[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 110-26]
 
     THE NATIONAL SECURITY PERSONNEL SYSTEM--IS IT REALLY WORKING?

                               __________

                                HEARING

                               BEFORE THE

                         READINESS SUBCOMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             MARCH 6, 2007

                                     
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                         READINESS SUBCOMMITTEE

                   SOLOMON P. ORTIZ, Texas, Chairman
GENE TAYLOR, Mississippi             JO ANN DAVIS, Virginia
SILVESTRE REYES, Texas               WALTER B. JONES, North Carolina
LORETTA SANCHEZ, California          J. RANDY FORBES, Virginia
ROBERT A. BRADY, Pennsylvania        MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                JOHN M. McHUGH, New York
MADELEINE Z. BORDALLO, Guam          HOWARD P. ``BUCK'' McKEON, 
MARK UDALL, Colorado                     California
DAN BOREN, Oklahoma                  ROBIN HAYES, North Carolina
NANCY BOYDA, Kansas                  FRANK A. LoBIONDO, New Jersey
CAROL SHEA-PORTER, New Hampshire     TOM COLE, Oklahoma
JOE COURTNEY, Connecticut            ROB BISHOP, Utah
DAVID LOEBSACK, Iowa                 CANDICE S. MILLER, Michigan
GABRIELLE GIFFORDS, Arizona          TRENT FRANKS, Arizona
KATHY CASTOR, Florida                CATHY McMORRIS RODGERS, Washington
                Cathy Garman, Professional Staff Member
                 John Chapla, Professional Staff Member
                   Christine Roushdy, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2007

                                                                   Page

Hearing:

Tuesday, March 6, 2007, The National Security Personnel System--
  Is It Really Working?..........................................     1

Appendix:

Tuesday, March 6, 2007...........................................    33
                              ----------                              

                         TUESDAY, MARCH 6, 2007
     THE NATIONAL SECURITY PERSONNEL SYSTEM--IS IT REALLY WORKING?
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck'', a Representative from 
  California, Readiness Subcommittee.............................     2
Ortiz, Hon. Solomon P., a Representative from Texas, Chairman, 
  Readiness Subcommittee.........................................     1

                               WITNESSES

Dominguez, Hon. Michael, Principal Deputy Under Secretary of 
  Defense for Personnel and Readiness............................     3
Gage, John, National President, American Federation of Government 
  Employees (AFGE), AFL-CIO......................................     5
Lacey, Mary, NSPS Program Executive Officer......................    12
Masters, Dr. Marick F., Professor of Business, Katz Graduate 
  School of Business, University of Pittsburgh...................     9
Stier, Max, President and CEO, Partnership for Public Service....     7

                                APPENDIX

Prepared Statements:

    Dominguez, Hon. Michael......................................    37
    Gage, John...................................................    47
    Masters, Dr. Marick F........................................    66
    Stier, Max...................................................    57

Documents Submitted for the Record:

    United DoD Workers Coalition statement by Ron Ault...........    75
Questions and Answers Submitted for the Record:

    Mr. McHugh...................................................    85
    Mr. Reyes....................................................    86
     THE NATIONAL SECURITY PERSONNEL SYSTEM--IS IT REALLY WORKING?

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                                    Readiness Subcommittee,
                            Washington, DC, Tuesday, March 6, 2007.
    The subcommittee met, pursuant to call, at 2:05 p.m. in 
room 2118, Rayburn House Office Building, Hon. Solomon P. Ortiz 
(chairman of the subcommittee) presiding.

 OPENING STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE 
          FROM TEXAS, CHAIRMAN, READINESS SUBCOMMITTEE

    Mr. Ortiz. This hearing will come to order, and if you can 
take your respective positions so that we can begin this 
hearing.
    We want to welcome you all to today's subcommittee hearing 
under the Department of Defense National Security Personnel 
System. I want to thank our witnesses for making the time to 
appear before us today. We know that our Department of Defense 
(DOD) witnesses had to change schedules, and they had to alter 
their plans, but, again, we appreciate you being with us today.
    Congress created the National Personnel System, or NSPS, in 
2003. Changing the way DOD manages its employees is a 
monumental undertaking, yet this committee has not held any 
hearings on this system, and we have not had any hearings since 
back in 2003, and we have not had any oversight hearings since 
that time back in 2003. So today's hearing is important to 
illustrate what is working and what challenges we have out 
there.
    Congress understands the Defense Department is facing tough 
challenges in managing its large civilian population of over 
700,000 workers. We recognize that addressing the critical 
concerns of hiring, promoting and keeping talented individuals 
is essential to NSPS. The new system was intended to help DOD 
respond to 21st century human resources needs, but was it the 
right fix?
    Regulations to putting the changes into place were 
published only two years ago in November of 2005. Some believe 
that not enough time has passed for us to see how NSPS is 
working. I disagree. Timely oversight is critical. Today's 
hearings will understand the problems that DOD may have found 
in the early stages, according to the elements of NSPS in 
place.
    What is DOD hearing from its employees? How is DOD taking 
care of concerns that have been raised by its employees? What 
is needed to move the system forward? What, if any, legislation 
might be needed to correct any problems that might be found? 
What role are the employees' unions playing in making the 
changes? These are only a few areas that we need to review.
    Today we will hear from the employees' representatives 
themselves, who found many problems, leading them to file a 
lawsuit. The union is an important partner in managing the 
workforce, so we must understand their views of the system and 
listen to their voices.
    Our other two witnesses are well known for their research 
on personnel systems. I look forward to your testimony.
    But before starting, I would like to include a statement 
from the--for the record from the Metal Trades Department, 
American Federation of Labor-Congress of Industrial 
Organizations (AFL-CIO), on the behalf of the United DOD 
Workers Coalition.
    And I would like to talk to my good friend from California 
Mr. McKeon for any remarks he might have.
    [The information referred to can be found in the Appendix 
on page 75.]

 STATEMENT OF HON. HOWARD P. ``BUCK'' McKEON, A REPRESENTATIVE 
            FROM CALIFORNIA, READINESS SUBCOMMITTEE

    Mr. McKeon. Thank you, Mr. Chairman. It is good to be with 
you, and I thank you for holding this hearing to discuss the 
Defense Department's initial implementation of the National 
Security Personnel System.
    Given both the size and scope of NSPS, which potentially 
affects nearly 700,000 civilian employees of the Pentagon, or 
about one-third of the federal government's nonpostal civilian 
workforce, NSPS is among the most important matters that will 
come before the subcommittee this session. This hearing will 
give the subcommittee members an opportunity to learn more 
about NSPS and to question the Defense Department and other 
stakeholders not only about NSPS implementation, but also about 
how NSPS has begun to affect the workforce.
    Congress enacted NSPS because it believed that a new way 
was required for the Department of Defense to find a way to 
recruit, reward and retain our most talented employees, and to 
get the most out of the federal workforce.
    Furthermore, the enacted legislation recognized that DOD, 
given its unique mission and the necessity for civilian 
employees to work hand in hand with the brave men and women who 
wear the uniform of our armed services, certainly had need for 
a personnel system that differed from the rest of the federal 
government.
    As you know, NSPS implementation has begun for only a 
portion of the Department's workforce and is being enjoined for 
the bargaining unit employees until decisions are rendered by 
the U.S. Court of Appeals for the District of Columbia Circuit. 
We should deal with that court decision when rendered and when 
the implications of it are thoroughly analyzed and not before.
    My focus is to understand more fully how well the 
Department is recognizing its challenges in starting a new 
civilian personnel system and whether it has begun to provide a 
system that truly does benefit both the Department and the 
magnificent civilian workforce it employs.
    Mr. Chairman, Mr. McHugh is in an intelligence meeting and 
cannot be here today, but I would like to have questions that 
he will submit answered in the record if that is possible.
    Mr. Ortiz. Today we have a panel of witnesses who will 
discuss the Department of Defense National Security Personnel 
System. Our witnesses today are Michael Dominguez, Principal 
Deputy Under Secretary of Defense for Personnel and Readiness, 
and he is accompanied by Mrs. Mary Lacey, NSPS Program 
Director. And then we have other witnesses: Mr. John Gage, 
National President, American Federation of Government 
Employees; Mr. Max Stier, President and CEO of Partnership for 
Public Service; Dr. Marick Masters, Professor of Business, Katz 
Graduate School of Business, Pittsburgh.
    Without objection, all of the written testimony will be 
submitted for the record, and we are going to try to see if we 
can stay within the five-minute rule so that we can be sure 
that everybody gets a chance to ask their questions.
    So, Secretary Dominguez, thank you. You can open up with 
your statement.

  STATEMENT OF HON. MICHAEL DOMINGUEZ, PRINCIPAL DEPUTY UNDER 
        SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS

    Secretary Dominguez. Thank you very much, Mr. Chairman and 
distinguished members of this subcommittee. Thank you for the 
opportunity to talk with you about implementation of the 
National Security Personnel System at the Department of 
Defense. And I agree with you, sir, and Congressman McKeon that 
an oversight hearing is welcome for us, and we welcome your 
interest in this.
    NSPS is well under way. In fact, as of today we have close 
to 80,000 DOD employees operating under NSPS. Mrs. Mary Lacey, 
the program executive officer responsible for design, 
development, and implementation for NSPS, joins me here today, 
and together we will be happy to take your questions.
    You called this hearing today to ask us if NSPS is working. 
Recognizing that we are still early in the implementation 
process, my answer is yes, NSPS is working. With Deputy 
Secretary of Defense Gordon England leading the NSPS 
transformation, the Department stays focused on successfully 
implementing NSPS. The design of NSPS has been well thought 
out, well managed, and extensively overseen.
    We have moved very carefully and deliberately to design and 
implement a system that achieves the Department's goal for a 
flexible human resource system that is results-focused and 
performance-oriented. It is early in the journey as it will 
take years before the Department realizes all of the results 
NSPS was designed to produce, but we are already showing a 
powerful return on investment.
    We are seeing an unprecedented training effort focused on 
performance management for employees and supervisors who are 
seeing greater communication between supervisors and employees. 
People are talking about performance, results, and mission 
alignments. We are seeing increased flexibility and rewarding 
exceptional performance. Finally, we are seeing positive 
movement in behaviors and in organizational culture. These 
early returns are cause for optimism as we continue to deploy 
the system.
    Today, NSPS remains as vital to the success of the 
Department's mission as it was in November of 2003. This 
modern, flexible human resources management system improves the 
way DOD hires, compensates and rewards its civilian employees, 
while preserving employee protections and benefits, veterans 
preference, as well as the enduring core values of the Civil 
Service. It provides a performance management system that 
aligns individual performance objectives with DOD's mission and 
strategic goals. Successful implementation of NSPS will improve 
our ability to accomplish the DOD's mission.
    The training component of NSPS deployment is one of the 
most extensive civilian-focused training initiatives ever 
undertaken in DOD. As of February 2007, about half a million 
training events have taken place. In addition to training on 
NSPS mechanics, supervisors were trained in soft skills, how to 
coach, monitor, and build a team. Employees also were offered 
soft-skill training, how to communicate, improve writing 
skills, and interact with their supervisor. Importantly, 
training was not and is not now a one-time event. Employees 
raise follow-up questions and concerns, and we respond.
    By the end of next month, the total number of employees who 
will have transitioned to NSPS will exceed 114,000 more 
employees than most Cabinet-level agencies. That is substantial 
progress, and important attention that we have received from 
our senior leaders has enabled us to sustain motivation in 
this.
    One of the key ingredients is program evaluation, and that 
applies to NSPS. The Department has an ongoing evaluation 
effort, a mechanism to monitor the effectiveness of NSPS and 
its effect on the workforce to ensure the system is delivering 
the results we expect. Evaluation process includes in-depth 
analysis of personnel data and statistics, employee surveys, 
structured interviews, and other methodologies.
    We have gained considerable experience in evaluation from 
our personnel demonstration projects, and we are working 
closely with Office of Personnel Management (OPM) to ensure we 
have a rigorous, objective analysis and the data upon which to 
base our assessments.
    This is an important feature of our Spiral implementation 
approach in which we expect to make incremental adjustments to 
the system going forward. In fact, based on feedback we already 
received from our employees and supervisors, we expanded our 
training program to include additional training on writing job 
objectives and performing self-assessments. We are working to 
improve the automated system that supports performance 
management, we developed a pay-setting guide, and we are 
developing a compensation guide that will soon be available to 
supervisors.
    So to answer your question, NSPS is really working. We 
believe it is. We also know that fundamental organizational 
cultural change takes time, and it can't be achieved overnight, 
and we are taking the time to do it right.
    And thank you for providing the opportunity, and I look 
forward to your questions.
    Mr. Ortiz. Thank you so much.
    [The prepared statement of Secretary Dominguez can be found 
in the Appendix on page 37.]
    Mr. Ortiz. Mr. Gage.

