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


 
            GAO PERSONNEL REFORM: DOES IT MEET EXPECTATIONS? 

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

                             JOINT HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                    POSTAL SERVICE, AND THE DISTRICT
                              OF COLUMBIA

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                                and the

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

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 22, 2007

                               __________

                           Serial No. 110-50

                               __________

   Printed for the use of the Committees on Oversight and Government 
         Reform and Homeland Security and Governmental Affairs


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California               TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
    Columbia                         BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
JIM COOPER, Tennessee                JIM JORDAN, Ohio
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
                  David Marin, Minority Staff Director

Subcommittee on Federal Workforce, Postal Service, and the District of 
                                Columbia

                        DANNY K. DAVIS, Illinois
ELEANOR HOLMES NORTON, District of   KENNY MARCHANT, Texas
    Columbia                         JOHN M. McHUGH, New York
JOHN P. SARBANES, Maryland           JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland         DARRELL E. ISSA, California
DENNIS J. KUCINICH, Ohio, Chairman   JIM JORDAN, Ohio
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
                      Tania Shand, Staff Director
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


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

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware           TED STEVENS, Alaska
MARK L. PRYOR, Arkansas              TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana          JOHN WARNER, Virginia

                   Richard J. Kessler, Staff Director
                        Jennifer Tyree, Counsel
               Thomas Richards, Professional Staff Member
             Jennifer A. Hemingway, Minority Staff Director
       Theresa Manthripragada, Minority Professional Staff Member
                      Emily Marthaler, Chief Clerk






















































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 22, 2007.....................................     1
Statement of:
    Seltser, Barry J., former Director, Center for Design, U.S. 
      Government Accountability Office; Gregory J. Junemann, 
      president, International Federation of Professional and 
      Technical Engineers, AFPTE, AFL-CIO; and Janice M. Reece, 
      former General Counsel, Personnel Appeals Board, U.S. 
      Government Accountability Office...........................   209
        Junemann, Gregory J......................................   223
        Reece, Janice M..........................................   236
        Seltser, Barry J.........................................   209
    Stroman, Ronald A., Managing Director, Office of Opportunity 
      and Inclusiveness, U.S. Government Accountability Office; 
      Curtis W. Copeland, Specialist in American National 
      Government, Congressional Research Service; Jon 
      Shimabukuro, Attorney, American Law Division, Congressional 
      Research Service; Jane K. Weizmann, senior consultant, 
      Watson Wyatt Worldwide; Dr. Charles H. Fay, professor of 
      human resource management and Chair of Human Resource 
      Management Department, Rutgers University School of 
      Management and Labor Relations; and Max Stier, president 
      and CEO, Partnership for Public Service....................   130
        Copeland, Curtis W.......................................   142
        Fay, Dr. Charles H.......................................   173
        Shimabukuro, Jon.........................................   158
        Stier, Max...............................................   194
        Stroman, Ronald A........................................   130
        Weizmann, Jane K.........................................   166
    Walker, David M., Comptroller General, U.S. Government 
      Accountability Office; and Anne M. Wagner, General Counsel, 
      Personnel Appeals Board, U.S. Government Accountability 
      Office.....................................................    43
        Wagner, Anne M...........................................    75
        Walker, David M..........................................    43
Letters, statements, etc., submitted for the record by:
    Akaka, Hon. Daniel K., a Senator in Congress from the State 
      of Hawaii, prepared statement of...........................    34
    Copeland, Curtis W., Specialist in American National 
      Government, Congressional Research Service, prepared 
      statement of...............................................   144
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   126
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, prepared statement of...................     6
    Fay, Dr. Charles H., professor of human resource management 
      and Chair of Human Resource Management Department, Rutgers 
      University School of Management and Labor Relations, 
      prepared statement of......................................   175
    Junemann, Gregory J., president, International Federation of 
      Professional and Technical Engineers, AFPTE, AFL-CIO, 
      prepared statement of......................................   225
    Reece, Janice M., former General Counsel, Personnel Appeals 
      Board, U.S. Government Accountability Office, prepared 
      statement of...............................................   238
    Seltser, Barry J., former Director, Center for Design, U.S. 
      Government Accountability Office, prepared statement of....   211
    Shimabukuro, Jon, Attorney, American Law Division, 
      Congressional Research Service, prepared statement of......   160
    Stier, Max, president and CEO, Partnership for Public 
      Service, prepared statement of.............................   196
    Stroman, Ronald A., Managing Director, Office of Opportunity 
      and Inclusiveness, U.S. Government Accountability Office, 
      prepared statement of......................................   133
    Voinovich, Hon. George V., a Senator in Congress from the 
      State of Ohio, prepared statement of.......................    39
    Wagner, Anne M., General Counsel, Personnel Appeals Board, 
      U.S. Government Accountability Office, prepared statement 
      of.........................................................    77
    Walker, David M., Comptroller General, U.S. Government 
      Accountability Office, prepared statement of...............    47
    Weizmann, Jane K., senior consultant, Watson Wyatt Worldwide, 
      prepared statement of......................................   168


            GAO PERSONNEL REFORM: DOES IT MEET EXPECTATIONS?

                              ----------                              


                         TUESDAY, MAY 22, 2007

        House of Representatives, Subcommittee on Federal 
            Workforce, Postal Service, and the District of 
            Columbia, Committee on Oversight and Government 
            Reform, joint with the U.S. Senate, 
            Subcommittee on Oversight of Government 
            Management, the Federal Workforce and the 
            District of Columbia, Committee on Homeland 
            Security and Governmental Affairs,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Danny K. Davis 
(chairman of the Subcommittee on Federal Workforce, Postal 
Service, and the District of Columbia) presiding.
    Present: Representatives Davis of Illinois, Marchant, 
Norton, McHugh, Sarbanes, Kucinich, Clay, Lynch, Cummings, and 
Issa.
    Also present: Senators Akaka and Voinovich.
    Staff present from the Subcommittee on Federal Workforce, 
Postal Service, and the District of Columbia: Tania Shand, 
staff director; Caleb Gilchrist, professional staff member; 
Lori Hayman, counsel; Cecelia Morton, clerk, LaKeshia Myers, 
editor/staff assistant; John Brosnan, minority senior 
procurement counsel; and Alex Cooper, minority professional 
staff member.
    Staff present from the Subcommittee on Oversight of 
Government Management, the Federal Workforce and the District 
of Columbia: Jennifer Tyree, chief counsel; Thomas Richards, 
professional staff member; Emily Marthaler, chief clerk; 
Richard Kessler, staff director; Theresa Manthripragada, 
minority professional staff member; and Jennifer Hemingway, 
minority staff director.
    Mr. Davis of Illinois. The subcommittees will come to 
order.
    Welcome Chairman Daniel Akaka, Ranking Member Marchant, 
Ranking Member Voinovich and members of both Senate and House 
subcommittees, hearing witnesses, and all of those in 
attendance. Welcome to a joint House and Senate hearing on GAO 
Personnel Reform: Does It Meet Expectations?
    Hearing no objection, the Chairs, ranking members and both 
subcommittee members will each have 5 minutes to make opening 
statements and all Members will have 3 days to submit 
statements for the record.
    Again, thank you all for coming, and I will begin.
    Good morning, Chairman Akaka and Ranking Member Voinovich, 
Ranking Member Marchant, and I welcome you and your colleagues 
to the House and this joint hearing on GAO's personnel reforms.
    The subcommittees thank the witnesses, some of whom have 
traveled here from out of town at their own expense to 
participate in today's hearing.
    This is an important hearing. It is important because GAO 
historically has been viewed by the Congress and the Federal 
community as a model agency in the area of personnel reform. It 
was against this backdrop that GAO was granted broad authority 
with the passage of the Human Capital Reform Act of 2004, Human 
Capital II, to implement a new personnel management system.
    GAO gained its new personnel authority during a period when 
other major executive branch agencies were also receiving 
authorization to undertake major personnel reforms. Two of 
those agencies, the Department of Homeland Security and the 
Department of Defense, have since been mired in court 
challenges brought by employee organizations that have 
questioned both the legality and fairness of the new personnel 
rules and procedures that have been implemented. We have also 
seen efforts undertaken within Congress to address the problems 
that have been identified.
    The situation that has unfolded at GAO is of particular 
concern to me as well as many of colleagues because it involves 
a legislative branch agency. It is close to home. It involves 
the agency we rely on to ensure that others do right.
    That is why for the last 15 months, the subcommittees have 
been researching and now investigating GAO's implementation of 
Human Capital II. What we have uncovered provides the basis for 
some very considerable concerns.
    The Comptroller General has testified on numerous occasions 
that the new personnel systems being launched across the 
government must be ``modern, effective, and credible and must 
have validated performance management systems in place with 
adequate safeguards, including reasonable transparency and 
appropriate accountability mechanisms to ensure fairness and 
prevent politicization and abuse.''
    I agree with him on that point. That is part of what my 
colleagues and I want, but there is more. GAO also recommended 
that new performance management systems contain: meaningful 
distinctions in individual employee performance; involve 
employees and stakeholders in designing the system; have 
employee buy-in; and achieve consistency, equity and 
nondiscrimination.
    Here, again, I agree. These are the standards, the prism 
through which new personnel systems must be evaluated and 
judged. However, when applying them to GAO itself, our staffs 
have uncovered a record of noncompliance that is troubling and 
that warranted the extraordinary joint hearing that we are 
conducting today.
    Beginning in November 2005, increasing numbers of GAO 
employees began calling our subcommittee about GAO's new 
personnel system. By February 2006, GAO employees were 
complaining that the Comptroller General had not kept his 
promise to Congress and had denied annual across the board 
increases to employees who met and even exceeded their 
performance expectations.
    GAO's management responded that these were just a few 
disgruntled employees or employees having difficulty adjusting 
to change.
    The key question for the subcommittee was whether the 
concerns raised had merit. These employees were not represented 
by a union and their concerns were not being addressed by GAO, 
so they came to the place they viewed as their last hope, the 
Congress itself.
    As much as I, and other Members, congressional staff, the 
Federal community and the public hold GAO in high esteem, it 
must be subject to the same level of oversight and 
accountability as other Federal agencies. GAO helps Congress 
hold other agencies accountable for their actions. The only 
body that can hold GAO accountable for its action is Congress.
    As it pertains to employees' claims that the Comptroller 
General did not keep his commitment to Congress, subcommittee 
staff searched the congressional record and reviewed House and 
Senate testimony that the Comptroller General delivered in 2003 
in connection with Human Capital II. Staff also reviewed House 
and Senate committee reports, GAO's Employee Advisory Council 
2003 testimony, GAO's own annual reports, Member statements and 
asked the Congressional Research Service to examine the issue.
    The record reflects that the Comptroller General told 
Congress that GAO employees would receive an annual across the 
board increase unless they were performing poorly or the agency 
was experiencing severe budgetary constraints.
    In March 2006, in response to questions submitted by 
Representative Hoyer at a GAO appropriations hearing on the 
issue, the Comptroller General acknowledges his commitment but 
said that his views changed as a result of a Watson Wyatt 
compensation-based study that led to a split in Band II and the 
finding that some, 308 GAO employees, were being overpaid.
    The employees, on the other hand, said that they were never 
involved in the Watson Wyatt study process and were not 
provided any of the documentation to support the claim that 
they were overpaid.
    The subcommittee determined that the concept of splitting 
Band II arose with the result a job questionnaire administered 
to GAO employees by Personnel Decisions Research Institute in 
2000. Furthermore, in its 2004 contract with Watson Wyatt, GAO 
requested compensation ranges not for the three bands that 
existed at GAO at the time but for four pay bands: Band I, Band 
IIA, Band IIB and Band III.
    The fact is the idea of splitting Band II predated the 
Watson Wyatt study by approximately 4 years and that Watson 
Wyatt provided compensation ranges that reflected a split in 
Band II because that was what GAO asked them to do.
    The subcommittee also found that the job descriptions that 
were used to survey jobs for the compensation study were 
written by GAO and vetted by approximately 30 senior level 
managing directors and 3 members of GAO's Employee Advisory 
Council [EAC]. The senor level managers also validated the job 
matches that Watson Wyatt proposed for the compensation study.
    The fact is that the analysts employed at GAO that were 
affected by this process were not substantively involved. The 
employees were advised and kept up to date as to what was 
transpiring, but they had no real input.
    The subcommittee, like GAO employees, had difficulty 
getting information on GAO's restructuring and the Watson Wyatt 
study. In early 2005, the subcommittee was initially provided 
one set of Watson Wyatt slides that outlined its compensation 
study for GAO. However, it was not until I, as chairman of the 
subcommittee, demanded that GAO provide all documentation and 
communications pertaining to the Watson Wyatt study that the 
materials requested were received.
    Members of Washington, DC Delegation and Members who 
support the Federal community, each year, fight for pay parity 
for Federal employees. We fight for Federal employees to 
receive an annual across the board increase. It is of great 
concern that GAO never consulted with Congress either before or 
after it denied GAO employees who met expectations, their cost 
of living increase.
    According to the Comptroller General's testimony, many of 
these employees will continue to be denied the annual across 
the board increase until he leaves office in 2013. The 
Comptroller General's reasons for breaking his commitment to 
Congress hinge on the Watson Wyatt compensation study and the 
notion that some GAO employees were overpaid.
    But even Watson Wyatt has said that they present the data. 
They do not make policy decisions as to who is and who is not 
overpaid. That decision is made by the client.
    The content and quality of the study is important to our 
understanding of what transpired at GAO and why. We will 
thoroughly examine it during this hearing.
    At the request of the Comptroller General, a member of 
GAO's EAC was invited to testify at today's hearing. EAC 
declined the invitation but asked that the subcommittee submit 
their December 2006, letter to Members of Congress for the 
record. The letter was in response to a bipartisan and 
bicameral request by congressional staff that the EAC report 
directly to Congress on employee concerns. A supermajority of 
the EAC voted and approved the issuance of the letter.
    The Comptroller General has requested that his response to 
the EAC letter also be included in the record.
    Without objection, both letters will be included. It is so 
ordered.
    Blacks in Government [BIG], which is represented on the 
EAC, informed me of their concerns regarding disparate 
performance ratings between African Americans and Caucasians at 
GAO. Employee ratings were central to who was and was not 
promoted to a Band II. Blacks in Government urged the 
Comptroller General in 2004 to study the issue and not to go 
through with the restructuring until the disparity between 
African Americans and Caucasians at GAO was better understood.
    While I commend the Comptroller General for recently 
acknowledging the disparity in ratings and taking steps to 
commission a study on the issue, it would appear that African 
Americans at GAO have been harmed by the restructuring, and 
this brings into question the fairness and credibility of GAO's 
performance management systems.
    Based on meetings with members of GAO's Executive 
Committee, I understand that the EAC can survey GAO employees 
as long as it informs GAO management that it intends to do so. 
I am requesting that the EAC survey all GAO employees on the 
Band II restructuring and the Watson Wyatt study and that it 
consult with the subcommittees in the development of the 
survey.
    Last year in a meeting with congressional staff, an EAC 
member was asked if she was so unhappy at GAO, why not leave? 
The EAC member responded that she had been working for GAO for 
over 10 years and that her job at GAO helped Members and 
influenced public policy. That is why she stayed, out of her 
dedication to public service which outweighed her concern about 
being treated fairly at GAO.
    Last night, GAO provided the subcommittee with 
documentation they received from Watson Wyatt on May 11, 2006, 
regarding the compensation study. This document is substantive 
in that it included the data that was used for the analysts and 
certain other jobs. This data was different from data provided 
earlier.
    However, these new documents do not alter the 
subcommittee's views on the reliability of the survey. If 
anything, it draws into further question the recordkeeping and 
documentation of the entire process. It appears that a hearing 
is needed that focuses specifically on how compensation studies 
are executed and documented.
    My hope is that at the end of this hearing, GAO will take 
steps to regain its credibility by honoring its commitments, 
obeying the law and addressing employee concerns.
    You might note that I took more than the normal 5 minutes 
for my statement, and I did that recognizing that it was 
important to get this information out into the public purvey. 
That is why I did so, and so I indicate that.
    [The prepared statement of Hon. Danny K. Davis follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Davis of Illinois. Now I would like to go to the other 
Members for their statements, and I will go to Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman. I want 
you to know that we are pleased that two of our subcommittees 
can come together to hold this joint hearing on the new 
personnel system at the Government Accountability Office.
    Mr. Chairman, I join you in welcoming Comptroller General 
Walker and all of our witnesses to discuss the changes that 
have taken place at GAO since we passed the GAO Human Capital 
Reform Act of 2004.
    Since GAO's system is being described as a model for the 
rest of the Federal Government, we need a better understanding 
of how GAO's system works and what its impact is on GAO's 
employees.
    We all agree with the Comptroller General that Federal 
agencies should have modern, effective, and credible 
performance management systems. Further, we agree that these 
systems need adequate safeguards to work. Safeguards include 
transparency and accountability mechanisms to ensure fairness 
and prevent abuse.
    GAO also recommends that agencies have a performance 
management system that makes meaningful distinctions in 
individual employee performance, involves employees and 
stakeholders in the design of the system, and achieves 
consistency, equity and nondiscrimination. It is through this 
same lens that we need to view the personnel system at GAO.
    The GAO Human Capital Reform Act of 2004 decoupled the 
annual pay adjustment for GAO employees from those provided to 
all other Federal employees paid under the general schedule. As 
a result, GAO sought to discover how its employees' pay 
compared to the private sector and other GAO competitors for 
the best and brightest workers. GAO hired Watson Wyatt 
Worldwide to conduct a market-based survey for its employees 
and then restructured the pay bands for GAO analysts.
    However, many GAO employees have concerns over these 
changes. Their complaints fall in three broad categories: a 
lack of transparency, credibility, and employee involvement in 
the development of the market-based survey; an unfair process 
and criteria used for determining placement in Band IIB; and 
failure of some GAO employees whose performance at least met 
expectations to receive a cost of living increase.
    In 2004, Watson Wyatt Worldwide conducted the market-based 
survey for GAO. However, according to documents provided to our 
subcommittees, it appears that only three employees who were 
not part of the GAO Executive Committee or the Senior Executive 
Service were invited to participate in the survey design.
    In addition, Watson Wyatt relied on off the shelf market 
data to pay ranges for GAO employees without weighing the data 
sufficiently toward its biggest competitors for top talent.
    It is no secret that Federal employees consistently lag 
behind their private sector counterparts in pay. The Federal 
Employee Pay Comparability Act is waived every year because it 
is too expensive to bridge the pay gap between the public and 
private sectors.
    As such, it is not clear why GAO analysts, who perform 
unique work for Congress in analyzing and investigating a range 
of complex programs and systems, would be overpaid. Nor is it 
clear why GAO, which is fighting to recruit the very best 
employees, would set its pay at a level below its competition.
    I am also concerned about a gap created in the work force 
ranks as a result of the Watson Wyatt survey. GAO separated 
Band II analysts into Band IIA for senior analysts and Band IIB 
for lead analysts. In doing so, it effectively demoted a large 
portion of the GAO analysts work force and undermined the team 
mentality at GAO whereby employees in the same band would 
sometimes lead and sometimes staff reports.
    After relying on the survey and the Band II restructuring 
to determine that several of its employees were overpaid, GAO 
decided that those employees should not receive a cost of 
living adjustment, despite the fact that these employees 
performed at or above the level of meets expectations which is 
a rigorous standard at GAO. Moreover, the Comptroller General 
explicitly promised Congress that an annual pay adjustment 
would be given to employees who met or exceeded expectations 
unless there were extraordinary economic circumstances or 
severe budgetary constraints.
    Because of these decisions, 12 employees filed a petition 
with the GAO Personnel Appeals Board, an independent appellate 
body at GAO, claiming that reassignment from Band II to Band 
IIA resulted in an unlawful demotion, reduction in pay, and was 
a violation of the GAO Personnel Act.
    On April 4, 2004, GAO settled the case. As a remedy, all 
the petitioners received retroactive placement in Band IIB 
effective January 8, 2006, with full back pay and interest and 
consideration for retroactive promotion to Band III with full 
back pay and interest.
    Last week, approximately 200 more GAO employees filed a 
petition with the PAB over the personnel reforms.
    Out of continuing concern over these changes, a majority of 
eligible employees also filed a petition on May 8, 2007, to 
elect a union to represent them.
    I look forward, Mr. Chairman, to learning more about the 
GAO personnel reforms. GAO is an important instrument of 
congressional oversight. Its employees are critical to 
Congress' mission.
    The question to be asked here today is whether the GAO 
personnel reforms should be considered best practices to be 
emulated throughout the government or rather a lesson in what 
not to do.
    Mr. Chairman, I agree with you that GAO needs to survey the 
employees' feelings on the new pay changes that have taken 
place, and I also urge EAC to do so.
    Mr. Chairman, I thank you for this opportunity to testify, 
and I look forward to hearing from our distinguished witnesses.
    [The prepared statement of Senator Akaka follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Davis of Illinois. Thank you very much, Senator Akaka.
    I now yield to the ranking member of the House 
subcommittee, Mr. Marchant.
    Mr. Marchant. Thank you, Mr. Davis. Chairman Davis and 
members of the subcommittee, I thank you for holding this 
hearing today on the Comptroller General's effort to revitalize 
the human resources management system at the Government 
Accountability Office.
    Over the past decade, concerted efforts have been 
undertaken in Congress and the executive branch to bring the 
decades old Federal Civil Service system into the 21st century 
so that the Federal Government can recruit and retain a top 
notch Federal work force. In Congress, we have authorized 
reforms to the personnel systems at the IRS, NASA, the 
Department of Defense, the Department of Homeland Security, the 
Government Accountability Office and the Securities and 
Exchange Commission as well as reforms to the Government-wide 
Civil Service system.
    In the executive branch, among other things, the President 
has made strategic human capital management a key component of 
his Presidential management agenda.
    As expected, implementing these reform efforts have proven 
to be easier in theory than in reality. While few can argue 
that the Civil Service system is in desperate need of reform, 
not everyone agrees on how to actually implement that reform.
    The purpose of today's hearing is to assess the efforts at 
the Government Accountability Office to implement the statutory 
requirements of the GAO Human Capital Reform Act of 2004 which 
authorized additional human capital flexibilities in the 
Government Accountability Office. Not surprisingly, the 
implementation of this legislation has been the source of some 
consternation among employees at the agency, and a degree of 
mistrust appears to have built up between the employees and 
management in certain parts of the agency.
    I am hopeful that today's discussion might help the parties 
come to some sort of solution to these issues so that the 
Government Accountability Office can continue its efforts to 
reform and revitalize its human capital system.
    While I appreciate the need for today's hearing on this 
important subject, Mr. Chairman, I am concerned that the scope 
of the hearing appears to include a pay dispute that is 
currently pending before the GAO Personnel Appeals Board. Just 
last week, it was reported that over 200 employees filed 
petitions with the Personnel Appeals Board, seeking pay and 
benefits they claim to have lost since the implementation of 
the GAO Capital Reform Act of 2004. Given that this particular 
issue is currently under consideration by the board, we must 
act carefully not to influence the outcome of these 
proceedings.
    In closing, as a general rule, it takes 5 to 7 years to 
begin to see the benefits of a major reform initiative such as 
those called for by the GAO Human Capital Reform Act. We are 
now almost 3 years into the reform, and I applaud the 
chairman's decision to hold this hearing today on the status of 
the implementation of these reforms.
    Thank you.
    Mr. Davis of Illinois. Thank you very much, Mr. Marchant.
    I now yield to the ranking member of the Senate 
subcommittee, Senator Voinovich.
    Senator Voinovich. Thank you, Chairman Davis, and I welcome 
the opportunity to be here this morning, and I welcome our 
witnesses and thank them for being here this morning.
    I have taken a keen interest in the management of Federal 
agencies during my 8 years in the Senate. GAO has played an 
integral role in providing comprehensive analysis and 
thoughtful recommendations on reforming the Federal 
Government's strategic human capital management. This is an 
issue that I have made the centerpiece of my efforts as the 
ranking member of the Senate Subcommittee on Oversight of 
Governmental Management and the Federal Workforce.
    I know of no other individual in government who has worked 
harder to bring to the attention of Congress and the executive 
branch officials, the need for the government to invest first 
and foremost in its work force. Not only has Mr. Walker led GAO 
in identifying weaknesses and recommending improvement to 
strategic human capital management throughout the executive 
branch of government, he has worked tirelessly to lead by 
example by reforming GAO's strategic human capital practices.
    Mr. Walker has often observed that for too long Federal 
employees have been seen as costs to be cut rather than assets 
to be valued, and I have observed that.
    As a former Mayor of Cleveland for 10 years and the 
Governor of Ohio for 8 years, I lobbied this place as chairman 
of the National Governors Association and president of the 
National League of Cities. I saw that the A Team, the people 
that really got the job done, were being neglected and ignored 
and weren't being turned to, to get their thoughts on how they 
could do a better job.
    In the first 9 years of Mr. Walker's term as Comptroller, 
he began important cultural transformations of his agency based 
in part on the authorities authorized in the GAO Capital Reform 
Act of 2003. I am proud to have sponsored the Senate version of 
this legislation.
    Mr. Walker, I look forward to your testimony detailing how 
you have worked to implement those reforms.
    As we hear the testimony of the witnesses here today, I 
would remind my colleagues that cultural transformation takes 
time. Understanding and accepting the market-based pay system 
that has been developed in GAO requires a change in culture, a 
change in culture throughout the government where we are trying 
to incorporate pay for performance. In its work, GAO has 
identified that the transformation takes approximately 5 to 7 
years.
    Quite frankly, after 10 years as Mayor and 8 years as 
Governor, my experience is that GAO's assessment is absolutely 
accurate. I think one of the things that Congress fails to 
understand is that if we are going to have true transformation 
it is not going to happen overnight. It takes 4 to 5 years for 
these things to be put in place, the bugs to be worked out and 
for it to be institutionalized.
    I understand a few witnesses will suggest GAO's authority 
under the 2004 act should be repealed or modified. I think it 
is premature to make such judgments. If this is the reaction to 
change in the Federal Government, then God help us.
    Major corporations with highly educated work forces like 
that of GAO succeed in this country because pay for their 
employees is based on performance and response to changing 
market conditions. People no longer seek to work for an 
organization with the idea that they will stay there for their 
entire professional career. People are looking to work hard and 
be recognized and be rewarded. So I understand some employees 
may be unhappy with the initial stage of this transformation.
    Mr. Walker has faced and will continue to face strong 
critique of the work he has done to modernize the system. I am 
pleased that GAO has responded to some of the concerns that 
Chairman Davis and Senator Akaka mentioned in their opening 
statements. It is important that GAO understand that they 
continue to respond to these concerns that are being mentioned 
here today at this hearing if they expect for this to become 
part of the culture of the GAO.
    Mr. Walker, when I was Mayor of Cleveland, I did what you 
are doing, implementing pay for performance. The study that was 
done back in 1980 was done by Watson Wyatt. So I know firsthand 
how difficult the process is.
    I know also firsthand how when done right, how motivating 
and rewarding it is for those employees that participate as 
witnessed by the fact that GAO was just recognized as the 
second best place to work in the Federal Government by the 
Partnership for Public Service.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator George V. Voinovich 
follows:]

