[Federal Register Volume 90, Number 84 (Friday, May 2, 2025)]
[Proposed Rules]
[Pages 18820-18826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07575]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 90, No. 84 / Friday, May 2, 2025 / Proposed
Rules
[[Page 18820]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 430
RIN 3206-AO81
Assuring Responsive and Accountable Federal Executive Management
AGENCY: Office of Personnel Management.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of Personnel Management (OPM) is proposing to
remove the prohibition of a forced distribution of performance rating
levels within the Senior Executive Service (SES) as well as eliminate
diversity, equity, and inclusion (DEI) language within SES performance
management regulations. Currently, agencies are prohibited from
establishing quotas or limits on the number or proportion of the
various rating levels assigned, meaning that each senior executive
potentially can receive any rating based on their performance,
irrespective of how other senior executives perform within the agency.
However, governmentwide SES ratings data have consistently shown that
virtually all SES receive the highest rating levels (i.e., levels 4 and
5) despite documented reports of SES failings. Removing the prohibition
on forced distribution would allow agencies to establish and enforce
limits on the highest SES rating levels, thereby increasing rigor in
the SES appraisal process and leading to a more normalized distribution
of SES ratings across the Federal Government.
DATES: Comments must be received on or before June 2, 2025.
ADDRESSES: You may submit comments, identified by RIN number ``3206-
AO81,'' and title using the following method:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
The general policy for comments and other submissions from members
of the public is to make these submissions available for public viewing
at https://www.regulations.gov without change, including any personal
identifiers or contact information.
As required by 5 U.S.C. 553(b)(4), a summary of this rule may be
found in the docket for this rulemaking at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Noah Peters, Senior Advisor to the
Director, 202-606-8046 or by email at [email protected].
SUPPLEMENTARY INFORMATION:
Background
The Senior Executive Service (SES) is a corps of top-level Federal
executives who provide leadership and oversee government operations,
bridging the gap between political appointees and career civil
servants. The SES was established by the Civil Service Reform Act
(CSRA) of 1978 and became effective in July 1979. CSRA envisioned a
senior executive corps with solid executive expertise, public service
values, and a broad perspective of Government. The CSRA established the
SES as a distinct personnel system that applies the same executive
qualifications requirements to all members. The system was designed to
provide greater authority to agencies to manage their executive
resources, including the flexibility for selecting and developing
Federal executives within a framework that preserves the larger
interests of the Government.
In 2004, the SES adopted a pay-for-performance system established
under Section 1125 of Public Law 108-136 (November 24, 2003), which
amended 5 U.S.C. 5382. The new pay-for-performance system replaced the
six-level SES pay structure previously used with an open-range system
tied to individual performance. Automatic pay increases were
eliminated, and salaries, raises, and bonuses became contingent on
rigorous performance evaluations. Agencies also had to obtain
performance appraisal system certification from OPM and the Office of
Management and Budget (OMB) in order to exceed the standard SES pay cap
of level III of the Executive Schedule, allowing top salaries to reach
level II. The reforms aimed to increase accountability, attract top
talent, and reward high performers.
In 2012, OPM issued a model SES performance appraisal system
referred to as the ``Basic SES Performance Appraisal System,'' \1\
which created a consistent and uniform framework to communicate
expectations and evaluate the performance of SES members across
agencies. The Basic SES system was refined in 2016 following a 2015
Government Accountability Office (GAO) report and OPM updates to SES
performance management regulations.
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\1\ OPM, ``Senior Executive Service Performance Appraisal
System,'' (January 4, 2012) available at https://chcoc.gov/sites/default/files/senior-executive-service-performance-appraisal-system_508.pdf.
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SES Performance Management
SES performance is managed through a structured performance
appraisal system that includes annual appraisals of senior executives
based on individual and organizational performance as they apply to the
senior executive's area of responsibility and control. Subpart C of 5
CFR part 430 provides the requirements for managing the performance of
senior executives. Each agency is required to have a performance
management system that incorporates standards specified in 5 CFR
430.305. Senior executives are appraised at least annually and are
assigned a numerical rating ranging from Level 1 ``Unsatisfactory'' to
Level 5 ``Outstanding.'' OPM does not anticipate that the appraisal
process for an individual employee will change under this proposed
rule. Nothing is changing in terms of how a rating official issues an
initial summary rating and agencies will still be required to provide
training to SES members on the appraisal system. All SES within an
agency will be fairly evaluated against the SES appraisal system
performance requirements and performance standards. SES initial summary
ratings will continue to be derived through a ``point score''
calculation and agency-level Performance Review Boards (PRB) will
likely rank SES based on their appraisal point scores to delineate
those SES who will be recommended for the highest ratings. It will be
up to the agency-level PRB to make recommendations to the appointing
authority on SES annual summary ratings consistent with the forced
distribution rating limit. OPM expects that, in accordance with the
Presidential Memorandum titled ``Restoring Accountability for Career
Senior Executives'' (90 FR 8481; Jan. 30, 2025)
[[Page 18821]]
(``Restoring Accountability Memo''), re-constituted PRBs made up of
individuals committed to full enforcement of the SES performance
standards will make fair recommendations on SES annual summary ratings.
