Human Capital: Building the Information Technology Workforce to  
Achieve Results (31-JUL-01, GAO-01-1007T).			 
								 
This testimony discusses the federal government's strategic human
capital management challenges, particularly in the information	 
technology (IT) area. No management issue facing federal agencies
could be more critical to the nation than their approach to	 
attracting, retaining, and motivating people. Having enough	 
people with the right mix of knowledge and skills will make the  
difference between success and failure. This is especially true  
in the information technology area, where widespread shortfalls  
in human capital have undermined agency and program performance. 
The federal government today faces pervasive human capital	 
challenges that are eroding the ability of many agencies--and	 
threatening the ability of others--to economically, efficiently, 
and effectively carry out their missions. How successfully the	 
federal government acquires and uses information technology will 
depend on its ability to build, prepare, and manage its 	 
information technology workforce. To address the federal	 
government's human capital challenges as a whole, GAO believes	 
that (1) agencies must take all administrative steps available to
them under current laws and regulations to manage their people	 
for results; (2) the Administration and Congress should pursue	 
opportunities to put new tools and flexibilities in place that	 
will help agencies attract, retain, and motivate employees--both 
overall, and especially, in connection with critical occupations 
such as those in IT, and; (3) all interested parties should work 
together to determine the nature and extent of more comprehensive
human capital (or civil service) reforms that should be enacted  
over time. These reforms should include greater emphasis on	 
skills, knowledge, and performance in connection with federal	 
employment and compensation decisions, rather than the passage of
time and rate of inflation, as is often the case today. 	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-1007T					        
    ACCNO:   A01494						        
  TITLE:     Human Capital: Building the Information Technology       
             Workforce to Achieve Results                                     
     DATE:   07/31/2001 
  SUBJECT:   Human resources utilization			 
	     Information technology				 
	     Labor supply					 
	     Performance measures				 
	     Personnel management				 
	     Personnel recruiting				 
	     Strategic planning 				 
	     President's Management Improvement 		 
	     Program						 
								 
	     Senior Executive Service				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-1007T
     
Testimony Before the Subcommittee on Technology and Procurement Policy
Committee on Government Reform, U. S. House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 10: 00 a. m. EST Tuesday July 31,
2001 HUMAN CAPITAL

Building the Information Technology Workforce to Achieve Results

Statement of David M. Walker Comptroller General of the United States

GAO- 01- 1007T

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 1 GAO- 01- 1007T

Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity
to discuss with you this morning the federal government?s strategic human
capital management challenges, with particular emphasis on the information
technology area.

No management issue facing federal agencies could be more critical to their
ability to serve the nation than their approach to attracting, retaining,
and motivating people. The need is a reflection of the times: Our society
has transitioned from the industrial age to the knowledge age, and people
are the source of all knowledge. Every organization today depends on its
people to contribute knowledge, create knowledge, and put knowledge to
practical use. Federal agencies are no different. For these organizations,
having sufficient numbers of people on board with the right mix of knowledge
and skills will make the difference between success and failure. This is
especially true in the information technology area, where widespread
shortfalls in human capital have contributed to demonstrable shortfalls in
agency and program performance.

I would like to make two main points: First, the federal government today
faces pervasive human capital challenges that are eroding the ability of
many agencies- and threatening the ability of others- to economically,
efficiently, and effectively perform their missions. Many parties will need
to work to address these challenges, including the President, department and
agency leaders, the Office of Management and Budget, the Office of Personnel
Management, the Congress, the private sector, foundations and academia, and
even the press.

Second, how successfully the federal government acquires and uses
information technology will continue to hinge on its ability to build,
prepare, and manage its information technology workforce. However, agencies
must overcome two basic challenges related to IT human capital: a shortage
of skilled workers and the need to provide a broad range of related staff
training and development. These are essential challenges to address so that
the managers and staff can effectively operate and maintain government
systems, adequately oversee related contractor support, and deliver
responsive service to the public.

In addition to discussing these two main points, at the Subcommittee?s
request I will briefly discuss selected GAO human capital efforts. Also, I
Human Capital: Building the Information

Technology Workforce to Achieve Results

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 2 GAO- 01- 1007T

will briefly discuss human capital challenges facing the government?s
acquisitions workforce.

We at GAO use the term ?human capital? because- in contrast to traditional
terms such as personnel and human resource management- it focuses on two
principles that are critical in a modern, results- oriented management
environment. First, people are assets whose value can be enhanced through
investment. As the value of people increases, so does the performance
capacity of the organization and therefore its value to clients and other
stakeholders. As with any investment, the goal is to maximize value while
managing risk. Second, an organization?s human capital approaches must be
aligned to support the mission, vision for the future, core values, goals
and objectives, and strategies by which the organization has defined its
direction and its expectations for itself and its people. An organization?s
human capital policies and practices should be designed, implemented, and
assessed by the standard of how well they help the organization pursue these
intents and achieve related results.

It is clear that, in many government entities and functional areas such as
information technology and acquisitions, the transition to modern,
resultsoriented management- and along with it, to strategic human capital
management- will require a cultural transformation. Hierarchical management
approaches will need to yield to partnerial approaches. Process- oriented
ways of doing business will need to yield to resultsoriented ones. And
siloed organizations will need to become integrated organizations if they
expect to make the most of the knowledge and skills of their people.
Government entities that expect to ensure accountability for performance and
make the best use of their human capital will need to build a solid
foundation in strategic planning and organizational alignment, leadership
and succession planning, recruiting and training the best possible talent,
and creating a strong performance culture- including appropriate performance
measures and rewards and a focus on continuous learning and knowledge
management.

A key step for agencies is to focus on human capital as a strategic asset.
Agencies can begin by assessing how well their existing human capital
approaches support their missions, goals, and other organizational needs. A
useful self- assessment tool is our human capital checklist, which
identifies a number of human capital elements and underlying values that
Background: What We

Mean By ?Human

Capital?

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 3 GAO- 01- 1007T

are common to high- performing organizations. 1 (See attachment I.) We have
used the checklist?s assessment framework to guide our recent inquiries into
human capital issues across the federal government and at specific agencies,
some of which are using the framework in their human capital planning
efforts. We have also used this framework to assess and guide our own
internal GAO efforts.

High- performing organizations in the private and public sectors have long
understood the relationship between effective ?people management? and
organizational success. However, the federal government, which has often
acted as if federal employees were costs to be cut rather than assets to be
valued, has only recently received its wake- up call. As our January 2001
Performance and Accountability Series reports made clear, serious federal
human capital shortfalls are now eroding the ability of many federal
agencies- and threatening the ability of others- to economically,
efficiently, and effectively perform their missions. 2 Agencies? strategic
human capital management challenges involve such key areas as strategic
human capital planning and organizational alignment; leadership continuity
and succession planning; acquiring and developing staffs whose size, skills,
and deployment meet agency needs; and creating resultsoriented
organizational cultures. Attachment II provides examples of the federal
government?s pervasive human capital challenges, from military recruitment
shortfalls at the Department of Defense to staff and skills losses at the
National Aeronautics and Space Administration to inadequate workforce
planning at the Environmental Protection Agency.

In January 2001, we added strategic human capital management to our list of
federal programs and operations identified as high risk. 3 However, we
continue to stress that federal employees are not the problem. Rather, the
problem is a long- standing lack of effective leadership and management,
along with the lack of a strategic approach to marshaling, managing, and
maintaining the human capital needed for government to discharge its

1 See Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/
OCG- 00- 14G, Sept. 2000). 2 Performance and Accountability Series- Major
Management Challenges and Program Risks: A Governmentwide Perspective (GAO-
01- 241, Jan. 2001). In addition, see the accompanying 21 reports, numbered
GAO- 01- 242 through GAO 01- 262, on specific agencies.

