[Federal Register Volume 60, Number 18 (Friday, January 27, 1995)]
[Proposed Rules]
[Pages 5542-5557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2109]




[[Page 5541]]

_______________________________________________________________________

Part VI





Office of Personnel Management





_______________________________________________________________________



5 CFR Parts 430, 432, 451 and 531



Performance Management; Proposed Rule

  Federal Register / Vol. 60, No. 18 / Friday, January 27, 1995 / 
Proposed Rules   
[[Page 5542]] 

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 430, 432, 451 and 531

RIN 3206-AG34


Performance Management

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is issuing proposed 
regulations to deregulate performance management and incentive awards, 
including provisions allowing agencies to use as few as two levels for 
critical element appraisals and summary ratings for non-SES employees, 
and to make conforming changes to related regulations. These changes 
are proposed to provide agencies additional flexibility as called for 
by the National Performance Review.

DATES: Comments must be submitted on or before March 28, 1995.

ADDRESSES: Comments may be sent or delivered to: Allan D. Heuerman, 
Assistant Director for Labor Relations and Workforce Performance, U.S. 
Office of Personnel Management, Room 7412, 1900 E Street NW., 
Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Barbara Colchao, (202) 606-2720.

SUPPLEMENTARY INFORMATION: To pursue the flexibility and 
decentralization called for by the National Performance Review (NPR), 
OPM proposes amending its regulations to remove many of the current 
regulatory requirements and permit agencies to implement performance 
management systems and programs for non-SES employees that better fit 
their organizational climate and needs. (OPM is conducting a separate 
review of SES performance appraisal regulations.) These proposed 
changes are intended to increase system flexibility and not to suggest 
the superiority of the newly available options. OPM advises agencies to 
examine their individual circumstances carefully before making any 
major changes to their performance management systems and programs.

Partnership and Successful Performance Management

    Agencies are strongly urged to develop their performance management 
systems and programs in partnership with their employees and union 
representatives in accordance with law. Many studies have shown that 
the success of a performance management system in achieving its goals 
is dependent upon acceptance by the management and employees who use 
it. There is no better way to garner support for a system than by 
giving all stakeholders a role in developing it. Further, the National 
Performance Review stated in its accompanying report, Reinventing Human 
Resource Management, that under the ideal performance management system 
``Employees and their representatives will be involved in design and 
implementation of performance management programs and in development of 
performance expectations.'' Consequently, OPM advises agencies that 
these regulatory changes in performance management should be 
implemented through full partnership with employees and their union 
representatives.

Performance Management Systems and Programs

    The recommendations of the National Performance Review for 
reforming the Government's performance management system contemplated a 
policy environment that would permit ``complete decentralization of 
performance management within a framework of broad, governmentwide 
principles.'' OPM is establishing that framework in these proposed 
regulations for appraisal and awards, which would remove many previous 
regulatory constraints and implement flexible Governmentwide systems 
for appraisal and awards. This approach will permit the implementation 
of the NPR recommendation for the development of agency-based 
performance management and incentive award programs tailored to meet 
each agency's unique needs.
    The law governing performance appraisal provides that agencies must 
establish one or more appraisal systems, and that OPM must review and 
approve an agency's system(s). OPM is proposing to define an agency 
appraisal system as the agency's framework of policies and parameters 
(i.e., guidelines, boundaries, limits) for the administration of 
performance appraisal. (See Sec. 430.204.) Although an agency would be 
authorized to establish more than one system, OPM anticipates that most 
agencies will not find it necessary to do so. OPM goes on to propose 
that within that OPM-approved framework, an agency would be free to 
establish and adapt one or more appraisal programs of specific 
procedures and requirements. (See Sec. 430.205.)
    Consequently, when an agency has determined it can more effectively 
meet the objectives for performance management to improve individual 
and organizational performance by establishing different specific 
performance appraisal procedures and requirements tailored to the 
mission, work technology, and/or employees of its organizational 
subcomponents or for subsets of positions, the proposed regulations 
would authorize the agency to develop appropriate, separate appraisal 
programs under the framework of its appraisal system.

Deregulating Performance Management

    OPM is proposing implementation of NPR recommendations for 
flexible, decentralized performance management through deregulation of 
appraisal and awards. That deregulation would be achieved in at least 
three ways.
    First, the regulations have been reviewed to eliminate unnecessary 
or redundant requirements. A number of requirements had been set forth 
in regulation, but were not required by statute. Many of these that 
have come to be unnecessarily constraining or burdensome (e.g., 
specifying required procedures for employees on details, requiring an 
SF-50 for a time-off award) would be eliminated. On the other hand, 
several regulations that merely repeat requirements that are already 
clearly stated in statute would also be eliminated. In these instances, 
of course, the statutory requirements will still be in effect.
    Second, a number of regulatory requirements would be removed, not 
because they were necessarily ineffective or redundant, but because 
agencies should be free to use them without being required to use them. 
For example, the proposal to eliminate the requirement for second-level 
review of performance plans should not be taken as an indication that 
OPM has concluded that second-level review is a bad idea. In many 
instances, the reverse is true. However, OPM is proposing to achieve a 
shift in policy perspective under which an agency's use of second-level 
review in its performance management programs would reflect the 
agency's program design choice rather than compliance with a 
Governmentwide regulatory requirement. A similar situation can be found 
in OPM's proposal to eliminate most restrictions on the use of time-off 
awards. Many agencies may choose to retain some limits, and they would 
be free to do so.
    Another example of this form of deregulation that would implement 
an authority without establishing a requirement is OPM's proposal to 
delete subpart E (Performance Awards) of part 430 and integrate 
provisions for rating-based cash awards into part 451 
[[Page 5543]] (Awards). This would consolidate the regulatory structure 
and clarify that rating-based cash performance award programs are an 
option that agencies are authorized--but not required--to use.
    Finally, deregulation would result from modifying OPM's review of 
agency systems. An agency's appraisal system, or overall policy 
framework, would still be reviewed and approved, as required by law, 
for compliance with regulatory requirements. However, the scope of that 
review would be limited to that required by law, and there would be 
fewer regulatory requirements to review. The proposed regulation 
returns the Governmentwide regulatory scheme for performance management 
to the decentralized approach initially taken in implementing the Civil 
Service Reform Act of 1978. The highly detailed regulatory requirements 
that OPM is proposing to modify date to the mid-1980's, a time when 
there was a strong policy interest in achieving Governmentwide 
uniformity. Experience has provided substantial evidence that the ``one 
size fits all'' approach does not support effective performance 
management and needs to be changed.

Reinventing Performance Management

    In addition to reducing the amount of regulation, OPM is proposing 
regulatory revisions to facilitate applying performance management 
regulations to improving individual and organizational performance. The 
language and context of existing regulation is centered strongly in a 
model of individual performance and recognition. The language, context, 
and focus of effective performance management practice have altered 
substantially in recent years. Many organizations have benefitted from 
a shift to focusing on the group or team performance level. Such a 
shift can greatly improve the credibility and utility of appraisal and 
award processes and outcomes for achieving the objective of improving 
organizational performance and mission accomplishment.
    The current regulations stem from a model of appraisal based more 
on process inputs and the duties and responsibilities in an employee's 
individual position description and less on the results and 
accomplishments for which that employee is accountable. Experience has 
shown that those results and accomplishments are often more reasonably 
and meaningfully described, and certainly measured, at the group or 
team level. One objective in OPM's revision of appraisal and award 
regulations is to ensure that they could be applied to managing group 
performance. Consequently, many proposed revisions would remove 
language (e.g., ``employee'' and ``position'') that narrowed the 
regulation's focus to individual performance. Several appraisal-related 
terms would be retained (e.g., appraisal, critical element, 
performance), but their definitions modified to accommodate this 
broader context.
    OPM's goal is to establish a regulatory scheme that would operate 
effectively at the individual and the team or group level. An agency 
would still be able to design and operate its programs entirely at the 
individual level. Establishing and maintaining individual 
accountability and taking appropriate actions to deal with poor 
performers must remain significant aspects of the Government's 
performance management system. Therefore, the regulations would 
continue to require that each employee have a performance plan, and OPM 
is proposing to require that each plan must include at least one 
critical element that addresses individual performance. (See 
Sec. 430.206(b)(4).)
    In addition to making changes to accommodate group performance, OPM 
is proposing some revisions to the regulatory structure that are 
intended to refocus attention away from the once-a-year summary rating 
aspects of performance appraisal procedures and back toward the 
processes involved in communicating performance expectations and 
providing ongoing feedback. To that end, OPM is proposing to establish 
separate sections within the appraisal subpart of part 430 that focus 
on:

--Planning performance, (See Sec. 430.206.)
--Monitoring performance, (See Sec. 430.207.)
and
--Rating performance at the end of an appraisal period or cycle. (See 
Sec. 430.208.)

    The definition and requirements for a performance plan would be 
broad enough to accommodate including other expressions of performance 
expectations in addition to establishing elements and standards. (See 
Sec. 430.203 and Sec. 430.206(b)(5).) This would facilitate agencies 
integrating other performance planning processes with their appraisal 
programs (for example, by including factors from performance contracts, 
performance goals and targets, published customer service standards, 
organization-level performance plans established under the Government 
Performance and Results Act of 1993, etc.). The proposed regulations 
seek only to establish clearly that agencies would be free to integrate 
such planning tools and products and do not establish specific 
requirements or procedures for doing so. Such factors could be 
considered, for example, in designing incentive award schemes and 
distributing rewards and recognition. However, such factors could not 
be used as the basis for initiating a performance-based action, which 
requires a determination that performance on a critical element is 
``Unacceptable.''
    Another area where OPM is proposing a broader context is the 
process for deriving a summary rating. Although OPM is proposing to 
permit as few as two summary rating levels (see below), it is also 
anticipated that agencies will continue to have an interest in making 
and recording further distinctions among the vast majority of employees 
who meet basic performance expectations. OPM is proposing regulations 
that would give agencies more flexibility in deriving and assigning 
summary rating levels. For example, agencies would be able to--but not 
required to--consider other performance-related factors beyond 
appraisal of employee or group performance on critical elements. (See 
Sec. 430.208(b).) Examples of such other factors include:

--Components from a performance plan such as meeting work plan 
objectives or group performance goals that had not been specifically 
framed as critical elements,
--A record of receiving awards for superior performance,
--A record of documented productivity gains,
--A non-critical element included in the performance plan to 
communicate an expectation and standards that, if met, could raise a 
summary rating above Level 3 (``Fully Successful'' or equivalent).

    In addition, OPM is proposing to give agencies the flexibility to 
use forced distributions of summary ratings above Level 3 (``Fully 
Successful'' or equivalent), but only where those summary ratings above 
that level are not derived solely based on a comparison of performance 
against predetermined standards. An example of such a scheme would be 
to use performance-related criteria to rank the employees whose 
critical elements are all appraised as at least ``Fully Successful'' 
and assign the highest rating level to a limited number of employees. 
It should be noted that the effectiveness and acceptance of such a 
scheme would rest largely on the credibility and equity of the 
processes and criteria used to rank the employees. 
[[Page 5544]] Nevertheless, OPM is proposing to offer agencies this 
flexibility. If performance standards defining the higher levels had 
been established, an agency would be prohibited from prescribing a 
distribution of ratings. (See Sec. 430.208(c).)
    Within the awards arena of performance management, reinventing the 
system of Governmentwide policies for recognition and reward programs 
would be achieved by integrating rating-based cash performance award 
provisions into the same regulatory part as other awards and by 
simplifying those regulatory provisions. This would have the effect of 
giving agencies a framework of broad, flexible principles for designing 
and administering decentralized award programs, consistent with NPR 
recommendations. Within those broad principles, agencies would be free 
to design and operate a wide variety of tailor-made incentive and 
recognition programs at the individual and group level, including most 
of the alternative reward, variable pay, and pay-for-performance 
schemes that can contribute to improving individual and organizational 
performance.

