[Federal Register Volume 62, Number 49 (Thursday, March 13, 1997)]
[Notices]
[Pages 12006-12024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6169]



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_______________________________________________________________________

Part IV





Office of Personnel Management





_______________________________________________________________________



Propose Laboratory Personnel Management Demonstration Project; 
Department of the Army, U.S. Army Engineer Waterways Experiment 
Station, Vicksburg, Mississippi; Notice

  Federal Register / Vol. 62, No. 49 / Thursday, March 13, 1997 / 
Notices  

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OFFICE OF PERSONNEL MANAGEMENT


Proposed Laboratory Personnel Management Demonstration Project; 
Department of the Army, U.S. Army Engineer Waterways Experiment 
Station, Vicksburg, Mississippi

AGENCY: Office of Personnel Management.

ACTION: Notice of Intent to Implement Demonstration Project.

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SUMMARY: Title V of the Civil Service Reform Act, 5 U.S.C. 4703, 
authorizes the Office of Personnel Management (OPM) to conduct 
demonstration projects that experiment with new and different personnel 
management concepts to determine whether such changes in personnel 
policy or procedures would result in improved Federal personnel 
management.
    Public Law 103-337, October 5, 1994, permits the Department of 
Defense (DoD), with the approval of the OPM, to carry out personnel 
demonstration projects generally similar to the China Lake 
demonstration project at DoD Science and Technology (S&T) reinvention 
laboratories. The Army is proposing demonstration projects initially to 
cover five of its S&T reinvention laboratories: the Army Research 
Laboratory; the Army Missile Research, Development, and Engineering 
Center; the Army Aviation Research and Development Center; the Army 
Medical Research and Materiel Command; and the Army Engineer Waterways 
Experiment Station. This proposal is for the Army Engineer Waterways 
Experiment Station (WES).

DATES: To be considered, written comments must be submitted on or 
before May 20, 1997; the public hearing will be scheduled as follows: 
Friday, May 2, 1997, at 10:00 a.m., in Vicksburg, Mississippi. At the 
time of the hearing, interested persons or organizations may present 
their written or oral comments on the proposed demonstration project. 
The hearing will be informal. However, anyone wishing to testify should 
contact the person listed under FOR FURTHER INFORMATION CONTACT, and 
state the hearing location, so that OPM can plan the hearings and 
provide sufficient time for all interested persons and organizations to 
be heard. Priority will be given to those on the schedule, with others 
speaking in any remaining available time. Each speaker's presentation 
will be limited to ten minutes. Written comments may be mailed to 
Fidelma A. Donahue, U.S. Office of Personnel Management, 1900 E Street, 
NW, Room 7460, Washington, DC 20415; public hearing will be held at the 
following location: U.S. Army Engineer Waterways Experiment Station, 
Building 1006, 3909 Halls Ferry Road, Vicksburg, Mississippi.

FOR FURTHER INFORMATION CONTACT: (1) On proposed demonstration project: 
Dr. C. H. Pennington, U.S. Army Engineer Waterways Experiment Station, 
ATTN: CEWES-ZT-E, 3909 Halls Ferry Road, Vicksburg, Mississippi 39180-
6199, phone 601-634-3549; on proposed demonstration project and public 
hearings: Fidelma A. Donahue, U.S. Office of Personnel Management, 1900 
E Street, NW, Room 7460, Washington, DC 20415, phone 202-606-1138.

SUPPLEMENTARY INFORMATION: Since 1966, at least 19 studies of DoD 
laboratories have been conducted on laboratory quality and personnel. 
Almost all of these studies have recommended improvements in civilian 
personnel policy, organization, and management. The proposed project 
involves simplified job classifications, pay banding, a contribution-
based compensation system, streamlined hiring processes, and modified 
Reduction-in-Force (RIF) procedures.

Office of Personnel Management
James B. King,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Problems with the Present System
    C. Changes Required and Expected Benefits
    D. Participating Organizations
    E. Participating Employees
    F. Project Design
III. Personnel System Changes
    A. Broadbanding
    B. Classification
    C. Pay for Performance
    D. Pay Setting Provisions
    E. Hiring and Placement Authorities
    F. Employee Development
    G. Reduction in Pay or Removal Actions
    H. Revised Reduction-In-Force (RIF) Procedures
IV. Training
    A. Supervisors
    B. Administrative Staff
    C. Employees
V. Conversion
    A. Conversion to the Demonstration Project
    B. Conversion from the Demonstration Project
VI. Project Duration
VII. Evaluation Plan
VIII. Demonstration Project Costs
    A. Step Buy-Ins
    B. Development Costs
IX. Required Waivers to Law and Regulations
    A. Waivers to Title 5, U.S. Code
    B. Waivers to Title 5, Code of Federal Regulations

I. Executive Summary

    The Department of the Army (DA) proposes to establish, as a 
demonstration project, a Personnel Demonstration Project generally 
similar to the system currently in use at the Navy Personnel 
Demonstration Project known as ``China Lake.'' The Personnel 
Demonstration Project will be implemented initially at five Army 
Science and Technology (S&T) Reinvention Laboratory sites, and will be 
developed to be in-house budget neutral, based on a baseline of 
September 1995 in-house costs and consistent with the DA plan to 
downsize the DA laboratories and research and development (R&D) 
centers. An in-house budget is a compilation of costs of the many 
diverse components required to fund the day-to-day operations of a 
laboratory. These components generally include pay of people (labor, 
benefits, overtime, awards), training, travel, supplies, non-capital 
equipment, and other costs depending on the specific function of the 
activity.
    This project was designed by the Assistant Secretary of the Army 
for Research, Development and Acquisition with the support of the 
Assistant Secretary of the Army for Civil Works, and the participation 
of five Army S&T Reinvention Laboratories. Review was provided by the 
US Army Corps of Engineers, DA, DoD, and OPM. Phases of the project 
that address non-Title 5 issues began as early as 1 October 1995, with 
implementation of Title 5 initiatives beginning no earlier than Spring 
1997.
    The project is built upon the concepts of linking performance to 
pay for all covered positions, simplifying paperwork in the processing 
of classification and other personnel actions, emphasizing partnerships 
among management, employees, and unions, and delegating classification 
and other authorities to line managers.

II. Introduction

A. Purpose

    The quality of DoD laboratories, their people, and products has 
been under intense scrutiny in recent years. This perceived 
deterioration of quality is due, in substantial part, to the erosion of 
control which line managers have over their human resources. This 
demonstration, in its entirety, attempts to provide managers, at the 
lowest practical level, the authority, control, and flexibility needed 
to achieve quality laboratories and quality products. The purposes of 
the demonstration project are to: improve the hiring process and

[[Page 12007]]

allow WES to compete more effectively for high-quality personnel; 
motivate and retain staff, through pay for performance, sabbaticals, 
and a more responsive personnel system; strengthen the manager's role 
in personnel management through increased delegation of personnel 
authorities; increase the efficiency of the personnel system by 
simplifying the classification system through broad banding and 
reduction of guidelines, steps, and paperwork; and create a model that 
could be adopted by other government agencies.
    This project will be under the joint sponsorship of the Assistant 
Secretary of the Army for Research, Development and Acquisition and the 
Assistant Secretary of the Army for Manpower and Reserve Affairs. The 
MACOM Commander of the participating Army S&T Reinvention Laboratory 
will execute and manage the project.
    Project oversight will be achieved by an executive steering 
committee made up of top-level executives, co-chaired by the Deputy 
Assistant Secretary of the Army for Research and Technology and the 
Deputy Assistant Secretary of the Army (Civilian Personnel Policy)/
Director, Civilian Personnel. Oversight external to the Army will be 
provided by DoD and OPM.

B. Problems With the Present System

    The civilian personnel system currently in use at DoD laboratories 
has several major inefficiencies, which hinder management's ability to 
recruit and retain the best qualified personnel. Line managers have 
only limited flexibility to administer personnel resources, and 
existing personnel regulations are often in conflict with line 
management's ability to perform world-class research. Laboratory 
managers are frustrated in their attempts to hire the best and 
brightest engineers and scientists (E&S).
    The classification system requires lengthy, narrative, individual 
position descriptions, which have to be classified by the use of 
complex and often outdated position classification standards. The 
system causes delays in recruiting, reassigning, promoting, and 
removing employees. Rewarding or taking a performance based action 
requires inordinate paperwork and time, often discouraging managers 
from pursuing critical actions. Few incentives, with limited 
flexibility, exist in dealing with all levels of the workforce, and pay 
is not always commensurate with performance. The current reduction-in-
force (RIF) system does not adequately recognize performance as a major 
criterion in RIF situations. The RIF rules are complex, and difficult 
to understand and administer. The RIF process disrupts operations, due 
to displacement of employees within their competitive levels and in the 
exercise of bumping and retreat rights.