3 High- Risk Series: An Update (GAO- 01- 263, Jan. 2001). In addition, see
Human Capital: Meeting the Governmentwide High- Risk Challenge (GAO- 01-
357T, Feb. 1, 2001). Strategic Human

Capital Management: Confronting The HighRisk Challenge

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 4 GAO- 01- 1007T

responsibilities and deliver on its promises. After a decade of government
downsizing and curtailed investments in people, it is becoming increasingly
clear that today?s federal human capital strategies are not appropriately
constituted to meet the current and emerging needs of the nation?s
government and its citizens. The federal government?s approach to people
management includes a range of outmoded attitudes, policies, and practices
that warrant serious and sustained attention. To view federal employees as
costs to be cut rather than as assets to be valued would be to take a narrow
and shortsighted view- one that is obsolete and must be changed.

Ever since we added strategic human capital management to our high- risk
list, we have been asked what would need to happen for it to be removed.
Clearly, we will need to see measurable and sustainable improvements in the
economy, efficiency, and effectiveness with which the government as a whole
and the individual agencies manage their workforces to achieve their
missions and goals. I believe that congressional hearings such as today?s
demonstrate that the momentum for these improvements is building, but the
process will undoubtedly take time.

Clearly, there is very little time to waste. Changes in the demographics of
the federal workforce, in the education and skills required of its workers,
and in employment structures and arrangements are all continuing to unfold.
The federal workforce is aging; the baby boomers, with their valuable skills
and experience, are drawing nearer to retirement; new employees joining the
federal workforce today have different employment options and different
career expectations from the generation that preceded them. In response to
an increasingly competitive job market, federal agencies will need the tools
and flexibilities to attract, retain, and motivate top- flight talent. More
and more, the work that federal agencies do requires a knowledge- based
workforce that is sophisticated in new technologies, flexible, and open to
continuous learning. This workforce must be adept both at delivering
services directly and at effectively managing the cost and quality of
services delivered by third parties on the government?s behalf. Agencies?
employment structures and working arrangements will also be changing, and
the workplace will need to accommodate a greater mix of full- time, part-
time, and temporary workers; more contracting- out; less job security; and
the possibilities of additional government downsizing and realignments.

With these challenges in mind, it is clear that federal agencies must not
wait to modernize their human capital policies and practices. Key

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 5 GAO- 01- 1007T

elements such as hiring, staffing, compensation, promotions, training and
development, and performance management all need to be aligned with
organizational missions and goals, and must be approached as interrelated
parts of a coherent human capital management strategy. Other elements must
also be considered. In the information area in particular, other key
elements will include sourcing, contract oversight, knowledge management,
and systems development. Overall, and in critical occupational areas,
agencies can and must take the initiative to be more competitive in
attracting new employees with needed skills; design and implement modern,
effective and credible performance evaluation systems; create the kinds of
performance incentives and training programs that motivate and empower
employees; and build labor- management relationships that are based on
common interests and the public trust. To shape human capital strategies
that support their specific needs and circumstances, agencies must give
strategic human capital management the enhanced and sustained attention it
deserves, modernize their existing human capital policies and practices, and
identify and make use of the tools and flexibilities available to them under
current law.

To address the federal government?s human capital challenges as a whole, we
believe a three- stage approach is appropriate. First, agencies must take
all administrative steps available to them under current laws and
regulations to manage their people for results. Much of what agencies need
to accomplish by way of focusing on human capital management is already
available to them. 4 They will, however, need the sustained commitment from
top management and the support from both the Office of Management and Budget
(OMB) and the Office of Personnel Management (OPM) to make the most of their
existing authorities. Second, the Administration and the Congress should
pursue selected legislative opportunities to put new tools and flexibilities
in place that will help agencies attract, retain, and motivate employees-
both overall and, especially, in connection with critical occupations such
as those in IT. Third, all interested parties should work together to
determine the nature and extent of more comprehensive human capital (or
civil service) reforms that should be enacted over time. These reforms
should include greater emphasis on skills, knowledge, and performance in
connection with federal employment and compensation decisions, rather than
the passage of time and rate of inflation, as is often the case today.

4 See Human Capital: Taking Steps to Meet Current and Emerging Human Capital
Challenges (GAO- 01- 965T, July 17, 2001).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 6 GAO- 01- 1007T

Mr. Chairman, as is clear from the array of witnesses you have gathered for
today?s hearing, addressing the federal government?s human capital
challenges is a responsibility shared by many parties. This includes the
President, department and agency leaders, OMB, OPM, the Congress, the
private sector, foundations and academia, and even the press. (See
attachment III). As I have noted elsewhere, strategic human capital
management has yet to find the broad conceptual acceptance or political
consensus needed for comprehensive legislative reform to occur. In this
sense, human capital remains the missing link in the framework of federal
management reforms enacted by the Congress over the past decade- reforms
that addressed such essential elements of high performing organizations as
financial management, information technology management, and results-
oriented goal- setting and performance measurement. However, I believe that
the day is approaching when we will see comprehensive federal human capital
legislative reform. The essential ingredients for progress in this area are
leadership, vision, commitment, persistence, communications, and
accountability.

Notably, OPM and OMB have taken steps in the past year to help raise
awareness of the federal government?s human capital challenges and to
encourage and enable agencies to make progress in this area. For example,
OPM has begun stressing to agencies the importance of integrating strategic
human capital management with agency planning and has also been focusing
more attention on developing tools to help agencies, such as new Senior
Executive Service performance standards and a workforce planning model with
associated Web- based research tools. Some of OPM?s efforts have been
directed specifically at addressing human capital challenges in the
information technology area. For example, in January 2001, OPM created a new
special- rate authority to boost the pay of approximately 33,000 current
federal information technology workers covered by the General Schedule (GS)
at grades GS- 5, 7, 9, 11, and 12. Both current and new federal employees
are covered by the new pay rates. Further, OPM has issued a new ?job family?
classification standard for ITrelated positions that revises and updates the
previous standard and incorporates many formerly separate IT- related
occupations into one. The new special pay rates and classification standard
are intended to give agencies more flexibility in their IT- related
recruiting and retention efforts.

OMB?s role in setting governmentwide management priorities and defining
resource allocations will be critical to inducing agencies to integrate
strategic human capital into their core business processes. Toward that end,
OMB has made strategic management of human capital one of the five

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 7 GAO- 01- 1007T

key elements of the President?s Management and Performance Plan, along with
budget and performance integration, expand competitive sourcing, improving
financial performance, and expanding e- government.

OMB?s current guidance to agencies on preparing their strategic and annual
performance plans states that the plans should set goals in such areas as
recruitment, retention, and training, among others. Further, early this
year, OMB instructed agencies to submit a workforce analysis by June 29,
2001. Each agency?s analysis was to include summary information on the
demographics of the agency?s permanent, seasonal, and temporary workforce;
projected attrition and retirements; an evaluation of workforce skills;
expected changes in the agency?s work; recruitment, training, and retention
strategies being implemented; and barriers to maintaining a highquality and
diverse workforce. The information that agencies were to develop may prove
useful in identifying human capital areas needing greater attention and,
moreover serve as an important first step toward the development of agency-
specific 5- year restructuring plans in the context of the agencies? fiscal
year 2003 budget requests and annual performance plans.