Number of Summary Rating Levels

    OPM is proposing to permit agencies to use as few as two levels for 
summary performance ratings. Among summary rating levels, agencies 
would be required to include a Level 1 (``Unacceptable'') and a Level 3 
(``Fully Successful'' or equivalent). If more than two summary rating 
levels were used, the agency could choose any combination from the 
remaining three levels (i.e., Level 2, Level 4, and Level 5). Agencies 
also would continue to be permitted to use equivalent terms for ``Fully 
Successful'' and/or ``Outstanding.'' (See Sec. 430.208(d).)
    Using the five possible summary rating-level designators 
established at Sec. 430.208(d), the following table illustrates the 
various patterns of levels available.

----------------------------------------------------------------------------------------------------------------
                                                 Summary rating level designator from new Sec. 430.208(d)       
                                         -----------------------------------------------------------------------
   Number of summary rating levels in                                     Level 3                               
                 program                        Level 1       Level 2     (``fully    Level 4       Level 5     
                                          (``unacceptable'')           successful'')           (``outstanding'')
----------------------------------------------------------------------------------------------------------------
Two.....................................             X        .......          X      .......  .................
Three:                                                                                                          
  Option 1..............................             X        .......          X      .......            X      
  Option 2..............................             X        .......          X           X   .................
  Option 3..............................             X             X           X      .......  .................
Four:                                                                                                           
  Option 1..............................             X        .......          X           X             X      
  Option 2..............................             X             X           X      .......            X      
  Option 3..............................             X             X           X           X   .................
Five                                                 X             X           X           X             X      
----------------------------------------------------------------------------------------------------------------

    Permitting the use of only two summary rating levels would not 
require a change in the rules governing additional service credit for 
performance in determining an employee's retention standing for RIF 
purposes since an appraisal program with only two summary rating levels 
would be required to use Level 3 (``Fully Successful'' or equivalent) 
to summarize acceptable performance. As set forth in 5 CFR 
351.504(d)(3), an employee would receive ``Twelve additional years of 
service credit for each performance rating of fully successful (Level 
3) or equivalent.''

Number of Levels for Appraising Elements

    OPM is proposing to permit agencies to use as few as two levels at 
which to appraise performance on the elements in employee performance 
plans. At a minimum, it must be determined whether performance is 
``Fully Successful'' (or equivalent) or ``Unacceptable'' when appraised 
against established performance standards. Agencies would still be 
required to establish performance standards at the ``Fully Successful'' 
(or equivalent) level for critical and non-critical elements. Also, 
agencies would continue to be permitted to determine performance to be 
at a level that has no established performance standard but which has 
been provided for by the applicable performance appraisal program. (See 
Sec. 430.206(b)(6).)

Regulatory Changes in Awards

    OPM is also proposing to revise regulations so that the 
requirements governing all types of awards for non-SES employees would 
be in part 451 of chapter 5 of the Code of Federal Regulations. The 
proposed regulations provide for a few basic requirements within which 
agencies can design award programs to meet their individual cultures 
and needs.
    The language throughout these regulations has been reviewed for its 
use of the term ``incentive award(s).'' For many years since the 
inception of the consolidated awards authority for Federal employees in 
1954, the term ``incentive'' was used broadly to cover all types of 
awards including those that are granted retrospectively at management 
discretion to recognize past contributions, such as special acts or 
suggestions. As awards theory and practice have developed in recent 
years, however, ``incentive'' typically is applied somewhat more 
restrictively to award programs, such as productivity gainsharing and 
performance goalsharing schemes, that are designed to specify clearly 
in advance what recognition and reward will be granted based on a given 
contribution. Programs such as these have demonstrated their 
effectiveness for improving performance. At the same time, awards that 
recognize past contributions not specified in advance beyond some 
general criteria remain an appropriate and effective use of the 
authority to grant awards.
    There is no strict definition or distinction for the term 
``incentive'' that can be established or applied. Nevertheless, to 
recognize trends in awards theory and practice, OPM is proposing to use 
only the term ``award(s)'' in the broad regulations that cover both the 
prespecified and the retrospective uses of the awards authority and 
limit use of the term [[Page 5545]] ``incentive'' in the regulations to 
situations where the relationship between contribution and award is 
clearly specified in advance.
    OPM is proposing to remove the separate subpart (subpart E) within 
part 430 governing the use of rating-based cash performance awards and 
to integrate a minimum number of essential provisions into subpart A of 
part 451. (See Secs. 451.104(a)(3), 451.104(b) & (g), and 451.106(b), 
(f) & (g).) OPM is also proposing to delete the separate subpart 
(subpart C) within part 451 governing the use of time-off awards and to 
integrate time-off awards within the more general award provisions. 
(See Secs. 451.104(a) and 451.104(e).)
    OPM is proposing new regulations to implement new statutory 
provisions at 5 U.S.C. 4508 and 4509 concerning restrictions on awards 
for senior political appointees. (See Sec. 451.105.) In addition, OPM 
is proposing a new regulation that alerts agencies that when designing 
award programs under this authority, they must ensure that award 
schemes, especially those based on achievements other than those 
directly related to an employee's performance plan, will not violate 
any other statute or Governmentwide regulation. (See Sec. 451.106(a).)

Within-Grade Increase Flexibilities

    OPM is proposing an agency-requested flexibility to permit the 
delay of the acceptable level of competence (ALOC) determination 
required for granting a within-grade increase when an employee has 
begun an opportunity period or has been given a notice of a proposed 
performance-based action. This option to delay an ALOC in no way 
restrains an agency from establishing a policy to deny a within-grade 
increase to an employee whose performance or rating of record supports 
such a denial. Furthermore, in those agencies that choose to continue 
using a Level 2 (``Minimally Successful'' or equivalent) summary rating 
level, exercising the delay option would create an inequity between the 
minimally acceptable and unacceptable employee in that the unacceptable 
employee would be given additional time to achieve ALOC. (See 
Sec. 531.409(c)(2).)
    Another proposed flexibility would cover situations where agencies 
have employees who are authorized to perform activities of official 
interest to the agency (e.g., labor-management partnership activities 
under section 2 of Executive Order 12871, serving as a representative 
of a labor organization, etc.), but are not able to perform under 
elements and standards (and, therefore, the agency is unable to provide 
a rating of record). OPM is proposing to permit the agency to waive the 
requirement for an ALOC determination and grant within-grade increases 
upon completion of the applicable waiting period. This waiver option 
recognizes that such employees have not had a sufficient opportunity to 
perform under their assigned elements and standards due to the other 
authorized activities and supposes that such performance would have 
been at least ``Fully Successful'' had it occurred. (See 
Sec. 531.409(d)(5).)

Eligibility for Quality Step Increases

    Agencies are required by Executive Order 11721 to establish plans 
for granting additional step increases to employees on the basis of 
high quality performance. Current regulation at Sec. 531.504 
establishes that a Level 5 (``Outstanding'' or equivalent) rating is 
required for granting such a quality step increase (QSI). OPM 
recognizes that agencies that choose to adopt two summary rating levels 
or to not include a Level 5 summary rating level would not be able to 
grant a QSI under current regulation, and thereby satisfy the 
requirements of Executive Order 11721. Consequently, OPM proposes to 
amend its pay regulations to permit an employee under an appraisal 
program without a Level 5 summary rating level to be eligible for a QSI 
based on demonstrating sustained performance that is significantly 
higher than that expected at the ``Fully Successful'' level. Agencies 
would be required to establish performance-related criteria for QSI 
eligibility consistent with this requirement. (See Sec. 531.504.)

Appraisal System Transition

    OPM is proposing a regulatory provision that would assist agencies 
as they develop and implement new appraisal systems and programs under 
new regulatory flexibilities. At the time that new regulatory 
requirements and provisions become effective, it is essential to 
support a smooth transition especially for agencies that might be 
pursuing a pending administrative action initiated under the systems 
that exist now. The regulatory provision would clarify that any 
appraisal system that had been reviewed and officially approved by OPM 
as of the effective date of the revised regulations would be considered 
an approved system under the revised regulations until such time as 
changes to the system are approved. This will permit agencies to pursue 
pending actions and to continue to operate their existing appraisal 
systems and initiate other actions based on appraisal results. (See 
Sec. 430.201(b).)
    Agencies should note that these regulatory changes establish no 
requirements or deadlines to make appraisal system changes. The 
flexibility the proposed regulations would achieve includes the 
flexibility to continue agency appraisal policies, procedures, and 
requirements that are already in use. OPM is proposing no regulatory 
provision that would create a regulatory conflict for any appraisal 
system already approved under current regulation.
    OPM would provide guidance to agencies on requirements and 
procedures for submitting system descriptions to OPM for review and 
approval.

Major Proposed Changes to Performance Management Regulations

    OPM also is proposing to amend its regulations in other ways to 
provide additional flexibilities, eliminate burdensome requirements, 
establish new provisions, and make conforming and editorial changes. 
The following list summarizes the substantive changes, including those 
discussed above.

Added Flexibilities and Reduced Requirements

    1. Permits agencies to use as few as two performance levels for 
appraising elements.
    2. Permits agencies to use as few as two levels for summary 
performance ratings.
    3. Removes the requirement for OPM approval of plans for awards, 
quality step increases, and within-grade increases, but retains 
statutory requirement that OPM approve performance appraisal systems.
    4. Permits recording of performance plans, ratings, etc., in 
formats other than paper.
    5. Deletes the requirement for higher-level review of performance 
plans.
    6. Replaces the requirement that agencies assist employees with 
performance below Fully Successful with the statutory requirement to 
assist with performance that is Unacceptable.
    7. Replaces the total prohibition on forced distributions of 
summary ratings with prohibitions limited to summary ratings below 
Level 3 or situations where summary ratings are based solely on 
appraisal against pre-established performance standards.
    8. Deletes the requirement that a rating of record under one pay 
system be used as the rating of record under a new system when there is 
no change in duties or responsibilities.
    9. Deletes the requirement for agencies to prepare a summary rating 
when an employee changes position and [[Page 5546]] to specify how such 
a rating is to be taken into account when preparing a rating of record.
    10. Deletes fixed limits (90 to 120 days) on the length of the 
minimum appraisal period, and replaces them with a requirement that a 
minimum period be established.
    11. Deletes specific requirements for rating employee performance 
while on detail and replaces them with a requirement that an agency 
appraisal program address appraisal while on detail.
    12. Deletes the general requirement for higher-level approval of a 
rating of record and replaces it with a requirement that only 
``Unacceptable'' summary ratings be approved at a higher level.
    13. Replaces the requirement for training supervisors and employees 
on the appraisal process with a requirement to communicate about 
relevant parts of the system and programs.
    14. Deletes subpart E (Performance Awards) of part 430 and 
incorporates some performance awards provisions into part 451 (Awards).
    15. Deletes the recommendation to make maximum use of awards 
authority.
    16. Replaces the requirement to document awards in the OPF with a 
provision for agencies to establish criteria to determine which awards 
to document in the OPF.
    17. Replaces the requirement for higher-level review of awards with 
a requirement to follow agency financial management control procedures.
    18. Deletes the requirements for an SF-50 for a time-off award and 
for annual reports on performance awards and awards program activity, 
and replaces them with a requirement to report data on all cash and 
time-off awards to the CPDF.
    19. Deletes the provision that awards cannot be used as substitutes 
for pay or other personnel actions.
    20. Deletes most regulatory provisions and requirements regarding 
time-off awards, but retains the provision that prohibits converting a 
time-off award to cash.