C. Changes Required and Expected Benefits

    This project is expected to demonstrate that a human resource 
management system tailored to the mission and need of WES will result 
in: increased quality in the engineering and science workforce and the 
laboratory products they produce; increased timeliness of key personnel 
processes; trended workforce data that reveals increased retention of 
excellent contributors and separation rates of poor contributors; and 
increased customer satisfaction with the laboratory and its products by 
customers serviced.
    This demonstration program builds on the successful features of 
demonstration projects at China Lake and the National Institute of 
Standards and Technology. These demonstration projects have produced 
impressive statistics on job satisfaction of their employees versus 
that for the federal workforce in general. This demonstration expects 
similar successes. A full range of data will be collected to evaluate 
the project (and is described in Section VII, Evaluation Plan).

D. Participating Organization

    U.S. Army Engineer Waterways Experiment Station, 3909 Halls Ferry 
Road, Vicksburg, Mississippi 39180-6199. Employees assigned to WES work 
at the locations shown in Table 1.

                        Table 1.--Duty Locations                        
------------------------------------------------------------------------
                                                               Total No.
                           Location                                of   
                                                               employees
------------------------------------------------------------------------
London, England..............................................         1 
Berkeley, CA.................................................         1 
Fort Collins, CA.............................................         1 
Washington, DC...............................................         3 
Gainesville, FL..............................................         1 
Jacksonville, FL.............................................         1 
Jackson, MS..................................................         1 
Natchez, MS..................................................         1 
Vicksburg, MS................................................      1412 
New Madrid, MO...............................................         1 
Duck, NC.....................................................        12 
Corvallis, OR................................................         1 
Calhoun Falls, SC............................................         3 
Lewisville, TX...............................................         3 
North Bonneville, WA.........................................         2 
Eau Galle, WI................................................         2 
Onalaska, WI.................................................         1 
------------------------------------------------------------------------

E. Participating Employees

    The project will cover all General Schedule (GS) employees assigned 
to WES. Federal Wage System (FWS) employees, Civilian Intelligence 
Personnel Management (CIPMS) employees covered by Title X, and 5 U.S.C. 
3105 Scientific and Technical (ST) employees will be included for 
employee development provisions only. The occupational series of 
employees included in the project are identified by occupational family 
in Table 2. All GS employees with appointments exceeding one year will 
be covered by the provisions of this project. GS employees with 
appointments limited to one year or less will be covered for pay 
banding, the performance appraisal process, and salary adjustments. 
Senior Executive Service (SES) employees will not be included in the 
project. It is the intent of WES to expand coverage of the project to 
all FWS employees 1 to 2 years following date of implementation. In the 
event of expansion to FWS employees beyond the performance appraisal 
provisions, full approval will be obtained from DA, DoD, and OPM.
    The American Federation of Government Employees (AFGE) represents 
approximately 550 GS and FWS employees at WES. The AFGE represents all 
E&S Technicians except student trainees; all General Support employees 
except fire protection inspectors, security guards, student trainees, 
and those designated as confidential employees; and all nonsupervisory 
FWS employees. AFGE Local 3310 has been involved with and participated 
in the development of the project since its inception. WES will 
continue to fulfill its obligation to consult or negotiate with the 
AFGE, as appropriate, in accordance with 5 U.S.C. 4703 (F) and 7117. 
The participation with the AFGE is within the spirit and intent of 
Executive Order 12871.

F. Project Design

    In August 1994, a Project Manager was appointed to lead the WES 
reinvention effort. The Project Manager was assisted by a 
representative of the servicing Human Resources Management (HRM) 
Office. During October-November 1994, a WES concept plan was developed 
to map out desired areas in which to propose changes in the personnel 
system. The concept plan was then merged into a single Army plan for 
the participating Army S&T Laboratories and was submitted to the DA in 
December 1994.

BILLING CODE 6325-01-P

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[GRAPHIC] [TIFF OMITTED] TN13MR97.014



BILLING CODE 6325-01-C

[[Page 12009]]

    WES formed four teams in January 1995 to develop specific 
initiatives to be undertaken in the WES demonstration project. The 
teams were composed of from 7 to 14 employees each and included 
representatives from management, engineers, scientists, technicians, 
clerical, administrative, wage grade, human resources, and 
representatives from the local union. The teams developed human 
resources management initiatives which were designed to: assist in 
hiring the best people to accomplish the mission; improve training and 
development of the workforce; improve and simplify the position 
classification process; develop a broadband system to facilitate 
classification and career progression; and develop a pay for 
performance system to recognize employee contributions to mission 
accomplishment.
    The Army's plan was reviewed concurrently by DoD and OPM in April 
1996. Among their many recommendations was one for each Army lab to 
submit individual project plans. The second joint review by DoD and OPM 
of the lab plans was conducted in September 1996. The philosophy and 
intent of WES throughout the process of project development was the 
inclusion of its total workforce. As such, a pay-for-performance 
broadbanding system was developed for FWS employees, in partnership 
with representation from the bargaining unit, and was included as part 
of the WES plan. At the joint reviews, the DoD Civilian Personnel 
Management Service and OPM's Office of Classification and Office of 
Compensation Policy considered the broadbanding of FWS employees as 
outlined in the WES plan to be inappropriate. FWS employees were 
removed from the plan for pay-for-performance purposes only. Options 
for including them in a pay-for-performance system at a later date are 
currently being developed by WES, DA, DoD, and OPM.
    This plan and these initiatives are the result of many months of 
effort by dedicated participants at WES, U.S. Army Corps of Engineers, 
DA, and DoD levels.
III. Personnel System Changes

A. Broadbanding

1. Pay Bands
    Each occupational family will be composed of discrete pay bands 
corresponding to recognized advancement within the occupations. The pay 
bands will replace grades. The pay bands will not be the same for all 
occupational families. Each occupational family will be divided into 
four to six pay bands, each pay band covering the same pay range now 
covered by one or more grades. The minimum rate of basic pay for a band 
will be the minimum rate for the lower grade in the band as shown on 
the regular GS schedule. The maximum rate of basic pay for a pay band 
will be the highest regular schedule GS rate possible for positions 
within that occupational family and pay band. A salary overlap, similar 
to the current overlap between GS grades, will be maintained.
    Ordinarily an individual will be hired at the lowest salary in a 
pay band. Exceptional qualifications, specific organizational 
requirements, or other compelling reasons may lead to a higher entrance 
salary within a pay band.
    The proposed pay bands for the occupational families and how they 
relate to the current GS grades are shown in Table 3. This pay band 
concept has the following advantages because it: reduces the number of 
classification decisions required during an employee's career; 
simplifies the classification decision-making process and paperwork; 
supports delegation of classification authority to line managers; 
provides a broader range of performance-related pay for each pay band; 
and prevents the progression of low performers through a pay band by 
mere longevity, since job performance serves as the basis for 
determining pay.

BILLING CODE 6325-01-P

[[Page 12010]]

[GRAPHIC] [TIFF OMITTED] TN13MR97.015


BILLING CODE 6325-01-C
    A feature is pay band VI of the Engineers and Scientists 
occupational family, which is an expansion of the broad banding concept 
used at China Lake and NIST. This pay band is designed for Senior 
Technical Managers and Senior Engineers/Scientists.
    Current OPM guidelines covering the Senior Executive Service and 
Scientific and Technical positions do not fully meet the needs of WES. 
The SES designation is appropriate for executive level managerial 
positions whose classification exceeds the GS-15 grade level. The 
primary knowledges and abilities of SES positions involve supervisory 
and managerial authorities. Positions classified as ST are designed for 
bench research scientists and engineers. OPM guidelines state that the 
duties and responsibilities of ST positions must not include any 
managerial or supervisory responsibility.
    WES currently has a few senior manager positions which have 
characteristics of both SES and ST classifications. Most of these 
positions are responsible for supervising other GS-15 positions, 
including branch chief, non-supervisory researcher engineers and 
scientists, and potential ST positions. The positions are classified at 
the GS-15 level, and one has been recognized at the SES level. WES 
management considers the primary requirement for the positions to be 
knowledge of and expertise in the specific scientific and technology 
areas related to the mission of the organization. The ability to 
manage, while important, is considered secondary. Historically, these 
positions have been filled by employees who possess primarily 
scientific/engineering credentials and who are considered experts in 
their field by the scientific community. While it is clear these 
positions warrant classification beyond the GS-15 level, attempts to 
classify the positions as SES have been difficult. Classification of 
the positions at ST is also not an option because of the supervisory 
responsibilities.
    As preeminent engineers and scientists, STs are responsible for 
specific research and development efforts that are continuing and long 
range, generally requiring the efforts of a team. STs usually serve as 
team leaders which means there is some responsibility for assigning 
work, coordinating results and redirecting efforts. It is 
administratively convenient for these research team leaders to also 
participate in performance management. The restriction of including 
supervisory authorities in ST jobs has forced WES to exclude any 
mention of the team leader responsibilities in these position 
descriptions for fear that they will be interpreted as characteristic 
of SES rather than ST positions. Consequently, WES has positions that 
do not conform to the strict OPM definitions of either the SES or ST.
    The purpose of pay band VI is to overcome the difficulties 
identified above by creating a category for two types of positions--the 
Senior Technical Manager (with full supervisory authorities) and the 
Senior Engineer/Scientist (less than or no supervisory authority). 
Current GS-15 Senior Technical Managers and Senior Engineers/Scientists 
will convert into the demonstration project at pay band V. After 
conversion the Senior Technical Manager and Senior Engineers/Scientist 
positions will be reviewed against established criteria to determine if 
they should be reclassified to pay band VI. The proposed salary range 
is the same as currently exists for ST positions (minimum of 120 
percent

