[Federal Register Volume 72, Number 245 (Friday, December 21, 2007)]
[Notices]
[Pages 72776-72802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-6144]


=======================================================================
-----------------------------------------------------------------------

OFFICE OF PERSONNEL MANAGEMENT


Personnel Demonstration Project; Pay Banding and Performance-
Based Pay Adjustments in the National Nuclear Security Administration

AGENCY: U.S. Office of Personnel Management.

ACTION: Notice of approval of a demonstration project final plan.

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

SUMMARY: Chapter 47 of title 5, United States Code, authorizes the U.S. 
Office of Personnel Management (OPM), directly or in agreement with one 
or more agencies, to conduct demonstration projects that experiment 
with new and different human resources management concepts to determine 
whether changes in human resources policy or procedures would result in 
improved Federal human resources management. The National Nuclear 
Security Administration (NNSA) and OPM will test a pay banding system 
in which within-band pay progression is based on performance. The final 
project plan has been approved by NNSA, the Department of Energy, and 
OPM.

DATES: This demonstration project will be implemented on March 16, 
2008.

FOR FURTHER INFORMATION CONTACT: National Nuclear Security 
Administration: Rosa Benavidez, Demonstration Project Leader, (202-586-
1622), Office of Human Capital Management Programs, 1000 Independence 
Ave., SW., Washington, DC 20585. U.S.
    Office of Personnel Management: Patsy Stevens, Systems Innovation 
Group Manager, U.S. Office of Personnel Management, (202) 606-1574, 
1900 E Street, NW., Room 7456, Washington, DC 20415.

SUPPLEMENTARY INFORMATION: 

1. Background

    In May 2006, NNSA responded to OPM's solicitation of interest in 
undertaking a demonstration project to experiment with and test the 
concept of performance-based pay increases. NNSA already had 
substantial experience with such a mechanism. NNSA's enabling statute 
(National Defense Authorization Act for Fiscal Year 2000, Pub. L. 106-
65, as amended) provided the NNSA Administrator with the authority to 
establish not more than 300 scientific, engineering, and technical 
positions as necessary to carry out the Administrator's 
responsibilities, and to appoint individuals to these positions and fix 
their compensation without regard to title 5, United States Code 
(U.S.C.) [hereafter in this notice referred to as the ``NNSA excepted 
service system'']. In developing an employment system to support this 
authority, NNSA opted for pay banding and designed a performance-based 
pay system. NNSA has made full use of its excepted service system 
authority and considers pay-for-performance a highly effective tool to 
attract, reward, and retain high performers. OPM's solicitation was 
opportune. NNSA now desires to test the feasibility of expanding pay-
for-performance among the ranks of its larger General Schedule (GS) 
workforce. At the same time, NNSA sees the demonstration project as an 
opportunity to streamline the traditional position classification 
system that governs GS positions by banding together one or more GS 
grades. NNSA had done similar banding when it established its excepted 
service system some years before. When NNSA submitted its official 
proposal to OPM in August 2006, pay banding was a vital part of the 
plan.

2. Overview

    The NNSA Demonstration Project proposal was approved by OPM and 
publicized in the Federal Register on February 28, 2007. With OPM's 
preliminary approval given, and knowing that NNSA would receive 
critical comments from the public and have about 6 months to refine its 
plan, NNSA's Administrator asked the agency's top program managers to 
re-examine projected career paths and proposed pay bands to ensure they 
effectively met the varying mission requirements and management needs 
found in NNSA's primary nuclear weapons, nuclear nonproliferation, and 
naval reactors propulsion programs. NNSA's Office of Human Capital 
Management Programs facilitated this re-examination. The agency's top 
managers were briefed on the various management and mission 
implications of the project, and discussions with managerial 
stakeholder groups were held to elicit insights and perspectives on how 
to ensure the project makes credible and meaningful contributions to 
enhancing the overall excellence of NNSA's twenty-first century 
workforce.
    Meanwhile, there was a 30-day public comment period immediately 
following publication of the proposed demonstration project plan in the 
Federal Register, culminating in a public hearing on April 4, 2007, 
held at the Department of Energy (DOE) headquarters in Washington, DC. 
A total of 55 individuals, mostly NNSA employees, one NNSA sub-
organization, and one labor organization, submitted written comments 
and questions. Two additional individuals provided comments and asked 
questions at the public hearing. Many of these commenters offered 
multiple comments and questions. A total of 170 different comments and 
questions were received, with some of them duplicative. Comments 
covered a number of different management and human resources topical 
areas, and in some cases, pertained to more than one topic. Two broad 
topics relating to pay bands and pay-related issues received the 
largest number of comments and questions by a considerable margin. 
There were 45 comments on pay-related issues and 39 on issues relating 
to pay bands. Other topical issues earning numerous comments/questions 
included staffing (17), position classification (14), management 
accountability (14), excepted service (10), employee relations (7), 
employee equity (6), performance management (5), and reduction in force 
(4). An additional 25 comments and questions did not fall into one of 
the above topical areas. Every comment and question received was 
extremely important, as each helped to focus NNSA's top leadership 
during the Administrator's re-examination of the project plan and 
helped the leadership to better understand the long-term management and 
employee implications of the project. Public comments and questions 
often served as a catalyst to raising additional questions on the part 
of top management. As a result of public comments received, NNSA has 
made a number of substantive refinements to its plan and a few 
clarifying editorial and textual changes as well.

3. Summary of Comments and Responses

    Comments are arranged into 11 broad topical areas that correspond 
to the topics identified in the previous section and are presented not 
in an order dictated by the number of comments received, but in an 
order that reflects the logic of the project's design scheme and 
contents; i.e., in a topical order beginning with pay banding and 
devolving through pay, position classification, staffing, performance

[[Page 72777]]

management, employee matters, and management matters. NNSA's responses 
are generic summaries relative to the major issues raised by comments/
questions, rather than point-by-point responses.

(a) Career Paths and Pay Bands

    There were several comments about proposed career paths, several 
comments about the constituent job series in each career path, several 
comments about proposed pay band pay rates, many comments about the 
lack of pay band symmetry across career paths, and many comments about 
the structure of proposed pay bands relative to the pay band structure 
in NNSA's excepted service system.
(1) Career Paths
    Comments: Several commenters wondered why NNSA didn't establish a 
supervisory career path to recognize and reward supervision or have 
more targeted and occupationally narrower career paths, as the Defense 
Department's National Security Personnel System does.
    Response: In designing proposed career paths, NNSA wanted to take 
the broadest approach that made sense, given the nature of the work 
performed and the nature of the occupations requiring this work. The 
broader the design approach, the more employees are treated alike and 
the simpler it is to administer pay banding. Employee equity and 
systemic simplification are central goals of this project. In deciding 
on the original career path proposal, NNSA opted to essentially build 
its career paths around OPM's white-collar ``PATCO'' categories with 
one exception. The PATCO scheme encompasses extremely broad groupings 
of white-collar occupational categories, largely based on differences 
in the nature of work and the essential job knowledge required to 
successfully perform the work (for instance, whether work 
accomplishment requires certain educational attainments, or analytical 
ability, or subject-matter competencies, and so on). OPM defines each 
distinct occupational job series according to whether work is 
professional (``P''), administrative (``A''), technical (``T''), 
clerical (``C''), or falls into a miscellaneous others (``O'') 
category. NNSA's original proposal simply lumped into two broad primary 
career paths all ``professional'' occupations and all 
``administrative'' occupations, respectively, while combining all 
``clerical'' and ``technician'' occupations into a third composite 
career path, irrespective of whether positions in these career paths 
possessed classifiable supervisory duties. There is no distinct PATCO 
category for supervision. The notable exception to this extremely broad 
general approach was an extremely narrow fourth career path, which 
covered only the GS-084 Nuclear Material Courier occupation. 
Notwithstanding the inclusion of only one job series, this career path 
covers a sizable block of employees. There are about 300 couriers 
scattered throughout the United States.
    In light of the comments received regarding career paths, NNSA's 
top managers have reconsidered and refined certain elements of the 
original proposal, including career paths. NNSA has reconstituted its 
two primary career paths into an Engineering and Scientific Career Path 
and a Professional, Technical, and Administrative Career Path and is 
establishing a fifth career path for interns enrolled in NNSA's Future 
Leaders Program.
    The most populous jobs in NNSA are engineering, followed by 
scientific. As of August 2007, there were 205 GS-801 employees, 64 GS-
840 employees, and another 24 employees in positions classified in 
other GS-0800 occupations. There were also 64 GS-1301 employees and 7 
in other GS-1300 occupations. All together, there were 364 General 
Schedule employees in engineering and scientific occupations, in 
complement to the additional 425 engineering and scientific employees 
appointed under NNSA's excepted service system authority and through 
two other DOE excepted service authorities. Because engineering and 
scientific employees perform work vital to NNSA's primary nuclear 
weapons, nuclear nonproliferation, and naval reactors missions, and 
because this cadre--engineers and scientists serving under either the 
General Schedule or the excepted service system--predominates in NNSA 
in comparison to other professional occupations (e.g., foreign affairs 
specialists, industrial hygienists, attorneys, and the like), the 
agency's top managers have decided to reconstitute the Engineering and 
Scientific Career Path to exclude other ``professional'' occupations. 
These other professional occupations are now incorporated into the 
reconstituted Professional, Technical, and Administrative Career Path.
    Future Leaders are recruited with academic achievement and 
diversity in mind and traditionally have been appointed under several 
competitive and excepted service authorities, with varying conditions 
of employment and advancement opportunities unique to each respective 
appointing authority. Establishing a Future Leaders Career Path, into 
which all interns will be appointed and advanced, and making all 
participants subject to pay banding will be of great benefit to NNSA 
and the interns. Not only will the human capital management practices 
attendant to these employees be standardized, but so will development 
and advancement opportunities--one set of rules and expectations for 
all Future Leader interns.
    In lieu of a supervisory career path, or a supervisory pay 
differential, NNSA will seek to recognize and reward supervisory 
performance by providing supervisory bonuses as described in the 
project plan.
(2) Occupational Series in Career Paths
    Comments: Several commenters wanted to know how NNSA decided which 
job series to assign to which career paths. In particular, there were 
questions relating to why certain ``administrative'' occupations were 
treated separately from ``professional'' occupations, since in the 
opinion of some commenters, the work accomplished in NNSA, regardless 
of whether performed, for example, by an engineer or program analyst, 
or an accountant or budget analyst, was pretty much the same.
    Response: As explained in the response immediately above, NNSA's 
original career path proposal conformed generally to OPM's PATCO 
categories. OPM assigns each authorized job series to one of these 
categories for definitional and pay purposes. In constructing its three 
broad career paths in the original proposal, NNSA simply used the same 
PATCO series assignments as does OPM. In light of comments received 
regarding the proposed demonstration project plan, NNSA has 
reconsidered and refined certain elements of the original proposal, 
including the constituent job series that make up respective career 
paths. For instance, only professional positions whose occupational job 
series are found in OPM's ``GS-0800 Engineering and Architecture 
Group'' and ``GS-1300 Physical Sciences Group'' are to be included in 
NNSA's redesigned Engineering and Scientific Career Path. After further 
reflection, NNSA could not agree that such professional occupations as 
GS-510 accountants, GS-690 industrial hygienists, and GS-905 attorneys, 
employees who primarily ``support'' the main missions of NNSA, belonged 
in the same career path as engineers and scientists, those who do the 
pre-eminent mission work of NNSA. Further, it was not felt that GS-130 
foreign affairs specialists, with their significantly

[[Page 72778]]

``non-technical'' knowledge base, albeit professional employees who 
perform primary mission work, should be grouped in the same career path 
as engineers and scientists. Similarly, such professional occupations 
as GS-1102 contract specialist and GS-1515 operations research analyst 
are to be included in NNSA's redesigned and expanded Professional, 
Technical, and Administrative Career Path.
(3) Pay Rates
    Comments: Some commenters pointed out that the pay rates associated 
with NNSA's proposed pay bands were lesser in value than corresponding 
pay rates found in the demonstration projects and alternative personnel 
systems of other Federal agencies, or even in comparison with the pay 
rates in NNSA's own excepted service system. Several commenters felt 
this rendered NNSA uncompetitive in the labor market versus these other 
systems, and several considered lower pay rates unfair and not 
consistent with the principle of ``equal pay for equal work.''
    Response: NNSA looked at two basic occupational questions in 
considering these comments:
    1. Historically, has NNSA been able to attract and retain critical 
skills to carry out important work within the traditional GS grade and 
pay structure?
    2. Is NNSA losing employees to pay-banded agencies with enhanced 
pay rates?
    In looking at the first question, what NNSA found was that there is 
no directly correlative data relating to ability ``to attract and 
retain critical skills,'' but there is plenty of anecdotal information. 
NNSA experiences instances of recruitment difficulty in two basic 
circumstances, (1) when a local private employer successfully competes 
for a top prospect by offering a higher starting salary than NNSA can, 
and (2) at locations that are considered geographically isolated and 
remote, and where top candidates are scarce. But despite these 
instances, NNSA has not experienced a general pattern of recruitment 
difficulty because NNSA's important national security work has an 
intrinsic attraction to prospective candidates, and because NNSA makes 
selective good use of Government-wide recruitment incentives. The 
second question was answered through a straightforward analysis of the 
data: NNSA is not losing current employees to any significant degree to 
agencies with enhanced pay rates, such as to the National Security 
Personnel System (NSPS) in the Department of Defense. In fact, during 
the past two years, NNSA has gained 13 employees (not including senior 
executives) from NSPS, while losing only 9 to NSPS.
    Based on these findings, NNSA's initial approach to establishing 
pay band pay rates is affirmed. NNSA remains committed to its 
demonstration project principle to construct pay band thresholds and 
boundaries, and associated pay rates, consistent with OPM's official 
classification criteria and the Government's prevailing pay structure.
    While the notion of pay rates in excess of the current rates 
permissible under the traditional GS pay system is attractive to many 
managers and employees, implementing enhanced pay rates on a broad 
scale is not compelling now on the evidence in hand. Nor is NNSA 
prepared at this time to undertake systematic occupational market 
studies to validate the need for enhanced pay rates or to develop NNSA-
only position classification criteria and standards, which are 
prerequisites to obtaining OPM's approval to institute enhanced pay 
rates. However, we note that the demonstration project includes an 
authority to establish special staffing supplements, in lieu of 
locality payments, in order to increase pay when necessary to address 
serious recruitment and retention difficulties associated with a 
particular category of jobs.
(4) Pay Band Structures
    Comments: Perhaps no other topic generated so many comments and 
often conflicting opinions. Many commenters felt that NNSA's proposal 
failed to live up to the project's goal to achieve greater parity with 
NNSA's own excepted service pay-banded system, not only due to 
differences in pay band pay rates but also due to differences in how GS 
grades were to be bundled. Others took strong exception to the 
differences in proposed pay-band structures for ``professional'' and 
``administrative'' positions, feeling that because, in their opinions, 
such work was of equivalent value to NNSA, it was unfair not to have 
identical pay bands, while others took a contrary view, feeling that 
engineers and scientists should not be in the same career path as other 
professional and administrative occupations. Still others offered that 
when NNSA proposed only single-grade pay bands (such as a GS-13 pay 
band, a GS-14 pay band, and a GS-15 pay band in the proposed 
``administrative'' career path), this defeated the purpose of pay 
banding, that in fact it was not ``pay banding'' at all but just more 
of the same bureaucratic classification practice. Some commenters 
proposed their own pay band structures. Several commenters suggested 
that NNSA establish supervisory pay bands with higher pay rates to 
recognize the value of supervision and to incentivize the voluntary 
movements of technical employees into leadership positions.
    Response: NNSA found much to agree with in the many comments 
received on this topic. These comments led NNSA to reconsider the 
proposed pay-band structures, while recognizing that no matter what 
NNSA did in response to comments, there was no practical way to 
reconcile all viewpoints or satisfy everyone's concerns. Consequently, 
NNSA revised some, though not all, of its earlier pay-band structures, 
where the work and employee promotional patterns supported doing so. 
NNSA agreed that the exercise of supervision compounds the complexities 
and value of a position's work and should be recognized in some way. 
NNSA is therefore adopting a supervisory bonus mechanism as part of its 
performance policies.
    In reconsidering NNSA's fundamental approach to pay bands, NNSA 
weighed the various and often competing arguments, only to affirm in 
the end the original approach. Upon closer study, NNSA found that lying 
just beneath the surface of a seemingly attractive ``equity'' argument 
on behalf of identical pay bands was the more powerful reality that all 
work is not equivalent in grade value across occupations and 
organizations, that in fact there can be meaningful differences in the 
inherent level of work performed by professional and administrative 
employees, and that fulfilling the principle of ``equal pay for 
substantially equal work'' actually results in pay band structures that 
reflect these meaningful differences. Positions attributable to a given 
career path will have traditional grading patterns, and employee 
recruitment and promotion patterns, in common with other positions in 
the career path, but not in common with positions in other career 
paths.
    Consequently, NNSA not only revised its career paths but is 
revising the attendant pay band structures, as follows:
    I. Engineering and Scientific Career Path: Encompasses all 
professional positions classified in the GS-0800 and GS-1300 job 
series, subdivided into the following pay bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-11)
     Pay Band III (GS-12/GS-13)
     Pay Band IV (GS-14/GS-15)
    II. Professional, Technical, and Administrative Career Path: 
Encompasses all OPM-recognized professional occupations, except GS-

[[Page 72779]]

