[Federal Register Volume 84, Number 64 (Wednesday, April 3, 2019)]
[Rules and Regulations]
[Pages 12873-12876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06396]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
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  Federal Register / Vol. 84, No. 64 / Wednesday, April 3, 2019 / Rules 
and Regulations  

[[Page 12873]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 337

RIN 3206-AN65


Examining System

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing a final 
regulation to implement changes to part 337 of OPM's regulations, which 
govern direct hire authority. Executive Order (E.O.) 13833, ``Enhancing 
the Effectiveness of Agency Chief Information Officers'' requires OPM 
to issue proposed regulations delegating to the head of a covered 
agency authority necessary to determine whether there is a severe 
shortage of candidates or a critical hiring need for information 
technology (IT) positions, under criteria established by OPM. OPM 
published the proposed regulations, has considered proposed comments, 
and has now determined to adopt a final rule making this change. The 
intended effect of this change is to enable Chief Information Officers 
to hire urgently needed IT professionals more quickly.

DATES: This rule is effective May 3, 2019.

FOR FURTHER INFORMATION CONTACT: Darlene Phelps by telephone on (202) 
606-0960, by fax (202) 606-4430, by TTY at (202) 418-3134, or by email 
at [email protected].

SUPPLEMENTARY INFORMATION: On October 29, 2018, OPM issued proposed 
regulations at 83 FR 209, as contemplated by E.O. 13833, ``Enhancing 
the Effectiveness of Agency Chief Information Officers.'' Section 9 of 
the E.O. directed OPM to propose regulations pursuant to which OPM 
could delegate to the heads of certain agencies (other than the 
Secretary of Defense) authority to determine, under regulations 
prescribed by OPM, whether a severe shortage of candidates (or, for the 
U.S. Department of Veterans Affairs (VA) a severe shortage of highly-
qualified candidates) or a critical hiring need exists for positions in 
the Information Technology Management series, general schedule (GS)-
2210, for purposes of demonstrating a need for a Direct Hire Authority. 
The agencies covered by the E.O. are those listed in 31 U.S.C. 901(b), 
or independent regulatory agencies defined in 44 U.S.C. 3502(5). OPM 
received seven sets of comments in response to the proposed rule. A 
discussion of these comments follows.

Discussion of Comments

    One individual expressed general support for the proposed rule, and 
opined that the risk and cost of potential cronyism is an acceptable 
opportunity cost of a direct hire authority. As a general matter, 
Congress has determined that in cases where a severe shortage or 
critical hiring need exists, direct hire authority is justified as a 
legitimate exception from the normal rules of competitive hiring. The 
use of the authority is subject to Merit System Principles, which 
include requirements that selection and advancement be determined 
solely on the basis of relative ability, knowledge and skills, 
regardless of the hiring authority used to fill a position. Further, 
OPM contends that the opportunity cost for cronyism, favoritism, and 
nepotism is not only the highest cost that a Government can pay, but is 
fundamentally at odds with Civil Service law. In accordance with 
statute, OPM's regulations prescribe the criteria that must be met in 
order to authorize direct hire authority, consistent with Congressional 
intent. In addition, OPM will take the following steps to help ensure 
this DHA is used appropriately by Federal agencies: (1) OPM will update 
its guidance on DHA at https://www.opm.gov/policy-data-oversight/hiring-information/direct-hire-authority/ with an emphasis to hiring 
managers and human resources personnel that when using DHA agencies are 
required to employ an objective selection process, such as selecting 
qualified candidates (including individuals entitled to veterans' 
preference) as they are found; (2) OPM will provide agencies with 
interactive sessions on how to use DHA, aimed at hiring managers and 
human resources personnel, through a variety of media: (3) OPM will 
review and monitor agencies' use of this authority, including hiring 
patterns, etc. Furthermore, the proposed regulation requires agencies 
to notify OPM when an agency head authorizes DHA and to provide to us 
the justification on which the approval was based. OPM is retaining 
this requirement in the final rule so that OPM will know which agencies 
are using this DHA, and can provide oversight to ensure that it is 
being used appropriately.
    Another individual commented on the severity of the wildfire season 
in 2018. OPM is not addressing this comment as it not within the scope 
of the proposed regulation.
    A representative from an internet-based professional networking 
service suggested the final rule should encourage agencies to use this 
hiring flexibility. OPM is not adopting this suggestion. Each agency 
must decide independently whether its particular circumstances justify 
the need for a DHA in accordance with the statutory and regulatory 
criteria required for an approval.
    The same individual suggested the internet-based professional 
networking service could help agencies determine when to implement DHA, 
based on the presence of competitors for the same skill-sets for which 
the agency is recruiting. OPM is not accepting this comment both 
because it is, in part, beyond the scope of this regulation and because 
it proceeds from a faulty premise as to the applicable standards that 
govern when a direct hire authority is appropriate. In using this 
delegation of authority, agencies must apply the provisions of 5 CFR 
part 337, 5 CFR part 330 subparts F and G. In doing so, agencies may 
rely upon a variety of data sources to gauge, in part, the availability 
of skill-sets to determine the presence of a severe shortage of 
candidates in accordance with 5 CFR 337.204. We also note that agencies 
must provide public notice of any vacancy to be filled through a direct 
hire authority, in accordance with 5 U.S.C. 3304(a)(3)(A) and 5 CFR 
330.104.
    Another individual commented that agencies may find recruitment of 
skilled IT professionals using this authority difficult if the hiring 
agency cannot match the level of salary and benefits

