Human Capital: DOD's Civilian Personnel Strategic Management and
the Proposed National Security Personnel System (12-MAY-03,
GAO-03-493T).
People are at the heart of an organization's ability to perform
its mission. Yet, a key challenge for the Department of Defense
(DOD), as for many federal agencies, is to strategically manage
its human capital. With about 700,000 civilian employees on its
payroll, DOD is the second largest federal employer of civilians
in the nation. Although downsized 38 percent between fiscal years
1989 and 2002, this workforce has taken on greater roles as a
result of DOD's restructuring and transformation. DOD's proposed
National Security Personnel System (NSPS) would provide for
wide-ranging changes in DOD's civilian personnel pay and
performance management, collective bargaining, rightsizing, and
other human capital areas. The NSPS would enable DOD to develop
and implement a consistent DOD-wide civilian personnel system.
Given the massive size of DOD, the proposal has important
precedent-setting implications for federal human capital
management and OPM. This testimony provides GAO's preliminary
observations on aspects of DOD's proposal to make changes to its
civilian personnel system and discusses the implications of such
changes for government-wide human capital reform. Past reports
have contained GAO's views on what remains to be done to bring
about lasting solutions for DOD to strategically manage its human
capital. DOD has not always concurred with our recommendations.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-493T
ACCNO: A06890
TITLE: Human Capital: DOD's Civilian Personnel Strategic
Management and the Proposed National Security Personnel System
DATE: 05/12/2003
SUBJECT: Civilian employees
Federal employees
Personnel management
Strategic planning
Human resources utilization
DOD National Security Personnel System
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** 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-03-493T
HUMAN CAPITAL DOD*s Civilian Personnel Strategic Management and the
Proposed National Security Personnel System
Statement of David M. Walker, Comptroller General of the United States
United States General Accounting Office
GAO Testimony Before the Subcommittee on Oversight of
Government Management, the Federal Workforce and the District of Columbia,
Senate Committee on Governmental Affairs For Release on Delivery Expected
at 12: 30 p. m. EDT Monday, May 12, 2003 GAO- 03- 493T
DOD*s lack of attention to force shaping during its downsizing in the
early 1990s has resulted in a workforce that is not balanced by age or
experience and that puts at risk the orderly transfer of institutional
knowledge. Human capital
challenges are severe in certain areas. For example, DOD has downsized its
acquisition workforce by almost half. More than 50 percent of the
workforce will be eligible to retire by 2005. In addition, DOD faces major
succession planning challenges at various levels within the department.
Also, since 1987, the industrial workforce, such as depot maintenance, has
been reduced by about 56 percent, with many of the remaining employees
nearing retirement, calling into question the longer- term viability of
the workforce. DOD is one of the
agencies that has begun to address human capital challenges through
strategic human capital planning. For example, in April 2002, DOD
published a department wide strategic plan for civilians. Although a
positive step toward fostering a more strategic approach toward human
capital management, the plan is not fully aligned with the overall mission
of the department or results
oriented. In addition, it was not integrated with the military and
contractor personnel planning.
We strongly support the concept of modernizing federal human capital
policies within DOD and the federal government at large. Providing
reasonable flexibility to management in this critical area is appropriate
provided adequate safeguards are in place to prevent abuse. We believe
that Congress should consider both governmentwide and selected agency,
including DOD, changes to address the pressing human capital issues
confronting the federal government. In this regard, many of the basic
principles underlying DOD*s civilian human
capital proposals have merit and deserve serious consideration. At the
same time, many are not unique to DOD and deserve broader consideration.
Agency- specific human capital reforms should be enacted to the extent
that the problems being addressed and the solutions offered are specific
to a particular agency (e. g., military personnel reforms for DOD).
Several of the proposed DOD reforms meet this test. At the same time, we
believe that Congress should consider incorporating additional safeguards
in connection with several of DOD*s proposed reforms. In our view, it
would be preferable to employ a
government- wide approach to address certain flexibilities that have
broad- based application and serious potential implications for the civil
service system, in general, and the Office of Personnel Management (OPM),
in particular. We believe that several of the reforms that DOD is
proposing fall into this category (e. g., broad- banding, pay for
performance, re- employment and pension offset waivers). In these
situations, it may be prudent and preferable for the Congress
to provide such authorities on a governmentwide basis and in a manner that
assures that appropriate performance management systems and safeguards are
in place before the new authorities are implemented by the respective
agency. However, in all cases whether from a governmentwide authority or
agency specific legislation, in our view, such additional authorities
should be implemented (or operationalized) only when an agency has the
institutional infrastructure in place to make effective use of the new
authorities. Based on our experience, while the DOD leadership has the
intent and the ability to
implement the needed infrastructure, it is not consistently in place
within the vast majority of DOD at the present time. HUMAN CAPITAL DOD*S
CIVILIAN PERSONNEL
STRATEGIC MANAGEMENT AND THE PROPOSED NATIONAL SECURITY PERSONNEL SYSTEM
www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 493T. To view the full
testimony, including the scope and methodology, click on the link above.
For more information, contact Derek B. Stewart at (202) 512- 5140 or
Stewartd@ gao. gov.
Highlights of GAO- 03- 493T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce and the District
of Columbia, Senate Committee on Governmental Affairs
May 2003
People are at the heart of an organization*s ability to perform its
mission. Yet, a key challenge for the Department of Defense (DOD), as for
many federal agencies, is to strategically manage its human capital. With
about 700, 000 civilian
employees on its payroll, DOD is the second largest federal employer of
civilians in the nation. Although downsized 38 percent between fiscal
years 1989 and 2002, this workforce has taken on greater roles as a result
of DOD*s restructuring and transformation. DOD*s proposed National
Security Personnel System (NSPS) would provide for wide- ranging changes
in DOD*s civilian personnel pay and performance management, collective
bargaining, rightsizing,
and other human capital areas. The NSPS would enable DOD to develop and
implement a consistent DOD- wide civilian personnel system. Given the
massive size of DOD, the proposal has important precedent- setting
implications for federal human capital management and OPM.
