[Federal Register Volume 74, Number 17 (Wednesday, January 28, 2009)]
[Notices]
[Pages 5044-5070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-1641]



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Part II





Office of Personnel Management





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

  Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / 
Notices  

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 OFFICE OF PERSONNEL MANAGEMENT


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 approval of a demonstration project final 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 U.S. Department of Agriculture (USDA), 
and OPM will test a results-based, competency-linked pay-for-
performance system that is combined with a simplified, pay banding 
classification and compensation system. The final project plan has been 
approved by FSIS, USDA, and OPM.

DATES: This demonstration project will be implemented on July 19, 2009.

FOR FURTHER INFORMATION CONTACT: Food Safety and Inspection Service: 
Laurie Lindsay, Director, HR Demonstration Project Staff, (202) 720-
7983, 1400 Independence Avenue, SW., Room 2134 South Building, 
Washington, DC 20250. 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: 

1. Background

    FSIS is a premier public health regulatory agency that continually 
invests in human capital. In order to continue agency success in 
performing a range of food safety, food defense, and public health 
regulatory missions over the next decade, FSIS requires an innovative 
human resources (HR) system. FSIS has an expanded mission 
responsibility for food defense, biosecurity, and public health science 
and is no longer just limited to the inspection of meat, poultry, and 
processed egg products. FSIS must assure science-based development and 
execution of policy and must also emphasize risk-oriented assessment, 
planning, analysis, inspection, and management activities.
    This growing list of advanced public health functions along with 
the USDA strategic human capital plan and the President's Management 
Agenda requires FSIS to manage human capital in the 21st century very 
aggressively. In the absence of enabling legislation, FSIS made the 
decision in 2005 to pursue the opportunity to propose a demonstration 
project in collaboration with OPM in an effort to address its human 
capital challenges.
    As the Federal Government's workforce as a whole continues to 
experience significant changes, FSIS has been confronted with several 
considerable challenges that are driving the need for this 
demonstration project. FSIS faces critical shortages in the number of 
positions, such as public health veterinarians and other scientists and 
are threatened with the task of replacing an aging workforce. The 
average age of mission-critical employees is between 50 and 53 years 
old. The retirement eligibility within the next ten years is near 50 
percent.
    FSIS also continues to experience shortages and turnover in spite 
of our aggressive use of recruitment and retention incentives (over $1 
million annually), use of direct hire, and a new entry level for public 
health veterinarians. Moreover, almost 375,000 Federal employees 
outside of USDA are covered by alternative performance-based pay 
systems. As more Federal employees transition into new pay systems, 
USDA will be one of the largest executive departments still covered by 
a less performance sensitive pay system which will significantly impede 
its ability to recruit and retain employees.
    Through the demonstration project, FSIS will be able to take a 
proactive role in finding solutions to all of these challenges in order 
to attract the best qualified candidates and to retain and motivate its 
current workforce. It will also simplify the current classification 
system for greater flexibility in classifying work and paying 
employees; improve hiring by allowing FSIS to compete more effectively 
for high quality employees through the judicious use of higher entry 
salaries; reaffirm the performance management and rewards system for 
improving individual and organizational performance; eliminate 
automatic pay increases (i.e., annual adjustments that normally take 
effect the first pay period beginning on or after January 1) by making 
pay increases performance sensitive, so that only Fully Successful and 
higher performers will receive payouts and the best performers will 
receive the largest payouts; test the effectiveness of multi-grade pay 
bands in recruiting, advancing, and retaining employees; and improve 
the retention of high-performing employees in developmental positions 
by testing the use of developmental pay increases to recognize the 
faster progression that can occur in these positions.
    By implementing a modern human resources management system that 
supports and protects this critical role in public health, food safety, 
and food security, FSIS will be better prepared in serving the general 
public by ensuring the nation's commercial supply of meat, poultry, and 
processed egg products are safe, wholesome, and correctly labeled and 
packaged.

2. Overview

    The FSIS Demonstration Project proposal was approved by OPM and 
publicized in the Federal Register on May 9, 2008. Prior to 
publication, the agency's program managers were briefed on the various 
management and mission implications of the project. There was a 30-day 
public comment period immediately following publication of the proposed 
demonstration project plan in the Federal Register, culminating in a 
public hearing on June 26, 2008, held at USDA Headquarters in 
Washington, DC. A total of 44 individuals, mostly FSIS employees, and 1 
employee organization submitted written comments and questions. Six 
individuals and the employee organization provided comments and asked 
questions at the public hearing. Many of the commenters offered 
multiple comments and questions. A total of 154 different comments and 
questions were received, with several of them duplicative. Comments 
covered a number of different management and HR topical areas, and in 
some cases, pertained to more than one topic. The topics that received 
the largest number of comments and questions related to management 
accountability (41), pay and pay pools (27) and staffing (24). Other 
topical issues receiving numerous comments/questions related to 
performance management (21), employee relations (8), and labor 
relations (7). There were seven comments on career paths and pay bands 
and two comments on project evaluation. An additional 17 comments and 
questions did not fall into one of the above topical areas. Every 
comment and question received was extremely important, as each helped 
to focus on an examination of the project plan and better understand 
the long-term management and employee implications of the project. 
Public comments and

[[Page 5045]]

questions often served as the catalyst to raising additional questions 
on the part of top management. As a result of public comments received, 
FSIS has made some refinements to its plan and a few clarifying 
editorial and textual changes as well.

3. Summary of Comments and Responses

    Comments are arranged into nine broad topical areas (including a 
miscellaneous ``other'' category) that correspond to the topics 
identified in the previous section and are presented not in an order 
dictated by the number of comments received, but in an order that 
reflects the logic of the project's design scheme and contents (i.e., 
in a topical order beginning with pay banding and classification, and 
devolving through pay, staffing, management accountability, performance 
management, employee relations, labor relations, and project 
evaluation). FSIS' responses are generic summaries relative to major 
issues raised by comments and questions rather than point-by-point 
responses.