[[Page 12874]]

offered by private sector employers. The commenter also suggested that 
OPM take steps to encourage agencies to use this authority to their 
advantage. The first comment is, essentially, an observation and thus 
does not require a response. OPM is not adopting the second suggestion. 
As noted above, each agency must decide independently whether its 
particular circumstances meet the statutory and regulatory criteria and 
thus justify using this delegation of authority. OPM provides guidance 
to agencies on DHA at: https://www.opm.gov/policy-data-oversight/hiring-information/direct-hire-authority/ authority/.
    One commenter expressed concern that this authority will be used by 
agencies to avoid applying veterans' preference when filling IT jobs. 
This commenter stated, ``Direct hire authority is often nothing more 
than a work around for statutory veterans' preference rights. At a 
minimum, there should be an objective and impartial review of the facts 
supporting a direct hire authority, and having each agency be its own 
judge and jury, as OPM is proposing, is fraught with problems. In my 
agency, we get many qualified applicants for IT jobs, so there is no 
shortage of good candidates. We are going to get a lot of pressure to 
do direct hire just to avoid having to hire well qualified veterans. 
This is bad for veterans and bad for civil service. Maybe agencies 
should have to show their veterans hiring numbers are good before they 
can use the direct hire.''
    Another individual expressed a similar concern about the impact of 
this authority on veterans' preference and asked that OPM conduct 
rigorous reviews of agencies who use this authority. This individual 
commented, ``I am writing concerning the proposal to grant agency heads 
the authority to determine which IT specialties may fall under the 
direct hire authority. In the last five years that I have been involved 
in staffing, to include a stint as the chief of our Delegated Examining 
Unit, it has been my experience that we usually receive large numbers 
of best qualified candidates for IT Specialist job announcements. When 
selecting officials in the agency complain about a certificate we 
issue, the basis for the complaint is that veterans with preference are 
the only applicants on the certificate. In our agency, approximately 70 
percent of the IT workforce are contractors, and usually the selecting 
official wishes to hire one of his or her contractors that is not 
within reach because they are not a veteran with preference. My agency 
has a practice of announcing most positions for five days, yet we still 
average 50 to 100 or more applicants for each IT Specialist position we 
advertise. I fear agencies will mis-use the proposed direct hire 
authority to essentially make the entire IT Specialist, GS-2210 
occupation direct hire. OPM will need to institute rigorous review of 
agencies who use the authority to ensure they do not abuse it; however, 
personally I think the proposed direct hire authority is an invitation 
to agencies to circumvent veterans' preference. As I stated above, 
selecting officials object to certificates with plenty of best-
qualified veterans, not because of qualifications, but because of the 
inability to select contractors currently working in their 
organization.''
    In response to the overall concern regarding veterans' preference, 
OPM is strongly committed to connecting the brave men and women who 
serve our Nation with opportunities to continue their service in the 
Federal workforce. OPM will continue our close coordination with the 
Department of Labor and Department of Veterans Affairs as required 
under E.O. 13518, which established the Veterans Employment Initiative. 
Additionally, OPM will continue our efforts across government to 
support agencies as they seek to hire veterans.
    With respect to the first comment, OPM agrees with the need for an 
`objective and impartial review of the facts supporting a direct hire 
authority.' The final rule provides this mechanism by establishing OPM 
as the impartial reviewer. The rule requires that when using this 
authority, an agency head must authorize DHA based on justification 
provided by the agency's Chief Human Capital Officer (or equivalent) in 
accordance with the provisions and criteria specified in 5 CFR part 
337. Further, once an agency head authorizes DHA using this criteria 
the deciding agency is required to provide the determination and a 
description of the supporting evidence to OPM. OPM may request access 
to the underlying documentation at any time, and may require corrective 
action in accordance with 5 U.S.C. 1104(c) and section 337.206 of the 
regulation. In accordance with 5 CFR 337.206 OPM will monitor agencies' 
use of DHA under this authority and may terminate or modify any DHA if 
OPM finds the basis on which such DHA was granted no longer exists, or 
when an agency has used an authority improperly. Regarding the 
commenter's concern that an agency may authorize DHA when a lack of 
qualified IT applicants exists, 5 CFR 337.206 requires agencies to 
notify OPM when the agency finds adequate numbers of qualified 
candidates previously filled under DHA based on a severe shortage of 
candidates. OPM will make this requirement a point of emphasis in its 
updated guidance and technical assistance. In addition, OPM will rely 
on a variety of data sources to monitor how DHA's under this authority 
are being utilized, to include the availability of qualified applicants 
as captured through USAJOBS and USASTAFFING data, nationwide labor 
trends on the availability of IT specialists in the general labor pool, 
the results of agencies' past attempts to fill IT jobs through other 
hiring mechanisms, the number of pass over request made for preference-
eligible veterans initially deemed to be qualified for these DHA 
covered IT positions, and the number of selections of qualified 
preference-eligible veterans hired under this authority. In addition 
OPM's Merit System Accountability and Compliance reports, which are 
periodic reviews of agency hiring practices, will also serve provide an 
objective basis on which to gauge how agencies are using this DHA.
    With respect to the second comment, OPM agrees that oversight by 
OPM is necessary. We believe that current statutory and regulatory 
authority exists in order for us to do so. In addition to the checks 
and measures described in the preceding paragraph OPM notes that any 
delegation of authority provided by OPM under 5 U.S.C. 1104(b)(2) 
requires a corresponding oversight program for use of the delegation. 
To facilitate this process OPM will be establishing a unique authority 
code for this DHA which will assist us in monitoring each agency's use 
of this authority.
    A Federal agency questioned the effectiveness of the time 
limitations on appointments made under this authority. The agency noted 
that IT modernization may be a permanent or on-going endeavor and 
suggested OPM provide for permanent appointments under this authority. 
OPM is not adopting this suggestion. We are adopting the time limits on 
appointments as proposed. Our rationale for doing so is to attune these 
rules with the hiring patterns of the twenty first century, in 
particular those of the IT workforce. Agencies are making greater use 
of time-limited employees than in the past and are expected to continue 
to do so. Likewise, many individuals prefer Federal employment that is 
characterized by a time-limited or project nature, with movement in and 
out of public service, rather than the traditional 30-year career 
model. Agencies with a need to make appointments of IT personnel on a 
permanent basis in response to a critical