Good performance management requires ongoing feedback in which an
employee is not only kept informed about how he or she is doing but is
also given guidance and assistance to do even better in the future.\2\
This starts with developing clear performance expectations and rigorous
performance standards against which performance is assessed.
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\2\ U.S. Merit Systems Protection Board, Office of Policy and
Evaluation, Performance Management is More than an Appraisal,
(Washington, DC: December 2015), available at https://www.mspb.gov/studies/publications/Performance_Management_is_More_than_an_Appraisal.pdf.
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The agency should then ensure only employees who have demonstrated
the highest levels of performance receive the highest ratings and
rewards. Indeed, a key part of effective performance management is
ensuring that meaningful distinctions are made based on relative
performance.
Agencies are required by statute to develop performance appraisal
systems that allow for the accurate evaluation of performance based on
criteria related to the position, that identify the critical elements
of that position, that provide for systematic appraisals of performance
by senior executives, that encourage excellence in performance, and
that provide a basis for making retention determinations and SES
performance awards. See 5 U.S.C. 4312(a).
Congress designed the SES to ``ensure that the executive management
of the Government of the United States is responsive to the needs,
policies, and goals of the Nation and otherwise is of the highest
quality.'' 5 U.S.C. 3131. Specifically, the statute directs OPM to
administer the SES to achieve fourteen goals, four of which are of
particular relevance to this rulemaking. Of these four, the first
requires OPM to ``ensure that compensation, retention, and tenure are
contingent on executive success,'' while specifying that success should
be based on individual and organizational performance. 5 U.S.C.
3131(2). Second, members of the SES must be held accountable and
responsible for the effectiveness and productivity of their subordinate
employees. 5 U.S.C. 3131(3). Third, OPM's administration of the SES is
intended to ``recognize exceptional accomplishment'' by senior
executives. 5 U.S.C. 3131(4). Finally, OPM must ensure accountability
for an ``honest, economical, and efficient Government.'' 5 U.S.C.
3131(10).
Historical Underperformance
Unfortunately, the current SES performance rating system falls
short of these statutory requirements, in particular in failing to
meaningfully differentiate among excellent, mediocre, and poor
performance. SES data have consistently shown that the vast majority of
executives' annual summary ratings are above the ``Fully Successful''
level. In January 2015, the Government Accountability Office (GAO)
published a study on SES ratings and performance awards concluding that
most of the federal agencies studied were not making meaningful
distinctions in performance ratings for senior executives.\3\ In that
report, about 85 percent of career executives received an
``Outstanding'' or ``Exceeds Fully Successful'' rating between fiscal
years 2010 and 2013. The 2015 GAO report also showed that only 0.1
percent of senior executives in Chief Financial Officers Act agencies
(31 U.S.C. 901) were rated at the lowest rating level.
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\3\ Government Accountability Office, ``OPM Needs to Do More to
Ensure Meaningful Distinctions Are Made in SES Ratings and
Performance Awards, GAO Report to Congressional Requesters''
(January 2015), available at https://www.gao.gov/assets/gao-15-189.pdf.
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Performance accountability for senior executives has a critical
impact on the provision of services to the public. To illustrate, in
2014, the Department of Veterans Affairs (VA) Office of Inspector
General (OIG) issued a report on the Department's manipulations of
wait-times in a VA medical facility in Phoenix, Arizona resulting in
investigations at 93 other sites of VA health care across the
country.\4\ During that same time period, 80 percent of VA SES members
received an ``Outstanding'' or ``Exceeds Fully Successful'' rating.\5\
This kind of disconnect between individual performance ratings and
organizational performance is inconsistent with the statutory
requirements regarding SES performance appraisal systems and
unacceptable as a matter of government administration.
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\4\ Department of Veterans Affairs Office of Inspector General,
``Review of Alleged Patient Deaths, Patient Wait Times, and
Scheduling Practices at the Phoenix VA Health Care System,'' Report
#14-02603-267, available at https://www.vaoig.gov/sites/default/files/reports/2014-08/VAOIG-14-02603-267.pdf.
\5\ See, supra, footnote 3.