(a) Career Paths and Pay Bands

    There were several comments about the proposed career paths and pay 
band structure including a question about the occupational series 
covered by the Administrative, Professional and Scientific Career Path 
and comments that pay bands have an adverse impact on career 
development and on supervisors.
(1) Career Paths
    Comments: A question was raised concerning the occupational series 
coverage for the Administrative, Professional, and Scientific Career 
Path. There was a perception that General Schedule (GS) Compliance 
Investigator positions (GS-1801) were not covered by this career path 
since this occupation does not have a positive education requirement 
and a path is needed to include investigators. There was also a comment 
questioning the placement of employees whose jobs do not require higher 
educational credentials or a positive education requirement in the same 
band with employees whose jobs do require credentials and a positive 
education.
    Response: In designing the proposed career paths, FSIS wanted to 
take the broadest approach that made sense given the nature of the work 
performed and the nature of the occupations requiring this work. The 
broader the design approach, the more employees are treated alike and 
the simpler it is to administer pay banding. Employee equity and 
systemic simplification are key goals of this project. In deciding on 
the original career path proposal, FSIS opted to essentially build its 
career paths using OPM's white-collar ``PATCO'' categories. The PATCO 
scheme encompasses extremely broad groupings of white-collar 
occupational categories, largely based on differences in the nature of 
work and the essential job knowledge required to successfully perform 
the work (for instance, whether work accomplishment requires certain 
educational attainments, or analytical ability, or subject-matter 
competencies, and so on). OPM defines each distinct occupational job 
series according to whether work is professional (``P''), 
administrative (``A''), technical (``T''), clerical (``C''), or falls 
into a miscellaneous others (``O'') category. The Administrative, 
Professional, and Scientific Career Path includes all jobs that have a 
2-grade interval career progression (e.g., GS-5, 7, 9, 11, 12, 13, 14, 
15, or any combination of these grades). This career path includes 
professional positions with a positive education requirement as well as 
administrative positions without a positive education requirement like 
GS-1801 Compliance Investigators. Using one career path for these 2 
categories of positions ensures the greatest flexibility in pay setting 
and pay progression. The decision to include professional and 
administrative jobs in the same career paths was based on a review of 
the current classification and pay progression for most jobs in FSIS. 
Educational credentials are important for many of FSIS' occupations and 
will continue to be used to make minimum qualifications determinations, 
where needed, upon appointment. For jobs where education can be 
substituted for experience, it may also positively impact the pay band 
a candidate is ultimately placed in at appointment. In FSIS, jobs that 
are either ``administrative'' or ``professional'' have very similar 
grade level progressions under the GS system, irrespective of the 
educational requirements of the job. Therefore, it was determined that 
these positions would be appropriately placed together in the 
Administrative, Professional, and Scientific Career Path which includes 
all jobs that have a 2-grade interval progression (e.g., GS-5, 7, 9, 
11, etc.) in order to facilitate system simplification without 
compromising classification principles.
(2) Pay Band Structure
    Comments: Several comments were made regarding the pay band 
structure that FSIS has established. There was a question as to whether 
FSIS plans to include non-supervisory employees and supervisory 
employees within the same bands. There was also a comment that banding 
grades together such as GS-12 and 13, or GS-13 and 14, without 
competition would be similar to a demotion for employees currently 
classified at the higher of the two grades. There was a question 
regarding why senior executives were not covered under the project and 
a comment that eligibility to the Senior Executive Service Candidate 
Development Program (SESCDP) could be compromised because of the 
proposed supervisory pay band structure. One commenter also stated that 
employees with disabilities, especially those with targeted 
disabilities, tended to be in the lower pay bands in other Federal pay-
for-performance programs and that the elimination of within-grade 
increases and implementation of pay banding would adversely impact pay 
progression for employees with disabilities.
    Response: FSIS reviewed the proposed pay band structure and 
determined that no changes are needed. With respect to placing 
supervisory and non-supervisory employees in the same band, FSIS notes 
that the proposed project did not originally include supervisors in the 
same band as non-supervisory employees unless the non-supervisory 
technical work of the position is at a higher level than the 
supervisory work. This occurs principally with the GS-701 Supervisory 
Public Health Veterinarian working in a plant where the supervisory 
work is at a lower level than the nonsupervisory veterinary work 
performed. Therefore, they are placed in the non-supervisory Pay Band 4 
of the Administrative, Professional, and Scientific Pay Band. The FSIS 
Demonstration Project Policies and Procedures Handbook will provide 
guidance to further clarify the bands and career paths.
    FSIS disagrees with the comment that combining two or more grades 
in one band is similar to a demotion as several gradations of work are 
possible within a given pay band. In essence, pay banding assumes that 
different employees in the same career path, job series, and pay band 
of a properly classified position can operate at differing levels--
within reason--due to variations in incumbent maturity (seasoning) and 
performance. In this circumstance, equal pay for equal work is not 
compromised even though one employee may be earning higher pay than 
another employee in the same pay band. In a fundamental respect, this 
is no different than disparities in pay that occur between employees in 
the same

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properly classified GS-13 position where one employee is earning a GS-
13, step 2, rate and another is earning a GS-13, step 9, rate. In 
addition, it is felt that the new pay band structure is actually more 
consistent with the manner in which most positions operate. For 
example, the main difference between two grades may simply be that 
supervisory controls are closer and/or guidelines are more defined at 
the lower grade. Oftentimes, classifiers use ``statements of 
difference'' which indicate that the position performs the same work at 
both grades but supervisory controls are closer and guidelines are more 
defined. Combining two grades into a single pay band, for example, 
shifts the focus of the employee pay advancement from position 
classification and merit promotion criteria to performance-based pay 
criteria, one of the chief goals of the demonstration project. This 
shift in pre-eminence from classification and promotion criteria to 
performance also occurs in the examples of other pay bands in other 
occupational career paths, and serves in the aggregate to underscore 
how pay-banding intrinsically enhances the potential effectiveness of a 
performance-based pay system. As the demonstration project is reviewed 
and evaluated over time, OPM and FSIS will make decisions on whether an 
adjustment to the band structure is warranted.
    With respect to the comment that eligibility for the SESCDP may be 
compromised by the proposed pay band placement structure, FSIS 
disagrees and does not believe the band structure will adversely impact 
an employee's eligibility for the program. The USDA SESCDP program is 
open to those who are at the GS-14 or 15 grade level or equivalent who 
are interested in applying and meet the qualifications requirements for 
the program. The proposed pay band 5S and 6S in the Administrative, 
Professional, and Scientific Career Path is considered equivalent to 
the GS-13/14 and GS-15 under the General Schedule, respectively. FSIS 
applicants who convert into the project at Band 5S or 6S and later 
apply to the SESCDP should not be adversely impacted by being in either 
pay band. Ultimately, as with any competitive process, the quality of 
the employee's application package which includes job experience will 
weigh most heavily in the final selection decision. It is also noted 
that Senior Executive Service employees are not participating in the 
project as they are already covered under a pay-for-performance system.
    In response to the comment that employees with disabilities tend to 
be at the lower pay bands in Federal pay-for-performance programs and 
will be adversely impacted by pay banding and the elimination of 
within-grade increases, FSIS noted that employees in lower pay bands 
will be entitled to the same benefits and opportunities for performance 
payouts made available to employees in the highest pay bands. Although 
there was no reference cited for the data source that employees with 
disabilities tend to be at lower pay bands in other pay-for-performance 
systems, a review of the FSIS workforce data shows that as of September 
2008, 71 percent of FSIS employees with disabilities are at the GS-12 
through GS-15 grade levels. Therefore, with a substantive number of 
FSIS employees with disabilities converting into the project at the 
highest pay bands, the comment is not substantiated for FSIS. It is 
noted that although within-grade increases will no longer be in effect, 
pay increases will be provided to all employees who perform at the 
``Fully Successful'' level or higher, including employees with targeted 
disabilities. The demonstration project will uphold the enduring values 
and principles upon which the Civil Service was founded and protect 
employee's fundamental rights and due process. While the demonstration 
project provides broad discretion in managing and compensating 
employees, actions taken by supervisors and managers must be based on 
legitimate, non-discriminatory reasons and protections against 
Prohibited Personnel Practices remain. Plans are being made to 
distribute a handout outlining the Merit System Principles, Prohibited 
Personnel Practices, and protections against employment discrimination 
on the bias of national origin, religion, color, race, age, sex, sexual 
harassment, and mental or physical disability. Finally, individuals who 
believe they have been discriminated against will have the same legal 
rights and protections under the demonstration project as were afforded 
to them prior to conversion.

(b) Pay and Pay Pools

    Comments: Several commenters posed questions seeking further 
clarification on how FSIS plans to establish, manage, and fund the pay 
pools. For instance, there were comments and questions relating to the 
size of the pay pools, composition of the pools, and share 
distribution. Concern was also raised regarding the adequacy of pay 
pool funding and the possible disparity of funds in the pools of 
differing sizes. There was a concern that there is a potential for 
employees in different pools with the same rating receiving different 
pay increases.
    Comments were also received about the merits of denying a pay 
increase to employees who receive a performance rating of less than 
``Fully Successful.'' Commenters also expressed the opinion that a 
``cost of living'' increase should not be dependent upon performance; 
therefore, employees should be entitled to receive the increases 
associated with the annual general increase and locality pay increase 
regardless of performance. One commenter inquired whether a lump sum is 
given to employees receiving an ``Outstanding'' rating who are at the 
top of the band or if the money and shares are returned to the pay pool 
for recalculation and distribution. Another commenter provided a 
recommendation for handling pay when the employee is at the maximum 
rate of the pay band by suggesting that FSIS provide an option for 
either issuing a monetary award or diverting the pay into the 
employee's retirement account.
    Some commenters had concerns that loyalty or longevity or seniority 
would no longer be factors in determining pay, and the security that 
longevity afforded employees would be jeopardized under the 
demonstration project.
    Response: A significant component of the demonstration project is 
the performance pay pool which will be used to distribute performance 
pay increases. The pay pool helps ensure that ratings, shares, and 
performance payouts are distributed consistently and fairly among those 
who are in the pool. Once a pay pool is established, employees in the 
pay pool who receive a performance rating of ``Fully Successful'' or 
higher are eligible for a performance payout. Employees in the pay pool 
whose performance ratings are below ``Fully Successful'' will not be 
eligible to receive an increase.
    In designing the pay pools, several factors will be taken into 
consideration. While there is no formula in place to determine the size 
and composition of a pay pool, there are some general guidelines and 
benchmarks that FSIS considered in determining the best approach for 
the agency to take when designing pay pools. A pay pool that is too 
large can be cumbersome to manage. FSIS will provide guidance on the 
structure and administration of the pay pools in the FSIS Demonstration 
Project Policies and Procedures Handbook.
    In terms of funding the pay pools, funds that would otherwise have 
been paid to demonstration project employees for the annual GS pay 
adjustment, within-grade increases, and quality step increases will be 
used to

