Human Capital: Agencies Are Using Buyouts and Early Outs with
Increasing Frequency to Help Reshape Their Workforces (31-MAR-06,
GAO-06-324).
Under the Chief Human Capital Officers (CHCO) Act of 2002, an
agency may request authority from the Office of Personnel
Management (OPM) to offer employees voluntary separation
incentive payments (buyouts) and voluntary early retirement
(early outs) to help reshape its workforce. GAO was asked to
identify (1) how many agencies have been granted authority to
offer buyouts and early outs and how often agencies used them,
(2) how agencies view OPM's role in facilitating the use of these
tools, (3) how agencies have used practices associated with
effective use of the tools, and (4) what challenges agencies
identified, if any, to continued effective use. To respond, GAO
reviewed the practices of the Departments of Agriculture,
Commerce, Energy, Health and Human Services, Interior, and the
Treasury because they were among the most frequent users of these
authorities.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-324
ACCNO: A50541
TITLE: Human Capital: Agencies Are Using Buyouts and Early Outs
with Increasing Frequency to Help Reshape Their Workforces
DATE: 03/31/2006
SUBJECT: Early retirement
Employee buyouts
Federal agencies
Strategic planning
Personnel management
Labor force
Federal employees
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GAO-06-324
* Report to Congressional Requesters
* March 2006
* HUMAN CAPITAL
* Agencies Are Using Buyouts and Early Outs with Increasing
Frequency to Help Reshape Their Workforces
* Contents
* Results in Brief
* Background
* Almost Half of All Agencies Have Used Buyout and Early-out
Programs to Reshape Their Workforces and the Number of Programs
Has Increased
* Total Number of Agencies Using These Authorities and Number
of Programs They Offered Has Increased Each Year
* Agencies Are Offering Combined Buyout and Early-out Programs
* Eight Agencies Are Major Users of the Authorities
* The Selected Agencies in Our Review Believe the Authorities
Have Been Effective Tools in Reshaping Their Workforces
* Agency Officials Responsible for Use of These Authorities Believe
OPM's Review Process Adds Value but in Some Cases Could Be
Quicker and Should Be Streamlined
* The OPM Review Process Assures Compliance with Legislative
Requirements and Provides Help for Agency Officials
Responsible for Use of These Authorities
* OPM and Agency Officials Responsible for Use of These
Authorities Believe Plans Can at Times Be Approved More
Quickly and the Process Can Be Streamlined
* Agencies in Our Review Are Using Most of the Practices Associated
with Effective Use of Buyouts and Early Outs and Have Found Them
Helpful in Achieving Their Reshaping Goals, Though One Practice
May Require Further Attention
* Officials in Agencies We Reviewed Suggested Ways to Make the
Buyout and Early-out Programs More Efficient and Effective
* Conclusions
* Recommendations for Executive Action
* Agency Comments and Our Evaluation
* Objectives, Scope, and Methodology
* Comments from the Office of Personnel Management
Report to Congressional Requesters
March 2006
HUMAN CAPITAL
Agencies Are Using Buyouts and Early Outs with Increasing Frequency to
Help Reshape Their Workforces
Contents
Tables
Figures
March 31, 2006Letter
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
The Honorable Jon C. Porter Chairman Subcommittee on the Federal Workforce
and Agency Organization Committee on Government Reform House of
Representatives
The federal government's people-its human capital-are a critical element
to meeting the current and emerging challenges of the 21st century,
including responding to natural emergencies and handling the increased
threat of terrorism, as well as maximizing the government's performance.
However, fiscal challenges and competing budget needs put pressure on
agencies to make trade-offs and difficult decisions regarding how to
invest in their human capital. In the past, agencies have often responded
to such financial challenges by using reductions-in-force (RIFs) to their
workforces to meet their budget limitations. This has caused a loss of
institutional memory and a backlog of work, among other problems. As a
result, agencies subsequently reported that such mandatory downsizing has
hindered them from carrying out their missions.1
Agency RIFs are not, however, the only-and often are not the best-means of
addressing reduced agency resources or changing the skill profile of the
workforce to address 21st century challenges. Agencies may use a variety
of approaches to reshape their workforce to achieve their mission results
with greater economy, efficiency, and effectiveness. Such approaches may
include merging departments or functions, redeploying people to different
organizational units or locations, conducting training or retraining
programs to improve workforce performance, implementing recruiting
programs for needed skills, and reducing the layers within an
organization's hierarchy.
The authorities granted by the Congress in the Chief Human Capital
Officers (CHCO) Act of 2002 provided two additional tools agencies may use
to help them reshape their workforces. Under buyout programs, agencies
offer cash incentives up to $25,000 for employees to voluntarily leave
federal service. The Act does not, however, provide funding for these
authorities. Thus, each agency must bear the cost of the incentives. Under
early-out programs, agencies offer early retirement at reduced annuity
payments to employees age 50 and above with at least 20 years of service
or to employees at any age with at least 25 years of service. An agency
does not face any costs for offering early outs.
For agencies to use these authorities, the Office of Personnel Management
(OPM) must first review agency plans for using these tools and assure that
the plans comply with certain legislative requirements. According to OPM
officials who are involved in reviewing agency programs, their reviews are
intended to ensure that agency plans are complete and are linked to the
accomplishment of the agency's strategic goals. Within OPM, agency plans
are reviewed by a human capital officer familiar with that agency's
operations, and four levels of supervision prior to the Director's
official approval decision. Agencies have multiple opportunities each year
to request authority to offer buyouts, early outs, or both to meet the
specific reshaping goals of any of their components or organizational
units. Agencies can request authority from OPM to offer programs for
either buyouts, early outs, or for both at the same time. However, OPM
cannot approve any buyout or combined buyout and early-out request without
the Office of Management and Budget's (OMB) concurrence, due to the budget
implications for the requesting agency.
To gain a better understanding of the extent to which agencies are using
the buyout and early-out tools authorized by the Act, you asked us to
identify (1) how many agencies have sought and been granted authority to
offer buyouts and early outs, and the extent to which agencies have used
these authorities; (2) how selected agency officials view OPM's role in
facilitating the use of the buyout and early-out authorities; (3) what
practices are associated with agencies' effective use of buyouts and early
outs, how selected agencies used these practices, and whether they have
helped agencies to achieve their workforce reshaping goals; and (4) what
challenges the selected agencies identified, if any, to continued
effective use of these authorities. The agencies we selected were the
Departments of Agriculture (USDA), Commerce (DOC), Energy (DOE), Health
and Human Services (HHS), Interior (DOI), and the Treasury (Treasury),
because we determined from OPM data on agency requests and approvals that
they are the most frequent users of the buyout and early-out authorities.2
The agency selection process was not designed to produce findings that
could be considered representative of the use of these authorities in the
federal government as a whole.
