[Federal Register Volume 73, Number 91 (Friday, May 9, 2008)]
[Notices]
[Pages 26436-26451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-10440]


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OFFICE OF PERSONNEL MANAGEMENT


Proposed Personnel Demonstration Project; Alternative Personnel 
Management System for the U.S. Department of Agriculture, Food Safety 
and Inspection Service

AGENCY: U.S. Office of Personnel Management.

ACTION: Notice of a proposed demonstration project plan.

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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 result in 
improved Federal human resources management. The Food Safety and 
Inspection Service (FSIS), the United States Department of Agriculture 
(USDA), and OPM propose to test a results-based, competency-linked pay-
for-performance system that is combined with a simplified, pay banding 
classification and compensation system. Section 4703 of

[[Page 26437]]

title 5 requires OPM to publish the proposed project plan in the 
Federal Register. This notice fulfills that requirement.

DATES: To be considered, written comments must be submitted on or 
before June 9, 2008. A public hearing will be held on the proposed 
project plan on Thursday, June 26, 2008, and will begin at 10 a.m., 
Eastern Standard Time. The location of the hearing is: U.S. Department 
of Agriculture, South Building, 1400 Independence Avenue, SW., 
Washington, DC 20250. You must use the 7th wing entrance which is 
accessible from Independence Avenue.
    Public parking is limited, but the building is conveniently 
accessible to the ``Smithsonian'' Metro stations. The South Building is 
a secure facility. Members of the public must show a government-issued 
photo ID (e.g. State driver's license). Attendees will undergo 
electronic screening, and their personal belongings will be subject to 
a physical search. Personal items prohibited in the South Building 
include devices that can transmit and record, weapons (guns, knives, 
explosives, etc.), and alcohol. A member of the public possessing such 
items will be barred from entering, and such items are subject to 
confiscation. There will be a sign-in table set up in the lobby of the 
Jefferson Auditorium. A greeter and signs will direct attendees to the 
auditorium location.
    There will be a telephone call-in number for members of the public 
and agency who cannot attend in person. That number will be 888-790-
4330 (Passcode: Demonstration Project), and the line will be active 
from 10 a.m. Eastern Standard Time until the conclusion of the hearing.
    At the time of the hearing, interested persons or organizations may 
present their written or oral comments on the proposed demonstration 
project. The hearing will be informal. However, anyone wishing to 
testify should contact the person listed under FOR FURTHER INFORMATION 
CONTACT, so that FSIS, USDA, and OPM can plan the hearing and provide 
sufficient lead time for all interested persons and organizations to be 
heard. Priority will be given to those on the schedule, with others 
speaking in any remaining available time. Each speaker's presentation 
will be limited to five minutes. Written comments may be submitted to 
supplement oral testimony during the public comment period.

ADDRESSES: Comments may be mailed to Demonstration Projects, U.S. 
Office of Personnel Management, 1900 E Street, NW., Room 7677, 
Washington, DC 20415 or submitted by e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: (1) FSIS, Laurie Lindsay, Director, HR 
Demonstration Project Staff, (202) 720-7983, 1400 Independence Avenue, 
SW., Room 2134 South Building, Washington D.C, 20250; (2) Office of 
Personnel Management, Patsy Stevens, Systems Innovation Group Manager, 
(202) 606-1574, U.S. Office of Personnel Management, 1900 E Street, 
NW., Room 7456, Washington, DC 20415.

SUPPLEMENTARY INFORMATION: The goals of this demonstration project are 
to improve workforce performance and promote mission accomplishment by 
making employees' pay increases more performance-sensitive, so that 
only Fully Successful and higher performers will receive any pay 
adjustments and the best performers will receive the largest pay 
adjustments. This will produce such measurable outcomes as improving 
the quality of new hires, increasing the proportion of agency positions 
that remain filled, improving supervisors' and employees' commitment to 
a highly effective performance culture, retaining good performers, 
making line managers more responsible and accountable for human 
resources management, improving the effectiveness and efficiency of 
human resources systems, and closing human capital gaps for supervisory 
and mission-critical occupations (e.g., the gap between the number of 
employees required at each competency proficiency level to perform 
current and future missions and the number of existing employees at 
those levels).

Linda M. Springer,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Problems with the Present System
    C. Changes Required/Expected Benefits
    D. Participating Organizations
    E. Participating Employees
    F. Labor Participation
    G. 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. Delegation of Classification Authority
    4. Classification Appeals
    5. Elimination of Fixed Steps
    6. Rate Range
    7. Locality Pay
    8. Rate of Basic Pay Upon Initial Appointment
    9. Rate of Basic Pay Upon Promotion
    10. Rate of Basic Pay in Noncompetitive Lateral Actions
    11. Other Pay Administration Provisions
    12. Staffing Supplements
    13. Status as GS Employees
    B. Performance Appraisal System
    1. Program Requirements
    2. Supervisory Accountability
    3. Reconsideration of Ratings
    C. Performance-based Pay Increases and Awards
    1. Performance Shares
    2. Performance Pay Pools
    3. Performance-based Pay Increases
    4. Employees Who Cannot Receive a Performance Pay Increase
    5. Performance Awards
    D. Developmental Pay Increases
    E. Staffing
    1. Minimum Qualification Requirements
    2. Flexible Pay Setting for New Hires
    3. Promotions
    F. Reduction-in-Force
IV. Training
V. Conversion
    A. Conversion to the Demonstration Project
    B. Conversion to the General Schedule
VI. Project Modification
VII. Project Duration
VIII. Project Evaluation
IX. Costs
    A. Buy-in Costs
    B. Recurring Costs
X. Waiver of Laws and Regulations Required

I. Executive Summary

    This project was designed by the United States Department of 
Agriculture (USDA), including the Food Safety and Inspection Service 
(FSIS), with participation of and review by the U.S. Office of 
Personnel Management (OPM). The demonstration project will pursue 
several key objectives: to simplify the current classification system 
for greater flexibility in classifying work and paying employees; to 
reaffirm the performance management and rewards system for improving 
individual and organizational performance; to assure that the 
allocation of annual pay increases reflects distinctions in levels of 
performance in a meaningful way; and to test the effectiveness of 
multi-grade pay bands in recruiting, advancing and retaining employees. 
The duration of the project will be 5 years, except that the project 
may be extended by OPM if further testing and evaluation are warranted.
    The proposed project will test whether a results-based, competency-
linked pay-for-performance system can be successful in USDA. Previous 
alternative pay systems that used competency models (e.g., the 
Government Accountability Office (GAO) compensation system and the 
Department of Defense (DOD) Acquisition Workforce Demonstration 
Project) did not focus on missions or occupations related to public 
health or food defense. Moreover, the workforce covered by the proposed 
demonstration project is predominantly supervisory (about 40%), and it 
is important to

[[Page 26438]]

establish effective pay-for-performance policies and procedures for 
supervisory positions before extending such systems to large numbers of 
line worker positions throughout the Federal Government. Finally, a 
substantial number of the covered employees (approximately 30 percent) 
have working conditions that are dramatically different from other 
white-collar workers (e.g., shift-oriented work in slaughter or meat 
processing facilities), including the requirement for substantial 
amounts of regularly-scheduled and intermittent overtime.