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In 2019, OPM issued a memorandum \6\ to agencies on how to increase
rigor in performance management through well-developed performance
standards that make clear distinctions among what is required to
achieve performance at the various performance levels. However, the
2024 Federal Employee Viewpoint Survey (FEVS) results showed that only
47% of federal employees agreed with the statement, ``In my work unit,
differences in performance are recognized in a meaningful way.'' This
was the lowest positive response rate for any question and has
consistently been the lowest over the past three years.\7\
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\6\ OPM, ``Applying Rigor in the Performance Management Process
and Leveraging Awards Programs for a High-Performing Workforce,''
available at https://chcoc.gov/sites/default/files/applying-rigor-performance-management-process-and-leveraging-awards-programs-high-performing_508_0.pdf.
\7\ FEVS Results for 2022 to 2024 available at https://www.opm.gov/fevs/reports/governmentwide-reports/.
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Through OPM oversight of agency SES performance appraisal systems,
OPM calculated that, for the fiscal year 2023 performance cycle,
approximately 96 percent of executives received an ``Outstanding'' or
``Exceeds Fully Successful'' rating and less than a half of a percent
of executives were rated below ``Fully Successful.'' \8\ These results
indicate that senior executive ratings may be inflated, and poor
performing executives are not being held accountable through a rigorous
appraisal process.
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\8\ SES ratings data submitted by individual agencies for SES
performance appraisal system certification purposes. OPM manually
compiled individual agency data to produce the fiscal year 23 SES
ratings distribution data.
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Ratings distributions like this have led to GAO recommendations
that OPM take enhanced actions to better ensure that agencies are
making meaningful distinctions in SES performance in support of more
effective executive performance management and accountability.\9\
Despite the recommendations of the 2015 GAO report, and OPM's resulting
modifications to the SES performance management regulations and Basic
SES Appraisal System, there continues to be a pervasive pattern of
misalignment between poor agency performance and executive performance
ratings. For example, in just the past two years, at least 12 VA OIG
reports have identified failings directly related to widespread
failures and deficiencies of VA senior leaders.\10\ The identified
failings
[[Page 18822]]
include repeated patient safety risks, financial hardship, morale
issues among VA employees, and lack of trust in senior leaders. More
than ten years after the 2015 GAO report, the examples provided
demonstrate the same over-inflation of performance ratings still
exists. Such a performance system fails to comply with the statutory
mandate that the SES performance system meaningfully distinguish
between excellent, mediocre, and poor performance and provide for an
accurate, systematic appraisal of SES performance to serve as the
``basis for making eligibility determinations for retention in the
Senior Executive Service and for Senior Executive Service performance
awards.'' 5 U.S.C. 4312(a).
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\9\ Supra, footnote 3.
\10\ See, e.g., the following reports from the Department of
Veterans Affairs, Office of Inspector General, available at https://www.vaoig.gov/reports/all: ``Lapse in Fiduciary Program Oversight
Puts Some Vulnerable Beneficiaries at Risk,'' Report #24-01219-12;
``Leaders Failed to Ensure a Dermatologist Provided Quality Care at
the Carl T. Hayden VA Medical Center in Phoenix, Arizona,'' Report
#24-00194-42; ``Leaders Failed to Address Community Care Consult
Delays Despite Staff's Advocacy Efforts at VA Western New York
Healthcare System in Buffalo,'' Report #23-03679-262; ``Deficiencies
in Facility Leaders' Summary Suspension of a Provider and Patient
Safety Reporting Concerns at the VA Black Hills Health Care System
in Fort Meade, South Dakota,'' Report #23-01502-234; ``Care Concerns
and Deficiencies in Facility Leaders' and Staff's Responses
Following a Medical Emergency at the Carl T. Hayden VA Medical
Center in Phoenix, Arizona,'' Report #23-02958-203; ``Mismanaged
Surgical Privileging Actions and Deficient Surgical Service Quality
Management Processes at the Hampton VA Medical Center in Virginia,''
Report #23-00995-211; ``Leaders at the VA Eastern Colorado Health
Care System in Aurora Created An Environment That Undermined the
Culture of Safety,'' Report #23-02179-188; ``Deficiencies in
Oversight and Leadership Response to Optometry Concerns at the
Cheyenne VA Medical Center in Wyoming,'' Report #23-00460-185; ``VA
Improperly Awarded $10.8 Million in Incentives to Central Office
Senior Executives,'' Report #23-03773-169; ``Delays Occurred in Some
Veterans' Benefits Claims While Awaiting Decision,'' Report #22-
03463-60; ``Sterile Processing Service Deficiencies and Leaders'
Response at the Carl Vinson Medical Center in Dublin, Georgia,''
Report #22-01315-90; ``Chief of Staff's Provision of Care Without
Privileges, Quality of Care Deficiencies, and Leaders' Failures at
the Montana VA Health Care System in Helena,'' Report #22-02975-70.
