[Federal Register Volume 62, Number 124 (Friday, June 27, 1997)]
[Notices]
[Pages 34876-34903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16850]



[[Page 34875]]

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Part IV





Office of Personnel Management





_______________________________________________________________________



Science and Technology Reinvention Laboratory Personnel Demonstration 
Project at the Missile Research, Development, and Engineering Center 
(MRDEC); Notice

  Federal Register / Vol. 62, No. 124 / Friday, June 27, 1997 / 
Notices  

[[Page 34876]]


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OFFICE OF PERSONNEL MANAGEMENT


Science and Technology Reinvention Laboratory Personnel 
Demonstration Project at the Missile Research, Development, and 
Engineering Center (MRDEC)

AGENCY: Office of Personnel Management

ACTION: Notice of approval of Demonstration Project Final Plan.

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SUMMARY: The National Defense Authorization Act for fiscal year 1995 
(P.L. 103-337) authorizes the Secretary of Defense, with Office of 
Personnel Management (OPM) approval, to conduct a Personnel 
Demonstration Project at Department of Defense (DoD) laboratories 
designated as Science and Technology Reinvention Laboratories. The 
legislation requires that most requirements of Section 4703 of Title 5 
shall apply to the demonstration project. Section 4703 requires OPM to 
publish the project plan in the Federal Register.

DATES: This demonstration project may be implemented by the MRDEC 
September 28, 1997.

FOR FURTHER INFORMATION CONTACT: MRDEC: Dr. William H. Leonard, Special 
Assistant for Laboratory Management, Research, Development, and 
Engineering Center, U.S. Army Missile Command, ATTN: AMSMI-RD, Redstone 
Arsenal, Alabama 35898-5240, 205-876-1442. OPM: Fidelma A. Donahue, 
U.S. Office of Personnel Management, 1900 E. Street, NW, Room 7460, 
Washington, DC 20415, 202-606-1138.

SUPPLEMENTARY INFORMATION:

1. Overview

    Ninety letters and six e-mails were received, and six individuals 
commented on the Federal Register notice at the public hearing. These 
comments brought several new perspectives to the attention of those 
responsible for implementing, overseeing, and evaluating the project. 
The comments highlighted instances of miscommunication and 
misunderstanding with the present system as well as the project 
interventions. Further, they underscored the importance of providing 
training to employees and supervisors on the Demonstration Project. The 
substance of all comments received has been conveyed to the Center 
Directors, the President of AFGE Local 1858, and the MICOM Civilian 
Personnel Advisory Center in the event that local policies, processes 
and training sessions may benefit from such perspectives. A summary of 
all comments received, along with accompanied responses, is provided 
below.

A. Step Increase Buy-In

    Comments: There were 73 comments (one manager claimed to speak for 
77 employees and 58 comments were identical) that expressed concern 
over the method of conversion into the demonstration. Employees 
preferred to have their accumulated time toward their next within-grade 
increase added to their base pay instead of receiving a lump-sum cash 
payment. Both employees and union recognized the proposed method does 
not provide funds that can be added to employees' base pay, and have a 
positive impact on their benefits such as retirement and thrift savings 
plans.
    Response: This issue has been the subject of negotiations with the 
union since the initial development of the proposal. In the 
demonstration there will no longer be step increases. The funds that 
would have been expended for that purpose will form part of the 
Performance Pay Pools for the payout of both performance pay increases 
and/or performance bonuses. Each employee converted into the 
demonstration will compete during the first performance assessment 
period for those funds that would have been paid for step increases. 
Thus the strategy developed by the demonstration development team was 
to provide a lump sum cash incentive at the implementation of the 
demonstration for the time credited to the employee toward what would 
have been the employee's next within-grade (step) increase and to 
maintain the Performance Pay Pool at the highest value (2%) which could 
be supported by historical fiscal data. The MRDEC, in negotiations with 
the union, has agreed to convert employees into the demonstration so 
that their base pay will be adjusted effective the date of 
implementation, by a prorated value based upon the number of weeks an 
employee has completed toward the next higher step. Payment will equal 
the current value of the employee's next within-grade increase times 
the proportion of the waiting period completed at the time of 
conversion. Both MRDEC Management and the union recognize that the 
demonstration must be guided by the concept of in-house budget 
neutrality. Therefore, the MRDEC will reexamine the Payout Factor (F) 
at the end of the first assessment period to determine if a payout 
factor of 2% was maintained by revised labor rates. If not, then the 
factor F must be adjusted prior to the first year payout to compensate 
for the early payment of step increases which would have been used to 
form the full robust value of the payout factor. These changes are in 
Sections III.B (Performance Pay Increases and/or Performance Bonuses) 
and V (Conversion to the Demonstration Project).

B. Competitive Area

    Comments: There were 73 comments (one manager claimed to speak for 
77 employees and 58 comments were identical) that expressed concern 
over the revised Reduction-in-Force (RIF) procedures that limit a 
competitive area to occupational families in all geographic areas. 
These comments came primarily from employees in the Business Management 
and E&S Support Occupational Families. Their concerns were two fold: 
(1) The inability to bump outside of occupational families and retreat 
to a position during a RIF situation that had been previously held that 
may be in a different occupational family than that occupied by the 
employee, and (2) the reduced number of employees in a particular 
occupational family will result in smaller competitive levels which may 
lead to more separations from that family if a RIF occurs within the 
MRDEC. Three comments recommended that the best solution would be to 
put the Missile Command into the demonstration so as to widen the 
competitive areas. There was one comment that suggested that 
competitive areas be restricted to series rather than occupational 
families and to restrict the competitive area to local geographic 
areas.
    Response: The project designers proposed this intervention as a 
means of minimizing the severe turbulence that is normally caused 
during a RIF. Since the MRDEC is predominately customer funded, its 
vitality and future credibility depend upon a reasonably stable 
workforce that is highly trained and motivated to the precepts of 
customer service and quality products. This intervention would achieve 
the desired goal of minimizing personnel turbulence, but at the same 
time it may put some loyal and recently hired employees at an added 
risk of separation. For this reason, this issue has been negotiated 
with the union, and the project design will be changed to define the 
competitive areas as the separate geographic areas of the MRDEC. This 
change was made in full recognition that prior to any RIF action being 
taken, action will be taken to place affected employees in other parts 
of the parent organization and that the provisions of the DoD Stability 
of

[[Page 34877]]

Employment Programs (Priority Placement Program) will be used to assist 
affected employees. At this time the demonstration cannot be extended 
to all of the Missile Command in that the demonstration can only be 
conducted in a Science and Technology Reinvention Laboratory, which the 
Missile Command is not. The suggestion to define competitive areas 
along the lines of series was considered but rejected because the 
comment may have reflected confusion between competitive areas and 
competitive levels (competitive levels will continue to fall along 
series lines). These changes are in Section III.F (Revised Reduction-
In-Force (RIF) Procedures).

C. Supervisory Pay Differentials

    Comments: Seventy-one comments (one manager claimed to speak for 77 
employees and 58 comments were identical) were received and all but 
three requested that supervisory pay differentials be made available to 
other than the engineers and scientists occupational family. One 
comment questioned whether the differential was an award or a bonus, 
one comment expressed concern about the impact of a supervisory 
differential on employee pay pools, and one comment recommended 
elimination of the supervisory differential.
    Response: A supervisory differential is a cash incentive that is 
paid on a pay period basis. It is not an award or a performance bonus. 
The differential is not automatic and will range in value from 0% to 
10% of the supervisor's basic rate of pay. Seven factors are provided 
for the Director to consider in determining the value of a 
differential. Supervisory differentials were designed to compensate 
supervisors who supervise employees that are typically at the same 
grade level or higher. This normally occurs at the higher bands in the 
E&S Occupational Families. However, in recognition that restricting 
supervisory differentials to just the E&S occupational families may be 
perceived as an unfair application, the plan will be changed in Section 
III.B (Supervisory Pay Differentials) to state that supervisory 
differentials may be used, at the discretion of the MRDEC Director, to 
incentivize and reward supervisors who are in Paybands III, IV or V in 
any occupational family, except for employees in Payband V of the E&S 
occupational family. Additionally, the plan is modified in Section 
III.B (Supervisory Pay Differentials) to state that supervisory 
differentials and supervisory adjustments will not be funded from the 
performance pay pools.

D. Performance Evaluation System

    Comments: Eleven comments (one manager claimed to speak for 77 
employees) were received that raised questions and concerns about the 
mechanics of implementing the performance evaluation system and also 
about perceived shortcomings of the system. Concerns relating to the 
mechanics of implementation include that (1) managers must be timely 
with evaluations, (2) peer evaluations may not be useful, (3) three 
performance elements need to be added, (4) rating levels be clearly 
defined, and (5) the employee to supervisor ratio of about 15:1 should 
be waived. With regard to perceived shortcomings, the new system is 
very subjective, has no advantages over the existing system, does not 
provide fairness, reduces cooperation and teamwork, and does not 
provide simplification, according to some commenters. Additionally, one 
commenter stated that TAPES could be made to work.
    Response: The design team acknowledges that it is imperative for 
managers and supervisors to be timely with their evaluations. Oversight 
by the Performance Management Board and the use of a critical 
supervision/EEO performance element that ``requires timely/appropriate 
personnel actions'' will help ensure timeliness. Additionally, 
supervisory training will emphasize the importance of timely 
evaluations and the consequences of untimeliness on the payout process. 
Peer evaluations are in the proposal as an option only, and their use 
will be governed by the Personnel Management Board. The recommended 
three additional performance elements (empowers his/her personnel, 
acquisition streamlining initiatives, and support to the organization) 
will not be added since they are considered to be embedded within the 
five non-supervisory performance elements or the two supervisory or 
management elements. Seven performance elements (five for non-managers) 
are considered to be sufficient. No change will be made to the proposal 
with regard to rating levels in that they are clearly defined in 
Appendix D at four rating levels. The proposal contains no provisions 
for changing supervisory ratios.
    Like many Performance Evaluation Systems, the proposed intervention 
makes appropriate provisions for supervisory judgment. The use of 
benchmark performance standards as universal criteria for evaluating 
all employees in the demonstration project on any element will lead to 
greater fairness and reliability of evaluation, thus reducing the 
potential for subjectivity in the evaluation process. These benchmark 
performance standards define expected performance at the 100%, 70%, 50% 
and unsatisfactory levels, thus assuring a clear definition of expected 
performance levels. The use of a performance element which measures 
``working relationships'' will assure that employees cooperate and that 
teamwork continues and rises to higher levels. The performance 
evaluation process is very critical to the pay-for-performance system, 
and as such the TAPES process has not necessarily been simplified but 
rather redesigned to make it supportive of the pay-for-performance 
system. A simplification does exist in that the rating supervisor is 
not required to write a justification for an assigned rating of record 
other than unsatisfactory.

E. Pay-for-Performance System

    Comments: Seventy-six comments (one manager claimed to speak for 77 
employees and 58 comments were identical) were received in this area. 
Comments included assertions that the 50% rule and the mid-point rule 
violate merit system principles, is a prohibited personnel practice and 
is arbitrary. Sixty-three comments expressed concern about the 
composition and control of pay pools, the source of funds for pay 
pools, and the effect of pay pool results on retirement and benefits; 
and one comment equated the pay-for-performance system to the 
discredited Performance Management Recognition System (PMRS). Two 
comments reflected a misunderstanding about whether the general 
increase was in the performance and bonus pay pools or not; two 
comments stated a desire to keep step increases.
    Response: As to the legality of the 50% rule and the mid-point 
rule, the MRDEC Personnel Demonstration proposal was reviewed by the 
MICOM Legal Office, DoD Office of General Counsel, and the OPM General 
Counsel prior to publishing it in the Federal Register on 13 March 
1997. The proposal was determined at that time to not violate any merit 
system principles, to have clearly avoided any prohibited personnel 
practices, and to not have been arbitrary in the design of proposed 
personnel practices. The 50% rule and the mid-point rule are 
consistently and fairly applied to all employees in the proposed 
demonstration. Therefore, the rules meet the test of being fair and 
equitable, and are in consonance with merit system principles. The 50% 
rule is similar in purpose to the use of longer waiting periods at 
higher steps in the General Schedule pay system. The 50%

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rule is not solely a cost containment method, but is also an effort to 
retain base pay as an incentive (i.e., to prevent reaching the top of a 
band too soon).
    Comments regarding the merit system principle of equal pay for work 
of equal value (5 U.S.C. 2301(b)(3)) are flawed. The words ``equal pay 
for work of equal value'' are intended to ensure that an employee's pay 
range is based on an accurate and equitable evaluation of the level of 
work for the employee's position. Employees performing at the same 
level (as defined by a grade or band) should be paid in the same pay 
range. Pay setting within a pay range can properly reflect factors such 
as tenure, past performance, and current performance, while ensuring 
equal treatment based on those factors. In fact, the latter part of the 
equal pay for work of equal value principle (5 U.S.C. 2301(b)(3)) 
expressly allows for ``Appropriate incentives and recognition * * * for 
excellence in performance.''
    The proposed demonstration is consistent with the merit system 
principles. Bands will be assigned based on employee's nature and level 
of work. Pay progression within a band will be based on performance and 
contributions over time. To provide enhanced incentives for excellence 
in performance, employees will not be allowed to advance beyond the 
mid-point of the pay range without an A or B rating. Also, employees 
whose pay is beyond the midpoint (because of past performance) will not 
be entitled to further base pay increases without an A or B rating. It 
is true that the proposed demonstration places more emphasis on 
performance than the General Schedule (by design), but that does not 
violate merit system principles.
    The demonstration proposal attributes clearly change the methods of 
providing incentives to employees, including the provision of group or 
individual incentive bonuses or pay. This is clearly an allowable 
practice in accordance with Title 5 United State Code, chapter 47 
Section 4703(a)(1-8). However, there is an assertion that, by changing 
the basic rate of pay that an employee may receive, this in effect 
changes the benefits defined in Chapter 63 or subpart G of Title 5, and 
therefore must be a violation of 4703(c)(1). All parts of Chapter 63 or 
subpart G of Title 5 are still intact, and have not been changed by 
this proposed demonstration. Changing the method of determining base 
pay increases does not change any provision of the retirement system or 
any other benefit program.
    The Personnel Management Board has been established, with permanent 
union membership, with the requirement to define the pay pool structure 
that will be used in the demonstration. This structure will be 
communicated to employees through a Director's Newsletter prior to 
implementation. At the minimum there could be two pay pools; one for 
supervisors and one for non-supervisors. The designers of the pay-for-
performance system were well aware of the problems with the PMRS system 
and benefited from the lessons learned. The PMRS system structure lent 
itself to essentially the creation of a quota system for ratings. The 
proposed pay-for-performance system was designed so that managers could 
fairly evaluate and provide employee incentives without creating 
artificial quota systems for ratings.
    The proposal will be revised in Section III.B (Pay-for-Performance) 
to clarify that the General Increase will be received by all covered 
employees whose rating of record is greater than U. Additionally, the 
proposal will be revised in Section III.B (Performance Pay Increases 
and/or Performances Bonuses) to state that performance bonuses have no 
impact on benefits such as retirement.