II. Introduction

A. Purpose

    The purpose of the proposed project is to strengthen the 
contribution of human resources management in helping to achieve the 
missions of the specific program areas of FSIS. The proposed project 
will test whether a results-based, competency-linked, pay-for-
performance system and related innovations will produce successful 
results in a public health regulatory environment with distinct working 
conditions and an ever-present concern for food defense and security.

B. Problems with the Present System

    The USDA Strategic Human Capital Plan and the President's 
Management Agenda require FSIS to manage human capital in the 21st 
century very aggressively. FSIS must achieve comprehensive human 
capital goals for strategic workforce planning, learning and workforce 
development, recruitment and retention, and evolution of a highly 
effective performance culture.
    The FSIS Strategic Plan calls for continued transformation of the 
existing workforce, which was recruited and trained during a time when 
food safety was considered a conventional inspection program governed 
by legislation such as the Federal Meat Inspection Act of 1906, the 
Poultry Products Inspection Act of 1957, the Wholesome Meat Act of 
1967, the Wholesome Poultry Products Inspection Act of 1968, and the 
Egg Products Inspection Act of 1970. This legislation was enacted when 
food industry practices were characterized by carcass-by-carcass 
organoleptic inspection. To carry out its public health regulatory 
missions today, FSIS must assure science-based development and 
execution of policy and must also emphasize risk-oriented assessment, 
planning, analysis, inspection, and management activities. Also, FSIS 
must recruit, develop, retain, and accomplish life-cycle management for 
a workforce that is educated and skilled in public health, food 
defense, food safety, public education, and emergency-response systems, 
programs, practices, and technologies. In addition to inspecting 
poultry and meat animals, poultry and meat products, and egg products, 
FSIS must accomplish a growing list of advanced public health functions 
to include conducting risk assessments to identify and evaluate the 
potential human health outcomes from the consumption of meat, poultry, 
and egg products.
    At best, the personnel system that currently covers USDA and FSIS 
employees is based on 20th century assumptions about the nature of 
public service. Although the current Federal personnel management 
system is based on important core principles, those principles operate 
in an inflexible, one-size-fits-all system of defining work, hiring 
staff, managing people, assessing and rewarding performance, and 
advancing personnel. These inherent weaknesses make support of the FSIS 
mission complex, costly, and, ultimately, risky from the standpoint of 
public health. Currently, pay and the movement of personnel are pegged 
to outdated, narrowly-defined work definitions, hiring processes are 
cumbersome, and high performers and low performers are generally paid 
alike. These systemic inefficiencies detract from the potential 
effectiveness of the public health workforce.
    The challenges facing USDA and FSIS today to assure and improve the 
public health from farm to table require a workforce transformation. 
FSIS employees are being asked to assume new and different 
responsibilities, take more initiative, and be more innovative, agile, 
and accountable than ever before. It is critical that USDA and FSIS 
support the entire public health workforce with modern systems, 
particularly a human resources management system that supports and 
protects their critical role in public health, food safety, and food 
security.

C. Changes Required/Expected Benefits

    The innovations of the project and their objectives are summarized 
below.
1. Pay Banding and Classification
    Occupational groups will be placed in appropriate career paths, pay 
bands will replace grades, and agency pay band standards will replace 
OPM position classification standards. The classification system will 
be automated as much as possible through intranet-based classification 
tools, and authority will be delegated to line managers (at least one 
level below the Deputy Assistant Administrator level).
    These changes are intended to simplify and speed up the 
classification process, make the process more serviceable and 
understandable, improve the effectiveness of classification decision-
making and accountability, and facilitate pay for performance.
    Pay bands, which generally correspond to multiple grade levels, 
provide larger classification targets that can be defined by shorter, 
simpler, and more understandable classification standards. This simpler 
system will be easier to automate, will require fewer resources to 
operate, and will facilitate delegation to line managers.
    By providing broader and more flexible pay ranges for setting entry 
pay, pay banding will provide hiring officials with an important tool 
for attracting high-quality candidates and thus contribute to the 
objective of increasing the quality of new hires.
    By providing more flexible pay progression based on performance, 
pay banding will give managers the ability to increase the pay of good 
performers to higher and more competitive levels, thus improving the 
retention of good performers. At the same time, the potential for 
higher pay increases for good performance, supported by the broader pay 
ranges of a pay banding system, will contribute to the objective of 
improving organizational and individual performance.
2. Staffing
    Additional staffing tools will include such elements as flexible 
entry salaries, staffing supplements for employees in the applicable 
special rate categories, developmental pay increases, and more flexible 
pay increases associated with promotion.
    These changes are intended to attract high-quality candidates and 
increase the retention of good performers. Flexible pay-setting for new 
hires is a recruiting tool that gives hiring officials greater 
flexibility to offer more competitive salaries to high-quality 
candidates, addressing the objective of improving the quality of new 
hires. This will be used in conjunction with existing recruitment and 
retention incentives under title 5.
3. Pay
    The most important change in pay administration is the introduction 
of a pay-for-performance system. The pay-for-performance system will 
support several objectives. It will strengthen the organization's 
performance culture. It will promote fairness through the

[[Page 26439]]

results-based, competency-linked, performance rating process. It will 
provide a motivational tool as well as a retention tool. As a 
motivational tool, the promise of higher pay increases for good 
performance encourages high achievement. As a retention tool, a pay-
for-performance system allows the organization to quickly move the 
salaries of good performers to levels that are more competitive in the 
labor market. The promise of higher pay increases for good performance 
will encourage achievement and promote the objective of improved 
individual and organizational performance.
    Under the proposed pay-for-performance system, employee performance 
ratings will govern individual pay progression within pay bands. Any 
general increase in GS rates of basic pay approved by Congress and the 
President will be applied only to the FSIS band ranges (i.e., band 
minimums and maximums). Demonstration project employees will receive 
pay increases based on their rating of record. Funds currently applied 
to within-grade increases, quality step increases, and the annual GS 
pay adjustment will be used to grant these performance-based pay 
increases. Employees rated below Fully Successful will not receive any 
basic pay increase, nor will they receive pay increases when locality 
pay percentages are increased. (See section III.C.)
    In addition, employees in developmental positions may receive 
additional pay increases. Funds used for career ladder promotions from 
one grade to a higher grade will initially be used to fund these 
developmental pay increases. These pay increases may be granted to an 
employee to recognize the faster progression that can occur in a 
developmental position. This pay flexibility addresses the objective of 
improving retention by raising the pay of high-performing employees 
while also supporting the objective of preserving merit system 
principles (e.g., equal pay for work of equal value). (See section 
III.D.)
4. Performance Appraisal
    The demonstration project will continue to use the current FSIS 
appraisal program including the current five-level rating process, 
which incorporates competencies into the performance standards. (The 
five-level rating system has the following levels: 1--Unacceptable, 2--
Marginal, 3--Fully Successful, 4--Superior, and 5--Outstanding.) The 
performance appraisal process is intended to (1) promote good 
performance; (2) encourage a continuing dialogue between supervisors 
and employees on organizational objectives, supervisory expectations, 
employee performance, employee needs for assistance and guidance, and 
employee development; and (3) provide a basis for performance-related 
decisions in employee development, pay, rewards, assignment, promotion, 
and retention. The program will more effectively communicate to 
employees how they are performing, the rewards of good performance, and 
the consequences of poor performance.
5. Pay for Performance
    The most important feature of the demonstration project is that it 
links the employee's rating of record to shares of a performance pay 
pool. Performance-based pay increases give an operating unit the 
ability to raise the pay of good performers more rapidly, thus 
improving retention of good performers. Performance pay is distributed 
to employees either in the form of increases in base pay or, when the 
employee reaches a band maximum (or is on retained pay), in the form of 
a performance bonus. The number and type of performance pay pools will 
be described in implementing guidance, but performance ratings will be 
linked to performance pay shares so that employees who earn a level 
five rating (the highest) will earn the greatest number of performance 
pay shares, employees who earn a level four rating will earn a smaller 
number of shares, and employees who earn a level three rating will earn 
the fewest number of performance shares. Employees rated below level 
three will not be eligible for performance pay increases.
6. Performance Awards
    Existing programs for both non-monetary and monetary recognition 
will remain under the plan in accordance with chapter 45 of title 5, 
United States Code.
    Awards address two objectives. First, rewarding achievement will 
make high achievers more likely to remain, thus improving retention of 
the best performers. Second, the potential for awards for achievement 
will encourage improved individual performance. Although FSIS is not 
testing any new procedures under the demonstration project authority in 
chapter 47 of title 5, awards are a key part of a performance pay 
system and therefore noted here to clarify their use and provide a full 
picture of the project plan.
7. Line Management Authority
    The program areas will delegate greater authority and 
accountability to line managers. This delegation is intended to improve 
the effectiveness of human resources management by strengthening the 
role of line managers as the human resources managers of their units. 
The project will be managed by the FSIS Demonstration Project 
Management Board (DPMB), composed of representatives from each 
operating unit (program area) and chaired by the Assistant 
Administrator for the Office of Management.