To meet our objectives, we analyzed information from a review of relevant
literature on the use of buyouts and early outs in organizations including
our prior studies of federal buyout programs in 1997 and 1998.3 We
obtained and analyzed governmentwide, excluding the Department of Defense
(DOD), data on agencies' use of buyouts and early outs, and interviewed
officials involved in the approval process from OPM and OMB on their roles
and responsibilities.4 We reviewed a sample of OPM case files for about a
tenth of all the offers made by the six selected agencies for fiscal years
2003 through 2005. While we cannot generalize the results of our file
review to OPM's overall program, the results can help us to illustrate
examples of OPM's review process. We also conferred with officials with
relevant expertise in the management of human resource programs from the
National Academy of Public Administration and the International Public
Management Association on the reasonableness of the effective buyout and
early-out practices we identified. Both of these organizations have
published reports on the effectiveness of these federal human capital
practices. In addition, we interviewed human capital and program officials
from the selected agencies to identify the particular buyout and early-out
practices they were using, how they believe the practices helped them to
achieve their goals, and the lessons learned from their experiences.
Although we provided each of our six selected agencies with OPM's count of
their buyout and early-out authorities to review, we did not independently
verify OPM's governmentwide buyout and early-out data. Our review was
conducted in accordance with generally accepted government auditing
standards from October 2004 through November 2005. Appendix I provides
additional information on our scope and methodology.
Results in Brief
Since November 2002, when the buyout and early-out authorities were
provided, the number of agencies using the authorities significantly
increased and the number of programs5 offered has also significantly
increased. To date, nearly half of the approximately 110 executive branch
agencies have taken advantage of these authorities to help reshape their
workforces, and according to OPM data, at least 22,600 employees separated
from federal service after accepting offers under these authorities during
this timeframe. During fiscal years 2003 through 2005, a total of 51
agencies have been granted authority to offer buyouts or early outs to
employees. This has increased from 28 agencies that were granted these
authorities in fiscal year 2003, the first year they were available.
During these same 3 years, OPM reviewed and approved agency requests for
the authorities to offer buyout and early-out programs a total of 136
times, 176 times, and 179 times, respectively (see fig. 1).
Figure 1: Total Number of Agencies Having Used the Authorities and Total
Number of Buyout and Early-out Programs Offered Since the Authorities Were
Made Available in Fiscal Year 2003
Nearly three-fourths of the authorities OPM approved in fiscal year 2005
were combined buyout and early-out programs. OPM data show that 70 percent
of all agency programs approved that year offered employees the
opportunity to take a buyout and an early retirement at the same time.
According to several agency officials responsible for use of these
authorities, employees are more likely to accept early-out offers when
they are combined with buyouts because the buyout's monetary payment helps
offset the employee's loss in income and reduced annuity payments under an
early-out program. The six agencies examined in our review used these
authorities more frequently than other agencies and believe the
authorities have helped to reshape their respective workforces more
effectively. For example, according to program officials involved with
managing these programs from DOC's National Institute of Standards and
Technology (NIST), the agency used a buyout and early-out program to
achieve a more optimal skills mix in the face of budget cuts and changing
priorities for its research and development, thereby limiting involuntary
staff reductions to a minimal number.
Officials associated with the management of buyout and early-out programs
at the agencies we met with believe OPM's review process adds value, but
could at times also be achieved more quickly and should be streamlined.
The program officials in each of the six agencies believed early OPM
feedback on their individual agency plans to implement buyouts and early
outs was helpful in obtaining final OPM approval. Several reported that
their agency has modified and improved their plans as a result. Managers
at DOE stated that the agency has worked closely with OPM to resolve any
questions in an effort to streamline the process. On the basis of a sample
of 28 programs that we examined at the selected agencies, we found that,
on average, OPM's review took 36 days and ranged from 7 to 88 days.
Agencies want timely reviews so that their programs can be implemented
early in the fiscal year to maximize savings and to give employees enough
time to decide whether to accept or decline the buyout or early out,
better helping to ensure the success of the program. Otherwise, if the
planned numbers of employees do not accept the offers, the agency may have
to institute a more costly action to reduce its workforce.
According to OPM and officials from the agencies we reviewed, a number of
variables can affect approval times, including the experience of the
officers (OPM, OMB, and agency) assigned to the request, complexity of the
request, and whether the request involved competitive sourcing decisions.
The OPM program managers said that reviews overall take on average 34 days
but that the agency has set a goal to reduce this to 21 days. To help
achieve this goal OPM has developed an application checklist for agencies
to help ensure their plans comply with regulatory requirements before they
are submitted, and according to OPM officials, the agency is currently
reviewing its program office review process for streamlining options.
These options include realigning or dedicating staff to evaluate agency
requests. Additionally, final approval of these requests is being
delegated from the Director to the Associate Director level. OPM's actions
to improve cycle time, if effectively implemented, should help address
agency concerns about shortening the windows for offering buyout and
early-out programs.
We identified seven practices associated with effective use of buyouts and
early outs, and the agencies in our review reported not only using most of
these practices to some degree, but also that doing so helped them to
achieve their reshaping goals. However, the agencies reported fewer
activities related to the practice of establishing an evaluation system.
Five of these practices are generally reflected in the CHCO Act of 2002
and OPM's implementing regulations. All seven practices are described in
the following table:
Table 1: Practices Associated with Effective Buyout and Early-out Programs
Practices reflected in legislation or OPM regulations
1. Identify the reshaping goals of the agency. This will assist agencies
in linking buyouts and early outs to specific organizational objectives.
2. Develop workforce reshaping strategies that fully consider alternative
methods. This will help agencies identify whether alternatives may more
effectively meet agency reshaping goals than buyouts and early outs, and
could work in conjunction with these tools.
3. Design buyout and early-out offerings that demonstrate a clear
relationship to agency's workforce reshaping goals and overarching
strategic goals. This will help ensure that employees critical to the
mission of an agency are retained.
4. Design buyout and early-out offerings that consider employees' needs.
Programs that do not do so may cause damage to the agency's reputation or
negatively affect employee morale and productivity.
5. Develop a communications strategy early in the process. Regular
communication with employees increases transparency in the process used to
determine which positions may be eliminated. This in turn increases
employee trust and maintains employee morale.
Practices not reflected in legislation or OPM regulations
6. Consider and adopt ways to maximize cost savings. In general, agencies
should maximize current year payroll savings by separating employees early
in the fiscal year when possible, preferably in the first quarter.
7. Establish an evaluation system to identify and report relevant data on
buyout and early-out recipients. Agencies can use these data to assess how
well the buyouts and early outs are meeting or have met reshaping goals
and whether they need to adjust their strategies.
Source: GAO analysis.
For example, officials responsible for use of these tools in the six
agencies reported that determining up front the reshaping goals they
wanted to attain with their buyout or early-out programs was critical to
their achieving successful outcomes. They explained that by analyzing the
reduction of staff they could achieve using these tools and how this would
in turn help them achieve changes in skill mix or geographic deployment
helped them to ensure they would meet their strategic goals. The agencies
in our review, however, have not taken full advantage of one of the
leading practices-establishing evaluation systems for these programs.
While the agencies do track how the individual program results relate to
their reshaping goals and analyze the results to assure that all employees
are treated fairly, agencies have not expanded or further developed these
monitoring efforts for longer-term evaluation of these tools. For example,
agencies could expand their analyses of results to include the examination
of how, if at all, the length of service influences acceptance or
rejection of an offer. This information could be useful in the structuring
or timing of future offers. Similarly, agencies could assess the costs and
savings of using buyouts and early outs relative to other separation
strategies. OPM officials informed us that they are developing Web site
guidance to assist agencies in implementing and administering buyout and
early-out programs.