F. Paybands and Occupational Families

    Comments: Eighty-two comments (three sets of identical comments: 
58, 4, and 3) were received in this area. Sixty comments (fifty-eight 
identical) recommended moving Budget Assistants (GS-561), Procurement 
Clerks (GS-1106), and Management Assistants (GS-344) from the General 
Support occupational family to the Business Management occupational 
family; move Library Technicians (GS-1411) from the General Support 
occupational family to the E&S Support occupational family; and 
aligning all Miscellaneous Administrative and Program positions (GS-301 
and GS-303) to the appropriate non-E&S occupational families depending 
upon the closest alignment. A comment cited the need to include the 
series Operations Research Analyst (Cost Analysis) (GS-1515) in the 
Business Management occupational family. Four identical comments 
expressed agreement with the use of benchmark position descriptions and 
one comment liked the payband structure. Four identical comments 
expressed concern that the creation of occupational families restricted 
movement between occupational families for career development purposes. 
Eight comments dealt with the width of Payband III in the E&S 
occupational family, removing high grade controls, and the lack of 
parity by not having all bands the same width. Two comments expressed 
concern that E&S band V would result in job losses and seriously reduce 
funds available for employee performance pay pools. One comment 
questioned the use of the term ``specific course work'' as a 
requirement for the E&S occupational family. One comment stated the 
need for a management occupational family.
    Response: The suggested occupational series changes are not 
considered feasible because the Technical and Business Support paybands 
are not compatible with the typical pay range and progression pattern 
of those series identified in the comments. The demonstration will not 
present barriers to employees who want to cross occupational family 
lines for career development purposes. However, the proposal will 
clarify in Section V (Personnel Administration) that this barrier does 
not exist and that the benchmark position descriptions identify series, 
specialty code, and function code. As a result of a Base Realignment 
and Closure (BRAC) 95 decision, the proposal will be modified in 
Appendix A to include Operations Research Analyst (Cost Analyst) (GS 
1515) in the Technical and Business occupational family. The proposed 
paybands for engineers and scientists were designed in conjunction with 
the union and with consideration given to OPM design guidelines, the 
developments of the Acquisition Corps and the definition of critical 
Acquisition Corps positions (GS 14 and 15), the designs of the China 
Lake experiment (banding of GS 14 and 15), and the job needs of the 
MRDEC. A separate management occupational family was considered, but 
rejected because the occupational families defined in the proposal 
already provide for career progression of managers. High grade controls 
are not an OPM or Title 5 authority; therefore, they cannot be affected 
by a Title 5 demonstration project. The initial salary of a Payband V 
employee comes from general operating budgets and does not adversely 
impact allocation of funds to the performance pay pools.
    The E&S Support and Business Management families are combined into 
one occupational family titled ``Technical and Business Support.'' This 
change is portrayed in Section III.A (Paybands) and also in Appendix A. 
This proposal modification is a technical change, and is a natural 
consequence of changing the MRDEC competitive areas from occupational 
families to the separate geographic areas of MRDEC. The new 
occupational family has one payband structure and benchmark position 
descriptions have been developed for each payband.

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G. Management Issues

    Comments: Twenty comments (two identical sets of 4 and 3; and one 
manager claimed to speak for 77 employees) were received in this area. 
These comments generally addressed: (1) Permanent union membership in 
the Personnel Management Board, (2) limited promotion opportunities for 
GS-13 engineers and scientists, (3) the inability of the proposal to 
solve stated personnel system problems, and (4) management's ability to 
fairly implement the demonstration project.
    Response: An extensive effort was made with the employees who 
submitted comments to clarify their comments and concerns. Section II.H 
(Personnel Management Board) is clarified to specify permanent union 
membership in the Personnel Management Board.
    In regard to promotions and solving personnel system problems, 
management literature is replete with theories on what motivates 
employees to higher standards of excellence. However, there have been 
very few experiments to validate these theories in a large, dynamic 
organizational environment over an extended period of time. This 
demonstration is a very large scale experiment to assess such 
interventions as sabbaticals, degree training for critical skills, a 
simplified assignment process to enhance career development through job 
rotations, performance pay and bonus increases in many cases without 
the need for promotion actions, minimal classification issues, greater 
ranges for promotions, and greater ranges for setting entrance 
salaries. The evaluation process will endeavor to measure the stated 
expected effects and determine improvements not only in personnel 
practices, but also to determine if the MRDEC collectively as an 
organization produces better science and technology. The demonstration 
attributes do offer simplifications in classification, staffing, 
compensation, and performance management. For example, hundreds of job 
descriptions will be eliminated and replaced by as few as about 30 
benchmark position descriptions. The need for promotion considerations 
has been reduced by more that 50 percent. The personnel problems faced 
by laboratory management are being addressed by both Title 5 changes 
and parallel actions involving both Service changes to regulations and 
to relief from issues managed by the Office of Management and Budget. 
This proposed demonstration is not a total solution, but serves as a 
significant building block to evolve to a better personnel system that 
is more management and employee friendly.
    A few comments questioned the ability of MRDEC supervisors to 
competently and fairly implement this personnel experiment. This issue 
has been discussed in negotiations with the union as an area of 
concern. The negotiated solution to this concern is through training 
and employee feedback. Prior to implementing the demonstration, 
managers and supervisors will be trained in the added responsibilities 
and accountabilities associated with the demonstration interventions. 
Additionally, the union will be given an opportunity to describe their 
role and function in the demonstration program. MRDEC management and 
the union agree that employee feedback to supervisors (in a non-
threatening and not-for-attribution environment) is essential for the 
success of this demonstration. Therefore, the proposal is changed in 
Section III.B (Performance Scores) to provide an employee feedback 
capability.

H. Miscellaneous Comments

    Comments: There were ninety-one comments (four identical sets of 
58, 4, 3, and 2; and one manager claimed to speak for 77 employees) in 
this area. These comments include the following: (1) The proposal 
limits employee ability to seek employment elsewhere; (2) the 
demonstration supports E&S/E&S Support occupational family positions 
only, therefore limit the demonstration to E&S occupational family; (3) 
the proposal should extend E&S perks to all occupational families; (4) 
the RIF retention points assignment process is unfair; and (5) clarify 
the demonstration project purpose.
    Response: Section V (Personnel Administration) is changed to 
clarify that the proposal does not present barriers to applying for 
external jobs and for movement between occupational families for career 
development purposes. In the proposal, training for degrees was always 
intended to apply to the entire workforce. The proposal will be changed 
in Section III.E.2 (Training for Degrees) to clarify that training for 
degrees is available for all occupational families. The Expanded 
Developmental Opportunity Program (sabbaticals) has been extended in 
Section III.E.1 (Expanded Developmental Opportunity Program) to all 
occupational families except for the General Support occupational 
family. Section III.B (Supervisory Pay Differentials) has been changed 
to make supervisory differentials applicable to all occupational 
families. The RIF retention point strategy proposed was designed to 
reward performance. Sensitivity modeling has demonstrated that this 
intervention will achieve the desired effect of retaining high 
achievers who have a limited amount of career status. Therefore, this 
intervention will be retained.

2. Demonstration Project System Changes

    The following is a summary of changes and clarifications in the 
project proposal that were of paramount interest to employees:
    (1) In Section V (Conversion), the method of converting employees 
into the demonstration is changed so that employees' base pay will be 
adjusted effective the date of implementation by a prorated value based 
upon the number of weeks an employee has completed toward the next 
higher step. Payment will equal the value of the employee's next 
within-grade increase times the proportion of the waiting period 
completed at the time of conversion.
    (2) Section III.B (Performance Pay Increases and/or Performance 
Bonuses) is changed to reflect that both MRDEC Management and the Union 
recognize that the demonstration must be guided by the concept of in-
house budget neutrality. Therefore, the MRDEC will reexamine the Payout 
Factor (F) at the end of the first assessment period to determine if a 
payout factor of 2% was maintained by revised labor rates.
    (3) In Section III.F (Competitive Areas), the project design is 
changed to redefine the competitive areas as separate geographic areas 
of the MRDEC. Additionally, the method of bumping and retreating is 
redefined as follows: ``In the Demonstration Project an employee can 
bump to a position held by another employee in a lower subgroup or 
tenure group; the position may be no lower than the equivalent of three 
GS grades (or appropriate grade intervals) below the minimum GS grade 
level of his/her current band. An employee can retreat to a position 
held by another employee in the same subgroup who has a lower adjusted 
RIF service computation date; the position may be no lower than the 
equivalent of three GS grades (or appropriate grade intervals) below 
the minimum GS grade level of his/her current band. A preference 
eligible with a compensable service-connected disability of 30 percent 
or more may retreat to a position equivalent to five GS grades below 
the minimum grade level of his/her current band.''
    (4) In Section III.A (Paybands) and Appendix A, the proposal is 
changed to combine the E&S Support occupational family with the 
Business Management

[[Page 34880]]

occupational family to form one occupational family called ``Technical 
and Business Support.''
    (5) Additionally, editorial and technical changes were made to 
correct the final version of the Project.
James B. King,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Problems with the Present System
    C. Changes Required/Expected Benefits
    D. Participating Organization
    E. Participating Employees
    F. Labor Participation
    G. Project Design
    H. Personnel Management Board
III. Personnel System Changes
    A. Broadbanding
    B. Pay-for-Performance Management System
    C. Classification
    D. Hiring and Appointment Authorities
    E. Employee Development
    F. Revised Reduction-in-Force (RIF) Procedures
IV. Training
V. Conversion
VI. Project Duration
VII. Evaluation Plan
VIII. Demonstration Project Costs
IX. Required Waivers to Laws and Regulations

Appendix A: Occupational Series by Occupational Family
Appendix B: Project Evaluation and Oversight
Appendix C: Performance Elements
Appendix D: Benchmark Performance Standards

I. Executive Summary

    This project was designed by the Department of the Army, with 
participation of and review by the Department of Defense (DoD) and the 
Office of Personnel Management (OPM). The purpose of the project is to 
achieve the best workforce for the MRDEC mission, adjust the workforce 
for change, and improve workforce quality. The MRDEC strives to exceed 
the greatest expectations of its many customers. To achieve this, the 
MRDEC must be able to balance customer requirements for near-term 
technical and scientific products and information with the evolving 
capabilities of the workforce. These purposes will be significantly 
enhanced by interventions such as training for degrees in critical 
skills areas, the contingent employee appointment authority, and the 
Voluntary Emeritus Program.
    The foundations of this project are based on the concept of linking 
performance to pay for all covered positions; simplifying paperwork and 
the processing of classification and other personnel actions; 
emphasizing partnerships among management, employees, and unions 
representing covered employees; and delegating classification and other 
authorities to line managers. Additionally, the research intellect of 
the MRDEC workforce will be revitalized through the use of expanded 
opportunities for employee development. These opportunities will 
reinvigorate the creative intellect of the research and development 
community.
    Development and execution of this project will be in-house budget 
neutral, based on a baseline of September 1995 in-house costs and 
consistent with the Department of the Army (DA) plan to downsize 
laboratories. Army managers at the DoD S&T Reinvention Laboratory sites 
will manage and control their personnel costs to remain within 
established in-house budgets. 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 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 
Commander, U.S. Army Materiel Command, will execute and manage the 
project. Project oversight within the Army 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 the Department of Defense and the Office 
of Personnel Management.

II. Introduction

A. Purpose

    The purpose of the project is to demonstrate that the effectiveness 
of Department of Defense (DoD) laboratories can be enhanced by allowing 
greater managerial control over personnel functions and, at the same 
time, expanding the opportunities available to employees through a more 
responsive and flexible personnel system. 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.