STATEMENT OF JOHN GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION 
                 OF GOVERNMENT EMPLOYEES (AFGE)

    Mr. Gage. Mr. Chairman, members of the committee, my name 
is John Gage, and on behalf of the more than 200,000 civilian 
employees of DOD represented by AFGE, I thank you for the 
opportunity to testify today.
    Since 9/11, the Bush Administration has taken every 
opportunity available to advocate for a profound erosion of 
Civil Service protections and collective bargaining rights for 
federal employees. First in 2001, the Bush Administration 
reluctantly agreed that the terrorist attacks necessitated 
federalizing airport security functions, But they also insisted 
that the legislation not allow security screeners the rights 
and protections normally provided to federal employees.
    In 2002, the Bush Administration reluctantly agreed with 
Senator Lieberman that the creation of the Department of 
Homeland Security (DHS) was necessary; however, the Bush 
Administration insisted on a quid pro quo for that 
acquiescence, specifically that federal employees who were 
transferred into the Department would not be guaranteed the 
collective bargaining rights they had enjoyed since President 
Kennedy was in office. In addition, the Bush Administration 
insisted that the legislation, which was eventually signed into 
law, exempted the DHS from compliance with major chapters of 
Title V, including pay classification, performance management, 
disciplinary actions, and appeal rights, as well as collective 
bargaining rights.
    In 2003, then-Defense Secretary Rumsfeld insisted that the 
national defense authorization bill include similar provisions 
which attacked the Civil Service protections and collective 
bargaining rights of 700,000 DOD civilian employees. Despite 
months of debate over serious objections raised by AFGE and 
Representatives and Senators from both parties, the national 
defense authorization bill granted DOD the ability to write 
regulations creating the new NSPS, a personnel system that 
removed many collective bargaining rights and Civil Service 
protections from DOD civilian employees.
    During this onslaught, AFGE's support of collective 
bargaining rights and Civil Service protections for Federal 
employees has never wavered. Without these rights and 
protections, it will be impossible for the government to 
attract and retain high-quality employees, and our democracy as 
well as our national security will suffer.
    Mr. Chairman, I am here today to urge the Congress to 
repeal the statutory authority for NSPS as provided under the 
2004 Defense Authorization Act.
    The Defense Authorization Act called for a new labor 
relations system ostensibly for DOD to engage in national-level 
bargaining with unions rather than negotiate the same issues at 
each local installation. In addition, the law addressed the 
need to retain an independent third party to resolve labor-
management issues. AFG strongly supported both of these 
principles.
    However, DOD showed its disregard of the latitude given by 
Congress and, contrary to the statute, drafted NSPS regulations 
allowing DOD to waive chapter 71 of Title V in its entirety. 
Specifically, the relations go beyond the concept of national-
level bargaining and instead virtually eliminate collective 
bargaining over matters that go to the very heart of employee 
issues, including overtime, shift rotations, flex time, 
compressed work schedules, safety and health programs, and 
deployment away from the work site.
    In addition, the regulations eliminate the statutory right 
to collective bargaining by providing the Secretary unlimited 
power to remove any subject from bargaining by unilateral 
issuance.
    DOD also showed its disregard of Congress and drafted NSPS 
regulations that replaced the current independent statutorily 
created Federal Labor Relations Authority and the Federal 
Service Impasses Panel with an internal board whose members are 
directed solely by the Secretary. This internal board is not 
independent as required by statute. The board's composition 
ensures that it will lack impartiality and thus undermine the 
credibility of the collective bargaining system among 
employees.
    AFGE, working with the other 36 unions of the United 
Defense Workers Coalition, spent months participating in the 
congressionally mandated meet and confer process, offering DOD 
options and alternatives that would have changed and enhanced 
current procedures without sacrificing the fundamental employee 
rights that Congress intended to be safeguarded by the law.
    We have produced and distributed a document entitled 
Contrasting Plans for the Department of Defense: Laborers 
Proposals for Positive Change; however, despite months of 
meetings, DOD failed to take the process seriously, and for all 
practical purposes ignored the coalition's proposals. DOD made 
clear they simply wanted unlimited authority with no effective 
outside review.
    On the other side, the coalition took the process very 
seriously. We listened carefully to DOD concerns, made concrete 
proposals to address them in a constructive framework. We 
offered to engage in national-level, multiunit, multiunion 
bargaining. We also offered to speed up the time frames for 
bargaining to work with the new concept of postimplementation 
bargaining when necessary to protect national security and 
defense, and to engage in mediation, arbitration processes by 
mutually selecting independent arbiters in order to quickly 
resolve any bargaining disputes. We believe these changes alone 
would allow DOD to succeed in implementing new processes that 
would enhance the mission of the agency. But without having the 
requirements of chapter 71 and other normal bargaining 
procedures, DOD simply ignored the union proposals. Any 
deviation from any proposal was met with a simple notation that 
it was needed for national security.
    At no time did DOD make any concrete showing how the 
failure to have any of these due regulations impacted national 
security. If DOD was acting in good faith, they could have made 
a national security explanation for each proposal. They had 
plenty of time to do it and did not. They have had, since 2003, 
to bring forward post-9/11 examples of the need for NSPS. The 
need simply does not exist. It never did. And I might add since 
2003, our locals are operating without incident under the 
current law.
    Mr. Chairman, in my written testimony I have detailed the 
regulations' effect on individual appeal rights and pay. These 
regulations are as damaging to the rights of employees to 
appeal adverse actions and to have their pay system be free of 
political influence as they are to the collective bargaining 
system.
    In conclusion, the NSPS envisioned by the DOD regulations 
is contrary to the 2004 Defense Authorization Act. The 
regulations are unfair to employees, and, if implemented, they 
will undermine the contribution to mission that DOD civilian 
employees have demonstrated so ably over the years.
    On behalf of AFG and the coalition, Mr. Chairman, I 
strongly urge the subcommittee to repeal the statutory 
authority for NSPS.
    Thank you.
    Mr. Ortiz. Thank you.
    [The prepared statement of Mr. Gage can be found in the 
Appendix on page 47.]
    Mr. Ortiz. Mr. Stier.

  STATEMENT OF MAX STIER, PRESIDENT AND CEO, PARTNERSHIP FOR 
                         PUBLIC SERVICE

    Mr. Stier. Thank you. I appreciate the opportunity to be 
here.
    My name is Max Stier. I am the President of Partnership for 
Public Service. We are a nonprofit organization dedicated to 
inspiring a new generation into government service and 
transforming the way government works. And the first 
observation I would make here is that it is kudos to you for 
holding this hearing. It is absolutely vital for committees 
such as yours to look at these workforce issues.
    If you look across the government today, we face a number 
of challenges that ultimately come down to something that we 
would all agree is very basic, which is good government 
requires good people, and we need to ensure that we have the 
right people and they are given the rights, the resources, in 
order to meet the challenges of the future.
    The 9/11 Commission said it best when they said the quality 
of the people is more important than the quality of the wiring 
diagram. Typically in Washington, we have an awful lot of time 
spent on wiring diagrams because they are easy, things you can 
do, you can feel, you can touch. You know they are finished 
once you have done it. The people issues are much more 
challenging, and they require sustained attention over a great 
deal of time and focus. And as I said, it is a testament to 
this committee that you are holding this hearing today.
    I believe that there is a lot of common ground here. I 
believe that most folks would agree that the government has to 
do things in a different way than it was done in the past to 
meet the new challenges in the future. And people issues are 
core to the possible--to the success of government in achieving 
its ultimate mission.
    The system we have in place today, with respect to 
personnel management, is largely a system that was created in a 
very different era. The personnel, the pay system was created 
in 1949, a time in which the kinds of demands we had on the 
workforce and the kinds of demands we had on our government 
were very different than we have today.
    You said it exactly right, and that is that the issue is we 
need to change. The questions are are these the right changes, 
and I think this committee has an incredibly important role in 
ensuring that those right changes are taking place.
    So I would offer three recommendations to this committee 
from the perspective of a nonprofit, nonpartisan organization 
thinking about these issues across government.
    First, with respect to the NSPS, we believe that you ought 
to move forward or allow the Defense Department to move forward 
with certain elements of the activity that is taking place, 
those elements that address hiring reforms, that address 
workforce reshaping, particularly the creation of a market-
sensitive pay system that is more sensitive to employee 
performance issues.
    The reason why I say this is that we are not operating 
within a vacuum. We have had extensive experimentation that 
extends back 25 years with these same issues. In 1978, the last 
time that Congress enacted a major reform of the Civil Service 
System, they provided a mechanism to test out different things, 
and that demonstration authority has been tested out at the 
Defense Department quite extensively beginning with China Lake 
in 1979. And one of the important facts to be focused on here 
is we have a record that ought to be looked at in terms of how 
we can bring additional changes to the rest of government.
    In China Lake in 1979, 21 percent of the employees 
supported the demonstration project. In 1978, that number was 
71 percent. We know some changes can work if they are done 
right. The key is good implementation.
    Number two, we think we ought to be separating out the 
changes that are taking place in NSPS at least in two buckets. 
There are some changes that are primarily focused on 
performance management systems. There are others that are 
focused on labor relations and due process issues. Unlike with 
the first bucket, you do not have the same record with 
experience with respect to these changes in the demo projects 
on labor relations and due process issues. You do not have the 
same record to be able to rely on that these kinds of changes 
are necessary or actually promote more effective workforces. 
And we would advise this committee to treat those changes very 
differently.
    Third, we think that the reality is that these changes do 
take a lot of time to understand and to be effectively put into 
place, and that the key for this committee is going to be 
ongoing oversight. And the key to successful ongoing oversight 
is going to require two elements. Number one, like with the 
demo project statute, we would advise this committee to require 
that there be an annual outside evaluation of what is taking 
place at DOD. That is part of the demo project. It is not part 
of NSPS. We think it ought to be.
    We think there is a smaller set of indicators that this 
committee can be looking at on a regular basis that will enable 
you to have a better sense in real time about what is going on, 
and we provide in our written testimony an outline of what 
those categories ought to be, things like looking at 
recruitment, retention, skill gaps, performance distinctions. 
All data that is available to you has to be done in 
collaboration with DOD. They collect a lot of information. You 
need quality of indicators, not quantity. But at the end of the 
day, you need real data that you can be looking at on a 
periodic basis to understand what is unfolding on the ground.
    I look forward to any questions you might have and 
appreciate the opportunity to be before you today.
    Mr. Ortiz. Thank you.
    [The prepared statement of Mr. Stier can be found in the 
Appendix on page 57.]
    Mr. Ortiz. Dr. Masters.