[[Page 12011]]

of the minimum rate of basic pay of GS-15 with a maximum of the basic 
rate of pay established for level IV of the Executive Schedule). Vacant 
positions in pay band VI will be competitively filled to ensure that 
selections are made from among the world's preeminent researchers and 
technical leaders in the specialty fields.
    The final component of pay band VI is the management of all pay 
band VI assets. Specifically, this includes authority to classify, 
create, abolish positions as circumstances warrant; recruit and 
reassign employees in this pay band; set pay and to have their 
performance appraised under this project's pay-for-performance system. 
This authority will be executed within parameters to be established at 
the DA level, to include controls on the numbers of pay band VI 
positions and recruitment/promotion criteria. The specific details 
regarding the control and management of pay band VI assets will be 
included in the demonstration's operating procedures. The laboratory 
wants to demonstrate increased effectiveness by gaining greater 
managerial control and authority, consistent with merit, affirmative 
action, and equal employment opportunity principles.
2. Occupational Families
    Positions will be grouped into occupational families according to 
similarities in type of work and customary requirements for formal 
training or credentials. The historical patterns of advancement within 
the occupational families will be considered. The current positions and 
grades at WES have been examined, and their characteristics and 
distribution have served as guidelines in the development of 
occupational families. Four occupational families will be established:
    (a) Engineers and Scientists. This occupational family includes all 
technical professional positions such as engineers (civil, hydraulic, 
structural, mechanical, electronic, electrical, chemical, and 
environmental), mathematicians, statisticians, computer scientists, 
outdoor recreational planners, geographers, architects, archaeologists, 
operations research analysts, and a variety of physical and biological 
scientists. Specific course work or educational degrees are required 
for positions in this occupational family.
    (b) E&S Technicians. This occupational family consists of the 
positions that support the various engineering and scientific 
activities. Employees in this occupational family are required to have 
training and skills in the various technical areas (civil, hydraulic, 
structural, geotechnical, physical, coastal, biological, chemical).
    (c) Administrative. This occupational family contains specialized 
functions in such fields as counsel, audit, finance, procurement, 
public information, accounting, administrative, computing, safety, and 
management analysis. Special training and skills in administrative 
fields or special degrees are required.
    (d) General Support. This occupational family is composed of 
positions requiring special skills and knowledge, such as typing or 
shorthand, and job-related experience. Clerical work usually involves 
the processing and maintenance of records. Assistant work requires 
knowledge of methods and procedures within a specific administrative 
area. Other support functions include the work of secretaries, legal 
clerks, guards, mail clerks, etc.
3. Fair Labor Standards Act
    Fair Labor Standards Act (FLSA) exemption and nonexemption 
determinations will be made consistent with criteria found in 5 CFR 
part 551. All employees are covered by the FLSA unless they meet the 
executive, administrative, or professional criteria for exemption. As a 
general rule, the FLSA status can generally be matched to the 
occupational families and pay bands found in Table 3. Exceptions to 
these guidelines include supervisors/managers who meet the definitions 
outlined in the OPM General Schedule Supervisory Guide. The generic 
position descriptions will not be the sole basis for the FLSA 
determination. Each position will be evaluated on a case by case basis 
by comparing the duties and responsibilities assigned, the 
classification standards for each pay band, under 5 CFR part 551 
criteria.

B. Classification

1. Coverage
    The present GS classification system has over 400 occupations (also 
called series), which are divided into 22 groups. The present 
occupational series will be maintained. New series may be added as 
needed to reflect new occupations in the work force when established by 
OPM.
2. Classification Standards
    The classification system will be modified to facilitate pay 
banding. The present classification standards will be used to create 
local benchmark position description/standards for each pay band, 
reflecting duties and responsibilities comparable to those described in 
present classification standards for the span of grades represented by 
each pay band. Present titles and series will continue to be used in 
order to recognize the types of work being performed and educational 
backgrounds and requirements of incumbents. Locally developed specialty 
codes and OPM functional codes will be used to facilitate titling, 
making qualification determinations, and assigning competitive levels 
to determine retention status.
3. Position Descriptions and Classification Process
    New standardized position descriptors will be developed to assist 
managers in exercising delegated position classification authority. 
Managers will identify the appropriate pay band and descriptor 
definition and proceed to finalize the position description. A cover 
sheet similar to the present DA Form 374 will be used to reflect their 
classification decision. The cover sheet used will include a provision 
for designating specialty codes. These specialty codes will be 
developed to identify the special nature of work performed and will be 
included on the final position descriptor.
    Employees will be entitled to appeal the title, series, and pay 
band level of their position to the DoD Field Advisory Service (FAS) 
and to OPM. The appeal will be adjudicated using the position 
classification provisions/criteria of this demonstration project. 
Employees may appeal either to FAS or OPM; however, if they first 
appeal to OPM, they may not then appeal to FAS.

C. Pay for Performance

    The objective is to establish a pay system that will improve the 
ability of WES to attract and retain quality employees. The new system 
will be a pay-for-performance system and, when implemented, will result 
in a redistribution of pay resources based upon individual performance.
1. Determining Pay Increases
    Compensation will be allocated to employees through organizational 
compensation pools. The WES Director, Commander and Deputy Director, 
and Laboratory Directors at WES will manage their respective pools.
    The compensation pools will have two components: funds for 
performance pay increases (money previously available for within-grade 
increases, quality step increases, and promotions between grades that 
are banded under the project); and funds for General

[[Page 12012]]

Schedule pay increases. Performance awards (cash awards and bonuses 
presently allowed) and locality pay increases will continue under the 
project and will be excluded from the compensation pools. The 
compensation pools will be managed to ensure relative cost neutrality. 
As a result, funds will not be shifted between pools.
    Annual base pay increases paid from the performance pay increase 
component of the compensation pools will be based on eligibility as 
well as scores on the established standards as follows:
[GRAPHIC] [TIFF OMITTED] TN13MR97.008

Where:

PR=employee's annual performance-based pay raise, $
V=value of a share, percent
S=number of shares earned by employee based on performance
P=employee's salary prior to pay raise

The number of shares earned by an employee will vary from 0 to 4 and 
will depend upon their performance score. A performance pay increase 
may not cause the employee's rate of basic pay to exceed the maximum 
rate of the bay band.
    The value of a share will be computed in a manner to ensure that 
the amount of money available for performance pay increases will not 
exceed the amount of money in a compensation pool that is available for 
raises. Therefore, the amount of money available annually within a pay 
pool for performance-based pay raises is:
[GRAPHIC] [TIFF OMITTED] TN13MR97.009

Where:

A=average annual historical pay raise, percent
M=pay pool size, $
Pi=salary of employee i
n=number of employees in compensation pool

    The share value (percent) is computed in a manner to ensure exact 
expenditure of the amount of money in the compensation pool as follows:
[GRAPHIC] [TIFF OMITTED] TN13MR97.010

Where:

Si=number of shares earned by employee i based upon performance
ne=number of employees within compensation pool that are eligible 
for a performance-based pay raise

    A payout function that correlates number of shares earned by an 
employee for a performance based pay raise to average performance score 
will be similar to the plot shown in Figure 1.

