International Trade: USTR Would Benefit from Greater Use of	 
Strategic Human Capital Management Principles (06-DEC-05,	 
GAO-06-167).							 
                                                                 
The Office of the U.S. Trade Representative (USTR) has a unique  
role in coordinating trade policy, resolving disagreements, and  
framing issues for presidential decision through an interagency  
trade policy process. In recent years, USTR's increased workload 
from numerous new regional and bilateral free trade agreement	 
negotiations and a new round of multilateral negotiations at the 
World Trade Organization has raised concerns about its human	 
capital strategy. GAO examined whether USTR is pursuing an	 
effective human capital strategy that supports the ability of its
workforce to accomplish its mission. Specifically, GAO (1)	 
reviewed USTR's commitment to strategic human capital leadership 
and planning and (2) analyzed to what extent USTR has used human 
capital tools to address its workforce challenges.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-167 					        
    ACCNO:   A42617						        
  TITLE:     International Trade: USTR Would Benefit from Greater Use 
of Strategic Human Capital Management Principles		 
     DATE:   12/06/2005 
  SUBJECT:   Federal employees					 
	     Human capital					 
	     Human capital management				 
	     Human capital planning				 
	     Internal controls					 
	     Personnel management				 
	     Strategic planning 				 

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GAO-06-167

Report to the Chairman, Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia, Committee
on Homeland Security and Governmental Affairs, U.S. Senate

December 2005

INTERNATIONAL TRADE

USTR Would Benefit from Greater Use of Strategic Human Capital Management
Principles

Contents

Tables

Figures

December 6, 2005 Letter

The Honorable George V. Voinovich Chairman, Subcommittee on Oversight   of
Government Management, the Federal Workforce,   and the District of
Columbia Committee on Homeland Security   and Governmental Affairs United
States Senate

Dear Mr. Chairman:

The Office of the U.S. Trade Representative (USTR) plays the lead role in
developing U.S. trade policy, negotiating trade agreements, and monitoring
and enforcing those agreements. It leads and coordinates the development
and implementation of U.S. trade policy through an interagency trade
policy process, comprised of 19 federal agencies and offices. As such,
USTR has a unique role within the trade policy arena in terms of providing
the leadership and coordination to build the consensus and marshal the
resources to move the interagency process forward to achieve the U.S.
trade agenda.

As a small, cabinet-level office within the Executive Office of the
President (EOP), USTR has about 200 full-time employees and uses temporary
detailees from other agencies to supplement its core staff. In recent
years, USTR's workload has grown as the number and complexity of trade
agreements has increased, with both ambitious negotiations of numerous new
regional and bilateral free trade agreements and a new round of
multilateral negotiations in the World Trade Organization (WTO). USTR's
extensive interagency leadership responsibilities and increasing workload
have increased the importance of having a sound human capital strategy.

Similarly, human capital planning has taken on increased importance in the
public sector in recent years. We have established strategic human capital
principles and standards in recent years in our Model of Strategic Human
Capital Management and a large body of work addressing specific human
capital issues, such as strategic workforce planning. The Office of
Personnel Management (OPM) has also established its Human Capital
Assessment and Accountability Framework, which is consistent with our
model, to provide the basis for executive branch agencies to meet the
human capital goals set out as the first element in the President's
Management Agenda. All of this guidance stresses the importance of
tailoring the approaches to the characteristics of each organization, such
as size and function.

To examine whether USTR is pursuing an effective human capital strategy
that supports the ability of its workforce to accomplish its mission, we
reviewed its human capital planning and implementation efforts.
Specifically, we (1) reviewed USTR's commitment to strategic human capital
leadership and planning and (2) analyzed to what extent USTR has used
human capital tools to address its workforce challenges.

To determine USTR's commitment to strategic human capital leadership and
planning, we reviewed internal planning documents and interviewed USTR
human resources staff, office managers, and senior management. We used
GAO's Model of Strategic Human Capital Management as our framework to
assess USTR's human capital efforts.1 We also discussed interagency
resource planning with four trade agencies: the Departments of State,
Commerce, and Agriculture, as well as the U.S. International Trade
Commission. To determine how USTR has addressed its human capital
challenges, we interviewed officials at USTR and the four trade agencies,
as well as trade association representatives and former USTR officials. We
reviewed USTR human capital data for key human capital trends in areas
such as staff profile, retirement eligibility, and retention challenges.
We tested USTR data for reliability by comparing them with OPM data and
with other USTR human capital documents. We determined that these data
were sufficiently reliable for the purposes of this report. We conducted
our work from January 2005 to September 2005 in accordance with generally
accepted government auditing standards.

Results in Brief

USTR could benefit from greater use of strategic human capital management
principles in the areas of leadership and planning, considering that its
small size and interagency trade leadership and coordination role give it
a unique responsibility to lead the trade agenda. While USTR officials
state that their human capital efforts are sufficient to accomplish USTR's
immediate mission, USTR does not demonstrate a commitment to managing its
human capital strategically. First, USTR has not sustained the leadership
resources for human capital; for example, the top human capital management
post has not been filled for over 1 1/2 years. USTR also does not conduct
formal succession planning to fill critical management positions in a
timely manner. Second, while USTR performs an interagency leadership and
coordination mission that it cannot achieve without the participation and
support of other trade agencies, it has not undertaken strategic human
capital planning to mitigate the risks inherent in its dependency-as a
"networked organization"-on interagency resources. For example, in recent
trade negotiations, other trade agencies comprised about 75 percent of the
total delegation staff. However, USTR does not formally conduct any
planning for these critical human capital resources at the interagency
level and, therefore, does not have a method to account for changes in
other agencies' resources that might impact its ability to achieve its
mission. Third, USTR's human capital planning efforts have been focused
primarily on short-term responses to trade negotiating needs identified in
its 2-year budget planning process; it has not conducted ongoing parallel
efforts to analyze the organization's longer-term workforce needs. For
example, USTR does not routinely review senior staff's eligibility for
retirement to ensure the organization's continued capacity to achieve its
mission. Moreover, USTR does not maintain the kind of up-to-date
information on available staff and future human capital needs that would
be necessary in conducting effective strategic workforce planning,
reducing its ability to make data-driven human capital decisions.

USTR's efforts to address its specific workforce challenges could benefit
from greater use of human capital tools. First, USTR could use more of the
existing federal human capital flexibilities to better tailor its human
capital approaches to its organizational needs. Although the agency has
used and benefited from some special hiring and pay authorities, such as
the use of higher-than-minimum salary offers, it has yet to take advantage
of others, such as retention bonuses. Second, while USTR prides itself on
being a results-oriented agency, it could do even better if it linked its
individual performance expectations to organizational goals. Most USTR
staff are not subject to agencywide performance expectations linked to
organizational goals. While managers have stressed the importance of
certain individual skills needed to advance USTR's mission, most staff are
held accountable to a range of expectations that vary among offices.

