[Senate Hearing 110-814]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-814

 IMPROVING PERFORMANCE: A REVIEW OF PAY-FOR-PERFORMANCE SYSTEMS IN THE 
                           FEDERAL GOVERNMENT

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

                                HEARING

                               before the

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

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 22, 2008

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

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





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        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
            Thomas J.R. Richards, Professional Staff Member
             Jennifer A. Hemingway, Minority Staff Director
                    Jessica K. Nagasako, Chief Clerk












                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Voinovich............................................    14

                               WITNESSES
                         Tuesday, July 22, 2008

Hon. Linda M. Springer, Director, U.S. Office of Personnel 
  Management.....................................................     3
Richard A. Spires, Deputy Commissioner for Operational Support, 
  Internal Revenue Service.......................................     5
Gale Rossides, Deputy Administrator, Transportation Security 
  Administration, U.S. Department of Homeland Security...........     6
Ronald P. Sanders, Associate Director of National Intelligence 
  for Human Capital, Office of the Director of National 
  Intelligence...................................................     8
Bradley Bunn, Program Executive Officer, National Security 
  Personnel System, U.S. Department of Defense...................    10
J. Christopher Mihm, Managing Director of Strategic Issues, U.S. 
  Government Accountability Office...............................    12
Carol A. Bonosaro, President, Senior Executives Association......    29
John Gage, President, American Federation of Government Employees    31
Colleen M. Kelley, National President, National Treasury 
  Employees Union................................................    33
Jonathan D. Breul, Executive Director, IBM Center for the 
  Business of Government, and Partner, IBM's Global Business 
  Services.......................................................    35
Charles H. Fay, Professor, School of Management and Labor 
  Relations, Rutgers University..................................    36

                     Alphabetical List of Witnesses

Bonosaro, Carol A.:
    Testimony....................................................    29
    Prepared statement...........................................   119
Breul, Jonathan D.:
    Testimony....................................................    35
    Prepared statement...........................................   161
Bunn, Bradley:
    Testimony....................................................    10
    Prepared statement...........................................    82
Fay, Charles H.:
    Testimony....................................................    36
    Prepared statement...........................................   165
Gage, John:
    Testimony....................................................    31
    Prepared statement...........................................   134
Kelley, Colleen M.:
    Testimony....................................................    33
    Prepared statement...........................................   149
Mihm, J. Christopher:
    Testimony....................................................    12
    Prepared statement...........................................    94
Rossides, Gale:
    Testimony....................................................     6
    Prepared statement...........................................    62
Sanders, Ronald P.:
    Testimony....................................................     8
    Prepared statement...........................................    68
Spires, Richard A.:
    Testimony....................................................     5
    Prepared statement...........................................    54
Springer, Hon. Linda:
    Testimony....................................................     3
    Prepared statement...........................................    49

                                APPENDIX

Chart submitted by Ms. Kelley....................................   177
Background.......................................................   178
Federal Managers Association (FMA), prepared statement...........   191
Letter to Senator Akaka from Carol A. Bonosaro, dated July 28, 
  2008...........................................................   198
Questions and Responses for the Record from:
    Ms. Springer.................................................   199
    Mr. Spires...................................................   207
    Ms. Rossides.................................................   209
    Mr. Sanders..................................................   221
    Mr. Bunn.....................................................   235
    Mr. Mihm.....................................................   245
    Ms. Bonosaro.................................................   248
    Mr. Gage.....................................................   250
    Ms. Kelley...................................................   253
    Mr. Breul....................................................   258
    Mr. Fay......................................................   260

 
 IMPROVING PERFORMANCE: A REVIEW OF PAY-FOR-PERFORMANCE SYSTEMS IN THE 
                           FEDERAL GOVERNMENT

                              ----------                              


                         TUESDAY, JULY 22, 2008

                                 U.S. Senate,      
              Subcommittee on Oversight of Government      
                     Management, the Federal Workforce,    
                            and the District of Columbia,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:06 p.m., in 
room 342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Subcommittee, presiding.
    Present: Senators Akaka and Voinovich.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. This hearing will come to order.
    I want to thank all the witnesses for being here. It is 
good to shake your hands and to see you again, and especially I 
am glad to see Director Linda Springer. As many of you know, 
Director Springer announced that she will step down next month. 
I want to take this opportunity to thank her for her many years 
of public service and wish her the best of luck in the future. 
Ms. Springer, it was a pleasure to work with you and you have 
done a great job in the time that you have been here. God bless 
your way.
    Today, the Subcommittee will examine pay-for-performance 
systems across the Federal Government. We have a full hearing 
today, so I will try to keep my opening remarks brief.
    Pay-for-performance systems have increased in the Federal 
Government out of a desire to improve the link between an 
employee's pay and his or her performance. Ideally, the better 
someone performs, the greater their pay.
    Since the Department of Navy demonstration project at China 
Lake began in 1980, the Federal Government has tinkered with 
pay and performance systems outside of the General Schedule 
(GS). The authority to implement pay-for-performance systems 
have been given to Federal agencies for employees in the Senior 
Executive Service and to the Internal Revenue Service, the 
Federal Aviation Administration, the Department of Defense, 
Transportation Security Administration, the Department of 
Homeland Security, components in the intelligence community, 
the Government Accountability Office, and many other agencies.
    When Congress granted Federal agencies statutory authority 
to develop pay-for-performance systems, employee and management 
groups expressed many concerns with the ability of Federal 
agencies to design systems that are transparent, fairly 
evaluate employees' performance, provide a fair appeals 
process, include employees and their representatives in the 
design and implementation of these systems, provide sufficient 
training to managers and employees to implement systems, and 
budget sufficient funds to properly reward employees for their 
performance. I share many of these concerns, which 
unfortunately have become reality.
    Federal pay-for-performance systems have often been 
modified from those in corporate America to address budgetary 
constraints. I continue to hear from employees that their 
performance rating and pay awards depend not only on their 
performance, but rather on that of other employees who are in 
competition with too limited resources to reward performance.
    If the Federal Government is serious about new and more 
rigorous pay-for-performance systems, it must invest in those 
systems with enough money to provide a real performance 
incentive. Part of this investment requires taking the extra 
time and effort to ensure that employees are involved in the 
development of these systems and have a clear understanding of 
how they operate.
    According to the last SES human capital survey, nearly 30 
percent of respondents do not understand how increases in their 
salary and bonuses are determined. The 2007 DHS employee survey 
found that 55 percent of TSA employees do not believe their pay 
is based on their performance, and 48 percent do not believe 
their pay awards depend on how well they perform their jobs. If 
employees do not understand their pay system, or think it is 
unfair, it will not work.
    Moreover, employee buy-in is essential to the government's 
effectiveness and efficiency. If employees are not involved and 
their concerns are not addressed, morale will drop and hinder 
agency mission.
    A recent report from the DHS Inspector General on TSA's 
responsiveness to address employee concerns acknowledges that 
low employee morale at TSA continues to be an issue and can 
contribute to high attrition rates. The estimates for TSA's 
attrition rate range from 17 to 20 percent. This is too 
high.\1\
---------------------------------------------------------------------------
    \1\ The chart from TSA appears in the Appendix on page 177.
---------------------------------------------------------------------------
    The GS system is not perfect. However, there are clear 
rules on how employees will be paid and under what 
circumstances pay increases are awarded. I am worried that we 
are spending hundreds of millions of dollars to transition away 
from the GS into new pay-for-performance systems at the cost of 
employee morale and agency mission.
    I look forward to hearing from our witnesses on the 
implementation of pay-for-performance systems in the Federal 
Government.
    My friend, colleague, and Ranking Member, Senator 
Voinovich, will be here shortly. So let's proceed to the first 
panel.
    On our first panel this afternoon is Linda Springer, 
Director, U.S. Office of Personnel Management; Richard Spires, 
Deputy Commissioner for Operational Support, Internal Revenue 
Service; Gale Rossides, Deputy Administrator, Transportation 
Security Administration; Dr. Ronald Sanders, Associate Director 
of National Intelligence for Human Capital, Office of the 
Director of National Intelligence; Brad Bunn, Program Executive 
Officer, National Security Personnel System, U.S. Department of 
Defense; and Christopher Mihm, Managing Director of Strategic 
Issues, Government Accountability Office.
    As you know, our Subcommittee requires that all witnesses 
testify under oath. Therefore, I ask all of you to please stand 
and raise your right hand.
    Do you solemnly swear that the testimony you are about to 
give this Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Ms. Springer. I do.
    Mr. Spires. I do.
    Ms. Rossides. I do.
    Mr. Sanders. I do.
    Mr. Bunn. I do.
    Mr. Mihm. I do.
    Senator Akaka. Thank you very much. Let it be noted for the 
record that the witnesses have answered in the affirmative.
    Before we begin, I want to remind all of you that although 
your oral statement is limited to 5 minutes, your full written 
statement will be included in the record.
    Director Springer, will you please begin with your 
statement.

 TESTIMONY OF HON. LINDA M. SPRINGER,\1\ DIRECTOR, U.S. OFFICE 
                    OF PERSONNEL MANAGEMENT

    Ms. Springer. Thank you, Mr. Chairman. I want to take a 
moment to thank you for the wonderful working relationship that 
you have led, along with Senator Voinovich, with the Office of 
Personnel Management (OPM), and with me personally during these 
years. It couldn't have been a more professional and more 
effective relationship. I thank you for your support and your 
interest in the workforce and for the work we have done 
together. So thank you very much, sir.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Springer appears in the Appendix 
on page 49.
---------------------------------------------------------------------------
    I want to talk today specifically about our progress with 
alternative pay systems in the Federal Government. OPM has been 
very active in monitoring these programs and in supporting 
implementation. In 2007, we issued three major reports on 
progress and today I would like to characterize just how we 
have been evolving in the Federal Government in this area.
    There are three main periods of time that I want to comment 
on: The 25-plus years of alternative pilots and programs prior 
to 2004, the three major legislative initiatives that occurred 
after 2004, and then the current activities. So, that will sort 
of be the framework for my comments.
    For those older alternative systems that began, as you 
said, in 1980 with the China Lake project, OPM maintains an 
archive of data that we use to evaluate these programs and how 
they are doing. In 2005, we issued a report summarizing these 
25 years from 1980 on and reached several conclusions as a 
result of our work. Among those were that performance, rather 
than tenure, drove pay in those systems. Success of the systems 
depended on effective implementation. And that over time, with 
the proper implementation, employees did support alternative 
pay systems. It was noted that progress in some organizations 
was slower than others, as you would expect with new programs, 
but that overall, there were clearly positive trends.
    Now, beginning in 2004, several legislative initiatives 
covered large groups of employees. The Senior Executive Service 
(SES) has been covered by a program that was required to make 
distinctions based on performance and certified by OPM with 
Office of Management and Budget (OMB) concurrence. In 2004, 76 
percent of the SES members were covered by certified programs. 
Over the past 3 years, that has grown to 99 percent. Virtually 
all of these programs now meeting certification.
    OPM recently conducted a survey of SES members, and among 
other things, we asked about the system, and we found that 93 
percent of the SES believe that their pay should be based on 
performance, and 91 percent believe that they should be held 
accountable for achieving results. I think that is a testimony 
to the high performance standards of the Senior Executives.
    We work closely with Chief Human Capital Officers to 
promote and to communicate the best practices of the SES. There 
is more to do and we are continuing to work collaboratively 
with the Chief Human Capital Officers to help this program work 
even better.
    The National Security Personnel System (NSPS) has been a 
focal point for OPM. We work closely with the Department of 
Defense (DOD) on regulations, including the more recent ones 
that are required by the 2008 Defense Authorization Act. Our 
review of NSPS, as we have said in our published report, 
indicates that both employees and supervisors are developing a 
better understanding of expected performance and how their jobs 
link to the organization and to performance ratings and pay.
    The Department of Homeland Security (DHS), the third major 
system as a result of legislation, has not progressed to that 
same point, although the TSA has initiated its own Performance 
Accountability and Standards System and the information on that 
has been provided separately in the testimony provided to the 
Subcommittee.
    Currently, OPM has been working with agencies that of their 
own initiative believe they are ready under a demonstration 
program authority to test on a very measured basis performance-
based systems for components of their agencies. These are not 
large projects. They are very self-contained and measured. They 
range from around 100 people up to maybe 2,500. There are 
currently five demonstration projects underway and they really 
are a logical step after that component of an agency has 
established the right performance infrastructure and they 
believe they are ready to move to test and learn from how a 
performance-based pay system could work.
    As I mentioned in the beginning of my remarks, OPM has 
issued a report on the status of all performance-based pay 
systems from all of these periods. Our report concluded that 
pay-for-performance systems continue to be successful and 
provide a strong link between pay and performance rather than 
under systems where longevity is an important factor. It only 
comes after effort and hard work, but we believe that these 
systems are better able to recruit and retain a high-quality 
workforce. I am personally convinced that pay-for-performance 
systems can be effective for the Federal workforce when they 
are done properly.
    Mr. Chairman, I thank you again for the opportunity to be 
here today and look forward to answering your questions.
    Senator Akaka. Thank you very much, Ms. Springer. Mr. 
Spires.

  TESTIMONY OF RICHARD A. SPIRES,\1\ DEPUTY COMMISSIONER FOR 
         OPERATIONAL SUPPORT, INTERNAL REVENUE SERVICE

    Mr. Spires. Thank you, Chairman Akaka. I am pleased to be 
here today to discuss the IRS's efforts to implement pay-for-
performance and respond to any questions from the Subcommittee. 
It is an important issue as the Federal Government continues to 
look at ways to recruit and retain talented managers.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Spires appears in the Appendix on 
page 54.
---------------------------------------------------------------------------
    While I have worked at the IRS in various capacities since 
2004, I have spent more than 20 years in private industry where 
pay-for-performance is commonplace, and from the perspective of 
the companies with which I was associated, has had great 
success. I recognize that there is not a perfect correlation 
between government and private enterprise and what works in one 
may not in the other. And in my 4-plus-year tenure at the IRS, 
I have seen some of the reasons why. However, the development 
of a strong pool of talented employees is such a critical issue 
for any enterprise that it is important that innovative 
programs be attempted.
    In many respects, the IRS has been at the forefront of the 
pay-for-performance program in the Federal Government. We have 
been dealing with it for over 7 years as we have implemented 
such a system for our more than 7,000 managers. Though there 
have been some bumps along the way, the creation of pay bands 
and compensating employees for the quality of their work rather 
than their tenure with the agency has helped the IRS respond to 
the challenges presented in turning the agency into a modern 
and more efficient organization.
    My written statement lays out much of the background of how 
we got into pay-for-performance and describes in some detail 
how we implemented the program and discusses some of the 
obstacles we faced. I want to focus my remarks this afternoon 
on two things. First, I want to outline the areas in which pay-
for-performance has benefited our agency. Second, I want to 
offer some of the lessons we have learned so that other 
agencies that follow us can benefit from our experiences and 
have an easier transition.
    Perhaps the greatest benefit of pay-for-performance for the 
IRS has been the opportunities afforded us in implementing the 
dramatic overhaul of the agency mandated by the IRS 
Restructuring and Reform Act of 1998. Specifically, the 
implementation of a new performance management system allowed 
us to link manager performance to the functional goals of the 
organization. Managers and their supervisors jointly develop 
specific performance commitments as part of annual performance 
plans that are designed to further the goals of the functional 
unit and the IRS. The pay flexibilities have enabled IRS to 
strengthen the linkage between manager performance and the 
overall IRS goals.
    In addition, the overall job satisfaction among our 
managers, based on annual employee survey results, has been on 
an upward path since 2005.
    Despite these benefits, the road has not always been smooth 
and without controversy. Let me offer several lessons we have 
learned, and frankly are still learning, that may benefit other 
agencies in the Federal Government.
    First, agencies should move deliberately and cautiously to 
implement the program that is right for their organization, 
recognizing that any change in the way employees are paid will 
raise concerns on their part.
    Second, communication is critical. Employees must 
understand how the program will work and how they will be 
affected. There must also be forums to have their questions 
answered.
    Third, an effective performance evaluation system must be 
in place. Employees must understand the basis for their 
evaluation, and there should be a review system in place to 
make sure evaluations are being made on a consistent basis.
    Fourth, supervisors and employees must be trained properly 
on how to use the system and make sound evaluations.
    Fifth, ongoing program evaluation is essential to ensure 
that the pay-for-performance system is operating as intended, 
and agencies must be willing to modify and revise to meet the 
changing needs of their organization.
    And finally, evaluations must be made free of any 
discrimination based on race, gender, age, or national origin.
    I am proud to say that an overall evaluation of the IRS 
program by a third-party contractor found that since fiscal 
year 2004, there have been no disparate impact on any group of 
managers. The contractor analyzed the trends of the ratings 
data grouped by race, gender, age, and national origin. In each 
group, ratings trended in a similar path to the average ratings 
across all groups.
    Thank you again, Mr. Chairman, for the opportunity to be 
here and I will be happy to respond to any questions.
    Senator Akaka. Thank you very much, Mr. Spires. Ms. 
Rossides.