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fund the pay pools. Since FSIS historically allocates monies to the 
salary budget on an annual basis for each of these increases, it is 
anticipated that FSIS will have sufficient funds for the pay pools. 
Since these increases have been historically paid to FSIS employees, 
the funding for these increases will continue under the demonstration 
project; however, the funds will be distributed differently in the form 
of performance pay increases.
    With respect to the concern regarding the possible disparity of 
funds in the pools of differing sizes and the potential for employees 
to be inequitably rewarded, FSIS notes that it will use the same 
percentage factor for all pay pools. Thus, the pay increase is a 
function of the rating and the share distribution within the pool. The 
higher the rating, the more shares an employee will receive. For 
example, those rated ``Outstanding'' receive 9 shares, ``Superior'' 
receive 6 shares, and ``Fully Successful'' receive 4 shares. No shares 
are given to those with less than a ``Fully Successful'' rating. 
However, this does not imply a forced distribution of ratings, which is 
not allowed under this project. To help facilitate a fair rating 
distribution under a pay-for-performance system, it will be extremely 
important for ratings to be well-supported by documentation and 
specific results, and for standards to be clear and measure what is 
important in the job and what it takes to exceed a performance element. 
Ensuring ratings are fair and consistent across program areas and that 
the agency is able to support meaningful levels of performance payouts 
to its top performers is a key tenet of the demonstration project. FSIS 
will run mock pay pools and provide training and the required tools to 
managers and employees detailing their responsibilities in this 
process.
    FSIS recognizes that clarification on locality pay is required in 
response to the points raised by commenters on how locality pay 
increases are handled for employees receiving a less than ``Fully 
Successful'' performance rating. Locality pay is added to the 
employee's base pay and serves as a means to equalize pay between the 
Federal and the private sector markets in a given area. It is not a 
cost of living increase (COLA) as some may perceive. FSIS believes that 
in order to fully test a pay-for-performance system and promote a 
performance culture, all pay increases should be tied to performance 
and that employees who fail to meet the basic requirements of their job 
and receive a Level 2 (Marginal) or Level 1 (Unacceptable) rating 
should not receive a pay increase, including a pay increase resulting 
from a locality pay increase. Employees will not lose pay but rather 
will not receive a pay increase. That is, the employee's base salary 
will be reduced to offset any locality pay increase. However, it is 
recognized that employees may improve their performance before the end 
of the next appraisal period as a result of the successful completion 
of a formal improvement plan. Therefore, if performance improves to the 
``Fully Successful'' or higher level, the employee is entitled to the 
same percentage of basic pay increase resulting from the annual general 
pay increase that the employee would have been guaranteed to receive if 
rated ``Fully Successful'' at the time the performance payout was 
denied. This pay increase will be applied prospectively. FSIS has 
clarified the language in this Federal Register Notice to emphasize 
that the employee is not eligible for a performance payout based on 
share distribution until the next January and the adjustment is not 
retroactive.
    With respect to how pay will be handled for employees who are at 
the maximum rate of the pay band, FSIS considered various options. 
Since a pay increase is most advantageous to the employee, it was 
decided these increases would be reserved for those employees who 
receive an ``Outstanding'' rating. The plan has a provision which 
extends the maximum rate of a pay band up to 5 percent for employees 
rated ``Outstanding'' so that the top performers who are at the normal 
maximum rate of the band may receive a performance pay increase. Those 
employees rated ``Superior'' or ``Fully Successful'' who are at the 
normal maximum rate of the band will receive the performance payout as 
a lump-sum payment. (Employees rated ``Outstanding who are at the 
maximum rate of the 5 percent band extension also will receive the 
performance payout as a lump-sum payment.) Therefore, funds will not be 
reallocated within the pay pool as one commenter questioned, and all 
pay pool funds will be distributed based on the shares allocated to 
those with performance ratings of ``Fully Successful'' or higher.
    FSIS did not adopt the suggestion to provide the option for 
diverting additional employee earnings into a retirement account. This 
can already be initiated by an employee through contributions to the 
Thrift Savings Plan, in addition to the automatic biweekly 
contributions made to their retirement account.
    In response to concerns that there is a need to recognize seniority 
and time spent on the job with automatic increases, FSIS believes that 
length of service is not as critical as the employee's performance and 
their contribution to the mission of the agency. FSIS wants to 
encourage a performance culture and a high performing organization that 
recognizes and compensates employees for their accomplishments rather 
than how long they have been in a position. Certainly with longevity 
comes valuable experience and institutional knowledge. FSIS 
acknowledges that it has many experienced employees who have made 
significant contributions over many years with the agency. The 
demonstration project is designed to recognize and retain these 
experienced high performers by providing more meaningful increases. 
Under a pay-for-performance system, FSIS does not believe that pay 
increases should be based solely on seniority nor should they be 
automatic or equivalent, particularly if an employee is performing at a 
less than ``Fully Successful'' level. This is contrary to the goals of 
the project.
    It should be noted that in some instances those long-term employees 
who are good performers and are currently at higher steps in their GS 
grades will actually see greater benefits under the demonstration 
project. The demonstration project eliminates the GS system requirement 
of waiting periods for receiving a pay increase. Specifically, under 
the demonstration project, employees who receive a rating of ``Fully 
Successful'' or higher will receive an annual performance pay increase 
until they reach the applicable maximum rate. In essence, employees 
with longevity may receive pay increases sooner than they would under 
the GS system with-grade increase waiting period requirements. In 
addition, employees who receive an ``Outstanding'' rating and are at 
the band maximum may have the top of the pay band extended by up to 5 
percent in order to receive a pay increase above the normal band 
maximum. In the GS system, employees at step 10 of their grade are no 
longer able to receive further pay increases at their grade level. FSIS 
wants to attract and retain a strong workforce and improve workforce 
performance.

(c) Staffing

    Comments: Most of staffing comments concerned the impact of 
employee conversion to pay banding on pre-existing promotion potential 
as a result of having successfully competed for a

[[Page 5048]]