STATEMENT OF DR. MARICK F. MASTERS, PROFESSOR OF BUSINESS, KATZ 
     GRADUATE SCHOOL OF BUSINESS, UNIVERSITY OF PITTSBURGH

    Dr. Masters. Thank you. It is a pleasure to be here this 
afternoon. My name is Marick Masters, and I am a professor of 
business and public and international affairs at the University 
of Pittsburgh, where I direct a Center on Conflict Resolution 
and Negotiations. I teach in the areas of human resource 
management, negotiations, labor management relations. I have 
studied Federal-sector personnel issues for about 25 years. I 
have done--I did my dissertation in the early 1980's on the 
topic. I have also been a university administrator, and I have 
dealt with some of these performance appraisal systems in 
practice, actually evaluating professionals and professional 
staff.
    I am also a coequity partner in a consulting firm. My two 
partners are retired Coast Guard vets; retired at the old age 
of 43, I might say. And I do a lot of consulting with 
management, mainly in the private sector, to some extent in the 
public sector.
    I should also note in the interest of full disclosure that 
I am a former candidate for Congress. I ran in the 18th 
District in 1992 for the Democratic nomination, and I took some 
money from Federal employee unions and postal employee unions. 
I have tried to be objective. It hasn't tainted my viewpoint at 
all, I can tell you. I don't taint my viewpoint for anybody.
    I am here to focus on the National Security Personnel 
System of the Department of Defense. I want to comment of four 
aspects of it: the plan overall, pay for performance, employee 
appeals and labor management relations. If you would like for 
me to comment in more detail, I would be happy to do so in 
writing.
    I must admit I want to compliment the Administration for 
taking on a very difficult task. It is easier to criticize than 
it is to compliment, and I want to highlight those things that 
I think they have done right.
    I believe very strongly in a strong civilian component. I 
have a son, Sergeant Masters, who is in the 3rd Infantry at 
Fort Stewart, Georgia. He has done two tours of duty. He is 
undergoing surgery for his knee next month. I hope he has got a 
good Army doctor or nurse. So I believe very strongly in 
promoting a civilian sector.
    The NSPS plan, its final regulations, let me comment 
briefly on a few of those things.
    It is very consistent, apart from the labor-management 
relations part, with trends in the private-sector research that 
has been done. There is nothing really new about what it is 
doing. There is growing use, numerous studies, I could cite you 
chapter and verse, about the use for pay for performance. If 
you are in the private sector and don't use pay for 
performance, they will look at you like you are crazy. There is 
an increased emphasis on performance management. That is true 
in government and the private sector.
    There has been an increased use in nonunion discipline 
procedures, grievance procedures, those kinds of things, and a 
traditional role for that in the unionized sector. And there 
has been an increasing emphasis in both the union and nonunion 
sectors on negotiating flexibilities.
    I prefer the term ``organizational'' to ``managerial'' 
flexibility because I think it implies a lot more to what 
management can do to move an organization forward. I applaud 
DOD for its efforts in this regard, and I think it is moving in 
the right direction, and I have worked with companies that have 
actually negotiated much more difficult things with unions to 
achieve some of the things that DOD has done.
    Pay for performance. It is certainly complementary. What it 
is trying to do here--there are some concerns that I have, and 
I haven't had first-hand knowledge of this, so let me raise 
some concerns that I have.
    I am concerned that there may not be enough money in the 
pay pool to receive the salary increases or bonuses that are 
meaningful. That is number one. You have got to give more than 
four, five, six, seven, eight percent. My doctoral student told 
me seven percent is the magic number, and he knows better than 
I because he just took his preliminaries in this area. You have 
got to have a meaningful amount of money.
    The process is heavily based on supervisory ratings. There 
is no way of saying that you can do it systematically wrong. 
That is my concern about this. You can do things 
systematically, but you can still end up with the wrong result, 
and I have dealt with these kinds of things, evaluating 
professionals, and they are very subjective.
    Now, I compliment DOD for the training that it has pursued 
in this. I have looked at some of the training materials, and 
they are very good. And for such a system to work requires 
employees and managers have confidence in the system.
    Now I am going to skip ahead. I am not certain that that 
precondition is here. I would like to be able to talk to 
managers away from their supervisors and find out what they 
really think about this system and--but let me go to the--the 
adverse action part of it raises questions about procedural 
justice. I will skip over that and go to what I think is the 
fundamental weakness of this plan and what is the hurdle for 
making it realize the other objectives, and that is its labor-
management system.
    If I had given an assignment to somebody to say, I want you 
to design a flexible management system with labor-management 
systems consistent with national security, I may or may not 
have come up with this plan. If I had given an assignment to 
somebody and said, I want you to come up with a plan that 
eviscerates collective bargaining as much without explicitly 
outlawing it, I would have come up with this plan. And I have 
sat on the opposite side of the table advising companies that 
this is what you should do if you want to do it.
    So basically they have expanded management rights, they 
have shrunk the scope of bargaining, and they have created what 
is--you know, it is comical to call the Security Labor 
Relations Board independent. It violates all pretense of 
independence.
    I shall not comment on the extent to which the unions have 
been involved so far in the design process, but I will say the 
meet and confer is a very low standard, as is consultation. I 
had an assignment as a doctoral student to rank public-sector 
laws as to what they extended to unions. Meet and confer is 
about the lowest thing that you can extend. All you have to do 
is hold a meeting, and you have met your obligation.
    I might say a mind is like a parachute. It works best when 
it is open. I get the impression--I don't have any factual 
basis to say this, but I get the impression that the process 
could have been more open, and I think the courts agree with 
that.
    I applaud DOD for taking on a difficult task. I applaud the 
Administration generally for paying attention to the management 
part of Office of Management and Budget (OMB), and I hope that 
these reservations are helpful in having them move forward on 
certain dimensions. But my principal concerns lie in the 
confrontational approach taken to labor. If you want them to go 
along for the ride, you might want a more collaborative 
approach than what has been done so far.
    Thank you.
    [The prepared statement of Dr. Masters can be found in the 
Appendix on page 66.]
    Mr. Ortiz. I am going to start off with one question, and 
then I am going to allow other Members to ask questions.
    But the Government Accountability Office (GAO), when it 
reviewed the Department's implementation efforts, emphasized 
the importance of the employee buy-in to the new system. And 
what are the specific mechanisms that are in place for 
continuous employee involvement; and in particular how is DOD 
evaluating manager and employee feedback or how the new system 
compares with the old one, the performance appraisal process, 
improvement in measuring performance, the time it takes for 
managers to review employee performance, and the overall 
operation and strength of the system?
    And I have a lot more questions, but maybe we can open up 
with this question, and hopefully maybe you can, you know, 
touch on it and enlighten us as to how this is going to happen.
    Secretary Dominguez. Thank you, Mr. Chairman.
    Let me go back to--I guess it was early 2004, spring of 
2004, before Mary came into the picture, when Deputy Secretary 
England, at that time Secretary of the Navy England, became 
very involved in NSPS and helped us restructure it in a way 
that did exactly what you are talking about. We stopped the 
implementation of it and then went out and did a very extensive 
employee feedback and comment-gathering process. And that 
extensive involvement with employees through town halls, 
through focus groups, through Web things, through the Web, 
through surveys, through e-mail, through leadership, right? We 
went out and got leadership together, got them understanding 
what needed to be done and then pushed them out to talk to 
people and receive feedback.
    So we have made a major effort from the beginning to 
communicate with employees, to seek feedback from employees, 
and we have changed what we are doing as a result of that 
feedback.
    Ms. Lacey can give you a lot more specifics, but, you know, 
I know that that feedback is ongoing. I have done the town 
halls. I have been out there and talked to people. I have 
grabbed commanders and pulled them into sessions where we 
talked to them about NSPS, talked to them about what their 
responsibilities are in NSPS and getting out and communicating 
to people, and leading that change face to face, nose to nose 
with people out there.
    I mentioned in my oral statements a quite extensive 
performance evaluation, program evaluation activities that we 
do have underway.
    So, Mary, do you want to add anything?