This testimony provides GAO*s preliminary observations on aspects of DOD*s
proposal to make changes to its civilian personnel system and discusses
the
implications of such changes for governmentwide human capital reform. Past
reports have
contained GAO*s views on what remains to be done to bring about lasting
solutions for DOD to strategically manage its human capital. DOD has not
always
concurred with our recommendations.
Page 1 GAO- 03- 493T Human Capital Chairman Voinovich, Senator Durbin, and
Members of the Subcommittee,
It is a pleasure to appear before the Subcommittee to discuss the status
and future of Department of Defense*s (DOD) civilian workforce* an
integral part of DOD*s *total force*. DOD uses the term total force to
refer to the different categories of workers that it uses to accomplish
its mission. The total force includes military personnel, both active and
reserve, federal civilian personnel, and private- sector contract
personnel. Collectively, these people are at the heart of the department*s
ability to perform its mission. DOD is in the midst of a major
transformation and it has undertaken a number of related initiatives to
transform its forces and fundamentally improve its business operations. As
part of DOD*s transformation process, the Secretary of Defense and senior
civilian and military leaders have committed to adopt a capabilitiesbased
approach to acquisition planning and to improve the linkage between
overall strategy and individual investments. At the same time, DOD has
embarked on a series of efforts to achieve strategic savings and improve
its business processes, including strengthened financial management,
support infrastructure reforms to include base closures, information
technology modernization, logistics reengineering, and more strategic
human capital management. Clearly, Secretary Rumsfeld and top DOD
leadership is committed to transforming the very way that DOD conducts
business. In that regard, I am pleased to serve as an observer to the
Defense Business Practice Implementation Board. Notwithstanding these
ongoing efforts, GAO has reported a range of DOD challenges for many
years. Importantly, DOD also is covered by 9 of the 25 areas on our
January 2003 highrisk list, including the area of strategic human capital
management.
DOD*s proposed National Security Personnel systems (NSPS) recognizes that,
as GAO has stated and the experiences of leading public sector
organizations here and abroad have found, strategic human capital
management must be the centerpiece of any serious government
transformation effort. The NSPS would provide for wide- ranging changes in
DOD*s civilian personnel pay and performance management, collective
bargaining, rightsizing, and a variety of other human capital areas. The
NSPS would enable DOD to develop and implement a consistent, DOD- wide
civilian personnel system bringing together the many disparate systems
that exist today. 1 We strongly support the concept of modernizing federal
human capital policies
both within DOD and for the federal government at- large. Providing
reasonable flexibility to management in this critical area is appropriate.
At the same time, incorporating adequate safeguards in order to maximize
the chance for success and prevent abuse is essential. The federal
personnel system is clearly broken in
1 DOD officials have said that the Department*s current thinking is that
NSPS will be based on practices were outlined in an April 2, 2003, Federal
Register 68 Fed. Reg. 16, 119- 16,142 (2003) notice asking for comment on
DOD*s plan to integrate all of its current science and technology
reinvention laboratory demonstration projects under a single human capital
framework consistent with the best practices DOD identified.
Page 2 GAO- 03- 493T Human Capital critical respects* designed for a time
and workforce of an earlier era and not able
to meet the needs and challenges of our rapidly changing and knowledge-
based environment. In this regard, many of the basic principles underlying
DOD*s civilian human capital proposals have merit and deserve serious
consideration. At the same time, many are not unique to DOD and deserve
broader consideration.
We believe that Congress should consider both governmentwide and selected
agency, including DOD, changes to address the pressing human capital
issues confronting the federal government. Agency- specific human capital
reforms should be enacted to the extent that the problems being addressed
and the solutions offered are specific to a particular agency (e. g.,
military personnel reforms for DOD). In addition, targeted reforms should
be considered in situations where additional testing or piloting is needed
for fundamental governmentwide reform. Several of the proposed DOD reforms
meet this test. At the same time, we believe that Congress should consider
incorporating additional safeguards in connection with several of DOD*s
proposed reforms.
In our view, it would be preferable to employ a government- wide approach
to address certain flexibilities that have broad- based application and
serious potential implications for the civil service system, in general,
and the Office of Personnel Management (OPM), in particular. We believe
that several of the reforms that DOD is proposing fall into this category
(e. g., broad- banding, pay for performance, re- employment and pension
offset waivers). In these situations, it may be prudent and preferable for
the Congress to provide such authorities on a governmentwide basis and in
a manner that assures that appropriate performance
management systems and safeguards are in place before the new authorities
are implemented by the respective agency. This approach is not intended to
delay action on DOD*s or any other individual agency*s efforts, but rather
to accelerate needed human capital reform throughout the federal
government in a manner that assures reasonable consistency on key
principles within the overall civilian workforce. This approach also would
provide agencies with reasonable flexibility while incorporating key
safeguards to help maximize the chances of success and minimize the
chances of abuse and failure. Finally, this approach also would help to
maintain a level playing field among federal agencies in competing for
talent.