0800 engineers and GS-1300 scientists, requiring positive education 
requirements, and all other subject-matter, business, and 
administrative occupations characterized by a traditional two-grade 
interval pattern of grade progression. All positions encompassed within 
this career path are subdivided into the following pay bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-12)
     Pay Band III (GS-13/GS-14)
     Pay Band IV (GS-15)
    III. Technician and Administrative Support Career Path: 
Encompassing technician, secretarial, assistant, and clerical 
occupations, and similar positions characterized by a traditional one-
grade interval pattern of grade progression. All positions encompassed 
within this career path are subdivided into the following pay bands:
     Pay Band I (GS-1 through GS-4)
     Pay Band II (GS-5 through GS-8)
     Pay Band III (GS-9)
    IV. Nuclear Materials Couriers Career Path: Encompassing all 
positions classified into the GS-084 job series, subdivided into the 
following pay bands:
     Pay Band I (GS-8 through GS-10)
     Pay Band II (GS-11)
     Pay Band III (GS-12)
     Pay Band IV (GS-13)
    V. Future Leaders Career Path: Encompassing the positions of all 
interns enrolled in NNSA's 2-year Future Leaders Program, in various 
engineering, scientific, professional, technical, and administrative 
occupations. All positions encompassed within this career path are 
subdivided into the following pay bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-11)
     Pay Band III (GS-12/GS-13) \1\
---------------------------------------------------------------------------

    \1\ Although all Future Leaders will have career ladders to pay 
band III in either the Engineering and Scientific Career Path, or 
the Professional, Technical, and Administrative Career Path, a 
control point equating to the salary of GS-12 step 10 will be 
established for those Future Leaders with a Masters Degree in 
business-related and administrative fields to enable these 
individuals to be converted from band III of the Future Leaders 
Career Path to band II of the Professional, Technical, and 
Administrative Career Path upon successful completion of the 2-year 
program.
---------------------------------------------------------------------------

    The arguments in favor of readjusting NNSA's original pay-band 
proposals were several. (The only pay bands not altered from the 
original are those associated with career path III.) The readjustment 
in the Engineering and Scientific Career Path not only better reflects 
the pre-eminent work done in NNSA by engineers and scientists, but is 
more consistent with the actual promotional patterns found in the 
demographics of the workforce. Most General Schedule engineers and 
scientists in NNSA are either at GS-14, or GS-15, with development 
patterns that often see GS-14 positions advance to GS-15 levels of 
work. Such advancement occurs traditionally under both competitive and 
noncompetitive promotional procedures, when such traditional job 
factors as Guidelines, Complexity, Scope and Effect, and others, have 
evolved under the weight of natural employee growth and maturation to 
the highest levels creditable (e.g., levels 2-5, 3-5, 4-6, and so on) 
under respective engineering and scientific standards and guides. In an 
agency with highly technical national security missions and one-of-a-
kind nuclear weapons, nonproliferation, and naval reactor propulsion 
programs, it is not surprising to find engineering and scientific 
positions expanding in scope and responsibility due to recognizable 
increases in technical job expertise and project authority, which so 
often accrue to such positions over time. Out of 364 GS engineers and 
scientists, there are 147 GS-14 and 148 GS-15 positions that are graded 
in almost every case, including many classified supervisors, on their 
paramount non-supervisory work assignments.
    Similarly, agency program managers, agreeing with many of the 
comments received on this subject, questioned the validity and 
effectiveness of the separate single-grade ``bands'' at the GS-13, -14, 
and -15 levels previously proposed for the now reconstituted 
Professional, Technical, and Administrative Career Path. As NNSA looked 
at the actual distributions of professional, subject-matter, and 
administrative positions that would be covered within this broad career 
path, as well as relevant employee promotional patterns, NNSA realized 
that this path's pay-band structure also required adjusting. The new 
pay-band patterns in this career path are more consistent with the 
demographics of the actual workforce today; the majority of positions 
found in this career path are graded at GS-13 and GS-14, about 640 
encumbered positions at this writing. Combining GS-13 and -14 into band 
III therefore makes better sense to NNSA than the original proposal 
did, given the relationship between these two grades among the many 
occupations covered by the career path. Generally, the main difference 
in NNSA between GS-13 and GS-14 in actual classification practice is 
that the Supervisory Controls and Guidelines factors are credited one 
level higher at GS-14, the two factors most readily influenced by the 
greater freedom from supervision and guidelines that invariably comes 
to a position through seasoning, through greater maturity of judgment, 
and through a derivatively more confident and authoritative incumbent 
performance. Combining these two grades into a single pay band, 
covering the majority of employees serving in positions in this 
important career path, shifts the focus of employee pay advancement 
from position classification and merit promotion criteria to 
performance-based criteria, one of the chief goals of this 
demonstration project. This shift in pre-eminence from classification 
and promotion criteria to performance also occurs, of course, in the 
examples of other pay bands in other occupational career paths, and 
serves in the aggregate to underscore how pay-banding intrinsically 
enhances the potential effectiveness of a performance-based pay system.
    A review of actual promotional patterns supports combining GS-13 
and -14 into one pay band. Of the 328 GS-14 employees serving in 
occupations that will be covered by the Professional, Technical, and 
Administrative Career Path, 80 were promoted from NNSA GS-13 positions 
in the same occupational series and line of work.
    With respect to the Nuclear Materials Couriers Career Path, NNSA's 
Office of Human Capital Management Programs worked diligently with the 
top managers from the Office Secure Transportation, the NNSA 
organization in which the couriers are assigned, to arrive at a pay-
band pattern that better met both management's mission needs and 
employee advancement expectations. In developing pay bands for the new 
Future Leaders Career Path, the Future Leaders Program Manager was 
heavily consulted.
(5) Comparisons With NNSA Excepted Service System Pay Bands
    Comments: Many commenters questioned why NNSA proposed pay bands 
for General Schedule engineering and scientific positions that did not 
correspond to the pay band structure in NNSA's own excepted service 
system, pointing out, in their opinions, that the work was identical.
    Response: To understand the different pay band structures between 
General Schedule and NNSA's excepted service system engineering and 
scientific positions, the fundamental distinction between these two 
systems must be understood. While it is true that many current excepted 
service system engineers and scientists are former General Schedule 
engineers and scientists, and that both General

[[Page 72780]]

Schedule and excepted service system employees can currently be found 
working in the same facilities and offices, what needs to be kept in 
mind when comparing the two systems is the very nature of the 
authorities through which respective employees are appointed and paid. 
The NNSA Act (P.L. 106-65, as amended) gives the Administrator the 
authority to appoint employees to scientific and engineering positions 
and to pay them without regard to title 5, United States Code, when the 
Administrator deems it necessary to accomplish his statutory 
responsibilities. By design, these positions are established in unusual 
occupational circumstances (either extreme difficulty of work, or 
extreme difficulty in recruitment), and do not represent the 
engineering and scientific work common to many occupational settings in 
NNSA. Furthermore, excepted service system employees in concept have 
been held to a higher performance threshold (as befitting a 
performance-based pay system) than their General Schedule counterparts, 
which NNSA believes has resulted in an overall improvement in 
excellence and mission accomplishment--the reason NNSA now seeks to 
expand the applicability of pay-for-performance. At the same time, 
these excepted service system employees do not possess traditional 
civil service entitlements, such as ``career status,'' or certain 
protections having to do with reduction in force and other employment 
matters--a key design difference between the two systems. Although it 
is true that NNSA could request that OPM approve pay rates exceeding 
those traditionally associated with GS grades under the authority of 
the demonstration project, as discussed in subsection C above, NNSA is 
not now prepared to undertake systematic occupational market studies to 
validate the need for enhanced pay rates or to develop NNSA-only 
position classification criteria and standards.

(b) Excepted Service

    Comments: There were other comments comparing the demonstration 
project to NNSA's existing excepted service system, aside from concerns 
relating to proposed pay bands and pay rates. A number of commenters 
expressed the view that NNSA's current General Schedule employees be 
permitted the opportunity to volunteer for the demonstration project, 
just as General Schedule engineers and scientists had the opportunity 
to volunteer to enter the NNSA excepted service system at the time of 
its inception a few years ago. Similarly, others suggested that NNSA 
provide an opportunity for current excepted service employees to 
volunteer for the demonstration project, and in essence, volunteer out 
of the excepted service system. There were various reasons given for 
this latter suggestion. The absence of ``career status'' (and the 
resulting inability to apply for many of NNSA's promotional 
opportunities), and the absence of ``second-round'' RIF protections, 
were mentioned. Also, some excepted service employees feel topped out 
in terms of pay potential.
    Response: Providing an opportunity to volunteer in or out of the 
demonstration project, or the excepted service system for that matter, 
is not tenable today. Because NNSA is experimenting with a pay-banding 
and pay-for-performance system that, were it to be successful, would 
replace entire segments of the General Schedule workforce, allowing 
employees to volunteer to participate in the demonstration project 
would be unwieldy to manage, impractical to administer, and, more 
compelling, not in the best interest of efficient Government. 
Furthermore, NNSA intends to continue to make full use of its unique 
excepted service employment authority in those circumstances and for 
those purposes that the NNSA Act envisions. From a practical 
standpoint, excepted service employees who have not previously competed 
for competitive appointment and who do not already have career status 
will have to apply for demonstration project positions through an 
appropriate appointing authority.

(c) Pay and Pay Pools

    Comments: This was the other topical issue receiving many comments. 
The most frequent pay comment, by far, had to do with the issue of 
annual comparability pay increases, locality pay, and the effects of 
performance on these annual pay events. NNSA had proposed one pay pool 
from which general pay adjustments and performance-based pay increases 
were to have been funded and paid out all at one time, and many 
commenters felt the plan was unclear in describing the 
interrelationships among these pay events. Other comments concerned (1) 
the effects of budgetary constraints on the amounts and timing of 
payouts; (2) the apparent lack of pay-setting guidelines with respect 
to hiring new employees and promoting existing employees; (3) the 
apparent lack of a financial incentive for an NNSA employee to be 
reassigned to another NNSA job or location to fill a critical need; (4) 
the pay implications of supervisory incompetence, caprice, or 
favoritism in appraising employee performance; and (5) the effect of 
pay banding on premium pay for overtime work for the courier workforce, 
the payment of night differential for work performed beyond the first-
40-hour tour of duty, and other pay matters relating to the unique 
irregular work schedules of the couriers.
    Response: NNSA agrees that the original proposal was not as clearly 
presented as it should have been, and furthermore, has reconsidered 
certain mechanical features of its pay provisions, making several 
changes to the plan accordingly. NNSA will establish two pay pools, one 
from which to fund annual general pay adjustments and the second from 
which to fund performance-based payouts. Each pay pool will have its 
own payout schedule, though in close proximity to the end of the 
calendar year and to each other. In conjunction with establishment of 
two pay pools, NNSA is increasing the maximum number of shares for 
performance payouts, from 3 shares to 4. NNSA is also changing the 
share distribution pattern (number of shares linked to performance 
level) from 3-2-1-0 to 4-3-2-1-0. An employee with a Significantly 
Exceeds Expectation (level ``5'' performance under NNSA's performance 
management program) may receive 3 or 4 shares, an employee with a Fully 
Meets Expectations (level ``3'' performance under NNSA's performance 
management program) rating and no critical element rate at the Needs 
Improvement level may receive 1 or 2 shares, and all other employees 
receive 0 shares. As under the original proposal, any increased 
locality pay or staffing supplement percentages will be applied on top 
of eligible employees' adjusted base rates outside of the pay pool 
process.
    Furthermore, NNSA will provide a limited flexibility to increase an 
employee's pay upon accepting an intra-pay band reassignment. These 
changes, along with NNSA's pay-setting guidelines, will be described in 
detail in NNSA's Demonstration Project Policies and Procedures Manual, 
which shall be published in accompaniment to this project plan. The 
pay-setting guidelines will ensure that the use of demonstration 
project pay flexibilities will be judicious and appropriate. NNSA's 
administration of the demonstration project will be under OPM's 
continuous oversight, with rigorous evaluations of pay-setting and 
other project provisions and applications. Supervisors will be afforded 
extensive training to ensure they have the competence to make fair

[[Page 72781]]

and valid employee appraisals, and they will be held accountable for 
doing so during their own performance appraisals. As for the courier 
workforce, pay banding will have no effect whatsoever on their tours of 
duty, their administrative work schedules, or on their eligibility 
under current law and regulation to receive premium pay, night 
differentials, and other pay benefits and incentives.

(d) Position Classification

    Comments: Several commenters wondered how upholding the use of 
OPM's traditional position classification criteria and standards will 
lend itself to streamlining the ``cumbersome, labor-intensive, and 
difficult to comprehend'' system, as the project plan calls it. They 
imply that part of the problem with the present system is just these 
criteria and standards, and they don't see how NNSA will be able to 
reduce documentation requirements, eliminate use of the Factor 
Evaluation System format (which typically increases the length of 
position descriptions threefold), or reduce traditional procedural 
steps. Others wondered how NNSA's pay-banding system would safeguard 
equal pay for equal work when a selecting official will be free to set 
pay for a new appointee anywhere in a band. Some noted that current 
employees might be penalized in comparison to a new hire's potential 
for a pay increase, as pay increases for internal promotees are limited 
to 8 percent, and this limitation may actually offer an employee less 
money than customarily received when moving from one GS grade to the 
next during a conventional promotion. Others were concerned about the 
effect on an employee's existing promotion potential in a traditional 
career-ladder position when converting to a pay-banded position, when 
that potential falls outside the band of the position to which the 
employee converts. One person asked what impact there would be on the 
conversion to pay banding of a position currently graded outside the 
proposed maximum band range of a given career path. Others were 
concerned about the right of employees to appeal their placement into a 
career path and pay band.
    Response: The comments in this topical area, while more process 
oriented than comments in other topical areas, underscore the need to 
clarify just how position classification works in a pay-banding 
environment. The comments, especially those about career ladders and 
equal pay for equal work, warrant more discussion.
    In general, OPM's position classification standards and guides 
remain the single most concise and valuable analytical tools with 
respect to defining occupations and evaluating assignments of white-
collar work, not only in the Federal sector, but in general. They 
remain models for other levels of Government, and even private 
industry, to emulate in developing their own local job-evaluation 
schemes. OPM's standards and guides do not in themselves contribute to 
the classification system's breakdown and inefficiency. Rather, it is 
the towering emphasis today on compensation as a tool for attracting 
and retaining the best talent in a hypercompetitive labor market that 
has hammered the rigid grade-bound classification system into a 
contorted and broken program. All the hammering has brought resistance, 
inertia, and resignation among managers and classifiers alike. Pay 
banding, in bundling several grades and pay rates together into one 
band when appropriate, will go a long way to lift the deadly onus off 
the classification program. But this is only the start of the 
classification program's streamlining. There will be a number of 
genuine and potentially significant opportunities under the 
demonstration project to simplify the administration of the 
classification program. Not delegating classification authority to 
managers, as most other demonstration projects and alternative 
personnel systems have done, is a significant simplification. Job 
analysis is no less sophisticated than are most other technical 
disciplines in the modern workplace. Efficient classification practice 
requires substantial training and years of seasoning. NNSA believes 
that it makes far better sense not to expend countless resources and 
endless hours trying to train and encourage supervisors to become 
seasoned classifiers, but rather, to hone their skills as leaders of 
the men and women they supervise and to retain classification authority 
and skills in the personnel office. Furthermore, there is nothing in 
OPM's existing doctrines and requirements that will not permit the 
simplification of position description formats or the synopsizing of 
traditional evaluation documents. Add pay banding to the flexibility 
that already exists, and there is a significant opportunity to 
streamline. Pay banding can group two or more levels of traditional 
work and associated pay rates into one pay band when appropriate, 
thereby compressing expanses of work and pay rates into fewer 
classification units and easing attendant classification practices and 
protocols, with less documentation, particularly when future automation 
comes on line.
    It is true that successful streamlining doesn't happen by itself 
and won't happen overnight. NNSA has considerable design and 
development work to do in building an effective pay-banding 
classification system, but not having to develop its own classification 
standards and guides will contract NNSA's design and development 
challenges immeasurably. This system will be built around demonstration 
project career paths and will feature two unique concepts, the ``core 
pay band descriptor'' and the ``core position description.'' A 
descriptor is a generic benchmark description used to illustrate the 
ranges of complementary work levels within a pay band. The assignment 
of a specific position to a particular pay band will be made on the 
basis of a core pay band descriptor. Core pay band descriptors will be 
based on the OPM job family standard and functional classification 
guide that most directly corresponds to the work encompassed within an 
occupational series. A core position description is simply an 
abbreviated benchmark description of a common set of core duties and 
responsibilities typical of large numbers of positions within each 
career path and pay band across NNSA's various organizational and 
functional settings. NNSA will publish its pay-banding classification 
policies in its companion document to this project plan, NNSA's 
Demonstration Project Policies and Procedures Manual, and will 
supplement these policies with handbook guidance as needed. This 
guidance will more fully describe NNSA's streamlined pay-banding 
classification system and will better describe the simplified position 
description concept with samples. Briefings tailored to managers, 
employees, and the personnel staff, respectively, will also be 
developed to accompany the development of the system and application of 
NNSA's classification policies.
    The compressed occupational construct of a pay band renders 
concerns about undermining the civil service system's classification 
principles unfounded, as several gradations of work are possible within 
a given pay band. In essence, pay banding assumes that different 
employees in the same career path, job series, and pay band of a 
properly classified position can operate at differing levels--within 
reason--due to variations in incumbent maturity (seasoning), and 
performance. In this circumstance, equal pay for substantially equal 
work is not compromised, even though one

[[Page 72782]]

employee may be earning higher pay than another employee in the same 
pay band. In a fundamental respect, this is really no different than 
the disparities in pay that occur between employees in the same 
properly classified GS-13 position where one employee is earning a GS-
13, step 2, rate and another is earning a GS-13, step 9, rate.
    The 8 percent limitation on a pay increase as a result of internal 
promotion is a standardized policy that will apply in most situations. 
Most other pay-banding systems set similar controls on pay increases. 
NNSA considered a higher percentage, and even considered a range of 
percentages, from lower to higher, but decided on the fixed 8 percent 
minimum increase to mitigate the opportunity for disparate employee 
treatment at such an important career event. While NNSA expects most 
internal promotion actions to adhere to this standard, like most rules, 
there will be the flexibility to allow an exception, with proper 
justification, and higher-management approval. This flexibility will be 
described in detail in the staffing and pay policies that will be 
published in accompaniment to this project plan.
    There will continue to be ``career ladders'' under NNSA's pay-
banding system, though instead of grade intervals, there will be band 
intervals. A ``laddered'' position is simply a position advertised 
during recruitment at a certain level of full performance that is 
filled through selection and appointment at a lower pay band. NNSA is 
developing staffing policies that will ``grandfather'' employees who at 
the time of conversion to the appropriate pay band have not reached 
their promotion potential. These employees will be eligible for an in-
band pay increase similar to a promotion increase under the General 
Schedule system until they reach their full promotion potential. ``Full 
promotion potential'' is a traditional position classification and 
personnel staffing concept that will continue to have validity under 
NNSA's demonstration project, and it means the highest grade, or pay 
band, of a career-ladder position for which an incumbent previously 
competed under the Government's merit system principles and an agency's 
merit promotion plan. Once an NNSA employee who converted to pay 
banding under this demonstration project receives an in-band pay 
increase or a promotion that takes him or her to a pay level equivalent 
to the highest GS grade in the formerly applicable career ladder, the 
employee will be considered to have reached the full performance level, 
and the grandfather provision will cease to apply. Future in-band pay 
increases for such an employee would then be based solely on 
performance, consistent with all other demonstration project employees. 
Of course, just as a GS employee is not guaranteed a career-ladder 
promotion without the supervisor's certification, the promotions and 
special grandfathered in-band increases for demonstration project 
employees will not be guaranteed, and they will be issued new 
performance plans with each pay increase. Only current NNSA employees 
who convert at the inception of pay banding will be afforded the 
benefit of having their career ladders grandfathered. The specific 
terms and conditions of this benefit will be published in the policies 
and procedures manual that will implement this project plan.
    As NNSA prepares to implement the demonstration project, NNSA is 
reviewing current position classification outcomes, and potential 
discrepancies and inconsistencies, with the intent to correct any that 
are found prior to implementation to assure a smooth conversion 
process.
    Under the demonstration project, employees retain their traditional 
position classification appeal rights. A classification appeal is a 
formal request by an employee in writing for a review of the official 
job series, pay band, or pay system, of the employee's current position 
to correct what the employee believes is an erroneous classification. 
Any employee in a position covered by chapter 51 of 5 U.S.C., and by 
NNSA's Demonstration Project, can file a classification appeal.

