Federal Downsizing: Better Workforce and Strategic Planning Could Have
Made Buyouts More Effective (Chapter Report, 08/26/96, GAO/GGD-96-62).

Pursuant to a congressional request, GAO reviewed several issues related
to the federal employee buyout program, focusing on: (1) whether the
Federal Workforce Restructuring Act's downsizing goals are being
achieved; (2) whether agencies' use of buyouts reflects National
Performance Review (NPR) downsizing goals; (3) the demographic results
of the buyouts; and (4) how agencies view buyouts as a downsizing tool.

GAO found that: (1) between January 1993 and March 1996, non-Postal
executive civilian employment decreased by 230,500 employees; (2)
employee buyouts have minimized the use of reductions in force (RIF);
(3) agencies have not met NPR restructuring goals, since the percentage
of management positions has not significantly changed; (4) agencies
often set lower downsizing goals for management positions, since they do
not specifically target buyouts to these positions; (5) agencies that
plan their buyouts have more successful outcomes; (6) buyouts have
allowed agencies to increase the representation of minorities and women
in the workforce, who likely would have been adversely affected by RIF;
(7) 72 percent of buyouts have gone to employees taking regular or early
retirement, and some employees may have delayed their separation so they
could receive buyouts; (8) most agencies believe buyouts have been an
effective downsizing tool, but downsizing has caused operational
problems such as the loss of corporate memory and expertise, increased
workloads and backlogs, skill imbalances, and more overtime; (9) some
agencies believe that downsizing has hindered their ability to carry out
their missions; (10) agencies have used reengineered work processes and
automation to offset personnel reductions, but a few agencies are using
contract employees, some of whom are buyout recipients; (11) outsourcing
work may offset some downsizing benefits and be inconsistent with the
act's purpose; and (12) agencies could have mitigated some of the
adverse impacts of downsizing through better strategic and workforce
planning.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-96-62
     TITLE:  Federal Downsizing: Better Workforce and Strategic Planning 
             Could Have Made Buyouts More Effective
      DATE:  08/26/96
   SUBJECT:  Federal downsizing
             Reductions in force
             Personnel management
             Employee buyouts
             Strategic planning
             Human resources utilization
             Federal personnel law
             Proposed legislation
             Women
             Employment of minorities
IDENTIFIER:  GSA Federal Operations Review Model
             Navy Building High-Performance Organizations for the 
             Twenty-First Century Program
             OPM Central Personnel Data File
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Civil Service, Committee on
Government Reform and Oversight, House of Representatives

August 1996

FEDERAL DOWNSIZING - BETTER
WORKFORCE AND STRATEGIC PLANNING
COULD HAVE MADE BUYOUTS MORE
EFFECTIVE

GAO/GGD-96-62

Federal Downsizing

(966646)


Abbreviations
=============================================================== ABBREV

  BLM - Bureau of Land Management
  CDC - Centers for Disease Control
  CPDF - Central Personnel Data File
  DOD - Department of Defense
  EPA - Environmental Protection Agency
  FAA - Federal Aviation Administration
  FORM - Federal Operations Review Model
  FTE - Full-time equivalent
  GSA - General Services Administration
  HHS - Health and Human Services
  NASA - National Aeronautics and Space Administration
  NPR - National Performance Review
  OIG - Office of Inspector General
  OMB - Office of Management and Budget
  OPM - Office of Personnel Management
  RIF - Reduction-in-Force

Letter
=============================================================== LETTER


B-270907

August 26, 1996

The Honorable John L.  Mica
Chairman, Subcommittee on Civil Service
Committee on Government Reform
 and Oversight
House of Representatives

Dear Mr.  Chairman: 

This report, prepared at your request, provides information on a
number of issues related to the implementation of the Federal
Workforce Restructuring Act of 1994 and agencies' use of buyouts.  As
such, this report is the latest in a series of studies we have
completed to help Congress monitor the downsizing of the federal
workforce. 

We will send copies of this report to the Vice President of the
United States, other congressional committees, the Director of the
Office of Personnel Management, and other interested parties.  We
will also make copies available to others upon request. 

Please call me or Associate Director Timothy P.  Bowling on (202)
512-8676 if you have any questions concerning this report.  The major
contributors to this report are listed in appendix V. 

Sincerely yours,

L.  Nye Stevens
Director
Federal Management and Workforce
 Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The Federal Workforce Restructuring Act of 1994 authorized
non-Department of Defense (DOD) agencies to offer buyouts to
employees of as much as $25,000 to voluntarily leave the workforce. 
DOD agencies already had buyout authority under earlier legislation. 

To help monitor the implementation of the act, the Chairman,
Subcommittee on Civil Service, House Committee on Government Reform
and Oversight, asked GAO to review a number of issues related to the
buyout program.  In response, GAO examined

  -- whether the downsizing goals of the Federal Workforce
     Restructuring Act were being achieved;

  -- whether agencies' use of buyouts reflected the administration's
     workforce restructuring goals as articulated by the National
     Performance Review (NPR);

  -- what the demographic results of the buyouts were;

  -- how agencies viewed buyouts as a downsizing tool; and

  -- what operational impacts were attributed by agencies to
     workforce downsizing. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

In recent years, the administration has relied heavily on NPR's
workforce restructuring goals to help guide federal downsizing
efforts.  In September 1993, NPR recommended cutting the federal
workforce by 252,000 positions, with these cuts intended to reduce
"management control" positions such as (1) those held by managers and
supervisors and (2) employees in personnel, budget, procurement, and
accounting occupations.  In its subsequent guidance, the
administration directed agencies to increase supervisors' and
managers' span of control over other employees from a ratio of 1:7 to
1:15, and to cut by half the remaining management control positions
by fiscal year 1999. 

To achieve these reductions while avoiding reductions-in-force (RIF),
NPR called for legislation to permit non-DOD agencies to offer
buyouts to employees who voluntarily left federal service.  NPR's aim
was to give federal agencies the same downsizing tool commonly used
by private companies. 

Subsequent to NPR's request, Congress enacted the Federal Workforce
Restructuring Act of 1994.  The act required the government to reduce
its workforce by 272,900 full-time equivalent (FTE) positions by
fiscal year 1999 and gave non-DOD agencies the authority to offer
buyouts of as much as $25,000 to workers who left federal employment
by March 31, 1995 (unless extensions were approved by agency heads). 
The act did not include NPR's workforce restructuring goal of cutting
specific types of positions. 

In addition to requiring governmentwide downsizing, the act also
contained provisions that required the elimination of one position
for each buyout granted, and it generally required buyout recipients
to repay the full amount of the buyout if they returned to federal
service within 5 years of taking the buyout.  Further, the act
provided that the President take appropriate action to ensure that
there was no increase in service contracts as a result of the act,
unless a cost comparison indicated that such contracts were
financially advantageous to the government. 

Although the act covered workforce reductions in all federal
departments and agencies, including DOD, it only authorized buyouts
in non-DOD agencies.  Buyouts in DOD were already authorized under
legislation passed in 1992.  According to OPM, as of September 30,
1995, agencies had paid more than 112,500 buyouts, nearly 80,000 of
which (about 71 percent) went to DOD employees. 

To ensure that agencies would accompany their downsizing with
management reforms consistent with NPR's goals, the President
directed agencies to prepare streamlining plans.  The plans were to
show, among other things, how agencies intended to reduce management
control positions as intended by NPR.  The Office of Management and
Budget (OMB) was responsible for approving agencies' streamlining
plans. 

Currently, Congress is considering legislation that would give
agencies temporary authority to pay retirement and separation
incentives.  As proposed, the Federal Employee Separation Incentive
and Reemployment Assistance Act (H.R.  2751) would allow agencies to
pay eligible employees as much as $25,000 if they left federal
service between enactment of the legislation and September 30, 1997. 
The maximum amount of the buyout would then decrease to $20,000 for
takers between October 1, 1997, and September 30, 1998.  A final
round of buyouts would pay up to $15,000 for takers between October
1, 1998, and September 30, 1999.  In addition to this governmentwide
bill, Congress is considering agency-specific buyout legislation. 

To address the Subcommittee's request, GAO analyzed Office of
Personnel Management (OPM) workforce data, examined selected
agencies' streamlining plans, interviewed agency officials, and sent
questionnaires to the 24 departments and agencies (both DOD and
non-DOD) responsible for paying most of the buyouts.  These agencies
accounted for about 31 percent of the executive branch civilian
workforce in fiscal year 1995.  In reviewing whether the agencies'
use of buyouts reflected the administration's workforce restructuring
goals as articulated by NPR, GAO did not attempt to judge the
appropriateness of these goals.  Rather, GAO's use of the goals as
criteria for evaluation was based solely on the administration's
stated intention of relying on them as the framework for its
downsizing strategy. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Considerable progress has been made in achieving the downsizing goals
of the Federal Workforce Restructuring Act.  Between January 1993 and
March 1996, non-Postal executive branch civilian employment declined
by almost 230,500 employees (10.5 percent).  In addition, the buyouts
authorized by the act helped agencies reach the act's downsizing
goals with minimal use of RIFs. 

With respect to the administration's restructuring goals, the data
show that, at the end of the non-DOD buyout window, there was little,
if any, decrease in the management control positions designated for
reduction by NPR, proportional to the workforce as a whole.  This
situation occurred because agencies often set downsizing goals for
management control positions that were less than those recommended by
the administration and did not use buyouts to specifically reduce
these positions. 

Demographically, the buyouts enabled agencies to downsize without
disproportionately affecting the representation of women and
minorities.  Had RIFs been necessary, it is unlikely that women and
minorities would have fared as well.  Since retention during a RIF is
based largely on seniority and military veteran status, women and
minorities--who generally rank lower in one or both of these factors
compared to white males--would, in all likelihood, be separated
disproportionately. 

The largest share of the buyouts were paid to employees who took
regular or early retirements.  Although GAO did not analyze whether
buyout payments motivated individual employees to leave federal
service earlier or later than they otherwise would have, GAO's
analysis of overall separation trends suggests that some employees
may have delayed their departures in order to receive a buyout
payment. 

On the one hand, agency officials viewed buyouts favorably as an
effective downsizing tool.  Indeed, most agencies GAO surveyed said
that buyouts had helped them to meet mandated workforce ceilings and
restructure their workforces while minimizing RIFs.  In our prior
work, we found that, depending upon the assumptions made, buyouts
generally saved the government more money than did RIFs.  RIFs can
also adversely affect agency operations and employee morale.\1

On the other hand, agencies reported that downsizing in general led
to such negative effects as the loss of institutional memory and an
increase in work backlogs.  In fact, half of the agencies in GAO's
survey said that downsizing hindered their ability to carry out their
missions.  To offset personnel reductions, most agencies said they
were relying more heavily on reengineering work processes and on
automation.  Five agencies reported using contractors to do the work
previously performed by employees who had taken buyouts.  In some
cases, buyout recipients returned to their agencies as contract
employees. 

Despite the general success of the buyouts in meeting the downsizing
goals of the Federal Workforce Restructuring Act, some agencies
believe that they are being stretched too thin.  Several agencies
reported that they anticipated production and service shortfalls,
skill imbalances, or increased use of overtime as a result of their
downsizing. 

Further, provisions of the act designed to guard against an increase
in service contracts, unless they are financially advantageous to the
government, are unclear.  The outsourcing of work previously done by
civil servants without adequate cost comparisons may offset some of
the benefits obtained by downsizing, and appears to be inconsistent
with the purpose of the act. 

Overall, many of the unintended results of downsizing could have been
mitigated had agencies done adequate strategic and workforce
planning.  Such planning would have helped agencies to clearly define
the agency's mission and identify the workforce mix needed to
successfully accomplish that mission.  Such planning would have
increased the likelihood that employees with the needed skills and
training were retained. 