D. Participating Organizations

    The Department proposes that FSIS be the only agency participating 
in this project. The Department and FSIS have determined that employees 
in all program areas in the agency, including headquarters and field 
employees, will participate, except that all bargaining-unit members 
will be excluded. Including all bargaining unit members would cause the 
project to exceed the 5,000 limit on the number of participating 
employees. Included in the project are all non bargaining-unit 
employees located in meat and poultry plants throughout the United 
States (excluding intermittent food inspection personnel (GS-1863) 
appointed under Schedule A 213.3113(1)(3) and Schedule C employees), 15 
District Offices, 3 Field Laboratories, a Technical Service Center in 
Omaha NE, a Financial Processing Center in Des Moines IA, a Human 
Resources Field Office in Minneapolis MN, as well as all Headquarters 
program offices. Each of these units is committed to operating a 
credible, robust performance appraisal program aligned to the 
organization's strategic goals and objectives. These organizations have 
demonstrated this commitment the past two years, as FSIS implemented a 
comprehensive performance management training program within the 
agency.

E. Participating Employees

    The demonstration project covers all General Schedule employees 
(with pay plan codes GS and GM) in non-bargaining unit positions. The 
excluded bargaining unit positions are nonsupervisory positions in the 
food technology (GS-1382), food inspection (GS-1863), and consumer 
safety inspection (GS-1862) series and non-bargaining food inspection 
(GS-1863) employees appointed under Schedule A 213.3113(1)(3).
    Also excluded from coverage of this project are all Senior 
Executive Service (SES), Senior Level (SL), and Federal Wage System 
(WG) employees, and all Schedule C employees.
    Table 1 shows the number of employees subject to coverage under 
this project by occupational series and

[[Page 26440]]

grade. The OPM occupational series will be retained for all covered 
positions.

                                                                Table 1.--Covered Employees, by Series and Grade (as of 01/08/08)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                             Series                                  1       2       3       4       5       6       7       8       9      10      11      12      13      14      15     Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0018............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       4       1  ......  ......       5
0080............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1
0099............................................................  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1
0101............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1
0110............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       4  ......       5
0199............................................................  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1
0201............................................................  ......  ......  ......  ......  ......  ......  ......  ......      10  ......       4      26      41      21       4     106
0203............................................................  ......  ......  ......  ......       6       5      17  ......  ......  ......  ......  ......  ......  ......  ......      28
0260............................................................  ......  ......  ......  ......  ......  ......  ......  ......       3  ......       1       1       8       4       1      18
0299............................................................  ......  ......  ......  ......  ......  ......       1  ......       2  ......  ......  ......  ......  ......  ......       3
0301............................................................  ......  ......  ......  ......  ......  ......       1  ......      46       1       1      23      20      19      11     122
0303............................................................       3  ......       3      14       9       4      12  ......       1  ......  ......  ......  ......  ......  ......      46
0305............................................................  ......  ......       1       5       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       7
0318............................................................  ......  ......  ......  ......       4      16      37       8       4  ......  ......  ......  ......  ......  ......      69
0326............................................................  ......       1  ......      14  ......       9  ......  ......  ......  ......  ......  ......  ......  ......  ......      24
0335............................................................  ......  ......  ......       1  ......       5       1  ......  ......  ......  ......  ......  ......  ......  ......       7
0340............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......      35      28      63
0341............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......  ......       2
0342............................................................  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......  ......       1       1  ......       3
0343............................................................  ......  ......  ......  ......  ......  ......       1  ......      16  ......      15      34      52      32      14     164
0344............................................................  ......  ......  ......  ......       1       4      35  ......  ......  ......  ......  ......  ......  ......  ......      40
0361............................................................  ......  ......  ......  ......  ......  ......       1  ......  ......       1  ......  ......  ......  ......  ......       2
0391............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1  ......  ......       2
0399............................................................  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1
0401............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       4       1       2       7
0403............................................................  ......  ......  ......  ......  ......  ......  ......  ......       6  ......       2      30      35      16       2      91
0404............................................................  ......  ......       5       2       1       1       8  ......      11  ......       2  ......  ......  ......  ......      30
0414............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......  ......       1
0415............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2       1  ......       3
0499............................................................  ......       1       1       1       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       4
0501............................................................  ......  ......  ......  ......  ......  ......       2  ......       5  ......       4       2       6       6       3      28
0503............................................................  ......  ......  ......       2      22       6       5       3  ......  ......  ......  ......  ......  ......  ......      38
0510............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       8      10       3  ......      21
0544............................................................  ......  ......  ......  ......  ......  ......       3  ......  ......  ......  ......  ......  ......  ......  ......       3
0560............................................................  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......       5       3       3       1      13
0561............................................................  ......  ......  ......  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......       1
0599............................................................  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1
0601............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       6       6       1      13
0602............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1
0690............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1  ......  ......       2
0696............................................................  ......  ......  ......  ......  ......  ......       2  ......       3  ......      14     161      83       2  ......     265
0699............................................................  ......  ......  ......       2  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2
0701............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......      74     678     184      25       6     967
0799............................................................  ......  ......  ......  ......  ......  ......      19  ......  ......  ......       1  ......  ......  ......  ......      20
0896............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1  ......       2
1035............................................................  ......  ......  ......  ......  ......  ......       1  ......       1  ......       3       5       7       1  ......      18
1071............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2  ......  ......  ......  ......       2
1084............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......  ......  ......       1
1101............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       3       1       1       5
1102............................................................  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......       3       3       2  ......       9
1301............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2       2  ......       4
1311............................................................  ......  ......  ......       1       1       1  ......  ......       6  ......       2  ......  ......  ......  ......      11
1320............................................................  ......  ......  ......  ......  ......  ......  ......  ......       2  ......       5      33      20       6  ......      66
1382............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       8       3  ......      11
1412............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       7       1       1  ......      10
1501............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       3       2  ......       5
1515............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1  ......  ......       2
1529............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2       1  ......       3
1654............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1       1  ......  ......       3
1701............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......       1
1702............................................................  ......  ......  ......  ......  ......       1  ......       1  ......  ......  ......  ......  ......  ......  ......       2
1801............................................................  ......  ......  ......  ......  ......  ......       1  ......       1  ......      41      71      30      16       2     162
1810............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       6       2       1  ......       9
1862............................................................  ......  ......  ......  ......  ......  ......  ......      15     115  ......  ......  ......  ......  ......  ......     130
1863............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       4  ......  ......       5
1899............................................................  ......  ......  ......       1       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       2
2001............................................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       3  ......       2  ......  ......       5
2005............................................................  ......  ......  ......  ......  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......       1
2210............................................................  ......  ......  ......  ......  ......  ......  ......  ......       2  ......       2      34      30      18       3      89
2299............................................................  ......  ......  ......  ......  ......  ......  ......  ......       1  ......  ......  ......  ......  ......  ......       1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total.......................................................       3       2      10      47      56      44     148      27     238       2     180   1,137     581     236      80   2,791
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 26441]]