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Forced Distribution
Currently, an agency may not require a particular distribution of
rating levels for senior executives. OPM is proposing to remove the
categorical prohibition against a forced distribution of any
performance rating levels for senior executives found in 5 CFR
430.305(a)(5). For this proposed rule, ``forced distribution'' refers
to a method of evaluating employees in which a supervisor first
assesses each employee based on certain pre-determined parameters and
thereafter must assign each employee a rating based on a pre-determined
number or percentage of ratings allowable for each performance rating.
This new approach would apply to all senior executive service
members covered under an appraisal system subject to subpart C of part
430, Code of Federal Regulations, including SES career, noncareer, and
limited appointees. In parallel with this rulemaking, OPM has issued a
revised SES performance plan and appraisal system \11\ in accordance
with the Restoring Accountability Memo. This Presidential Memorandum
requires the Director of OPM, in coordination with the Director of OMB,
to issue SES performance plans that agencies must adopt. OPM's revised
performance plan and system incorporate various changes aimed at
reinvigorating the SES corps, including implementation of a forced
distribution of level 4 and 5 ratings contingent upon this proposed
rule being made final. Other changes include revised performance
requirements and more frequent performance feedback.
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\11\ OPM, ``New Senior Executive Service Performance Appraisal
System and Performance Plan, and Guidance on Next Steps for Agencies
to Implement Restoring Accountability for Career Senior Executives''
(February 25, 2025), available at https://chcoc.gov/content/new-senior-executive-service-performance-appraisal-system-and-performance-plan-and-guidance.
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Forced distribution, also sometimes referred to as ``stack
ranking,'' can be executed by assigning individual ranks to employees
or by categorizing them into groups, such as top performers, average
performers, and low performers. The practice has a well-documented
history of private sector adoption over the last several decades.
Wijayanti, A., Sholihin, M., Nahartyo, E. et al. (2024) conducted a
review of the forced distribution literature.\12\ A total of 41
research articles published from 1960 to 2022 were included in their
review. These studies highlight many notable benefits of utilizing
forced distribution as well as areas for caution. For example, several
studies indicated that forced distribution can increase rating accuracy
by eliminating leniency bias, which is the tendency for raters to
provide lenient ratings to avoid conflicts that arise from granting
unfavorable ratings. Findings also show that forced distribution can
quickly enhance organizational performance and promote the success of
merit-based reward systems. Some studies also found that forced
distribution can have negative consequences such as discrimination,
perceptions of unfairness, and reduced organizational citizenship
behavior and knowledge sharing. Nonetheless, the authors concluded
that, when implemented carefully, forced distribution has been shown to
increase employee satisfaction and reduce turnover.
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\12\ Wijayanti, A., Sholihin, M., Nahartyo, E., & Supriyadi, S.,
What do we know about the forced distribution system: A systematic
literature review and opportunities for future research, Management
Quarterly Review (2024).
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Indeed, while not the norm, a forced distribution has been used by
many major private sector companies in executive performance plans over
the past few decades, including Oracle, Meta, Amazon, Microsoft, Uber,
and Google.\13\ One recent source estimates that 30% of Fortune 500
companies use a forced distribution of some sort in their performance
evaluations.\14\ Even more pertinent, forced distributions have been
used to evaluate the performance of civil service executives in many
other countries, most notably Germany, Portugal, Italy, Latvia,
Indonesia, and the United Kingdom.\15\ After moving away from a forced
distribution in 2019, the United Kingdom civil service returned to a
system with an ``expected distribution'' of senior-level performance
ratings in 2025.\16\
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\13\ See, e.g., ``Should a company rate its staff? A former
Amazon exec says `stack ranking' is useful when done right,'' CNBC,
December 5, 2023, available at https://www.cnbc.com/2023/12/05/stack-ranking-ex-amazon-exec-explains-the-performance-review-system.html.
\14\ ``Stack Ranking--All You Need to Know,'' Medium (April 3,
2020) available at https://medium.com/@corvisio/stack-ranking-all-you-need-to-know-a5339c27ad83.
\15\ ``Performance Appraisal in the EU Member States and the
European Commission,'' [Uacute]RAD VL[Aacute]DY SLOVENSKEJ REPUBLIKY
(2017) available at https://www.eupan.eu/wp-content/uploads/2019/02/2016_2_SK_Performance_Appraisal_in_the_EU_Member_States_and_the_European_Commission.pdf.
\16\ ``SCS performance management system to include new `minimum
standards' in 2025,'' Civil Service World (December 12, 2024)
available at https://www.civilserviceworld.com/professions/article/senior-civil-service-performance-management-minimum-standards-expected-distribution-2025. See also GOV.UK Civil Service Guidance,
``Performance management framework for the Senior Civil Service
(2025 to 2026 performance year)'' (February 6, 2025), available at
https://www.gov.uk/government/publications/senior-civil-service-performance-management/performance-management-framework-for-the-senior-civil-service-2025-to-2026-performance-year.