In this report, we make several recommendations to improve USTR's human
capital management in the areas of strategic human capital leadership and
planning, recruiting and retention, and performance management. We
provided a draft of this report to USTR; the Departments of Agriculture,
Commerce, and State; and the U.S. International Trade Commission. USTR
provided written comments, which are reproduced in appendix IV. The other
agencies did not provide comments. USTR stated that it shared our general
observations and recommendations regarding the critical importance of
human capital planning and said it would take some of the steps suggested
by our report. However, in other areas, USTR believes it is sufficiently
performing its human capital functions. USTR also provided technical
comments, which we have incorporated where appropriate.

Background

USTR Mission and Organizational Structure

USTR is responsible for developing and coordinating U.S. international
trade, commodity, and direct investment policy and for overseeing trade
negotiations with other countries. The head of USTR is the U.S. Trade
Representative, a Cabinet member who serves as the president's principal
trade advisor, negotiator, and spokesperson on trade issues. Through an
interagency structure, USTR coordinates trade policy, resolves
disagreements, and frames issues for presidential decision.

USTR provides trade policy leadership and negotiating expertise in its
major areas of responsibility, including the following:

o Bilateral, regional, and multilateral trade and investment issues;

o Expansion of market access for U.S. goods and services;

o International commodity agreements;

o Negotiations affecting U.S. import policies;

o Oversight of the Generalized System of Preferences and Section 301
complaints concerning foreign unfair trade practices;

o Trade, commodity, and direct investment matters managed by international
institutions such as the Organization for Economic Cooperation and
Development and the United Nations Conference on Trade and Development;

o Trade-related intellectual property protection issues; and

o WTO issues.

USTR has offices in Washington, D.C., and Geneva, Switzerland, where the
WTO is located. The Geneva Deputy USTR is the U.S. Ambassador to the WTO
and to the United Nations Conference on Trade and Development on commodity
matters. Figure 1 shows USTR's organizational structure as of July 5,
2005.

Figure 1: USTR Organizational Structure, as of July 5, 2005

Interagency Trade Policy Process

USTR leads and coordinates the development and implementation of U.S.
trade policy through an interagency process. It consults with other
government agencies on trade policy matters through the Trade Policy
Review Group (TPRG) and the Trade Policy Staff Committee (TPSC). USTR
administers and chairs these groups, which are composed of 19 federal
agencies and offices. TPSC is the primary operating group, with
representation at the senior civil service level. If agreement is not
reached in TPSC, or if significant policy questions are being considered,
then issues are taken up by TPRG (Deputy USTR/Under Secretary level). The
final tier of the interagency trade policy mechanism is the National
Economic Council, chaired by the President. The National Economic Council
Deputies' committee considers memorandums from TPRG, as well as important
or controversial trade-related issues. The current administration operates
the National Economic Council jointly with the National Security Council,
according to a senior USTR official.

Strategic Human Capital Management Principles

We have developed a Model of Strategic Human Capital Management2 to help
agency leaders effectively use their people, or human capital, and
determine how well they integrate human capital considerations into daily
decision making and planning for the program results they seek to achieve.
It highlights the importance of a sustained commitment by agency leaders
to maximize the value of their agencies' human capital and manage related
risks.

As shown in figure 2, the model has four human capital cornerstones: (1)
leadership; (2) strategic human capital planning; (3) acquiring,
developing, and retaining talent; and (4) results-oriented organizational
cultures. Each of these cornerstones, in turn, is characterized by two
critical success factors.

Figure 2: GAO Model of Strategic Human Capital Management

Our human capital model is consistent with similar efforts by the Office
of Management and Budget (OMB) and OPM to develop federal human capital
standards. In the summer of 2001, OMB announced the President's Management
Agenda, designed to address management weakness across the government. To
this end, the agenda highlighted five governmentwide initiatives for
management reform. The first of these was the Strategic Management of
Human Capital Initiative, which is being led by OPM. As part of this
initiative, in October 2002, OPM released a Human Capital Assessment and
Accountability Framework that built on its prior guidance for workforce
planning. OPM has also developed Human Capital Standards for Success,
which incorporates the GAO model's critical success factors.3

USTR Could Benefit from Greater Commitment to Strategic Human Capital
Principles in Its Human Capital Leadership and Planning

USTR does not follow key strategic human capital principles in its human
capital leadership and planning. While USTR officials state that their
human capital efforts are sufficient to accomplish USTR's immediate
mission, USTR does not demonstrate a commitment to strategic human capital
management. First, the commitment of USTR to providing the leadership
resources of human capital has not been sustained. Second, while USTR
performs an interagency leadership and coordination mission that it cannot
achieve without the participation and support of other trade agencies, it
has not undertaken formal strategic human capital planning to mitigate the
risks inherent in its dependency on interagency resources. Third, USTR's
human capital planning efforts have been primarily focused on short-term
responses to trade negotiating needs identified in its 2-year budget
planning process; it has not conducted ongoing parallel efforts to analyze
the organization's longer term workforce needs to ensure its continued
capacity to achieve its mission.

USTR Does Not Address Human Capital Leadership Strategically Despite the
Importance of Each Position

Despite being the lead U.S. trade agency and having the responsibility to
coordinate the U.S. government trade agenda, which places a significant
responsibility on each individual, USTR does not manage human capital
strategically. USTR's commitment to provide leadership resources for human
capital has not been sustained. For example, USTR does not have the human
capital management resources in place to ensure that critical human
capital management tasks-such as succession planning-are carried out,
which places its interagency leadership role at risk when key vacancies
occur within a short period of time. In fact, the senior human capital
management post has not been filled for over 1 1/2 years. USTR has relied
on one person to act as senior manager for administration, thus assuming
all senior human capital and administrative duties.

Although a key element of strategic human capital leadership principles is
the use of succession planning to ensure a smooth transition of knowledge
from incumbents to successors to strengthen organizational capacity,4 USTR
does not conduct formal succession planning. Federal agencies that manage
succession well do so with active leadership support for identifying
critical talent throughout the organization and linking succession efforts
to the agency's overall long-term goals.5 Our analysis of USTR's human
capital data found substantial risk of future leadership and knowledge
loss due to retirement. Five of 22 senior executive service (SES) staff
are currently eligible to retire, representing 23 percent of USTR's SES
staff. Another 4 SES staff are eligible to retire in five years or less,
for a total of 41 percent either currently eligible to retire or eligible
in 5 years or less. Along with the SES posts, USTR also faces the
potential retirement of several experienced trade experts and attorneys
who also have roles coordinating U.S. trade policy. Just over 10 percent
of GS-15 trade analysts, attorneys, or economists are eligible to retire
in 5 years or less.6 USTR has not undertaken formal succession planning to
fill these eventual vacancies, even though the staff USTR risks losing to
retirement are critical to managing the interagency process. Instead,
senior managers reexamine the staffing balance as vacancies occur, and
office managers may look for good candidates as replacements from other
agencies in the interagency process or from the private sector. According
to a senior manager, USTR receives an occasional list of staff eligible to
retire in the next year or two from the EOP. However, USTR senior
management staffing discussions are limited to short-term contingency
plans for particular posts and are not part of any systematic agencywide
succession planning effort. Likewise, when office managers look outside
the agency to find potential USTR staff, their efforts also are not part
of any formal succession strategy. As we have previously reported,7
without careful planning, an organization's retirement eligibility rate
can suggest that it will experience an eventual loss in institutional
knowledge, expertise, and leadership continuity. Moreover, leading
organizations go beyond a succession approach that simply replaces
individuals. Rather, they instead identify and develop successors for
leadership and other key positions.

