Human Capital: OPM Can Better Assist Agencies in Using Personnel 
Flexibilities (09-MAY-03, GAO-03-428).				 
                                                                 
Congressional requesters asked GAO to provide information on	 
actions that the Office of Personnel Management (OPM) has taken  
to facilitate the effective use of human capital flexibilities	 
throughout the federal government and what additional actions OPM
might take in this regard. These flexibilities represent the	 
policies and practices that an agency has the authority to	 
implement in managing its workforce.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-428 					        
    ACCNO:   A06654						        
  TITLE:     Human Capital: OPM Can Better Assist Agencies in Using   
Personnel Flexibilities 					 
     DATE:   05/09/2003 
  SUBJECT:   Federal employees					 
	     Strategic planning 				 
	     Personnel management				 
	     Labor force					 
	     Human resources utilization			 

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GAO-03-428

                                       A

Report to Congressional Requesters

May 2003 HUMAN CAPITAL OPM Can Better Assist Agencies in Using Personnel
Flexibilities

GAO- 03- 428

Letter 1 Results in Brief 2 Background 5 OPM Has Taken Several Actions to
Assist Agencies in Using

Flexibilities 10 Agencies* Human Resources Directors Gave Mixed Views on
OPM*s

Role Related to Flexibilities 15 Additional OPM Actions Could Further
Facilitate Agencies* Use of

Flexibilities 19 Conclusions 25 Recommendations for Executive Action 26
Agency Comments 27

Appendixes

Appendix I: Objectives, Scope, and Methodology 28

Appendix II: Comments from the Office of Personnel Management 31

Appendix III: GAO Contacts and Staff Acknowledgments 34 Table Table 1:
Human Resources Directors* Responses to GAO

Questionnaire on Human Capital Flexibilities (Fall 2001 and Fall 2002) 30
Figures Figure 1: Key Practices for Effective Use of Human Capital

Flexibilities 9 Figure 2: Human Resources Directors* Extent of
Satisfaction with

OPM*s Role in Helping Their Agencies Use Available Human Capital
Flexibilities (Fall 2001 and Fall 2002) 16 Figure 3: Human Resources
Directors* Extent of Satisfaction with

OPM*s Role in Helping Their Agencies Identify Additional Human Capital
Flexibilities That Could Be Authorized (Fall 2001 and Fall 2002) 18

Abbreviations

CHCO chief human capital officer DOJ Department of Justice NAPA National
Academy of Public Administration OMB Office of Management and Budget OPM
Office of Personnel Management

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Letter

May 9, 2003 The Honorable Joseph I. Lieberman Ranking Minority Member
Committee on Governmental Affairs United States Senate The Honorable
Daniel K. Akaka Ranking Minority Member Subcommittee on Financial
Management, the Budget and International Security Committee on
Governmental Affairs United States Senate The Honorable George V.
Voinovich Chairman The Honorable Richard J. Durbin Ranking Minority Member
Subcommittee on Oversight of Government Management, the Federal Workforce
and the District of Columbia Committee on Governmental Affairs United
States Senate

The Honorable Thad Cochran United States Senate To deal with the
challenges that federal agencies are experiencing in acquiring and
retaining staff to meet current and expected needs, agencies need
effective human capital flexibilities* with appropriate safeguards* to
assist them. In broad terms, human capital flexibilities represent the
policies and practices that an agency has the authority to implement in
managing its workforce to accomplish its mission and achieve its goals.
These flexibilities can include actions related to recruitment, retention,

compensation, position classification, incentive awards and recognition,
training and development, performance management and appraisals,
realignment and reorganization, and work arrangements and work- life
policies. The tailored use of such flexibilities for acquiring,
developing, and

retaining talent is an important cornerstone of our model of strategic
human capital management. 1 As the federal government*s human capital
agency, the Office of Personnel

Management (OPM) has an important leadership role in identifying,
developing, and applying human capital flexibilities across the federal
government. Given the importance of OPM*s role, you asked us to provide
information on the actions that OPM has taken to facilitate the effective
use of human capital flexibilities throughout the federal government and
what additional actions OPM might take in this regard. This report is the
second of two reports responding to your request for information on the
use of human capital flexibilities in the federal government. In December
2002, we reported on (1) the key practices that agencies should implement
for effective use of human capital flexibilities and (2) agency and union
officials* views related to the use of human capital flexibilities. 2 In
addition to the above addressees, both reports were also done at the
request of the Honorable Fred Thompson, former ranking minority member of
the Senate Committee on Governmental Affairs.

To address the issue of OPM*s role in facilitating agencies* use of human
capital flexibilities, we reviewed relevant reports and interviewed
cognizant officials from OPM, the Merit Systems Protection Board, and the
National Academy of Public Administration (NAPA). We also interviewed the
individuals serving in the positions of human resources directors for

the federal government*s 24 largest departments and agencies. We surveyed
these 24 human resources directors in the fall of 2001 and surveyed the
individuals in these positions again in the fall of 2002. In addition, we
reviewed previous GAO reports on a broad range of human capital issues. We
conducted our work in accordance with generally

accepted government auditing standards. (See app. I for additional
information on our objectives, scope, and methodology.)

Results in Brief OPM recognizes its important leadership role in assisting
federal agencies in identifying, developing, and applying human capital
flexibilities across

1 U. S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO02- 373SP (Washington, D. C.: Mar. 15, 2002). 2 U. S.
General Accounting Office, Human Capital: Effective Use of Flexibilities
Can Assist Agencies in Managing Their Workforces, GAO- 03- 2 (Washington,
D. C.: Dec. 6, 2002).

the federal government. As noted in its most recent strategic plan, OPM*s
strategy in fulfilling its mission is to provide human resources
management leadership and services for all agencies in a manner that
blends and balances flexibility and consistency. OPM seeks to maintain
consistency in the federal government*s human resources management systems
for areas such as merit principles and accountability, while at the same
time assist agencies to facilitate the effective use of available human
capital flexibilities, as well as to identify and develop additional human
capital flexibilities that could be authorized to help agencies manage
their workforces.

OPM has several initiatives underway to assist federal agencies in
effectively using the human capital flexibilities that are currently
available to agencies. For example, OPM has issued a handbook 3 for
agencies that identifies the various flexibilities available to help
manage human capital and has several initiatives under way to address key
personnel challenges in the area of hiring. OPM has also developed
information on lessons learned for using human capital flexibilities and
implementing change to improve federal human resources management. OPM has
also committed the assistance of its various internal experts to serve as
liaisons with agencies and to provide expedited services when needed,
including assistance in the implementation of human capital flexibilities.

