-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-617R		

TITLE:     Additional Posthearing Questions Related to Proposed 
Department of Homeland Security (DHS) Human Capital Regulations

DATE:   04/30/2004 
				                                                                         
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This is the accessible text file for GAO report number GAO-04-617R 
entitled 'Additional Posthearing Questions Related to Proposed 
Department of Homeland Security (DHS) Human Capital Regulations' which 
was released on April 30, 2004.

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April 30, 2004:

The Honorable George V. Voinovich:

Chairman:

The Honorable Richard 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 Jo Ann Davis:

Chairwoman:

The Honorable Danny Davis:

Ranking Minority Member:

Subcommittee on Civil Service and Agency Organization:

Committee on Government Reform:

United States House of Representatives:

Subject: Additional Posthearing Questions Related to Proposed 
Department of Homeland Security (DHS) Human Capital Regulations:

On February 25, 2004, I testified before your subcommittees at a 
hearing entitled "The Key to Homeland Security: The New Human Resources 
System."[Footnote 1] I provided responses to an initial set of 
questions in correspondence dated March 22, 2004.[Footnote 2] This 
report responds to your request that I provide answers to additional 
posthearing questions posed by Senator Akaka and Senator Lautenberg. 
The questions and responses follow.

Questions from Senator Akaka:

1. In your written testimony, you recommend giving members of the 
internal appeals panel, rather than the Secretary, the authority to 
remove their fellow panel members for inefficiency. However, you are 
silent on the same issue for the internal labor-management board. What 
recommendations do you have for improving the impartiality of the 
proposed labor-management board at the Department of Homeland Security 
(DHS)?

As you noted, I raised independence concerns about the panel to be 
created to hear appeals for mandatory removal offenses. Members of that 
panel are appointed by the Department of Homeland Security (DHS) 
Secretary for 3-year terms and may be removed by the Secretary "only 
for inefficiency, neglect of duty, or malfeasance." These appointment 
and removal procedures are identical to the appointment and removal 
provisions for the members of the proposed DHS Labor Relations Board. 
As I noted in my statement with regard to the mandatory removal offense 
panel, removal of the panel members by the Secretary may potentially 
compromise the real or perceived independence of the panel's decisions. 
We suggested, as an alternative, that the department should consider 
having members of the panel removed only by a majority decision of the 
panel. Such changes might also strengthen the independence of the Labor 
Relations Board. We also said that DHS might wish to consider 
staggering the terms of the members to ensure a degree of continuity on 
the board.

2. The General Accounting Office (GAO) has been active in reviewing and 
making recommendations regarding new personnel flexibilities in the 
federal government. As you know, DHS has requested $102.5 million for 
the implementation of its new personnel system. Based on GAO research 
and your own experience with the personnel system at GAO, is the 
department's request sufficient to adequately implement the system? How 
much do you expect the financial cost of the system to be in the long 
term?

As you note, the administration has requested for fiscal year 2005 
$102.5 million to fund training, the development of the performance 
management and compensation system, and contractor support. In 
addition, the fiscal year 2005 budget requests over $10 million for a 
performance pay fund in the first phase of implementation (affecting 
about 8,000 employees) to recognize those who meet or exceed 
expectations and about $20 million to fund the development of a 
departmental human resources information technology system. The 
training costs do not include employees' time during training or 
expenses of the internal training resources that already exist within 
DHS.

We have reported that based on the data that the Office of Personnel 
Management's (OPM) personnel demonstration projects provided us, direct 
costs associated with salaries, training, and automation and data 
systems were the major cost drivers of implementing their pay for 
performance systems. The demonstration projects reported other direct 
costs, such as evaluations and administrative expenses. We described a 
number of approaches they used to manage the direct costs of 
implementing and maintaining their pay for performance 
systems.[Footnote 3]

While we do not have an estimate of additional implementation costs, 
clearly, further funding will be required as the system is rolled out 
to additional DHS personnel. In addition, ongoing training is essential 
to reinforce the considerable cultural change that is needed to 
continue to implement a new performance management system. DHS is 
recognizing that there are up-front costs and that its components are 
starting from different places regarding the maturity and capabilities 
of their performance management systems. While the investments are 
important to the ultimate success of DHS's efforts, it is equally 
important that certain costs are one-time in nature and, therefore, 
should not be built into the base of DHS's budget for future years.

The GAO has conducted extensive reviews of personnel reform in other 
countries and at other federal agencies. In the case of the FAA, 
Congress granted certain flexibilities but then reinstated the current 
labor-management relations system found in chapter 71 and appeals to 
the MSPB. I also understand that other countries, which initially moved 
from a centralized system to an individual agency personnel system, 
have since returned to a form of centralization. What are the lessons 
learned from personnel reform efforts both here and abroad and, in your 
opinion, has DHS incorporated these best practices?

