[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 111-38]
DEPARTMENT OF DEFENSE NATIONAL SECURITY PERSONNEL SYSTEM
__________
HEARING
BEFORE THE
READINESS SUBCOMMITTEE
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
APRIL 1, 2009
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READINESS SUBCOMMITTEE
SOLOMON P. ORTIZ, Texas, Chairman
GENE TAYLOR, Mississippi J. RANDY FORBES, Virginia
NEIL ABERCROMBIE, Hawaii ROB BISHOP, Utah
SILVESTRE REYES, Texas MIKE ROGERS, Alabama
JIM MARSHALL, Georgia TRENT FRANKS, Arizona
MADELEINE Z. BORDALLO, Guam BILL SHUSTER, Pennsylvania
HANK JOHNSON, Georgia K. MICHAEL CONAWAY, Texas
CAROL SHEA-PORTER, New Hampshire DOUG LAMBORN, Colorado
JOE COURTNEY, Connecticut ROB WITTMAN, Virginia
DAVID LOEBSACK, Iowa MARY FALLIN, Oklahoma
GABRIELLE GIFFORDS, Arizona JOHN C. FLEMING, Louisiana
GLENN NYE, Virginia FRANK A. LoBIONDO, New Jersey
LARRY KISSELL, North Carolina MICHAEL TURNER, Ohio
MARTIN HEINRICH, New Mexico
FRANK M. KRATOVIL, Jr., Maryland
BOBBY BRIGHT, Alabama
Cathy Garman, Professional Staff Member
John Chapla, Professional Staff Member
Megan Putnam, Staff Assistant
C O N T E N T S
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CHRONOLOGICAL LIST OF HEARINGS
2009
Page
Hearing:
Wednesday, April 1, 2009, Department of Defense National Security
Personnel System............................................... 1
Appendix:
Wednesday, April 1, 2009......................................... 33
----------
WEDNESDAY, APRIL 1, 2009
DEPARTMENT OF DEFENSE NATIONAL SECURITY PERSONNEL SYSTEM
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Forbes, Hon. J. Randy, a Representative from Virginia, Ranking
Member, Readiness Subcommittee................................. 3
Ortiz, Hon. Solomon P., a Representative from Texas, Chairman,
Readiness Subcommittee......................................... 1
WITNESSES
Bunn, Bradley, Program Executive Officer, National Security
Personnel System, Department of Defense........................ 4
Crum, John L., Ph.D., Director, Office of Policy and Evaluation,
U.S. Merit Systems Protection Board............................ 9
Farrell, Brenda S., Director, Defense Capabilities and
Management, Government Accountability Office................... 7
Perkinson, Darryl, National President, Federal Managers
Association.................................................... 11
APPENDIX
Prepared Statements:
American Federation of Government Employees, AFL-CIO......... 117
Brown, Richard N., National President of the National
Federation of Federal Employees............................ 105
Bunn, Bradley................................................ 43
Crum, John L................................................. 77
Farrell, Brenda S............................................ 57
Forbes, Hon. J. Randy........................................ 41
Laborers' International Union of North America............... 124
Ortiz, Hon. Solomon P........................................ 37
Perkinson, Darryl............................................ 92
Documents Submitted for the Record:
[There were no Documents submitted for the record.]
Witness Responses to Questions Asked During the Hearing:
Mr. Ortiz.................................................... 129
Questions Submitted by Members Post Hearing:
Mr. Forbes................................................... 143
Mr. Ortiz.................................................... 133
DEPARTMENT OF DEFENSE NATIONAL SECURITY PERSONNEL SYSTEM
----------
House of Representatives,
Committee on Armed Services,
Readiness Subcommittee,
Washington, DC, Wednesday, April 1, 2009.
The subcommittee met, pursuant to call, at 2:45 p.m., in
room 2118, Rayburn House Office Building, Hon. Solomon P. Ortiz
(chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE
FROM TEXAS, CHAIRMAN, READINESS SUBCOMMITTEE
Mr. Ortiz. This hearing will come to order. We want to
welcome you to today's Readiness Subcommittee hearing on the
Department of Defense's (DOD) National Security Personnel
System (NSPS). I want to thank our witnesses for making the
time to appear before us today. Welcome. We are very happy to
have you with us.
Two years ago the subcommittee held its first oversight
hearing on the Department's new personnel system, NSPS. It was
clear from that hearing and formal studies, it has gotten mixed
reviews. The intent of NSPS was to help DOD respond to its 21st
century resources needs. Two years ago I asked the question:
Was it the right fix? That question is still valid today.
I am pleased that the Department has now undertaken a
comprehensive review of NSPS. This review response is to a
letter that Chairman Skelton and I wrote asking that Secretary
Gates discontinue converting employees to the new system until
the administration and Congress can properly address the future
of NSPS.
Since the Department has only begun its review, I
understand that our DOD witnesses will not be able to give us
very many details. However, I do hope that DOD will share with
us the guiding principle that would be followed in undertaking
this view. And all our witnesses should be able to provide the
subcommittee with information on the challenges and concerns
that must be addressed in any review of NSPS. This includes
such issues as hiring, fairness of the performance rationing
ratings, payment of salary increases versus bonuses, employee
acceptance and managers' accountability.
We also should take a critical look at the General Schedule
(GS) system and incentives provided under that system. During
the campaign, President Obama indicated that he would consider
either a repeal of NSPS or its complete overhaul. This
subcommittee will be actively involved in any proposals related
to NSPS.
We also will look carefully at the civilian personnel
management system in general since DOD's employees are 26
percent of the Federal workforce. Indeed, staff has been
conducting a several month long analysis of such system.
Today's hearing will help lay the groundwork for any action
that needs to be taken following the results of the NSPS review
and the President's direction.
Let me go back for a minute to the time of the enactment of
NSPS in the year 2003. At that time Congress was told that a
new system was necessary to provide the Department with greater
flexibility in hiring employees. This would respond to the
number one complaint of Federal managers: that is, the need to
fix the complex and lengthy hiring process.
In fact, the Merit Systems Protection Board, which is
represented by one of our witnesses today, has stated that the
Defense Department could be the model for reforming the
government's hiring process. However, DOD has made no effort to
tackle what I consider to be one of the biggest challenges
faced by the Department: attracting qualified new people to
work for the military services and the defense agencies.
Since passage of NSPS, the Department has focused its
efforts on its own unique pay-for-performance system. But
should each agency be allowed to grade its own personnel
system, which appeared to be the trend of the last
administration? I wonder if that is good for the employees and
the government as a whole.
Even within the Department there are now three separate
personnel systems--NSPS, GS and wage grade--and I am asking
should this continue? Of course, many employees that I have
heard from, the answer is clear: Stop NSPS and return to the GS
system.
Giving incentives for good performance and improving hiring
were key reasons for the creation of NSPS. However, Congress
already has provided numerous flexible authorities to all
government agencies to reward performance in the GS system.
These were never used.
Today we will hear from a variety of witnesses. No hearing
on NSPS is complete without a hearing from DOD. None of the
political appointees from the Bush administration who pushed
for NSPS are still around. So today we will hear from the
individuals tasked with the challenge of making it work. They
are always the most knowledgeable about NSPS.
We have mandated that the Government Accountability Office
(GAO) conduct a thorough review of NSPS to ensure that adequate
safeguards are in place to ensure fairness. We will hear about
the most recent report and GAO, which has its own unique pay-
for-performance system, has found numerous problems with the
DOD system.
I already have mentioned the Merit Systems Protection
Board, an agency that we rarely hear from. The Board has done
numerous studies on the government's hiring system. They
recognize that hiring is critical to any discussion on civilian
personnel management. And they have put forth numerous
recommendations on reforming the Federal hiring process.
Finally, the Federal Managers Association represents the
users of NSPS. As managers, they have some very strong views on
NSPS and what it will take to get it fixed or what we should do
if NSPS is eliminated and we return to the GS system. I look
forward to your testimony.
[The prepared statement of Mr. Ortiz can be found in the
Appendix on page 37.]
Mr. Ortiz. But before starting, I ask unanimous consent to
include the statements for the record for the National
Federation of Federal Employees, the International Federation
of Professional Technical Engineers and the American Federation
of Government Employees.
[The information referred to can be found in the Appendix
beginning on page 105; a statement from the International
Federation of Professional Technical Engineers was not
available at the time of printing.]
Mr. Ortiz. And I would like to turn to my good friend from
Virginia, Mr. Forbes, for any statement that he would like to
make. Mr. Forbes.
STATEMENT OF HON. J. RANDY FORBES, A REPRESENTATIVE FROM
VIRGINIA, RANKING MEMBER, READINESS SUBCOMMITTEE
Mr. Forbes. Thank you, Mr. Chairman. As you know, this
hearing is important because it provides us an opportunity to
gather relevant information and perspectives about the future
of the National Security Personnel System. I can think of few
programs this subcommittee has dealt with that were more
controversial, more revolutionary, or more challenging to
implement than NSPS. So I agree with the President's directive
to the Department of Defense to conduct a comprehensive review
of NSPS.