However, in all cases whether from a governmentwide authority or agency
specific legislation, in our view, such additional authorities should be
implemented (or operationalized) only when an agency has the institutional
infrastructure in place to make effective use of the new authorities. This
institutional infrastructure includes, at a minimum, a human capital
planning process that integrates the agency*s human capital policies,
strategies, and programs with its program goals and mission, and desired
outcomes; the capabilities to effectively develop and implement a new
human capital system; and importantly, the existence of a modern,
effective, and credible performance
management system that includes adequate safeguards, including reasonable
transparency and appropriate accountability mechanisms, to ensure the
fair, effective, and non- discriminatory implementation of the system.
Thus, for
Page 3 GAO- 03- 493T Human Capital example, while it is imperative that we
take steps to better link employee pay to
performance across the federal government, how it is done, when it is
done, and the basis on which it is done, can make all the difference in
whether or not such efforts are successful. Based on our experience, while
the DOD leadership has the intent and the ability to implement the needed
infrastructure, it is not in place within a vast majority of DOD at the
present time. In that regard, last week the House Government Reform
Committee marked- up H. R. 1836, which incorporates the DOD civilian
personnel reforms. I was pleased to see that a number of safeguards,
including several along the lines we have been suggesting, were included
in the mark- up. I*m also pleased to see that the Committee added an
amendment that removed language allowing DOD authority to waive the
antinepotism requirements. As Congress continues to consider DOD*s
proposed reforms, I believe it is very important that such safeguards and
protections be included in future legislation. I will now discuss each of
these three elements of an institutional infrastructure in more detail.
Strategic Human Capital Planning and Management at DOD With almost 700,000
civilian employees on its payroll, DOD is the second largest federal
employer of civilians in the nation, after the Postal Service. Defense
civilian personnel, among other things, develop policy, provide
intelligence, manage finances, and acquire and maintain weapon systems.
Given the current global war on terrorism, the role of DOD*s civilian
workforce is expanding, such as participation in combat support functions
that free military personnel to focus on warfighting duties for which they
are uniquely qualified. Career civilians possess *institutional memory,*
which is particularly important in DOD because of the frequent rotation of
military personnel and the short tenure of the average political
appointee. However, since the end of the Cold War, the civilian workforce
has undergone substantial change, due primarily to downsizing, base
realignments and closures, competitive sourcing initiatives, and DOD*s
changing missions. For example, between fiscal years 1989 and 2002, DOD
reduced its civilian workforce by about 38 percent, with an additional
reduction of about 55,000 personnel proposed through fiscal year 2007.
Without a strategic view, DOD*s approach to civilian downsizing in the
early 1990s relied primarily on voluntary turnover and retirements and
varying freezes on hiring authority. DOD also used existing authority for
early retirements to encourage voluntary separations at activities facing
major reductions in force. The fiscal year 1993 National Defense
Authorization Act authorized a number of transition assistance programs
for civilian employees, including financial separation incentives, or
*buyouts,* to induce the voluntary separation of civilian employees and
reduce authorized positions. DOD has credited the use of separation
incentives, early retirement authority, and various job placement
opportunities as ways to avoid nearly 200,000 involuntary demotions and
separations.
Page 4 GAO- 03- 493T Human Capital While the tools available to DOD to
manage its civilian downsizing helped mitigate
the adverse effects of force reductions, DOD*s approach to the reductions
was not oriented toward shaping the makeup of the workforce. During our
work on the early phases of the DOD downsizing, some DOD officials voiced
concerns about what was perceived to be a lack of attention to identifying
and maintaining a balanced basic level of skills needed to maintain in-
house capabilities as part of the defense industrial base. Historically,
DOD has not focused on human capital planning for civilians to the extent
that it has for its military force. In 2000, the Defense Science Board
reported that senior civilian and military leaders have devoted *far less*
attention to civilian personnel challenges than the challenges of
maintaining an effective military force.
The consequences of the lack of attention to force shaping can be seen in
the current age distribution of the civilian workforce in comparison to
the distribution at the start of the drawdown. Today*s workforce is older
and more experienced; and not surprisingly, 58 percent of the workforce
will be eligible for early or regular retirement in the next 3 years.
The net effect is a workforce that is not balanced by age or experience
and that puts at risk the orderly transfer of institutional knowledge. The
continuing increase in the number of retirement- age employees, as well as
the loss of experienced personnel which can result from ongoing emphasis
on public- private sector competition involving commercial activities
under OMB Circular A- 76, could make it difficult for DOD to infuse its
workforce with new and creative ideas and develop the skilled civilian
workers, managers, and leaders it will need to meet future mission
requirements. With senior management attention, strategic leadership and
results- oriented performance management, however, DOD can rebuild its
civilian workforce to meet future requirements for specific skills and
experience. The work of the congressionally mandated Commercial Activities
Panel, which I chaired, noted the importance of government human capital
practices in sourcing decisions. In fact, one of the ten principles
adopted by the Panel to guide future sourcing decisions, stipulates that
sourcing and related policies should be consistent with human capital
practices designed to attract, motivate, retain, and reward a high-
performing workforce. 2 This principle underscores the importance of
considering human capital concerns
in connection with the sourcing process. While it does not mean that
agencies should refrain from outsourcing due to its impact on the affected
employees, it does mean that the federal government*s sourcing policies
and practices should consider the potential impact on the government*s
ability to attract, motivate, retain, and reward a high- performing
workforce both now and in the future.
2 The Panel, mandated by section 832 of the Defense Authorization Act for
fiscal year 2001, required the Comptroller General to convene a panel of
experts to study the process used by the federal government to make
sourcing decisions. After a yearlong study, the Panel published its report
on April 30, 2002. See Commercial Activities Panel, Improving the Sourcing
Decisions of the Government: Final Report, (Washington, D. C.: April 30,
2002). The report can be found on GAO*s web site at www. gao. gov under
the Commercial Activities Panel heading.