     TESTIMONY OF GALE ROSSIDES,\1\ DEPUTY ADMINISTRATOR, 
  TRANSPORTATION SECURITY AGENCY, U.S. DEPARTMENT OF HOMELAND 
                            SECURITY

    Ms. Rossides. Good afternoon, Chairman Akaka and Ranking 
Member Voinovich. I am pleased to be here today to discuss 
TSA's progress on our pay-for-performance system known as PASS. 
I am honored to represent the thousands of TSA employees, our 
Transportation Security Officers, who serve to ensure the 
safety and security of two million passengers a day. These 
women and men are dedicated security professionals with one of 
the most difficult jobs in government. These officers are the 
most tested in the Federal workforce.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Rossides appears in the Appendix 
on page 62.
---------------------------------------------------------------------------
    Twenty-two thousand of our officers have been with TSA from 
the beginning. They have participated in the largest stand-up 
of a Federal agency in 50 years. They have stayed with us as we 
have responded to the evolving threat by continuously enhancing 
the security processes while also helping us build the 
infrastructure and the human capital system to properly pay, 
train, reward, and recognize their performance. They stayed for 
the mission.
    There are two reasons TSA relies on pay-for-performance. 
Security is the first and foremost. Second, it is to instill a 
culture of high performance and accountability in our 
workforce.
    Performance on the job has a special meaning to us. Let me 
be very direct. Our job is to stop a terrorist attack. Our 
officers work in an environment in which 99.9 percent of the 
people they see every day are not a threat, but the threats 
against our aviation system remain. TSOs want to get passengers 
through the security check point with a high degree of 
confidence that they have stopped anyone seeking to do harm. 
Your safety is their priority.
    How does PASS improve security? When you get paid more to 
do a better job, you do a better job. PASS is targeted to 
reward excellent performance. That is an incentive to perform 
at the highest levels to which you are capable. PASS rewards 
the individual performance necessary to achieve TSA's 
organizational goals and that increases security.
    TSA's pay-for-performance system is driven by validated 
data. Its performance metrics are standardized, measurable, 
observable, and almost completely objective. PASS has been 
adjusted based on the feedback from our officers about what the 
real job is. Our officers have told us that they want a pay-
for-performance system because they know what is at stake. They 
want to know that their fellow officers are equally competent.
    But building a pay-for-performance system takes time. It 
takes employee engagement. It takes leadership. It takes 
flexibilities in the human capital system. It takes continuous 
improvement. And it takes constant communication. But for us, 
it is essential.
    In my 30 years of Federal service, 23 of them with the 
General Schedule, I have never been more sure of anything. The 
pay-for-performance system is the best way in this post-
September 11, 2001 environment for TSA to manage and ensure the 
quality of persons on the front line. The effectiveness of PASS 
is proven by the statistics. More than half of our TSO 
workforce has been on the job for 4 years or more. TSA 
supervisors have a significant stake in the PASS program, as 
well. Successful implementation of the program is a component 
of their own PASS ratings.
    At TSA, pay-for-performance ensures the technical 
proficiency of the people on the front line. Our goal is for 
our officers to be switched on and always at the ready. Pay-
for-performance drives their higher level of performance 
because their earning power is directly tied to their learning 
power.
    The senior leadership of TSA is passionately dedicated to 
its people and to the principles of pay-for-performance. We are 
committed to using the flexible human capital system provided 
under ATSA to make TSA a model performance-based organization. 
We are building a culture in which our workforce is actively 
engaged. It is through listening and working collaboratively 
with all of our officers to find solutions that will continue 
to meet our challenges.
    While significant advancements are being made in our 
technology and our security processes, each day's success 
begins and ends with our officers. They are TSA's greatest 
investment. They are everyday heroes. In this War on Terror, 
the individual motivation of our officers to excel is critical 
to our success. We rely on the best to do the best at the 
security job, and pay-for-performance is vital to sustaining 
this top-performing workforce.
    I look forward to answering your questions. Thank you.
    Senator Akaka. Thank you very much, Ms. Rossides. Dr. 
Sanders.

   TESTIMONY OF RONALD P. SANDERS,\1\ ASSOCIATE DIRECTOR OF 
NATIONAL INTELLIGENCE FOR HUMAN CAPITAL, OFFICE OF THE DIRECTOR 
                    OF NATIONAL INTELLIGENCE

    Mr. Sanders. Good afternoon, Mr. Chairman and Senator 
Voinovich. Thank you for the invitation to testify at today's 
hearing. It is my pleasure to provide a status report to this 
Subcommittee on one of the Intelligence Community's most 
important strategic human capital initiatives, the National 
Intelligence Civilian Compensation Program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Sanders appears in the Appendix 
on page 68.
---------------------------------------------------------------------------
    Our program is modeled after the National Geospatial 
Intelligence Agency's innovative performance-based pay system, 
which has been operating successfully for a decade. The product 
of over 2 years of extensive interagency collaboration, the 
NICCP's five enabling IC directives have now been issued by the 
Director of National Intelligence. However, because of our 
complex statutory context, they will be implemented via 
departmental and agency personnel regulations. For example, DOD 
will do so with authorities established under Title 10 of the 
Code, CIA under Title 50, and so forth.
    Why are we doing this? Today's complex national security 
challenges underscore the need for an IC workforce that is 
second to none. Outmoded civilian personnel policies and 
practices, especially those dealing with pay and performance 
management, are an impediment to excellence. The NICCP will 
replace them with a 21st Century pay and performance management 
program that is far more performance-based and market 
sensitive. In so doing, it will also transcend departmental and 
agency boundaries to better integrate and unify the 
Intelligence Community, while rewarding and reinforcing 
behaviors that are transformational in their own right, such 
things as analytic integrity, collaboration and information 
sharing, and critical thinking.
    Further, the program will, to the extent permitted by law, 
assure a level playing field among our 17 agencies, most of 
which are in six cabinet departments. Most of the major IC 
agencies are not covered by Title 5. When you add them to those 
that are, you have six separate statutory personnel systems in 
the IC, each with different authorities and flexibilities.
    Employee input has played a significant part in our design 
process. According to our surveys, less than a third of our 
employees believe their pay depends on how well they perform. 
Conversely, less than a third of our workforce believes that 
management takes steps to deal with poor performers. These 
results suggest that a majority of the IC's employees want a 
stronger link between performance and pay, but they also have 
concerns.
    We heard as much in a series of focus groups we held in 
each of our major agencies. In all, several hundred employees 
and supervisors were involved. We have tried to address those 
concerns in our final design.
    With the final IC directives all signed, departments and 
agencies have begun communicating these changes to employees 
through dozens of town hall meetings and focus groups, websites 
and satellite broadcasts, even blogs. These efforts have 
reached thousands of employees and will continue throughout our 
implementation.
    Our directives establish rigorous safeguards and oversight 
mechanisms to ensure that our system is credible, transparent, 
and above all, merit-based. For example, the directives require 
that all employees receive written performance expectations up 
front, with final ratings subject to at least two levels of 
management review, one of which is at the agency level 
specifically intended to protect against unlawful 
discrimination.
    The directives also prohibit ratings quotas and forced 
distributions, and to ensure transparency in the performance 
pay process, they establish a standard mathematical formula and 
two additional levels of management review to ensure 
consistency and fairness in pay decisions.
    We have also begun delivering a comprehensive training 
curriculum for managers, HR specialists, and employees that not 
only covers the technical aspects of the system, but the soft 
skills that are just as critical. Those involved in the 
performance pay process get even more instruction, including 
training to identify and correct any implicit or unintentional 
bias against protected classes of employees in the performance 
evaluation and performance pay process.
    Finally, the directives establish an IC human capital board 
to oversee the entire effort. Chaired by the Principal Deputy 
Director of National Intelligence, the board is comprised of 
the deputy directors of each of our intelligence agencies--the 
senior career officials--as well as the IC's Chief of EEO and 
Diversity.
    The system is fully funded in the National and Military 
Intelligence Programs of record and will be phased in over the 
next 5 years. It will be implemented agency by agency, with DIA 
this fall, with most remaining defense agencies and part of the 
FBI implementing through the end of 2009. The CIA and the 
Office of the Director of National Intelligence will follow 
about a year after that. In each case, performance pay 
decisions will typically follow 12 to 15 months thereafter, so 
we are approaching this with all deliberation. However, phases 
will ultimately be event-driven based on the readiness of each 
IC agency to proceed, not a calendar date.
    To implement this program throughout the IC, we need some 
additional authorities and assistance from the Congress. As it 
stands today, our smaller elements, those covered by Title 5, 
do not have the statutory authority to implement the system. To 
remedy this, the Administration's 2008 intelligence 
authorization proposed that the DNI be authorized to extend 
flexibilities that Congress has given one IC agency to those 
that may not have it to keep the playing field level. As it did 
last year, the Senate Select Committee on Intelligence has 
included this provision in its Intelligence Authorization Act, 
S. 2996, and we ask for your support.
    In conclusion, the NICCP is an essential ingredient of the 
IC's transformation. The first pay-for-performance system that 
is truly interdepartmental and interagency in nature, it was 
conceived through intensive collaboration and the final result 
will help the IC develop a stronger sense of unity and common 
purpose. That translates into mission success, the ultimate aim 
of the Intelligence Reform and Terrorism Prevention Act.
    Thank you very much. I look forward to your questions.
    Senator Akaka. Thank you very much, Dr. Sanders, for your 
statement. Mr. Bunn.

   TESTIMONY OF BRADLEY BUNN,\1\ PROGRAM EXECUTIVE OFFICER, 
 NATIONAL SECURITY PERSONNEL SYSTEM, U.S. DEPARTMENT OF DEFENSE

    Mr. Bunn. Mr. Chairman and Senator Voinovich, thank you for 
the opportunity to speak with you today about the National 
Security Personnel System at the Department of Defense.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Bunn appears in the Appendix on 
page 82.
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    Successful NSPS implementation remains a critical 
transformation priority for the Department, and while we are 
still relatively early in our implementation, it is clear that 
NSPS is taking root. As of today, we have over 180,000 
employees operating in the system. I would like to give you an 
update today on our progress.
    We are just over 2 years into the implementation, and like 
any major transformation, we have had our share of successes 
and challenges. We believe, however, that NSPS is working. The 
active engagement and participation of our senior leaders, most 
notably Deputy Secretary of Defense, Gordon England, speaks 
volumes to the importance of our civilian workforce and the 
role NSPS plays in the transformation of our Department.
    The design of NSPS has been deliberate, well managed, and 
transparent, based on guiding principles that include putting 
mission first, respecting our employees, valuing talent, 
performance, and commitment to public service, and ensuring 
flexibility and accountability.
    It will take some time before the Department fully realizes 
all the benefits NSPS was designed to produce, but we are 
already seeing a powerful return on investment. An 
unprecedented training effort focused on performance 
management, greater and more frequent communication between 
employees and supervisors. They are talking about performance, 
results, and mission alignment. And better tools to compete for 
talent and reward exceptional performance. Overall, we are 
seeing positive movement in individual and organizational 
behaviors toward a performance culture. These returns are cause 
for optimism.
    In April 2006, we began implementing the human resources 
provisions of NSPS. Over that 2-year period, we have converted 
approximately 182,000 employees and will convert another 15,000 
to 20,000 beginning this fall. These transitions were preceded 
by comprehensive and extensive training to senior leaders, 
managers, supervisors, and employees with a particular focus on 
performance management. From the beginning of the program, we 
have worked to ensure that our organizations have sufficient 
time and resources to accomplish the training, prepare their 
employees, and implement when they are ready.
    Several factors have contributed to our success to date, 
including the extensive consultations the Department and the 
Office of Personnel Management carried out with our 
stakeholders in the design process, the value and investment 
placed in monitoring implementation and making adjustments 
along the way, and perhaps the most important factor, the 
emphasis and resources we have dedicated to NSPS training, one 
of the most extensive civilian human capital training 
initiatives ever undertaken by the Department. As of June 2008, 
our employees have completed over a half-million NSPS-related 
courses.
    Late last year, we completed our second full performance 
cycle under NSPS, resulting in performance-based salary 
increases and bonuses for over 100,000 employees in January. 
This was the culmination of a rigorous and robust performance 
evaluation and pay pool process that assigns ratings based on 
objective criteria and allocates rewards based on those 
ratings. The pay pool process, which has a proven track record 
in our personnel demonstration projects, is designed to ensure 
that appraisals and pay decisions are accomplished in a 
consistent, fair, and deliberate manner.
    To ensure fairness in the system, we designed safeguards 
into the process. In addition to the thorough reviews of 
performance evaluations through the pay pool process, employees 
have the right to challenge their rating in a formal 
reconsideration process. Also, we have been very clear in our 
regulations, policies, and training that forced distribution of 
ratings is prohibited.
    One of the key ingredients to effective program management 
is program evaluation. The Department has an ongoing evaluation 
effort to ensure the system is delivering the results we 
expect. Although we have not formally reported findings from 
our internal assessments, I can share some of what we are 
hearing and seeing.
    NSPS is clearly a significant change for our workforce. It 
requires more time and energy than previous systems and many of 
our employees are not yet completely comfortable with the 
system. Performance plans and assessments need improvement, as 
many are struggling with translating organizational goals into 
individual measurable job objectives. Employees have also 
expressed concern over the pay pool process, how it works and 
whether it produces fair results, and many are having trouble 
accepting a more rigorous evaluation system.
    Despite those concerns, it is clear that NSPS employees 
have a better understanding of how their jobs relate to the 
mission and goals of the organization. They see a stronger link 
between pay and performance. And there is increased dialogue 
between employees and supervisors about performance.
    So far, the results we are seeing are similar to the 
experience of our personnel demonstration projects and other 
alternative personnel systems. We have said from the beginning 
that we expect it to take 3 to 5 years for employees to fully 
understand and embrace the system. However, we continuously 
monitor and assess NSPS and look for ways to address employee 
concerns by making adjustments to the system and improving our 
communications tools and training.
    Is NSPS working? We believe it is. It will take time, 
however, to assess how well NSPS is working through thoughtful 
and thorough analysis and assessment. We also know that 
transformation takes time and can't be achieved overnight. In 
the meantime, we continue to gather information, listen to our 
workforce, and do what is necessary to ensure the system is 
credible, effective, and fair.
    Thank you, Senator Voinovich and Mr. Chairman, for your 
ongoing support for our DOD civilian workforce and for 
providing this opportunity to share our experiences about NSPS. 
I look forward to your questions.
    Senator Akaka. Thank you very much, Mr. Bunn, for your 
statement. Mr. Mihm.