    STATEMENT OF MARY LACEY, NSPS PROGRAM EXECUTIVE OFFICER

    Ms. Lacey. Thank you, Mr. Chairman. Let me add a few things 
about systemic collection of information from employees.
    We have a status of forces survey that we put out yearly or 
biyearly within the Department, and we are already--we have 
already added questions to that survey so we can get specific 
feedback on the National Security Personnel System from 
employees and supervisors, and, in fact, we have oversampled 
the population that is in NSPS to ensure that we do get robust 
data.
    I have a Web site that I get hundreds of questions in, that 
we respond to questions from employees, but that tees up areas 
where they are concerned. And I use that to shape additional 
communication and training material that we need to put in the 
hands of employees and managers.
    We are working already in capturing some of the information 
that we know from our laboratory demonstration experience and 
work with GAO and OPM that if we don't capture it now, we won't 
get it; but that is some of the feedback, the--actually what 
happened with the Spiral 1.1 employees, the first group in, so 
that we can capture that for evaluation purposes in the future. 
And in addition to that, we are continuing to have discussions 
with the unions that represent some of the employees in the 
Department of Defense.
    So there is a multitude of methods that we are employing to 
continue to get the employee feedback.
    Mr. Ortiz. See, before I pass it on to my good friend from 
California, one of the things is that the five members that 
would be selected or have been selected to make the evaluation, 
you know, because when we look at all of the different workers, 
the workforce, there is different skills, different 
occupations, and if I was to be evaluating somebody, I want to 
be sure that I understand the skills that they perform. 
Otherwise I don't think I would be able to make a good 
evaluation.
    I hope I am getting across--you know what I am talking 
about? If I am a mechanic, and I am supposed to be evaluating a 
mechanic, and I don't have that expertise, it would be very 
hard for me to evaluate that individual. But we can come back 
to that.
    Let me yield to my friend from California.
    Mr. McKeon. Thank you.
    As I stated earlier, this is important to address. I 
appreciate your testimony.
    Based on your experience so far with NSPS, I would like 
each of you to tell me weaknesses that you have seen in the 
implementation of what you would do to change that, to overcome 
those weaknesses.
    We will start with you, Mr. Secretary.
    Secretary Dominguez. Thank you, Congressman. I will cover a 
little bit. Again, Mary has a lot more detail about it as the 
program executive.
    From the lessons learned from the implementation of Spiral 
1.1, we learned that we needed to move away from a fixed 
conversion date. We brought everybody in Spiral 1.1 in on one 
day. That was tough on a lot of organizations and tough on a 
lot of people, and one of the things we learned was why we need 
to do that, let us spread it out, give people a window, and 
then let commanders bring their organizations in when the 
mission allows and when they feel like their unit is ready to 
go. So that was a no-brainer, great fix.
    The second is we got a lot of feedback from people about we 
need more training on writing performance objectives and doing 
feedback and doing self-assessments. So we bumped up the 
training in that area.
    We need more IT tools to help people and supervisors do the 
performance evaluations and record it and--you know, and just 
streamline that process. We need more IT tools.
    And then we need to be able to help managers figure out how 
to set pay. When you bring someone in, and you have got a pay 
band, instead of GS-7, where do I start them in their salary? 
How do I think about that? And in the performance evaluation 
and award, how do I think about the split between bonus and 
salary, and what should I be doing and considering about that?
    So we are developing guidelines and tools and information 
for managers on those things, and that is the stuff that we 
heard.
    And do you need to add anything?
    Thank you, sir.
    Mr. McKeon. Mr. Gage.
    Mr. Gage. There has been little evidence of NSPS on our 
work sites, but I must say that when you insist on abrogating 
employee rights and protections in order to put in a new 
personnel system, this is no way to start, this isn't anything 
for the middle, and it certainly can't be the end.
    The rights issue is extremely important to any acceptance 
of a new personnel system. When you come to some of the--our 
people who are veterans, they are tearing apart tanks on 
overtime down in Anniston, and you tell them that you are going 
to lose rights to put in a new personnel system, just not going 
to accept it, sir, and I think this abrogation of rights has to 
stop.
    Mr. Stier. I would reiterate my earlier comment that, A, it 
is really too early to know what the consequences are in terms 
of both pro and con, I think, in implementation. They have one 
performance cycle only with the first Spiral that is completed 
in January of 2007. And to me, I think the vital question right 
now is in addition to, as I alluded to earlier, separating out 
the different kinds of things that are taking place in the 
system, because I think there are some that have a background 
of support from the demo projects and some there don't, but I 
think the critical piece right now that I would advise this 
committee to pursue is to ensure that you are getting right 
data to understand on an ongoing basis what is happening. DOD 
is absolutely collecting very important information. You don't 
need to see all of that information, but you do need to agree 
to some small subset that is an appropriate representative from 
your perspective about what is going on on the ground.
    I would also suggest that there is obviously a 
governmentwide requirement for a survey of employees. I think 
it is very important DOD's oversampling NSPS's population. But 
in addition to an annual selection of material, you can engage 
in pulse surveys of that NSPS population so that you can be 
looking at a more frequent basis at some of the impact that is 
taking place on the ground.
    I think that they are going to be interested in much 
greater detail than you ever will be and should be, but that 
there is a small subset of indicators that you--I think would 
help your ability to ensure that that is--what is happening is 
what you want to see happen.
    Dr. Masters. I haven't seen enough data to really comment 
about the progress so far with pay for performance, but I am 
very glad they are collecting a lot of it, and I would like to 
know what benchmarks they are looking for and how they measure 
the change they expect in evaluations. I commend them for doing 
all they have done so far.
    But if I were to recommend a change, I would scrap the 
labor-management relations part of the regulations. I really 
think that that is the monkey wrench that is going to keep you 
from moving this organization forward.
    Mr. Ortiz. Mr. Loebsack.
    Mr. Loebsack. As a new member of this committee, I am kind 
of on a steep learning curve as far as these issues are 
concerned, new Member of Congress, I should say as well. But I 
want to thank all of you today for your testimony, and in 
particular I guess I want to thank Dr. Masters for his comment 
about collective bargaining because I think they are right on.
    I do have some questions also, Mr. Gage. I have some 
questions of Mr. Stier, for example.
    You said at the outset there are differences from now and 
1949. Maybe you could elaborate some of those differences other 
than the fact that it is 2007, and that was 1949, and maybe the 
national security issue that was part of that. But I think it 
is important for us to recall that in 1949, the Soviet Union 
exploded a nuclear weapon. In 1949, we were at the beginning of 
the Cold War, and the next year we had the Korean War. We have 
had a lot of national security threats, and I think this is 
important for the Honorable Dominguez also to keep in mind for 
people in DOD who adopted this system and are trying to 
implement this system.
    I think there are differences--other differences. For 
example, I am sure Mr. Gage might very well agree with me that 
the labor movement is a lot weaker than it was at that time and 
an easier target than it was at that time.
    Those are some of the things that immediately come to mind 
for me when I hear you say there are differences between now 
and 1949. But maybe you can either refute those differences 
that I mentioned or add to them.
    Mr. Stier. If I might say, I am a Hawkeye from Iowa City.
    Mr. Loebsack. That doesn't get you off the hook. I went to 
Iowa State.
    Mr. Stier. Everyone has their weaknesses.
    But in any event, I think in direct answer to your 
question, I have no dispute with the similarities that you are 
describing. I think fundamentally the nature of the government 
work force, the nature of the challenges that we expected to 
address has changed dramatically. So looking at the absolute 
demographics in 1949, and excuse me for round figures, but you 
are looking at a professional workforce of 70 percent clerical 
and 30 percent professional, whereas today it is the opposite. 
Now you have got 70 percent professional and 30 percent 
clerical. You are talking about a workforce that is much more 
dominated, rather than by repetitive tasks, than by knowledge 
workers, a much more fragmented knowledge workforce that in 
many ways requires individualized attention and treatment, so 
that it is a different world in terms of trying to attract 
talent into a regimented, compartmentalized system that did 
work in 1949 that doesn't work today.
    There are some wonderful photos of the workforce in 1949 
and earlier with these, you know, giant, you know, full-floor 
cube farms where people are filing papers. That is not what 
Federal workers are doing today.
    We need to be looking at systems that are both going to 
attract and retain and get the most out of that knowledge 
workforce, which is, as I suggested, very different.
    Mr. Loebsack. Do you believe in collective bargaining?
    Mr. Stier. Absolutely. As I suggested earlier in my 
testimony, both written and oral, my view is that you are 
really dealing with apples and oranges here. There are some 
sets of changes that engage in looking at the hiring 
flexibility and workforce reshaping, in market-sensitive pay, 
in performance management systems. All of those things I think 
are really important for us to be looking at DOD and across 
government to ensure that we are able to motivate and attract 
and retain the right workforce.
    I don't believe that you have that same record of support 
for the labor relation changes, nor, very importantly, 
something we haven't talked about here, the due process issues, 
the adverse actions and appeal issues, where I think 
fundamentally, at the end of the day, we need a workforce that 
buys into any system, any new system that we are adopting. And 
that is--you know, you can have the best system in the world. 
It ain't going to work if the workers don't believe in it, and 
that is something we need to see here.
    Mr. Loebsack. Just to sort of bring me up to speed.
    Maybe, Mr. Dominguez, you can answer. What were the 
problems that were identified in the first place? I know we are 
getting at the end of my time here, but why did this system 
come about in the first place? What were the problems that 
Secretary Rumsfeld or others saw that they believe had to be 
remedied?
    Secretary Dominguez. Congressman, first let me say 
congratulations on your election. Welcome to the Congress.
    I find myself facing a steep learning curve perpetually. 
The problems were many, as Mr. Stier mentioned about, just the 
fundamental change in the workforce and the nature of work in 
our environment, but, more importantly, specifically about the 
national defense as contrasted with 1949. I love the good old 
days with the Soviet Union because they were an understandable 
threat. They were a predictable threat. They were a stable 
threat. We could build against them. It was strength against 
strength, and ours was better.
    We are dealing today in a global environment against 
asymmetric threats. Nobody is going to come against us strength 
to strength because they will lose. They understand that. So 
they are coming at us in ways we cannot anticipate and ways we 
are trying to imagine before they hit us.
    There is a rapid change through technology in the nature of 
our business, both at the warfighting end and in the business 
operations end, where we need to be able to implement that 
change rapidly to both fragility in terms of delivering our 
product on the battlefield, but also in terms of stewardship of 
the taxpayers' resources so we get the most into the teeth of 
the DOD.
    And so those things are fundamentally different as is the 
imperative to transform around performance and to move to a 
performance and results culture as opposed to a culture of 
activity and seniority.
    Mr. Loebsack. Thanks.
    Ms. Bordallo [presiding]. I wish to thank the gentleman 
from Iowa, and the Chair recognizes Ms. Shea-Porter.
    Ms. Shea-Porter. Thank you, Madam Chair.
    Don Rumsfeld was never accused of being warm and fuzzy, and 
neither has the Department of Defense ever been accused of 
being warm and fuzzy, and I don't think that is a 
responsibility, by the way. But I am very concerned about what 
I have been hearing.
    Let me quote a little bit of the language here where you 
have been talking, Mr. Dominguez, about this program and the 
great work that you are doing now.
    Ms. Shea-Porter. Unprecedented training, for example, and 
in-depth analysis and other skills. And it makes me wonder if 
what is different, why you weren't doing that to begin with for 
a workforce to try to improve a workforce that was already in 
place. Because it seems to me that when you had so many 
complaints about this switch, and they weren't in your town 
hall meetings, they were not positive responses to this, and it 
was actually stated that you were trying to weaken the unions. 
I don't understand. And then not allowing a union to be present 
and a union to engage in collective bargaining. I get 
suspicious at what you are really trying to do was bust the 
labor unions. And so I ask you to please address that.
    Secretary Dominguez. Thank you very much. Let me speak 
first to the training effort.
    I have, been for most of my life, a public servant, in the 
Army from 1971 to 1980, as a civil servant beginning in 1983 
with the few, you know, years out to dabble in dot com business 
and Beltway bandits. But most of my career has been in the 
civil service or in public service in DOD.
    And as a civil servant, a career civil servant, I have 
never witnessed this amount of training going into focused on 
improving the skills in the civil workforce.
    Ms. Shea-Porter. Let me ask you, could you have done that 
and still allowed the unions to have collective bargaining?
    Secretary Dominguez. NSPS was the catalyst for that 
transformational change. Now, we did design a labor relation 
system that was to be the partner for the NSPS, so that revised 
and modified the labor relation system. That has not been 
implemented. It is enjoined by the courts right now. And we are 
not doing anything with it until after the court rules. And I 
believe that we did design a system that did allow for 
collective bargaining. But it also followed the law which said 
that--not meet and confer--but continuing collaboration was the 
sole and exclusive process for the labor to be involved in the 
development of the NSPS.
    Ms. Shea-Porter. Let me take another tack then. You 
mentioned that you were in the military. And the military, 
again, goes by rank. And so has civil service. A certain amount 