B. Problems with the Present System

    The MRDEC products contribute to the readiness of U.S. forces and 
to the stability of the American economy. To do this, the MRDEC must 
acquire and retain an enthusiastic, innovative, and highly educated and 
trained workforce, particularly scientists and engineers. The MRDEC 
must be able to compete with the private sector for the best talent and 
be able to make job offers in a timely manner with the attendant 
bonuses and incentives to attract high quality employees. Today, 
industry laboratories can make an offer of employment to a promising 
new hire before the government can prepare the paperwork necessary to 
begin the recruitment process.
    Currently, jobs are described using a classification system that is 
overly complex and specialized. This hampers a manager's ability to 
shape the workforce and match the positions while making best use of 
employees. Managers must be given local control of positions and their 
classification to move both their employees and vacancies within their 
organization to other lines of the business activities to match the 
life cycle needs of supported customers.
    These issues work together to hamper supervisors in all areas of 
human resource management. Hiring restrictions and overly complex job 
classifications, coupled with poor tools for rewarding and motivating 
employees and a system that does not assist managers in removing poor 
performers builds stagnation in the workforce and wastes valuable time.

C. Changes Required/Expected Benefits

    This project is expected to demonstrate that a human resource 
system tailored to the mission and needs of the MRDEC will result in: 
(a) Increased quality in the total workforce and the products they 
produce; (b) increased timeliness of key personnel processes; (c) 
increased retention of high quality employees and separation rates of 
poor quality employees; and (d) increased customer satisfaction with 
the MRDEC and its products by all customers it serves.
    The MRDEC demonstration program builds on the successful features 
of

[[Page 34881]]

demonstration projects at China Lake and the National Institute of 
Standards and Technology (NIST). These demonstration projects have 
produced impressive statistics on the job satisfaction for their 
employees versus that for the federal workforce in general. Therefore, 
in addition to expected benefits mentioned above, the MRDEC 
demonstration expects to find more satisfied employees on many aspects 
of the demonstration including pay equity, classification decisions, 
and career development opportunities. A full range of measures will be 
collected during project evaluation (Section VII).

D. Participating Organization

    MRDEC has approximately 1881 employees covered by the project. 
Approximately 99 percent of the employees are located at Redstone 
Arsenal, Alabama, with the remaining located at the following sites: 
Andover, Massachusetts; Eglin AFB, Florida; Orlando, Florida; Dallas, 
Texas; White Sands Missile Range, New Mexico; Camden, Arkansas; Los 
Angeles, California; Washington, DC; Fort Benning, Georgia; Hampton, 
Virginia; and Kwajalein Island.

E. Participating Employees

    The demonstration project includes civilian appropriated funded 
employees in the competitive and excepted service paid under the 
General Schedule (GS) pay system. Scientific and Professional (ST) 
employees and positions will be included for employee development, 
performance appraisal, and award provisions only; their classification, 
staffing, and compensation, however, will not change. Senior Executive 
Service employees and positions, Federal Wage System employees, and 
employees in the Quality Assurance Specialist (Ammunition Surveillance) 
(QASAS) career program will not be covered in the demonstration 
project. Additionally, DA interns will not be converted to the 
demonstration until they complete their intern program. Personnel added 
to the laboratory after implementation, in like positions covered by 
the demonstration (either through appointment, promotion, reassignment, 
change to a lower grade or where their functions and positions have 
been transferred into the laboratory) will be converted to the 
demonstration project. Successor organizations which may result from 
actions associated with the 1995 Base Realignment and Closure 
Commission (BRAC) or future Commissions will continue coverage in the 
demonstration project.

F. Labor Participation

    The American Federation of Government Employees (AFGE) represents 
many GS employees at MRDEC. The MRDEC is continuing to fulfill its 
obligations to consult and/or negotiate with the AFGE, 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.
    The AFGE represents all professional and non-professional employees 
except those who are supervisors or managers. AFGE Local 1858 has been 
involved with and has participated in the development of the project 
since its inception. The union is an integral part of this personnel 
demonstration, and will be a full partner in arriving at major 
decisions involving program implementation.

G. Project Design

    An Integrated Process Team approach was used at the U.S. Army 
Missile Command to develop the attributes of this personnel 
demonstration proposal. The team was lead by MRDEC management, and team 
members came from managers and associates from the MRDEC, AFGE Local 
1858, the Civilian Personnel Office, and several other major functional 
organizations within the Missile Command.
    This personnel system design has been subjected to critical reviews 
by Executive Steering Groups within the MRDEC and the Missile Command. 
Additionally, negotiations with AFGE Local 1858 have influenced the 
design in areas of significant concern to bargaining unit employees. A 
survey, designed by AFGE Local 1858, was conducted to elicit MRDEC 
employee opinions and preferences on key features of the proposal.
    The design was preceded by an exhaustive study of broadbanding 
systems currently practiced in the Federal sector. A first generation 
design was briefed to the MRDEC workforce with the assistance of AFGE 
Local 1858. During these briefing sessions, employees were provided a 
copy of the first generation proposal, a set of anticipated questions 
and answers, and a list of points of contact for concerns and 
questions. Later design generations have evolved from critical reviews 
by headquarters elements of the Department of the Army, Department of 
Defense, and the Office of Personnel Management. Additionally, 
consultation was provided by the designers of the broadbanding systems 
practiced by the Navy China Lake experiment and the National Institute 
of Standards and Technology.

H. Personnel Management Board

    The MRDEC intends to establish an appropriate balance between the 
personnel management authority and accountability of supervisors and of 
the oversight responsibilities of a Personnel Management Board (PMB). 
The Director will delegate management and oversight of the Project at 
MRDEC to a Personnel Management Board whose members, Chairperson, and 
staff (other than the union and Equal Employment Opportunity Office 
members) will be appointed by the Director. The union and the Equal 
Employment Opportunity Office will have permanent membership in the 
PMB, and their representatives will be selected by the respective 
organizations. The establishment of this Board shall not affect the 
authority of any management official in the exercise of their 
management rights set forth in 5 U.S.C. 7106(b)(1). The PMB will be 
tasked with the following:
    1. Overseeing the civilian pay budget,
    2. Determining the composition of the pay-for-performance pay pools 
in accordance with the guidelines of this proposal and internal 
procedures,
    3. Administering funds allocation to pay pool managers,
    4. Reviewing operation of MRDEC pay pools,
    5. Reviewing hiring and promotion salaries as well as exceptions to 
pay-for-performance salary increases,
    6. Providing guidance to pay pool managers,
    7. Monitoring award pool distribution by organization or any other 
special categorization,
    8. Selecting participants for the Expanded Developmental 
Opportunity Program, long term training, and any special developmental 
assignments,
    9. Managing promotions to stay within ``high grade'' controls,
    10. Addressing in-house budget neutrality issues to include 
tracking of average salaries,
    11. Assessing the need for changes to demonstration procedures and 
policies.

III. Personnel System Changes

A. Broadbanding

Occupational Families
    Occupations at the MRDEC will be grouped into occupational 
families. Occupations will be grouped according to similarities in type 
of work, customary requirements for formal training or credentials, and 
in consideration of the business practices at the MRDEC. The common 
patterns of advancement within the occupations as

[[Page 34882]]

practiced at DoD Laboratories and in the private sector will also be 
considered. The current occupations and grades have been examined, and 
their characteristics and distribution have served as guidelines in the 
development of the three occupational families described below:
    1. Engineers and Scientists (E&S). This occupational family 
includes all technical professional positions, such as engineers, 
physicists, chemists, metallurgists, mathematicians, and computer 
scientists. Predominantly, specific course work or educational degrees 
are required for these occupations.
    2. Technical and Business Support. This occupational family 
contains positions that directly support the E&S mission: it includes 
specialized functions in such fields as technical information 
management, librarians, equipment specialists, quality assurance, 
engineering and electronics technicians, finance, accounting, 
administrative computing, and management analysis.
    Employees in these jobs may or may not require college course work. 
Analytical ability and specialized knowledge in administrative fields 
are required. Knowledge of and training in the various electrical, 
mechanical, chemical, or computer principles, methods, and techniques 
are also generally required.
    3. General Support. This occupational family is composed of 
positions for which minimal formal education is needed, but for which 
special skills, such as office automation or shorthand, are usually 
required. 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, guards, and mail clerks.
Paybands
    Each occupational family will be composed of discrete paybands 
(levels) corresponding to recognized advancement within the 
occupations. These paybands will replace grades. They will not be the 
same for all occupational families. Each occupational family will be 
divided into four to five paybands; each payband covering the same pay 
range now covered by one or more grades. 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 
payband. Exceptional qualifications, specific organizational 
requirements, or other compelling reasons may lead to a higher entrance 
level within a band.
    The proposed paybands for the occupational families and how they 
relate to the current GS grades are shown in Figure 1. Application of 
the Fair Labor Standards Act (FLSA) within each payband is also shown 
in Figure 1. This payband concept has the following advantages:

    1. It may reduce the number of classification decisions required 
during an employee's career.
    2. It simplifies the classification decision-making process and 
paperwork. A payband covers a larger scope of work than a grade, and 
will be defined in shorter and simpler language.
    3. It supports delegation of classification authority to line 
managers.
    4. It provides a broader range of performance-related pay for 
each level. In many cases, employees whose pay would have been 
frozen at the top step of a grade will now have more potential for 
upward movement in the broader payband.
    5. It prevents the progression of low performers through a 
payband by mere longevity, since job performance serves as the basis 
for determining pay.

    The MRDEC paybanding plan expands the paybanding concept used at 
China Lake and NIST by creating Payband V of the Engineers and 
Scientists occupational family. This payband is designed for Senior 
Scientific Technical Managers.
    Current legal definitions of Senior Executive Service (SES) and 
Scientific and Professional (ST) positions do not fully meet the needs 
of MRDEC. 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 relate to 
supervisory and managerial responsibilities. Positions classified as ST 
are reserved for bench research scientists and engineers; these 
positions require a very high level of technical expertise and they 
have little or no supervisory responsibility.
    MRDEC currently has several positions, typically directorate/office 
chiefs, that have characteristics of both SES and ST classifications. 
Most directorate/office chiefs in MRDEC are responsible for supervising 
other GS-15 positions, including function chiefs, non-supervisory 
research engineers and scientists and, in some cases, ST positions. 
Most directorate/office chief positions are classified at the GS-15 
level, although their technical expertise warrants classification 
beyond GS-15. Because of their management responsibilities, these 
individuals are excluded from the ST system. Because of management 
considerations, they cannot be placed in the SES. Management considers 
the primary requirement for directorate/office chiefs to be knowledge 
of, and expertise in, the specific scientific and technology areas 
related to the mission of their directorates/offices. Historically, 
incumbents of these positions have been recognized within the community 
as scientific and engineering leaders, who possess primarily 
scientific/engineering credentials and are considered experts in their 
field. However, they must also possess strong managerial and 
supervisory abilities. Therefore, although some of these employees have 
scientific credentials that might compare favorably with ST criteria, 
classification of these positions as STs is not an option, because the 
managerial and supervisory responsibilities inherent in the positions 
cannot be ignored.
    The purpose of Payband V (which will reinforce the equal pay for 
equal work principle) is to solve a critical classification problem. It 
will also contribute to an SES ``corporate culture'' by excluding from 
the SES positions for which technical expertise is paramount. Payband V 
proposes to overcome the difficulties identified above by creating a 
new category of positions, the Senior Scientific Technical Manager, 
which has both scientific/technical expertise and full managerial and 
supervisory authority.
    Current GS-15 directorate/office chiefs will convert into the 
demonstration project at Payband IV. After conversion they will be 
reviewed against established criteria to determine if they should be 
reclassified to Payband V. Other positions possibly meeting criteria 
for classification to Payband V will be reviewed on a case by case 
basis. The proposed salary range is a minimum of 120% of the minimum 
rate of basic pay for GS-15 with a maximum rate of basic pay 
established at the rate of basic pay (excluding locality pay) for SES 
level 4 (ES-4). Vacant positions in Payband V will be competitively 
filled to ensure that selectees are preeminent researchers and 
technical leaders in the specialty fields who also possess substantial 
managerial and supervisory abilities. MRDEC will capitalize on the 
efficiencies that can accrue from central recruiting by continuing to 
use the expertise of the Army Materiel Command SES Office as the 
recruitment agent.
    Panels will be created to assist in filling Payband V positions. 
Panel members will be selected from a pool of current MRDEC SES 
members, ST employees, and later those in Payband V, and an equal 
number of individuals

[[Page 34883]]

of equivalent stature from outside the laboratory to ensure 
impartiality, breadth of technical expertise, and a rigorous and 
demanding review. The panel will apply criteria developed largely from 
the current OPM Research Grade Evaluation Guide for positions exceeding 
the GS-15 level.
    DoD will test the establishment of Payband V for a five-year 
period. Positions established in Payband V will be subject to 
limitations imposed by OPM and DoD. Payband V positions will be 
established only in an S&T Reinvention Laboratory which employs 
scientists, engineers, or both. Incumbents of Payband V positions will 
work primarily in their professional capacity on basic or applied 
research and secondarily perform managerial or supervisory duties. The 
number of Payband V positions within the Department of Defense will not 
exceed 40. These 40 positions will be allocated by ASD (FMP), DoD, and 
administered by the respective Services. The number of Payband V 
positions will be reviewed periodically to determine appropriate 
position requirements. Payband V position allocations will be managed 
separately from SES, ST, and SL positions. An evaluation of the Payband 
V concept will be performed during the fifth year of the demonstration 
project.
    The final component of Payband V is the management of all Payband V 
assets. Specifically, this authority will be exercised at the DA level, 
and includes the following: authority to classify, create, or abolish 
positions within the limitations imposed by OPM and DoD; recruit and 
reassign employees in this payband; set pay and to have their 
performance appraised under this project's Pay for Performance System. 
The laboratory wants to demonstrate increased effectiveness by gaining 
greater managerial control and authority, consistent with merit, 
affirmative action, and equal employment opportunity principles.