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    Mr. Davis of Illinois. Thank you very much, Senator.
    I am going to ask other members of the subcommittee who 
have opening statements if you would consider submitting those 
for the record so that we can go directly to our witnesses. If 
someone has a burning desire.
    Ms. Norton. I have a burning desire.
    Mr. Davis of Illinois. All right, then the Chair recognized 
Delegate Eleanor Holmes Norton.
    Ms. Norton. I have a burning desire in part, Mr. Chairman, 
because you announced there would be opening statements. Mr. 
Chairman, so I don't think it is fair to change the rules in 
the middle of the opening statements.
    Mr. Chairman, I want to comment on this matter, and I want 
my comments to be understood not to have reference to any 
individual complaints that may be pending. I want to comment on 
the structure, the structure that I follow very closely from 
the moment it was put into existence.
    I do believe that the committee should note that this was a 
kind of grand experiment in the new compensation system and 
that what it has gotten the agency is a union which is some 
indication since this was an agency which, unlike similar 
agencies, did not in fact have a union. The CRA does have a 
union. The NSA and some of its upper level engineers are 
unionized. Some administrative judges are unionized.
    But the GAO did not have a union, and the reason that this 
is worth noting is that what the GAO was doing was supposed to 
demonstrate the success of the new compensation system. For all 
the notions about whether or not this is premature, the fact is 
that GAO held itself out as being able to show that the pay 
banding system could work.
    I think we have to ask ourselves, is it the failure of the 
experiment or the failure of the new compensation system? It 
could be a failure of both, but it is hard to call what we now 
have, a success.
    I don't see how on the basis of what GAO has done and the 
reaction of its upper tier employees, surely unrepresentative 
of the Federal work force. This is not your average Federal 
agency. I don't know how we could say that this system should 
now be spread to other agencies without a great deal more work.
    There have even been allegations that I think Mr. Walker 
should speak to, words of management style intimidation, which 
I find shocking. If the people want to unionize, I don't think 
that the GAO will rise or fall tomorrow. It does seem to me 
that was unfair, if unwarranted, if it occurred, and I leave it 
to him to speak to that. I think he ought to affirmatively 
speak to that in his remarks.
    I am very concerned that the matter has been complicated by 
allegations of racial disparity. Any new system has to be 
tested for disparities of all kinds and especially after what 
this country has gone through for any disparate racial impact.
    I am concerned, as a Member of Congress who has relied very 
substantially on the GAO, at the possibility that we have 
endangered, by this dispute, the reputation of the agency as a 
place to go to work. So the Congress may not be assured of the 
best and the brightest employees, however Members may come down 
on this dispute.
    Finally, Mr. Chairman, I want to say a word about COLAs. 
The chairman has said rightly that Members of the regional 
delegation lead the annual effort for COLAs, but let me also 
say for the record that these COLAs pass the Congress by 
lopsided majorities. This is something we do for employees who 
could go and work elsewhere at a time when, by the way, we are 
losing the baby boom generation without any assurance that we 
will have employees of their caliber, given the competition 
from the private sector to replace them.
    I did some homework, Mr. Chairman, and found that my 
impression that GAO employees would be the only employees 
without a COLA. Two million employees and the GAO employees 
would be the only ones without a COLA was, in fact, the case. 
How in the world can any agency justify a compensation system 
that picks them out in this respect.
    In fact, some people's pay was lowered. I also have checked 
the facts on that. When locality pay was instituted, the 
Federal Government tried once lowering the pay of a few 
workers. However, there was no dispute because everybody got an 
across the board raise.
    The Federal Government was sued once when for some of its 
very high level employees, those that we have a hard time 
recruiting, like scientists, that no COLA--no COLA--occurred. 
They sued. We lost. We meaning the Federal Government.
    There is some institutional history, not just legislative 
history, Mr. Chairman, and I must say that the whole setup of 
the GAO bothers me as a former Chair of the EEOC that regards 
separation of powers as important.
    I have no reason to criticize the Personnel Board that 
these matters go to, but it is worth noting that the GAO alone 
has its own EEOC in this Personnel Board, its own FLRA, its own 
MSBP. My, you must be special. And, these members are not even 
appointed by the President or some other body like us or 
somebody. They are appointed by the person against whom the 
complaints are filed. They have terms. The Personnel Board has 
terms.
    We are not here to criticize them. I don't know anything 
about what they have done, but I do think we have a very fancy 
setup here for an agency of Congress that looks as if the 
workers in this agency are preferred in a way other workers are 
not. If that is the case, I believe it is time to look more 
closely, not only at the GAO but at the entire way in which it 
is structured.
    Thank you, Mr. Chairman.
    Mr. Davis of Illinois. Thank you very much, Delegate 
Norton.
    [Applause.]
    Mr. Davis of Illinois. Any other Member?
    If not, then we will go directly to our witnesses, and I 
will introduce our first panel of witnesses.
    Panel one: Mr. David M. Walker is the seventh Comptroller 
General of the United States. He began his 15 year term when he 
took his oath of office on November 9, 1998. As Comptroller 
General, Mr. Walker is the Nation's Chief Accountability 
Officer and head of the U.S. Government Accountability Office.
    We also have Ms. Ann Wagner who is the General Counsel for 
GAO's Personnel Appeals Board. The Personnel Appeals Board 
adjudicates personnel disputes involving employees or 
applicants to GAO as well as monitors equal employment 
opportunities at the GAO.
    Let me thank our witnesses for coming. As is the tradition 
with this committee and all committees, we swear in the 
witnesses.
    [Witnesses sworn.]
    Mr. Davis of Illinois. Let the record will show that each 
witness answered in the affirmative.
    Your entire statement will be in the record. The green 
light indicates that you have 5 minutes to summarize. The 
yellow light means your time is running down, and you have 1 
minute. Of course, the red light means that your time has 
expired.
    Mr. Davis of Illinois. Mr. Walker, would you begin?

   STATEMENTS OF DAVID M. WALKER, COMPTROLLER GENERAL, U.S. 
 GOVERNMENT ACCOUNTABILITY OFFICE; AND ANNE M. WAGNER, GENERAL 
       COUNSEL, PERSONNEL APPEALS BOARD, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

                  STATEMENT OF DAVID M. WALKER

    Mr. Walker. Thank you, Mr. Chairman. I will endeavor to get 
done in 5 minutes. I would respectfully request my entire 
statement be included as part of the record, and I will 
summarize now.
    I appreciate the opportunity to appear before you today to 
talk about the GAO's efforts to implement its human capital 
reforms.
    Because we are the agency that audits, investigates and 
evaluates other agencies, we believe very strongly in leading 
by example. GAO is not perfect, and we never will be, but quite 
frankly no agency in government is perfect nor will it ever be. 
We strive to do what is right, and we strive to continuously 
improve.
    Clearly, the government's greatest asset is its employees. 
Certainly, this is the case at GAO. Therefore, all of our human 
capital efforts are designed to attract and retain top talent 
within current and available resource levels.
    As Comptroller General of the United States, I have a 
fiduciary and stewardship responsibility to focus not just on 
today but also to do what is right for tomorrow. This requires 
me, among other things, to do what I believe is in the 
collective best interest of all of GAO's employees rather than 
what might be in the narrow interest of some of GAO's 
employees. It also requires me to consider which policies are 
appropriate to attract and retain a top flight work force while 
assuring that those policies are both affordable today and 
sustainable over the longer term.
    The fact is when you are making tough transformational 
changes, you cannot make everybody happy. Nonetheless, it is 
important for an agency's leadership to listen to the views of 
all clients, employees, and other key stakeholders and to 
seriously consider all legitimate comments and concerns. At the 
same time, at the end of the day, it is critically important 
for leaders to make difficult decisions based on what they 
think is the right thing to do even though it may not be 
popular. This is the approach that we employ at GAO.
    While our transformational human capital changes have 
required some difficult adjustments, they, along with other key 
reforms, have helped to achieve record organizational results 
which are provided for the record.
    Furthermore, we continue to achieve very positive results 
in connection with our people measures including in connection 
with our Employee Annual Feedback Survey, and we provided fact-
based evidence to the same which is in the record.
    Most employee concerns regarding our recent changes relate 
to the implementations of our moving to a more market-based 
skills, knowledge and performance-oriented pay system. We hired 
a top compensation consultant firm, Watson Wyatt, with 
extensive public, private and not for profit sector experience 
through a competitive process.
    As a result of this study, the pay ranges for about 25 
percent of our employees were raised. You don't hear much about 
that.
    However, the study also determined that while most of our 
employees were paid within market ranges, about 10 percent of 
our employees were paid above market levels based upon their 
roles, responsibilities and/or relative performance. That is 
what you hear about.
    We believe we are the first major agency in the Federal 
Government to implement broad banding, market-based pay and 
skills, knowledge and performance-oriented pay systems on an 
agency-wide basis. As noted previously, this is a major 
accomplishment that was difficult to achieve, and our reforms 
have been subject to many positive case studies and articles by 
various organizations, academics and others on how to achieve 
tough transformational changes within the Federal Government. 
We are proud of what GAO has done.
    Nonetheless, as I stated previously, in hindsight I regret 
that there were certain expectation and communication gaps that 
occurred in connection with our initial implementation of 
market-based pay ranges and the related across the board pay 
adjustments in 2006. We have undertaken numerous steps, 
including me personally, to address this matter over the past 
year so that such gaps should no longer exist.
    Unfortunately, despite our concerted and good faith 
efforts, there has been a lot of false and misleading 
information disseminated about our changes.
    First and foremost, I know that some believe that I did not 
follow through on certain assertions they thought that I made 
in 2003 during consideration of GAO's Human Capital Reform Act, 
namely that we would provide across the board pay adjustments 
to GAO employees who received at least meets expectations 
ratings irrespective of their pay levels. However, in late 
2004, after we received the market-based pay study, we were 
faced with the reality that some of our employees were paid 
above market. This fact was not known in 2003.
    In retrospect, we should have advised the Congress and 
others sooner that we did not view my prior statements as 
applying to employees who were paid above market levels. I am 
sorry that we didn't do that. However, the fact remains that I 
do not believe now, nor did I believe then, that it would be 
appropriate or equitable to provide across the board pay 
increases to employees who were paid above market levels. The 
very notion of doing so would be fundamentally inconsistent 
with a market-based pay system and fundamentally inconsistent 
with the premise of equal pay for work of equal value.
    Importantly--and this is not in my statement, but I have 
confirmed it three times--not one single GAO employee asserted 
until after the Band II restructuring took place that I was 
breaching an alleged promise that I made in 2003, not one.
    With regard to our recent Band II restructuring effort, the 
plain and simple truth is that no GAO employee took a pay cut 
as a result of our classification and compensation changes. 
Furthermore, all GAO employees who were on board as of January 
2006, were given the opportunity to earn what they could have 
made under the prior Band II pay system at the time of 
conversion.
    While 308 GAO employees who performed at meets expectations 
levels or better did not receive the annual across the board 
adjustment in 2006 because they were paid above market, this 
number decreased to 298 as a result of the recent PAB 
settlement.
    The number of employees who did not receive across the 
board adjustments declined from about 10 percent of our work 
force in 2006 to about 5 percent in 2007, and of these 139 
employees who didn't receive an across the board in 2007, only 
2 did not receive performance-based compensation. In fact, some 
of the ones received more in performance-based compensation 
than they would have received had they received an across the 
board adjustment in lieu of that.
    Importantly, our limits on across the board pay adjustments 
represent a temporary transition issue and, as I provided for 
the record, I expect that before the time I leave office, every 
GAO employee will receive across the board pay adjustments in 
addition to be eligible for PBC.
    Some have asserted that morale at GAO is poor. This is 
simply not supported by the facts. Morale is up 33 percent 
after our changes and since I came to GAO. We're also ranked 
No. 2 by our own employees in the Best Places to Work Survey 
after the changes for our classification and compensation 
systems.
    Some have asserted that we did not have an extensive 
outreach effort or communication effort with regard to our 
changes. The record does not support that assertion, as I have 
provided for the record.
    Importantly, we have taken additional steps. We have 
learned some lessons and we will continue to learn lessons, and 
we have tried to make improvements as time has gone on.
    For example, I have made a number of adjustments to provide 
additional opportunities for performance-based compensation and 
base pay adjustments over time, and I am contemplating that we 
may continue to do so going forward.
    Finally, some have questioned the degree of diversity in 
GAO's work force. These assertions don't stand up to the facts 
which I have provided for the record.
    In closing, GAO's leadership team is committed to 
continuous improvement while avoiding constant change. GAO is 
not perfect, and we never will be. We are, however, a clear 
leader in transforming how government does business in many 
areas including the human capital area. We are proud of this 
fact and plan to do everything that we can in partnership with 
our clients and our employees to continue to stay that way.
    Fortunately, we have a great work force, and we have many, 
many, many, many more people who want to work for GAO than we 
have positions, and I want to keep it that way.
    Thank you.
    [The prepared statement of Mr. Walker follows:]

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    Mr. Davis of Illinois. Thank you very much, Mr. Walker.
    We will now proceed to Ms. Wagner.

                  STATEMENT OF ANNE M. WAGNER

    Ms. Wagner. Good morning, Chairman Davis, Chairman Akaka, 
members of the subcommittees.
    I have appeared here today in response to your request that 
I speak to issues arising out of the restructuring of the Band 
II analyst specialists work force at GAO that occurred in 
December 2005.
    As a preliminary, well, let me just say that the assertions 
that we were prepared to litigate in those cases are set forth 
in my written statement which I would respectfully request be 
admitted into the record.
    As a preliminary matter, I do want to note that these cases 
settled as was noted by Chairman Akaka in April of this year, 
and as such the assertions that are set forth in my written 
statement, to which I will speak to today, do not constitute 
findings in the legal sense of that term, meaning conclusions 
of fact and law derived upon an adjudication of the evidence. 
However, I firmly believe that had these matters gone on to 
hearing before the Personnel Appeals Board, that we would have 
prevailed.
    The fundamental thrust of the Band II cases that we had 
taken to the Personnel Appeals Board was essentially that the 
restructuring of the Band II work force violated the 
petitioners' statutory due process rights.
    There were three essential grounds to this claim: First, 
that the reassignments from Band II to Band IIA constituted 
demotions and that these demotions were taken by GAO without 
just cause as required by law.
    Second, we were prepared to litigate that the restructuring 
process itself was so flawed from the inception to 
implementation, that the ensuing demotions could not be 
sustained.
    Third, we were prepared to show that the restructuring was 
contrary to 5 U.S.C. 4302 which is made applicable to GAO under 
the GAO Personnel Act at 31 U.S.C. 732. We were also prepared 
to show that the restructuring process did not comport with the 
human capital legislation, specifically Section 9 of Public Law 
108-271.
    Finally, we were prepared to argue that the elimination of 
the COLA for the Band IIA petitioners was contrary to the 
statutory authorization as set forth in Public Law 108-271 
Section 3.
    With regard to the first grounds, that is, that these 
demotions were taken without just cause, our investigation and 
ensuing discovery reflected that the stated cause for the 
demotions was not substantiated by GAO. Specifically, GAO 
undertook the restructuring ostensibly to achieve equal pay for 
equal, for work of equal value over time.
    However, despite repeated requests that GAO produce 
documented evidence that the existing performance-based 
compensation system that was existing at GAO prior to the 
restructuring as well as the Band II structure himself somehow 
impeded GAO's ability to pay employees equally for work of 
equal value over time.
    Throughout the discovery process, the alternate rationales 
for the restructuring that were proffered by GAO were the PDRI 
study from 2000 as well as the Watson Wyatt study. However, 
upon close examination of both of those, it was clear that 
neither supported GAO's contention that they somehow compelled 
the restructuring of the Band II.
    In particular, the PDRI study that was done in 2000 
reflected a so-called bimodal response among the respondents 
which GAO assumed signified that there were, in fact, two 
distinct positions at the Band II level. However, upon further 
examination of that data, it appeared that the vast majority of 
the respondents to that survey were, in fact, AICs themselves 
which are the leader positions within the Band II, so that the 
assumption that GAO made, based on the bimodal response, was 
unsubstantiated.
    Further, with regard to the Watson Wyatt study, we 
discovered in the course of the discovery process that the GAO 
actually provided Watson Wyatt, as a design characteristic for 
the study, the fact that there were these two distinct 
positions at the Band II. So it wasn't accurate to say that 
Watson Wyatt somehow independently confirmed that there were 
these two positions at the Band II level that justified the 
restructuring.
    I do note that my time is up, and I would be happy to 
answer additional questions with regard to the other grounds 
for which we were prepared to litigate before the Personnel 
Appeals Board.
    [The prepared statement of Ms. Wagner follows:]