of time and you have to assume--and perhaps you have to tighten 
the process--and I wouldn't argue about that, to make sure that 
people perform at the level that they are hired at and they 
continue to perform in order to have their promotions. But it 
has worked very well in the military, for the most part, to 
have a certain amount of time at rank before you reach another 
rank, and the same thing for the civil service system. My 
concern, and you stated it yourself when you said, when you get 
a new employee, you have to ask yourself, how do I think about 
that pay band?
    Well, the reason that they had the civil service was so 
that there would be more objective criteria, that it wouldn't 
be left up to did you like this person? Was this person a 
friend of so-and-so? Was this person politically connected? It 
was to level the playing field and have you concentrate more on 
what the particular skills were.
    So if they are hiring the wrong people to begin with, you 
certainly should be looking at personnel. But once you hire 
somebody, it seems to me you should be doing the ongoing 
unprecedented training that you talked about, and that you 
should be a certain amount of time in grade. Because what it 
does is it gives the employees a sense of confidence that they 
are being promoted or being left behind--which is the option in 
civil service not to promote. But they are being promoted or 
left behind based on certain criteria.
    When you switch over to this kind of system and you leave a 
union out and you leave collective bargaining out, it leaves a 
lot of reasons for employees to be suspicious about who got 
promoted and why.
    And by the way, I know it already exists inside to a 
certain extent in civil service, but at least you can look at 
certain steps and say, there is a certain amount of time and a 
certain level of performance.
    So what would make your system so much better and make it 
so crucial to replace this civil service that was put in there 
to give the employees the confidence that it was a fair system 
and that they were safe from any kind of retribution or any 
kind of pressure, political or otherwise?
    Secretary Dominguez. Ma'am, I don't believe that we left 
the unions out. And I believe there is a role for organized 
labor in the system that we did design----
    Ms. Shea-Porter. May I just add that even if there is a so-
called role there, by not even allowing an independent third 
party to come into the process states by having an internal 
review within the DOD that does not make sense. If you really 
wanted to look as if you are hearing the employees, the unions 
and they have an opportunity, why not allow somebody from the 
outside to come in instead of an internal review by the DOD?
    Well, when you are not allowing a third party to do 
arbitration and when it is closed inside the DOD, I am not 
really sure, but it looks to me, again, as if you are trying to 
take away the voice of the unions.
    Secretary Dominguez. That was not our intent. I am hopeful 
that the system that we designed doesn't do that. We did strive 
to create boards for adverse action appeals and labor relations 
that could work--could do their work objectively, and 
independently, but that would be mindful of our mission which 
is a national security mission.
    And the consequences of us not getting our mission right 
were too profound to, you know, continue down the track we were 
going.
    Ms. Shea-Porter. But----
    Secretary Dominguez. Congress agreed with us.
    Ms. Shea-Porter. But most of your jobs couldn't possibly 
come just under security. And you are not allowing independent 
third party review to process firing appeals. And I realize you 
have some security issues. But it can't possibly apply to all 
of the employees that you have.
    Are all jobs that security conscious that you can't allow 
an independent third party to review firing?
    Secretary Dominguez. There are, in NSPS design, still 
avenues people can take to the merit systems protection board. 
So those paths remain open.
    And as I said, we try to design in--what we wanted to 
design in was boards that understood the national security 
mission and put that mission foremost in their thinking and 
then thought about, you know, how to adjudicate issues and 
conflicts between management and the workforce in that context 
so that the national security mission always was a feature in 
the decision making. That is not case in the current systems 
and that is what we tried to build in.
    Ms. Shea-Porter. But it is not an independent third party 
review.
    Secretary Dominguez. I disagree, Congresswoman.
    Mr. Ortiz [presiding]. We can come back to that question. 
And let me yield back to my good friend, Mr. Jones from North 
Carolina.
    Mr. Jones. Mr. Chairman, thank you very much, and Mr. 
Secretary and Ms. Lacey, I couldn't help but think you know the 
shadow of Donald Rumsfeld is still around here. This system was 
his creation. I just--I feel like it is another failed policy, 
quite frankly. I say that because ever since this was 
instituted--and let me ask you, at this point, how much money 
has been spent to implement this program as of today? How many 
billions of dollars?
    Secretary Dominguez. Sir, let me--certainly not billions. 
But let me try and put this in context for you.
    Mr. Jones. Sir, I want to be respectful. My staff just 
came. We have votes in the Banking Committee next door, but 
just give me a ballpark figure as of today how much money has 
been spent to try to move this program forward?
    Secretary Dominguez. $65 million.
    Mr. Jones. $65 million?
    Secretary Dominguez. That is correct.
    Mr. Jones. What would be the projection--did anybody at the 
table disagree with that figure? What have you--and I am not 
trying to get tit for tat, I am not, but I want to know, does 
anyone else agree that that is the amount of money that has 
been spent so far on everything to implement this program?
    Mr. Gage. I disagree.
    Mr. Jones. Would you give me a figure?
    Mr. Gage. I don't know the figure but overall figure it is 
certainly in the hundreds of millions. They spent 65 million on 
lawyer's fees.
    Mr. Jones. Well the reason I asked that I will tell you at 
Camp Lejeune, Cherry Point, and Seymour Johnson in the third 
district, I have had base commanders to tell me quite frankly 
that they truthfully--and this goes back before we went into 
Iraq by the way--that they think that this is just a waste of 
the taxpayer's money. And when I see what we are spending in 
Iraq--which is billions and billions and billions of dollars, 
and here at Walter Reed, we can't even take care of the 
wounded. And here we have a program that is already--part of 
the program is in the Federal Court system because it is being 
challenged. And I have employees down in my district--and quite 
frankly, and I agree with them--that this program--I just think 
it is not going to accomplish what you think because as the 
lady said before me that we have, if the workers and Mr. Stier, 
I believe, and Dr. Masters both said, if you don't get the 
employees to buy into the program, it is not going to work.
    And I had a great relationship with Secretary England. I 
think he is a very fine man. But I told him up front that the 
problem is if you cannot bring the players together, you can't 
have a victory.
    And there has been a--I am not talking about you two nice 
people. I am not saying this about you. But what was coming 
down from the mountain when this thing first started was an 
arrogancy that didn't care what the people at the bottom of the 
mountain felt. And that was the federal employee.
    And I wish him well. But my point is--I know I am doing 
most of the speaking--but I am telling you that this program 
has serious problems to it. And until you understand that the 
federal employee, who has spent many years of their life, we 
have battled this thing with the depot, Mr. Ortiz and myself 
for years. We have battled this thing so we are somewhat 
familiar with it. But I will tell you today that if you think 
this program can go forward, then I am going to tell you, you 
have to learn to work together and to realize you can't have it 
just one way or the other way. It is not going to work.
    Secretary Dominguez. Thank you, Congressman. First thing I 
want to tell you, we stopped the initial implementation of NSPS 
because the way it was being moving forward, it was not mindful 
of the employee feedback. And we went out--and that is the 
strategic pause--back in early of 2004. And we went out and 
collected that feedback. And we had extensive engagement. And 
we continue that engagement today with employee feedback, 
including the meet and confer and the collaboration with 
organized labor.
    So we--I agree with you. We need employee buy-in. We 
designed the system who is--one of the key performance 
parameters is credible and trusted. It has to be credible and 
trusted by the employees. And we are working very hard at that.
    We are not implementing the labor system that we designed. 
It is enjoined by the courts. When they point the way through, 
we will either move forward the way they dictate or come back 
to the Congress for additional authorities, you know, or many 
other whatever options there are. But we--the courts have a 
role on the labor system.
    On the performance management piece, the human resource 
system, people in that system are excited. The people in spiral 
1.1 are excited. The leaders in spiral 1.1 are excited. They 
are out connecting with 1.2 and 1.3, spreading that excitement, 
sharing their knowledge and pumping them up about getting in 
because they love where they are. And we are basing that also 
on the 25 years of knowledge around these kind of systems in 
the laboratory and acquisition experiments we have done in the 
DOD.
    Mr. Jones. Well, I thank you for that. And my time is up. I 
just hope, Mr. Chairman, that as you move forward and the 
committee moves forward, that we can get a better understanding 
of the cost of this program of where it is today, where it 
started from, where it is today and where it is going to be 
down the road.
    Because I don't question your numbers at all. I don't have 
the knowledge to question. And I really do not. But I am just 
of the firm belief that with this country going, we are going 
financially broke as a country. And with this failed policy in 
Iraq--and it is a failed policy--I don't know how we can put 
much more stress, financial stress on our military. And 
sometimes you need to say, well, maybe right now we need to put 
this on the back burner until we get more in a better financial 
situation to move forward.
    And if this is going to cost billions of dollars, I hope 
this committee will look at it very carefully before we give 
the green light to move forward. Thank you, Mr. Chairman.
    Mr. Ortiz. Thank you so much. The gentlelady from Guam is 
heard now.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Mr. Secretary, thank you for your testimony today. I 
represent Guam. Our island is home to service members and their 
families stationed at Anderson Air Force base and Naval Base 
Guam. And it is planned that Guam will become home to a 
significant number of U.S. Marines and their families who will 
be relocated from Okinawa, Japan in the coming years.
    Additionally, an increase in the number of Air Force and 
naval personnel stationed on Guam is planned. So we are looking 
at several thousand personnel.
    The increase in overall uniform personnel on Guam will 
likely require an increase be made in the number of civilian 
personal assigned to Guam's bases. Guam's bases have a strong 
reputation for providing service members and their families a 
high quality of life. This is, in part, the product of the 
efforts of our Federal civilian workforce on Guam's bases which 
includes many skilled employees hired from within the local 
community.
    Now, I am concerned that the high quality of life 
traditionally enjoyed by service members and their families 
stationed on Guam may suffer due to the fast pace at which 
activity in Guam's bases will grow in the coming years. And 
that is, I want to make sure that the Department of Defense 
continues to provide for a committed federal civilian workforce 
to support operations in mission requirements on Guam's bases.
    Can you please describe for the subcommittee how this 
personnel system, the NSPS, will achieve this goal, as number 
of facilities, range of activities, and the overall operational 
tempo on Guam increases at a fast pace? And also, how does the 
NSPS account for the interests of the civilian workers of the 
department assigned to Guam's bases and their commitment to and 
record of providing for a high quality of life for them?
    Secretary Dominguez. Thank you, ma'am. I think the way I 
would answer the question is, to describe just two aspects of 
NSPS that I think are relevant here.
    The first is that NSPS is a results-oriented, performance-
based system. It requires command to be clear about what the 
mission is and to articulate clear and compelling goals and 
objectives that command wants to achieve, and that, as required 
in the NSPS statute, individual civil servant performance plans 
can hook right to those goals. So the system that we have 
designed and deployed here, because it is results-focused and 
performance-based, you get this powerful alignment around what 
the mission is and what we have got to accomplish.
    In order to make that system work, leaders have to lead. 
That is part of why we did such a massive investment in 
training is to teach people the skills because we did hear from 
the workforce, I don't believe my supervisor knows how to do 
this.
    And for the most part, our employees were right there. And 
so we invested in that. And in this system, leaders have to 
lead. They have to do the hard work of coaching, mentoring, 
performance feedback and importantly, setting goals and 
objectives that are clear, understandable, compelling to 
people. And so that is, NSPS will work there.
    The second thing it does is because of the pay bands, 
because of the structure of NSPS, there is huge agility in 
being able to move people to different tasks as that mission 
unfolds, as the objective changes, and you need to swing the 
workforce to deal with a problem and eradicate it, you have the 
flexibility of doing that more easily in NSPS to move people 
into different positions again with, you know, all the right 
merit protections and those kind of things, and you know, with 
consultation, recognizing the value of the employees.
    But the system is more agile that way, and so as problems 
emerge, you can line the workforce up around compelling 
objectives that are tied to their performance plans and they 
can solve it for you.
    Ms. Bordallo. I guess, Mr. Secretary, what I wanted from 
you was would the system be able to handle a massive increase 
like we are getting on Guam, 8 to 10,000 Marines and their 
families. Are we prepared? Are we on your horizon?
    Secretary Dominguez. Mary is prepared to jump in on that 
one.
    Ms. Lacey. Ma'am, in fact, it is exactly that kind of thing 
that NSPS is going to shine at. We have provided for additional 
flexibility--structured flexibilities--to ensure that we can 
hire faster, bring people on board quickly and match then, the 
right person to each particular job, taking the greatest 
advantage of their skills.
    We have also provided for market-based pay. We realize when 
something like that happens, a rapid growth on a base, in fact, 
people can become hard to find. And people are being hired left 
and right for not just as civil servants, but for some of the 
other support infrastructures that start to build around a 
base. And so we have provided for some flexibilities to make 
coming to work for the Department of Defense even more 
attractive with some pay flexibilities that we could not have 
achieved under the old system.
    Ms. Bordallo. I am glad to hear that positive response. 