(e) Staffing

    Comments: Most of the 17 staffing comments crossed over into other 
topical areas already treated, such as the structure of relative pay 
bands across career paths, and the impact of employee conversion to pay 
banding on pre-existing promotion potential as a result of having 
successfully competed for a career-ladder position. Other comments 
concerned such issues as pay-setting and band and grade assignment upon 
converting to a pay-banding position from a GS position, and vice 
versa, upon converting back to GS from pay banding. Many commenters 
pointed out that the language in the February 28 Federal Register 
notice pertaining to such practical staffing and pay matters was vague. 
One person expressed concern at the quality of applicants under pay 
banding, should candidates only need to meet the minimum qualification 
requirements associated with the lowest grade level in a multi-graded 
band, and believed that the candidate screening process would suffer as 
a result.
    Response: It is understandable that many commenters found NNSA's 
proposed project plan vague and unclear in parts. NNSA's demonstration 
project plan, in both its proposed and final incarnations, is designed 
to mainly answer the ``what'' of a matter, not the ``how.'' This is why 
there have been many references in these responses, as well as 
throughout the text of the project plan, to a policies and procedures 
manual. But this response is not to dodge the issues. Most of the 
comments received during the public comment period have been invaluable 
in guiding NNSA's development of its companion policies and procedures. 
By design, a demonstration project is an experiment. Frankly, there is 
more than one way to execute and effect almost any feature of this 
experiment, and though modeling previous successful experiments and 
viable alternative personnel systems can be extremely useful, there are 
still mechanical subtleties and finer points of interpretation in 
matters of pay banding, staffing, and pay that NNSA must come to terms 
with. Having said this, it can be said after the past 6 months of 
rigorous development and refinement, that NNSA has gained competence 
and sureness about how to effectively execute the innumerable features 
and applications of this project. With respect to questions about 
conversion, NNSA GS employees will be converted to the career path and 
pay band that is equivalent to their current job series and grade, 
irrespective of pre-existing promotion potential, as discussed in the 
preceding subsection. In no case will an employee lose pay upon 
conversion; in fact, at conversion, most employees will receive an 
increase in pay reflecting the prorated value of their next scheduled 
within-grade increase (WIGI) based on the amount of time they have 
served in their respective waiting period.
    The project plan gives NNSA authority to establish the rules 
governing pay-setting for employees who convert out of the 
demonstration project and move to a GS position. Those technical 
conversion-out rules will be provided in NNSA's manual of implementing 
policies and procedures and will be forwarded to other Federal agencies 
should an NNSA pay-banded employee move to a GS position in another 
agency. In general, demonstration project employees moving to a GS 
position will be converted to a GS-equivalent grade and rate before 
they leave the demonstration

[[Page 72783]]

project and thus will be treated as GS employees under GS pay-setting 
rules.
    NNSA is also developing staffing guidelines to aid managers, 
selecting officials, and personnel office staff on processes to use in 
evaluating candidate qualifications, and to identify the more qualified 
candidates from among applicants. We expect that this will take time as 
we train staff, develop operating procedures, and evaluate their 
effectiveness. This will be true of most other operational features and 
applications of the project. It will be some time following project 
implementation and employee conversion before NNSA is proficient in 
most demonstration project matters, though NNSA is taking great pains 
and care to ensure that start-up and transition are implemented as 
smoothly as possible.

(f) Performance Management

    Comments: Most of the several comments received on performance 
management concerned the adaptability of NNSA's existing performance 
management program to the demonstration project. There were concerns 
expressed about the timing of implementation--too soon--about the 
readiness of NNSA's supervisors to fulfill their responsibilities to 
appraise their subordinates fairly--not ready--about the subjectivity 
of NNSA's four-level rating scheme--can't make distinctions--and so on. 
A labor union suggested ways to improve NNSA's appraisal program.
    Response: The project is scheduled to be implemented on March 16, 
2008. Once implementation occurs, there will be complete instructions 
on what to expect, and how to proceed, midway through the rating year 
as it will be. As NNSA prepares to implement the demonstration project, 
agency management holds many of the same reservations as did 
commenters. When NNSA was established seven years ago as a separately 
organized agency within DOE, NNSA inherited a variety of then existing 
performance management programs, between headquarters and a multitude 
of field offices. Four appraisal cycles ago, NNSA consolidated and 
standardized all GS and equivalent appraisal programs into one. At the 
onset of each new rating year since then, NNSA has made changes in its 
program based on the lessons learned from the previous rating cycle. As 
NNSA's program has evolved from year to year, it has been necessary to 
conduct focus groups and supervisory training. This upcoming year, 
during the transition to the demonstration project, will be no 
exception. And NNSA thinks this is a good thing. It is doubtful there 
would ever be an ideal time to embark on such a project. NNSA believes 
waiting for such a time will be a precious opportunity lost. By design, 
the demonstration project is an experiment. Many things are supposed 
and anticipated, but few things are known for sure in advance. They 
need to be tried and tested. This NNSA intends to do, realizing that it 
is likely that there will continue to be a need for improvements in 
design and execution for the next several years to come, not only 
concerning the existing performance management program, but to the 
demonstration project as a whole.

(g) Reduction in Force

    Comments: There were several questions concerning the mechanics of 
reduction in force (RIF) under the demonstration project, and the 
impact on employee RIF entitlements. One person asked whether 
demonstration project employees and excepted service employees would 
compete together in a RIF. Another asked whether employee protections 
would be lessened under the demonstration project. A third person asked 
specifically whether there would be ``bumping'' rights.
    Responses: Not only will there be bumping rights for demonstration 
project employees, but all other traditional employee protections are 
retained under the demonstration project. There is only one substantive 
change from traditional rules, having to do with a further subdivision 
of an NNSA competitive area by career path. Currently in NNSA, the 
decision to undertake RIF is made by the Administrator, respective Site 
Office Managers, the Service Center Director, and the heads of the 
Naval Reactors Offices in Pittsburgh, PA, and Schenectady, NY. 
Consequently, each of these management officials is considered to be 
the head of a competitive area for RIF purposes. (The Administrator has 
actually delegated the authority to take and direct personnel actions 
to these officials, while retaining this authority for all headquarters 
components, except Naval Reactors, which has a unique dual reporting 
arrangement with the Secretaries of Energy and Navy.) What this means 
from a practical management standpoint is that Site Offices, the 
Service Center, and the Pittsburgh and Schenectady Naval Reactors 
Offices are considered to be under separate administration for RIF 
purposes, while the Administrator remains the head of the headquarters 
competitive area. The existing competitive area standard in NNSA under 
current Federal regulation, and DOE policy, is ``a subdivision of the 
agency under separate administration within the local commuting area 
[5CFR351.402].'' The concept of ``local commuting area'' further 
defines the competitive area standard. Regulations permit agencies to 
subdivide competitive areas according to commuting area, the geographic 
proximity within which normal patterns of applicant recruitment and 
worker commutation can be expected to occur, even when the management 
official with the authority to take and direct personnel actions is 
located elsewhere. This is what NNSA does currently, and this part 
won't change under the demonstration project. Therefore, employees in 
one NNSA competitive area would not now compete with employees in 
another competitive area, nor would employees in different commuting 
areas within the same competitive area compete with each other. Under 
the demonstration project, NNSA will institute one additional 
competitive area subdivision, by career path, so that the employees in 
one career path would not compete with employees in another career path 
in a given RIF. NNSA's non-demonstration project employees, such as 
bargaining unit employees at headquarters, or all excepted service 
employees, are not affected by this competitive area change. They 
continue to be subject to traditional RIF rules, and applicable 
collective bargaining agreements, and would not compete with 
demonstration project employees in a given RIF.

(h) Employee Relations

    Comments: The several comments in this topical area concerned 
whether employees have the right of appeal, or to grieve, their 
performance ratings, and whether employees whose ratings are less than 
Fully Meets Expectations will have an opportunity to improve.
    Response: The demonstration project has no direct bearing on NNSA's 
performance management program, though the program continues to be 
refined based on lessons learned from previous rating cycles. Under 
NNSA's performance management policies, employees whose ratings are 
less than Fully Meets Expectations are provided structured 
opportunities to improve their performance. An employee who is 
dissatisfied with an official rating can request a reconsideration, 
under NNSA's policies and procedures.

(i) Employee Equity

    Comments: Commenters generally felt that the demonstration project 
will actually produce contrary results. Instead of encouraging workers 
to

[[Page 72784]]

higher levels of excellence, it will actually discourage workers who 
benefit now from the employment stability that the traditional civil 
service system provides. They suggested that the net effect of basing 
pay increases on performance will allow for faster pay progression in 
the short-term, with the ultimate effect of increasing salary costs to 
such a degree that there won't be sufficient funds to properly reward 
employees in the future. Two persons agreed with basing pay increases 
on performance, but had concerns about the equity of the process, and 
disagreed that performance pay increases should be combined with the 
annual comparability pay adjustment.
    Response: NNSA shares some of these same concerns, and views these 
concerns as challenges. Perhaps the biggest challenge the agency faces 
is earning and keeping the trust of its employees during this time of 
profound change, while ensuring that the demonstration project is not 
perceived as a disincentive. Perhaps the next biggest challenge is 
ensuring that supervisors are properly trained in their key 
responsibilities under the demonstration project, and that they are 
held accountable when they don't uphold these responsibilities. And two 
other significant challenges are ensuring that there are adequate cost 
controls in place, and that ample funds are appropriated to support 
meaningful levels of performance-based pay increases. NNSA does not 
minimize the significance of these challenges, but does not shrink from 
them either.
    As already discussed, NNSA is establishing two pay pools, and will 
administer annual pay adjustments and performance-based pay increases 
separately.

(j) Management Accountability

    Comments: A uniform thread runs through the many comments submitted 
on management accountability. Commenters expressed disbelief that 
managers will be held accountable for not rendering objective and fair 
performance ratings, and some said they have yet to see measures put in 
place, or actions taken, to assure accountability. One person wanted to 
know how OPM will oversee accountability and conduct ongoing 
evaluations.
    Response: Chapter 47 of title 5 requires an evaluation of the 
results of each demonstration project and its impact on improving 
public management. This project plan has been revised to include 
additional details about the project evaluation. In addition, NNSA will 
be held to scrutiny under DOE's human capital management accountability 
regimen. Aside from these layers of oversight, NNSA is dedicated to 
changing the management culture. One of the Administrator's highest 
goals is to make NNSA an Employer of Choice. NNSA will encourage 
openness between managers and employees, will provide extensive 
training to supervisors, will institute a regimen of employee 
communications, and will hold supervisors accountable through the 
performance management process. Supervisors, like everyone else in 
NNSA, will be held to higher standards.

(k) Other

    Comments: The comments in this category did not fall neatly under 
any other topic, and mainly reflected employee anxiety, or asked 
extremely process-oriented questions that will be responded to via 
other media. A general concern in various comments was the desire for 
more specificity. In some cases, NNSA has made changes that provide 
more specific information. (See section 4, ``Changes to Demonstration 
Project Plan.'')
    Two specific comments warrant NNSA's response: a letter from a 
labor organization, and a thoughtful comment about the merit system 
principles.
    Response: The labor organization offered an extensive critique of 
recent pay-for-performance initiatives in Government, and then offered 
suggestions concerning NNSA's proposal. NNSA shares the union's deep 
concern for the welfare of affected employees, and for advancing the 
public's interest in protecting nuclear security. NNSA will consider 
all suggestions for improving the demonstration project, and for making 
it a success. Should NNSA decide to apply the demonstration project to 
its bargaining unit employees in the future, it will honor its 
collective bargaining obligations.
    One person expressed concern that NNSA and OPM were not giving due 
adherence to the statutory merit system principles [5 U.S.C. 2301]. We 
disagree. As explained earlier, NNSA is relying on OPM's position 
classification criteria and standards and is adhering to the 
classification principle in 5 U.S.C. 5101(1) of ``equal pay for 
substantially equal work,'' which is akin to the merit principle in 5 
U.S.C. 2301(b)(3) of ``equal pay should be provided for work of equal 
value.'' NNSA has a profound regard for the merit system principles and 
has taken great pains in the design of this project to safeguard these 
principles. We note that the merit principle in 5 U.S.C. 2301(b)(3) 
also states that ``appropriate incentives and recognition should be 
provided for excellence in performance.'' Thus, the performance-based 
pay features of this demonstration project support this merit 
principle.

4. Changes to Demonstration Project Plan

    What follows is a list enumerating the substantive changes to 
NNSA's demonstration project, and major textual changes to the plan. 
The page numbers referenced are those found in the February 28, 2007, 
Federal Register Notice. Some of the changes have been described in the 
preceding responses to specific comments. Other changes provide 
additional detail, provide clarification, or correct technical 
problems.
    (1) Page 9038: The Table of Content is revised to reflect the 
addition of three new sections, III.A. 3., ``Position Classification 
Appeals,'' III.D., ``Supervisory Bonuses'', and VII., ``Project 
Modification.''
    (2) Page 9039: The ``executive summary'' is rewritten to reflect 
NNSA's final project goals.
    (3) Page 9040: NNSA has decided to create separate pay pools for 
comparability adjustments and performance payouts.
    (4) Page 9041: August 2006 data is superseded with August 2007 data 
in the table, ``Covered Employees by Occupational Series and Grade.''
    (5) Page 9042: The design principles are rewritten to eliminate 
ill-defined and inadequately developed principles.
    (6) Page 9043: Career path and pay band structures are revised, 
consistent with the NNSA's response herein under the ``pay band 
structures'' subsection.
    (7) Page 9043: A new section III.A.3., ``Position Classification 
Appeals,'' is added.
    (8) Page 9044: The pay increase preclusion for maximum rate 
employees who receive less than an SEE performance rating is modified 
to permit a 50 percent increase.
    (9) Page 9044: A locality rate cap 5 percent higher than the 
statutory pay cap is provided for top-rated performers in the upper 
range extension.
    (10) Page 9044: The section ``rate of basic pay upon promotion'' is 
clarified.
    (11) Page 9044: The date of performance-based pay adjustment is 
changed to ``the first day of the last full pay period in each calendar 
year.''
    (12) Page 9044: The pay retention provisions in the section ``other 
pay administration provisions'' are modified to provide 100 percent of 
the annual comparability pay adjustment for up to

[[Page 72785]]

2 years for employees who are reduced in band through no fault of their 
own.
    (13) Page 9045: NNSA clarifies that it may request that OPM 
establish a new staffing supplement for a category of NNSA employees.
    (14) Page 9045: The performance-rating reconsideration process is 
to be referenced, rather than stipulated, in the plan.
    (15) Page 9046: There are to be two pay pools.
    (16) Page 9046: The share distribution pattern (linked to levels of 
performance) is revised to take into account the effect of the 
establishment of separate pay pools for comparability adjustments and 
performance payouts and to provide additional flexibility.
    (17) Page 9046: The section ``pay adjustments'' is modified to 
reflect the impact of establishing two pay pools, with staggered 
payouts.
    (18) Page 9047: The section ``employees who do not receive a pay 
adjustment'' is modified to eliminate general references to employee 
notification and redress procedures, which will be handled through 
NNSA's own performance-rating reconsideration process.
    (19) Page 9047: The mechanism for withholding a pay increase from 
an employee who receives a less than fully Meets Expectations rating is 
modified; in the unlikely event that an employee whose basic pay is 
frozen as a result of a less than Fully Meets Expectations rating moves 
to another demonstration project position with a different locality pay 
schedule or staffing supplement, the employee's frozen base and 
locality pay or staffing supplement would be adjusted in accordance 
with NNSA's Demonstration Project Policies and Procedures Manual.
    (20) Page 9047: A new section III.D., ``Supervisory Bonuses,'' is 
added.
    (21) Page 9048: A new section VII, ``Project Modification,'' is 
added.
    (22) Page 9049: Several changes are made and citations are added in 
the ``waiver of laws and regulations required'' segments.