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    Mr. Davis of Illinois. Thank you very much, Ms. Wagner.
    We will now proceed to the question period.
    Part of our staff has put on the easel some exhibits, and 
those are exhibits 1 and 2. We called them, Mr. Walker, and 
they are the EAC and your House subcommittee hearing testimony 
on Human Capital II as reflected during the hearing period.
    Members of Congress often engage in colloquies between 
themselves so that their intent and promises are documented for 
the record. Members often ask hearing witnesses to make 
commitments on the record that are intended to govern future 
action of the parties making the commitment. Members of 
Congress govern themselves by commitments they make on the 
record, and they expect hearing witnesses to do the same.
    It is clear from the record that Members were concerned 
that you would deny employees who meet expectations an annual 
across the board increase and therefore extracted a commitment 
from you on the record that you would not do so without regard 
to your analysis and interpretation of Watson Wyatt.
    What would perhaps then give you the feeling that you could 
change this commitment without any effort to make sure that all 
of the involved parties had an understanding of the rationale 
that you were using?
    Mr. Walker. Well, Mr. Chairman, first let me say that I 
said before, as I noted in my statement, that obviously there 
are certain Members who believe that I promised something that 
I do not believe that I promised, and because of that 
expectation gap, I think that is unfortunate. Had I known that 
such a gap existed, I would have come up here earlier.
    But let me reiterate something that I said earlier. I went 
back and researched personally, myself, and had it confirmed by 
others over the last week or so in preparation for this 
hearing, whether or not any person including any GAO employee 
ever asserted until after the Band II restructuring was final, 
that the fact that we weren't going to give across the board 
pay adjustments to people who were paid in excess of market-
based levels would not get across the board adjustments. 
Whether or not anybody asserted that would have been a breach 
of my promise, and the answer is no one did.
    If you look at the November 2005 summary that I did which 
made it very clear that was what we were talking about. No one 
commented on that. Nobody complained about that. It wasn't 
until after the Band II restructuring became effective that I 
first started hearing things.
    Second, I spoke with Mr. Van Hollen personally because I 
was aware of this colloquy, and I spoke with him personally in 
early 2006 in order to talk to him about that.
    The bottom line is this: I am not going to dispute what I 
said. I did say that.
    But I think you have to keep in mind four things: No. 1, 
contextual sophistication, we were testifying about going to a 
market-based system that included concepts of equal pay for 
work of equal value over time and competitive pay levels. 
Second, I didn't know then and I didn't find out until a year 
and a half later that we had people paid above market. Third, I 
was not asked, nor did I answer, whether or not we would give 
across the board adjustments for people paid above market.
    And, fourth, the expressed statutory criteria that I am 
required to consider, which I have before me, says, among other 
things, there shall be substantially equal pay for work of 
equal value within each local pay area and also ones dealing 
with provisions that require for us to be competitive with 
people in markets where we have people.
    I am sorry that there was an expectation gap. Had I known 
that it existed, I would have come up quicker, but I believe 
that my actions were consistent with my commitment and I 
believe they are consistent with the law.
    Mr. Davis of Illinois. Thank you very much.
    Ms. Wagner, you just heard Mr. Walker's interpretation and 
analysis of that exchange. If you were to give an 
interpretation of what it meant and its impact, how would you 
characterize it?
    Ms. Wagner. Well, Mr. Chairman, any analysis of the 
legality of agency action would be determined by reference to 
the statutory language on its face. If that language was 
ambiguous, then the next step to discern the meaning of the 
language would be to go to legislative history so that, first 
and foremost, in trying to determine what this language means, 
any court would go first to the language itself.
    I think that the language on the face of the statute, which 
speaks in terms of mandatory terms of shall, would be, to a 
court, persuasive argument that Congress intended that 
employees who were performing at a meets expectations level 
were entitled to an annual adjustment. There is nothing in the 
face of the statutory language that suggests that the 
Comptroller General has the discretion to eliminate for 
employees who are performing well, to eliminate entirely the 
COLA.
    For instance, if this case had gone to hearing, if the 
Board were to conclude that the language was ambiguous on its 
face, the next step would be to go to legislative history. The 
fact is that the testimony at the time that Congress enacted 
this statute clearly indicated that its understanding of what 
it was doing at this time was to provide employees who were 
performing at a meets expectations level with an annual 
adjustment.
    The fact that there might be some events that arose later 
does not, cannot retroactively be used to ascertain what 
Congress intended in 2004 when it enacted that statute.
    Mr. Davis of Illinois. Thank you very much.
    Mr. Walker, in March 2006, in reply to questions submitted 
by Representative Hoyer during an appropriations hearing, you 
stated that your commitments to Congress and the GAO employees 
in 2003 were accurate at the time but that your views were 
altered about whether and when employees should receive pay 
adjustments after completion of the 2004 Watson Wyatt-based 
compensation study. Last week in a Federal Computer Week 
article, you made the same assertion, that the Band II split 
and subsequent policy determination that some GAO employees are 
overpaid was a direct result of the Watson Wyatt study.
    However, in Appendix 7 on page 18 of your testimony, it 
states that in August 2002, GAO's Employee Advisory Council and 
Executive Committee began to discuss the feasibility of 
splitting the Band II level. If the EAC and the EC were meeting 
to discuss the Band II split in 2002, how could the decision to 
split the Band II level result from a 2004 Watson Wyatt study?
    Mr. Walker. Let me, if I can, provide an executive summary 
of a chronology of events if it would be helpful to the 
Members.
    First, PDRI did its work in 2000. PDRI's work gave an 
indication--it was not dispositive--that there were potentially 
different roles and responsibilities in Band II.
    Frankly, I didn't need PDRI to tell me that. It was 
blatantly obvious from my period of time being at GAO. I came 
to GAO in November 1998. I had extensive knowledge of what GAO 
was doing, the levels that we had. I did significant research 
on what we did in 1989 to restructure the agency, and I knew 
that we had apples, oranges and pears in Band II. All PDRI did 
was just to reconfirm something that I knew.
    So we talked back in 2002 that there may be a need at some 
point in time in the future to consider restructuring Band II. 
Many things happened between 2002 and 2006 when we ultimately 
did. We talked about various options of not splitting Band II 
by potentially having different speed bumps within Band II. We 
talked about a hard split of Band II. Ultimately, we ended up 
with a hybrid of the two.
    At the time of July 2003, I did not know then that we had 
any GAO employees who were paid above market. That fact was not 
known to me. That fact was not known to any Member, and to my 
knowledge that fact was not known to anybody.
    And so, I believe that my statements were accurate at the 
time and, as I said, had I known that we had people paid above 
market, then I would have addressed that issue directly. But 
not knowing it and considering the context of what we were 
talking about at the time, frankly, it didn't even occur to me.
    Mr. Davis of Illinois. Thank you very much, Mr. Walker.
    I am going to now go to Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Walker, in testimony before our subcommittees you said 
that reasonable transparency is essential in the development of 
a new personnel system. I would like to talk to you about the 
standardized rating scores [SRS]. It is my understanding that 
GAO developed the SRS to help address differences in how 
managers rate their employees and is used to determine an 
employee's performance pay.
    Can you explain how the SRS is calculated and if the data 
and methodology has been provided to GAO employees?
    Mr. Walker. Sure. I think it is important to understand 
what the SRS is and why we did it.
    Our employees are rated by designated performance managers. 
Their ratings are reviewed by SES members. All the ratings are 
subject to independent review by our Office of Opportunity 
Inclusiveness and our Human Capital Office before they are 
finalized. But they are done on a team by team basis, and for 
GAO we have 13 major teams for the work that we do in 
conducting auditing, evaluations and investigations.
    Our Employee Advisory Council, several years ago, expressed 
concerns about the differences in average ratings between the 
various teams, and they asked us to explore what, if anything, 
could be done to try to assure horizontal equity with regard to 
the application of performance-based compensation, given some 
of these differences.
    In doing that, we looked at various options. One of the 
options that we looked at was the so-called Z Score approach 
that was brought to our attention among many others by Watson 
Wyatt, and that was way of normalizing ratings across the 
various teams.
    We called it a Standardized Rating Score [SRS], and it was 
a way to basically take into consideration that there could be 
somewhat different average ratings between the different teams, 
but as long as one thought the talent in GAO was roughly 
equally distributed across the teams, then this was a 
methodology that you could try to assure equity between the 
teams.
    In January 2007, we provided to all of our employees, how 
they could calculate their own SRS score, and I will be happy 
to provide that for the record if you want the detail.
    Second, we made available from the first time that we ever 
used the SRS score. We made it available for our employees to 
be able to contact our Human Capital Office, if they had any 
questions at all about their score, to have it recalculated.
    We had concerns expressed by our Employee Advisory Council 
and other employees that, gee, some employees would like to 
calculate their own SRS score. So listening to what they had to 
say, we have now made. We have made the entire thing 
transparent. People can calculate their own score if they want, 
and I am happy to provide the details for the record if you 
would like.
    Senator Akaka. Thank you, Mr. Walker.
    In your testimony, you cited the Partnership for Public 
Service report on the Best Places to Work, in which GAO placed 
second, and noted that the ranking took place after GAO 
implemented its pay reforms. However, it is my understanding 
that GAO only asked three questions of its employees for the 
report.
    Has GAO asked employees about the new pay system, 
specifically about splitting the Band IIs and not giving 
everyone a COLA who at least met expectations? If so, what has 
been the response and, if not, why?
    Mr. Walker. Well, Senator, first it is important to 
understand that since 1999 we have done an annual electronic 
confidential employee feedback survey of our employees which 
asks many, many, many questions.
    The three questions that you properly refer to with regard 
to the Partnership for Public Service rankings are the ones 
that are asked of every agency in order to come with those 
rankings. So those are only three of many questions that are 
asked to our employees, but they have the exact same wording as 
the questions that are asked to other agencies. Therefore, we 
were ranked No. 2 among large Federal agencies based on that 
ranking.
    With regard to the issue of whether or not we asked, as 
part of our employee feedback service, people as to whether or 
not they liked or didn't like the Band II restructuring or our 
new compensation system? No, we did not because that is, in 
effect, a poll. It is a poll.
    As I said before, in my mind, what I get paid to do is to 
listen very carefully to our employees, to seriously consider 
everything that they have to say and to make adjustments as 
deemed appropriate but not to do what is popular. To do what I 
think is right.
    Now, I will note for the record that our average ratings 
from our employees on issues like our performance management 
system have gone up over time under our new system, not down. 
Second, I will also note for the record that the average rating 
that our employees gave to whether or not our system is more 
performance-based or not in comp is better than most agencies.
    Senator, a lot of people have opinions about this, but the 
facts are our friend.
    Senator Akaka. Ms. Wagner, Mr. Walker has testified that 
even though some employees were determined to be overpaid, no 
employees took a pay cut and all employees in Band II were 
given the opportunity to earn what they could have earned under 
the prior Band II pay system at the time of the conversion.
    Based on your investigation into the 12 employees' 
petition, did any employee take a pay cut and were all 
employees given a real opportunity to be placed in Band IIB?
    Ms. Wagner. Mr. Chairman, our claim that the reassignment 
amounted to a demotion was based on two grounds: First, that 
the movement from Band II to Band IIA was, in effect, a 
reduction in grade. The second component of that is that the 
petitioners experienced a real reduction in pay insofar as 
being placed into IIA meant that they were not going to receive 
an annual adjustment to their basic pay rate.
    With regard to that second point, the fact is that the 
employees did not have a pay cut per se in the sense that their 
paycheck was less the week before the restructuring than it was 
the week after.
    However, we were prepared to argue before the board--and 
again I firmly believe that we would have prevailed on this--
that unlike in the executive branch where you have a situation 
where you can have reassignments with pay retention, grade 
retention and the Merit Systems Protection Board might find 
that not to be a demotion, in this context where the employees 
were not going to get their annual adjustment or COLA, that the 
stagnation of their pay, in effect, really does amount to a 
reduction in pay. That was the claim that we were going to 
assert before the board.
    The board has not ruled on that, so I can't say whether or 
what the board's view is, but I believe that it is a 
meritorious position and that we would have prevailed.
    Senator Akaka. Mr. Walker, would you like to comment?
    Mr. Walker. If I can, thank you, Mr. Chairman.
    First, no employee took a pay cut.
    No. 2, every Band II employee had the opportunity to make 
as much as they could have made under the old system as of the 
time of the conversion albeit at a slower rate than otherwise 
they could have done under the old system.
    Third, Ms. Wagner is an advocate. She is not an independent 
judge. She is prepared to argue a lot of things. I am prepared 
to argue a lot of things. In my view, there is no question; we 
would have prevailed. She has the right to her opinion.
    The fact is the matter was settled to the interest of all 
parties, and the only reason that we entered into a settlement 
is because this was putting this issue behind us. That is the 
only reason we entered into a settlement.
    Senator Akaka. Thank you very much for your responses.
    Mr. Chairman, my time is expired.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    We will now go to Ranking Member Marchant.
    Mr. Marchant. Thank you.
    General, what types of appeal rights are available to GAO 
employees that believe they have been treated unfairly?
    Mr. Walker. Thank you, Mr. Marchant.
    It depends upon the issue involved. To give an example of 
the Band II restructuring which is really, I think, the primary 
concern here. I am not saying it is the exclusive concern, but 
I really think it is the primary concern. It was an 
unprecedented event. I wouldn't wish it on anybody.
    There were a number of options they had. First, every 
employee had the opportunity to apply to be considered for Band 
IIB.
    If they didn't like the decision, the initial decision that 
came out of that, they had the ability to appeal directly to me 
as part of a reconsideration process. A number of employees 
took advantage of that, and a number of those appeals were 
granted. In fact, some individuals who didn't even appeal to me 
because of the decision rules that I applied were granted Band 
IIB status even though they didn't appeal to me.
    So, in addition to that, which was a supplemental effort, 
they had the ability to go to our Office of Opportunity 
Inclusiveness which is headed by Ron Stroman who will be on the 
next panel.
    If they believe there was a discrimination complaint, they 
had the ability to go to the Personnel Appeals Board of which 
12 employees did, and we settled that case. They filed timely 
appeals. The others didn't. That case has been settled.
    They had the ability to go to district court, should they 
decide to go to district court.
    So there were a number of different avenues available to 
individuals, and many individuals chose to take advantage of 
those avenues.
    Mr. Marchant. If they go to district court, who bears the 
burden of the representation cost?
    Mr. Walker. The individual does, and that is why the PAB 
exists, Mr. Marchant. It is a very good question.
    The reason the PAB exists is Ms. Wagner is the General 
Counsel of the PAB. She is not a judge. She was a former judge 
of the PAB. She is the person who, if people want to allege a 
violation of law, they can go to her.
    She then has to do her own investigation to determine 
whether or not she is going to represent them. If she decides 
yes, then she can represent them and she becomes an advocate. 
She becomes a lawyer just like anybody else.
    That case then would go before the Personnel Appeals Board 
and only the judges of the Personnel Appeals Board can make, 
can render a judgment which was not the case in any of these 
matters. They did not render any judgments.
    Mr. Marchant. Ms. Wagner, do you feel like that there is 
adequate recourse for an employee to seek justice in their 
case?
    Ms. Wagner. Yes, I do. I think in this, in my response, I 
would like to address perhaps what Congresswoman Norton had 
raised before about the Personnel Appeals Board and whether it 
represents a fair and independent process for employees at GAO. 
I strongly believe in that.
    I was, as the Comptroller General pointed out, a member of 
the Personnel Appeals Board as a judge. I now serve in the 
capacity as General Counsel.
    The quality of the adjudication at the board is high. The 
independence of the decisionmaking is apparent to me, and I 
think is a matter of record so that an employee who has 
suffered an adverse action or prohibited personnel practice at 
GAO or believes that they have been unlawfully discriminated 
against, I think has recourse to the PAB for all of those 
claims as well as to internal agency appeal mechanisms which I 
can't address at this point.
    But in terms of the board's process, I do believe that the 
process reflects a full due process right and adequately meets 
the needs of GAO employees.
    Mr. Marchant. Has there ever been an instance where you had 
this kind of volume of protest?
    Ms. Wagner. No.
    Mr. Marchant. In any other implementation?
    Ms. Wagner. No.
    Mr. Marchant. What is the amount of time an employee will 
take to go through this process?
    Ms. Wagner. Our process is that an employee, the 
regulations contemplate that an employee has 30 days within 
which the file a charge with the Personnel Appeals Board, which 
is initially filed with my office, the General Counsel's 
Office.
    By policy and practice, we have 90 days within which to 
investigate that charge. The purpose of that investigation is 
simply to reach a determination that reasonable grounds exist 
to believe that the violation has occurred or that the 
employee's statutory regulatory rights have been violated.
    If we conclude that reasonable grounds so exist, we are 
required to offer representation to the individual, at which 
point we would file a petition on their behalf.
    In this case, in the case of the restructuring, because of 
internal changes at the PAB and General Counsel's Office, 
employees filed, 15 actual employees filed timely charges in 
February 2006, challenging their demotion in to the Band IIA. I 
came on board in April 2006, and the investigation rapidly 
ensued.
    We concluded those investigations in July. We conducted 60 
some interviews of managing directors and other officials at 
GAO during that investigation. Once the report in the 
investigation was issued, we had, I think, 30 days within which 
to file a petition which was done in September 2006.
    At that point, the discovery process was undertaken. It was 
an extensive discovery process. It concluded in February 2007.
    So I don't know if that is a typical trajectory for the 
board. I don't think so. I think that because of the volume and 
the complexity and the importance of these cases, especially in 
terms of the discovery process, the period was extended. I do 
think that was warranted, however.
    Mr. Marchant. If the case goes to a district judge, the 
plaintiff would have to bear the costs, but would the judge 
have the right to rule differently than you and award the legal 
costs to the employee?
    Ms. Wagner. I believe that the right of access to district 
court is limited to discrimination complaints so that the other 
rights that we were talking about, if it doesn't come within 
the framework of a discrimination complaint, those individuals 
would not have access to district court for that.
    Mr. Marchant. OK, OK. Thank you.
    Mr. Davis of Illinois. Thank you very much, Mr. Marchant.
    Our timing equipment is slightly malfunctioning. So if 
people are watching the timer, we will just have to rely upon 
our regular Timex and move ahead.
    Senator Voinovich.
    Senator Voinovich. Thank you, Mr. Chairman.
    Mr. Walker, I would like for you to put all of this in 
perspective. How many employees do you have?
    You mentioned that 25 percent of them were found to be 
underpaid. What happened to those people?
    You found 10 percent that were overpaid. You made it clear 
that you didn't cut their pay, all these cases go. How many 
people is that? I am interested in the big picture so everybody 
can understand just how many people we are talking about.
    Last but not least, I would like you to tell me how many 
individuals are eligible for retirement from the GAO? Do you 
believe that this new pay for performance system is going to 
help or hinder your ability to recruit new people for the 
agency?
    Mr. Walker. Well first, Senator, we have roughly 3,150 to 
3,200 total employees.
    With regard to the Band II restructuring which took place 
in January 2006, which is unprecedented, it has never happened 
before and Lord knows I don't want it to ever happen again. I 
wouldn't wish it on anybody. As I recall, there was 1,400 to 
1,500 individuals that were covered by that. I believe that is 
about right, but I will provide an exact number for the record.
    Twenty-five percent of the individuals were deemed that 
they should have the opportunity to earn more money over time. 
One example of that is when we restructured Band II, the way 
that our old system worked----
    Senator Voinovich. By the way, did they get a pay increase?
    Mr. Walker. They get the opportunity to make more money 
immediately. We didn't give them an automatic pay increase, no. 
We couldn't afford to, quite frankly. As you probably recall, 
GAO's budget has not kept pace with inflation since 2003.
    But what we did do was give them an opportunity to earn 
more money over time. Let me give you a specific example that 
relates to Band II restructuring. It is very important.
    Under our old system, all Band IIs were treated the same, 
no matter what their roles and responsibilities were. Everybody 
had an opportunity to make the pay cap, irrespective of their 
performance. Everybody had the opportunity to make up to over 
$118,000 a year.
    Under the new system, people who are Band IIBs have the 
opportunity to make up to about $128,000 a year, $10,000 more 
than they ever could have made under the old system. That is 
the good news, and that is a big portion of the 25 percent but 
not all.
    The bad news is that those that were Band IIBs--IIAs, I 
apologize--IIAs, the market said they ought to be able to make 
roughly about $104,000. These are the numbers as of the time, 
as I recall. Now, over for those people, we didn't cut their 
pay and we gave them a chance to make up to about $118,000 
which they could have made under the old system but at a slower 
rate.
    But if they get placed into Band IIB, and many of them 
have, quite frankly. That is one of the reasons why we have 
gone from 10 percent with no across the board adjustment in 
2006 to 5 percent in 2007. If they get placed into IIB, not 
only will they get the across the board adjustment, they will 
be able to make more money if they perform well than they ever 
could have made before.
    And so, there is good news and bad news with this. There is 
absolutely no question about it, but there is more good news 
than bad news.
    The bottom line question that you asked me, absolutely, I 
think this is going to enable us to attract and retain quality 
people over time. If I didn't think that it would do that, we 
never would have done it.
    Senator Voinovich. How many people right now are involved 
in the controversy, you have had appeals and you have settled 
them.
    Mr. Walker. Sure.
    Senator Voinovich. How many people are we really talking 
about in an agency of how many, 3,200? How many are really 
involved still in this controversy?
    Mr. Walker. There is about 5 percent.
    Senator Voinovich. Some of them are here today that are 
unhappy.
    Mr. Walker. Yes, sir, I realize that.