Furthermore, OPM has reorganized its structure with the expectation that
it will be able to better serve and respond to requests from agency
customers and help ensure that all levels within OPM are supportive of
agencies* efforts to use flexibilities. 4

OPM has also taken some actions to identify legislative options for
additional flexibilities that might be helpful to agencies in managing
their workforces. For example, OPM has suggested the broader application
through legislation of various personnel flexibilities that have been
tested and evaluated through pilot projects and alternative personnel
systems over the past two decades. Also, OPM has been recently more active
in supporting the passage of proposed legislation that would enhance the

3 U. S. Office of Personnel Management, Human Resources Flexibilities and
Authorities in the Federal Government (Washington, D. C.: Updated July 25,
2001). 4 For additional information on OPM*s restructuring efforts see our
report: Major Management Challenges and Program Risks: Office of Personnel
Management (GAO- 03- 115, January 2003).

human capital flexibilities already available, including the
governmentwide provisions in the Homeland Security Act of 2002. 5 The
views of human resources directors from across the federal

government yield revealing indications of the progress that OPM has made
in its important role related to assisting agencies in the use of human
capital flexibilities. The human resources directors we surveyed in the
fall of 2001 and again in the fall of 2002 gave mixed views on their
satisfaction with OPM*s role in assisting agencies in using available
flexibilities. One

director we interviewed, for example, praised OPM for the positive actions
it had taken in facilitating work- life programs for federal employees. On
the other hand, several directors noted, for instance, that OPM often has
placed its own restrictive interpretation on the use of personnel
flexibilities, surrounding them with too many regulations that make the
use

of such flexibilities extremely complicated and more difficult than
needed. The human resources directors were generally less satisfied with
OPM*s role in identifying additional flexibilities that could be
authorized for agencies to use in managing their workforces, although the
level of satisfaction was greater in 2002 than in 2001. Several directors
we interviewed said, for example, that although OPM had actively listened
to agency officials* views about their various needs for additional
flexibilities, OPM had not worked diligently enough in supporting efforts
to bring about governmentwide authorization and implementation of
innovative human capital practices and flexibilities that have been
sufficiently tested and deemed successful. Although OPM has recently taken
numerous actions, OPM could take

additional steps to assist agencies in identifying, developing, applying,
and overseeing human capital flexibilities across the federal government.
As part of its ongoing internal review of its existing regulations and
guidance, OPM has focused chiefly on reviewing the clarity and readability
of its regulations and guidance. OPM could more directly focus on
determining the continued relevance and utility of its regulations and
guidance by asking whether they provide the flexibility that agencies need
in managing their workforces while also incorporating protections for
employees. In addition, OPM could enhance its efforts to make human
capital flexibilities and effective practices more widely known to
agencies. Although OPM has made efforts to inform agencies of what
flexibilities are generally available

5 Pub. L. No. 107- 296, Nov. 25, 2002.

and why their use is important, OPM has yet to take full advantage of its
ability to compile, analyze, and share information about when, where, and
how the broad range of flexibilities are being used, and should be used,
to help agencies meet their human capital management needs. It is also
important for OPM to oversee the use of personnel flexibilities to ensure
not only that the use of flexibilities are being maximized, but also,
along with agencies, ensuring that flexibilities are being used consistent
with the merit principles and other national goals and include appropriate
safeguards. Finally, OPM could play a critical role in identifying and
building a consensus for new flexibilities that would help agencies better
manage their human capital.

These additional OPM actions are consistent with OPM*s overall goal of
aiding federal agencies in adopting human resources management systems
that improve their ability to build successful, high- performance
organizations. Because this role is critical to improved governmentwide
strategic human capital management, this report contains

recommendations to the Director of OPM for the more effective use of
existing human capital flexibilities and for the identification of
additional human capital flexibilities that might be needed within the
federal government.

OPM commented on a draft of this report and agreed with the conclusions
and recommendations. OPM pointed out that in future studies that address
OPM leadership issues, in addition to surveying agency human resource
directors, we should also survey agency chief operating officers. OPM

believed that the chief operating officers have the *best perspective and
the widest array of information about recruitment and retention issues.*
We agree that such future studies would benefit from the perspectives of
chief

operating officers. OPM*s complete comments are shown in appendix II.
Background In serving as the federal government*s human capital agency,
OPM sees its

role to be the President*s strategic advisor on human capital issues, to
develop tools and provide support to agencies in their human capital
transformation efforts, and to assist in making the federal government a
high- performing workplace. As such, OPM, in conjunction with the Office
of Management and Budget (OMB), is charged with leading the federal
government*s strategic management of human capital initiative, one of five

governmentwide initiatives of the President*s Management Agenda. 6 In
carrying out this effort, OPM*s strategy is to provide human resources
management leadership and services to all agencies in a manner that blends
and balances flexibility and consistency. As we noted in our recent

report on OPM*s management challenges, OPM carries out its leadership role
in a decentralized environment where both it and the agencies have shared
responsibilities for addressing the human capital and related

challenges facing the federal government. 7 OPM*s role in aiding federal
agencies represents a considerable challenge because federal managers have
complained for years about the rigid and elaborate procedures required for
federal personnel administration and have often expressed the need for
more flexibility within a system that has

traditionally been based on uniform rules. Reformers have long sought to
decentralize the personnel system and simplify the rules, arguing that
however well the system may have operated in the past, it is no longer
suited to meet the needs of a changing and competitive world. In 1983, for
example, NAPA published a report critical of excessive restrictions on
federal managers, including constraints on their human resources

decisions. 8 In response to these criticisms, OPM has, over time,
decentralized and delegated many personnel decisions to the agencies and
has encouraged agencies to use human capital flexibilities to help tailor
their personnel approaches to accomplish their unique missions. Our
strategic human capital management model also advocates that agencies
craft a tailored approach to their use of available flexibilities by
drawing on those flexibilities that are appropriate for their particular
organizations and their mission accomplishment. 9 Because of this
tailoring, the federal personnel system is becoming more varied,
notwithstanding its often- cited characterization as a *single employer.*

6 The President*s Management Agenda includes five governmentwide
initiatives: the strategic management of human capital, competitive
sourcing, improved financial performance, budget and performance
integration, and expanded electronic government. 7 U. S. General
Accounting Office, Major Management Challenges and Program Risks: Office
of Personnel Management, GAO- 03- 115 (Washington, D. C.: January 2003).

8 National Academy of Public Administration, Revitalizing Federal
Management: Managers and Their Overburdened Systems (Washington, D. C.:
1983). 9 GAO- 02- 373SP.

The overall trend toward increased flexibility has revealed itself in a
number of ways, including the efforts of some agencies to seek
congressional approval to deviate from the personnel provisions of Title 5
of the U. S. Code that have traditionally governed much of the federal
government*s civil service system. 10 As observed in a 1998 OPM report, 11
federal agencies* status relative to these Title 5 personnel requirements
can

be better understood by thinking of them on a continuum. On one end of the
continuum are federal agencies that generally must follow Title 5
personnel requirements. These agencies do not have the authority, for
example, to establish their own pay systems. On the other end of the
continuum are federal agencies that have more flexibility in that they are
exempt from many Title 5 personnel requirements. For example, the Congress
provided the Tennessee Valley Authority and the Federal Reserve Board with
broad authority to set up their own personnel systems and procedures. This
trend toward greater flexibility, in fact, has gained

momentum to the extent that about half of federal civilian employees are
now exempt from at least some of the personnel- related requirements of
Title 5. For example, the Federal Aviation Administration, the Internal
Revenue Service, and the new Department of Homeland Security have
exemption from key Title 5 requirements.

In addition to receiving congressional authorizations for exemptions from
the personnel- related requirements of Title 5, other mechanisms are
available to initiate human capital innovations and flexibilities within
federal agencies. OPM has the authority to reassess and make changes to

its existing regulations and guidance to supply agencies with additional
flexibilities. Additionally, a federal agency can obtain authority from
OPM to waive some existing federal human resources laws or regulations
through an OPM- sponsored personnel demonstration project. The aim of
these demonstration projects is to encourage experimentation in human
resources management by allowing federal agencies to propose, develop,
test, and evaluate changes to their own personnel systems. In some cases,

Congress has allowed some agencies to implement alternatives that have 10
Title 5 laws (or requirements) refer to those personnel management laws,
procedures, and associated functions generally applicable to federal
employees. Most federal personnel laws governing topics such as
classification, appointment, pay and benefits, and adverse action are
contained in Title 5. Title 5 also contains laws unrelated to federal
personnel issues, such as the Administrative Procedure Act and the Freedom
of Information Act, that are also applicable to federal agencies.