BILLING CODE 6325-01-P
[GRAPHIC] [TIFF OMITTED] TN13MR97.016


BILLING CODE 6325-01-C
    The annual General Schedule pay increase will be allocated as 
follows:
    (a) The first step is setting the percentage General Schedule 
increase that will be given to all eligible employees. This amount will 
be equal to the General Schedule increase authorized for GS employees. 
All employees whose average performance score is 2.0 or greater will be 
eligible for the increase. Employees with an average performance score 
of less than 2.0 will be ineligible for the full General Schedule 
increase and may receive either none or one-half of the increase. Pay 
increases for employees receiving retained rates will be determined in 
accordance with 5 U.S.C. 5363 except that those with an average 
performance score of less than 2.0 may receive either none or one-
quarter of the increase in the maximum rate of basic pay for the 
applicable pay band.
    (b) The minimum and maximum pay rates of basic pay for each pay 
band in an occupational family will be adjusted by any general pay 
increase to reflect the new rates in accordance with the

[[Page 12013]]

criteria reflected in Section III, Broadbanding, of this plan.
2. Performance Evaluation
    The performance appraisal system will link compensation to 
performance through annual performance evaluations and performance 
ratings. Performance will be evaluated against generic performance 
standards. Rating elements will be provided for all employees. All 
rating elements will be critical and scored on a scale of 0 to 5. The 
score will be based on employees performance as evaluated against 
generic performance standards for each element. The supervisor will 
discuss performance rating standards with the employee to clarify 
performance criteria at the beginning of the rating period. The generic 
performance standards, with the provision to add specific work plans, 
will be used to evaluate employee performance. The standards will 
describe the level of performance required for the employee to be rated 
fully successful. Reviews will be conducted at least at mid-year to 
evaluate employee progress in meeting performance standards. However, 
WES interns in recognized career programs will be appraised semi-
annually until they complete their internship. The last performance 
rating in each annual cycle will be considered to be the rating of 
record for interns.
    Since all employees will not have the same number of rating 
elements, the element scores will be summed and averaged by the number 
of elements rated to determine the overall performance score. The score 
will be used for setting performance pay increases and determining 
eligibility for performance awards.
    Employees must have an average performance score of 2.5 and above 
to be eligible for performance pay increases. Employees with an average 
performance score of 2.0 or greater will be eligible for performance 
awards and full General Schedule increases. Employees with an average 
score of less than 2.0 will be ineligible for performance awards and 
full General Schedule increases. A within-the-year review may be used 
to reevaluate employees with performance scores of less than 2.0. If 
the employee's performance has improved sufficiently since the last 
rating period, the employee may be eligible for a nonretroactive 
General Schedule pay raise at that time.
3. Awards
    WES currently has an extensive awards program consisting of both 
internal and external awards. On-the-spot, special act, and other 
internal awards (both monetary and nonmonetary) will continue under the 
project. MACOM, DA, and DoD awards and other honorary noncash awards 
will be retained.
    Cash awards may be given for performance and to recognize and 
encourage special contributions. Awards can be made to individuals, 
teams, or organizations. Awards must be approved at a managerial level 
at least one level higher than the recommending official except in the 
case where the WES Director is the recommender. Cash awards will not be 
considered to be a part of base pay.

D. Pay Setting Provisions

1. Pay and Compensation
    (a) Pay Ceilings. An employee's total monetary compensation paid in 
a calendar year may not exceed the rate of basic pay for level I of the 
Executive Schedule consistent with 5 U.S.C. 5307 and 5 CFR part 530, 
subpart B. Each pay band will have its own pay ceiling, just as grades 
do in the GS system. Basic pay rates for the various pay bands will be 
directly keyed to the GS basic rates of pay except for pay band VI in 
the Engineers and Scientists occupational family. Pay band VI will have 
pay rates keyed to a minimum of 120% of the minimum rate of basic pay 
for GS-15 basic pay with a maximum of the basic rate of pay established 
for level IV of the Executive Schedule.
    (b) Staffing Supplements. Employees assigned to occupational series 
covered by special rates will be eligible for a staffing supplement if 
the maximum adjusted rate for the banded GS grades to which assigned 
exceeds the maximum GS locality rate for the banded grades (e.g., 
engineers in pay bands II and III). The staffing supplement is added to 
the base pay, much like locality rates are added on to base pay. The 
employee's total pay immediately after implementation of the 
demonstration project will be the same as immediately before the 
demonstration project, but a portion of the total will be in the form 
of a staffing supplement. Adverse action and pay retention provisions 
will not apply to the conversion process as there will be no change in 
total salary. The staffing supplement is calculated as described below.
    Upon conversion, the demonstration base rate will be established by 
dividing the old maximum GS adjusted rate (special rate or locality 
rate) by the staffing factor. The staffing factor will be determined by 
dividing the maximum special rate for the banded grades by the GS 
unadjusted rate corresponding to that special rate (step 10 of the GS 
rate for the same grade as the special rate). The employee's 
demonstration staffing supplement is derived by multiplying the 
demonstration base rate by the staffing factor minus one. So the 
employee's final demonstration special staffing rate equals the 
demonstration base rate plus the special staffing supplement; this 
amount will equal the employee's former maximum GS adjusted rate. 
Simplified, the formula is:
[GRAPHIC] [TIFF OMITTED] TN13MR97.011


[[Page 12014]]


    Example: In the case of a GS-801-11/03 employee who is receiving a 
special salary rate, the salary before the demonstration project is 
$42,944. The maximum special rate for a GS-801-11 Step 10 is $51,295 
and the corresponding regular rate is $46,523. The staffing factor is 
computed as follows:
[GRAPHIC] [TIFF OMITTED] TN13MR97.012

    Then to determine the staffing supplement, multiply the 
demonstration base by the staffing factor minus 1.
[GRAPHIC] [TIFF OMITTED] TN13MR97.013

    The staffing supplement of $3,996 is added to the demonstration 
base rate of $38,948 and the total salary is $42,944, which is the 
salary of the employee before conversion to the demonstration project.
    If an employee is in a band where the maximum GS adjusted rate for 
the banded grades is a locality rate, when the employee is converted 
into the demonstration, the demonstration base rate is derived by 
dividing the employee's former GS maximum adjusted rate (locality or 
special rate) by the applicable locality pay factor. The employee's 
demonstration locality-adjusted rate will equal the employee's former 
maximum GS adjusted rate.
    Annual pay adjustment for employees in special rate occupations 
will require recomputation of the staffing supplement. If OPM 
discontinues or decreases special rates, employees will be entitled to 
pay retention. Upon geographic movement, an employee who receives the 
special staffing supplement will have the supplement recomputed. Any 
resulting reduction in pay will not be considered an adverse action or 
a basis for pay retention.
    Established salary including the staffing supplement will be 
considered basic pay for the same purposes as a locality rate under 5 
CFR 531.606(b), i.e., for purposes of retirement, life insurance, 
premium pay, and severance pay purposes and for advances in pay. It 
will also be used to compute worker's compensation payments and lump 
sum payments for accrued and accumulated annual leave.
2. Promotions
    A promotion is the movement of an employee to a higher pay band 
within the same occupational family or to a pay band in a different 
occupational family which results in an increase in the employee's 
salary. Progression within a pay band, whether by performance pay 
increases or supervisory adjustments, are not subject to the provisions 
of this section.
    Promotions will be processed under competitive procedures in 
accordance with merit principles and requirements. The following 
actions are excepted from competitive procedures:
    (a) Re-promotion to a position which is in the same pay band and 
occupational family as the employee previously held on a permanent 
basis within the competitive service.
    (b) Promotion, reassignment, demotion, transfer, or reinstatement 
to a position having promotion potential no greater than the potential 
of a position an employee currently holds or previously held on a 
permanent basis in the competitive service.
    (c) A position change permitted by RIF procedures.
    (d) Promotion without current competition when the employee was 
appointed through competitive procedures to a position with a 
documented career ladder.
    (e) A temporary promotion, or detail to a position in a higher pay 
band, of 180 days or less.
    (f) Impact of person-in-the-job promotions.
    (g) Promotion resulting from the accretion of duties and 
responsibilities.
    (h) A promotion resulting from the correction of an initial 
classification error.
    Upon promotion to a higher pay band, an employee will be entitled 
to a 6 percent basic pay increase or the lowest level in the pay band 
to which promoted, whichever is greater.
3. Link Between Promotion and Performance
    Noncompetitive promotions (e.g., accretion of duties, recognition 
of impact of person-in-job, career ladder) will require an acceptable 
level of performance in their current position. To be promoted 
noncompetitively from one band to the next within an occupational 
family, an employee must meet the minimum qualifications for the job 
and have a current average performance score of 2.5 or above (Section 
III, Performance Evaluation) or equivalent under a different 
performance management system (an equivalence chart will be developed 
by HRM specialists and included in the implementation instructions). 
Selection of employees through competitive procedures will require a 
current average performance score of 2.5 or above.
4. Supervisory Pay Adjustments
    Supervisory pay adjustments may be used, at the discretion of the 
WES Director, to compensate employees in the Engineers and Scientists 
occupational family in supervisory positions. Supervisory pay 
adjustments are increases to the supervisor's basic rate of pay, 
ranging up to 10 percent of that pay rate, subject to the constraint 
that the adjustment may not cause the employee's basic rate of pay to 
exceed the pay band maximum rate. Only employees in supervisory 
positions with formal supervisory authority meeting that required for 
coverage under the OPM GS Supervisory Guide will be considered for the 
supervisory pay adjustment. Criteria to be considered in determining 
the pay increase percentage include the following organizational and 
individual employee factors: needs of the organization to attract, 
retain, and motivate high quality supervisors; budgetary constraints; 
years of supervisory experience; amount of supervisory training 
received; performance; and managerial impact on the organization.
    Conditions, after the date of conversion into the demonstration 
project, under which the application of a supervisory pay adjustment 
will be considered are as follows:
    (a) New hires into supervisory positions will have their initial 
rate of basic pay set at the supervisor's discretion within the pay 
range of the applicable pay band. This rate of pay may include a 
supervisory pay