``career ladder'' position. Commenters also expressed concerns that 
employees who convert into the demonstration project and have already 
served a period of time in their grade might have to begin a new 52-
week waiting period to qualify for a band promotion.
    There were also questions about being confined to a band with 
little room for advancement and promotion within or to a higher band. 
Some believe that the move to a demonstration project will not have a 
benefit on recruitment or retention of employees. One commenter 
expressed the opinion that the demonstration project, particularly with 
its recruitment features, will be a discriminatory system toward 
current employees if new hires are placed at a higher salary than 
current employees. In addition, an employee group commented that the 
demonstration project should be patterned after the U.S. Department of 
Veterans Affairs (VA) title 38 pay system, which incorporates longevity 
pay and special pay for public health medical professionals.
    There was a question concerning whether the demonstration project 
would cover intermittent veterinary medical officers since they do not 
receive performance ratings. Other comments concerned pay setting upon 
conversion back to the GS in the event that the demonstration project 
is not made permanent. It was suggested that FSIS track employee 
salaries and set GS pay based on what employees would have received if 
they had remained under the GS.
    Response: Clearly, the feature of the plan that generated a high 
number of comments concerned career ladders and promotions, warranting 
some clarification to those sections of the notice. There will continue 
to be ``career ladders'' under FSIS' pay banding system, although 
instead of grade intervals, there will be band intervals. A 
``laddered'' position is simply a position advertised during 
recruitment at a certain level of full performance that is filled 
through selection and appointment at a lower pay band.
    Under the demonstration project plan, FSIS will have authority to 
``grandfather'' employees who become covered by the demonstration 
project at the time it initially takes effect and who have not reached 
their full promotion potential at that time. On an annual basis (until 
full promotion potential is reached), FSIS will compare each 
``grandfathered'' employee's base rate entitlement under the 
demonstration project to the projected base rate they would have 
received under the GS system (taking into account general increases, 
regular within-grade increases, and career-ladder promotion increases). 
If the projected GS base rate is higher than the base rate determined 
under the normal demonstration project rules, and if the employee meets 
any additional required conditions established by FSIS, the employee 
will receive a special pay adjustment so that his or her payable base 
rate does not fall below the projected GS base rate. In other words, 
the projected GS base rate that would have been in effect on the 
specified annual date (as determined by FSIS) acts as a floor rate for 
the next 12 months. Even though the floor rate may be the payable rate, 
FSIS will continue to maintain the employee's normal base rate 
entitlement under the demonstration project as an alternative 
entitlement. While the ``grandfathering'' benefit is in effect, the 
normal base rate entitlement will be determined without regard to any 
GS floor rate that may be payable--that is, the GS floor rate is not 
used in applying pay adjustments under the demonstration project but is 
simply a separate entitlement or minimum guarantee for qualified 
employees. The ``grandfathered'' employee's normal base rate 
entitlement under the demonstration project will become payable if it 
exceeds the GS floor rate. This ``grandfathering'' benefit will cease 
to be applicable when the employee reaches his or her full promotion 
potential (as further described in the following paragraph). At that 
point, if the base rate established under this ``grandfathering'' 
authority is higher than the normal base rate established under the 
demonstration project, the base rate under the ``grandfathering'' 
authority will be converted into the employee's official base rate 
under the demonstration project.
    ``Full promotion potential'' is a traditional position 
classification and personnel staffing concept that will continue to 
have validity under FSIS' demonstration project, and it means the 
highest grade, or pay band, of a career-ladder position for which an 
incumbent previously competed under the Government's Merit System 
Principles and an agency's merit promotion plan. Once an FSIS employee 
who converted to pay banding under this demonstration project receives 
an in-band pay increase or promotion that takes him or her to a pay 
level equivalent to the highest GS grade in the formerly applicable 
career ladder, the employee will be considered to have reached his or 
her full performance potential and the ``grandfather'' provision will 
cease to apply. Future in-band pay increases for such an employee would 
then be based solely on performance, consistent with other employees. 
Of course, just as a GS employee is not guaranteed a career-ladder 
promotion without the supervisor's certification, the promotions and 
special ``grandfathered'' in-band increases for demonstration project 
employees will not be guaranteed, and they will be issued new 
performance plans with each pay increase. Additional terms and 
conditions of this ``grandfathering'' benefit will be published in the 
FSIS Demonstration Project Policies and Procedures Handbook that will 
implement this project plan.
    In terms of meeting the proposed 52-week time in band requirement 
for promotion to the next higher band, FSIS has reevaluated this 
provision in light of the final rule issued on November 7, 2008, which 
eliminated the time-in-grade requirements. Promotions to the next 
higher band will be determined based on meeting the qualifications 
requirements for promotion to the next higher band and will not require 
employees to serve 52 weeks in the band if qualifications are met. 
Policies will be further defined in the FSIS Demonstration Project 
Policies and Procedures Handbook to ensure fair and consistent 
promotion decisions throughout FSIS.
    FSIS disagrees with the comment that being placed into a pay band 
provides little room for advancement and promotion. Pay bands replace 
grades and in most cases simply provide a broader range of pay than a 
single grade currently does. As with grades, employees are not confined 
to one band and being in a band does not prevent employees from 
applying for promotional opportunities to a higher band or to a 
different career path with higher band potential. Promotions will 
continue to exist under the demonstration project. Bands offer greater 
pay potential to employees and are not designed to limit career 
advancement. Promotions will continue to be based on performance and 
promotional criteria that are established for the position. FSIS will 
continue to uphold Merit System Principles (and other personnel 
authorities) and will work to avoid Prohibited Personnel Practices as 
it currently does under the GS system. That will not change.
    Recruitment and retention of a skilled workforce is important to 
FSIS and was one of the reasons FSIS decided to pursue a demonstration 
project to test a pay-for-performance system. The demonstration project 
better positions FSIS to be more competitive with other Federal 
Government agencies and the

[[Page 5049]]

private sector when recruiting new hires. Pay setting flexibilities 
allow FSIS to bring new hires to the agency at any point within the pay 
band based on the credentials and experience they bring to the agency. 
Pay for performance will also provide managers with the ability to 
fairly compensate current employees based on their performance and also 
help to align agency salaries with those in the more competitive labor 
markets. Employees who are rated at higher levels will receive larger 
payouts than employees rated at lower levels. Higher pay increases 
based on performance facilitates a performance culture and produces a 
high performing organization that achieves results. When designing the 
demonstration project, the recruitment and retention of employees in 
the FSIS public health veterinary occupation, which has experienced 
shortages in the last eight to ten years, was of particular concern. 
With respect to implementing a system which includes provisions for 
special pay and longevity pay, FSIS closely studied the features of the 
VA system. Because the focus of the demonstration project is to test 
pay-for-performance in a public health environment, FSIS is moving away 
from the current system's focus on longevity as the basis for all pay 
increases. FSIS felt that instituting longevity pay would be contrary 
to the purpose of the project. In terms of special pay, FSIS is 
exploring several options, including the use of retention incentives 
that are already in existence under title 5. For example, a group 
retention incentive could be authorized for public health veterinarians 
who have certain board certifications that are of significant value to 
the FSIS mission when such veterinarians are likely to leave the 
Federal service because the board certifications improve their 
marketability in the private sector. Over the life of the project, FSIS 
also may request that OPM establish a new staffing supplement for a 
category of FSIS employees for which there are staffing difficulties.
    FSIS does not agree with the suggestion that employees' salaries 
should be tracked in order to set GS pay based on what employees would 
have received if they had remained under the GS. The project plan gives 
FSIS authority to establish the rules governing pay setting for 
employees who convert out of the demonstration project and move to a GS 
position. Those technical conversion-out rules will be provided in the 
FSIS Demonstration Project Policies and Procedures Handbook and will be 
forwarded to other Federal agencies should an FSIS employee move to a 
GS position in another agency. In general, demonstration project 
employees moving to a GS position, whether during the project or at its 
conclusion, will be converted to a GS-equivalent grade and rate before 
they leave the demonstration project and thus will be treated as GS 
employees under GS pay administration rules when setting pay in their 
new GS position. Employees will not lose pay upon conversion to the GS 
system should the demonstration project end. Employees may actually 
progress faster than they would have under the GS system because under 
a pay banding system rate ranges are generally broader, performance pay 
increases may be earned each year, pay increases may be given above the 
pay band maximum for Outstanding performers, and pay setting 
flexibilities may provide for higher entry rates.
    With respect to the question regarding whether intermittent 
veterinary medical officers will participate in the demonstration 
project, FSIS decided to exclude these employees from the project 
because they are excluded from the performance management plan and do 
not have regular performance appraisals.