Our experience so far indicates that most agencies have a way to go before
producing human capital strategies that are integrated with their strategic
and programmatic planning processes. For example, earlier this year, we
reported on the extent to which the 24 agencies covered by the Chief
Financial Officers Act discussed human capital issues in their fiscal year
2001 performance plans. 5 Overall, agencies? plans reflected different
levels of attention to human capital, ranging from merely identifying human
capital challenges to putting forward solutions to address those challenges,
such as defining actual plans, committing resources, and assigning
accountability. We found that, in general, agencies needed to increase the
breadth, depth, and specificity of many related human capital goals and
strategies and to better link them to the agencies? strategic and
programmatic planning. Currently, we are preparing a summary of agencies?
attention to human capital issues in their fiscal year 2002 performance
plans. Although the summary is not yet complete, our preliminary review
indicates that the agencies continue to have difficulty

5 Managing for Results: Human Capital Management Discussions in Fiscal Year
2001 Performance Plans (GAO- 01- 236, Apr. 24, 2001). As part of the
Government Performance and Results Act annual performance planning
requirements, agencies are to establish results- oriented performance goals
and describe the strategies and resources- including human capital- needed
to accomplish those goals.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 8 GAO- 01- 1007T

in linking their human capital goals to meaningful performance measures or
programmatic results. For example, agencies? workforce planning efforts
generally were not targeted toward specific agency programmatic outcomes.

As agencies wrestle with human capital management, they face a significant
challenge in the information management and technology area. The rapid pace
of technological change and innovation in the current information age poses
wide- ranging opportunities for improved information management and enhanced
performance in achieving agency missions and goals. Investments in
information technologies alone are expected to account for more than 40
percent of all capital investment in the United States by 2004. The federal
government?s IT investment is conservatively estimated in fiscal year 2002
to be $44 billion- an increase in federal IT spending of 8.6 percent from
fiscal year 2000. 6 This investment is substantial and should provide
opportunities and demonstrate real results for increasing productivity and
decreasing cost. Already, we have over 1,300 electronic government
initiatives under way throughout the federal government, covering a wide
range of activities involving interaction with citizens, business, other
governments, and employees 7 .

However, federal executives and managers must also be cognizant of the
responsibilities and challenges that accompany these opportunities. Among
these challenges are:

 sustaining committed executive leadership and involvement in technology
initiatives;

 building effective e- government business cases that identify full costs
and expected benefits;

 maintaining a citizen focus in service delivery;

 protecting personal privacy and providing a secure computing environment
to reduce the risks of unauthorized access, which can lead to fraud, theft,
destruction of assets, and service disruptions;

6 Published data from agency Exhibit 53s, Office of Management and Budget
(April 9, 2001) 7 Electronic Government: Challenges Must Be Addressed With
Effective Leadership and Management (GAO- 01- 959T, July 11, 2001). Rapid
Changes In

Information Technology Require A Skilled And WellManaged Workforce

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 9 GAO- 01- 1007T

 developing adequate capabilities for storing, retrieving, and when,
appropriate, disposing of electronic records;

 providing a robust technical infrastructure guided by sound enterprise
architectures; and

 ensuring uniform service to the public using multiple methods of access to
government services and process.

Additionally, the rush to electronic government can lessen the emphasis on
the critical human element. Agencies must overcome two basic challenges
related to IT human capital- a shortage of skilled workers and the need to
provide a broad range of related staff training and development. These are
essential challenges to address so that that staff can effectively operate
and maintain new e- government systems, adequately oversee related
contractor support, and deliver responsive service to the public.

Indeed, in our own study of public and private sector efforts to build
effective Chief Information Officer (CIO) organizations, 8 we found that
leading organizations develop IT human capital strategies to assess their
skill bases and recruit and retain staff who can effectively implement
technology to meet business needs. Figure 1 provides an overview of a common
strategy that organizations in our study used to secure human capital for
information management.

8 Maximizing the Success of Chief Information Officers: Learning from
Leading Organizations (GAO- 01- 376G, February 2001).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 10 GAO- 01- 1007T

Figure 1: Strategy for Securing IT Human Capital in Leading Organizations

Leading organizations assess their IT skills on an ongoing basis to
determine what expertise is needed to meet current responsibilities and
support future initiatives. Needed skills are compared with existing
capabilities in the organization to determine gaps in the IT skills base.
Strengthening IT skills and capabilities identified in the gap analysis is
addressed though training and innovative hiring practices as part of a
formula for building information technology and management capabilities.
Further, we found effective CIO organizations cultivate expertise in their
internal workforces while outsourcing skills that are available from
multiple sources at lower cost. In short, effective staffing and sourcing
strategies provided the organizations we studied with dynamic, flexible
workforces that can execute IT management functions to meet changing
business needs and priorities.

As agencies complete their skills inventories and perform gap analyses
against existing and future IT requirements, it will be important for
executives to determine an appropriate IT sourcing strategy. This should
include an examination of the current and future IT market and a
corresponding assessment of the agency?s ability to attract, hire and retain
managers and staff the needed skills. This information should inform
strategic decisions about the appropriate nature and scope of IT sourcing
needs that are both short and longer- term in nature. Agency executives
should also differentiate between core skills needed to maintain a IT
management ?steady state? versus just- in- time needs in hot jobs areas to
address peak workloads brought about by events such as the Year 2000 date
conversion crisis, immediate computer security vulnerabilities, or

Recruit Retain

Training

Source

Tools & Technology Recognition

Assess Skill Base

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 11 GAO- 01- 1007T

creation of publicly accessible on- line forms required by legislative or
executive branch deadlines. Irrespective of the final decisions regarding
what IT functions are performed by federal employees or contractors,
agencies must have an adequate number of skilled IT professionals to oversee
the cost, quality, and performance of IT contractors.

It is also important to note that the IT human capital challenge is not just
an issue unique to our government or nation alone. The Organization for
Economic Co- operation and Development (OECD)- an international organization
that studies how governments organize and manage the public sector and
identifies emerging challenges that governments are likely to face- recently
issued a report discussing the recurring problem of the lack of IT skills in
the public sector. 9 The report found that the lack of IT skills makes it
impossible for some countries to develop technology in- house and
establishes an imbalance in relations between purchasers and providers.
Moreover, as in the United States, against the background of a very tight IT
labor market and an ever- increasing demand for highly qualified staff, the
report noted that the competitiveness of the public employer has to be
visibly strengthened.

Interestingly, solutions seem to vary according to the different traditions
in OECD member countries and can include higher wages, differentiated pay
systems, better knowledge management, and better human resources management.
For example, many countries have undertaken knowledge management
initiatives, including training of staff and collecting IT- related
information in databases. To illustrate, the United Kingdom has set up a
database on all high- profile public sector IT- enabled projects, including
project descriptions as well as a list of people running these initiatives.
The database is expected to allow existing resources to be incorporated in
future projects.

The demand for IT workers remains robust despite the decrease in demand over
the last year. Notwithstanding the recent economic slowdown, employers from
every sector, including the federal government, are still finding it
difficult to meet their needs for highly skilled IT workers. In the long
term, demand is expected to increase. The Bureau of Labor Statistics
projects that the demand for computer systems

9 The Hidden Threat to E- Government: Avoiding Large Government IT Failures,
OECD Public Management Policy Brief Number 8 (Mar. 2001). Demand for Skilled
IT

Workers Remains Substantial Despite Recent Slowdown

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 12 GAO- 01- 1007T

analysts, engineers, and scientists will almost double between 1998 and 2008
and the demand for computer programmers will increase by 30 percent during
the same time period. 10 While recent data indicate a slowing demand, the
ability of the United States to meet this demand is still considered a
problem. In April, the Information Technology Association of America (ITAA)
released a study on the size of the privatesector IT workforce, the demand
for qualified workers and the gap between the supply and demand. 11 Among
the study?s top findings were the following:

 Information technology employment remains at the forefront of the United
States economy, directly accounting for approximately 7 percent of the
nation?s total workforce. Over 10.4 million people in the United States are
IT workers, an increase of 4 percent over the 10 million reported for last
year.