--------------------
\1 Federal Downsizing:  The Costs and Savings of Buyouts Versus
Reductions-in-Force (GAO/GGD-96-63, May 14, 1996). 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      AGENCIES USED BUYOUTS MORE
      TO MEET THE ACT'S DOWNSIZING
      OBJECTIVES THAN THE
      ADMINISTRATION'S
      RESTRUCTURING GOALS
-------------------------------------------------------- Chapter 0:4.1

Overall, federal agencies have made good progress in meeting the
Federal Workforce Restructuring Act's downsizing goals.  According to
OPM data, from fiscal year 1994 through March 1995 (a period when
both DOD and non-DOD agencies had buyout authority), governmentwide,
on-board personnel levels dropped from 2.16 million employees at the
beginning of fiscal year 1994 to 2.03 million employees as of March
31, 1995.  Buyouts accounted for 63,789 (48 percent) of these
reductions, while 7,450 (6 percent) were accomplished through RIFs. 
Given this level of downsizing, agencies were able to meet the act's
fiscal year 1995 ceiling of 2.04 million FTE positions.  (See pp. 
22-24). 

Concerning the administration's workforce restructuring goals, the
number of management control positions was reduced, but as a
proportion of the total workforce, there was little change.  For
example, at DOD agencies, the ratio of supervisors to other employees
moved from 1:6.9 to 1:7.4 while the remaining categories of
management control positions stayed roughly equal to their
representation in the workforce.  Similarly, non-DOD agencies
reflected only slight reductions in the proportion of these positions
in the workforce.  (See pp.  24-27). 

Data provided by the 24 agencies GAO surveyed suggest that management
control positions were not reduced in greater numbers in large part
because agencies' restructuring goals were often lower than those
called for by the administration and agencies were inconsistent in
using their buyouts to achieve NPR's workforce restructuring goals. 
This occurred in large part because (1) while OMB encouraged agencies
to use buyouts to downsize in accordance with NPR's workforce
restructuring goals, OMB's guidance on preparing streamlining plans
did not specifically require agencies to show how they planned to use
buyouts to meet these goals; (2) some agencies feared that morale and
agency operations would be adversely affected if they tried to reduce
specific occupations to the levels recommended by the administration;
and (3) the Workforce Restructuring Act did not require that buyouts
be used to reduce the ranks of management control positions as
intended by NPR.  (See pp.  27-32)


      PLANNING FOR BUYOUTS
      APPEARED TO BE AN IMPORTANT
      FACTOR IN ACHIEVING
      SUCCESSFUL RESULTS
-------------------------------------------------------- Chapter 0:4.2

Good strategic and workforce planning are important tools for helping
to ensure successful downsizing.  Agencies that said they planned
their use of buyouts appeared to have more successful outcomes than
those that did not.  For example, an agency that reported planning
its buyouts said that it was able to eliminate unnecessary positions,
while simultaneously retaining critical skills.  On the other hand,
comments from other agencies indicated that the loss of critical
employees could have been avoided had agencies done meaningful
planning and granted their buyouts consistent with those plans.  This
is supported by our earlier review of downsizing strategies at
nonfederal organizations where 15 of the 25 organizations included in
our study indicated the importance of planning before initiating
workforce reductions.\2 (See p.  32). 


--------------------
\2 Workforce Reductions:  Downsizing Strategies Used in Selected
Organizations (GAO/GGD-95-54, Mar.  13, 1995). 


      BUYOUTS ENABLED AGENCIES TO
      DOWNSIZE WITHOUT
      DISPROPORTIONATELY AFFECTING
      WOMEN AND MINORITIES AND MAY
      HAVE LED SOME EMPLOYEES TO
      DELAY SEPARATIONS
-------------------------------------------------------- Chapter 0:4.3

The personnel reductions that have occurred since 1993 were carried
out without adversely affecting workforce diversity.  Of the 24
agencies responding to GAO's survey, 10 indicated that buyouts helped
them enhance the representation of women and minorities.  Moreover,
because males and whites took buyouts at a somewhat higher percentage
than their representation in the workforce, the proportion of women
and minorities in the workforce governmentwide increased slightly. 
In 1992, for example, women made up 43.4 percent of the workforce,
compared to 44.6 percent at the end of the first half of fiscal year
1995.  Likewise, during that same period, minorities increased their
representation from 27.9 percent to 28.9 percent of the workforce. 
(See pp.  34-36). 

Of the 82,771 buyouts made from when DOD first began them in January
1993, through June 30, 1995, about 40 percent of the buyouts were
paid to employees who took regular retirement, and 32 percent were
paid to employees taking early retirement.  GAO did not examine
whether buyouts influenced individual employees to leave federal
service any earlier or later than they would have without the
separation incentive.  Nevertheless, separations dropped by more than
20 percent from the end of fiscal year 1992 through fiscal year 1993,
when Congress was considering buyout legislation, but then rose by 35
percent in fiscal year 1994, when both DOD and non-DOD agencies had
buyout authority.  This suggests that some employees may have delayed
their retirements to receive buyout payments.  (See pp.  36-37). 


      AGENCIES VIEWED BUYOUTS
      POSITIVELY BUT SAID THAT
      STAFF REDUCTIONS CREATED
      OPERATIONAL PROBLEMS
-------------------------------------------------------- Chapter 0:4.4

Most of the agencies GAO surveyed viewed buyouts favorably as a
downsizing tool.  Of the 24 agencies responding to GAO's survey, 23
said that buyouts allowed them to avoid or reduce the number of RIFS,
and 20 reported that buyouts allowed them to both meet mandated
workforce ceilings and align their workforce with changing mission
requirements. 

Nevertheless, many of the agencies GAO surveyed said that downsizing
itself had caused problems.  Fifteen agencies cited the loss of
corporate memory and expertise, and 11 reported work backlogs due to
the loss of key personnel.  (See pp.  38-40). 

To offset workforce reductions, all 24 agencies reported they were
relying on reengineering/reinvention initiatives to streamline their
operations, while 20 said they were making greater use of automation. 
Five agencies reported using contractors to do the work previously
performed by buyout recipients, typically without doing cost
comparisons to determine if such outsourcing saved money. 

The law and guidance on outsourcing following buyouts is vague, as
demonstrated in part by two agencies' different interpretations of
what types of contract actions could trigger the cost comparison
requirement.  Further, in some cases, buyout recipients returned to
agencies as employees of private contractors.  In such situations,
any savings and workforce reductions realized from buyouts would be
reduced by increased contracting costs and thus would appear to be
inconsistent with the purpose of the Workforce Restructuring Act and
the administration's downsizing goals.  At a minimum, the Workforce
Restructuring Act required that agencies complete a cost comparison
to ensure that any new contracts were financially advantageous to the
government.  (See pp.  40-44). 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
---------------------------------------------------------- Chapter 0:5

To ensure the most cost-effective use of any future buyouts and to
help mitigate the adverse effects that can result from poorly planned
downsizing, GAO recommends that Congress, in reviewing HR 2751 or
other legislation that would grant buyout authority to agencies,
consider: 

  -- Requiring agencies to do strategic and workforce planning as a
     prerequisite for receiving buyout authority, and to implement
     downsizing consistent with the results of their planning
     efforts.  To the extent possible, priority should be given to
     retaining those employees possessing the knowledge and skills
     necessary to accomplish the agency's work. 

  -- ensuring that consideration of any buyout legislation is
     completed quickly and that buyouts, if approved, occur shortly
     thereafter.  This will help reduce the number of employees who
     might delay their retirements and other types of separations in
     the expectation of receiving a buyout. 

  -- Clarifying the kinds of procurement actions (e.g., new
     contracts, task orders, modifications, etc.) that would be
     subject to the cost comparison requirement.  (See p.  45). 


   AGENCY COMMENTS AND GAO'S
   EVALUATION
---------------------------------------------------------- Chapter 0:6

NPR and OPM provided written comments on a draft of this report.  NPR
said the report brought to light several important issues, including
the administration's commitment to downsizing the federal workforce
and the value of buyouts in reducing the impact of downsizing on
employees.  OPM commented that GAO's report was a timely analysis of
federal downsizing and would be helpful in planning future downsizing
activities. 

NPR and OPM both commented that GAO mixed the different purposes or
results of buyouts and the more general concept of downsizing, and
expressed concern that GAO used three different sources of data
interchangeably.  GAO agreed that the use of buyouts as a tool for
downsizing is different from the broader concept or results of
downsizing, and has modified the language of the report to clarify
that distinction.  GAO also agreed that it obtained data from several
sources as necessary to address the objectives of the work.  GAO did
not agree, however, that the data were used interchangeably.  Rather,
the data were used to describe, corroborate, or explain key findings. 
Where appropriate, GAO has modified the report to clarify the source
and purpose of the data. 

NPR commented further that the report's conclusions and observations
might be better understood if additional information were provided as
context for the discussion about contracting out and reemployment of
buyout recipients.  GAO agreed that additional context would be
helpful and provided additional information to that end.  NPR also
observed that GAO's matters for congressional consideration
concerning workforce planning and clarifying guidance on contracting
out following the use of buyouts might be difficult to implement and
could cause additional problems.  Because strategic and workforce
planning were identified as key elements of successful downsizing in
other organizations it has studied, GAO continues to believe that
such planning is a critical starting point for implementation of
buyout authorities in the federal government.  GAO also continues to
believe that, since different agencies had different interpretations,
clarification of the requirements for cost comparisons in

contracting out would reduce the likelihood of agencies'
misinterpretation of the intent of the Workforce Restructuring Act. 

NPR's and OPM's comments are discussed further at the end of chapter
4 and reprinted in full in appendixes III and IV. 


INTRODUCTION
============================================================ Chapter 1

To downsize the federal workforce with minimal use of reductions-in-
force (RIF), Department of Defense (DOD) and non-DOD agencies were
given the authority--under separate pieces of legislation-- to pay
eligible employees voluntary separation incentive payments (buyouts)
of as much as $25,000 to leave federal service.  In September 1994,
we testified on the results of the fiscal year 1994 buyouts at
non-DOD agencies.\1 Since then, thousands of additional employees
have taken buyouts, and new buyout legislation for non-DOD agencies
has been introduced in Congress.  What have the buyouts achieved?  To
answer this, we examined whether statutorily- mandated downsizing
goals were being achieved; the management strategy used to implement
the buyouts; the demographic results; how agencies viewed buyouts as
a downsizing tool; and what agencies said about the operational
effects of downsizing. 


--------------------
\1 Federal Employment:  The Results to Date of the Fiscal Year 1994
Buyouts at Non-Defense Agencies (GAO/T-GGD-94-214, Sept.  22, 1994). 


   ORIGINS OF THE FEDERAL BUYOUT
   AUTHORITY
---------------------------------------------------------- Chapter 1:1

The National Performance Review (NPR)--the administration's
initiative to "reinvent" government--called on agencies in its
September 1993 report to implement a variety of management reforms
that would allow for the elimination of 252,000 federal positions
over the following 5 years.  Included in this number were 100,000
positions the President had earlier ordered eliminated by the end of
fiscal year 1995.\2

To achieve these reductions while avoiding RIFs, NPR called for
legislation to allow non-DOD agencies to offer buyouts to employees
who voluntarily left federal service.  DOD agencies had been making
buyouts since January 1993 under earlier legislation.\3 According to
NPR, the original purpose of the DOD buyout authority was to ease the
reductions in the size of DOD following the end of the Cold War. 

According to Office of Personnel Management (OPM) data, agencies paid
over 112,500 buyouts to employees from January 1993 through September
30, 1995.  About 80,000 (71 percent) of these buyouts were paid to
DOD employees. 


--------------------
\2 Executive Order 12839, Feb.  10, 1993. 

\3 P.L.  102-484 authorized DOD buyouts through Sept.  30, 1997; P.L. 
103-337 extended DOD buyouts through Sept.  30, 1999. 