(d) Management Accountability

    Comments: Perhaps no other topic generated so many comments as the 
topic of supervisory accountability. Most of the comments concerned the 
objectivity and consistency of performance appraisals and the recourse 
employees will have should they desire to appeal their performance 
ratings. A number of commenters expressed concern over fairness of 
performance ratings and supervisory caprice or favoritism in appraising 
employee performance. Some concerns were raised about performance 
appraisals not being completed on time during a rating cycle and the 
level of paperwork required by supervisors when an employee receives a 
``Superior'' or ``Outstanding'' rating. A suggestion was made to add a 
provision to the regulation to permit employees to rate their 
supervisors.
    Response: FSIS agrees with commenters that the performance 
management rating system must be fair and equitable. FSIS also agrees 
with commenters who state that employees should be rewarded based on 
their performance. The demonstration project has developed a series of 
safeguards and checks and balances to help ensure that the process is 
fair and consistent within organizational units.
    One of the safeguards is the way the pay pool process has been 
structured which provides an added level of accountability and checks 
and balances to ensure that the ratings and supporting documentation 
are consistent across the pay pool. Employee accomplishment reports 
prepared by the employee, and supervisory rating justifications 
prepared by the rating supervisor, play a significant part in ensuring 
a fair and equitable performance management rating system. An 
accomplishment report will serve as a critical document in describing 
the employee's performance in accomplishing the agency's mission during 
the rating cycle. Employee ratings will be based on performance 
standards that have been established for the employee's position. 
Ratings will not compare one employee against another employee.
    The demonstration project has been designed with a series of 
reviews to ensure employees are rated according to their level of 
performance. A first-level supervisor reviews an employee's 
accomplishment report and performance standards, in conjunction with 
other performance criteria, and provides a rating for an employee. 
Supervisors will be held accountable for the ratings they recommend for 
employees. The rating will be reviewed by a second-level supervisor and 
then the rating will be presented to the pay pool panel, consisting of 
FSIS management officials, who will evaluate and reconcile, if 
necessary, an organization's performance ratings. The pay pool panel 
will make the final decision on the performance ratings.
    Employees who receive a rating of ``Fully Successful'' or higher 
are entitled to a performance payout. Employees whose performance is 
less than ``Fully Successful'' are not and will receive written 
notification, as well as have the right to request reconsideration of 
the rating. To support fairness and transparency for the program, 
employees have an opportunity to request reconsideration of rating by a 
management official other than the rating official.
    Supervisors will also be under the demonstration project and will 
be held accountable for meeting the supervisory requirements of their 
position. One such requirement is the completion of performance 
appraisals within the designated timeframe for their employees and all 
associated paperwork that accompanies the appraisal. Disciplinary 
action can be taken if supervisors fail to meet the requirements of 
their positions, which includes performance management. FSIS did not 
add a provision to the project notice to permit employees to rate their 
supervisors. Under present

[[Page 5050]]

guidelines, feedback can be obtained in a variety of ways, to include 
employee feedback, surveys, etc.; therefore, a change is not necessary. 
FSIS encourages utilizing various feedback mechanisms available to 
assess management performance.

(e) Performance Management

    Comments: Most of the comments received on performance management 
concerned the establishment of clear, measurable, and realistic 
performance standards to which employees would be rated. Most who 
commented felt that without good standards, a pay-for-performance 
system that is fair and equitable would be difficult to achieve. One 
commenter stated that FSIS had not met OPM-established performance 
management system requirements (i.e., objective and measurable 
performance standards) and therefore questioned FSIS readiness for the 
demonstration project. Some commenters stated morale and teamwork will 
suffer and there will be a disincentive for employees to work together 
as teams because there may be competition among staff members for a 
limited amount of funds that are in the pay pool. Commenters expressed 
concern that employees rated against each other would create situations 
to improve individual performance at the expense of others. There were 
a couple of commenters who welcomed the pay-for-performance system as a 
means to be compensated for their high level of performance.
    One commenter stated that a method, the In-Plant Performance System 
(IPPS), is not being used to measure performance. Commenters also 
expressed the importance of ensuring the availability of comprehensive 
and adequate training for employees, supervisors, and managers on all 
the various components of the demonstration project.
    Response: FSIS agrees that clear, measurable performance standards 
are critical to the success of the demonstration project and has 
steadily worked on the requirements of the President's Management 
Agenda Scorecard and met OPM's requirements for an improved performance 
management system. During 2006, FSIS completed OPM's Performance 
Appraisal Assessment Tool (PAAT), covering ten major areas of focus on 
performance management, and was the first to receive a passing score 
within USDA. FSIS, more recently, completed a partial PAAT assessment 
and demonstrated that employee performance plans were strategically 
aligned, contained balanced credible measures, were results focused, 
and adequately distinguished between levels of performance. In this 
assessment, FSIS received a perfect score. FSIS continues to be a USDA 
and Federal agency leader in making improvements to the performance 
management system, similar to its leadership role in pursuit of 
additional human resources authorities. FSIS feels it is well-
positioned to move forward with the demonstration project and, in fact, 
has met the requirements to do so.
    Other important efforts also underway involve training. As outlined 
in the May 9, 2008 Federal Register Notice, FSIS is providing training 
to all participating employees, supervisors, and managers before the 
project is implemented and throughout the five-year life of the 
project. Supervisors and managers continue to receive extensive 
training in setting and communicating performance expectations, 
monitoring performance, and providing timely feedback. They will also 
receive training on the mechanics of the performance management system. 
Supervisors and managers will be held accountable for the effective 
management of the performance of the employees they supervise through 
performance expectations and appraisals of their own performance in 
this regard.
    FSIS is also providing training in effective accomplishment writing 
for all employees before and throughout the life of the demonstration 
project. Classroom workshops, desk guides, CDs, and net conferencing 
tools will be utilized to provide employees with multiple training 
methods to reach out to the agency's physically dispersed workforce.
    Performance management training has been and will continue to be 
offered to employees and supervisors. Employees are encouraged to ask 
questions about the standards and to ensure that the standards that 
have been established are compatible with their responsibilities.
    Perhaps the biggest challenge the agency faces is earning and 
keeping the trust of its employees during this time of profound change, 
while ensuring that the demonstration project is not perceived as a 
disincentive. The demonstration project is not designed to pit 
employees against each other. Employees will be evaluated against their 
established performance standards and will not be evaluated and 
compared against the performance of other employees in the work unit. 
The effectiveness of every employee is enhanced by his or her ability 
to work effectively with others which in turn can ultimately impact his 
or her level of performance. There are generic elements identified in 
FSIS' Performance Management Plan that are used to evaluate an 
employee's interpersonal skills, including Customer Service, Teamwork, 
and a mandatory Personal Contacts element which can be used to promote 
teamwork and evaluate an employee's effectiveness in working with 
others. Certainly, FSIS will monitor and evaluate the performance 
management process throughout the project to ensure there is no adverse 
impact of this nature.
    Supervisors need to evaluate an employee's performance based on the 
standards that have been established and must take into consideration 
all aspects of the individual's performance. There are several methods 
that are to be used to monitor and evaluate employee performance to 
include a review of work products and other supporting documentation 
and input related to work accomplishment, internal/external customer 
feedback, direct observation of performance, the employee's assessment 
of their own performance, etc. The IPPS is another tool used by 
supervisors to assess the employee's knowledge of his or her job 
requirements. IPPS applies to non-supervisory in-plant occupations. It 
is designed to provide supervisors with a structured process to look at 
specific elements of the job to identify, address, and correct areas 
where there is a need for improvement in performance and provide 
feedback to employees. According to FSIS Directive 4430.3 which 
outlines the policy on the IPPS system, supervisors should use IPPS 
data with other data and information about an employee's performance to 
determine the performance rating.

(f) Employee Relations

    Comments: A few comments in this topical area concerned whether 
employees have the right to appeal or grieve their performance rating. 
Commenters expressed the point that the administrative grievance 
procedure is ineffective as there is a reluctance of managers to 
overturn decisions made by supervisors. Some felt that there needs to 
be a credible system of appeal that is apart from the current 
administrative grievance process. Commenters also expressed concern 
that FSIS already has many grievances and questioned FSIS' 
consideration of the impact the demonstration project would have on 
inspectors in districts where the grievance filings are already rather 
high.
    Response: Under the demonstration project, there will be a 
reconsideration process that is separate from other appeal processes 
like the administrative grievance process. Employees will have the 
right to request reconsideration of their performance rating. These

[[Page 5051]]

procedures will be outlined in the FSIS Demonstration Project Policies 
and Procedures Handbook and will address how the process will work. In 
addition to the reconsideration process, employees who believe they 
have been treated unfairly have the same legal rights and protections 
under the demonstration project as under the GS system and also have 
the right to file a formal Equal Employment Opportunity (EEO) 
complaint.
    With respect to the comment on grievances and their impact on 
inspection personnel, a decision was made to exclude the bargaining 
unit. Therefore, the demonstration project will have no effect on 
inspectors.