The changing demographics of the federal workforce, and limits on the
dollar amount for buyouts, could pose challenges to the future viability
of these tools, according to many of the agency officials associated with
the use of these authorities in our review. For example, as more employees
retire and are replaced by younger employees further from retirement,
buyouts and early outs may not be attractive to them. In addition,
officials in each of the six agencies also believe that the $25,000 limit
on the buyout payment amount, which has not been changed since 1992, may
make the programs less attractive to prospective candidates. They note
that they would benefit from having the flexibility to offer more money,
even though doing so could limit the number of offers agencies could
provide if additional funding is not available. Officials in three
agencies also suggested they were challenged because they could not make
minor deviations to the plans OPM approved. They would like the
flexibility, for example, to include an additional occupation as being
eligible for the program during implementation if they need to in order to
achieve their reshaping goals, as long as they do not exceed the total
number of buyouts or early outs OPM approved. Finally, some agency
officials stated that obtaining examples of how some agencies used
effective practices in ways that were particularly successful or
instructive in reshaping their workforces could help them improve program
implementation and administration. OPM, as the central human capital
organization, is in the best position to collect and share this
information, and determine what improvements would be worth implementing
governmentwide, especially since some would require legislative changes.
To address challenges agencies face in using these authorities and
consider possible ways to increase their viability, we are making
recommendations to OPM and the CHCO Council that they serve as a
clearinghouse to share examples of how agencies have used effective
practices to achieve program successes; help agencies implement the
practice of assessing the long-term effectiveness of these tools for
future reshaping efforts; and assess potential improvements to these
tools, and the steps needed to accomplish these improvements.
We provided a draft of this report to the Director of OPM for review and
comment. The Director agreed with our recommendations and stated that OPM
is actively working with agencies to help them measure the effectiveness
of their buyout and early-out programs. This in turn will enable OPM to
consider whether changes are needed to improve the effectiveness of these
two tools. Further, the Director of OPM reported that, working with the
CHCO Council, it sees a proactive role that it can take in sharing
information from agencies on their best buyout and early-out practices,
and how agencies may subsequently improve the effectiveness of their
reshaping strategies. The Director's written responses are reprinted in
appendix II.
Background
In the past, to help reduce and restructure their workforces, federal
agencies have paid buyouts to employees to voluntarily leave federal
service. DOD has had buyout authority since January 1993.6 Most non-DOD
executive branch agencies have had two buyout opportunities. The first,
under the Federal Workforce Restructuring Act (FWRA) in 1994,7 provided
these agencies the authority to offer buyouts of as much as $25,000 to
employees to voluntarily leave federal service, thereby eliminating the
need for involuntary staff reductions. Nearly 40 percent of the buyouts
were paid to those employees in overhead positions such as personnel,
budget, procurement, and accounting. About 70 percent went to employees in
mid- to upper-level positions in their organizations. The second major
buyout opportunity was authorized by section 663 of the Treasury, Postal
Service, and General Government Appropriations Act of 1997.8 According to
Administration officials, the buyouts have had three distinct purposes.
Initially they were used to help ease reductions in the DOD civilian
workforce following the end of the Cold War. Later, as part of the
National Performance Review-the Clinton administration's initiative to
reinvent government-buyouts were used to reduce what the administration
called "management control" positions. These positions included those held
by managers and supervisors and employees in personnel, budget,
procurement, and accounting occupations. Lastly, the buyouts were used to
help save money by reducing the federal workforce as the Congress and the
President agreed to pursue a balanced budget.
During the first buyout time frame, the Congress, as well as our own
reports, began expressing concern over agencies' lack of adequate planning
prior to the implementation of their buyout programs and workforce
reduction initiatives.9 The Congress considered this concern in a series
of hearings and addressed the issue when it passed Public Law 104-208 in
September 1996, which directed agencies to prepare strategic buyout plans
for congressional review. OMB required agencies to first submit their
plans for its review prior to submitting them to the Congress. In a June
1997 report on effective buyout practices, we found that, overall, the
fiscal year 1997 buyout programs at six agencies we examined at that time
appeared to have been better managed than was generally the case
governmentwide during the 1994 and 1995 buyout window. This was due in
large part to statutory and OMB requirements, as well as OPM guidance.
Together, the requirements and guidance resulted in more structured
programs in which agencies indicated they used buyouts to accomplish
specific objectives and reportedly would save millions of dollars in the
years ahead.10
In response to this success, the Congress streamlined the approval process
for agency programs by eliminating congressional and OMB review of agency
plans, although OPM must still consult with OMB on buyout plans. The CHCO
Act of 2002 provided executive branch agencies, with OPM approval, the
authority to offer buyouts and early outs to certain qualifying employees,
for the purposes of workforce reshaping, not just downsizing. DOD has
separate legislative authority to offer buyouts and early outs and does
not require approval of OPM for its programs.11 The Act expanded the
buyout and early-out authority to give agencies the flexibility required
to reorganize their workforces should agencies need to substantially
reduce their number of organizational layers, transfer functions, or make
other substantial workforce changes. As such, the Act's provisions allow
agencies to reduce managerial or supervisory positions, correct skill
imbalances, and reduce operating costs without the loss of full-time
positions.
Congress specified that each executive agency requesting buyouts, early
outs, or both must submit a plan to OPM outlining its intended use of
these authorities. OPM also issued regulations to the heads of executive
agencies with information on how to prepare these plans. OPM review
officials said they approve or disapprove agency requests for the
authorities based on the quality of the plans. For example, they ensure
that all legislative requirements are met. OPM reviews each agency's plan
and, for buyouts only, consults with OMB before final approval is granted.
OMB assures that the agency has funding for the buyout program and meets
the legislative requirements. Agencies must have OPM approval before using
buyout and early-out authorities and are required to provide OPM with
interim and final reports on their use.
Agency plans are to describe how they will use buyout and early-out offers
as tools to facilitate agencies' reshaping goals. For agencies requesting
buyout or buyout and early-out authority, the plans are also to include
identification of the agency or specified component(s) within the agency
for which the authority is being requested; identification of the specific
functions to be reduced or eliminated; a description of the categories of
employees who will be offered these options identified by organizational
unit, geographic location, occupational series, or grade level; and the
time period during which buyouts may be paid or early outs offered.
Agencies may request and offer buyout and early-out programs
simultaneously for each of their components and organizational units.
Almost Half of All Agencies Have Used Buyout and Early-out Programs to
Reshape Their Workforces and the Number of Programs Has Increased
Since fiscal year 2003, the number of agencies using buyouts and early
outs to reshape their workforces has increased, and to date, about half of
the executive branch agencies have requested and used these authorities.
In addition, agencies are more frequently offering buyouts and early outs
together as an additional incentive for employees. Eight agencies are the
major users of the authorities and represent approximately 70 percent of
all requests. Agencies' decisions to use buyouts and early outs are based
on specific workforce planning needs. In some cases, technological
advances that necessitated a different skill mix primarily drove
agency-reshaping efforts. In other cases, agencies' reshaping efforts were
driven by a more diverse set of needs such as consolidation of functions
or budgetary restrictions. Officials responsible for use of these
authorities at our six selected agencies believe that buyouts and early
outs have been successful tools to help reshape their respective
workforces.