USTR also faces periodic management transitions, which illustrates the
risk to its interagency leadership role of facing multiple senior
vacancies within a short period of time. The turnover in key positions
that can result from such management transitions is particularly critical
for a small agency such as USTR, at which each position is vitally
important and staff are not easily replaced. For instance, a recent
transition in early 2005 resulted in vacancies of five key posts within a
2-month period, including the offices of China Affairs, Europe and
Mediterranean, and Labor.8 While USTR generally managed to fill these
positions in a timely manner,9 the risks inherent in suddenly having large
gaps to fill in the government trade leadership underscore the importance
of USTR having the human capital leadership in place to prepare the agency
for transitional vacancies with minimal disruption to the interagency
trade process.

USTR Operates as a Networked Organization Performing an Interagency
Leadership and Coordination Mission, but Without Formal Interagency
Resource Planning

USTR's lack of commitment to strategic human capital principles in its
human capital leadership and planning also has implications for the
interagency trade process. USTR is a highly networked organization10 that
performs an interagency leadership and coordination mission. It
administers and chairs TPRG and TPSC, which make up the subcabinet-level
mechanism for developing and coordinating U.S. government positions on
international trade and trade-related investment issues. Supporting TPSC
are more than 90 subcommittees responsible for specialized areas and
several task forces that work on particular issues. USTR works with other
agencies to carry out its mission, including obtaining approval for
initiatives in the interagency process. Through interviews with current
and former USTR officials, other trade agency officials, and trade
association representatives, we found that USTR, a small trade agency that
receives support from other larger agencies (e.g., Commerce, State, and
Agriculture) in doing its work, operates more like an elite core staff
that provides leadership and coordination in working in concert with
others in the interagency trade policy process. USTR's networked
operational mode is a defining characteristic.

In developing trade policy and conducting trade negotiations, the USTR
office directors (Assistant USTRs) whom we spoke with described working
with an extended interagency group comprised of other subject experts at
USTR and at a range of agencies. One Assistant USTR for a geographic
office described working with a "virtual team" that crossed agency
boundaries but was instantaneously connected by e-mail. Another Assistant
USTR stressed that she had also developed a close working relationship
with embassy staff in her primary countries of interest, whom she
described as a critical resource. An Assistant USTR for a functional
office added that USTR was not only interacting with the major trade
agencies in the interagency process but also on many issues with the
relevant regulatory agencies in order to gain their perspective. One
example would be USTR's Agricultural Affairs office working not just with
the Foreign Agricultural Service at the Department of Agriculture but also
with the Animal and Plant Health Inspection Service for scientific
assessment and analysis on sanitary/phytosanitary issues such as mad cow
disease.

In explaining how USTR works to marshal interagency support, the Assistant
USTR for the Americas gave the example of the recently concluded Central
American Free Trade Agreement (CAFTA), for which she had the negotiating
lead. She said her negotiating team included members of her office staff
working with Central American desk officers at a range of agencies, such
as State and Commerce. However, it also included subject experts from
other USTR offices, for issues such as financial services, agriculture,
intellectual property, pharmaceuticals, market access, and labor; and they
all worked with their counterparts at a range of agencies, such as
Treasury, Agriculture, the Patent and Trademark Office, the Food and Drug
Administration, Commerce, and Labor, respectively. In addition to their
interagency interactions, the Office of the Americas also coordinated and
received input from USTR's private sector advisory committees as well as
trade associations.

USTR can operate as a small elite agency precisely because of the
extensive support it receives from the other trade agencies. This support
can be characterized as falling into three main categories of assistance:

o Participation in the interagency process-As other trade agencies
participate in the interagency trade process, their staff contribute to
the work of the Trade Policy Staff Committee and its approximately 90
subcommittees. These staff assist in trade policy development in their
areas of expertise. When USTR forms trade negotiating teams, the USTR
negotiating lead generally draws the team largely from this core group

of experts and supplements with others, as necessary. Generally, even
though USTR has the lead, its staff are a small minority, averaging about
24 percent of the total delegation staff.11

o Technical assistance-USTR receives extensive technical assistance from
subject experts at the other agencies through formal and informal requests
for information. For instance, U.S. International Trade Commission staff
may provide data analyses on the impact of tariff reductions or
eliminations in prospective free trade agreements. USDA Foreign
Agricultural Service staff may provide commodity expertise on issues
related to Brazilian cotton or Japanese beef, or Health and Human Services
staff may provide information on pharmaceutical pricing.

o Detailees - USTR also benefits from temporary staff on detail from other
agencies that continue to pay their salaries; USTR provides office space
and travel expenses. This is an important avenue for supplementing USTR's
core staff with specific subject expertise on a temporary basis. For
example, as of July 5, 2005, USTR supplemented its core staff of 206
permanent employees with 26 detailees in its Washington, D.C., office and
9 in its Geneva, Switzerland, office.

This extensive assistance underlies USTR's ability to operate as a
networked organization. USTR officials stressed that it would not make
sense to try to duplicate this expertise within USTR and is unnecessary
because they can tap governmentwide expertise, when needed, without
bringing on staff they might not need permanently. USTR only adds core
staff for the most critical, long-term issues. For example, USTR added
intellectual property rights staff when it became clear it was a long-term
issue important to U.S. industry, according to a senior USTR official. In
addition, USTR also added staff with expertise on labor issues in recent
years.

However, USTR does not formally discuss or plan human capital resources at
the interagency level, even though it must depend on the availability of
these critical resources to achieve its mission, according to USTR
officials. Interagency discussions focus on the substance of trade policy;
USTR does not formally discuss or plan the resources needed to implement
policies. In two recent reports, we have addressed the need for USTR to
conduct interagency resource planning related to specific trade issues, 
making specific recommendations for improvements.12 Such interagency
resource planning would also facilitate human capital planning by the
other agencies that work with USTR. For example, USTR undertakes resource
planning when forming actual trade negotiating teams rather than at times
when this would contribute to agency resource planning. USTR officials
told us that their view is that when agencies reach formal TPRG agreement
on a trade policy or trade agreement, it carries a commitment by the
agencies to provide resources. In addition, they said that assisting USTR
is a part of the other trade agencies' missions to support the U.S.
government trade agenda. While officials we interviewed at other agencies
generally agreed with this perspective, some of them also said that
potential budget cuts could result in fewer resources being available for
USTR. For example, officials at the Foreign Agricultural Service expressed
concern that the expanding trade agenda has been a strain on its
resources, and it was facing serious budget cuts. As a result, since USTR
does not provide the other agencies with specific resource requirements
when the agencies are performing their planning, it is shifting the risk
to the agencies of having to later ensure the availability of staff in
support of the trade agenda, potentially straining their ability to
achieve other agency missions.