BILLLING CODE 6325-01-U
[GRAPHIC] [TIFF OMITTED] TN27JN97.009


BILLING CODE 6325-01-C

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. There are six paybands (see Figure 1) where employees can be 
either exempt or nonexempt from overtime provisions. For these six 
paybands supervisors with classification authority will make the 
determinations on a case-by-case basis by comparing the duties and 
responsibilities assigned, the classification standards for each 
payband, and the FLSA criteria under 5 CFR part 551. Additionally, the 
advice and assistance of the Civilian Personnel Advisory Center/
Civilian Personnel Operations Center (CPAC/CPOC) will be obtained in 
making determinations as part of the performance review process. The 
benchmark position descriptions will not be the sole basis for the 
determination. Basis for exemption will be documented and attached to 
each description. Exemption criteria will be narrowly construed and 
applied only to those employees who clearly meet the spirit of the 
exemption. Changes will be documented and provided to the CPAC/CPOC, as 
appropriate.
Simplified Assignment Process
    Today's environment of downsizing and workforce transition mandates 
that the MRDEC have increased flexibility to assign individuals. 
Broadbanding can be used to address this need. As a result of the 
assignment to a particular level descriptor, the organization will have 
increased flexibility to assign an employee, without pay change, within 
broad descriptions consistent with the needs of the organization, and 
the individual's qualifications and rank or level. Subsequent 
assignments to projects, tasks, or functions anywhere within the 
organization requiring the same level and area of expertise, and 
qualifications would not constitute an assignment outside the scope or 
coverage of the current level descriptor.
    Such assignments within the coverage of the generic descriptors are 
accomplished without the need to process a personnel action. For 
instance,

[[Page 34884]]

a technical expert can be assigned to any project, task, or function 
requiring similar technical expertise. Likewise, a manager could be 
assigned to manage any similar function or organization consistent with 
that individual's qualifications. This flexibility allows a broader 
latitude in assignments and further streamlines the administrative 
process and system.
Promotion
    A promotion is a move of an employee to (1) a higher payband in the 
same occupational family or (2) a payband in another occupational 
family in combination with an increase in the employee's salary. 
Positions with known promotion potential to a specific band within an 
occupational family will be identified when they are filled. Not all 
positions in an occupational family will have promotion potential to 
the same band. Movement from one occupational family to another will 
depend upon individual knowledge, skills, and abilities, and needs of 
the organization.
    Promotions will be processed under competitive procedures in 
accordance with merit principles and requirements and the local merit 
promotion plan. The following actions are excepted from competitive 
procedures:
    (a) Re-promotion to a position which is in the same payband 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 reduction in force 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 
payband, of 180 days or less.
    (f) Reclassification to include impact of person on-the-job 
promotions.
    (g) A promotion resulting from the correction of an initial 
classification error or the issuance of a new classification standard.
    (h) Consideration of a candidate not given proper consideration in 
a competitive promotion action.
    (i) Impact of person on the job and Factor IV process (application 
of the Research Grade Evaluation Guide, Equipment Development Grade 
Evaluation Guide, Part III, or similar guides) promotions.
Link Between Promotion and Performance
    Career ladder promotions and promotions resulting from the addition 
of duties and responsibilities are examples of promotions that can be 
made noncompetitively. Promotions can be made noncompetitively when 
contributions and achievements are such that a higher payband is 
achieved when comparing the overall position to the Equipment 
Development Grade Evaluation Guide, Part III or the Research Grade 
Evaluation Guide. To be promoted noncompetitively from one band to the 
next, an employee must meet the minimum qualifications for the job and 
have a current performance rating of B or better (see Performance 
Evaluation) or equivalent under a different performance management 
system. Selection of employees through competitive procedures will 
require a current performance rating of B or better.

B. Pay-for-Performance Management System

Performance Evaluation
Introduction
    The performance evaluation system will link compensation to 
performance through annual performance appraisals and performance 
scores. The performance evaluation system will allow optional use of 
peer evaluation and/or input from subordinates as determined 
appropriate by the Personnel Management Board. The system will have the 
flexibility to be modified, if necessary, as more experience is gained 
under the project.
Performance Objectives
    Performance objectives are statements of job responsibilities based 
on the work unit's mission, goals and supplemental benchmark position 
descriptions. Employees and supervisors will jointly develop 
performance objectives which will reflect the types of duties and 
responsibilities expected at the respective pay level. In case of 
disagreements, the decision of the supervisor will prevail. Performance 
objectives deal with outputs and outcomes of a particular job. The 
performance objectives, representing joint efforts of employees and 
their rating chains, should be in place within 30 days from the 
beginning of each rating period.
Performance Elements
    Performance elements are generic attributes of job performance, 
such as technical competence, that an employee exhibits in performing 
job responsibilities and associated performance objectives. New 
performance elements and rating forms will be designed to implement a 
new scoring and rating system. The new performance evaluation system 
will be based on critical and non-critical performance elements defined 
in Appendix C. Each performance element is assigned a weight between a 
specified range. The total weight of all elements is 100 points. The 
supervisor assigns each element some portion of the 100 points in 
accordance with its importance for mission attainment. As a general 
rule, essentially identical positions will have the same critical 
elements and the same weight. These weights will be developed along 
with employee performance objectives.
Mid-Year Review
    A mid-year review between a supervisor and employee will be held to 
determine whether objectives are being met and whether ratings on 
performance elements are above an unsatisfactory level. Performance 
objectives should be modified as necessary to reflect changes in 
planning, workload, and resource allocation. The weights assigned to 
performance elements may be changed if necessary. Additional reviews 
may be held as deemed necessary by the supervisor or requested by the 
employee. The supervisor will provide periodic feedback to the employee 
on their level of performance. If the supervisor determines that the 
employee is not performing at an acceptable level on one or more 
elements, the supervisor must alert the employee and document the 
problem(s). This feedback will be provided at any time during the 
rating cycle.
Employee Feedback to Supervisors
    Employee feedback to supervisors (in a non-threatening and not-for-
attribution environment) is considered essential for the success of 
this demonstration. A feedback process will be developed and 
implemented within six months after implementation of the 
demonstration. The employee feedback will be for the supervisors' 
information only, and will not be a factor in determining annual 
ratings of record. Additionally, the individual supervisor ratings will 
be aggregated into a summary for the Director's use (with copies 
furnished to the union) in assessing the quality of supervision

[[Page 34885]]

provided and to take whatever steps are needed in supervisory training 
and development.
Performance Appraisal
    A performance appraisal will be scheduled for the final weeks of 
the annual performance cycle, although an individual performance 
appraisal may be conducted at any time after the minimum appraisal 
period of 120 days is met. The performance appraisal process brings 
supervisors and employees together for formal discussions on 
performance and results in (1) written appraisals, (2) performance 
ratings, (3) performance scores, and (4) other individual performance-
related actions as appropriate. A performance appraisal shall consist 
of two meetings held between employee and supervisor: the performance 
review meeting and the evaluation feedback meeting.
Performance Review Meeting Between Employee and Supervisor
    The review meeting is to discuss job performance and 
accomplishments. Supervisors will not assign performance scores or 
performance ratings at this meeting. The supervisor notifies the 
employee of the review meeting in time to allow the employee to prepare 
a list of accomplishments. Employees will be given an opportunity at 
the meeting to give a personal performance assessment and describe 
accomplishments. The supervisor and employee will discuss job 
performance and accomplishments in relation to performance elements and 
performance objectives.
Evaluation Feedback Meeting Between Employee and Supervisor
    In this second meeting between employee and supervisor, the 
supervisor informs the employee of management's appraisal of the 
employee's performance on performance objectives, and the employee's 
performance score and rating on performance elements. During this 
second meeting, the supervisor and employee will discuss and document 
performance objectives for the next rating period.
Performance Scores
    The overall score is the sum of individual performance element 
scores. Employees will receive an academic-type rating of A, B, C, or U 
depending upon the score attained. These summary ratings are 
representative of pattern E (a 4 level system) in summary level chart 
in 5 CFR 430.208(d)(1). This rating will become the rating of record, 
and only those employees rated C or higher will receive general 
increases, performance pay increases (i.e., basic pay increases), and/
or performance bonuses. A rating of A will be assigned for scores from 
85 to 100 points, B for scores from 70 to 84, C for scores from 50 to 
69, and U for scores from 0 to 49 or a failure to achieve at the 50% 
level of any critical element. The academic-type ratings will be used 
to determine performance payouts and to award additional RIF retention 
years as follows:

------------------------------------------------------------------------
                                                                  RIF   
               Rating                       Compensation       retention
                                                               yrs added
------------------------------------------------------------------------
A...................................  4 shares + c *.........         10
B...................................  2 shares + c *.........          7
C...................................  1 share + c *..........          3
U...................................  0......................         0 
------------------------------------------------------------------------
* c = GS General Increase (Title 5, Section 5303). Pay increases for    
  employees receiving retained rates will be determined in accordance   
  with 5 U.S.C. 5363 except that those with a U rating will receive no  
  pay increase.                                                         

    Selection of the weighted points to assign to an employee's 
performance on performance elements is assisted by use of benchmark 
performance standards (Appendix D). These benchmark performance 
standards are modified versions of the performance standards used by 
the National Institute of Standards and Technology (NIST), National 
Bureau of Standards. Each benchmark performance standard describes the 
level of performance associated with a particular point on a rating 
scale. Supervisors may add supplemental standards for employees they 
supervise to further elaborate the benchmark performance standards.
Performance-Based Actions
    MRDEC will implement a process to deal with poor performers. This 
process may lead to involuntary separations, with grievance or appeal 
rights. The process may start at any time during the rating period, not 
necessarily at the end of an appraisal period. This process begins when 
the supervisor identifies a deficiency(ies) which causes the level of 
performance to be at the U (unsatisfactory) level based on a composite 
score that is less than 50 for all elements or a score on any critical 
element of less than 50 percent.
    When the employee's performance is determined to be unsatisfactory 
at the close of the annual rating period, the Unsatisfactory (U) rating 
will become the rating of record for all matters relating to pay or 
Reduction-in-Force (RIF).
    There are two processes to deal with poor performers:
    1. Change in Assignment--Because it is recognized that employees 
may be assigned to a position for which they are not suited, an attempt 
will be made to place poor performers in a position better suited to 
their skills and capabilities. The offer of change in assignment will 
be contingent upon the employee's concurrence and will be either within 
the same band or in the next lower payband. If reassigned, the employee 
will receive written notification that they will be given a reasonable 
opportunity period of no less than thirty (30) calendar days in length, 
to demonstrate performance at a level that is at least equal to that of 
a summary level C rating. The period of time considered to be 
reasonable will be determined, in part, by whether the employee's 
reassignment is to a substantially similar or the same position under a 
different supervisor, or in a different office, or in a substantially 
different position. Essential training and mentoring will be provided 
as appropriate during this opportunity period. Failure to achieve a 
level of performance that is at least equal to that of a summary level 
C rating (following the above-referenced opportunity period) will place 
the employees in Step 3 of this process. There will be no further 
opportunity period.
    2. Performance Improvement Plan (PIP)--If the employee does not 
accept an offer of change in assignment, or if there is no appropriate, 
available position to assign an employee, the supervisor will develop a 
PIP that will be monitored for a reasonable period of time (no less 
than 30 calendar days). When an employee is placed in a PIP, the 
employee will be informed in writing, that unless their level of 
performance improves to, and is sustained at a level at least equal to 
that of a summary level C rating, the employee may be removed from the 
position (change in assignment, reduction in pay, or removal from the 
Federal service).
    If, during or at the conclusion of the PIP, the employee's level of 
performance improves to a level at least equal to that of a summary 
level C rating and is again determined to deteriorate to below level C 
in any area during one year from the beginning of the PIP, the MRDEC 
may initiate action to remove the employee from the position with no 
additional opportunity to improve. An employee whose level of 
performance improves to a level at least equal to that of a summary 
level C rating for one year from the beginning of the PIP, and then 
deteriorates to below level C again, in any area, during succeeding 
rating periods, will be placed in a second PIP before initiating action 
to remove the employee from the position.

[[Page 34886]]

    If and when performance improves during the period in which the 
employee is otherwise ineligible for the general increase, then the 
general increase shall be restored. Such restoration is not retroactive 
and is separate and apart from incentive pay.
    3. Removal--If the employee fails to demonstrate a level of 
performance at least equal to that of a summary level C rating after 
completing either Step 1 or Step 2, the employee will be given a 
written notice of proposed removal from the position. The notice period 
will be a minimum of 30 calendar days and the employee will have a 
reasonable period of time in which to reply. The employee will be given 
a written notice of decision to include all applicable grievance and 
appeal rights.