[[Page 12015]]

adjustment determined using the ranges and criteria outlined above.
    (b) An employee selected for a supervisory position that is within 
the employee's current pay band may also be considered for a 
supervisory pay adjustment.
    (c) If a supervisor is already authorized a supervisory pay 
adjustment and is subsequently selected for another supervisory 
position, within the same pay band, then the supervisory pay adjustment 
will be redetermined.
    (d) An employee promoted to a supervisory position in a higher pay 
band may be considered for a supervisory adjustment in addition to the 
pay increase that resulted from the promotion.
    Supervisors, upon initial conversion into the demonstration project 
into the same, or substantially similar position, will be converted at 
their existing basic rate of pay and will not be offered a supervisory 
pay adjustment.
    Before supervisory employees may receive the pay adjustment, they 
must sign a statement acknowledging that the entire adjustment will be 
immediately withdrawn if they are removed from the supervisory position 
because of unacceptable performance or conduct. Supervisory employees 
who are reassigned to a nonsupervisory position for any other reasons 
(i.e., employee choice, management directed reassignment, or RIF) will 
receive one-half of the pay adjustment for one year following the 
reassignment. Eliminations or reductions in supervisory pay adjustments 
are not adverse actions, are not subject to appeal, and are not covered 
under pay retention provisions.
5. Supervisory Pay Differentials
    Supervisory pay differentials may be used, at the discretion of the 
WES Director, to incentivize and reward E&S supervisors who are in pay 
bands IV and V whose pay is at the maximum rate of the pay band. Formal 
supervisory authority meeting that required for coverage under the OPM 
GS Supervisory Guide is required. A supervisory pay differential is a 
cash incentive, paid out on a pay period basis, which is not included 
as part of the supervisor's basic rate of pay. The differential may be 
up to 10 percent of the supervisor's basic rate of pay. Criteria to be 
considered in determining the amount of this supervisory pay 
differential includes those identified for supervisory pay adjustments.
    The supervisory pay differential may be considered, either during 
conversion into or after initiation of the demonstration project. The 
differential will be terminated if the employee is removed from a 
supervisory position, regardless of cause.
    As specified in the Supervisory Pay Adjustment Section, all 
personnel actions involving a supervisory differential will require a 
statement signed by the employee acknowledging that the differential 
may be terminated or reduced at the discretion of the WES Director. The 
termination or reduction of the differential is not an adverse action, 
is not subject to appeal, and is not covered under pay retention 
provisions.

E. Hiring and Placement Authorities

1. Modified Term Appointments
    WES conducts many research and development projects that range from 
3 to 6 years. The current 4-year limitation on term appointments 
imposes a burden on laboratory managers by forcing the termination of 
some term employees prior to completion of projects they were hired to 
support. This disrupts the research and development process and reduces 
the ability of WES to serve its customers.
    Under the demonstration project, WES will have the authority to 
hire individuals under modified term appointments. These appointments 
will be used to fill positions for a period of more than 1 year but not 
more than 5 years when the need for employee's services is not 
permanent. The modified term appointments differ from term employment 
as described in 5 CFR part 316 in that they may be made for a period 
not to exceed 5, rather than 4 years. The WES Director is authorized to 
extend a term appointment 1 additional year.
    Employees hired under the modified term appointment authority may 
be eligible for conversion to career-conditional appointments. To be 
converted, the employee must: have been selected for the term position 
under competitive procedures, with the announcement specifically 
stating that the individual(s) selected may be eligible for conversion 
to a career-conditional appointment at a later date; have served 2 
years of continuous service in the term position; be selected under WES 
merit promotion procedures for the permanent position; and have a 
current performance score of 2.5 or better.
    Employees serving under term appointments at the time of conversion 
to the demonstration project will be converted to the new modified term 
appointments provided they were hired for their current positions under 
competitive procedures. These employees will be eligible for conversion 
to career-conditional appointment if they have a current performance 
score of 2.5 or better and are selected under merit promotion 
procedures for the permanent position after having completed 2 years of 
continuous service. Time served in temporary or term positions prior to 
conversion to the modified term appointment is creditable, provided the 
service was continuous. Employees serving under modified term 
appointments under this plan will be covered by the plan's pay-for-
performance system.
2. Extended Probationary Period
    A new employee needs to demonstrate adequate contribution during 
all cycles of a research effort for a laboratory manager to render a 
thorough evaluation. The current 1-year probationary period will be 
extended to 2 years for all newly hired career employees in the 
Engineers and Scientists occupational family. The purpose of extending 
the probationary period is to allow supervisors an adequate period of 
time to fully evaluate an employee's contribution and conduct.
    Aside from extending the time period, all other features of the 
current probationary period, including the criteria for crediting prior 
service and the limited notice and appeal rights, are retained. The 
requirements for conversion to career tenure are unchanged. Employees 
appointed prior to the implementation date will not be affected.
    Probationary employees will be terminated when the employee fails 
to demonstrate proper conduct, technical competency, and/or adequate 
work contribution for continued employment. When WES decides to 
terminate an employee serving a probationary period because their work 
contribution or conduct during this period fails to demonstrate their 
fitness or qualifications for continued employment, it shall terminate 
their services by written notification of the reasons for separation 
and the effective date of the action. The information in the notice as 
to why the employee is being terminated shall, as a minimum, consist of 
WES's conclusions as to the inadequacies of their work contribution or 
conduct.
3. Voluntary Emeritus Program
    Under the demonstration project, the WES Director will have the 
authority to offer retired or separated individuals (engineers and 
scientists) voluntary assignments in the laboratory. This

[[Page 12016]]

authority will include individuals who have retired or separated from 
Federal service. Voluntary Emeritus Program assignments are not 
considered ``employment'' by the Federal Government (except for 
purposes of injury compensation). Thus, such assignments do not affect 
an employee's entitlement to buy-outs or severance payments based on an 
earlier separation from Federal service. The Voluntary Emeritus Program 
will ensure continued quality research while reducing the overall 
salary line by allowing higher paid individuals to accept retirement 
incentives with the opportunity to retain a presence in the scientific 
community. The program will be of most benefit during manpower 
reductions as senior E&Ss could accept retirement and return to provide 
valuable on-the-job training or mentoring to less experienced 
employees.
    To be accepted into the emeritus program, a volunteer must be 
recommended by a Laboratory Director to the WES Director. Everyone who 
applies is not entitled to a voluntary assignment. The WES Director 
must clearly document the decision process for each applicant (whether 
accepted or rejected) and retain the documentation.
    To ensure success and encourage participation, the volunteer's 
federal retirement pay (whether military or civilian) will not be 
affected while serving in a voluntary capacity. Retired or separated 
federal employees may accept an emeritus position without a waiting 
period.
    Volunteers will not be permitted to monitor contracts on behalf of 
the government or to participate on any contracts or solicitations 
where a conflict of interest exists. The same rules that currently 
apply to source selection members will apply to volunteers.
    An agreement will be established between the volunteer and the WES. 
The agreement will be reviewed by the local Office of Counsel for 
ethics determinations under the Joint Ethics Regulation. The agreement 
must be finalized before the assumption of duties and shall include:
    (a) A statement that the voluntary assignment does not constitute 
an appointment in the civil service and is without compensation and any 
and all claims against the Government because of the voluntary 
assignment are waived by the volunteer.
    (b) A statement that the volunteer will be considered a federal 
employee for the purpose of injury compensation.
    (c) Volunteer's work schedule.
    (d) Length of agreement (defined by length of project or time 
defined by weeks, months, or years).
    (e) Support provided by the laboratory (travel, administrative, 
office space, supplies).
    (f) A one page Statement of Duties.
    (g) A provision that states no additional time will be added to a 
volunteer's service credit for such purposes as retirement, severance 
pay, and leave as a result of being a member of the Voluntary Emeritus 
Program.
    (h) A provision allowing either party to void the agreement with 10 
working days written notice.
    (i) The level of security access required (any security clearance 
required by the assignment will be managed by the laboratory while the 
volunteer is a member of the Voluntary Emeritus Program).