Since the United States is not alone in experiencing challenges in 
managing its human capital, we reviewed other countries' experiences in 
our August 2002 report on performance management.[Footnote 4] For 
example, Australia devolved almost all human capital management 
responsibilities to individual departments and agencies whose chief 
executives may negotiate compensation with individuals or groups of 
employees. Australia's Public Service Commission was to remain 
responsible for promoting high-quality human capital management and its 
Department of Employment and Workplace Relations plays a key role in 
helping agencies develop workplace relations that are consistent with a 
high performing public service. We have not updated our work to 
identify if there have been any changes in their responsibilities.

As we noted in our statement, we strongly support the need for 
government transformation and the concept of modernizing federal human 
capital policies. To help the new DHS, we convened a forum of a cross-
section of leaders who have had experience managing large-scale 
organizational mergers, acquisitions, and transformations, and 
identified key practices and implementation steps that can help 
agencies implement successful transformations of their own.[Footnote 5] 
While no two efforts are exactly alike, the "best" approach for any 
given effort depends upon a variety of factors specific to each 
context. Last September, we reported that DHS's design of its human 
capital system generally reflects these elements of effective 
transformation.[Footnote 6]

Our work has also shown that changes to human capital management should 
be implemented only when an agency has the institutional infrastructure 
in place. 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 develop and implement 
a new human capital system effectively; and a modern, effective, and 
credible performance management system that includes adequate 
safeguards to prevent abuse of employees. We have issued several 
products that discuss this framework in more detail.[Footnote 7]

As you noted, the Federal Aviation Administration (FAA) is managing its 
personnel under one of the most flexible human capital management 
environments in the federal government. This is a result of 1995 
legislation that granted the agency broad exemptions from laws 
governing federal civilian personnel management found in title 5 of the 
United States Code. Congress provided these flexibilities in response 
to FAA's position that the inflexibility of federal personnel systems 
was one of the most important constraints to the agency's ability to be 
responsive to the airline industry's needs and to increase productivity 
in air traffic control operations. In a report issued last year, we 
noted that FAA had not fully incorporated elements that are important 
to effective human capital management into its overall reform 
effort.[Footnote 8] These elements include data collection and 
analysis, performance goals and measures, and linkage of reform goals 
to program goals. FAA human resource management officials said that the 
agency should have spent more time to develop baseline data and 
performance measures before implementing the broad range of reforms, 
but that establishing these elements was a complex and difficult task. 
We additionally reported that FAA had also not gone far enough in 
establishing linkage between reform goals and the overall program goals 
of the organization. Clearly, FAA did not have the institutional 
framework in place that could have helped to maximize its personnel 
flexibilities.

Consistent with the institutional infrastructure described above, 
agencies in other countries are placing a greater emphasis on achieving 
alignment between individual and organizational results. A first step 
towards this end is to align the performance expectations of top 
leadership with organizational goals and then cascade those 
expectations down to lower levels and then to align performance 
expectations between agencies and with governmentwide priorities.

The proposed DHS regulations state the department's interest in the 
alignment of individual performance expectations with the mission and 
strategic goals, but do not yet detail how individual performance 
expectations will be aligned with the department's mission and 
strategic goals. The release of the DHS Strategic Plan can enable this 
alignment. In addition, the proposed regulations describe a phased 
approach to implementation and a commitment to an ongoing evaluation of 
the effectiveness of the human capital system. A phased approach 
recognizes that different organizations will have different levels of 
readiness and different capabilities to implement the new authorities. 
Moreover, a phased approach allows for learning so that midcourse 
corrections can be made before the regulations are fully implemented 
organizationwide. Likewise, evaluations of the system's success will 
ensure that these system revisions are based on data-driven lessons 
learned.

According to the proposed regulations, law enforcement officers are not 
among the list of individuals excluded from the personnel system. As 
the Department plans to implement a pay-for-performance system, I am 
concerned over the method by which law enforcement officers are judged 
on their performance and whether a pay-for-performance system could 
increase civil rights abuses. Due to your extensive experience in 
studying, as well as implementing, pay-for-performance systems, what 
are the best practices on how to measure the performance of law 
enforcement officers?

While we have reported on local police forces' experiences in 
recruiting and retaining officers after the terrorist attacks of 
September 11, 2001, we have not reviewed how to measure the performance 
of law enforcement officers.[Footnote 9] However, high-performing 
organizations use validated core competencies to examine individual 
contributions to organizational results. Competencies define the skills 
and supporting behaviors that individuals are expected to exhibit to 
carry out their work effectively and can provide a fuller picture of an 
individual's performance and contribution to organizational 
goals.[Footnote 10] With regard to law enforcement, a focus on 
competencies would entail identifying and validating those competencies 
that are critical to successful law enforcement efforts. This approach 
should include a range of factors, including achieving results and 
protecting individual constitutional rights and civil liberties. A 
related pay for performance approach would center on creating 
incentives for--and rewarding--demonstrated proficiencies in the 
validated core competencies.