   PROVISIONS OF THE FEDERAL
   WORKFORCE RESTRUCTURING ACT OF
   1994
---------------------------------------------------------- Chapter 1:2

Responding to NPR's recommendation, on March 30, 1994, Congress
enacted the Federal Workforce Restructuring Act of 1994 (P.L. 
103-226) that permitted non-DOD executive branch agencies to offer
buyouts.  The buyouts could be paid to eligible employees in any
designated component, occupation, and/or geographic location who
agreed to resign, retire, or take early retirement by March 31, 1995,
unless the date was extended by the head of the agency, but no later
than March 31, 1997.  The buyout payment was the lesser of $25,000 or
an employee's severance pay entitlement. 

To receive a buyout, an employee must

  -- have served under appointment without time limit,

  -- have had 12 months of continuous service,

  -- not be a reemployed annuitant, and

  -- not be eligible for disability retirement. 

Under the law, buyout recipients who are rehired by the federal
government or perform services under a personal services contract
with the government within 5 years of their separation date are
generally required to repay the full amount of the buyout. 


   THE WORKFORCE RESTRUCTURING ACT
   INCREASED FEDERAL DOWNSIZING
   GOALS
---------------------------------------------------------- Chapter 1:3

In addition to providing non-DOD agencies with buyout authority, the
Workforce Restructuring Act raised the federal downsizing target for
all agencies, including DOD, from 252,000 to 272,900 full-time
equivalent (FTE) positions by fiscal year 1999.\4 Additionally, as
shown in table 1.1, the act placed annual ceilings on civilian
executive branch FTE levels for fiscal years 1994 through 1999. 



                               Table 1.1
                
                  Annual FTE Ceilings Mandated by the
                      Workforce Restructuring Act

Fiscal year                                                FTE ceiling
----------------------------------------  ----------------------------
1994                                                         2,084,600
1995                                                         2,043,300
1996                                                         2,003,300
1997                                                         1,963,300
1998                                                         1,922,300
1999                                                         1,882,300
----------------------------------------------------------------------
Source:  Federal Workforce Restructuring Act of 1994. 

In March 1995, we testified that data from the President's fiscal
year 1996 budget showed that for fiscal years 1995 and 1996, the
administration anticipated that the workforce would be below the FTE
levels mandated by the act.\5

To ensure that vacated positions were not refilled, the act required
a governmentwide (excluding DOD and the Central Intelligence Agency)
reduction in one FTE positions for each buyout given.  OMB
interpreted this to mean that for each buyout that occurs in a fiscal
year, the following year's FTE level should be reduced by at least
one. 


--------------------
\4 According to OMB guidance, an FTE or work-year generally includes
260 compensable days or 2,080 hours.  These hours include
straight-time hours only and exclude overtime and holiday hours. 

\5 Federal Downsizing:  The President's Fiscal Year 1996 Budget and
Its Compliance With the Federal Workforce Restructuring Act of 1994
(GAO/T-GGD-95-105, Mar.  30, 1995). 


   PAST WORK ON NONFEDERAL
   ORGANIZATIONS SHOWED THAT
   DOWNSIZING WAS MORE EFFECTIVE
   WHEN ACCOMPANIED BY ADEQUATE
   PLANNING
---------------------------------------------------------- Chapter 1:4

In calling on Congress to pass buyout legislation, NPR wanted to give
federal agencies the same downsizing tool commonly used by private
companies.  Our March 1995 review of downsizing strategies used by
selected nonfederal organizations found that they often used buyouts
to help cut employment levels.\6 Indeed, of the 25 entities we
contacted (17 private companies, 5 state governments, and 3 foreign
governments) that had successfully downsized in recent years, at
least 18 provided various incentives to encourage employees to
voluntarily leave.  Of these, 14 allowed buyouts based on the
organization's severance pay formula--usually 1 or 2 weeks' pay for
each year of service, with a maximum of a year's salary.  Employees
electing early retirement, regular retirement, or resignation were
eligible for the payments. 

Fifteen of the 25 nonfederal organizations we contacted said that it
was essential to do adequate strategic and workforce planning before
making decisions about appropriate workforce size and composition. 
They said strategic planning was needed to establish an
organization's mission.  Workforce planning was used to ensure that
employees with the skills and training needed to carry out the
organizations' mission were retained.  Several nonfederal
organizations noted that when they did not plan their downsizing or
consider the skills they would need in the future, they cut needed
employees, suffered skill imbalances, and were often forced to
replace employees with essential skills. 


--------------------
\6 Workforce Reductions:  Downsizing Strategies Used in Selected
Organizations (GAO/GGD-95-54, Mar.  13, 1995). 


   CONGRESS IS CONSIDERING NEW
   BUYOUT LEGISLATION
---------------------------------------------------------- Chapter 1:5

In December 1995, legislation was introduced in the House of
Representatives that would give agencies temporary authority to pay
retirement and separation incentives.  The Federal Employee
Separation Incentive and Reemployment Assistance Act (H.R.  2751)
would allow agencies to pay eligible employees the lesser of their
severance pay entitlement or $25,000, if they left federal service
between enactment of the legislation and September 30, 1997.  The
maximum amount of the buyout would then decrease to $20,000 for
takers between October 1, 1997, and September 30, 1998.  A final
round of buyouts would pay up to $15,000 for takers between October
1, 1998, and September 30, 1999.  The bill also contains incentives
for employees not yet eligible for retirement.  In addition to this
governmentwide bill, Congress is also considering agency-specific
buyout legislation. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:6

To help monitor the implementation of the Workforce Restructuring
Act, the Chairman, Subcommittee on Civil Service, House Committee on
Government Reform and Oversight, asked us to examine several issues
related to the buyout program.  In response, we reviewed

  -- whether the downsizing goals of the Federal Workforce
     Restructuring Act were being achieved;

  -- whether agencies' use of buyouts reflected the administration's
     workforce restructuring goals as articulated by NPR;

  -- what the demographic results of the buyouts were;

  -- how agencies viewed buyouts as a downsizing tool; and

  -- what operational impacts were attributed by agencies to
     workforce downsizing. 

To determine whether agencies' use of buyouts was consistent with
NPR's workforce restructuring goals, we interviewed representatives
of NPR, OMB, OPM, and officials of agencies that were downsizing.  We
also reviewed OMB memoranda and other pertinent documents, and did a
content analysis of a judgmental sample of 15 agencies' streamlining
plans.\7 The President had directed executive departments and
agencies to prepare streamlining plans that described how they
intended to meet NPR's restructuring goals. 

We compared the management strategies identified through our
interviews and document reviews to governmentwide results of the
buyouts as indicated by workforce data contained in OPM's Central
Personnel Data File (CPDF).  The file includes information on federal
workers in most agencies, the major exclusions being Members and
employees of Congress, the Judicial Branch, and the Postal Service. 
The CPDF covered fiscal years 1992 (the prebuyout workforce) through
March 31, 1995, (the date when the non-DOD buyouts ended).  We did
not assess the validity of the management strategies. 

To determine the demographic results of the buyouts, we analyzed CPDF
data by race, gender, occupation, type of separation, and years of
service. 

To identify operational impacts that were attributed by agencies to
workforce downsizing, we mailed questionnaires to the seven
departments and agencies that, at the time we began our study, were
expected to make nearly 85 percent of all buyouts granted between
January 1993 (the date of the first DOD buyouts) and the end of
fiscal year 1995.  The departments and agencies included Agriculture,
Interior, Transportation, DOD, Health and Human Services (HHS), GSA,
and NASA.  For all but GSA and HHS, we sent questionnaires to the
major subunits that granted the largest number of buyouts at those
agencies.  GSA and HHS each received a single questionnaire, and
responses represented the agencies in their entirety.  In all,
questionnaires were sent to 24 agencies.  Together, they accounted
for about 31 percent of the executive branch civilian workforce in
fiscal year 1995.  All 24 agencies responded for a return rate of 100
percent (app.  I lists the agencies included in our survey). 

Questionnaires were generally sent to personnel officials such as
office directors.  When warranted, we had follow-up discussions with
agency officials.  Agency responses to our questionnaire were also
used to respond to the first two objectives, when applicable.  The
aggregate results from respondents are contained in appendix II. 

The scope of our work covered the DOD buyout window, which began in
January 1993 (and is to remain open through fiscal year 1999), and
the non-DOD buyout window, which opened Apri1 1994 and ended March
31, 1995.  We did not verify the data in the CPDF nor the information
provided by agencies in their questionnaire responses and interviews. 

NPR and OPM provided written comments on a draft of this report. 
These comments are presented and evaluated in chapter 4.  NPR's
comments are reprinted in appendix III, and OPM's comments are
reprinted in appendix IV.  Our detailed responses to their comments
are presented in these appendixes as well. 

We did our audit work in Washington D.C., from April 1995 through
April 1996 in accordance with generally accepted government auditing
standards. 


--------------------
\7 The 15 plans we reviewed were the Departments of Agriculture,
Commerce, Defense, Education, Energy, Housing and Urban Development,
Interior, Justice, State, and Transportation; and the Environmental
Protection Agency, General Services Administration (GSA), Internal
Revenue Service, National Aeronautics and Space Administration
(NASA), and National Archives.  These agencies were selected because
they include the largest users of the buyout authority, and to obtain
a cross-section of different agencies. 


AGENCIES USED BUYOUTS MORE TO MEET
STATUTORILY MANDATED DOWNSIZING
OBJECTIVES THAN THE
ADMINISTRATION'S WORKFORCE
RESTRUCTURING GOALS
============================================================ Chapter 2

Buyouts helped agencies downsize with comparatively few RIFs.  Were
it not for buyouts, the agencies we surveyed said that many more
involuntary separations would have been necessary.  Although NPR
recommended that agencies direct their downsizing toward certain
"management control" positions that the administration said
contributed to government inefficiency, there has been little, if
any, decrease in management control positions as a proportion of the
total workforce. 


   BUYOUTS HELPED AGENCIES
   DOWNSIZE WITH MINIMAL USE OF
   RIFS
---------------------------------------------------------- Chapter 2:1

Federal employment levels have declined steadily since the
administration's downsizing efforts began in early 1993.  According
to OPM data, as of March 1996, non-Postal executive branch civilian
employment was 1.96 million, a reduction of almost 230,500 employees
(10.5 percent) since January 1993. 

Moreover, from fiscal year 1994 through March 1995 (a period when
both Defense and non-Defense agencies had buyout authority), the
executive branch civilian workforce downsized from 2,164,727
employees to 2,032,440 employees, a reduction of 6 percent.  The
nearly 64,000 buyouts that were made by Defense and non-Defense
agencies during that period accounted for much of this downsizing and
helped mitigate the need for RIFs.  Of the 24 agencies responding to
our questionnaire, 13 reported they RIFed 4,466 employees in fiscal
year 1994, and 12 reported they RIFed 868 employees in fiscal year
1995, at the time of our study.  (Nearly half of the fiscal year 1994
RIFs occurred at the Naval Sea Systems Command's Philadelphia,
Portsmouth, and Norfolk Naval Shipyards.  Fiscal year 1995 RIFs were
more evenly distributed across agencies). 

Governmentwide, CPDF data showed there were 7,450 RIFs during this
same period.  Thus, as shown in figure 2.1, RIFs were responsible for
6 percent of the 132,287 reductions in on-board personnel that took
place in fiscal year 1994 and the first half of fiscal year 1995,
while buyouts were responsible for about 63,789 reductions (48
percent).  The remaining reductions resulted from separations without
buyouts or were not coded by the CPDF. 

   Figure 2.1:  Buyouts Were
   Responsible for Nearly Half of
   the Reductions in On-Board
   Personnel in FY 1994 Through
   the First Half of FY 1995

   (See figure in printed
   edition.)

Note 1:  "Other reductions" include separations without buyouts or
those that were not coded by the CPDF. 

Note 2:  During this period there was a reduction of 132, 287
on-board personnel. 

Source:  GAO calculations based on OPM's CPDF database. 