F. Employee Development

    The objective of the employee development program will be to 
develop the competence of employees for maximum achievement of 
Laboratory, MACOM, DA, and DoD goals. WES will continue its employee 
development programs, such as local training, off-site training, long-
term training, and developmental assignments. Under this Project, the 
opportunity to apply for expanded developmental opportunities to 
include sabbaticals and training for degrees, which was previously 
restricted, will be made available to permanent employees.
1. Sabbatical
    WES will have the authority to grant sabbaticals to career 
employees to permit them to engage in study or uncompensated work 
experience that will contribute to their development and effectiveness. 
Each sabbatical should benefit WES as well as increase the employee's 
individual effectiveness. Examples are as follows: advanced academic 
teaching, study, or research; self-directed (independent) or guided 
study; and on-the-job work experience with a public, private, or 
nonprofit organization. Each recipient of a sabbatical must sign a 
continued service agreement and agree to serve a period equal to at 
least three times the length of the sabbatical.
2. Degree Training
    Degree training is an essential component of an organization that 
requires continuous acquisition of advanced and specialized knowledge. 
Degree training in the academic environment of DoD laboratories is also 
a critical tool for recruiting and retaining employees with or 
requiring critical skills. Constraints under current law and regulation 
limit degree payment to shortage occupations. In addition, current 
government-wide regulations authorize payment for degrees based only on 
recruitment or retention needs. Degree payment is currently not 
permitted for non-shortage occupations involving critical skills.
    Under the Personnel Demonstration Project, WES will expand the 
authority to provide degree training for purposes of meeting critical 
skill requirements, to ensure continuous acquisition of advanced and 
specialized knowledge essential to the organization, and to recruit and 
retain personnel critical to the present and future requirements of the 
organization. It is expected that the degree payment authority will be 
used primarily for attainment of advanced degrees.

G. Reduction in Pay or Removal Actions

    Employees covered by the project will be evaluated under a 
performance evaluation system that affords grievance and/or appeal 
rights the same as those provided currently.
1. Unacceptable Performance
    Employees whose performance is unsatisfactory (equivalent to a 
performance score of 0 on any critical element) at anytime during the 
year shall be placed in a Performance Improvement Plan (PIP). If in a 
PIP at the end of a rating period, the employee will not be given a 
performance rating while in that program. If performance remains 
unsatisfactory upon completion of the PIP, the employee will be 
separated from his or her position or reduced to a lower pay band. If 
performance becomes satisfactory, the employee will receive a 
performance rating of record and appropriate adjustments to pay may be 
made at that time (i.e. granting General Schedule increase). These 
performance-based actions will follow the same procedures as current 
performance-related removals and reductions in grade under Chapter 43 
or Chapter 75 when appropriate.
2. Placement in a Lower Pay Band
    An employee who is determined ineligible for a performance award 
may receive either none or one-half the General Schedule pay increase 
and will not receive a performance pay increase or performance award. 
Because the minimum pay rate for each pay band will be increased each 
year by the amount of the General Schedule increase, it is possible 
that the new minimum rate of a pay band will exceed the basic pay of an 
employee in that band who did not receive the full

[[Page 12017]]

General Schedule increase. In these cases, the employee will be moved 
to the next lower band level and the action will be considered a 
demotion. This will not be considered an adverse action, will not be 
appealable through a statutory appeals process, and will not be covered 
under grade retention provisions.

G. Revised Reduction in Force (RIF) Procedures

    Modifications include limiting competitive areas to occupational 
families and increasing the emphasis on performance in the RIF process. 
These modifications will increase the probability of retaining the 
highest performing individuals in their positions and will increase the 
probability of displacing the lowest performing individuals.
1. Competitive Areas
    For RIF purposes, the competitive area will be the occupational 
family in which the employee is assigned and will cover all geographic 
locations.
2. Retention
    Retention registers will be established based on the following 
criteria listed in order of priority: tenure status (Tenure I-career, 
Tenure II-career conditional, Tenure III-modified term); veteran's 
preference; most recent employee performance score; and service 
computation date. Modified term employees within the affected 
occupational family will be separated before permanent Tenure I and II 
employees. The present RIF system essentially remains in effect, except 
that performance scores are part of the retention order. Performance 
scores will not be used to adjust the service computation date. A 
preference eligible with a compensable service-connected disability of 
30 percent or more may displace employees in positions equivalent to 5 
GS grades below the minimum grade level of his/her current pay band. 
Increasing the emphasis on job performance will help ensure the 
retention of outstanding individuals in RIF situations.
3. Grade and Pay Retention
    Except where waived or modified in the waiver section of this plan, 
grade and pay retention will follow current law and regulations.

IV. Training

    The key to the success or failure of the proposed demonstration 
project will be the training provided for all involved. This training 
will not only provide the necessary knowledge and skills to carry out 
the proposed changes, but will also lead to commitment to the program 
on the part of all participants. Training will be tailored to fit the 
requirements of every employee included and will fully address employee 
concerns to ensure that everyone has a comprehensive understanding of 
the program.
    Training at the beginning of implementation and throughout the 
demonstration will be provided to supervisors, employees, and the 
administrative staff responsible for assisting managers in effecting 
the changeover and operation of the new system.
    The elements to be covered in the orientation portion of this 
training will include the following: a description of the system; how 
employees are converted into the system; pay adjustment process; 
familiarization with the new position descriptions and performance 
objectives; the individual performance rating process; the 
reconsideration process; and the demonstration project administrative 
and formal evaluation process.

A. Supervisors

    The focus of this project on management-centered personnel 
administration, with increased supervisory and managerial personnel 
management authority and accountability, demands thorough training of 
supervisors and managers in the knowledge and skills that will prepare 
them for their new responsibilities. Training will include detailed 
information on the policies and procedures of the demonstration 
project, skills training in using the classification system, position 
description preparation, and performance evaluation. Additional 
training may focus on nonproject procedural techniques such as 
interpersonal and communication skills.

B. Administrative Staff

    The administrative staff, generally personnel specialists, 
technicians, and administrative officers, will play a key role in 
advising, training, and coaching supervisors and employees in 
implementing the demonstration project. This staff will need training 
in the procedural and technical aspects of the project.

C. Employees

    WES will train employees covered under the demonstration project. 
In the months leading up to the implementation date, meetings will be 
held for employees to fully inform them of all project decisions, 
procedures, and processes.

V. Conversion

A. Conversion to the Demonstration Project

    Initial entry into the demonstration project for covered employees 
will be accomplished through a full employee protection approach that 
ensures each employee an initial place in the appropriate occupational 
family and pay band without loss of pay. An automatic conversion from 
current GS/GM grade and pay into the new broad banding system will be 
accomplished. Except for special rate employees, each employee will be 
converted at their current GS salary at the time of conversion.
    Special conversion rules will apply to special rate employees (see 
Section III, Pay Setting Provisions). Employees who enter the 
demonstration project later by lateral reassignment or transfer will be 
subject to the same pay conversion rules. Employees serving under 
regular term appointments at the time of project implementation will be 
converted to the modified term appointment. Position announcements, 
etc. will not be required for these term appointments. If conversion 
into the demonstration project is accompanied by a geographic move, the 
employee's GS pay entitlements in the new geographic area must be 
determined before performing the pay conversion.
    Employees who are on temporary promotions at the time of conversion 
will be converted to a pay band commensurate with the grade of the 
position to which temporarily promoted. At the conclusion of the 
temporary promotion, the employee will revert to the pay band which 
corresponds to the grade of record. When a temporary promotion is 
terminated, pay will be determined as described in Section III, Pay 
Setting Provisions. The only exception will be if the original 
competitive promotion announcement stipulated that the promotion could 
be made permanent; in these cases, actions to make the temporary 
promotion permanent will be considered and, if implemented, will be 
subject to all existing priority placement programs.
    At the time of conversion, each employee will be given a lump sum 
cash payment for the time credited (in weeks) to the employee toward 
what would have been the employee's next within-grade increase. This 
step buy-in is applicable only to employees converted into the project 
at the time of its initial establishment.
    Any OCONUS employee covered by the project will continue to be 
ineligible for locality pay. The maximum basic

[[Page 12018]]

salary payable in the pay band will be limited to the maximum rate of 
pay on the GS salary table which does not include any locality pay.