The Congress, primarily on initiatives originating in this
subcommittee, made significant changes to NSPS in the 2008
Defense Authorization Act, and I believe we will again be faced
with more decisions regarding NSPS once the recommendations and
findings of the Department's review are done and acted upon by
the President. Until we know and have had a chance to analyze
what the President proposes, I would caution the subcommittee
from taking action to significantly change NSPS.
Paying employees for the quality of their work is an
underlying principle of most businesses and it should be an
underlying principle in government. This is one of the
underlying principles of NSPS, and I agree with this principle.
The belief that people should be paid based on what they
contribute is why so many are rightfully upset that American
International Group (AIG) executives took on millions of
dollars while their company was driven into the ground. The
soundness of this principle is why the President has challenged
our nation to provide extra pay to outstanding teachers while
insisting that we stop making excuses for the bad ones.
However, based on the reports of GAO and others, the
implementation of a pay-for-performance system has been
problematic. As we get to the questioning of our witnesses
today, I would like to further explore with them what needs to
be changed in NSPS to improve the pay-for-performance system
and establish the credibility of it in the perception of NSPS
managers and employees.
I am also interested in what alternatives the Department
has to implementing the principle that we should reward those
who are outstanding and ensure the few bad apples are removed
from the important work that is nothing less than protecting
our national security.
So, Mr. Chairman, I join you in welcoming our witnesses and
I look forward to their testimony. And I yield back the balance
of my time.
Mr. Ortiz. Thank you.
[The prepared statement of Mr. Forbes can be found in the
Appendix on page 41.]
Mr. Ortiz. Today we are very fortunate to have a panel of
distinguished witnesses who will discuss the Department of
Defense National Security Personnel System. Mr. Brad Bunn is
the Program Executive Officer, National Security Personnel
System, Department of Defense; Ms. Brenda Farrell, Director of
Defense Capabilities and Management, Government Accountability
Office; Mr. John L. Crum, Ph.D., Director, Office of Policy and
Evaluation, United States Merit Systems Protection Board; and
Mr. Darryl Perkinson, National President, Federal Managers
Association.
Without objection, all the written testimony will be
included in the record. And thank you again for giving us this
information that we so much would like to hear about today.
Mr. Bunn, you are welcome. And we look forward to your
opening statements.
STATEMENT OF BRADLEY BUNN, PROGRAM EXECUTIVE OFFICER, NATIONAL
SECURITY PERSONNEL SYSTEM, DEPARTMENT OF DEFENSE
Mr. Bunn. Mr. Chairman, Congressman Forbes, distinguished
members of the subcommittee, thank you for the opportunity to
speak with you today about the National Security Personnel
System at the Department of Defense. NSPS implementation
remains a critical area of focus for the Department. As of
today, we have over 200,000 employees operating under the
system.
Today I would like to update you on our implementation, the
challenges we have encountered and what is being considered in
the upcoming comprehensive review of the program. We are in our
third year of implementation and, like any major change
initiative, we have had our share of both challenges and
successes. As we consider how to best move forward with NSPS, I
can assure you that the Department is committed to operating
fair, transparent and effective personnel systems for our
civilian workforce.
In November of 2003, Congress authorized DOD to develop a
more flexible civilian personnel management system to improve
our ability to execute our national security mission. In
November 2005, after a comprehensive design process, the
Department and the Office of Personnel Management (OPM) jointly
published final NSPS regulations. In April of 2006, we began
our phased implementation of the system.
Today the total number of NSPS employees is approximately
205,000. Because the system may only be extended to our white
collar workforce, and based on our policy to convert only non-
bargaining unit employees, this represents most of the
population that would come under the system.
Before organizations converted, there was a comprehensive
and extensive initiative to train senior leaders, managers,
supervisors and employees on the core elements of NSPS on soft
skills with a focus on performance management. This training
represents one of the most extensive civilian-focused
initiatives ever undertaken by the Department.
We recently announced that we are delaying further
conversions of organizations into NSPS pending the outcome of
the upcoming review. During this review, organizations and
employees already covered by NSPS will continue to hire,
assign, promote, reward, and carry out other personnel actions
necessary to accomplish their missions.
Before I address the review, let me briefly describe where
we are with implementation and some of the key issues we are
facing. The original statute was enacted in November of 2003,
and provided the Secretary of Defense and the Director of OPM
the authority to establish a flexible and contemporary civilian
personnel system to recognize the unique role that our
civilians play in supporting national defense, while adhering
to the fundamental tenets of the civil service system; namely,
the merit principles.
The Department and OPM jointly published those regulations
in November of 2005. In the National Defense Authorization Act
(NDAA) for fiscal year 2008, Congress made significant changes
to the underlying NSPS statute, including repealing most of the
labor relations adverse actions and appeals and a reduction in
force provision. The core features of NSPS that we actually
implemented were left essentially intact, including the pay
banding and classification structure, compensation
flexibilities, and the performance management system.
The Duncan Hunter NDAA for fiscal year 2009 further
clarified language regarding the staffing and employment
provisions of NSPS. And over the last year the Department and
OPM revised the NSPS regulations to conform to these statutory
requirements.
This past January, the Department completed its third cycle
under the NSPS pay-for-performance system. Resulting in
performance evaluations----
Mr. Ortiz. I think your mike is gone. Try the other mike to
see if it works.
Mr. Bunn. Last fall over 1,600 NSPS pay pool panels
convened to review and finalize performance appraisals and
allocate performance-based salary increases and bonuses. Under
NSPS, employees are evaluated on a five-level rating system
with one being unacceptable and five representing role model
performance.
For the fiscal year 2008 performance cycle, the average
performance rating was 3.46. The average performance-based
salary increase was 3.67 percent with an average cash bonus of
1.94 percent. All NSPS employees rated above unacceptable
received an additional general base salary increase of 1.74
percent and an average locality increase of 1 percent.
The average total salary increase for NSPS employees in
January of 2009 was 6.41 percent. To ensure fairness in the
system, a number of safeguards were built into the process,
including uniform performance evaluation criteria, multiple-
level reviews of recommended ratings, shared distributions and
payout determinations, prohibition on the practice of forced
distribution of ratings across the five levels and the
employees' right to challenge their performance rating through
a formal reconsideration process.
NSPS represents a significant change, particularly in the
area of pay and performance management. Recognizing that this
kind of cultural shift takes time, we have been paying close
attention to the perceptions and attitudes of our workforce to
assess our implementation and the design with an eye towards
improving the system.
Some common themes, both positive and negative, have
emerged. What we know is that NSPS organizations are making
meaningful distinctions in performance and associated rewards.
We are also seeing improvement in communication between
employees and supervisors and better alignment between
performance plans and organizational mission and goals.
NSPS employees are generally positive about certain aspects
of the performance management system, including the linkage
between their performance plans and the organization's mission,
the linkage between pay and bonuses and their performance. NSPS
employees overall are generally more satisfied with their pay
and the management of the organizations than their non-NSPS
counterparts, and they are no more likely than non-NSPS
employees to leave DOD for another job. These are results from
our status of forces civilian survey that we have been taking
over the past several years.
However, other indicators are less positive. Employees and
supervisors are struggling with the more stringent performance
measures used in the evaluation process and employees are
questioning whether the ratings are fair. Employees and
supervisors, particularly those who are new in the system,
often struggle to define measurable results-oriented job
objectives and have difficulty in writing narrative
assessments.
We have also heard concerns from employees and supervisors
about the increased administrative requirements associated with
the performance management system and the transparency of the
pay pool process, including whether forced distribution is
occurring despite our prohibition on the practice.
Both the Government Accountability Office and OPM in their
formal assessments of NSPS highlighted many of these issues and
pointed out that these kinds of reactions and perceptions are
typical of broad change in management initiatives like NSPS.
They noted that when there is a major change to a personnel
system, employee attitudes and perceptions decline initially
before employees fully understand and accept the new system.
They also recognize that it generally takes three to five years
for a new personnel system to gain acceptance.
However, the Department has been taking steps to address
many of these concerns, including expanding our pay pool
training; offerings to include employees and supervisors;
enhancing our online training tools and automated performance
management systems; revising our policies to require
organizations share aggregate pay pool results with the
workforce; requiring defense components to conduct a thorough
analysis of pay pool results to identify and examine and remove
barriers to similar rating and payout potential for demographic
and other groups in the workforce, apart from differences based
on individual performance or material job differences; and
developing guidance for organizations designed to ensure that
forced distribution of ratings is not occurring in the rating
and payout process.
On March 16 the Department and OPM announced a review of
NSPS to assess whether the program is fair, transparent and
effective. In addition, the Department decided to delay any
further conversions of organizations to NSPS pending the
outcome of this review. I can assure you that Deputy Secretary
Lynn recognizes that there are a variety of viewpoints
regarding NSPS, and is committed to a thorough examination that
includes outreach to Congress, other Federal agencies,
personnel management experts, labor organizations, employees
and other key stakeholders.