    Note: Performance-based adverse actions may be taken under 5 
U.S.C. Chapter 75, rather than Chapter 43.

    A decision to remove an employee for poor performance may be based 
only on those instances of poor performance that occurred during the 
opportunity period (Step 1) or during the one-year period ending on the 
date of proposed removal (Step 2). The notice of decision will specify 
the instances of poor performance on which the action is based and will 
be given to the employee at or before the time the action will be 
effective.
    The MRDEC will preserve all relevant documentation concerning an 
action taken for poor performance and make it available to review by 
the affected employee or designated representative. At a minimum, the 
record will consist of a copy of the notice of proposed action; the 
employee's written reply, if provided, or a summary if the employee 
makes an oral reply. Additionally, the record will contain the written 
notice of decision and the reasons therefore, along with any supporting 
material including documentation regarding the opportunity afforded the 
employee to demonstrate improved performance. An employee who sustains 
their performance at a level at least equal to a summary level C rating 
for one year, will have all relevant documentation removed from their 
record.
Employee Relations
    Employees covered by the project will be evaluated under a 
performance evaluation system that affords grievance or appeal rights 
comparable to those provided currently.
Senior Executive Service and 5 U.S.C. 3104 (ST) Employees
    Members of the SES will remain under the current SES performance 
appraisal system. Title 5 U.S.C. 3104 (ST) employees will be included 
in the project performance evaluation system, but will not be in the 
project pay-for-performance system.
Awards
    The MRDEC currently has an extensive awards program consisting of 
both internal and external awards. On-the-spot, special act (which are 
both performance related and nonperformance related), and other 
internal awards (both monetary and nonmonetary) will continue under the 
project, and may be modified or expanded as appropriate. MACOM, DA, and 
DoD awards and other honorary noncash awards will be retained.
    Teams may distribute an award pool among themselves where 
appropriate. Thus, a team leader or supervisor may allocate a sum of 
money to a team for outstanding completion of a special task, and the 
team may decide the individual distribution of the total dollars among 
themselves.
    The MRDEC Director will have the authority to grant awards to 
covered employees of up to $10,000 for a special act. The scale of the 
award will be determined using criteria in AR 5-17. AFGE Local 1858 
will be notified and provided an opportunity to comment on proposed 
special act awards for bargaining unit employees before the effective 
date of the award. The name of proposed special act awardees will not 
be released to the union for privacy act purposes.
    Members of the SES will remain under their current awards system 
and will not participate in the project performance recognition bonus 
awards program. Title 5 U.S.C. 3104 (ST) employees will be eligible for 
cash awards.
Pay Administration
Introduction
    The objective is to establish a pay system that will improve the 
ability of the MRDEC 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. The first performance payout will be made effective with 
the first full pay period of FY 1999 (October 1998). Future pay 
adjustments will be effective at the beginning of the first full pay 
period of subsequent fiscal years. General increase payouts in January 
1998 will be provided to all covered employees regardless of their 
rating of record or current performance status.
Pay-for-Performance
    MRDEC will use a simplified performance appraisal system that will 
permit both the supervisor and the employee to focus on quality of the 
work. The proposed system will permit the manager/supervisor to base 
incentive pay increases entirely on performance or value added to the 
goals of the organization. This system will allow managers to withhold 
pay increases from nonperformers, thereby giving the nonperformer the 
incentive to improve performance or leave government service. For 
example, employees with ratings of U will receive no performance pay 
increase, general increase, or performance bonus. This action may 
result in the employee's pay falling below the minimum rate of their 
current payband because the minimum rate is increased by the general 
increase (5 U.S.C. 5303). Under these transitory conditions, the 
employee's payband designator will remain the same. Since there is no 
reduction in band level or pay, there is no adverse action.
    Pay for performance has two components: performance pay increases 
and/or performance bonuses. The basic rates of pay used in computing 
the pay pool and performance payouts exclude locality pay. All covered 
employees will be given the full amount of locality pay adjustments 
when they occur regardless of performance. Additionally, all covered 
employees who have a rating of record above U will receive a full 
general increase, except that employees receiving retained rates will 
receive a pay increase in accordance with 5 U.S.C. 5363. The funding 
for performance pay increases and/or performance bonuses is composed of 
money previously available for within-grade increases, quality step 
increases, promotions from one grade to another where both grades are 
now in the same payband, and for some performance awards. Additionally, 
funds will be obtained from performance pay increases withheld for poor 
performance (see Performance Evaluation ).
Performance Pay Pool
    The performance pay pool is composed of a base pay fund and a bonus 
pay fund. The payouts made to employees from the performance pay pool 
will be a mix of base pay increases and bonus payments, subject to the 
amounts available in the respective funds.
    The funding for the base pay fund is composed of money previously 
available for within-grade increases, quality step increases, and 
promotions between grades that are banded under

[[Page 34887]]

the demonstration project. The bonus pay fund is separately funded 
within the constraints of the organization's overall performance award 
budget. Some portion of the performance award budget will be reserved 
for special ad hoc awards--e.g., suggestion awards or special act 
awards--and will not be included as part of the performance pay pool.
    The MRDEC Center Support Office, in consultation with AFGE Local 
1858 and supporting personnelists, will calculate the total performance 
pay pool funds and allocate pay pools prior to implementation to Major 
Organizational Units or teams as appropriate.
Performance Pay Increases and/or Performance Bonuses
    A pay pool manager is accountable for staying within pay pool 
limits. The pay pool manager assigns performance pay increases and/or 
performance bonuses to individuals on the basis of an academic-type 
rating, the value of the performance pay pool resources available, and 
the individual's current basic rate of pay within a given payband. A 
pay pool manager may request approval from the Personnel Management 
Board (PMB) or its designee to grant a performance pay increase to an 
employee that is higher than the compensation formula for that employee 
to recognize extraordinary achievement or to provide accelerated 
compensation for local interns.
    Performance payouts will be calculated for each individual based 
upon a performance pay pool value that will be initially 3 percent 
(e.g., 2.0% performance pay + 1.0% performance bonus) of the combined 
basic rates of pay of the assigned employees.
    This percentage, a payout factor, will be adjusted as necessary to 
compensate for changing employee demographics which impact the elements 
used in the GS system, such as the amount of step raises, quality step 
increases, and promotions. The MRDEC will reexamine the payout factor 
(F) at the end of the first assessment period to determine if a payout 
factor of 2% was maintained by revised labor rates. If not, then the 
factor F must be adjusted prior to the first year payments to 
compensate for the early payment of step increases which would have 
been used to form the full robust value of this factor. Performance 
payouts will be calculated so that a pay pool manager will not exceed 
the resources that are available in the pay pool. An employee's 
performance payout is computed as follows:
[GRAPHIC] [TIFF OMITTED] TN27JN97.010

Where: Pool Value=F * SUM (SALk); k=1 to n
n=Number of employees in pay pool
N=Number of shares earned by an employee based on their performance 
rating (0 to 4)
SAL=An individual's basic rate of pay
SUM=The summation of the entities in parenthesis over the range 
indicated
F=Payout Factor

    Once the individual performance payout amounts have been 
determined, the next step is to determine what portion of each payout 
will be in the form of a base pay increase as opposed to a bonus 
payment. A base pay share factor is derived by dividing the amount of 
the base pay fund by the amount of the total performance pay pool. This 
factor is multiplied by the individual performance payout amounts to 
derive each individual's projected base pay increase. Certain employees 
will not be able to receive the projected base pay increase due to base 
pay caps. Base pay is capped when an employee reaches the maximum rate 
of pay in an assigned payband, when the midpoint principle applies (see 
below), and when the 50 percent rule applies (see below). Also, for 
employees receiving retained rates above the applicable payband 
maximum, the entire performance payout will be in the form of a bonus 
payment.
    If the organization determines it is appropriate, it may reallocate 
a portion (up to the maximum possible amount) of the unexpended base 
pay funds for capped employees to uncapped employees. This reallocation 
must be made on a proportional basis so that all uncapped employees 
receive the same percentage increase in their base pay share (unless 
the reallocation adjustment is limited by a pay cap). Any dollar 
increase in an employee's projected base pay increase will be offset, 
dollar for dollar, by an accompanying reduction in the employee's 
projected bonus payment. Thus, the employee's total performance payout 
is unchanged.
    A midpoint principle will be used to determine performance pay 
increases. This principle requires that employees in all paybands must 
receive a B rating or higher to advance their basic rate of pay beyond 
the midpoint dollar threshold of their respective paybands. If the 
performance payout formula yields a basic pay increase for a C-rated 
employee that would increase their basic rate of pay beyond the 
midpoint dollar threshold, then their basic rate of pay will be 
adjusted to the midpoint dollar threshold and the balance converted to 
a performance bonus. Once an employee has progressed beyond the 
midpoint dollar threshold, future performance pay increases will 
require a B rating or greater. If an employee attains a C rating and is 
beyond the midpoint dollar threshold, incentive pay increases will be 
restricted to performance bonuses only.
    Annual performance pay increases will be limited to (1) 50 percent 
of the difference between the particular maximum band rate and the 
employee's current basic rate of pay, or (2) the projected performance 
pay increase, whichever is less, with the balance converted to a 
performance bonus. This rule will not apply when an employee's current 
basic rate of pay is within $100 of the maximum band rate. This means 
that employees whose pay has reached the upper limits of a particular 
payband will receive most performance incentives as a performance 
bonus. Performance bonuses are cash payments and are not part of the 
basic pay for any purpose (e.g., lump sum payments of annual leave on 
separation, life insurance, and retirement).
Supervisory Pay Adjustments
    Supervisory pay adjustments may be used at the discretion of the 
MRDEC Director, to compensate employees assuming positions entailing 
supervisory responsibilities. 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 payband maximum rate. 
Only employees in supervisory positions with formal supervisory 
authority meeting that required for coverage under the OPM GS 
Supervisory Guide may be considered for the supervisory pay adjustment. 
Criteria to be considered in determining the pay increase percentage 
include the following organizational

[[Page 34888]]

and individual employee factors: (1) Needs of the organization to 
attract, retain, and motivate high quality supervisors; (2) budgetary 
constraints; (3) years of supervisory experience; (4) amount of 
supervisory training received; (5) performance appraisals and 
experience as a group or team leader; (6) their organizational level of 
supervision; and (7) managerial impact on the organization. The 
supervisory pay adjustment will not apply to 5 U.S.C. 3104 (ST) 
positions or to employees in Payband V of the E&S occupational family.
    Conditions, after the date of conversion into the demonstration 
project, under which the application of a supervisory pay adjustment 
may be considered are as follows:
    (1) 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 payband. This rate of pay may include a 
supervisory pay adjustment determined using the ranges and criteria 
outlined above.
    (2) A career employee selected for a supervisory position that is 
within the employee's current payband may also be considered for a 
supervisory pay adjustment. If a supervisor is already authorized a 
supervisory pay adjustment and is subsequently selected for another 
supervisory position, within the same payband, then the supervisory pay 
adjustment will be redetermined.
    Within the demonstration project rating system, the performance 
element ``Supervision/EEO'' is identified as a critical element. 
Changes in the rating value for this element awarded to a supervisor 
with a supervisory pay adjustment may generate a review of the 
adjustment and may result in an increase or decrease to that 
adjustment. Decrease to a supervisory pay adjustment is not an adverse 
action if this action results from changes in supervisory duties or 
supervisory ratings.
    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. Supervisory adjustments will not be funded from 
performance pay pools.
    The initial dollar amount of the adjustment will be removed when 
the employee voluntarily leaves the supervisory position. The 
cancellation of the adjustment under these circumstances is not an 
adverse action and is not appealable. If an employee is removed from a 
supervisory position for personal cause (performance or conduct), the 
adjustment will be removed under adverse action procedures. However, if 
an employee is removed from a non-probationary supervisory position for 
conditions other than voluntary or for personal cause, then the pay 
retention provisions of 5 CFR part 536 will prevail.
Supervisory Pay Differentials
    Supervisory differentials may be used, at the discretion of the 
MRDEC Director, to incentivize and reward supervisors who are in 
Paybands III, IV, and V of any occupational family in supervisory 
positions with formal supervisory authority meeting that required for 
coverage under the OPM GS Supervisory Guide (excluding Payband V of the 
E&S occupational family). A supervisory pay differential is a cash 
incentive that may range up to 10 percent of the supervisor's basic 
rate of pay. It is paid on a pay period basis and is not included as 
part 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, if 
the supervisor has subordinate employees in the same payband. The 
differential must be terminated if the employee is removed from a 
supervisory position, regardless of cause, or no longer meets 
established eligibility criteria. Supervisory differentials will not be 
funded from performance pay pools.
    As specified in Supervisory Pay Adjustments, after initiation of 
the demonstration project, 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 MRDEC Director's discretion. The termination or 
reduction of the differential is not an adverse action and is not 
subject to appeal.
Pay and Compensation Ceilings
    An employee's total monetary compensation paid in a calendar year 
may not exceed the basic rate of pay paid in level I of the Executive 
Schedule consistent with 5 U.S.C. 5307 and 5 CFR part 530, subpart B.
    In addition, each payband will have its own pay ceiling, just as 
grades do in the current system. Pay rates for the various paybands 
will be directly keyed to the GS rates. Except for retained rates, 
basic pay will be limited to the maximum rates payable for each 
payband.
Pay Setting for Promotion
    Upon promotion to a higher payband, an employee will be entitled to 
a 6% pay increase or the lowest level in the payband to which promoted, 
whichever is greater. Highest previous rate also may be considered in 
setting pay upon promotion, under rules similar to the highest previous 
rate rules in 5 CFR 531.203 (c) and (d).
Grade and Pay Retention
    Except where waived or modified in the waivers section of this 
plan, grade and pay retention will follow current law and regulations.