F. Labor Participation

    No bargaining-unit employees are covered in this project.

G. Project Design

    The project methodology is to introduce into all FSIS program areas 
(for covered positions) certain innovations in human resources 
management, and to evaluate over time the effects of those innovations 
on the ability of the program areas to manage their human resources. 
The methodology includes the following steps:
    1. Selection of Innovations: The Department and FSIS have 
determined that particular pay banding and performance-based pay 
progression innovations that are linked to a framework of core 
competencies should be included in the proposed project. These 
innovations, and the procedures associated with them, are described 
below under Pay Banding Classification and Pay System, Performance 
Appraisal System, Performance-based Pay Increases and Awards, 
Developmental Pay Increases, Staffing and Reduction-in-Force (See 
Section III, A through F).
    2. Selection of Program Areas: The Department and FSIS have 
selected all program areas of the agency for inclusion in the project 
since the total number of non-bargaining unit employees is 
approximately 2,900 (part-time, full-time, and intermittent) and falls 
within the maximum of 5,000 allowed for a demonstration project.
    3. Goals and Objectives: The specific project objectives are listed 
under SUPPLEMENTARY INFORMATION and Executive Summary and are directly 
related to the issues identified under Section II.B, Problems with the 
Present System.
    4. Partnership: The Department and FSIS have limited the covered 
workforce to non-bargaining unit positions. Therefore, input from labor 
representatives is not required. However, consistent with the policy of 
the agency Administrator, FSIS will seek input from two employee 
associations whose membership overlaps with the covered workforce.
    5. Baseline Evaluation: To provide a basis of comparison between 
employee opinions of the current system and their future opinions of 
the project system, each employee in the covered program areas will be 
asked to complete an opinion questionnaire comparable to the Federal 
Human Capital Survey prior to implementation of the project. To 
establish a baseline for cost analysis, each operating unit will be 
required to analyze its personnel costs during fiscal years 2005, 2006, 
and 2007.
    6. Training: The agency and the program areas will provide training 
to managers, employees, and human resources staff prior to 
implementation of the project and will provide additional training to 
managers on the pay-for-performance system prior to the end of the 
first performance cycle. (See Section IV, Training.)
    7. Implementation: To ensure a smooth implementation, the agency 
will emphasize top management support; the development of detailed 
operating procedures and implementing directives prior to 
implementation; thorough training of managers, employees and human 
resources staff; step-by-step implementation planning; adequate backup 
systems, particularly in automated personnel and payroll systems; and 
sufficient operating resources.
    8. Program Evaluation: The Department and FSIS will arrange for 
periodic evaluation of the project under an OPM-approved evaluation 
plan. (See Section VIII, Project Evaluation.) The evaluation will be 
designed to determine whether the innovations are achieving project 
goals and objectives and are operating within acceptable cost limits. 
(See Section IX, Costs.)

III. Personnel System Changes

A. Pay Banding Classification and Pay System

1. Establishment of Career Paths and Pay Bands
    In coordination with OPM, FSIS may establish, and adjust over time, 
career paths that group one or more occupational categories together 
and provide a common pay banding structure ( i.e., a set of work levels 
and rate ranges) for occupations within a given career path. Initially, 
FSIS intends to establish four career paths as follows:
    (a) Professional, Scientific, and Administrative [AP]: Policy, 
staff, line, supervisory, and managerial positions in science, 
veterinary medicine, consumer safety, food technology, mathematics, 
accounting, and other comparable occupations with a positive education 
requirement. Examples of occupational series are 0403-Microbiology, 
0510-Accounting, 0696-Consumer Safety, 0701-Veterinary Medical Science, 
and 1301-General Physical Science. In addition, this career path will 
include policy, staff, line, supervisory, and managerial positions in 
such fields as finance, procurement, human resources management, public 
information, management and program analysis, compliance investigation, 
and other two-grade interval occupations that do not maintain a 
positive education requirement. Examples of these occupational series 
are 0201-Human Resources Management, 0343-Management and Program 
Analysis, 1035-Public Affairs.
    (b) Supervisory Inspection [AI]: Supervisory positions that direct 
the work of inspectors at an import warehouse, a plant, or in a circuit 
of plants within a geographic area. These positions are 1862-
Supervisory Consumer Safety Inspectors.
    (c) Scientific and Technical Support [AS]: Line positions, 
predominantly in agency laboratories, which support professional and 
scientific operations. Examples include 0404-Biological Science 
Technician, 1311-Physical Science Technician and similar traditional 
one-grade interval technician support occupations in agency 
laboratories.
    (d) Management Support [AO]: Nonsupervisory and supervisory 
clerical and assistant positions that support positions not fitting the 
definition of any other career paths. Examples include 203-Human 
Resources Assistant, 318-Secretary, 326-Office Automation Assistant, 
344-Management Assistant and similar traditional one-grade interval 
technician and administrative support occupations.
    Each career path will be subdivided into pay bands. Each pay band 
will correspond to one or more GS grades. Pay bands provide larger 
classification targets that can be defined by shorter, simpler and more 
understandable classification standards. In coordination with OPM, FSIS 
may establish, and adjust over time, a career path's pay band 
structure. Initially, the pay bands within each career path and their 
relationship to GS grades will be as follows:

[[Page 26442]]



                                                         Table 2.--Sample Pay Bands Under PHHRS
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Career path                Pay band 1          Pay band 2          Pay band 3          Pay band 4          Pay band 5           Pay band 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Administrative, Professional,    GS-1/4 (Student     GS-5/7 Trainee....  GS-9/11             GS-12/13 * Full     GS-14 Expert......  GS-15 Senior Expert
 and Scientific (AP).             Trainee).                               Intermediate.       Performance.       Pay Band 5S.......  Pay Band 6S
                                                                                                                 GS-13/14            GS-15 Manager
                                                                                                                  Supervisor.
Supervisory Inspection (AI)....  ..................  ..................  GS-8/9 Supervisory  GS-10/11 Senior
                                                                          Inspectors.         Supervisors.
Scientific & Technical (AS)....  GS-1/4 (Aide).....  GS-5/6/7 Entry....  GS-8/9 Independent  GS-10/11 Expert &
                                                                                              Supervisory.
Management Support (AO)........  GS-1/4 Clerical     GS-5/6/7 Assistant  GS-8/9/10 Senior
                                  (Entry).            or Clerical         or Lead
                                                      Supervisor.         Assistant, and
                                                                          Supervisor .
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Also includes supervisory positions where the band-controlling work is actually personally performed non-supervisory work.