You asked that we discuss what is being considered in the
program review. We expect that it will include a review of the
underlying design principles of NSPS, the current policies and
regulations and the extent to which the system is achieving its
goals. We expect the review to also focus on key issues of
fairness and transparency, not only in the design but also in
the implementation. It is likely that the review will include
visits to organizations operating under NSPS to speak directly
to employees, supervisors and senior leaders who are operating
under the system to gain their perspective.
In addition to examining the various reports and
assessments already conducted, the team will also obtain views
on NSPS from labor unions, managers and professional
associations, employee groups, Members of Congress and their
staff, and recognized experts in personnel management. The goal
is to obtain an objective, thorough assessment of the program
resulting in recommendations to the Deputy Secretary and the
Director of OPM on a way forward for NSPS.
Mr. Chairman, we look forward to continuing to work with
this committee on the way forward for NSPS. And thank you for
your ongoing support for our DOD civilian workforce. I look
forward to your questions.
Mr. Ortiz. Thank you so much.
[The prepared statement of Mr. Bunn can be found in the
Appendix on page 43.]
Mr. Ortiz. Ms. Farrell.
STATEMENT OF BRENDA S. FARRELL, DIRECTOR, DEFENSE CAPABILITIES
AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Farrell. Thank you, Mr. Chairman. Chairman Ortiz and
members of the subcommittee thank you for the opportunity to be
here today to discuss GAO's most recent report on the
implementation of DOD's new human capital system for managing
civilian personnel, the National Security Personnel System.
It is important to note that strategic human capital
management remains on GAO's high-risk list that was updated in
January 2009. The area remains high risk because of the
continuing need for a governmentwide framework to advance human
capital reform to ensure the Federal Government civilian
workforce can respond to the challenges of the 21st century.
NSPS represents a huge undertaking for DOD, given its
massive size and geographically and diverse workforce.
Importantly, NSPS could have far-reaching implications not just
for DOD but for civil service reform across the Federal
Government. While GAO supports human capital reform in the
Federal Government, how such reform is done, when it is done
and the basis upon which it is done can make all the difference
in whether such efforts are successful.
Specifically, we have noted that Federal agencies must
ensure that performance management systems contain appropriate
internal safeguards. We have developed an initial list of
safeguards based on our extensive body of work reviewing
performance management practices by leading public sector
organizations.
In 2008 Congress directed GAO to evaluate, among other
things, annually for three years, the extent to which DOD
implemented internal safeguards as specified in NSPS law. Today
I am here to discuss the finding and recommendations in the
first of these reports. Specifically, my statement focuses on
two areas: one, the extent to which DOD has implemented
safeguards to ensure the fairness, effectiveness and
credibility of the new system; two, how the DOD civilian
workforce perceive NSPS and what actions DOD has taken to
address these perceptions.
First, while DOD has taken steps to implement internal
safeguards to ensure the new system is fair, effective and
credible, we found the implementation of three of the
safeguards could be improved. For example, DOD does not require
a third party to analyze rating results for anomalies prior to
finalizing the ratings. And thus it does not have a process to
determine whether the ratings are nondiscriminatory before they
are finalized. Without a predecisional analysis, employees may
lack confidence in the fairness and credibility of NSPS.
To address this finding, GAO recommended that DOD require a
predecisional demographic and other analysis. However, DOD did
not concur, stating that a postdecisional analysis is more
useful. GAO continues to believe that our recommendation has
merit.
Second, although DOD employees under NSPS responded
positively regarding some aspects of performance management,
DOD does not have an action plan to address generally negative
perceptions of employees under NSPS. According to DOD's surveys
of civilian employees, generally employees under NSPS are
positive about some aspects of performance management, such as
receiving feedback and linking pay to performance.
However, employees who had the most experience under the
new system showed a negative movement in their perceptions. For
example, the percent of NSPS employees who believe NSPS will
have a positive effect on DOD's personnel practices declined
from an estimated 40 percent in 2006 to 23 percent in 2007.
Our ongoing work is reviewing DOD's latest survey results.
Some negative perceptions also emerged during discussion groups
that GAO held. For example, employees and supervisors were
concerned about the excessive amount of time required to
navigate the process. While it is reasonable for DOD to allow
employees some time to accept NSPS, not addressing persistent
and negative employee perceptions could jeopardize employee
acceptance and successful implementation of NSPS.
As a result, GAO recommended that DOD develop and implement
an action plan to address employees' concerns. DOD partially
concurred with GAO's recommendation, but has yet to develop an
action plan.
In summary, we recognize that DOD faces many challenges in
implementing the new system. NSPS is a new program and
organizational change requires time to gain employees'
acceptance and, most importantly, trust.
Moving forward as DOD and OPM embark on a study of NSPS,
DOD has a unique opportunity to consider our previous
recommendations as well as all of the safeguards key to
ensuring that performance systems in the government are fair,
credible, and effective.
Mr. Chairman, that concludes my opening remarks. I will be
happy to take questions when you are ready.
Mr. Ortiz. Thank you.
[The prepared statement of Ms. Farrell can be found in the
Appendix on page 57.]
Mr. Ortiz. Dr. Crum.
STATEMENT OF JOHN L. CRUM, PH.D., DIRECTOR, OFFICE OF POLICY
AND EVALUATION, U.S. MERIT SYSTEMS PROTECTION BOARD
Dr. Crum. Good afternoon, Chairman Ortiz, Ranking Member
Forbes, and members of the subcommittee. Thank you for the
opportunity to testify today regarding the challenges related
to recruiting and hiring candidates for Federal civilian jobs.
U.S. Merit Systems Protection Board (MSPB) conducts
independent studies of Federal civil service systems to
determine the workforce is managed under the merits principles
and free from personnel practices. In doing so we have
identified a set of key challenges the government faces in
terms of recruiting and selecting the next generation of
Federal employees.
The research MSPB has conducted on Federal hiring and the
recommendations we have offered to the President and Congress
are particularly relevant to discussions regarding the National
Security Personnel System. In fact, DOD has cited many of the
same challenges we have seen in other agencies as reasons for
needing to establish new hiring flexibilities.
Our studies have shown that there are several key barriers
that have often prevented qualified applicants from seeking
employment with the Federal Government. These include the
length of the process, the complexity of the process, the use
of ineffective candidate assessment tools, the absence of an
effective marketing strategy, the lack of human resources and
supervisory expertise and training in these areas, and the
fragmented hiring approach used by many different Federal
agencies.
I will briefly discuss these issues in turn. First, with
respect to the length of the hiring process, MSPB research has
shown that it is not uncommon for successful candidates to wait
five months or more to receive job offers. Of course the longer
the process takes, the more likely attrition is likely to
occur.
The second barrier to effective recruiting and selecting a
high-quality workforce is the complexity of the process.
Decentralization in the hiring process has added to the
complexity because there is no standard application for Federal
employment.
A third issue of concern regarding the Federal Government's
ability to hire a high-quality workforce is how Federal
employers assess the relevant qualifications of job applicants.
The assessment tools many agencies use are simply not effective
predictors of assessing a job.
Fourth, the Federal Government often fails to market itself
effectively. Vacancy announcements are often poorly written,
difficult to understand, and filled with jargon and unnecessary
information. Consequently, many announcements can actually
discourage potential applicants from applying for Federal jobs.
The fifth area of concern is the current expertise of
Federal human resources staffs and selecting officials.
Previous Federal downsizing efforts resulted in the loss of
human resource institutional knowledge that has not yet been
fully restored. Hiring officials often do not have the
knowledge they need to effectively carry out their role in the
hiring process. This lack of expertise can create redundancies
and bottlenecks.
Finally, the Federal Government has moved toward a
decentralized hiring process and the proliferation of human
resource flexibilities and appointing authorities. The benefit
of this approach is that agencies may tell their hiring
authorities to better seek their mission needs. However, it
also results in fewer economies of scale across the government,
increased competition among agencies, and increased confusion
among applicants as to why agencies use different hiring
procedures. All these factors can affect merit principles and
the ability of individual agencies to hire high-quality
applicants.
The MSPB offers several recommendations to guide, reform,
and improve the Federal hiring process. We believe these
recommendations would be relevant toward the improvements NSPS
is also seeking in its hiring process.
First, agencies should manage hiring as a critical business
process, not an administrative function that is relegated
solely to the human resources staff.
Second, agencies should evaluate their own internal hiring
practices to identify barriers to high-quality, timely, and
cost-effective hiring decisions. The MSPB is in the process of
performing its own hiring makeover to identify redundant and
unnecessary steps and to improve our communications with
applicants throughout the process. Many agencies would probably
be surprised to see that many of the barriers they face were
self-imposed.
Third, we recommend that agencies, with the assistance of
OPM, employ rigorous assessment strategies that emphasize
selection quality, not just the cost. In addition, we recommend
that agencies implement sound marketing practices and better
recruitment strategies, improve their vacancy announcements and
communicate more effectively with applicants. These reforms
should encourage applicants to await a final decision rather
than to abandon the Federal job search in favor of employment
elsewhere.