Ten of 24 agencies said that they expected RIFs during the second
half of fiscal year 1995.  For fiscal year 1996, nine agencies said
they expected RIFs, six did not expect RIFs, and nine did not know. 
The U.S.  Geological Survey, for example, RIFed 485 people early in
fiscal year 1996. 

Had it not been for the buyout authority, it is likely that more
agencies would have RIFed a larger number of employees to meet
federal downsizing goals.  Indeed, 23 of the 24 agencies responding
to our questionnaire claimed that buyouts helped them avoid RIFs.  As
one respondent commented, "The buyout authority allowed us to
implement our reorganization and streamlining of staff without the
use of RIFs." Likewise, an official from a Defense agency noted, "By
using buyouts, we drastically decreased the number of involuntary
separations originally planned.  The use of buyouts has been a big
payoff for our command." A third said, "Buyouts substantially reduced
the number of individuals who would have been involuntarily separated
at three of our field activities which were targeted for closure.  . 
.  ."


   THE ADMINISTRATION DIRECTED
   AGENCIES TO PARE DOWN SPECIFIC
   POSITIONS
---------------------------------------------------------- Chapter 2:2

To streamline government, the administration, through NPR, directed
agencies to aim their workforce reductions at specific "management
control" positions that it said added little value to serving
taxpayers.  The administration also required agencies to prepare
streamlining plans describing the steps they intended to take to pare
down their workforces consistent with NPR's objectives.  OMB was to
review these plans to determine whether or not agencies could proceed
to offer buyouts. 

As defined by NPR, management control positions were those held by
managers and supervisors (including members of the Senior Executive
Service); headquarters staff; and employees in personnel, budget,
acquisition, and accounting/auditing occupations.  NPR recommended
that agencies increase supervisors' span of control over other
employees from 1:7 to 1:15, as well as to cut the remaining NPR
management control positions by 50 percent, all by fiscal year 1999. 
According to NPR, such positions had grown to twice their optimum
number.  By NPR's calculations in September 1993, they amounted to
about 660,000 positions, or about one-third of all federal employees. 

To ensure that agencies would accompany their downsizing with
workforce restructuring consistent with NPR's objectives, the
President called on each federal agency to submit a streamlining plan
to OMB.  Through a series of detailed memorandums and bulletins, OMB
provided the heads of executive agencies with information on how to
prepare these plans.  Agencies were to address, among other items,
how and when streamlining actions would occur, how the supervisory
span of control would be increased, and how their workforces would be
reduced consistent with NPR's objectives.  If an agency was unable to
meet one or more NPR goals, it was to justify its reasons for not
doing so and explain what it was doing instead to streamline and
improve program performance.  OMB officials told us that the quality
of these plans played an important role in whether or not OMB
approved agencies' buyout requests. 


   MANAGEMENT CONTROL POSITIONS
   SHOWED LITTLE PROPORTIONAL
   REDUCTION
---------------------------------------------------------- Chapter 2:3

Although agencies substantially reduced the number of management
control positions, as a proportion of the total workforce many of
these positions showed little, or no, reduction and, in some cases,
have increased. 


      GOVERNMENTWIDE, MANAGEMENT
      CONTROL POSITIONS HAVE NOT
      BEEN REDUCED AS INTENDED BY
      NPR
-------------------------------------------------------- Chapter 2:3.1

Although large numbers of management control positions have been
eliminated since the end of fiscal year 1992 (the year before buyouts
began at non-Defense agencies), as a proportion of the total
workforce, they were barely reduced.  As shown in table 2.1, for
example, while Defense and non-Defense agencies have made substantial
reductions in the number of supervisors, reductions in most other
positions have been carried out more slowly. 



                               Table 2.1
                
                Reductions in NPR Positions Compared to
                         Administration's Goals

                                                    Change from end of
                                     NPR reduction     FY 1992 through
NPR management control                        goal          first half
position                                by FY 1999             FY 1995
------------------------------  ------------------  ------------------
Defense agencies
----------------------------------------------------------------------
Personnel                                      50%               -8.3%
Budget                                          50                -1.8
Accounting/                                     50                -4.1
 auditing
Acquisition                                     50               -12.2
Headquarters staff                              50                -1.8
Supervisory span of control            1:7 to 1:15               1:7.4

Non-Defense agencies
----------------------------------------------------------------------
Personnel                                      50%               -7.0%
Budget                                          50                +0.1
Accounting/                                     50                -1.0
 auditing
Acquisition                                     50                -2.4
Headquarters staff                              50                -6.5
Supervisory span of control            1:7 to 1:15               1:7.6
----------------------------------------------------------------------
Source:  GAO calculations based on OPM's CPDF database. 

Moreover, because the entire government was being downsized, in many
instances the management control positions increased relative to the
workforce as a whole.  This was particularly true for Defense
agencies.  While the percentage of supervisors dipped from 12.7
percent of the Defense workforce to 11.9 percent, (1 supervisor for
every 6.9 employees to 1 supervisor for every 7.4 employees), all but
one of the other management control positions increased somewhat. 
Acquisition positions showed no change (see table 2.2). 

Non-Defense agencies did only slightly better.  The percentage of
supervisors in the non-Defense workforce went from 12.5 percent to
11.6 percent (1 supervisor for every 7 employees to 1 supervisor for
every 7.6 employees).  Personnel and headquarters staff also
decreased as a proportion of the non-Defense workforce, while the
remainder showed no improvement or slight increases (see table 2.2). 



                               Table 2.2
                
                NPR Positions Recommended for Reduction
                  as a Proportion of the Workforce, FY
                   1992 and the First Half of FY 1995

                                          Percentage of
                           Percentage of    DOD/non-DOD
                             DOD/non-DOD   workforce at
NPR management control      workforce FY      end first  Net change FY
position                            1992   half FY 1995   1992 to 1995
-------------------------  -------------  -------------  -------------
Defense agencies
----------------------------------------------------------------------
Personnel                           1.5%           1.6%          +0.1%
Budget                               1.2            1.3           +0.1
Accounting/                          2.4            2.6           +0.2
 auditing
Acquisition                          4.9            4.9              0
Headquarters staff                   6.6            7.4           +0.8
Supervisors                         12.7           11.9           -0.8

Non-Defense agencies
----------------------------------------------------------------------
Personnel                           1.7%           1.6%          -0.1%
Budget                               0.4            0.4              0
Accounting/auditing                  2.4            2.5           +0.1
Acquisition                          2.0            2.0              0
Headquarters staff                  14.6           14.2           -0.4
Supervisors                         12.5           11.6           -0.9
----------------------------------------------------------------------
Note:  Workforce totals for the end of FY 1992 were 960,317 (DOD);
1,231,229 (non-DOD); workforce totals for the end of the first half
of FY 1995 were 846,479 (DOD); 1,185,961 (non-DOD). 

Source:  GAO calculations based on OPM's CPDF database. 


      A NUMBER OF AGENCIES REDUCED
      SUPERVISORY POSITIONS BY
      RECLASSIFYING SUPERVISORS TO
      NONSUPERVISORS
-------------------------------------------------------- Chapter 2:3.2

Nineteen of the 24 agencies responding to our survey said they
reduced the number of supervisors partly by converting existing
supervisors to nonsupervisors or team leaders.  Four agencies said
this practice was not occurring, and one did not know.  Although such
conversions help flatten agencies and could result in less
bureaucracy, individuals in these positions remain on the payroll. 

As shown in table 2.3, among the seven agencies that indicated the
extent of this practice, such conversions often represented a large
portion of the total reduction in supervisors.  Conversions were
responsible for 41 percent of the supervisory reductions at NASA's
Marshall Space Flight Center; 40 percent at Bureau of Land Management
(BLM); 35 percent at Federal Aviation Administration (FAA); 29
percent at Naval Sea Systems Command; and 28 percent at HHS. 
Conversions accounted for 5 percent of the reduction in supervisors
at both the Natural Resource Conservation Service and NASA's Lewis
Research Center. 



                               Table 2.3
                
                 Percentage of Supervisors Converted to
                          Nonsupervisory Roles

                                                   Percentage of total
                                             reductions in supervisors
                                             represented by converting
                                                        supervisors to
Agency                                                  nonsupervisors
----------------------------------------  ----------------------------
NASA Marshall Space Flight Center                                  41%
BLM                                                                 40
Federal Aviation Administration                                     35
Naval Sea Systems Command (excluding                              29\a
 shipyards)
Department of Health and Human Services                             28
Natural Resources Conservation Service                               5
NASA Lewis Research Center                                           5
----------------------------------------------------------------------
\a This percentage represents an average of all unit activities. 
Individual activities ranged from 10 percent to 51 percent. 

Source:  GAO survey (see app.  II, question 21). 


   POSSIBLE REASONS WHY DOWNSIZING
   IS FALLING SHORT OF THE
   ADMINISTRATION'S WORKFORCE
   RESTRUCTURING GOALS
---------------------------------------------------------- Chapter 2:4

Data provided by the 24 agencies we surveyed suggested that at least
two factors may be responsible for the lack of progress made in
reducing management control structures:  (1) agencies were
inconsistent in their use of the buyout authority to reduce
management control positions and (2) a number of agencies often set
downsizing goals for the management control positions that were less
ambitious than those called for by the administration.  Although the
administration gave agencies discretion to downsize in ways that best
suited their needs, it appears that buyouts were used to meet the
numerical goals of the Federal Workforce Restructuring Act with
minimal regard for NPR's objective to reduce management control
positions. 


      EXCEPT FOR SUPERVISORS,
      AGENCIES WERE INCONSISTENT
      IN USING BUYOUTS TO HELP
      MEET NPR'S WORKFORCE
      RESTRUCTURING GOALS
-------------------------------------------------------- Chapter 2:4.1

One reason for the lack of progress made in meeting NPR's workforce
restructuring goals lies in the fact that with the exception of
supervisory positions, agencies were inconsistent in using the buyout
authority as a tool to trim management control positions as
recommended by NPR.  Instead, agencies appeared to use buyouts mostly
for achieving the numerical targets of the Workforce Restructuring
Act. 

Had agencies more successfully directed their buyouts to NPR
management control positions, the percentage of buyouts in these
occupations would probably have been higher than their representation
in the workforce.  However, as shown in table 2.4, when both Defense
and non-Defense agencies had buyout authority (fiscal year 1994
through the first half of fiscal year 1995), this was not the case
for most positions.  In fact, the percentage of buyouts taken in
budget, accounting/auditing, and headquarters positions, was actually
less than their representation in the workforce.  For most other
positions, the percentage of buyouts was roughly equal to their
representation in the workforce.  The one exception to this was
supervisory positions, which represented 11.5 percent of the
workforce during this period but received 20 percent of the buyouts. 



                               Table 2.4
                
                   Buyouts by NPR Management Control
                                Position

                                     Percentage of       Percentage of
                                workforce, FY 1994     buyouts FY 1994
NPR management control           through the first  through first half
position                              half FY 1995             FY 1995
------------------------------  ------------------  ------------------
Personnel                                     1.9%                2.2%
Budget                                         0.9                 0.8
Accounting/auditing                            3.1                 1.8
Acquisition                                    3.6                 5.4
Headquarters staff                            15.1                 9.5
Supervisors                                   11.5                20.0
----------------------------------------------------------------------
Note:  There were 63,790 buyouts in fiscal year 1994 through the
first half of fiscal year 1995. 

Source:  GAO calculations based on OPM's CPDF database. 

In some instances, agencies simply did not attempt to use buyouts to
help meet NPR's workforce restructuring goals.  Although the
Workforce Restructuring Act authorized the use of buyouts to assist
agencies in meeting numerical downsizing targets, it did not require
that buyouts be used to reduce the ranks of management control
positions as intended by NPR.  Moreover, OMB's guidance on preparing
streamlining plans did not specifically require agencies to show how
they planned to use buyouts to meet NPR's workforce restructuring
goals.  Finally, some agencies may not have restricted buyout
eligibility to employees in specific positions because they may have
feared morale would be adversely affected if buyouts were offered to
one set of employees but not to others. 