Page 5 GAO- 03- 493T Human Capital Regardless of the result of specific
sourcing decisions, it is important for the
workforce to know and believe that they will be viewed and treated as
valuable assets.
The Acquisition and Logistics Workforces These human capital challenges
are even more severe in certain areas, such as acquisition and logistics.
The acquisition area is a part of the workforce that the United States has
relied upon to maintain the technological superiority that plays an
essential role in the national security strategy. According to DOD*s
Acquisition 2005 task force report, the rate of reduction in the civilian
acquisition workforce has substantially exceeded that of the rest of the
DOD workforce. In the past decade, DOD has downsized its acquisition
workforce by almost half. More than 50 percent of the remaining
acquisition workforce will be eligible to retire by 2005; and in some
occupations, DOD projects that half of the current employees will have
retired by 2006.
The task force report made a series of recommendations to DOD in October
2000. In April 2002, we reported on DOD*s plans to implement these
recommendations. We noted that DOD has made progress in laying a
foundation for reshaping its acquisition workforce. Taking a strategic
approach to human capital can be challenging itself. First, it requires a
shift in how the human resources function is perceived, from strictly a
support function to one integral to an agency*s mission. Second, agencies
may also find that they need some of the basic tools and information to
develop strategic plans, such as accurate and complete information on
workforce characteristics. Consequently, DOD views implementation of the
recommendations as long- term efforts with specific outcomes taking years
to achieve.
As a result of downsizing initiatives, the increased use of the private
sector for logistics support activities, and other factors, the civilian
workforce in DOD*s industrial activities-- maintenance depots, arsenals,
and ammunition manufacturing plants-- was reduced by about 56 percent
between 1987 and 2002. The result is that many in this workforce* which
comprises about twelve percent of DOD*s total civilian workforce* are
currently eligible to retire and about 43 percent will be eligible to
retire by 2009. In recent years, we have specifically identified
deficiencies in DOD*s planning for depot maintenance operations. In
October 2001, we reported that DOD had no overall plan that tied
investments in depot maintenance facilities and equipment with future
workloads and, in turn, with human capital needs. 3 We recommended, among
other things, that DOD develop a depot strategic plan that would delineate
future workloads to be accomplished in each of the services* maintenance
depots. We recently reported
3 U. S. General Accounting Office, Defense Logistics: Actions Needed to
Overcome Capability Gaps in the Public Deport System, GAO- 02- 105
(Washington, D. C.: Oct. 12, 2001).
Page 6 GAO- 03- 493T Human Capital that while DOD has initiated some
action toward developing a depot strategic
plan, the department still has no depot strategic plan. We also reported
that while DOD has initiated some action toward developing a depot
strategic plan, the department still has no depot strategic plan and the
future of these activities is uncertain. 4 Without the benefit of a
departmentwide strategic depot plan, the services* efforts
to develop comprehensive depot strategic plans vary. For example, the
Army, Air Force and Marine Corps have developed depot plans, but the Army
plan has been suspended, the Air Force plan does not address one depot nor
identify specific new work, and the Marine Corps plan has not been
approved and has no approval schedule. While the Navy has not developed a
strategic depot plan, two of the Navy components* the shipyard and
aviation communities* have begun strategic planning efforts.
In addition, we reported that the services have also not developed and
implemented strategic workforce plans that will position the civilian
industrial workforce to meet future requirements. Except for the Air
Force, the services industrial activities* workforce plans are mostly
short- term rather than strategic. The plans are also lacking in other
areas that OPM guidance and high- performing organizations identify as key
to successful workforce planning. Specifically, they (1) usually do not
assess the competencies needed for current and future workforces; (2) do
not develop comprehensive retention plans that identify employees critical
to accomplishment of organizational goals, develop an infrastructure to
assist workers in becoming long- term assets of the organization, or
provide meaningful incentives to retain valued employees; and (3)
sometimes do not develop performance measure for evaluating workforce
plans to identify corrective actions needed to improve planning efforts.
In our April 2003 report we made recommendations to strengthen strategic
workforce planning for DOD industrial activities. DOD concurred with most
of our recommendations and highlighted the importance the department
places in human capital management. In non- concurring with two of our
recommendations, DOD officials said that DOD*s new NSPS will provide all
the flexibilities and authorities needed to maintain and enhance human
resources competencies, capabilities, and performance across the
department. We believe it is premature to assume that all its provisions
will be approved and that the new system will address our concerns.
DOD*s Development of Strategic Human Capital Plans Over the past few
years, DOD has recognized the need for strategic human capital management.
Most recently the Quadrennial Defense Review Report (2001) 4 U. S. General
Accounting Office, DOD Civilian Personnel: Improved Strategic Planning
Needed to Help Ensure Viability of DOD*s Civilian Industrial Workforce,
GAO- 03- 472 (Washington, D. C.: Apr. 30, 2003).