A fundamental principle of strategic human capital management is that
high-performing organizations manage risk based on strategic planning
supported by reliable and current information. One result of USTR's lack
of strategic planning for these critical interagency resources is that it
does not have a systematic method to account for potential changes in
other agencies' resources that might impact its ability to achieve its
mission. The absence of this method also affects the other agencies'
ability to account for changes that could affect their ability to provide
resources to support the trade agenda.

USTR Is Not Conducting Ongoing Strategic Human Capital Planning

USTR's human capital planning efforts have been focused primarily on
short-term responses to trade negotiating needs; it has not conducted
ongoing long-term analyses of its workforce needs. USTR conducts human
capital planning primarily in its centrally administered annual budget
process that looks forward 2 fiscal years. For instance, in the summer of
2005, USTR planned needed adjustments for the fiscal year 2006 budget and
made projections for fiscal year 2007. The organization plans the
resources-including staff or funding for travel-it will need for specific
trade activities in that time frame, whether free trade agreement
negotiations, WTO meetings, or trade conferences.

USTR Conducts Short-Term Planning through Its Budget Process

Each summer the USTR budget office sends a budget call to the negotiation
offices and requests a time table of expected expenditures, such as
negotiations rounds. Support offices review negotiation office estimates
and complete their own estimates, accordingly. The USTR budget office uses
the office-level information to compile a total budget estimate and set
the level of staffing and other budgetary allowances across the agency.
For instance, when the CAFTA negotiations were launched, the Assistant
USTR for the Americas-whose office had the lead responsibility for the
negotiations-estimated what additional staff might be needed, how many
rounds of negotiations might take place over the next 2 fiscal years, and
how much money would be needed for travel, translations, conferences, or
other needed expenses. She also indicated the assistance her office would
likely need from other functional offices (such as Agricultural Affairs or
Services, Investment, and Intellectual Property) and from staff offices
(such as General Counsel or Economic Affairs). In turn, these functional
and staff offices could then also factor this information, as well as the
requests for assistance from the other geographic offices, into their own
office planning. In addition, the budget office also monitors the need for
resources throughout the year through its mid-year adjustment reviews,
generally in the form of monthly resource checks and quarterly revised
budget calls.

USTR Does Not Conduct Ongoing Strategic Workforce Planning

While USTR uses its annual budget planning process to meet its short-term
human capital needs, it has not conducted ongoing parallel efforts to
analyze the organization's longer term workforce needs. Although USTR's
human capital planning is directly linked to the organization's mission
and objectives in the budget process, this is essentially a short-term
tactical process to meet immediate needs. USTR does not conduct ongoing
strategic planning or routinely analyze the organization's longer term
workforce needs, for example, such as routinely reviewing eligibility for
retirement of senior staff and conducting formal succession planning, as
discussed above, so that it ensures the organization's continued capacity
to achieve its mission. USTR also does not conduct ongoing analysis of
workforce composition and skills. (For information related to USTR's staff
profile, see app. II.) While USTR conducted a workforce analysis required
by OMB of all executive branch agencies in mid-2001, which incorporated
many of these elements, it has not followed up on this analysis in a
systematic, ongoing manner, or used it as the basis for strategic
workforce planning.

In addition, USTR management does not maintain the kind of up-to-date
information on available staff and future human capital needs that would
be necessary in conducting effective strategic workforce planning. USTR's
personnel data files are maintained in EOP's Office of Administration;
USTR itself maintains little human capital data. USTR's Office of
Administration did not have the internal human capital information
available that would be required for workforce analyses. For instance, it
did not have a personnel roster associated with information such as
employees' retirement eligibility or their specific knowledge and skills,
such as language ability.

USTR officials said that USTR is such a small organization that managers
know the professional and skill backgrounds of the staff, therefore such a
data system would not be needed. This means that, rather than establishing
information systems, institutional knowledge at USTR depends on
individuals. However, as we have previously reported, it is crucial that
human capital leadership and planning be based on a data-driven
decision-making process. The absence of such data can seriously undermine
efforts to identify and respond to current and emerging human capital
challenges, particularly in a small organization where turnover or
unfilled positions could quickly deplete the institutional memory.

USTR Makes Limited Use of Human Capital Tools to Mitigate Risk of
Workforce Challenges

USTR does not make full use of available human capital tools, despite
facing recruitment and retention challenges; and it does not link most
employees' performance standards with organizational needs. While USTR can
generally recruit staff with requisite skills, competitive pressures and
postemployment restrictions on foreign representation could place
limitations on USTR's ability to hire from the private sector. More use of
available human capital flexibilities could help to better ensure
consistent success in recruitment and retention. In addition, USTR risks
inconsistent attainment of its strategic goals if it does not link
individual performance expectations to its needs.

USTR Uses Some Human Capital Tools but Could Benefit from Adding Others

USTR faces risks from recruitment and retention challenges, which in turn
could hamper its interagency leadership role. USTR addresses these risks
in part through limited use of human capital flexibilities, and USTR
office managers said they do not have difficulties recruiting needed
staff. However, senior managers said that the recruitment environment for
staff with critical skills needed for USTR's interagency leadership role,
such as trade attorneys, is becoming more competitive. Not only can people
with these skills find higher-paying positions outside the federal
government, they also face restrictions on representing foreign clients
after service with USTR, according to senior managers. USTR often seeks
interagency trade experts for recruitment, according to USTR and other
trade agency management.13 Other trade agency officials have confirmed
that USTR targets their high-performing staff and that several current
USTR employees were hired from their agencies. However, USTR has benefited
from the hiring flexibility to hire private sector attorneys at a
"higher-than- minimum step," which, according to a senior manager in
USTR's Office of General Counsel, helps attract experienced private sector
attorneys who may be reluctant to start federal service at the minimum pay
step. USTR also uses its authority to hire and pay administratively
determined positions without regard to the civil service laws, but this
authority restricts the agency to 20 such positions.14

USTR does not take advantage of other available human capital
flexibilities, most of which are expanded and more targeted versions of
those it now uses. As we have previously reported, hiring flexibilities
could help agencies in expediting and controlling their hiring
processes.15 Moreover, insufficient and ineffective use of flexibilities
can significantly hinder the ability of federal agencies to recruit, hire,
retain, and manage their human capital.16 Examples of expanded human
capital flexibilities for which USTR has authority, but does not use,
include the following:

o Expanded direct hire authority, which would streamline hiring for
critical needs, such as trade experts;

o Recruitment and retention authorities, both of which would allow USTR to
offer bonuses of 25 to 50 percent for new hires and highly qualified
employees; and

o Enhanced annual leave authority, which would allow nonfederal staff,
such as private sector attorneys, to enter federal service with
higher-than-minimum annual leave rates.