(g) Labor Relations

    Comments: There were a few comments related to labor management to 
include a comment concerning the involvement of employee groups in the 
planning, development, and implementation of this demonstration 
project. There was also a comment that FSIS did not communicate the 
right of employees to unionize or give them the option to do so. Some 
members of the bargaining unit commented that it is hard to receive a 
higher rating because of the nature of their job where they work on the 
line. One commenter noted that the majority of the workforce, which 
primarily includes the bargaining unit employees, were not included. 
The commenter questioned how FSIS can exempt the majority of the 
workforce from the project.
    Response: In the initial design of the system, FSIS formed a 
workgroup that was comprised of employees from all levels of the 
organization, several of whom were members of the employee groups. The 
draft Federal Register Notice issued on May 9, 2008, allowed for input 
and comment from employee groups. One group submitted both written and 
oral comments. FSIS values the opinions of its employees and welcomes 
input from its employee groups. Briefings and subsequent discussions 
were held with the leadership of the National Association of Federal 
Veterinarians and the Association of Technical and Supervisory 
Personnel employee groups to solicit questions and concerns during the 
comment period. With respect to the comment on communicating 
information on or providing employees with the option to unionize, FSIS 
notes that employees have the right to unionize, but it is not a 
management responsibility to communicate information on how to do so. 
As noted in other parts of this notice, the decision to exclude the 
bargaining unit was made in part due to the fact that no more than 
5,000 employees may participate in a demonstration project. Since the 
bargaining unit comprises over 6,000 employees, FSIS decided to exclude 
this group. Therefore, the demonstration project will have no effect on 
the performance ratings, pay, or other incentives for bargaining unit 
employees.

(h) Evaluation

    Comments: A few commenters noted the importance of evaluating the 
demonstration project in their comments concerning other topical areas. 
A couple of commenters, however, specifically addressed the topic of 
evaluation. One commenter pointed out that an evaluation of the GS 
system against the demonstration project, conducted by non-agency 
officials, would provide a fair and accurate assessment of the results. 
Another commenter expressed concern that the objectives of the 
demonstration project are not being met under the proposed structure. 
One commenter stated that FSIS is presenting the positive points and 
none of the adverse issues relating to the demonstration project.
    Response: FSIS agrees that the evaluation portion of the Public 
Health Human Resources System (PHHRS) is a critical means of 
determining the impact on improving human resources management. 
Evaluation, a legal requirement of a demonstration project, will take 
place throughout the five-year demonstration project period. It will be 
conducted by an independent evaluator to assess whether the 
flexibilities of the proposed system will help FSIS better attract and 
retain employees, or whether FSIS would realize the same results had a 
change from the GS system to PHHRS not been made.
    Over the five-year period, surveys, focus groups, and structured 
interviews with FSIS employees will be conducted as part of the 
evaluation process. FSIS will work with OPM to address issues that 
arise, especially any adverse impact issues that are identified during 
the evaluation period, and will apprise employees of any warranted 
changes or revisions. To ensure the goals and objectives of the 
demonstration project are being realized, FSIS has made some changes to 
its initial proposal of the demonstration project which can be found in 
section 4, ``Changes to Demonstration Project Plan,'' of this notice.

(i) Other

    Comments: There were some general comments and observations that do 
not specifically relate to the FSIS demonstration project and therefore 
are not covered in this section. The comments in this category relate 
to a variety of topics that do not specifically fall under any of the 
other topical areas. These comments relate to timing of implementation 
especially during the election year; communication efforts and the lack 
of specificity in operational and implementation procedures; 
administrative burden; workload distribution; the option of employees 
voting to participate in the project; and the impact on retirement.
    Response: All of these comments warrant a response. FSIS does not 
see the benefit of waiting to implement the demonstration project. By 
design, the demonstration project is an experiment and needs to be 
tried and tested over a five-year period of time. Delaying the project 
would not yield any benefits. Many things are supposed and anticipated, 
but few things are known for sure in advance. They need to be tried and 
tested.
    It is understandable that some commenters found FSIS' proposed 
project plan vague and unclear in parts. FSIS' demonstration project 
plan, in both its proposed and final incarnations, is designed to 
mainly answer the ``what'' of a matter, not the ``how.'' This is why 
there have been many references in these responses, as well as in the 
text of the project plan, to the FSIS Demonstration Project Policies 
and Procedures Handbook, which will contain more details about the 
project's operating procedures. But this response is not to dodge the 
issues. Most of the comments received during the public comment period 
have been invaluable in guiding FSIS' development of its companion 
policies and procedures. By design, a demonstration project is an 
experiment. There is more than one way to execute and effect almost any 
feature of this experiment, and though modeling previous successful 
experiments and viable alternative personnel systems can be extremely 
useful, there are still mechanical subtleties and finer points of 
interpretation in matters of pay banding, staffing, and pay with which 
FSIS must come to terms. Having said this, it can be said that after 
many months of rigorous development and refinement, FSIS has gained 
competence and sureness about how to effectively execute the 
innumerable features and applications of this project. FSIS is 
developing guidelines and conducting training to aid managers, 
employees, and the human resources office in implementing the 
operational features of the project. It will be some time

[[Page 5052]]

following project implementation and employee conversion before FSIS is 
proficient in most demonstration project matters, though FSIS is taking 
great pains and care to ensure that start up and transition are 
implemented as smoothly as possible.
    For a period of time beginning prior to the publication of the 
Federal Register Notice on May 9, 2008, to present, FSIS has followed a 
process of informing employees of the demonstration project through the 
employee newsletters and e-mails. A 30-day comment period followed the 
publication of the Notice, and OPM held a public hearing at the USDA 
Headquarters in June 2008 where individuals could comment on the 
system. FSIS has set up a mailbox on its intranet site for employees to 
submit questions and comments. In addition, agency publications, both 
in written and electronic format, have been regularly used to apprise 
employees of the status of the demonstration project and to provide 
answers to commonly asked questions and other pertinent information. 
Presentations were conducted for employees at headquarter and field 
locations and at various agency meetings and conferences. Throughout 
the life of the project, FSIS will continue to regularly inform 
employees of the status of the project and provide opportunities for 
employee comments.
    FSIS does not intend to increase staff to handle the administrative 
workload under the demonstration project. Automation of several 
administration processes associated with the features of the project is 
being considered.
    With respect to workload burden for supervisors, the 
responsibilities for managing employee performance are leadership 
responsibilities inherent in all managerial and supervisory jobs. These 
responsibilities are the same whether under a demonstration project or 
the current system. By setting goals and expectations for employees up 
front through the performance management process and communicating 
throughout the year, organizational performance can be improved and 
workload less burdensome. FSIS recognizes that for pay pool managers 
and others participating in that process, there will be additional 
responsibilities. However, with automated processes and training, FSIS 
will work diligently to prepare for a smooth transition which should 
facilitate the process.
    FSIS does not agree that employees should vote on participating in 
the demonstration project. Because FSIS is experimenting with a pay 
banding and pay for performance system that, were it to be successful, 
would replace entire segments of the GS workforce, allowing employees 
to vote would be impractical, and more compelling, not in the best 
interest of efficient Government.
    FSIS is not proposing to experiment with retirement benefits and 
laws, which cannot be waived under the demonstration project authority. 
Therefore, we disagree that the demonstration project will adversely 
impact employees under the Federal Employees Retirement System. 
Employment rules are often changed during the average career of a 
Federal employee to include provisions for additional flexibilities and 
modernization of the Civil Service system.

4. Changes to Demonstration Project Plan

    What follows is a list enumerating the changes to FSIS' 
demonstration project and textual changes to the project plan. The 
changes are clarifying in nature and are not substantial or major. The 
page numbers referenced are those found in the May 9, 2008, Federal 
Register Notice. Some of the changes have been described in the 
preceding responses to specific comments. Other changes provide 
additional detail and clarification or correct technical problems.
    (1) Page 26437: The Table of Contents is revised to reflect the 
addition of four new sections--VIII.A., Overview; VIII.B., Evaluation 
Models; VIII.C., Evaluation; and VIII.D., Method of Data Collection.
    (2) Page 26437: Section I, Executive Summary, is rewritten to 
reflect FSIS' final project goals.
    (3) Page 26438: Section II.A., Purpose, is revised to ensure 
consistency with the Executive Summary.
    (4) Page 26439: Section II.D., Participating Organizations, is 
revised to exclude intermittent veterinary medical officers and to 
reflect a name change from Technical Service Center to Policy 
Development Division.
    (5) Page 26439: Section II.E., Participating Employees, is revised 
to exclude intermittent veterinary medical officers.
    (6) Page 26440: January 2008 data are superseded with September 
2008 data in the table, ``Covered Employees by Occupational Series and 
Grade.''
    (7) Page 26441: The description for the Administrative, 
Professional, and Scientific career path was modified, consistent with 
the FSIS response herein under the subsection for career paths and pay 
bands.
    (8) Page 26443: Section III.A.9, Rate of Basic Pay Upon Promotion, 
is clarified.
    (9) Page 26447: Section III.C.4, Employees Who Cannot Receive a 
Performance Pay Increase, is clarified.
    (10) Page 26447: Section III.E.3, Promotions removes the time-in-
band requirement.
    (11) Page 26449: Section VIII, Project Evaluation, is rewritten to 
provide more detail on the evaluation framework and assessment 
criteria.
    (12) Page 26449: Under section X, Waiver of Laws and Regulations 
Required, the chapter 51 waiver is revised to correct an error.