    Senator Voinovich. I could see the expressions on their 
faces during your testimony.
    Mr. Walker. Sure, that is fine. I mean my testimony is very 
fact-based, so I don't have any problem.
    About 5 percent of our employees did not receive an across 
the board adjustment 2007. That is down from 10 percent last 
year and, as the exhibit in my testimony shows, it will go to 
zero before I leave office.
    How quickly it will go to zero depends upon two things: No. 
1, whether or not these individuals get placed into IIB in 
which case they would be able to make more money than they ever 
could make, and No. 2, how much we index the pay ranges every 
year. Last year, we indexed our pay range by 3 percent which 
was more than the GS system indexed its pay range.
    Senator Voinovich. OK, but the fact of the matter is that 
you had 320 employees, 10 percent, and now it is down to 160 of 
3,200 employees, correct?
    Mr. Walker. About 150 to 160, yes, sir, that is my 
recollection.
    Senator Voinovich. Thank you.
    Thank you, Mr. Chairman.
    Mr. Davis of Illinois. Thank you very much, Senator.
    We will proceed to Delegate Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    Mr. Wagner, you are a good advocate. It is very clear you 
are a good advocate because it is clear that is why GAO 
settled.
    We weren't casting aspersion on you or on the board 
although I do note for the record that when this committee 
asked for you to come and meet with this committee, the board, 
the board of GAO which, of course, is a congressional entity, 
initially refused to have you come to speak to Members of 
Congress. If I may say so, Mr. Walker, I don't think that 
speaks well for the independence of the board or for its 
respect for Congress.
    My concern is with the unheard of across the board 
authority. I noted in my opening statement that there was a 
term, so that provides some protection, but I did not see how 
you can have confidence in a system where the members of the 
board are appointed exclusively by the person against whom 
complaints are filed. As you and I know as lawyers, part of the 
importance of justice is the appearance of justice, and I am 
going to look into whether or not there is some adjustment that 
should be made in that regard.
    Mr. Walker, you just spoke of budget restraints on your own 
budget, but we do note that at least we are told, and perhaps 
you can correct this notion that your managing directors and 
that your executive committee each received $20,000 bonuses. 
What performance system are they subject to? Is that correct?
    Mr. Walker. No, it is not correct.
    Ms. Norton. Particularly in light of your testimony about 
budget constraints.
    Mr. Walker. No, it is not correct. I don't know who told 
you that, but they are not right.
    Ms. Norton. Will you tell me if they have received any 
bonuses?
    Mr. Walker. Sure, let me. I will be happy to.
    First, let me make clear, Ms. Norton, that GAO did not 
object. GAO as an entity did not object to the PAB appearing. 
They are totally independent from us. We didn't have any 
opinion on that. Thank you.
    Ms. Norton. I haven't claimed that nor would that have 
mattered.
    Mr. Walker. Thank you very much. I appreciate that. I just 
want to make it clear.
    I know you didn't. I just wanted to make sure that others 
may not have misinterpreted that.
    We do the following for our senior executives. We have a 
performance appraisal system for them. We look at their 
performance each year. We look at their roles and 
responsibilities.
    Ms. Norton. So who does that? Is there a market-based 
system or not?
    I have only a few minutes to ask my questions. Are they 
based on a market-based system or not and did they get $20,000 
bonuses.
    Mr. Walker. The answer is no because Congress won't let us.
    Ms. Norton. Congress will not let you?
    Mr. Walker. The Congress does not. The Congress has decided 
that senior executive service members can only make so much 
money irrespective of the market, and so, no, the senior 
executive service is not on a market-based system because 
Congress hasn't given them.
    Ms. Norton. Did they get $20,000?
    Mr. Walker. No. About 50 percent of our executives get 
bonuses. Those bonuses range from less than $10,000 to somewhat 
over $20,000.
    About 50 percent get bonuses. It is based upon their 
respective roles and responsibilities and their performance, 
and I am happy to provide that information to you.
    Ms. Norton. Mr. Walker, would you provide to the chairman 
the names and bonuses and the job descriptions of those who got 
bonuses?
    Mr. Walker. Sure, be happy to. Sure.
    Ms. Norton. The market-based study has been subject to some 
controversy because you used a very different kind of study 
from the one used by OPM, for example. Did you consult or did 
anyone consult with OPM?
    Did your consultant consult with OPM so that we would not 
have huge disparities between how we do studies, for example, 
for locality pay and how you do your study so you wouldn't have 
another great big unique system, the way you do with your 
across the board MSAPP, EEOC, your PAB, the very special nature 
of your agency?
    Did you do any such thing?
    Mr. Walker. Well, first, it is my understanding, although 
Watson Wyatt can speak for itself, that they have done work for 
OPM in the past.
    Second, I personally am some familiarity with regard to how 
the----
    Ms. Norton. Mr. Walker, I am going to have to ask because I 
have other questions.
    Mr. Walker. Sure, yes ma'am.
    Ms. Norton. Did the consultant consult with OPM in doing 
its market-based study?
    Mr. Walker. Ms. Norton, I respectfully request that you ask 
them. I don't know. I can't speak for them.
    Ms. Norton. The reason I ask is because the OPM does a 
market-based study too. It is not as if the Federal Government 
didn't have someone, some precedent to look to. You might have 
decided that it doesn't fit GAO, but they also have to do it. 
They have to do it for employees and by locale, who range in 
very different ways, and it is a very hard job.
    They have found that you have to do it by averages because 
it is very difficult to find in the marketplace, jobs 
sufficiently like the jobs formed by the Federal Government so 
that you can have a study that can withstand validation.
    So I am questioning first, if you don't even know whether 
they consulted with the only large employer that does the same 
kind of study, I am questioning your market-based study in the 
first place as a basis for somehow equating what is done in the 
Federal sector with what is done at the GAO.
    Mr. Walker. Ms. Norton, with all due respect, I am familiar 
with how the GS pay ranges are determined.
    Ms. Norton. You didn't do the study, sir.
    Mr. Walker. No, I didn't. No, I didn't, but I have been 
briefed by OPM and by BLS, and I wouldn't call it a market-
based study. I think if you ask Dr. Fay----
    Ms. Norton. Mr. Walker, reclaiming my time.
    Mr. Walker. Sure, thank you. Go ahead.
    Ms. Norton. With all due respect to you, you are not an 
expert, and I wanted to know whether you knew whether your 
expert had consulted the OPM which I think most Members of 
Congress would regard as an expert. We will wait and see if we 
can find that out in some other way.
    Mr. Walker. Ms. Norton, I was the worldwide head of a 
compensation consulting practice. I am more expert than just 
about anybody else you are going to have here other than Watson 
Wyatt. I present that.
    Ms. Norton. So you regard yourself as an expert on 
marketplace compensation.
    Mr. Walker. I have done it, I have personally been 
involved.
    Ms. Norton. For Federal employees.
    Mr. Walker. Not for Federal employees but market-based 
compensation.
    Ms. Norton. That is what I am asking. That is what I am 
asking, sir.
    Mr. Walker. No.
    Ms. Norton. That is what I am asking.
    Mr. Walker. Market-based comp. Market-based comp.
    Ms. Norton. We weren't just doing a marketplace study. I 
served on the board of three Fortune 500 companies. We knew how 
to do marketplace studies for these companies, comparing with 
others who were in the same kind of business.
    I am asking whether or not you consulted with the Federal 
agency who has done these studies comparing employees in the 
private sector with employees here, and the answer seems to be 
no.
    Now, let me ask you another question.
    Mr. Walker. We did consider the GS schedule if that helps.
    Ms. Norton. No. That is not my question.
    Mr. Walker. But please ask Watson Wyatt.
    Ms. Norton. I am talking about locality pay. I am talking 
about the studies that have been done since locality pay.
    Let me move forward.
    Mr. Walker, were you aware that when there are, in the 
Federal Government, pay and grade downgrades of employees, that 
employees always get some increase--even when there is some 
kind of finding that there should be some kind of downgrade, 
that the employee may not get the increase that she would 
otherwise have gotten but that, in our system, always gets some 
increase rather be left with no increase whatsoever, sir?
    Mr. Walker. Ms. Norton, I am familiar with the normal GS 
system, and I am familiar with what you are talking about if 
there is a demotion.
    We do not believe that we demoted our people because they 
have the opportunity to make as much money as they could have 
in the old system.
    Ms. Norton. You didn't demote them. You just demoted their 
pay. Look.
    Mr. Walker. I am going based on what my counsel is telling 
me.
    Ms. Norton. In fact, I think you should have talked with 
your counsel more often because part of what happened, it seems 
to me, was in violation of law. For example, the basis for not 
doing COLAs at all which really blew the roof off and frankly 
has meant that whatever future pay banding has, it certainly 
doesn't have any longer in my view.
    In the 2004 GAO Human Capital Reform Law, if you look at 
that law, Section 3(a), the law looks virtually identical to 
the laws that apply to other Federal employees and does give 
you the right to adjust annually the pay of employees.
    Then it goes down a list of the bases upon that: equal pay, 
protecting the purchasing power. I wonder if you think not 
giving a COLA protects the purchasing power of employees. Pay 
rates for the same levels of work as non-Federal employees 
although you do not know whether you consulted with the OPM.
    I wonder if your counsel looked at 3(a) and found that you 
were in compliance with Section 3(a) of our GAO Reform Act.
    Mr. Walker. We do believe we are in compliance.
    I would note for the record, look at 3(a)(3), criteria 1, 
3, 4 and 6. We clearly believe we are in compliance, and we 
were prepared to litigate that.
    Ms. Norton. Equal pay should be valued for work of equal 
value, is that the one you are talking about?
    Mr. Walker. Right.
    Ms. Norton. How about the need to protect purchasing power?
    Mr. Walker. That is one of six criteria, and we did 
consider.
    Ms. Norton. Yes, what about that one?
    Mr. Walker. We did think about it.
    Ms. Norton. In other words, are you supposed to comply with 
all six or with all but the ones you don't want to comply with?
    Mr. Walker. No, no, no. My understanding is, Ms. Norton, my 
understanding, OK, and reasonable people can and will differ. 
My understanding is that I shall consider all of the factors, 
and I did consider all of the factors.
    Ms. Norton. You thought that you were protecting the 
purchasing power of those employees who got no COLA and some 
got actually less or the proposal was for them to get actually 
less than they had gotten before, not only no COLA. You thought 
that was protecting their purchasing power.
    Mr. Walker. I had to make a decision based upon a 
preponderance of the evidence, based upon all six criteria, 
also with the understanding that if we allocate one dollar of 
our budget to people who are paid above market, that is one 
dollar we do not have to allocate to people who are not paid 
above market.
    Ms. Norton. Or one dollar that you don't have.
    Mr. Walker. Seriously, and it is a lot more than a dollar.
    Ms. Norton. And one dollar that you don't have to pay 
bonuses to your executive staff.
    Now, you said that this was a temporary----
    [Applause.]
    Ms. Norton. Please.
    You said that this was a temporary transition issue.
    Mr. Walker. Right.
    Ms. Norton. Does that mean that the COLAs for every 
employee are now back as a matter of policy at the GSA?
    Mr. Walker. No. At the GAO, no.
    Ms. Norton. The GAO, I am sorry.
    Mr. Walker. Let me clarify what I mean by that, Ms. Norton. 
What I mean by that is that in 2006, 10 percent of our 
employees didn't receive an across the board pay adjustment. In 
2007, it is 5 percent. It should go down consistently to where 
before I leave office in 2013, hopefully well before I leave 
office, everybody will get an across the board adjustment for 
two reasons.
    No. 1, they get hopefully placed into the next level of 
responsibility or, No. 2, every year we index our pay ranges. 
For example, Band IIA, which are the people who are involved 
here, we index that pay range every year, and this past year it 
was 3 percent which, by the way, is more than any other market-
based system I am aware of.
    OK? And so, it is a temporary issue because of those 
factors.
    By the way, our people do get performance-based comp.
    Ms. Norton. You sell a case that seems to indicate that you 
understand that the annual COLA passed by the Congress of the 
United States says nothing about the exclusion of any employee 
of the GAO. Do you understand that to be the law, sir?
    Mr. Walker. It doesn't address it one way or the other.
    Ms. Norton. We make the laws.
    Mr. Walker. I understand that.
    Ms. Norton. If we wanted to exclude them from COLAs of some 
kind, and I don't care what you call them. You say you will do 
it in one way or the other. You can do it your own way. But do 
you understand that the annual COLA makes no exclusion for any 
employee of the Federal Government including those of the GAO?
    Mr. Walker. You mean for the GS system?
    Ms. Norton. I mean the annual COLAs.
    Mr. Walker. But we are not subject to the annual COLA. We 
are not in the GS system. Congress authorized and gave us our 
own system.
    Ms. Norton. So you believe that your employees are not 
entitled to an annual raise under the appropriation that we 
pass each year.
    Mr. Walker. I believe that the authority that the Congress 
gave us, just as the Congress has given authority to IRS, DoD, 
DHS, NASA, FAA and many others, that they have given us 
authority to be able to decouple from what happens to the GS 
system.
    I have a responsibility, as you properly pointed out, to 
give some annual adjustments.
    Ms. Norton. Mr. Walker, my time is running out.
    Mr. Walker. Sure.
    Ms. Norton. You have not answered the question that I have 
asked, and that is whether or not employees may be denied--may 
be denied--an increase in pay annually, and you are not 
prepared to say that they may not be denied an increase in pay 
annually.
    Mr. Walker. The only way that we would not provide an 
across the board adjustment to anybody at GAO is if the 
criteria that are in the statute are met, if we have severe, 
severe budgetary constraints.
    Ms. Norton. Those criteria are performance-based.
    Mr. Walker. I am sorry, Ms. Norton.
    Ms. Norton. I don't have the words before me now.
    Mr. Walker. Are you talking about No. 6? No. 6 says such 
other criteria as the Comptroller General deems appropriate 
including but not limited to.
    Ms. Norton. No. I am talking about your own law.
    Mr. Walker. That is my own law. That is our own law.
    Ms. Norton. No. I am talking about obviously you can deny a 
performance-based raise for somebody who doesn't perform.
    Mr. Walker. Sure.
    Ms. Norton. But the allegation here is these employees were 
performing and yet they did not get their raise, sir. That is 
what I am trying to discern here.
    Mr. Walker. Sure, I understand. I understand.
    Ms. Norton. Yes or no?
    If an employee performs adequately, will the employee get 
some increase, sir, yes or no? Can I get an answer to that 
question?
    Mr. Walker. Yes, they are eligible for performance-based 
compensation. No, they do not get an across the board 
adjustment if they are paid above market.
    Ms. Norton. Well, you can try to go off on the technical 
difference between the GS system and the system you have if you 
like. You know exactly what I am talking about. I am talking 
about the fact that some people got no raise and that some 
people actually got a demotion, if you will, a raise.
    I take your answer to be that unless there is a 
performance-based reason, that some increase in compensation 
will be available to GAO employees. If you think not, this is 
the time to say so.
    Now, in hindsight, let me ask you this, and I want to know 
how you communicate with employees. You now have a union. I 
didn't mean.
    Mr. Walker. We don't have a union, Ms. Norton.
    Ms. Norton. Well, you now have people.
    Mr. Walker. We don't have a union. We may not ever have a 
union.
    Ms. Norton. As I understand it, counsel has found that 
enough cards have been filed to have an election.
    I am further advised, although this is not public 
knowledge, that more than the majority of employees. If you 
want that on the record, here it is. More than the majority of 
employees have filed to have a union.
    Now, I mention that not because I think unions are 
punishment for management. Many of our employees are unionized. 
Some have just organized on the basis of an organizing effort 
without any particular gripe. This clearly did not occur that 
way.
    In hindsight, would it have been better to have some union 
in which to work these matters out in advance the way many 
Federal employees already do, in hindsight, sir?
    Mr. Walker. Not necessarily. The fact is a majority of 
certain employees may have signed cards that would call for an 
election, a confidential ballot.
    Ms. Norton. They just want the right to vote against the 
union. Is that what you are telling me?
    Mr. Walker. No, no, no. Ms. Norton, as you know, signing 
that card does not mean they are going to vote for a union.
    Ms. Norton. It may mean they are going to vote against it.
    Mr. Walker. We have also challenged. We have also 
challenged.
    Ms. Norton. The majority of employees have signed a card, 
some of whom wish to vote against the union.
    Mr. Walker. I haven't seen it, so I don't know.
    That is correct. That is correct.
    Ms. Norton. Mr. Chairman, you have been very generous with 
your time. Just let me say this.
    There appears to have been no systematic way for the 
employees, whether a union or not, to communicate with 
management, and I believe that has been at the root of this 
problem.
    Mr. Walker. If I might, Ms. Norton, I would respectfully 
suggest.
    [Applause.]
    Mr. Walker. Please, let us be professional.
    I would respectfully suggest.
    [Applause.]
    Mr. Walker. I would respectfully suggest that you look at 
the exhibit that I provided as to the type of communications we 
had. No agency head in government, I would respectfully 
suggest, communicates directly with our employees more than I 
do.
    Ms. Norton. Talk to somebody who is unionized, Mr. Walker.
    Mr. Walker. No agency head. I stand by what I said, and I 
am under oath.
    And, second, please look at all the communications that 
took place. When there are briefings, people have an 
opportunity to ask questions. They have an opportunity to say 
whatever they want. They can do it confidentially. They can do 
it with attribution.
    I am not going to apologize for our process. We did learn 
some lessons, and we made some modifications based upon that. 
But you compare us to another organization and we stand up 
mighty darn well.
    Mr. Davis of Illinois. Thank you very much.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I want to thank Mr. Walker and Ms Wagner for coming before 
the committee and helping us with our work.
    Just as a small matter of disclosure, I am a former union 
president myself. I know we have spoken before, Mr. Walker. In 
all honesty, things might not get a whole lot better than the 
previous round of questioning.
    I do want to say that I did hear your clarification before 
when you were asked by Mr. Van Hollen, who was sitting next to 
me at a previous hearing, when he asked for the assurances. I 
believe they were shown in the previous boards that your words 
were clearly to the effect that everybody will get the cost of 
living adjustment, the across the board increase.
    Now, it had an effect on my view of things because it was 
unequivocal. It was not conditional. You stated the fact of how 
the law that we have put out there and how the regulations that 
you all devised that are supposed to be consistent with the 
law, how they were going to work. So I have to say that I was 
surprised when I spoke to some of the employees after receiving 
those assurances that they, in fact, did not get the cost of 
living increase.
    In the regulations, it cites the need to protect the 
purchasing power of officers and employees of the office, 
taking into consideration the CPI, the consumer price index, or 
other appropriate indices. So this is clearly something that is 
protecting purchasing power. It is countering inflation. It is 
formulaic. It is not based on any criteria or performance 
review. It is really trying to protect the standard of living 
of those workers in the face of inflation.
    Given the fact that all these employees received meets 
expectations assessments with respect to the way they worked, I 
am bothered by the fact that I was told the law and the 
regulations were going to be put into effect one way, only to 
find out that they were not.
    This is an important point. We on this side of the dais 
have an opportunity to change the law if we believe that it is 
not working in a fashion that is consistent with congressional 
intent. These were times when there was a Republican majority. 
So I feel that we lost our opportunity.
    Look, I think you made a honest mistake. I think you made 
an honest mistake. You said what you thought was the case, but 
in the process I believe we were misled here to believe that 
all those employees of this unit were going to receive cost of 
living adjustments, and that was not correct. That was not 
accurate.
    So we were denied the opportunity to make sure that those 
employees who met expectations were treated fairly. They were 
not treated fairly. I think they were wise to go to Ms. Wagner, 
and I think her advocacy was commendable.
    I look at some other changes here where actually Band II 
was subdivided, and that was not supposed to happen. People 
were not supposed to be removed and put into a lower pay band 
based on the earlier reading of the statute. Clearly, their pay 
was, in effect, reduced. This was a matter that was brought by 
the General Counsel, and it was an important part of her 
complaint. I think it would have prevailed had not you settled 
prior to the decision on the merits.
    I just want your assurances here today that in the future, 
going forward, that we will hold these employees harmless.
    I find also it is a little bit disturbing that if you 
assumed there were no people making above market pay, 
compensation, I guess it is fair to say that your assumption 
was otherwise, that you assumed everyone in that pay band was 
being paid either at market or below market. Yet, here is an 
advocacy point that you have carried, that there should be pay 
for performance. We should have the opportunity to pay people 
above market areas. So I think there is some inconsistency 
there.
    I would like to assume the best of intentions on your part 
and on the part of your administration, but the facts would 
point otherwise, and I am just concerned about that. I have to 
say that, well, perhaps not surprisingly, I side with the 
employees in looking at the facts of this matter.
    I would just hope that in the interest of morale and the 
interest of creating incentives to those employees to do the 
best job possible and to bring the GAO together, you are the 
watch dogs for the rest of the government. We have to have you 
working together. I will say this episode has caused some 
fracture in that.
    While I take some comfort that you say by the time you 
leave office, everybody will have received the cost of living 
adjustment, I just want to remind you that is what you said 
last time you were here. And so, I need to have some type of 
accountability with that with respect to those types of 
remarks.
    A lot of time has passed in which these employees have gone 
through a tremendous effort, a great expense in order to just 
be treated fairly. We just simply can't be misled on this count 
again.
    I just hope that you will redouble your efforts to repair 
the damage that has been done, to fix the morale problem that 
now exists and that those employees who were, I think, harmed 
through no fault of their own simply by standing up for what 
they believed in, what they thought was fair and right, make 
sure that those employees are reinstated to the point of 
compensation that they truly deserve under the law.
    Mr. Chairman, I yield back my time.
    Mr. Walker. Can I respond, Mr. Chairman, real quickly?
    First, there is no intent by me or anybody else to mislead 
you or any other Member of Congress. It would be totally 
counter-productive to do that.
    Second, quite frankly, I am still perplexed as to why if 
people feel so strongly about this now, that in November 2005 
when I personally did a briefing, closed circuit television to 
all of our employees nationwide and made it very clear about 
what we were proposing to do, including the fact that certain 
individuals wouldn't get across the board pay adjustments as a 
result of the Band II restructuring and the result of the 
market compensation study, and even though that was further 
reinforced in the order that went out for comments for all 
employees to comment on, that not one employee, not one 
asserted that I was breaching my promise, not one.
    And so, therefore, I am a little bit perplexed, OK, as to 
why all of sudden everybody is now saying it. It happened after 
the Band II restructuring implementation, not when we went 
through the due process.
    Mr. Lynch. Mr. Chairman and Mr. Walker, if I could just 
intervene.
    Mr. Walker. Sure.
    Mr. Lynch. I do have the formula that I think was given to 
the employees. I am a lawyer and I have an engineering degree, 
and I would say that if this were delivered to me one time by 