Linda M. Springer,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purposes and Approach
    B. Problems with the Present System
    C. Changes Required/Expected Benefits
    D. Participating Organizations
    E. Participating Employees
    F. Project Design
III. Personnel System Changes
    A. Pay Banding Classification and Pay System
    1. Establishment of Career Paths and Pay Bands
    2. Position Classification
    3. Position Classification Appeals
    4. Minimum Qualifications Requirements
    5. Elimination of Fixed Steps
    6. Rate Range
    7. Rate of Basic Pay Upon Initial Appointment
    8. Rate of Basic Pay upon Promotion
    9. Rate of Basic Pay in Noncompetitive Lateral Actions
    10. Other Pay Administration Provisions
    11. Staffing Supplements
    B. Performance Appraisal
    1. Program Requirements
    2. Supervisory Accountability
    3. Reconsideration of Ratings
    C. Performance-based Pay Increases
    1. Pay Pools
    2. Performance Shares
    3. Performance Pay Increases
    4. Employees Who Cannot Receive a Performance Pay Increase
    D. Supervisory Bonuses
    E. Reduction-in-Force
IV. Training
V. Conversion
    A. Conversion to the Demonstration Project
    B. Conversion to the General Schedule System
VI. Project Duration
VII. Project Modification
VIII. Project Evaluation
IX. Costs
X. Waiver of Laws and Regulations Required
    A. Title 5, United States Code
    B. Title 5, Code of Federal Regulations

I. Executive Summary

    This project was designed by NNSA in consultation with OPM. The 
goals of this demonstration project are to--
    (1) Improve hiring by allowing NNSA to compete more effectively for 
high quality employees through the judicious use of higher entry 
salaries;
    (2) Motivate and retain staff by providing faster pay progression 
for high-performing employees;
    (3) Improve the usefulness and responsiveness of the position 
classification system to managers;
    (4) Increase the efficiency of administering the position 
classification system through a simplified pay-banded application of 
the current General Schedule grade structure, and reduce the procedural 
steps and documentation requirements traditionally associated with 
classifying positions;
    (5) Eliminate automatic pay increases (i.e., annual adjustments 
that normally take effect the first day of the first pay period 
beginning on or after January 1) by making pay increases performance-
sensitive, so that only Fully Successful (known as ``Fully Meets 
Expectations'' in NNSA) and higher performers will receive pay 
adjustments, and the best performers will receive the largest pay 
adjustments;
    (6) Integrate with, build upon, and advance the work of several key 
human capital management improvement initiatives and projects currently 
underway in NNSA, including--
    a. Advancing the ongoing refinement of NNSA's four-year old 
enterprise-wide performance management program, which currently 
features a pilot for automating yearly performance ratings, to the next 
logical level, encompassing performance-based pay adjustments,
    b. Achieving greater parity, though not complete harmony, with 
NNSA's mature excepted service pay-banded and pay-for-performance 
system (e.g., will have lower pay band maximum rates; no automatic pay 
increases, etc.),
    c. Building on the simplified position description (PD) format and 
automated PD library that are already in place,
    d. Continuing to develop improved performance management skills 
among first-line supervisors through increased program rigor, 
additional training, and better guidance materials, to better develop 
standards that reflect differences in performance,
    e. Establishing a system of career-enhancing career paths for the 
purpose of developing, advancing, and retaining employees,
    f. Building on the new workforce analysis and planning system, 
already in place to identify FTE needs and competency needs and skills 
gaps, to conduct a valid occupational analysis to construct meaningful 
pay bands.
    The demonstration project will modify the General Schedule (GS) 
classification and pay system by identifying several broad career 
paths, establishing pay bands which may cover more than one grade in 
each career path, eliminating longevity-based step progression, and 
providing for annual pay adjustments based on performance. The proposed 
project will test (1) the effectiveness of multi-grade pay bands in 
recruiting, advancing, and retaining employees, and in reducing the 
processing time and paperwork traditionally associated with classifying 
positions at multiple grade levels, and (2) the application of 
meaningful distinctions in levels of performance to the allocation of 
annual pay increases.

II. Introduction

A. Purposes and Approach

    The purposes of the proposed project are to--
    (1) Modify the GS classification system by establishing pay bands 
which may cover more than one grade; and
    (2) Modify the GS pay system to provide larger annual pay increases 
to employees who are better performers

[[Page 72786]]

based on performance distinctions made under a credible, strategically-
aligned performance appraisal system/program and thereby improve the 
results-oriented performance culture within the organization.
    NNSA's approach to achieving these purposes is to integrate with 
and build upon the several ongoing human capital management initiatives 
and projects that are already underway, and to design a GS pay banding 
and performance-based pay adjustment system that--
    (1) Complements and increases parity with the statutory NNSA 
excepted service employment system already in place, and
    (2) Profits from the successes, mistakes, and lessons of other 
agency demonstration projects, past and current.

B. Problems With the Present System

Position Classification Rigidity, Incomprehensibility, and Procedural 
Excesses
    Although the GS classification system is not a compensation system 
per se, the classification and pay systems are inextricably 
intertwined. In practice, the GS classification system is the primary 
determinant of an employee's basic pay. Furthermore, NNSA believes in 
the principles underlying the GS classification system (i.e., equal pay 
for substantially equal work, and variations in pay based on the work 
actually performed, rather than on who performs the work) and believes 
that these principles are as valid and applicable to the Federal civil 
service system today as when originally enacted into law in 1923, and 
when the General Schedule was established in 1949. As Ismar Baruch 
wrote in a classic groundbreaking 1941 report, Position Classification 
in the Public Service:

    * * * the very nature of governmental jurisdictions places them 
in a position of peculiar responsibility to the public at large. 
Individual actions without plan or system and based merely upon the 
expediency of the moment are undesirable. Public personnel policies 
and transactions affecting positions and employees should be 
supportable by facts and logic in the light of broad considerations 
applicable to the service as a whole. Further, in the management of 
public personnel affairs, considerations of fairness and equity 
require uniform action under like circumstances, particularly in the 
establishment of pay rates.

This in essence is what the Federal position classification system was 
designed to achieve, and has achieved in principle, if not practice, 
ever since these words were first written. Thus, rather than 
``scrapping'' the current GS classification system and starting over, 
NNSA believes that modifying the system to accommodate the work and 
workforce of the 21st century is a more prudent and workable approach.
    Pay banding does this. The current GS classification system is 
cumbersome, labor intensive, and difficult to comprehend. As OPM's 
April 2002 white paper, A Fresh Start for Federal Pay: The Case for 
Modernization, points out, the GS classification system was designed 
during the World War II years when civil servants were predominantly 
``process-obsessed'' file clerks. Public servants in the middle of the 
20th century performed work that tended to be mechanical and repetitive 
in nature, consisting of job tasks readily observable and measurable. 
Today, work tends to be knowledge-based and highly specialized, and 
does not lend itself to easy categorization based on readily observable 
characteristics. Nonetheless, as an employee progresses from the entry 
level to the full-performance level in a given occupation today, under 
the traditional classification system, a separate position description 
is still required for each grade. For example, an entry level GS-5 
Engineer with promotion potential to GS-12 requires five different 
position descriptions (or statements of differences) covering grade 
intervals GS-5, GS-7, GS-9, GS-11, and GS-12. Additionally, each 
position description should be accompanied by a position evaluation 
report certifying that the duties and responsibilities of the position 
meet the requirements for classification into the series and grade. 
Often, the difference between a higher-graded and lower-graded position 
in the same career progression may be the level of supervision an 
employee receives, or the increasing gradations in the scope and effect 
of an employee's work on agency missions and programs, or some other 
interpretative degree of occupational difficulty and responsibility. As 
a result, managers who assign work and who are responsible for 
describing such assignments of work, and the position classifiers who 
evaluate assignments of work against OPM's and applicable agency 
classification criteria, often view the practice attendant to the 
current GS classification system as an exercise in semantics, and PD 
writing, for the purpose of ``beating the system'' to award the highest 
grade possible to a position, instead of as a management tool by which 
to make meaningful and significant distinctions between levels of work.
    The current GS classification system also directly impacts the 
effectiveness of agency recruitment activities. Recruiting for a 
vacancy which may be filled at any level from the entry level to the 
full-performance level requires a separate position description for 
each grade, separate qualifications requirements for each grade, 
separate applicant assessment and rating tools (often referred to as 
``crediting plans'') for each grade, and separate lists of best-
qualified candidates (often referred to as ``certificates'') for each 
grade. For example, recruiting for a single GS-5/12 Engineer vacancy 
requires five different position descriptions (GS-5, GS-7, GS-9, GS-11, 
and GS-12) and five different ``crediting plans,'' and will result in 
the agency issuing multiple ``certificates.'' Thus, Federal managers 
and applicants for Federal employment often view the system as 
cumbersome, time consuming, and unresponsive.
    Modifying the current system to supplant sequential grade 
progression with valid, rational, and credible pay bands will (1) 
provide much needed management relief from the seeming arbitrariness, 
rigidity, and document heaviness of the current classification system, 
(2) provide managers with much needed flexibility, and (3) offer 
applicants and employees greater opportunities for advancement and 
inducements to retention, while retaining the public policy principles 
and management values underlying the current civil service system.
A Need for Performance-Based Pay Increases
    Additionally, the current GS pay system provides annual pay 
increases to all employees, even those whose performance is less than 
Fully Successful. Similarly, periodic within-grade pay increases are 
virtually automatic. Although an employee's performance must be 
determined to be at an ``acceptable level of competence'' in order for 
the employee to receive a within-grade increase (WGI), this is only a 
single-level threshold and no further distinctions in levels of 
performance play a role. All performance levels above the threshold are 
treated the same for purposes of determining the amount of the increase 
and the rate at which an employee advances through the rate range of 
his or her grade. NNSA and OPM do not believe it is a wise use of the 
limited resources available for the compensation of Federal employees--
nor does it serve taxpayers effectively or treat employees fairly--to 
pass on the same pay adjustments, year after year, to all employees 
regardless of differences in their performance.
    The current GS pay system does provide one limited tool to address 
distinctions in levels of performance--

[[Page 72787]]

namely, quality step increases (QSIs). QSIs are discretionary 
adjustments that are not integrated into the normal pay adjustment 
process; thus, limited funds are available to provide QSIs, and the 
decision-making process may not be very transparent. In addition, there 
is no flexibility as to the amount of the QSI; a full step increase is 
required. Also, QSIs may be used only for those with the highest rating 
of record. In summary, QSIs alone cannot be relied upon to establish an 
effective link between pay and performance based on meaningful 
distinctions among different levels of performance.
    Under these constraints of the GS pay system, agencies are severely 
limited in their ability to establish a results-oriented performance 
culture as contemplated under the Human Capital Assessment and 
Accountability Framework (HCAAF). Within the HCAAF, a results-oriented 
performance culture effectively plans, monitors, develops, rates, and 
rewards employee performance, consistent with the merit system 
principle that ``appropriate incentives and recognition should be 
provided for excellence in performance'' (5 U.S.C. 2301(b)(3)).

C. Changes Required/Expected Benefits

    The proposed demonstration project will respond to the GS 
classification system problems identified above by compressing the 15 
GS grades into pay bands that may cover multiple grades. Although this 
``compression'' is neither designed nor intended to eliminate the 
fundamental statutory grading distinctions embedded in the traditional 
position classification system, it will considerably reduce the 
excessive rigidity inherent in the current system, making it 
substantially less cumbersome, less labor intensive, less time 
consuming, and easier to comprehend and apply.
    Importantly, banding the GS grade structure shifts the emphasis for 
employee pay advancement from position classification factors and merit 
promotion criteria to performance factors, one of the chief goals of 
this demonstration project. Because a pay banding system uses broader 
work levels, the system can be viewed as having more of a rank-in-
person emphasis; that is, it permits a more direct relationship between 
an incumbent's actual (or anticipated) individual level of job 
performance and a given position's particular level of pay.
    By permitting the advancement of employees within given bands 
without the necessity of advertising promotional opportunities, and 
without the need for handling employee applications in accordance with 
publicized merit promotion procedures, the attainment of some of the 
project's process simplification and streamlining objectives is also 
furthered.
    The proposed demonstration project will respond to the pay problem 
identified above by eliminating fixed steps within each of the pay 
bands and by making annual GS pay adjustments performance-sensitive. 
Pay adjustments will be funded from two pay pools: One consisting of 
the amount that would otherwise be used to pay the annual GS pay 
adjustment, and the second consisting of the amounts that would 
otherwise be used to pay WGIs and QSIs to employees covered by the 
demonstration project. The second pay pool also may include funds saved 
through the elimination of promotion increases for promotions between 
grades that are consolidated into the same band. A share mechanism will 
be used to allocate pay increases among employees with different levels 
of performance, and managers will be expected to control costs (and 
will be held accountable for doing so in their own performance plans). 
Implementation of the proposed pay system will result in larger pay 
increases going to employees who demonstrate higher performance. By 
regularly rewarding better performance with better pay, participating 
organizations will strengthen their results-oriented performance 
cultures. Among other things, they will be better able to retain their 
good performers and recruit new ones.

D. Participating Organizations

    It is expected that every major headquarters and field organization 
in NNSA will participate. This includes HQ, program, and support 
components, including NNSA's cadre of nuclear materials couriers, who 
are deployed at various locations in the United States, eight 
geographically dispersed Site Offices and two special purpose Naval 
Reactors Offices (in Pittsburgh, PA, and Schenectady, NY), and the 
Service Center in Albuquerque, NM. Each of these units is committed to 
operating a credible, robust performance appraisal program aligned to 
the organization's strategic goals and objectives, by providing the 
necessary training and resources. These organizations have demonstrated 
this commitment the past three years, as NNSA implemented a 
comprehensive performance management program enterprise-wide.

E. Participating Employees

    The demonstration project will cover all GS non-bargaining unit 
employees in the participating organizations identified in the 
preceding paragraph. (The only bargaining unit in NNSA is at 
headquarters, and currently includes 16 positions.) Included in the 
coverage are Schedule A and B Excepted Service employees. Not included 
are Schedule C Excepted Service employees and Excepted Service 
employees authorized under the NNSA Act, National Defense Authorization 
Acts, and the DOE Organization Act. Table 1 shows the number of 
employees available through September 2007 who are subject to coverage 
under this project by occupational series and grade.

[[Page 72788]]



                                                                  Table 1.--Covered Employees by Occupational Series and Grade
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             GS Grade
                 OCC Series                  ---------------------------------------------------------------------------------------------------------------------------------------   GS total
                                                 01       02       03       04       05       06       07       08       09       10       11       12       13       14       15
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
00018.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        7        3  .......           11
00028.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        1        3  .......        2            7
00080.......................................  .......  .......  .......  .......  .......  .......        1  .......        6  .......        3       36       30       40       12          128
00084.......................................  .......  .......  .......  .......  .......  .......  .......       30       54       80       66       52       22  .......  .......          304
00086.......................................  .......  .......  .......  .......  .......        2        2  .......  .......  .......  .......  .......  .......  .......  .......            4
00099.......................................  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......            1
00130.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3        4       14       40       43          104
00132.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3        5        2  .......           10
00201.......................................  .......  .......  .......  .......  .......  .......        1  .......        2  .......        2        7       19        9        7           47
00203.......................................  .......  .......  .......  .......  .......        1        6        1  .......  .......  .......  .......  .......  .......  .......            8
00260.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        3        1  .......            5
00299.......................................  .......  .......  .......  .......        1  .......        2  .......  .......  .......  .......  .......  .......  .......  .......            3
00301.......................................  .......  .......  .......  .......  .......  .......        3  .......       24  .......       39       41       49       29       26          211
00303.......................................        4        5        4       10        3       14       22        6  .......  .......  .......  .......  .......  .......  .......           68
00318.......................................  .......  .......  .......  .......        2       10       10        5        2  .......  .......  .......  .......  .......  .......           29
00326.......................................  .......  .......        2        5  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......            7
00335.......................................  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......  .......  .......            1
00340.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1       20           21
00341.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        1            2
00342.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        2  .......  .......  .......            2
00343.......................................  .......  .......  .......  .......  .......  .......  .......  .......        5  .......        6       21       36       49       30          147
00344.......................................  .......  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......            1
00346.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        2        3        3  .......            8
00361.......................................  .......  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......            1
00391.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
00399.......................................  .......  .......        1        2  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......            3
00401.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......            1
00501.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        4        3        3        1           12
00505.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3            3
00510.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1       10       15       22        3           51
00511.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        4  .......        1  .......            6
00525.......................................  .......  .......  .......  .......  .......        1  .......        1  .......  .......  .......  .......  .......  .......  .......            2
00560.......................................  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        1        9       15       18        7           51
00561.......................................  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......  .......            1
00599.......................................  .......  .......  .......  .......        2  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......            2
00610.......................................  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        1  .......  .......  .......  .......            2
00671.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
00690.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        2        2  .......            4
00801.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        6       26       91       82          205
00802.......................................  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        1  .......        1  .......  .......            3
00803.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        2  .......            2
00804.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        2  .......            3
00810.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        2  .......  .......            3
00819.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3        1  .......            4
00830.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......            1
00840.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        2        3       10       14       35           64
00850.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
00854.......................................  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......        2        4        1        2           10
00905.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        3        8       14           26
00950.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3  .......  .......  .......  .......            3
00986.......................................  .......  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......            1
00999.......................................  .......  .......  .......  .......  .......  .......        2  .......  .......  .......  .......  .......  .......  .......  .......            2
01035.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        5        1            7

[[Page 72789]]

 
01082.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......  .......            1
01099.......................................  .......  .......        1  .......        1  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......            2
01101.......................................  .......  .......  .......  .......  .......  .......        1  .......        2  .......        1        1        5        5        3           18
01102.......................................  .......  .......  .......  .......  .......  .......  .......  .......        6  .......  .......       13       29       36       15           99
01103.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3        4        1        2  .......           10
01106.......................................  .......  .......  .......  .......  .......  .......        1  .......  .......  .......  .......  .......  .......  .......  .......            1
01150.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
01170.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        1        1        1            4
01176.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
01199.......................................  .......  .......        1        1  .......  .......        1  .......        1  .......  .......  .......  .......  .......  .......            4
01222.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......        2        1            4
01301.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        5       33       26           64
01306.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        3  .......            4
01310.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        3            3
01412.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
01515.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......            1
01712.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......       11       10        4  .......           25
01750.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......  .......            1
01910.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1        6        5        1        1           14
02003.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......            1
02010.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        1  .......            2
02101.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        4       15        6           25
02130.......................................  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        9        1  .......           10
02210.......................................  .......  .......  .......  .......  .......  .......  .......  .......        1  .......        2        2       15       13        2           35
                                             ---------------------------------------------------------------------------------------------------------------------------------------------------
    Grand Total.............................        4        5        9       19        9       29       53       46      107       80      141      251      368      468      347         1936
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 72790]]

    Management has provided initial notice to affected employees and 
will continue consultation throughout project implementation.