Page 7 GAO- 03- 493T Human Capital called upon DOD to modernize and
transform its civilian force so that it is as
equally agile, flexible, and innovative as a transformed U. S. military
force. In April 2002, DOD published a department wide strategic plan, the
Civilian Human Resources Strategic Plan, to set forth its vision to
*design, develop, and implement human resource policies, strategies,
systems, and tools to ensure a mission- ready civilian workforce that is
motivated to excel.* As we reported in March 2003, top- level leaders in
the Air Force, the Marine Corps, the Defense Contract Management Agency,
and the Defense Finance and Accounting Service have initiated planning
efforts and are working in partnership with their civilian human capital
professionals to develop and implement civilian strategic plans; such
leadership, however, was increasing in the Army and not as evident in the
Navy. 5 DOD's issuance of its departmentwide civilian human capital plan
begins to lay a
foundation for strategically addressing civilian human capital issues;
however, DOD has not provided guidance on aligning the component- level
plans with the department- level plan to obtain a coordinated focus to
carry out the Secretary of Defense's transformation initiatives in an
effective manner. High- level leadership attention is critical to
developing and directing reforms because, without the overarching
perspective of such leaders as Chief Operating Officers and the Chief
Human Capital Officers, reforms may not be sufficiently focused on mission
accomplishment, and without their support, reforms may not receive the
resources needed for successful implementation. We have previously
reported that the concept of a Chief Operating Officer (COO) could offer
the leadership to help elevate attention on key management issues and
transformational change, integrate these various efforts, and
institutionalize accountability for addressing management issues and
leading transformational change both within and between administrations 6
. In our view, DOD is a prime candidate to adopt this COO concept. In
addition, if Congress provides DOD with many of the flexibilities it is
seeking under the NSPS, the basis for adding a COO position at DOD would
be even stronger.
The human capital strategic plans we reviewed in our March report, for the
most part, lacked key elements found in fully developed plans. Most of the
civilian human capital goals, objectives, and initiatives were not
explicitly aligned with the overarching missions of the organizations.
Consequently, DOD and defense components cannot be sure that strategic
goals are properly focused on mission achievement. Also, none of the plans
contained results- oriented performance measures to assess the impact of
their civilian human capital initiatives (i. e.,
5 U. S. General Accounting Office, DOD Personnel: DOD Actions Needed to
Strengthen Civilian Human Capital Strategic Planning and Integration with
Military Personnel and Sourcing Decisions, GAO- 03- 475, (Washington, D.
C.: Mar. 28, 2003).
6 U. S. General Accounting Office, Highlights of a GAO Roundtable: The
Chief Operating Officer Concept: A Potential Strategy To Address Federal
Governance Challenges, GAO- 03- 192SP (Washington, D. C.: Oct. 4, 2002).
Page 8 GAO- 03- 493T Human Capital programs, policies, and processes).
Thus, DOD and the components cannot gauge
the extent to which their human capital initiatives contribute to
achieving their organizations* missions. Finally, the plans did not
contain data on the skills and competencies needed to successfully
accomplish future missions; therefore, DOD and the components risk not
being able to put the right people, in the right place, and at the right
time, which can result in diminished accomplishment of the overall defense
mission.
Moreover, the civilian plans we reviewed did not address how the civilian
workforce will be integrated with their military counterparts or with
sourcing initiatives. DOD*s three human capital strategic plans* two
military and one civilian* were prepared separately and were not
integrated to form a seamless and comprehensive strategy and did not
address how DOD plans to link its human capital initiatives with its
sourcing plans, such as efforts to outsource non- core responsibilities.
The components* civilian plans acknowledge a need to integrate planning
for civilian and military personnel* taking into consideration
contractors* but have not yet done so. Without an integrated strategy, DOD
may not effectively and efficiently allocate its scarce resources for
optimal readiness. In our March report we recommended, among other things,
that DOD improve
future revisions and updates to the departmentwide strategic human capital
plan by more explicitly aligning its elements with DOD*s overarching
mission, including performance measures, and focusing on future workforce
needs. DOD only partially concurred with our recommendation, and, as
explanation stated that the recommendation did not recognize the
involvement in and impact of
DOD*s Quadrennial Defense Review on the development of the departmentwide
plan. We also recommended that DOD assign a high priority to and set a
target date for developing an integrated departmentwide plan for both
military and civilian workforces that takes into account contractor roles
and sourcing initiatives. DOD did not concur with this recommendation and
stated that it presently has both a military and civilian plan; the use of
contractors is just another tool to accomplish the mission, not a separate
workforce, with separate
needs, to manage. Finally, we wish to note that the Under Secretary of
Defense for Personnel and Readiness made a point that DOD is in the early
stages of its strategic planning efforts. 7 We recognize this and believe
that our recommendations represent opportunities that exist to strengthen
its developing planning efforts.
The Capabilities Needed to Effectively Develop and Implement Human Capital
Flexibilities Our work has identified a set of key practices that appear
to be central to the
effective use of human capital authorities. These practices, which are
shown in 7 U. S. General Accounting Office, DOD Personnel: DOD Comments on
GAO*s Report on DOD*s Civilian Human Capital Strategic Planning, GAO- 03-
690R (Washington, D. C.: Apr. 18, 2003).
Page 9 GAO- 03- 493T Human Capital figure 1, center on effective planning
and targeted investments, involvement and
training, and accountability and cultural change. 8 Figure 1: Key
Practices for Effective Use of Human Capital Flexibilities Congress should
consider the extent to which an agency is capable of employing these
practices before additional human capital flexibilities are implemented.
In the context of NSPS, Congress should consider whether and to what
extent DOD has used and is using these practices as it develops and
implements its new civilian personnel system. Adequate Safeguards,
Reasonable Transparency, and Appropriate
Accountability In the absence of the right institutional infrastructure,
granting additional human capital authorities will provide little
advantage and could actually end up doing damage if the new flexibilities
are not implemented properly. Our work looking at DOD*s strategic human
capital planning efforts and our work looking across the federal
government at the use of human capital flexibilities and related human
capital efforts underscores the critical steps that DOD needs to take to
properly develop and effectively implement any new personnel authorities.
As I mentioned at the outset, should Congress decide to provide DOD
additional authorities, a set of adequate safeguards, including reasonable
transparency and appropriate accountability mechanisms to ensure the fair
and merit- based
8 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).