video conference, I probably would not get the essence of this 
either.
    [Applause.]
    Mr. Walker. That is the Standardized Rating Score, Mr. 
Lynch. That is not what I am talking about. I appreciate your 
comment on that.
    Mr. Lynch. OK.
    Mr. Walker. I am talking about the actual pay ranges. It 
doesn't even take somebody with a Bachelor's degree to get 
that. We were very, very clear. I will be happy to provide it 
for the record. It was abundantly clear.
    Here is my point, though, which gets to your point. Here is 
the key because I appreciate your comment and your concern. Let 
me tell you what I am considering doing now as a good faith 
gesture because, keep in mind, these individuals did receive 
eligibility for performance-based compensation. I wasn't 
required to give them any of that under the law. The issue that 
we are debating here is whether or not they should have 
received some across the board adjustment.
    They have received performance-based compensation in lieu 
of the across the board adjustment and some of them actually 
received more in performance-based compensation than they would 
have gotten in the across the board adjustment.
    What I am actively considering right now is the possibility 
for these individuals to say that you would get the greater of 
but not both what you are eligible for under performance-based 
compensation or any across the board adjustment that we give 
everybody else up to this Band II T cap.
    I have asked the numbers be run on that, and I am waiting 
to get the final analysis of that. I have gotten some 
preliminary numbers. That would be a good faith gesture, and it 
is something that I think that we could afford and sustain, but 
frankly, Mr. Lynch, I need help, your help and the help of the 
other Members to make sure we get funded adequately because we 
are not.
    Mr. Lynch. Mr. Chairman, if I could, I just want to address 
one point that the gentleman has raised.
    Mr. Davis of Illinois. Yes.
    Mr. Lynch. I understand on the pay for performance side of 
the ledger. Let me back up.
    The annual adjustments are meant to ensure that employees 
don't slide back in their pay because of inflation. That is why 
that operates. As long as an employee is meeting expectations, 
we together make an assumption that we want those. They are 
valued employees, and we don't want them to slip back. It is 
really a compensatory increase to keep them from falling 
behind. It is what they deserve anyway just to maintain their 
position. That is a baseline. That is a baseline.
    You are saying, at least the first part of your earlier 
statement, is that we are going to somehow juggle this, that 
you can either get the performance because you are working your 
tail off or, tell you what, we might give you money that stops 
you from falling behind.
    Those should not be equated. One should be given as a 
matter of just maintaining employees in the agency so that they 
are not earning less next year. You understand how that might 
affect.
    Mr. Walker. Sure, I understand. I understand.
    Mr. Lynch. Allow me to just finish my thought here.
    Mr. Walker. Yes, sir. Go ahead.
    Mr. Lynch. I have employees in my office. If every year 
they earned less, I would have fewer and fewer employees and 
fewer motivated employees if every year they worked for me, 
they earned less. Think about that. That is what you are saying 
if you are going to hold back that across the board adjustment. 
There is the possibility they could be earning less every year, 
and that can't be the case.
    Now, the matter of that increase is a function of inflation 
and, as it says right in the statute, the need to protect 
purchasing power of your employees. That is not a true raise in 
terms of what they are earning. It is just a stop-gap so that 
they don't fall further behind.
    I hope you see the difference between that and a 
performance increase.
    Mr. Walker. I do.
    Mr. Lynch. Because you are talking here now about, through 
the goodness of your heart, weighing either giving them a cost 
of living adjustment or giving them a performance increase 
based on how hard they are working. I just say those are two 
different analyses that you have to go through, and we 
shouldn't be juggling between the two.
    Mr. Walker. Let me clarify what I am saying. This is very 
important, and I am trying to deal with this as a good faith 
gesture here.
    Ninety-five percent of our employees would be eligible for 
an across the board adjustment and performance-based 
compensation. I am only talking about the 5 percent, down from 
10 percent last year, who didn't receive an across the board 
adjustment.
    What I said was the possibility of letting them have the 
greater of their PBC and, as I said, some people earn more on 
PBC even though they didn't get the across the board. I wasn't 
required to make them eligible for PBC. The law doesn't require 
me to do that if you are paid above market.
    So what I am saying is that for people who don't make as 
much under PBC is the possibility of allowing them to be able 
to have the across the board adjustment up to the Band II T 
cap. That is what I am talking about.
    So, in no event will somebody be worse off than what they 
are now. They could only be better off than what they are now.
    Mr. Davis of Illinois. Thank you very much, Mr. Lynch.
    I have just got a couple of additional observations.
    Mr. Walker, it is difficult for me, and I am trying to 
determine how less can become more, that is, if employees are 
denied.
    Am I understanding you to suggest that if an employee is 
simply barely holding his or her own, that they are just kind 
of at the workplace, barely doing enough to not be separated, 
then they may have an option that if there is a cost of living 
adjustment, which doesn't necessarily have much to do with the 
work but has to do with inflation--unless inflation goes down 
and I doubt if we are going to experience that--that this 
individual is not eligible for any pay for performance 
consideration because they really have not performed and cost 
of living, they actually can be denied that, and so it is very 
possible that they could receive nothing in addition to what 
they currently get? Is that a possible scenario?
    Mr. Walker. Let me clarify, Mr. Chairman, and it is very 
important. Obviously, there was an expectation gap before, so I 
want to try and make sure we don't have another one, OK.
    First, there are two elements of our system: one, market-
based which has to do with the pay ranges, and performance-
oriented. They are separate.
    Second, our employees have the opportunity if they are not 
paid above market to earn two types of annual pay increases. 
The first is the across the board adjustment if they are meets 
expectations or better. The second is performance-based 
compensation based upon how they compare to their peers. That 
would continue to be the case for the 95 percent and 
increasingly over time of our people who are in that category.
    For the 5 percent who this year did not get the across the 
board adjustment but were eligible for performance-based comp, 
what I am suggesting is for those 5 percent since we are not 
required to give them the performance-based comp under the law. 
That is something we did as an additional, and I want to incent 
people to perform better than the minimum. Keep in mind, across 
the board is only for minimally acceptable performance. I want 
to encourage people to perform better than the minimally 
acceptable level.
    What I am saying is what I am actively considering now is 
the possibility to say that for that 5 percent, decreasing over 
time, that you could earn the greater of your PBC percent or 
whatever the amount would be. I will give you a specific 
example for 2007.
    The across the board percent was 2.4 percent. The average 
PBC was 2.15. But some people performed well above average, so 
they got more than 2.4. So, if they get more than the 2.4, they 
get that, but on the other hand they wouldn't get less than 2.4 
on a prospective basis. That is what I am talking about.
    I am happy to work with this committee on a bipartisan and 
bicameral basis to try to see if we can do something here that 
would be a good faith gesture, but I also need your help on our 
funding because we are not funded adequately. Eighty percent of 
our budget is people costs.
    Mr. Davis of Illinois. How does the performance-based 
system relate to retirement in terms of an individual's 
retirement and their expectation there?
    Mr. Walker. Thank you, Mr. Chairman.
    This year, 100 percent of performance-based compensation 
was added to somebody's base pay up to the applicable pay 
limit. Last year, it was 50 percent. This year, it was 100 
percent.
    I have said to our employees that unless and until Congress 
ends up changing the law, so you can count that cash-based COP 
as part of your high three for pension purposes which is what 
you are talking about, then I think we need to continue to have 
PBC go into base pay up to the applicable pay caps unless and 
until Congress changes that law because otherwise it could 
affect people's high three. And so, that is what we did this 
year.
    That is what I intend to do unless and until Congress 
changes the law to allow us to go to a more market-based 
system. I don't want our people to be penalized, and they 
weren't this year, OK, for the high three relating to their 
PBC.
    Mr. Davis of Illinois. Ms. Wagner, let me just ask you if 
you would hazard a response or guess. If there are no pay cuts, 
there is no reduction in career status or one's professional 
career, if there is no loss of anything but the possibility of 
gaining even more, why are the employees seemingly so concerned 
about the new system?
    Ms. Wagner. Mr. Chairman, I can speak to, if not why, 
explaining their feelings or motives about their actions here. 
I can't speak to the question of does the law contemplate that 
the agency can demote people without cause and without regard 
to their procedural rights.
    I think what happened to people in the course of the 
restructuring process is that, in fact, they actually demoted, 
and it wasn't simply a reduction in pay to the extent that they 
were denied the real actual dollar value of their salaries by 
getting denied the COLA.
    But another point that I hadn't had an opportunity to 
address before is that there really was an actual reduction in 
band level. The Band II position, in essence, became the Band 
IIB position so that people who were placed from Band II to 
Band IIA were effectively demoted. Some of these, some of the 
petitioners, for example, had been GS-14 prior to the merger, 
prior to the creation of the band in 1989 so that was an actual 
demotion into the equivalent Band IIA, GS-13 position.
    Mr. Davis of Illinois. Let me ask you. Does the notion of 
overpayment constitute a sort of backdoor demotion?
    Ms. Wagner. I believe that when individuals' pay was 
stagnated, and that doesn't constitute pay retention so that 
does constitute, in effect, a pay reduction. We were prepared 
to argue that.
    I would also note that some of these individuals were 
actually also denied 50 percent of their PBC, and this was an 
expectation for past high performance. As a result of the pay 
order which was issued by GAO in January 2006, where it became 
clear actually to employees what the pay implications were of 
the restructure, that it became obvious in some instances 
people were going to be denied 50 percent of their PBC.
    So I think that in some, that people actually did 
experience a pay reduction if you look at the effect of the 
elimination of the COLA and their basic pay rate.
    Mr. Davis of Illinois. Thank you very much.
    Senator, let me ask if you have any wrap-up comment or 
question?
    Senator Akaka. Thank you very much, Mr. Chairman. I do have 
other questions, and I would like to include them in the 
record.
    Mr. Davis of Illinois. Thank you very much.
    Ms. Norton. Mr. Chairman, I have no further questions.
    I do want to say that I believe that Mr. Walker, as a 
result of the claims that have been brought against the agency 
to the PAB, has corrected a number of the problems raised for 
this round of employees at this time. I think the committee 
needs some assurance that a permanent change for employees 
heretofore has taken or will take place. I say that, Mr. 
Chairman, because this is an agency responsible to us.
    May I also say that in terms of the PAB about which I have 
no particular complaint except a structural appearances 
problem, considering that the agency, Mr. Chairman, is a 
congressional agency, I must have misspoken when I said it 
should perhaps be appointed by the President. I wash my mouth 
out with soap on that one. [Laughter.]
    But there are circumstances, Mr. Chairman, and perhaps this 
is to be one where the appointments would be made by Members of 
Congress or the Speaker, the Majority Leader or some such 
matter.
    Again, this goes only to appearances. It really is no 
reflection, Mr. Walker, on what you have done here. I don't 
suggest that there has been any collusion between you and the 
PAB. I am, frankly, finding out for the first time this 
astonishing notion of which there is absolutely no precedent 
elsewhere in the government, and I can understand exactly how 
we got there in trying to contrive a system that worked for an 
agency that, in fact, is in judgment of other agencies. I am 
just trying to use this hearing as a way to improve things all 
around.
    Finally, Mr. Walker, I have been very critical of you. You 
know that I have the highest regard for your professionalism. 
My criticism of you comes frankly from my astonishment that a 
man of your skill and character would have had this arise in 
your agency.
    I want to assure you that for any changes in the agency, I 
personally would like to work closely with you and with the 
chairman because of my great interest in structural reform. 
When I was at the Equal Employment Opportunity Commission as 
Chair, I was very interested in structural reform. Look, the 
union picketed me and yet when I ran for Congress, they were 
first ones to endorse me, so they may yet come to love you.
    Thank you, Mr. Chairman.
    Mr. Davis of Illinois. Thank you.
    Mr. Walker. Mr. Chairman, in conclusion, could I mention?
    Mr. Davis of Illinois. Yes.
    Mr. Walker. Ms. Norton, I appreciate your concern about the 
appearance issue. I was dealt a deck. That was the deck that I 
was dealt. We have tried to involve employees more in selecting 
the judges or having input on the judges. Needless to say, they 
are acting independently.
    But I appreciate your concern, and I think that is a 
legitimate issue. I think it needs to be in the leg branch, but 
I think how they are appointed is a legitimate issue we ought 
to talk about.
    The second issue is I don't know who came up with this, but 
you are probably going to get it a little bit later. The thing 
that this fails to consider is if one ends up doing their 
homework and looks at what types of across the board 
adjustments have been provided by other agencies who have been 
given authority to decouple from the GS system, you will find 
that we have, to my knowledge, the highest across the board 
adjustment of any such agency--for example, IRS, DOD, etc.--and 
that we indexed our pay ranges the highest of any other such 
agency that had that authority.
    So everything in the world is relative. We are not perfect. 
We never will be. But we are trying hard to do as best as we 
can.
    Mr. Davis of Illinois. Thank you very much.
    Ms. Wagner, your last comment.
    Ms. Wagner. Mr. Chairman, thank you.
    I was asked here to provide comments with regard to the 
Band II restructuring, and I hope that you found the comments 
helpful.
    I would also just like to address the concern raised by 
Congresswoman Norton about our initial response to the 
subcommittee's request to produce documents, notes, memoranda 
and also to have me come testify.
    As, Ms. Norton, you have pointed out, this is a sui generis 
situation in the sense that the general counsel for the PAB is 
not like the general counsel at the Federal Labor Relations 
Authority [NLRB] or even the special counsel. The relationship 
that emerges once the general counsel makes an offer of 
representation is one of attorney-client with regard to those 
individuals so that my concern with regard to producing 
document was simply one of transgressing my ethical obligations 
with regard to my responsibility to those individuals. I did 
consult with the D.C. Bar with regard to all of that, but it 
was a real legitimate concern.
    Ms. Norton. Of course, there was a refusal to have you come 
to meet with the agency. We are all here, Ms. Wagner. Nobody on 
this committee would ever have asked for documents that 
breached the lawyer-client relationship, and there should never 
be a presumption when the chairman of a committee invites you 
that is what he intends. If he does, when you come to meet with 
him, you need only raise the lawyer-client relationship, and 
you will find him respectful of that.
    Ms. Wagner. I appreciate that.
    Mr. Davis of Illinois. Thank you very much, and this panel 
is excused.
    I might add, Mr. Cummings.
    Mr. Cummings. Mr. Walker, please don't go.
    Mr. Davis of Illinois. We have been joined by Mr. Cummings.
    Mr. Cummings. I want to just ask a few questions. Thank you 
very much, Mr. Chairman. I will be brief.
    Mr. Walker, in a December 27, 2000 letter to Congressman 
John Lewis on behalf of the GAO Atlanta employee, Mr. Gene 
Barnes, you told Congressman Lewis that the GAO-analyzed 
appraisal data for 1998, 1999, 2000 found that the average 
change for all staff was 0.471 compared with 0.512 for African 
Americans from 1998 to 1999 and from 1999 to 2000, the average 
change was 0.003 compared with 0.011 for African Americans.
    You stated that although there was variance in the numbers, 
they were not statistically significant. How did you arrive at 
that conclusion that the variances were not statistically 
significant?
    Mr. Walker. I understand. Through applying statistical 
applications.
    I will, however, say, Mr. Cummings, that they are 
statistically significant now. That is a matter of concern to 
me, and I have committed publicly both to this committee as 
well as to our employees that we are doing a separate and 
independent African American performance appraisal review. I 
have made that commitment to do that.
    We had a request for proposal issued, and I would be more 
than happy to keep you and every other member of this 
subcommittee and subcommittees, I should say, apprized of the 
results of that.
    Mr. Cummings. Please do. I have some other questions.
    In March 2004, Blacks in Government, the GAO chapter wrote 
to you concerning the proposed ban to split and raised problems 
that would disadvantage African American employees under the 
split. Such problems included lower performance appraisals, 
lack of assignments as analysts in charge. What was your 
reaction to the letter of BIG's claims?
    Mr. Walker. Well, my concern was to make sure that we had a 
process in place that provided reasonable assurance that we 
were being consistent, equitable and nondiscriminatory. The 
other thing is that we also had our Office of Opportunity 
Inclusiveness, of which Ron Stroman will be testifying on the 
panel after me, as well as our Human Capital Office involved in 
reviewing all proposed decisions in order to try to help assure 
that we were being consistent and nondiscriminatory.
    Furthermore, we had published data and made that available 
to this body on the results of that placement process to 
provide transparency over what the results were.
    Mr. Cummings. Just one other question, Mr. Walker. What was 
the impact on African Americans as a result of restructuring? 
How many African Americans were subject to the restructuring 
decision?
    Mr. Walker. And that is what we provided for the record, 
Mr. Cummings. We provided a detailed analysis of what 
percentage of African Americans versus Asians versus Hispanics 
versus Caucasians, male, female, etc. were placed versus the 
ones that weren't placed.
    Mr. Cummings. Did the employees view the restructuring as a 
demotion without cause or any of them?
    Mr. Walker. They may view it. We disagree with the PAB 
General Counsel on whether or not this was a demotion. There is 
no doubt in my mind that to the extent an individual does not 
receive an increase that otherwise they thought they were going 
to receive, that even though legally it may not be a demotion, 
they may perceive it that way.
    Mr. Cummings. You said the General Counsel viewed it that 
way also?
    Mr. Walker. Well, they were prepared to argue that, but 
then again I was prepared to argue that it wasn't, and 
ultimately an independent adjudicatory body would have had to 
decide that. However, we settled that matter to put it behind 
us.
    Mr. Cummings. How many African Americans filed complaints 
with the GAO Office of Opportunity and Inclusiveness?
    Mr. Walker. Mr. Cummings, I would respectfully request that 
you ask Mr. Stroman that, who is going to be on the next panel. 
He is head of the Office of Opportunity and Inclusiveness.
    Mr. Cummings. One of the reasons why I raise these 
questions is sadly, sadly, still in 2007, we have to be 
vigilant with regard to these issues. As one who represents 
Baltimore with a whole lot of Federal employees who get on that 
train at 5:30 every morning, 6, and come over here. As one who 
represents the great State of Maryland and I hear the 
complaints, I just want to make sure that we remain vigilant.
    As much as I would want to believe that we are a color 
blind society--I want to believe it so bad--but the evidence 
does not always come out on the side of that, and so I just 
raise these issues.
    I will look at the information that you all have provided, 
and I may have some additional questions that I will submit to 
you in writing.
    Mr. Walker. I appreciate your concerns, and that is one of 
the reasons why, in an unprecedented manner, I have asked for 
this study to be done. It is unprecedented, and I look forward 
to sharing the results with the subcommittees.
    Mr. Cummings. It is one thing to do a study. A whole lot of 
people do studies. The question is: Does the study get placed 
on a shelf--let me finish--placed on a shelf and dust settles 
on it or do we take the study and do something with it? That is 
the issue.
    I think depending on what the study shows and all that kind 
of thing, we have to have some kind of guidelines and 
timetables for corrections because I am telling you the more I 
have lived and the more I have seen more and more people who 
have not gotten their due. It is not just about them. It is 
about their children and generations yet unborn and fairness to 
them.
    I don't want to sound presumptuous here, but I am just 
concerned because, see, I hear the complaints and I read the 
emails. And so, I appreciate your being here.
    Mr. Walker. Well, first, I don't know what the results of 
the study are going to be. I can assure you I will take it 
seriously. It would be a waste of taxpayer money to engage in 
doing this unless we were going to seriously consider the 
results. But let us see what comes out. Thank you.
    Mr. Cummings. I have to say that, sadly, a lot of 
taxpayers' money is wasted, sadly. Hopefully, it will not be in 
this instance.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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    Mr. Davis of Illinois. Thank you very much, Mr. Cummings.
    Thank you Mr. Walker, Ms. Wagner.
    Mr. Walker. Thank you, Mr. Chairman.
    Ms. Wagner. Thank you, Mr. Chairman.
    Senator Akaka. Mr. Chairman.
    Mr. Davis of Illinois. Senator.
    Senator Akaka. While preparing for the second panel, I 
would like to apologize to you, Mr. Chairman, but I have 
another meeting to attend on the Senate side, and I will try to 
make it back.
    Mr. Davis of Illinois. Well, thank you so much, Senator, 
for coming over. It is not every day that we get an opportunity 
to play host to the Senate, but we appreciate both you and 
Senator Voinovich coming over, and we look forward to 
continuing to work with you.
    Senator Akaka. I look forward to continuing to work with 
you. As I said, I am pleased that we had this opportunity to 
work together. We have much to do in the future, and I look 
forward to that. Thank you.
    Mr. Davis of Illinois. Thank you very much.
    As our second panel is being seated, let me thank you for 
coming and for your participation and let me move ahead and 
introduce the witness panel.
    Ronald Stroman is the Managing Director of GAO's Office of 
Opportunity and Inclusiveness known as O and I. Mr. Stroman is 
responsible for reviewing GAO's human capital policies and 
practices to ensure they are fair, merit-based and promote the 
opportunity for all GAO employees to maximize their 
contributions to the agency's mission.
    Mr. Curtis Copeland is currently a specialist in American 
Government at the Congressional Research Service, CRS, within 
the U.S. Library of Congress in Washington, DC. His specific 
area of research expertise is Federal Rulemaking and Regulatory 
Policy. He is also head of the Executive and Judiciary Section 
with the CRS Government and Finance Division.
    John Shimabukuro is currently a legislative attorney in the 
American Law Division at the Congressional Research Service. 
His specific area of legal expertise is Labor Employment Law 
and Abortion Law.
    Ms. Jane Weizmann is a senior consultant with Watson Wyatt 
Worldwide, a human capital consulting firm.
    Dr. Charles Fay is a professor and Chair of Human Resource 
Management at the School of Management and Labor Relations at 
Rutgers University. He has worked over the last 5 years as a 
consultant to the Bureau of Labor Statistics on the National 
Compensation Survey. He was a Presidential appointee to the 
Federal Salary Commission and also served as Chair of the 
Research Committee of the American Compensation Association.
    Mr. Max Stier is the president and CEO for the Partnership 
for Public Service. The Partnership is a non-partisan, non-
profit organization dedicated to revitalizing the public 
service through a campaign of educational efforts, policy 
research, public-private partnerships and legislative advocacy.
    Thank you all for coming.
    As is our tradition, we will swear in the witnesses.
    [Witnesses sworn.]
    Mr. Davis of Illinois. The record will show that each 
person answered in the affirmative.
    We will then move ahead and proceed beginning with Mr. 
Stroman.