Good. And I will bring the message home. Thank you.
    Mr. Ortiz. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. This would be for 
either the Secretary or Ms. Lacey, either, in following up on 
your interaction with the gentleman from North Carolina as well 
as the gentlelady from Guam. You talked about the interaction 
you had with the workforce during this transition, spiral 1, 
and how you had people buying into it and positive feedback, 
and then you talked with the gentlelady from Guam about hearing 
from some employees that their supervisor didn't know how to do 
their job. They were right, and you came back and worked them 
in that.
    I would like for you to tell me what would you say the 
three primary concerns that the DOD heard from its workforce 
during this transition spiral 1, and what you have done to 
address these those three primary concerns for the workforce? 
That is either one of you.
    Secretary Dominguez. Thank you. I will take a shot at that.
    The first thing we heard was, I am not sure this will be 
fair. I am not sure my supervisor will do this fairly. Okay, 
second thing we heard was, I am not sure that they have the 
skills to do it. Again, this requires leadership. We didn't 
have to do that. It is not how we grew up. How are they going 
to magically do this overnight, our supervisors? The third is 
which we heard, the money won't be there.
    Okay. Fair. Here is what we did on fair. Extensive 
training--extensive training to everybody on this. The second 
is that we built this goal and objective, this framework of 
setting goals and specifying objectives and aligning your 
performance plans to those objectives. All right. So that is a 
structured disciplined process.
    And we put lots of training into what the right kind of--
how do you write those clear compelling objectives.
    The second or the next thing we did was the evaluation 
structure itself. It is not just a supervisor doing the grade 
and turning it in and that is it. Done deal.
    There are review groups of peer managers to look at these 
things across an organization.
    Mr. Rogers. How that is review triggered?
    Secretary Dominguez. It is required. It is a normal part of 
the process.
    Mr. Rogers. So once a evaluation is done it is 
automatically sent for peer review?
    Secretary Dominguez. Yes, sir and they, these peer managers 
in this panel make sure that there is nothing out of line, that 
the grading was fair and balanced across the enterprise. And 
that grading is against competency, statements of performance, 
what a fully successful performance looks like that was 
validated across our enterprise with the people in the 
enterprise.
    So that has been specified. Here is what it looks like, you 
know, to be at, to perform at this level.
    There is an appeal rights. So if still someone thinks this 
isn't right, there is an appeal to a higher authority.
    Mr. Rogers. What is that higher authority? How does that 
work?
    Secretary Dominguez. It is the pay pool manager, so it will 
vary from place to place but it is, you know, typically a 
commander two or three levels above where this thing is 
happening.
    Second issue is knowledge. They don't know how to do this. 
Well, you are right. We didn't do this. We didn't used to do 
this in civil service. We had no experience with it except in 
our demos. So we built a training program to teach people how 
to coach, how to mentor, how to set performance objectives, how 
to do the strategic planning, how to do the feedback. We are 
giving skills to our leadership to allow them to lead. And that 
is a major effort.
    And we did practice. You know, when you went in, you go in 
the spiral 1.1, halfway through that year, you did the payout 
in practice, you went through every step. You made all the 
evaluations. You did all the rankings. You calculated scores. 
You did the payout, right, and you learned from that practice 
about how to do this and how to make the system work so that 
when you did it for real and your effecting somebody's pay, you 
had already been through it.
    Then the money. We went--Mary and I went to the Under 
Secretary of Defense Comptroller and said, we have to do 
something different. NSPS requires a different approach to 
things. And with, in cooperation with her, went to the Deputy 
Secretary. And he set aside the performance pool up front. That 
is unheard of. You don't fence money--particularly O&M 
dollars--in the Department of Defense, except we did for this 
program because we had to tell employees that money is going to 
be there.
    And he set that money aside.
    Now, the other thing we did, was we moved the evaluation 
period for everybody to the end of the fiscal year, so that the 
end of the fiscal year then you begin doing the evaluations and 
then you do the payout in the end of January and that is early 
enough in the fiscal year that the money is still there. So you 
know, if you have the payout in September, you know, stuff can 
happen and you may be short of cash. In January, we are not 
short of cash. So these things told the workforce the money 
will be there. We will put it in. You can see it. And we will 
guarantee it.
    Mr. Rogers. I thank you.
    Thank you, Mr. Chairman.
    Mr. Ortiz. Thank you. Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    I apologize. I was at other meetings and didn't hear a lot 
of the testimony and questions, and my question may be covering 
ground that has already been traveled, so I apologize for that. 
But one thing I have to say, just reviewing the documents both 
from staff and the witnesses that, you know, this obviously has 
not been a smooth implementation of the system to say the 
least. I mean, to have a Federal court strike down provisions 
of significant portions of the plan obviously is not 
insignificant. And it has already been a year or will be a 
year, I guess, when the anticipated appellate court decision is 
expected, which is, in some people, might view is a lost year.
    I am just curious whether or not there was any attempt by 
the government to sit down and negotiate with the other side 
rather than continue to litigate away at this issue.
    Secretary Dominguez. Sir, this statute was pretty clear, 
that continuing collaboration was the sole and exclusive 
process for the engagement with organized labor in the 
development of NSPS.
    We believe the statutes also clear once we are into NSPS, 
then, other things like Mr. Gage has made reference to, 
national level bargaining as opposed to bargaining at the 1,600 
different localities which we do today. But the statute, from 
our point of view, was very clear that continuing collaboration 
was the sole and exclusive process and we followed that 
process.
    Mr. Courtney. How about you, Mr. Gage, do you have any 
comments on whether there has been any attempts to try and find 
some common ground?
    Mr. Gage. We would welcome it. We still think we have the 
best ideas from our members and from supervisors and from the 
generals and the captains on the ground on how collective 
bargaining, on how appeals, and on how pay could be handled. I 
think our ideas are better.
    And we would certainly welcome sitting down with DOD and 
having a real discussion that was two-way.
    Mr. Courtney. I guess my question would be, then, would you 
agree that the only way to sort of find that common ground 
would be to have Congress modify the statute, or is there a way 
to do it without congressional action, which seem to be you 
know, the Secretary's position.
    Mr. Gage. I don't think there is a way, given the history 
of this thing for the last several years, that there is a way 
to get it back to a positive personnel system for employees. I 
think the horse is way out of the barn with employees. They saw 
DOD come after their rights right out of the box and that has 
that has made a very telling impression on employees. So, I am 
very much in favor--plus we still haven't had DOD trying to 
reach out at all to resume any discussions even after the court 
cases, so I think we need congressional action.
    Mr. Courtney. Again, that seems to me that you know, if 
both sides sort of feel there is a gap here, and there may be a 
need for congressional action by that is one area you guys can 
agree on. I mean, it seems helping us sort of find where that 
balance is would be a lot more helpful than just going in, and 
as I said, litigating and rehashing because as we all know, 
appellate courts aren't the last stop in the system either. And 
it sounds like both sides, you know, regardless of the outcome, 
are probably going to continue sort of this grinding it out.
    And in the meantime, you know, the system is really not 
going to have any real clear direction until the courts act and 
then Congress may act. So why don't we just sort of cut to the 
chase?
    Secretary Dominguez. Sir, I believe that we have appealed. 
We believe the law was clear. We believe we followed the law. 
That is now being adjudicated by the courts.
    At this stage, I don't--I urge the Congress not to act. I 
urge the Congress to refrain from acting until after we get a 
ruling by the appellate court.
    Mr. Ortiz. Thank you.
    Mr. Gage, clearly the court was critical of certain aspects 
of the NSPS, but not so critical that they halted the entire 
implementation. And I know that maybe when you talk to some 
lawyers they have different opinions, you know, just like 
reading the Bible, you know, different interpretations. But how 
do your employees, the American Federation of Government 
Employees interpret what the court said about NSPS in terms of 
the future of NSPS. Maybe you can----
    Mr. Gage. Well, our members were very happy that a court 
stood up and stopped this theft of the rights that had been in 
place for so long. And I hate to see that we are at this point, 
Mr. Chairman. I really do. Our men work very hard every day, 
our men and women in DOD. And they feel like what did they do 
wrong that suddenly their rights are being taken away? It is 
almost like their patriotism is challenged.
    And I don't know, maybe it has gone too far. But I know one 
thing. Our people, and from what I am told from our workers, we 
are never giving up our rights. We are never giving up these 
rights, especially for the reasons that have been put forward 
by DOD. So there is a bitterness out there, Mr. Chairman, and I 
don't know how that bitterness can be solved. I think we ought 
to start over. I think NSPS should be repealed.
    Mr. Ortiz. Mr. Masters and anybody else who would like to 
respond to this question, what is the way ahead for NSPS, and 
do you think Congress should consider major changes to the 
underlying legislation?
    Mr. Stier. Sir, I am happy to jump in here. I would say 
that obviously, Congress has a very important role here. This 
is a vital component of our defense. We talk a lot about 
military transformation. The civilian workforce is a hugely 
important component of our defense establishment and needs a 
lot of attention, I think from Congress more generally.
    The way forward I would suggest is first, you do have a 
Federal appeals court that is likely to rule very shortly here. 
And the reality is that that will undoubtedly inform both DOD 
and the employee groups positioning here as well your own.
    And so would I presume that it makes some sense to wait at 
a minimum before you review this until the court has--or not 
until you act or until the court has ruled, since we expect a 
ruling fairly soon.
    Number two irrespective of the way the court rules, I think 
you can separate out different elements of the NSPS, those that 
are, again, that are engaged around the labor relations, the 
due process issues aren't ones that from the partner's 
perspective we can see evidence or that supports the notion 
that it is vital to make those changes in order to be able to 
create a more performance sensitive and effective organization. 
However, we don't believe that the GS system, the one created 
in 1949, and a number of the preexisting hiring authorities, 
that it was the status quo is the way forward. And we would 
propose that this committee, instead of trying to change those, 
rather put into place a set of indicators that permit you to 
have a better understanding about what is happening on the 
ground and whether those changes are, in fact, making the kinds 
of affirmative productive opportunities available to us that 
the Defense Department would like to create. And I believe that 
those indicators are things that would inform your decision 
making as well as other policy makers.
    And finally, I think you might--if you were going to add 
anything--propose that there is some kind of independent 
evaluation and more detailed evaluation that is akin to what 
takes place underneath the demonstration project authority that 
was created in 1978.
    Mr. Ortiz. Mr. Masters.
    Dr. Masters. I agree with much of what was said just now. I 
don't think Congress should wait for the courts to act. I think 
Congress should determine what the labor management rights of 
employees are and the appellate rights in adverse actions of 
employees are. I don't think you need the courts to tell you 
what to do in that.
    The fact of the matter is this Administration, if you look 
at its history from February of 2001, has by executive fiat, 
tried to abrogate labor management rights. And I say that as an 
objective observer. There is no way of naysaying that. They 
have done things that are just mind-boggling in the degree of 
temerity that they have in singularly striking these rights.
    And I would hope to hear a better advocacy from 
administrative representatives of the program that is on the 
rule books now. And if they don't want to defend it, why are 
they litigating it now? They could be like DHS and drop their 
litigation and move on. But DOD has chosen not to do that.
    I think it is time for Congress to intervene and settle 
this battle. I don't think anybody else is going to do it for 
you.
    Mr. Gage. If I may, Mr. Chairman, I completely agree. I 
have done a lot of contracts. And the ones that are good are 
made where both the parties reach agreement. When you have a 
third party like the courts that is going to write the labor 
relations system, you know, both sides are going to hate it, 
and it is not going to work and it won't be the end of it. That 
is why I think Congress really has to step in. And I really 
think it is the obligation and responsibility of Congress to 
get this straight.
    Mr. Ortiz. Mrs. Shea-Porter, do you have a question?
    Ms. Shea-Porter. Yes, I do. When I was studying for my 
masters degree in Administration, I heard in class--and this 
was way back when--a lot of the words that you were using, Mr. 
Dominguez, talking about coaching, training, doing feedback, 
objective management, review. None of this is new. This has 
been around for a long time.
    I have friends who work in the federal government who have 
given their heart and soul to this country because they are 
patriots. And they did that. They did objective management. 
They did feedback. It almost sounds like an aspersion when you 
say my manager didn't know how to lead. I am certain there were 
some managers who did not know how to lead. It has always been 
thus. But it is also true that that was a hard working force. 
And so, if you want to make the change for other reasons then 
we can talk about that.
    But to act as if the workforce was not producing, and that 
is why you were forced to do this for national security 
reasons, I am just having trouble with it, and obviously I am.
    I would like to talk about that pay for performance part. 
This is a government. This is not business. If I were running a 
business, then I would look at certain criteria differently. 
But the government's business goes on day after day. And we 
don't--although we need to save money and I have certainly 
talked loudly about being fiscally conservative and 
responsible, and that is an issue I have about the cost of 