Total Number of Agencies Using These Authorities and Number of Programs
They Offered Has Increased Each Year
Of the approximately 110 executive branch agencies under the CHCO Act, a
total of 51 agencies have been granted authority to offer their employees
programs of buyouts, early outs, or both at least once.12 This has
increased from 28 agencies that were granted these authorities in fiscal
year 2003. As shown in figure 2, OPM approved, and the agencies used, the
authorities to offer programs a total of 136 times, 176 times, and 179
times, respectively, to help reshape their workforce. According to OPM
data, at least 22,600 employees have separated from federal service under
a buyout, early out, or both. Among the employees who separated and
received a buyout, 59 percent were employees who separated by retiring
under the government's standard retirement qualifications and did not need
an early out, 36 percent were employees who separated using an early-out
program, and 5 percent were employees who separated through a resignation.
Figure 2: Total Number of Agencies and Total Number of Buyout and
Early-out Programs They Offered Since Authorities Were Made Available in
Fiscal Year 2003
Agencies Are Offering Combined Buyout and Early-out Programs
In fiscal year 2003, 40 percent of all agency programs offered employees
the opportunities to have a buyout and take an early retirement at the
same time. In fiscal year 2004 this increased to 55 percent. In fiscal
year 2005 this further increased to 70 percent. DOI, DOE, and Treasury
were agencies more likely to offer programs with combined buyout and
early-out offers. For example, in fiscal years 2004 and 2005, DOI combined
buyouts and early outs in 39 of its 42 programs, DOE combined them in 38
of its 45 programs, and Treasury combined them in 14 of its 23 programs.
According to several agency officials responsible for use of these
authorities, employees are more likely to accept early-out offers when
they are combined with buyouts because the buyout's monetary payment would
help offset the employee's loss in income and reduced annuity payments.
Eight Agencies Are Major Users of the Authorities
Over the 3-year period, OPM granted a total of 491 requests from the 51
agencies for buyout, early-out, or both authorities. As shown in figure 3,
USDA, DOC, DOE, HHS, DOI, DOT, Treasury, and VA represent approximately 70
percent of granted buyout and early-out programs.
Figure 3: Major Users of Buyout and Early-out Authorities
Note: Numbers indicate total number of buyout and early-out programs
offered by each agency from fiscal year 2003 through fiscal year 2005.
The Selected Agencies in Our Review Believe the Authorities Have Been
Effective Tools in Reshaping Their Workforces
The six agencies in our review based their decisions to use buyouts and
early outs on specific reshaping objectives identified in their particular
agency's workforce planning process. For example, HHS consolidated its
human resources (HR) offices from 40 to 5 using the buyout authority to
manage the workforce transition from 1,167 employees to approximately 860.
According to the HHS agency official who led the agency's HR consolidation
effort, the agency successfully used the buyout authority to manage the
reduction of higher-graded positions and to strategically adjust its
workforce size and skills mix. The official stated that over 125 of the
estimated 350 staff affected by the agency's consolidation of its HR
offices accepted buyout offers. He explained that initially they were able
to redeploy displaced staff to mission-critical occupations and functions;
however as consolidations continued and the balance shifted more and more
away from administrative positions and toward mission-critical
occupations, their ability to absorb and redeploy staff to other
administrative or mission-support jobs diminished. According to the
official, the buyout program allowed HHS to meet its targets without
requiring a RIF.
In fiscal year 2004, NIST experienced a budget shortfall, new
responsibilities, and changing national priorities for its research and
development. Because of its budget shortfall, NIST officials anticipated
conducting several RIFs during fiscal year 2004. NIST's reshaping goals
were to (1) phase out a major program, (2) reduce funding of another
program, (3) streamline institutional and administrative support, and (4)
shift the focus of some laboratories. NIST officials reported that they
used a combined buyout and early-out program, reassignments, and RIFs to
help restructure its workforce, achieve a more optimal skills mix, and
reduce its staff from 2,744 employees to 2,556. NIST officials reported
that while they were unable to totally avoid involuntary reductions, the
use of the buyout and early-out program enabled them to limit the RIFs to
a minimal number of employees.
Agency Officials Responsible for Use of These Authorities Believe OPM's
Review Process Adds Value but in Some Cases Could Be Quicker and Should Be
Streamlined
All of the agencies in our selected sample believe OPM's feedback during
the review process improved their use of the buyout and early-out
authorities. OPM approved all agencies' buyout and early-out requests that
met the statutory and regulatory requirements. However, according to
program officials in three agencies, OPM's review process can at times be
quicker so as to avoid possible delays in the approval process that could
limit the success of the programs. OPM is taking steps to reduce the
amount of time it takes to review agency submissions and is further
planning to streamline its review process.
The OPM Review Process Assures Compliance with Legislative Requirements
and Provides Help for Agency Officials Responsible for Use of These
Authorities
OPM plays the central role in the oversight and implementation of the
buyout and early-out authorities. OPM regulations, issued under the
authority of the CHCO Act, require agencies to develop plans that provide
information on agencies' intended buyout and early-out usage. OPM, in
turn, reviews and approves agency plans for using the authorities. The Act
and OPM's regulations also state that OPM will consult with OMB regarding
agency buyout plans. These plans are to include the following:
o Identification of the specific positions to be reduced or eliminated,
identified by organizational unit, geographical location, occupational
series, grade level, and any other factors related to the positions.
o A description of the categories of employees who will be offered
incentives, identified by organizational unit, geographic location,
occupational series, grade level, and any other factors, such as skills,
knowledge, or retirement eligibility.
o A description of how the agency will operate without the eliminated or
restructured positions and functions.
o The time period during which incentives may be paid.
o The number of and maximum amounts of Voluntary Incentive Payments to be
offered.
Agencies' early-out plans are to include the following:
o Identification of the agency or specified component(s) for which the
authority is being requested.
o Reasons why the agency needs voluntary early retirement authority.
o The date on which the agency expects to effect the workforce reshaping.
o The time period during which the agency plans to offer voluntary early
retirement.
According to an OPM reviewing official, the OPM human capital officer
assigned to review a particular agency provides the first level of
examination. The review process then includes additional management
reviews and the final approval by the OPM Director. Through this process,
OPM checks to see whether all legislative and regulatory requirements are
met, and that these criteria are being consistently applied across all
agencies' requests for buyout and early-out authority. In some cases, OPM
had agencies revise their plans until they met OPM's standards, according
to an OPM review official. For example, OPM officials reported they
received an agency request that involved four different components or work
units. The justifications submitted for each component were in various
states of readiness and covered different time periods. After consultation
with OPM reviewing officials, the agency elected to withdraw the request
and resubmit them as separate more-targeted requests. In its first
resubmission, the agency provided a request dealing with reshaping,
business process reengineering, and downsizing of one of the four
components, thus improving the linkage to its business strategy. This
request received OMB concurrence and was approved by OPM. Figure 4
illustrates OPM's review process for agency buyout and early-out requests.