 STATEMENTS OF RONALD A. STROMAN, MANAGING DIRECTOR, OFFICE OF 
 OPPORTUNITY AND INCLUSIVENESS, U.S. GOVERNMENT ACCOUNTABILITY 
  OFFICE; CURTIS W. COPELAND, SPECIALIST IN AMERICAN NATIONAL 
 GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE; JON SHIMABUKURO, 
    ATTORNEY, AMERICAN LAW DIVISION, CONGRESSIONAL RESEARCH 
  SERVICE; JANE K. WEIZMANN, SENIOR CONSULTANT, WATSON WYATT 
  WORLDWIDE; DR. CHARLES H. FAY, PROFESSOR OF HUMAN RESOURCE 
 MANAGEMENT AND CHAIR OF HUMAN RESOURCE MANAGEMENT DEPARTMENT, 
 RUTGERS UNIVERSITY SCHOOL OF MANAGEMENT AND LABOR RELATIONS; 
   AND MAX STIER, PRESIDENT AND CEO, PARTNERSHIP FOR PUBLIC 
                            SERVICE

                 STATEMENT OF RONALD A. STROMAN

    Mr. Stroman. Thank you, Mr. Chairman.
    My name is Ron Stroman, and I am the Managing Director of 
the Office of Opportunity and Inclusiveness. My prepared 
statement prepares out the efforts that we have made to make 
GAO a fair and inclusive workplace.
    I believe that our efforts have really been on the cutting 
edge of diversity within the executive branch. We have taken 
unprecedented steps with regard to making diversity part and 
parcel of the human capital principles and efforts at GAO, our 
monitoring efforts as well as our efforts to hold our senior 
managers accountable.
    In the time I have, Mr. Chairman, what I would like to do, 
and let me say that I am happy to discuss any of those 
initiatives with the Members. Let me focus on the issue of 
African American performance appraisals, and I think Mr. 
Cummings was exactly right to certainly raise that issue.
    When I first came to GAO, we held a series of listening 
sessions, and what I heard repeatedly from the African American 
staff was that there were two issues of primary concern. One 
was performance appraisals, and the second was promotion, 
particularly into senior management positions within GAO.
    In an effort to deal with this issue, during the course of 
the implementation of the performance management system, we 
made really an unprecedented decision. We decided to publish to 
all of our employees, a list of performance averages on the 
basis of race, gender, age, disability and veteran status to 
every employee in GAO. We did not run from the issue. We wanted 
to shine a bright light on the issue.
    I believe, Mr. Chairman, that this has been nowhere am I 
aware that this is being done in the executive branch or any 
Fortune 500 company. I believe it is the right thing to do. I 
think that the only way we can hold ourselves accountable for 
fixing this system is to shine a bright light on it.
    But despite our efforts in that regard, not only to publish 
these statistics but to monitor the efforts with regard to our 
performance appraisals, quite honestly I must tell you that the 
performance ratings of African American employees at GAO are 
unacceptably low. During 2002 to 2005, the most significant 
differences in performance appraisals were African American 
staff versus white analysts. These differences are inconsistent 
with our efforts to bring the best employees regardless of race 
into the Government Accountability Office.
    We held an SES offsite with regard to this to make it clear 
to our senior managers that this was unacceptable.
    Shortly after that, the Comptroller General decided that he 
was going to initiate a study, an unprecedented study, to look 
at the issue head-on, and I agree with that decision. I think 
it is important that we tackle this issue with the same 
intellectual rigor as well as the same independence that we 
approach any other engagement at GAO.
    But I want to put this into a little bit of context as 
well. When I first came to GAO, I must tell you that everybody 
in the agency had inflated ratings. The appraisal ratings 
really meant nothing in GAO. What that meant was that when I 
met with senior officials to talk about issues with regard to 
African American and other minorities at GAO with regard to 
promotions, what came back repeatedly was that the ratings 
don't mean anything.
    The way promotions was instituted at that point was that 
literally managers would go into a back room and make a 
decision about who would be promoted. You could not hold those 
managers accountable for the results because the performance 
appraisals meant absolutely nothing. It was totally subjective. 
We couldn't enforce. We couldn't enforce any efforts in this 
regard.
    What we decided to do was to do several things. First, with 
regard to the issue of promotions, we centralized the promotion 
process so that we had senior executives within GAO review the 
promotion panels' decisions.
    Second, because the performance appraisal systems were now 
meaningful, you could hold the managers accountable for their 
results. As a result of that, if you look at the promotion of 
GAO African American employees into senior levels between 2001 
and 2006, you will see a significant increase as a result of, I 
think, our efforts in that regard and I think it is directly as 
a result of the efforts that we made.
    But additional steps, Mr. Chairman, need to take place. The 
fact of the matter is that a performance management system is 
extraordinarily complicated. It requires every employee to be 
trained with regard to the system.
    What we have found over the course of the years that I have 
been there is quite honestly when you have a performance system 
that is based on expectation setting and consistent feedback, 
we have found that there are significant differences in the 
feedback and conversations that African American employees are 
receiving from management as opposed to other employees.
    The honest truth is that with regard to setting 
expectations and doing engagements, my judgment is that African 
American staff are not getting the type of feedback, coaching, 
feedback on a timely basis that they need in order to perform 
at the same levels. We need to do a number of things in 
addition to the study. We need to require timely feedback. We 
need to make sure that engagement of feedback is in writing if 
it is necessary. We need to develop models with regard to 
performance.
    What I hear most often is at the end of the day with regard 
to performance appraisals is that the African American staff 
said they are surprised by their ratings. That should not 
happen. Under our system, there is supposed to be a system of 
constant communication. At the end of the day, both sides 
should understand where they are at the end of the performance 
cycle. That simply is not happening.
    We need additional transparency with regard to how teams 
are assigning their AIC or leadership roles, and we need to 
hold managers accountable for results.
    Finally, Mr. Chairman, let me just say that we are, I 
believe, doing things with regard to safeguards that no other 
agency is doing. DoD has approximately 113,000 employees 
currently on its competency-based performance management system 
with an effort to go to 700 with none of the safeguards that we 
have at GAO.
    I can tell you that we need an expanded role in that 
context for civil rights officers within those agencies in 
order to monitor the performance and results, I think, of 
people of color in those agencies.
    I will be happy to take any questions, Mr. Chairman.
    [The prepared statement of Mr. Stroman follows:]

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    Mr. Davis of Illinois. Thank you very much.
    Mr. Copeland.

                STATEMENT OF CURTIS W. COPELAND

    Mr. Copeland. Thank you, Mr. Chairman.
    I am here today to discuss several issues that CRS was 
asked to address related to the implementation of GAO's Human 
Capital Reform Act of 2004.
    The first issue was whether the Comptroller General told 
Congress and GAO employees during consideration of the 
legislation that all employees who received a meets 
expectations performance rating would receive annual 
adjustments to their base pay. The record indicates that the 
Comptroller General gave such assurances in writing and orally 
on several occasions.
    For example, as one of your posters indicated, at a July 
16, 2003 House hearing, the Comptroller General said GAO had 
agreed to ``guarantee annual across the board purchase power 
protection and to address locality pay considerations to all 
employees rated as performing at a satisfactory level or above 
absent extraordinary economic circumstances or severe budgetary 
constraints.''
    He confirmed that assurance when answering specific 
questions from Representative Van Hollen during the hearing.
    Minority views in the House committee report on the GAO 
Reform Act state the Comptroller General has ``assured GAO 
employees that anyone performing satisfactory work will receive 
at least a cost of living adjustment.''
    The Comptroller General made similar assurances during a 
September 2003 Senate hearing. The Senate report on the GAO 
Reform Act states the committee had ``received a commitment 
from the Comptroller General that absent extraordinary 
circumstances or serious budgetary constraints, employees or 
officers who perform at a satisfactory level will receive an 
annual base pay adjustment designed to protect their purchasing 
power.''
    The next issue was whether all GAO employees with meets 
expectations ratings did, in fact, receive those adjustments. 
As has been stated before, the short answer is no.
    The record indicates that 308 of 1,829 GAO analysts and 
specialists, about 17 percent of that group, did not receive 
the 2.6 percent permanent pay increase that other GAO employees 
received in January 2006. All 308 employees had meets 
expectations ratings or better. Most of these employees were at 
the second of GAO's three-banded pay system, roughly GS-13 or 
14 employees, but some employees at all three levels were 
affected.
    In March 2006, GAO said the Comptroller General's 
statements in 2003 were ``accurate at the time,'' but that 
subsequent events had altered his views on this issue. The most 
significant of these events was reportedly a market-based pay 
study by the Watson Wyatt consulting firm, indicating that many 
GAO employees were already paid more than what they should be, 
the maximum pay for their positions.
    Also, separate from the Watson Wyatt study, GAO changed its 
compensation policy and concluded that certain employees at the 
top of the band should not receive annual pay increases unless 
other performance criteria were met over and above having met 
expectations.
    Another question asked of CRS was whether the Watson Wyatt 
study was correct, that certain GAO employees were overpaid. 
Although CRS has recently obtained some detailed information 
about the study, that same information has also been provided 
to compensation experts, one of whom is testifying today. 
Therefore, we will defer to those experts for conclusions 
regarding this issue.
    We would note however that the incumbents of the jobs being 
compared to the market were not substantively involved in the 
descriptions of their jobs or matching them to the market. In 
addition, the study was conducted by comparing GAO salaries to 
off the shelf pay surveys, not by comparing GAO to specific 
outside organizations with which it competes for talent.
    Also, contrary to previous statements by GAO and others, 
Watson Wyatt did not reveal the need to split Band II into two 
groups. GAO instructed Watson Wyatt to collect data on Band II 
employees at two data points.
    Finally, CRS was asked to describe the financial 
implications of the Comptroller General's decision to deny a 
pay increase to certain of GAO's employees with at least meets 
expectations ratings. Forecasting these kinds of financial 
implications is difficult and depends on a variety of factors. 
However, using what CRS believes to be reasonable assumptions, 
it appears the financial implications may be significant. As 
detailed in my written statement, a GAO Band IIA employee whose 
pay is frozen could forego nearly $120,000 in salary and 
retirement income over the next 25 years when compared to a 
similar non-GAO Federal employee.
    Mr. Chairman, that concludes my prepared statement. I would 
be happy to answer questions.
    [The prepared statement of Mr. Copeland follows:]

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    Mr. Davis of Illinois. Thank you very much.
    Mr. Shimabukuro.

                  STATEMENT OF JON SHIMABUKURO

    Mr. Shimabukuro. Thank you, Mr. Chairman.
    My name is Jon Shimabukuro. I am a legislative attorney 
with the American Law Division of the Congressional Research 
Service, and I thank you for the opportunity to testify today 
on personnel reform at the Government Accountability Office.
    My testimony today will discuss the statutory authority for 
the denial of annual pay adjustments to 308 GAO analysts and 
specialists in January 2006. In particular, my testimony will 
focus on Section 3 of the GAO Human Capital Reform Act of 2004. 
This section has been identified as providing the Comptroller 
General with the authority to deny annual pay adjustments.
    Another section of the GAO Reform Act, Section 4, was 
previously identified as a separate source of authority. 
However, as explained in my written testimony, Section 4 is no 
longer considered by GAO to be applicable and for that reason 
will not be discussed today.
    Section 3(a) of the GAO Reform Act states that the basic 
rates of officers and employees of the office shall be adjusted 
annually to such extent as determined by the Comptroller 
General. In making his determination on the extent of the 
adjustment, the Comptroller General is required to consider six 
factors including the need to protect the purchasing power of 
GAO officers and employees. Section 3(a) also indicates that an 
adjustment should not be applied in the case of an officer or 
employee whose performance is not at a satisfactory level.
    In information provided to CRS by GAO, the agency 
maintained that Section 3(a) provides the Comptroller General 
with broad discretion to determine if an employee should 
receive an adjustment. The agency noted that so long as the 
factors identified in Section 3(a) are considered, the 
Comptroller General is authorized to determine the appropriate 
adjustments including the option of providing no adjustment.
    However, an examination of Section 3(a) suggests that such 
broad discretion is not authorized by the section. The language 
of Section 3(a) and the section's legislative history appear to 
illustrate clear congressional intent to have a pay adjustment 
in the form of an increase in basic pay rates for all officers 
and employees who perform at a satisfactory level. The 
existence of such congressional intent is significant because a 
court, if asked to review the agency's actions, would first 
attempt to determine what Congress intended when it passed the 
GAO Reform Act.
    To discern congressional intent, a reviewing court would 
begin with the language used in the statute. In this case, the 
use of the term, shall, in Section 3(a) is particularly 
noteworthy. General principles of statutory construction 
construe the term, shall, to be imperative or mandatory. 
Section 3(a) indicates that basic rates shall be adjusted 
annually. This clause avoids the use of the generally 
permissive term, may, which would have suggested greater 
discretion over the decision to deny pay adjustments.
    Section 3(a) also indicates that an adjustment shall not be 
available for an officer or employee whose performance is not 
at a satisfactory level. General principles of statutory 
construction dictate that each part of a section must be 
interpreted in reference to the statute as a whole. Here, if 
one considers Section 3(a) in its entirety, it seems unlikely 
that the basic rate of an officer or employee performing at a 
satisfactory level would either not be adjusted or would be 
adjusted downward. Section 3(a) appears to establish that only 
individuals who are not performing at a satisfactory level will 
be ineligible for an adjustment.
    The legislative history of Section 3(a) further illustrates 
Congress' understanding that a pay increase would be available 
for GAO officers and employees performing at a satisfactory 
level. Both the House and Senate reports that accompany the GAO 
Reform Act describe assurances or commitments from the 
Comptroller General that employees at a satisfactory level will 
receive an annual pay adjustment.
    The language of Section 3(a) and the legislative history of 
the section considered together appear to generally support the 
position that a pay adjustment would be required for officers 
and employees who perform at a satisfactory level. Although 
Section 3(a) does permit the Comptroller General to determine 
when performance is satisfactory, here, attainment of a meets 
expectations rating would seem to comply with a common 
understanding of satisfactory performance.
    According to various sources, a meets expectations rating 
was considered to be a good rating with the agency. Moreover, 
at a 2003 hearing, the Comptroller General confirmed that a pay 
adjustment would be available ``as long as employees are 
performing at the meets expectations level or better.''
    I would once again like to thank the subcommittees for the 
opportunity to testify today, and I welcome any questions you 
may have about my testimony.
    [The prepared statement of Mr. Shimabukuro follows:]

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    Mr. Davis of Illinois. Thank you very much.
    Ms. Weizmann.

                 STATEMENT OF JANE K. WEIZMANN

    Ms. Weizmann. Thank you. Thank you, Mr. Chairman and 
members of the subcommittee, for the opportunity to describe 
Watson Wyatt's 2004 work with GAO involving the design of 
market-based salary ranges.
    By way of background, I am a senior consultant and the 
Practice Leader for Watson Wyatt's Washington, DC, area 
practice. Watson Wyatt's published surveys covered 3,800 
different job titles, 131 industries and 24,000 zip codes. By 
order of magnitude, Watson Wyatt's survey participants cover 
17.7 million employees or 1 of every 6 employees in the U.S. 
work force.
    I have worked for Watson Wyatt since 1989 and have close to 
25 years experience doing hands-on compensation design. Before 
joining Watson Wyatt, I worked as a compensation consultant for 
another national consulting firm, as a manager at the U.S. 
Department of Labor and as a compensation director for one of 
the largest employers in the city of Philadelphia.
    Over the course of my career, I have led hundreds of 
compensation assignments. In 1999, I served as an expert to the 
House Subcommittee on Government Management, Information, and 
Technology on issues related to the salary of the President of 
the United States. In 2003, I was retained as an expert to the 
President's Commission on Postal Service Reform. I am a 
published author, recognized thought leader and frequent 
commentator on compensation and human capital related issues.
    So what is market-sensitive compensation design? It is a 
systematic process for using external market data to establish 
pay ranges. Market-sensitive compensation designs are used by 
the majority of today's large national private sector 
organizations and are growing in use by the public sector.
    Why? Attraction and retention of talent requires 
organizations to offer market-competitive wages.
    There are three essential steps to building a credible 
market-sensitive design. First, in order to make market 
comparisons, it is essential to understand what people do and 
their qualifications.
    The GAO group of employees covered by this study are 
economists, attorneys and analysts. Analysts have a Master's 
degree in public policy, public health, public affairs, 
business, accounting, economics. Washington, DC, is, in fact, 
the place where the majority of people with analyst job titles 
and qualifications work.
    Second, based on what people do, it is essential to define 
the market. The market is where you compete for talent. Where 
do you hire from and when employees leave, where do they go?
    For GAO, the market is other Washington, DC, area employers 
including government agencies, unique Washington, DC, not for 
profit organizations such as think tanks, trade associations, 
professional standards boards, industry groups and research 
organizations and private sector organizations such as 
government contractors, law firms, consulting firms and lobby 
groups.
    Finally, you need robust, credible data covering the 
defined marketplace. Credible published data is found in 
surveys that are administered on a regular basis, query similar 
participant populations, employ an articulated data collection 
methodology and have rigorous data verification and quality 
standards.
    Because Washington, DC, is home to one of if not the 
world's largest concentration of attorneys, economists and 
analysts, the region's published survey data is robust and 
credible.
    For the 39 job titles covered in the review, the pay ranges 
link 98 percent of GAO employees to 18 different credible 
survey sources covering more than 200 survey matches, covering 
90,366 Washington, DC, employees performing comparable jobs. 
Market matches were carefully reviewed and validated by GAO job 
content experts in 35 hours of hands-on review meetings. This 
means that GAO had an excellent basis for determining market 
competitive pay and building salary ranges.
    In closing, Watson Wyatt is privileged to have worked with 
GAO on this assignment. Rarely have we worked with a more 
engaged, mission-driven group of employees.
    Thank you. I would be happy to answer any questions you may 
have.
    [The prepared statement of Ms. Weizmann follows:]

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    Mr. Davis of Illinois. Thank you very much.
    We will move to Dr. Fay.

                  STATEMENT OF CHARLES H. FAY

    Mr. Fay. Thank you, Mr. Chairman.
    My name is Charles Fay. I am here to discuss issues related 
to market pricing and, in particular, the market pricing of 
analyst jobs in the Government Accountability Office. My 
written testimony goes into great detail on these issues. In my 
oral testimony, I would like to focus on the primary results of 
these analyses.
    Ordinarily, when a market pricing process indicates some 
significant number of incumbents are overpaid, most 
compensation professionals pause and look for explanations of 
that overpayment before assuming the process and the resulting 
data were correct. That is particularly true in the case of 
general schedule employees and even more true of upper level 
general schedule employee jobs since data has suggested for 
some time and labor economists have had lots of arguments about 
the degree to which general schedule jobs, government jobs in 
general, are overpaid or underpaid. The general agreement from 
all those studies is that upper level general schedule jobs are 
routinely underpaid against the market.
    This process of evaluation appears not to have happened at 
GAO, yet the problems that I see in this study are significant. 
This is particularly true, given that I had lots of haystacks 
and had to find a few needles in it.
    First of all, there is a disconnect between the rhetoric of 
GAO being the home of the best and brightest and the 
competitive compensation strategy, that is, you would expect 
GAO, as the best and hiring the best, to want to pay more than 
market and yet they chose to pay at market, at the market 
median.
    Second, few employees other than executives appear to have 
been involved in the study. This could result in poor job 
matches and lack of buy-in from employees whose pay was 
impacted by the study.
    Three, off the shelf surveys were used that are unlikely to 
capture appropriate market data. A custom survey would have 
provided a better basis for benchmarking these jobs.
    Fourth, the data from the surveys used is problematic. Too 
much of the data comes from too few organizations. The range of 
data for each job is very broad, and the data are not stable 
from 1 year to the next.
    Fifth, Watson Wyatt used inconsistent data cuts in 
developing benchmark medians.
    Sixth, the process used by Watson Wyatt to blend data is at 
odds with the process that they claim to have used.
    Seven, the pay ranges developed within bands are 
problematic both because of the data input and because of the 
clustering grouping technique.
    Eight, documentation of the study process and the resulting 
pay structure are ambiguous and confusing. Employees should 
understand how their pay structure was established, and nothing 
that I have seen would be likely to lead to that.
    Compensation is an art and not a science. That does not 
mean that it is or should be free of any standards. GAO is 
noted for the quality of its analyses. It is unfortunate the 
same care was not taken with the analysis of its own pay 
system.
    Mr. Chairman, I would be happy to answer any questions that 
you or other members of the subcommittees may have.
    [The prepared statement of Mr. Fay follows:]

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    Mr. Davis of Illinois. Thank you very much, Dr. Fay.
    Mr. Stier.