New Provisions

    1. A distinction is made between an agency system (agencywide 
policy and parameters) and an agency program (specific procedures, 
forms, standards, etc.).
    2. Agencies are encouraged to involve employees and their 
representatives in the development of award and appraisal systems and 
programs.
    3. Key definitions and provisions have been broadened to explicitly 
include teams.
    4. Provision to maintain applicability of appraisal systems already 
reviewed and approved by OPM is added.
    5. At least one element in a performance plan must address 
individual performance.
    6. Agencies are to ensure that any award program they develop does 
not conflict with any other applicable law or regulation.
    7. OPM is authorized to grant agency requests to extend 5 U.S.C. 
4505a to non-General Schedule employees as provided by Executive Order 
12828.
    8. The provision that a rating-based cash performance award cannot 
be appealed is clarified to include all awards.
    9. The statutory restrictions on granting awards to senior 
political officials is added.
    10. Agencies are to use the OPM Guide to Federal Workforce 
Reporting Systems when reporting data.
    11. OPM is authorized to evaluate agency award programs.
    12. A provision permitting an agency to delay an ALOC determination 
if the employee is in an opportunity period or notice period is added.
    13. A provision permitting an agency to waive the ALOC 
determination for employees who have been unable to perform under 
elements and standards because they spent 100% of their time on 
activities of official interest to the agency is added.
    14. An agency that does not use the ``Outstanding'' (Level 5) 
summary rating level will be permitted to establish performance-related 
criteria and grant a quality step increase to an employee who 
demonstrates significantly high quality performance.

Table of Changes

    The following table lists all the proposed changes to the current 
regulation, including those discussed above.

--In the left column, the table lists all current regulations in parts 
430 and 451 and current regulations in parts 432 and 531 that are 
impacted by the proposed regulations.
--In the middle column, the table lists the proposed regulations that 
track the provisions of the current regulations in the left column.
--In the right column, the table explains the changes in provisions 
from the current regulation in the left column to the proposed 
regulation in the middle column.

----------------------------------------------------------------------------------------------------------------
        Current rule                  Proposed rule                         Description of change               
----------------------------------------------------------------------------------------------------------------
Sec. 430.101................  Sec. 430.101................  Proposed rule removes citation of incentive award   
                                                             and pay statutes because they no longer apply.     
Sec. 430.102................  Sec. 430.102(a).............  Proposed rule redefines performance management to   
                                                             reorient the definition to team settings and goals 
                                                             of the National Performance Review (NPR).          
Sec. 430.103................  Sec. 430.102(c).............  Proposed rule redescribes the Performance Management
                                                             Plan; removes the requirement for OPM approval of  
                                                             plans for awards, quality step increases, and      
                                                             within-grade increases; the requirement for final  
                                                             approval of component plans by OPM; and reference  
                                                             to the Performance Management Plan Checklist to    
                                                             provide greater agency flexibility and to reflect  
                                                             OPM's scope of review.                             
                              Sec. 430.209 (a) & (f)......  Proposed rule revises and redesignates the provision
                                                             requiring submission of appraisal system(s), system
                                                             changes, and records to OPM to reflect OPM's scope 
                                                             of review.                                         
Sec. 430.201(a).............  Sec. 430.201(a).............  Proposed rule makes editorial changes to section    
                                                             addressing statutory authority to eliminate        
                                                             nonessential information.                          
                              Sec. 430.201(b).............  Proposed rule adds provision to maintain            
                                                             applicability of performance appraisal systems     
                                                             already reviewed and approved by OPM.              
Sec. 430.201(b).............  Sec. 430.102(b).............  Proposed rule revises language that specifies       
                                                             objectives of performance appraisal systems to     
                                                             specify objectives of performance management and to
                                                             add references to teams.                           
Sec. 430.202(a).............  Sec. 430.202(a).............  Proposed rule attaches to ``General Schedule'' a    
                                                             parenthetical reference to ``GS/GM'' to accommodate
                                                             termination of the Performance Management and      
                                                             Recognition System.                                
Sec. 430.202(b).............  Sec. 430.202(b).............  Proposed rule deletes requirements regarding the    
                                                             statutory authority under which agencies may       
                                                             exclude temporary employees to increase agency     
                                                             flexibility.                                       
[[Page 5547]]                                                                                                   
                                                                                                                
Sec. 430.202(c).............  Sec. 430.202(c).............  Proposed rule substitutes a ``minimum period        
                                                             established by the agency'' for the fixed ``120    
                                                             calendar days'' as the minimum period of time a    
                                                             position is not reasonably expected to exceed to be
                                                             excluded from coverage for the purpose of          
                                                             increasing agency flexibility.                     
Sec. 430.202(d).............  Sec. 430.202(d).............  No change.                                          
Sec. 430.203................  Sec. 430.203................  Appraisal is broadened to allow more flexibility.   
                                                            Appraisal period is revised to reinforce the        
                                                             expectation that appraisal periods generally last  
                                                             one year and to establish them as the basis for    
                                                             ratings of record.                                 
                                                            Appraisal program is added to distinguish specific  
                                                             appraisal procedures and requirements from         
                                                             agencywide appraisal policies and parameters       
                                                             established for the administration of performance  
                                                             appraisal within the agency.                       
                                                            Appraisal system is revised to clarify that it      
                                                             refers only to an agencywide framework for         
                                                             appraisal policy and to remove references to       
                                                             various system requirements that would no longer   
                                                             apply.                                             
                                                            Critical element is broadened to facilitate using   
                                                             performance planning to communicate expectations,  
                                                             especially in team settings, by removing           
                                                             classification-centered references to duties and   
                                                             responsibilities of the position.                  
                                                            Non-critical element is deleted because it is not   
                                                             needed.                                            
                                                            Performance is revised to broaden the definition, to
                                                             reference work responsibilities as well as         
                                                             assignments, and to remove the classification-     
                                                             centered reference to a position to better         
                                                             accommodate team settings.                         
                                                            Performance Appraisal System is retained without    
                                                             change.                                            
                                                            Performance Management Plan is deleted because it is
                                                             described in subpart A already.                    
                                                            Performance plan is revised to reorient the         
                                                             definition to team settings and NPR goals and to   
                                                             permit the performance plan to be recorded in      
                                                             formats other than paper.                          
                                                            Performance rating is added to replace the          
                                                             definition of ``summary rating'' which is no longer
                                                             needed, to permit the performance rating to be     
                                                             recorded in formats other than paper, and to       
                                                             acknowledge that non-critical elements are         
                                                             optional.                                          
                                                            Performance standard is revised to remove language  
                                                             that implies that management should develop        
                                                             standards without employee input and to improve    
                                                             clarity.                                           
                                                            Progress review is revised to emphasize             
                                                             communication and the legitimacy of team elements  
                                                             and standards.                                     
                                                            Rating is deleted because it is not needed.         
                                                            Rating of record is revised to refer to             
                                                             ``performance rating'' instead of ``summary        
                                                             rating,'' to include the assignment of a summary   
                                                             rating level, to remove reference to the           
                                                             Performance Management Plan, to specify that the   
                                                             rating of record generally applies to performance  
                                                             over the entire appraisal period, and to specify   
                                                             that all references to official ratings,           
                                                             performance ratings, and ratings of record in title
                                                             5 of the Code of Federal Regulations refer to this 
                                                             definition. The purpose of these changes is to     
                                                             clarify the rating process and provide greater     
                                                             flexibility.                                       
                                                            Summary rating is deleted and replaced by a new     
                                                             term, ``performance rating,'' and language in the  
                                                             ``rating of record'' definition (see above) to     
                                                             clarify the rating process and provide greater     
                                                             flexibility.                                       
Sec. 430.204(a).............  Sec. 430.204(a).............  No change.                                          
                              Sec. 430.204(b).............  Proposed rule adds new provision to require agencies
                                                             to establish agencywide policies and parameters and
                                                             sets forth minimum requirements for a system to    
                                                             reflect OPM's scope of review.                     
                              Sec. 430.204(c),............  Proposed rule adds new provision to encourage       
                              Sec. 430.204(d).............   employee involvement in system and program         
                                                             development to reflect team settings and NPR goals.
                              Sec. 430.205(a).............  Proposed rule adds new provision that requires      
                                                             agencies to develop at least one appraisal program 
                                                             within the scope of agency systems to specify      
                                                             procedures and requirements to operate the         
                                                             performance appraisal system.                      
                              Sec. 430.205(c).............  Proposed rule adds new provision that permits the   
                                                             development of separate appraisal programs to      
                                                             implement decentralized performance appraisal.     
Sec. 430.204(b).............  Sec. 430.206(b)(3), Sec.      Proposed rule revises and redesignates provisions   
                               430.207(b), Sec. 430.208(a)   requiring performance plans, appraisals, and       
                                                             summary ratings; and permits formats other than    
                                                             paper for recording performance plans to clarify   
                                                             the rating process and provide greater flexibility.
Sec. 430.204(c).............  Sec. 430.206(b)(1)..........  Proposed rule retains provision for employee        
                                                             participation in establishing performance plans,   
                                                             deletes reference to examples of employee          
                                                             participation in establishing performance plans to 
                                                             eliminate nonessential information, and deletes the
                                                             provision that supervisory officials have ultimate 
                                                             authority to establish such plans to accommodate   
                                                             team settings and support NPR goals.               
Sec. 430.204(d)(1)..........  Sec. 430.206(b)(2)&(3)......  Proposed rule revises and redesignates the          
                                                             provisions for job-related performance plans       
                                                             provided at the beginning of the appraisal period  
                                                             to clarify the rating process.                     
                              (b)(4)......................  Proposed rule adds new provision to ensure that at  
                                                             least one element addresses individual performance.
Sec. 430.204(d)(2)..........  Sec. 430.206(b)(5)..........  Proposed rule revises and redesignates the provision
                                                             for the inclusion of organizational objectives in  
                                                             performance plans to provide for team setting and  
                                                             support NPR goals.                                 
Sec. 430.204(e).............  Sec. 430.206(b)(6)..........  Proposed rule permits agencies to use as few as two 
                                                             levels to appraise elements to provide greater     
                                                             flexibility (see section in supplementary          
                                                             information above), and continues requirement for  
                                                             Fully Successful standard and ability to appraise  
                                                             at levels without explicit standards.              
Sec. 430.204(f).............  Sec. 430.206(b)(6)(ii)......  Proposed rule revises and redesignates requirement  
                                                             for written performance standard and deletes       
                                                             requirement for higher-level review of performance 
                                                             plans to provide greater flexibility.              
[[Page 5548]]                                                                                                   
                                                                                                                