When agencies used buyouts to reduce the ranks of management control
positions, they were often directed at one or two management control
positions, typically supervisors and upper-level employees.  For
example, 7 of the 15 agency streamlining plans we examined tied their
buyouts to reducing supervisors and managers as well as upper-level
employees; however, none of the plans tied buyouts to personnel,
budget, acquisition, or accountant/auditor positions.  Similarly,
other agency documents we reviewed only gave preference to some of
the groups NPR recommended for reduction.  In such instances,
supervisors, managers, and upper-level employees were generally given
priority for receiving buyouts.  For example, in its first round of
buyouts, BLM gave priority to Senior Executive Service employees,
followed by employees in grades 15 and 14, and personnel occupations. 
Similarly, in its voluntary separation incentive plan, the Department
of Energy gave priority to supervisory and managerial positions and
upper-level employees in both fiscal years 1994 and 1995. 

Finally, even those agencies that directed buyouts at specific
positions did not always get the results they wanted.  The
Environmental Protection Agency (EPA), for example, planned to use up
to 80 percent of its total buyouts for managers and supervisors.  In
actuality, about 20 percent of the buyouts went to such individuals,
and EPA had to flatten the agency through other means, including
converting supervisors to nonsupervisors and team leaders. 


      AGENCIES OFTEN SET
      RESTRUCTURING GOALS THAT
      WERE LESS AMBITIOUS THAN
      THOSE RECOMMENDED BY THE
      ADMINISTRATION
-------------------------------------------------------- Chapter 2:4.2

Another likely reason for the minimal change in levels of management
control positions is that agencies said they could not meet NPR's
workforce restructuring goals without adversely affecting their
ability to carry out their missions.  Like the government as a whole,
the 24 agencies we surveyed made substantial personnel reductions,
many of which were achieved through buyouts.  However, our analysis
of agency streamlining plans shows that agencies claimed they could
not reduce management control positions to the levels recommended by
NPR without adversely affecting their operations.  As a result, these
agencies often set their own restructuring goals at a less ambitious
level than those called for by the administration.  Although OMB
allowed this, agencies were asked to specify what alternative steps
they were taking to restructure their workforces. 

Table 2.5 shows the variance between NPR's goals for reducing
management control positions and the average of agencies' reduction
goals as reported in their survey responses.  While agencies made
considerable progress in meeting their own workforce restructuring
goals, those goals were generally far lower than those recommended by
NPR.  DOD agencies may have had somewhat lower reduction goals for
management control positions because when closing a military base,
all positions are eliminated, regardless of whether they are
management control positions. 



                                    Table 2.5
                     
                       Reductions in NPR Management Control
                                    Positions

NPR
manageme                                            Percentage
nt           NPR reduction        Average of      reduction FY     Percentage of
control               goal         agencies'      1993 through  reduction due to
position        by FY 1999   reduction goals        Sept. 1995           buyouts
--------  ----------------  ----------------  ----------------  ----------------
Defense agencies
--------------------------------------------------------------------------------
Personne               50%             25.9%             16.0%             55.3%
 l
Budget                  50              17.3               7.6             114\a
Accounti                50              20.7              28.9              18.3
 ng/
 auditin
 g
Acquisit                50              15.6              15.7              74.5
 ion
Supervis       1:7 to 1:15            1:14.1             29.7%             33.3%
 ory
 span of
 control

Non-Defense agencies
--------------------------------------------------------------------------------
Personne               50%             37.1%             26.5%             48.8%
 l
Budget                  50              33.4              17.0              57.2
Accounti                50              27.8              17.4              46.4
 ng/
 auditin
 g
Acquisit                50              31.4              15.4              76.8
 ion
Supervis       1:7 to 1:15            1:12.5             16.7%             64.4%
 ory
 span of
 control
--------------------------------------------------------------------------------
\a The percentage of reduction due to buyouts was 114 percent because
three agencies increased their FTE levels while still granting
buyouts, and a fourth agency reported it granted more buyouts than
the decrease in its FTEs. 

Note:  Our analysis was based only on those agencies that provided
complete data for each category in their survey responses. 

Source:  GAO survey (see app.  II, questions 6-8). 

With regard to meeting their own goals, however, table 2.5 shows
that, on average, agencies are well on their way.  Indeed, several
individual agencies have already met or exceeded their reduction
goals.  For example, the Geological Survey's goal for reducing
accountants and auditors was 47 percent, but the Survey expected a 58
percent reduction by the end of fiscal year 1995.  The Forest
Service's goal for reducing acquisition specialists was 15 percent,
but the Service expected a 22 percent reduction by the end of fiscal
year 1995.  Similarly, three agencies responding to our survey stated
that buyouts helped them meet their reduction goals for supervisors
and managers.  For example, the Department of Health and Human
Services (HHS) said that buyouts helped its Agency for Health Care
Policy and Research reduce senior staff by six people, supervisory
staff by five people, and control staff by one person. 

The agency streamlining plans we examined cited various reasons for
not meeting NPR's goals.  For example, the Department of Housing and
Urban Development said it will increase acquisition specialists by 23
percent because it needs them to address long-standing weaknesses
cited in reports on compliance with the Financial Integrity Act.  The
Department of Education said it will reduce budget analysts by 25
percent, but that a deeper cut is infeasible given, for example, the
continuing growth in the number of department programs as well as the
complexity of its legislation, budgets, policies, and programs. 

Only one of the 15 agencies whose plans we reviewed had complied with
the NPR recommendation to establish a goal that would increase the
supervisor to subordinate ratio from 1:7 to 1:15 by fiscal year 1999. 
The others set goals ranging from 1:9 to 1:14.  The Department of
Justice, for example, said the U.S.  Marshals Service will not make
significant progress at improving its supervisory ratio.  Because the
Marshals Service must maintain offices with 10 or fewer employees in
order to staff all federal court facilities, it is difficult to
eliminate supervisors in district offices.  The Department of
Agriculture claimed that doubling the current span of control for
supervisors to 1:15 would not allow it to carry out its mission.  It
said most of its work is at field project locations, where a
supervisor monitors two to six people.  Moreover, the optimum size of
fire fighting crews for safety and coordination purposes is less than
the 1:15 ratio. 

Although OMB gave agencies discretion to downsize according to their
needs, if agencies could not meet NPR's workforce restructuring
goals, they were to provide information on what they were doing
instead to streamline and improve program performance.  Of the 15
agency streamlining plans we examined in our content analysis, 10
indicated they could not meet NPR's objectives.  While these 10
streamlining plans generally included discussions of how agencies
intended to reorganize, reengineer, and take other steps to improve
services, only one indicated what the agency was doing instead to
meet NPR's workforce restructuring goals. 


      AGENCIES THAT REPORTED THEY
      PLANNED THEIR USE OF BUYOUTS
      SAID THEY HAD SUCCESSFUL
      OUTCOMES
-------------------------------------------------------- Chapter 2:4.3

As we found in our earlier survey of nonfederal organizations,
several federal agencies, in comments written on their questionnaire
responses, indicated that they planned the use of their buyouts and
thus had successful outcomes.  The National Park Service, for
example, said that it "used the buyout authority, with management
controls, to target occupational series and organization levels as
well as senior management positions to effect those reductions that
were consistent with the administration's goals.  We were very
successful accomplishing this without the need for [RIFs]."
Similarly, the Naval Supply Systems Command reported that
"Controlling [buyout] eligibility by series and grade level provided
an opportunity to encourage attrition in labor surplus skill while
permitting the retention of critical skills."

However, other agencies' comments suggested that they could have
avoided certain adverse impacts had they done more meaningful
workforce planning.  One agency noted the effects of inadequate
workforce planning at its Office of Inspector General (OIG): 

     "[The] average grade for buyouts was GS-13.  Employees in these
     grades were primarily journeyman level auditors and
     investigators with a great deal of experience and knowledge in
     [agency] programs and OIG's mission.  It will take considerable
     time for remaining staff to acquire the previous level of
     expertise given continuing workload pressures."

Another agency noted: 

     "Some activities have actually had to turn away work because of
     insufficient numbers of personnel .  .  .  while other
     activities carry more employees than there is work.  Downsizing
     is only effective if it is based on a full analysis of workload,
     past, present, and future.  Some activities actually could use
     more personnel; most could downsize to an even greater extent."


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:5

The buyouts enabled agencies to meet the downsizing goals of the
Workforce Restructuring Act while mitigating the need for RIFs.  Had
it not been for the buyout authority, it is likely that agencies
would have needed to RIF a larger number of employees to meet their
downsizing objectives.  Nevertheless, compared to the workforce as a
whole, little, if any, progress was made in reducing the ranks of
management control positions, as recommended by NPR in the belief
that these positions added to federal bureaucracy.  As a proportion
of the workforce, the number of management control positions was
rarely smaller and, in some cases, was slightly larger than they were
before the buyouts began. 

The buyout authority gave agencies a powerful tool to manage their
downsizing by directing personnel cuts where they were needed most. 
However, it appears that many agencies used buyouts to meet workforce
reduction goals without restructuring their agencies' workforces.  As
a result, some agencies are reporting skill gaps (see chapt.  3).  As
demonstrated in our earlier study of downsizing strategies at
selected nonfederal organizations, better workforce planning--which
would have analyzed what skills were needed and where--combined with
using buyouts to help achieve the results of such planning, would
likely have made agencies' downsizing and restructuring efforts more
effective. 


THE EFFECTS OF BUYOUTS AND
DOWNSIZING ON EMPLOYEE
DEMOGRAPHICS AND AGENCY OPERATIONS
============================================================ Chapter 3

Buyouts allowed agencies to downsize without adversely affecting
workforce diversity.  Had RIFs been used instead, our prior work
suggests that women and minorities might not have fared as well. 
Most buyouts went to retirement-eligible employees. 

Although we could not determine whether buyouts influenced individual
employees to leave federal service earlier or later than they would
have otherwise, separation data suggests that some employees stayed
longer to receive a buyout. 

Agencies generally had favorable views of buyouts as a downsizing
tool.  They noted that buyouts allowed them to meet mandated
workforce ceilings and align their workforce with changing mission
requirements, among other positive outcomes. 

On the other hand, agencies reported that downsizing has had certain
adverse operational effects.  These included the loss of
institutional memory and an increase in work backlogs. 

To compensate for fewer employees, agencies said they were relying
more heavily on reinvention initiatives and automation as well as
contracting out.  Although such outsourcing could help agencies carry
out their work, it was often done without first determining whether
it was financially advantageous to the government.  Further, without
such a determination, it appears to be contrary to the purpose of the
Workforce Restructuring Act and the administration's downsizing
goals. 


   BUYOUTS ENABLED AGENCIES TO
   DOWNSIZE WITHOUT
   DISPROPORTIONATELY AFFECTING
   WOMEN AND MINORITIES
---------------------------------------------------------- Chapter 3:1

The buyouts enabled agencies to downsize while maintaining their
workforce diversity.  RIFs, an alternative method of downsizing,
could have resulted in higher separation rates of such individuals. 


      THE EFFECT OF BUYOUTS ON
      WOMEN AND MINORITIES
-------------------------------------------------------- Chapter 3:1.1

Although it was not an explicit goal of the buyout legislation, 10 of
the 24 agencies responding to our survey indicated that buyouts
helped them improve the diversity of their workforces.  This is
because, as shown in figure 3.1, buyout recipients governmentwide
were most likely to be white males.  Indeed, of the nearly 83,000
employees who accepted buyouts from fiscal year 1993 through the
first half of fiscal year 1995, 52 percent were white males. 

   Figure 3.1:  Buyout Recipients
   Were Most Likely to Be White
   Males

   (See figure in printed
   edition.)

Note 1:  Buyouts were authorized only for DOD agencies in FY 1993. 

Note 2:  There were 18,982 buyouts taken in FY 1993; 34,341 in FY
1994; and 29,449 through the first half of FY 1995. 