Figure 4: OPM Review Process for Buyout and Early-out Requests
Program officials in each of the agencies in our review believed OPM's
feedback on their plans was helpful and several reported that they have
modified and improved their plans as a result. Managers at DOE stated that
the agency has worked closely with OPM to resolve any questions in an
effort to streamline the process. USDA officials responsible for use of
these authorities stated that OPM has been responsive to their requests
and subsequent inquiries.
OPM and Agency Officials Responsible for Use of These Authorities Believe
Plans Can at Times Be Approved More Quickly and the Process Can Be
Streamlined
OPM program officials and nearly all of the agency officials responsible
for use of these authorities in our review believe the approval process
can at times be accomplished more quickly and have fewer steps. Agencies
want to avoid delaying the timelines for offering a buyout and early-out
program, for fear that shortening the time frame employees have for
deciding whether to accept or decline the buyout or early out can reduce
the number of employees taking them and thus the success of the program.
Both the quality of the agency request and the number of OPM reviews, as
well as OMB's review of requests for buyout authority, can affect the
cycle time for final approval. One agency official stated that he believes
a contributing factor is that too many people have to review each request,
a point that OPM is addressing in its planned streamlining of the review
process.
When we looked at a sample of 28 programs between fiscal years 2003 and
2005 for our six selected agencies, we saw a variation in approval times
that ranged from 7 to 88 days. On average, we found that OPM took 36 days
to review the programs in our sample. According to OPM and officials from
the selected agencies, a number of variables can affect approval times,
including the experience of the officers (OPM, OMB, and agency) assigned
to the request, the completeness of the agency request, the complexity of
the request, and whether the requests are based on competitive sourcing
situations.
According to OPM program managers, their calculations show that, overall,
their reviews take on average 34 days, but they have set a goal to reduce
this to 21 days. They established this target by analyzing results of
previous reviews and also from surveying agency program officials. To help
speed up its review process, OPM issued an application checklist for
agencies to help ensure their plans comply with regulatory requirements
prior to submission to OPM. According to OPM officials, OPM has expedited
its review process by establishing more-stringent timeframes and standards
for reviewing agency submissions and is developing Web site guidance on
both authorities. In addition, to further streamline its review process,
OPM plans to reduce the number of reviewers within each review step. If
such actions are effectively implemented, OPM's steps to improve cycle
time should help address agency concerns about shortening the windows for
offering buyout and early-out programs.
Agencies in Our Review Are Using Most of the Practices Associated with
Effective Use of Buyouts and Early Outs and Have Found Them Helpful in
Achieving Their Reshaping Goals, Though One Practice May Require Further
Attention
On the basis of our review of the literature on buyouts and early outs, we
identified seven practices that are associated with effective buyout and
early-out programs. All of the agency officials responsible for use of
these authorities in our review believe that these practices have been
helpful as they have used most of them to implement their programs. Of the
identified practices, five are generally reinforced in the provisions of
the CHCO Act and OPM's regulations for implementing it.13 The two
practices not reflected in statutory and OPM documents are (1) consider
and adopt ways to maximize cost savings and (2) establish an evaluation
system to identify and report relevant data on buyout and early-out
recipients (see table 2).
Table 2: Practices Associated with Effective Use of Buyout and Early-out
Programs Were Generally Reflected in Legislation and OPM Regulations
Practices reflected in legislation or OPM regulations
1. Identify the reshaping goals of the agency. This will assist agencies
in linking buyouts and early outs to specific organizational objectives.
2. Develop workforce reshaping strategies that fully consider alternative
methods. This will help agencies identify whether alternatives may more
effectively meet agency reshaping goals than buyouts and early outs, and
could work in conjunction with these tools.
3. Design buyout and early-out offerings that demonstrate a clear
relationship to agency's workforce reshaping goals and overarching
strategic goals. This will help ensure that employees critical to the
mission of an agency are retained.
4. Design buyout and early-out offerings that consider employees' needs.
Programs that do not do so may cause damage to the agency's reputation or
negatively affect employee morale and productivity.
5. Develop a communications strategy early in the process. Regular
communication with employees increases transparency in the process used to
determine which positions may be eliminated. This in turn increases
employee trust and maintains employee morale.
Practices not reflected in legislation or OPM regulations
6. Consider and adopt ways to maximize cost savings. In general, agencies
should try to maximize current year payroll savings by separating
employees early in the fiscal year when possible, preferably in the first
quarter.
7. Establish an evaluation system to identify and report relevant data on
buyout and early-out recipients. Agencies can use these data to assess how
well the buyouts and early outs are meeting or have met reshaping goals
and whether they need to adjust their strategies.
Source: GAO analysis.
Agency officials responsible for agency use of these authorities reported:
1.Identifying their reshaping goals up front helped agencies use these
tools to achieve them.
Officials at each of the agencies in our review reported that a first step
in developing buyout and early-out programs is identifying the reshaping
goals of the agency. They explained that the reshaping goals must align
with organizational strategic goals. For example, the DOC's Economics and
Statistics Administration had an organizational strategic goal to enhance
the quality and effectiveness of its economic policy support function by
consolidating two subunits. The agency in turn developed a reshaping goal
to streamline the offices and eliminate unneeded positions. In addition,
agency program officials determined a decreased need for traditional
clerical skills and decided to also target those positions and employees
for buyouts and early outs. According to an agency official responsible
for use of these authorities, they met their estimated buyout and
early-out projections and achieved a number of reshaping goals. They
formed a new organizational structure with increased quality and
efficiencies in policy and administrative support functions, reduced
staffing, and created a more desirable supervisor-to-employee ratio.
2.Considering not only buyouts and early outs, but also a range of
alternative methods to meet reshaping goals helped agencies ensure
success.
Considering not only buyouts and early outs, but also a range of
alternative methods to meet reshaping goals helped agencies ensure
success. Agencies in our review stressed that developing workforce
strategies to meet reshaping goals that consider alternative methods for
meeting the goals, including buyouts and early outs, is important and that
they routinely do so. They explained that some alternatives work better
than others in certain situations. For example, one agency official stated
that in some areas the agency may need to strengthen its student programs
and build that particular pipeline of talent and in other skill areas they
may need to redeploy employees to programs in which their skills are
better utilized. USDA's Agricultural Marketing Service considered
alternative methods such as placement opportunities, hiring freezes,
redeployment, retraining, delaying capital purchases, and suspension of
bonuses. For example, the agency provided opportunities for some employees
to accept a lower grade position or take on additional duties and
responsibilities, which required on-the-job training.
In addition to offering buyouts or early outs, several of the agencies
considered retraining as part of their reshaping strategies. However, one
agency official explained that retraining was not always a viable option.
For example, at USDA's Agricultural Research Service, the new skills
required a specialized academic background. But the vast majority of the
affected employees was in manual trade positions and did not have the
background necessary to successfully complete a retraining program for
scientific duties. Thus, the agency could only assign a few of the
affected employees to other positions and used the buyout and early-out
programs for the remaining affected employees.