Sec. 430.204(g).............  Sec. 430.208(b).............  Proposed rule revises and redesignates the          
                                                             requirement for a summary rating method and        
                                                             provides added flexibility in deriving summary     
                                                             rating levels.                                     
Sec. 430.204(h).............  Sec. 430.208(d).............  Proposed rule permits agencies to use as few as two 
                                                             summary rating levels (Unacceptable and Fully      
                                                             Successful) (see section in supplementary          
                                                             information above) and permits use of other levels 
                                                             to provide greater flexibility.                    
Sec. 430.204(i).............  Sec. 430.208(d) Sec.          Proposed rule simplifies regulatory text and        
                               430.209(3).                   replaces the outdated reference to the Federal     
                                                             Personnel Manual with a reference to the current   
                                                             OPM Guide to Federal Workforce Reporting Systems.  
Sec. 430.204(j).............  Sec. 430.207(c)(1)..........  Proposed rule clarifies that agencies are required  
                                                             to assist employees with ``Unacceptable''          
                                                             performance and deletes examples of assistance to  
                                                             remove nonessential information.                   
Sec. 430.204(k).............  Sec. 430.207(c)()...........  Proposed rule simplifies language addressing        
                                                             unacceptable performance to delete information     
                                                             stated elsewhere in regulation (performance-based  
                                                             action can be taken either under procedures        
                                                             established in part 432 or part 752, subpart D).   
Sec. 430.204(1).............  ............................  Proposed rule deletes provision requiring ratings of
                                                             record under one pay system to be used as ratings  
                                                             of record under a new pay system when there is no  
                                                             change in the duties and responsibilities of the   
                                                             position to provide greater flexibility.           
Sec. 430.204(a).............  Sec. 430.206(a).............  Proposed rule revises and redesignates the          
                                                             requirement for appraisal period and removes the   
                                                             requirement for agencies to prepare a summary      
                                                             rating when an employee changes position and to    
                                                             specify how these are taken into account when      
                                                             preparing ratings of record to clarify the rating  
                                                             process and provide greater flexibility.           
Sec. 430.205(b).............  Sec. 430.207(a).............  Proposed rule deletes fixed limits on the length of 
                                                             minimum appraisal periods to provide greater       
                                                             flexbility.                                        
Sec. 430.205(c).............  Sec. 430.207(b).............  Proposed rule makes editorial changes to provisions 
                                                             regarding appraising performance on each element   
                                                             and progress reviews to increase emphasis on       
                                                             communication.                                     
Sec. 430.205(d).............  Sec. 430.205(b).............  Proposed rule replaces requirement to rate employee 
                                                             performance while on detail with requirement that  
                                                             programs address the issue to provide greater      
                                                             flexibility.                                       
Sec. 430.205(e).............  Sec. 430.207(b).............  Proposed rule revises and redesignates the          
                                                             requirement for a progress review to increase      
                                                             emphasis on communication.                         
Sec. 430.205(f).............  Sec. 430.208(f).............  Proposed rule revises the redesignates and provision
                                                             regarding rating disabled veterans to clarify      
                                                             rating process.                                    
Sec. 430.206(a).............  Sec. 430.208(a).............  Proposed rule revises and redesignates requirement  
                                                             for rating of record to eliminate repeating        
                                                             information in the definition and permits agencies 
                                                             to use formats other than paper to give ratings of 
                                                             record to employees.                               
Sec. 430.206(b).............  ............................  Proposed rule deletes a provision repeated in       
                                                             current Sec. 430.205(c) and proposed Sec.          
                                                             430.207(b) (see above).                            
Sec. 430.206(c).............  Sec. 430.208(e).............  Proposed rule limits requirement for higher-level   
                                                             approval to ``Unacceptable'' ratings of record to  
                                                             provide greater flexibility.                       
Sec. 430.206(d).............  Sec. 430.208(c).............  Proposed rule revises and redesignates the          
                                                             prohibition of forced distribution, but limits it  
                                                             to ratings below Level 3 or to situations where    
                                                             employees are rated only against pre-established   
                                                             standards, and removes the requirement that        
                                                             agencies establish procedures to ensure that only  
                                                             those employees who exceed normal expectations     
                                                             receive ratings above Fully Successful. These      
                                                             changes are made to provide greater flexibility.   
Sec. 430.206(e).............  Sec. 430.208(g).............  Proposed rule makes editorial changes to provision  
                                                             regarding extension of appraisal period to clarify 
                                                             the rating process and provide greater flexibility.
Sec. 430.206(f).............  Sec. 430.209(b).............  Proposed rule revises and redesignates the          
                                                             requirements to transfer ratings of record when    
                                                             employees go to a new agency or organization to    
                                                             clarify the rating process.                        
Sec. 430.207................  ............................  Proposed rule deletes reserved secton for           
                                                             performance appraisal advisory committees that is  
                                                             not needed.                                        
Sec. 430.208................  Sec. 430.209 (c) & (d)......  Proposed rule replaces the requirement for training 
                                                             supervisors and employees on the appraisal process 
                                                             with requirement to communicate about the relevant 
                                                             parts of the system(s) and programs to reflect     
                                                             emphasis on communication and provide graeter      
                                                             flexibility, and retains the requirement to        
                                                             evaluate system(s) and programs.                   
Sec. 430.209................  Sec. 430.209(g).............  Proposed rule moves the requirement for agencies to 
                                                             take corrective actions to clarify                 
                                                             responsibilities.                                  
                              Sec. 430.210................  Proposed rule revises and redesignates OPM role to  
                                                             reflect OPM's authority to review, evaluate, and   
                                                             direct corrective action.                          
Sec. 430.210................  Sec. 430.209(a).............  Proposed rule clarifies that each agency must submit
                                                             its performance appraisal system(s) for OPM        
                                                             approval.                                          
Subpart E Performance Awards  ............................  Proposed rule deletes this subpart and combines the 
                                                             provision for performance awards into other        
                                                             sections of part 451 to integrate awards policy and
                                                             support NPR goals.                                 
Sec. 430.501(a).............  Sec. 451.101................  Proposed rule revises and redesignates the reference
                                                             to chapter 43, United States Code to accommodate   
                                                             relocation of information.                         
Sec. 430.501(b).............  Sec. 451.101(c).............  Proposed rule makes editorial changes to provision  
                                                             regarding definition of employees to accommodate   
                                                             relocation of information.                         
Sec. 430.501(c).............  Sec. 451.101(c).............  Proposed rule makes editorial changes to provision  
                                                             regarding definition of agencies to accommodate    
                                                             relocation of information.                         
Sec. 430.501(d).............  ............................  Proposed rule deletes reference to part 451 for     
                                                             regulatory requirements for granting superior      
                                                             accomplishment awards that is no longer needed.    
Sec. 430.502................  ............................  Proposed rule deletes definitions for performance   
                                                             award, performance award budget, Performance       
                                                             Management Plan, and rating of record that are no  
                                                             longer needed.                                     
Sec. 430.503(a).............  ............................  Proposed rule deletes purpose section for           
                                                             performance awards that is no longer needed.       
Sec. 430.503(b).............  Sec. 451.104(a)(3)..........  Proposed rule revises and redesignates the provision
                                                             to permit use of a rating of record as the basis   
                                                             for granting an award to accommodate relocation of 
                                                             information.                                       
[[Page 5549]]                                                                                                   
                                                                                                                
Sec. 430.503(c).............  Sec. 451.106(g).............  Proposed rule replaces requirement to document      
                                                             awards in OPF with provision for agencies to       
                                                             establish criteria to determine which awards to    
                                                             document in OPF to provide greater flexibility.    
Sec. 430.503(d).............  Sec. 451.106(h).............  Proposed rule redesignates provision for giving due 
                                                             weight to awards in promotions without change.     
Sec. 430.503(e).............  ............................  Proposed rule deletes recommendation to make maximum
                                                             use of awards authority to remove nonessential     
                                                             information.                                       
Sec. 430.504(a).............  ............................  Proposed rule deletes repetition of the statutory   
                                                             percentage limits for performance-based cash awards
                                                             at 5 U.S.C. 4505a(a)(2)(A).                        
Sec. 430.504(b).............  Sec. 451.104(b).............  Proposed rule revises and redesignates the provision
                                                             that cash awards are paid as lump sums to          
                                                             accommodate relocation of information.             
Sec. 430.504(c).............  Sec. 451.104(g).............  Proposed rule makes editorial changes regarding     
                                                             application of locality pay to clarify language.   
Sec. 430.504(d).............  Sec. 451.103(c).............  Proposed rule replaces higher level review of awards
                                                             based on a rating of record with requirement to    
                                                             follow agency financial management control         
                                                             procedures to give flexibility while maintaining   
                                                             necessary levels of control.                       
Sec. 430.504(e).............  Sec. 451.104(h).............  Proposed rule moves the provision that a performance-
                                                             based cash award and its amount cannot be appealed 
                                                             (5 U.S.C. 4505a (b)(2)). Resulting rule covers all 
                                                             awards under this subpart. This change is made to  
                                                             accommodate relocation of information and to       
                                                             reflect that appeal rights are granted specifically
                                                             by statute.                                        
Sec. 430.505................  ............................  Proposed rule deletes this section requiring OPM    
                                                             approval of award plans to ease administrative     
                                                             burden.                                            
Sec. 430.506(a).............  Sec. 451.103(a).............  Proposed rule revises and redesignates the provision
                                                             to establish award programs to support NPR goals.  
Sec. 430.506(b)(1) & (2)....  ............................  Proposed rule deletes requirement for OPM approval  
                                                             of agency award plans and changes to them to ease  
                                                             administrative burden.                             
Sec. 430.506(b)(3)..........  Sec. 451.106(b).............  Proposed rule revises and redesignates the          
                                                             requirement for submitting awards in excess of     
                                                             $10,000 to OPM to clarify the approval process.    
Sec. 430.506(b)(4)..........  Sec. 451.106(e).............  Proposed rule replaces required reports with        
                                                             requirement to report cash and time off awards to  
                                                             CPDF to reduce reporting requirements.             
Sec. 432.103(b).............  Sec. 432.103(b).............  Critical element is revised to conform with its new 
                                                             definition in Sec. 430.203.                        
Sec. 451.101................  Sec. 451.101(a).............  Proposed rule makes editorial changes to section    
                                                             addressing statutory authority to accommodate      
                                                             relocated rating-based award information.          
                              Sec. 451.101(b).............  Proposed rule adds existing requirement for OPM to  
                                                             prescribe procedures governing payment of certain  
                                                             types of awards recommended by more than one agency
                                                             for a member of the armed forces as provided by    
                                                             Executive Order 11438, and existing authority for  
                                                             OPM approval of requests to extend 5 U.S.C. 4505a  
                                                             to non-General Schedule employees as provided by   
                                                             Executive Order 12828.                             
                              Sec. 451.101(c).............  Proposed rule combines location of statutory        
                                                             definitions currently in Sec. 451.101(b) & (c).    
                              Sec. 451.101(d).............  Proposed rule deletes reference to Part 430, subpart
                                                             E (performance awards) that no longer applies.     
Sec. 451.102................  ............................  Proposed rule deletes description of superior       
                                                             accomplishment awards because it is not needed.    
Sec. 451.103................  Sec. 451.102................  Award or superior accomplishment award is replaced  
                                                             and revised by Award to accommodate team settings; 
                                                             Contribution, Intangible benefits, Non-monetary    
                                                             award, Performance Management Plan, Special act or 
                                                             service (including requirement that contribution be
                                                             non-recurring), Superior accomplishment award, and 
                                                             Tangible benefits are deleted to increase          
                                                             flexibility and because they are not needed to give
                                                             meaning to the provisions of part 451; and a       
                                                             definition for award program is added to support   
                                                             NPR goals.                                         
Sec. 451.104(a).............  Sec. 451.103(a).............  Proposed rule revises and redesignates reference to 
                                                             agency developed program(s) to provide greater     
                                                             flexibility.                                       
                              Sec. 451.103(b).............  Proposed rule adds new provision to encourage       
                                                             employee involvement in system and program         
                                                             development to support NPR goals.                  
                              Sec. 451.104(a).............  Proposed rule combines the various bases for        
                                                             granting awards into one section to reflect        
                                                             relocated information and support NPR goals.       
Sec. 451.104(b).............  ............................  Proposed rule deletes an emphasis on determining a  
                                                             contribution's value to the Government instead of  
                                                             to the agency to increase flexibility.             
Sec. 451.104(c).............  ............................  Proposed rule deletes explicit permission to grant  
                                                             different awards and/or quality step increases     
                                                             simultaneously for the same contribution(s) because
                                                             it is not needed.                                  
Sec. 451.104(d).............  ............................  Proposed rule deletes provision that awards cannot  
                                                             be used as substitutes for pay or other personnel  
                                                             actions because it is not needed.                  
Sec. 451.104(e)(1)..........  ............................  Proposed rule deletes repetition of statutory       
                                                             requirement regarding contributions made while a   
                                                             Government employee (5 U.S.C. 4505).               
Sec. 451.104(e)(2)..........  Sec. 451.103(c)(2)..........  Proposed rule revises and redesignates the provision
                                                             for justification of awards to protect integrity of
                                                             award programs.                                    
Sec. 451.104(e)(3)..........  Sec. 451.103(c)(1)..........  Proposed rule replaces requirement for higher-level 
                                                             review of awards with requirement to follow agency 
                                                             financial management control procedures to give    
                                                             flexibility while maintaining necessary levels of  
                                                             control.                                           
Sec. 451.104(f).............  Sec. 451.104(e).............  Proposed rule redesignates provision for granting   
                                                             awards to heirs or estates, and deletes the        
                                                             repetition of a statutory requirement (5 U.S.C.    
                                                             4502 (c)) that acceptance of an award releases the 
                                                             Government from further claim.                     
                              Sec. 451.105................  Proposed rule adds new section regarding statutory  
                                                             restrictions on granting awards to senior political
                                                             officials (5 U.S.C. 4508 and 4509) to clarify      
                                                             coverage.                                          
[[Page 5550]]                                                                                                   
                                                                                                                