Page 10 GAO- 03- 493T Human Capital implementation and application of the
new authorities is important to maximize
the chances of success and minimize the chances of abuse. Similarly,
Congress should consider ensuring that safeguards are in place for any
additional governmentwide human capital authorities that are provided to
agencies.
The following provides some safeguards Congress should consider in regards
to the proposed NSPS. First, I offer some suggestions for safeguards for
the overall design for the NSPS. Second, I suggest some safeguards for
specific elements of the NSPS. In that regard, last week the House
Government Reform Committee marked- up H. R. 1836, which incorporates the
DOD civilian personnel reforms. I
was pleased to see that a number of safeguards, including several along
the lines suggested below, were included in the mark- up. I*m also pleased
to see that the Committee added an amendment that removed language
allowing DOD authority to waive the anti- nepotism requirements. As
Congress continues to consider DOD*s proposed reforms, I believe it is
very important that such safeguards and protections be included in future
legislation. Safeguards for the DOD*s Overall Human Capital Program
Authority To Act Independently From The Director Of The Office Of
Personnel Management The DOD proposal would allow the Secretary of Defense
to jointly prescribe regulations with the Director of OPM to establish a
flexible and contemporary human resources management system for DOD* NSPS.
The joint issuance of regulations is similar to that set forth in the
Homeland Security Act of 2002 9 between the Secretary of Homeland Security
and the Director of OPM for the
development of the DHS human resources management system. However, unlike
the legislation creating Department of Homeland Security (DHS), the
Defense Transformation for the 21st Century Act would allow the Secretary
of Defense to waive the requirement for joint issuance of regulations if,
in his or her judgment, it is *essential to the national security** which
is not defined in the act. Congress may want to consider eliminating this
provision to make the NSPS consistent with the Homeland Security Act of
2002. If Congress decides to move forward with the provision, it should
consider the following safeguards:
Potential Safeguards:
Provide statutory criteria to define what is *essential to the national
security*, or stipulate that such criteria should be developed in
consultation with the Director, Office of Management and Budget.
Require that the criteria consider Federal Labor Relation Authority (FLRA)
administrative case law decisions. FLRA has ruled on several cases
involving the application of 5 U. S. C. 7112 where the FLRA determines the
appropriate units for labor organization representation.
9 Pub. L. No. 107- 296, Nov. 25, 2002.
Page 11 GAO- 03- 493T Human Capital
Require that the Director of OMB or the President certify the
determination by the Secretary of Defense that an action is *essential to
the national security*, rather than giving the sole authority to the
Secretary. This would provide for an institutionally independent *tie-
breaker* approach to such issues.
Strategic Human Capital Planning Under the DOD proposal, key
governmentwide provisions of the Homeland Security Act concerning
strategic human capital management and planning, such as the creation of a
Chief Human Capital Officer (CHCO) Act can be waived. Congress should
consider requiring that key governmentwide provisions of the Homeland
Security Act concerning strategic human capital management and
planning be nonwaiveable by DOD. This would include such provisions as:
Appointment of a DOD Chief Human Capital Officer.
Requirement that DOD*s human capital planning be included in Government
Performance and Results Act performance plans and programs performance
reports.
Adherence to strategic human capital management standards set by OPM. (The
Homeland Security Act requires OPM to design a set of systems to assess
the management of human capital by federal agencies, including appropriate
metrics.)
Employee Involvement The proposed Defense Transformation for the 21st
Century Act includes provisions intended to ensure collaboration with
employee representatives in the planning, development, and implementation
of a human resources management system. Such provisions include allowing
employees to comment on, and review the proposed human capital system and
provides for a mediation procedure if agreement cannot be reached. The
provisions are generally consistent with those required of DHS. In
addition, the legislation provides that the Secretary may at his or her
sole and exclusive discretion engage in national level bargaining.
Potential Safeguards:
Explicitly state the intent of Congress on the importance of allowing DOD
employees to participate in a meaningful way in the creation of any human
resources management system affecting them. This was done for DHS in the
Homeland Security Act.
Require DOD to submit disagreements with the union over the design of the
human resources system after 30 days to an independent body for some level
of assistance in resolution rather than provide that the Secretary may
implement and inform Congress. As the bill is now written, if an agreement
has not been reached after 30 days, and the Secretary determines that
further
consultation with employee representatives will not produce agreement, the
Page 12 GAO- 03- 493T Human Capital Secretary may implement any or all
parts of the proposal, including any
modifications made in response to the recommendations. The Secretary is to
notify Congress of the implementation of any part of the proposal, any
changes made to the proposal as a result of recommendations from the
employee representatives, and the reasons why implementation is
appropriate.
Provide guidance as to appropriate issues to be resolved at the national
and local levels.
Employee Appeals Procedures The proposal states that the appeals
procedures shall ensure due process protections and expeditious handling,
to the maximum extent possible. In this regard, the proposal provides that
presently applicable appeals procedures should only be modified insofar as
such modifications are designed to further the fair, efficient, and
expeditious resolution of matters involving DOD employees. This provision
is substantially the same as a similar provision in the Homeland Security
Act of 2002 allowing DHS to prescribe regulations for employee appeals
related to their employment. Similar to the requirement for the Secretary
of DHS, the Secretary of Defense would likewise be required to consult
with MSPB prior to issuing regulations. However, neither the Homeland
Security Act nor the proposed legislation expressly requires that employee
appeals be heard and decided by the MSPB. There is also no express
provision for judicial review of decisions regarding employee appeals
decisions.
Potential safeguards: Require that DOD establish an independent appeals
authority if it decides not to use MSPB.