    The final pay banding architecture will be described in 
implementing guidance. FSIS will coordinate changes in career paths or 
pay banding structures with OPM. After coordination with OPM, FSIS will 
give affected employees advance notice and an opportunity to comment 
before effecting a change with respect to career paths or pay banding 
structure.
2. Position Classification
    Occupational groups will be placed in career paths, pay bands will 
replace grades, and FSIS pay band standards will replace OPM position 
classification standards. The General Schedule occupational series will 
be retained.
    Each classification standard will describe the threshold of work 
encompassed by each pay band based on general duties and 
responsibilities, knowledge, skills, and abilities. FSIS will establish 
classification standards in consultation with OPM. Positions must meet 
or exceed the threshold to be classified into a pay band. These bases 
complement each other at each pay band in a career path and may not be 
separated in classifying a position. OPM classification standards will 
not be used directly, but may be used indirectly to establish 
competency criteria that distinguish pay bands or pay levels within a 
key career path.
3. Delegation of Classification Authority
    The agency has delegated classification authority to SES and GS-15 
executives and managers since July 2004. The delegated classification 
authority (DCA) provisions of this project continue this initiative and 
increase the number of managers who receive classification authority. 
Managers must successfully complete DCA training before classification 
authority may be exercised. The delegation of classification authority 
will be facilitated by the expansion of an intranet-based Position 
Description Library, which will include standard descriptions of all 
key positions in all career paths and pay bands. Line managers will 
utilize this intranet-based Position Description Library to select or 
classify most positions. These changes are intended to simplify and 
speed up the classification process, make the process more serviceable 
and understandable, improve the effectiveness of classification 
decision-making and accountability, and facilitate pay for performance. 
Implementing guidance will describe the modified DCA policies and 
procedures.
4. Classification Appeals
    An employee covered by the FSIS Demonstration Project may appeal 
the occupational series, official title, or pay band of his or her 
position at any time to the agency, Department or directly to the 
Office of Personnel Management consistent with procedures currently 
prescribed under 5 CFR part 511, subpart F. Implementing guidance will 
describe the classification appeals process.
5. Elimination of Fixed Steps
    Employees will be converted from existing 15-grade GS position 
classification and pay system established under 5 U.S.C. chapter 51 and 
chapter 53, subchapter III, to the new pay banding system. The 10 fixed 
steps of each GS grade will not apply to employees participating in the 
demonstration project. The fixed-step system operates primarily to 
reward longevity. A pay banding pay 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. (See section V.A.) However, demonstration project employees 
will no longer receive longevity-based, within-grade pay increases at 
prescribed intervals. Instead, they will be granted annual performance 
increases and bonuses 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 
GS that are included in the pay band. The normal minimum and maximum 
rates of each band will be increased at the time of a general pay 
increase under 5 U.S.C. 5303 so they equal the new minimum and maximum 
rates of the grades corresponding to the 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 
Successful. 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 increase because the 
employee's rating of record is below Fully Successful, 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 ``Outstanding'' in FSIS). This feature will 
help to 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 an Outstanding rating. If an employee in 
the upper range extension is rated below the

[[Page 26443]]

Outstanding level, special provisions apply, as described in section 
III.A.11.
7. Locality Pay
    Locality-based comparability payments under 5 U.S.C. 5304 will be 
paid on top of the rate of basic pay in the same manner as those 
payments apply to GS employees (except as otherwise provided in this 
plan). Staffing supplements may apply as described in section III.A.12. 
When a locality-based comparability payment established under 5 U.S.C. 
5304 is increased, a demonstration project employee whose most recent 
rating of record is Fully Successful or higher is entitled to the 
increased locality payment.
    A demonstration project employee whose most recent rating of record 
is below Fully Successful is entitled to the increased locality 
payment, but his or her underlying rate of basic pay will be reduced in 
a manner that ensures the employee's total rate of pay does not 
increase. This reduction is necessary to ensure, in an administratively 
feasible way, that an employee rated less than Fully Successful will 
not receive a pay increase. It does not constitute a reduction in pay 
for purposes of applying the adverse action procedures in chapter 75 of 
title 5, United States Code. (Exception: An employee's rate of basic 
pay may not be reduced under this paragraph to the extent that the 
reduction would cause an employee's rate to fall more than 5 percent 
below the normal range minimum.)
    A locality rate cap 5 percent higher than the normal EX-IV cap is 
established to accommodate those Outstanding performers in the 5 
percent upper rate range extension. This higher cap will apply only to 
employees receiving a rate within 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 normal 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.)
8. 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 rate of basic pay may be set at any rate within the 
normal pay band range. In exercising this flexibility, FSIS will 
consider the appointee's qualifications, competing job offers, FSIS's 
need for the appointee's talents, the appointee's potential 
contributions to FSIS mission accomplishment, and the rates received by 
on-board employees. This flexibility will allow FSIS to compete more 
effectively with private industry for the best talent available. 
Implementing guidance will provide managers with assistance in setting 
pay to assure fair and equitable treatment of a diverse workforce.
9. Rate of Basic Pay Upon Promotion
    Upon promotion to a higher pay band within a career path or to a 
pay band in another career path with a higher maximum rate, an 
employee's rate of basic pay will be set at a rate within the higher 
pay band that provides a pay increase of 8 percent, unless a greater 
increase is necessary to set pay at the normal range minimum. (See 
section III.E.3 for definition of ``promotion.'') In consultation with 
OPM, FSIS may establish exceptions to this policy to deal with 
employees receiving a retained rate, employees who are re-promoted 
shortly after demotion, employees with exceptional performance 
warranting a larger increase with higher-management approval, etc. FSIS 
may adopt, in consultation with OPM, policies providing a promotion-
equivalent increase in appropriate circumstances to a Federal employee 
outside the demonstration project who accepts a position covered by the 
demonstration project.
10. Rate of Basic Pay in Noncompetitive Lateral Actions
    Upon non-competitive lateral movement (e.g., via transfer or 
reassignment, not conversion of position) to a demonstration project 
position from another Federal position, an employee's pay rate 
(including any locality payment or staffing supplement) will be set at 
an amount that is equal (after any geographic pay conversion) to the 
employee's existing pay rate (including any locality payment or 
equivalent basic pay supplement), subject to the applicable normal 
range maximum. For such an employee moving from a position outside the 
demonstration project, FSIS may provide an increase in the rate of 
basic pay immediately after movement to reflect the prorated value of 
the employee's next scheduled within-grade increase under the former 
pay system, consistent with the requirements in section V.A.
11. Other Pay Administration Provisions
    Annual performance-based pay increases described in section III.C.3 
will be made to the rate of basic pay. These increases are scheduled to 
be made on the same date that the annual rate range adjustments 
normally take effect--i.e., the first day of the first pay period 
beginning on or after January 1. To be eligible for an annual 
performance pay increase an employee must have a rating of record of 
Fully Successful or higher.
    Annual performance awards described in section III.C.5. provide for 
lump-sum cash payments recognizing performance and will be made at the 
same time as the annual performance pay increase. To be eligible for a 
performance award, an employee must have a rating of record of Fully 
Successful or higher.
    Developmental pay increases described in Section III.D may be paid 
no more than once during any 52-week period, following the mid-year 
progress review.
    The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536 
are not applicable (i.e., no pay 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) An employee with a rating of record below Fully Successful may 
not receive an increase in his or her retained rate under the 50-
percent adjustment rule in 5 U.S.C. 5363(b)(2)(B);
    (2) 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 in 5 CFR 536.306) in order to accommodate the upper range 
extension;
    (3) An employee in the upper range extension who is rated below 
Outstanding will be converted to a retained rate before processing any 
other pay action; and
    (4) The range maximum rate used in computing retained rate 
adjustments under the 50-percent adjustment rule will be the maximum 
rate of the highest applicable rate range (including any applicable 
locality payment or staffing