   TESTIMONY OF J. CHRISTOPHER MIHM,\1\ MANAGING DIRECTOR OF 
    STRATEGIC ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Mihm. Chairman Akaka and Senator Voinovich, it is a 
great honor to appear before you again today and I appreciate 
the opportunity. My specific role today is to discuss the 
preliminary results of our review of selected agencies' SES 
policies and procedures for performance pay.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Mihm appears in the Appendix on 
page 94.
---------------------------------------------------------------------------
    As you know, successfully implementing the SES performance 
management pay authorities the Congress has provided is 
important for any number of reasons. First, leading 
organizations have recognized that effective performance 
management systems create a line of sight to help ensure that 
individual and organizational performance are aligned and 
thereby are effectively contributing to the meaningful results 
and outcomes that citizens value.
    Further, effective agency-wide pay-for-performance 
initiatives must begin, in our view, at the SES level and then 
cascade down throughout the organization. In short, the SES 
must lead by example on performance management and pay reforms. 
The data that Director Springer quoted from the survey clearly 
indicates that the SES appreciates that it needs to have the 
leadership role in this.
    Finally and especially important this year, effective 
performance management systems that link programs and daily 
operations to significant results can provide continuity during 
the upcoming Presidential transition by maintaining a 
consistent focus on results. Clearly, the new team will have a 
different set of goals and a different set of performance 
measures, but what the Administration with the current efforts 
of Congress and the agencies now are delivering is a ready-made 
vehicle the next Administration can use in order to implement 
its policy priorities.
    My prepared statement focuses on agencies' policies and 
procedures for SES performance management and pay in a number 
of important areas, and our forthcoming report will discuss OPM 
and OMB's oversight role and make recommendations to selected 
agencies, OPM, and OMB in that regard.
    My bottom line today is that the agencies are making 
positive steps in addressing three important aspects of their 
performance pay systems. First, all of the agencies that we 
reviewed have policies in place that require Senior Executive 
performance expectations to be aligned with organizational 
results and for organizational performance to be factored into 
SES appraisal systems. However, on the other hand, OPM has 
found that while many agencies are doing a good job of this 
alignment, some performance plans fall short of identifying the 
specific measures used to determine whether or not the results 
are achieved. In other words, there is alignment at the front 
end. We need better data at the back end to see whether or not 
the success is actually taking place.
    Second, all of the selected agencies had multiple rating 
levels in place for assessing SES performance, and as one would 
expect, in general, those SESes with the highest ratings 
received the largest bonuses. Several of the agencies, such as 
the Nuclear Regulatory Commission, Department of State, 
Department of Energy, have designed their appraisal systems to 
help allow for differentiations when assessing and rewarding 
executive pay by establishing tier structures or prescribed 
performance payout ranges based on the resulting performance 
rating. Tier structures identify up front that certain SES 
positions have greater complexity, greater responsibility for 
managing risk, greater responsibility for achieving outcomes, 
and therefore should have greater opportunities for higher 
bonus and pay awards.
    Third, all of the selected agencies have built safeguards 
into their SES performance management systems, such as pre-
decisional checks--you have heard a number of those today, of 
performance appraisal recommendations through higher-level 
reviews, as well as publishing information on aggregate results 
to help enhance the credibility, fairness, and transparency of 
their systems.
    However, on the other hand, this is one area where much 
more work needs to be done. Sixty-five percent of the 
respondents to the OPM survey that Director Springer was 
mentioning--these are of SES--said that they were not given 
summary information of their agency's performance ratings, 
bonuses, and pay adjustments. This information is important in 
order to let someone know where they stand in the organization 
so that they can identify and take meaningful action in order 
to improve performance. It is both a transparency and fairness 
aspect as well as important to improving individual and 
organizational performance.
    In summary, through the combined efforts of Congress, 
members of the SES, OPM, OMB, and the agencies, much progress 
on SES performance management has been made over the last 
several years. The key now, in our view, is to maintain and 
build on that progress and for the next Administration to use 
the SES performance management system to achieve additional 
results.
    Mr. Chairman and Senator Voinovich, this concludes my 
statement and I would obviously be happy to answer any 
questions you may have.
    Senator Akaka. Thank you very much, Mr. Mihm, for your 
statement.
    Now I would like to ask Senator Voinovich for his 
statement.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you very much, Mr. Chairman. I 
apologize for being late. We had the new President and the 
Prime Minister of Kosovo here and I have been working on those 
issues for a long time and I thought it was important that I at 
least congratulate them and have a chance to visit with them, 
so I hope you understand.
    I would like to begin by thanking my good friend and 
partner on human capital issues, Senator Akaka, for holding 
this hearing. This is one of so many hearings that we have had 
over the last number of years on human capital. We want to make 
sure that the Federal Government has the right people at the 
right place at the right time to get the job done, and it is an 
issue that I have been involved with during my entire time on 
this Subcommittee because of my strong belief in the need for 
the government to invest first and foremost in its workforce.
    The Federal Government has begun an important cultural 
transformation in how it manages its most important asset, its 
people. As we hear the testimony today, I would remind our 
other colleagues that such transformation does take time. 
Understanding and accepting the systems being implemented at 
several agencies require a change in thinking and an emphasis 
on continuous improvement, and we have again heard that from 
the witnesses here.
    In commenting on management, Harold Geneen, former Chairman 
of International Telephone and Telegraph said, ``It is an 
immutable law in business that words are words, explanations 
are explanations, promises are promises, but only performance 
is reality.''
    Our next generation workforce no longer seeks to work for 
an organization with the idea that they will stay there their 
entire professional career. People are looking to work hard and 
be recognized and rewarded, and that is why I have introduced 
the Federal Workforce Performance Appraisal and Management 
Improvement Act, which would require that Federal employees 
receive a written performance appraisal annually. Current law 
only requires periodic appraisals for job performance.
    The legislation would also require that an individual's 
performance appraisal be aligned with the agency's strategic 
goals and be developed with the employee. The performance 
appraisal system would make meaningful distinctions among 
employee performance and require agencies to use this 
information in making personnel decisions.
    I know there are a couple provisions of the bill that cause 
some concern because of the fact that it would prevent an 
employee from receiving an annual pay adjustment if that 
employee has not earned a ``successful'' performance appraisal. 
Mr. Chairman, I would argue that we owe the American taxpayer 
something to better ensure that they are getting value for 
their hard-earned dollar.
    I would remind those who have concerns that before an 
agency would even reach the point where an underperforming 
employee would not receive a pay increase, the agency would be 
required work with the Office of Personnel Management to 
develop and refine its performance appraisal system. In other 
words, if they don't have a good appraisal system in place, and 
again, and we have heard this from witnesses, pay for 
performance doesn't work. Employees would have then 1 year 
under the performance appraisal system to understand how it 
would be used to make pay decisions.
    These decisions would not be arbitrary or capricious. 
Managers would be required to receive appropriate training to 
judge the performance of their subordinates, make expectations 
clear to employees, and give constructive feedback. People want 
to know whether they are doing good or whether they are doing 
bad. The last thing they would like is to be ignored. This 
would support the Chairman's bill to improve the training 
provided to the Federal workforce.
    The only way the Federal Government will succeed in 
accomplishing its many missions is to have motivated employees 
working towards the strategic goals of their respective 
agencies. Challenges facing our Nation, from gas prices and the 
growing budget deficit to our crumbling infrastructure, are too 
significant to rely on an antiquated pay system which rewards 
tenure, and I think that is more important today than ever 
before.
    Everywhere I go today, whether it is in government or the 
private sector, we have a human capital crisis. Everybody is 
going to be out there trying to find the best and the brightest 
people to come to work for them, and I think that pay-for-
performance, if properly implemented and explained and so on, 
is a real asset to our ability to attract the kind of people 
that we want to work for the Federal Government. It is going to 
be a challenge that we are going to have to continue to work 
on, but one I think that is very worthwhile.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Voinovich. And 
now we will have the questions.
    Director Springer, according to OPM's 2007 report on pay-
for-performance, the 2007 DHS employee survey, the recent SES 
employee survey, and other reports, there are mixed results on 
the success of pay-for-performance systems. Employees are not 
necessarily satisfied with their pay. They do not completely 
understand the pay system and many do not see meaningful 
distinctions in their performance evaluations. Earlier this 
year, the FDIC suspended its pay-for-performance system based 
in part on declining employee support.
    Your message at this hearing is that pay-for-performance 
systems are a success in Federal agencies based on numerous 
evaluations that you have had. Our reading is not along those 
lines. If employee surveys point to problems within these pay 
systems, what other evaluations are you basing the success of 
the pay-for-performance systems on?
    Ms. Springer. Mr. Chairman, it is important to draw the 
distinction between the execution of specific programs and the 
notion of performance-based pay. What we find in the surveys, 
like the SES survey, is that most of our respondents do believe 
that performance should be a factor in determining pay.
    In the areas where the implementation has not been at the 
level that we would expect, that doesn't negate the premise 
that people do believe that their performance should be 
recognized. It is more a matter of execution and how that has 
proceeded. It also, in some cases, is a function of training 
and just the basic infrastructure being in place. I believe 
both you and Senator Voinovich, as well as the panelists, have 
acknowledged that is foundational and critical to the success.
    What I would say is that in the systems where the 
underlying infrastructure is in place, that you find a better 
result and better acceptance, and that is why we are 
encouraging this more measured demonstration approach that only 
proceeds when the agency has the infrastructure in place. But 
it doesn't negate the fundamental belief that most people 
believe that their performance rightfully should be a factor in 
determining pay.
    Senator Akaka. Mr. Spires, Ms. Rossides, Mr. Sanders, and 
Mr. Bunn, how are your agencies using the employee surveys and 
feedback to address the issues with pay-for-performance 
systems? Mr. Spires.
    Mr. Spires. Yes, Mr. Chairman. We conduct an employee 
survey every year and some of those questions go to the heart 
of how we evaluate and reward our employees. On the not-so-
positive side of this, our employees and our managers who are 
under pay-for-performance system tell us that we are still not 
yet measuring performance as well as we should. To distinguish 
those that are outstanding versus those that are just 
satisfactory or even below. Likewise, we are also told by our 
employees and managers that we are not yet dealing with poor 
performers as well as we need to.
    But again, we think that a pay-for-performance system that 
we have implemented and have rolled out to our managers 
actually addresses some of these concerns. In fact, we are 
seeing increases in our employee satisfaction scores overall 
and we are seeing increases in these particular questions that 
have to do with how we both evaluate and we reward our 
managers.
    Senator Akaka. Ms. Rossides.
    Ms. Rossides. Yes, Mr. Chairman. We take a look at both 
TSA's survey results and the DHS survey results and look at all 
of the questions and the issues directly impacting the 
workforce. But the survey results give us the opportunity to 
focus on things like the importance of communicating directly 
with the employees on our pay-for-performance system and we 
have put a number of things in place this year to make that 
system transparent to the workforce.
    Every TSO today can actually access their performance 
record online. We have direct communications with the TSOs on a 
quarterly basis. So the survey results really targets the 
leadership's attention on what our employees are asking for, 
what kind of information, and clarity around those survey 
results.
    We are also corporately, all of the operating components 
are taking the DHS survey results and looking at what issues 
are common to all of the DHS workforce in terms of our law 
enforcement and security occupations. So those surveys are very 
valuable to us to help us guide the areas we need to focus on 
to improve the system.
    Senator Akaka. Dr. Sanders.
    Mr. Sanders. Mr. Chairman, we start with our surveys. We do 
an annual survey across all of the agencies in the Intelligence 
Community. And as I mentioned, those survey results suggest 
that our employees want this kind of system.
    Let me tell you a statistic that may surprise you. About 50 
percent of Intelligence Community employees have 5 years or 
less of service. And to be quite blunt, they are not going to 
have the patience to stay with us for a system that is based on 
tenure and time in grade. That is what they tell us in the 
focus groups.
    We have reached thousands of employees in focus groups, 800 
in the Office of the Director of National Intelligence alone, 
which is not much bigger than that, and that demographic and 
their views suggest that we need to develop and deploy this 
kind of system if we really want to win that war for talent 
that Senator Voinovich talked about.
    Senator Akaka. Mr. Bunn.
    Mr. Bunn. Mr. Chairman, we have been using surveys for many 
years to assess the satisfaction of our civilian workforce. 
About 3 years ago, we started targeting the NSPS population 
both pre-implementation and post-implementation so that we 
could zero in on what the folks under NSPS are thinking about 
performance management, about pay and other workforce issues. 
We have been able to begin trending how our NSPS employees, 
what their attitudes are in comparison to the rest of the 
workforce. It is a cornerstone of our program evaluation 
effort.
    That is how we are getting the valid employee feedback on 
what is going on with NSPS, in addition to visits to 
installations, focus groups with employees, and other normal 
outreach mechanisms. But we spend a lot of time focusing our 
questions specifically for our NSPS workforce and they have 
been extremely helpful so far as we have done our internal 
assessments, and we will continue to do that throughout the 
program. Thank you.
    Senator Akaka. Mr. Bunn, as you know, one of the main 
concerns raised by Federal employee unions over the recently 
proposed NSPS regulations is the definition of the term ``rate 
of pay.'' The employee unions argue that the definition used by 
DOD and OPM would limit bargaining over procedures and work 
arrangements for determining overtime work, including rotation, 
seniority, and other methods for selecting employees fairly. Is 
it your intention to deny unions the ability to bargain over 
these type of issues?
    Mr. Bunn. That is not our intention. We have heard the 
concerns through our formal public comment period with our 
recent revised regulations that were published back in May and 
through the national consultation process with the unions, 
their concerns over how we have defined the term ``rate of 
pay.''
    Rate of pay is a term that is in the Defense Authorization 
Act from 2008 and it is specifically referenced as something 
that is not negotiable under NSPS. However, the term is not 
defined in the law and it is used in many different ways in 
current law, rule, and regulation. So what we attempted to do 
in our proposed regulation is define it in the context of NSPS.
    We fully recognize that Chapter 71 of Title 5 applies with 
respect to collective bargaining in NSPS, but that term is one 
of the limitations in terms of collective bargaining, so we 
have attempted to deal with that in the regulation.
    We are taking those concerns to heart. We are looking at 
that language that we have used. But we have no intention of 
denying the unions what they may bargain under the law under 