Require that the qualifications, experience, and terms of appointment of
the members be specified in the statute or established jointly in
consultation with MSPB.
Expressly state that decisions of any DOD appeals board would be subject
to judicial review. Evaluation and Reporting DOD has stated that it would
continue its evaluation of the science and
technology reinvention laboratory demonstration projects when they are
integrated under a single human capital framework. An evaluation and
reporting requirement would facilitate congressional oversight of NSPS,
allow for any midcourse corrections in its implementation, and serve as a
tool for documenting best practices and sharing lessons learned with
employees, stakeholders, other federal agencies, and the public.
Page 13 GAO- 03- 493T Human Capital Potential safeguards:
Require DOD to fully track and periodically report on its implementation
and results of its new human capital program. Such reporting could be on a
specified timetable with sunset provisions.
Require DOD to undertake evaluations that are broadly modeled on the
evaluation requirements of OPM's personnel demonstration program. Under
the demonstration project authority, agencies must evaluate and
periodically report on results, implementation of the demonstration
project, cost and benefits, impacts on veterans and other EEO groups,
adherence to merit principles, and extent to which the lessons from the
project can be applied elsewhere, including governmentwide. Provide that
such reports be done jointly, in consultation with, or subject to review
and approval of OPM.
Safeguards for Specific DOD Human Capital Policies and Practices
Performance Management and Pay Reform DOD has said that the cornerstone of
the NSPS will be a broad banded performance management and pay for
performance systems. Performance- based pay flexibility for broad- based
employee groups should be grounded in performance management systems that
are capable of supporting pay and related decisions. DOD*s personnel
demonstration projects clearly provide helpful insights and valuable
lessons learned in connection with broad banding and pay for performance
efforts. At the same time these projects and related DOD efforts involve
less than 10 percent of DOD*s civilian workforce and expanding these
approaches to the entire department will require significant effort and
likely need to be implemented in phases over several years.
Potential safeguards:
Establish statutory standards that an agency must have in place before it
can implement broad banding or a more performance- based pay program:
Assure that the agency*s performance management systems (1) link to the
agency*s strategic plan, related goals, and desired outcomes, and (2)
result in meaningful distinctions in individual employee performance. This
should include consideration of critical competencies and achievement of
concrete results.
Involve employees, their representatives, and other stakeholders in the
design of the system, including having employees directly involved in
validating any related competencies, as appropriate.
Assure that certain predecisional internal safeguards exist to help
achieve the consistency, equity, nondiscrimination, and nonpoliticization
of the performance management process (e. g., independent reasonableness
reviews by Human Capital Offices and/ or Offices of Opportunity and
Inclusiveness or their equivalent in connection with the establishment and
implementation of a
Page 14 GAO- 03- 493T Human Capital performance appraisal system, as well
as reviews of performance rating
decisions, pay determinations, and promotion actions before they are
finalized to ensure that they are merit- based; internal grievance
processes to address employee complaints; and pay panels whose membership
is predominately made up of career officials who would consider the
results of the performance appraisal process and other information in
connection with final pay decisions).
Assure reasonable transparency and appropriate accountability mechanisms
in connection with the results of the performance management process (e.
g., publish overall results of performance management and pay decisions
while protecting individual confidentiality, and report periodically on
internal assessments and employee survey results).
Require DOD to have OPM certify that a modern, effective, credible, and,
as appropriate, validated performance management system with adequate
safeguards, including reasonable transparency and appropriate
accountability mechanisms, is in place to support more performance- based
pay and related personnel decisions, before DOD could implement a new
system. OPM should be required to act on any individual certifications
within prescribed time frames (e. g., 30- 60 days).
SES Pay and Performance The proposed NSPS, similar to the Homeland
Security Act, would increase the current total allowable annual
compensation limit for senior executives up to the Vice President*s total
annual compensation. However, the Homeland Security Act provides that OPM,
with the concurrence of the Office of Management and Budget, certify that
agencies have performance appraisal systems that, as designed and applied,
make meaningful distinctions based on relative performance. NSPS does not
include such a certification provision.
Potential Safeguards:
Require OPM to certify that the DOD SES performance management system
makes meaningful distinctions in performance and employs the other
practices used by leading organizations to develop effective performance
management systems, before DOD could increase the annual compensation
limit for senior executives.
As part of that certification, require that DOD show how its SES
performance management approaches are consistent with leading
organizations*, particularly in regards to establishing a clear, direct
connection between SES performance ratings and rewards and the degree to
which the organization achieved its goals.
Page 15 GAO- 03- 493T Human Capital SES Non- Career Appointments The DOD
proposal would allow the Secretary to waive the provisions of Title 5
that limits non- career SES appointments to 25 percent of an agency*s
total SES. We believe that Congress should consider eliminating the
proposed waiver authority or otherwise place alternative numerical or
percent of SES workforce caps on DOD*s authority to make non- career SES
appointments.
Attracting Key Talent The legislation has a number of provisions designed
to give DOD flexibility to help obtain key critical talent. Specifically,
it allows DOD greater flexibility to (1) augment the use of temporary
appointment authorities, (2) hire experts and consultants and pay them
special rates and (3) define benefits for overseas employees.
Specifically, the Secretary would have the authority to establish a
program to attract highly qualified experts in needed occupations with the
flexibility to establish the rate of pay, eligibility for additional
payments, and terms of the appointment. These authorities give DOD
considerable flexibility to obtain and compensate individuals and exempt
them from several provisions of current law.
Potential Safeguards: Place numerical or workforce percentage caps on the
use of these provisions.
Require these provisions only be used to fill critically needed skills
that are identified as such in DOD*s strategic human capital plan.