[[Page 12875]]

hiring need or severe shortage of candidates may continue to request 
DHA from OPM pursuant to Subpart B of 5 CFR part 337. OPM retains the 
ability to authorize DHA to agencies, in appropriate circumstances, 
when presented with a well-justified request for DHA to fill positions 
on a permanent basis.
    OPM is adopting the proposed rule without change.

Regulatory Flexibility Act

    I certify that this regulation would not have a significant 
economic impact on a substantial number of small entities because it 
affects only Federal agencies and employees.

E.O. 13563 and E.O. 12866, Regulatory Review

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing benefits, of harmonizing rules, and of promoting 
flexibility. This final rule is not a ``significant regulatory 
action,'' under Executive Order 12866.

Executive Order 13771: Reducing Regulation and Controlling Regulatory 
Costs

    This final rule is not an E.O. 13771 (82 FR 9339, February 3, 2017) 
action because this rule is not significant under E.O. 12866.

E.O. 13132, Federalism

    This regulation will not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this rule does not have sufficient 
federalism implications to warrant preparation of a Federalism 
Assessment.

E.O. 12988, Civil Justice Reform

    This regulation meets the applicable standard set forth in section 
3(a) and (b)(2) of Executive Order 12988.

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local or 
tribal governments of more than $100 million annually. Thus, no written 
assessment of unfunded mandates is required.

Congressional Review Act

    This action pertains to agency management, personnel and 
organization and does not substantially affect the rights or 
obligations of non-agency parties and, accordingly, is not a ``rule'' 
as that term is used by the Congressional Review Act (Subtitle E of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)). 
Therefore, the reporting requirement of 5 U.S.C. 801 does not apply.

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35)

    This final regulatory action will not impose any additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act.

Lists of Subjects in 5 CFR Part 337

    Government employees.