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There is even more reason to implement a forced distribution in the
Federal Government than in the private sector. Private sector companies
typically do not operate under a statutory mandate requiring that they
have performance appraisal systems that permit the accurate evaluation
of performance. But the SES operates under just such a statutory
mandate. See 5 U.S.C. 4312(a)(1). In addition, the Federal Government
is entrusted with many critical responsibilities from veterans' health
care to law enforcement to disaster relief to fighting pandemics.\17\
When senior executives in the federal government fail to perform at
[[Page 18823]]
a high level, these crucial, life-or-death missions are compromised.
Further, unlike the private sector, the Federal Government lacks a
profit motive to ensure meaningful evaluations of its executives.
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\17\ See, e.g., Titles 38, 34, and 42 of the United States Code.
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In sum, it is particularly important that the Executive Branch have
the option to implement a forced distribution of at least some ratings
given the systemic and pervasive use of Level 4 and 5 ratings, and the
disconnect between these ratings and actual senior executive
performance, as reflected in reports and critical incidents throughout
the past decade.
Restoring Accountability for Career Senior Executives
On January 20, 2025, President Trump issued a Presidential
Memorandum titled ``Restoring Accountability for Career Senior
Executives.'' 90 FR 8481 (``Restoring Accountability Memo''). With this
Presidential Memorandum, President Trump intended to ``reinvigorate the
SES system and prioritize accountability.'' Specifically, he sought to
``ensure[ ] that SES officials are properly accountable to the
President and the American people.'' President Trump directed OPM, in
coordination with OMB, to ``issue SES Performance Plans that agencies
must adopt.''
As described in the Background, to ensure that SES officials are
properly accountable to the President and the American people, the
Presidential Memorandum directed the Director of OPM, in coordination
with the Director of OMB to issue SES performance plans for agencies to
adopt for their SES workforces. OPM's review and proposed revision of
current governmentwide SES performance plans place special attention on
updating the plans, and the accompanying performance appraisal system,
with tools for managers and supervisors to ensure that the executive
management and performance of the Government of the United States is
responsive to the needs, policies, and goals of the Nation and
otherwise is of the highest quality. See 5 U.S.C. 3131.
As discussed in the Background, governmentwide SES performance
appraisal data consistently show the vast majority of ratings for
senior executives are above average (i.e., above the ``Fully
Successful'' level), with less than one percent rated at the lowest
rating level. By removing the categorical prohibition on forced
distributions, OPM expects that the highest ratings will be awarded
only to the highest performing executives. Consistent with the SES
performance plan it issued earlier this year,\18\ OPM intends that the
forced distribution of SES ratings will only be applied to limit the
number of level 4 and 5 ratings. Establishing governmentwide limits on
rating levels will promote a high-performance culture where only truly
deserving performers receive the highest ratings. And although such a
limit on the top rating levels would not directly require a greater
number of ratings indicating unsatisfactory work or poor performance, a
high-performance culture would encourage supervisors to provide poor
performers ratings commensurate with their performance.
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\18\ OPM, ``New Senior Executive Service Performance Appraisal
System and Performance Plan, and Guidance on Next Steps for Agencies
to Implement Restoring Accountability for Career Senior Executives''
(February 25, 2025), available at https://chcoc.gov/content/new-senior-executive-service-performance-appraisal-system-and-performance-plan-and-guidance.
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Ending Radical and Wasteful Government DEI Programs and Preferencing
On January 20, 2025, President Trump issued an Executive Order
titled, ``Ending Radical and Wasteful Government DEI Programs and
Preferencing.'' E.O. 14151, 90 FR 8339 (Jan. 29, 2025). This order
directs the termination of all DEI policies, programs, and preferences
in the Federal Government, under whatever name they appear. Section
430.308 of title 5, Code of Federal Regulations, ``Appraising
performance,'' states that SES performance appraisals should take into
account ``leadership effectiveness in promoting diversity, inclusion,
and engagement'' as one of several factors.
OPM proposes to remove paragraph (d)(7) of this section to
eliminate this vague language that is not in fact set forth by the text
of 5 U.S.C. 7201 as the current rule suggests. This change is
consistent with E.O. 14151 because paragraph (d)(7) conveys to both the
senior executive and to the public that executives are expected (1) to
promote a particular, controversial ideology throughout the government
and (2) to promote ``policies, programs, and preferences'' throughout
the federal government that the President has identified as wasteful
and divisive.
Additionally, 5 CFR 430.311(a), which defines the membership of an
agency's SES Performance Review Board (PRB), states that agency heads
``are encouraged to consider diversity and inclusion in establishing
their PRBs.'' Consistent with both E.O. 14151 and the Restoring
Accountability Memo, OPM proposes to replace this language with
language to emphasize that agency heads should consider choosing
individuals committed to the full enforcement of SES performance
evaluations and promoting and assuring an SES of the highest caliber.