 The demand for IT workers- while slowing- remains substantial, as
employers attempt to fill over 900,000 new IT jobs in 2001. For example, the
demand for skilled IT workers by large IT firms has doubled over the year
2000 figure. However, ITAA has noted that overall demand for IT workers is
down 44 percent from last year?s forecast, attributable in part, to the
slowdown in the high tech sector and the economy in general. Still, the drop
does not reflect a fall- off in IT employment, which will increase year to
year.

 The talent gap for IT workers remains large. Hiring managers reported an
anticipated shortfall of 425,000 IT workers because of a lack of applicants
with the requisite technical and non- technical skills.

The ITAA also reported that despite softening in overall demand, technical
support, database development/ administration, programming/ software
engineering, web development/ administration, and network design/
administration are the ?hot skills? that remain most in demand by IT and
non- IT companies alike. These positions represent nearly 86 percent of the
demand for IT workers. The study further notes that the demand for
enterprise systems professionals and network designers and administrators
increased by 62 percent and 13 percent respectively. The increases suggest
that companies may be staffing less in anticipation of

10 ?The 1998- 2008 Job Outlook in Brief? Occupational Outlook Quarterly
(Bureau of Labor Statistics, Spring 2000). 11 When Can You Start? Building
Better Information Technology Skills and Careers,

Information Technology Association of America (April 2001).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 13 GAO- 01- 1007T

winning new business and concentrating instead on rationalizing technology
investments, tightening operations and making infrastructure improvements.

As is apparent, the need for qualified IT professionals has placed the
public sector in direct competition with the private sector for scarce
resources. For the second consecutive year, federal CIOs have identified the
need for skilled IT workers as their most critical issue. 12 This is related
to the stark reality that a substantial portion of the federal workforce
will retire between fiscal years 1999 and 2006. We recently estimated that
by 2006 about 31 percent 13 of 24 major departments and agencies? employees
working in 1998 will be eligible to retire, and that through the end of 2006
about half of those eligible will actually retire. 14 In the area of IT, all
24 major departments and agencies reported that they consider the occupation
in the computer specialist series as mission- critical. We estimated that 30
percent of the employees in this series would be eligible to retire by the
end of fiscal year 2006 and that 14 percent would retire by then. (See
figure 2).

12 Update: Implementation of the Federal IT Workforce Challenge
Recommendations,

Chief Information Officers Council, Federal IT Workforce Committee (Mar. 21,
2001). 13 The eligibility estimate of 31 percent is based on cumulative
data, which includes those already eligible and those reaching retirement
eligibility between fiscal years 1999 through 2006, less the estimated 4
percent who are estimated to leave before they become eligible to retire.

14 Federal Employee Retirements: Expected Increase Over the Next 5 Years
Illustrates Need for Workforce Planning (GAO- 01- 509, Apr. 27, 2001).
Sustained Attention to

Federal IT Human Capital Challenges Is Key to Achieving Agency Performance
Improvements

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 14 GAO- 01- 1007T

Figure 2: Eligible and Estimated Percentage of Selected Federal Workforce to
Retire in FY 2006

Source: Federal Employee Retirements, Expected Increase Over the Next 5
Years Illustrates Need for Workforce Planning (GAO- 01- 509, Apr. 27, 2001).

Federal organizations such as OPM and the federal CIO Council are taking a
number of steps towards developing solutions for the federal government?s IT
human capital solutions. For example, as I mentioned earlier, in January
2001 OPM established higher pay rates for new and currently employed
computer specialists, computer engineers, and computer scientists at grades
GS- 5, 7, 9, 11, and 12- the levels at which OPM identified the most severe
federal IT staffing problems and at which it found that GS salaries lag far
behind non- federal salaries. In combination with the across- the- board GS
increase, the special pay rates produced overall net increases ranging from
7 percent to 33 percent for most affected employees. The special rates are
designed to help agencies address significant problems in recruiting high-
quality entry- and developmental- level federal IT workers with the latest
skills. OPM has stated that it will continue to monitor the IT staffing
situation to determine whether the special rates should be expanded. It will
be important to track how the salary increases affect the federal
government?s ability to hire and retain qualified IT professionals.

The CIO Council also has a Federal IT Workforce Committee focused on
facilitating activities designed to (1) improve the federal government?s
ability to attract and retain a top- notch IT workforce and (2) expand

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 15 GAO- 01- 1007T

effective IT education and training opportunities for the existing federal
workforce. 15 Among the Council?s initiatives is the support of the CIO
University, which is a collaborative effort between the federal government
and private institutions to develop IT executives and support of the
Strategic and Tactical Advocates for Results (STAR) program. STAR is a
graduate- level program designed to create an optimal learning environment
for professionals. The Council also committed to reviewing and revising the
CIO core competencies on a biennial basis. These competencies serve as a
tool for determining IT skills, knowledge, and education requirements.

To help better understand the magnitude of federal IT human capital issues
and possible alternatives for new solutions, the CIO Council and the
Administrative Office of the U. S. Courts asked the National Academy of
Public Administration (NAPA) to study IT compensation strategies and to make
recommendations on how the government can best compete for IT talent. NAPA
has completed and reported on the first phase of this study. NAPA expects to
complete its final report by mid- September. It will contain an evaluation
of alternative compensation models and address recommended solutions.

Table 1 summarizes NAPA?s overall comparison of compensation and work
factors among various sectors, which demonstrates some of the similarities
and differences among the sectors. NAPA?s high, medium, and low designations
shown below are based on an overall evaluation of data and information
obtained for organizations in each sector in comparison with the other
sectors.

15 Strategic Plan: Fiscal Year 2001- 2002, Chief Information Officers
Council (October 2000).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 16 GAO- 01- 1007T

Table 1: Overall Comparison of Compensation and Work Factors Sector Salary
levels

Work- life benefits

Rewards/ recognition

Advancement/ Training Use of recruiting tools

Federal Low High Low Low Low State Low Medium Medium Medium Medium Local Low
Medium Medium Low Low Non- profit Medium Medium Medium Medium High Private
High High High High High Academia Medium High Medium Medium Medium

Source: Comparative Study of Information Technology Pay Systems: Executive
Study (NAPA, March 2001).

To date, we have issued reports on the IT human capital management practices
at two agencies- the Small Business Administration (SBA) and the United
States Coast Guard. 16 We also have similar work ongoing at the Social
Security Administration and the Centers for Medicare and Medicaid Services.
Our evaluations have focused on agency practices in four areas:

 Requirements- assessing the knowledge and skills needed to effectively
perform IT operations to support agency mission and goals

 Inventory- determining the knowledge and skills of current IT staff to
identify gaps in needed capabilities

 Workforce strategies and plans- developing strategies and implementing
plans for hiring, training, and professional development to fill the gap
between requirements and current staffing

 Progress evaluation- evaluating progress made in improving IT human
capital capability, and use the results of these evaluations to continuously
improve the organization?s human capital strategies

The results of our reviews indicate that although agencies are initiating
strategies and plans to attract, retain, and/ or train a skilled IT
workforce, much remains to be done. Common weaknesses include a lack of (1)
organizational commitment, (2) effective workforce planning, and (3)
meaningful performance evaluation systems. For example, none of the agencies
we reviewed had completed workforce planning activities, such as identifying
knowledge and skill requirements and inventorying current staff
capabilities. Further, none had developed and implemented

16 Information Technology Management: SBA Needs to Establish Policies and
Procedures for Key IT Processes (GAO/ AIMD- 00- 170, May 31, 2000) and
Information Technology Management: Coast Guard Practices Can Be Improved
(GAO- 01- 190, Dec. 12, 2000). Agencies? Progress in

Addressing IT Human Capital Strategies Has Been Sluggish

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 17 GAO- 01- 1007T

mechanisms to evaluate progress in improving staff IT capabilities and
therefore lacked the evaluation results that would have been used to
continuously improve human capital strategies.