See appendix III for a more detailed description of federal human capital
flexibilities available to USTR.

Closely aligned with USTR's recruiting efforts is how well it can retain
staff, but USTR's efforts to minimize its retention risks have also been
limited. Retention concerns are especially relevant given that, according
to senior officials, USTR employees have highly marketable skills. In
addition, USTR staff have an important role in leading and coordinating
the interagency trade policy process. To illustrate the potential for
retention risks, from March 2000 through March 2005, 158 USTR employees
separated from the agency, according to our calculations of EOP data.17
USTR has also experienced turnover among its recently hired staff during
this time period. For instance, 25 professional staff (defined in this
report as GS-13 through SES staff) hired in the last 5 years have already
left USTR. While USTR is in the process of taking steps to increase
compensation for senior executives to help keep pay competitive, which
would allow for bonuses of 5 to 20 percent, officials could not provide a
specific time frame for implementation. In addition, a senior USTR
official told us that the loss of senior GS-level trade experts can create
a loss of institutional knowledge. According to a Commerce official,
familiarity with the details of negotiated agreements is critical for
subsequent enforcement of trade agreements. Finally, USTR has had
challenges retaining security administrators (e.g., three of five hired in
the past 5 years have left).18

USTR Does Not Link All Staff Performance Appraisals to Agency Goals

USTR does not link the performance of most of its staff to agencywide
goals, risking the loss of consistency in its implementation of agency
goals, even though USTR's small size and leadership role mean that all
employees have a critical role in maintaining the agency's trade policy
coordination mission. Only SES staff, making up just over 10 percent of
USTR employees, are subject to agencywide performance competencies. In
addition, attorneys in the Office of General Counsel and its Monitoring
and Enforcement Unit have performance competencies that are linked to
agency goals, accounting for another 12 percent of staff. USTR managers
have stressed the importance of certain individual skills needed to
advance USTR's mission, such as the ability to effectively interact within
the interagency trade policy framework. However, USTR employees not
subject to agencywide standards are instead held accountable for a range
of expectations that vary among USTR offices according to specific
assignments. As we have previously reported,19 linking performance
expectations to organizational goals is important because strategic goals
should guide job responsibilities. In this way, an agency can ensure that
staff performance supports agency goals. Moreover, high-performing
organizations use their performance management systems to help provide
continuity during transition by maintaining a consistent focus on a broad
set of mission priorities. In USTR's case, without a performance
management system that ties individual performance to USTR's goals, it
does not have a mechanism to translate its strategic goals into individual
performance. Without agencywide goals, USTR is at risk of having its
mission guided by office-level goals, which would not be conducive to
meeting agency goals, given that USTR has over 15 separate mission-related
offices. In addition, USTR could help mitigate the potentially disruptive
effects of periodic management transitions, such as it experienced this
year, with a concrete set of performance expectations that guide staff
performance throughout such periods and ensure consistency in mission
priorities.

Conclusions

USTR needs to place more emphasis on strategic human capital principles,
otherwise it leaves itself open to human capital risks that could
otherwise be mitigated. While USTR often cites its small size as a reason
it can afford to sidestep requirements that are often applied to larger
bureaucracies, in the case of human capital management, it is precisely
because every individual is important that effective human capital
leadership is critical. Yet our review has found that USTR is focused on
achieving trade results but has overlooked the substantial additional
value it could gain from strategic human capital management. For example,
without a senior manager acting as its chief human capital officer, USTR
cannot ensure that critical human capital leadership tasks, such as
succession planning, are accomplished in a way that maximizes USTR's
ability to achieve its mission with minimal risk of interagency disruption
due to management transitions. Given the number of SES staff who will be
eligible to retire within the next 5 years, it is important that USTR
address these issues strategically rather than reactively. Further,
although USTR seems to be making effective use of its networked structure
to marshal the relevant expertise across the government in support of the
trade agenda, it has not taken additional steps to mitigate the risk
inherent in its dependency on interagency resources. Without a method to
plan interagency resources devoted to the trade agenda, USTR has no way to
account for potential changes in other agencies' resources. Given the
prospect of a tightening federal budget environment, lack of a formal
interagency resource planning method means USTR is in no position to
evaluate how budget reductions could impact USTR's ability to achieve its
mission. In addition, USTR has not conducted ongoing strategic human
capital planning for its own longer-term organizational workforce needs
and does not maintain the information systems required for such analysis.
While USTR primarily uses its 2-year budget planning process to focus its
human capital planning efforts, this approach limits it to planning how it
can best achieve its trade mission with the resources available to it in
the short term. USTR has not taken steps to strategically identify and
respond to current and emerging human capital risks in its workforce. As a
result, by not conducting ongoing strategic workforce planning, USTR is
opening itself up to human capital risks that it could be taking steps to
mitigate.

USTR could also better meet some of its key workforce challenges by making
better use of available human capital tools. In an increasingly
competitive recruitment environment, USTR could benefit from using the
additional hiring and pay flexibilities available to it. In addition, USTR
has not ensured that its performance standards support its organizational
goals by extending agencywide performance criteria to its entire staff. As
a result, USTR is missing an opportunity to translate its strategic goals
into individual performance.

Recommendations for Executive Action

To improve USTR's human capital management, we recommend that the U.S.
Trade Representative develop a strategic human capital management system.
The system should include the following elements, tailored to its small
size and unique role:

o filling its senior human capital management positions with human capital
professionals who will significantly contribute to strategic planning and
decision making,

o developing an interagency resource planning method with appropriate
participation from key agency stakeholders,

o undertaking strategic workforce planning in order to optimize its
workforce's continued capacity to achieve its mission,

o improving its ability to utilize data for measuring the effectiveness of
human capital approaches in support of its mission and goals,

o determining if additional use of available pay and hiring flexibilities
would better position USTR to hire and retain experts, and

o developing agencywide performance criteria for staff to align management
expectations with critical organizational goals.

Agency Comments and Our Evaluation

We provided a draft of this report to USTR; the Departments of
Agriculture, Commerce, and State; and the U.S. International Trade
Commission. USTR provided written comments, which are reproduced in
appendix IV. The other agencies did not provide comments.

USTR stated that the insights provided by our study were a valuable
contribution to its ongoing internal efforts to effectively manage its
human capital. USTR said it shared our general observations and
recommendations regarding the critical role of human capital planning.
USTR also noted that it (1) has recently hired a new Assistant U.S. Trade
Representative for Administration, (2) will examine the additional human
capital flexibilities available to it, and (3) is committed to linking
performance evaluations to its strategic planning.

USTR stated that it believed we had not adequately factored into our
analysis how it had tailored its human capital planning to its size and
networked organizational structure. While we have modified our report
language in several places to clarify our discussion of USTR's human
capital planning, we do not agree, however, that USTR's human capital
planning activities, which primarily focus on meeting short-term
negotiating needs, have to this point demonstrated a commitment to
long-term strategic human capital planning.