This amendment would thus remove language that is inconsistent with
E.O. 14151 and that suggests an agency could impermissibly base
decisions on whom to appoint to PRBs on protected characteristics and
thus risk discrimination. In addition, the replacement language
proposed by OPM also aligns criteria for PRB membership with the
requirements specified in the Restoring Accountability Memo--that PRB
members be chosen based on their commitment to the full enforcement of
SES performance evaluations and promoting and assuring an SES of the
highest caliber.
Proposed Changes in This Rulemaking
OPM has reviewed the performance management regulations governing
the SES and is issuing this proposed rule in response to both of the
President's January 2025 directives and pursuant to its regulatory
authority in 5 U.S.C. 4315. OPM proposes to amend 5 CFR 430.305(a)(5)
by removing the prohibition on the use of a forced distribution of
ratings. Removing the categorical prohibition will allow OPM to require
and enforce a pre-established agency-wide and governmentwide
distribution of performance ratings among all SES members, for covered
agencies and personnel. OPM anticipates that agencies would implement a
forced distribution limiting the highest rating levels (i.e., levels 4
and 5) only, and would not impose any requirements with respect to the
number of executives rated at levels 1 through 3. To be clear, the
proposed rule would only eliminate a prohibition on pre-established
distribution of performance ratings. Whether and how to implement such
a pre-established distribution would be a task for agencies to
implement, consistent with applicable OPM guidance.
As discussed in the section titled Ending Radical and Wasteful
Government DEI Programs and Preferencing, OPM proposes to revise
additional language consistent with E.O. 14151. Accordingly, this
rulemaking proposes to remove the language in 5 CFR 430.308(d) to
eliminate the non-statutory performance factor of ``promoting
diversity, inclusion, and engagement.'' Additionally, this rulemaking
proposes to revise the language in 5 CFR 430.311(a) by removing the
text that encourages agencies to consider diversity and inclusion when
appointing PRB
[[Page 18824]]
members. In line with the Restoring Accountability Memo, the rulemaking
also proposes to add text that encourages agencies to consider
individuals committed to applying the SES performance appraisal system
and performance plans.
Expected Impact of This Rulemaking
A. Statement of Need
OPM is issuing this proposed rule pursuant to its authority to
issue regulations governing performance appraisals in the SES in
subchapter II of chapter 43 of title 5, United States Code. The purpose
of this rulemaking is to provide a means by which only the highest
performing SES members receive the highest performance ratings.
Previous efforts \19\ to promote rigor in SES performance appraisal by
encouraging agencies to develop more stringent performance requirements
have not resulted in significant changes to SES ratings distributions.
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\19\ See, e.g., OPM, ``Applying Rigor in the Performance
Management Process and Leveraging Awards Programs for a High-
Performing Workforce,'' (July 12, 2019) available at https://chcoc.gov/sites/default/files/applying-rigor-performance-management-process-and-leveraging-awards-programs-high-performing_508_0.pdf.
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During the FY23 performance appraisal cycle, across 91 federal
agencies, the distribution of SES members' performance ratings was as
follows: 64.3% (4,608 members) were rated ``Outstanding'' at level 5,
31.7% (2,273 members) were rated ``Exceeds Fully Successful'' at level
4, 3.6% (261 members) were rated ``Fully Successful'' at level 3, 0.2%
(15 members) were rated ``Minimally Satisfactory'' at level 2, and 0.1%
(10 members) were rated ``Unsatisfactory'' at level 1.\20\ The
distribution of these ratings demonstrates that there continues to be
inflation of SES performance ratings and that action must be taken in
order to re-set and infuse rigor into the SES performance appraisal
process. As such, the removal of the prior prohibition of forced
distribution of SES ratings is necessary to enable the establishment
and enforcement of limits on SES rating levels.
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\20\ See, supra, footnote 8.
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B. Impact
The President must be able to trust that the Executive Branch will
work together in service of the Nation. By applying a forced
distribution of SES performance ratings, agencies and individual SES
members could be held to a higher standard of accountability because
there would be a pre-established limited number of higher performance
ratings, thereby ensuring only the truly deserving performers are
rewarded for their performance.
Removing the regulatory prohibition on forced distribution would be
an important first step towards recalibrating agencies' focus and
efforts on ensuring meaningful distinctions in SES performance ratings.
Allowing for the establishment of limits on SES ratings would result in
a more normalized distribution of performance ratings and potentially
fewer performance awards and pay adjustments for SES members, creating
an opportunity for agencies to reduce overall spending on pay
adjustments and performance awards. OPM expects that forced
distribution would incentivize improved performance of SES members as
they no longer would expect to receive the highest ratings without
demonstrating superior performance relative to the other senior
executives in their agency. This would ultimately improve the
performance of the government in providing services to the American
public.