Chapter 71.
    Senator Akaka. OK. Can you elaborate on what exactly DOD is 
attempting to limit bargaining over?
    Mr. Bunn. I think what the issue is, Mr. Chairman, is how 
we use the term, what we call applicability and conditions with 
respect to rate of pay. We understand that Congress's intent 
was to provide for collective bargaining for our bargaining 
unit employees who would be brought under NSPS with a 
limitation on bargaining over pay, which most Federal employees 
don't have a right to bargain over now. But there was a 
provision in the law that allowed for bargaining over 
procedures and arrangements with respect to that, which is a 
term of art in the labor relations arena.
    What we have attempted to do is build and construct where 
we have some uniformity in how that bargaining would be done 
and define what is really meant by rate of pay, so, for 
example, decisions around modifying our pay band structure or 
adjusting the pay bands on an annual basis or the funding that 
goes into performance-based pay pools. There are certain things 
that we think are appropriate for bargaining under Chapter 71 
rules and under the now Chapter 99 rules, but there are things 
that would remain off the table. So what we have attempted to 
do is define those things.
    So for purposes of things like overtime, determining 
applicability on who would receive overtime, things that are 
currently in collective bargaining agreements, it is not our 
intent to go in and overturn those kinds of things that are 
currently bargained over in DOD.
    Senator Akaka. Well, thank you.
    Mr. Bunn. Thank you, sir.
    Senator Akaka. Senator Voinovich.
    Senator Voinovich. Thank you, Mr. Chairman. Before I ask my 
questions, I would like to thank Ms. Springer and Mr. Spires 
for your service in the Federal Government. I understand that 
both of you are going to be leaving. Ms. Springer and I got to 
know each other quite well over the years. She served over at 
the Office of Management and Budget and they convinced her to 
come back into government and I think you have done a really 
outstanding job over there. I appreciate your service and wish 
you good luck in our next endeavor.
    Mr. Spires, I am not that familiar with your record, but 
thank you very much. I was impressed with what you had to say 
about what you are doing at the IRS.
    Director Springer, OPM has an important operational 
responsibility to work with Federal departments and agencies to 
ensure reforms of performance management systems provide 
employees a fair and transparent system with meaningful 
opportunities to enhance communication, improve individual 
performance, and I would like to know how OPM has met this 
responsibility. Perhaps you could also make reference to a 
meeting in July that you had with the Chief Human Capital 
Officers where they discussed lessons learned from your recent 
survey of the Senior Executive Service. I would like to know 
what you have tried to do to make sure that these systems that 
we are putting in are robust and also maybe some of the things 
that you have learned from that meeting you had on July 14, 
2008.
    Ms. Springer. Thank you, Senator. Let me also say that it 
has been a pleasure to work with you. As I said to Senator 
Akaka, there is really no better champion in the Senate than 
both of you for the Federal workforce, so thank you.
    With respect to our oversight and our work with the 
agencies, one of the key things that we use is our Performance 
Appraisal Accountability Tool (PAAT) and there is a version of 
that specifically for the SES. The Chief Human Capital Officers 
(CHCO) Council, has worked with us in developing that, and that 
is one of the principal tools we use with each agency. We have 
OPM aligned with our different agencies so that there are 
dedicated people that work closely with the CHCOs and the 
performance managers at each agency.
    So, not only do we work with them to assess their 
infrastructure and each of the things that the panelists have 
mentioned here today in their practice of performance 
development and monitoring, goal setting, all of the things, we 
assess them and give them a score based on that tool.
    The community represented by the CHCO Council, half career, 
deputies that are career officials, have helped us develop that 
tool and they use it, as well, for their own diagnostic through 
the year.
    We have had, as you have said, several sessions with the 
Council and the Subcommittee on Performance to have those 
agencies that score well on that tool share their best 
practices. In our hearing a year ago, you encouraged us to 
actually be more proactive in that area and use that council, 
and we have been doing that. Those performance-based pay 
practices are being adopted. They are being documented. They 
are being shared and our agencies tell us that that is helpful.
    We are also having a CHCO Council Training Academy. That is 
the formal educational arm of the Council, again, dedicated in 
August to the SES survey and the agencies' practices that we 
learned there that got high marks. So the July meeting, the 
upcoming August meeting, all of these as well as the 
collaborative effort in developing our assessment tools help 
OPM to do that work.
    Senator Voinovich. We have talked in the past about the SES 
and how it in certain areas has been very well received, in 
others, it has not. Can you give me an example of where you 
have had an agency where from the survey their folks weren't 
real happy and how your intervention has made any difference in 
terms of the next survey?
    Ms. Springer. If I may get back to you on that, I can give 
you some specific examples. However, I will tell you that in 
addition to getting agencies to reach a level of performance, 
there also is the effort of keeping the ones who have achieved 
it performing at that high level, as well. We are not focused 
just on the ones that need remediation, but also on maintaining 
the ones that have been doing a good job. But we will get you 
that information, Senator.
    Senator Voinovich. Well, I think that if we are going to 
make any progress in this area, even this proposed legislation 
I am thinking about, it has got to start with the Senior 
Executive Service. And if you have people in there who are not 
happy with the system or don't feel that it has been 
implemented the way it is supposed to, the chances of making 
any progress with the rest of the agency, I think is remote. So 
I think that work is really very important, and I would really 
like to get your best guesstimate about which agencies are your 
super performers, and then your candid opinion about where we 
need to do some improvement.
    Ms. Springer. We will get that.
    Senator Voinovich. Dr. Sanders, you have described a very 
comprehensive program that you have put together. I have two 
questions for you. One is, I just didn't realize all these 
agencies, Senator Akaka----
    Mr. Sanders. That is what keeps me awake at night.
    Senator Voinovich. It is unbelievable. What guarantee do we 
have that when the next Administration comes in, that all this 
work that you have done is going to prove fruitful?
    Mr. Sanders. I don't know if there is a guarantee. As I 
believe you have heard Director McConnell testify, the 
personnel authorities of the Director of National Intelligence 
are somewhat ambiguous and the directives I have talked about, 
and maybe there is some good news here, the directives that I 
have talked about are literally agreements, treaties amongst 
the various departments and agencies in the IC. So where that 
legal authority is vague, the fact is you have cabinet 
Secretaries and agency heads who have said that ambiguity 
notwithstanding, we are going to agree as a matter of policy to 
move forward as a community, cutting across all of those 
departmental and agency lines. So while those regulations may 
not be ``imposed,'' by the DNI, the fact that they were 
collaboratively derived may, frankly, make them more resilient 
in this transition. At least that is what I hope.
    Senator Voinovich. Have you identified folks within the 
agencies where you are going to have a change in leadership 
that are committed to moving forward with this?
    Mr. Sanders. As I indicated, this effort has been largely 
led by the agency deputy directors, which are the senior career 
officials across the board, and that was done deliberately to 
ensure that we do have that continuity. They will be there 
through the transition and be prepared to brief the new agency 
heads.
    In that regard, many of our agency heads are uniformed 
military, so they do transition independently of Presidential 
elections. We have already been able to sustain some of that 
continuity with the change in leadership in individual 
agencies.
    Senator Voinovich. And you sense an understanding about how 
important this is for their ability to retain the folks they 
have and to attract other ones and they get that?
    Mr. Sanders. Yes, sir, I believe they do. We literally need 
a workforce that knows something about everything. We are at 
the cutting edge of this competition, this war for talent with 
the private sector, with other Federal agencies, and I think 
they understand that in order to keep that keen edge, in order 
for us to be competitive in that regard, we need the kinds of 
flexibilities that this system will give us. They also need 
that level playing field so that no one IC agency enjoys a 
competitive advantage over the others.
    And since I have the floor, let me put one other thing on 
your radar screen for this Subcommittee. One of the things that 
I worry about is executive pay compression.
    Senator Voinovich. I was just going to ask you about it.
    Mr. Sanders. This Subcommittee had a hand in fixing that 
problem 4 years ago. The passage of time has eroded those great 
benefits. And one of the things that I worry about is that your 
very best-performing executives, who will by definition be the 
first to reach that cap, are suddenly now against the ceiling. 
There are literally no financial rewards, at least those that 
go to base pay and annuity. This is something that I would ask 
this Subcommittee, the full Committee, this Administration and 
the next to take on before it becomes a crisis.
    Senator Voinovich. We certainly will take that under 
advisement. When you are hiring new people, does the fact that 
you are implementing this performance system have any impact at 
all on their decisionmaking? In other words, we assume that it 
does, and I have mentioned that. But of anybody at the table, 
have you found that the fact that you do have this system in 
place has made your agency more attractive in terms of hiring 
folks?
    Mr. Sanders. Anecdotally, we get lots of stories from our 
recruiters, and as you may know, we get 100,000 to 150,000 
resumes a year, the Nation's very best and brightest, and we 
have had to equip our recruiters with an information sheet on 
our pay-for-performance effort because that is a constant 
question amongst the best and brightest.
    What are the rules of engagement when it comes to 
compensation? Will I be paid based on results or will I be paid 
based on tenure? And, of course, these are in most cases pretty 
young, pretty aggressive, very talented people, scary smart, 
and they, of course, want to be paid on the basis of results.
    Senator Voinovich. Well, I know this, not anecdotally, but 
probably during the last maybe 6 or 7 years I have had at least 
a half-dozen people tell me they left the Federal service 
because they just felt that everyone was treated the same way 
and there wasn't any recognition for people who were performing 
at a higher level and cited that they were going someplace else 
where maybe their hard work and talent would be more 
appreciated than working for the Federal Government. Go ahead.
    Senator Akaka. Thank you very much, Senator Voinovich.
    Ms. Rossides, according to a TSA briefing for Subcommittee 
staff, TSA uses quotas in its pay-for-performance system. I 
understand that unlike other Federal agencies, TSA is not 
prohibited from using quotas. However, I am concerned that the 
use of quotas undermines the pay-for-performance system. No 
matter how well an employee performs, he or she may not get a 
significant pay increase. Given that the use of quotas is 
prohibited in other agencies, why is TSA using them?
    Ms. Rossides. Mr. Chairman, we do not use quotas at all in 
our pay-for-performance system. In fact, we have what we have 
described to our employees as a rate and rank system. We have a 
sum of money that is part of our appropriation and the 
employees are scored at the end of the performance cycle under 
our pay-for-performance system based upon their performance 
during the year and they receive basically a rating on a scale 
of 100 points. And then depending upon the distribution of the 
performance of those employees, we give out our bonuses and pay 
awards based on that. But we do not have quotas under our 
system.
    Senator Akaka. At our hearing on the SES in 2006, Director 
Springer, you were crystal clear on the fact that quotas are 
prohibited for the SES pay-for-performance system. However, 
despite OPM and other agencies issuing regulations barring the 
use of quotas or a forced distribution of performance ratings, 
I continue to hear from employees, not just in the SES, that 
agencies are, in fact, using quotas. What guidance is OPM 
providing agencies on making meaningful distinctions in 
performance?
    Ms. Springer. In our annual guidance, which came out not 
long after that hearing, we added a dedicated section to 
agencies to reiterate to them that quotas were prohibited. That 
we would be including in our audit work reviews to make sure, 
to see if we spotted any instances of it. We also in cases 
where it came to our attention that an employee of an agency 
felt that they were subject to a quota, we wrote letters back 
to that agency to deal with it.
    We have through the CHCO Council and very specific written 
communications of guidance to agencies reiterated very strongly 
that this is prohibited. It will be a constant effort for us of 
vigilance to make sure that, (A) we respond to what is reported 
to us, and (B) to generally, as a matter of course, be on the 
lookout.
    Senator Akaka. Thank you. Dr. Sanders, you state that IC 
employees will be evaluated on behaviors such as personal 
leadership, integrity, collaboration, and critical thinking. 
However, there is a dark side to promoting uniformity in the 
intelligence community in that it may promote a uniformity of 
analysis. I fear that convention and safe thinking will be 
rewarded and risk taking will be discouraged as more and more 
managers are trained to do performance evaluations with a 
common perspective. Analysis may miss what is important in 
order to conform with group thinking.
    Differences of interpretation are important, and many have 
argued, as an example, that if the President has listened to 
the State Department's view of Iraq's weapons of mass 
destruction analysis, his decision to go to war would have been 
different.
    What have you built into your performance evaluation 
process to ensure that not all analysts think alike and are not 
pressured into conforming their independent analysis to 
political pressure?
    Mr. Sanders. In fact, Senator, the very definitions of the 
words you described and the behaviors that we are trying to 
elicit amongst IC employees guard against that. For example, 
the definition of the performance element, Personal Leadership 
and Integrity includes the courage to speak truth to power. So 
employees have a set of behavioral definitions that deal with 
that specifically. Managers and executives, in their 
performance plans, under the behavioral part of them, are 
specifically charged with promoting and encouraging that 
courage to speak truth to power.
    The same thing with collaboration. We have taken great care 
to define collaboration. It is not consensus. It is not group 
think. It is sharing information, but it is also conforming to 
analytic craft trade standards, which require alternative 
analysis. We want the sharp edges of a debate on any given 
intelligence topic to be exposed in the IC. So these 
definitions are deliberately intended and deliberately defined 
to do that, to guard against the very dysfunctions that you 
have described.
    Senator Akaka. Thank you. Ms. Springer, under the IRS pay-
for-performance system, it is possible for a GS employee to get 
a higher rate of pay than their manager. According to a report 
from the Treasury Inspector General for Tax Administration on 
the IRS pay-for-performance system, this is a disincentive for 
GS employees to become managers. Similarly, under the SES pay-
for-performance system, GS-14s and 15s are guaranteed pay 
raises that SES employees are not. Dr. Sanders points out the 
same problem in his testimony, that high-performing GS-15s are 
less likely to move into the SES if pay continues to erode.
    Do you see a disincentive for GS-14s and 15s to enter into 
the SES because pay is not guaranteed under the SES pay-for-
performance system? And if so, what do you plan to do about 
that?
    Ms. Springer. I think that there are several proposals that 
have been offered to deal with the disincentive from a pay 
standpoint of moving from the upper General Schedule levels 
into the SES. One of those that has been proposed, for example, 
is an automatic pay increase when you move up to the SES. That 
is something that we would be interested in exploring and 
working with the Subcommittee on. And, the SEA, I might add.
    The whole challenge, and I don't think this is so much a 
performance-based pay issue as it is generally a pay issue, and 
the problem that you have moving from the one system to the 
other is a real issue and it is becoming increasingly so. I 
think that, clearly, we need to do something. If we don't, and 
if in the next Administration this isn't taken on, I think we 
will see more and more people disinclined to move into the SES. 
And, that is certainly not a desirable outcome.
    But one that I would suggest off the bat that OPM and 
others working with your Subcommittee should do is to look at 
that proposal of an automatic increase.
    Senator Akaka. Thank you very much, Director Springer.
    Mr. Mihm, as the various employee surveys show, there are 