this. But also we have to recognize that there is, it is a 
different set of standards.
    You can work within the system that exists now--or let me 
rephrase that and ask you, can you work within the system that 
is there right now? If you have been remiss about the training, 
can you correct the training within the system that we have 
now?
    Within the civil service, are you able to deliver what you 
are trying to deliver with the change there? Is it possible to 
do that without wrecking the whole system?
    I believe that you had 58,000 comments when this was 
offered. And the majority of them were negative. Two thirds of 
the DOD employees I believe were union. You can't help but 
think that this really didn't have as much to do with cleaning 
up as it was taking away union rights.
    So can you do the work that I think is laudable--some of it 
I am sure you need to do. Can you do that and shouldn't you do 
that within the system now and allowing the unions to be there 
and be part of the whole process and recognizing--and I would 
like us all to recognize--the commitment of this workforce 
through the years?
    Secretary Dominguez. Congresswoman, let me first correct 
what I fear is a misunderstanding.
    I implied no aspersions on the quality of the civil 
workforce of which I have been a part.
    Ms. Shea-Porter. I am sure you did not mean to.
    Secretary Dominguez. The important thing is that those 
were--that was the feedback we received from employees when we 
were talking to them during the strategic pause about going 
into pay banded, performance driven system where your pay was 
determined by your supervisor's evaluation of your performance, 
right, as opposed to moving away from the civil service.
    So when we went to our employees with, here is the concept 
around NSPS that we derived out of the lab demos and 
acquisition demos, the feedback we got from our supervisors or 
from our employees were, I am not sure my boss can be fair, and 
I am not sure my boss knows how to do this. So that is the 
feedback we got, which then led to the training program.
    Now, and so within the context of moving forward with NSPS.
    Can we do this? The answer is no. NSPS is just--is a 
catalyst for a greater global comprehensive transformational 
change in the culture and ethos within the Department. It is 
moving the Department to a results-based, performance-driven 
organization, away from a focus on inputs and activity toward 
are we achieving the mission? Are we accomplishing what we set 
out to do? How do we know it? How did everybody contribute to 
doing that?
    So that is the big change. That change needs to happen. 
That revolutionary change was embraced by Secretary Rumsfeld, 
embraced by President Bush as part of his managing for results 
in his Presidential management agenda, but more importantly, 
was actually first tabled in the public sector by the Congress 
of the United States and the Government Performance and Results 
Act.
    This is about turning us into a performance driven, results 
delivering organization. And NSPS is a critical piece of that 
and a catalyst for that transformation.
    Ms. Shea-Porter. Maybe I am missing something here, but I 
have pretty close knowledge about some other federal agencies 
that have done exactly that. And as a matter of fact, I went 
back and looked at the language and it was very similar to what 
you are talking about now--results driven and you know this is 
for promotion, and they had standards and they had people, not 
just one employer but others looking to review promotions and 
review whether there were work coming in and their work flow.
    I don't hear anything different. But I am not as familiar 
with the Department of Defense. I would like to think that you 
have had some skilled managers through the year, that you are 
not suddenly finding out that you have not done it right at 
all.
    But other agencies have been doing this. I have the sheets 
of paper from personnel showing this and from management 
showing exactly the same buzz words you are using now. So are 
you telling me that just within the DOD, they weren't following 
good management techniques and that this is a new change?
    Secretary Dominguez. I am telling you that the culture of 
results, the obsession with performance, the association of 
reward--particularly in terms of your compensation--with 
results, with your contribution to accomplishment of the 
mission, is part of a change and the propagation of that ethos 
across the Department of Defense. NSPS is a key part of that. 
The training that we are doing is a key part of that.
    And in addition to the focus on results, NSPS provides us 
agility in managing the workforce to deal with an agile threat. 
And it provides us market sensitive pay so the ability to 
respond more rapidly to the marketplace to bring in and retain 
the high quality talent we need in our workforce to deal with 
the national security threat that we face.
    So NSPS is about all of those things. And it is a package 
deal. And that package, I feel very strongly is very good for 
the country and very good for the national defense.
    Ms. Shea-Porter. But other agencies have done exactly what 
you are talking about and I don't understand the difference. 
Thank you.
    Mr. Ortiz. You know, I have been here for 25 years and I 
have worked with government employees for a long time. Morale 
is very, very important. For us to be able to produce, you 
know, the products that we have, to fixing airplanes, tanks and 
so forth and so on. They tell me that there had been a cloud 
out there for a long time beginning with the A 76, base closure 
commissions, and now new regulations.
    I think that we are going through some very critical times 
now. We are fighting two wars. We have seen an exodus of very 
knowledgeable employees just walk out the door.
    All you have to do is take a look at Walter Reed Hospital. 
You know, there is a lot of things going on. And I think that 
this is a time when I hope that we can find middle ground.
    And I think that the courts were right in coming in and 
looking at it. We need to come, and like Lyndon Johnson used to 
say, it is time for us to sit down and reason together for the 
good.
    My friends, we are going through critical times. Huge 
deficits. Supplementals. What we don't want to do is break the 
morale of the workers. But we are willing to look at both 
sides. Thank God that we have great federal workers who do a 
great job. But they have been demoralized for a long period of 
time.
    I can remember when we had the A 76 and they would come to 
us and talk about it. Then we had at base closure. They didn't 
know what bases were going to be shut down. And now they say 
now we have a new regulation.
    One of the things that I would like to know, and maybe you 
can help me. DOD is going to appoint five members, it is a 
five-member board. Is that correct when I say that? The 
evaluators who evaluate, maybe you can fill me in. Who appoints 
them? DOD?
    Ms. Lacey. Sir, I think we have a couple of different kinds 
of evaluators. We have used that word loosely here today. If 
you are talking about the evaluator for an individual person, 
their performance, that is one set of evaluators. But in terms 
of the evaluation of the program itself, we actually have about 
five evaluations already ongoing.
    Mr. Ortiz. Let's start, one particular base.
    Ms. Lacey. Sure.
    Mr. Ortiz. Who select those employees to evaluate--let's 
say we have 3,500 employees at that base. Who selects who is 
going to evaluate the other 300 some odd employees.
    Ms. Lacey. Okay, the evaluation of the individual 
performance are folks--first, the first level is between the 
supervisor and the employee. That is where the fundamental 
performance contract is to begin with, that written contract 
about what is expected. And so that supervisor will evaluate 
the individual's performance against some standards that have 
been written and validated DOD wide for what that performance 
looks like.
    That particular evaluation will then be reviewed by a group 
of peer managers at that base, at that site, who are 
knowledgeable of the kind of work that is done. So you will 
have supervisory mechanics reviewing the work of mechanics. 
They will have subject matter expertise and knowledge. And then 
the work of that panel will be reviewed by a high level 
authority.
    Now depending on how large a base is, how many people are 
in the command, the ultimate person on that base could be a--
could be the two-star general, or it could be a smaller at a 
lower level, depending on the size of the work unit. So for 
example, sir, you have 20 civilians down in Corpus Christi that 
will be reviewed by the head civilian there subject to the 
commanding officer. So it is going to depend on organization by 
organization.
    Mr. Ortiz. But I go back to my question, who appoints these 
people that do the evaluation?
    Ms. Lacey. The commander of that organization, ultimately, 
the head civilian or military commander of that organization 
will designate who the officials are on that base. They will be 
line managers. It is ultimately the job of supervisors to 
evaluate employees' performance.
    Mr. Ortiz. But if I had it in for Mr. Courtney here because 
I just didn't like him, you know, and I want him out. What 
safeguards are there to be sure that he gets a fair hearing?
    Ms. Lacey. Actually, sir, there are quite a few safeguards, 
and perhaps in many cases, more than there are today, because 
today we have situations where it is only the first level 
supervisor that reviews an individual's performance. Under 
NSPS, there are multiple looks at that. And in addition, we put 
in place a DOD wide standard for that performance. So you have 
those benchmarks.
    Employees also have the ability to request a 
reconsideration of that.
    Now what that is going to look like with our representative 
employees remains to be determined, because we have negotiated 
processes already for those sorts of things. But the way it is 
now, and the way we ran it for spiral 1.1, employees that felt 
they were not given fair treatment, were not objectively 
evaluated, had the opportunity to appeal to the second or third 
level above. And they did.
    We had employees that asked for reconsideration. They had 
the opportunity to make their case to clear up any 
misunderstandings. And, in fact, ratings were changed as a 
result of employees providing additional information.
    So, we have provided for that. And we will continue to 
provide for that. In fact, I think personally that is an 
incredibly important part of the process. If employees don't 
feel like they have been given fair treatment, I want to hear 
about it. I want to know so we can go back in and correct it, 
provide the training that supervisors need or employees need, 
and clear the air so that we can focus on outcomes.
    Mr. Ortiz. Mr. Gage.
    Mr. Gage. Yes. Mr. Chairman, taken what Mary just said, I 
am a supervisor, and I think this employee has done an 
excellent job under the standards that he has been given, 
performance standards at the beginning of that appraisal 
period. But I don't give the employee at that part my 
evaluation. I go to this peer group, which Ms. Lacey is saying 
that this is a safeguard from employees.
    What the supervisors do in there is they get a quota of 
forced distribution of the number of outstandings they can 
give, because they only have a certain pot of money. It is 
called a forced distribution. It is against merit principles. 
And I think we will end up in court if they are not going to be 
able to rate the employees on exactly what they should be 
instead of going to a peer group of supervisors who then jockey 
around and see how many outstandings they are going to give 
rather than really giving the employee what he deserves because 
of his work against those supposedly objective performance 
standards.
    And for Ms. Lacey to say they go up in the levels, we don't 
need a company union. We don't need management to look upon the 
judgment of another manager and look upon the judgment of 
another manager to determine fairness.
    We have situations in place. It is called binding 
arbitration. And that is what we have. And that is what we 
insist on keeping.
    Secretary Dominguez. Sir, let me--there is no force 
distribution. The managers can give as many ``outstandings'' as 
they want. They can score it as high or as low as the situation 
warrants based on an objective evaluation of the performance. 
The review groups, the peer review of an individual 
supervisor's decision is important in this system because you 
need to be able to reach across the enterprise and ensure there 
are common standards, common objectives set, common evaluations 
across an enterprise under the command of this one individual.
    So there was fair and equitable treatment of all people 
across the enterprises. That is what those review groups do is 
there is a dialogue with managers. It is not about forcing a 
distribution. It is about ensuring consistency in the 
evaluations across the enterprise.
    Mr. Ortiz. I can remember one time when we had a group of 
employees from a workplace come and complain to me about they 
were being written up because they couldn't perform. They came 
to me and said we can't perform because we don't get the parts. 
You know, and this human nature, you know, it plays a part in 
all of this. So I am glad we are beginning to air this out and 
see. Like I said before, maybe we can find a middle ground 
because this is too important to completely neglect, and find a 
way to work together. And I will tell you what, and we have got 
some wonderful employees and I know what you are telling us, 
Mr. Secretary, and you are telling us in good faith that you 
think this program is going to work, but I am just going back 
to what my experience has been in my 25 years here.
    Mr. Courtney.
    Mr. Courtney. Listening to the Secretary defend the 
Secretary's position to litigate where you obviously feel the 
President and the Congress passed this perfectly formed, 
crafted proposal, I mean, I practiced law for the last 25 
years, and I was--an old timer used to say to me if you want 
perfect justice, you are going to have to wait until you go to 
heaven. And we would always sort of remind clients and people 
who have to make decisions about people who have to contest and 
litigate that at some point there is no perfect justice and you 
have got to sit down and find that common ground.
    At some point it seems like you are giving us no other 
choice but to act as a coequal branch of government if this 
problem doesn't get resolved. And it just seems to me that when 
you look at least at the materials that were prepared by staff 
here, that when the regulations were issued by the Department 
and the comment from the GAO and the federal district court 
came in so negatively, you have got a problem. And you have got 
to deal with it, and I mean, what I am hearing is that you 
don't want to deal with it. You want to have us do nothing and 
the courts will hopefully rule in your favor. And to me, that 
just seems like a very unfortunate posture for the government 
to be in, as the chairman said, dealing with such a critical 
area of our government.
    And you don't have to comment, but I thought I would share 
my old friend's view of decisions like that about whether you 
just have to pursue at all costs an outcome.
    Mr. Ortiz. Thank you so much.
    I think that this has been a good hearing today. We 
certainly welcome all of your testimony, and there might be 
some members who couldn't be with us today because they were 
attending another hearing, but we will--if they have some 
questions, we will submit them to you, and you can respond for 
the record.
    Hearing no questions, thank you so much, and this hearing 
is adjourned.
    [Whereupon, at 3:55 p.m., the subcommittee was adjourned.]
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                            A P P E N D I X