    U.S. Office of Personnel Management.
Michael W. Hager,
Acting Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Rationale for a New 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 Payouts and Awards
    1. Performance Shares
    2. Performance Pay Pools
    3. Performance-Based Payout
    4. Employees Who Cannot Receive a Performance Payout
    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
    A. Overview
    B. Evaluation Models
    C. Evaluation

[[Page 5053]]

    D. Method of Data Collection
IX. Costs
    A. Buy-in Costs
    B. Recurring Costs
X. Waiver of Laws and Regulations Required
    A. Title 5, United States Code
    B. Title 5, Code of Federal Regulations

I. Executive Summary

    This project was designed by the U.S. 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 goals of the demonstration project are to--
    (1) Simplify the current classification system for greater 
flexibility in classifying work and paying employees;
    (2) improve hiring by allowing FSIS to compete more effectively for 
high quality employees through the judicious use of higher entry 
salaries;
    (3) reaffirm the performance management and rewards system for 
improving individual and organizational performance;
    (4) eliminate automatic pay increases (i.e. annual adjustments that 
normally take effect the first day of the first pay period beginning on 
or after January 1) by making pay increases performance sensitive, so 
that only Fully Successful and higher performers will receive payouts 
and the best performers will receive the largest payouts;
    (5) test the effectiveness of multi-grade pay bands in recruiting, 
advancing, and retaining employees;
    (6) improve the retention of high-performing employees in 
developmental positions by testing the use of developmental pay 
increases to recognize the faster progression that can occur in these 
positions.
    The demonstration project will modify the General Schedule (GS) 
classification and pay system by identifying several broad career 
paths, establishing pay bands which may cover more than one grade in 
each career path, eliminating longevity-based step progression, and 
providing for annual performance payouts based on performance. The 
proposed project will test (1) the effectiveness of multi-grade pay 
bands in recruiting, advancing, and retaining employees, and in 
reducing the processing time and paperwork traditionally associated 
with classifying positions at multiple grade levels and (2) the 
application of meaningful distinctions in levels of performance to the 
allocation of annual payouts. The project is scheduled for 5 years. 
However, with OPM's concurrence, the project may be extended if further 
testing and evaluation are warranted or may be terminated before the 
expiration of the 5-year period.
    The 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 
demonstration project is predominantly supervisory (about 40%), and it 
is important to 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 project is to test whether a results-based, 
competency-linked, pay-for-performance system and related innovations 
will produce successful results in a public health regulatory 
environment and occupations associated with public health and food 
defense.

B. Rationale for a New 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 processed 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 processed 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.

[[Page 5054]]

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 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 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

[[Page 5055]]

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 proposed 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) and 
intermittent veterinarian personnel (GS-701) appointed under Schedule A 
213.3113(1)(3) and Schedule C employees), 15 District Offices, 3 Field 
Laboratories, a Policy Development Division 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 
during 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) and veterinary (GS-701) 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 grade. The OPM occupational 
series will be retained for all covered positions.
BILLING CODE 6325-43-P

[[Page 5056]]

[GRAPHIC] [TIFF OMITTED] TN28JA09.000


[[Page 5057]]


[GRAPHIC] [TIFF OMITTED] TN28JA09.001

BILLING CODE 6325-43-C

F. Labor Participation

    No bargarining 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 project. These innovations, and 
the procedures associated with them, are described below under Pay 
Banding Classification and Pay System, Performance Appraisal System, 
Performance-based Payouts 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, and full-time) and falls within the

[[Page 5058]]

maximum of 5,000 allowed for a demonstration project.
    3. Goals and Objectives: The specific project objectives are listed 
under the 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) Administrative, Professional, and Scientific, [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, and 1801--
Compliance Officer.
    (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:

                                                          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
 and Scientific (AP).              Trainee).                               Intermediate.       Performance.                            Expert.
                                                                                                                 ---------------------------------------
                                                                                                                      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.

[[Page 5059]]

 
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 OPM 
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 the 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 solely 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 GS grades 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 of basic pay may fall below the 
normal pay band minimum when the minimum rate 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 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

[[Page 5060]]

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 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.
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. In 
exercising this flexibility, FSIS will consider the appointee's 
qualifications, competing job offers, FSIS's need for the appointee's 
talents, and the appointee's potential contributions to FSIS mission 
accomplishment. 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 is selected 
for a position covered by the demonstration project.
    FSIS employees, who at the time of conversion into the 
demonstration project are in a career ladder to a higher GS grade 
(i.e., have not reached the top level of that career ladder), will be 
eligible for special in-band pay increases under the authority of this 
demonstration project. The in-band pay increases will be sufficient to 
ensure that an employee's base rate under the demonstration project is 
equivalent to the base rate which the employee would have received had 
the employee and the position remained in the General Schedule. Only 
one in-band increase may be received in a 52-week period under this 
``grandfathering'' authority. In other words, once a year, FSIS will 
compare the normal base rate established for the employee under the 
demonstration project with the base rate the employee would have been 
paid under the General Schedule pay system. The projected General 
Schedule base rate serves as a floor rate that becomes payable when it 
exceeds the normal base rate under the demonstration project (resulting 
in a special pay increase to reach the floor rate). The floor rate will 
not be used in applying future pay adjustments under the demonstration 
project while the grandfathering benefit is in effect; instead, FSIS 
will continue to calculate the employee's normal base rate under the 
demonstration project as a separately maintained pay entitlement that 
will become payable if it exceeds the floor rate.. This 
``grandfathering'' benefit will cease to be applicable when the 
employee reaches equivalence with the top GS grade of the formerly 
applicable career ladder. At that point, if the base rate established 
under this ``grandfathering'' authority is higher than the normal base 
rate established under the demonstration project, the rate under the 
``grandfathering'' authority will be converted into the employee's 
official base rate under the demonstration project. Only current FSIS 
employees who convert at the inception of pay banding will be afforded 
this ``grandfathering'' benefit. More specific terms and conditions of 
this benefit will be established by FSIS in the FSIS Demonstration 
Project Policies and Procedures Handbook that will implement the 
project plan.
    FSIS may establish special rules for computing the promotion 
increase for promotions involving positions covered by a staffing 
supplement that take into account the staffing supplement and locality 
pay, subject to guidance provided by OPM.
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 or similar within 
range adjustment 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.

[[Page 5061]]

    Annual performance awards described in section III.C.5. provide for 
lump-sum cash payments to recognize 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 employees in the 
upper range extension whose rating of record falls below Outstanding;
    (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 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

[[Page 5062]]

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 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.'' 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 mid-year 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

[[Page 5063]]

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 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 Payouts 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 performance payouts 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), and quality step increases 
(QSI) 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 WGIs, QSIs, and the 
annual GS pay adjustments that otherwise would have been paid to 
participating employees. In computing the estimated value of WGIs and 
QSIs, FSIS may use estimated Governmentwide averages as computed by OPM 
or agency historical averages.
3. Performance-Based Payout
    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 payout 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). This 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

[[Page 5064]]

of the 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 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 Payout
    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, as a result of the successful completion of a formal 
improvement plan, 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 
percentage basic pay increase resulting from the general pay increase 
that the employee would have been guaranteed to receive if he or she 
had been rated Fully Successful at the time the performance payout was 
initially denied. This provision only applies to the annual general 
increase and is not retroactive. Under no circumstances is an employee 
eligible for a performance payout based on share distribution until the 
next January.
    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-ladder 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 based on the amount 
historically spent on career-ladder promotions, 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

[[Page 5065]]

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, 
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
    Reference paragraph III A.8 regarding the rate of basic pay upon 
initial appointment.
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 and meet the 
qualifications requirements for promotion to the next higher band. 
There are no time-in-band requirements. (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 and GS-701) 
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, 
receiving a retained rate under 5 U.S.C. 5363 or a saved rate under 5 
U.S.C. 3594, or on a temporary promotion 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 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, or staffing supplement) is not reduced upon 
conversion.