still many concerns that employees have with the pay-for-
performance systems. In 6 months, the new Administration will 
take office. What are the top three employee concerns that you 
think should be addressed before the transition occurs?
    Mr. Mihm. Well, before the transition occurs, I think it 
will be very difficult because I think the top employee 
concerns, at least that we have seen in looking across the 
various agency surveys, and frankly GAO's, as well--we are not 
perfect by any means in this, our own employee concerns show 
these types of things--are long-term issues that need to be 
addressed.
    The first, I would say, Mr. Chairman, is the clarity, 
honesty, and integrity of the entire performance management 
system. It is something there has been a lot of discussion 
about here this afternoon, something that you have certainly 
pointed out, of making sure that we have a good, validated, 
robust performance management system in place that has the 
confidence of managers and employees that we are accurately 
measuring and fairly measuring what we purport to measure. So 
that would be the first issue.
    Second is, to make sure that we have adequate training in 
place, both for supervisors and managers. One of the things 
that you mentioned in your opening statement, sir, was about 
the costs associated with doing pay-for-performance the right 
way. In fact, kind of the flip side to that is that if you want 
to try and kill it, the way to kill it is try and do it on the 
cheap because the experience from the demonstration projects, 
and our experience in GAO is it takes an investment. It is an 
investment that is worth it, but it takes an investment if you 
are going to do pay-for-performance. It takes an investment 
initially in technology and making sure you get a robust 
performance management system, but it takes an investment in 
training, and that is an ongoing investment that you have to 
make.
    And it is not just on how to do a performance appraisal. It 
is training on how to manage, how to lead, how to supervise, 
and there are huge gaps across the Federal complex in those 
types of basic leadership and supervisory skills.
    And then the third key area I would say is making sure that 
we have the alignment in place, and this is making sure that 
the organizational goals cascade all the way down into 
individual performance expectations because that is going to be 
a key part of the transition. Because of the work of the 
Congress, the work of the agencies here and other agencies, 
they really have put in place a system that the next 
Administration, the next Congress can use as they are 
implementing their program priorities to make sure that they 
cascade down throughout the organization. It is by no means 
perfect, as you have been hearing. But it has taken a lot of 
work to get to where we are now. That is a tool that the next 
Administration, the next Congress can use in order to deliver 
effective results for the American people.
    So I would say those are three key things we should focus 
on.
    Senator Akaka. Thank you very much, Mr. Mihm. Senator 
Voinovich.
    Senator Voinovich. One of the things that I would be 
interested in knowing more about is training. With NSPS, for 
example, did the Department use a train-the-trainer model, or 
am I mistaken? Did you bring in other people to do it? I 
thought you trained the trainer and then you worked it out 
within the organization. Did that interfere with the job of 
those individuals that were taken off whatever they were doing 
to become involved in the training, and second of all, in terms 
of your budgets as to the allocation of resources for training?
    I go back to my early days here when I did a survey when I 
first came to the Congress and I sent a letter out to 12 
agencies and I asked them, how much money do you spend on 
training, and I think all of them said that they didn't know 
except one, and they said, we know but we won't tell you. 
[Laughter.]
    Senator Voinovich. So I would like you to comment on both 
of those things, or anybody who wants to chip in on this 
question. We will start with you, Mr. Bunn.
    Mr. Bunn. Senator, thank you. We used kind of a hybrid 
approach with respect to how we trained our workforce on NSPS. 
We certainly did the core development of the training, the 
materials, and delivery through a train-the-trainer approach, 
and that was for a couple of reasons. One, we wanted to ensure 
that we maintained control over the content and that the 
training materials themselves were of high quality and that we 
had the best control possible over those. We also wanted to 
ensure that we had a cadre of performance management experts 
that we could tap into as we moved through the process and 
institutionalized NSPS and pay-for-performance throughout the 
Department.
    So we made a conscious choice to, in some cases, take 
people off of what they were doing and get them those 
competencies and skills in performance management, and it 
wasn't just their platform training skills but it was actually 
their performance management skills that we are now able to tap 
into.
    We did use some external training vehicles, contractors. We 
brought in some retirees from various sources to help with 
training, but that was mostly to offset the load. But we 
certainly used our own internal resources to do that.
    Senator Voinovich. What guarantee did you have that the 
last spiral received as much training as the first spiral, 
because Senator Akaka and I had a chance to visit with that 
first group of individuals and then in Ohio, I had a chance to 
visit with some of those folks. But one of the questions I had 
was that you started out with this great program and people 
understood it. What did you put in place to guarantee that that 
training was consistent with what you had in the beginning?
    Mr. Bunn. Well, we certainly applied the resources to it 
and maintained the momentum as demonstrated by the resources we 
put to the whole program. We have spent millions of dollars 
implementing NSPS. It is no secret. We have reported on that 
before. And the majority of the resources we have spent have 
been on training.
    What is interesting, Senator, there was a lot of attention 
paid to the first adopters, what we call our spiral 1.1s, those 
first organizations that came in, and we certainly saw the 
return on that investment. There was leadership engagement from 
all corners of the Department, including the organizations 
themselves.
    I would probably point to the engagement of Deputy 
Secretary England and his engagement and leadership in 
maintaining cognizance over NSPS for the past 3 to 4 years as 
probably the biggest factor in ensuring that we had the 
resources as we went through implementation.
    And what we are seeing so far in our employee surveys is 
that the folks who came in in the second and third tranches of 
NSPS, actually, the training was a little bit better than the 
very first set, mostly--and it makes sense--we learned lessons. 
We adjusted our training materials. We adjusted the content 
based on feedback we got from those first organizations and 
actually delivered a better product. We are also working on 
ensuring that we have institutionalized that training really 
from here on out so that we maintain and sustain the training 
as part of our normal human capital training for any 
organization that comes under NSPS.
    Senator Voinovich. But the thing that really helped out was 
that Mr. England made it a very high priority and stayed on top 
of it.
    Mr. Bunn. Absolutely, and to this day, he has maintained 
his awareness and he is very much in charge of NSPS.
    Mr. Spires. I might just add real quickly that once our 
system had been set up, one of the things that we did was 
brought in an independent contractor with specialty in this 
area. This enabled focus groups and other types of evaluations 
to go on directly from the employees so that we could get 
candid feedback as to what was working well. But more 
importantly, what was not working well, and have adjusted based 
on feedback.
    Senator Voinovich. That was your snapshot to look at how 
things were going?
    Mr. Spires. Yes, sir.
    Senator Voinovich. Ms. Rossides, I travel around the 
country and I have a special relationship with your people 
because I have a pacemaker, so I get a chance to talk to a lot 
of them.
    Ms. Rossides. Yes. [Laughter.]
    Senator Voinovich. And I do my own survey as I go along. 
And I must say that in the last couple of years, things have 
gotten better. The issue seems to be two things, that some of 
the employees are not aware of the flexibilities that are 
available to them, particularly if they have a gripe that they 
want to have taken care of, and the others are complaining, 
some of them, that the system of evaluation is too objective 
and that there isn't enough subjectivity in the evaluation. So 
I don't know whether you would comment on both those things.
    And last but not least, I know that there is going to be an 
effort made to eliminate the flexibilities that we gave your 
agency when it came into being because we had to stand up, some 
50,000 people overnight. What would be your opinion in the 
event that these flexibilities were yanked and we went away 
from this very aggressive experiment? Fifty-five-thousand 
people in performance evaluations, it is a big deal.
    Ms. Rossides. Yes, sir, it is, and if I could start with 
that because I think the flexibilities that ATSA provided to 
TSA are enormously critical to our success in building this 
agency and continuously improving its performance. And 
specifically, those flexibilities have allowed us to provide to 
our front-line officers differences in pay for hard-to-fill 
airports, for example. It has allowed us to pay our part-time 
TSOs the full-time equivalency under health benefits. Those 
flexibilities have allowed us to build this pay-for-performance 
system and to continue to improve it.
    Our PASS system is only in its third year, and as a lot of 
my colleagues here have said, it takes several years to get it 
right. And our commitment is to make sure that we continuously 
improve upon this and hear from our officers, just like you do.
    The system is predominately objective. Roughly 70 percent 
of the assessment of the officers is an objective assessment. 
It is based on their performance on critical aspects of the 
job, including their ability to recognize explosive devices on 
the X-ray. It is based specifically on their training that they 
complete. And honestly, we think in the long term, this 
percentage of objectivity will help to build the credibility of 
the system for the officers and for the managers.
    Last, I would say that this entire process requires the 
commitment of the top leadership, and your question to Dr. 
Sanders about the importance of continuing this kind of a 
system, we know we have several years of continuous improvement 
in this system. The leadership of TSA is predominately career 
people. Our succession plan for both the transition and the 
long-term maturity of TSA is to ensure that we have career 
people in the jobs, both in our human capital arena, but across 
the whole organization. And this is something that you can't 
start and stop in a year. This is something that takes years to 
perfect because when you are rolling out something like this to 
55,000 people, it is an enormous transition. But we believe 
very strongly it is critical to our mission success.
    The kinds of feedback that you are getting, the kinds of 
experience that you see as a passenger who requires special 
attention, shall we say, because of your pacemaker, is exactly 
the kind of concrete skill that we are building in our 
officers, and that is exactly what we are trying to measure 
through this pay-for-performance system.
    Senator Voinovich. Thank you.
    Ms. Rossides. Thank you.
    Senator Akaka. Thank you, Senator Voinovich.
    I have a question to Mr. Bunn and Mr. Spires. DOD is 
required to make meaningful distinctions in performance and not 
institute a quota system or engage in forced distribution. It 
has come to my attention that some DOD managers have been told 
that most employees should receive a performance rating of 
three. This looks a lot like forced distribution.
    At the IRS, the Federal Mangers Association issued comments 
on regulations to revise the IRS broadbanding system and called 
for the elimination of performance rating caps or quotas.
    Can both of you tell me what measures you are taking to 
ensure that you are making meaningful distinctions in 
performance and not arbitrarily lowering scores? Mr. Bunn.
    Mr. Bunn. Mr. Chairman, I will start. We have heard that 
kind of feedback. I think the results, as demonstrated through 
this past performance cycle, say otherwise. We have a five-
level system, as you mentioned. We had over 100,000 people 
rated. Roughly 57 percent of those folks were rated at level 
three, 36 percent were rated at level four, which is ``exceeds 
expectations,'' and about 5 percent were considered role model, 
and then less than 2 percent were unacceptable or what we call 
``fair'' performers. So that distribution, I think, shows that 
we are making meaningful distinctions.
    We did set the bar high when we developed our performance 
evaluation system to ensure that it was rigorous and not that 
the expected outcome would be a three, a valued performer, but 
that it would take a lot to get above the valued performer 
level three. And I think, as I said before, when you look at 
the overall results, I think we have made meaningful 
distinctions, and those performance ratings also drove 
performance-based salary increases and bonuses. So the 
meaningful distinctions extended not only to the ratings, but 
also into the rewards and salary increase aspect of it.
    So I would argue that we have taken great pains to ensure 
that we don't have forced distribution. Certainly all of our 
training materials, all of our regulations and policies 
prohibit forced distribution. It could be that there is some 
miscommunication out there about what the expectation should 
be, and we have through our evaluation process gathered 
feedback on that--and will take the steps necessary to make 
sure that what we are training and what we are communicating 
are appropriate. Thank you.
    Senator Akaka. Mr. Spires.
    Mr. Spires. Mr. Chairman, first, I would like to say that 
there are many differences in my having come into the 
government from my 20 years in the private sector. But this 
challenge of how do you distinguish performance, but then also 
have the issue of limited amount of cash at play is a classic 
problem that not only faces those of us in the Federal 
Government, but in the private sector, as well. The issue of 
grade inflation comes into play here significantly, as well.
    Specifically at the IRS, we have some guidelines because we 
don't want to have grade inflation in the sense that you get a 
lot of people at the ``outstanding'' level unless they deserve 
to be at that level. We have a system that has some checks and 
balances. We issue guidance, and I call it guidance--it is not 
a quota system--but is guidance around what we would expect the 
distribution to look like.
    However, we have Performance Review Boards at both the 
organizational level and at the enterprise level across all of 
the IRS. Managers can come in and they can make a case for why 
individuals, for instance, in their organization should be 
rated at generally a higher level than the overall average and 
make that case.
    So it is that balance point. We are trying to strike for 
balance. We don't have a system where essentially you can rate 
everybody ``outstanding'' and that will hold. Again, from a 
grade inflation perspective, is that really the case? It is 
tough. I mean, this is a tough problem because you are asking 
managers to rate their employees and to be open and honest. But 
also to give them the right rating. It is that balance point 
that we are striking by providing some guidance. Also having a 
process through these Performance Review Boards to ensure that 
we are doing the right things if people truly are operating at 
an outstanding level.
    Senator Akaka. Thank you very much.
    Now, I have one final question not related to pay-for-
performance and this is to Mr. Bunn. As you know, last year's 
NDAA contained a provision I authored to help reemployed 
annuitants at DOD who were forced to retire due to a reduction 
in force. I have employees in Hawaii who continue to ask me 
when DOD will issue regulations on that provision. Can you tell 
me the status of those regulations?
    Mr. Bunn. I can certainly take that question back. That is 
not within my portfolio, but I am aware of that issue. I know 
that the policy that you are talking about is in the final 
stages of review within the Department and it should be out 
soon, but I will certainly get back to you with a more specific 
estimate for when the policy will be out.
    Senator Akaka. I would appreciate that.
    Mr. Bunn. Yes, sir.
    Senator Akaka. Again, I want to say thank you to this panel 
for your responses. It will certainly help us in what we are 
trying to do. So thank you very much.
    [Pause.]
    I want to welcome our second panel, Carol Bonosaro, 
President, Senior Executives Association; John Gage, President 
of American Federation of Government Employees; Colleen Kelley, 
National President, National Treasury Employees Union; Jonathan 
Breul, Executive Director, IBM Center for the Business of 
Government; and Dr. Charles Fay, Professor, School of 
Management and Labor Relations, Rutgers University.
    As you know, our Subcommittee requires that all witnesses 
testify under oath, so I ask all of you to please rise and 
raise your right hand.
    Do you solemnly swear that the testimony you are about to 
give the Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Ms. Bonosaro. I do.
    Mr. Gage. I do.
    Ms. Kelley. I do.
    Mr. Breul. I do.
    Mr. Fay. I do.
    Senator Akaka. Thank you very much. Let the record show 
that the witnesses answered in the affirmative, and let me 
remind you that although your oral statement is limited to 5 
minutes, your full statement will be included in the record.
    It is good to see you again, Ms. Bonosaro. Please proceed 
with your statement.