F. Project Design

    The project is designed to (1) fundamentally simplify the position 
classification system as the key to improving recruitment, retention, 
and classification activities, (2) ensure that no participating 
employee with a rating of record of less than Fully Meets Expectations 
will receive a pay increase, and (3) ensure that funds available for 
pay adjustments will be allocated on the basis of performance, the 
better performers receiving the greater performance payouts.
    To ensure expeditious and effective project implementation and 
completion, NNSA will model, to the extent feasible and appropriate, 
programmatic features and operating systems and procedures relating to 
NNSA's own pay-banded, pay-for-performance excepted service system; in 
addition, NNSA will review the successes, mistakes, and lessons from 
the experiences of other agency demonstration projects, notably the 
current Department of Defense (DoD) laboratory projects, which are 
based on the foundational China Lake project; the National Institute of 
Standards and Technology permanent Alternative Personnel System; and 
DoD's new National Security Personnel System (one of the participating 
Air Force labs shares Kirtland AFB with NNSA).
    Two basic design principles will underpin this project:
     NNSA will not establish its own classification standards, 
but rather, will construct band thresholds and boundaries consistent 
with OPM's official classification criteria. To streamline 
documentation, NNSA will establish core pay band descriptors and core 
position descriptions based on the OPM job family standard and 
functional classification guide that most directly corresponds to the 
work encompassed within an occupational series. The descriptor is a 
generic benchmark description used to illustrate the ranges of 
complementary work levels within a pay band. The assignment of 
positions to pay bands will be made on the basis of the core pay band 
descriptor.
     NNSA will not delegate classification authority to 
managers. NNSA understands that not delegating classification authority 
runs counter to the experiences of other agency demonstration projects. 
Nonetheless, it is much more efficient to leave the exercise of this 
authority and all attendant administration activities in the trained 
hands of the resident human resources (HR) staff. NNSA sees little 
value in turning managers into classifiers, but rather, believes the 
value is in preparing managers to become better supervisors. NNSA's 
pre-eminent managerial goal is to develop a seasoned cadre of Federal 
managers who can practice the art of supervision at an uncommonly high 
level (i.e., the supervisor who is more mentor than taskmaster, who can 
nurture subordinates and unleash their potential for superior 
performance through the instruments of performance appraisal and reward 
programs).

III. Personnel System Changes

    The 15-grade GS position classification system established under 5 
U.S.C. chapter 51 and the GS pay system established under 5 U.S.C. 
chapter 53, subchapter III, will be modified as described in the 
following sections. Except as otherwise provided in this plan, 
demonstration project employees will be considered to be GS employees 
in applying other laws, regulations, and policies. NNSA does not 
currently have employees covered by law enforcement officer (LEO) 
special base rates. Should any law enforcement officers be covered by 
this demonstration project in the future, they will not be considered 
to be General Schedule employees for the purposes of applying LEO 
special base rates authorized by section 403 of the Federal Employees 
Pay Comparability Act of 1990; a separate career path would be 
established for these employees, and band ranges for any such LEOs will 
take LEO special base rates into account.

A. Pay Banding Classification and Pay System

1. Establishment of Career Paths and Pay Bands
    NNSA may establish, and adjust over time, career paths that group 
one or more occupational categories together and provide a common 
banding structure (i.e., set of work levels and rate ranges) for 
occupations within a given career path. Initially, NNSA intends to 
establish five career paths.
    Each career path will be subdivided into pay bands. Each pay band 
will correspond to one or more GS grades. NNSA may establish, and 
adjust over time, a career path's pay band structure.
    NNSA's initial career path and pay bands are:
    (1) Engineering and Scientific Career Path: Encompasses all 
professional positions (with the exception of professional positions in 
the Future Leaders Career Path) classified in the GS-800 and GS-1300 
job series, subdivided into the following pay bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-11)
     Pay Band III (GS-12/GS-13)
     Pay Band IV (GS-14/GS-15)
    (2) Professional, Technical, and Administrative Career Path: 
Encompasses all OPM-recognized two-grade interval occupations, except 
GS-800 engineers and GS-1300 scientists. All positions in this career 
path are subdivided into the following pay bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-12)
     Pay Band III (GS-13/GS-14)
     Pay Band IV (GS-15)
    (3) Technician and Administrative Support Career Path: Encompasses 
all OPM-recognized one-grade interval occupations, excepting positions 
classified in the GS-084 Courier series (see below). All positions in 
this career path are subdivided into the following pay bands:
     Pay Band I (GS-1 through GS-4)
     Pay Band II (GS-5 through GS-8)
     Pay Band III (GS-9)
    (4) Nuclear Materials Couriers Career Path: Encompasses all 
positions classified into the GS-084 job series, subdivided into the 
following pay bands:
     Pay Band I (GS-8 through GS-10)
     Pay Band II (GS-11)
     Pay Band III (GS-12)
     Pay Band IV (GS-13)
    (5) Future Leaders Career Path: Encompasses the positions of all 
interns enrolled in NNSA's 2-year Future Leader Program, in various 
engineering, scientific, business, and administrative occupations. All 
positions in this career path are subdivided into the following pay 
bands:
     Pay Band I (GS-5 through GS-8)
     Pay Band II (GS-9 through GS-11)
     Pay Band III (GS-12/GS-13) \2\
---------------------------------------------------------------------------

    \2\ Although all Future Leaders will have career ladders to pay 
band III in either the Engineering and Scientific Career Path, or 
the Professional, Technical, and Administrative Career Path, a 
control point equating to the salary of GS-12 step 10 will be 
established for those Future Leaders with a Masters Degree in 
business-related and administrative fields to enable these 
individuals to be converted from band III of the Future Leaders 
Career Path to band II of the Professional, Technical, and 
Administrative Career Path upon successful completion of the 2-year 
program.
---------------------------------------------------------------------------

    NNSA will coordinate changes in career paths or pay banding 
structures with OPM. After coordination with OPM, NNSA will give 
affected employees advance notice and an opportunity to comment before 
effecting a change with respect to career paths or banding structure.

[[Page 72791]]

2. Position Classification
    Application of the 15-grade GS position classification system 
established under 5 U.S.C. chapter 51 will be simplified by allowing a 
position to be assigned to a specific pay band if the duties and 
responsibilities of the position meet (or exceed) the requirements for 
classification into the lowest grade included in that specific pay 
band. For example, an 801, Engineer, position assigned to Pay Band 1 
(GS-5 through GS-8), need only meet the requirements for classification 
at the GS-5 level. Position descriptions will include examples of 
higher-level duties and responsibilities to which employees are fully 
intended to progress. NNSA will establish pay band boundaries 
consistent with OPM's existing position classification standards, 
grade-evaluation criteria, and grading practices.
3. Position Classification Appeals
    An individual employee may request that NNSA or OPM reconsider the 
classification (i.e., pay system, occupational series, official title, 
or pay band) of his or her official position of record at any time, 
consistent with procedures currently prescribed under 5 CFR part 511, 
subpart F. A full description of the classification appeals process for 
the NNSA demonstration project will be included in the Demonstration 
Project Policies and Procedures Manual that will accompany this project 
plan.
4. Minimum Qualifications Requirements
    Application of the OPM Operating Manual: Qualification Standards 
for General Schedule Positions is simplified by allowing a candidate to 
qualify for a specific pay band if the candidate meets (or exceeds) the 
requirements for the lowest grade included in that specific pay band. 
For example, a candidate for an 801 Engineer position assigned to Pay 
Band 1 (GS-5 through GS-8), need only meet the qualifications 
requirements for a GS-801 Engineer position at the GS-5 level.
    For NNSA demonstration project employees and employees of other 
Federal agencies who are in sufficiently similar pay banding systems, 
the common OPM requirement of one year of experience ``at the next 
lower grade in the normal line of progression for the occupation'' is 
changed to ``at the next lower pay band in the normal line of 
progression for the occupation.''
    Federal employees in the General Schedule pay system, Federal 
employees in other pay systems comparable to the General Schedule, and 
non-Federal applicants must meet the common OPM requirement of one year 
of experience ``at the next lower grade in the normal line of 
progression for the occupation.''
5. Elimination of Fixed Steps
    The 10 fixed steps of each GS grade will not apply to employees 
participating in the demonstration project. The fixed-step system was 
designed to reward longevity. A pay banding system is an important 
element of any effort to make pay more performance-sensitive. No 
employee's pay will be reduced as a result of becoming covered by the 
demonstration project. However, demonstration project employees will no 
longer receive longevity-based within-grade pay increases at prescribed 
intervals. Instead, they will be granted annual performance adjustments 
as described in section III.C. below.
6. Rate Range
    The normal minimum and maximum rates of the rate range for each pay 
band will equal the applicable step 1 rate and step 10 rate, 
respectively, for the lowest and highest grades, respectively, in the 
General Schedule that are included in the pay band. The minimum rate of 
the pay band is extended 5 percent below the normal minimum for 
employees with a rating of record below Fully Meets Expectations (FME). 
Such an employee's rate may fall below the normal pay band minimum when 
that minimum increases as a result of a pay band adjustment, but the 
employee cannot receive a pay adjustment, or performance pay increase, 
because the employee's rating of record is below Fully Meets 
Expectations, as described in section III.C.4.
    The maximum rate of each pay band is extended 5 percent above the 
normal maximum for all employees with a rating of record at the highest 
level (currently called ``Significantly Exceeds Expectations'' (SEE) in 
NNSA). This upper range extension will help ensure that the range of 
available pay rates will be adequate to recognize truly outstanding 
performance. The upper range extension is reserved for employees with a 
SEE rating. If an employee in the upper range extension is rated below 
the SEE level, special provisions apply, as described in section 
III.A.10.
    In addition to rates of basic pay, employees may receive locality 
payments or staffing supplements as described in section III.A.10 or 
III.A.11, respectively.
7. Rate of Basic Pay Upon Initial Appointment
    Upon appointment to a demonstration project position under 
Delegated Examining, Direct-Hire Authorization, or other authority 
primarily designed for initial entry into the Federal service (e.g., 
Veterans Employment Opportunity Act, 30% Disabled Veteran Appointment), 
an appointee's pay rate may be set at any rate within the normal pay 
band range. In exercising this flexibility, NNSA will consider the 
appointee's qualifications, competing job offers, NNSA's need for the 
appointee's talents, the appointee's potential contributions to NNSA 
mission accomplishment, and the rates received by on-board employees. 
This flexibility will allow NNSA to compete more effectively with 
private industry for the best talent available, though managers will be 
expected to use this flexibility with great judiciousness and prudence.
8. Rate of Basic Pay Upon Promotion
    Upon promotion to a higher pay band, an appointee's pay rate 
generally will be set at a rate within the normal pay band range to 
which the appointee is being promoted that provides a pay increase of 8 
percent, unless a greater increase is necessary to set pay at the 
normal range minimum. NNSA may establish exceptions to this policy to 
deal with employees receiving a retained rate, employees who are re-
promoted shortly after a demotion, employees with exceptional 
performance warranting a larger increase with higher management 
approval, etc. In exercising this flexibility, NNSA will consider the 
appointee's qualifications, competing job offers, NNSA's need for the 
appointee's talents, and the appointee's potential contributions to 
NNSA mission accomplishment. A demonstration project employee who moves 
to a higher pay band (defined as a pay band with a maximum base rate 
for the normal range that is higher than the maximum rate of the normal 
range of the employee's pay band before the move) in a different career 
path is considered to have been promoted under policies prescribed by 
NNSA. NNSA may adopt policies providing a promotion-equivalent increase 
to a Federal employee outside the demonstration project who is 
selected, through merit promotion plan procedures, to fill a higher-
level position (as defined in NNSA policies) covered by the 
demonstration project.
    NNSA employees, who at the time of conversion into the 
demonstration project are in a career ladder to a higher

[[Page 72792]]

GS grade (i.e., have not reached the top level of that career ladder), 
will be eligible for special in-band pay increases under the authority 
of this demonstration project. The in-band pay increases will be 
sufficient to ensure that an employee's base rate under the 
demonstration project is equivalent to the base rate which the employee 
would have received had the employee and position remained in the 
General Schedule. Only one in-band pay increase may be received in a 
52-week period. This ``grandfathering'' benefit will cease to be 
applicable when the employee reaches equivalence with the top GS grade 
of the formerly applicable career ladder. Only current NNSA employees 
who convert at the inception of pay banding will be afforded this 
``grandfathering'' benefit. The specific terms and conditions of this 
benefit will be established by NNSA in NNSA's Demonstration Project 
Policies and Procedures Manual that will implement this project plan.
    NNSA may establish special rules for computing the promotion 
increase for promotions involving positions covered by a staffing 
supplement that take into account the staffing supplement and locality 
pay, subject to guidance provided by OPM.
9. Rate of Basic Pay in Competitive and Noncompetitive Lateral Actions
    When a non-demonstration project employee from NNSA or DOE is 
reassigned into a demonstration project position, NNSA may provide an 
immediate increase in the rate of basic pay to reflect the prorated 
value of the employee's next scheduled within-grade increase or similar 
within-range adjustment under the former pay system, consistent with 
the requirements in section V.A. Similarly, when an employee transfers 
into NNSA from another Federal agency, NNSA may provide an immediate 
increase in the rate of basic pay to reflect the prorated value of the 
employee's next scheduled within-grade increase or similar within-range 
adjustment, also consistent with section V.A. When a demonstration 
project employee is selected through competitive procedures to fill 
another demonstration project position that is at the same pay band as 
the employee's current position, or has no greater pay potential, NNSA 
may provide an immediate pay increase up to 5 percent upon 
reassignment. The increase to pay must be based on a review of the 
employee's current salary, salary history, performance evaluations, and 
qualifications. Justification and review requirements for such an 
increase will be reflected in the staffing and pay-setting policies 
found in NNSA's Demonstration Project Policies and Procedures Manual.
10. Other Pay Administration Provisions
    Performance-based pay increases described in section III.C will be 
made to the scheduled annual rate of pay. These increases will be made 
on the first day of the last full pay period in each calendar year. 
Annual general pay adjustments will be effective on the first day of 
the first full pay period in January of each year.
    Locality-based comparability payments under 5 U.S.C. 5304 will be 
paid on top of the scheduled annual rate of pay in the same manner as 
those payments apply to other GS employees (except as described in the 
following paragraph). Staffing supplements may apply as described in 
section III.A.11.
    A locality rate cap 5 percent higher than the normal EX-IV 
statutory cap is established to accommodate those employees in the 
upper rate range extension, whose current rating of record is SEE. This 
higher cap will only apply to employees whose pay rate is in the upper 
range extension. If the locality rate for an employee at the normal 
band maximum is affected by the EX-IV cap, resulting in an ``effective 
locality pay percentage'' that is less than the regular locality pay 
percentage, the locality rate for an employee in the upper rate range 
extension of the same band will be computed using that same effective 
locality pay percentage. (For example, if the regular locality pay 
percentage is 30 percent, but the EX-IV cap causes the amount of 
locality pay actually received by an employee at the regular band 
maximum to be 20 percent, that effective locality pay percentage of 20 
percent would be used to compute locality pay for an employee in the 
upper range extension of the same band.)
    If an employee in the upper range extension receives a Fully Meets 
Expectations (FME) annual rating of record following the previous 
year's SEE rating, the employee will be converted to a retained rate 
status and will receive 50 percent of the increase in the adjusted rate 
for the normal range maximum (including any applicable locality payment 
or staffing supplement). The employee will receive the 50 percent 
adjustment each year he or she receives an FME rating of record until 
the employee's pay falls at or below the normal maximum rate of the pay 
band.
    Employees receiving a rating of record below Fully Meets 
Expectations are prohibited from receiving any increase in basic pay 
including any annual adjustment in the scheduled rate of pay, locality 
pay, or staffing supplement, except as necessary to prevent their 
frozen rate from falling below the 5 percent threshold of the lower 
band extension. A frozen rate of pay does not result in a reduction in 
pay and therefore is not subject to adverse action procedures in 
chapter 75 of title 5, United States Code. In no case may an employee's 
rate of basic pay fall below the 5 percent lower band extension. If an 
employee's frozen rate of pay falls below the bottom threshold of the 
lower range extension, it will be adjusted by the dollar amount of the 
annual adjustment in the scheduled rate of pay necessary to bring their 
adjusted frozen rate back within the lower extended range. NNSA's 
Demonstration Project Policies and Procedures Manual will address how a 
frozen locality payment or staffing supplement will be adjusted if an 
employee moves to a demonstration project position with a different 
locality pay schedule or staffing supplement.
    When an employee receives a rating of record below Fully Meets 
Expectations, their existing rate of basic pay including any applicable 
locality pay or staffing supplement is frozen until they receive a new 
rating of record of Fully Meets Expectations. If NNSA chooses to give 
such an employee a new rating of record of FME before the end of the 
current appraisal period, the employee is entitled to an increase in 
the rate of basic pay effective on the first day of the first pay 
period beginning on or after the date the new rating is final, as 
described in section III.C.4.
    Subject to guidance provided by OPM, NNSA will establish 
supplemental pay administration rules for determining an employee's 
rate of pay upon initial appointment, promotion, demotion, transfer, 
reassignment, or other position change, as needed. In addressing 
geographic conversions and simultaneous pay actions, such rules must be 
consistent with 5 CFR 531.205 and 5 CFR 531.206, respectively.
    The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536 
are not applicable (i.e., no band retention). The pay retention rules 
in 5 U.S.C. 5363 and 5 CFR part 536 apply to demonstration project 
employees, subject to the following exceptions:
    (1) Enhanced pay retention (as described in the next paragraph) 
applies to an employee who is entitled to a retained rate as a result 
of an involuntary reduction in band through no fault of his or her own;
    (2) An employee with a rating of record below Fully Meets 
Expectations