C. Classification

Introduction
    The objectives of the new classification system are to simplify the 
classification process, make the process more serviceable and 
understandable, and place more decision-making authority and 
accountability with line managers. All positions listed in Appendix A 
will be in the classification structure. Provisions will be made for 
including other occupations as employment requirements change in 
response to changing technical programs.
Occupational Series
    The present GS classification system has over 400 occupations (also 
called series), which are divided into 22 groups. The occupational 
series will be maintained. New series, established by OPM, may be added 
as needed to reflect new occupations in the workforce. Appendix A lists 
the occupational series currently represented at the MRDEC by 
occupational family.
Classification Standards
    MRDEC will use a classification system that is a modification of 
the system now in use at the U.S. Navy, Naval Command, Control and 
Ocean Surveillance Center, San Diego, California. The present 
classification standards will be used to create local benchmark 
position descriptions for each payband, reflecting duties and 
responsibilities comparable to those described in present 
classification standards for the span of grades represented by each 
payband. There will be at least one benchmark position description for 
each payband. A supervisory benchmark position description may be added 
to those paybands that include supervisory employees. Present titles 
and series will continue to be used in order to recognize the types of 
work being performed and educational backgrounds

[[Page 34889]]

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.
Position Descriptions and Classification Process
    The MRDEC Director will have delegated classification authority and 
may redelegate this authority to subordinate managers. New benchmark 
position descriptions will be developed to assist managers in 
exercising delegated position classification authority. Managers will 
identify the occupational family, job series, the functional code, the 
specialty code, payband level, and the appropriate acquisition codes. 
The manager will document these decisions on a cover sheet similar to 
the present DA Form 374.
    Specialty codes will be developed by Subject Matter Experts (SMEs) 
to identify the special nature of work performed. Functional codes are 
those currently found in the OPM Introduction to the Classification 
Standards which define certain kinds of activities, e.g., Research, 
Development, Test and Evaluation, etc., and covers Engineers & 
Scientists.
Classification Appeals
    An employee may appeal the occupational family, occupational 
series, or payband level of his or her position at any time. An 
employee must formally raise the areas of concern to the supervisors in 
the immediate chain of command, either verbally or in writing. If an 
employee is not satisfied with the supervisory response, he or she may 
then appeal to the DoD appellate level. If an employee is not satisfied 
with the DoD response, he or she may then appeal to the Office of 
Personnel Management, only after DoD has rendered a decision under the 
provisions of this demonstration project. Appellate decisions from OPM 
are final and binding on all administrative, certifying, payroll, 
disbursing, and accounting officials of the Government. Time periods 
for case processing under Title 5 apply.
    An employee may not appeal the accuracy of the position 
description, the demonstration project classification criteria, or the 
pay-setting criteria; the assignment of occupational series to an 
occupational family; the title of a position; the propriety of a salary 
schedule; or matters grievable under an administrative or negotiated 
grievance procedure or an alternative dispute resolution procedure.
    The evaluation of a classification appeal under this demonstration 
project are based upon the demonstration project classification 
criteria. Case files will be forwarded for adjudication through the 
Civilian Personnel Advisory Center/Civilian Personnel Operations Center 
(CPAC/CPOC) providing personnel service and will include copies of 
appropriate demonstration project criteria.

D. Hiring and Appointment Authorities

1. Hiring Authority
    A candidate's basic eligibility will be determined using Office of 
Personnel Management's (OPM) Qualification Standards Handbook for 
General Schedule Positions. Candidates must meet the minimum standards 
for entry into the payband. For example, if the payband includes 
positions in grades GS-5 and GS-7, the candidate must meet the 
qualifications for positions at GS-5 level. Specific experience/
education required will be determined based on whether a position to be 
filled is at the lower or higher end of the band. Selective placement 
factors can be established in accordance with the OPM Qualification 
Handbook, when judged to be critical to successful job performance. 
These factors will be communicated to all candidates for particular 
position vacancies and must be met for basic eligibility. Under the 
demonstration authority, the MRDEC will modify qualification standards 
only as authorized in the General Policies and instructions (paragraph 
8) of the Qualification Standard Handbook.
2. Appointment Authority
    Under the demonstration project, there will continue to be career 
and career conditional appointments and temporary appointments not to 
exceed one year. These appointments will use existing authorities and 
entitlements. Non-permanent positions (exceeding one year) needed to 
meet fluctuating or uncertain workload requirements will be filled 
using a Contingent Employee appointment authority.
    Employees hired for more than one year, under the contingent 
employee appointment authority, are given term appointments in the 
competitive service for no longer than five years. The MRDEC Director 
is authorized to extend a contingent appointment one additional year. 
These employees are entitled to the same rights and benefits as term 
employees and will serve a one year trial period. The Pay-for-
Performance Management System described in III.B applies to contingent 
employees.
    Appointments will be made under the same appointment authorities 
and processes as regular term appointments, but recruitment bulletins 
must indicate that there is a potential for conversion to permanent 
employment.
    Employees hired under the contingent employee authority may be 
eligible for conversion to career-conditional appointments. To be 
converted, the employee must (1) have been selected for the term 
position under competitive procedures, with the announcement 
specifically stating that the individual(s) selected for the term 
position(s) may be eligible for conversion to career-conditional 
appointment at a later date; (2) served two years of substantially 
continuous service in the term position; (3) be selected under merit 
promotion procedures for the permanent position; and (4) have a current 
rating of B or better.
    Employees serving under regular term appointments at the time of 
conversion to the Demonstration Project will be converted to the new 
contingent employee 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 rating of B or better (or one of the top two ratings on the 
current evaluation system), and are selected under merit promotion 
procedures for their permanent position after having completed two 
years of continuous service. Time served in term positions prior to 
conversion to the contingent employee appointment is creditable to the 
requirement for two years of continuous service stated above, provided 
the service was continuous.
3. Extended Probationary Period
    The current one year probationary period will be extended to two 
years for all newly hired employees in the Engineers and Scientists and 
Technical and Business Support occupational families. The purpose of 
extending the probationary period is to allow supervisors an adequate 
period of time to fully evaluate an employee's ability to complete a 
cycle of work (such as research, program development and execution, and 
technology transfer) and to fully evaluate an employee's contribution 
and conduct. Employees in the General Support occupational family will 
serve a one year probationary period.
    Aside from extending the time period, all other features of the 
current probationary period are retained

[[Page 34890]]

including the potential to remove an employee without providing the 
full substantive and procedural rights afforded a non-probationary 
employee. Any employee appointed prior to the implementation date will 
not be affected. The two year probation will apply to new hires or 
those who do not have reemployment rights or reinstatement privileges.
    Probationary employees will be terminated when the employee fails 
to demonstrate proper conduct, technical competency, and/or adequate 
contribution for continued employment. When the MRDEC decides to 
terminate an employee serving a probationary period because his/her 
work performance or conduct during this period fails to demonstrate 
their fitness or qualifications for continued employment, it shall 
terminate his/her 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, 
consists of the manager's conclusions as to the inadequacies of their 
performance or conduct.
4. Supervisory Probationary Periods
    Supervisory probationary periods will be made consistent with 5 CFR 
315, Subchapter 315.901. Employees that have successfully completed the 
initial probationary period will be required to complete an additional 
one year probationary period for the initial appointment to a 
supervisory position. If, during the probationary period, the decision 
is made to return the employee to a nonsupervisory position for reasons 
solely related to supervisory performance, the employee will be 
returned to a comparable position of no lower payband and pay than the 
position from which they were promoted.
5. Voluntary Emeritus Program
    Under the demonstration project, the MRDEC Director will have the 
authority to offer retired or separated individuals (engineers and 
scientists) voluntary assignments in the MRDEC. This 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 buyouts 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 S&Es could accept retirement and return to provide 
valuable on-the-job training or mentoring to less experienced 
employees. Voluntary service will not be used to replace any employee, 
or interfere with career opportunities of employees.
    To be accepted into the emeritus program, a volunteer must be 
recommended by MRDEC managers to the MRDEC Director. Everyone who 
applies is not entitled to a voluntary assignment. The MRDEC Director 
must clearly document the decision process for each applicant (whether 
accepted or rejected) and retain the documentation throughout the 
assignment. Documentation of rejections will be maintained for two 
years.
    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 break or 
mandatory 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, the MRDEC 
Director and the CPAC/CPOC Director. The agreement will be reviewed by 
the local Legal Office 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 MRDEC (travel, administrative, office 
space, supplies),
    (f) a one page Statement of Duties and Experience,
    (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, and
    (i) the level of security access required (any security clearance 
required by the assignment will be managed by the MRDEC while the 
volunteer is a member of the Voluntary Emeritus Program).

E. Employee Development

1. Expanded Developmental Opportunity Program
    The MRDEC Expanded Developmental Opportunity Program will be funded 
by the MRDEC, and it will cover all demonstration project employees in 
the Engineers and Scientists and the Technical and Business Support 
occupational families. An expanded developmental opportunity 
complements existing developmental opportunities such as (1) long term 
training, (2) one year work experiences in an industrial setting via 
the Relations With Industry Program, (3) one year work experiences in 
laboratories of allied nations via the Science and Engineer Exchange 
Program, (4) rotational job assignments within the MRDEC, (5) up to one 
year developmental assignments in higher headquarters within the Army 
and Department of Defense, and (6) self directed study via 
correspondence courses and local colleges and universities.
    Each developmental opportunity period should benefit the MRDEC, as 
well as increase the employee's individual effectiveness. Various 
learning or uncompensated developmental work experiences may be 
considered, such as advanced academic teaching or research, or on-the-
job work experience with public or non-profit organizations. Employees 
will be eligible after completion of seven years of Federal service. 
Final approval authority will rest with the MRDEC Director, and 
selection of an employee to be granted an expanded developmental 
opportunity will be on a competitive basis. An expanded developmental 
opportunity period will not result in loss of (or reduction in) basic 
pay, leave to which the employee is otherwise entitled, or credit for 
time or service. Employees accepting an expanded developmental 
opportunity

[[Page 34891]]

do not have to sign a continued service agreement cited in 5 U.S.C. 
4108(a)(1) (Supplement 1995).
    The opportunity to participate in the Expanded Developmental 
Opportunity Program will be announced annually. Instructions for 
application and the selection criteria will be included in the 
announcement. Final selection for participation in the program will be 
made by the Personnel Management Board. The position of employees on an 
expanded developmental opportunity may be backfilled with employees 
temporarily promoted or contingent employees or employees assigned via 
the simplified assignment process in III.A. However, that position or 
its equivalent must be made available to the employee returning from 
the expanded developmental opportunity.
2. Training for Degrees
    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 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 not permitted 
currently for non-shortage occupations involving critical skills.
    The MRDEC proposes to expand the authority to provide degree 
payment to employees in all occupational families 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. Degree payment may not be authorized 
where it would result in a tax liability for the employee without the 
employee's express and written consent. It is expected that the degree 
payment authority will be used primarily and largely for advanced 
degrees, except where an undergraduate program is necessary to the 
attainment of an advanced degree or credits. Any variance from this 
policy must be rigorously determined and documented.
    The MRDEC will develop guidelines to ensure competitive approval of 
degree payment and that such decisions are fully documented.

F. Revised Reduction-in-Force (RIF) Procedures

Introduction
    Modifications include limiting competitive area, as defined below, 
and increasing the emphasis on performance in the RIF Process. 
Retention criteria are in the following order; tenure, veterans' 
preference, service credit adjusted by a sum of the last three 
performance ratings. Current reduction in force regulations/procedures 
have been adjusted in the context of the occupational family and the 
payband classification system.
Competitive Areas
    All positions included in the Demonstration Project at a specific 
geographic location will be considered a separate competitive area. 
Bumps and retreats will occur only within the competitive area and only 
to positions for which the employee is qualified. Competitive levels 
will be established based on the payband, classification series, and 
where responsibilities are similar enough in duties, qualification 
requirements, pay schedules, and working conditions so that an employee 
may be reassigned to any of the other positions within the level 
without requiring significant training or causing undue interruption. 
Separate competitive levels will be established for positions in the 
competitive and excepted service; for positions filled on a full-time, 
part-time, intermittent, seasonal, or on-call basis; and separate 
levels will be established for positions filled by an employee in a 
formally designated trainee or developmental program.
Retention
    Competing employees are listed on a retention register in the order 
shown below. Each tenure group has three subgroups (30% or higher 
compensable veterans, other veterans, and non-veterans) and employees 
appear on the retention register in that order. Within each subgroup, 
employees are in order of years of service adjusted to include 
performance credit.