 TESTIMONY OF CAROL BONOSARO,\1\ PRESIDENT, SENIOR EXECUTIVES 
                          ASSOCIATION

    Ms. Bonosaro. Mr. Chairman, the Senior Executives 
Association appreciates the opportunity to share our 
experiences and views related to the current SES pay-for-
performance system.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Bonosaro appears in the Appendix 
on page 119.
---------------------------------------------------------------------------
    Since the creation of the SES in 1978, with its performance 
awards and Presidential Rank Awards, its members have been 
subject to a rigorous pay-for-performance system. That system 
was changed, as you know, in 2003 and has been in effect now 
for three cycles. A system that was meant to be transparent, 
flexible, and to reward performance has instead become a 
disincentive for many of the best employees who might otherwise 
desire to join the SES.
    Senior Executives take on more duties, work longer hours, 
and have fewer rights than GS-15 managers, yet they receive no 
locality pay, no compensatory time, and no guaranteed annual 
pay raises, unlike General Schedule employees. With a large 
number of Senior Executives eligible to retire, it is critical 
that issues with the current pay system be corrected so that we 
will retain a highly qualified pool of applicants to fill their 
positions.
    A comprehensive survey of the SES that SEA undertook in 
2006, continued feedback from our members, and a survey 
recently completed by OPM shows several areas of concern with 
the system, including pay overlap between GS-15s and the SES, 
perceived quotas, and lack of transparency in both the rating 
and pay adjustment processes.
    One of the most disturbing findings of the SEA's survey was 
the opinion of 47 percent of the respondents that GS-14s and 
15s are losing interest in applying to the SES. The OPM survey 
reported that only half of Senior Executives believe that the 
current system is helpful in recruiting qualified applicants to 
the SES. Anecdotal evidence we continue to receive indicates 
that the narrowing gap between SES pay and GS pay, coupled with 
the inconsistency of the SES system, result in a less 
attractive Senior Executive Service.
    Another issue highlighted by the SEA's survey was the 
perception that agency quotas, not actual performance, drive 
decisions about performance levels and salary adjustments. 
Downward pressure on rating levels exists within many agencies 
and we continue to receive reports from executives whose 
ratings were reduced without explanation.
    The certification process itself is a cumbersome one that 
some smaller agencies do not even attempt. It must be done 
every 1 or 2 years, and often the decision to certify does not 
come until well into the performance cycle.
    We are also concerned with the consistency by which the SES 
pay system is being implemented. The OPM survey found that 
communication of the results of the system to executives--
ratings, pay adjustments, performance awards--varied greatly 
from agency to agency. However, the greatest inconsistency has 
arisen from the total discretion that agencies have with regard 
to pay, and it is not unusual to find a disconnect between 
ratings and pay adjustments.
    As one Senior Executive told us, he received no pay 
increase for several years despite receiving ``fully 
successful'' ratings for his performance at the Department of 
Energy. Largely because of this, he voluntarily resigned his 
position in the SES to move back to the ``EJ'' excepted 
service, where he then received the same 4.49 percent pay 
increase given to GS employees this year in the Washington 
region.
    Our written testimony provides several other examples of 
this inconsistent and, on its face, arbitrary treatment.
    In the 3 years of experience under the new system, one of 
the most striking results is the low salary adjustments. In 
2007, the most recent year for which data is available, or at 
least was available prior to today, those SES rated ``fully 
successful'' the year before received an annual average salary 
increase of only 2 percent, substantially below the increase, 
2.64 percent, received by GS employees in the Washington, DC 
area.
    Given these issues with the pay system, it is no wonder 
that some who might otherwise aspire to the SES now perceive 
that the risks far outweigh the rewards.
    SEA's recommendations for legislative fixes to the pay 
system include ensuring at least a minimum annual increase for 
those rated ``fully successful'' or better and including 
performance awards and retention allowances in the high-three 
retirement calculation. I think this would no doubt go a long 
way towards dealing with the pay compression Director Sanders 
referred to and even that Dr. Springer admitted in her 
testimony, or in her response to your question, that pay 
compression is a problem.
    We also recommend a longer certification period, guaranteed 
funding of at least minimum SES salary adjustments, a minimum 
increase in pay for new Senior Executives, rules for pay tiers 
if an agency has them, feedback to Senior Executives, and 
greater transparency in the Administration of these systems.
    It is SEA's hope that with the adoption of our 
recommendations, the SES pay system will be one that adequately 
and fairly compensates those who perform the most challenging 
and important jobs in the career civil service and which will 
continue to attract quality candidates in the future. Thank 
you.
    Senator Akaka. Thank you very much, Ms. Bonosaro. Mr. Gage.

 TESTIMONY OF JOHN GAGE,\1\ PRESIDENT, AMERICAN FEDERATION OF 
                      GOVERNMENT EMPLOYEES

    Mr. Gage. Thank you, Mr. Chairman, for the opportunity to 
testify today. I will focus my remarks on the National Security 
Personnel System and TSA's past system. And thank you, too, Mr. 
Chairman, for your leadership in the 2008 National Defense 
Authorization Act, which in addition to excluding blue collar 
workers from NSPS, the law fully restored collective bargaining 
rights.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gage appears in the Appendix on 
page 134.
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    But AFGE remains profoundly concerned about the NSPS pay 
system. There are many issues, including new illegal 
restrictions on bargaining rights, the disconnection between 
pay and performance, despite what employees have been told, the 
requirement that performance ratings be pushed into a forced 
distribution or bell curve, the suppression of wages by 
permitting bonuses to be paid instead of base salary increases, 
and the virtual elimination of merit promotion.
    On May 22, DOD proposed revised NSPS regulations which 
cynically and purposely attempt to evade Congress's mandate for 
collective bargaining. DOD intends to implement these 
regulations in October, preventing the next Administration from 
reviewing the pay system and making adjustments before it goes 
into effect. This double-cross is unfortunate, but predictable. 
We strongly urge the Congress to block the implementation of 
the May 22 proposed regulations.
    Section 9902(e)(9) of the 2008 NDAA clearly says any rate 
of pay established or adjusted in accordance with the 
requirements of this section shall be non-negotiable but shall 
be subject to procedures and appropriate arrangements of 
Paragraphs 2 and 3 of Section 7106(b), the labor statute. And 
yet in its proposed regulations, DOD has broadened its 
definition of rate of pay to include the phrase, ``and the 
conditions defining applicability of each rate.'' The proposed 
regulation goes on to list conditions defining applicability of 
each rate for a dozen pages, clearly intending to eliminate any 
bargaining of the very procedures and arrangements Congress 
mandated that DOD negotiate.
    It is an act of cynicism and defiance on DOD's part to 
think it can define itself out of its statutory obligation. We 
urge the Senate to clarify in the Fiscal Year 2009 Defense 
Authorization Act that rate of pay does not include conditions 
defining applicability of each rate.
    The 2008 NDAA also ensures that an NSPS employee will be 
guaranteed 60 percent of the GS nationwide pay adjustment and 
100 percent of the GS locality adjustment every year, provided 
that the employee is rated above ``unacceptable.'' As you know, 
DOD was prepared to give only 50 percent of the pay adjustment 
to employees in 2008 and none of its annual adjustment in 2009. 
The new law ensures that the full amount of the nationwide pay 
adjustment go for base pay increases.
    But to ensure the viability of the DOD pay system, DOD must 
be required to adjust its pay bands by the full amount of the 
nationwide pay adjustment, just as grades in the GS system are 
adjusted annually. In DOD's proposed regulations, the Secretary 
can adjust different pay bands by different amounts and the 
minimum and maximum rates of each pay band by different 
amounts.
    Mr. Chairman, we have heard from so many managers and 
employees about the implementation of this new pay system. They 
complain that it is unpredictable, unfair, and opaque. 
Supervisors have been ordered to withhold information from 
their employees about their ratings. The pay pools are required 
to force performance ratings into a bell curve, and the 
decision about how and by how much to compensate an employee 
for performance is completely arbitrary.
    When supervisors substitute bonuses for salary increases, 
workers lose not only in base salary, but also in their defined 
benefit pensions and in contributions to the Thrift Savings 
Plan. The result, Mr. Chairman, is the suppression of wages and 
benefits for civilian DOD employees.
    Under NSPS, promotions are rare. Employees might be given 
additional duties by their supervisor with a subjective pay 
raise or bonus in what NSPS calls reassignments, but there will 
be no clear pathway to that advancement, nor is there a 
requirement that the reassignment be open to competitive or 
even that other employees know about the opportunity. The Merit 
Promotion System will be all but dead. Bias and favoritism are 
inevitable.
    On Transportation Security Officers, Mr. Chairman, TSOs 
continue to be drastically underpaid, around $30,000 annually. 
TSOs are subject to the pay system known as PASS. While it is 
virtually impossible to obtain data or even basic information 
about how the system is supposed to work, to make matters 
worse, TSA continually changes the playing field. Employees 
believe that PASS is based on favoritism, not performance. Last 
December, TSA disclosed that TSOs would receive a smaller pay 
raise in 2008 than in 2007, even if they received the same or 
better performance rating as the previous year.
    On March 25 of this year, TSA Administrator Hawley sent a 
memo to all TSOs making changes to PASS, agreeing that it had 
become too complicated and that TSOs are being trained and 
tested on different standards and these standards do not 
reflect how TSOs do their job. Yet in May, TSA implemented the 
infamous image test, and in a stroke of astounding 
contradiction continued to hold flawed previous test results 
against TSOs.
    To make matters worse, TSOs still have limited access to 
image test training. The new training software is not available 
at all airports and in some cases does not work. Trainers are 
given wrong information about identifying threat objects during 
the test, which led directly to TSO test failure.
    TSOs with excellent work histories and commendations have 
been told they may lose their jobs. But instead of correcting 
the test and properly training TSOs, the agency has come up 
with another policy that continues to hold previous test 
failures against TSOs but allows management to retain and 
retrain whoever they want, making the new and improved image 
testing even more unfair than it was.
    TSA consistently ranks at the bottom of all surveys of 
employee morale in the Federal Government. This workforce is 
too important to be treated so callously. These workers need a 
rational pay system before the attrition rate climbs higher. 
AFGE urges the Subcommittee to end the PASS system and place 
TSOs under the General Schedule that applies to other Federal 
workers, including their colleagues throughout DHS.
    That concludes my statement, Mr. Chairman.
    Senator Akaka. Thank you very much, Mr. Gage. Ms. Kelley.

TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL 
                    TREASURY EMPLOYEES UNION

    Ms. Kelley. Thank you very much, Chairman Akaka, Ranking 
Member Voinovich, for the invitation to discuss pay-for-
performance systems in the Federal Government.
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    \1\ The prepared statement of Ms. Kelley appears in the Appendix on 
page 149.
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    The President's fiscal year 2009 budget submission 
reaffirmed his commitment to replace the current GS pay system 
with a more subjective pay banding system. OPM's December 2007 
report touts the Administration's alternative so-called pay-
for-performance systems now in many Federal agencies as 
successful experiments.
    NTEU does not agree with the notion that the GS system 
needs to be replaced, and I believe the evidence is now clear 
that current pay-for-performance systems have not been 
successful. To the contrary, alternative pay systems have 
produced a litany of failed experiments, widespread employee 
dissatisfaction, inequitable distribution of resources, abuse 
in ratings systems, and rampant employee confusion leading to 
low morale. I don't know of one pay-for-performance system that 
currently gets good reviews from employees who are working 
under it.
    The goals of recruiting and retaining high-quality 
employees and better accomplishing the agency mission are 
simply not being met by these pay systems. NTEU believes that 
for a pay system to be credible and effective, it must either 
be set in statute, like the GS system, so everyone understands 
the rules and consequences, or there must be collective 
bargaining so employees can have a role in the pay system and 
can have remedies for unfairness.
    The Transportation Security Administration has neither 
collective bargaining nor a statutory pay system. It is a prime 
example of the failure of a current pay-for-performance system. 
Under the TSA PASS system, employees are constantly tested, but 
if they fail, they are not told what they did wrong. The 
training is minimal. A majority of Transportation Security 
Officers do not even know what is expected of them to get a pay 
raise. Only 21 percent of TSA employees believe that promotions 
are based on merit. Fewer than one in four believe that their 
pay raise is determined by their performance.
    The PASS system has resulted in the highest attrition rate 
in the Federal Government, and now TSA has awarded a $1.2 
billion contract to Lockheed Martin to perform its human 
resource activities, including pay. NTEU believes this taxpayer 
money could be better spent by putting TSOs under the existing 
GS pay system and increasing staffing and reducing airport 
congestion, rather than increasing contractor profits. TSOs 
must also be afforded collective bargaining rights like their 
coworkers throughout the Federal Government.
    At the IRS, where we heard earlier that managers are under 
a pay banding system, the Federal Managers Association has 
spoken out against the system's forced pay quotas and they said 
that pay was not necessarily dependent upon performance 
ratings. In addition, the Treasury Inspector General for Tax 
Administration found a number of deficiencies in the IRS 
managers' pay-for-performance system. A July 2007 TIGTA report 
states, ``The IRS risks reducing its ability to provide quality 
service to taxpayers because the IRS pay-for-performance system 
potentially hinders the IRS's ability to recruit, retain, and 
motivate highly skilled leaders.'' If these alternative pay 
systems are jeopardizing the achievement of an agency's core 
mission, in this case to provide quality service to taxpayers, 
how can we justify continuing or even expanding their use?
    Even at agencies where pay is negotiated through collective 
bargaining, NTEU has seen problems. In September 2007, NTEU won 
an important legal battle when an arbitrator ruled that the 
Security and Exchange Commission system was found to 
discriminate against African-American employees and employees 
that were 40 years of age and older. The SEC has since agreed 
to freeze its flawed merit pay system and is working with NTEU.
    Similar problems existed at the FDIC, where we collectively 
bargain over pay. Only 12 percent of employees surveyed found 
that the pay system rewarded performance there at the FDIC. To 
Chairman Bair's credit, that program was also suspended and 
NTEU is also working with that agency on a revision.
    The GS system, though much maligned, has rules, standards, 
and evaluations which must be written. Employees receive 
within-grade raises and career ladder promotions based on 
performance criteria. Locality adjustments make it market 
sensitive. Flexibilities, like awards, quality step increases, 
telework, student loan repayment, and others, are authorized 
and should be used more extensively to attract and keep 
talented employees in government.
    In conclusion, NTEU supports a moratorium on new pay-for-
performance systems and a review of those that are in place to 
see whether they are successful in accomplishing their goals. 
Those that are failing should be canceled. NTEU also strongly 
believes that collective bargaining over pay must be provided 
to employees under alternative pay systems to provide employees 
with a check on abuse.
    Thank you again for the opportunity to testify and I would 
welcome any questions you have.
    Senator Akaka. Thank you very much, Ms. Kelley. Mr. Breul.