                     STATEMENT OF MAX STIER

    Mr. Stier. Chairman Davis, thank you very much for having 
me here today and thank you for the opportunity to testify 
here.
    The Partnership for Public Service, as you noted, is a non-
partisan, non-profit organization dedicated to trying to make 
our government an employer of choice both by inspiring a new 
generation into service and also by transforming the way 
government works.
    Our bottom line is that we believe that GAO is on the right 
path, not perfect but definitely on the right path, and we 
would ask you to take a step back for a second with me to think 
about where we are today. I cannot name a single large 
organization, public or private sector, that is using the same 
talent management system that it used 60 years ago and still 
finding that it has success in the marketplace. Ultimately, we 
need a system that is going to be both performance and market-
sensitive in order for the government to be able to attract and 
keep the kind of talent it needs to do the job that all 
Americans believe that they deserve and that they, in fact, do 
deserve.
    This is also in line with the values that Congress has 
stated again and again in developing personnel systems both for 
the general schedule and also for GAO going back to the 1978 
reforms when the merit principles were initiated. Those merit 
principles, in particular, the third merit principle, provides 
for a desire for government to reward high performers, to 
reward people on the basis of their performance and also to 
reward on the basis of what the talent market actually 
requires.
    Second, in 1990, Congress passed the Federal Employee Pay 
Compensation Act and again that was an effort to move our 
system, the general schedule system to a more market-sensitive 
system based on geographic not on profession factors, and I 
believe that what Congress did with GAO is, in fact, the right 
next move in that march forward, to be looking at professions 
specifically and what kind of compensation they actually 
deserve. A GS-12 who is an H.R. professional may or may not be 
appropriately paid at the same level of a GS-12 who is an 
engineer if you are trying to, again, keep or recruit the very 
best talent.
    I would propose to this committee that they look at four 
different data sources to find out whether GAO is, in fact, 
doing its job right.
    First and foremost, you need to hear from the employees, 
and I would suggest that you have a very, very potent data 
source for that which is the survey work that is the basis of 
the Best Places to Work rankings that the Partnership for 
Public Services publishes in conjunction with American 
University.
    According to that survey, and we now have our third 
iteration, GAO is No. 2 among large Federal agencies. I would 
note that they have had a small but significant drop, but they 
still rank at the very top of all Federal agencies. I would 
also note that GAO chose voluntarily to participate in the 
survey. They are not required to participate by law, and I 
think this demonstrates again the seriousness with which the 
leadership at GAO approaches these kinds of issues.
    The second factor that is worth looking at with respect to 
the surveys is their response rate. Nearly 80 percent of GAO 
employees respond to the surveys that they conduct on an annual 
basis. I will put that in contrast to the 57 percent response 
rate that you see as an average across the executive branch, 
and it is quite striking. In fact, there is only one other 
Federal agency in the executive branch that has that kind of 
response rate. What I think that shows is a sense of commitment 
and engagement by the employees of GAO in a sense that what 
they have to say actually matters.
    The second factor I would propose you look at is the actual 
performance of the organization. Here, again, GAO is unusually 
placed in that it actually measures its performance in a 
variety of important ways, one of which is its return on 
investment. We have seen from fiscal year 2005 to 2006, an 
increase from $83 to $105 return for every dollar spent at GAO.
    Third, I would suggest you look at customer satisfaction, 
and obviously that means what you have to say and what fellow 
Members of Congress have to say about the product that they are 
receiving from GAO. Again, GAO covers, collects a fair bit of 
data on that point, but that is obviously quite crucial.
    And, fourth and finally, I would propose something that I 
don't know whether GAO does, and that would be poll surveys, 
surveys that might take place in between the annual survey, 
focused on specific issues of concern that are needed to be 
highlighted in that particular timeframe.
    As a closing comment, I would just like to say that the 
Federal Government is facing a true crisis. We are in a time in 
which the government has to perform in ways that it has never 
had to do before when a lot of talent is leaving and a lot of 
new talent doesn't want to come in.
    In order for us to succeed in the talent workplace, we need 
to make sure we have performance and market-based systems that 
are going to be able to compete against other organizations 
that want that very same talent. In order for us to succeed, we 
are going to need to be able to move forward in the ways that 
GAO is doing.
    Absolutely, is GAO doing exactly right? No. But we cannot 
let the perfect be the enemy of the good.
    I would suggest to this committee that while your oversight 
is absolutely vital, that you give it some time. These things 
don't take place easily. These things take a lot of effort and 
attention. But at the end of the day, they pay off in very 
significant ways both for the organization and ultimately for 
the American people.
    Thank you.
    [The prepared statement of Mr. Stier follows:]

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    Mr. Davis of Illinois. Thank you very much.
    I am going to try to get a couple of questions in. We do 
have House votes that are underway.
    But let me ask you, Mr. Copeland. Perhaps I will just try 
and start with you. In researching GAO's human capital reform 
efforts, did you find any evidence that the Comptroller General 
or that anyone could have anticipated that a market-based 
compensation would likely be the conclusion----
    [Interruption to proceedings.]
    Mr. Copeland. Sorry, was that question to me?
    Mr. Davis of Illinois. Yes.
    Mr. Copeland. I couldn't hear you.
    Mr. Davis of Illinois. Would lead to a conclusion of 
employees being overpaid.
    Mr. Copeland. There were a couple of indications. One was 
actually there was a quote from the Comptroller General on July 
14, 2004, 1 week to the day after the enactment of the act 
where he indicated that he believed that some GAO employees may 
have been, may be overpaid, and that was months before the 
delivery of the Watson Wyatt data.
    There was also an indication during the hearing in July 
2004, when the Comptroller General was looking for information 
or revision of the retention provisions, and he indicated 
there. I can provide for the record the specifics, but he 
indicated there that changes were needed because of the 
potential overpayment issue.
    Mr. Davis of Illinois. Would you say that the Partnership's 
survey is adequate to gauge employee morale at the GAO?
    Mr. Copeland. I couldn't say whether it is accurate or not 
accurate. I would note, though, that there really are a grand 
total of 3 questions out of I believe it was about 75 questions 
in the Government-wide survey that was administered, that were 
actually the same questions that were asked of GAO. So it was 
on the basis of just those three questions that GAO's ranking 
emerged.
    I would also note that there are differences in the way 
that the data were collected, that the OPM survey was 
administered directly to Federal agencies, and the employees 
would respond directly back to OPM whereas at GAO, the surveys 
were responding back to GAO. And so, one could question whether 
or not that methodology would yield a different result.
    Mr. Davis of Illinois. Thank you.
    Ms. Weizmann, did Watson Wyatt recommend to GAO that it 
split Band II into two bands?
    Ms. Weizmann. No, we did not.
    Mr. Davis of Illinois. Why not?
    Ms. Weizmann. Well, your question, Mr. Davis, is one where 
we put together market data and, in aggregate, looked at that 
market data. We did find that there is in the marketplace at 
the Band II level, two different data points that would support 
that.
    But in terms of putting the design together and clustering 
information, it was our recommendation to take all the data 
points in Band II--analysts, economists, attorneys--as well and 
work out two bands. So with regard to analysts, dividing wasn't 
unique to them. It was dividing the entire band for all 
employees and focusing on the clustering.
    In terms of placing employees into the bands or how that 
was accomplished, that was not something that Watson Wyatt did.
    Mr. Davis of Illinois. Did Watson Wyatt state to GAO that 
certain GAO employees were overpaid and should not receive an 
annual cost of living increase?
    Ms. Weizmann. No. Again, overpaid would not be a word that 
a compensation consultant would use. We performed a competitive 
assessment, and the competitive assessment compared employee 
pay in aggregate to market data, and we showed a range of data 
round that.
    The determination of being overpaid is a value judgment, 
and it would not be one that we would have given. We were able 
to identify where people were highly competitive or less than 
competitive.
    Mr. Davis of Illinois. Thank you.
    Mr. Cummings, I know that we are going to have to go and 
vote, and we actually have 10 votes. So I am going to ask you 
two questions.
    Mr. Cummings. Just two questions, Mr. Chairman.
    To any members of the panel, how much discretion should 
agencies have in establishing pay and how can they be held 
accountable?
    Come on, somebody.
    Mr. Stier. I am happy to jump onto the bridge here.
    I think it depends a great deal. I think you have a 
different circumstance at GAO in part because you have 
obviously a legislative branch organization that is led by 
someone who has a 15 year term and therefore has the capacity 
to be focused on longer term issues. I think it is a very 
different circumstance.
    To my mind, what I think is absolutely vital is that this 
committee and Congress in general have the data it needs to 
understand whether these organizations are performing in the 
way that you expect them to and the American people need them 
to. That is why I suggest that much of the discretion that you 
may or may want to provide depends a lot on your ability to 
assess their actual performance.
    Mr. Cummings. Actually, we only have 5 minutes. I yield 
back.
    Mr. Davis of Illinois. Thank you very much, Mr. Cummings, 
and let me thank you all.
    We have just been informed that we actually have 10 votes. 
Any witnesses who can, if you can have lunch while we are off 
voting. These votes will be all be 5 minutes in all likelihood. 
They may even be two. We have gone to the point where we 
sometimes vote every 2 minutes after the first vote, and if 
that is the case, that means that we would probably be finished 
in about 40 minutes.
    If you can, we appreciate it. Thank you so very much, and 
we have to run off and vote.
    [Recess.]
    Mr. Davis of Illinois. The committee will resume.
    Let me first thank you all for staying. We really do, in 
fact, appreciate that a great deal.
    I think as we were leaving, I had asked a question of Ms. 
Weizmann. I want to go back a minute if I could.
    Ms. Weizmann, in your testimony, you state that you used 
compensation data to align GAO's pay rates with pay rates that 
are competitive with comparable organizations. Which 
organizations, could you tell us, were those?
    Ms. Weizmann. When we collected market data, we collected 
it from four different marketplaces. Government was one. 
Private sector was another. Private not for profit, not for 
profit was the third, and general industry was the fourth. Each 
of those marketplaces as part of the methodology were equally 
weighted.
    Did that answer your question, sir?
    Mr. Davis of Illinois. Yes.
    Mr. Stroman, we understand that African Americans were 
disproportionately impacted by the Band II restructuring 
decision and disproportionately did not receive annual 
adjustments in January 2006. We further understand that many of 
these analysts were later placed in the Band IIB category, yet 
the 2006 annual adjustment was forever lost.
    How did their performance change over a 6-month or a 1-year 
period and, if you could, what factors took place that 
warranted the initial lower placement and then the higher 
placement 6 to 12 months later.
    Mr. Stroman. With regard to the adjustment, Mr. Chairman, I 
am not sure what the adjustment numbers quite honestly were.
    With regard to the Band II, you mean the Band IIB 
replacement. Yes, I think that your data is exactly correct, 
that there were approximately 11 percent of the applicants to 
Band IIB were African American, and the placement was 
approximately 9 percent so that there was not a proportionate 
placement in Band IIB.
    With regard to what the factors were, can you repeat the 
last question, Mr. Chairman?
    Mr. Davis of Illinois. Which factors warranted the initial 
lower placement and then 6 to 12 months later, the higher?
    Mr. Stroman. Sure. Let me say that there were really two 
issues with regard to the subsequent placement. The initial 
placement, the primary factor had to do with the appraisal 
ratings. There was one of the criteria that was used with 
regard to whether you were placed in Band IIB had to do with 
your performance appraisal relative to other people in that 
band, and so, that was the primary factor.
    With regard to the subsequent placement, there was a 
different process which was used. As I had mentioned during my 
oral and written testimony, we have had a much more aggressive 
procedure with regard to promotion placement, that is, that we 
use a centralized process to review the panel determinations 
with regard to whether people are placed on the best qualified 
list. Then, we also review the selection, preliminary selection 
criteria. Consistent with, I think, what we had been doing in 
the agency in regard to promotions, people were placed, were 
promoted into Band IIB.
    I think right now, again, the promotion process has 
resulted in approximately 10 percent of the African Americans 
being placed in the Band IIB level which is more consistent 
with our overall applicant pool.
    So, again, I would say, Mr. Chairman, that the difference 
really is two-fold. One is the different process that we used 
and in that process, it wasn't a placement. It was a promotion, 
and the promotion is really based on people's performance.
    Mr. Davis of Illinois. Would it be safe to suggest that 
African Americans who enter the agency enter with the same 
level of preparation and meet the same requirements as other 
applicants?
    Mr. Stroman. There is no question about it. We have been 
very aggressive as I said, again, as I stated both in my oral 
and written testimony. We have reached out to the best 
universities in the country to bring in applicants, and we 
screen those applicants. They all go through exactly the same 
process.
    It is because of that I stated in my testimony that the 
results with regard to performance appraisal are inconsistent 
with our efforts to bring people in who have exactly the same 
educational background, similar work experience and skill sets. 
I think that is part of the reason why we are making the 
efforts that we are doing with regard to our need to study this 
issue. But it is certainly a fact that they have exactly 
similar experiences as everyone else.
    Mr. Davis of Illinois. Has the agency, to your knowledge, 
made any assumptions prior to the study relative to what is 
causing this disparity?
    Mr. Stroman. Well, I think we have looked it during the 
course of the time that I have been there over the last 6 
years. As I mentioned with regard to performance, our clear 
sense is when we talk to African American staff about their 
performance ratings, we hear pretty much the same thing, and 
that is that at the end of the day (a) they believe the 
feedback that they have been given all throughout the 
engagement is that they have been performing extraordinarily 
well or been performing well. That doesn't match up with the 
appraisal that they are receiving at the end of the day.
    Our sense is, Mr. Chairman, that when you have a 
performance management system that is predicated on both the 
expectation setting process as well as consistent feedback, our 
sense of it is that feedback and expectation setting has broken 
down with respect to African American staff. What I mean by 
that is that the normal discussions that go on with regard to 
what the expectations are or particular aspects of the 
engagement, be it at the design phase, be it at the data 
gathering phase, be it at the report writing phase, that 
communication end of it is simply not operating with regard to 
white staff and African American staff.
    We have suggested several things need to be done. First, 
what needs to happen is that all of our senior management in 
our view need to certainly be trained in issues of having 
communication with regard to having difficult conversations and 
different conversations.
    Second, I think in some instances what needs to happen is 
that where we have been most successful with regard to 
performance appraisals is when we have really required the 
staff to sit down and meet and talk and work with each other. 
When that has happened, I have seen remarkable turnaround, Mr. 
Chairman, with regard to the performance appraisals of African 
American staff, that is, that they have performed well when 
they have clear understanding of what is expected of them in 
all phases of the engagement.
    In addition to that, there has to be the same level of 
opportunity to perform what we call key competencies, and those 
key competencies are things like achieving results, critical 
thinking and writing. All staff have to be given the same or 
similar opportunities to perform those key competencies. The 
way the system is set up, if you are not given those 
opportunities, quite honestly, you cannot achieve the highest 
ratings within the agencies and, in some instances, we have 
seen problems with regard to the equitable distribution of 
opportunities to receive key competencies, Mr. Chairman.
    So those are some of the issues that from our perspective 
are problematic. At the same time, I will say that we really do 
need to study this with exactly the same rigor that we do all 
other agencies, and I think the study that we have commissioned 
hopefully will help us in that regard.
    Mr. Davis of Illinois. Finally for you, let me just ask, do 
you think that there might be too much subjectivity in this 
type of system that relies too heavily upon the analysis and 
opinions of perhaps too few people that are making the 
assessment as well as the determination?
    Mr. Stroman. Yes, Mr. Chairman. I will say this to you 
based on our experiences.
    As I mentioned, we have published competencies. What the 
DPMs or the reviewers have to do is to look at the performance 
and match that up with the written competencies, and it is not 
easy. When we have gotten our key managers together and asked 
them to do that, there have been differences in terms of how 
people evaluate the competencies. I think that those 
differences are reflective of the fact that people, similar 
people can reach different conclusions.
    I think the same thing is obviously the case with regard to 
different teams. If you look at different teams, the 
evaluations within those teams are different from team to team, 
and I think part of the difference is with regard to the 
management of that particular team. So there is no question 
that I think that there is a degree of subjectivity which is 
attached to that.
    I think the solution, the issue is how do we solve the 
problem, and I think solving the problem requires, I think, 
consistent and constant training and oversight with regard to 
the application of those standards and making sure that we have 
a consistent understanding of those standards.
    But there is no question that there is a fair amount of 
subjectivity which has crept in, and where you have 
subjectivity, sometimes individual biases can play a factor.
    Mr. Davis of Illinois. Thank you very much.
    Dr. Fay, if I could draw your attention to what we call 
exhibits 4 and 5.
    Mr. Fay. Yes, sir.
    Mr. Davis of Illinois. How important are job descriptions 
to implement in a compensation study?
    Mr. Fay. Well, if you are going to make matches to jobs in 
the market, you clearly have to be certain that the jobs that 
you have in your own organization are equivalent to those that 
you are benchmarking against.
    Mr. Davis of Illinois. If you can see exhibit 4, does it 
tell us anything or what does it tell us about one of the 
survey that Watson Wyatt used in its study?
    Mr. Fay. Yes, this is the Washington Technical Professional 
Forum survey, and it has a two sentence definition of a job 
family which is the operations research analysis job which was 
matched to the analyst job, one of five jobs that was matched 
to that job.
    The job description is actually pretty short: Conduct 
analytical studies of military, commercial or civil operations. 
Projects and/or programs may involve engineering, scientific, 
information systems, logistics, administration, administrative 
or strategic planning expertise and lead to recommendations to 
improve operational effectiveness in the client organization.
    So that is what you have to match on. I would state that 
this is actually fairly common for a lot of job surveys, that 
they don't have extensive descriptions. Some have much more 
extensive descriptions than this.
    Now, this is for a whole job family, and then they break it 
out additionally by levels. I won't read all of those, but let 
me just point out some differences between the three levels. P1 
which is the lowest professional level, which was not used in 
benchmarking, just says that they provide technical or 
operational support, has a Bachelor's, zero to 1 year.
    Level 2 which was matched against the analyst is their 
intermediate professional and now instead of support, they have 
technical and operational proficiency in the primary duties.
    Level 3 which was used for Band IIA is a seasoned 
professional in the job family, and again the only differences 
are from support to proficiency to seasoned professional. The 
only difference in job specifications that are listed is from 
zero to 1 year, 2 to 4 years and 5 to 7 years of related 
experience.
    The point is not that this is necessarily bad. It is that 
it is extremely judgmental when you make these kinds of matches 
on data that is as skimpy as this.
    Mr. Davis of Illinois. Based upon your review of the Watson 
Wyatt documents, would you say that GAO analysts were 
sufficiently involved in the process?
    Mr. Fay. I did not get that impression. My understanding is 
that an executive committee, and then there was a second 
committee that had a small number of employees who were 
involved in these matches but that there was no widespread 
participation by Watson Wyatt employees. I am sorry, by GAO 
employees.
    Mr. Davis of Illinois. Mr. Shimabukuro, many of the 308 
employees who were denied pay adjustments in 2006 have filed 
charges with the PAB, seeking relief. Putting these charges 
aside for the sake of discussion, can you think of what might 
be a legislative solution if Congress itself was interested in 
awarding or making sure that these individuals got pay 
adjustments?
    Mr. Shimabukuro. Mr. Chairman, I think one of the options 
Congress has is to impose a condition on the agency's 
appropriations, in other words, to condition the use of funds 
appropriated to the agency on providing those pay adjustments 
to the affected employees.
    Mr. Davis of Illinois. You don't think that would be 
stretching legislative interaction relative to a decision of 
this nature?
    Mr. Shimabukuro. I believe that there are political 
questions that Congress would have to consider. However, these 
kinds of conditions are imposed on appropriations measures to 
agencies, and I don't think would be inappropriate.
    Mr. Davis of Illinois. I think that we may very well submit 
additional questions. If each of you would respond to those in 
writing, we would appreciate it.
    So let me thank you very much for your appearance, and we 
certainly want to add another thank you for your patience in 
waiting for us to return from the voting process. Thank you 
very much.
    Gregory Junemann, Dr. Barry Seltser and Janice Reece, thank 
you all very much. Let me just introduce the witnesses.
    Gregory J. Junemann was unanimously elected to serve as 
president of the International Federal Professional and 
Technical Engineers [EFPTE], AFL-CIO and CLA at the union's 
54th convention in March 2001. On Tuesday, May 8th, the IFPTE 
filed petition to hold an election at the Government 
Accountability Office.
    Dr. Barry Seltser is the former Director of GAO's Center 
for Design Methods and Analysis. He is currently an independent 
consultant with expertise in government program evaluations and 
performance management systems.
    Ms. Janice Reece is the former General Counsel for GAO's 
Personnel Appeals Board.
    Thank you all for being with us.
    [Witnesses sworn.]
    Mr. Davis of Illinois. The record will show that each one 
of the witnesses answered in the affirmative.
    Perhaps we will just start with you, Dr. Seltser.

  STATEMENTS OF BARRY J. SELTSER, FORMER DIRECTOR, CENTER FOR 
   DESIGN, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; GREGORY J. 
 JUNEMANN, PRESIDENT, INTERNATIONAL FEDERATION OF PROFESSIONAL 
 AND TECHNICAL ENGINEERS, AFPTE, AFL-CIO; AND JANICE M. REECE, 
     FORMER GENERAL COUNSEL, PERSONNEL APPEALS BOARD, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

                 STATEMENT OF BARRY J. SELTSER

    Mr. Seltser. Thank you, Mr. Chairman.
    I would like to begin by clarifying that I am here at the 
request of the committees. Since I resigned from GAO a year ago 
because of my opposition to the way the new personnel system 
was being implemented, I have not sought out opportunities to 
speak about these issues. I have agreed to testify today in the 
hope that some of my perceptions and experiences can help 
strengthen this important organization.
    I had a very satisfying 16 year career at GAO, and I have 
the highest respect for the wonderful staff and senior managers 
throughout the organization. I am not calling into question the 
motives or good intentions of anyone at GAO. I am speaking only 
for myself although many of my views are shared by many of 
GAO's strongest and most successful staff.
    I cover these topics as well as several others in a longer 
written statement that I have submitted for the record.
    GAO's new performance management system has made some 
significant improvements, but several related problems have 
emerged in the process of its design and implementation. For 
example, there is unacknowledged and distorting subjectivity in 
how ratings are assigned and calculated, unwarranted 
assumptions that the competencies are equally important and 
that skills and performance are distributed similarly across 
work units, excessive pressures from the top of the 
organization to avoid rating inflation and there was 
insufficient reliability testing of the work standards that are 
used in developing ratings.
    These problems, I believe, created a gap between the formal 
way the system is supposed to work and its actual 
implementation. This gap is, I believe, partly responsible for 
a decrease in transparency and trust throughout the 
organization.
    Most important, the increased emphasis on an inflexible 
application of relative as opposed to absolute performance has 
created a much more competitive environment at GAO. 
Increasingly, financial opportunities and organization status 
are being competed in a zero sum atmosphere where only a fixed 
percentage of staff in each work unit can be viewed as strong 
performers.
    This became a particular problem when placement in the top 
half of the units' rating distribution over the prior 3 years 
was used as a crucial factor in the pay category placement 
decisions in 2006. Staff in relatively stronger units were 
disadvantaged because they would have been placed higher in the 
relative rating distribution if they were working in weaker 
units.
    Many employees who were fully qualified to carry out the 
roles and responsibilities of the higher pay category were 
placed in the lower one solely because of their relative 
performance scores within their work units, not because they 
would be unable to carry out the responsibilities at the higher 
pay range.
    The result, I believe, was a set of decisions that demeaned 
the very significant contributions made by many GAO staff whose 
only weakness was being assessed in a group of other highly 
qualified employees.
    During my final years at GAO, I observed a serious 
deterioration in morale and trust as a result of these changes, 
and I found it much more difficult as a senior manager to 
foster and maintain a culture of teamwork in the face of this 
new incentive system. I believe many of the intended benefits 
could have been achieved with more openness about the actual 
process of assigning rating scores, a more flexible approach to 
actual differences of performance across work units and more 
sensitivity to the effects of labeling employees in the lower 
portions of the rating distributions in a highly productive 
organization filled with highly competent staff.
    I hope that Congress can help GAO and the rest of the 
Federal Government design and implement pay for performance 
systems that can avoid or minimize many of the problems that 
GAO is now encountering.
    Thank you very much, and I will be glad to take any 
questions you might have.
    [The prepared statement of Mr. Seltser follows:]

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    Mr. Davis of Illinois. Thank you very much, Dr. Seltser.
    We will move to Mr. Junemann.