Source:  GAO calculations based on OPM's CPDF database. 

The demographic profile of buyout recipients is one reason why the
personnel reductions that have taken place over the past few years
were carried out without disproportionately affecting the employment
of women and minorities.  To the contrary, as a percentage of the
total workforce, women and minorities made slight gains from fiscal
year 1992 (the year before buyouts were authorized for DOD agencies)
through the first half of fiscal year 1995 (see table 3.1). 



                               Table 3.1
                
                   Federal Agencies Downsized Without
                 Disproportionately Affecting Women and
                               Minorities

                                On-board  Percentage of  Percentage of
Fiscal year                    personnel          women     minorities
-------------------------  -------------  -------------  -------------
1992                           2,191,546          43.4%          27.9%
1993                           2,164,727           44.1           28.4
1994                           2,086,877           44.3           28.6
First half FY 1995             2,032,440           44.6           28.9
----------------------------------------------------------------------
Source:  GAO calculations based on OPM's CPDF database. 

Had RIFs been used to downsize the federal workforce, it is unlikely
that women and minorities would have fared as well.  As set forth in
5 U.S.C.  3502, an employee's retention depends on (1) tenure (i.e.,
career, career conditional, or temporary); (2) veterans' preference;
(3) length of service; and (4) efficiency or performance rating.  The
RIF regulations implementing this provision require agencies to rank
each employee where jobs are to be eliminated and record this ranking
in a retention register.  In our prior work at three defense
installations, we found that women and minorities were separated at a
rate disproportionate to their numbers, partly because they ranked
lower than white males in one of the retention factors.\1 Moreover,
our analysis of the retention factors for all civilian workers
employed by the military services at the end of fiscal year 1991
indicated that minority and women employees may continue to be
vulnerable to future RIFs because they ranked lower than their male
counterparts in all retention factors. 


--------------------
\1 Federal Personnel:  The EEO Implications of Reductions-In-Force
(GAO/T-GGD-94-87, Feb.  1, 1994). 


   MOST BUYOUTS WERE PAID TO
   EMPLOYEES WHO RETIRED
---------------------------------------------------------- Chapter 3:2

The largest share of the buyouts were paid to employees who took
regular or early retirements.  Short of surveying these individuals,
there is no way of knowing whether the buyout payment motivated them
to leave earlier than they would have otherwise, thus generating
payroll savings.  However, recent separation trends suggest that
among all buyout recipients, there were probably a number who stayed
on the federal payroll longer in order to receive a buyout payment. 


      RETIREMENT-ELIGIBLE
      EMPLOYEES RECEIVED THE
      LARGEST SHARE OF THE BUYOUTS
-------------------------------------------------------- Chapter 3:2.1

As shown in table 3.2, of the 82,771 buyouts made governmentwide
between fiscal year 1993 and the first half of fiscal year 1995, when
we could identify the type of separation, 40 percent of the buyouts
were paid to employees who took regular retirement.  Nearly another
third were paid to employees who took early retirement.  Thus, even
without buyouts, a number of these employees might have left anyway. 



                                    Table 3.2
                     
                     Most Buyout Recipients Were Eligible for
                        Either Early or Regular Retirement


                                                                     Others plus
Fisca                                                                  those not
l                                            Early        Regular  classified by
year   Total buyouts    Resignation     retirement     retirement         CPDF\a
-----  -------------  -------------  -------------  -------------  -------------
1993          18,982          10.2%          28.9%          30.1%          30.8%
1994          34,341           12.2           35.1           45.7            6.9
First         29,448            9.8           31.2           40.6           18.4
 half
 FY
 1995
================================================================================
Total         82,771          10.9%          32.3%          40.3%          16.5%
--------------------------------------------------------------------------------
\a Of 82,771 buyouts, 20 accompanied separations other than those
listed in the table; 13,649 buyouts were not classified by the CPDF
according to type of separation. 

Note:  Row percentages may not add to 100 percent because of
rounding. 

Source:  GAO calculations based on OPM's CPDF database. 

Without directly surveying employees, it is difficult to determine
whether buyouts influenced them to leave federal service earlier or
later than they would have otherwise.  However, governmentwide data
shows that separations for employees covered by the Civil Service
Retirement System and the Federal Employees Retirement System dropped
by 20 percent from the end of fiscal year 1991 through fiscal year
1992, when Congress was considering buyout legislation.  Separations
then rose by 35 percent in fiscal year 1994, when both DOD and
non-DOD agencies had buyout authority.  Although some of the drop in
separations may have been due to economic conditions at the time, it
is likely that some employees delayed their separations so that they
could receive a buyout.  As one agency commented in its survey
response: 

     "Due to the heavy, constant and lengthy publicity about
     potential legislation to authorize buyouts, many individuals
     eligible to retire earlier had delayed their retirement hoping
     to cash-in on the extra money, i.e., attrition during the 2 or 3
     years prior to the incentive legislation was almost
     non-existent."


   MOST AGENCIES VIEWED BUYOUTS
   FAVORABLY AS A DOWNSIZING TOOL
---------------------------------------------------------- Chapter 3:3

When asked their opinion of the buyout authority as a downsizing
tool, most respondents to our questionnaire reported positive
outcomes.  As shown in table 3.3, nearly all of the agencies
responding to our survey reported that buyouts enabled them to
mitigate the need for RIFs (as already discussed in chapt.  2); meet
mandated workforce ceilings; and align their workforce with changing
mission requirements. 



                               Table 3.3
                
                Agencies Reported Buyouts Had Favorable
                                Outcomes

Outcome                                            Agencies responding
----------------------------------------  ----------------------------
Allowed agencies to avoid or reduce the                             23
 number of RIFs
Allowed agencies to meet mandated                                   20
 workforce ceilings
Assisted agencies in aligning workforce                             20
 with changing mission requirements
Assisted in improving agencies'                                     10
 diversity profiles
----------------------------------------------------------------------
Source:  GAO survey (see app.  II, question 15). 

Several respondents added comments to their questionnaires that
elaborated on their views.  They include the following: 

  -- "The buyout authority has enabled the Centers for Disease
     Control (CDC) to reduce staffing and realign and improve its
     organization.  .  .  .  FTE reductions coupled with attrition
     have enabled CDC to reach its fiscal year 1995 targeted FTE
     level while allowing for selected external recruitment for
     critical scientific and technical vacancies."

  -- "Buyouts helped the Naval Supply Systems Command meet budgeted
     end-strength targets for the headquarters and its subordinate
     field activities."

  -- "Buyouts helped limit organizational turmoil/disruption during
     downsizing by reducing adverse impacts and involuntary
     separations."

Moreover, in our prior work, we found that buyouts generally saved
the government more money than did RIFs.  Our analysis showed that
compared to a typical RIF, buyouts could generate over $60,000 more
in net savings for each vacated position over a 5-year period,
depending upon the assumptions made.\2 RIFs can also adversely affect
agency operations and employee morale. 


--------------------
\2 Federal Downsizing:  The Costs and Savings of Buyouts Versus
Reductions-in-Force (GAO/GGD-96-63, May 14, 1996). 


   AGENCIES SAID THAT DOWNSIZING
   HAS CAUSED OPERATIONAL IMPACTS
---------------------------------------------------------- Chapter 3:4

From fiscal year 1993 to fiscal year 1995, the 24 agencies responding
to our survey reported that they lost nearly 85,000 FTEs, or about 12
percent of their allocation.  As shown in figure 3.2, when
respondents were asked whether they thought downsizing has helped,
hindered, or had no effect on their agency's ability to accomplish
its mission, half said that downsizing somewhat or greatly hindered
their agency's mission.  Ten agencies could not say, one reported no
effect, and only one said that downsizing has helped the agency
accomplish its mission. 

   Figure 3.2:  Respondents' Views
   on How Downsizing Has Affected
   Their Agency's Ability to
   Accomplish its Mission

   (See figure in printed
   edition.)

Source:  GAO survey (see app.  II, question 26). 

Other operational effects of downsizing reported by agencies are
shown in table 3.4.  Of these, the largest number of respondents said
that downsizing resulted in the loss of corporate memory and
expertise and created work backlogs because key personnel were
separated. 



                               Table 3.4
                
                Agencies Reported Negative Outcomes From
                               Downsizing

Outcome                                            Agencies responding
----------------------------------------  ----------------------------
Loss of corporate memory and expertise                              15
Created work backlogs due to loss of key                            11
 personnel
Lowered morale of remaining employees                                8
Agency projects have been delayed or                                 5
 canceled because of staffing
 deficiencies
Lowered productivity of remaining                                    4
 workforce
Reduced ability to oversee contractor                                2
 operations
----------------------------------------------------------------------
Source:  GAO survey (see app.  II, question 15). 

Comments supporting their views include: 

  -- ".  .  .  [S]ince older, more experienced workers took advantage
     of [the buyout] there was an initial backlog plus loss of
     corporate memory.  We are adjusting to that by increased
     training (mostly on-the-job).  Morale has been somewhat lower
     due to the loss of experienced employees.  Remaining personnel
     required to assume additional duties may not have experience."

  -- "Several [agency] operating divisions were impacted by the loss
     of expertise in key management areas including program
     management, financial management, procurement and grants,
     personnel, and engineering services."

  -- "Downsizing has had a material impact on the [agency] in meeting
     its critical mission requirements.  Backlogs have been created
     and some "nice to do" actions are no longer being performed or
     are significantly delayed.  There is an impact on the morale of
     the employees left behind who have been tasked with maintaining
     productivity and the level of services expected by the customers
     prior to downsizing."


   AGENCIES REPORTED TAKING
   VARIOUS STEPS TO COMPENSATE FOR
   A SMALLER WORKFORCE
---------------------------------------------------------- Chapter 3:5

Given the large-scale downsizing that has taken place over the past
few years, agencies reported taking a number of steps to offset
workforce reductions.  These included various reengineering and
automation initiatives as well as contracting out work formerly done
by federal employees. 


      AGENCIES SAID THEY WILL RELY
      ON REENGINEERING AND
      AUTOMATION TO COMPENSATE FOR
      A SMALLER WORKFORCE
-------------------------------------------------------- Chapter 3:5.1

To compensate for fewer employees, all of the agencies we surveyed
said they were relying on reengineering/reinvention initiatives to
streamline their operations, while 20 indicated they were increasing
their use of automation.  Examples of the steps being taken by
agencies include the following: 

  -- GSA said that it has enlisted the services of a contractor to
     develop a Federal Operations Review Model (FORM).  FORM is the
     avenue through which all GSA business operations are to be
     evaluated to determine the most cost effective method of
     ownership, management, and operations. 

  -- HHS reported it is deploying staff more efficiently by
     cross-training auditors and evaluators to assist in
     investigative work through joint audits, evaluations, and
     investigations.  Its Office of Inspector General (OIG) is also
     doing joint investigations with other federal law enforcement
     agencies, including the Secret Service, Federal Bureau of
     Investigation, Internal Revenue Service, Postal Inspection
     Service, state governments, and other agencies' Offices of
     Inspector General.  OIG also said it was making greater use of
     teleconferencing, the Internet, and other forms of electronic
     mass communication. 

  -- The Naval Sea Systems Command said it began reinventing its
     operations through a program called "Building High-Performance
     Organizations for the Twenty-first Century." It focuses on team
     building, formal and informal employee training, leveraging
     technology, and promoting leadership throughout all levels of
     the organization.  According to the Naval Sea Systems Command,
     this effort has resulted in a net cost avoidance of over $160
     million and an increased return on investment by 60 percent in
     at least one program. 

Despite these initiatives, agencies may still encounter problems in
trying to carry out all their work with fewer employees.  One agency,
for example, said that despite taking steps to compensate for staff
losses, such as readjusting workloads to ensure that the highest
priority work was accomplished with the available resources, it
anticipated shortfalls in production and service levels.  Further,
the agency estimated that it would take 3 years to return to the
current skill level for fire management, one of its key functions. 
Another agency reported that it was using a substantial amount of
overtime to meet production schedules. 