                              Sec. 451.106(a).............  Proposed rule rule adds new provision that requires 
                                                             agencies to ensure that an award program does not  
                                                             conflict with any other applicable law or          
                                                             Governmentwide regulation to protect the integrity 
                                                             of award programs.                                 
Sec. 451.104(g).............  Sec. 451.106(i).............  Proposed rule revises and redesignates the provision
                                                             permitting agencies to determine which awards are  
                                                             to be documented in the OPF to provide greater     
                                                             flexibility.                                       
Sec. 451.104(h).............  Sec. 451.106(h).............  Proposed rule revises and redesignates the provision
                                                             for giving due weight to awards in promotions to   
                                                             reflect more accurately the statutory provision.   
Sec. 451.104(i).............  Sec. 451.106(c).............  Proposed rule replaces the requirement for agencies 
                                                             to provide training to supervisors and employees on
                                                             its award program(s) with requirement to provide   
                                                             for communicating about award program(s) to reflect
                                                             emphasis on communication and provide greater      
                                                             flexibility.                                       
                              Sec. 451.106(d).............  Proposed rule revises and redesignates the provision
                                                             requiring agencies to evaluate award programs to   
                                                             provide greater flexibility.                       
Sec. 451.104(j).............  Sec. 451.103(c)(1)..........  Proposed rule replaces requirement for higher-level 
                                                             approval of awards with requirement to follow      
                                                             agency financial management control procedures to  
                                                             give flexibility while maintaining necessary levels
                                                             of control.                                        
Sec. 451.105(a).............  Sec. 451.104 (b)&(c)........  Proposed rule revises and redesignates the          
                                                             provisions regarding award payments and taxation to
                                                             accommodate relocation of information and to       
                                                             clarify requirements.                              
Sec. 451.105(b).............  Sec. 451.104(d)(1)..........  Proposed rule makes editorial changes to paragraph  
                                                             addressing agency responsibility for award payment 
                                                             when the award is approved for an employee of      
                                                             another agency to streamline regulatory text.      
Sec. 451.105(c).............  Sec. 451.104(d)(2)..........  Proposed rule makes editorial changes to paragraph  
                                                             regarding payment of an award approved for a member
                                                             of the armed forces for a suggestion, invention, or
                                                             scientific achievement to streamline regulatory    
                                                             text.                                              
Sec. 451.106(a).............  ............................  Proposed rule deletes OPM approval of superior      
                                                             accomplishment awards component of Performance     
                                                             Management Plans to ease administrative burden.    
Sec. 451.106(b).............  Sec. 451.107(a).............  Proposed rule clarifies that the limits established 
                                                             for award payments apply to individuals only to    
                                                             provide greater flexibility.                       
                              Sec. 451.107(b).............  Proposed rule establishes explicitly that           
                                                             Presidential approval is required for award        
                                                             payments over $25,000 that OPM has approved to     
                                                             clarify the award approval process.                
Sec. 451.107(a).............  ............................  Proposed rule deletes the requirement to submit a   
                                                             superior accomplishment awards component of a      
                                                             Performance Management Plan to OPM for approval to 
                                                             ease administrative burden.                        
Sec. 451.107(a)(3)..........  Sec. 451.106(b).............  Proposed rule makes editorial changes to provision  
                                                             that agencies shall submit to OPM for approval all 
                                                             award recommendations that would grant an          
                                                             individual more than $10,000 to clarify the award  
                                                             approval process.                                  
Sec. 451.107(a)(4)..........  Sec. 451.106(e).............  Proposed rule replaces requirement for an annual    
                                                             report on the program's activities and expenditures
                                                             with a requirement to report all cash and time off 
                                                             awards to the CPDF to reduce reporting             
                                                             requirements.                                      
                              Sec. 451.106(f).............  Proposed rule adds provision for agencies to use OPM
                                                             Guide to Federal Workforce Reporting Systems when  
                                                             reporting award data to ensure proper reporting.   
                              Sec. 451.106(g).............  Proposed rule permits OPM to define the records it  
                                                             requires to meet the information needs of agencies 
                                                             and other stakeholders.                            
                              Sec. 451.106(j).............  Proposed rule adds provision requiring agencies to  
                                                             take corrective actions prescribed by OPM to ensure
                                                             compliance with law and regulation.                
Sec. 451.107(b).............  ............................  Proposed rule deletes requirement that agencies     
                                                             consider adopted ideas for wider application both  
                                                             within the agency and Governmentwide to provide    
                                                             greater flexibility.                               
                              Sec. 451.107(c).............  Proposed rule adds requirement for OPM to review and
                                                             determine whether to approve requests to extend the
                                                             provisions of 5 U.S.C. 4505a to non-General        
                                                             Schedule employees to implement Executive Order    
                                                             12828.                                             
                              Sec. 451.107(d).............  Proposed rule adds new provision that permits OPM to
                                                             evaluate the application and operation of agency   
                                                             award program(s) to support OPM's oversight        
                                                             responsibilities.                                  
Sec. 451.201................  Sec. 451.201................  Proposed rule adds new sentence to end of paragraph 
                                                             (a) that cautions that Presidential awards under   
                                                             this paragraph are subject to the restrictions as  
                                                             specified in Sec. 451.105 (the statutory           
                                                             restrictions at 5 U.S.C. 4508 and 4509) to         
                                                             implement statute.                                 
Subpart C Time Off Awards...  ............................  Proposed rule deletes this subpart and combines the 
                                                             provisions for time-off awards into other sections 
                                                             of part 451 to integrate awards policy and support 
                                                             NPR goals.                                         
Sec. 451.306(d).............  Sec. 451.104(f).............  Proposed rule redesignates the provision prohibiting
                                                             the conversion of time off to cash with no change. 
Sec. 531.401(c)&(d).........  Sec. 531.401(c)&(d).........  Proposed rule includes the title of Executive Order 
                                                             11721 and Public Law 103-89 for easier reference.  
Sec. 531.402(a).............  Sec. 531.402(a).............  Proposed rule replaces reference to maximum step    
                                                             with maximum rate to accommodate GM employees.     
Sec. 531.403................  Sec. 531.403................  Acceptable level of competence is revised to remove 
                                                             reference to duties of the position to conform with
                                                             definition of critical element at Sec. 430.203 and 
                                                             to include agency head in setting requirements to  
                                                             provide greater flexibility.                       
                                                            Critical element is revised to update reference to  
                                                             the redesignated definition section in performance 
                                                             appraisal regulation.                              
                                                            Equivalent increase is revised to include reference 
                                                             to higher rate of the grade to accommodate GM      
                                                             employees.                                         
Sec. 531.404................  Sec. 531.404................  Proposed rule replaces step 10 with maximum rate of 
                                                             the grade to accommodate GM employees.             
[[Page 5551]]                                                                                                   
                                                                                                                
Sec. 531.404(a).............  Sec. 531.404(a).............  Proposed rule deletes reference to duties of the    
                                                             position to conform with definition of critical    
                                                             element at Sec. 430.203 and replaces reference to  
                                                             the locus of the rating of record definition from  
                                                             the agency Performance Management Plan to the      
                                                             regulation at Sec. 430.204 to accommodate          
                                                             regulatory changes.                                
Sec. 531.408................  Sec. 531.409(b).............  Proposed rule revises and redesignates provisions   
                                                             for communicating performance requirements by      
                                                             including a reference to subpart B, replacing      
                                                             appraisal requirements by OPM for systems not under
                                                             part 430 with agency-established requirements, and 
                                                             making other editorial changes to conform with     
                                                             revised terms in part 430 to provide greater       
                                                             flexibility.                                       
                              Sec. 531.409(c)(2)..........  Proposed rule adds new provision to permit          
                                                             opportunity period and notice period as reasons for
                                                             delay of an ALOC (acceptable level of competence)  
                                                             determination to provide greater flexibility.      
Sec. 531.409(c)(2) (i) &      Sec. 531.409(c)(3) (i) &      Proposed rule redesignates provisions regarding     
 (iii).                        (iii).                        within-grade increase delays with no change.       
Sec. 531.409(c)(2)(ii)......  Sec. 531.409(c)(3)(ii)......  Proposed rule makes editorial changes to conform    
                                                             with the revised terms in part 430 and to reference
                                                             opportunity period.                                
                              Sec. 531.409(c)(3)(iv)......  Proposed rule adds requirement that within-grade    
                                                             increase is not granted if performance is not at an
                                                             acceptable level of competence and references      
                                                             follow-up procedures to clarify the within-grade   
                                                             increase process.                                  
Sec. 531.409(d).............  Sec. 531.409(d).............  Proposed rule makes editorial changes to conform    
                                                             with the revised terms in part 430.                
                              Sec. 531.409(d)(5)..........  Proposed rule adds new provision that includes 100% 
                                                             time spent on authorized activities of official    
                                                             interest to the agency as a reason to waive an ALOC
                                                             determination to grant greater flexibility.        
Sec. 531.409(d)(5)..........  Sec. 531.409(d)(6)..........  Proposed rule redesignates provision regarding long-
                                                             term training with no change.                      
Sec. 531.501................  Sec. 531.501................  Proposed rule includes the title of Executive Order 
                                                             11721 for easier reference and removes partial     
                                                             content of the Executive Order from regulation     
                                                             because it is not needed.                          
Sec. 531.503................  Sec. 531.503................  Proposed rule establishes a merit system principle  
                                                             rather than referencing recognition of outstanding 
                                                             performance as the context for granting QSI's to   
                                                             accommodate regulatory change at Sec. 531.504.     
Sec. 531.504................  Sec. 531.504................  Proposed rule revises the provision to permit       
                                                             agencies that choose not to have a Level 5 rating  
                                                             in their appraisal programs to establish           
                                                             performance-related criteria to grant QSI's to     
                                                             provide greater flexibility.                       
Sec. 531.506................  Sec. 531.506................  Proposed rule removes reference to completion of    
                                                             rating of record and ties effective date to        
                                                             approval of QSI to provide greater flexibility.    
Sec. 531.507................  ............................  Proposed rule removes requirement to include QSI    
                                                             plan as part of Performance Management Plan to ease
                                                             administrative burden.                             
Sec. 531.507(a)-(e).........  Sec. 531.507(a).............  Proposed rule references rather than repeats the    
                                                             requirements of Executive Order 11721 because they 
                                                             are not needed.                                    
Sec. 531.508(a).............  Sec. 531.507(b).............  Proposed rule revises and redesignates requirement  
                                                             for reporting QSI usage to clarify responsibility. 
                              Sec. 531.507(c).............  Proposed rule requires use of OPM's Guide to Federal
                                                             Workforce Reporting Systems for CPDF reporting to  
                                                             ensure proper reporting.                           
Sec. 531.508(b).............  Sec. 531.508................  Proposed rule redesignates the provision for OPM    
                                                             evaluation with no change in text.                 
----------------------------------------------------------------------------------------------------------------

E.O. 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with E.O. 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
apply only to Federal agencies and employees.