[[Page 72793]]

may not receive an increase in his or her retained rate under 5 U.S.C. 
5363(b)(2)(B);
    (3) An employee in the upper range extension who is rated below 
Significantly Exceeds Expectations will be converted to a retained rate 
before processing any other pay action;
    (4) The cap on retained rates is equal to the rate for level IV of 
the Executive Schedule plus 5 percent (instead of the EX-IV cap 
established under 5 CFR 536.306) in order to accommodate employees in 
the upper range extension whose rating of record falls below SEE; and
    (5) The range maximum rate used in computing retained rate 
adjustments will always be the applicable adjusted rate for the normal 
range maximum (including any applicability locality payment or staffing 
supplement), not the upper range extension maximum, regardless of the 
employee's rating of record.
    Enhanced pay retention applies to employees who become entitled to 
a retained rate as a result of an involuntary reduction in band under 
conditions that would have met the requirements for grade retention if 
the employee were covered by 5 CFR 536.201-536.202. Under enhanced pay 
retention, an employee's retained rate will be determined as prescribed 
in 5 CFR 536.304. However, an employee's retained rate will be 
increased by 100 percent (instead of 50 percent) of the dollar amount 
of any increase in the normal maximum rate of the employee's band 
during the 2-year (i.e., 104-week) period beginning on the date the 
employee's retained rate is established. After the 2-year period of 
enhanced pay retention, the regular 50-percent adjustment rule in 5 
U.S.C. 5363(b)(2)(B) and 5 CFR 536.305 will apply, as modified by the 
provisions in this section. The 50-percent adjustment rule will be 
applied by measuring the dollar change in the applicable adjusted rate 
for the normal maximum rate of the band (linked to applicable GS step 
10 rate).
    If an employee is receiving a retained rate that is less than the 
applicable adjusted maximum rate (including any applicable locality 
payment or staffing supplement) for the upper range extension for the 
employee's band, and if that employee receives a rating of record of 
Significantly Exceeds Expectations, the employee's retained rate will 
be terminated and converted to an equal adjusted rate (base rate in 
upper range extension plus applicable locality payment or staffing 
supplement). This conversion must be processed before any other pay 
adjustment.
    For a retained rate employee with a rating of record of 
Significantly Exceeds Expectations, if a retained rate adjustment 
provided at the time of a range adjustment results in the retained rate 
falling below the applicable adjusted rate for the upper range 
extension maximum, the employee's retained rate will be terminated, and 
the employee's pay will be set at the maximum rate of the upper range 
extension.
    For a retained rate employee with a rating of record of Fully Meets 
Expectations, if a retained rate increase provided at the time of a 
range adjustment results in the retained rate falling below the 
applicable adjusted rate for the normal band maximum, the employee's 
retained rate will be terminated, and the employee's pay will be set at 
the normal band maximum rate.
    For a retained rate employee with a rating of record below Fully 
Meets Expectations, the retained rate is frozen and not subject to 
adjustment. When such an employee's retained rate falls below the 
applicable adjusted rate for the normal band maximum, the employee's 
retained rate will be terminated, and the employee's pay will be set at 
an adjusted rate equal to the retained rate (i.e., the rate is not set 
at the range maximum).
    As required by 5 CFR 536.304(a)(2) and 536.305(a)(2), any general 
pay adjustment, including a retained rate adjustment as described in 
the preceding paragraphs, must be processed before any other 
simultaneous pay action (such as a geographic pay conversion).
    When applicable, the saved pay rules in 5 U.S.C. 3594 and 5 CFR 
359.705 for former SES members continue to apply to demonstration 
project employees, except that (1) an employee with a rating of record 
below Fully Meets Expectations may not receive an increase in his or 
her saved rate under 5 U.S.C. 3594(c)(2); and (2) the 50-percent 
adjustment rule must be applied in the same manner as it is applied for 
a retained rate under 5 U.S.C. 5363, subject to the modifications 
described in the preceding paragraphs. The rules regarding termination 
of a saved rate when it falls below the applicable adjusted maximum 
rate must be parallel to those governing termination of a retained rate 
under 5 U.S.C. 5363, subject to the modifications described in the 
preceding paragraphs. The enhanced pay retention provisions described 
in the preceding paragraphs do not apply to saved rates under 5 U.S.C. 
3594.
    NNSA may adopt supplemental pay administration policies governing 
matters not specifically addressed in this plan, subject to any OPM 
guidance.
11. Staffing Supplements
    An employee who is assigned to an occupational series and 
geographic area covered by an OPM-established special rates schedule, 
and who meets any other applicable coverage requirements, will be 
entitled to a staffing supplement if the maximum adjusted rate for a 
covered position in the GS grades corresponding to the employee's band 
is a special rate that exceeds the applicable maximum GS locality rate. 
The staffing supplement is added on top of the rate of basic pay in the 
same manner as locality pay. An employee will receive the higher of the 
applicable locality payment or staffing supplement.
    For employees being converted into the demonstration project, the 
employee's total pay immediately after conversion will be the same as 
immediately before, but a portion of the total will be in the form of a 
staffing supplement. Adverse action and pay retention provisions will 
not apply to the conversion process as there will be no change in the 
total salary rate. The staffing supplement is calculated as described 
below.
    Upon conversion, the demonstration base rate will be established by 
dividing the employee's former GS adjusted rate (the higher of special 
rate or locality rate) by the staffing factor. The staffing factor will 
be determined by dividing the maximum special rate for the banded 
grades by the GS base rate corresponding to that special rate (step 10 
GS base rate for the same grade as the special rate). The employee's 
demonstration staffing supplement is derived by multiplying the 
demonstration base rate by the staffing factor minus one. Therefore, 
the employee's final demonstration special staffing rate equals the 
demonstration base rate plus the special staffing supplement; this 
amount will equal the employee's former GS adjusted rate.
    Simplified, the formula is this:

Staffing factor = (Maximum special rate for banded grades) / (GS 
base rate corresponding to that special rate)
Demonstration base rate = (Former GS adjusted rate [special or 
locality rate]) / (Staffing factor)
Staffing supplement = demonstration base rate x (staffing factor - 
1)
Salary upon conversion = demonstration base rate + staffing 
supplement [sum will equal existing rate]

    If a special rate employee is converted to a band where the maximum 
GS adjusted rate for the banded grades is a

[[Page 72794]]

locality rate, when the employee is converted into the demonstration 
project, the demonstration base rate is derived by dividing the 
employee's former special rate by the applicable locality pay factor 
(for example, in the Washington-Baltimore area, the locality pay factor 
is 1.175 in 2006). The employee's demonstration locality-adjusted rate 
will equal the employee's former GS adjusted rate.
    Any General Schedule or special rate schedule adjustment will 
require recomputation of the staffing supplement. Employees receiving a 
staffing supplement remain entitled to an underlying locality rate, 
which may over time supersede the need for a staffing supplement. If 
OPM discontinues or decreases a special rate schedule, pay retention 
provisions will be applied, as appropriate. Upon geographic movement, 
an employee who receives the special staffing supplement will have the 
supplement recomputed; any resulting reduction in the supplement will 
not be considered an adverse action or a basis for pay retention.
    Established salary including the staffing supplement will be 
considered basic pay for the same purposes as a special rate under 5 
CFR 530.308--e.g., for purposes of retirement, life insurance, premium 
pay, severance pay, and advances in pay. It will also be used to 
compute workers' compensation payments and lump-sum payments for 
accrued and accumulated annual leave. Staffing supplement adjusted 
rates are subject to the Executive Schedule level IV cap that applies 
to GS locality rates and special rates (except as provided in the 
following paragraph).
    Adjusted rates that include a staffing supplement are subject to an 
Executive Schedule level IV cap, except for employees in the upper 
range extension whose rating of record is SEE. For those with a base 
rate in the 5 percent upper range extension, an adjusted rate cap 5 
percent higher than the normal EX-IV cap is established. This higher 
cap will apply only to employees receiving a rate within the upper 
range extension. If the adjusted rate for an employee at the normal 
band maximum is affected by the EX-IV cap, resulting in an ``effective 
staffing supplement percentage'' that is less than the regular staffing 
supplement percentage, the adjusted rate for an employee in the upper 
rate range extension of the same band will be computed using that same 
effective staffing supplement percentage. (For example, if the regular 
staffing supplement percentage is 35 percent, but the EX-IV cap causes 
the amount of the staffing supplement actually received by an employee 
at the regular band maximum to be 20 percent, that effective staffing 
supplement percentage of 20 percent would be used to compute the 
staffing supplement for an employee in the upper range extension of the 
same band.)
    OPM may approve staffing supplements for categories of employees 
within the NNSA demonstration project who are not in approved special 
rate categories for GS employees, consistent with the provisions in 5 
U.S.C. 5305(a) and (b).

B. Performance Appraisal

    NNSA recognizes the importance of maintaining highly credible 
performance management systems. NNSA will use a performance management 
program under the Department of Energy appraisal system that has been 
approved by OPM consistent with chapter 43 of title 5, United States 
Code. Throughout the duration of the demonstration project, the 
effectiveness of performance management within the project will be 
monitored by examining metrics and assessments that will be included in 
the demonstration project evaluation plan.
1. Program Requirements
    The NNSA performance appraisal program requires written performance 
plans for each covered employee containing the employee's performance 
elements and standards. The performance plan links the performance 
elements and standards for individual employees to the organization's 
strategic goals and objectives. Ongoing feedback and dialogue between 
employees and their supervisors regarding performance is required. In 
addition, the program provides for, at a minimum, one mid-year progress 
review.
    The NNSA appraisal program, including its performance levels and 
standards, provides for making meaningful distinctions in performance. 
The program currently uses a four-level rating pattern to both 
summarize performance and to appraise performance at the element level. 
Its summary level pattern under 5 CFR 430.208(d) uses Levels 1, 2, 3, 
and 5, which NNSA has labeled Does Not Meet Expectations, Needs 
Improvement, Fully Meets Expectations, and Significantly Exceeds 
Expectations, respectively. Employees must be covered by their 
performance plan for at least 90 days before they can be assigned a 
rating of record. Supervisors and managers apply the appraisal program 
in a way that makes appropriate differentiations in performance. These 
differentiations reflect overall organizational performance. Employees 
receive a written performance appraisal (i.e., a rating of record) 
annually. Forced distributions of ratings are prohibited. Each annual 
appraisal period will begin on October 1 and end on the following 
September 30. Performance appraisals will be completed in a timely 
manner to support pay decisions in accordance with section III.C.
    Additional guidance on the NNSA performance appraisal program is 
provided through internal operations manuals. Performance appraisal is 
an evolutionary process, and changes may be made during the course of 
the demonstration project based on findings from our ongoing 
evaluations and reviews. Any changes will be communicated to affected 
employees, and they will be given a chance to comment before NNSA 
implements the changes.
2. Supervisory Accountability
    Supervisors are responsible for providing appropriate consequences 
for employee performance by addressing poor performance and recognizing 
exceptional performance. The performance plans for supervisors and 
managers include the degree to which supervisors and managers plan, 
assess, monitor, develop, correct, rate, and reward subordinate 
employees' performance. It is recognized that specific training must be 
provided to prepare supervisors and managers to exercise these 
responsibilities. NNSA has provided supervisory training each of the 
past three years on philosophical and procedural aspects of its new and 
still evolving performance management program (i.e., the lessons 
learned in the administration of each performance appraisal cycle have 
resulted in refinements each subsequent year). NNSA understands that 
this demonstration project will heighten the need for continuing 
supervisory training to support the accurate and realistic appraisal of 
performance.
3. Reconsideration of Ratings
    To support fairness and transparency for the program and its 
consequences, employees have an opportunity to request reconsideration 
of a rating of record. Such requests will be administered through a 
reconsideration process outlined in NNSA's Demonstration Project 
Policies and Procedures Manual. This procedure will be the sole process 
for addressing complaints regarding overall summary ratings and ratings 
of individual elements.

[[Page 72795]]

C. Performance-Based Pay Increases

1. Pay Pools
    Funds that otherwise would be spent on the annual GS pay 
adjustment, WGIs, and QSIs for demonstration project employees will 
instead be placed into two pay pools: (1) the general pay increase pool 
will include funds that otherwise would be spent on the annual 
scheduled rate pay adjustment and (2) the performance pay pool will 
include funds that would otherwise be used to pay WGIs and QSIs. The 
performance pay pool also may include funds saved through the 
elimination of promotion increases for promotions between grades that 
are consolidated into the same band.
    All employees with a rating of Fully Meets Expectations or higher 
are entitled to an adjustment in the scheduled rate of pay equal to the 
annual pay adjustment, which is also used to adjust NNSA pay ranges. 
This general increase is funded by the general increase pool. Employees 
who receive a rating below FME will be eligible for the annual pay 
adjustment, should a new rating be assigned after a period of time 
under a performance improvement plan.
    Additional pay increases will be funded from the performance pay 
pool using a share mechanism (1) to ensure that employees with higher 
ratings of record receive greater pay increases than employees with 
relatively lower ratings of record and (2) to control costs without 
resorting to a forced distribution of ratings. Each employee will be 
assigned a certain number of shares, based on his or her rating of 
record in accordance with section III.C.2.
    Participating organizations will establish pay pools for allocating 
performance pay increases. NNSA will determine which participating 
employees are covered by any pay pool and determine the dollar value of 
each pay pool. In setting the value of pay pools, NNSA will initially 
allocate an amount for performance pay increases equal to the estimated 
value of the WGIs, QSIs, and applicable promotion increases that 
otherwise would have been paid to participating employees. In computing 
the estimated value of WGIs and QSIs, NNSA may use estimated 
Governmentwide averages as computed by OPM.
2. Performance Shares
    NNSA will establish rating/share patterns for each pay pool--that 
is, the relationship between a rating of record and the number of 
shares. NNSA rating/share patterns will ensure that a higher rating of 
record receives a higher performance payout percentage for employees in 
the normal rate range.
    NNSA may adjust rating/share patterns over time after coordination 
with OPM and after giving affected employees advance notice. A change 
in the rating/share pattern may be applied in computing performance-
based pay adjustments based on an appraisal period only if it takes 
effect at least 120 days before the end of that appraisal period. 
Initially, the number of shares for each rating level will be as 
follows: 4 shares are assigned to a Significantly Exceeds Expectations 
summary rating when an employee receives SEE ratings in all critical 
elements; 3 shares are assigned when an employee receives a summary 
rating of SEE, but one or more critical elements are rated at FME; 2 
shares are assigned to an FME summary rating when one or more critical 
elements are rated at SEE; and 1 share is assigned to an FME summary 
rating when no critical element is rated below FME. Employees who 
receive a final summary rating of FME with one critical element rated 
at the NI level are not eligible for any shares from the performance 
pay pool.
    No shares may be assigned to any rating of record below Fully Meets 
Expectations, since no pay increase is payable to employees with such a 
rating of record. After the ratings of record and shares are assigned 
to employees, the value of a single share can be calculated.
    In addition to performance-based pay increases, demonstration 
project employees remain eligible to receive both monetary and non-
monetary forms of recognition, so long as employees are not rewarded 
twice for the same contributions using incentive awards authorities 
under chapter 45 of title 5. Additionally, supervisors may receive 
supervisory bonuses, as referenced in section III.D. of this plan. NNSA 
will adopt supplemental award administration policies not specifically 
covered by this plan.
3. Performance Payout
    In general: NNSA will determine the value of one performance share, 
expressed as a percentage of the employee's rate of basic pay, based on 
the value of the pay pool and the distribution of shares among pay pool 
employees. An individual employee's performance payout is determined by 
multiplying the determined percentage value of a performance share by 
the number of shares assigned to the employee. The performance payout 
is computed as a percentage of the employee's rate of base pay as in 
effect on the date determined in NNSA policies. On the first day of the 
last full pay period in each calendar year, this amount must be paid as 
an increase in the employee's rate of basic pay, but only to the extent 
that it does not cause the employee's rate to exceed the maximum rate 
of the employee's rate range. Notwithstanding the preceding sentence, 
employees in the upper band extension rated below the highest rating 
level are subject to special rules as described in section III.A.6 and 
III.A.10. Any portion of an employee's performance payout amount that 
cannot be delivered as a basic pay increase will be paid out as a lump 
sum (with no charge to the pay pool). Such a lump-sum payment is not 
basic pay for any purpose and is not a cash award under chapter 45 of 
title 5, United States Code.
    An employee who does not have a rating of record for the appraisal 
period most recently completed will be treated the same as employees in 
the same pay pool who received the modal rating for that period, 
subject to NNSA proration policies.
    NNSA may establish policies on prorating the performance pay 
increases and/or lump-sum payments for an employee who, during the 
period between annual pay adjustments, was (1) hired or promoted, (2) 
in leave-without-pay status, (3) on a part-time work schedule, or (4) 
in other circumstances that make proration appropriate. Those policies 
may establish a minimum employment period as a condition to receive any 
amount of a performance payout.
    If an employee's rating of record that is the basis for a 
performance payout is retroactively revised (after the regular 
effective date of performance payouts) through the reconsideration 
process, the employee's performance payout must be retroactively 
recomputed using the share value as originally determined. This also 
applies to the retroactive correction of a critical element previously 
rated as Needs Improvement, when that element rating resulted in zero 
shares being given to an employee with a Fully Meets Expectations 
rating of record. Any such retroactive corrections are not funded out 
of the pay pool and do not affect the performance payouts provided to 
other employees in the pay pool. In setting the size of a future pay 
pool, management will take into account past and projected corrections.
    Special provisions for employees returning to duty after a period 
of service in the uniformed services or in receipt of workers' 
compensation benefits: Special pay-setting provisions apply to 
employees who do not have a rating of record to support a pay

[[Page 72796]]

adjustment but who are returning to duty status after a period of leave 
without pay or separation during which the employee (1) was serving in 
the uniformed services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102) 
with legal restoration rights (e.g., 38 U.S.C. 4316), or (2) was 
receiving workers' compensation benefits under 5 U.S.C. chapter 81, 
subchapter I. In these cases, NNSA will determine the employee's 
prospective rate of basic pay upon return to duty by making performance 
pay adjustments for the intervening period based on the modal rating of 
record for employees in the same pay pool. The performance pay 
increases during the intervening period may not be prorated based on 
periods covered by this provision. In addition, a performance pay 
increase that is effective after the employee's return to duty may not 
be prorated based on periods covered by this provision. A lump-sum 
payment for a period including actual service performed after the 
employee's return to duty must be prorated (based on service covered by 
this provision) under the same agency proration policies that apply 
generally to periods of leave without pay.
    Special provisions for employees receiving a retained rate: An 
employee receiving a retained rate under 5 U.S.C. 5363 or 5 U.S.C. 3594 
is not eligible for a basic pay increase except in conjunction with a 
rate range adjustment, as described in section III.A.10. At the 
discretion of the Administrator or the Administrator's designee, a 
retained rate employee may receive the same lump-sum payment approved 
for an employee in the same pay pool who is at the applicable range 
maximum and who has the same performance rating of record and number of 
shares.
4. Employees Who Cannot Receive a Performance Pay Increase
    Employees with a rating of record at Fully Meets Expectations with 
one or more elements rated at the Needs Improvement level are 
prohibited from receiving a performance payout. Employees with a rating 
of record below Fully Meets Expectations are prohibited from receiving 
a performance payout or general pay adjustment. When an employee's pay 
is frozen because of performance below Fully Meets Expectations, his or 
her pay rate may fall below the normal minimum rate of the pay band, 
since that range minimum may be increasing. However, in no case may an 
employee's rate of basic pay be reduced more than 5 percent below the 
normal range minimum. Details on adjusting the basic rate of pay to 
stay within the 5 percent extended minimum rate range can be found in 
III.A.10.
    If NNSA later chooses to give such an employee a new rating of 
record of Fully Meets Expectations before the end of the next appraisal 
period, as a result of the successful completion of a formal 
improvement plan, the employee is entitled to the same percentage of 
basic pay as the percentage that would have applied if the employee had 
been rated FME at the time the general pay adjustment was denied. This 
provision only applies to the annual general pay adjustment and is not 
retroactive. Under no circumstances is an employee eligible for a 
performance payout based on share distribution until the next appraisal 
period closes.