Office of Personnel Management.
Steve Hickman,
Regulatory Affairs Analyst.

    Accordingly, OPM is revising 5 CFR part 337 of title 5, Code of 
Federal Regulations, as follows:

PART 337--EXAMINING SYSTEM

0
1. Revise the authority citation for part 337 to read as follows:

    Authority:  5 U.S.C. 1104(a), 1302, 2302, 3301, 3302, 3304, 
3319, 5364; E.O. 10577, 3 CFR 1954-1958 Comp., p. 218; 33 FR 12423, 
Sept. 4, 1968; and 45 FR 18365, Mar. 21, 1980; 116 Stat. 2135, 2290; 
117 Stat. 1392, 1665; and E.O. 13833.

Subpart B--Direct Hire Authority

0
2. In Sec.  337.204, add paragraph (d) to read as follows:


Sec.  337.204   Severe shortage of candidates.

* * * * *
    (d) Information Technology (IT) positions. (1) The head of a 
covered agency, as defined in paragraph (d)(2) of this section, may 
determine whether a severe shortage of candidates exists at that agency 
for any position in the information technology management series, 
general schedule (GS)-2210 or equivalent. In making such a 
determination, a covered agency must adhere to and use the supporting 
evidence prescribed in 5 CFR 337.204(b)(1)-(8). For purposes of 
paragraph (b)(5) of this section, the U.S. Department of Veterans 
Affairs (VA) need only determine whether a severe shortage of highly-
qualified candidates exists. In addition, a covered agency must 
maintain a file of the supporting evidence for documentation and 
reporting purposes. Upon determination of such a finding, an agency 
head may approve a direct hire authority for covered positions within 
the agency.
    (2) Covered agency. A covered agency is an entity listed in 31 
U.S.C. 901(b) (except the Department of Defense), or an independent 
regulatory agency defined in 44 U.S.C. 3502(5).
    (3) Notification to the U.S. Office of Personnel Management (OPM). 
Once the head of a covered agency affirmatively determines the presence 
of a severe shortage and the direct hire authority is approved by the 
agency head, he or she must notify OPM within 10 business days. Such 
notification must include a description of the supporting evidence 
relied upon in making the determination.
    (4) Using this authority. A covered agency must adhere to all 
provisions of subpart B of this part.
    (5) Length of appointments. A covered agency may use this authority 
to appoint individuals for a period of more than 1 year, but not more 
than 4 years.
    (i) A covered agency may extend any appointment under this 
authority for up to 4 additional years, if the direct hire authority 
remains in effect.
    (ii) No individual may serve more than 8 years on an appointment 
made under these provisions for information technology positions.
    (iii) No individual hired under these provisions may be transferred 
to positions that are not IT positions.

0
3. In Sec.  337.205, add paragraph (c) to read as follows:


Sec.  337.205   Critical hiring needs.

* * * * *
    (c) Information Technology (IT) positions. (1) The head of a 
covered agency, as defined in paragraph (c)(2) of this section, may 
determine whether a critical hiring need exists for any position in the 
information technology management series, general schedule (GS)-2210 or 
equivalent. In making such a determination, a covered agency must 
adhere to and use the supporting evidence criteria prescribed in 
paragraphs (b)(1) through (4) of this section. In addition, a covered 
agency must maintain a file of the supporting evidence for 
documentation and reporting purposes. Upon determination of such a 
finding, an agency head may approve a direct hire authority for covered 
positions within the agency.
    (2) Covered agency. A covered agency is an entity listed in 31 
U.S.C. 901(b) (excluding the Department of Defense),

[[Page 12876]]

or an independent regulatory agency defined in 44 U.S.C. 3502(5).
    (3) Notification to the U.S. Office of Personnel Management (OPM). 
Once the head of a covered agency affirmatively determines the presence 
of a critical hiring need and the direct hire authority is approved by 
the agency head, he or she must notify OPM within 10 business days. 
Such notification must include a description of the supporting evidence 
relied upon in making the determination.
    (4) Using this authority. A covered agency must adhere to all 
provisions of subpart B of this part.
    (5) Length of appointments. A covered agency may use this authority 
to appoint individuals for a period of more than 1 year, but not more 
than 4 years, if the direct hire authority remains in effect.
    (i) A covered agency may extend an appointment under this authority 
for up to 4 additional years.
    (ii) No individual may serve more than 8 years on an appointment 
made under these provisions for information technology positions.
    (iii) No individual hired under these provisions may be transferred 
to positions that are not IT positions.

[FR Doc. 2019-06396 Filed 4-2-19; 8:45 am]
 BILLING CODE 6325-39-P