Also we recommend that agencies prepare the human resources
staffs and selecting officials to carry out the full range of
services necessary to implement an efficient recruitment and
hiring system. When DOD began implementing NSPS, the Department
put significant resources on training human resources (HR)
staffs, managers and employees on the new pay-for-performance
processes. If agencies devoted similar resources to ensuring
their HR staffs and managers are prepared to carry out their
hiring duties, this would greatly reduce bottlenecks in the
process.
Agencies should take the majority of these steps without
having to change existing rules and regulations. Implementing
these recommendations should help agencies ensure that they are
hiring qualified employees in a timely manner, from all
segments of society, after fair and open competition, while
treating applicants fairly and equitably as described by the
Merit Systems' principles.
Again thank you, Mr. Chairman, for the opportunity to
appear this afternoon and I would be happy to respond to
questions from you or other members of the subcommittee.
Mr. Ortiz. Thank you.
[The prepared statement of Dr. Crum can be found in the
Appendix on page 77.]
Mr. Ortiz. Mr. Perkinson.
STATEMENT OF DARRYL PERKINSON, NATIONAL PRESIDENT, FEDERAL
MANAGERS ASSOCIATION
Mr. Perkinson. Chairman Ortiz, Ranking Member Forbes, and
members of the subcommittee, my name is Darryl Perkinson, and I
am here today representing the over 200,000 managers and
supervisors in the government in my role as the National
President of the Federal Managers Association (FMA). Currently
I serve as the nuclear training manager at the Norfolk Naval
Shipyard. I recently completed 29 years of service with the
Navy, and the last 23 in management. Please keep in mind that I
am here on my own time and my own volition representing the
views of FMA and do not speak on behalf of the Department of
Defense.
Throughout my career I have spent time in three separate
pay systems: wage grade, General Schedule (GS) and now the
National Security Personnel System. Over the past 18 months I
have been involved with NSPS as a rating official and an
employee being rated. Nearly all of FMA's DOD members are now
operating under NSPS.
As stakeholders are the ultimate success or failure of this
system, we appreciate the opportunity to appear before you
today. The face of America's workforce is changing. A model
once attracted for employing the most talented members of the
workforce, the civil service now seems unreflective of the
expectations of today's job seekers. The current General
Schedule pay system and performance review methods are
antiquated. FMA managers believe a switch to pay-for-
performance is necessary to compete with the private sector and
also to encourage and reward high performance. The time for
rewarding employees simply for longevity has passed, and many
managers want to be rewarded for the job they do.
We are realizing, however, that NSPS is not delivering on
its promises. The implementation of NSPS has caused a
fundamental shift in culture at DOD, a shift for which our
members were not adequately prepared. Going into the system,
the biggest concern among our members was how the funds in the
pay pools would be distributed.
In 2007 Congress determined that all NSPS employees rated
above unsuccessful must receive no less than 60 percent of the
General Schedule raise appropriated by Congress. It is
absolutely critical that an employee rated a three or above
receive no less than the General Schedule pay raise. Issues of
fairness and low morale will certainly surface if valued
performers were to receive pay raises lower than their GS
counterparts. Avoiding this situation is necessary to promote
confidence in the system.
We are also finding there is a lack of concrete business
rules that allow for a transparent and fair deployment for pay-
for-performance. We have heard several reports of the pay pool
panels being out of touch with objectives and job functions of
the employees they are rating. If the panel is the ultimate
authority on the final evaluation and is able to adjust the
supervisor's rating, employees should have access to their
evaluation before the panel engages in that review.
We have heard reports of great pressure from the panels to
lower ratings, especially in the cases of poorly written self-
assessments, despite claims from DOD leadership that this
should not occur. The pay pool panels heavily rely on one's
written assessment, even though these evaluations are not
required.
The panels are also too focused on the impact they have on
the share value. The sole purpose of the pay pool panel should
be to ensure fairness, transparency and consistency exists in
the system. This is an issue I personally experienced. During
the last cycle I rated seven employees and the sub-pool panel
took particular issue with the rating of one of them, mostly
because they did not feel his self-assessment was up to snuff
despite my repeated claims that he was my ``go to'' person. In
the end the panel won out, and I do not feel that this employee
was properly rewarded.
DOD currently employs workers enrolled in three different
pay systems. This is simply unacceptable. The problem is
exasperated when raises among equally performing employees
differ. It is the recommendation of FMA that DOD establish
cohesion within the Department in order to foster a sense of
equality among the workforce.
Many members of FMA are calling for us to return to the
General Schedule system. However, this is not as easy as one
might think. First and foremost, we must ensure employees' pay
is protected. Employees who excel under NSPS and who were
appropriately rewarded by increases in salary beyond the GS
schedule scale should not be penalized by losing current pay or
eligibility for future pay raises. Given that the average pay
raises under NSPS have far exceeded the GS raises, many
employees are now a GS level or two above where they were when
they entered NSPS, sometimes without added responsibility.
We must ask ourselves what the options are for these
employees, and I lay out some suggestions in my written
testimony. I also discuss several performance awards that are
available to GS employees that we feel have been underutilized.
We are encouraged the Department heeded calls to halt further
implementation of NSPS until an independent review of the
system could take place. While the details of this process are
unknown, we strongly suggest employee groups, both managerial
and unions, be invited to participate. The unique experience of
these employees allows them to convey what is working, what is
not, and what is actually going on at the ground level.
Any pay system, whether it be NSPS, General Schedule, or
something entirely different must adhere to certain principles.
As Congress debates where to go with the pay system at DOD, I
include many suggestions for improvements in my written
statement, including adherence to merit principles, adequate
funding for performance awards and engagement between employees
and managers. It is imperative that any system stand by the
principles of objectivity and transparency. We must take a
cautious and deliberate path as we move forward.
Thank you for this opportunity to appear before you today.
And I am happy to answer any questions you may have.
Mr. Ortiz. Thank you so much.
[The prepared statement of Mr. Perkinson can be found in
the Appendix on page 92.]
Mr. Ortiz. You have given us very, very important testimony
today. And I know that the members will have a lot of questions
to ask.
One of the questions that I have, you know, for employees
converted from GS to NSPS, did the Department develop a system
to make that decision? If NSPS is repealed, how would DOD
reconvert back to the GS system? And what are the Department's
other options? In other words, converting to a hybrid of NSPS
and the GS or any other option? What potential challenges do
you foresee? How long will the process take?
And, briefly, if you all can give us some feedback. And I
don't want to take too much time because we have a lot of good
members here who would like to ask questions as well.
Mr. Bunn. Thank you, Mr. Chairman. One of the issues that
will likely be taken up by a review panel and the little bit of
details that I can share with you on that is that it is likely
going to be an external review to ensure that there is
independence, so that it is an objective review. But we haven't
determined all the details of who is going to be doing it, how
long it will take. But certainly one of the things that will be
under their purview is to look at the various options for
moving forward. And at this point all the options are
essentially on the table, to include making changes to the
existing system all the way to the more extreme option of
reverting back to the GS.
I can't say that we have done a lot of work to analyze the
impact of that kind of an option. I can tell you that the
fundamental principle that we will likely follow is to ensure
that we do no harm to the employees if they do revert back to
the General Schedule, similar to our approach to converting
people to NSPS, ensuring that no pay was lost.
So those are the kind of things that we would be looking
at. We would certainly be interested in hearing from the
Federal Managers Association, other groups on their ideas, if
that is an option that is taken by the Department and OPM.
Mr. Ortiz. Do you feel that there might be room for
modifications?
Mr. Bunn. Well NSPS, Mr. Chairman, was developed to provide
flexibility. And part of that includes evolving over time. So
there has always been an expectation that as we implement the
system and evaluate that implementation and the design of the
system, that there would be changes over time. So the current
structure of the program, including the regulations and the
policies, they are built to change over time and they can
certainly do that.
So most of the changes that we could foresee, we would be
able to make those changes under the current regulatory
statutory structure, including changes to the performance
management system, the rules around pay-for-performance. On the
implementation side, we are always looking for ways to improve
how we implement the system, how we train our workforce, how we
communicate to the workforce to ensure that there is fairness
and transparency in the program.
Mr. Ortiz. Anybody who would like to add anything to the
question?
Mr. Perkinson. Mr. Chairman, I think the key point for us
is we have taken 205,000 people and put them in a system that
there is no doubt that we have seen it work in several areas.
It works in several areas and it hasn't worked in others. And
we have shared--we will share and we have shared the
complications that we have seen with the system as it presently
works and some of the disparities that do occur in our
different agencies and organizations.
I feel that with the fairness to the people that have gone
in the system--and we don't want to lose the fact that we did
reward people in this particular system for pay-for-
performance--and we think from our standpoint that was the
right direction to go. We don't want to lose that ground, but
we also want to protect them, whatever options come out after
we do our review.