11 U. S. Office of Personnel Management, HRM Policies and Practices in
Title 5- Exempt Organizations (Washington, D. C.: August 1998).

been tested and deemed successful. For example, more flexible pay
approaches that were tested within the Department of the Navy*s China Lake
(California) demonstration project in the early 1980s were eventually
adopted by other federal agencies such as the Department of Commerce*s
National Institute of Standards and Technology. In December 2002, we
reported on agency officials* and union

representatives* views regarding various issues related to flexibilities.
According to the agency officials and union representatives we
interviewed, existing flexibilities that are most effective in managing
the workforce are work- life policies and programs, such as alternative
and flexible work schedules, transit subsidies, and child care assistance;
monetary recruitment and retention incentives, such as recruitment bonuses
and retention allowances; special hiring authorities, such as student
employment and outstanding scholar programs; and incentive awards for
notable job performance and contributions, such as cash and time- off
awards. Agency and union officials also identified five categories of
additional human capital flexibilities as most helpful if authorized for
their agencies: (1) more flexible pay approaches, (2) greater flexibility
to streamline and improve the federal hiring process, (3) increased
flexibility in addressing employees* poor job performance, (4) additional
workforce restructuring options, and (5) expanded flexibility in acquiring
and retaining temporary employees. Furthermore, we reported that the
agency managers and supervisors and human resources officials we
interviewed

generally agreed that additional human capital flexibilities could be
authorized and implemented in their agencies while also ensuring
protection of employees* rights. Union representatives, however, expressed
mixed views on the ability of agencies to protect employee

rights with the authorization and implementation of additional
flexibilities. Specifically, several union representatives said that
managers could more easily abuse their authority when implementing
additional flexibilities, and that agency leaders often do not take
appropriate actions in dealing with abusive managers.

Based on our interviews with human resources directors from across the
federal government and our previous human capital work, we also reported
on six key practices that agencies should implement to use human capital

flexibilities effectively. Figure 1 identifies these key practices.

Figure 1: Key Practices for Effective Use of Human Capital Flexibilities

Lastly, also in our December 2002 report, we noted that agency and union
officials identified several significant reasons why agencies have not
made greater use of the human capital flexibilities that are available to
them. These reported barriers that have hampered agencies in maximizing
their

use of available flexibilities included: agencies* weak strategic human
capital planning and inadequate funding for using these flexibilities
given competing priorities; managers* and supervisors* lack of awareness
and knowledge of the flexibilities; managers* and supervisors* belief that
approval processes to use specific flexibilities are often burdensome and
time- consuming; and managers* and supervisors* concerns that employees
will view the use of various flexibilities as inherently unfair,
particularly given the common belief that all employees must be treated
essentially the same regardless of job performance and agency needs.

As noted in our report, the recently enacted Homeland Security Act of 2002
provided agencies with a number of additional flexibilities relating to
governmentwide human capital management. For example, agencies will now be
permitted to offer buyouts to their employees without the requirement to
reduce their overall number of employees. The legislation also permits
agencies to use a more flexible approach in the rating and ranking of job
candidates (categorical rating) during the hiring and staffing process.
The Act also created chief human capital officer (CHCO)

positions for the largest federal departments and agencies, an interagency
CHCO Council, and a requirement that agencies discuss their human capital
approaches in their annual performance plans and reports under the
Government Performance and Results Act.

OPM Has Taken OPM deems that its role related to human capital
flexibilities is broader

Several Actions to than merely articulating polices that federal agencies
use in managing their

workforces. OPM sees that it has an important leadership role in Assist
Agencies in

identifying, developing, and applying human capital flexibilities across
the Using Flexibilities

federal government. As such, OPM has several initiatives underway with the
goal of assisting federal agencies in using available flexibilities and
identifying additional flexibilities that might be beneficial for
agencies.

OPM Has Initiatives to One of OPM*s primary functions related to assisting
agencies in the use of

Assist Agencies in Using human capital flexibilities is to serve as a
clearinghouse for information

Available Flexibilities through a variety of sources, including its Web
site. For example, OPM

prepared and posted on its Web site a handbook on personnel flexibilities
generally available to federal agencies. This handbook, Human Resources
Flexibilities and Authorities in the Federal Government, describes the

flexibilities that agencies can use to manage their human capital
challenges and provides information about the statutory and regulatory
authorities for the specific flexibilities. OPM has also established Web-
based clearinghouses of information on best practices in two areas of
human resources management: employee performance management and
accountability. OPM said that it has received positive feedback on these
two Web- based clearinghouses and that many of OPM*s customers have said
that the information has been useful to them in researching information
and when redesigning human resources- related programs.

OPM is also developing a Preferred Practices Guide that it said would
highlight efficient and effective hiring practices using existing hiring

flexibilities. To assist in developing this guide, OPM in July 2002 asked
federal human resources directors to share information with OPM about
their improved results in areas related to hiring by using newly developed
practices, strategies, and methods that could assist other agencies in
addressing similar challenges. According to OPM, the contents of this
Webbased

document will likely parallel the steps of the federal hiring process and
encompass areas such as workforce planning, recruitment, assessment, and
retention. The guide is also expected to include actual examples of agency
hiring practices, such as the Emerging Leaders Program, a 2- year career
development intern program created by the Department of Health and Human
Services, and the Recruitment *Timely Feedback* Executive Tool, a monthly
reporting and accountability system

for gauging progress on recruiting initiatives that was established at the
Social Security Administration. This Preferred Practices Guide, which OPM
plans to post on its Web site in early 2003, would complement other
ongoing OPM hiring- related efforts to encourage agencies to (1) provide
interested persons with timely and informed responses to questions about
the federal recruiting process, (2) develop clear and understandable job
announcements, and (3) provide job applicants with regular updates on the
status of their applications as significant decisions are reached.

OPM has also issued a report entitled Demonstration Projects and
Alternative Personnel Systems: HR Flexibilities and Lessons Learned,

which contains lessons learned about implementing change to improve
federal human capital management. According to OPM, these lessons learned
are based on the testing of several personnel flexibilities in a wide
variety of demonstration projects and alternative personnel systems at
federal agencies over the past 20 years. 12 OPM said that agency officials
from the various projects collaborated with OPM staff in developing the
report. The lessons learned in OPM*s report are similar to the key
practices that we recently reported on for effectively using human capital
flexibilities.

OPM has also committed the assistance of its various experts to help
agencies with human capital issues and challenges, including use of the
various flexibilities available to agencies. OPM has established a human
capital team of desk officers who serve as liaisons with agencies and who
are to work closely with the agencies to help them in responding to the

12 U. S. Office of Personnel Management, Demonstration Projects and
Alternative Personnel Systems: HR Flexibilities and Lessons Learned
(Washington, D. C.: 2001).

President*s Management Agenda. For some agencies with less planning and
actions on strategic human capital management, these desk officers provide
coaching and assistance and establish contacts with OPM*s program office
experts. OPM said that when working with their assigned agency
representatives, the desk officers take full advantage of all available
OPM resources, including clearinghouse information, to help agencies
identify available flexibilities. For example, OPM said that its desk
officer for the Department of Education fielded an inquiry that led to on-
site assistance in the planning and implementation of a demonstration
project for that department. OPM has also formed *strike force teams,*
created on an ad hoc basis, to

provide expedited service to agencies with critical, time- sensitive human
capital needs. These strike force teams are to serve a single focal point
through which agencies can get assistance and advice on a wide range of
topics and issues, including the implementation of human capital
flexibilities. OPM has created strike force teams for several agencies,
including the Department of Housing and Urban Development, the Department
of Justice (DOJ), and the Transportation Security Administration. For
example, at the request of the Assistant Attorney General, a strike force
team worked with DOJ human resources staff to develop and present a
briefing on human resource flexibilities for DOJ political appointees. OPM
is also working jointly with the new Department of Homeland Security to
prescribe regulations for the department*s human resources management
system.