[[Page 26444]]

supplement) taking into consideration an employee's rating of record. 
For retained rate employees rated Outstanding, the increase is 50 
percent of the dollar change in the applicable adjusted rate for the 
upper range extension maximum. (Note that an employee rated Outstanding 
must have a retained rate in excess of the upper range extension 
maximum adjusted rate, since he or she would otherwise be converted to 
a rate within that range extension.) For retained rate employees rated 
below Outstanding, the increase is 50 percent of the dollar change in 
the applicable adjusted rate for the normal band maximum.
    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 
Outstanding, 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 
Outstanding, 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 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 
Successful or Superior, 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 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 
Successful, 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 Successful 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.
    FSIS may adopt supplemental pay administration policies governing 
matters not specifically addressed in this plan, subject to any OPM 
guidance. In addressing geographic conversions and simultaneous pay 
actions, such rules must be consistent with 5 CFR 531.205 and 5 CFR 
531.206, respectively.
12. 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 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 1.2089 in 2008). The 
employee's demonstration locality-adjusted rate will equal the 
employee's former GS adjusted rate.
    Any GS 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 his 
or her entitlement to a staffing supplement redetermined; any resulting 
reduction in the supplement will not be considered an adverse action or 
a basis for pay retention.
    When a staffing supplement is increased, a demonstration project 
employee whose rating of record is below Fully Successful is entitled 
to the increased supplement, but his or her underlying rate of basic 
pay will be reduced in a manner that ensures the employee's total rate 
of pay does not increase. Such a reduction does not

[[Page 26445]]

constitute a reduction in pay for purposes of applying the adverse 
action procedures in chapter 75 of title 5, United States Code. 
(Exception: An employee's rate of basic pay may not be reduced under 
this paragraph to the extent that the reduction would cause an 
employee's rate to fall more than 5 percent below the normal range 
minimum.)
    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.
    Adjusted rates that include a staffing supplement are subject to an 
Executive Schedule Level IV (EX-IV) cap, except that an adjusted rate 
cap 5 percent higher than the EX-IV rate is established exclusively for 
Outstanding-rated employees in 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 and in the same staffing supplement category 
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 normal 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 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).
13. Status as GS Employees
    Notwithstanding the waiver of laws governing the GS classification 
and pay system, demonstration project employees will be considered to 
be GS employees in applying other laws, regulations, and policies, 
except as otherwise provided in this plan. For example, demonstration 
project employees will remain eligible for locality pay under 5 U.S.C. 
5304 (subject to exceptions described in this plan), hazardous duty 
differentials under 5 U.S.C. 5545(d), and recruitment, relocation, and 
retention incentives under 5 U.S.C. 5753-5754. Demonstration project 
employees will be covered by the regulations in 5 CFR part 300, subpart 
F, except that ``grade'' will be replaced with ``pay band.'' (See 
section III.E.3. for a 52-week time-in-band requirement.) However, 
project employees will not be covered by the supervisory differential 
provision in 5 U.S.C. 5755.
    A demonstration project employee who converts from the project 
position to a GS position without a break in service will be considered 
a GS employee for the purpose of applying the GS promotion rule under 5 
U.S.C. 5334(b). (See section V.B.)

B. Performance Appraisal System

    FSIS will use its current performance management program under the 
Department of Agriculture 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 FSIS 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 midyear progress 
review.
    The FSIS appraisal program, including its performance levels and 
standards, provides for making meaningful distinctions in performance. 
The program currently uses a five-level summary rating pattern to 
summarize performance and three levels to appraise performance at the 
element level. Its summary level pattern under 5 CFR 430.208(d) uses 
Pattern H with Levels 1, 2, 3, 4, and 5, which FSIS has labeled 
Unacceptable, Marginal, Fully Successful, Superior, and Outstanding, 
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 performance appraisal program is 
provided in current FSIS directives. 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 FSIS 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. FSIS 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 by a management official other than the rating 
official. Such reconsiderations must be initiated no more than 15 days 
after the official rating of record is assigned, consistent with the 
applicable administrative grievance policy. If the reconsideration of 
the appraisal results in a different rating of record, the revised 
rating of record will become the basis for the employee's pay 
increase(s) in accordance with section III.C. If the adjustment occurs 
after all pay deliberations have been finalized, it

[[Page 26446]]

does not result in a recalculation of other employees' pay increases.
    If, after an opportunity to improve, an employee's performance is 
still not satisfactory, the Rating Official will give the employee a 
rating of Level 1, Unacceptable, and must take action to reassign or 
remove the employee, or place the employee in a lower pay band, in 
accordance with performance action provisions in law and regulation.