B. Conversion From the Demonstration Project

    If a demonstration project employee is moving to a position not 
under the demonstration project, or if the project ends and each 
project employee must be converted back to the GS system, the following 
procedures will be used to convert the employee's project pay band to 
an equivalent grade and the employee's project rates of pay to 
equivalent rates of pay. The converted grade and rates of pay must be 
determined before movement or conversion out of the demonstration 
project and any accompanying geographic movement, promotion, or other 
simultaneous action. For conversions upon termination of the project 
and for lateral reassignments, the converted grade and rates will 
become the employee's actual grade and rates after leaving the 
demonstration project (before any other action). For transfers, 
promotions, and other actions, the converted grade and rates will be 
used in applying any pay movement out of the project (i.e., promotion 
rules, highest previous rate rules, pay retention rules) as if the 
converted grade and rates were actually in effect immediately before 
the employee left the demonstration project.
    1. Grade-Setting Provisions. An employee in a pay band 
corresponding to a single grade is converted to that grade. An employee 
in a pay band corresponding to two or more grades is converted to one 
of those grades according to the following rules:
    (a) The employee's adjusted rate of basic pay under the 
demonstration project (including any locality payment or staffing 
supplement but excluding any supervisory pay adjustment) is compared 
with step 4 rates in the highest applicable GS rate range. For this 
purpose, a ``GS rate range'' includes a rate range in the GS base 
schedule, the locality rate schedule for the locality pay area in which 
the position is located, or the appropriate special rate schedule for 
the employee's occupational series, as applicable. If the series is a 
two-grade interval series, only odd-numbered grades are considered 
below GS-11.
    (b) If the employee's adjusted project rate equals or exceeds the 
applicable step 4 rate of the highest GS grade in the band, the 
employee is converted to that grade.
    (c) If the employee's adjusted project rate is lower than the 
applicable step 4 rate of the highest grade, the adjusted rate is 
compared with the step 4 rate of the second highest grade in the 
employee's pay band. If the employee's adjusted rate equals or exceeds 
step 4 rate of the second highest grade, the employee is converted to 
that grade.
    (d) This process is repeated for each successively lower grade in 
the band until a grade is found in which the employee's adjusted 
project rate equals or exceeds the applicable step 4 rate of the grade. 
The employee is then converted at that grade. If the employee's 
adjusted rate is below the step 4 rate of the lowest grade in the band, 
the employee is converted to the lowest grade.
    (e) Exception: If the employee's adjusted project rate exceeds the 
maximum rate of the grade assigned under the above-described ``step 4'' 
rule but fits in the rate range for the next higher applicable grade 
(i.e., between step 1 and step 4), then the employee shall be converted 
that next higher applicable grade.
    (f) Exception: An employee will not be converted to a lower grade 
than the grade held by the employee immediately preceding a conversion, 
lateral reassignment, or lateral transfer into the project, unless 
since that time the employee has undergone a reduction in band.
    2. Pay-Setting Provisions. An employee's pay within the converted 
GS grade is set by converting the employee's demonstration project 
rates of pay to GS rates of pay in accordance with the following rules:
    (a) The pay conversion is done before any geographic movement or 
other pay-related action that coincides with the employee's movement or 
conversion out of the demonstration project.
    (b) An employee's adjusted rate of basic pay under the project 
(including any locality payment or staffing supplement but excluding 
any supervisory pay adjustment) is converted to a GS adjusted rate on 
the highest applicable GS rate range for the converted GS grade. For 
this purpose, a ``GS rate range'' includes a rate range in the GS base 
schedule, an applicable locality rate schedule, or an applicable 
special rate schedule.
    (c) If the highest applicable GS rate range is a locality pay rate 
range, the employee's adjusted project rate is converted to a GS 
locality rate of pay. If this rate falls between two steps in the 
locality-adjusted schedule, the rate must be set at the higher step. 
The converted GS unadjusted rate of basic pay would be the GS base rate 
the corresponding to the converted GS locality rate (i.e., same step 
position). If this employee is also covered by a special rate schedule 
as a GS employee, the converted special rate will be determined based 
on the GS step position. This underlying special rate will be basic pay 
for certain purposes for which the employee's higher locality rate is 
not basic pay.
    (d) If the highest applicable GS rate range is a special rate 
range, the employee's adjusted project rate is converted to a special 
rate. If this rate falls between two steps in the special rate 
schedule, the rate must be set at the higher step. The converted GS 
unadjusted rate of basic pay will be the GS rate corresponding to the 
converted special rate (i.e., same step position).
    3. Within-Grade Increase--Equivalent Increase Determinations. 
Service under the demonstration project since the last pay-for-
performance determination is creditable for within-grade purposes upon 
conversion back to the GS pay system. Performance pay increases 
(including a zero increase) under the demonstration project are 
equivalent increases for the purpose of determining the commencement of 
a within-grade increase waiting period under 5 CFR 531.405(b).

VI. Project Duration

    Public Law 103-337 removed any mandatory expiration date for this 
demonstration. The project evaluation plan adequately addresses how 
each intervention will be comprehensively evaluated for at least the 
first 5 years of the demonstration (Proposed Plan for the Evaluation of 
the DoD Laboratory Demonstration Program, OPM, 1995). Major changes and 
modifications to the interventions can be made through announcement in 
the Federal Register and would be made if formative evaluation data 
warranted. At the 5 year point, the entire demonstration will be 
reexamined for either: permanent implementation; change and another 3-5 
year test period; or expiration.

VII. Evaluation Plan

    Authorizing legislation mandated evaluation of the demonstration 
project to assess the merits of project outcomes and to evaluate the 
feasibility of applications to other federal organizations. A 
comprehensive and methodologically rigorous evaluation of the personnel 
system changes will be carried out. The overall evaluation consists of 
two components--external and internal evaluation. The external 
evaluation will be conducted by OPM's Personnel Resources and 
Development Center (PRDC) to benefit from their extensive experience 
evaluating demonstration projects. PRDC will serve in the role of 
external evaluator to

[[Page 12019]]

ensure the integrity of the evaluation process, outcomes, and 
interpretation of results. Their external evaluation will be 
supplemented by an internal evaluation to be accomplished by the staff 
of WES. Selected parts of the evaluation will be completed using 
contractor support. The contractor(s) will be well qualified and 
experienced with demonstrated expertise in performing relevant support 
functions.
    Essential elements of the evaluation plan are set forth below. The 
demonstration project is a complex experiment to be conducted in a 
dynamic environment over several years. Modifications and refinements 
to the evaluation plan will be made as required by mid-course project 
changes. All additions, deletions, and refinements to the current plan 
will be fully documented and explained as part of the evaluation 
reporting process. The main purpose of the evaluation is to determine 
the effectiveness of the personnel system changes described by the 
individual interventions. Every effort will be made to establish direct 
cause-and-effect relationships between the interventions and 
effectiveness criteria. An ancillary objective is to assess the effects 
of the interventions on improved organizational performance. An 
indirect causal link is hypothesized between the personnel system 
changes and improved organizational effectiveness, i.e., improved 
laboratory performance, mission accomplishment, and customer 
satisfaction. The current personnel management system with its many 
rigid rules and regulations often is perceived as a barrier to mission 
accomplishment. Together, the demonstration project initiatives are 
intended to remove some of those barriers, and therefore, are expected 
to contribute to improved laboratory performance.
    The evaluation effort will be accomplished in four distinct phases:
    (a) Design phase--includes development of the evaluation model, 
selection of experimental and comparison sites, and collection of 
baseline data prior to implementation.
    (b) Implementation phase--includes actual project implementation 
and monitoring of the degree and support of implementation to assure 
that each of the project interventions has been operationalized as 
originally conceived.
    (c) Formative evaluation phase--includes data collection and 
analysis for five years for purposes of evaluating the effects of the 
interventions. Periodic reports and annual summaries will be prepared 
to document the findings.
    (d) Summative evaluation phase--focuses on summary evaluation and 
overall assessment of the project's impact, including presentation of 
conclusions and final recommendations upon completion of the project.
    An intervention impact model (Appendix A) will be used to measure 
the effectiveness of the various personnel system changes or 
interventions. Additional measures will be developed as new 
interventions are introduced or existing interventions modified with 
consistent with expected effects. Measures may also be deleted when 
appropriate. Activity specific measures may also be developed to 
accommodate specific needs or interests which are locally unique.
    The evaluation model for the Demonstration Project identifies 
elements critical to an evaluation of the effectiveness of the 
interventions. The overall evaluation approach will also include 
consideration on context variables that are likely to have an impact on 
project outcomes (e.g., HRM regionalization, downsizing, cross-service 
integration, and the general state of the economy). However, the main 
focus of the evaluation will be on intermediate outcomes, i.e., the 
results of specific personnel system changes which are expected to 
improve human resources management. The ultimate outcomes are defined 
as improved organizational effectiveness, mission accomplishment, and 
customer satisfaction.
    Data from a variety of different sources will be used in the 
evaluation. Information from existing management information systems 
supplemented with perceptual data will be used to assess variables 
related to effectiveness. Multiple methods provide more than one 
perspective on how the demonstration project is working. Information 
gathered through one method will be used to validate information 
gathered through another. Confidence in the findings will increase as 
they are substantiated by the different collection methods. The 
following types of data will be collected as part of the evaluation: 
workforce data; personnel office data; employee attitudes and feedback 
using surveys, structured interviews and focus groups; local activity 
histories, and core measures of laboratory effectiveness.

VIII. Demonstration Project Costs

A. Step Buy-Ins

    Under the current pay structure, employees progress through their 
assigned grade in step increments. Since this system is being replaced 
under the demonstration project, employees will be awarded that portion 
of the next higher step they have completed up until the effective date 
of implementation. As under the current system, supervisors will be 
able to withhold these partial step increases if the employee's 
performance is not at an acceptable level of competence.
    At the time of conversion, each employee will be given a lump sum 
cash payment for the time credited (in weeks) to the employee toward 
what would have been the employee's next within-grade increase. 
Employees at the top step of their grade on the date of implementation 
will not be eligible for within-grade increase equity adjustments since 
they are already at the top of the step scale.