                STATEMENT OF GREGORY J. JUNEMANN

    Mr. Junemann. Thank you, Mr. Chairman, and I would also 
like to thank Chairman Akaka, for the record, for holding this 
hearing.
    The GAO employees are particularly grateful that you have 
taken the opportunity to express your concern in investigating 
because of your appreciation for the work they do on behalf of 
Congress and the American taxpayers.
    I would like to say also that most of these folks behind me 
are GAO employees. They are Band Is, Band IIAs and Band IIBs 
here on their own time, have traveled on their own cost to 
participate in this hearing.
    Really, I have understood that Mr. Walker has referred to 
the unionization effort as being brought about by a handful of 
disgruntled employees. I would like to correct that. These are 
hundreds and hundreds of dedicated professionals, many of whom 
have fared quite well under the new system. These aren't the 
losers. These are the cream of the crop, and they are very 
dedicated to the profession.
    I think that is also why when people look and say, well, 
how could there be a unionization effort and still this second 
place rating among large facilities within the Federal 
Government, because we don't see unionization as somehow 
contrary to making a workplace better. In fact, we think a 
unionized work force is a more efficient and more productive 
work force, and that is really their goal is to make GAO an 
even better place to work.
    What brought about the unionization effort, of course, was 
the split in the Band II, when we went from Band IIA to Band 
IIB. What happened there was, one, they changed their criteria 
without informing the employees, that retroactively the 3-year 
expectations were no longer going to apply, that they were 
going to go back 3 years and change the rules on that.
    And, second, there was a large group of people, something 
like 20 percent, 300 of 1,500, saw their pay frozen. I took 
note this morning when Mr. Walker reminded you that GAO's 
budget has not kept place with inflation. There are 300 
employees that work for him that say, welcome to our world, 
because their pay was frozen as well.
    Beyond that, the criteria that was changed, again, without 
anyone's knowledge it was going to happen, such as analysts in 
charge; what was meant by the performance standard of meets 
expectations; the risk expectations of individual engagements, 
whether it was high, medium or low depending on the particular 
project, that somehow had a new criteria, a new measurement and 
criteria that wasn't there before.
    Even things like people who were working as advisors on the 
professional development program, they saw that as integral 
before to getting promoted. Then once the new system came into 
place, they saw that it was actually holding them back.
    I was also interesting to hear Mr. Walker talk about that 
he held a nationwide video conference explaining the new system 
and then said no employees talked to him about any of their 
concerns. That is because they were talking to each other, and 
they saw that the only thing they could possibly do was to band 
together and form themselves into a union.
    We didn't target these people for unionization. They came 
to us because they saw it as their way of getting control of 
what was happening. We don't see it as a campaign that is 
around financial issues. It is a cultural problem that is at 
fault.
    That is, I guess, where I take exception to some of the 
folks who have said that this takes 3 to 5 to 7 years before it 
really takes hold. Maybe on a financial end, it does. But 
people can see, especially pretty smart dedicated professionals 
can see right up front that this is a cultural change, that 
these are square wheels on the wagon, and it isn't going to 
work this way. Also, again, they saw that the fix needs to be 
made immediately.
    But that being said, we have a tremendous amount of ideas 
that we would like to work with Comptroller General Walker to 
make this a better place. These folks that we hope to 
represent--and we think we are going to win this election--that 
we hope are representing this union, they are going to be the 
ones doing the heavy lifting with this effort to work with 
management to say we can make this a better place.
    We can make this new pay system more efficient. We can fix 
some of these things that have gone askew.
    Beyond that, we do ask, and I should go back to my written 
remarks. We do ask our Congress to take some actions on this. 
We feel that the invalid process used for the Band II pay split 
and the denial of annual pay adjustments to many staff contrary 
to repeated promises prove that the Comptroller General has too 
much discretion over the GAO Human Capital Reform Act of 2004 
and that he has not complied with both the provisions of the 
act requiring accountability measures to ensure that the 
performance management system is fair, credible and equitable.
    Therefore, I ask you to consider repealing or substantially 
revising the authority given the Comptroller General under the 
act, and we also ask that you decline to provide any additional 
discretion over personnel policy at the agency such as 
discretion to set rules independent of OPM requirements.
    And, finally, we ask that you consider requiring 
independent review of the criteria and processes GAO and 
management used to implement the Band II split.
    Mr. Chairman, I really appreciate this morning when I heard 
you say that the EAC can do a survey to see what can be done 
about this. I think actually it does need to go independent. In 
talking to some of the employees on the break, they feel the 
same way, that it would be terrific if the EAC could do this, 
but it would be much more beneficial to the problems at hand if 
we could have an outside agency assist with the overall 
measurement of what has happened here.
    Again, I thank you very much for the opportunity to speak 
on behalf of the employees that we will represent as one of our 
new locals. Thank you.
    [The prepared statement of Mr. Junemann follows:]

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    Mr. Davis of Illinois. Thank you very much.
    We will proceed to Ms. Reece.

                  STATEMENT OF JANICE M. REECE

    Ms. Reece. My name is Janice Reece. I was the General 
Counsel for the Personnel Appeals Board from 1999 until my 
retirement in 2005, and my experiences during that period form 
the basis of my comments today.
    GAO made many promises to its employees and Congress in 
order to obtain the personnel reform authority of the 
Flexibility Act of 2000 and HC II. These promises have already 
been discussed here today, and I will not address them in my 
comments here.
    Instead, I will limit my oral comments to a matter that I 
believe is crucial to the implementation of GAO's personnel 
reforms, that is, GAO's commitment to provide employees 
adequate and meaningful rights to appeal actions taken by GAO, 
personnel actions taken by GAO.
    The significant personnel reforms implemented by GAO caused 
uncertainty and confusion among its employees and managers 
alike. The subjective nature of many other reforms including 
the new performance appraisal system has given rise to concerns 
from many employees about the fairness of decisions made under 
the new scheme. Despite this, GAO has not seen fit to increase 
resources for the processing of internal employee complaints, 
particularly discrimination complaints.
    The lack of resources for the operation of the civil rights 
office or the Office of Opportunity and Inclusiveness has 
created substantial delays in the processing of EEO complaints. 
Employees had difficulty starting the complaint process and for 
those who were lucky enough to get a complaint filed, their 
complaints lingered for years without the issuance of a final 
agency decision with some employees not getting a final agency 
decision at all.
    The delays and unresponsiveness of the office caused many 
employees to inform me that they wanted to forego their claims 
of discrimination completely. GAO's failure to address these 
problems compromised the availability of this very important 
form of employee appeal.
    Also, GAO's failure to take steps to ensure the 
independence of the PAB has compromised the integrity of that 
employee appeal process. GAO's appointment of GAO board members 
and its funding of PAB operations presents the appearance at 
least of a conflict of interest. While this alone has raised 
employee concerns in the past, the practices adopted by the 
board itself add to the concerns that employees are not 
receiving a fair and unbiased assessment of their claims.
    The board's personal interest in ensuring its continued 
existence has led it to implement a number of initiatives aimed 
at ensuring an active adjudication docket. The most important 
of these initiatives has been the complete control of the 
operations of this Office of General Counsel. It has 
unilaterally, without the consultation with PAB General 
Counsel, implemented procedures that limit investigations, 
employee access to information obtained during investigations 
and employee access to informal advice.
    At the same time, the procedures give the board significant 
input and access to PAB, OGC, its General Counsel's Office 
investigations and prosecutorial decisions. This control not 
only represents a direct conflict of interest between the 
board's adjudicatory function and the PAB General Counsel's 
investigative and prosecutorial responsibilities, it 
compromises the integrity of the General Counsel's 
investigations and prosecutions decisions as well as any 
decision issued by the board in connection with cases brought 
before it for adjudication.
    There is a real danger that the board's close connection 
with GAO will adversely affect employee appeals at the PAB.
    During my tenure with the board, I was not aware of any 
efforts of GAO to restructure the board to avoid these problems 
or to undertake a comprehensive review of the internal 
processes of the board to determine whether it was meeting its 
responsibilities under pertinent statutes.
    Instead, the board has been allowed to operate with no 
oversight from anyone. Such lack of accountability has given 
rise to a number of questionable practices including 
socializing with GAO officials who might find themselves 
involved in investigations by the PAB and General Counsel and 
the lack of a requirement that the board members report their 
non-PAB activities or employment.
    It is time for Congress to take a serious look at the 
employee appeal avenues afforded to its employees. The lack of 
commitment and resolve by GAO to afford its employees the same 
rights as those enjoyed by employees in executive branch 
agencies, most importantly the right to unbiased and fair 
processing and adjudication of complaints, must not be allowed 
to continue.
    Thank you for this opportunity to talk to you today.
    [The prepared statement of Ms. Reece follows:]

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    Mr. Davis of Illinois. Thank you very much. I really want 
to thank all three of you and appreciate the fact that you are 
still here.
    Ms. Reece, perhaps I could begin with you since you raised 
the issue of discrimination complaints. I get more of those as 
chairman of the subcommittee than any other kind of complaint, 
and it is really somewhat perplexing. I could actually spend 
all of my time just trying to deal with discrimination 
complaints that I get and do absolutely nothing else, and I 
still wouldn't feel that I had adequate time to try and sort 
out and deal with what people are coming with.
    How effective do you think the appeal board is in terms of 
its structure and what it deals with to help prevent or handle 
some of these complaints, this type of complaint.
    Ms. Reece. First, I think I would like to give a little of 
background. Before an employee can bring a discrimination 
complain to the Personnel Appeals Board, they must exhaust 
administrative remedies, thereby going to the Office of 
Opportunity and Inclusiveness and filing a complaint. They 
don't have to keep it there if after 120 days, I believe it was 
when I was there, 120 days, they haven't received a final 
agency decision.
    They can then appeal it to the Personnel Appeals Board's 
General Counsel's Office or go to district court and file a 
claim in district court.
    The claims of discrimination that were filed with the PAB 
General Counsel's Office during my tenure there were handled in 
the same way that we handled other investigations, that we 
sought information and we tried to get as much information as 
we could because, as you probably are aware, discrimination 
claims are not always just cut and dry. So you do have to try 
to delve in to try to get information.
    After that, if after our investigation we found that there 
was reasonable grounds to believe that discrimination had 
occurred, then we would offer to represent the employee or give 
the employee then the right to go to district court and file in 
district court and avoid, not have to go through the Personnel 
Appeals Board hearing process. But if they chose, we would go 
through the process.
    In and of itself, the claims, the handling of the claims of 
discrimination at the Personnel Appeals Board, of course, they 
are handled on an individual basis, and so during my tenure we 
did not have any class actions or anything there although the 
board has a procedure for that.
    But the board also has authority to conduct oversight. If 
you are looking for, in terms of a broad, a broader kind of 
focus in terms of discrimination, the board has the authority 
to conduct oversight studies on issues relating to EEO 
discrimination. They can select. They can gather information 
form GAO and make its own assessment as to what GAO has done 
and make recommendations to GAO for corrective measures.
    Mr. Davis of Illinois. Let me ask you, Dr. Seltser. Could 
you explain the Standardized Rating Score?
    Mr. Seltser. I am not sure what I did to deserve that 
question, Mr. Chairman. [Laughter.]
    The underlying assumption of using something like a 
Standardized Rating Score, in my view anyway, is that when you 
find differences on the way ratings are given across different 
units, different averages, for example.
    So you may look at one unit in an organization that, let us 
say, has an average rating score of 20 and another unit that 
has an average rating score of 15. If you assume that those 
differences are due to differential practices in rating, that 
one unit, for example, tends to simply rate more easily than 
another unit, so that if they had the same staff with the same 
experiences and the same performance, they would be giving 
higher ratings to those same people than the other unit.
    If you accept that assumption, then something like the 
Standardized Rating Score is a way to try to control for that. 
All it is doing is it simply looks at what the average rating 
scores are for those two units, looks at the way the scores are 
distributed within the units and attempts to sort of control 
for those factors.
    So the idea is that you want to, you would be able to then 
say that let us say Person A has a rating score of 25, but 
their average in their unit may be 20. Someone in another unit 
has a score of 25, but the average in their unit is 30. So 
standardizing the scores in that way allows you then to compare 
people in a way that takes into account what their relative 
placement is within their particular unit.
    The difficulty that I have with this is precisely in the 
assumption that I just stated. I don't believe, at least I 
wasn't aware when I was at GAO, that there was any evidence 
that whatever discrepancies there were in assigning rating 
scores was simply due to the fact that one unit tended to rate 
more easily than another unit.
    My own view was that there may have been some of that was 
going on, but there was also a lot of discrepancy that would 
happen within that particular unit in terms of people rating 
differently. And, even more significantly I think, there was no 
evidence that, in fact, the actual performance and skill levels 
of people in all of these different 13 teams were, in fact, 
equivalent.
    If they are not, in fact, equivalent, if you really do have 
a situation which for a number of different reasons certain 
teams simply have stronger performers at a given time, and that 
can change over time, from year to year. There are a lot of 
reasons that happens in any organization. Units get 
reputations. Units are doing different kinds of work. They 
attract different kinds of staff. They spend more or less 
attention to recruitment. For any of those reasons, you can end 
up with a situation which frequently, I believe, does occur, 
that certain units simply have stronger performers.
    My view is a pay for performance system ought to be able to 
reward people who are the better performers, not simply the 
people who are better relative performers in their units. So I 
would challenge the underlying assumption of creating those 
kinds of SRS scores. But that is at least what they are 
intended to do which is to take into account those kinds of 
differences in rating tendencies that may occur across groups.
    I don't know if that helps or confuses things even more.
    Mr. Davis of Illinois. I think it helps me a great deal 
actually, especially the conclusion that you reach relative to 
who should be rewarded and why, and I appreciate.
    We have also been joined by Representative Issa from 
California, and I am going to yield to him at this moment for 
any questions that he would like to ask.
    Mr. Issa. Thank you, Chairman. I think timing is 
everything. [Laughter.]
    Virtually, 15 minutes is an eternity when you are in our 
position.
    Dr. Seltser, I am concerned that government in general has 
had a mixed history of pay for performance.
    Many years ago, the military went through a series of 
rating changes. One of them that I would like to ask you about 
was they normalized all the raters and endorsers based on their 
numeric evaluation. So over a period of time, and this is one 
of the success stories in my opinion. Over a period of time, 
they normalized somebody who decided to give all of his or her 
subordinates 100's. If you gave everyone 100's, over time, what 
you were giving them was a 50.
    It did force a critical eye toward, at least digitally, the 
haves and the have nots, the make the grade and not make the 
grade. When you are looking at lieutenants, captains, majors, 
colonels, that is the question you are asking. Do you want this 
person to get promoted and eventually be at your rank or not?
    You were talking about elements that you are concerned 
about, isn't that an element that must be involved when you 
have a rating system, an evaluating system that turns into 
either promotion or money?
    Mr. Seltser. Yes. I think the difficulty or one of the 
difficulties in determining again to what extent those 
differences that you may get between raters are due to the 
different staff that those particular raters have.
    I think that takes a lot of time and up-front effort in 
developing a system to do enough testing of the reliability of 
how the scores are assigned. I think the kind of effort you are 
talking about, it seems to me is necessary. You want to be able 
to identify people who tend to rate the same person more highly 
than someone else who would rate that person.
    There are ways. Social scientists have been doing this for 
years. There are ways of doing this kind of testing to try to 
determine that and tease that out. The problem is if you don't 
do that effectively and, to my knowledge at least, GAO didn't 
do that in building and designing and then implementing the 
system, then you have no way of knowing whether the 
discrepancies between raters or between units are due to actual 
differences in staff performance or due to the way that the 
raters tend to operate.
    Mr. Issa. So if I hear you right, one of the problems for 
the GAO is not coming up with a system for evaluating units.
    Going back to the military example, the military is very 
good at evaluating units. Are you mission-ready? Are you 
combat-ready? What did you get on your annual this or that? 
What did the IG say? In a sense, the military is all about 
testing, fitness.
    Is that essentially what you are saying is the most 
important missing component, some sort of unit normalization 
score?
    Mr. Seltser. No. My view would be that they have a unit 
normalization score which is the way the SRS actually 
functions.
    What I am questioning is both for the reason I already 
indicated. Is that the right comparison group to use for an 
individual as opposed to performance across the whole 
organization?
    It would be if, in fact, you believe that performance is 
equally distributed across every group in GAO. Therefore, you 
would want to standardize for any differences that you might 
find with groups, between different groups. But, as I said, I 
am not sure there is any evidence for that.
    The other problem that I want to just mention which----
    Mr. Issa. But can you say categorically that if you are the 
shining star in a dead organization under this system, that is 
the right place to be if you want to get pay and promotion?
    Mr. Seltser. Yes. I actually, as a manager, would have very 
difficult conversations with staff in my group who were very, I 
thought very good performers, working very well, making major 
contributions to the organization but who, because the group I 
was managing was a very strong group, ended up in the bottom 
half of the rating distribution.
    When someone would ask me, what can I do to pull that up, 
obviously there is coaching. There are ways of improving, but 
the danger then is everybody else in the group is also going to 
get better and your relative placement may not change.
    I actually found myself saying occasionally to very good 
staff: I want you to stay here, but frankly if what you are 
saying is the only thing that is going to really give you job 
satisfaction is becoming a star, find the weakest unit in the 
organization. I think that is a real disincentive.
    It is also a disincentive in terms of trying to get 
teamwork within the unit because it really does very explicitly 
place people in a much more competitive kind of situation 
against each other, the other people in their units, and you 
want people at a place like GAO to be able to coach each other, 
to help the other person improve. The danger is if I help my 
colleague get better and get a higher rating score, I then slip 
down more in the relative distribution.
    So I am not saying that this isn't something to look at, 
but I just think the way GAO has implemented that with that set 
of assumptions is, in my view, a much too rigid kind of way and 
has some of these real deleterious consequences.
    Mr. Issa. I guess I will make one closing question. 
Forgetting about what they have done so far, do you believe 
that a system can be devised that only awards pay for 
performance if you have both in place, a unit individual who 
truly is exceptional and performance at the unit level? Meaning 
if a unit performs badly, how well do we want to reward people 
who are in it based on some anecdotal they are wonderful people 
in a bad job?
    Isn't the system that we want to have one that says we want 
to rewards units that are performing well in greater amounts 
than units who are performing poorly as the private enterprise 
does and then the superstars within organizations do even 
better than the mean of that organization? Is that essentially 
the snapshot where we need to get to and do you believe we can 
reach it?
    Mr. Seltser. Yes, I think that is the goal.
    One of the steps, and GAO has to its credit started to do 
some of this, is think in terms of team awards much more 
frequently rather than just individual rewards because the 
issue of performance.
    You mention the two types of performance. There is really 
the performance of the unit. Then there is the performance of 
the individuals within the unit. I think you need to be 
focusing on both of those and make a determination about which 
gets the bulk of the money and the financial kind of rewards.
    I think it is possible to move toward that kind of system, 
but I think it requires much more flexibility and, to some 
extent, more trust of managers to look at their own unit and 
make some of these determinations about what is the skill level 
and the accomplishment level within the organization and not 
have the organization as a whole necessarily assume that is 
fixed across all of the units.
    Mr. Issa. I guess for anyone else who wants to comment, I 
would also say and how do we protect the taxpayers from this 
being an everyone succeeds, the money just keeps going up?
    I agree with you that is how private enterprise does it, 
but we know in private enterprise when a company is losing. We 
don't always know it right away. Sometimes the stockholders 
take a while to figure out the bonuses versus the performance 
don't match, but in time they do find it.
    Mr. Junemann. I can trip over this, I guess. Coming out of 
the private sector, our union, we represent engineers, 
technicians working in private industry who are part of pay for 
performance systems. Some have even insisted on that over the 
years, that they want this. Rather than getting across the 
board increases, they insist that we maintain a pay for 
performance system as part of their collective bargaining 
agreement.
    Mr. Issa. Kind of like when Chrysler came out of 
bankruptcy.
    Mr. Junemann. Yes, yes. Well, in fact, at United Airlines, 
just recently, about 4 years ago now, we organized the 
engineers at United Airlines when they were in bankruptcy, and 
they actually had me guarantee them as president of the union 
that if they were successful in getting a union, that we would 
work to getting them a pay for performance system as part of 
their contract.
    Mr. Issa. Did they hold you accountable?
    Mr. Junemann. Yes, yes, and we did. We got a contract, and 
it is smiles all around especially with United management.
    In any event, so they are the same thing. The engineers, 
they can do work that isn't necessarily measurable, though, on 
the profitability, right, and even with departmental level.
    So I don't think. I mean as part of a pay for performance 
system, you don't want something where--you can't have it where 
everybody wins because I think that is your question. We don't 
want to put something in here within GAO that we say, well, 
everybody automatically advances because then you just get away 
from the whole premise of pay for performance.
    I am bothered with this system that they have in place just 
from the back and forth you just had with Dr. Seltser, 
Congressman, that if they put in this 50th percentile 
measurement where just that, that everybody over the 50th 
percentile is entitled to increases and those below, I guess, 
get COLA or wherever they fall. It tends to destroy teamwork in 
a lot of ways in an agency where teamwork, I think, is 
essential in working in some of these engagements where you 
have teams of analysts and accountants and auditors working on 
something.
    Second, I think another part of this that is bothersome is 
that there is suddenly a primary factor in evaluating an 
employee, the risk level of the engagement. From what I am told 
by people smarter than me sitting behind me, that some of these 
low level or say low risk engagements are incredibly complex 
and difficult. Yet, they won't lead a person, say, to go from 
Band IIA to Band IIB. They have to be working on high or mid-
level risk level things.
    So what happens there in a pay for performance system is 
you lose the opportunity to advance, and that is essential.
    I worked for an employer that we made parts for the space 
shuttle. We made parts for jet engines and other sort of hot 
and sexy items, and we also made things for farm equipment, 
earthmoving equipment. You could have crackerjack engineers 
working on the latter categories, and they didn't seem to be 
worth quite as much, but they were doing--to your other 
question--they were doing fantastic work in an element or in 
part of the industry that just wasn't very profitable.
    Mr. Davis of Illinois. Thank you, Mr. Issa.
    Mr. Issa. Thank you, Chairman. I really appreciate your 
indulgence.
    Mr. Davis of Illinois. We will have to bring this to an 
end. I want to thank everyone and we are adjourned.
    [Whereupon, at 4:05 p.m., the subcommittees were 
adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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