The ramifications of the deficiencies in the agencies? IT human capital
management efforts are serious. Without complete assessments of IT skill
needs, agencies will lack assurance that they have effectively identified
the number of staff they will require with the specific knowledge and skills
needed to sustain their current and future operations and developed
strategies to fill these needs. Also, lacking an inventory of IT knowledge
and skills, agencies will not have assurance that they are optimizing the
use of current IT workforce nor have data on the extent of IT skill gaps.
This information is necessary to developing effective workforce strategies
and plans. Further, without analyzing and documenting the effectiveness of
workforce strategies and plans, senior decisionmakers lack assurance that
they are effectively addressing IT knowledge and skill gaps.

At GAO, we have faced human capital challenges similar to those facing the
federal government in general and the IT area specifically. However, we have
made human capital management a top priority. We are undertaking a wide
array of initiatives in this area and are investing considerable time,
energy, and financial resources to make them work. 17 The aim of these
efforts is to enhance our performance and assure our accountability by
attracting, retaining, and motivating a top- quality workforce, including
staff in critical occupations such as IT. We have identified and made use of
a variety of tools and flexibilities, some of which were made available to
us through the GAO Personnel Act of 1980 and some through legislation passed
by the Congress in 2000, but most of which are available across the broad
spectrum of federal agencies.

The past decade was a difficult one for ensuring that GAO?s workforce would
remain appropriately sized, shaped, and skilled to meet its mission demands.
Severe downsizing of the workforce, including a suspension of most hiring
from 1992 through 1997, and constrained investments in such areas as
training, performance incentives and rewards, and enabling technology, left
us with a range of human capital challenges that we have begun to address.
We face certain skills imbalances that include a pressing

17 See Human Capital: Taking Steps to Meet Current and Emerging Human
Capital Challenges (GAO- 01- 965T, July 17, 2001). GAO Has Taken Steps

To Meet Human Capital Challenges, Including Those In The It Area

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 18 GAO- 01- 1007T

need for information technology professionals, but also for other skilled
professionals such as accountants, statisticians, economists, and health
care analysts. Further, we face a range of succession planning challenges.
Specifically, by fiscal year 2004, 55 percent of our senior executives, 48
percent of our management- level analysts, and 34 percent of our analyst and
related staff will be eligible for retirement. Moreover, at a time when a
significant percentage of our workforce is nearing retirement age,
marketplace, demographic, economic, and technological changes indicate that
competition for skilled employees will be greater in the future, making the
challenge of attracting and retaining talent even more complex.

To address these challenges, we have taken numerous steps, all designed to
support our strategic plan, which describes our role and mission in the
federal government; our core values of accountability, integrity, and
reliability that guide our work; the trends, conditions, and external
factors underlying the plan; and our goals, objectives, and strategies for
serving the Congress. From a human capital standpoint, our strategic plan
and core values are our touchstones for designing, implementing, and
evaluating our approaches to managing our people. These two vital elements
will also be the foundation for our revised institutional and individual
performance measurement and reward systems.

In addition to laying the groundwork through strategic planning, in the fall
of 2000 we realigned our mission- related functions at headquarters and the
field to better support the Congress and prepare ourselves, with current and
expected resource levels, to meet the future challenges outlined in our
strategic plan. As with strategic planning, organizational alignment is
crucial if an agency is to maximize its performance and assure its
accountability. The choices that go into aligning an organization to support
its strategic and programmatic goals have enormous implications for further
decisions about human capital management, such as what kinds of leaders the
agency should have and how it will best ensure leadership continuity, how
skills needs will be identified and filled- particularly in critical
occupations such as IT- and what strategies the agency will use to steer the
organizational culture to maximize its results.

We have taken many administrative steps to enhance the value of our human
capital. (See figure 3).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 19 GAO- 01- 1007T

Figure 3: Administrative Actions to Address GAO?s Human Capital Challenges

 Self- assessment checklist

 Human capital profile/ planning

 Employee feedback survey and suggestion program

 Employee Advisory Council

 Enhanced employee communications/participation

 Skills/knowledge inventory

 Employee preference survey

 Competency model/competency based appraisal system

 Workforce and succession planning

 Recruiting and college relations

 Training/ development

 Recognition and rewards

 Flexitime and Flexiplace

 Business casual and business cards

 Enabling technologies

 Commuting subsidy (pending)

 College loan repayment fund (pending)

 Opportunity/ Inclusiveness

Also, as seen in figure 4, we have pursued flexibilities that were made
available to us through legislation. It should be noted that strategic human
capital management is a work- in- progress for us, as it is for others. Our
approaches are not the only way for agencies to proceed, but they can help
others to see their way forward to addressing their individual human capital
challenges.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 20 GAO- 01- 1007T

Figure 4: Use of Legislative Flexibilities to Address GAO?s Human Capital
Challenges

 Broadbanding system for mission staff

 Excepted hiring authority (e. g., internship program)

 Special pay rates

 Senior Level for technical staff

 Targeted early outs and buyout authority

 Revised RIF rules Among these challenges at GAO is the need to attract and
retain IT and other technical staff. The steps we have taken to meet this
challenge include the following:

 Expanding our overall recruiting efforts, to increase our presence at
colleges and universities by leveraging technology and by our participation
at area job fairs. To support our increased efforts, GAO is enhancing the
existing Applicant Tracking System. This is an interim effort to render the
system more user friendly and robust in order to meet the needs of GAO?s
staff involved in recruitment, while providing better service to GAO
applicants. GAO is also exploring Web- based recruitment services that
support the advertisement of vacancies, the receipt and processing of
applications, and the development and maintenance of Web- based recruitment
targeted for specific skills.

 Using a 25 percent pay differential (equal to the OPM pay differential for
executive branch IT hires) to bring aboard entry- level technical staff for
our IT team.

 Offering pay bonuses in attracting and retaining top IT talent with
specific technical skill sets.

 Making wide use of contractor resources in the IT area to supplement both
the numbers and skill sets of government employees. Currently, about 60
percent of the staff supporting GAO internal IT operations and initiatives
are contractor staff. The other 40 percent are in- house staff. Given
staffing constraints and market conditions, we have found this arrangement
to work very well. We focus our training of in- house staff on project
management, contract management, and technical training to ensure sound
project management and oversight of the contractors. Using contractor
resources has given us the ability to quickly bring on staff with the IT
skills needed to carry out new projects/ initiatives.

 Transitioning from a traditional classroom training approach to one that
combines and balances classroom training with various online learning
experiences that can be delivered at the desktop. To support this approach

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 21 GAO- 01- 1007T

to learning, GAO plans to acquire a system that will maintain on- line
individual development plans supported by competency- based learning paths
and to support the development and delivery of Web- based learning with on-
line testing and on- line course evaluations.

 Using the authority that the Congress provided in our 2000 legislation to
create Senior Level positions to meet certain scientific, technical, and
professional needs and to extend to those positions the rights and benefits
of SES employees. One of the areas targeted was IT. We recently named four
new Senior Level technical IT positions, and provided a few other
specialists- such as our Chief Statistician and Chief Accountant- with new
titles and SES- equivalent benefits.

The authority to create Senior Level positions in certain critical areas
reflects a specific need we identified and to which the Congress responded.
As we assessed GAO?s human capital challenges at the start of the new
century- including those related specifically to the IT area- we recognized
that our preexisting personnel authorities would not let us address these
challenges effectively. Therefore, using comprehensive workforce data that
we had gathered and analyzed to make a coherent business case, we worked
with the Congress last year to obtain several narrowly tailored
flexibilities to help us reshape our workforce and establish the Senior
Level technical positions.