      SEVERAL AGENCIES REPORTED
      CONTRACTING OUT FUNCTIONS TO
      COPE WITH STAFF LOSSES
-------------------------------------------------------- Chapter 3:5.2

Another way agencies are compensating for a smaller workforce is by
outsourcing work to private contractors.  Five of the 24 agencies
responding to our survey said they were using contractors to perform
work previously done by employees who had taken a buyout.  Three of
these agencies said they anticipated contracting out more work in the
future. 

Of these five agencies, four reported that some of the contract
employees were former federal workers who took buyouts and then
returned to the agency under a contract.  Three additional agencies
indicated that buyout recipients returned as employees of private
contractors, but the agencies did not say whether these employees had
replaced civil servants who took buyouts.  In total, seven agencies
indicated that buyout recipients had returned to work as employees of
contract firms. 

The reemployment of buyout recipients as employees of service
contractors was not prohibited under the DOD and non-DOD buyout
authorities.  Further, we did not find any evidence that would
suggest that this practice was pervasive, especially when considered
in light of the total number of buyouts that have been made to date. 


      CONTRACTING PROVISIONS OF
      THE WORKFORCE RESTRUCTURING
      ACT AND OTHER GUIDANCE ON
      PROCUREMENT ARE UNCLEAR
-------------------------------------------------------- Chapter 3:5.3

The Workforce Restructuring Act and OMB guidance limited an agency's
ability to replace vacated civil service positions with contract
employees.  Section 5(g) of the act provided that the President shall
take appropriate action to ensure that there is no increase in
service contracts as a result of the act, unless a cost comparison
indicated that such contracts were financially advantageous to the
government.  In a 1994 memorandum to the heads of departments and
agencies, the Acting Director of OMB stated that the administration
did not expect agencies to simply contract out the work of employees
who left the government as a result of downsizing, and asked for
"vigilance" in complying with the provisions of section 5(g). 

Nevertheless, section 5(g) is unclear and may not be effective in
limiting the outsourcing of vacated positions.  This is demonstrated
in part by the different interpretations of section 5(g) by two
agencies that reported that buyout recipients returned to their
agencies as contractor employees. 

At NASA's Lewis Research Center, 18 of the 199 buyout recipients in
fiscal year 1994 returned to Lewis as employees of service
contractors.  All but 1 received the maximum allowable buyout of
$25,000, and 5 of the 18 returned within a week of leaving the
agency.  NASA did not do a cost comparison because, according to a
Lewis official, the former employees were hired under task orders of
an existing contract.  Because of this, NASA felt that section 5(g)
of the Workforce Restructuring Act did not apply.\3

Conversely, guidance issued by FAA required cost comparisons for task
orders and other procurement actions.  The Department of
Transportation's Inspector General cited this guidance in finding
violations of the Workforce Restructuring Act at FAA.  In its
February 1996 report, the Inspector General found that of the 20
former FAA employees it audited who had returned as contract
employees, cost comparisons were done in just three cases.\4

Section 5(g) is also unclear in specifying what type of "appropriate
action" agencies shall take to comply with the section.  Thus, there
is little to ensure accountability on the part of agencies. 

Aside from these legal issues, our analysis and prior work\5 suggest
that better planning, and particularly offering buyouts based on the
results of such planning efforts, could have reduced or eliminated
the need for contract personnel.  For example, one agency told us
that when two employees who provided computer services took buyouts,
it left a gap in the agency's technical support.  The agency turned
to an existing contractor to provide the services, and the contractor
supplied the two former employees.  Another agency paid a buyout to
the only engineer in a particular region.  To get the work done, the
agency had to rehire that person as a contractor. 


--------------------
\3 Nevertheless, following our inquiry, the Center director stopped
the practice of using contractors to fill positions vacated by civil
servants in order to avoid the appearance of impropriety. 

\4 The Department of Transportation Inspector General recommended,
and the FAA administrator agreed, to take action to identify
individuals who violated applicable provisions of the Workforce
Restructuring Act and initiate appropriate remedial action. 

\5 Workforce Reductions:  Downsizing Strategies Used in Selected
Organizations (GAO/GGD-95-54, Mar.  13, 1995). 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:6

Available data indicate that buyouts helped agencies downsize without
disproportionately affecting the representation of women and
minorities in the workforce.  Despite the successes of buyouts, a
number of agencies said they are being stretched too thin, in part
because the agency workforce was reduced, while the workload was not. 
This is why strategic planning is so important--it establishes an
organization's future goals and work to be carried out.  Without
meaningful strategic planning, it is unlikely that agencies can
continue to downsize and maintain the level of service and
productivity that they currently provide taxpayers.  Moreover, when
strategic planning is combined with workforce planning, as described
in chapter 2, skill imbalances-- which may be contributing to some of
the adverse effects that agencies are experiencing as a result of
downsizing--are more easily avoided.  Similarly, such comprehensive
planning could have better determined the number of potential
retirees at agencies, thus permitting better planning to retain or
replace key skills. 

Further, although outsourcing may be economically feasible in certain
circumstances, without cost comparisons, the savings to taxpayers are
difficult to determine.  The Workforce Restructuring Act is unclear
in specifying when such cost comparisons are required.  Without a
cost comparison showing that contracting-out is financially
advantageous to government, any savings realized from buyouts would
be reduced by increased contracting costs and would appear to be
inconsistent with the purpose of the Workforce Restructuring Act and
the administration's downsizing goals. 


MATTERS FOR CONGRESSIONAL
CONSIDERATION
============================================================ Chapter 4

To ensure the most cost-effective use of any future buyouts and to
help mitigate the adverse effects that can result from poorly planned
downsizing, we recommend that Congress, in reviewing HR 2751 or other
legislation that would grant buyout authority to agencies, consider: 

  -- Requiring agencies to do strategic and workforce planning as a
     prerequisite for receiving buyout authority and to implement
     downsizing consistent with the results of their planning
     efforts.  To the extent possible, priority should be given to
     retaining those employees possessing the knowledge and skills
     necessary to accomplish the agency's work. 

  -- Ensuring that consideration of any buyout legislation is
     completed quickly and that buyouts, if approved, occur shortly
     thereafter.  This will help reduce the number of employees who
     might delay their retirements and other types of separations in
     the expectation of receiving a buyout. 

  -- Clarifying the kinds of procurement actions (e.g., new
     contracts, task orders, modifications, etc.) that would be
     subject to the cost comparison requirement. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:1

NPR and OPM provided written comments on a draft of this report. 
NPR's comments, along with our responses, are reprinted in appendix
III; OPM's comments and our responses are reprinted in appendix IV. 

NPR said that the report brought to light several interesting issues,
including the administration's commitment to downsizing the federal
workforce, the value of buyouts in reducing the impact of downsizing
on employees, and the need for the administration to do a better job
of decreasing management control positions as NPR recommended in its
September 1993 report.  However, NPR expressed concerns with aspects
of our methodology and with our proposed matters for congressional
consideration.  OPM commented that our report was a timely analysis
of federal downsizing, and that it was quite helpful for "planning
future action relating to reducing the size of the federal workforce
in an efficient and fiscally responsible manner." OPM also expressed
concerns about aspects of our methodology. 

With respect to our methodology, both NPR and OPM stated that we had
used data from three different sources 'interchangeably," and that we
had not adequately distinguished the use of buyouts as a tool for
downsizing and the broader concept and results of downsizing.  We
acknowledge that we obtained data from several different sources
(e.g., the CPDF, agency streamlining plans, and a survey of agency
officials).  We did so to address each of the specific objectives of
our review.  For example, the CPDF data were relevant to our
evaluation of the governmentwide use of buyouts and to our analysis
of the workforce reductions in the management control positions
targeted for reduction by the NPR.  Information from agency
streamlining plans and our survey were relevant to our evaluation of
the extent of agency planning for their reductions and to the broader
impacts of downsizing on agency operations.  Thus, we do not believe
that we used the data interchangeably.  However, we have added
clarification where appropriate to identify the source and purpose of
the data we report.  We also agree that it is important to
distinguish between the use of buyouts as a tool for downsizing and
the broader concept and results of downsizing, and have modified the
report to make that distinction clearer. 

NPR observed that our conclusions and observations would be better
understood if additional information were provided to show more
details about DOD's and non-DOD agencies' use of buyouts, including
the different time periods and constraints of the buyout authorities. 
We agree and have modified the report to clarify those differences. 
NPR also suggested that it would be helpful to provide additional
context for our discussion about the use of contracting out and the
reemployment of buyout recipients.  In particular, NPR was concerned
that it be made clearer that contracting out and reemployment of
buyout recipients were occurring on a relatively small scale compared
to the use of buyouts governmentwide.  We agree and have added
language to better provide that perspective. 

NPR also expressed concern that the matters for congressional
consideration would "do more harm than good," and could cause
additional burdens or costs, because workforce planning is difficult
and time consuming and would conflict with the recommendation to
promptly implement buyout authority.  Because strategic and workforce
planning have been identified as key elements of successful
downsizing in other organizations we have studied, we have long
considered such planning to be a critical aspect of carrying out a
downsizing effort.  We agree that such planning can be a challenge to
do successfully, since downsizing objectives are not always
consistent with mission requirements or organizational needs, but we
continue to believe that strategic and workforce planning should be
part of the decisions regarding the use of buyouts. 

Finally, NPR commented that our recommendation that additional
guidance be provided concerning the requirement for cost comparisons
in the contracting out of activities carried out by employees who
accepted buyouts would further complicate an already overly
restrictive and burdensome law.  On the basis of our observations
that NASA and FAA had different interpretations of the cost
comparison requirement, we believe that additional guidance would
clarify the issue for agencies, with little if any additional burden
or cost. 

NPR and OPM each made additional specific comments, which are
addressed as appropriate in appendixes III and IV. 


AGENCIES PARTICIPATING IN GAO'S
STUDY
=========================================================== Appendix I

1.  Air Force Materiel Command

2.  Army Armament, Munitions, and Chemical Command

3.  Army Communications and Electronics Command

4.  Army Corps of Engineers

5.  Army Depot Systems Command

6.  Army Forces Command

7.  Army Training and Doctrine Command

8.  Bureau of Indian Affairs

9.  Bureau of Land Management

10.  Bureau of Reclamation

11.  Defense Logistics Agency

12.  Department of Health and Human Services

13.  Federal Aviation Administration

14.  Forest Service

15.  General Services Administration

16.  Geological Survey

17.  NASA Lewis Research Center

18.  NASA Marshall Spaceflight Center

19.  National Park Service

20.  Natural Resources Conservation Service

21.  Naval Air Systems Command

22.  Naval Sea Systems Command (excluding shipyards)

23.  Naval Sea Systems Command (including shipyards)

24.  Naval Supply Systems Command




(See figure in printed edition.)Appendix II
AGGREGATE QUESTIONNAIRE RESPONSES
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix III
COMMENTS FROM THE NATIONAL
PERFORMANCE REVIEW
=========================================================== Appendix I

See comment 1. 



(See figure in printed edition.)

See comment 1. 

See comment 1. 

See comment 1. 

See comment 1. 

Now on p.30. 

See comment 2. 

Now on p.  19. 

Now on pp.  48-49. 

See comment 2. 

Now on p.  17. 

Now on p.  22. 

See comment 3. 



(See figure in printed edition.)

See comment 3. 

See comment 4. 

See comment 5. 

Now on p.  6. 

See comment 5. 

Now on p.  6. 

Now on p.  6. 

See comment 5. 

See comment 5. 

Now on p.  2. 

See comment 6. 



(See figure in printed edition.)

See comment 6. 

Now on p.  5. 

Now on pp.  41-42. 

See comment 6. 

Now on p.  44. 

See comment 6. 

See comment 7. 

See comment 8. 

See comment 9. 



(See figure in printed edition.)