D. Supervisory Bonuses

    NNSA may provide supervisors with annual supervisory bonuses. A 
supervisory bonus may not exceed 5 percent of the employee's rate of 
basic pay. A supervisory bonus is not basic pay for any purpose, nor 
may it be used in computing a lump-sum annual leave payment under 5 
U.S.C. 5551-5552. A supervisory bonus is not an award under 5 U.S.C. 
chapter 45; it is a special lump-sum payment established under the 
demonstration project authority. Bonus expenditures will be funded 
through other NNSA funding sources. NNSA may establish supplementary 
policies and procedures to implement these bonuses, subject to OPM 
guidance.

E. Reduction-in-Force

    1. If, during the life of the demonstration project, NNSA enters 
into a reduction-in-force (RIF), the RIF will be conducted in 
accordance with 5 U.S.C. 1302, 3502, and 3508 and 5 CFR part 351, 
except as follows:
    (a) Each of the five career paths in each NNSA local commuting area 
will constitute separate competitive areas (i.e., separate from the 
other career paths, and separate from the competitive areas of other 
NNSA employees);
    (b) NNSA will establish competitive levels consisting of all 
positions in a competitive area which are in the same pay band and 
classification series, and which are similar enough in duties, 
qualification requirements, pay schedules, and working conditions so 
that the incumbent of one position may be reassigned to any of the 
other positions in the level without undue interruption. Each 
demonstration project competitive level will become a Retention List 
for purposes of competition when employees are released from their 
competitive levels, displaced by higher-standing employees, or placed 
during the exercise of assignment rights.
    (c) Assignment rights will be modified by substituting ``one pay 
band'' for ``three grades'' and ``two pay bands'' for ``five grades.''
    (d) NNSA will use retention standing when it chooses to offer 
vacant positions within the meaning of 5 CFR 351.704.
    2. Prior to conducting a RIF, NNSA will issue and implement a 
policy for the establishment and operation of an agency-level 
reemployment priority list (RPL) designed to assist current NNSA 
competitive service demonstration project employees who will be 
separated as a result of a RIF and, subsequently, former NNSA 
competitive service demonstration project employees who have been 
separated as a result of a RIF, or who have fully recovered from a 
compensable injury after more than one year, in their efforts to be 
reemployed at NNSA, by affording them priority consideration over 
certain outside job applicants for NNSA competitive service 
demonstration project vacancies.
    NNSA will develop and adopt supplemental RIF administration 
procedures to augment the RIF policies stipulated by this plan.

IV. Training

    As NNSA has learned during the past three years of implementing and 
refining a new performance management program, training for all 
involved will be essential to the success of the demonstration project. 
Training will be provided to employees, supervisors, and managers 
before the project is launched and throughout the life of the project. 
It is important that employees perceive the performance management 
program as fair and transparent; therefore, supervisors and managers 
will be trained extensively in setting and communicating performance 
expectations; monitoring performance and providing timely feedback; 
developing employee performance and addressing poor performance; rating 
employees' performance based on expectations; and involving employees 
in the development and implementation of the performance appraisal 
program. Supervisors and managers will be held accountable for the 
effective management of the performance of employees they supervise 
through performance expectations set for and appraisals made of their 
own performance in this regard.
    All employees will be trained in the performance appraisal process 
and the pay adjustment mechanism. Various types of training are being 
considered,

[[Page 72797]]

including videos, on-line tutorials, and train-the-trainer concepts.

V. Conversion

A. Conversion to the Demonstration Project

    1. Employees whose positions become covered by the demonstration 
project will convert into the career path and pay band covering the 
occupational series and grade of their position of record. Employees 
will convert to the demonstration project with no change in their total 
rate of pay (including basic pay, plus any applicable locality payment, 
special rate supplement, or staffing supplement). Special conversion 
rules apply to special rate employees as described in section III.A.10, 
Staffing Supplements. Any simultaneous pay action that is scheduled to 
take effect under the GS pay system on the date of conversion must be 
processed before processing the conversion to the pay banding system. 
NNSA implementing policies will provide procedures for converting an 
employee on grade retention under 5 U.S.C. 5362 or receiving a retained 
rate under 5 U.S.C. 5363 or a saved rate under 5 U.S.C. 3594 to the 
demonstration project.
    2. Immediately after conversion, eligible employees will receive an 
increase in basic pay reflecting the prorated value of the next 
scheduled within-grade increase (WGI). The prorated value is determined 
by calculating the portion of the time-in-step employees have completed 
towards the waiting period for their next WGI. This WGI ``buy-in'' 
adjustment will not be paid to (1) employees who are at the step 10 
rate for their grade immediately before conversion to the demonstration 
project, (2) employees who are receiving a retained rate of pay under 5 
U.S.C. 5363 or saved rate under 5 U.S.C. 3594 immediately before 
conversion to the demonstration project, or (3) employees whose rating 
of record is below Fully Meets Expectations.
    3. Adverse action provisions under 5 U.S.C. chapter 75, subchapter 
II, do not apply to reductions in pay upon conversion into the 
demonstration project as long as the employee's total rate of pay 
(including basic pay, plus any applicable locality payment, special 
rate supplement, or staffing supplement) is not reduced upon 
conversion.
    4. The first performance-based pay increase under the project's pay 
adjustment mechanism will be effective on the first day of the last 
full pay period in calendar year 2008.
    5. For employees who enter the demonstration project by lateral 
reassignment or transfer (i.e., not by conversion of position), NNSA 
may apply parallel pay conversion rules, including rules for providing 
a prorated adjustment reflecting time accrued toward a GS within-grade 
increase or similar within-range adjustment under another pay system. 
If conversion into the demonstration project is accompanied by a 
geographic move, the employee's pay entitlements under the former pay 
system in the new geographic area must be determined before performing 
the pay conversion.

B. Conversion to the General Schedule System

    NNSA implementing policies will provide procedures for converting 
an employee's pay band and pay rate to a GS-equivalent grade and rate 
of pay if the employee moves out of the demonstration project to a GS 
position. The converted GS-equivalent grade and rate of pay will be 
determined before any geographic move, promotion, or other simultaneous 
action that occurs simultaneously with conversion back to the GS 
system. The new employing organization must use the converted GS-
equivalent grade and rate of pay in applying various pay administration 
rules that govern how pay is set in the GS position (e.g., rules for 
promotion and highest previous rate under 5 CFR part 531, subpart B, 
and pay retention under 5 CFR part 536). The converted GS grade and 
rate of pay are deemed to have been in effect at the time the employee 
left the demonstration project pay banding system. The rules for 
determining the converted GS grade for pay administration purposes do 
not apply to the determination of an employee's GS-equivalent grade for 
other purposes, such as reduction-in-force or adverse action. NNSA will 
perform the computations for employees who remain within NNSA and DOE. 
NNSA may perform the computations, as a courtesy, for employees who 
move to other Federal agencies. At a minimum, NNSA will provide a copy 
of the conversion procedures to gaining Federal agencies for their use. 
If an employee moves out of the demonstration project to a non-GS 
system, the employee's pay will be set under the pay-setting rules 
governing that system.

VI. Project Duration

    The initial implementation period for the demonstration project 
will be 5 years. However, with OPM's concurrence, the project may be 
extended for additional testing or terminated before the expiration of 
the 5-year period.

VII. Project Modification

    Demonstration projects require modification from time to time as 
experience is gained, results are analyzed, and conclusions are reached 
on how the system is working. NNSA may modify and adjust over time 
features and elements of this project plan. NNSA will coordinate such 
modifications with OPM and gain its approval prior to implementing the 
modification. Depending on the nature and extent of the modification, 
OPM may require that the modification be published as a notice in the 
Federal Register.

VIII. Project Evaluation

    Chapter 47 of title 5, United States Code, requires an evaluation 
of the results of the demonstration project. NNSA, in coordination with 
OPM, will develop a plan to evaluate the demonstration project to 
determine the extent to which the pay increases paid to participating 
employees reflect meaningful distinctions among their levels of 
performance and the extent to which the project is achieving its other 
stated goals. Workforce data will be analyzed to make this assessment 
and to determine whether the project is resulting in any adverse impact 
on particular groups of employees. Key indicators, including leadership 
commitment, communication, stakeholder involvement, training, planning, 
mission alignment, and the rewarding of performance, will be assessed 
to ensure compliance with stated project goals.
    To evaluate and assess this project, NNSA intends to use a new 
approach developed by OPM and piloted during OPM's 2007 assessments of 
the Department of Defense's and Department of Homeland Security's 
Alternative Personnel Systems (APSs). This new approach is entitled the 
``Alternative Personnel Systems Objectives-Based Assessment 
Framework.'' Because demonstration projects are APSs, this Framework 
will be applicable.
    The Assessment Framework is an evaluation structure for determining 
the extent to which an agency is adequately preparing for and 
progressing on the goals and objectives of its APS. It describes 
assessment components, dimensions, elements, and indicators that may be 
adapted to address the project's specific requirements. The Framework 
complements the approach used in previous demonstration projects where 
the evaluation assessed both the implementation and impact of specific 
interventions and determined whether

[[Page 72798]]

these interventions were effective and likely to be beneficial 
Governmentwide. It uses a standard approach that assesses project 
implementation and the extent to which personnel system changes are 
meeting their intended objectives. The Assessment Framework allows 
stakeholders, including OPM, to draw conclusions about the success of 
the project. It includes a set of qualitative and quantitative 
standards which, based on past experience in both the public and 
private sectors, and input from key stakeholders in both OPM and other 
agencies, are essential to successfully implementing significant human 
capital reforms.
    There are two major components to the Framework: Preparedness and 
Progress. The Preparedness component assesses an agency's readiness to 
implement a demonstration project. The Progress component assesses the 
extent to which the agency has achieved, or is in the process of 
achieving, the project's goals and objectives.
    Each of the components includes five dimensions or key attributes. 
The dimensions of the Preparedness component are Leadership Commitment, 
Open Communication, Training, Stakeholder Involvement, and 
Implementation Planning. Agencies that provide adequate emphasis and 
effort in the Preparedness dimensions are well positioned to 
successfully implement a demonstration project or other APS. The 
dimensions of the Progress component are Mission Alignment, Results-
Oriented Performance Culture, Workforce Quality, Equitable Treatment, 
and Implementation Plan Execution. Agencies that demonstrate Progress 
in achieving these broad goals are successfully implementing their APS.
    The following table depicts the Assessment Framework, including the 
dimensions (key attributes of the Preparedness and Progress components) 
and elements (specific features that define dimensions) for each 
component.

                APS Objectives-Based Assessment Framework
------------------------------------------------------------------------
               Dimension                             Element
------------------------------------------------------------------------
                              Preparedness
------------------------------------------------------------------------
LEADERSHIP COMMITMENT:
    Agency leaders are actively engaged  Engagement--The extent and
     in promoting and gaining workforce   sufficiency of senior leader
     acceptance of the program, as well   efforts to promote, provide
     as prioritizing program              information about, and gain
     implementation. Agency leaders       widespread acceptance of the
     provide appropriate resources for    APS across an agency workforce
     program implementation and are       via leadership outreach and
     held accountable for effective       communication programs.
     execution.                          Accountability--Agency leaders
                                          identify APS implementation as
                                          an agency priority, and are
                                          responsible for playing an
                                          active role in the design,
                                          development and/or
                                          implementation of the APS.
                                         Resources--Agency leaders
                                          ensure an agency has
                                          established an appropriate
                                          organizational framework with
                                          sufficient resources and
                                          authorities to effectively
                                          design, develop, and implement
                                          the APS.
                                         Governance--Agency leaders
                                          ensure a clear governance
                                          process is established for the
                                          APS program, including an
                                          effective mechanism for
                                          resolving conflicts and
                                          finalizing decisions, and this
                                          governance process is being
                                          used to address disagreements
                                          regarding APS design,
                                          development, and
                                          implementation issues.
OPEN COMMUNICATION:
    Agency provides accurate, up-to-     Information Access--Agencies
     date information on system           ensure comprehensive
     features and implementation plans.   information is available via a
     Active outreach efforts are          website accessible by all
     undertaken to provide information    employees regarding key APS
     to employees and to address          design features, training
     questions and concerns. Effective    materials, rollout schedules,
     mechanisms are in place for          and other APS issues.
     gathering and considering feedback. Outreach--Agencies conduct
                                          regular outreach sessions such
                                          as town meetings, webinars,
                                          electronic newsletters and
                                          other information channels
                                          that provide employees with up-
                                          to-date information on APS
                                          status and issues.
                                         Feedback--Agencies provide
                                          employees with an accessible
                                          mechanism for providing
                                          feedback on APS features and
                                          issues, and establish
                                          practical procedures for
                                          considering this feedback.
TRAINING:
    Agency developers and executes a     Planning--An agency establishes
     comprehensive training strategy      a comprehensive training
     for effective training on relevant   strategy that addresses the
     components of the program to users   full range of APS components,
     via a range of delivery methods.     tools, and roles.
                                         Delivery--An agency implements
                                          the training strategy to
                                          ensure all staff receive
                                          training appropriate for their
                                          role in the APS, with special
                                          emphasis on ensuring
                                          supervisors acquire the
                                          performance management
                                          competencies required to
                                          administer the APS
                                          effectively.
STAKEHOLDER INVOLVEMENT:
    Stakeholders are actively involved   Inclusion--Agencies engage a
     in the program design and            broad spectrum of key
     evaluation process and play a        stakeholder groups to capture
     supportive role in the               a wide range of perspectives
     implementation of the program.       regarding APS design features,
                                          and to foster buy-in and
                                          support for the APS across
                                          these stakeholder groups.