OPM also holds conferences, training sessions, and other meetings to share
information with agency officials, including material on the availability
of flexibilities. For example, OPM conducts an annual conference to
provide federal managers and human resources practitioners with updates
and other information about the federal compensation environment,
including topics such as pay and leave administration, performance
management, position classification, and efforts to improve the
compensation tools available to support agency missions. As an example of
its training function, OPM, in collaboration with OMB, presented a half
day of training on personnel authorities available to agencies as part of
transition training for new political appointees. OPM said that it also
held one- on- one meetings with more than 30 agencies to discuss telework,
learn about agency initiatives in this area, and find out how OPM can
assist agencies in expanding telework opportunities.

In addition, OPM has realigned its own organizational structure and
workforce. OPM*s goal was to create a new, flexible structure that will
*destovepipe* the agency; enable it to be more responsive to its primary
customers, federal departments and agencies; and allow it to focus on the
agency*s core mission. For example, OPM has decided to put its various
program development offices under the control of one associate director
and its product and services functions under another associate director to
ensure that it appropriately and efficiently responds to its customers.
Effective implementation of OPM*s latest organizational and workforce

realignment will be crucial to maximizing its performance as the federal
government*s human capital leader, assuring its own and other agencies*
accountability, and ultimately achieving its goals.

OPM Also Has Some OPM has furthermore initiated some efforts to assist
agencies in identifying

Initiatives to Assist in additional flexibilities that might be effective
in helping the agencies Identifying Additional

manage their workforces. For example, OPM said that it has actively
Flexibilities supported passage of proposed legislation that would enhance
human capital flexibilities and provide more latitude for flexible
implementing regulations. OPM told us, for example, that it developed and
drafted a significant portion of the proposed Managerial Flexibility Act
of 2001, 13 a bill intended to give federal managers tools and flexibility
in areas such as personnel, budgeting, and property management and
disposal. This proposed legislation did not pass the 107th Congress,
although several related provisions were included in the recently enacted
Homeland Security Act of 2002. OPM officials told us that these
legislative efforts

should serve as evidence that OPM can and does identify areas where
changes to statute would provide more flexibility to agencies. Moreover,
one component of the proposed legislation, which was not enacted, includes
streamlining the process for implementing demonstration projects and
creating a mechanism to export tested innovations to other federal
organizations. OPM believes that to get a better return on investment from
years of demonstration project evaluations, a method should exist* short
of separate legislation* for converting successfully tested alternative
systems and flexibilities to permanent programs and for making them
available to other agencies.

13 S. 1612, 107th Cong., 1 st sess.

OPM has taken other actions to assist agencies in identifying additional
flexibilities that they could use to manage their workforces. For example,
in its HR Flexibilities and Lessons Learned report, OPM identified
personnel flexibilities that have been tested and evaluated through
demonstration projects or alternative personnel systems over the last 20
years. OPM said that during the development of the Managerial Flexibility
Act, the President*s Management Council requested information on existing
flexibilities and that OPM created its report in response to that request
in an effort to catalogue these flexibilities in one document. OPM said
that some of the flexibilities catalogued in its report have been
thoroughly tested over time in a variety of environments, while others
have more limited agency applicability and thus have more limited data to
show their success. Some of these flexibilities outlined in the report
correspond to the types of flexibilities that agency and union officials
told us could be beneficial for their agencies, such as broadbanded pay
systems, categorical rating for hiring, and expanded probationary periods
for new employees. 14 OPM recognizes that additional efforts are needed to
address key

personnel challenges within the federal workforce, particularly in the
areas of pay and hiring. In April 2002, OPM released a report that
presents the case for the need for reform of the white- collar federal pay
system under which 1.2 million General Schedule federal employees are
paid. 15 Without recommending a specific solution, OPM*s report stresses
the importance of developing a contemporary pay system that is more
flexible, marketsensitive, and performance- oriented as well as a better
tool for improving strategic human capital management. Also, OPM said that
in the coming months it will identify additional projects and proposals
that will address systemic problems associated with the hiring process.
These additional initiatives will include deploying competency- based
qualifications, improving entry- level hiring, and updating and
modernizing exam scoring policy. According to OPM officials, as it moves
forward on these pay and hiring initiatives, OPM will assess what
additional flexibilities and tools might be needed for agencies as they
look for ways to better manage their workforces.

14 GAO- 03- 2. 15 U. S. Office of Personnel Management, A Fresh Start for
Federal Pay: The Case for Modernization (Washington, D. C.: April 2002).

Agencies* Human Although federal agencies have the primary responsibility
to maximize

Resources Directors their use of human capital flexibilities, OPM also
plays a key role in

facilitating agencies* use of existing flexibilities as well as
identifying new Gave Mixed Views on

personnel authorities that agencies might need in managing their OPM*s
Role Related to

workforces. The views of agencies* human resources directors can help to
Flexibilities

provide indications of the progress that OPM has made in its important
role related to human capital flexibilities. We therefore surveyed the
human resources directors for the 24 largest departments and agencies in
the federal government to obtain their views on OPM*s role related to
flexibilities.

Directors* Views Varied on In the surveys we conducted in the fall of 2001
and again in the fall of 2002, OPM*s Role Related to Using

the human resources directors for the largest departments and agencies
Available Flexibilities

gave mixed views on their satisfaction with OPM*s role in assisting their
agencies in using available human capital flexibilities. Figure 2 depicts
the directors* responses on this issue for both 2001 and 2002. 16 In 2002,
7 of the 24 responding directors said that they were satisfied to *little
or no* or *some* extent regarding OPM*s role in assisting their agencies
in using available flexibilities. Conversely, 7 of the 24 responding
directors in 2002

said that they were satisfied to a *great* or *very great* extent with
OPM*s role in assisting their agencies with available flexibilities.
Overall for 2002 on this issue, the average satisfaction level of the
human resource directors was unchanged between 2001 and 2002.
Specifically, for 2002 our survey showed that for five agencies, the
director*s level of satisfaction was greater than the level of
satisfaction for that agency*s human resources director from the previous
year; for five agencies, the directors* level of satisfaction was less
than the level of satisfaction for that agency*s human

resources director from the previous year. 16 During the period between
the 2001 and 2002 surveys, 16 of the 24 individuals serving in the
positions of human resources directors had changed.

Figure 2: Human Resources Directors* Extent of Satisfaction with OPM*s
Role in Helping Their Agencies Use Available Human Capital Flexibilities
(Fall 2001 and Fall 2002)

Question: To what extent are you satisfied with the role that OPM has
played in helping your department/ agency use these available human
capital flexibilities?

10 Number

9

8

8 7 7

6

5 4

4

3 2

2

2

1

0

0 0

extent extent

extent extent

extent NA

no judge/ or Some Moderate Great great to Little Very basis No 2001 2002

Source: Federal human resources directors* responses to GAO questionnaire.