Along with the Senior Level positions, the legislation gave us additional
tools to realign GAO?s workforce in light of overall budgetary constraints
and mission needs; to correct skills imbalances; and to reduce high- grade,
managerial, or supervisory positions without reducing the overall number of
GAO employees. To address any or all of these three situations, we now have
authority to offer voluntary early retirement (VER) to a maximum of 10
percent of our employees each fiscal year until December 31, 2003. We also
have the authority to offer voluntary separation incentive (VSI) payments to
a maximum of 5 percent of our employees during each fiscal year until
December 31, 2003. Further, in the case of a reduction- in- force (RIF), we
have the authority to place a much greater emphasis in our decisionmaking on
our employees? knowledge, skills, and performance, while retaining veterans?
preference and length of service as factors to consider in connection with
applicable RIFs.

Since the legislation was enacted, we have established agency regulations
for implementing the VER program. Having analyzed GAO workforce data, we
recently began offering voluntary early retirements to take effect from

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 22 GAO- 01- 1007T

October 1, 2001 until January 3, 2002. We have largely limited our voluntary
early retirement offers to organizational areas in which we do not expect to
grow, while at the same time stepping up our efforts to recruit and retain
employees in critical occupations such as those related to information
technology.

The development of agency regulations to cover VSIs and RIFs is still in
progress. We have no plans to offer VSIs, nor do we intend to pursue any
involuntary layoffs during this or the next fiscal year.

We believe that three of the authorities provided in our 2000 legislation
may have broader applicability for other agencies and are worth
congressional consideration at this time. Authority to offer voluntary early
retirement and voluntary separation incentives could give agencies
additional flexibilities with which to realign their workforces; correct
skills imbalances; and reduce high- grade, managerial, or supervisory
positions without reducing their overall number of employees. Further, the
authority to establish Senior Level positions could help agencies become
more competitive in the job market, particularly in critical scientific,
technical, or professional areas.

Further, the Administration and the Congress should consider other
legislative actions that would help federal employers address their human
capital challenges. As demographics change, as the marketplace continues to
evolve, we will continue to think strategically and proactively to identify
areas in which new innovations would make good business sense. In this
regard, we believe it is worth exploring selective legislative proposals to
enhance the federal government?s ability to attract, retain, and motivate
skilled employees, particularly in connection with critical occupations, on
a governmentwide basis. In addition to the three items I just mentioned, the
following represent areas in which opportunities exist to better equip
federal employers to meet their human capital needs:

 Critical occupations. Although agencies generally have more hiring and pay
flexibilities today than in the past, further innovations might be explored
to help federal agencies recruit, retain, and reward employees in such
critical fields as information technology, where there is severe competition
with other sectors for talent.

 Recruiting funds. In order to help attract and retain employees,
consideration should be given to authorizing agencies to use appropriated
funds for selective recruiting, recognition, and team building activities.
Further Legislative

Reforms Should Be Explored

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 23 GAO- 01- 1007T

 Professional development. To encourage federal employees in their
professional development efforts, consideration should be given to
authorizing agencies to use appropriated funds to pay for selected
professional certifications, licensing, and professional association costs.

 Pay compression relief. Executive compensation is a serious challenge for
federal agencies, which to an increasing extent must compete with other
governmental organizations- and with not- for- profit and private sector
organizations- to attract and retain executive talent. In this regard, the
existing cap on SES pay has increased pay compression between the maximum
and lower SES pay levels, resulting in an increasing number of federal
executives at different levels of responsibility receiving identical
salaries. Further, pay compression can create situations in which the
difference between executive and nonexecutive pay is so small that the
financial incentive for managers to apply for positions of greater
responsibility may disappear. The Congress needs to address this increasing
pay compression problem. It could do so, perhaps, by delinking federal
executive compensation from congressional pay, or by raising the cap on
executive performance bonuses.

 Cafeteria benefits. Federal employees could be provided with flexible
benefits available to many private sector workers under Section 125 of the
Internal Revenue Service Code. This would give federal employees the ability
to pay for such things as childcare or eldercare with pre- tax rather than
after- tax dollars.

 Frequent flyer miles. Employees who travel on government business should
be allowed to keep their ?frequent flyer? miles- a small benefit but one
that private sector employers commonly provide their people as part of a
mosaic of competitive employee benefits. Let?s face it, flying is not fun
anymore. Allowing federal workers to keep these miles, as employees
elsewhere can, is a small price to pay. In addition, federal agencies could
still use gainsharing programs to reward employees and save the government
travel costs. As you know, Mr. Chairman, there has already been some
meaningful progress on this issue: Last week, the House Government Reform
Committee approved a bill that would allow civil service employees to
?retain for personal use promotional items received as a result of travel
taken in the course of employment.?

 Phased retirement. It may be prudent to address some of the succession
planning issues associated with the rise in retirement eligibilities by
pursuing phased retirement approaches, whereby federal employees with needed
skills could change from full- time to part- time employment and receive a
portion of their federal pension while still earning pension credits.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 24 GAO- 01- 1007T

 Fellowships. The Congress should explore greater flexibilities to allow
federal agencies to enhance their skills mix by leveraging the expertise of
private and not- for- profit sector employees through innovative fellowship
programs, particularly in critical occupations. Through such fellowships,
private and not- for- profit professionals could gain federal experience
without fully disassociating themselves from their positions, while federal
agencies could gain from the knowledge and expertise that these
professionals would bring during their participation in the program.
Obviously, appropriate steps would have to be taken to address any potential
conflicts. This concept could also be used to allow federal workers to
participate in fellowship programs with private and not- forprofit sector
employers.

The federal government spends about of $200 billion a year contracting for
goods and services. We are concerned with having the right people with the
right skills to successfully manage federal contracts. We all agree that
dealing with this issue will not be easy. The government is facing
evergrowing public demands for better and more economical delivery of
products and services. At the same time, the ongoing technological
revolution requires a workforce with new knowledge, skills, and abilities.
And at the moment, agencies must address these challenges in an economy that
makes it difficult to compete for people with the competencies needed to
achieve and maintain high performance. This situation is aptly illustrated
by the problems found in the growing area of acquiring services.

Federal agencies spend billions of tax dollars each year to buy services
ranging from clerical support and consulting services to information
technology services, such as network support, to the management and
operation of government facilities, such as national laboratories. Our work
continues to show that some service procurements are not being done
efficiently, putting taxpayer dollars at risk. In particular, agencies are
not clearly defining their requirements, fully considering alternative
solutions, performing vigorous price analyses, or adequately overseeing
contractor performance. Further, it is becoming increasingly evident that
agencies are at risk of not having enough of the right people with the right
skills to manage service procurements. Consequently, a key question we face
in the federal government is whether we have today, or will have tomorrow,
the ability to acquire and manage the procurement of increasingly
sophisticated services the government needs. Acquisition Workforce

Challenges Hinder Government?s Ability To Oversee Outside Contractors

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 25 GAO- 01- 1007T

The amount being spent on services is growing substantially. Last year
alone, the federal government acquired more than $87 billion in services- a
24- percent increase in real terms from fiscal year 1990. In fact,
government purchase of services now accounts for 43 percent of all federal
contracting expenses- surpassing supplies and equipment as the largest
component of federal contract spending. Another dimension to this issue is
that federal agencies are increasingly contracting out for information
technology services.

The growth in service contracting has largely been driven by the
government?s increased purchases of two types of services:

 information technology services, which increased from $3.7 billion in
fiscal year 1990 to about $13.4 billion in fiscal year 2000, and

 professional, administrative, and management support services, which rose
from $12.3 billion in fiscal year 1990 to $21.1 billion in fiscal year 2000.

The increase in the use of service contracts coincided with a 21- percent
decrease in the federal workforce, 18 which fell from about 2.25 million
employees as of September 1990 to 1.78 million employees as of September
2000.