  TESTIMONY OF JONATHAN D. BREUL,\1\ EXECUTIVE DIRECTOR, IBM 
   CENTER FOR THE BUSINESS OF GOVERNMENT, AND PARTNER, IBM'S 
                    GLOBAL BUSINESS SERVICES

    Mr. Breul. Thank you, Chairman Akaka and Senator Voinovich, 
for the opportunity to discuss performance pay systems in the 
Federal Government.
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    \1\ The prepared statement of Mr. Breul appears in the Appendix on 
page 161.
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    The question of how to compensate civil servants remains 
what I would call a thorny issue. Public sector positions no 
longer necessarily offer a job for life, and Federal 
departments and agencies are increasingly in competition with 
the private sector to recruit and retain top performers. One 
solution widely used in some parts of the private sector is to 
replace or complement the traditional civil service system of 
automatic salary increases based on length of service with 
financial reward for good performance, or performance-based 
pay.
    In order to gain a better understanding of the challenges 
and issues related to performance-related pay, the IBM Center 
has sponsored and published three recent research reports by 
public management experts. The first report, ``Designing and 
Implementing Performance-Oriented Pay Band Systems,'' is by Jim 
Thompson at the University of Chicago. According to Professor 
Thompson, pay banding is not a new concept to the public 
sector. The essential concept is that for purposes of salary 
determination, positions are placed within broad bands instead 
of narrow grades. And according to Mr. Thompson, the 
preponderance of data shows that these systems have achieved 
high levels of employee acceptance. However, the degrees of 
success seem to vary depending on how well those systems have 
been designed and implemented.
    Mr. Thompson's report goes on to describe nine different 
performance-oriented pay band systems that have been in 
operation in the government, in some cases for more than two 
decades. He makes the case that successful designs are those 
that, one, achieve a balance between efficiency, equity, and 
employee acceptance; two, acknowledge the soft as well as the 
hard design features; and three, fit the organizational 
context.
    A second IBM report is ``Managing for Better Performance: 
Enhancing Federal Performance Management Practices,'' by Howard 
Risher and Charles Fay, who is sitting to my left. The authors 
of this report recognize that performance management is 
recognized worldwide as a critical factor in helping 
individuals and organizations achieve their goals. When done 
correctly, performance management becomes a powerful and 
effective tool to drive individual and organizational 
performance. When done poorly, it can create an atmosphere of 
distrust between managers and employees, ultimately limiting 
performance and the organization's ability to achieve its full 
potential.
    Fay and Risher argue that the responsibility for effective 
management of employee performance rests squarely on the 
shoulders of executives and front-line managers. They emphasize 
the management of employee needs are a core responsibility of 
every manager. In this view, it is critical that managers 
understand and effectively practice the fundamentals of 
performance management, including planning, monitoring, 
developing, appraising, and rewarding employee performance.
    The third report is ``Pay for Performance: A Guide for 
Federal Managers,'' by Howard Risher. Risher insists that 
research over the years confirms that organizations benefit 
when they recognize and reward employee and group performance. 
He explains that for the new system to succeed, managers need 
to be comfortable with their new role in overseeing such 
systems. This makes it essential for them to play a role in 
planning and implementing the new systems.
    Risher argues that pay-for-performance, including the 
reward system, must be an integral part of an organization's 
overall strategy to create a performance culture. Further, he 
contends that Federal agencies will have to overcome barriers 
of cynicism and distrust among Federal employees, and there 
will be what he calls bumps and detours along the way, so 
agencies must expect to adjust their plans with experience.
    He concludes that, in the end, the new policy can be 
expected to contribute to improved agency performance. 
Importantly, however, Risher warns that the transition will not 
be easy. ``This may prove to be the most difficult change any 
organization has ever attempted,'' but in the end, he believes 
it will better serve the needs of the Federal Government than 
the current General Schedule salary system.
    In conclusion, the question of how to compensate public 
employees remains a thorny one. Performance pay is an appealing 
idea, but research indicates that implementation, as well as 
improving government performance, remains complex and 
deceptively difficult, both technically and politically.
    Thank you, Chairman Akaka and Senator Voinovich, for 
holding this important hearing and for remaining engaged on the 
important issue of improving management and performance of 
government.
    Senator Akaka. Thank you very much, Mr. Breul. Dr. Fay.