Place limits on the terms of individuals appointed under certain of the
authorities noted above (e. g., the experts and consultants). Allow for
limited re- appointment.
Periodically report on the use of such authorities. Personal Services
Contracts The legislation gives DOD greater flexibility to enter into
personal services contracts for experts and consultants for national
security missions, including for service outside of the United States.
Such contracts may waive the Ethics in Government Act of 1978, chapter 73
of Title 5 US Code (which includes conduct and the Hatch Act), and section
27 of the Office of Federal Procurement Policy Act (which includes
limitations of subsequent employment for contracting officials). We
believe that Congress should consider eliminating the waiver authority for
some or all of the waiver provisions.
Page 16 GAO- 03- 493T Human Capital Reduction in Force The legislation
could also allow DOD to revise Reduction- in- Force (RIF) rules to
place greater emphasis on an employee's performance. DOD has indicated
that it will be considering for application DOD- wide, personnel practices
that were identified in the April 2, 2003, Federal Register notice. This
notice describes revised RIF procedures that change the order in which
employees would be retained under a RIF order and does not directly
provide for length of service to be considered. Specifically, employees
would be placed on a retention list in the following order: type of
employment (i. e., permanent, temporary), level of performance, and
veterans* preference eligibility (disabled veterans will be given
additional priority), which would reduce the order in which veterans*
preference is currently provided.
Potential safeguards:
See the safeguards related to modern, effective and credible performance
management systems above.
Specify in statute* rather than leaving it to DOD to determine-- the
criteria for the release of competing employees in a reduction in force.
These may include: type of employment, (e. g., permanent, temporary),
performance, veterans* preference, and length of service.
Rightsizing and Organizational Alignment The proposal also provides that
annuitants who receive an annuity from the Civil Service Retirement and
Disability Fund and become employed in a position within the Department of
Defense shall continue to receive their unreduced annuity. This and
selected other NSPS provisions will clearly have incremental budget
implications for which we have not seen any related cost estimate.
Potential Safeguards:
Require additional financial accountability by requiring DOD to consult
with OPM on the planned number of reemployed annuitants.
Place numerical or FTE percentage limitations on the use of these
provisions.
Require these provisions only be used to fill critically needed skills
that are identified as such in DOD*s strategic human capital plan.
Place limits on the terms of individuals appointed under this authority.
Allow for limited re- appointment.
Periodically report on the use of such authorities.
Summary Observations We at GAO strongly support transforming DOD and the
federal government at large. In fact, we are in the vanguard of the
federal government*s transformation and we plan to stay there. We applaud
Secretary Rumsfeld and DOD*s leadership*s efforts to transform how DOD
does business.
Page 17 GAO- 03- 493T Human Capital Many of the basic principles
underlying DOD*s civilian human capital proposal
have merit and deserve serious consideration. The proposal is, however,
unprecedented in its size, scope, and significance. As a result, it should
be considered carefully-- and not just from a DOD perspective. DOD*s
proposal has significant precedent- setting implications for the human
capital area in government in general, and for OPM, in particular. DOD*s
request raises several critical questions both for DOD as well as
governmentwide policies and approaches. Should DOD and/ or other federal
agencies be granted broad- based exemptions from existing law, and if so,
on what basis? Does DOD have the institutional infrastructure in place to
make effective use of the new authorities? Agency- specific human capital
reforms should be enacted to the extent that the
problems being addressed and the solutions offered are specific to a
particular agency (e. g., military personnel reforms for DOD). A
government- wide approach should be used to address certain flexibilities
that have broad- based application and serious potential implications for
the civil service system, in general, and the
OPM, in particular. However, in all cases whether from a governmentwide
authority or agency specific legislation, in our view, such additional
authorities should be implemented (or operationalized) only when an agency
has the institutional infrastructure in place to make effective use of the
new authorities. As you know, we have strongly supported the concept of
modernizing federal
human capital policies, including providing reasonable flexibility to
management in this critical area. However, adequate safeguards must be in
place to prevent abuse. Significant progress has been* and is being* made
in addressing the federal government*s pressing human capital challenges.
But experience has shown that how it is done, when it is done, and the
basis on which it is done, can make all the difference in whether or not
we are ultimately successful.
Chairman Voinovich, Mr. Durbin, and Members of the Subcommittee, this
concludes my prepared statement. I would be pleased to respond to any
questions that you may have.
Contacts and Acknowledgments For questions about this statement, please
contact Derek B. Stewart, Director, Defense Capabilities and Management on
(202) 512- 5140 or at stewartd@ gao. gov. For further information on
governmentwide human capital issues, please contact J. Christopher Mihm,
Director, Strategic Issues, on (202) 512- 6806 or at mihmj@ gao. gov.
Major contributors to this testimony included Julia Denman, William
Doherty, Brenda S. Farrell, Christine Fossett, and Edward H. Stephenson.
(350326)
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, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO*s
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail
this list to you every afternoon, go to www. gao. gov and select
*Subscribe to daily E- mail alert for newly released products* under the
GAO Reports heading.
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to: U. S. General Accounting Office 441 G Street NW, Room LM
Washington, D. C. 20548 To order by Phone: Voice: (202) 512- 6000
TDD: (202) 512- 2537 Fax: (202) 512- 6061
Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail:
fraudnet@ gao. gov Automated answering system: (800) 424- 5454 or (202)
512- 7470 Jeff Nelligan, managing director, NelliganJ@ gao. gov (202) 512-
4800
U. S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.
C. 20548 Obtaining Copies of GAO Reports and
Testimony Order by Mail or Phone
To Report Fraud, Waste, and Abuse in Federal Programs Public Affairs
*** End of document. ***