Mr. Ortiz. Ms. Farrell.
Ms. Farrell. Mr. Chairman, we would probably advise what we
advised when NSPS was first introduced as a concept: Move
cautiously. We would recommend giving the study that my
colleague from DOD has mentioned with DOD and OPM time to look
at the aspects.
NSPS, as you know, is very broad. It covers performance
management, classification, compensation. There are so many
moving parts. And first be sure what it is you want to fix
before you move forward to fix it. There are no specific rules
that we are aware regarding how to convert back, if that were
the option determined to take. But there are demonstration
projects that have been conducted, say, at the U.S. Army
laboratory where they did write rules in their regulations
about converting back. It basically, though, was directed at
pay.
And as you have already heard from other panel members,
there are roles and responsibilities and things are changing.
But there are some other rules in these demonstration projects
that might be looked at as a point.
Mr. Ortiz. I just have one--would you like to add
something? Thank you. I just have one more question and then I
will yield to my good friend from Virginia.
Why has the experience with pay-for-performance in defense
laboratories demonstrated your program has been so much more
positive than DOD and NSPS experience? And I ask GAO and DOD.
Maybe they can add something to that.
Mr. Perkinson. From the FMA perspective, we had some folks
that--one of our chapters in China Lake, they were run under
the demo projects. And I think one of the things that Ms.
Farrell brought up was they moved cautiously as they
implemented the demo projects, whereas when we implemented
across agency lines in the different departments, we had a
tendency for things to--the different ways that business rules
could apply didn't leave a consistent base for the projects to
go out. So we had individual pockets created at the different
agencies or the facilities.
So with the demo projects, they were concentrated on what
they did and they moved cautiously. So I think that was the
success of those.
Mr. Bunn. If I could add something, Mr. Chairman. We did
use some of the lessons that we learned from defense
laboratories and other personnel demonstration projects as we
have designed NSPS. One of the things I want to point out is
that as we implemented those, the early years of those
implementations did experience some of the negative perceptions
and attitudes that we are seeing in NSPS. The important
difference between NSPS and those demos is that the nature of
the workforce and those laboratories were different. It was a
professional workforce. It was homogeneous for the most part.
And the flexibilities were very much designed for that kind of
organization.
NSPS organizations and the way we designed NSPS, it is not
the same kind of implementation. We have rules that are more
standard across NSPS and weren't as tailored to those
workforces. So there was a--you know, in some ways there were
important parallels. We are experiencing the same kinds of
things in the early years that they have experienced. And OPM
and, I believe, GAO has pointed to those as well. But there are
also important differences. And we have attempted to learn the
lessons from the demonstration projects and we have continued
to do that.
Mr. Ortiz. I would just add that performance management is
something that we have talked about. NSPS touches compensation
and hiring and performance management. But true performance
management touches everything throughout the organization. The
goals cascade through the organization and touches how you
hire, how you motivate, how you reward. And NSPS is very broad,
much broader, I agree, than what we have seen at the
demonstration projects. And it takes time. It takes five to
seven years, when we have looked at results-oriented
organizations that do use such type of management.
Mr. Ortiz. Anybody else? If not, I yield to my good friend
from Virginia, Mr. Forbes.
Mr. Forbes. Thank you, Mr. Chairman. Again I want to thank
our witnesses for your expertise and for sharing it with us
today.
I am going to have a number of questions with some degree
of specificity I would like to submit to you in writing, where
you can think about them and just give us answers so we can get
information. While we have got this brain trust here, I want to
do a more macro question. I think all of us would agree anytime
we have a personnel system, it is never going to start off
perfect.
The second thing, it is never going to be implemented
perfect. And I remember the days in law school; I used to envy
the law school professors because all they had to do was stir
the pot and ask questions, but never answered anything. When
you get to be a judge or lawmaker, ultimately we have got to
pull that hot stuff from stirring all around, and we have to
answer the questions.
One of the questions we are going to have to answer is
this: Do we continue to tweak the NSPS system? Or at what point
do we ditch it and say we are going to go back to the GS
system, or do we ever get there?
And what I would like to ask you is just your individual
perspectives. Do we continue working and trying to tweak this
and make it better? Or do we ditch it and go back to the GS
system? Because both of them have pitfalls. It is not a clear-
cut question on either one of those.
And from your individual perspectives, seeing all you have
seen, know all the questions we can stir up, know that we can
say well, this is a problem here, this is a problem there, what
do you think? Continue to tweak it, modify it, or ditch it and
go back to GS?
And if each of you would give us your perspectives on that,
I would appreciate it.
Mr. Bunn. Well, I think that is one of the issues that this
review team is going to look at and wrestle with. My experience
is that these kinds of systems are only successful when we have
full commitment on the part of leadership, the line management
in organizations, all the way up to the senior leadership. And
in the Department of Defense that is both a civilian leadership
as well as the military leadership.
This review, this time-out that we are taking, gives the
new leadership in the Department of Defense under the new
administration an opportunity to grapple with those fundamental
questions and the underlying design principles of NSPS. And,
really, I think what is going to happen is they are going to
struggle with figuring out what things are implementation
issues and what things are fundamental design or systemic kinds
of issues. And, frankly, where we are in implementation now, we
are just now far enough along in our implementation to start
seeing and discern those things. But ultimately, trying to get
back to your question, it could go either way.
Mr. Forbes. Brad, let me just--you have immunity here.
There is no liability. We are just trying to get our arms
around it. We really respect all of your opinions.
From what you know now--and I realize there are a million
different things, and I know what they are going to try to do--
what are each of your opinions? Is it worth tweaking and making
it work? Can we get there? Is that the way to go? Or do we need
to ditch it?
Mr. Bunn. I think the--you said immunity, right?
Mr. Forbes. You have got immunity.
Mr. Bunn. I think there have been examples and
demonstrations of successful systems like NSPS that we can
point to and say they made it work over there. I think we can
look at that and see--at least see a potential future where
there is an NSPS and that have overcome and tackled these major
problems.
We have addressed the issues that, Mr. Chairman, you
mention in your opening statement and, Congressman Forbes, you
mentioned. And that given time, we can overcome those. But the
other side of that is that there are fundamental issues that,
Mr. Chairman, you raised, one of them being multiple systems
across the Federal Government, agency unique kind of systems.
And I think this will probably open a debate about whether that
is the right approach for the Federal Government.
So I think it is a healthy debate that we need to have. And
I think that we need to have this review so that the new
administration can embrace the program if we are going to move
forward with it, and then at the very least get clarity so that
our workforce knows what it is going to be operating under.
Mr. Forbes. I don't have a lot of time. Ms. Farrell, Mr.
Bunn is still teaching law school on me. What do you think? If
we go back to GS, are we going to have to make major changes in
GS? Where do we go? What do you think; keep it, tweak it, go
back to GS? Do we have to make major changes?
Ms. Farrell. My agency would say--and I agree with my
agency--tweak it. We strongly believe in performance management
and the benefits that can be derived. It is not that you can't
get results from the GS system, but performance management has
given DOD the opportunity to reenergize and refocus their
efforts and look at how they hire and how they develop and how
they pay with the flexibilities. Give them more time to work
through this.
Mr. Forbes. Thank you. Dr. Crum.
Dr. Crum. Yes. I am going to say something slightly
different, which is that the issues that are faced by DOD are
also faced by other Federal agencies so that, in fact, if we
wait for DOD to reservice a proving ground, we would be waiting
some time and fail to capitalize I think on an opportunity to
improve the civil service at the present time; where now we can
capitalize on the economy to bring in people, which maybe we
otherwise could not if in fact we had the right systems in
place.
We will ultimately still be facing the same sort of
retirement tsunami, for instance, in a few years that was
talked about by GAO and others. Even though that may be delayed
because of the economy, it will come up. We need to solve the
same problems from other agencies, not just DOD.
Mr. Forbes. Mr. Perkinson.
Mr. Perkinson. Congressman, I have a constituency that
probably whatever answer I give you will be the wrong one.
Mr. Forbes. So would we.
Mr. Perkinson. I am going to speak from my experience,
being a supervisor and head of an organization that already
has--we have the three systems. I have to manage those three
systems. I have wage-grade people assigned to me, I have
General Schedule and I have NSPS employees. My personal feeling
is that if at the end of the review we are going to come up and
say we will go back to GS, we ought to go back to GS now,
because that only gives me two systems to have to work with. I
truly do think, though, we need to look across the board
agency-wide at all the different aspects that are going on.
In the Internal Revenue Service, for instance, with the FMA
organization, they have the pay-for-performance system. Social
Security is looking at it. So we need to come back with basic
principles that we are looking at, that all the agencies can
adhere to, that we have one pay-for-performance system and some
principles laid out there that we all can use as a standard. I
think that is the direction we need to go so we don't have
multitudes of pay-for-performance systems that we are trying to
operate under.
But if I had my gut feel in what would serve me better at
Norfolk Naval Shipyard today, I would say go back to GS.