List of Subjects

5 CFR Parts 430 and 451

    Decorations, medals, awards, Government employees.

5 CFR Part 432

    Administrative practice and procedure, Government employees.

5 CFR Part 531

    Government employees, Law enforcement officers, Wages.

U.S. Office of Personnel Management.
James B. King,
Director.

    Accordingly, OPM is proposing to amend parts 430, 432, 451 and 531 
of title 5, Code of Federal Regulations, as follows:

PART 430--PERFORMANCE MANAGEMENT

    1. The authority citation for part 430 is revised to read as 
follows:

    Authority: 5 U.S.C. chapter 43.

    2. Subpart A is revised to read as follows:

Subpart A--Performance Management

Sec.
430.101  Authority.
430.102  Performance management.

Subpart A--Performance Management


Sec. 430.101  Authority.

    Chapter 43 of title 5, United States Code, provides for performance 
appraisal of Federal employees. This subpart supplements and implements 
this portion of the law.


Sec. 430.102  Performance management.

    (a) Performance management is the systematic process by which an 
agency involves its employees, as individuals and members of a group, 
in improving organizational effectiveness in the accomplishment of 
agency mission and goals.
    (b) Performance management integrates the processes an agency uses 
to--
    (1) Communicate and clarify organizational goals to employees;
    (2) Identify individual and, where applicable, team accountability 
for accomplishing organizational goals;
    (3) Identify and address developmental needs for individuals and, 
where applicable, teams;
    (4) Assess and improve individual and organizational performance; 
[[Page 5552]] 
    (5) Use appropriate measures of performance as the basis for 
recognizing and rewarding accomplishments; and
    (6) Use the results of performance appraisal as a basis for 
appropriate personnel actions.
    (c) A Performance Management Plan is the description of an agency's 
framework for implementing all aspects of performance management and 
shall include, but not be limited to, the agency performance appraisal 
system(s) (as defined in Secs. 430.203 and 430.303) and the agency 
award program(s) (as defined in Sec. 451.102).
    3. Subpart B, consisting of Secs. 430.201 through 430.210, is 
revised to read as follows:
Subpart B--Performance Appraisal for General Schedule, Prevailing Rate, 
and Certain Other Employees
Sec.
430.201  General.
430.202  Coverage.
430.203  Definitions.
430.204  Agency performance appraisal system(s).
430.205  Agency performance appraisal program(s).
430.206  Planning performance.
430.207  Monitoring performance.
430.208  Rating performance.
430.209  Agency responsibilities.
430.210  OPM responsibilities.

Subpart B--Performance Appraisal for General Schedule, Prevailing 
Rate, and Certain Other Employees


Sec. 430.201  General.

    (a) Statutory authority.  Chapter 43 of title 5, United States 
Code, provides for the establishment of agency performance appraisal 
systems and requires the Office of Personnel Management (OPM) to 
prescribe regulations governing such systems. The regulations in this 
subpart in combination with statute set forth the requirements for 
agency performance appraisal system(s) and program(s) for employees 
covered by subchapter I of chapter 43.
    (b) Savings provision. The performance appraisal system portion of 
an agency's performance management plan approved by OPM as of the 
effective date of these regulations shall constitute an approved 
performance appraisal system under these regulations until such time 
changes to the system are approved. No provision of these regulations 
shall be applied in such a way as to affect any administrative 
proceeding related to any action taken under regulations in this 
chapter pending at the effective date of the regulations in this 
subpart.


Sec. 430.202  Coverage.

    (a) Employees and agencies covered by statute. (1) Section 4301(1) 
of title 5, United States Code, defines agencies covered by this 
subpart.
    (2) Section 4301(2) of title 5, United States Code, defines 
employees covered by statute by this subpart. Besides General Schedule 
(GS/GM) and prevailing rate employees, coverage includes, but is not 
limited to, senior-level and scientific and professional employees paid 
under 5 U.S.C. 5376.
    (b) Statutory exclusions. This subpart does not apply to agencies 
or employees excluded by 5 U.S.C. 4301(1) and (2), the United States 
Postal Service, or the Postal Rate Commission.
    (c) Administrative exclusions. OPM may exclude any position or 
group of positions in the excepted service under the authority of 5 
U.S.C. 4301(2)(G). This regulation excludes excepted service positions 
for which employment is not reasonably expected to exceed the minimum 
period established by the agency under Sec. 430.207(a) in a consecutive 
12-month period.
    (d) Agency requests for exclusions. Heads of agencies or their 
designees may request the Director of OPM to exclude positions in the 
excepted service. The request must be in writing, explaining why the 
exclusion would be in the interest of good administration.


Sec. 430.203  Definitions.

    In this subpart, terms are defined as follows:
    Appraisal means the process under which performance is reviewed and 
evaluated.
    Appraisal period means the period of time (generally 1 year) 
established by an agency for which performance will be reviewed and a 
rating of record will be prepared.
    Appraisal program means the specific procedures and requirements 
established by an agency or the components of an agency within the 
policies and parameters covered by the agency appraisal system(s).
    Appraisal system means the framework of agencywide policies and 
parameters for the administration of performance appraisal programs 
established under subchapter I of chapter 43 of title 5, United States 
Code, and this subpart within an agency as defined at 5 U.S.C. 4301(1).
    Critical element means a work assignment or responsibility of such 
importance that unacceptable performance on the element would result in 
a determination that overall performance is unacceptable.
    Performance means accomplishment of work assignments or 
responsibilities.
    Performance appraisal system: see Appraisal system.
    Performance plan means all of the written, or otherwise recorded, 
individual, team, or organizational performance factors that lead to 
the assignment of an employee's summary rating level. A plan contains 
the critical elements based on employee assignments and 
responsibilities, and their related performance standard(s), and may 
contain other performance-related factors including, but not limited 
to, non-critical elements.
    Performance rating means the written, or otherwise recorded, 
appraisal of performance compared to the performance standard(s) for 
each critical element (and non-critical element, where applicable) on 
which there has been an opportunity to perform for the minimum period.
    Performance standard means the management-approved expression of 
the performance threshold(s), requirement(s), or expectation(s) for an 
element that must be met to be appraised at a particular level of 
performance (as specified in Sec. 430.206(b)(6)(i) of this subpart). A 
performance standard may include, but is not limited to, factors such 
as quality, quantity, timeliness, and manner of performance.
    Progress review means communicating with the employee about 
performance on individual and, where applicable, team elements and 
standard(s).
    Rating of record means the performance rating prepared at the end 
of an appraisal period (under provisions specified by the agency) for 
performance over the entire period and the assignment of a summary 
rating level (as specified in Sec. 430.208(d)). This constitutes the 
official rating of record referenced in this chapter.


Sec. 430.204  Agency performance appraisal system(s).

    (a) Each agency as defined at section 4301(1) of title 5, United 
States Code, shall develop one or more performance appraisal systems 
for employees covered by this subpart.
    (b) The agency system(s) shall establish agencywide policies and 
parameters for the application and operation of performance appraisal 
within the agency. At a minimum, an agency system shall--
    (1) Provide for--
    (i) Establishing employee performance plans, including, but not 
limited to, critical elements and performance standards; [[Page 5553]] 
    (ii) Communicating performance plans to employees at the beginning 
of an appraisal period;
    (iii) Evaluating each employee during the appraisal period on the 
employee's elements and standards;
    (iv) Recognizing and rewarding employees whose performance so 
warrants;
    (v) Assisting employees in improving unacceptable performance; and
    (vi) Reassigning, reducing in grade, or removing employees who 
continue to have unacceptable performance, but only after an 
opportunity to demonstrate acceptable performance.
    (2) Identify employees covered by the system;
    (3) Establish the permissible values (including, but not limited 
to, number of days and number of levels) that an agency program may use 
for--
    (i) The appraisal period (as specified in Sec. 430.206(a));
    (ii) The minimum period (as specified in Sec. 430.207(a));
    (iii) The number(s) of performance levels at which elements shall 
be appraised (as specified in Sec. 430.206(b)(6)); and
    (iv) The number of summary rating levels that may be assigned in a 
rating of record (as specified in Sec. 430.208(d)); and
    (4) Include, where applicable, criteria and procedures for 
establishing separate appraisal programs within the agency; and
    (5) Require that an agency appraisal program shall conform to 
statute and the regulations of this chapter.
    (c) Agencies are encouraged to involve employees and their 
representatives in developing and implementing their system(s).


Sec. 430.205  Agency performance appraisal program(s).

    (a) Each agency shall establish at least one appraisal program of 
specific procedures and requirements to be implemented in accordance 
with the agency's appraisal system(s). At a minimum, each appraisal 
program shall include procedures and requirements for planning 
performance as specified in Sec. 430.206, monitoring performance as 
specified in Sec. 430.207, and rating performance as specified in 
Sec. 430.208.
    (b) An agency program shall establish criteria and procedures to 
address employee performance for employees who are on detail, who are 
transferred, or for other special circumstances as established by the 
agency.
    (c) An agency may permit the development of separate appraisal 
programs under the framework of its appraisal system(s).
    (d) Agencies are encouraged to involve employees and their 
representatives in developing and implementing their program(s).


Sec. 430.206  Planning performance.

    (a) Appraisal period.  (1) An appraisal program shall designate an 
official appraisal period for which a performance plan shall be 
prepared, during which performance shall be monitored, and for which a 
rating of record shall be prepared.
    (2) The appraisal period shall generally be designated so that 
employees shall be provided a rating of record on an annual basis. An 
appraisal program may provide that longer appraisal periods may be 
designated when work assignments and responsibilities so warrant or 
performance management objectives can be achieved more effectively.
    (b) Performance plan. (1) Agencies shall encourage employee 
participation in establishing performance plans.
    (2) Performance plans shall be provided to employees at the 
beginning of each appraisal period (normally within 30 days).
    (3) An appraisal program shall require that each employee be 
covered by an appropriate written, or otherwise recorded, performance 
plan based on work assignments and responsibilities.
    (4) Each performance plan shall include at least one critical 
element that addresses individual performance.
    (5) When appropriate, performance plans may also include 
accomplishment of team, group, or organizational objectives by 
incorporating elements, objectives, goals, program plans, work plans, 
or by other similar means that account for program results.
    (6) (i) An appraisal program shall provide for establishing the 
number of levels at which performance on an element may be appraised. 
At a minimum, two levels shall be used, with one level being ``Fully 
Successful'' or its equivalent and another level being 
``Unacceptable.''
    (ii) A performance standard shall be established at the ``Fully 
Successful'' level for each element and may be established at other 
levels.
    (iii) The absence of an established standard at a level specified 
in the program shall not preclude a determination that performance is 
at that level.