B. Development Costs

    Costs associated with the development of the personnel 
demonstration system include software automation, training, and project 
evaluation. All funding will be provided through the WES budget. The 
projected annual expenses for each area is summarized in Table 4. 
Project evaluation costs are not expected to continue beyond the first 
6 years.

                                                         Table 4.--Projected Developmental Costs                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        FY 96                FY 97               FY 98               FY 99               FY 00               FY 01      
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training.......................  $97K                 $19K                ..................  ..................  ..................  ..................
Project Evaluation.............  25K                  60K                 $60K                $60K                $60k                $60K              
Automation.....................  80K                  10K                                                                                               
    Totals.....................  202K                 89K                 60K                 60K                 60k                 60K               
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 12020]]

IX. Required Waivers to Law and Regulations

    Public Law 103-337 gave the DoD the authority to experiment with 
several personnel management innovations. In addition to the 
authorities granted by the law, the following are the waivers of law 
and regulation that will be necessary for implementation of the 
Demonstration Project. In due course, additional laws and regulations 
may be identified for waiver request.

A. Waivers to Title 5, U.S. Code

Section 3111, Acceptance of volunteer service
Section 3324, Appointments to positions classified above GS-15
Section 3341, Details
Section 4107, Non-Government facilities; restrictions (to the extent 
that training may be paid for the purpose of an employee to obtain a 
degree)
Section 4108, Employee agreements; service after training (to the 
extent that continued service is required only for long-term training 
and sabbaticals)
Sections 5101-5111, Purpose, definitions, basis, classification of 
positions, review, authority (to the extent that white collar employees 
will be covered by broadbanding. Pay category determination criteria 
for Federal Wage System positions remain unchanged).
Sections 5301; 5302 (8), and (9); 5303; and 5304, Pay comparability 
system (Sections 5301, 5302, and 5304 are waived only to the extent 
necessary to allow: (1) Demonstration project employees, except 
employees in band VI of the Engineers and Scientists occupational 
family, to be treated as General Schedule employees; (2) basic rates of 
pay under the demonstration project to be treated as scheduled rates of 
basic pay; and (3) employees in band VI of the Engineers and Scientists 
occupational family to be treated as ST employees for the purposes of 
these provisions)
Section 5305, Special pay authority
Sections 5331-5336, General Schedule pay rates
Sections 5361-5366, Grade and pay retention (to the extent necessary to 
(1) Replace ``grade'' with ``pay band'; (2) allow demonstration project 
employees to be treated as General Schedule employees; (3) provide that 
pay band retention provisions do not apply to movements to a lower pay 
band as a result of receiving no or only part of a general pay increase 
because of poor performance; (4) provide that pay retention provisions 
do not apply to conversions from General Schedule special rates to 
demonstration project pay, as long as total pay is not reduced, and to 
reductions in pay due solely to the removal of all or part of a 
supervisory pay adjustment upon leaving a supervisory position; and (5) 
provide that an employee on pay retention whose performance rating is 
less than 2.0 is not entitled to 50 percent of the amount of the 
increase in the maximum rate of basic pay payable for the pay band of 
the employee's position. This waiver does not apply to employees in 
band VI of the Engineers and Scientists occupational family who are to 
be treated as ST employees for the purposes of applying the grade and 
pay retention provisions.)
Section 5545, Night, standby, irregular, and hazardous duty 
differential (to the extent necessary to allow demonstration project 
employees to be treated as General Schedule employees. This waiver does 
not apply to employees in band VI of the Engineers and Scientists 
occupational family.)
Sections 5753, 5754, and 5755, Recruitment and relocation bonuses, 
retention allowances, and supervisory differentials (to the extent 
necessary to allow: (1) Employees and positions under the demonstration 
project to be treated as employees and positions under the General 
Schedule; and (2) employees in band VI of the Engineers and Scientists 
occupational family to be treated as ST employees)
Section 7512(3), Adverse actions (to the extent necessary to (1) 
substitute ``pay band'' for ``grade.''
Section 7512(4), Adverse actions (to the extent necessary to provide 
that adverse action provisions do not apply to: (1) Conversions from 
General Schedule special rates to demonstration project pay, as long as 
total pay is not reduced; and (2) reductions in pay due to removal of 
all or part of a supervisory adjustment)

B. Waivers to Title 5, Code of Federal Regulations

Part 300.601-605, Time-in-grade restrictions (to the extent that time-
in-grade restrictions are eliminated)
Part 308.101-103, Volunteer service (to the extent that volunteer 
service is unrestricted)
Parts 315.801(a) and 315.802(a), Length of probationary period (to the 
extent that the probationary period for engineers and scientists is 
increased to 2 years)
Part 316.301, Term appointment (to the extent that modified term 
appointments may cover a maximum period of 6 years)
Part 316.303, Tenure of term employees (to the extent that term 
employees may compete for permanent status through local merit 
promotion plans)
Part 335.103, Covering the length of details and temporary promotions
Part 351.402(b), Competitive area (to the extent that occupational 
family is the competitive area)
Part 351.403, Competitive level (to the extent that pay band is 
substituted for grade)
Part 351.504, Retention standing, credit for performance (to the extent 
that service credit will not be modified based on performance rating)
Part 351.701, Assignment involving displacement (to the extent that a 
performance score of 1 is substituted for level 2 and bumping and 
retreating will be limited to no more than 2 pay bands except for 30 
percent compensable veterans who can retreat to the equivalent of 5 GS 
grades)
Part 430.101-210, subparts A and B, Performance Management System
Part 432.103-105, Performance based reduction-in-grade and removal 
actions (to the extent that pay band is substituted for grade, 
reduction in band level as a result of non-receipt of General Schedule 
increases because of poor performance is not an adverse action, and 
unacceptable performance is redefined)
Part 511.101, 201-203, General provisions and coverage of the General 
Schedule (to the extent that positions are covered by broadbanding)
Part 511.601-612, Classification appeals (to the extent that positions 
are covered by broadbanding)
Part 530, subpart C, Special salary rates
Part 531, subparts B, D, and E, Determining the rate of basic pay, 
within-grade increases, and quality step increases
Part 531, subpart F, Locality-based comparability payments (to the 
extent necessary to allow: (1) demonstration project employees, except 
employees in band VI of the Engineers and Scientists occupational 
family, to be treated as General Schedule employees; (2) basic rates of 
pay under the demonstration project to be treated as scheduled annual 
rates of pay; and (3) employees in band VI of the Engineer and 
Scientist occupational family to be treated as ST employees)
Part 536, Grade and pay retention (to the extent necessary to: (1) 
replace ``grade'' with ``pay band'; (2) provide

[[Page 12021]]

that pay band retention provisions do not apply to movements to a lower 
pay band as a result of receiving no or only part of a general pay 
increase because of poor performance; (3) provide that pay retention 
provisions do not apply to conversions from General Schedule special 
rates to demonstration project pay, as long as total pay is not 
reduced, and to reductions in pay due solely to the removal of all or 
part of a supervisory pay adjustment upon leaving a supervisory 
position; and (4) provide than an employee on pay retention whose 
performance rating is less than 2.0 is not entitled to 50 percent of 
the amount of the increase in the maximum rate of basic pay payable for 
the pay band of the employee's position. This waiver does not apply to 
employees in band VI of the Engineers and Scientists occupational 
family who are to be treated as ST employees for the purposes of 
applying the grade and pay retention provisions)
Part 550.703, Severance pay (to the extent necessary to modify the 
definition of ``reasonable offer'' by replacing ``two grade or pay 
levels'' with ``one band level'' and ``grade or pay level'' with ``band 
level''
Part 550.902, Hazardous duty differential, definition of ``employee'' 
(to the extent necessary to allow demonstration project employees to be 
treated as General Schedule employees. This waiver does not apply to 
employees in band VI of the Engineers and Scientists occupational 
family)
Part 575, subparts A, B, C, and D, Recruitment bonuses, relocation 
bonuses, retention allowances and supervisory differentials (to the 
extent necessary to allow (1) employees and positions under the 
demonstration project to be treated as employees and positions under 
the General Schedule and (2)employees in band VI of the Engineers and 
Scientists occupational family to be treated as ST employees)
Part 752.401 (a)(3), Adverse actions (this provision is waived only to 
the extent necessary to (1) substitute ``pay band'' for ``grade'' and 
(2) provide that moving a lower pay band as a result of not receiving 
the full amount of a general pay increase because of poor performance 
is not an adverse action)
Part 752.401 (a)(4), Adverse actions (to the extent necessary to 
provide that adverse action provisions do not apply to: (1) conversions 
from General Schedule special rates to demonstration project pay, as 
long as total pay is not reduced; and (2) reductions in pay due to the 
removal of all or part of a supervisory adjustment)

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[FR Doc. 97-6169 Filed 3-10-97; 8:45 am]
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