The following are GAO's comments on the National Performance Review's
letter dated June 14, 1996. 


   GAO COMMENTS
--------------------------------------------------------- Appendix I:1

1.  NPR commented that the buyout authority was used for three
different purposes and that our analyses did not adequately
distinguish these purposes.  They also suggested that table 2.5 be
modified to report DOD's and non-DOD agencies' experiences in
reducing management control positions separately. 

We agree that the buyout authority was used for three purposes (DOD
civilian force reductions, reductions in certain categories of
employees, and staff reductions associated with decreasing budgets),
and we addressed those purposes as they related to the objectives of
our work.  For example, the purpose of using buyouts to implement
overall budget reductions was addressed under our first
objective--whether the downsizing goals of the Federal Workforce
Restructuring Act were being achieved.  The purpose of using buyouts
to achieve reductions in certain categories of employees was
addressed under our second objective-- whether agencies' use of
buyouts reflected the administration's workforce restructuring goals
as articulated by NPR. 

Because our analyses involved governmentwide use of buyouts, the
separate purpose of using buyouts for civilian force reductions in
DOD might not have been as clearly addressed.  Accordingly, we have
added some language to better describe that purpose, and consistent
with NPR's suggestion, we modified table 2.5 to show results for DOD
and non-DOD agencies separately.  We note, however, that these
results show that, while non-DOD agencies set higher reduction goals
for NPR management control positions than did DOD agencies, actual
percentage reductions in total for these positions were similar for
DOD and non-DOD agencies.  However, the distribution of reductions
among occupations was different.  For example, the data show that DOD
agencies had more reductions in accounting and auditing occupations,
while non-DOD agencies had more reductions in personnel occupations. 

2.  NPR stated that we used three different data sets
"interchangeably" and questioned our analyses because the data sets
covered varying groups of agencies.  They also said that our use of
data on both FTE and on-board personnel mixed different types of
data. 

We acknowledge that we used data from three sources (the CPDF,
certain agencies' streamlining plans, and our own survey of agency
experiences in using buyouts).  However, all three of these data
sources covered most of the major agencies we describe in our report. 
For example, all but 1 of the 24 agencies included in our survey
correspond to the 15 departments and agencies for which we reviewed
streamlining plans, and the CPDF includes data from all of the
agencies in our study.  We used these data for different albeit
related purposes.  For example, CPDF data were used to analyze the
overall reductions achieved through use of buyouts, while the survey
was used to obtain information on how agencies were affected by
downsizing.  Thus, the data were not used interchangeably but rather
in related corroborative or explanatory analyses. 

With regard to our use of FTEs and on-board personnel levels, we used
FTEs when analyzing downsizing in the context of the Workforce
Restructuring Act because the act set workforce ceilings using FTEs. 
Elsewhere in the report, we used on-board personnel levels from the
CPDF because those are more direct measures of actual reductions. 

3.  NPR pointed out that our analyses covered the use of buyouts
spanning periods of time in which DOD and non-DOD agencies had
differing buyout authorities and constraints and that, as a result,
our findings may imply agencies engaged in inappropriate behavior. 
We recognize that agencies had differing authorities and constraints
during the period covered by our work, and have taken care to
identify the periods and agencies covered in the data we present. 
For example, in figure 2.1 and table 2.4, we used data from fiscal
year 1994 through the first half of fiscal year 1995, a period when
the DOD and non-DOD buyout windows overlapped.  However, we
necessarily included data from the period after the non-DOD buyout
window closed to report on the latest available information on the
total number of buyouts granted governmentwide. 

4.  NPR commented that the period covered by our review (October 1992
through November 1995) is inappropriate to assess progress in
achieving the NPR recommendations to reduce certain occupational
categories, because it starts before the recommendations were made
and does not reflect the more recent progress agencies have made
since the end of 1995.  The time period covered by our review was
chosen to address several objectives related to government downsizing
(the goals of the Federal Workforce Restructuring Act and the use of
buyouts, as well as the NPR objectives), and included the entire
period of the non-DOD buyout authority--which was requested by the
administration in part to assist agencies in achieving the NPR
recommendations.  Thus, we believe it was appropriate to assess
progress toward those objectives during that period.  NPR stated that
additional downsizing of management control positions occurred from
July 1995 through June 1996.  We have no basis to evaluate that
statement because that time period was not within the scope of our
work and data from that period is not yet available from the CPDF. 

5.  NPR noted that our report did not include "basic" data (in
addition to percentages) to reflect agency-by-agency results in using
buyouts or achieving reductions in management control positions, and
stated that additional information would be helpful in understanding
the reasons why agencies did not further reduce management control
positions.  NPR also stated that the Presidential Memorandum on
Streamlining the Federal Workforce did not require a reduction in the
ratio of supervisors to employees from 1:7 to 1:15, and thus we
should not state that goal as an administration mandate. 

We agree that actual numbers could be helpful to the reader in
understanding the use of buyouts, and have added those numbers in
addition to the percentages presented in the report.  We also agree
that additional information might have been helpful in further
understanding agencies' reasons for their decisions with respect to
management control positions, but time constraints did not permit
additional follow-up work along those lines in this review. 

NPR is correct that the Presidential Memorandum on Streamlining did
not require the specific reduction of the management span of control
cited in our report.  However, several other administration guidance
documents (the September 1993 NPR report and an August 19, 1994, OMB
memorandum) did state the goal with specificity, and it is those
documents we used in our characterization of the goal. 

6.  NPR suggested that our discussion of agencies' use of contractors
to replace federal employees who had taken buyouts and employees'
return to work in the agency after taking buyouts needed to be better
placed in the context of the overall number of buyouts, and raised a
concern that our report implied that use of contractors following
buyout offers was illegal.  We agree that it is important to
recognize that the extent of contracting out that we found was
relatively small compared to the overall use of buyouts, and we have
revised the text to show that the cases of reemployment we identified
appeared to be isolated and that we did not find any evidence that
the practice is pervasive.  To further clarify this section, we added
that the Workforce Restructuring Act did not prohibit buyout
recipients from returning to federal agencies as employees of service
contractors, and--as suggested by NPR--we also added information on
steps agencies have taken to prevent inappropriate reemployment of
buyout recipients. 

We did not intend to imply that contracting-out of activities
performed by employees who took buyouts was illegal, and have
clarified that point.  However, we were and remain concerned that,
because the Workforce Restructuring Act specifically provided that
there be no increase in service contracts as a result of the use of
buyouts, unless a cost comparison indicated such contracts were
financially advantageous to the government, the lack of clear
guidance requiring a cost comparison prior to implementing a service
contract could lead to contracts that were inconsistent with the
clear intent of the act. 

7.  NPR commented that our recommendation for additional guidance
about the requirement for cost comparisons in contracting-out would
be unnecessarily burdensome.  We did not intend to create additional
administrative burden.  Rather, because we observed that NASA and FAA
interpreted the contracting provisions of the Workforce Restructuring
Act differently, we believed that clarification of the requirement
would reduce confusion for agencies in future procurements.  We
continue to believe that, since agencies have different
interpretations, clarification is needed. 

8.  NPR noted that, in recognition that the administration does not
support the wholesale conversion of government positions to service
contracts, the administration's most recent proposed buyout
legislation continues to require cost comparisons, although exempting
functions of 10 or fewer FTEs from that requirement.  We note that,
as of the end of July 1996, the administration had withdrawn that
legislation. 

9.  NPR expressed concern that our matters for congressional
consideration may create more problems than we describe in this
report, in part because workforce planning may be difficult to
achieve and may take additional time that would make prompt
implementation of buyout legislation, as we recommend, impossible. 
We based our recommendations to do strategic and workforce planning,
and to give priority to retaining those employees possessing the
knowledge and skills necessary to accomplish the agency's work, on
the experiences of other organizations that have downsized.  We agree
that such planning may be challenging, but lessons learned from other
organizations suggest that it is critical to retaining a viable and
productive organization after the downsizing.  We have long
recommended that such planning precede authorization of buyout
authorities so that prompt implementation would not be affected. 




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE OFFICE OF
PERSONNEL MANAGEMENT
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)

See comment 1. 

See comment 1. 

See comment 1. 

See comment 2. 



(See figure in printed edition.)

See comment 3. 

See comment 4. 

See comment 5. 


The following are GAO's comments on the Office of Personnel
Management's letter dated June 21, 1996. 


   GAO COMMENTS
--------------------------------------------------------- Appendix I:2

1.  OPM expressed concern that the report mixed the use of buyouts
and the overall objective of downsizing, and offered several examples
of instances where it believed effects of downsizing could be
confused with the use of buyouts.  We agree that it is important to
make a distinction between buyouts as a tool to achieve downsizing,
and the broader concept of downsizing itself, which includes staff
reductions that may result from voluntary attrition or other causes. 
Indeed, the objectives of our work specifically included both the
overall results of downsizing efforts and the use of buyouts as a
tool toward that objective.  Thus, we report on the operational
impacts that were attributed by agencies to downsizing, as well as
the benefits of buyouts as a tool to avoid the need for RIFs and to
reduce staffing levels without adversely affecting the representation
of women and minorities.  Where appropriate, we have revised the
report to further clarify the distinction between buyouts as a tool
and the overall impacts of downsizing. 

2.  OPM stated that we failed to consider that buyouts were intended
to serve multiple purposes, such as reducing the size of government
and avoiding costly and disruptive RIF actions, and that we did not
differentiate among these purposes.  We agree that buyouts can be
intended to serve multiple purposes, but many of the purposes cited
by OPM are interrelated.  For example, lessening the impact of
mandatory base closures is a subset of reducing the size of
government.  Another purpose that could be identified is optimizing
the capability of the remaining organization to carry out the mission
of the agency.  The existence of multiple purposes reinforces the
importance of planning in the use of buyouts as a tool, to ensure
that the goal of reductions can be achieved without creating
unintended consequences, such as loss of critical expertise. 

3.  OPM commented that, although we conclude that buyouts produced
varying results in reducing the occupational areas identified by NPR
for reduction, other data show that reductions did take place in many
of those occupational families.  We agree that more specific data
show that agencies often used buyouts to reduce management control
positions consistent with NPR's recommendations, and, as noted in
appendix III, we adjusted the presentation of the data in table 2.5
to more clearly show some of those reductions.  However, although
staffing levels have been reduced in some of these areas in some
agencies, there were no significant decreases in these categories of
occupations overall, as a percentage of the total workforce.  If such
reductions are desirable, we continue to believe that better
workforce planning could make buyouts a more effective tool in
meeting these goals. 

4.  OPM, like NPR, expressed concern that we used data
"interchangeably" from three different sources.  As noted in comment
2, appendix III, these data sources cover the agencies included in
our review and were obtained to address the specific objectives of
our work.  The data were not used interchangeably, but rather to
provide descriptive, corroborative, or explanatory analyses, as
necessary. 

5.  OPM observed that the data we report on management control
positions are different from data it obtained directly from the CPDF. 
Although the differences reported by OPM are relatively small, we
believe they may arise because of differences in the specific
definitions of occupational categories included.  We used OMB's
definition of management control positions, which excluded certain
types of occupations within each occupational family.  For example,
OMB defined personnel positions as the GS-200 series, excluding
GS-204 and GS-205.  We also excluded supervisors from each
occupational series and counted them as a separate category.  It is
not clear that OPM made such adjustments in the data it presented. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V


   GENERAL GOVERNMENT DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix V:1

Steven J.  Wozny, Assistant Director,
 Federal Management and Workforce Issues
Robert Goldenkoff, Evaluator-in-Charge
Geraldine Beard, Senior Evaluator
Gregory Wilmoth, Senior Social Science Analyst
Jerome T.  Sandau, Social Science Analyst


   DENVER REGIONAL OFFICE
--------------------------------------------------------- Appendix V:2

Thomas R.  Kingham, Senior Evaluator
Robert Pickering, Senior Evaluator

*** End of document. ***