[[Page 72799]]

 
IMPLEMENTATION PLANNING:
    Agency establishes and implements a  Work Stream Planning and
     comprehensive planning process       Coordination--Agencies require
     that coordinates activities across   an effective planning process
     key work streams, such as HR         that identifies and defines
     business processes and procedures,   key work streams, highlights
     tools and technology                 critical dependencies,
     infrastructure, and change           provides for the management
     management, while providing          and mitigation of risk, and
     mechanisms for assessing status      facilitates regular
     and managing risk.                   assessments of status against
                                          key milestones.
                                         HR Business Processes and
                                          Procedures--Prior to rolling
                                          out an APS, an agency
                                          documents the business
                                          processes and procedures
                                          associated with all APS
                                          components, such as staffing,
                                          pay pool administration, and
                                          performance management.
                                         Tools and Technology
                                          Infrastructure--Agencies
                                          develop appropriate technology
                                          tools and infrastructure to
                                          enable administering the APS.
                                         Structured Approach--Agencies
                                          develop a comprehensive change
                                          management strategy that
                                          addresses managing the
                                          mechanisms for people side of
                                          change.
------------------------------------------------------------------------
                                Progress
------------------------------------------------------------------------
MISSION ALIGNMENT:
    The program effectively links        Line of Sight--The degree to
     individual, team, and unit           which employee performance
     performance to organizational        expectations are linked to
     goals and desired results.           agency mission.
                                         Accountability--Identifies not
                                          only whether or not the
                                          linkage is present in
                                          performance plans, but also
                                          whether or not employees are
                                          actually accountable for
                                          achieving them.
RESULTS-ORIENTED PERFORMANCE CULTURE:
    The program promotes a high          Differentiating Performance--
     performance workforce by             The extent to which
     differentiating between high and     performance ratings cover a
     low performers and rewarding         full distribution of likely
     employees on the basis of            levels, versus clustering at
     performance while effectively        the higher end of the scale.
     managing payroll costs.             Pay for Performance--The
                                          relationship between pay
                                          raises and awards/bonuses and
                                          performance rating levels.
                                         Cost Management--The extent to
                                          which reliable cost estimates
                                          are associated with decisions
                                          and the extent to which
                                          decision makers are
                                          accountable for cost
                                          management.
WORKFORCE QUALITY:
    Agency retains its high performers,  Recruitment--The extent to
     keeps employees satisfied and        which the agency can improve
     committed, attracts high-quality     its ability to recruit
     new hires, and transitions its low   employees with the appropriate
     performers out of the organization.  skills, based on the
                                          perceptions of supervisory
                                          employees.
                                         Flexibility--The agency's
                                          Progress in providing
                                          supervisors with the personnel
                                          flexibility needed to re-
                                          deploy their staff, and the
                                          extent to which this
                                          flexibility is used.
                                         Retention--The ability of an
                                          agency to use the tools
                                          provided by the APS to
                                          increase the rewards to high
                                          performers, thereby helping
                                          assure that they remain with
                                          the agency, and to provide
                                          appropriately lower rewards to
                                          lower performers such that
                                          they either improve their
                                          performance or decide to leave
                                          the agency.
                                         Satisfaction and Commitment--
                                          Based on the premise that an
                                          agency's mission performance
                                          is increased when its
                                          workforce is both committed
                                          and satisfied.
EQUITABLE TREATMENT:
    The program promotes an environment  Fairness--The objective is to
     of fairness and trust for            measure the impact of the APS
     employees, consistent with the       on the perceived fairness of
     Merit System Principles and free     agency-related practices.
     of Prohibited Personnel Practices.  Transparency--This element will
                                          assess whether pay for
                                          performance processes and
                                          procedures are available and
                                          understood by stakeholders.
                                         Trust--The literature and
                                          historical data suggest that
                                          employee trust is essential to
                                          success not only of the APS,
                                          but also an agency's overall
                                          effectiveness. This element
                                          will assess the impact of the
                                          APS on the level of trust
                                          employees have for their
                                          supervisors.
IMPLEMENTATION PLAN EXECUTION:
    Agency demonstrates Progress in      Work Stream Planning and
     implementing the program in          Status--This element will
     accordance with its comprehensive    assess the execution of the
     planning process.                    implementation process in
                                          accordance with the planning
                                          process, with attention to key
                                          work streams, critical
                                          dependencies, management and
                                          mitigation of risk, and
                                          regular assessment of status.
                                         Performance Management System
                                          Execution--This element will
                                          provide an assessment of the
                                          extent to which the
                                          performance management
                                          components of the APS are
                                          being as intended.
                                         Employee Support for APS--While
                                          not definitive as to the
                                          overall effectiveness of the
                                          APS, employee support is a
                                          strong indicator of
                                          implementation Progress and
                                          will be assessed.
------------------------------------------------------------------------


[[Page 72800]]

    In addition to dimensions and elements, NNSA's final Evaluation 
Plan, to be approved by OPM, will stipulate the indicators 
(characteristics used to measure or assess the agency's performance 
against the elements), the assessment criteria (standards by which the 
individual indicators are judged), and planned data sources to be used 
to evaluate the project. Assessment criteria will be used to assess 
indicators; indicators will be used to assess elements, and elements 
will be used to assess dimensions. An example of indicators, assessment 
criteria, and data sources is included in the table below:

                                                    Progress
----------------------------------------------------------------------------------------------------------------
                                                                              Assessment
            Dimension                   Element            Indicator           criteria          Data sources
----------------------------------------------------------------------------------------------------------------
Results-Oriented Performance      Pay for             Extent to which     Following program   Payout matrices,
 Culture.                          Performance.        pay/bonuses are     implementation,     salaries,
                                                       linked to           there is a high     bonuses, and
                                                       performance         association         performance
                                                       (e.g., mean pay     between             ratings from
                                                       increases and       performance         workforce data.
                                                       bonuses by          ratings and
                                                       performance level/  salary increases
                                                       band).              (allowing for pay
                                                                           band limits).
                                                                          Following program
                                                                           implementation,
                                                                           there is a high
                                                                           association
                                                                           between
                                                                           performance
                                                                           ratings and
                                                                           bonuses.
                                                      Perception of       Continuing          Employee Survey.
                                                       association         improvement over   Awards/pay raises
                                                       between             baseline/prior      in my work unit
                                                       performance         year's work.        depend on how
                                                       rating and                              well employees
                                                       financial reward.                       perform their
                                                                                               jobs.
----------------------------------------------------------------------------------------------------------------

    The evaluation process will be conducted in two main phases over a 
5-year period--formative and summative evaluation. The formative 
evaluation phase will include baseline data collection (i.e., 
collecting ``current state'' measures prior to the implementation of 
the project) and analyses, implementation and progress evaluation, and 
interim assessments. The formal reports and interim assessments will 
provide information on the project implementation and operation, as 
well as current information on the impact of the project on veterans 
and EEO groups, Merit System Principles, and Prohibited Personnel 
Practices. The summative evaluation will focus on an overall assessment 
of the demonstration project outcomes after five years. The final 
report will provide information on how well the interventions achieved 
the desired goals and will provide recommendations on broader Federal 
Government application.
    The project will be examined during each phase of the evaluation to 
assess that costs are being managed effectively. Moreover, cost 
discipline will be examined during each phase of the evaluation to 
ensure spending remains within acceptable limits. The evaluation will 
also address the extent to which the project has incorporated the 
elements required by section 1126 of Public Law 108-136 (5 U.S.C. 4701 
note) for pay-for-performance systems in demonstration projects: (1) 
Adherence to merit principles set forth in section 2301 of title 5; (2) 
a fair, credible, and transparent employee performance appraisal 
system; (3) a link between elements of the pay-for-performance system, 
the employee performance appraisal system, and the agency's strategic 
plan; (4) a means for ensuring employee involvement in the 
implementation and operation of the pay-for-performance system; (5) 
adequate training and retraining for supervisors, managers, and 
employees in the implementation and operation of the pay-for-
performance system; (6) a process for ensuring ongoing performance 
feedback and dialogue between supervisors, managers, and employees 
throughout the appraisal period, and setting timetables for review; (7) 
effective safeguards to ensure that the management of the system is 
fair and equitable and based on employee performance; and (8) a means 
of ensuring that adequate agency resources are allocated for the 
design, implementation, and administration of the pay-for-performance 
system.

IX. Costs

A. Buy-in Costs

    There will be added costs resulting from the within-grade increase 
``buy-in'' provision described in section V; however, those costs will 
be offset to some degree by the elimination of within-grade step 
increases that otherwise would have occurred.

B. Recurring Costs

    All funding will be provided through the organization's budget. No 
additional funding will be requested specifically for this project; all 
costs will be charged to available funds through existing 
appropriations, including those incurred in the areas of project 
development, training, and project evaluation.

X. Waiver of Laws and Regulations Required

A. Title 5, United States Code

    Chapter 35, section 3594: Saved pay for former members of the 
Senior Executive Service (only to the extent necessary to (1) bar 
employees with a rating of record lower than Fully Meets Expectations 
from receiving saved rate increases under 5 U.S.C. 3594(c)(2); (2) 
provide a saved rate that is less than the maximum rate (including any 
locality adjustment or staffing supplement) of the upper range 
extension for an employee who receives a rating of record of 
Significantly Exceeds Expectations will be terminated and converted to 
an equal adjusted rate; (3) provide the range maximum rate used to 
compute saved rate adjustments is the normal range maximum rate 
(including any locality adjustment or staffing supplement); and (4) 
provide when a frozen saved rate for an employee with a rating of 
record below Fully Meets Expectations falls below the applicable 
adjusted rate for the normal band maximum, the saved rate will be 
terminated and the employee's pay will be set at an adjusted rate equal 
to the saved rate).
    Chapter 51: Classification (except that (1) sections 5111 and 5112 
are retained with ``grade'' replaced by ``pay bands'' and (2) for the 
purpose of applying any other laws, regulations, or policies that refer 
to GS employees or to chapter 51

[[Page 72801]]

of title 5, United States Code, the modified classification system 
established under this plan must be considered to be a GS 
classification system under chapter 51; this includes, but is not 
limited to, the reference to the General Schedule in section 5545(d) 
(relating to hazard pay)).
    Chapter 53, section 5302(1)A, (8) and (9): Definitions (only to the 
extent necessary to provide that employees under the demonstration 
project are not considered to be GS employees for the purposes of 
annual adjustments under section 5303 or similar provisions of law 
governing annual adjustments for employees covered by section 5303).
    Chapter 53, section 5303: Annual adjustments to pay schedules.
    Chapter 53, section 5304: Locality-based comparability payments 
(only to the extent necessary to (1) provide a locality rate that may 
not exceed the rate for EX-IV plus 5 percent for employees in the upper 
range extension; (2) apply an ``effective'' locality pay percentage for 
employees in the upper range extension under circumstances described in 
the plan); and (3) allow a frozen locality pay percentage for employees 
with a rating of record below Fully Meets Expectations, as provided in 
the plan
    Chapter 53, section 5305: Special pay authority.
    Chapter 53, sections 5331-5336: General Schedule pay rates (except 
that, for purposes of applying any other laws, regulations, or policies 
that refer to GS employees or to subchapter III of chapter 53 of title 
5, United States, Code, the modified pay system established under this 
plan must be considered to be a GS pay system established under such 
subchapter III; this includes, but is not limited to, references to the 
General Schedule in section 5304 (relating to locality pay), section 
5545(d) (relating to hazard pay), and sections 5753-5754 (dealing with 
recruitment, relocation, and retention incentives)).
    Chapter 53, section 5362: Grade retention.
    Chapter 53, section 5363: Pay retention (only to the extent 
necessary to (1) replace ``grade'' with ``band;'' (2) bar employees 
with a rating of record lower than Fully Meets Expectations from 
receiving retained rate increases under 5 U.S.C. 5363(b)(2)(B); (3) 
provide that pay retention provisions do not apply to conversions into 
the demonstration project from the General Schedule or other pay 
system, as long as the employee's total pay rate is not reduced; (4) 
provide the pay (including any locality adjustment or staffing 
supplement) of an employee in the upper range extension who is rated 
below Significantly Exceeds Expectations will be converted to a 
retained rate before processing any other actions; (5) provide a 
retained rate that is less than the maximum rate (including any 
locality adjustment or staffing supplement) of the upper range 
extension for an employee who receives a rating of record of 
Significantly Exceeds Expectations will be terminated and converted to 
an equal adjusted rate; (6) provide the range maximum rate used to 
compute retained rate adjustments is the normal range maximum rate 
(including any locality adjustment or staffing supplement); (7) provide 
a retained rate under the enhanced pay retention provisions in section 
III.A.10. will be increased by 100 percent of the dollar amount of any 
increase in the normal maximum rate of the employee's band during the 
two-year period beginning on the date the employee's retained rate is 
established; and (8) provide when a retained rate for an employee with 
a rating of record below Fully Meets Expectations falls below the 
applicable adjusted rate for the normal band maximum, the retained rate 
will be terminated and the employee's pay will be set at an adjusted 
rate equal to the retained rate)
    Chapter 55, section 5542(a): Overtime rates (only to the extent 
necessary to provide that the GS-10 minimum special rate (if any) for 
the special rate category that would otherwise apply to an employee 
(but for the existence of the demonstration project) is deemed to be 
the ``applicable special rate of pay'' in determining the overtime 
hourly rate cap)
    Chapter 55, section 5547: Limitation on premium pay (only to the 
extent necessary to provide that an applicable staffing supplement is 
added to the GS-15, step 10, rate in lieu of the applicable locality 
payment)
    Chapter 75, section 7512(34): Adverse actions (only to the extent 
necessary to replace ``grade'' with ``band'')
    Chapter 75, section 7512(4): Adverse actions (only to the extent 
necessary to provide that adverse action provisions do not apply to 
conversions into the demonstration project from the General Schedule or 
other pay system, as long as the employee's total rate of pay is not 
reduced)

    Note: If any of the provisions of title 5, United States Code, 
listed above are amended during the period this demonstration 
project is in effect, NNSA may choose to terminate the waiver of one 
or more such provisions with respect to employees participating in 
the project, without formally modifying the project itself. NNSA 
must notify OPM when any such waiver is terminated.

B. Title 5, Code of Federal Regulations

    Part 210, subpart A, section 210.102(b)(12): Reassignment (only to 
the extent necessary to modify the definition of reassignment to 
include the movement of an NNSA demonstration project employee from one 
position to another position with a pay adjustment).
    Part 300, subpart F, section 300.604: Restrictions (only to the 
extent necessary to restrict advancement to a higher pay band to 
candidates who have completed a minimum of 52 weeks in positions no 
more than one pay band lower than the position to be filled)
    Part 330, subpart B, section 330.201: Establishment and maintenance 
of Reemployment Priority List (RPL) (only to the extent necessary to 
establish and maintain a reemployment priority list exclusively for 
NNSA competitive service demonstration project employees)
    Part 351, subpart D, section 351.402: Competitive area (only to the 
extent necessary to permit the use of career paths in conjunction with 
organizational units and geographic locations when establishing 
competitive areas)
    Part 351, subpart D, section 351.403: Competitive level (only to 
the extent necessary to substitute ``same pay band'' for ``same 
grade'')
    Part 351, subpart G, section 351.701: Assignment involving 
displacement (only to the extent necessary to substitute ``one pay 
band'' for ``three grades'' and ``two pay bands'' for ``five grades'')
    Part 359, subpart G, section 359.705: Pay (only to the extent 
necessary to (1) bar employees with a rating of record lower than Fully 
Meets Expectations from receiving a saved rate increase under 5 CFR 
359.705(d)(1); (2) provide a saved rate that is less than the maximum 
rate (including any locality adjustment or staffing supplement) of the 
upper range extension for an employee who receives a rating of record 
of Significantly Exceeds Expectations will be terminated and converted 
to an equal adjusted rate; (3) provide the range maximum rate used to 
compute saved rate adjustments is the normal range maximum rate 
(including any locality adjustment or staffing supplement); and (4) 
provide when a saved rate for an employee with a rating of record below 
Fully Meets Expectations falls below the applicable adjusted rate for 
the normal band maximum, the saved rate will be terminated and the 
employee's pay will be set at an adjusted rate equal to the saved rate)

[[Page 72802]]

    Part 430, subpart B, section 430.203: Definitions (only to the 
extent necessary to allow an additional rating of record to support a 
pay decision under section III.C.3 or 4 of this project plan)
    Part 511, subpart B: Coverage of the General Schedule
    Part 530, subpart C: Special Rate Schedules for Recruitment and 
Retention
    Part 531, subpart B: Determining Rate of Basic Pay
    Part 531, subpart D: Within-Grade Increases
    Part 531, subpart E: Quality Step Increases
    Part 531, section 531.604: Determining an employee's locality rate 
(only to the extent necessary to (1) allow a frozen locality pay 
percentage for employees with a rating of record below Fully Meets 
Expectations, as provided in the plan; and (2) apply an ``effective'' 
locality pay percentage for employees in the upper range extension 
under circumstances described in the plan)
    Part 531, section 531.606: Maximum limits on locality rates (only 
to the extent necessary to provide a locality rate may not exceed the 
rate for EX-IV plus 5 percent for employees in the upper range 
extension).
    Part 536, subpart B: Grade Retention
    Part 536, subpart C: Pay Retention (only to the extent necessary to 
(1) replace ``grade'' with ``band;'' (2) bar employees with a rating of 
record lower than Fully Meets Expectations from receiving retained rate 
increases under 5 CFR 536.305; (3) provide that pay retention 
provisions do not apply to conversions into the demonstration project 
from the General Schedule or other pay system, as long as the 
employee's total pay rate is not reduced); (4) provide that a retained 
rate may not exceed the rate for EX-IV plus 5 percent; (5) provide the 
pay (including any locality adjustment or staffing supplement) of an 
employee in the upper range extension who is rated below Significantly 
Exceeds Expectations will be converted to a retained rate before 
processing any other actions; (6) provide a retained rate that is less 
than the maximum rate (including any locality adjustment or staffing 
supplement) of the upper range extension for an employee who receives a 
rating of record of Significantly Exceeds Expectations will be 
terminated and converted to an equal adjusted rate; (7) provide the 
range maximum rate used to compute retained rate adjustments is the 
normal range maximum rate (including any locality adjustment or 
staffing supplement); (8) provide a retained rate under the enhanced 
pay retention provisions in section III.A.10. will be increased by 100 
percent of the dollar amount of any increase in the normal maximum rate 
of the employee's band during the two-year period beginning on the date 
the employee's retained rate is established; and (9) provide when a 
retained rate for an employee with a rating of record below Fully Meets 
Expectations falls below the applicable adjusted rate for the normal 
band maximum, the retained rate will be terminated and the employee's 
pay will be set at an adjusted rate equal to the retained rate).
    Part 550, sections 550.106-107: Biweekly and annual maximum 
earnings limitation (only to the extent necessary to provide that an 
applicable staffing supplement is added to the GS-15, step 10, rate in 
lieu of the applicable locality payment.
    Part 550, section 550.113(a): Computation of overtime pay (only to 
the extent necessary to provide that the GS-10 minimum special rate (if 
any) for the special rate category that would otherwise apply to an 
employee (but for the existence of the demonstration project) is deemed 
to be the ``applicable special rate of pay'' in determining the 
overtime hourly rate cap).
    Part 550, section 550.703: Definitions (to the extent necessary to 
modify paragraph (c)(4) of the definition of ``reasonable offer'' by 
replacing ``two grade or pay levels'' with ``one pay band level'' and 
``grade or pay level`` with ``pay band level'').
    Part 752, section 752.401(a)(3): Adverse actions (only to the 
extent necessary to replace ``grade'' with ``band'').
    Part 752, section 752.401(a)(4): Adverse actions (only to the 
extent necessary to provide that adverse action provisions do not apply 
to conversions into the demonstration project from the General Schedule 
or other pay system, as long as the employee's total rate of pay is not 
reduced.

    Note: If any of the provisions of title 5, Code of Federal 
Regulations, listed above are revised during the period this 
demonstration project is in effect, NNSA may choose to terminate the 
waiver of one or more such provisions with respect to employees 
participating in the project, without formally modifying the project 
itself. NNSA must notify OPM when any such waiver is terminated.

[FR Doc. 07-6144 Filed 12-20-07; 8:45 am]
BILLING CODE 6325-43-P