Mr. Forbes. Thank you. And thank, all of you, for your
answers. And Mr. Chairman, thank you for your patience.
Mr. Ortiz. Thank you. Ms. Shea-Porter.
Ms. Shea-Porter. Thank you, Mr. Chairman. Well, your last
comment certainly got my attention. And I wanted to ask you to
please elaborate the reason for that, Mr. Perkinson. Why would
you go back?
Mr. Perkinson. Well, right now, one of the difficulties in
being a good, competent manager is the different types of rules
we are under. Under the wage-grade system, of course, I have
got to deal with different rules and responsibilities, and plus
they are getting a structured raise that is dictated by the
wage survey system. And the General Schedule, the bargaining
unit employees that I have, they are coming under the
congressionally approved pay raise. And then I have the NSPS
folks that we are giving raises to. We are rewarding
performance.
So it is a management nightmare to kind of have to explain
why you are not--why certain aspects or certain people are not
getting the same consideration that another group is getting.
For instance, the new question at my activity is, from our
General Schedule bargaining unit, when are we going to get paid
for our performance like the NSPS folks? When the survey came
out and the results of the payout, they got 3.9 percent. Okay.
So the average payout for the NSPS folks was 6.4. Legitimate
question. But it is a tough one to manage through when you have
got those different types of attitudes and people that you have
to motivate to get your job done on a daily basis.
Ms. Shea-Porter. But if they had the choice--I thought I
heard you say that you would go back to the GS.
Mr. Perkinson. I said as a manager I would go back to the
General Schedule because it would make it easier for me. There
are--and I included in my written testimony--there are
different flexibilities with the General Schedule system where
we can pay for performance. Quality step increase, those type
of activities, there are some tools in the General Schedule
system where we can reward performance.
Ms. Shea-Porter. I have to say I have a family member who
has lived and been happy under the GS system for a long time.
Mr. Bunn, I have been hearing some complaints--and not from
my family member. I have plenty of complaints but not about
this. I have been hearing complaints from Federal employees
that under the system they don't feel comfortable talking to a
manager about something they don't like, or a suggestion,
because they fear that they do not any longer have the
protective structure around them and that later they will be
punished for being so frank. And so they tend to find somebody
who has the courage or the good standing with their boss, so
that they won't have to worry.
What are you doing to make sure that doesn't happen? I am
sure that happens. But what are you doing to acknowledge it and
to work on that? I mean, that is why we have got the system to
begin with, the original GS, so that it would be fair and
equitable and people could understand. I know there are
problems. But at least we understood if you were here a certain
amount of time, you performed at a certain level, you could
expect that the job would not go to the relative who just
showed up two days ago.
Mr. Bunn. Well, one of the things we did early on in the
system was a fairly extensive training effort with our
supervisors and managers. They are really the people who have
to make this work because that is where we are putting this
discretion. We are putting discretion in the hands of
supervisors and managers who now have more influence over the
pay outcomes of their workforce. So that was a conscious choice
the Department made. That is one of the underlying principles
of pay-for-performance. Part of it is the design of the
performance management system and ensuring that you have a
structured evaluation system that measures performance against
objective criteria.
So when we designed the performance management system we
established benchmark criteria against which individual
performance is measured, and then ultimately rewarded under the
pay-for-performance system. Training our supervisors and
employees in understanding how that works and setting results-
oriented goals and objectives aligned with the mission, those
are all parts of our implementation training and continues to
be part of NSPS training going forward.
Ms. Shea-Porter. That sounds wonderful. But how do you
extract the part--in every person--which is, I like this one
better, or I didn't like the work that one did because I
thought we should have used----
Mr. Bunn. The issue of favoritism.
Ms. Shea-Porter. Or for whatever. There are people who
don't even recognize it in themselves, and you could train them
forever and they could agree with you about the objectives but
not recognize that they are not using those objectives, that
their outlook is colored by starting off with a certain
perception.
So how do you account for that? And how do you try to pull
that out of the recipe?
Mr. Bunn. I think what you have to look at, then, is what
safeguards do we have in the system. And in fact that is what
my colleague from GAO has done most of her work on in looking
at NSPS, and GAO has actually found that we do have safeguards
in the system. Part of that is multiple layers of review in the
performance management process, so that first-line supervisor
is not the final say in the performance evaluation process;
that a higher level of review looks at the rating, and at that
point that could catch some of those kinds of behaviors if
there is a bias, if there is favoritism going on.
And then the pay pool process, which is the panel process
that we instituted as part of NSPS, and the performance
evaluation where you have a panel of senior leaders from within
the organization reviewing the outcomes of the rating process
to ensure that the criteria is applied appropriately,
consistently, and fairly across the organization. So those are
the most significant safeguards that we have.
Ms. Shea-Porter. But of course it is the massiveness of the
job, and I know how hard Federal employees work. They really
can't sit down and find out all the nuts and bolts in a
particular work station, in a particular issue. It is just not
possible. But if that were working, Ms. Farrell, could you
please tell me why the satisfaction rate is dropping? It would
seem to me--did you say about 26 percent now?
Ms. Farrell. Twenty-three.
Ms. Shea-Porter. It would seem to me that over, you know, a
couple of years, as people became a little more accustomed to
it, that the rate would stay the same or maybe even rise a
little bit instead of plummeting.
Ms. Farrell. It did plummet, and typically with a
transformation of this major end scope, you will see a plummet.
There hasn't been enough time to pass to see if that is going
to be a consistent trend. We will be looking at this year's and
next year's results as well to see, but typically it will
plummet, it will level off, and hopefully it will go back up.
But if I may go back to your first question regarding the
safeguards, as Mr. Bunn said, we did look at the internal
safeguards, and training is one. Training and retraining. And
we cannot emphasize enough that the training has to be
continuous. It is not just up front when you launch the system,
but you have to keep doing it with the supplementals. And we
did give kudos to DOD regarding training that was needed by all
employees up front and then specialized training on different
aspects of the system, et cetera.
But the predecisional analysis that I referred to that DOD
disagrees with, that is an opportunity for a third party that
is outside of the chain of command to be--to conduct an
analysis to look for anomalies that may need further
investigation in terms of a particular individual or certain
groups, inconsistencies that warrant investigations; not to
necessarily change the rating to make it look ideal for a
certain type of distribution, but to see if something needs to
be investigated, to make sure that the employee is receiving a
rating that is a comparison of what they did with their
objective and the other performance indicators, and then take
steps and change it if a mistake was made. But that is
something that DOD does not require, and it could help, help,
ensure what you are talking about.
Ms. Shea-Porter. I remember a couple of years ago when we
had the hearing and the report on that side of the table was
pretty sunny, that people were happy, that their money was
better, that they thought it was fair, that they were getting
recognized. So it is interesting to me to see this happen again
and see that what my initial suspicions were seem to be
possibly coming true under this system. So thank you all. I
appreciate it.
I yield back.
Mr. Ortiz. Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman.
Ms. Farrell, I wanted to talk a little bit to follow up on
a question. Tell me about these ratings. The employees
participated in a rating program where they rated their
satisfaction level. Is that what you were saying had plummeted?
Ms. Farrell. She was referring to some remarks in my
opening statement about employees' overall dissatisfaction.
Those who had been under the system the longest when we look at
DOD's employee survey results, there was dissatisfaction
expressed from 2006 to 2007, and it plummeted from about 43 to
about 27 percent.
Mr. Rogers. Just among those in NSPS?
Ms. Farrell. Yes, those who were in NSPS for the longest.
As you know, NSPS has been phased in. Again, that is why we
believe an action plan is needed to address such concerns, to
find out what is behind that statement that they are
dissatisfied that NSPS will have a positive impact on the
personnel practices, and to dig deeper and address those
concerns.
Mr. Rogers. Was there a similar review or sampling of the
wage grade in the GS employees to see if they were satisfied
with their pay system?
Ms. Farrell. There are statistics that surveyed the GS, and
there are statistics that show those who are under--for certain
questions, those who are under NSPS have a more favorable view
than when they were under the GS system. So there are positive
indicators as well.
Mr. Rogers. But I am trying to compare apples to apples.
Currently a snapshot of the employees in the three systems,
does one stand out as being much less desirable than the other
two?
Ms. Farrell. It is mixed. When we looked at what data is
available, it is a mixed report card right now.
Mr. Rogers. Okay. Staying with you, you talked about
finding a way to reassure employees that it is fair and
equitable. What kind of ways do you think that you are going to
be able to do that?
Ms. Farrell. One of the safeguards that Congress mandated
for DOD to include in the NSPS system is to involve the
employees in design and implementation. Now, we are past
design, but we are well into implementation. Again, one way to
involve the employees--and I am not saying that DOD does not.
They hold town hall meetings. They have focus groups. They
conduct this status of survey for civilians that is projectable
to the entire population on a regular basis, asking questions
about NSPS; but it is take that survey result and document what
the employees' concerns are, and take action, hold somebody
accountable with coming up with something to respond to the
employees, and that would be pulling the employees into the
implementation part at this point.