In our interviews with the human resources directors regarding the issue
of OPM*s role in assisting agencies in the use of available flexibilities,
several of the directors said that OPM communicates well with agencies
through emails, meetings, workgroups, and its Web site and has taken some
action to disseminate information about existing flexibilities. One
director, for example, commended OPM for effectively using its Web site to
share information about what flexibilities are generally available to
agencies. Another director praised OPM for the positive actions it had
taken with respect to facilitating work- life programs for federal
employees. However, directors frequently commented that OPM often puts its
own restrictive

interpretation on the use of flexibilities, surrounding them with too many
regulations that can make their use unduly complicated and more difficult;
regulations and guidance on implementing the Federal Career Intern Program
were mentioned frequently in this regard, for example. Several directors
argued that their agencies should be able to implement human capital
flexibilities in the most flexible fashion, not the most restrictive.

One director expressed the opinion that, although the upper management of
OPM may support using flexibilities, middle management and lowerlevel
staff within the agency seemed resistant to change and sometimes hampered
the efforts of agencies in the use of flexibilities. This director wanted
to see OPM play a more facilitative and consultative role, working in
concert with agencies. In addition, directors from several agencies stated
that OPM needs to host additional forums to share experiences on the use
of existing human capital flexibilities, with OPM more fully serving as a
clearinghouse in making flexibilities and effective practices more widely
known to agencies.

Directors Were Somewhat While the human resources directors we surveyed
gave mixed views on

Less Satisfied with OPM*s their satisfaction with OPM*s role related to
available flexibilities, the

Role Related to Identifying directors were less satisfied with OPM*s role
in assisting agencies in

Additional Flexibilities identifying additional human capital
flexibilities that could be authorized. However, the directors* extent of
satisfaction on this issue, as measured in our survey, was greater in 2002
than in 2001. Figure 3 depicts the directors*

responses on this issue for both 2001 and 2002. In 2002, 11 of the 24
responding directors said that they were satisfied to *little or no* or
*some* extent regarding OPM*s role in identifying additional flexibilities
that could be authorized for agencies. Conversely, 6 of the 24 responding
directors said that they were satisfied to a *great* or *very great*
extent regarding OPM*s role in identifying additional flexibilities. For
seven agencies, the director*s level of satisfaction was greater in 2002
than the level of satisfaction for that agency*s human resources director
from the previous year; for four agencies, the director*s level of
satisfaction was less than the level of satisfaction for that agency*s
human resources director from the previous year.

Figure 3: Human Resources Directors* Extent of Satisfaction with OPM*s
Role in Helping Their Agencies Identify Additional Human Capital
Flexibilities That Could Be Authorized (Fall 2001 and Fall 2002) Question:
To what extent are you satisfied with the role that OPM has played in
helping your department/ agency identify additional human capital
flexibilities that could be authorized?

10 Number

9

8 6

6 6

5 4

4

4

3 3 3

3 2

2 0

0

extent extent

extent extent

extent NA

no judge/ or Some Moderate Great great to Little Very basis No 2001 2002

Source: Federal human resources directors* responses to GAO questionnaire.

One human resources director we interviewed said, for example, that OPM
has done a commendable job of listening to agencies* concerns about the
need for additional flexibilities, particularly through the Human
Resources Management Council, an interagency organization of federal human
resources directors. 17 However, several directors said that OPM needs to
play a more active role in identifying flexibilities that agencies might
use to manage their workforces. Several human resources directors said
that

OPM should be doing more to conduct or coordinate personnel management
research on additional flexibilities that might prove effective for
agencies to use in managing their workforces. Several of these directors
also told us that OPM should work more diligently to support

17 The recently enacted Homeland Security Act of 2002 establishes an
Interagency Chief Human Capital Officer Council, which could replace the
Human Resources Management Council.

efforts in authorizing and implementing governmentwide those innovative
human capital practices and flexibilities that have been sufficiently
tested and deemed to be successful, such as those tested in OPM- sponsored
personnel demonstration projects. According to many of the human resources
directors we interviewed, OPM

needs to play a larger role in acting as a change agent to get human
capital legislation passed and implemented. While recognizing that OPM
cannot promote legislation that is inconsistent with the administration*s
views of the civil service, human resources directors said that OPM should
be the policy leader in the area of human capital and, as the leader,
should push harder for major civil service reform. In the human resources
directors*

opinions, OPM needs to look at personnel reforms in a new, open, and
objective way and develop changes to current laws and regulations to
ensure that agencies can effectively obtain and manage their workforces.
In addition, some directors expressed frustration about the lack of
coordination between OPM and OMB in responding to OMB*s request for
agencies to complete workforce planning and restructuring analyses. 18
Further, they said that OPM, OMB, and Congress need better

communication and coordination in developing budgets and recognizing the
costs involved in using human capital flexibilities.

Additional OPM Assisting federal agencies in using available flexibilities
and in identifying

Actions Could Further additional flexibilities is an important part of
OPM*s overall goal of aiding

agencies in adopting human resources management systems that improve
Facilitate Agencies*

their ability to build successful, high- performance organizations. In Use
of Flexibilities

testimony before Congress in February of 2001, we suggested two areas in
which OPM could make substantial additional contributions in addressing
the federal government*s human capital challenges. 19 The first was in
reviewing existing OPM regulations and guidance to determine their
continued relevance and utility by asking whether they provide agencies
with the flexibilities they need while incorporating protections for
employees. The second area was in making existing human capital
flexibilities and effective practices more widely known to the agencies,
and in taking fullest advantage of OPM*s ability to facilitate
information- sharing

18 This requirement for workforce planning and restructuring analyses is
contained in OMB Bulletin No. 01- 07, dated May 8, 2001. 19 GAO- 01- 357T.

and outreach to human capital managers throughout the federal government.
Although OPM has taken concerted action in some areas to assist agencies
in using flexibilities, OPM has taken limited actions related to these two
areas. Moreover, OPM could do more to assist agencies in identifying
additional human capital flexibilities that could be authorized and also
be actively working to build consensus to support related legislation that
might be needed. Greater attention to these areas could

allow OPM to more fully fulfill its leadership role to assist agencies in
identifying, developing, and applying human capital flexibilities across
the federal government. As we noted in the previous testimony, as OPM
continues to move from *rules to tools,* its more valuable contributions
in the future will come less from traditional compliance activities than
from its initiatives as a strategic partner to agencies.

OPM*s Review of Just as agencies need to streamline and improve their own
internal Regulations Could Provide

administrative processes to effectively use flexibilities, OPM similarly
Opportunity to Give

needs to ensure that its regulations and guidance provide adequate
Additional Flexibility to

flexibility while also recognizing the importance of ensuring fairness and
Agencies

incorporating employee protections. As we noted in our December 2002
report, if senior managers within agencies want supervisors to make
effective use of flexibilities, supervisors must view agencies* internal
processes to use the flexibility worth their time compared to the expected
benefit to be gained in implementing the flexibility. Similarly, if OPM
wants agencies to make effective use of flexibilities, agencies must view
OPM*s regulatory requirements for using the flexibility worth the expected
benefits that the flexibility would provide. In comments that it provided
in response to our December 2002 report, OPM said that it is undertaking a
review of its regulations and guidance. According to OPM, the purpose of
this regulatory review, which began in

December 2001, is to restate regulations in plainer language wherever
possible to eliminate redundant or obsolete material and to revise
regulations to make them more easily usable by a variety of readers. OPM
said that because it has focused chiefly on making the regulations as

readable as possible, rather than making substantive changes, the agency
did not anticipate making changes to provide additional flexibility as
part of this effort. OPM said that its Office of General Counsel, which is
leading the regulatory review, has been carrying it out by working with
OPM*s program offices to establish basic protocols, selecting provisions
that require elimination or redrafting, soliciting drafts from the
offices, and then reviewing and revising these drafts in conjunction with
the OPM program

staff. OPM said that it amends its regulations to provide flexibility, on
an as- needed basis, in the ordinary course of carrying out the OPM
Director*s policies.