TESTIMONY OF CHARLES H. FAY,\1\ PROFESSOR, SCHOOL OF MANAGEMENT 
            AND LABOR RELATIONS, RUTGERS UNIVERSITY

    Mr. Fay. Chairman Akaka and Senator Voinovich, thank you 
for giving me the opportunity to testify on compensation and 
pay-for-performance again. Given my background, it should be 
obvious I have a bias favoring strong performance management 
systems and pay-for-performance in general. When well designed 
and well implemented, these systems can and do increase 
employee understanding of what is required of them and increase 
both their performance and organizational outcomes. Flawed 
programs can and do decrease productivity and employee job 
satisfaction.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Fay appears in the Appendix on 
page 165.
---------------------------------------------------------------------------
    I think it is appropriate for the government to institute 
pay-for-performance systems. It is clear that agencies have 
done their homework in studying the large literature on private 
sector performance management and pay-for-performance systems. 
That said, I see many of the same problems in the various 
systems implemented by government agencies that plague similar 
systems in the private sector.
    First of all, these programs seem too ambitious. They are 
trying to do too much, too fast, for too many.
    Second, the culture that makes ``meets standards'' 
performance a failure, and it is in most of these systems, 
needs to be changed. When ``meets standards'' is a failure, you 
are going to end up with an excellence entitlement mentality 
and no system will be able to differentiate high performers 
from standard performers.
    Third, managers need to be held accountable in terms of pay 
and their own performance for performance management and pay-
for-performance. Many managers think they are far too busy to 
do pay-for-performance, to do performance management, and if 
managers don't have time to manage, it is questionable what 
they should be doing.
    The programs and particularly the DOD programs confuse 
market adjustments and performance bonuses. Employees expect to 
be kept whole against market, and it is clear from union and 
employee complaints that they know the difference between 
market adjustments and performance bonuses. Hence, all the 
arguments about comparison with GS, which is getting the FEPCA 
adjustments, as compared to what is happening in the pay-for-
performance systems. The market adjustment issue is 
particularly important to government workers because they 
generally make less than equivalent private sector workers, 
especially from about GS-8 or GS-9 upwards.
    For a variety of reasons, government employees are much 
more heavily unionized than private sector employees. You can't 
simply import private sector programs into government and 
expect them to work well. Unions in general are opposed to 
performance management and pay-for-performance systems because 
employees and employee representatives lose partial control of 
terms and conditions, and you have heard that again today. I 
hear both that employee representatives have been active in the 
design and Administration of these systems and that they have 
been precluded from participating in that. In a unionized 
organization, they should be very heavily involved in designing 
and implementing the systems.
    Having bonus pools, as the Department of Defense system 
does, where ratings and bonuses are calibrated, is one of the 
better designed approaches in these systems. However, 
calculating the bonus pool solely as a function of the salaries 
of the members of the pool is inappropriate. It rests on the 
assumption that the aggregate performance of employees making 
up each pool is equal across pools and that the employees of 
each pool are equally strategic to the agency or the 
department. Neither of these assumptions is likely to be 
accurate.
    Calibration committees should not be negotiating ratings or 
awards. When bonuses appear to employees to be a function of 
the negotiating skill of their manager, or when there is a 
drive for some specific distribution of ratings, the whole 
system loses any value in motivating those employees.
    At the same time, there should be an effort to standardize 
reward share numbers across pools. A ``meets standards'' 
employee should receive the same number of shares regardless of 
the pool to which he or she is assigned. Similarly, the range 
of share measures that each performance level can be assigned 
is problematic. When a ``meets standards'' can be assigned any 
one of four or five different sets of performance shares, it is 
clear that there is lots of room for bias and arbitrariness in 
the system.
    Performance management systems and pay-for-performance 
systems for employees who work as parts of groups or teams need 
to have team citizenship taken into account as part of their 
performance. Otherwise, they will be motivated to maximum 
individual performance even at the expense of suboptimizing 
group performance. Performance ought to be rated and rewarded 
at the level at which it occurs, and particularly in the kind 
of service jobs at the government, it rarely occurs at the 
individual level.
    It is not clear what evaluation systems have been built 
into the various pay-for-performance systems. The previous 
panel discussed some of that, but I will make one point about 
that in a minute.
    The 2007 Annual Employee Survey results of the Department 
of Treasury, for example, notes that only 27 percent of 
employees believe pay raises are determined on how well 
employees perform their job. Only 32 percent of employees state 
they typically receive formal or informal feedback from their 
supervisor. Those are signs of a broken system or one that 
never worked in the first place.
    Furthermore, I think that just looking at employee 
reactions to systems is really the wrong measure and I was 
surprised that none of the people on the previous panel spoke 
to the real issue that private sector organizations always look 
for as a measure of goodness of the pay-for-performance system, 
and that is the performance of the organization gets better. If 
you are tying individual criteria and performance criteria, to 
organizations' success, then the measure of success of the 
system is whether the organization increases its success.
    Thank you. I will be happy to answer any questions.
    Senator Akaka. Thank you very much, Dr. Fay.
    My first question is to all of the witnesses. As we 
discussed on the first panel, I continue to hear from employees 
about the use of quotas or forced distribution of ratings. Can 
each of you discuss your thoughts on the use of quotas and how 
you would recommend agencies avoid actual or perceived quotas. 
Ms. Bonosaro.
    Ms. Bonosaro. Well, it has been an interesting phenomenon 
to watch. I think certainly in the first year or two, our 
strong suspicion is that many agencies felt that the way to 
achieve certification with the Office of Personnel Management 
and OMB of their systems was to show a substantially lower 
number of outstanding ratings, to push the ratings down. I 
think there was just no doubt that--let us simply say there was 
an informal message that was operating within the agencies.
    My guess is that is less true now. However, we still have 
examples of executives who find that their ratings have been 
reduced without explanation. Whether that arises because that 
political superior is unwilling to actually address substantial 
issues with the executive's performance or whether there is a 
hang-over, if you will, about the need to suppress higher 
ratings, it is very difficult to tell because very few of the 
people involved, the individual executives, want anyone to move 
forward and make a case out of them. They value their jobs and 
they recognize that doing that is not going to be to their 
ultimate advantage.
    I think, too, that there has been finally one unfortunate 
example that we faced where Navy had literally a PowerPoint 
presentation with a graph, a normal distribution curve, which 
they were using with regard to the SES system, and when we 
brought it to OPM's attention, their ultimate conclusion was 
that it was not a quota, it was a notional system, and I 
frankly don't quite understand what that meant, but rather that 
it was some generalized idea of perhaps how ratings should 
look.
    With regard to a remedy, the OPM regulations prohibit the 
use of quotas. I think that one remedy is certainly for OPM to 
be willing to quickly jump on every instance we can bring to 
their attention where we can convince an executive to permit us 
to do that, and another is to put that prohibition in statute, 
to make clear that we take it seriously. We don't have any 
particular recommendation for what the penalty should be if the 
statute is violated, but I think it would send a message that 
we are serious about this.
    And then finally, I think the message that Director 
Springer talked about has to be reinforced every year and 
pushed down through the agencies, that there is a clear 
interest in evaluating and rating every executive fairly and 
not with regard to some presupposed outcome.
    Senator Akaka. Thank you. Mr. Gage.
    Mr. Gage. Senator, just look at the time line, what DOD 
does in rating an employee. In October, the supervisor gives 
the employee a performance plan. The following September, the 
supervisor has to rate the employee on that performance plan, 
but he is forbidden to talk to the employee about that rating 
or to give him that rating. Then in October, he has to sit down 
and do a new performance plan, even though he doesn't know what 
is going to happen with his original rating, nor does the 
employee.
    The rating in November, or what the supervisor submitted, 
that rating goes to the pay pool. They do whatever they want, 
which is a forced distribution and apply these ratings to a 
curve. Then in January, the supervisor is finally told what the 
rating is for the employee and how much money the employee will 
get or not get.
    If this is transparent--employees are not fools, Senator. 
They understand that the supervisor's rating, which should be 
the employee's performance matched to that performance plan, 
has nothing to do with the real rating he is going to get or 
the money he is going to receive.
    So I suggest that the Subcommittee just look at DOD's own 
time line and see if it is believable, that there is not a bell 
curve or a forced distribution going on. Employees already know 
there is.
    Senator Akaka. Ms. Kelley.
    Ms. Kelley. Whether agencies acknowledge there is a quota 
system or not, there is, and it happens for two reasons. One, 
because they have this notional idea of how the workforce is 
performing and should be distributed, which really just makes a 
farce of the system. If you announce that only 25 percent of 
employees or some fill-in-the-blank percentage can be 
``outstanding'' or excel or a role model or whatever the new 
term of the year is, the fact is, what you are saying to the 
other 75 percent of the employees is no matter how well you do, 
even if you are doing exactly the same thing as those top 20 or 
25 percent, there are too many of you to be rated that way. So 
it makes the whole system a farce, and from there, the 
conversation has nowhere to go but down and it has zero 
credibility for employees.
    But one of the other reasons that I believe it happens is 
because of limited resources in the Federal Government. When 
the agencies are given their budgets, they then decide how they 
are going to divide that up, and it is a system that requires 
that if one employee is going to get more, that another 
employee will get less based on however the agency decides to 
distribute their funds.
    So there is a very real issue within the Federal Government 
when it comes to appropriations, but then if the agencies are 
not making wise decisions, it leads to very serious problems 
like we saw in the FDIC and in the SEC. In both of those cases, 
the agency announced--they announced as part of their program a 
forced distribution system, that only 25 percent of the 
employees in the FDIC, they said, could be rated at the highest 
level, and it had nothing to do with their annual evaluation or 
whatever their rating was. It was their rating plus some 
invisible criteria that managers would come up with. They 
actually gave it a name. They called it a Corporate 
Contribution Factor. You will find a definition of it nowhere 
in English, anyway, that employees can hang their hat on. And 
the system, as a result, had zero credibility, again, with 
employees.
    Now, as I said, the good news is the FDIC and the SEC are 
now sitting down with NTEU to fix that system. But whether they 
admit it or not, there is a forced distribution system and a 
quota system. They can come up with all the names with it that 
they want and they can say that it is a suggestion, that it is 
not written in stone, but it is implemented as if it is written 
in stone, in our experience.
    Senator Akaka. Mr. Breul.
    Mr. Breul. Mr. Chairman, I don't think there is any real 
room for a quota. What I would do is reframe the question a 
little differently and ask how many employees receive an honest 
performance appraisal that tells them where they really stand. 
It was my experience in government for many years that too 
often, very few receive a real honest appraisal of where they 
stand, and I think this is equally unacceptable.
    Managers can't call themselves managers unless they 
regularly tell their people what they are doing well and how 
they need to improve. So the whole notion of an honest, 
transparent appraisal system, I think is an essential element 
here.
    Senator Akaka. Thank you. Dr. Fay.
    Mr. Fay. Yes, Senator Akaka. You know, faculty deal with 
the same problem all the time in grading. Everybody wants to 
make an A. It doesn't happen that way. What does happen is if 
you develop a measure of learning or performance that 
accurately describes or accurately taps what people are 
supposed to have done, then if you rate against standards, you 
will get whatever distribution you get. I think it would be 
great if every employee in the government got an 
``outstanding'' and deserved it. I think it is pretty bad if 
they all get it and they don't deserve it, but I think it is 
equally bad if 57 percent of them get a ``meets standards'' 
just for some financial purpose.
    As a couple of people have said, employees are not stupid. 
They figure this stuff out and nothing loses credibility for a 
system faster than having any kind of artificial constraint on 
where people come out.
    Private sector organizations face the same problem and what 
they do is a senior manager will go into a junior manager and 
say, ``I noticed you gave everybody in your unit an 
`outstanding.' If they are all outstanding, how come your 
department is a failure?'' That is, performance rating has to 
roll up the organization just as the goals of the organization 
roll down, and if a department is performing in an outstanding 
fashion against whatever criteria the organization has set for 
that unit, then maybe everybody in the department does deserve 
an ``outstanding.'' If the department is failing, maybe 
everybody deserves a ``non-acceptable.''
    Senator Akaka. Thank you very much, Dr. Fay. Senator 
Voinovich.
    Senator Voinovich. I am certainly glad that I am here today 
to hear this testimony. I am going to get the transcript of 
what Mr. Gage and Ms. Kelley had to say today and I am going to 
get it over to the Departments and get to the bottom of this, 
because if what you are saying is true, it is shocking. It is 
not what we intended to do. So I just want you to know that we 
are definitely going to follow up on what we have heard today, 
or I have heard today.
    How much do you think of some of what is going on is the 
result of agencies not having the budget that they ought to 
have and they are trying to figure out how they can cut back, 
and as a result of that, the systems get shortchanged?
    Mr. Gage. I think that is at the bottom of this whole 
system. I have talked with some of our base commanders, who are 
very good people and have run very fair bases, and they said, 
``with this new pay-for-performance, my money is very tight. Of 
course, I am going to tap into that and I am not going to use 
it for employees. I am almost forced to do it.''
    So I think this is just an elaborate scheme, Senator, to 
reduce overall Federal pay. And if you go through the mechanics 
of it like we have had to do just to try to understand it, it 
is just fraught with bias and prejudice and it is a system that 
it is going to be very hard to get out--it is just not going to 
be named abuse.
    So I had better ideas of this. I think Colleen did, too. We 
really tried to work with some of these agencies. DOD refused 
to work with any of the unions. But I am really concerned that 
this is the end of the good part of the civil service as we 
know it.
    Ms. Kelley. I think definitely the resources is the 
starting point of the problem, but they are given X resources 
and then the question is how you spend it, and whether you are 
going to build a system that has any credibility to employees 
or not. That is not what has been done. In fact, as I listened 
to Dr. Fay, I will give you another example of what we see 
happen often that is, managers receive bonuses and awards and 
not one employee in their group is recognized with an award or 
any kind of recognition. So how could that manager be so 
successful if every one of their employees were just OK and did 
nothing to be recognized?
    I mean, there are a lot of flaws in the system that, for 
me, are about implementation. So even if you start with the 
fact there is not enough money, which there is not, and the 
agencies need to be funded to be able to recognize the top 
performers, that money should be provided. But whatever the 
pool of money is, then the credibility with which it is 
distributed is about implementation.
    So it is really a two-part question for me. It is, yes, the 
resources are needed, but then the agencies should be 
accountable for the implementation of how they spend that money 
and how they recognize and reward employees. And today, I have 
yet to see a system that I could point to that I would say NTEU 
would support, and I would like to see that. I have looked at 
every one of these systems that OPM and that the Administration 
point to as successes and employees will tell you every one of 
them is an abysmal failure.
    Senator Voinovich. Ms. Bonosaro, would you like to comment, 
and then I have another question for you.
    Ms. Bonosaro. I think that certainly has been somewhat of a 
problem in regard to the SES system, and obviously all of the 
pay adjustments in the Senior Executive Service are now totally 
discretionary with the agencies so that even budget issues 
aside, an agency could determine not to grant any pay 
adjustments. But certainly we have seen some examples over the 
years where budget has entered into it. I think right now, 
there has been a decision at the NLRB, for example, to give no 
performance awards because of budgetary problems.
    I think, too, that sometimes what we have thought is that 
perhaps the reason that performance awards have been more 
forthcoming than more substantial pay adjustments in the SES is 
because you don't then build that into salary. It is a one-time 
payment. So that is one of the reasons why one of the 
legislative provisions we are recommending is to guarantee that 
some budget be devoted to the system.
    Senator Voinovich. We have had 2 or 3 years of pay for 
performance in SES and we still have some agencies that are 
doing great and others are not doing so great. Would you like 
to comment about, first of all, where the agencies aren't doing 
a good job, at least from the surveys that come back, if OPM 
has really done an adequate job of getting in there and working 
with them to find out what is wrong and why it is not working 
in terms of what they are doing versus another agency where the 
folks understand the system and seem to be satisfied with it.
    Ms. Bonosaro. Well, I think just taking one of the areas 
where the differences between agencies, where it is most 
obvious was with regard to transparency and communicating 
results and information about the system, and there were 
tremendous differences between the agencies, which was really 
difficult to understand because it is not rocket science to 
share these results with executives.
    I think there, OPM Director Springer really did make a very 
strong effort as part of the certification process to make 
clear to agencies that communication was critical. So it really 
is difficult to understand what is going on there.
    I honestly don't have a good enough sense of exactly what 
they are doing beyond the work in the CHCO Council with regard 
to some of the agencies.
    One of the problems, I think, that makes it difficult to 
fully understand some of the disconnects is that all of the 
data we see, for example, with regard to pay adjustments, are 
averages. So when we see, for example, that Senior Executives 
rated ``fully successful'' receive an average 2 percent pay 
increase, we don't know how many receive no pay increase or how 
many receive a 1 percent pay increase or a 5 percent pay 
increase. So some of the data really masks some of the 
differences.
    But there are very clear differences and I think one of the 
really striking things were some of the poor results at OMB, 
which is charged with acting with regard to agency 
certifications in the system. So it is, frankly, a bit 
baffling.
    Senator Voinovich. I am very frustrated because we still 
have some poor performers out there, and apparently even with 
OPM involved. Is it your impression that is not being done, 
that there is not enough concern at OMB to try to make sure 
that the system is successful, or do you think they are just 
hiding behind the budget, too?
    Ms. Bonosaro. I honestly don't know. I wish we had a good 
answer for you. I think a lot of this--we have to go back to 
the beginning and the fact that this legislation was adopted 
with no hearings. There is no legislative history. So in 
essence, OPM developed regulations that took almost a year to 
do. Agencies didn't get geared up quickly enough, and then they 
were scrambling. I think the learning curve has been pretty 
steep and there wasn't enough, at least early enough on, not 
sharing between the agencies that knew what they were doing or 
trying to do it well and enough clear guidance from OPM. But 
then you had two agencies both involved in looking at these 
systems. So I think, frankly, it didn't get off to a very good 
launch and now you are trying to clean it up, frankly.
    Senator Voinovich. Is the CHCO Council doing any good? I 
mean, it has been in place for 5 years and we have elevated 
human capital to a higher level, supposedly, in the Federal 
Government where people are paying more attention to the people 
that work in the agencies. Is it--or you don't see any 
difference?
    Ms. Bonosaro. Those of us at this table are invited to the 
CHCO Council meetings once a year, so it is a little difficult 
to comment on what they are doing the rest of the time.
    One of the things, though, that we do believe is that if we 
still had the office in OPM that oversaw--that was kind of a 
focal point for the Executive Corps, that we would have a much 
clearer understanding of what they were doing and there would 
be some clearer direction. Now, OPM, Linda Springer may well 
disagree with that, but there are several parts of OPM that 
have been involved in this process and I think one clear focal 
point, having this under their wing, certainly would have been 
helpful. And also a good deal more sharing among the agencies 
that were doing well. It is just my impression that did not get 
started early enough and well enough.
    Senator Voinovich. Well, I will just finish up with this, 
that I think the communication is extremely important and there 
ought to be a vehicle there at OMB for that to go on. I know 
way back when we got started, I think President Clinton had 
where you had a chance to meet with the Administration. Wasn't 
there something set up in the President's office where the 
unions had a chance to come in and talk to some folks and have 
a chance to have your voice heard at a high level?
    Mr. Gage. Yes.
    Senator Voinovich. One of the things that Senator Akaka and 
I might do is just to maybe look at some of these things, and 
whoever the next President is, make some recommendations on how 
we think we can improve the situation to get this flow of 
information. I can't believe, you say you can't even get over 
and talk to the people at the Defense Department. That is just 
incredible. Thanks.
    Senator Akaka. Thank you, Senator Voinovich.
    Mr. Gage, you heard Mr. Bunn's response to my question over 
DOD's intention with the definition of rate of pay. What are 
your thoughts on his answer?
    Mr. Gage. Well, they have taken ``rate of pay,'' which is 
pretty simple, three words, and wrote about 12 pages of 
regulations that it would go into every aspect of pay, even 
procedures put in for fairness to employees over time, 
differentials in pay, night differentials. It would be all 
subject to management discretion, non-negotiable, can't talk 
about it.
    Don't take my word, Senator. It is right there in the 
regulations. We have had a number of experts around and met 
with all our people and I feel it is really--it is shameful, 
what they did, especially after Congress very directly told 
them that this stuff was negotiable and restored our bargaining 
rights, and for them to come about regulations and then try to 
submit it at the end of this Congress, and you know this 60-day 
rule, if you all don't do anything, it is in effect, and it is 
just--well, I think it is dirty pool. It is certainly not the 
way to have a discussion or a collaboration on something as 
important as this.
    Senator Akaka. Dr. Fay, you testified for pay-for-
performance to work in the Federal Government, there has to be 
a legitimate appeals system in place for employees who feel 
they have been treated arbitrarily or in a biased fashion. What 
in your opinion comprises an adequate appeals system? Do you 
believe the systems in place at Federal agencies, particularly 
ones we have discussed today, have adequate appeals systems?
    Mr. Fay. I can't speak to all of those agencies, but let me 
give you an example from IBM, which is a non-unionized company, 
generally speaking. They have a system where if an employee 
feels that he or she has been mistreated, arbitrarily treated 
by the organization, that they go first to the HR unit. If the 
HR unit cannot resolve it to the employee's satisfaction, it 
then goes into a system where someone from a different part of 
the organization comes in and hears it, hears the problem and 
makes a decision.
    When it first started, there were a significant number of 
those where managers got fired, got pay reduced, had a variety 
of bad things happen to them. As time has gone on, managers 
understand that you can't treat people arbitrarily or unfairly 
and so a far smaller percentage do, in fact, turn out in favor 
of the employee.
    But they still run--and another thing they do that I think 
is pretty remarkable, very few private companies do this, they 
put the person who made the complaint into a pool with other 
people who have made complaints. They select another pool who 
are equivalent in terms of their performance, in terms of their 
education, a variety of things. So they have parallel pools. 
And then they track the pools and make sure that people who 
filed a complaint don't end up out in limbo or laid off or 
anything at any greater rate than members of the other pool.
    That is, they go beyond just hearing and correcting when 
they see things are bad. They do two things I think are 
important. One is that managers who do behave in an arbitrary, 
capricious fashion feel it. They learn not to do that very 
quickly if they stay. And then second, they follow up to make 
sure that the employee does not suffer from having made a 
complaint, whether it is a supported complaint or not a 
supported complaint. You know the problems that whistleblowers 
in government agencies have and this was IBM's attempt, and a 
very successful one, to prevent people who filed this 
particular kind of complaint from being retaliated against.
    Senator Akaka. Well, let me ask my final question to Mr. 
Gage and Colleen Kelley. I am very concerned about the low 
morale reported at TSA and the disturbing picture painted by 
the responses to the 2007 DHS employee survey. Based on 
feedback that you all received from employees, what are the 
biggest concerns employees have with the TSA Performance and 
Accountability Standards System (PASS)? Mr. Gage.
    Mr. Gage. I interview TSA employees probably once a month 
and, for instance, they are supposed to do this one test with a 
contractor and it basically is they have to pat down, I believe 
it is a Lockheed contractor person and they don't get any 
feedback from the person they are patting down. But if they do 
something wrong in that pat down, they see that they are rated 
badly for that very important standard and they don't know why. 
Their supervisor doesn't know why. He wasn't there. He didn't 
do it.
    So there are so many of these things, while they say they 
are objective standards, they are not objective as far as the 
employee is concerned. He doesn't even know what he did wrong. 
And I hear that again and again and again. The same thing with 
the image test, which is completely unfair. Yet they say, well, 
you flunked the test, but why did I flunk it? How did I flunk 
it? What did I do wrong? I think I am a good TSO Officer.
    So I think that is one of the big things, but the other 
thing is the inflexibility of their leave policies and working 
conditions. Those are really the two big complaints that I get.
    Ms. Kelley. And I would add that the third one is the issue 
of pay and pay raises. There is no TSO who knows what it is 
they have to do to get a better pay raise next year, and they 
would tell you that pay raises are distributed based on 
favoritism and cronyism, not based on skills; not based on 
performance of the job. And they would say that in the same way 
it is true for promotions, whether it is to a lead TSO position 
or to a manager position.
    Senator Akaka. Senator Voinovich.
    Senator Voinovich. As I say, I do my own personal survey 
and the last couple of years, I am getting better responses 
from people, but I will say that some of them think that their 
evaluation is too subjective. I am aware of the fact that 
somebody else is doing it, and what you are basically saying is 
that once it is done, employees don't get any feedback about 
where it was that they failed and they are left in the dark 
about their performance.
    Mr. Gage. And by a contractor.
    Senator Voinovich. Yes. I wasn't aware of the details of 
the contract.
    Ms. Kelley. Well, the $1.2 billion contract I mentioned is 
a new Lockheed Martin contract, and that is for them to develop 
and deliver a human resources system and delivery of their pay 
system. So that is an additional $1.2 billion, with a B, 
contract, in addition to the one that Mr. Breul mentioned where 
they actually come in and conduct the testing of the TSOs.
    Senator Voinovich. How long ago was that contract signed?
    Ms. Kelley. I believe within the last 6 to 8 weeks. It is 
very recent.
    Senator Voinovich. I will check into it.
    Mr. Gage, you testified that DOD refused to work with the 
unions. Do you have any examples of when you have been over 
there and tried to get some input with them, and who do you 
contact there?
    Mr. Gage. Well, I have known Mary Lacey for a long time. I 
used to--when she was down at Indian Head. It was pretty clear 
during the last session of Congress where we were at 
loggerheads certainly on the collective bargaining aspects of 
NSPS, and we tried some negotiation--one meeting. But it was 
very obvious that there just wasn't discussion. There just 
wasn't an attitude of, well, what are your concerns and how can 
we work to answer some of your concerns.
    It was basically very--and through the whole collaboration 
process, it was an our way or the highway type of approach and 
there was no collaboration. There was no discussion. And I 
thought that was kind of odd because Ms. Lacey and I had done a 
lot of business in the past. But on this--this was a much 
different thing. I think DOD as an organization had their mind 
made up and they were going to do it their way and there was no 
looking back and no turning around.
    Senator Voinovich. I think one of the things that I 
understood was is that in terms of the implementation of the 
system, the people that are going into the system now are 
really not the unionized employees.
    Mr. Gage. Oh, yes. Well, they haven't been. But under these 
new regulations--see, we have wage grade exempted. They are out 
of NSPS totally. Why, you might ask? That is a good question. 
But the GS, the GS people now are the ones that are--the GS 
bargaining unit, non-management types, they are the ones that 
will be going into NSPS in these coming spirals under these new 
regulations that they put in. So we are completely concerned 
about that and----
    Senator Voinovich. My understanding is that they still have 
to go down some more spirals before they touch those people in 
the Defense Department that are members of your union----
    Mr. Gage. They are talking about this fall, or the fall 
next year.
    Senator Voinovich. Next year.
    Mr. Gage. Yes.
    Senator Voinovich. And that part of the reason why that 
they may not have had the level of discussion you would like is 
because they haven't gotten to your people yet. That is what I 
have heard. When we have had Mary Lacey in, she seems to be 
very committed to the system.
    Thank you.
    Senator Akaka. Well, I want to thank this panel. The 
performance of Federal agencies, as we know, depends on the 
ability of its workforce to trust the system that governs 
employee pay and performance. From improving transparency and 
communication to ending quotas or the perception thereof, there 
remain many problems with pay-for-performance systems at 
Federal agencies. We must address these issues in order to 
maintain the integrity and the trust of our civil service and 
ensure that the Federal Government is an employer of choice.
    Again, I want to thank all of the witnesses for being here 
today. I look forward to continuing to work with you and with 
Senator Voinovich to address these issues.
    The hearing record will remain open for 1 week for 
additional statements and questions from Members.
    This hearing is adjourned.
    [Whereupon, at 4:56 p.m., the Subcommittee was adjourned.]


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