Question from Senator Lautenberg:

1. Could you explain how local labor market rates will determine the 
pay bands and why you think that private sector salaries should affect 
DHS employees' salaries?

A competitive compensation system can help organizations attract and 
retain a quality workforce. To begin to develop such a system, 
organizations assess the skills and knowledge they need; compare 
compensation against other public, private, or nonprofit entities 
competing for the same talent in a given locality; and classify 
positions along levels of responsibility. While one size does not fit 
all, organizations generally structure their competitive compensation 
systems to separate base salary--which all employees receive--from 
other special incentives, such as retention allowances or performance 
awards.

Similar to many other aspects of DHS's proposal, important elements of 
the new pay system have not been determined. Under the proposed 
regulations, DHS, after coordination with OPM, may consider factors 
such as labor market conditions, among other things, in setting and 
adjusting ranges of basic pay for bands. We have reported that OPM's 
personnel demonstration projects have considered the labor market in 
determining how much to budget for pay increases.[Footnote 11] For 
example, the Naval Sea Systems Command Warfare Center at Newport uses 
regional and industry salary information compiled by the American 
Association of Engineering Societies when determining how much to set 
aside for pay increases and awards. Specifically, in response to higher 
external engineer, scientist, and information technology personnel 
salaries, Newport funded pay increases and awards at a higher level in 
fiscal year 2001 than in fiscal year 2000.

We are sending copies of this report to the Chair and Ranking Minority 
Member, Senate Committee on Governmental Affairs; the Chairman and 
Ranking Minority Member, House Committee on Government Reform; the 
Chairman and Ranking Minority Member, House Select Committee on 
Homeland Security; and other interested congressional parties. We will 
also send copies to the Secretary of the Department of Homeland 
Security and the Director of the Office of Personnel Management. Copies 
will be made available at no charge on the GAO Web site at http://
www.gao.gov. For additional information on our work on federal agency 
transformation efforts and strategic human capital management, please 
contact me on (202) 512-5500 or J. Christopher Mihm, Managing Director, 
Strategic Issues, on (202) 512-6806 or at [email protected].

Signed by: 

David M. Walker:

Comptroller General of the United States:

(450318):

FOOTNOTES

[1] U.S. General Accounting Office, Human Capital: Preliminary 
Observations on Proposed DHS Human Capital Regulations, GAO-04-479T 
(Washington, D.C.: Feb. 25, 2004).

[2] U.S. General Accounting Office, Posthearing Questions Related to 
Proposed Department of Homeland Security (DHS) Human Capital 
Regulations, GAO-04-570R (Washington, D.C.: Mar. 22, 2004).



[3] U.S. General Accounting Office, Human Capital: Implementing Pay for 
Performance at Selected Personnel Demonstration Projects, GAO-04-83 
(Washington, D.C.: Jan. 23, 2004).

[4] U.S. General Accounting Office, Results-Oriented Cultures: Insights 
for U.S. Agencies from Other Countries' Performance Management 
Initiatives, GAO-02-862 (Washington, D.C.: Aug. 2, 2002).

[5] U.S. General Accounting Office, Results-Oriented Cultures: 
Implementation Steps to Assist Mergers and Organizational 
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003); and 
Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned 
for a Department of Homeland Security and Other Federal Agencies, GAO-
03-293SP (Washington, D.C.: Nov. 14, 2002). 

[6] U.S. General Accounting Office, Human Capital: DHS Personnel System 
Design Effort Provides for Collaboration and Employee Participation, 
GAO-03-1099 (Washington, D.C.: Sept. 30, 2003).

[7] U.S. General Accounting Office, Human Capital: Key Principles for 
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: 
Dec. 11, 2003); Human Capital: Effective Use of Flexibilities Can 
Assist Agencies in Managing Their Workforces, GAO-03-2 (Washington, 
D.C.: Dec. 6, 2002); and Results-Oriented Cultures: Creating a Clear 
Linkage between Individual Performance and Organizational Success, GAO-
03-488 (Washington, D.C.: Mar. 14, 2003).

[8] U.S. General Accounting Office, Human Capital Management: FAA's 
Reform Effort Requires a More Strategic Approach, GAO-03-156 
(Washington, D.C.: Feb. 3, 2003).

[9] U.S. General Accounting Office, Federal Uniformed Police: Selected 
Data on Pay, Recruitment, and Retention at 13 Police Forces in the 
Washington, D.C., Metropolitan Area, GAO-03-658 (Washington, D.C.: June 
13, 2003).

[10] GAO-03-488.

[11] GAO-04-83.