C. Costs
This proposed rule would affect the operations of more than 90
Federal agencies--ranging from cabinet-level departments to small
independent agencies--that have employees in the SES. We estimate that
this rule would require individuals employed by these agencies to spend
time updating agency SES performance appraisal policies and procedures
during fiscal year 2025 to prepare for implementation in the fiscal
year 2026 performance appraisal period. Typically, an agency's
Executive Resources staff handles tasks associated with updating SES
performance plans and refining policy documents. Therefore, for this
cost analysis, the assumed average salary rate of Federal employees
performing this work will be the rate in 2025 for GS-14, step 5, in the
Washington, DC, locality pay table ($161,486 annual locality rate and
$77.38 hourly locality rate). We assume the total dollar value of
labor, which includes wages, benefits, and overhead, is equal to 200
percent of the wage rate, resulting in an assumed labor cost of $154.76
per hour.
To comply with the regulatory changes in the proposed rule,
affected agencies would need to review the rule and update their
policies and procedures. We estimate that, in the first year following
publication of a final rule, this would require an average of 80 hours
of work by employees with an average hourly cost of $154.76 per hour.
This would result in estimated costs of about $12,400 per agency and
about $1.1 million Governmentwide.
SES members revise their performance requirements each year as they
develop their performance plans. OPM anticipates that adjusting their
performance requirements to reflect the updated critical elements may
take each executive slightly longer than usual in the first year. We
estimate that this would require approximately 15 additional minutes in
the first year of implementation compared to the time usually spent to
develop performance requirements for the annual performance plan. Based
on the average salary for the ES pay plan in September 2024 (most
recent available data), we assume an average salary rate of $207,313,
or $99.67 per hour.\21\ We assume the total dollar value of labor,
which includes wages, benefits, and overhead, is equal to 200 percent
of the wage rate, resulting in an assumed labor cost of $199.34 per
hour. There are approximately 8,430 members of the SES corps in the
executive branch. This would result in a one-year, transitional
increase in costs of about $420,000 Governmentwide.
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\21\ Average SES pay drawn from Office of Personnel Management
FedScope data, available at https://www.fedscope.opm.gov/.
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OPM anticipates that the overall implementation costs would be
limited in duration and would total about $1.5 million.
D. Benefits
A 2016 Government Executive article expressed that a cultural shift
might be needed among agencies and employees to acknowledge that a
rating of ``Fully Successful'' is already a high bar and should be
valued and that ``Outstanding'' is a difficult level to achieve.\22\
The application of a forced distribution within the SES performance
appraisal system would reinforce the understanding that success as a
senior executive is aligned to the appropriate rating at the fully
successful level. By establishing a limit on the number of SES members
who can receive a rating above the fully successful level, there would
be a clear distinction of the highest performers across an agency and
the Federal Government. Agencies would no longer be able to rate
virtually all of their senior executives at the highest performance
ratings, thus encouraging SES members to strive for increased levels of
performance and ultimately provide better results for the government
and the American public. Consistent with the letter and intent of 5
U.S.C. 3131 and 4312(a), only truly
[[Page 18825]]
deserving senior executives would be rewarded and recognized for
outstanding performance.
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\22\ ``Are So Many Feds Really That Exceptional? Government
Executive,'' (June 9, 2016) available at https://www.govexec.com/management/2016/06/are-so-many-feds-really-exceptional/128963/.
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E. Regulatory Alternatives
An alternative to this rulemaking is to not remove the prohibition
on forced distribution and instead issue further guidance encouraging
agencies to be increasingly rigorous in their management of SES
performance to promote meaningful distinctions in SES performance.
However, previous attempts to achieve this result through guidance have
not been successful in curbing inflated SES ratings; instead, it
appears that the percentage of SES receiving Level 4 or 5 performance
ratings has only increased. Without the ability to place limits on SES
ratings, there will almost certainly continue to be a pervasive
inflation of ratings and a lack of accountability and meaningful
distinction in performance ratings throughout the SES.
Another alternative to this rulemaking is to reinstate the review
of SES performance plans by OPM as part of the SES performance
appraisal system certification review process. Prior to the issuance of
OPM's further streamlined performance appraisal system certification
process in 2018, referred to as Certification 2.0, agencies were
required to submit a sample of performance plans to OPM for review. OPM
could revert to requiring agencies to submit SES performance plans for
review to ensure that performance requirements are properly calibrated
to established SES performance standards. OPM's practice of reviewing
individual SES performance plans was abandoned under Certification 2.0
primarily due to the administrative burden that it placed on agencies
and OPM. While the aim of this proposed rule is to increase the
performance of SES, OPM also must consider the mandate to deliver a
government to the American people that is lean and efficient. Returning
to the practice of OPM reviewing individual SES performance plans is
not a practical alternative given the additional time required by OPM
to review, and for agencies to make corrections to, SES performance
requirements. In addition, it is unlikely that requiring OPM to
individually certify agency SES performance plans would meaningfully
shift the distribution of SES performance ratings in the absence of a
repeal of the rule against forced distribution.