At Treasury's Office of the Comptroller of the Currency, agency officials
reported that they established a working group that did extensive cost
analyses to help design its reshaping options. The group compared costs of
its current field locations and identified: (1) imbalances in its
manager-to-employee ratios; (2) a declining volume of work in some areas;
and (3) overstaffing in some district offices, particularly among support
positions and within some information technology units. The working group
made some assumptions on the number of staff positions needed for each
option and recognized that each would have an effect on employees. They
developed net savings projections for the various realignment
configurations. The final decisions on the agency's district structure
resulted in the closure of three district offices and establishment of one
district office in a new location. As a result, the agency recognized
there were employees with needed skills, but they were in the wrong
locations. In addition to offering buyouts (under its own authority)14 and
early outs, a number of surplus employees were given the opportunity to
transfer with their function to the new office.
3.Designing buyout and early-out programs that demonstrate a clear
relationship to the agency's workforce reshaping goals helped agencies
achieve those goals.
Our review of agency buyout and early-out plans submitted to OPM shows
that the plans identified the agency's workforce reshaping goals and
specified how using the authorities would help meet those goals. For
example, following an analysis of Treasury's Bureau of the Public Debt's
Information Technology (IT) programs, management set the goal of
consolidating most of the bureau's functions into one existing
organizational unit that would require fewer employees to perform the IT
work. The bureau established an IT consolidation team, made up of members
of management as well as human resources representatives, to develop the
workforce reshaping strategy. Team members, for the most part, were those
who would be directly affected by the consolidation.
According to Bureau of the Public Debt officials involved with the
consolidation effort, the bureau used a combined buyout and early-out
program to help reshape its workforce to achieve a more optimal skills mix
and to eliminate the need to use RIFs to cut excess IT positions. Prior to
offering the buyout and early-out program, the agency's HR division
surveyed all eligible employees. From the results of the survey, they were
able to estimate the number of interested employees and also identify
individuals likely to accept an offer. The agency also decided to make
offers to non-IT individuals working in organizations identified as
affected by the changes to create open positions for surplus IT employees.
Agency officials reported that they met their goal to consolidate into one
existing organizational unit and also met their targeted number of
employees accepting program offers, which eliminated the need for
involuntary separations.
4.Designing buyout and early-out programs that considered employees' needs
helped them to cope with the changes.
Agency officials responsible for use of these authorities in the agencies
we reviewed pointed out they consider employees' needs when designing and
implementing programs. They believed that buyout and early-out programs
should generally provide career guidance, counseling, and outplacement
assistance to employees who may be displaced. Treasury's Office of the
Comptroller of the Currency, when offering a buyout and early-out program,
made a wide variety of other services available to employees. For example,
in those offices to be closed Treasury solicited the affected employees'
relocation preferences and tried to accommodate them to the extent
possible. Employees who were interested in other positions and locations
could visit the new locations at the agency's expense. In addition, the
agency paid relocation bonuses to some affected employees and instituted a
"safe landing" program that consisted of a support network matching
affected employees with "buddies" who provided encouragement to those
employees and served as sounding boards for them, training and discussion
forums that focused on career and stress management, and technical
training to prepare for other job opportunities.
Program officials in these agencies also reported that their programs are
routinely reviewed internally at many levels, including agency general
counsel offices, to ensure that the programs not only conform to
applicable laws, union agreements, and regulations, but also would be
considered equitable from the employees' point of view. Officials at
USDA's Agricultural Research Service reported that in addition to
reviewing the appropriate contracts and regulations, they continuously
consulted with the employee union and its human capital office throughout
the duration of the buyout and early-out program to ensure fairness.
Additionally, the agency ensured that information packets regarding the
proposed programs were provided to all eligible employees before the date
the offers took effect in an effort to give employees ample time for
fullest consideration. Program officials at USDA's Natural Resources
Conservation Service reported that their Civil Rights Division conducted a
Civil Rights Impact Analysis to determine if there were any adverse
effects on employees and concluded that there were none, since every
employee was offered a similar position at their current grade level. None
of our selected agencies reported any grievances filed as a result of
their buyout and early-out programs.
5.Developing a communication strategy early in the process helped to build
an understanding of the purpose of planned changes.
Agency officials in our review stressed that communication early and
throughout the reshaping process was critical. In a recent report, we said
that creating an effective, ongoing communication strategy is essential to
implementing a merger or transformation.15 Communicating often,
accurately, and consistently was the key factor to one agency's successful
strategy, according to an official responsible for use of the buyout and
early-out authorities. At NIST, the Director met with staff prior to
getting approval to offer buyouts and early outs, and explained the agency
was facing financial deficits and wanted to avoid the possible need to
resort to involuntary separations, and so was soliciting the authority to
offer voluntary separation incentives.
Other agencies began communicating with employees immediately after
obtaining OPM approval to offer buyouts or early outs. Treasury's Office
of the Comptroller of the Currency established an electronic bulletin
board and employees were invited to provide their comments, suggestions,
or recommendations on the agency's proposed reshaping initiative and
options that the agency's program officials might want to consider. A
number of agencies also communicated with employees about the particulars
of their programs through e-mails and brochures to ensure employees were
kept advised of all reshaping actions. Agency officials also stressed that
having highly visible top management involvement in their communication
strategies helped to deliver the message of organizational changes as
efficiently as possible. One agency had its managers in the components and
offices targeted for reshaping brief their employees and attend group
information sessions with those employees. During these sessions,
employees were able to directly ask these managers specific questions
about the reshaping effort, thus helping the employees to understand
management's rationale for decisions made.
6.Agencies in our review considered ways to maximize cost savings.
Nearly all of the agencies in our review, in an attempt to maximize costs
savings, reported that they tried to separate employees from federal
service early in the fiscal year so as to save on employee salary
expenses. One agency also assigned affected employees to nonaffected
positions where appropriate.
7.Although they monitor who is accepting buyouts and early outs, the
agencies were not evaluating the continuing and future effectiveness of
these authorities.
Agencies in our review collected and reviewed data on the number of
employees who accept offers under their individual programs compared with
their intended goals. One agency has a system in place that periodically
generates a report on the numbers of employees who accept buyout offers,
thus providing management with useful information to consider the progress
toward their reshaping goals and make necessary adjustments. To monitor
the progress and success of its reshaping initiative, another agency
established a consolidation team that met weekly to discuss issues that
emerged as the agency implemented this initiative and potential roadblocks
to achieving its reshaping goals. The team also maintains a list of all
individuals who separate from the agency with a buyout and provides this
information to the agency's staff involved in recruitment and placement to
help ensure that previous buyout recipients repay the full amount of the
buyout payment if they are rehired within five years of receiving the
buyout.16
However, agencies have not expanded on these monitoring efforts to provide
an evaluation of the longer-term effectiveness of these tools. For
example, agencies could compare the length of service for employees in its
workforce, the role this factor plays in employee decisions about
accepting buyout and early-out offers, and how this could affect the
composition and timing of future offers. This information on length of
service in relation to the acceptance or rejection of a buyout or
early-out offer could help the agencies as they plan and prepare for
future programs. In addition, agencies could perform an analysis to
determine the savings generated by buyouts and early outs relative to
other separation strategies, such as involuntary staff reductions. Such an
analysis would help agencies determine whether anticipated cost savings of
buyouts and early outs will in fact provide the best choice of resource
actions that could be taken.