In response to our request for examples of regulations that it has
redrafted under this effort, OPM said it was reviewing all of the
regulations in chapter I of Title 5 of the U. S. Code of Federal
Regulations but that it was not yet in a position to supply examples
because it had recently begun to submit some of the redrafted material to
OMB for clearance. Nonetheless, a report

we recently issued included an example of where OPM revised regulations
to, at least in part, provide additional flexibility to agencies. 20 In
the fall of 2000, OPM amended regulations on evaluating the job
performance of senior executives within the federal government. OPM*s goal
in developing these regulations was to help agencies hold their senior
executives accountable by increasing agency flexibility, focusing on
results, emphasizing accountability, and improving links between pay and
performance. These changes were to balance the agencies* desire for
maximum flexibility with the need for a corporate approach that safeguards
merit principles. OPM*s changes to the regulations included paring back
many of the previous requirements to those in statute to give agencies
more flexibility to tailor their performance management systems

to their unique mission requirements and organizational cultures. OPM made
these regulatory changes in part because performance management systems
have tended to focus on process over results.

Because providing additional flexibility has not been a fundamental
purpose of its current regulatory review, OPM is not taking advantage of a
crucial opportunity to provide additional flexibility, where appropriate,
on a systematic basis rather than through a piece- meal, ad hoc approach.
Human resources directors we interviewed often said that OPM should

provide agencies with greater delegation to carry out their human capital
programs. For example, some directors commented that agencies should be
able to waive the annuity offsets for reemployed annuitants without

authority by OPM. 21 Some directors also told us that OPM should allow 20
U. S. General Accounting Office, Results- Oriented Cultures: Using
Balanced Expectations to Manage Senior Executive Performance, GAO- 02- 966
(Washington, D. C.: Sept. 27, 2002). 21 Unless waived by OPM or an agency
pursuant to a grant of authority by OPM, an amount equal to the annuity
will be deducted from the reemployed annuitant's salary when the

federal civilian retiree is reemployed. See 5 U. S. C. 8344 and 8468 and 5
CFR part 553.

agencies to extend the probationary periods for newly hired employees
beyond the standard 1- year period. 22 Directors also said that OPM*s
guidance for implementing human capital programs could sometimes be overly
restrictive and burdensome. For example, some directors said that OPM*s
internal approval and evaluation processes for personnel

demonstration projects needed to be streamlined to make the program more
practical. 23 One director told us, for instance, that her agency had
considered applying as a demonstration project but demurred because
officials at her agency viewed OPM*s requirements as too burdensome. It is
important to note that human resources directors we interviewed also

expressed interest in gaining increased flexibilities that would require
changes in federal statute and thus are outside of OPM*s authority to
change independently. Directors commented on such areas as decreasing

some of the limitations and parameters of allowable personnel
demonstration projects. As we noted in recent testimony, OMB and the
Congress have key roles in improving human capital management
governmentwide, including the important responsibility of determining the
scope and appropriateness of additional human capital flexibilities
agencies may seek through legislation. 24 In recent testimony on using
strategic human capital management to drive transformational change, we
noted the potential benefits of providing additional flexibility in the
government*s personnel systems by suggesting, for example, that the
Congress may wish to explore the benefits of allowing agencies to apply to
OPM on a case- by- case basis (i. e., case exemptions) for authority to
establish more flexible pay systems for certain critical occupations or,
even more broadly, allowing OPM to grant governmentwide authority for all

agencies (i. e., class exemptions) to use more flexible pay systems for
their critical occupations. 25 22 See 5 CFR 315, Subpart H.

23 Guidance on developing, implementing, and evaluating an OPM- sponsored
personnel demonstration project can be found in OPM*s Demonstration
Projects Handbook and OPM*s

Demonstration Projects Evaluation Handbook.

24 U. S. General Accounting Office, Human Capital: Meeting the
Governmentwide HighRisk Challenge, GAO- 01- 357T (Washington, D. C.: Feb.
1, 2001). 25 U. S. General Accounting Office, Managing For Results: Using
Strategic Human Capital Management to Drive Transformational Change, GAO-
02- 940T (Washington, D. C.: July 15,

2002).

A More Comprehensive In our December 2002 report on human capital
flexibilities, we noted that

Clearinghouse and one of the key factors for effectively using
flexibilities is educating agency

Increased Information managers and employees on the availability of these
flexibilities as well as

Sharing about Flexibilities about the situations where the use of those
flexibilities is most appropriate.

Ultimately the flexibilities within the personnel system are only
beneficial Could Better Assist

if the managers and supervisors who would carry them out are aware of not
Agencies

only their existence but also the best manner in which they could be used.
With a comprehensive clearinghouse and broad information sharing about
flexibilities, OPM can greatly assist agencies in educating their managers
and supervisors as well as preparing their human capital managers for
their consultative role regarding the best manner in which the full range
of flexibilities should be implemented. 26 This information would also be
useful to support OPM*s oversight of agencies* use of personnel
flexibilities.

OPM has not, however, fully maximized its efforts to make human capital
flexibilities and effective practices more widely known to agencies.
Although OPM has made efforts to inform agencies of what flexibilities are
generally available and why their use is important, OPM has yet to take
full advantage of its ability to compile, analyze, and distribute
information

about when, where, and how the broad range of flexibilities are being
used, and should be used, to help agencies meet their human capital
management needs. Human resources directors we interviewed frequently
brought up that OPM needs to take further determined action on this issue.
One human resources director said, for example, that OPM should be setting
benchmarks and identifying best practices for using flexibilities. Another
director added that OPM should provide agencies with different scenarios
of how flexibilities can be used. Another director commented that OPM
needs to develop more educational and training aids to inform agency
officials about these best practices. Yet another director added that OPM
should evaluate the effectiveness of many different flexibilities and
share the results with other agencies. OPM officials told us that they do
not generally know which federal

agencies have done effective jobs in using specific flexibilities nor
which practices these agencies employed to produce effective results. OPM
could

26 We discussed agency actions to shift their human capital offices from
primarily compliance activities to consulting activities in our report:
Human Capital: Selected Agency Actions to Integrate Human Capital
Approaches to Attain Mission Results (GAO- 03- 446,

April 2003).

use its outreach and information- sharing efforts to more thoroughly
identify which federal agencies are specifically using the various
flexibilities in effective ways and reporting on the particular practices
that these agencies are using to implement their flexibilities.
Examination of information from OPM*s database of federal civilian
employees, the Central Personnel Data File, could help OPM in such
analysis, including identifying possible correlations between an agency*s
use of flexibilities and factors such as employees* occupations, grade
levels, and duty stations. This compilation, analysis, and distribution of
information could also include research OPM conducts or sponsors that may
shed light on effective practices for implementing existing flexibilities.

OPM could also use this analysis of agencies* use of flexibilities in its
oversight role. OPM*s new Human Capital Assessment and Accountability
Framework provides guidance for agencies to maximize their human capital
management and is being used by OPM to evaluate agencies*

progress. For example, under one of the framework*s six standards for
success, 27 key questions to consider include the following:

 Does the agency use flexible compensation strategies to attract and
retain quality employees who possess mission- critical competencies?

 Does the agency provide work/ life flexibilities, facilities, services,
and programs to make the agency an attractive place to work?