USTR also stated that our report suggests that it should extend its
interagency coordinating role to formally overseeing the human capital
planning activities of these agencies. Our recommendation that USTR
develop an interagency resource planning method with appropriate
participation from key agency stakeholders is not intended to suggest that
USTR should formally oversee the human capital planning activities of the
agencies involved, but rather envisions an extension of USTR's interagency
coordination role to better anticipate and plan resource needs devoted to
the U.S. trade agenda. This recommendation is consistent with several of
our recent reports.

USTR also provided technical comments, which we have incorporated where
appropriate.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
the date of its issuance. At that time, we will send copies of this report
to appropriate congressional committees. We will also send copies to the
U.S. Trade Representative, the Secretaries of Agriculture, Commerce, and
State, and the Chairman of the U.S. International Trade Commission. We
will also make copies available to others upon request. In addition, this
report will be available at no charge on the GAO Web site at
http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-4347 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
listed in appendix V.

Sincerely yours,

Loren Yager Director, International Affairs and Trade

Objectives, Scope, and Methodology Appendix I

To determine whether the Office of the U.S. Trade Representative (USTR) is
pursuing an effective human capital strategy that adequately supports the
ability of its workforce to accomplish its mission, we reviewed its human
capital planning and implementation efforts and compared them with U.S.
government best practices. We used our Model of Strategic Human Capital
Management as the framework in assessing USTR's human capital efforts.
Specifically, we (1) reviewed USTR's commitment to strategic human capital
leadership and planning and (2) analyzed to what extent USTR has used
human capital tools to address its workforce challenges.

To determine USTR's commitment to strategic human capital leadership and
planning, we reviewed USTR's available human capital planning documents,
including annual performance planning required by the Government
Performance Results Act for the past 5 years, the most recent annual USTR
budget call, and agency budget justifications for the past 5 years. We
also reviewed Office of Personnel Management (OPM) and Office of
Management and Budget (OMB) human capital guidance and our previous human
capital reports to determine how government best practices could be best
applied to USTR. We augmented our documentation review with interviews
with USTR human resources staff, office managers, and senior management at
the Washington, D.C., and Geneva, Switzerland, offices. We spoke with the
Geneva senior manager by telephone. We further discussed interagency
planning and commitment of resources with officials of four trade
agencies: the Departments of State, Commerce, and Agriculture, as well as
the U.S. International Trade Commission (ITC).

To determine to what extent USTR has used human capital tools to address
its workforce challenges, we obtained USTR human capital data from the
Executive Office of the President (EOP) for key human capital trends, such
as retirement eligibility, time in service, and dates of separation. We
also reviewed these data for certain routine human capital categories to
better understand the agency's overall staff profile, such as office level
and aggregate staffing levels, grade levels, and occupation types.
Finally, we used these data to determine the extent to which USTR fills
its job announcements, as well as the number of staff who received
training. We tested USTR data for reliability by comparing them with OPM
data from the central personnel data file and with USTR organizational
documents. We determined that these data were sufficiently reliable for
the purposes of this report. We used USTR's pending senior executive
service (SES) performance management guidance as part of our review of the
agency's efforts to address performance management. Along with the data
review, we interviewed office managers and senior management officials at
USTR to determine the workforce challenges they faced and how they were
addressing those challenges. We also met with officials from the
Departments of State, Commerce, Agriculture, and ITC, as well as with
trade association representatives and former USTR officials, to get their
perspectives on USTR's workforce challenges. Finally, to determine which
human capital flexibilities USTR was eligible for, and which could benefit
USTR, we reviewed existing human capital statutes. We compared these
statutory authorities with those that USTR currently uses, accounting for
workforce challenges identified through USTR human capital data obtained
from EOP and interviews. We conducted our work from January 2005 to
September 2005 in accordance with generally accepted government auditing
standards.

USTR Staff Profile Appendix II

EOP provided us with recent USTR human capital data. We analyzed data in
the following categories: (1) active staff, by office; (2) agencywide,
full-time equivalent staff (FTE) over recent years; (3) grades; (4)
retirement eligibility; (5) length of service; (6) occupations;1 (7)
active detailees; (8) position announcement fill rates; and (9) training.2

These data spanned 5 years, from January 2000 to April 2005, with the
exception of detailees, the reliability of which was limited to active
detailees; position announcements, available back to March 2003; and
training data, which USTR could only provide back to May 2001, but up to
June 2005.

Active USTR Staff by Office

As of April 2005,3 USTR had 212 active staff. USTR offices average about 8
staff, but some, such as Administration, have over 20 while others, such
South Asia, Labor, and Trade Capacity, have 2 staff each. SES or political
appointees head most offices. Exceptions include one office that is headed
by a staff member under special hiring authority and another office headed
by a staff member at the GS-15 level. The South Asia and the Europe and
Mediterranean offices are both currently headed by temporary detailees.

Table 1: Active USTR Staff by Office

                                        

                           Office                                Active staff 
Office of the Ambassador                                                 4 
Deputiesa                                                                7 
Geneva                                                                  13 
Chief Agriculture Negotiator                                             2 
Administration                                                          21 
Agriculture                                                              8 
Africa                                                                   6 
China Affairs                                                            9 
Congressional Affairs                                                    3 
Economic Affairs                                                         4 
Environment and Natural Resources                                        7 
Europe and Mediterranean                                                11 
General Counsel                                                         13 
Monitoring and Enforcementb                                             17 
Industry, Market Access, and Telecommunications                         12 
Intergovernmental Affairs and Public Liaison                             4 
Japan, Korea, and APECc                                                  6 
Labor                                                                    2 
Policy Coordination and Information                                      5 
Public Media Affairs                                                     3 
SE Asia and the Pacific                                                  5 
Services, Investment, and Intellectual Propertyd                        16 
Special Textile Negotiator                                               4 
South Asia Affairs                                                       2 
The Americas                                                            13 
Trade Capacity Building                                                  2 
WTO and Multilateral Affairs                                            13 
Total                                                                  212 

Source: GAO analysis of EOP data.

Note: Active staff as of April 2005, not including temporary detailees
from other agencies.

aDeputies includes both Washington, D.C.-based deputy offices.

bThe Monitoring and Enforcement Unit is part of the Office of General
Counsel.

cAPEC is Asia-Pacific Economic Cooperation.

dSince we received these data, the Services, Investment, and Intellectual
Property office has been reorganized into a Services office and an
Intellectual Property office, both headed by GS-15 level staff acting as
office heads.

USTR Agencywide FTEs in Recent Years

USTR's use of FTEs has been guided by the number Congress has authorized.4
USTR's FTE authorization has increased over the past 5 years, from 185 in
fiscal year 2000 to 225 in fiscal years 2004 and 2005. In those years,
USTR has actually used 171 FTEs in fiscal year 2000 and 212 FTEs by fiscal
year 2005, as shown in figure 3. While there was a slight decrease in FTEs
used between fiscal years 2001 and 2002, the number of FTEs USTR has used
has risen steadily, along with its authorization. However, as of the
middle of fiscal year 2005, the number of FTEs used has not changed
significantly from fiscal year 2004.