Request for Comments
OPM requests comments on the implementation and potential impacts
of this proposed rule. Such information will be useful for better
understanding the effect of this amendment on SES performance
management by Federal agencies. The type of information in which OPM is
interested includes, but is not limited to, the following:
How will forced distribution reward merit, competence, and
excellence across the federal government?
Is there any research OPM should consider regarding what
impact forced distribution may have on senior executive performance and
organizational performance?
Does the current SES performance management system
accurately distinguish excellent from mediocre from poor performance?
If so, how?
Would a forced distribution help drive a high-performance
culture across the federal government? Why?
Would a forced distribution motivate senior executives to
work harder and produce better results for the American people? Why?
Would a forced distribution empower agency leadership to
hold senior executives accountable for poor performance? Why?
What effect, if any, would a forced distribution have on
the Government's ability to hire and retain top-level senior executive
talent?
Would a forced distribution have a positive or negative
impact on knowledge management, programs, and mission delivery? Why?
How has forced distribution of executive performance
rankings worked in the private sector? Has it positively or negatively
impacted corporate performance?
Regulatory Compliance
A. Regulatory Flexibility Act
The Acting Director of OPM certifies that this rulemaking will not
have a significant economic impact on a substantial number of small
entities because it will apply only to Federal agencies and employees.
B. Regulatory Review
OPM has examined the impact of this rule as required by Executive
Order 12866 and Executive Order 13563, which 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). A
regulatory impact analysis must be prepared for major rules with
economically significant effects of $100 million or more in any one
year. This rulemaking does not reach that threshold but has otherwise
been designated a ``significant regulatory action'' under section 3(f)
of Executive Order 12866. This proposed rule is not expected to be an
Executive Order 14192 regulatory action because it does not impose any
more than de minimis regulatory costs.
C. Federalism
This rulemaking 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 proposed rule does not have
sufficient federalism implications to warrant preparation of a
Federalism Assessment.
D. Civil Justice Reform
This rulemaking meets the applicable standards set forth in section
3(a) and (b)(2) of Executive Order 12988.
E. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any rule that would impose spending costs on State, local, or
tribal governments in the aggregate, or on the private sector, in any 1
year of $100 million in 1995 dollars, updated annually for inflation.
That threshold is currently approximately $206 million. This rulemaking
will not result in the expenditure by State, local, or tribal
governments, in the aggregate, or by the private sector, in excess of
the threshold. Thus, no written assessment of unfunded mandates is
required.
F. Paperwork Reduction Act
This regulatory action will not impose any reporting or
recordkeeping requirements under the Paperwork Reduction Act.
List of Subjects in 5 CFR Part 430
Decorations, Government employees.
Office of Personnel Management.
Jerson Matias,
Regulations Liaision.
Accordingly, for the reasons stated in the preamble, OPM is
proposing to amend 5 CFR part 430 as follows:
PART 430--PERFORMANCE MANAGEMENT
0
1. The authority citation for part 430 continues to read as follows:
[[Page 18826]]
Authority: 5 U.S.C. chapter 43 and 5307(d).
Subpart C--Managing Senior Executive Performance
0
2. Amend Sec. 430.305 by revising paragraph (a)(5) to read as follows:
Sec. 430.305 System standards for SES performance management
systems.
(a) * * *
(5) Derive an annual summary rating through a mathematical method
that ensures executives' performance aligns with level descriptors
contained in performance standards that clearly differentiate levels
above fully successful;
* * * * *
0
3. Amend Sec. 430.308 by:
0
a. Revising paragraph (d)(6);
0
b. Removing paragraph (d)(7); and
0
c. Redesignating paragraph (d)(8) as (d)(7).
The revision reads as follows:
Sec. 430.308 Appraising performance.
* * * * *
(d) * * *
(6) The effectiveness, productivity, and performance results of the
employees for whom the senior executive is responsible; and
* * * * *
0
4. Amend Sec. 430.311 by revising paragraph (a)(1) to read as follows:
Sec. 430.311 Performance Review Boards (PRBs).
(a) * * *
(1) Each PRB must have three or more members who are appointed by
the agency head, or by another official or group acting on behalf of
the agency head. Agency heads are encouraged to choose individuals for
each PRB committed to applying the SES Performance Appraisal System and
Performance Plan and the requirements therein and promoting and
assuring an SES of the highest caliber.
* * * * *
[FR Doc. 2025-07575 Filed 5-1-25; 8:45 am]
BILLING CODE 6325-39-P