Officials in Agencies We Reviewed Suggested Ways to Make the Buyout and
Early-out Programs More Efficient and Effective
Agency officials responsible for use of these authorities that we
contacted found the requirement that agencies must get even minor changes
to their plans approved by OPM to be restrictive. Under OPM regulations,
even slight deviations from approved plans by even one position or grade
level requires additional OPM review. Officials in three agencies
suggested that agencies be allowed to make such minor deviations, as long
as the agencies do not exceed the total number of approved buyouts or
early outs. For example, an agency official responsible for use of these
authorities from HHS explained that agencies using the authorities in
nearly all cases are being asked to predict the future because when
offering buyouts, the agency never really knows how many employees will
accept the offers, or where they will be located. The official explained
that agencies target a group of employees who will be offered the buyouts,
and then hope for the best. Having the flexibility to adjust the target
group to which the offer is made during the implementation of their plans
could improve program results and ultimately provide additional
opportunity for agencies to achieve their reshaping goals, according to
this manager. OPM officials said that they believe that the CHCO Act does
not provide OPM the authority to allow agencies to make changes to
approved plans.
Furthermore, agency officials responsible for use of these authorities in
our review believe that the buyout maximum payment amount of $25,000,
which has been constant since 1992,17 may not be enough incentive to
encourage eligible workers to voluntarily leave the workforce, especially
higher-salaried employees. They explained that inflation has eroded the
buying power and value of buyouts, making them less attractive unless the
employee is ready to retire anyhow, thus defeating the purpose of the
program. Officials in four agencies said some consideration should be
given to ways to make buyouts more attractive to employees. On the other
hand, one agency official acknowledged that increasing the buyout amount
may reduce the number of offers agencies could make at a higher amount and
thus could make alternative approaches to reshaping more attractive.
Although they have not undertaken any studies regarding this, OPM
officials believe that agencies' reporting that they are meeting their
targeted number of reductions indicates the dollar amount is sufficient.
In addition, some agency officials suggested that more coordination across
the agencies using the programs would be helpful as would the sharing of
examples of how some agencies used effective practices in ways that were
particularly successful or instructive in reshaping their workforces, and
that OPM may be in the best position to do this coordination. For example,
several program officials suggested that OPM could sponsor forums, an
interagency working group, or even additional training sessions, such as
the session OPM headquarters offered in May 2005, to encourage information
sharing on how agencies may more efficiently implement their buyout and
early-out programs.
A number of the agency suggestions for improving the outcomes achieved
with the buyout and early-out programs would benefit all agencies using
the authorities, but some would require legislative changes. OPM, as the
central human capital office, is well positioned to determine which
governmentwide improvements to pursue and how to implement them, including
regulatory changes or proposals for legislative reform. For example, OPM
may assess the effects of raising the $25,000 buyout amount and, if
appropriate, sponsor legislative proposals for these changes.
Conclusions
As agencies transform to better meet 21st century challenges and changing
missions, they are increasingly recognizing the need to reshape their
workforces to meet these challenges. The Congress also recognized this
need and responded to it by designing legislation creating buyout and
early-out programs as additional tools agencies could consider using in
their efforts to reshape their workforces. Our review shows that agencies
have taken advantage of these programs and are employing certain practices
that help them to use these tools more effectively.
Now agencies and OPM, working through each agency's CHCO, have the
opportunity to make even better use of these authorities and best
practices. Several agencies we reviewed have formulated ideas about how to
improve them. OPM and the CHCOs, through their governmentwide Council,
could provide an important service by sharing information with agencies on
successful ways to use the tools and the lessons learned across agencies,
and helping agencies determine what data to collect and evaluate as
indicators of the program's results. Currently, the individual agencies in
our review have not systematically evaluated the relative efficiency,
continuing effectiveness, and future viability of the authorities as
reshaping tools for their agencies. By doing so, agencies will know
whether they need to make adjustments in their long-term strategy for
employing those tools, and whether it is more cost-efficient to spend
funds on implementing buyouts and early outs rather than on other
reshaping tools, such as retraining. Finally, because OPM takes a
governmentwide perspective on human capital programs, it is well
positioned to assess potential improvements to these authorities, such as
the agencies proposed changes, and determine what changes to implement and
the steps needed to do so.
Recommendations for Executive Action
To help ensure that agencies can take full advantage of the authorities to
use buyouts and early outs to reshape their workforces, we recommend that
the Director of OPM, in conjunction with the CHCO Council, take the
following actions.
1. Share additional information with agencies on examples of how agencies
have used practices associated with effective use of buyout and early-out
programs to support their programs and achieve successful results. In
addition, OPM could support the improvement of approval cycle time and the
effectiveness of the programs by facilitating information sharing among
agencies, such as holding forums and training sessions on the use of the
authorities for agencies with less-experienced staff.
2. Help agencies identify ways they can determine the extent to which the
authorities have been effective tools and will continue to be in the
future, and how agencies may need to tailor their reshaping strategies
accordingly.
3. Assess potential program improvements, such as those the agencies have
identified, for possible governmentwide implementation, then take the
steps necessary to accomplish this, such as changing the regulations
governing the program, or proposing any needed statutory changes.
Agency Comments and Our Evaluation
We provided a draft of this report to the Director of OPM. The Director
provided written comments, which are included in appendix II. The Director
agreed with our recommendations, as well as our conclusion that buyouts
and early outs have been effective tools for agencies implementing
workforce reshaping plans. The Director also stated that the
agency-specific examples included in our report provide additional insight
on the usefulness of buyouts and early outs as proven workforce reshaping
options, and will help agencies to emulate best practices as they manage
their own restructuring plans. In addition, the Director of OPM agreed
that, working with the CHCO Council, the agency could provide an important
service by sharing information on such successful ways to use the tools
and the lessons learned across agencies. Furthermore, the Director stated
that the examples will help as OPM actively works with agencies to
determine what data to collect and evaluate as indicators of the program's
results in an effort to measure the effectiveness of their buyout and
early-out programs. Once OPM reviews agencies' actual experiences using
these two tools, it will be able to consider whether changes are needed to
improve their effectiveness. The Director of OPM also agreed that its
review of agency plans could be done more quickly and stated that it is
expediting approval of agencies' buyout and early-out requests.
The Director of OPM also provided technical comments, which we
incorporated as appropriate.
We are sending copies of this report to other interested congressional
parties, the Director of OPM, and the federal agencies and offices
discussed in this report. In addition, we will make copies available to
other interested parties upon request. This report will also be made
available at no charge on the GAO Web site at http://www.gao.gov .
If you have any questions about this report, please contact me at (202)
512-6510 or at larencee@gao.gov . Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Key contributors to this report include William Doherty,
Clifton G. Douglas Jr., Charlesetta Bailey, Tom Beall, Andrew Edelson,
Jeffrey McDermott, Amy Rosewarne, and Lou Smith.