[[Page 5066]]

    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. 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 any 
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

A. Overview

    Chapter 47 of title 5, United States Code, requires an evaluation 
of each demonstration project, and section 470.317(b) of title 5, Code 
of Federal Regulations, further specifies a results evaluation ``to 
measure the impact of the project results in relation to its 
objectives.'' A rigorous longitudinal evaluation of the project, 
including a baseline evaluation, implementation evaluation, progress 
evaluation, and summative evaluation will be conducted in accordance 
with an OPM-approved evaluation plan. Below is a summary of the 
evaluation.

B. Evaluation Models

    The evaluation plan is guided by four distinct models: A context 
model, an intervention impact model, an implementation impact model, 
and an overall logic model. Each model serves a unique and important 
purpose in the evaluation of the demonstration project. Also considered 
in the development of the evaluation plan is OPM guidance issued in its 
Alternative Personnel Systems (APS) Objectives-Based Assessment 
Framework Handbook. The APS Handbook includes an assessment framework 
which outlines the elements and dimensions for assessing Preparedness 
and Progress of alternative personnel systems, specifically those 
featuring performance-based pay. The Preparedness dimensions will be 
covered in the implementation evaluation and Progress elements as part 
of the longitudinal impact evaluation.
    The logic model shown in Figure 1 integrates information from the 
context model, the intervention impact model, and implementation impact 
model with other key information, such as contextual factors cited in 
the FSIS 2008-2013 Strategic Plan. The logic model specifies the 
relationships among program elements (e.g., participants, initiatives) 
and defines program success. The logic model provides a detailed 
representation of program inputs, program initiatives, intended 
intermediate outcomes, ultimate outcomes, unintended outcomes, and 
contextual factors of the demonstration project. For example, program 
inputs include the budget, participants of the project, as well as HR 
staff, supervisors, and the comparison group. Implementation factors 
such as leadership commitment, open communication and stakeholder 
involvement, as well as the degree of implementation (i.e., the extent 
to which interventions were implemented as planned), will be considered 
as part of the implementation evaluation. These program inputs are 
expected to impact the program initiatives, including pay banding, 
classification and performance management, described in detail earlier.
    The logic model is designed to evaluate two levels of 
organizational performance: intermediate and ultimate outcomes. The 
intermediate outcomes, the main focus of the evaluation, are defined as 
the results from specific personnel system changes. Intermediate 
outcomes may occur at the individual or organizational level. The 
ultimate outcomes are determined through improved organizational 
performance, improved customer satisfaction, and mission 
accomplishment. Although it is not possible to establish a direct 
causal link between changes in the HR management system and 
organizational effectiveness, it is hypothesized that the program 
initiatives will contribute to improved organizational effectiveness. 
The logic model also illustrates that the context within which the 
demonstration project operates during its 5-year period is an important 
consideration in interpreting the results obtained. The contextual 
factors, which may occur at any stage of the project, are potential 
intervening variables that may affect project outcomes positively or 
negatively. Intervening variables can facilitate or inhibit the 
intended outcomes, or they can result in unintended outcomes.

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    In addition, the evaluation will take into account the requirements 
of section 1126 of Public Law 108-136 (5 U.S.C. 4701 note) which states 
that a pay-for-performance system may not be initiated under chapter 47 
of title 5, United States Code, unless it incorporates the following 
eight elements: (1) Adherence to merit principles set forth in section 
2301 of title 5; (2) a fair, credible, and transparent employee 
performance appraisal system; (3) a link between elements of the pay-
for-performance system, the employee performance appraisal system, and 
the agency's strategic plan; (4) a means for ensuring employee 
involvement in the design and implementation of the system; (5) 
adequate training and retraining for supervisors, managers, and 
employees in the implementation and operation of the pay-for-
performance system; (6) a process for ensuring ongoing performance 
feedback and dialogue between supervisors, managers, and employees 
throughout the appraisal period, and setting timetables for review; (7) 
effective safeguards to ensure that the management of the system is 
fair and equitable and based on employee performance; and (8) a means 
for ensuring that adequate agency resources are allocated for the 
design, implementation, and administration of the pay-for-performance 
system.

C. Evaluation

    A quasi-experimental design will be used for the evaluation of this 
demonstration project. The Animal and Plant Health Inspection Services 
(APHIS) will serve as the ``no treatment'' GS comparison group, since 
it is not possible to randomly assign individuals to an 
``experimental'' group and a ``control'' group in a demonstration 
project. APHIS is a similar organization, with a similar occupational 
mix and working conditions. This comparison group will be used 
primarily in the analysis of workforce data and employee perceptions 
gathered from employee surveys. Longitudinal data from APHIS and FSIS 
will be analyzed and compared to determine the overall effectiveness of 
the changes to the FSIS personnel system. Pre-post comparisons for 
FSIS, pre-post comparisons for APHIS, longitudinal comparisons for 
FSIS, longitudinal comparisons for APHIS, and cross-sectional 
comparisons between FSIS and APHIS will identify pre-existing baseline 
differences and help determine whether changes over time were due to 
the demonstration interventions.

D. Method of Data Collection

    A multi-method approach to data collection and analysis will be 
used in the evaluation. Workforce information from OPM's Central 
Personnel Data File (CPDF) and personnel office records will be 
supplemented with perceptual survey data to assess the effectiveness 
and perception of the new system. Data from a variety of sources 
provide more than one perspective on the effectiveness of demonstration 
projects. In addition, both qualitative and quantitative data will be 
used in evaluating outcomes. The following data will be collected: (1) 
Workforce data; (2) personnel office data; (3) employee attitude 
surveys; (4) structured interviews and focus group data; (5) local site 
historian logs and implementation information; and (6) core results 
measures of organizational performance. In addition, data collected 
from prior demonstration projects will

[[Page 5068]]

provide benchmark data for additional comparisons. All data collection 
methods will consider the various career paths, pay bands, locations, 
operating units and other important distinguishing factors of the 
demonstration project. Each phase of the project will involve 
collecting the different types of data and preparing reports and 
interim briefings on the results. By using both qualitative and 
quantitative methods in conducting the evaluation, as well as benchmark 
data, confidence in the findings will increase and a more comprehensive 
understanding of the changes and impact will be gained.
    The evaluation effort will consist of two main phases covering 
formative and summative evaluation over a 5-year period. The formative 
evaluation phase covers baseline data collection prior to 
implementation of the personnel system changes as well as the 
Implementation and Progress evaluations. The Summative Evaluation will 
focus on an overall assessment of the demonstration project after about 
four years of data have been collected to provide sufficient time for 
policy-makers during the fifth year to make a decision on broader 
government application, extension of the project, or expiration after 
the 5-year period.

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) section 5103 is 
retained and modified after ``finally'' to read ``the coverage of 
positions and employees under this modified classification system,'' 
(2) sections 5111 and 5112 are retained with ``grade'' replaced by 
``pay bands'' and (3) 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).
    Chapter 53, section 5303: Annual adjustments to pay schedules.
    Chapter 53, section 5304: Locality-based comparability payments 
(only to the extent necessary to (1) provide a locality rate 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

[[Page 5069]]

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 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 replace ``same grade'' with ``same pay band'').
    Part 351, subpart G, section 351.701: Assignment involving 
displacement (only to the extent necessary to replace ``three grades'' 
with ``one pay band'' and ``five grades'' with ``two pay bands'').
    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).
    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

[[Page 5070]]

``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. E9-1641 Filed 1-27-09; 8:45 am]
BILLING CODE 6325-43-P