    Tenure I (Career employees)
    Tenure II (Career-Conditional employees)
    Tenure III (Contingent employees)

    In the demonstration project, an employee can bump to a position 
held by another employee in a lower subgroup or tenure group; the 
position may be no lower than the equivalent of three GS grades (or 
appropriate grade intervals) below the minimum GS grade level of his/
her current band in accordance with Section V (Conversion or Movement 
from a Project Position to a General Schedule Position, a. Grade-
Setting Provision). An employee can retreat to a position held by 
another employee in the same subgroup who has a lower adjusted RIF 
service computation date; the position may be no lower than the 
equivalent of three GS grades (or appropriate grade intervals) below 
the minimum GS grade level of his/her current band, in accordance with 
Section V (Conversion or Movement from a Project Position to a General 
Schedule Position, a Grade Setting Provision). A preference eligible 
with a compensable service-connected disability of 30 percent or more 
may retreat to a position equivalent to five GS grades (or appropriate 
grade intervals) below the minimum grade level of his/her current band.
    An employee with a current annual performance rating of U has 
assignment rights only to a position held by another employee who has a 
U rating. An employee who has been given a written decision of removal 
because of unacceptable performance will be placed at the bottom of the 
retention register for his/her competitive level.
Link Between Performance and Retention
    An employee will have additional years of service added to the 
service computation date for retention purposes. The credit is applied 
for each of the last three annual performance ratings of record, 
received over the last four years, for a potential credit of 30 years. 
If an employee has less than three annual performance ratings of 
record, then for each missing rating, an average of the ratings 
received for the past four years will be used. Ratings given under non-
demo systems will be converted to the demo rating scheme and provided 
the equivalent rating credit.

    Rating A adds 10 years
    Rating B adds 7 years
    Rating C adds 3 years
    Rating U adds no credit for retention

IV. Training

Introduction
    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 program commitment on the 
part of participants.
    Training before the beginning of implementation and throughout the 
demonstration will be provided to supervisors, employees, and the 
administrative staff responsible for

[[Page 34892]]

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: (1) A description of the personnel system, (2) 
how employees are converted into and out of the system, (3) the pay 
adjustment and/or bonus process, (4) familiarization with the new 
position descriptions and performance objectives, (5) the performance 
evaluation management system, (6) the reconsideration process, and (7) 
the demonstration project administrative and formal evaluation process. 
AFGE Local 1858 will be given an opportunity to describe their role and 
function in the demonstration program.
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, performance evaluation, and interaction with 
AFGE Local 1858 as a partner. Additional training may focus on 
nonproject procedural techniques such as interpersonal and 
communication skills.
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.
Employees
    The MRDEC, in conjunction with the AFGE Local 1858 and education 
and development assets of the CPAC/CPOC 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

Conversion to the Demonstration Project
    a. Initial entry into the demonstration project will be 
accomplished through a full employee protection approach that ensures 
each employee an initial place in the appropriate payband without loss 
of pay. Employees serving under regular term appointments at the time 
of the implementation of the demonstration project will be converted to 
the contingent employee appointment. Position announcement, etc. will 
not be required for these contingent employee appointments. An 
automatic conversion from current GS/GM grade and pay into the new 
broadband system will be accomplished. Each employee's initial total 
salary under the demonstration project will equal the total salary 
received immediately before conversion. Employees who enter the 
demonstration project later by lateral reassignment or transfer will be 
subject to parallel pay conversion rules. 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.
    b. Employees who are on temporary promotions at the time of 
conversion will be converted to a payband commensurate with the grade 
of the position to which promoted. At the conclusion of the temporary 
promotion, the employee will revert to the payband which corresponds to 
the grade of record. When a temporary promotion is terminated, the 
employee's pay entitlements will be determined based on the employee's 
position of record, with appropriate adjustments to reflect pay events 
during the temporary promotion, subject to the specific policies and 
rules established by the MRDEC. In no case may those adjustments 
increase the pay for the position or record beyond the applicable pay 
range maximum rate. 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.
    c. Employees who are covered by special salary rates, prior to the 
demonstration project, will no longer be considered a special rate 
employee under the Demonstration Project. These employees will, 
therefore, be eligible for full locality pay. The adjusted salaries of 
these employees will not change. Rather, the employees will receive a 
new basic pay rate computed by dividing their adjusted basic pay 
(higher of special rate or locality rate) by the locality pay factor 
for their area. A full locality adjustment will then be added to the 
new basic pay rate. Adverse action and pay retention provisions will 
not apply to the conversion process as there will be no change in total 
salary.
    d. During the first 12 months following conversion, employees will 
receive pay increases for non-competitive promotion equivalents when 
the grade level of the promotion is encompassed within the same 
broadband, the employee's performance warrants the promotion and 
promotions would have otherwise occurred during that period. Employees 
who receive an in-level promotion at the time of conversion will not 
receive a prorated step increase equivalent as defined below.
    e. 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 (including those 
added to the MRDEC by BRAC 95 actions) will be awarded that portion of 
the next higher step based upon the portion of the waiting period they 
have completed prior to the date of implementation. As under the 
current system, supervisors will be able to withhold these partial step 
increases if the employee's performance falls below fully successful. 
Rules governing Within-Grade Increases (WGI) under the current Army 
performance plan will continue in effect until the implementation date. 
Adjustments to the employee's base salary for WGI equity will be 
computed effective the date of implementation to coincide with the 
beginning of the first formal PFP assessment cycle. WGI equity will be 
acknowledged by increasing base salaries by a prorated share based upon 
the number of weeks an employee has completed toward the next higher 
step. Payment will equal the current value of the employee's next WGI 
times the proportion of the waiting period completed (weeks completed 
in waiting period/weeks in the waiting period) at the time of 
conversion. Employees at step 10, or receiving retained rates, on the 
date of implementation will not be eligible for WGI equity adjustments 
since they are already at or above the top of the step scale.
Conversion or Movement From a Project Position to a General Schedule 
Position
    If a demonstration project employee is moving to a General Schedule 
(GS) 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 
payband to a GS-equivalent grade and the employee's project rate of pay 
to GS equivalent rate of pay. The converted GS grade and GS

[[Page 34893]]

rate 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 
GS grade and rate will become the employee's actual GS grade and rate 
after leaving the demonstration project (before any other action). For 
transfers, promotions, and other actions, the converted GS grade and 
rate will be used in applying any GS pay administration rules 
applicable in connection with the employee's movement out of the 
project (e.g., promotion rules, highest previous rate rules, pay 
retention rules), as if the GS converted grade and rate were actually 
in effect immediately before the employee left the demonstration 
project.
    a. Grade-Setting Provisions: An employee in a payband corresponding 
to a single GS grade is converted to that grade. An employee in a 
payband corresponding to two or more grades is converted to one of 
those grades according to the following rules:
    (1) The employee's adjusted rate of basic pay under the 
demonstration project (including any locality payment) is compared with 
step 4 rates in the highest applicable GS rate range. (For this 
purpose, a ``GS rate range'' includes a rate in (1) the GS base 
schedule, (2) the locality rate schedule for the locality pay area in 
which the position is located, or (3) 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.
    (2) 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.
    (3) 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 payband. If the employee's adjusted rate equals or exceeds 
step 4 rate of the second highest grade, the employee is converted to 
that grade.
    (4) 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.
    (5) 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 
to that next higher applicable grade.
    (6) 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.
    b. Pay-Setting Provisions: An employee's pay within the converted 
GS grade is set by converting the employee's demonstration project rate 
of pay to GS rate of pay in accordance with the following rules:
    (1) 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.
    (2) An employee's adjusted rate of basic pay under the project 
(including any locality payment) is converted to a GS adjusted rate on 
the highest applicable rate range for the converted GS grade. (For this 
purpose, a ``GS rate range'' includes a rate range in (1) the GS base 
schedule, (2) an applicable locality rate schedule, or (3) an 
applicable special rate schedule.)
    (3) 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 
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.)
    (4) 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 rates 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).
    c. E&S Payband V Employees: An employee in Payband V of the E&S 
Occupational family will convert out of the demonstration project at 
the GS-15 level. The MRDEC, in consultation with the MICOM CPAC, will 
develop a procedure to ensure that employees entering Payband V 
understand that if they leave the demonstration project and their 
adjusted pay exceeds the GS-15, step 10 rate, there is no entitlement 
to retained pay; their GS-equivalent rate will be deemed to be the rate 
for GS-15, step 10. For those Payband V employees paid below the 
adjusted GS-15, step 10 rate, the converted rates will be set in 
accordance with paragraph b.
    d. Employees with Band or Pay Retention: (1) If an employee is 
retaining a band level under the demonstration project, apply the 
procedures in paragraphs a and b, above, using the grades encompassed 
in the employee's retained band to determine the employee's GS-
equivalent retained grade and pay rate. The time in a retained band 
under the demonstration project counts toward the 2-year limit on grade 
retention in 5 U.S.C. 5382.
    (2) If an employee is retaining rate under the demonstration 
project, the employee's GS-equivalent grade is the highest grade 
encompassed in his or her band level. MRDEC will coordinate with OPM to 
prescribe a procedure for determining the GS-equivalent pay rate for an 
employee retaining a rate under the demonstration project.
    e. Within-Grade Increase--Equivalent Increase Determinations: 
Service under the demonstration project is creditable for within-grade 
increase 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).
Personnel Administration
    All personnel laws, regulations, and guidelines not waived by this 
plan will remain in effect. Basic employee rights will be safeguarded 
and merit principles will be maintained. Supporting personnel 
specialists will continue to process personnel-related actions and 
provide consultative and other appropriate services.
    Use of benchmark position descriptions is not anticipated to 
adversely impact an employee's ability to seek employment outside of 
MRDEC. MRDEC employees participating in the project will have short 
generic benchmark position descriptions which describe the general type 
of work performed, and the range of complexity and supervisory 
controls. The

[[Page 34894]]

benchmark position description cover sheet lists the OPM occupational 
series, e.g., 855 for Electronics Engineer, to which the employee is 
assigned, and, where additional specificity is needed, lists a 
specialty code, which ties the employee's benchmark description to a 
particular technology or functional area. The OPM occupational code 
will serve as ready identification Government-wide of the basic 
qualifications and experience that the employee possesses. In addition, 
virtually all federal employment systems, including the Office of 
Personnel Management's, rely on employee-generated resumes which allow 
the applicants to summarize or describe the details of their experience 
and training. Any pertinent information regarding the MRDEC employees' 
knowledge, skills or abilities not contained in the benchmark position 
description can be conveyed to potential employers through their 
resume.
Automation
    The MRDEC will continue to use the Defense Civilian Personnel Data 
System (DCPDS) for the processing of personnel-related data. Payroll 
servicing will continue from the respective payroll offices.
    Local automated systems will be developed to support computation of 
performance related pay increases and awards and other personnel 
processes and systems associated with this project.
Experimentation and Revision
    Many aspects of a demonstration project are experimental. Upon 
written request by Management or the union to the other party, 
modifications may be negotiated at any time as experience is gained, 
results are analyzed, and conclusions are reached on how the system is 
working. The MRDEC will make minor modifications, such as changes in 
the occupational series in an occupational family without further 
notice. Major changes, such as a change in the number of occupational 
families, will be negotiated with the union and published in the 
Federal Register. See 5 CFR part 470.

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. 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: (a) Permanent implementation, (b) change and another 3-5 year 
test period, or (c) expiration.

VII. Evaluation Plan

    Chapter 47 (Title 5 U.S.C.) requires that an evaluation system be 
implemented to measure the effectiveness of the proposed personnel 
management interventions. An evaluation plan for the entire laboratory 
demonstration program covering 24 DoD labs was developed by a joint 
OPM/DoD Evaluation Committee. A Comprehensive evaluation plan was 
submitted to the Office of Defense Research & Engineering in 1995 and 
subsequently approved (Proposed Plan for Evaluation of the Department 
of Defense S&T Laboratory Demonstration Program, Office of Merit 
Systems Oversight & Effectiveness, June 1995). The overall evaluation 
effort will be coordinated and conducted by OPM's Personnel Resources 
and Development Center (PRDC). The primary focus of the evaluation is 
to determine whether the waivers granted result in a more effective 
personnel system than the current as well as an assessment of the costs 
associated with the new system.
    The present personnel system with its many rigid rules and 
regulations is generally perceived as an impediment to mission 
accomplishment. The Demonstration Project is intended to remove some of 
those barriers and therefore, is expected to contribute to improved 
organizational performance. While it is not possible to prove a direct 
causal link between intermediate and ultimate outcomes (improved 
personnel system performance and improved organizational 
effectiveness), such a linkage is hypothesized and data will be 
collected and tracked for both types of outcome variables.
    An intervention impact model (Appendix B) 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 
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 of 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: 
(1) Workforce data; (2) personnel office data; (3) employee attitudes 
and feedback using surveys, structured interviews, and focus groups; 
(4) local activity histories; and, (5) core measures of laboratory 
effectiveness.

VIII. Demonstration Project 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 MICOM/MRDEC 
budget. The projected annual expenses for each area is summarized in 
Table 1.