C. Performance-based Pay Increases and Awards

1. Performance Shares
    FSIS will establish rating/share patterns for each pay pool--that 
is, the relationship between ratings of record and numbers of shares. A 
share mechanism will be used (1) to ensure that employees with higher 
ratings of record receive greater pay increases than employees with 
relatively lower ratings, and (2) to control costs without resorting to 
a forced distribution of ratings, which is prohibited.
    FSIS 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 
increases based on an appraisal period only if it takes effect at least 
120 days before the end of that appraisal period.
    Each employee will be assigned a certain number of shares, based on 
his or her rating or record. Initially, the number of shares for each 
rating level will be as follows: 9 shares are assigned to the 
Outstanding rating; 6 shares to the Superior rating; and 4 shares to 
the Fully Successful rating. No shares may be assigned to any rating of 
record below Fully Successful, 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. The value of each 
performance share will be expressed as a percentage of the rate of 
basic pay. The agency will provide training to all project participants 
to assure fair, accurate performance ratings and equitable performance 
payouts.
2. Performance Pay Pools
    Funds that otherwise would be spent on the annual GS pay 
adjustment, within-grade increases (WGI's), and quality step increases 
(QSI's) for demonstration project employees will instead be placed into 
a pay pool, which will be used to fund annual performance increases. 
Unlike GS employees, participating employees whose most recent rating 
of record is below Fully Successful will not receive any increase in 
their rate of basic pay.
    Participating programs will establish pay pools for allocating 
performance-based pay increases. FSIS 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 the pay pool, 
FSIS will initially allocate an amount for performance-based pay 
increases equal to the estimated value of the WGI's, QSI's and the 
annual GS pay adjustments that otherwise would have been paid to 
participating employees. In computing the estimated value of WGI's, and 
QSI's, FSIS may use Governmentwide or agency historical averages.
3. Performance-based Pay Increases
    FSIS 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. On the first day of the 
first pay period beginning on or after January 1 of each year, this 
amount will 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 applicable maximum of the employee's rate range. 
Notwithstanding the preceding sentence, employees in the upper range 
extension rated below the highest rating level are subject to special 
rules as described in sections III.A.6 and III.A.11. Any portion of an 
employee's performance pay increase amount that cannot be delivered as 
a basic pay increase will be paid out as a lump-sum performance bonus 
(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 with a rating of record of Fully Successful or higher 
may not receive a performance payout that is less than the percentage 
value of any simultaneous rate range adjustment, except for (1) an 
employee receiving a retained rate and (2) an employee in the upper 
range extension with a rating of record below Outstanding (Level 5) who 
is converted to a retained rate (as provided in section III.A.11.). 
This guaranteed amount will be used in place of any lower performance 
payout resulting from the share methodology. Any additional costs of 
using the guaranteed amount will be funded outside the pay pool. 
Otherwise, the guaranteed amount is applied in the same manner as the 
regular performance payout.
    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 FSIS proration policies.
    FSIS may establish policies on prorating the performance-based 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. Such proration 
policies will provide each eligible employee with the full percentage 
adjustment used to adjust base rate ranges (if any) and will prorate 
any additional amount of performance pay increase that would be 
applicable to the employee but for the proration requirement.
    If any 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 a reconsideration or 
grievance process, the employee's performance payout must be 
retroactively recomputed using the share value as originally 
determined. 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 provision 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 (1) 
a rate range adjustment as described in section III.A.11 or (2) a 
geographic conversion under 5 CFR.359.705(e) or 536.303(b), as 
applicable. At the discretion of an authorized agency official, a 
retained rate employee may receive the same lump-sum payment payable to 
an employee in the same pay pool who is at the applicable range maximum 
and who has the same rating of record and number of shares.
    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 
adjustment but who are returning to

[[Page 26447]]

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, FSIS will determine the employee's prospective rate of basic pay 
upon return to duty by making performance-based pay increases 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.
4. Employees Who Cannot Receive a Performance Pay Increase
    Employees with a rating of record below Fully Successful are 
prohibited from receiving a performance payout. When an employee does 
not receive a performance pay increase because of performance below 
Fully Successful, 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 set more 
than 5 percent below the normal range minimum.
    If FSIS later chooses to give such an employee a new rating of 
record of Fully Successful or higher before the end of the next 
appraisal period, the employee is entitled to an increase effective on 
the first day of the first pay period beginning on or after the date 
the new rating of record is final. The increase must be the same dollar 
amount as the increase the employee would have received if he or she 
had been rated Fully Successful at the time the increase was initially 
denied.
    Each employee who does not receive an increase in basic pay because 
his or her performance is less than Fully Successful will be entitled 
to be notified promptly in writing of that fact. At the same time, the 
employee must be informed in writing of the right to request that the 
agency reconsider its determination, under the same procedures 
prescribed by OPM regarding the determination not to provide a within-
grade increase under 5 U.S.C. 5335(c). The Merit Systems Protection 
Board will process any appeals under this section in the same manner 
that it processes appeals under 5 U.S.C. 5335(c).
    See section III.A.7 and section III.A.12 regarding the 
recomputation of an employee's rate of basic pay to prevent a pay 
increase resulting from an increase in the applicable locality payment 
or staffing supplement.
5. Performance Awards
    Performance awards may be granted to any employee with a rating of 
record at Level 3 (Fully Successful) or higher and are given at the end 
of the performance year in conjunction with decisions on performance 
pay increases. FSIS will adopt supplemental award administration 
policies not specifically covered under the plan to improve 
implementation of existing authorities prescribed under chapter 45, 
title 5, United States Code. These performance awards are separate from 
performance pay increases.

D. Developmental Pay Increases

    Employees in developmental positions (i.e., positions with 
promotion potential to a higher pay band) may receive additional pay 
increases (in addition to the annual performance pay increase) as they 
acquire the competencies, skills and knowledge necessary to advance to 
the full performance level of their position. An employee in a 
developmental position may be awarded a pay increase within his or her 
pay band that ranges up to 7 percent of basic pay to recognize the 
faster progression that can occur in a developmental position. 
Employees must be performing at the Fully Successful level or higher to 
be eligible for a developmental pay increase. Developmental pay 
increases may be paid no more than once during a 52-week period and 
following the mid-year progress review in accordance with implementing 
guidance. Developmental pay increases must be approved by the program's 
Assistant Administrator or his or her designee to ensure equity and 
accountability. The funds previously used for career promotions for the 
GS grade levels will initially be used to fund the developmental pay 
increases in the first fiscal year of the program's implementation. In 
all future fiscal years, FSIS will allocate a fixed amount of funds 
within the annual appropriation, and these funds will go into a pool 
for distribution to each FSIS program area to cover developmental pay 
increases.

E. Staffing

1. Minimum Qualification 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 a 403-Microbiologist position assigned to 
Pay Band 2 (GS-5 through GS-7) need only meet the qualification 
requirements for a GS-0403 Microbiologist position at the GS-5 level.
    For FSIS demonstration project employees and employees of other 
Federal agencies who are in sufficiently similar pay banding systems 
(as described in FSIS implementing policies), the common OPM 
requirement of 1 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.''
2. Flexible Pay Setting for New Hires
    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, FSIS will consider the 
appointee's qualifications, competing job offers, the agency's need for 
the appointee's talents, the availability of other candidates, the 
appointee's potential contributions to FSIS mission accomplishment, and 
the rates received by on-board employees. This flexibility will allow 
FSIS to compete more effectively with private industry for the best 
talent available. Implementing guidance will provide managers with 
assistance in setting pay to assure fair and equitable treatment of a 
diverse workforce.
3. Promotions
    A promotion is a change to (1) a higher pay band in the same career 
path or (2) a pay band in another career path with a higher maximum 
rate of basic pay. To be eligible for promotion, an employee must have 
a current performance rating of Fully Successful or higher. The time-
in-band requirement for promotion eligibility is 52 weeks, with one 
exception: An employee may be promoted from Pay Band 1 to Pay

[[Page 26448]]

Band 2 in the Management Support Career Path or in the Scientific and 
Technical Support Career Path without time restriction. (See section 
III.A.9. for pay setting upon promotion.) When employees are 
competitively selected for a position with promotion potential, and are 
subsequently moved to a higher pay band in their career path, the 
action is processed as a non-competitive pay band promotion until the 
full performance level of the position is reached.