As federal spending and employment patterns were changing, changes were also
occurring in the way that federal agencies buy services. Specifically, there
has been a trend toward agencies purchasing professional services using
contracts awarded and managed by other agencies. For example, in 1996, the
General Services Administration (GSA) began offering information technology
services under its Federal Supply Schedule program, 19 and it now offers
services ranging from professional engineering to laboratory testing and
analysis to temporary clerical and professional support services. The use of
the schedule program to acquire services has increased significantly over
the past several years.

18 This decrease reflects the total civilian employment for executive branch
agencies, excluding the U. S. Postal Service and the Postal Rate Commission.
19 Under the schedule program, GSA negotiates contracts with vendors for a
wide variety of mostly commercial- type products and services, and permits
other agencies to place orders under these contracts directly with the
vendors. Traditionally, the program had generally been used for common
goods, such as office supplies and furniture. According to GSA, it takes 268
days to award a contract using traditional methods, but it takes only 15
days, on average, to award an order under the schedule program.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 26 GAO- 01- 1007T

Other governmentwide contracts have also come into use in recent years. The
Federal Acquisition Streamlining Act of 1994 authorized federal agencies to
enter into multiple- award, task- and delivery- order contracts for goods
and services. These contracts provide agencies with a great deal of
flexibility in buying goods or services while minimizing the burden on
government contracting personnel to negotiate and administer contracts. The
Clinger- Cohen Act of 1996 authorized the use of multiagency contracts and
what have become known as governmentwide agency contracts to facilitate
purchases of information technology- related products and services such as
network maintenance and technical support, systems engineering, and
integration services.

While we have seen the environment change considerably, what we have not
seen is a significant improvement in federal agencies? management of service
contracts. Simply stated, the poor management of service contracts
undermines the government?s ability to obtain good value for the money
spent. This contributed to our decision to designate contract management a
high- risk area for the Departments of Defense and Energy, the two largest
purchasers within the federal government. Improving contract management is
also among the management challenges faced by other agencies.

Compounding these problems are the agencies? past inattention to strategic
human capital management. As I noted earlier, we are concerned that federal
agencies? human capital problems are eroding the ability of many agencies-
and threatening the ability of others- to perform their missions
economically, efficiently, and effectively. For example, we found that the
initial rounds of downsizing were set in motion without considering the
longer- term effects on agencies? performance capacity. Additionally, a
number of individual agencies drastically reduced or froze their hiring
efforts for extended periods. Consequently, following a decade of downsizing
and curtailed investments in human capital, federal agencies currently face
skills, knowledge, and experience imbalances that, without corrective
action, will worsen, especially in light of the numbers of federal civilian
workers becoming eligible to retire in the coming years.

I would like to use DOD?s experience to illustrate this problem. As we
recently testified, 20 DOD?s approach to civilian workforce reduction was

20 Human Capital: Major Human Capital Challenges at the Departments of
Defense and State (GAO- 01- 565T, Mar. 29, 2001).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 27 GAO- 01- 1007T

not oriented toward shaping the makeup of the force. Rather, DOD relied
primarily on voluntary turnover and retirements, freezes on hiring
authority, and its authority to offer early retirements and ?buy- outs? to
achieve reductions. While DOD had these kinds of tools available to manage
its civilian downsizing and to mitigate the adverse effects of force
reductions, its approach to civilian force reductions was not really
oriented toward shaping the workforce for the future. In contrast, DOD did a
much better job managing active- duty military force reductions because it
followed a policy of trying to achieve and maintain a degree of balance
between its accessions and losses in order to shape its forces with regard
to rank, specialties, and years of service. 21 As a result, DOD?s current
civilian workforce is not balanced and therefore poses risks to the orderly
transfer of institutional knowledge. According to DOD?s Acquisition 2005
Task Force, ?After 11 consecutive years of downsizing, we [DOD] face serious
imbalances in the skills and experience of our highly talented and
specialized civilian workforce,? putting DOD on the verge of a retirement-
driven talent drain. 22

DOD?s leadership had anticipated that using streamlined acquisition
procedures would improve the efficiency of contracting operations and help
offset the effects of workforce downsizing. However, the DOD Inspector
General reported that the efficiency gains from using streamlined procedures
had not kept pace with acquisition workforce reductions. The Inspector
General reported that while the workforce had been reduced by half, DOD?s
contracting workload had increased by about 12 percent 23 and that senior
personnel at 14 acquisition organizations believed that workforce reductions
had led to problems such as less contractor oversight.

While I have discussed DOD?s problems at length, we believe our concerns are
equally valid regarding the broader civilian agency contracting community.
For example, our analysis of personnel data maintained by

21 Human Capital: Strategic Approach Should Guide DOD Civilian Workforce
Management (GAO/ T- GGD/ NSIAD- 00- 120, Mar. 9, 2000). 22 Shaping the
Civilian Acquisition Workforce of the Future, Final Report of the
Acquisition 2005 Task Force to the Under Secretary of Defense, Acquisition,
Technology, and Logistics and the Under Secretary of Defense, Personnel and
Readiness (October 2000).

23 DOD Acquisition Workforce Reduction Trends and Impacts, Office of the
Inspector General, Department of Defense (Feb. 29, 2000).

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 28 GAO- 01- 1007T

OPM shows that while DOD downsized its workforce to a greater extent than
the other agencies during the 1990s, both DOD and the other agencies will
have about 27 percent of their current contracting officers eligible to
retire through the end of fiscal year 2005. Consequently, without
appropriate workforce planning, federal agencies could lose a significant
portion of their contracting knowledge base.

As we underscored through our January 2001 designation of strategic human
capital management as a governmentwide high- risk area, the federal
government is facing pervasive human capital challenges. These challenges
are eroding the ability of many agencies- and threatening the ability of
others- to economically, efficiently, and effectively perform their
missions. Many parties will need to work to address the government?s human
capital problems, including the President, department and agency leaders,
OMB, OPM, the Congress, the private sector, foundations and academia, and
even the press.

We believe that fundamental human capital legislative reform will eventually
become a reality. However, agencies must first take the steps available to
them under current laws and regulations to better manage their people.
Second, agencies and the Congress alike should explore several legislative
opportunities to help attract, motivate, and retain employees, both overall
and especially in connection with critical occupations such as those in the
information technology area. Finally, all interested parties should work
together to determine the nature and extent of more comprehensive human
capital (or civil service) reforms that should be enacted over time. These
reforms should include placing greater emphasis on skills, knowledge, and
performance in connection with federal employment and compensation
decisions.

Human capital issues have particular bearing on the information technology
area. How successfully the federal government acquires and uses information
technology will continue to hinge on its ability to build, prepare and
manage its information technology workforce. Agencies must overcome two
basic challenges related to IT human capital: a shortage of skilled workers
and the need to provide a broad range of related staff training and
development. These challenges must be addressed so that federal managers and
staff can effectively operate and maintain government systems, adequately
oversee related contractor support, and deliver responsive service to the
public. Summary

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 29 GAO- 01- 1007T

For further information regarding this testimony, please contact Victor S.
Rezendes, Managing Director, Strategic Issues, on (202) 512- 6806 or at
rezendesv@ gao. gov. For information specific to the information technology
portion of this testimony, please contact David L. McClure, Director,
Information Technology Management, on (202) 512- 6240 or at mcclured@ gao.
gov. For further information specific to the acquisitions related portion of
this testimony, please contact David E. Cooper, Director, Acquisition and
Sourcing Management, on (202) 512- 4841 or at cooperd@ gao. gov. Individuals
making key contributions to this testimony included Stephen Altman, Margaret
Davis, Ralph Dawn, Gordon Lusby, and Joseph Santiago. Contact and

Acknowledgments

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 30 GAO- 01- 1007T Strategic Planning: Establish the agency?s mission,
vision for the

future, core values, goals and objectives, and strategies. Shared vision
Human capital focus

Organizational Alignment: Integrate human capital strategies with the
agency?s core business practices.