Eileen Regen Larence Director, Strategic Issues
Objectives, Scope, and Methodology Appendix I
The objectives of our review were to identify
o how many agencies have sought and been granted authority to offer
buyouts and early outs and the extent to which agencies have used these
authorities;
o how selected agency officials view the Office of Personnel Management's
(OPM) role in facilitating the use of the buyout and early-out
authorities;
o what practices are associated with agencies' effective use of buyouts
and early outs, how selected agencies used these practices, and whether
they have helped agencies to achieve their workforce reshaping goals; and
o what challenges the selected agencies identified, if any, to continued
effective use of these authorities.
To address our first objective, we obtained and analyzed OPM data on the
buyout and early-out programs authorized under the Chief Human Capital
Officers Act of 2002 to obtain governmentwide data on agencies' use of the
program and to help identify agencies for further review.
To address our other objectives, we reviewed the OPM data to identify
those federal agencies that were the most frequent users of the buyout and
early-out authorities under the Act. We selected the Departments of
Agriculture, Commerce, Energy, Health and Human Services, Interior, and
the Treasury for further review since they accounted for over half of all
requests for authorities at the time we started our review.1
We interviewed agency officials, such as human capital officers and buyout
and early-out program managers from the six selected agencies to ascertain
(1) their views of OPM's role in their use of the buyout and early-out
authorities, (2) the particular buyout and early-out practices they were
using, (3) their views on how the practices helped them to achieve their
goals, (4) the lessons learned from their experiences, and (5) the
challenges to continued successful use of these authorities. As part of
this review, we also asked officials to identify and discuss more
specifically either a buyout or early-out offer in each of fiscal years
2003, 2004, and 2005 that, in their view, was among the most successful of
such offers conducted that year.
In addition, using a systematic selection procedure with a random start,
we reviewed a sample of OPM case files for about a tenth of all the offers
made by the six selected agencies for fiscal years 2003 through 2005. We
reviewed the files to determine the length of OPM's review time and also
to identify instances where agencies used practices associated with
effective buyout and early-out use. While our total sample of cases
consisted of 40 buyout or early-out offers, we excluded 7 cases from our
analysis of OPM's review time because in these cases, the agencies
requested buyouts or early outs on the assumption that they would possibly
use contractors to conduct some of the agencies' work. OPM could not
approve the offers, however, until the agencies made these final
outsourcing decisions. In addition, we excluded 5 cases from this analysis
because either OPM's review of the case was pending or we were unable to
identify the agency date of the submission or OPM's date of approval from
the file. To supplement and support the views provided by agency
officials, our review also included obtaining and examining available
documentation, such as strategic workforce plans, buyout and early-out
plans, and other documents associated with the use of the authorities from
each of our selected agencies.
We also interviewed officials involved in the review process from OPM and
the Office of Management and Budget to obtain information on their roles
and responsibilities in approving agency requests and their perspectives
on the use of buyout or early-out offers governmentwide. In addressing our
third objective, we first reviewed information from relevant literature on
the use of buyouts and early outs in organizations including our prior
studies of federal buyout programs in 1997 and 1998.2 We conducted a
content analysis and included as effective practices those common to
multiple sources and those previously cited in GAO reports. We next
conferred on the reasonableness of selected buyout and early-out practices
we identified with officials from the National Academy of Public
Administration and the International Public Management Association who had
relevant expertise in the management of human resource programs. Both of
these organizations have published reports on the effectiveness of federal
human capital practices related to buyout and early-out programs.
Because we designed our selection of agencies and cases to examine the
experiences, practices, and perspectives of a set of agencies that, in
recent years, have been relatively more engaged in conducting buyout and
early-out programs, the findings are not generalizable to other agencies
or the federal government as a whole. To assess the reliability of OPM's
database on buyout and early-out authorities, we interviewed the officials
at OPM who were knowledgeable about maintaining that database. In
addition, we provided each of our six selected agencies with OPM's count
of their buyout and early-out authorities to review. We determined that
OPM's data were sufficiently reliable for the purpose of providing general
information on the number of agencies participating in buyouts and early
outs over time and the number and nature of authorities that these
agencies used. Our review was conducted in accordance with generally
accepted government auditing standards from October 2004 through November
2005.
Comments from the Office of Personnel Management Appendix II
(450370)
www.gao.gov/cgi-bin/getrpt?GAO-06-324 .
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Eileen Larence, (202) 512-6510,
larencee@gao.gov.
Highlights of GAO-06-324 , a report to congressional requesters
March 2006
HUMAN CAPITAL
Agencies Are Using Buyouts and Early Outs with Increasing Frequency to
Help Reshape Their Workforces
Under the Chief Human Capital Officers (CHCO) Act of 2002, an agency may
request authority from the Office of Personnel Management (OPM) to offer
employees voluntary separation incentive payments (buyouts) and voluntary
early retirement (early outs) to help reshape its workforce.
GAO was asked to identify (1) how many agencies have been granted
authority to offer buyouts and early outs and how often agencies used
them, (2) how agencies view OPM's role in facilitating the use of these
tools, (3) how agencies have used practices associated with effective use
of the tools, and (4) what challenges agencies identified, if any, to
continued effective use. To respond, GAO reviewed the practices of the
Departments of Agriculture, Commerce, Energy, Health and Human Services,
Interior, and the Treasury because they were among the most frequent users
of these authorities.
What GAO Recommends
GAO recommends that OPM, with the CHCO Council, (1) share information on
agencies' successful use of the effective practices GAO identified, (2)
help agencies assess their programs' effectiveness, and (3) assess
potential program improvements agencies identified for possible
implementation, and pursue needed regulatory and statutory changes to
implement them. OPM agreed with the recommendations.
The total number of agencies using buyouts and early outs to reshape their
workforces has significantly increased from 28 to 51 during fiscal years
2003 through 2005, and the number of programs agencies have offered over
the past 3 years has also significantly increased (see fig. below). During
this timeframe, at least 22,600 employees have separated from federal
service under these authorities.
Total Number of Agencies Having Used the Authorities and Total Number of
Buyout and Early-out Programs Offered Since the Authorities Were Made
Available in Fiscal Year 2003
Officials at all six agencies GAO reviewed believe that OPM's mandatory
review of and feedback on their plans for using buyouts and early outs has
improved implementation. However, nearly all of the agencies said they
believe the review at times can be achieved more quickly and should be
streamlined. OPM on average took 36 days to review the 28 randomly
selected programs GAO assessed at the six agencies. OPM is taking steps to
reduce its overall average review time including establishing more
stringent timeframes for review and reducing the number of reviewers.
The six agencies also reported using almost all of the practices GAO
identified as associated with the effective use of buyouts and early outs,
and that these practices resulted in better-planned programs. Agencies
were not, however, using one practice that involves evaluating the
longer-term effectiveness of the buyout and early-out authorities for
reshaping their future workforces. Officials at the six agencies suggested
that information on how some agencies used effective practices in ways
that were particularly successful or instructive in reshaping their
workforces could help them improve program results.
Agency officials responsible for use of these authorities from the six
agencies agreed that certain reforms would help them address some of the
challenges they face in implementing their programs. These include (1)
increasing the current dollar amount agencies can pay under buyouts to
make the programs more attractive to employees and increase the acceptance
rate and (2) allowing agencies to make minor changes to buyout and
early-out plans after OPM approval. OPM is in the best position to assess
these and other possible reforms and ways to achieve them.
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