Mr. Rogers. As a part of your review, did you all look at
in the NSPS system employees that had gotten significant
bonuses and kind of review where the complaints were that they
were inequitable?
Ms. Farrell. No, we did not look at individual cases, and
the survey results I don't believe break down the type of
information that you are trying to get to. It would come up in
our focus group discussions, but nothing that would be
projectable.
Mr. Rogers. Well, Mr. Perkinson talked about his situation
with his employees and how he found it to be unfair from a
manager's standpoint. And it would be good if you could take
the pay raise situations where there has been expressed concern
that it was unfair the way it worked out and look at them and
see if there is some way we could remedy that.
But, Mr. Perkinson, do you know of any way we could do
that?
Mr. Perkinson. There is a mechanism in NSPS that allows--it
is called reconsideration, and it is a process that can work by
the employee. But it comes back to a point that was made
earlier about, you know, the employee has got to have the
desire and the knowledge to want to go make that
reconsideration. And I think in some cases what happens is the
employee is frustrated and says, ``I will just accept what I
get,'' rather than make the effort to ask for reconsideration.
I do know of a personal experience where somebody did ask for
reconsideration, and it was accepted, and the process worked.
So there is a tool in NSPS that does allow for the employee to
make a challenge to a rating if they think it is inappropriate.
Mr. Rogers. My depot employees are very apprehensive about
this NSPS and its equitable nature, which leads me to want to
know how do employees feel about the wage grade and the General
Schedule? I would love to see some apples-to-apples employees
survey among those three groups, because if we follow what Mr.
Perkinson indicated would make his life simpler and got rid of
NSPS, I would like to know that the people who are in wage
grade and GS and say, that is a good thing, and not say, you
made it worse. So I would just like to see that survey.
Thank you, Mr. Chairman.
Mr. Ortiz. Ms. Bordallo.
Ms. Bordallo. Thank you, Mr. Chairman.
I have a question for Mr. Bunn. In fact, I have a series of
questions. First, the issue of implementing this system is of
great importance to our civilian workforce, and the halt in
further implementation of this system allows us time to get the
process right and make sure it is fair and equitable for all
civilian employees in DOD.
Now, on Guam--I represent the U.S. territory of Guam. The
commanders in the Air Force and the Navy are moving toward
implementing a joint region concept that was dictated by a 2005
Base Closure and Realignment (BRAC) decision. I have heard from
several constituents on Guam about concerns they have regarding
how civilian personnel will be treated for purposes of
promotion and eligibility for other civilian jobs within their
specific service.
Now, similarly, NSPS allows--the rules allow each
individual military organization or service to determine how
much funding is available for raises and bonuses, which leads
to inconsistency among all DOD organizations.
What action can be taken to require more consistency in the
budgeting of NSPS among the various organizations to ensure
more fairness in payouts?
The second part of that question: What impact does joint
basing or joint region implementation have on civilian
employees who are part of the NSPS system?
And, third, has DOD factored in the complexities of joint
base implementation into how the NSPS system would be
implemented on Guam and at other installations facing similar
joint basing requirements?
Mr. Bunn. I will start with the joint basing issues first.
We are in the process of planning for implementing the joint
basing decisions, and in some of those cases, it does involve
bringing organizations from different services together under a
single umbrella and under a single service, which also means,
whether it is NSPS or wage grade or GS, there are some
different ways that the services handle personnel management,
and that includes funding for pay pools, funding for
performance awards on the wage grade and GS side as well. So
some of the consistency issues don't just apply to the NSPS pay
pool funding; they kind of apply across the board.
But one of the things that the review will--and I know I
sound like a broken record, Mr. Chairman, but one of the things
that the review will take up is the issue of managing a
workforce under multiple systems, and what impact and what
challenges that presents, and what we could possibly do to
mitigate those challenges, and also fundamentally whether that
is something that we can live with.
Specifically for the joint basing, we do know that there
are some--which is another word for ``reorganization''
essentially is what is going on--there will be some moves of
employees off of some service rolls onto the joint base rolls,
and generally once they move onto the rolls of the new
organization, they will be treated--say, a Navy civilian moves
onto the Army rolls, they will be treated as an Army civilian,
and that includes whatever personnel policies apply to those--
to the Army population. So that is generally how we are
approaching it.
Now, there are some issues with respect to bargaining unit
employees who move from an organization into an NSPS
organization, and I know that issue has come up on whether that
is going to cause them to be moved into NSPS, and whether that
might have--have an implication with respect to our delay in
further conversions. The bottom line on that is that if they
are bargaining unit employees, and they are moving to a new
organization, again, regardless of the NSPS/GS issue, there
needs to be a determination that is made by the Federal labor
relations authority with respect to their bargaining unit
status and whether they still are a member of a bargaining
unit. And until that process happens, which generally takes
several months, we wouldn't change the system that they are
under. So if they are under GS, they wouldn't change to NSPS
until the bargaining unit issue is clarified.
Ms. Bordallo. I see.
I would like to get Mr. Perkinson's suggestions on this.
Mr. Perkinson. With the joint basing issue, it sounds to me
like if we were consolidating, we were bringing people so there
is a consistency, that is a proper way to look at it. In
particular you can look at our organization and make the rules
the same so that there is the transparency and equitability on
how the payments are. That seems like it would be the right way
to go for the employees and for the managers as well who have
to work in that system.
Ms. Bordallo. Thank you.
And I have one more quick question, Mr. Chairman, if I
could.
Mr. Ortiz. Go ahead.
Ms. Bordallo. All right. Guam is in the midst of a major
military realignment, and the key component of this realignment
is the transfer of 8,000 marines and 9,000 dependents from
Okinawa, Japan, to Guam, as well as an increase in all the
other services: the Air Force, the Navy, and Army. And in the
end we expect a large increase in civilian DOD personnel.
It is important that any civilian hiring system on Guam be
flexible enough to provide incentives for workers to remain on
Guam. So we are doing our part as a Congress to pass
comprehensive pay locality legislation for the nonforeign Cost
of Living Adjustment (COLA) areas, but we need to be mindful of
keeping options open for certain types of compensation and
recruiting and retention incentives when implementing an NSPS
on Guam.
So to that extent I understand that NSPS tends to put a
significant amount of employee compensation at risk by moving
payroll dollars into performance-based pay pools. How has DOD
ensured that employee compensation is not artificially affected
by budget constraints and ensure that NSPS-covered employees--
that they have their at-risk compensation sufficiently
protected from budget fluctuations?
Mr. Bunn, I guess you would be able to answer that.
Mr. Bunn. Yes, ma'am.
One of the provisions in the statute, the underlying
statute, for NSPS is to ensure that as employees move into
NSPS, that they are not disadvantaged from the standpoint of
overall compensation. So our policies, the rules that we put in
place for how we fund NSPS pay pools and how we fund civilian
compensation under NSPS, essentially protect those funds. And,
in fact, we require our components to certify every year that
the funds that are allocated for purposes of NSPS compensation
pay for performance are no less than what would have been
allocated had those employees at that population not converted
to NSPS.
So we protect that money, and we ensure that the money is
available, and that it is allocated. It is now--under NSPS, it
is now expended under the pay-for-performance process and under
those rules, and that is how the compensation is distributed,
but the money is there.
Ms. Bordallo. Thank you, Mr. Bunn.
Thank you, Mr. Chairman, for giving me some extra time.
Mr. Ortiz. Mr. Bishop.
Mr. Bishop. Allow me, I think, about four questions that
are more general, and to whomever wishes to respond, it is fair
game.
The first one just deals across the board. Is there still a
consensus by the four of you that incentive bonuses have some
kind of role? Should they be maintained in some form or
another, not necessarily the one you have now, but are
incentive bonuses a legitimate factor that should be maintained
in the compensation system?
Mr. Perkinson. Yes, sir. I think it is a factor that needs
to be kept on the table and utilized as a tool. Incentive
bonuses and paying people for doing above and beyond their
normal expected duties is something that we need to do.
Mr. Bishop. Is there any disagreement with that, then?
One of the things I thought that was a purpose of NSPS was
to try to reduce the number of pay grades, scales, so that they
were more in line with the regular Federal workforce. Is that
still a plus? Is it still a goal? Should there be more steps in
pay grades? Should it be reduced? Should DOD be significantly
different vis-a-vis the rest of the Federal workforce?
Ms. Farrell. I believe you are referring to broadbanding.
Mr. Bishop. Yes.
Ms. Farrell. And that is a management flexibility that does
aid with hiring. When you are bringing someone into the Federal
Government, because you have banding, there is a broader range
of compensation that you can offer them rather than having them
come in, which is traditionally they come in, and it is step
one, period, that is it. So actually broadbanding can help to
make DOD more competitive to bring people in and reward them
that way.
Mr. Bishop. Is that still a plus that should be a goal
regardless of what you do with this system?