Improving workforce planning Integrating the ?HR? function

Leadership: Foster a committed leadership team and provide for reasonable
continuity through succession planning.

Defining leadership Building teamwork and communications Ensuring continuity

Talent: Recruit, hire, develop, and retain employees with the skills needed
for mission accomplishment.

Recruiting and hiring Training and professional development Workforce
deployment Compensation Employee- friendly workplace

Performance Culture: Empower and motivate employees while ensuring
accountability and fairness in the workplace.

Performance management Performance incentives Continuous learning and
improvement Managers and supervisors Job processes, tools, and mission
support Information technology Inclusiveness Employee and labor relations

Source: Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/
OCG- 00- 14G, September 2000).

Attachment I: GAO?s Human Capital Framework

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 31 GAO- 01- 1007T

Agency Illustrative human capital challenges

Agriculture Organizational culture problems, including resistance from
affected USDA agencies and employees, have hampered departmentwide
reorganization and modernization efforts. Further, the nation?s food safety
system, in which USDA plays a major role, continues to suffer from
inconsistent oversight, poor coordination, and inefficient deployment of
resources. Bureau of Indian Affairs

Untrained and inexperienced staff hamper effective management of $3 billion
in Indian trust funds. Commerce A lack of sufficient numbers of experienced
staff with the right expertise limits the ability of

Commerce and two other trade agencies to monitor and enforce trade
agreements. Defense In the past two years, the military services have
struggled to meet recruiting goals. Attrition

among first- time enlistees has reached an all- time high. The services face
shortages among junior officers, and problems in retaining a range of
uniformed personnel, including intelligence analysts, computer programmers,
and pilots. On the civilian side, skills and experience imbalances following
downsizing are jeopardizing acquisitions and logistics capabilities. Energy
Headquarters and field staff have lacked contract management skills to
oversee large projects,

such as the cleanup of radioactive and hazardous waste sites. Environmental
Protection Agency EPA has not yet implemented any systematic means of
determining the right size, skills needs,

or deployment of its workforce to carry out its mission and achieve its
strategic goals and objectives, despite the demand for new skills due to
technological changes and the shift in EPA?s regional environmental
responsibilities to the states, as well as growing retirement eligibilities
in its workforce. Federal Aviation Administration

In major acquisition projects, FAA has lacked technical expertise to address
vital project issues.

Attachment II: Examples of Federal Agencies with Human Capital Challenges

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 32 GAO- 01- 1007T

Agency Human capital challenges

Centers for Medicare and Medicaid Services Medicare?s leadership problems
include the lack of any official whose sole responsibility it

is to run the program. Further, frequent leadership changes at CMS have
hampered longterm Medicare initiatives and the pursuit of a consistent
management strategy. CMS? workforce lacks skills needed to meet recent
legislative requirements. The mismatch between CMS? administrative capacity
and its mandate could leave Medicare unprepared to handle future population
growth and medical technology advances. Housing and Urban Development

As HUD?s reorganization moves into its final phases, workload imbalances
pose programmatic challenges to several specialty centers and field offices.
Single family mortgage insurance programs administered by HUD?s Federal
Housing Administration have been marked by a number of human capital
challenges, including insufficient staff. Further, insufficient or
inexperienced staff led to problems in quality assurance reviews for 203( k)
home rehabilitation loans and oversight of appraisers and mortgage lenders.
Immigration and Naturalization Service

Lack of staff to perform intelligence functions and unclear guidance for
retrieving and analyzing information hamper efforts to combat the growing
problem of alien smuggling. Interior and U. S. Forest Service Difficulties
replacing experienced fire personnel threaten firefighting capabilities
during

catastrophic events. Internal Revenue Service

IRS lacks reliable cost and operational information to measure the
effectiveness of its tax collection and enforcement programs and to judge
whether it is appropriately allocating its staff resources among competing
management priorities.

National Aeronautics and Space Administration Staff and skills losses
following downsizing pose potentially serious problems for the

safety and planned flight rate of the space shuttle. National Park Service

Historically, the Park Service?s decentralized priority- setting and
accountability systems left it without the means to monitor progress toward
achieving its goals or hold park managers accountable for the results of
park operations. The park concessions program continues to face management
problems, including inadequate qualifications and training of the agency?s
concession specialists and concessions contracting staff. Insufficient fire
safety training has contributed to fire safety risks at visitor centers,
hotels, and other national park buildings.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 33 GAO- 01- 1007T

Agency Human capital challenges

Nuclear Regulatory Commission

NRC?s organizational culture is struggling with the agency?s new ?risk-
informed? regulatory approach. Further, NRC?s ability to maintain the skills
needed to achieve its mission and fill the gaps created by growing
retirement eligibilities could be threatened by the decline in university
enrollments in nuclear engineering and other fields related to nuclear
safety. Pension Benefit Guaranty Corporation

Because the agency did not adequately link its contracting decisions to
long- term strategic planning, it may not have the cost- effective mix of
contractor and federal employees needed to meet future workload challenges.
Further, PBGC employees who monitor contractors lack adequate guidance and
policies essential to monitoring contractor performance. Social Security
Administration Increasing demand for services, imminent retirement of a
large part of its workforce,

changing customer expectations, and mixed success in past technology
investments will challenge SSA?s ability to meet its service delivery
demands, which include faster and more accurate benefit claims
determinations and increased emphasis on returning the disabled to work.
State Issues related to the quality of life at overseas posts, career
development opportunities,

and talent management are hampering recruitment and retention of Foreign
Service Officers. Efforts to determine the right size and composition of
overseas posts have begun, but State faces challenges in aligning its
workforce with new economic, political, security, and technological
requirements. Also, staffing shortfalls are hampering counternarcotics
programs and efforts to combat visa fraud. US Agency for International
Development Staffing shortfalls in the procurement area have hampered the
agency?s ability to initiate

and monitor contracts, thus delaying reconstruction assistance in the wake
of natural disasters in Central America and the Caribbean. Veterans Affairs
A national nursing shortage could adversely affect VA?s efforts to improve
patient safety in

VA facilities and put veterans at risk. Further, VA?s training and
recruitment programs may not be adequate to ensure a sufficient workforce of
competent claims processors, which would likely undermine efforts to improve
current problems of claims processing backlogs and errors.

Source: GAO?s Performance and Accountability Series, numbered GAO- 01- 241
to 262, January 2001.

Human Capital: Building the Information Technology Workforce to Achieve
Results

Page 34 GAO- 01- 1007T

Attachment III: Addressing the Human Capital Challenge: Shared
Responsibilities

(450063)

 President

 Lead

 Promote

 Recognize

 OMB

 Lead

 Coordinate

 Link

 OPM

 Lead

 Advise/ Assist

 Review

 Departments/ Agencies

 Lead

 Design

 Implement

 Congress

 Confirm

 Oversee

 Legislate

 GAO

 Review

 Recommend

 Share

 Private Sector

 Partner

 Recognize

 Support

 Foundations

 Partner

 Research

 Integrate

 Academia

 Partner

 Revise

 Promote

 Media

 Learn

 Investigate

 Report

The first copy of each GAO report is free. Additional copies of reports are
$2 each. A check or money order should be made out to the Superintendent of
Documents. VISA and MasterCard credit cards are also accepted.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

Orders by visiting:

Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
20013

Orders by phone:

(202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

Each day, GAO issues a list of newly available reports and testimony. To
receive facsimile copies of the daily list or any list from the past 30
days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
will provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an email
message with ?info? in the body to:

Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
gao. gov

Contact one:

 Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

 E- mail: fraudnet@ gao. gov

 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***