The information gathered on personnel flexibilities could assist OPM in
its assessment of this standard. In addition, OPM has the responsibility
to not only review whether agencies are maximizing the use of personnel

flexibilities, but also, along with agencies, ensure that flexibilities
are being used fairly and are consistent with the merit principles and
other national goals and include appropriate safeguards. 27 The six human
capital standards for success in OPM*s Human Capital Assessment and

Accountability Framework are strategic alignment, workforce planning and
deployment, leadership and knowledge management, results- oriented
performance culture, talent, and accountability.

Additional Efforts to The human resource directors we interviewed said
that OPM could do Identify New Flexibilities

more to assist agencies in identifying additional human capital
flexibilities Needed

that could be authorized. The information gathered on agencies* use of
flexibilities could also be used to gain greater insight into agencies*
needs related to additional flexibilities that might be helpful for
agencies* management of their human capital. In our discussions with OPM
about its

efforts in assisting agencies with flexibilities, OPM officials told us
that it was not feasible to identify or track all agency requests for
additional flexibilities because such requests are received throughout the
organization and range from casual questions to formal requests for
exceptions or demonstration projects. Tracking such requests, however,
could assist OPM in gaining a clearer picture of agency concerns and
requests for additional tools and flexibilities as well as more

comprehensively documenting agency needs for the benefit of policymakers
as statutory and regulatory changes are proposed and considered. The
recently legislated Chief Human Capital Officers Council, chaired by the
OPM Director, could also aid in disseminating information about effective
human capital practices. We have reported that the use of

the similar interagency councils of chief financial officers and chief
information officers to, among other things, share information about
effective practices, was one of the major positive public management
developments over the past decade. 28

Once OPM determines that additional flexibilities are needed, it could
actively work to build consensus to support needed legislation. As noted
earlier, OPM actively supported legislation in the last Congress to
authorize additional flexibilities to agencies. Specifically, OPM drafted
and supported a significant portion of the proposed Managerial Flexibility
Act of 2001. OPM could continue to support such legislation and identify
additional personnel flexibilities that are needed. Conclusions The
ineffective use of flexibilities can significantly hinder the ability of

federal agencies to recruit, hire, retain, and manage their human capital.
To deal with their human capital challenges, it is important for agencies
to assess and determine which human capital flexibilities are the most
appropriate and effective for managing their workforces. As we previously
28 U. S. General Accounting Office, Government Management: Observations on
OMB*s Management Leadership Efforts, GAO/ T- GGD/ AIMD- 99- 65
(Washington, D. C.: Feb. 4, 1999).

reported, to ensure more effective use of human capital flexibilities, it
is important that agencies (1) plan strategically and make targeted
investments, (2) ensure stakeholder input in developing policies and

procedures, (3) educate managers and employees on the availability and use
of flexibilities, (4) streamline and improve administrative processes, (5)
build accountability into their systems, and (6) change their
organizational cultures. By more effectively using flexibilities, agencies
would be in a better position to manage their workforces, assure
accountability, and transform their cultures to address current and
emerging demands.

OPM provides the necessary link to agencies to accomplish their goals by
making existing human capital flexibilities more widely known and easier
to use and by identifying additional flexibilities that can help agencies
better manage their workforces. While it has taken some actions to inform
agencies about what flexibilities are generally available and why their
use is important, OPM has significant opportunities to strengthen its role
as its

moves forward to assist agencies as an integral part of the
administration*s human capital transformation efforts. By taking hold of
these opportunities, OPM could more successfully aid agencies with more
comprehensive information about the tools and authorities available to

them for managing their workforce and the most effective ways that these
flexibilities can be implemented. The new CHCO Council could be an
excellent vehicle to assist in these areas.

Recommendations for Given the importance of the effective use of
flexibilities as a critical part of

Executive Action improved human capital management within the federal
government and

consistent with OPM*s ongoing efforts in this regard, we recommend that
the Director of OPM take the following actions.

 Review existing OPM regulations and guidance to determine whether they
provide agencies with needed flexibility while also incorporating
protection for employees.

 Work with and through the new Chief Human Capital Officers Council to
more thoroughly research, compile, and analyze information on the
effective and innovative use of human capital flexibilities and more fully
serve as a clearinghouse in sharing and distributing information about
when, where, and how the broad range of flexibilities are being used, and
should be used, to help agencies meet their human capital management
needs.

 Continue to identify additional personnel flexibilities needed to better
manage the federal workforce and then develop and build consensus for
needed legislation.

Agency Comments OPM commented on a draft of this report and agreed with
the conclusions and recommendations. OPM pointed out that in future
studies that address

OPM leadership issues, in addition to surveying agency human resource
directors, we should also survey agency chief operating officers. OPM
believed that the chief operating officers have the *best perspective and
the widest array of information about recruitment and retention issues.*
We agree that such future studies would benefit from the perspectives of
chief

operating officers. OPM*s complete comments are shown in appendix II. As
agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
its date. At that time, we will send copies to the Chairman, Senate
Committee on Governmental Affairs, and the Chairman and Ranking Minority
Member, House Committee on Government Reform, and other interested
congressional parties. We will also send copies to the Director of OPM. We
also will make copies available to others upon request. In addition, the

report will be available at no charge on the GAO Web site at http:// www.
gao. gov.

If you have any questions about this report, please contact me on (202)
512- 6806. Key contributors to this report are listed in appendix III.

J. Christopher Mihm Director, Strategic Issues

Appendi Appendi xes x I

Objectives, Scope, and Methodology This report is the second of two
reports responding to a request from the Senate Committee on Governmental
Affairs and two of its subcommittees regarding the use of human capital
flexibilities in managing agency workforces. The objectives of our first
report, issued in December 2002, were to provide information on (1)
actions that federal agencies can take to more effectively implement human
capital flexibilities and (2) agency and union officials* views related to
the use of human capital flexibilities. 1 The objectives of this report
were to provide information on actions that the Office of Personnel
Management (OPM) has taken to facilitate the effective use of human
capital flexibilities throughout the federal government as well as what
additional actions OPM might take in this regard. Our work in responding
to this request was conducted in two phases. Phase one of our work
primarily involved surveying and interviewing the human resources
directors from the 24 largest departments and agencies. Phase two of our
work involved conducting semi- structured interviews with managers and
supervisors, human resources officials, and local union representatives

from seven federal agencies we selected for more detailed review. 2 This
report was developed primarily from our work during phase one.

To respond to the objectives of this report, we gathered information from
a variety of sources using several different data collection techniques.
During phase one of our work, we interviewed representatives from OPM, the
federal government*s human resources agency; Merit Systems Protection
Board, a federal agency that hears and decides civil service cases,
reviews OPM regulations, and conducts studies of the federal government*s
merit systems; and the National Academy of Public Administration, an
independent, nonpartisan, nonprofit, congressionally chartered
organization that assists federal, state, and local governments in
improving their performance. We interviewed representatives of these

three organizations to gather background information on the federal
government*s experiences with and use of human capital flexibilities and
OPM*s role in assisting agencies in their use of personnel flexibilities.
We also reviewed numerous reports issued by these organizations on

governmentwide human capital issues, the use of various human capital 1 U.
S. General Accounting Office, Human Capital: Effective Use of
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO- 03- 2
(Washington, D. C.: Dec. 6, 2002). 2 The seven agencies were the
Department of the Air Force, General Services Administration, Internal
Revenue Service, International Trade Administration, U. S. Mint,

Department of State, and Veterans Benefits Administration.

flexibilities in federal agencies, and the role of OPM. In addition, we
reviewed previous GAO reports on a broad range of human capital issues.