Sec. 430.207  Monitoring performance.

    (a) Minimum period. An appraisal program shall establish a minimum 
period before any performance determination can be made.
    (b) Ongoing appraisal. An appraisal program shall include methods 
for appraising each element in the performance plan during the 
appraisal period, unless there has been insufficient opportunity to 
demonstrate performance on the element. Such methods shall include, but 
not be limited to, conducting one or more progress reviews during each 
appraisal period.
    (c) Unacceptable performance. At any time during the appraisal 
period that performance is determined to be unacceptable in one or more 
critical elements, an appraisal program shall provide for--
    (1) Assisting employees in improving unacceptable performance; and
    (2) Taking action based on unacceptable performance.


Sec. 430.208  Rating performance.

    (a) As soon as practicable after the end of the appraisal period, a 
written, or otherwise recorded, rating of record shall be given to each 
employee.
    (b) Rating of record procedures for each appraisal program shall 
include a method for deriving a summary rating and assigning a summary 
rating level as specified in paragraph (d) of this section based at a 
minimum on appraisal of performance on critical elements, and, at 
agency discretion, consideration of other performance-related factors 
including, but not limited to, appraisal of performance on non-critical 
elements.
    (1) A summary rating above Level 1 (``Unacceptable'') shall not be 
assigned if performance on any critical element has been appraised as 
``Unacceptable.''
    (2) Consideration of other performance-related factors shall not 
result in assigning a summary rating of Level 1 (``Unacceptable'') if 
each critical element has been appraised at least ``Fully Successful'' 
(or equivalent).
    (c) An appraisal program shall not establish a forced distribution 
of summary ratings--
    (1) Below Level 3 (``Fully Successful'' or equivalent); or
    (2) If those summary ratings are derived solely from an appraisal 
of performance against pre-established standards.
    (d) Summary rating levels. (1) An appraisal program shall provide 
for--
    (i) At least two and not more than five summary rating levels;
    (ii) A Level 1 (``Unacceptable'') summary rating level; and
    (iii) A Level 3 (``Fully Successful'' or equivalent) summary rating 
level.
    (2) If more than two summary rating levels are used, agencies may 
provide for any combination of additional summary rating levels (Level 
2, Level 4, and Level 5) provided that--
    (i) Level 2, if used, is a rating level above Level 1 and below 
Level 3; and [[Page 5554]] 
    (ii) Level 4, if used, is a rating level above Level 3 and below 
Level 5 (``Outstanding'' or equivalent), if used.
    (3) The term ``Outstanding'' shall be used only to describe a Level 
5 summary rating level.
    (4) The summary rating level designator (Level 1 through Level 5) 
shall be used to provide consistency in describing ratings of record 
and in referencing other related regulations (including, but not 
limited to, Sec. 351.504 of this chapter).
    (e) A rating of record of ``Unacceptable'' (Level 1) shall be 
reviewed and approved by a higher level management official.
    (f) The rating of record or performance rating for a disabled 
veteran shall not be lowered because the veteran has been absent from 
work to seek medical treatment as provided in Executive Order 5396.
    (g) When a rating of record cannot be prepared at the time 
specified, the appraisal period shall be extended. Once the conditions 
necessary to complete a rating of record have been met, a rating of 
record shall be prepared as soon as practicable.
    (h) A performance rating may be prepared at such other times as an 
appraisal program may specify for special circumstances including, but 
not limited to, transfers and performance on details.


Sec. 430.209  Agency responsibilities.

    An agency shall--
    (a) Submit to OPM for approval a description of its appraisal 
system(s) as specified in Sec. 430.204(b) of this subpart, and any 
subsequent changes that modify any element of the agency's system(s) 
that is subject to a regulatory requirement in this part;
    (b) Transfer the employee's most recent rating of record, and any 
subsequent performance ratings, when an employee transfers to another 
agency or is assigned to another organization within the agency;
    (c) Require communication with supervisors and employees about 
relevant parts of its performance appraisal system(s) and program(s);
    (d) Evaluate the performance appraisal system(s) contained in its 
Performance Management Plan and performance appraisal program(s) in 
operation in the agency;
    (e) Use OPM's Guide to Federal Workforce Reporting Systems to 
report ratings of record data to the CPDF;
    (f) Maintain and submit such records as OPM may require; and
    (g) Take any action required by OPM to ensure conformance with 
applicable law, regulation, and OPM policy.


Sec. 430.210  OPM responsibilities.

    (a) OPM shall review and approve an agency's performance appraisal 
system(s).
    (b) OPM may evaluate the operation and application of an agency's 
performance appraisal system(s) and program(s).
    (c) If OPM determines that an appraisal system or program does not 
meet the requirements of applicable law, regulation, or OPM policy, it 
shall direct the agency to implement an appropriate system or program 
or to take other corrective action.
    4. Subpart D [Reserved] and Subpart E, consisting of Secs. 430.501 
through 430.506, are removed.

PART 432--PERFORMANCE BASED REDUCTION IN GRADE AND REMOVAL ACTIONS

    5. The authority citation for part 432 continues to read as 
follows:

    Authority: 5 U.S.C. 4303, 4305.

    6. In Sec. 432.103, paragraph (b) is revised to read as follows:


Sec. 432.103  Definitions.

* * * * *
    (b) Critical element means a work assignment or responsibility of 
such importance that unacceptable performance on the element would 
result in a determination that overall performance is unacceptable.
* * * * *

PART 451--AWARDS

    7. The heading of part 451 is revised to read as follows:

PART 451--AWARDS

    8. The authority citation for part 451 is revised to read as 
follows:

    Authority: 5 U.S.C. 4302, 4501-4507; E.O. 11438, 12828.

    9. Subpart A, consisting of Secs. 451.101 through 451.107, is 
revised to read as follows:

Subpart A--Agency Awards

Sec.
451.101  Authority and Coverage.
451.102  Definitions.
451.103  Agency award program(s).
451.104  Awards.
451.105  Award restrictions.
451.106  Agency responsibilities.
451.107  OPM responsibilities.

Subpart A--Agency Awards


Sec. 451.101  Authority and coverage.

    (a) Chapter 45 of title 5, United States Code authorizes agencies 
to pay a cash award to, grant time-off to, and incur necessary expense 
for the honorary recognition of, an employee (individually or as a 
member of a group) and requires the Office of Personnel Management to 
prescribe regulations governing such authority. Chapter 43 of title 5, 
United States Codes provides for recognizing and rewarding employees 
whose performance so warrants. The regulations in this subpart, in 
combination with the chapters 43 and 45, United States Code, and any 
other applicable law, establish the requirements for agency award 
programs.
    (b) Section 4 of E.O. 11438 (Prescribing Procedures Governing 
Interdepartmental Cash Awards to the Members of the Armed Forces, 
December 3, 1968) requires the Office of Personnel Management to 
prescribe procedures for covering the cost of a cash award recommended 
by more than one agency for a member of the armed forces for the 
adoption or use of a suggestion, invention, or scientific achievement. 
Section 1 of E.O. 12828 (Delegation of Certain Personnel Management 
Authorities, January 5, 1993) delegates to the Office of Personnel 
Management the authority of the President to permit performance-based 
cash awards under 5 U.S.C. 4505a to be paid to categories of employees 
who would not be eligible otherwise.
    (c) This subpart applies to employees as defined by section 2105 
and agencies as defined by section 4501 of title 5, United States Code, 
except as provided in Secs. 451.105 and 451.201(a).
    (d) For the regulatory requirements for granting performance awards 
to Senior Executive Service (SES) employees based on an employee's 
performance appraisal and rating of record, refer to Sec. 534.403 of 
this chapter.


Sec. 451.102  Definitions.

    Award means something bestowed or an action taken to recognize and 
reward individual or team achievement that contributes to meeting 
organizational goals or improving the efficiency, effectiveness, and 
economy of the Government or is otherwise in the public interest. Such 
awards include, but are not limited to, employee incentives (e.g., 
agency productivity gainshares), which are based on predetermined 
criteria such as productivity standards, performance goals, measurement 
systems, award formulas, or payout schedules.
    Award program means the specific procedures and requirements 
established by an agency or a component of an agency for granting 
awards under subchapter I of chapter 43 and of chapter 45 of title 5, 
United States Code, and this subpart. [[Page 5555]] 


Sec. 451.103  Agency award program(s).

    (a) Agencies shall develop one or more award programs for employees 
covered by this subpart.
    (b) Agencies are encouraged to include employees and their 
representatives in developing such programs.
    (c) An agency award program shall provide for--
    (1) Obligating funds consistent with applicable agency financial 
management controls and delegations of authority; and
    (2) Documenting justification for awards that are not based on a 
rating of record (as defined in Sec. 430.203 of this chapter).


Sec. 451.104  Awards.

    (a) An agency may grant a cash, honorary, or informal recognition 
award, or grant time-off without charge to leave or loss of pay 
consistent with chapter 45 of title 5, United States Code, and this 
part to an employee, as an individual or member of a group, on the 
basis of--
    (1) A suggestion, invention, superior accomplishment, or other 
personal effort that contributes to the efficiency, economy, or other 
improvement of Government operations or achieves a significant 
reduction in paperwork;
    (2) A special act or service in the public interest in connection 
with or related to official employment; or
    (3) Performance as reflected in the employee's most recent rating 
of record (as defined in Sec. 430.203 of this chapter), except that 
such awards may be paid to SES employees only under Sec. 534.403 of 
this chapter and not on the basis of this subpart.
    (b) A cash award under this subpart is a lump sum in addition to 
regular pay and does not increase an employee's rate of basic pay.
    (c) An award is subject to the withholding of taxes.
    (d) When an award is approved for--
    (1) An employee of another agency, the benefiting agency shall make 
arrangements to transfer funds to the employing agency to cover the 
award. If the administrative costs of transferring funds would exceed 
the amount of the award, the employing agency shall absorb the award 
costs and pay the award; and
    (2) A member of the armed forces for a suggestion, invention, or 
scientific achievement, arrangements shall be made to transfer funds to 
the agency having jurisdiction over the member in accordance with E.O. 
11438, ``Prescribing Procedures Governing Interdepartmental Cash Awards 
to the Members of the Armed Forces''.
    (e) An award may be granted to the legal heirs or estates of 
deceased employees.
    (f) A time-off award granted under this subpart shall not be 
converted to a cash payment under any circumstances.
    (g) When granting an award on the basis of a rating of record that 
is paid as a percentage of basic pay under 5 U.S.C. 4505a(a)(2)(A), the 
rate of basic pay used shall be determined without taking into account 
any locality-based comparability payment under 5 U.S.C. 5304 or an 
interim geographic adjustment or special law enforcement adjustment 
under section 302 or 404 of the Federal Employees Pay Comparability Act 
of 1990, respectively.
    (h) Employees may not appeal an agency's decision not to grant an 
award or the amount of such an award. This does not affect any right or 
remedy under subchapter II of chapter 12, chapter 71, or section 
2302(d) of title 5, United States Code.


Sec. 451.105  Award restrictions.

    (a) Agencies shall not grant awards under this subpart during a 
Presidential election period (as defined at 5 U.S.C. 4508) to employees 
who are--
    (1) In the Senior Executive Service and not career appointees 
(i.e., non-career or limited appointees), or
    (2) In an excepted service position of a confidential or policy-
determining character (schedule C).
    (b) Agencies shall not grant cash awards under this subpart to 
employees appointed by the President with Senate confirmation who serve 
in--
    (1) An Executive Schedule position, or
    (2) A position for which pay is set in statute by reference to a 
section or level of the Executive Schedule.