Figure 3: USTR FTEs Authorized and Actual, Fiscal Year 2000 through First
Half of Fiscal Year 2005

Note: Actual FTEs are 4th quarter data except for fiscal year 2005, which
are 2nd quarter data.

Grades

USTR's interagency leadership role is evident in its high number of middle
and senior grade levels. About half of USTR career staff are at the GS-15
level,5 about one-sixth are GS-13 and GS-14 levels, and slightly over
one-tenth are SES level. Another fifth of USTR personnel are GS-12 and
below, which are primarily support staff.

Figure 4: Number of USTR Staff by Grade Level

Note: Does not include 13 special employees, including presidential
appointees or student employees and those classified under special hiring
authority.

Retirement Eligibility

About 18 percent of all USTR staff are eligible for retirement within the
next 5 years. Within individual grades, political appointees and SES have
the highest percent of staff who are eligible for retirement. Among other
grades, the GS-15 level, made up mostly of trade analysts and attorneys,
make up the bulk of USTR staff and have one of the lowest percent of staff
eligible for retirement within the next 5 years or less. (See fig. 5.)

Figure 5: Percent of USTR Staff Eligible for Retirement in 5 Years or Less

Note: Does not show political appointees or those classified under special
hiring authority.

Length of Service

The median length of agency service at USTR for active staff is just under
4 years. About 30 percent of active staff have been at the agency for less
than 2 years. However, given USTR's interagency ties, some USTR staff have
longer experience within the interagency structure through service with
other trade agencies.

Occupations

According to information from OPM's central personnel data file, most USTR
FTEs are classified as miscellaneous administration and program
occupation. This particular occupation reflects the overall FTE gains at
USTR in the past 5 years. However, certain occupations, such as
economists, attorneys, and support staff, illustrate different trends. For
instance, in the past 10 years, the number of attorneys has increased
substantially, from 18 to 45, or 150 percent, as USTR has added attorneys
to address an increased litigation caseload (see fig. 6). However, during
that same time period, the number of economists decreased from 46 to 17, a
decrease of about 63 percent. From fiscal year 2000 through 2004, support
occupations such as clerks and secretaries also decreased. USTR officials
told us that as agency functions have become more automated, the need for
previous numbers of support staff decreased.

Figure 6: USTR Staff Occupation Comparison, Attorneys and Economists

Active Detailees

USTR had 30 active temporary detailees from other trade agencies, as of
April 2005.6 USTR has a formal detailee program with the Department of
State, and less formal agreements with other trade agencies, such as the
U.S. International Trade Commission, Agriculture, and Commerce. However,
USTR also currently uses temporary detailees from a variety of other
agencies and entities, including the Congressional Research Service, the
Central Intelligence Agency, the Small Business Administration, and the
White House.

Out of the 30 temporary detailees assigned to USTR, most began service in
2004, as shown in figure 7. However, several current detailees were
assigned to USTR before 2003, and 1 active detailee, from USDA, has been
at the USTR Washington, D.C., office longer than 5 years, according to
data from EOP.

Figure 7: USTR Active Detailees, by Year Detail Started

Notes: As of April 2005; includes 7 detailees assigned to Geneva, 4 of
whom started in 2002 or before.

USTR Job Announcements

Most job announcements that USTR has advertised in recent years have been
filled, according to EOP data. Of 79 USTR announcements EOP posted from
October 2002 through March 2005, 45 announcements, or 57 percent, were
filled. Of the job announcements USTR did not fill, most were trade
analysts or support staff and Information Technology positions, but three
unfilled positions were attorney slots, and four were budget or human
resources positions. USTR did not fill one senior human capital position,
Assistant USTR for Administration, in Spring 2004, and that position
remains unfilled as of October 1, 2005.

A USTR human resources official told us that the reason the agency does
not fill certain announcements may vary. For instance, the agency may
decide to pull announcements before they are filled, announcements may not
receive qualified applications, or job offers may not be accepted. If a
job announcement was not filled, USTR might post it again under a separate
announcement. As a result, according to the USTR human resources official,
USTR's data did not allow us to identify that multiple announcements had
been made for a specific job and to link them to the position being filled
on a specific date.

Training

USTR employees do not receive very much formal training. In a 4-year
period from May 2001 to June 2005, 51 USTR staff took part in 76 training
courses, according to USTR human resource data. A little over 80 percent
of the courses USTR staff received were mission related; the rest were for
personal enrichment, such as retirement seminars. Most staff who received
training were GS-12 and under, and GS-15 levels. USTR staff from the
offices of Administration, Americas, Agriculture Affairs, and Environment
and Natural Resources received the most mission-related training over the
4-year period, while staff from other offices, such as Services,
Investment, and Intellectual Property, South East Asia and the Pacific,
and Europe and Mediterranean, received no mission-related training.

Human Capital Flexibilities Available to USTR Appendix III

USTR is eligible to use a variety of human capital flexibilities to
address its risk of future workforce challenges. Tables 2 and 3 show
specific authorities that USTR is eligible to use that could address its
recruitment and retention challenges.

Table 2: Flexibilities Available to USTR that Could Address Recruitment
Risks

                                        

      Authority      Statutory basis  OPM regulations       Description       
                                                       Authority to directly  
                                                       hire employees         
                    Homeland Security                  (without using the     
                    Act of 2002 [P.L.                  competitive service    
Direct Hire      107-296, S:       5 C.F.R. S:S:    process) for positions 
Authority        1312]. Found at 5 337.201-337.206. for which OPM has      
                    U.S.C. S:                          determined there is a  
                    3304(a)(3).                        critical hiring need   
                                                       or a severe shortage   
                                                       of candidates.         
                                                       Expanded authority to  
                                                       pay bonuses to a new   
                                                       hire or a current      
                                                       employee moving to a   
                                                       new position or        
                    Federal Workforce                  geographic location of 
Recruitment and  Flexibility Act                    up to 25 percent of    
Relocation Bonus of 2004 [P.L.     70 F.R. 25732    base pay multiplied by 
Authority        108-411, S: 101]. (Interim rule).  the years the employee 
                    Found at 5 U.S.C.                  has agreed to serve in 
                    S: 5753                            a written service      
                                                       agreement. OPM may     
                                                       authorize up to 50     
                                                       percent of base pay if 
                                                       there is a critical    
                                                       agency need.           
                                                       Authority to credit    
                    Federal Workforce                  relevant nonfederal    
                    Flexibility Act                    service for purposes   
Enhanced Annual  of 2004 [P.L.     70 F.R. 22245    of determining annual  
Leave Authority  108-411, S: 202]. (Interim rule).  leave accrual rates if 
                    Found at 5 U.S.C.                  an agency determines   
                    S: 6303(e).                        it is necessary for    
                                                       its mission or a       
                                                       performance goal.      