In the fall of 2001, we also gathered information for our objectives by
conducting semistructured interviews with the human resources directors of
the 24 largest federal departments and agencies. To produce a general
summary of the human resources directors* views, we first reviewed their

responses to the open- ended questions we had posed to them. Based on our
analysis of those responses, we identified a set of recurring themes and
then classified each director*s responses in accord with these recurring
themes. At least two staff reviewers collectively coded the responses from
each of the 24 interviews and the coding was verified when entered into a

database we created for our analysis. In addition, prior to our interviews
with the 24 human resources directors, each of the 24 officials completed
a survey of seven closed- ended questions dealing with agencies* use of
human capital flexibilities, OPM*s role related to these flexibilities,
and the federal hiring process. To update this information, we resurveyed
the 24 individuals serving in the

agencies* human resources director positions in the fall of 2002, asking
the same seven questions. During the period between the 2001 and 2002
surveys, 16 of the 24 individuals serving in the positions of human
resources directors had changed. Table 1 shows the questions from these
surveys along with a summary of the answers provided. For each item,
respondents were to indicate the strength of their perception on a 5-
point scale, from *little or no extent* to *very great extent.*

Our audit work on both phases of our review was done from May 2001 through
November 2002. We conducted our audit work in accordance with generally
accepted government auditing standards.

Table 1: Human Resources Directors* Responses to GAO Questionnaire on
Human Capital Flexibilities (Fall 2001 and Fall 2002) Little or

Some Moderate Great Very great No basis to no extent extent extent extent
extent judge/ NA

1. To what extent are managers and Fall 2001 1 2 14 7 0 0 supervisors
within your department/ agency

Fall 2002 0 1 13 10 0 0 aware of the human capital flexibilities available
to them?

2. To what extent has the U. S. Office of Fall 2001 1 5 9 6 3 0 Personnel
Management (OPM) assisted

Fall 2002 2 6 9 4 3 0 your department/ agency in using human

capital flexibilities that are already available to your department/
agency? 3. To what extent are you satisfied with the Fall 2001 0 7 8 7 0 2
role that OPM has played in helping your

Fall 2002 2 5 9 4 3 1 department/ agency use these available

human capital flexibilities? 4. To what extent has OPM assisted your

Fall 2001 4 10 4 3 0 3 department/ agency in identifying additional Fall
2002 4 9 5 3 1 2 human capital flexibilities that could be authorized?

5. To what extent are you satisfied with the Fall 2001 3 9 6 3 0 3 role
that OPM has played in helping your

Fall 2002 5 6 4 4 2 3 department/ agency identify additional

human capital flexibilities that could be authorized?

6. To what extent is the time needed to fill a Fall 2001 0 2 7 13 2 0
position, or *hiring time,* a problem within Fall 2002 0 3 8 10 3 0 your
department/ agency?

Neither Greatly Somewhat

helped nor Somewhat

Greatly No basis to hindered hindered

hindered helped helped judge/ NA

7. Overall, would you say that OPM has Fall 2001 0 5 5 11 2 1 helped or
hindered the hiring process in

Fall 2002 2 2 9 7 3 1 your department/ agency?

Source: GAO survey data. Note: For the Fall 2001 and Fall 2002 surveys, N=
24.

Comments from the Office of Personnel

Appendi x II Management

Appendi x III

GAO Contacts and Staff Acknowledgments GAO Contacts J. Christopher Mihm or
Edward Stephenson, (202) 512- 6806 Acknowledgments In addition to the
persons above, K. Scott Derrick, Charlesetta Bailey, Tom

Beall, Ridge Bowman, Karin Fangman, Molly K. Gleeson, Judith Kordahl,
Shelby D. Stephan, Gary Stofko, Mike Volpe, and Scott Zuchorski made key
contributions to this report.

(450158)

GAO*s Mission The General Accounting Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities

and to help improve the performance and accountability of the federal
government for the American people. GAO examines the use of public funds;
evaluates federal programs and policies; and provides analyses,
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a

GAO United States General Accounting Office

OPM Has Taken Several Actions to Assist Agencies

OPM has an important leadership role in identifying, developing, applying,
and overseeing human capital flexibilities across the federal government.
OPM has taken several actions to assist federal agencies in effectively
using the human capital flexibilities that are currently available to
agencies. For example, OPM has issued a handbook for agencies that
identifies the various flexibilities available to help manage their human
capital. Also, OPM has taken various actions to assist agencies in
identifying additional flexibilities that might be helpful to agencies in
managing their workforces. Human Resources Directors Gave Mixed Views on
OPM*s Role

To yield indications of the progress that OPM has made in its important
role related to assisting agencies in the use of human capital
flexibilities, GAO surveyed the human resources directors of the federal
government*s 24 largest departments and agencies in fall of 2001 and again
in the fall of 2002. There was little change in the directors* level of
satisfaction with OPM*s role

in assisting agencies in using available flexibilities, which remained
mixed. For example, one director said OPM had effectively facilitated the
use of work- life flexibilities, but others thought that OPM had placed
its own restrictive interpretation on the use of other personnel
flexibilities. The level of satisfaction with OPM*s role in identifying
additional flexibilities was greater in 2002 than in 2001, but still
remained below the satisfaction level

for assistance with existing flexibilities. Several directors said that
OPM had not worked diligently enough in supporting authorization of
governmentwide use of new flexibilities that have been sufficiently tested
and deemed successful. Additional OPM Actions Could Further Facilitate Use
of

Flexibilities Although OPM has recently taken numerous actions, OPM could
more fully meet its leadership role to assist agencies in identifying,
developing, and applying human capital flexibilities across the federal
government. In its ongoing internal review of its existing regulations and
guidance, OPM could more directly focus on determining the continued
relevance and utility of its regulations and guidance by asking whether
they provide the flexibility that

agencies need in managing their workforces while also incorporating
protections for employees. In addition, OPM can maximize its efforts to
make human capital flexibilities and effective practices more widely known
to agencies by compiling, analyzing, and sharing information about when,
where, and how the broad range of flexibilities are being used, and should
be used, to help agencies meet their human capital management needs. OPM
also needs to more vigorously identify new flexibilities that would help
agencies better manage their human capital and then work to build
consensus for the legislative action needed.

HUMAN CAPITAL

OPM Can Better Assist Agencies in Using Personnel Flexibilities

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 428. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact J. Christopher Mihm at (202) 512- 6806 or mihmj@ gao.
gov. Highlights of GAO- 03- 428, a report to

Congressional Requesters

May 2003

Congressional requesters asked GAO to provide information on actions that
the Office of Personnel Management (OPM) has taken to facilitate the
effective use of human capital flexibilities throughout the federal
government and what additional actions OPM might take in this regard.
These

flexibilities represent the policies and practices that an agency has the
authority to implement in managing its workforce.

To better facilitate the effective use of human capital flexibilities
throughout the federal government and consistent with OPM*s ongoing
efforts in this regard, GAO recommends that the Director of OPM

 review existing OPM regulations and guidance to determine whether they
provide agencies with needed flexibility,  more thoroughly research,

compile, and analyze information on the effective and innovative use of
flexibilities, and  identify and build consensus for legislation to
authorize new flexibilities that would help

agencies better manage their human capital.

OPM commented on a draft of this report and agreed with the conclusions
and recommendations.

Page i GAO- 03- 428 OPM's Role in Flexibilities

Contents

Contents

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Page 1 GAO- 03- 428 OPM's Role in Flexibilities United States General
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Appendix I

Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix II

Appendix II Comments from the Office of Personnel Management Page 32 GAO-
03- 428 OPM's Role in Flexibilities

Appendix II Comments from the Office of Personnel Management Page 33 GAO-
03- 428 OPM's Role in Flexibilities

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Appendix III

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