                             March 6, 2007

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             QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD

                             March 6, 2007

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                   QUESTIONS SUBMITTED BY MR. MCHUGH

    Mr. McHugh. I have heard a number of concerns from civilian 
employees at Fort Drum, New York, in my 23rd Congressional District 
regarding the implementation of NSPS. The new system appears to leave a 
great deal of discretion in the hands of managers to determine pay 
raises and to impose adverse actions without adequate employee 
recourse. How are you training people to be good managers and how do 
you measure whether the management system under NSPS is working?
    Secretary Dominguez and Ms. Lacey. The NSPS has flexibilities, but 
their use is not unconstrained. First, under NSPS, employees continue 
to have the same protections as other federal employees--merit systems 
principles, due process, whistleblower protections, and protection 
against illegal discrimination and prohibited personnel practices. 
Additionally you identify two areas of concern where we have built in 
additional procedural limits to ensure fairness and consistency.
    While the adverse actions and appeals portions of NSPS have not 
been implemented due to on-going litigation, there is no greater level 
of discretion for managers to impose adverse actions under these 
regulations, nor any less employee recourse available, than exists 
under Governmentwide provisions of title 5, United States Code. The 
regulations recognize the critical nature of the Department's national 
security mission and provide for greater individual accountability, 
which is accomplished without compromising guaranteed protections of 
due process.
    As for pay raises, managers do have greater discretion in making 
pay decisions than before NSPS, however we included multiple internal 
review processes to ensure our system is fair to our people. For 
instance, our design built in checks and balances so our employees 
receive full and fair consideration during the appraisal process. 
Senior officials review performance plans to ensure consistency and 
fairness across the organization. There are multiple review levels to 
make sure performance ratings are based on documented accomplishments, 
make sense and are consistent within the pay pool. Also, all employees 
have the right to request reconsideration of their ratings through a 
formal process.
    Managers and supervisors, including military supervisors and 
managers, are key to the success of NSPS. Extensive training is given 
to ensure their understanding of the system and the key role they play. 
Courses focus heavily on the performance management aspect of NSPS, 
such as setting clear goals and expectations, communicating with 
employees, and linking individual expectations to the goals and 
objectives of the organization.
    The Department is also focusing attention on the behavioral aspects 
of moving into NSPS to better prepare the workforce for the changes 
NSPS brings. Course offerings such as interpersonal communication, team 
building and conflict management help facilitate interaction between 
employee and supervisor. More than a half million training instances 
have already taken place--and this number will steadily rise as more 
workers transition to NSPS.
    Oversight and assessment of human capital management, regardless of 
the personnel system, are part of the Department's Human Capital 
Accountability system. To assess management under NSPS at a system-wide 
level, we are following the practices of the Government Accountability 
Office and the Office of Personnel Management used for assessing human 
capital systems. This includes monitoring patterns of how authorities 
are being used, general trends in complaints, and workforce attitudes. 
Specific examples of criteria to measure are trends in opinions of 
employees, supervisors, and managers about matters relative to mission 
alignment, quality of new applicants and those being hired, action on 
problem employees, usefulness of performance feedback, and trust in 
supervisors and managers.
    Mr. McHugh. As more information comes to light about the widely 
publicized problems at Walter Reed Army Medical Center, it appears that 
private-public job competition, referred to by many as the ``A-76 
process,'' sapped the facility of needed workers. While NSPS and A-76 
are two different programs, they are advertised as ways to achieve 
efficiencies and improve performance. To put a finer point on the 
issue, how will you ensure that NSPS works to actually improve the 
functioning of the federal workforce? What criteria will you use to 
measure that improvement? Furthermore, it seems to me, based on the 
February 2006 D.C. District Court ruling and union concerns that while 
the Department awaits the outcome of the appeal to the district court 
decision, and perhaps continues further legal action if the appeal is 
not favorably considered, the Department will be setting up the same 
kind of workforce sapping environment created by the A-76 process at 
Walter Reed. Why doesn't the Department act now, without further 
litigation, to address directly with the workforce the significant 
shortcomings identified by the courts with regard to labor-management 
relations and grievance appeals?
    Secretary Dominguez and Ms. Lacey. Working from the premise that 
good human resource management practices are necessary for employees to 
be effective, we plan to look at areas where we expect NSPS to 
contribute rather than try to measure granular improvements in employee 
operational effectiveness. There will be a measured implementation to 
ensure that managers and supervisors build upon their experiences and 
training. Examples of criteria to measure NSPS contributions include 
higher retention rates for high performers than low ones, pay 
consequences for those who perform below a fully successful level, 
supervisor satisfaction with applicants under NSPS and with the ability 
to make organizational changes in an acceptable amount of time; 
positive feedback from the workforce and managers on any improvements 
in communication, organizational awareness, or work integration related 
to the performance system; positive trends in opinions of NSPS 
employees, supervisors and managers about matters like mission 
alignment, quality of those being hired, action on problem employees, 
frequency and usefulness of performance feedback, and trust in 
supervisors and management.
    The NSPS statute authorized the Secretary and the Director of the 
Office of Personnel Management to design a labor relations system and 
adverse actions and appeals processes that recognize the Department's 
national security mission while preserving collective bargaining and 
employee rights. On May 18, 2007, the United States Court of Appeals 
for the District of Columbia ruled that the Department's regulations 
complied with the law and overturned the D.C. District Court ruling. In 
order for DoD to implement labor relations, adverse actions, and 
appeals portions of NSPS, the court must issue a mandate to implement 
the decision. In the interim, while DoD awaits the court decision to 
implement the mandate, unions have requested to stay the mandate's 
issuance.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. REYES
    Mr. Reyes. A large segment of the civilian Department of Defense 
work force is made up of personnel who perform unique tasks that do not 
exist in the private sector, in particular those working in the 
intelligence community. One of the proposed merits of NSPS is the idea 
of pay for performance. The current GS schedule is based on performance 
and tenure and is transparent to ensure fair treatment and pay for 
federal employees. However, the NSPS would do away with these 
safeguards. I am concerned that without the transparency provided by 
the current GS schedule intelligence easily could become subject to 
abuse and politicization. For example, a high performing individual 
could be stymied in promotion or performance pay opportunities for 
providing assessments and intelligence that that may be at odds with 
the views of US policy makers. As a result, individuals may feel more 
compelled to alter their judgments to ensure promotions or higher pay. 
Has DOD considered the potential negative impact of the National 
Security Personnel System on the production of fair and impartial 
intelligence assessments? What action is DOD taking to ensure that 
intelligence personnel will not feel pressured to alter or shape their 
analysis in order to achieve promotions or pay bonuses?
    Secretary Dominguez. DoD Intelligence professionals are under the 
auspices of the Defense Civilian Intelligence Personnel System (DCIPS). 
The DCIPS legislation, Title 10, United States Code, Sections 1601-
1614, was enacted in October 1996 and provides the Secretary of Defense 
the authority to establish a separate personnel system to meet the 
unique needs of the intelligence community. The legislation provides 
the authority to hire, develop, and retain a diverse, versatile, and 
highly qualified workforce to perform both Defense and National 
Intelligence missions. DCIPS is the Defense Intelligence pay-for-
performance personnel system. DCIPS is being implemented within the 
Department in coordination with both the Director of National 
Intelligence (DNI) and the Under Secretary of Defense for Personnel and 
Readiness (USD(P&R)).
    Under DCIPS, similar to NSPS, employees and management are 
subjected to greater accountability, performance documentation, and 
transparency. The layers of checks and balances within the systems 
provide the civilian employees with greater protection from abuse and 
politicization. High performing employees will receive significantly 
greater compensation in pay and rewards under NSPS and DCIPS than they 
would have under the GS system. Under NSPS, and DCIPS in the case of 
the DoD Intelligence Components, there are multiple safeguards during 
both the performance rating and the performance pay decision processes. 
For intelligence employees, those safeguards will include review of the 
supervisor's rating of performance by both the next level in the chain 
of command, and an additional review at yet a higher level to ensure 
that there is consistency and fairness across the organization. If an 
employee believes that he or she has been treated unfairly in the 
process, there remain avenues of redress through the grievance and 
equal employment opportunity protection processes. Similar processes 
are included to protect employees during the pay decision processes. To 
ensure the process works properly, all supervisors and managers will be 
evaluated on their effectiveness in the management of their employees 
and the performance-pay decision processes.
    Under the GS system, pay increases are for the most part 
automatic--either as a result of the annual government-wide pay raises 
or periodic within-grade increases. Because there is little direct 
relationship between compensation and performance management, it is 
difficult to reward high-performing employees under this system.
    Under DCIPS and NSPS, employees will be provided specific, 
measurable performance objectives at the beginning of each annual 
performance period that detail what is expected, and how outcomes will 
be measured. The performance management system's processes and 
procedures are transparent to the employees. As an example, under 
DCIPS, an intelligence analyst's performance objectives will detail the 
types of analyses that are expected, and the quality of those analyses 
will be evaluated based on the extent to which they represent a 
collaborative approach to the development of the analytic judgment; the 
quality of the technical analytic product based on competencies 
developed under the aegis of the Director of National Intelligence for 
all intelligence community analysts; the critical thinking that went 
into the product development; and the personal leadership demonstrated 
in the development of the product--including demonstration of the 
courage to stand up for one's judgments in the face of opposition. 
Those accomplishments will be documented, and reviewed by others both 
within and, if necessary, outside the chain of command to assess the 
value of the work products against established standards for the 
occupation.
    If there should be pressure from policy makers or superiors to 
modify judgments to conform to a desired answer, it is far more likely 
that the employee will have a documented, evidentiary basis for 
challenging inappropriate treatment than would be likely under the GS 
system.
    The design of both the NSPS and DCIPS is intended to develop 
accountability from the top down. At the Senior Executive level, the 
Department will establish objectives of accountability for results, 
transparency of processes, personal integrity, and fairness in the 
management of personnel. Under the performance-based compensation 
systems represented by the NSPS and DCIPS, those values and 
expectations will cascade throughout the Department with results 
evaluated and used to improve our performance as a Department in both 
the national security and intelligence worlds; and documented for 
oversight. DCIPS will contribute to fostering the environment and 
culture under which production of fair and impartial intelligence 
assessments occurs, as NSPS will contribute to meeting mission 
requirements in other areas of the Department.

                                  
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