F. Reduction in Force

    If, during the life of the demonstration project, FSIS enters into 
a reduction in force (RIF), the RIF will be conducted in accordance 
with 5 U.S.C. 1302 and 3502 and 5 CFR part 351, except as follows:
    (a) Each of the career paths in each FSIS local commuting area will 
constitute separate competitive areas (i.e., separate from the other 
career paths, and separate from the competitive areas of other FSIS 
employees);
    (b) FSIS 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) FSIS will use retention standing when it chooses to offer 
vacant positions within the meaning of 5 CFR 351.704.
    Prior to conducting a RIF, FSIS will issue and implement a policy 
in accordance with 5 CFR part 330, subpart B, except that the 
establishment and operation of a reemployment priority list (RPL) will 
be designed to assist current FSIS competitive service demonstration 
project employees who will be separated as a result of a RIF and, 
subsequently, former FSIS 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 1 year, in 
their efforts to be reemployed at FSIS, by affording them reemployment 
priority over certain outside job applicants for FSIS competitive 
service demonstration project vacancies.
    FSIS will develop and adopt supplemental RIF administration 
procedures to augment the RIF policies stipulated by this plan.

IV. Training

    Training will be provided to all participating 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, including video conferencing, on-line tutorials, 
simulation, and train-the-trainer concepts.

V. Conversion

A. Conversion to the Demonstration Project

    1. Only General Schedule (pay plan codes GS and GM) employees who 
are not in a bargaining unit will be converted to this project 
(excludes non-bargaining unit food inspection (GS-1863) employees 
appointed under Schedule A 213.3113(1)(3) and Schedule C employees). 
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.12, 
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. 
FSIS 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 Successful.
    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) 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 first 
pay period beginning on or after January 1, 2010.
    5. For employees who enter the demonstration project by lateral 
reassignment or transfer (i.e., not by conversion of position), FSIS 
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

    FSIS implementing guidance 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.

[[Page 26449]]

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 rate will not be 
adjusted to match a step rate before applying those rules. 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. FSIS will perform the computations for 
employees who remain within FSIS and USDA. FSIS may perform the 
computations, as a courtesy, for employees who move to other Federal 
agencies. At a minimum, FSIS 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 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. FSIS may modify and adjust features and 
elements of this project plan over time. FSIS 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.

VII. 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.

VIII. Project Evaluation

    Chapter 47 of title 5, United States Code, requires an evaluation 
of the results of the demonstration project. FSIS, in coordination with 
USDA and 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. Key features of successful performance-based pay systems, 
including leadership commitment, communication, stakeholder 
involvement, training, planning, mission alignment, and the rewarding 
of performance, will be assessed to determine the effectiveness of the 
demonstration project and ensure compliance with stated project goals. 
The evaluation will 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). In addition, 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. Finally, employee feedback will be sought through 
surveys, interviews, and focus groups to assess employee perceptions of 
the fairness and integrity of the performance appraisal and pay 
adjustment processes.

IX. Costs

A. Buy-in Costs

    Upon conversion to the demonstration system many employees will 
receive an increase in basic pay for the prorated time in grade towards 
their next within-grade increase. However, these costs will be offset 
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. 
Each project program area will maintain compensation during the project 
at the level it would have reached under the current system. No 
additional funding will be requested specifically for this project; all 
costs will be charged to available funds through existing 
appropriations. To ensure appropriate carryover of costs from pre-
project to project years, a base assessment will be made using 3 base 
years: Fiscal Years 2005, 2006, and 2007. For example, data associated 
with average annual salary, pay increases and promotions, turnover, and 
other relevant data will be collected to ensure a thorough analysis of 
costs which are impacted by pay banding. Budget discipline will be 
required and achieved by imposing specific funding principles. Finally, 
both longitudinal and site comparisons will be used to ensure that 
spending remains within acceptable limits.

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 Successful 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 Outstanding 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) for employees with a rating of record below Outstanding and 
the upper range maximum rate (including any locality adjustment or 
staffing supplement) for an employees with an Outstanding rating of 
record; and (4) provide when a frozen saved rate for an employee with a 
rating of record below Fully Successful 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 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 provision of law 
governing annual adjustments for employees covered by section 5303).

[[Page 26450]]

    Chapter 53, section 5303: Annual adjustments to pay schedules 
Chapter 53, section 5304(g)(1): Locality-based comparability payments 
(only to the extent necessary to (1) provide a locality rate may not 
exceed the rate for EX-IV plus 5 percent for employees in the upper 
range extension) and (2) apply an ``effective'' locality pay percentage 
for employees in the upper range extension under circumstances 
described in the plan).
    Chapter 53, section 5305: Special pay authority.
    Chapter 53, subchapter III: 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, except as otherwise provided in this plan; 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 ``pay band;'' (2) bar employees 
with a rating of record lower than Fully Successful 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 Outstanding 
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 
Outstanding 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) for employees with a rating of 
record below Outstanding and the upper range maximum rate (including 
any locality adjustment or staffing supplement) for an employees with 
an Outstanding rating of record; and (7) provide when a retained rate 
for an employee with a rating of record below Fully Successful 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 59, section 5941: Cost-of-living allowances and post 
differentials (only to the extent necessary to provide that employees 
in the demonstration project pay system are eligible for coverage under 
section 5941).
    Chapter 75, section 7512(3): Adverse actions (only to the extent 
necessary to replace ``grade'' with ``pay band'').
    Chapter 75, section 7512(4): Adverse actions (only to the extent 
necessary to provide that adverse action provisions do not apply to (1) 
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 and (2) reductions in rates of basic pay to offset a locality 
pay or staffing supplement increase as a result of receiving a rating 
of record below Fully Successful).

    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, FSIS 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. FSIS 
must notify OPM when any such waiver is terminated.

B. Title 5, Code of Federal Regulations

    Part 300, subpart F: Time-in-grade restrictions (only to the extent 
necessary to replace ``grade'' with ``pay band'').
    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 
FSIS 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 
Successful 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 Outstanding 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) for employees with a rating of 
record below Outstanding and the upper range maximum rate (including 
any locality adjustment or staffing supplement) for an employees with 
an Outstanding rating of record; and (4) provide when a saved rate for 
an employee with a rating of record below Fully Successful 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).
    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 511, section 511.607: Nonappealable issues.
    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 apply an ``effective'' locality pay 
percentage for employees in the upper range extension under 
circumstances described in the plan).

[[Page 26451]]

    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 ``pay band;'' (2) bar employees with a 
rating of record lower than Fully Successful 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 Outstanding 
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 
Outstanding 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) for employees with a rating of 
record below Outstanding and the upper range maximum rate (including 
any locality adjustment or staffing supplement) for an employees with 
an Outstanding rating of record; and (8) provide when a retained rate 
for an employee with a rating of record below Fully Successful 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 591, subpart B, section 591.204: Cost-of-living allowances and 
post differentials (only to the extent necessary to provide that the 
demonstration project pay system is a qualifying pay plan).
    Part 752, section 752.401(a)(3): Adverse actions (only to the 
extent necessary to replace ``grade'' with ``pay 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 (1) 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 and (2) reductions in rates of basic pay to offset a 
locality pay or staffing supplement rate increase as a result of 
receiving a rating of record below Fully Successful).

    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, FSIS 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. FSIS must notify OPM when any such waiver is terminated.

 [FR Doc. E8-10440 Filed 5-8-08; 8:45 am]
BILLING CODE 6325-43-P