has
not and cannot be changed by NSPS.
Mr. Blair. DOD employees will continue to enjoy the same
protections from whistleblower reprisal as they do today. The proposed
NSPS regulations maintain the current protections for whistleblowers
under the law as NSPS legislation charged OPM and DOD to do. The
proposed regulations do not change the avenues of redress available to
employees who believe they have been subjected to reprisal for
whistleblowing. Employees will know that they are protected in the same
manner as today should they feel compelled to come forward with
information under the NSPS.
53. Senator Akaka. Secretary England and Mr. Blair, what are the
various mechanisms the new system will use to guarantee a Federal
worker who speaks his or her mind won't be subjected to retribution by
their supervisors?
Secretary England. The Department cannot and does not wish to
change rules regarding prohibited personnel practices. Rules remain
unchanged regarding prohibited personnel practices and are reviewable
by outside independent agencies such as the Office of Special Counsel
and the Merit Systems Protection Board.
Mr. Blair. As noted above, employees will be able to file
complaints of whistleblower reprisal to the Office of Special Counsel
which can investigate such complaints and file on behalf of the
employee before the Merit Systems Protection Board. If the Special
Counsel declines to pursue a complaint, an employee is entitled to file
an appeal directly with the MSPB. In addition, employees will be
entitled to raise whistleblower reprisal as an affirmative defense in
any adverse action appeal to the MSPB. These are the same mechanisms
that are in place today so employees will see no change in this regard.
______
Questions Submitted by Senator Hillary Rodham Clinton
DEFENDING COMPUTER NETWORKS
54. Senator Clinton. Secretary England, Rome Lab in New York has a
unique mission to help defend the computer networks that support many
of our warfighting efforts. This mission requires them to compete with
private industry for a limited pool of highly compensated cybersecurity
specialists. I understand that Rome, as part of the overall Air Force
Research Lab, is operating under a congressionally authorized special
personnel system that has enabled them to recruit, hire, and retain
these types of people, as well as electrical engineers and other
scientists. These systems are controlled at the local level and as such
are very responsive to the specialized needs of each lab--for example,
hiring computer specialists to come to Rome. How will these ongoing
special personnel demonstration programs be handled in the NSPS?
Secretary England. As noted at question 30, above, NSPS is a
comprehensive HR system that will be supportive of the many different
DOD missions. In general, the range of NSPS authorities exceeds those
applicable to DOD laboratories under their current demonstration
project authority. NSPS can make changes in the same areas as are open
to DOD laboratories, and also in the areas of the labor-management
relations system and appeals process.
The Department will conduct a substantive comparison of NSPS and
laboratory demonstration project authorities in accordance with section
1107 of the NDAA for Fiscal Year 2005, concerning effective utilization
of personnel management authorities in DOD laboratories.
PERSONNEL PROGRAMS
55. Senator Clinton. Secretary England, the National Defense
Authorization Act for Fiscal Year 2004 excluded these programs from
inclusion in NSPS so places like Rome could continue to provide the
best support to our warfighters. Congress was unwilling to disrupt an
ongoing successful program at such a critical juncture. How do you plan
to enable places like Rome to continue and expand their unique
personnel programs so they can best perform their missions?
Secretary England. We will continue to monitor and learn from our
existing laboratory personnel demonstration projects, including the
Rome Research Site. The NSPS strategy to preserve HR flexibilities via
implementing issuances vice regulations provides the opportunity to
learn from the demos and rapidly improve NSPS based on their
experiences. We fully expect that once the Air Force Research
Laboratory (which includes Rome Research Site) is eligible for coverage
under NSPS, the system will provide even greater flexibilities than the
current personnel demonstration project authority, including the
ability to modify the system faster to meet mission requirements. In
the meantime, the Laboratory will operate under its demonstration
project authority, with the ability to modify its system if necessary.
The Department is developing a plan for the effective utilization of
flexible personnel management authorities in the Defense Laboratories,
in accordance with section 1107 of the National Defense Authorization
Act for Fiscal Year 2005.
[Whereupon, at 12:05 p.m., the committee adjourned.]