Sec. 451.106  Agency responsibilities.

    (a) In establishing and operating its award program(s), an agency 
shall assure that a program does not conflict with or violate any other 
law or Governmentwide regulation.
    (b) When a recommended award would grant over $10,000 to an 
individual employee, the agency shall submit the recommendation to OPM 
for approval.
    (c) Agencies shall provide for communicating with employees and 
supervisors about the relevant parts of their award program(s).
    (d) Agencies shall evaluate their award program(s).
    (e) Agencies shall report all cash and time off awards to the CPDF.
    (f) Agencies shall use OPM's Guide to Federal Workforce Reporting 
Systems to report award data to the CPDF.
    (g) Agencies shall maintain and submit such records as OPM may 
require.
    (h) Agencies shall give due weight to an award granted under this 
part in qualifying and selecting an employee for promotion as provided 
in 5 U.S.C. 3362.
    (i) Agencies shall establish criteria for identifying which awards 
to document in the Official Personnel Folder in conformance with OPM's 
Guide to Personnel Recordkeeping.
    (j) Agencies shall take any corrective action required by OPM to 
ensure conformance with applicable law, regulation, and OPM policy.


Sec. 451.107  OPM responsibilities.

    (a) OPM shall review and approve or disapprove each agency 
recommendation for an award that would grant over $10,000 to an 
individual employee.
    (b) When a recommended award would grant over $25,000 to an 
individual employee, OPM shall review the recommendation and submit it 
(if approved) to the President for final approval.
    (c) OPM shall review and approve or disapprove a request from the 
head of an Executive agency to extend the provisions of 5 U.S.C. 4505a 
to any category of employees within that agency that would not be 
covered otherwise.
    (d) OPM may evaluate the operation and application of an agency's 
award program(s).
    10. In Sec. 451.201, the second introductory paragraph (a) is 
removed, paragraph (b), (c), and (d) are redesignated as paragraphs 
(c), (d), and (e) respectively, and a new paragraph (b) is added to 
read as follows:


Sec. 451.201  Authority and coverage.

* * * * *
    (b) Awards granted under paragraph (a) are subject to the 
restrictions as specified in Sec. 451.105.
* * * * *
    11. Subpart C, consisting of Secs. 451.301 through 451.307, is 
removed.

PART 531--PAY UNDER THE GENERAL SCHEDULE

    12. The authority citation for part 531 is revised to read as 
follows:

    Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-
89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, February 4, 1991, 3 
CFR 1991 Comp., p. 316;

    Subpart A also issued under 5 U.S.C. 5304, 5305, and 5553; section 
302 of the Federal Employees Pay Comparability Act of 1990 (FEPCA), 
Pub. L. 101-509, 104 Stat. 1462; and E.O. 12786, 56 FR 
[[Page 5556]] 67453, December 30, 1991, 3 CFR 1991 Comp., p. 376;
    Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), and 
7701(b)(2);
    Subpart C also issued under 5 U.S.C. 5304, 5305, and 5553; sections 
302 and 404 of FEPCA, Pub. L. 101-509, 104 Stat. 1462 and 1466; and 
section 3(7) of Pub. L. 102-378, 106 Stat. 1356;
    Subpart D also issued under 5 U.S.C. 5335(g) and 7701(b)(2);
    Subpart E also issued under 5 U.S.C. 5336;
    Subpart F also issued under 5 U.S.C. 5304, 5305(g)(1), and 5553; 
and E.O. 12883, 58 FR 63281, November 29, 1993, 3 CFR 1993 Comp., p. 
682.
    13. In Sec. 531.401, paragraphs (c) and (d) are revised to read as 
follows:


Sec. 531.401  Principal authorities.

* * * * *
    (c) Section 402 of E.O. 11721 (Providing for Federal Pay 
Administration, May 23, 1973), as amended, provides that ``The Civil 
Service Commission (Office of Personnel Management) shall issue such 
regulations and standards as may be necessary to ensure that only those 
employees whose work is of an acceptable level of competence receive 
periodic step-increases under the provisions of section 5335 of title 
5, United States Code.''
    (d) Section 4 of Public Law 103-89 (Performance Management and 
Recognition System Termination Act of 1993) provides that ``the Office 
of Personnel Management shall prescribe regulations necessary for the 
administration of this section.''
    14. In Sec. 531.402, paragraph (a) is revised to read as follows:


Sec. 531.402  Employee coverage.

    (a) Except as provided in paragraph (b) of this section, this 
subpart applies to employees who occupy permanent positions classified 
and paid under the General Schedule and who are paid at less than the 
maximum rate of their grades.
* * * * *
    15. In Sec. 531.403, the definitions of acceptable level of 
competence, critical element, and equivalent increase are revised to 
read as follows:


Sec. 531.403  Definitions.

* * * * *
    Acceptable level of competence means performance by an employee 
that warrants advancement of the employee's rate of basic pay to the 
next higher step of the grade (or, in the case of a GM employee, the 
next higher rate within the grade) of his or her position, subject to 
the requirements of Sec. 531.404 of this subpart, as determined by the 
head of the agency.
* * * * *
    Critical element has the meaning given that term in Sec. 430.203 of 
this chapter.
* * * * *
    Equivalent increase means an increase or increases in an employee's 
rate of basic pay equal to or greater than the difference between the 
employee's rate of basic pay and the rate of pay for the next higher 
step of that grade (or, in the case of a GM employee, the next higher 
rate within the grade).
* * * * *
    16. In Sec. 531.404, the introductory text, and the introductory 
text of paragraph (a) are revised to read as follows:


Sec. 531.404  Earning within-grade increase.

    An employee paid at less than the maximum rate of the grade of his 
or her position shall earn advancement in pay to the next higher step 
of the grade or the next higher rate within the grade (as defined in 
Sec. 531.403) upon meeting the following three requirements established 
by law:
    (a) The employee's performance must be at an acceptable level of 
competence, as defined in this subpart by authority of section 402 of 
E.O. 11721, as amended. To be determined at an acceptable level of 
competence, the employee's most recent rating of record (as defined in 
Sec. 430.203 of this chapter) shall be at least Level 3 (``Fully 
Successful'' or equivalent).
* * * * *
    17. Section 531.408 is removed and reserved.


Sec. 531.408  [Reserved].

    18. In Sec. 531.409, paragraph (b) is revised, paragraph (c)(2) is 
redesignated as paragraph (c)(3) and revised, a new paragraph (c)(2) is 
added, the introductory text to paragraph (d) is revised, paragraph 
(d)(4) is revised, paragraph (d)(5) is redesignated as paragraph 
(d)(6), a new paragraph (d)(5) is added, and the concluding text at the 
end of paragraph (d) is revised to read as follows:


Sec. 531.409  Acceptable level of competence determinations.

* * * * *
    (b) Basis for determination. When applicable, an acceptable level 
of competence determination shall be based on a current rating of 
record made under part 430, subpart B, of this chapter. For those 
agencies not covered by chapter 43 of title 5, United States Code, and 
for employees in positions excluded from 5 U.S.C. 4301, an acceptable 
level of competence determination shall be based on performance 
appraisal requirements established by the agency. If an employee has 
been reduced in grade because of unacceptable performance and has 
served in one position at the lower grade for at least the minimum 
period established by the agency, a rating of record at the lower grade 
shall be used as the basis for an acceptable level of competence 
determination.
    (c) * * *
    (2) An acceptable level of competence determination may be delayed 
during an employee's opportunity to demonstrate acceptable performance 
(as defined at Sec. 432.103(d)) of this chapter or during a notice 
period for a proposed performance-based action under part 432 or 752 of 
this chapter.
    (3) When an acceptable level of competence determination has been 
delayed under this subpart:
    (i) The employee shall be informed that his or her determination is 
postponed and, where applicable, the rating period extended and shall 
be told of the specific requirements for performance at an acceptable 
level of competence.
    (ii) An acceptable level of competence determination shall then be 
made upon completion of either the minimum period established by the 
agency or the opportunity to demonstrate acceptable performance.
    (iii) If, following the delay, the employee's performance is 
determined to be at an acceptable level of competence, the within-grade 
increase shall be granted retroactively to the beginning of the pay 
period following completion of the applicable waiting period.
    (iv) If, following the delay, the employee's performance is 
determined not to be at an acceptable level of competence, the within-
grade increase shall not be granted. The provisions of Sec. 531.411 
govern the determination of an employee's acceptable level of 
competence following the withholding of a within-grade increase.
    (d) Waiver of requirement for determination. An acceptable level of 
competence determination shall be waived and a within-grade increase 
granted when an employee has not served in any position for the minimum 
period under an applicable agency performance appraisal program during 
the final 52 calendar weeks of the waiting period for one or more of 
the following reasons:
* * * * *
    (4) Because of details to another agency or employer for which no 
rating has been prepared; [[Page 5557]] 
    (5) Because the employee has had insufficient time to demonstrate 
an acceptable level of competence due to authorized activities of 
official interest to the agency not subject to appraisal under part 430 
of this chapter (including, but not limited to, labor-management 
partnership activities under section 2 of Executive Order 12871 and 
serving as a representative of a labor organization); or
* * * * *
    In such a situation, there shall be a presumption that the employee 
would have performed at an acceptable level of competence had the 
employee performed the duties of his or her position of record for the 
minimum period under the applicable agency performance appraisal 
program.
    19. Section 531.501 is revised to read as follows:


Sec. 531.501  Applicability.

    This subpart contains regulations of the Office of Personnel 
Management to carry out section 5336 of title 5, United States Code, 
which authorizes the head of an agency, or another official to whom 
such authority is delegated, to grant quality step increases, and to 
carry out section 403 of Executive Order 11721 (Providing for Federal 
Pay Administration, May 23, 1973), as amended.
    20. Section 531.503 is revised to read as follows:


Sec. 531.503  Purpose of quality step increases.

    The purpose of quality step increases is to provide appropriate 
incentives and recognition for excellence in performance by granting 
faster than normal step increases.
    21. Section 531.504 is revised to read as follows:


Sec. 531.504  Level of performance required for quality step increase.

    A quality step increase shall not be required but may be granted 
only to--
    (a) An employee who receives a rating of record at Level 5 
(``Outstanding'' or equivalent), as defined in part 430, subpart B, of 
this chapter; or
    (b) An employee who is covered by a performance appraisal program 
that does not have a Level 5 rating and who demonstrates sustained 
performance of high quality significantly above that expected at the 
``Fully Successful'' level in the type of position concerned, as 
determined under performance-related criteria established by the 
agency.
    22. Section 531.506 is revised to read as follows:


Sec. 531.506  Effective date of a quality step increase.

    The quality step increase should be made effective as soon as 
practicable after it is approved.
    23. Section 531.507 is revised to read as follows:


Sec. 531.507  Agency responsibilities.

    (a) Agencies shall develop and implement a plan(s) for granting 
quality step increases in accordance with Executive Order 11721.
    (b) Agencies shall maintain and report such records as the Office 
may require.
    (c) Agencies shall use OPM's Guide to Federal Workforce Reporting 
Systems to report quality step increases to the CPDF.
    24. Section 531.508 is revised to read as follows:


Sec. 531.508  Evaluation of quality step increase authority.

    The Office of Personnel Management may evaluate an agency's use of 
the authority to grant quality step increases. The agency shall take 
any corrective action required by the Office.

[FR Doc. 95-2109 Filed 1-26-95; 8:45 am]
BILLING CODE 6325-01-P