                                               Table 1.--Projected Developmental Costs (Then Year Dollars)                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          FY 96               FY 97               FY 98               FY 99               FY 00              FY 01      
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training.........................  $6K                 $99K                $12K                                                                         
Project Evaluation...............  $25K                $60K                $60K                $60K                $60K                $60K             

[[Page 34895]]

                                                                                                                                                        
Automation.......................  $80K                $10K                                                                                             
                                  ----------------------------------------------------------------------------------------------------------------------
      Totals.....................  $111K               $169K               $72K                $60K                $60K                $60K             
--------------------------------------------------------------------------------------------------------------------------------------------------------

IX. Required Waivers to Law and Regulation

    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.
    1. Title 5, U.S. Code
    Chapter 31, Section 3111: Acceptance of Volunteer Service--To the 
extent that the acceptance of retired or separated engineers and 
scientists are included as volunteers under current statute.
    Chapter 31, Section 3132: The Senior Executive Service; Definitions 
and exclusions.
    Chapter 33, Section 3324: Appointment to positions classified above 
GS-15.
    Chapter 41, Section 4107: Pay for Degrees.
    Chapter 41, Section 4108: Employee Agreements; Service after 
Training--To the extent that employees who accept an expanded 
developmental opportunity (sabbatical) do not have to sign a continued 
service agreement.
    Chapter 43, Sections 4301(3): Definitions
    Chapter 43, Section 4302: Establishment of Performance Appraisal 
Systems.
    Chapter 43, Section 4303(a), (b), and (c): Actions based on 
Unacceptable Performance.
    Chapter 51, Sections 5101-5111: Related to classification standards 
and grading; to the extent that white collar employees will be covered 
by broadbanding. Pay category determination criteria for federal wage 
system positions remain unchanged.
    Chapter 53, Sections 5301, 5302 (8) and (9), 5303 and 5304: 
Sections 5301, 5302, and 5304 are waived only to the extent necessary 
to allow demonstration project employees to be treated as General 
Schedule employees and to allow basic rates of pay under the 
demonstration project to be treated as scheduled rates of pay. This 
waiver does not apply to ST employees who continue to be covered by 
these provisions, as appropriate. Employees in Payband V of the E&S 
occupational family are treated as ST employees for the purposes of 
these provisions.
    Chapter 53, Section 5305: Special Rates
    Chapter 53, Sections 5331-5336: General Schedule pay rates.
    Chapter 53, Sections 5361-5366: Grade and pay retention--This 
waiver applies only to the extent necessary to (1) replace ``grade'' 
with ``payband'; (2) allow demonstration project employees to be 
treated as General Schedule employees; (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 a 
supervisory pay adjustment upon voluntarily leaving a supervisory 
position; (4) provide that an employee on pay retention whose 
performance rating is ``U'' is not entitled to 50 percent of the amount 
of the increase in the maximum rate of basic pay payable for the 
payband of the employee's position; and, (5) ensure that for employees 
of Payband V of the E&S occupational family, payband retention is not 
applicable and pay retention provisions are modified so that no rate 
established under these provisions may exceed the rate of basic pay for 
GS-15, step 10 (i.e., there is no entitlement to retained rate). This 
waiver does not apply to ST employees unless they move to a GS-
equivalent position under the demonstration project under conditions 
that trigger entitlement to pay retention.
    Chapter 55, Section 5545(d): Hazardous duty differential--This 
waiver applies only to the extent necessary to allow demonstration 
project employees to be treated as General Schedule employees. This 
waiver does not apply to ST employees or employees in Payband V of the 
E&S occupational family.
    Chapter 57, Section 5753, 5754, and 5755: Recruitment and 
Relocation Bonuses, Retention Allowances and Supervisory 
Differentials--This waiver applies only to the extent necessary to 
allow employees and positions under the demonstration project to be 
treated as employees and positions under the General Schedule. This 
waiver does not apply to ST employees who continue to be covered by 
these provisions, as appropriate. Employees in Payband V of the E&S 
occupational family are treated as ST employees for the purposes of 
these provisions.
    Chapter 75, Section 7512(3): Adverse actions--This waiver applies 
only to the extent necessary to replace ``grade'' with ``payband''.
    Chapter 75, Section 7512(4): Adverse actions--This waiver applies 
only 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 a supervisory pay adjustment 
upon voluntary movement to a nonsupervisory position.
    2. Title 5, Code of Federal Regulations:
    Part 300.601-605: Time-in-Grade requirements--Restrictions 
eliminated under the demonstration.
    Part 308.101 through 308.103: Volunteer Service--To the extent that 
retired engineers/scientists can perform voluntary services.
    Part 315.801 and 315.802: Probationary Period--Demonstration 
project employees in some occupational families will have extended 
probationary period.
    Part 316.301: Term Appointments--Adding years to exceed 4.
    Part 316.303: Tenure of Term Employees--Demonstration allows for 
conversion.
    Part 316.305: Eligibility for Within-Grade Increases.
    Part 351.402(b): Competitive Areas--Demonstration establishes each 
separate geographic location of the MRDEC as a separate competitive 
area.
    Part 351.403: Competitive level--To the extent that payband is 
substituted for grade.
    Part 351.504: Credit for Performance--As it relates to years of 
credit.
    Part 351.701: Assignment Involving Displacement--To the extent that 
employees bump and retreat rights will be limited to one payband except 
in the case of 30% preference eligibles which is a position equivalent 
to five GS grades below the minimum grade level of his/her payband.
    Part 430 subpart B, Performance Appraisal for General Schedule,

[[Page 34896]]

Prevailing Rate, and Certain Other Employees: Employees under the 
demonstration project will not be subject to the requirements of this 
subpart.
    Part 432: Modified to the extent that an employee may be removed, 
reduced in band level with a reduction in pay, reduced in pay without a 
reduction in band level and reduced in band level without a reduction 
in pay based on unacceptable performance. Also modified to delete 
reference to critical element. For employees who are reduced in band 
level without a reduction in pay, Sections 432.105 and 432.106(a) do 
not apply.
    Part 432, Sections 104 and 105: Proposing and Taking Action Based 
on Unacceptable Performance.
    Part 511: Classification Under the General Schedule--To the extent 
that grades are changed to paybands, and that white collar positions 
are covered by paybanding.
    Part 530, subpart C: Special salary rates.
    Part 531, subparts B, D, and E: Determining rate of basic pay, 
within-grade increases, and quality step increases.
    Part 531, subpart F: Locality pay--This waiver applies only to the 
extent necessary to allow demonstration project employees to be treated 
as General Schedule employees, and basic rates of pay under the 
demonstration project to be treated as scheduled annual rates of pay. 
This waiver does not apply to ST employees who continue to be covered 
by these provisions, as appropriate. Employees in Payband V of the E&S 
occupational family are treated as ST employees for the purposes of 
these provisions.
    Part 536: Grade and pay retention--This waiver applies only to the 
extent necessary to (1) replace ``grade'' with ``payband'; (2) 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 a supervisory pay adjustment upon voluntarily leaving a supervisory 
position; (3) provide that an employee on pay retention whose 
performance rating is ``U'' is not entitled to 50 percent of the amount 
of the increase in the maximum rate of basic pay payable for the 
payband of the employee's position; and, (4) ensure that for employees 
of Payband V of the E&S occupational family, payband retention is not 
applicable and pay retention provisions are modified so that no rate 
established under these provisions may exceed the rate of basic pay for 
GS-15, step 10 (i.e., there is no entitlement to retained rate). This 
waiver does not apply to ST employees unless they move to a GS-
equivalent position under the demonstration project under conditions 
that trigger entitlement to pay retention.
    Part 550.703: Severance Pay--This waiver applies only 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--This waiver applies only 
to the extent necessary to allow demonstration project employees to be 
treated as General Schedule employees. This waiver does not apply to ST 
employees or employees in Payband V of the E&S occupational family.
    Part 575, subparts A, B, C, and D: Recruitment Bonuses, Relocation 
Bonuses, Retention Allowances and Supervisory Differentials--This 
waiver applies only to the extent necessary to allow employees and 
positions under the demonstration project covered by paybanding to be 
treated as employees and positions under the General Schedule. This 
waiver does not apply to ST employees who continue to be covered by 
these provisions, as appropriate. Employees in Payband V of the E&S 
occupational family are treated as ST employees for the purposes of 
these provisions.
    Part 752.401 (a)(3): Adverse Actions--This waiver applies only to 
the extent necessary to replace ``grade'' with ``payband.''
    Part 752.401(a)(4): Adverse Actions--This waiver applies only 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 a supervisory pay adjustment 
upon voluntary movement to a nonsupervisory position.

Appendix A: Occupational Series by Occupational Family

I. Engineers & Scientists
    0801   General Engineer
    0806   Materials Engineer
    0808   Architecture
    0810   Civil Engineer
    0819   Environmental Engineer
    0830   Mechanical Engineer
    0850   Electrical Engineer
    0854   Computer Engineer
    0855   Electronics Engineer
    0861   Aerospace Engineer
    0892   Ceramics Engineer
    0893   Chemical Engineer
    0896   Industrial Engineer
    0899   Student Trainee (Engr)
    1301   Physical Scientist
    1310   Physicist
    1320   Chemist
    1321   Metallurgist
    1515   Operations Research Analyst
    1520   Mathematician
    1529   Mathematician Stat
    1550   Computer Scientist
II. Technical and Business Support
    0028   Environ Protec Specialist
    0301   Data & Configuration Management, Standardization
    0301   Misc Admin & Program
    0334   Computer Specialist
    0340   Program Manager
    0341   Administrative Officer
    0342   Support Services Spec
    0343   Mgmt/Prog Analyst
    0346   Log Mgt Spec
    0391   Telecommunications
    0560   Budget Analyst
    0802   Engineering Technician
    0809   Construction Rep
    0856   Electronics Technician
    1001   General Arts & Information
    1040   Language Specialist
    1082   Technical Information Writer
    1083   Technical Writer/Editor
    1102   Contract Specialist
    1150   Industrial Specialist
    1176   Building Manager
    1311   Physical Sciences Tech
    1410   Librarian (Phy Sci & Engr)
    1412   Technical Information Spec
    1499   Student Trainee
    1515   Operations Research Analyst (Cost)
    1521   Mathematics Technician
    1670   Equipment Specialist
    1910   Quality Assurance Specialist 42001   General Supply Spec
III. General Support
    0085   Guard
    0302   Messenger
    0303   Misc Clerk and Asst
    0305   Mail Clerk
    0312   Clerk-Stenographer
    0318   Secretary
    0326   Ofc Automation Clerk
    0344   Management Assistant
    0561   Budget Assistant
    1106   Procurement Clerk
    1411   Library Technician
    2005   Supply Technician

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BILLING CODE 6325-01-C

Appendix C--Performance Elements

    All employees will be rated against at least the five generic 
performance elements listed through ``e'' below. Technical competence 
is a mandatory critical element. Other elements may be identified as 
critical by agreement between the rater and the employee. In case of 
disagreements, the decision of the supervisor will prevail. Generally, 
any performance element weighted 25 or higher should be critical. 
However, only those employees whose duties require manager/leader 
responsibilities will be rated on element ``f.'' Supervisors will be 
rated against an additional critical performance element, listed at 
``g'' below:
    a. Technical Competence. Exhibits and maintains current technical 
knowledge, skills, and abilities to produce timely and quality work 
with the appropriate level of supervision. Makes prompt, technically 
sound decisions and recommendations that add value to mission 
priorities and needs. For appropriate occupational families, seeks and 
accepts developmental and/or special assignments. Adaptive to 
technological change. (Weight range: 15 to 50)
    b. Working Relationships. Accepts personal responsibility for 
assigned tasks. Considerate of others' views and open to compromise on 
areas of difference, if allowed by technology, scope, budget, or 
direction. Exercises tact and diplomacy and maintains effective 
relationships, particularly in immediate work environment and teaming 
situations. Always willing to give assistance. Shows appropriate 
respect and courtesy. (Weight Range: 5 to 15)
    c. Communications. Provides or exchanges oral/written ideas and 
information in a manner that is timely, accurate and cogent. Listens 
effectively so that resultant actions show understanding of what was 
said. Coordinates so that all relevant individuals and functions are 
included in, and informed of, decisions and actions. (Weight Range: 5 
to 15)
    d. Resource Management. Meets schedules and deadlines, and 
accomplishes work in order of priority; generates and accepts new ideas 
and methods for increasing work efficiency; effectively utilizes and 
properly controls available resources; supports organization's resource 
development and conservation goals. (Weight Range: 15 to 50)
    e. Customer Relations. Demonstrates care for customers through 
respectful, courteous, reliable and conscientious actions. Seeks out 
and develops solid working relationships with customers to identify 
their needs, quantifies those needs, and develops practical solutions. 
Keeps customer informed and prevents surprises. Within the scope of job 
responsibility, seeks out and develops new programs and/or reimbursable 
customer work. (Weight Range: 10 to 50)
    f. Management/Leadership. Actively furthers the mission of the 
organization. As appropriate, participates in the development and 
implementation of strategic and operational plans of the organization. 
Develops and implements tactical plans. Exercises leadership skills 
within the environment. Mentors junior personnel in career development, 
technical competence, and interpersonal skills. Exercises due 
responsibility of technical/acquisition/organizational positions 
assigned to them. (Weight Range: 0 to 50)
    g. Supervision/EEO. Works toward recruiting, developing, 
motivating, and retaining quality team members; takes timely/
appropriate personnel actions, applies EEO/merit principles; 
communicates mission and organizational goals; by example, creates a 
positive, safe, and challenging work environment; distributes work and 
empowers team members. (Weight Range: 15 to 50)

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[FR Doc. 97-16850 Filed 6-26-97; 8:45 am]
BILLING CODE 6325-01-C