Source: GAO analysis of human capital statute.

Table 3: Flexibilities Available to USTR that Could Address Retention
Risks

                                        

      Authority      Statutory basis   OPM regulations       Description      
                                                        Expanded authority to 
                                                        pay bonuses to        
                                                        employees with        
                                                        unusually high or     
                                                        unique qualifications 
                                                        or to a group of      
                                                        employees if there is 
                    Federal Workforce                   a high risk that a    
                    Flexibility Act                     significant portion   
Retention Bonus  of 2004 [P.L.     70 F.R. 25732     would likely leave.   
Authority        108-411, S: 101]. (Interim rule).   The bonus may be up   
                    Found at 5 U.S.C.                   to 25 percent of      
                    S: 5754.                            basic pay (50 percent 
                                                        for a critical agency 
                                                        need with OPM         
                                                        approval) or 10       
                                                        percent for a group   
                                                        of employees and is   
                                                        subject to a written  
                                                        service agreement.    
                                                        Increased maximum     
                                                        rate of base pay for  
                                                        the SES to Executive  
                                                        Schedule Level II and 
                    Homeland Security                   increased cap on      
                    Act of 2002 [P.L.                   total annual          
                    107-296, S:                         compensation (base    
Senior Executive 1322]; FY04       5 C.F.R. S:S:     salary plus bonuses,  
Service          Defense           430.401-430.405,  awards, etc.) to the  
Compensation     Authorization Act 530.203, 534.403. Vice President's      
Increasea        [P.L. 108-136, S:                   salary for agencies   
                    1125]. Found at 5                   certified by OPM and  
                    U.S.C. S:S:                         OMB as having a       
                    5307(d), 5382(b).                   performance appraisal 
                                                        system which makes    
                                                        meaningful            
                                                        distinctions based on 
                                                        relative performance. 

Source: GAO analysis of human capital statute.

aUSTR officials told us they are planning to eventually implement this
flexibility, but they do not have a specific time frame.

Comments from the Office of the U.S. Trade Representative Appendix IV

The following are GAO's comments on USTR's letter dated November 10, 2005.

GAO Comments

1.We agree that human capital planning must be tailored to the mission and
characteristics of each agency and, in fact, had stressed this critical
idea at several points in the report, including the recommendations. We
acknowledge the steps USTR has taken in its human capital planning and
have added clarifications where appropriate to further reflect USTR's
human capital planning activities and actions. However, we do not believe
that these steps demonstrate a commitment to long-term strategic human
capital planning. USTR's human capital planning focuses primarily on
short-term responses to trade negotiating needs identified through the
budget process, such as shifting staff and resources to meet the increased
needs associated with particular trade negotiations. This kind of
planning, while valuable, is not the same as strategic, ongoing analysis
and planning for long-term agencywide workforce needs, such as retirement
eligibility of senior staff or changing workforce composition and skills
needs. Further, while at the conclusion of our study USTR provided us with
a 5-year workforce analysis it had been required to conduct in 2001 by
OMB, it was not able to show us that it had used this analysis in an
ongoing manner as the basis of strategic workforce planning.

2.Our recommendation to USTR to conduct formal interagency resource
planning is consistent with several of our recent reports that came to the
same basic conclusion. We do not state that USTR should formally oversee
the human capital planning activities of the agencies involved. Rather, we
said that USTR should mitigate the risks inherent in its dependency on
interagency resources by developing an interagency resource planning
method with appropriate participation from key agency stakeholders. This
would envision an extension of USTR's coordination role, not increased
oversight over agency human capital planning activities.

GAO Contact and Staff Acknowledgments Appendix V

Loren Yager, (202) 512-4347

In addition, Anthony Moran, Assistant Director; as well as Leyla Kazaz;
Donald Morrison; and Paul Revesz made key contributions to this report.
Other contributors include Martin DeAlteriis, William Doherty, Etana
Finkler, Ernie Jackson, Jeffrey McDermott, Jamie McDonald, Lisa Shames,
Sarah Veale, Michael Volpe, and Gregory Wilmoth.

(320304)

www.gao.gov/cgi-bin/getrpt?GAO-06-167.

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact Loren Yager, 202-512-4347, [email protected].

Highlights of GAO-06-167, a report to the Chairman, Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Homeland Security and Governmental
Affairs, U.S. Senate

December 2005

INTERNATIONAL TRADE

USTR Would Benefit from Greater Use of Strategic Human Capital Management
Principles

The Office of the U.S. Trade Representative (USTR) has a unique role in
coordinating trade policy, resolving disagreements, and framing issues for
presidential decision through an interagency trade policy process. In
recent years, USTR's increased workload from numerous new regional and
bilateral free trade agreement negotiations and a new round of
multilateral negotiations at the World Trade Organization has raised
concerns about its human capital strategy.

GAO examined whether USTR is pursuing an effective human capital strategy
that supports the ability of its workforce to accomplish its mission.
Specifically, GAO (1) reviewed USTR's commitment to strategic human
capital leadership and planning and (2) analyzed to what extent USTR has
used human capital tools to address its workforce challenges.

What GAO Recommends

GAO recommends that the U.S. Trade Representative develop a strategic
human capital management system addressing the areas of strategic human
capital leadership, planning, recruitment and retention, and performance
management. USTR said it shared our general observations and
recommendations regarding the critical importance of human capital
planning, but believes it is sufficiently performing these functions.
Other agencies did not provide comments.

USTR could benefit from greater use of strategic human capital management
principles in leadership and planning, considering that its small size and
interagency trade leadership and coordination role give it a unique
responsibility to lead the trade agenda. First, USTR has not sustained the
leadership resources for human capital; for example, the top human capital
management post has not been filled for over 1 1/2 years. Second, USTR has
not undertaken formal strategic human capital planning to mitigate the
risks inherent in its dependency-as a "networked organization"-on
interagency resources to achieve its mission. Therefore, it does not have
a method to account for changes in other agencies' resources that might
impact its ability to achieve its mission. Third, USTR has focused its
human capital planning efforts primarily on short-term responses to trade
negotiating needs identified in its 2-year budget planning process; it has
not conducted ongoing parallel efforts to analyze longer-term workforce
needs.

USTR's efforts to address its specific workforce challenges could benefit
from greater use of human capital tools. First, USTR could use more of the
existing federal human capital flexibilities to better tailor its human
capital approaches to organizational needs. Although the agency has used
and benefited from some special hiring and pay authorities, such as the
use of higher-than-minimum salary offers, it has yet to take advantage of
others, such as retention bonuses. Second, while USTR prides itself on
being a results-oriented agency, most USTR staff are not subject to
agencywide performance expectations linked to organizational goals. While
managers have stressed the importance of certain individual skills needed
to advance USTR's mission, most staff are held accountable to a range of
expectations that vary among offices.

USTR Leads the Interagency Trade Policy Process

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