Mr. Perkinson. I think that broadbanding would be a tool
that we need to utilize in the workforce, though we have got to
be careful on how we utilize it, and that we utilize it fairly,
you know, because it is sort of like--we don't want to run amok
like baseball salaries do for getting the best player. You
know, we want to have some kind of reasonable----
Mr. Bishop. Careful. I like the Yankees, so----
Mr. Perkinson. I understand.
Mr. Bishop. Okay. But that still is a concept that it is
fair game.
Mr. Perkinson. Yes.
Mr. Bishop. I know in depots, and I have one obviously as
well, there is an aging civilian workforce. There is going to
come a time when there is going to be a serious drop in the
resources and manpower that we have.
Does NSPS system, in your view, either help or hinder in
that particular challenge of attracting new people that are
going to be coming into the system? Once again, it is open for
people who want to take it.
Dr. Crum. I think it gives management more options and to
what they pay new people when they come in, thereby creating
greater flexibility, greater ability to hire someone. That
would be the main thing in terms of sort of attraction and
retention of those people. So I do think it gives that sort of
flexibility.
Mr. Perkinson. I agree with that assessment to a point. And
what I want to bring up as a caution is that some of the
feedback we are getting from some of our agencies is that some
of our brightest younger employees are avoiding NSPS because of
the press it has been getting, okay, because they are looking
to stay in the General Schedule system versus go to an NSPS
system, because right now if you look at the scope of the NSPS
system, they are mostly managerial, non-bargaining unit-type
employees, and they are saying, why should I go to that system?
So I think if we clear up the image that is out there, and in
some cases a false image, I think it is a good tool to use to
bring our younger people on board.
Mr. Bishop. I guess what I am hearing from all of you is
some of the goals we still have are valid. The devil is
obviously in the details of how can we structure it in some
particular way.
Let me ask one last, hopefully a little bit more specific
question, once again of anyone who is here. Since 2003, when we
started this program, there have been some significant changes
with regard to the appeals rights of employees in dismissal and
disciplinary matters. Are you satisfied that that is a more
appropriate--the modifications have been more appropriate in
making it satisfactory to employees in the way they have
changed over the years? Are we in a better--you know what I am
trying to ask. Are we in a better position now than we started
in 2003 with regard to dismissals and discipline appeals? Maybe
that wasn't the right question to ask. I am sorry. Go ahead.
Mr. Bunn. Well, the original statutory language did provide
flexibility to rewrite how we do employee disciplinary appeals,
if that is what you are referring to, sir. And we wrote
regulations to essentially streamline the appeals process and
how employees who are subject to adverse action, how they
interact with the Merit Systems Protection Board. But in the
fiscal year 2008 National Defense Authorization Act, that
portion of the statute was repealed. So we haven't actually
implemented any changes to how we do employee disciplinary
appeals. We are operating under government-wide rules with
respect to those kinds of appeals, if that is what you were
referring to, sir.
Mr. Bishop. Okay. You gave me a better answer than what I
should have phrased as my question in the first place. Thank
you.
I realize my time is up. Thank you, Mr. Chairman.
Mr. Ortiz. Thank you.
Mr. Kissell.
Mr. Kissell. Thank you, Mr. Chairman.
Thank you, panel, for being here.
Maybe a couple of overview questions.
Was there a model--and, Mr. Bunn, you maybe can answer
this. Was there a model when we set this up? Did somebody have
this system in place where it worked, and we said, hey, we want
to do that; or did we go to the drawing board and kind of put
it together from there?
Mr. Bunn. Back in 2004 and 2005, we conducted a fairly
extensive design process, but where we started was looking
within our own experience in the Department of Defense starting
with our demonstration projects that were in place at our
Science and Technology (S&T) laboratories, as well as one of
the early demonstration projects for alternative personnel
systems out at China Lake. And the way we designed the system
was we took pieces of those--we didn't take any one single
system in whole and implement that as NSPS. We took portions of
those, essentially following very similar design principles
with respect to performance and pay and the importance of
rewarding excellent performance and contributions, and we
structured the system based loosely on our experience of the
demonstration project. So our pay bands are based loosely on
what we did in our demonstration process.
The pay-for-performance system is very similar to the pay-
for-performance systems in our lab demos, but, again, there are
some minor differences, but it is essentially modeled after
what we did with those organizations.
Mr. Kissell. Has the model that you started out with stayed
basically the same, or has it been added to, added to, added to
as we have gone?
Mr. Bunn. In terms of the performance management and
classification in pay and the pay-for-performance system, the
core of it has been the same since the implementation. We did
make changes to our--the governing regulations to conform to
changes that Congress made in the NDAA for 2008, namely the
changes in repealing the labor relations provisions, adverse
actions, those kinds of things, but also changes to the pay
system that require us to provide at least 60 percent of the
General Schedule-based pay increase. That is now part of the
system. But fundamentally the design of the pay-for-performance
system has been the same throughout.
Mr. Kissell. Ms. Farrell, either you or Mr. Bunn, I can't
remember, mentioned 205,000 employees. Are all of these on
NSPS, or is the total number of civilian employees that we
have?
Mr. Bunn. Sir, I mentioned that we have about 205,000 in
right now. There are another 2- or 3,000 that are eligible to
come under the system, meaning they are currently white-collar,
GS, non-bargaining unit employees that we could, and those are
the conversions that we actually delayed in order to do this
review. Once those--if they come in, that will complete our
implementation, and that represents the former GS non-
bargaining workforce in the Department.
Ms. Farrell. May I answer that? The initial plan was to
bring all DOD employees under, and that is roughly around
700,000. So the roughly 205-, 207- where DOD will end up is
significantly less, and that is due to collective bargaining
and agreements with the union, populations that at this time
have been excluded. So it is significantly less than the
700,000 original plan.
Mr. Kissell. It would seem to me that consistency across
the board when you are talking about the broad range where the
services are performed and the broad number of people that have
to make these judgments, it would seem that consistency would
be one of the most formidable tasks that this system would
face. Have you found in your reviews that in one area of the
country it might be performance showing certain things, and
another area showing certain things, and if you compare it,
then maybe it was the perception rather than a difference in
actual performance?
Mr. Bunn. One of the things that we are looking at now and
that this review will eventually look at is how much
variability there is within the system depending on what
organization you are a part of. Overall the rules are fairly
standard.
The way that we conduct performance management, the
performance management system itself is standard across the
board, but we do give flexibility to organizations to operate
differently within that common framework, and there can be and
there have been differences in the outcomes based on
organization, the organization you are a part of.
I am not familiar with differences based on geography, but
some of it is driven by organizational differences in how they
have actually implemented the system, how they have funded pay
pools and those sorts of things. And I think what we are going
to be looking at is how much inconsistency is tolerable.
Mr. Kissell. And that is what I am thinking. Manager A
might give out certain bonuses, and manager B might say, I am a
little harder, I don't want to give money out as quick.
And my last question, and please forgive my ignorance here,
but I have heard it said in both ways: Are we talking about pay
in terms of salary, or are we talking about pay in bonuses on
top of set salary scales?
Mr. Bunn. We are talking about both. The NSPS pay-for-
performance system, the performance evaluation drives both a
performance-based salary increase as well as a bonus on top of
that. So generally the pay for performance--the payouts are a
combination of a salary increase and a bonus, and that is on
top of the general increases that we also provide based on the
annual increase that Congress appropriates for the civilian
workforce.
Mr. Kissell. I came from a background in 27 years in
production management. I know the advantages of incentives, but
those advantages have to be clear-cut, easily defined, where
everybody can see what everybody else is doing and what
everybody else is getting. I am anxiously awaiting your report,
because it seems like there is a lot of gray zones of
decisionmaking by individuals that become very hard to do and
be consistent. So thank you for your testimony.
Mr. Chairman, I yield back my time.
Mr. Ortiz. Thank you.
Dr. Crum, I have a question for you. The Federal Government
must compete with the private sector for talented candidates or
employees. Why does the Federal Government hiring process take
longer than hiring processes found in the private sector, and
what can the government do to attract qualified candidates at
all levels, those fresh out of the university or college, those
leaving the military and seeking a new career, those midlevel-
career private-sector individuals who might want a chance to
work for the Federal Government? It seems to me that the
Federal Government takes a long time. Maybe you or anybody else
that would like to answer.
Dr. Crum. I would be happy to try.
The process takes longer for a variety of reasons.
Partially we are held to different standards. We have a
standard of transparency. We have a standard of inclusion, a
standard of making sure that everyone gets due process, if you
will, so that we can--for instance, if we are trying to make a
decision on hiring someone, we are going to consider everyone
who might apply for that job. Compared to the private sector,
they might, in fact, identify someone early on in the process
that they want and cut off the process. We have to, in fact,
not do that, but consider everyone and apply the standards
equally.
So the process itself may take longer than if we compared
it directly to the private sector; however, it also takes
longer for inappropriate reasons. We overlay many times other
steps in the process that are unnecessary. We do not do our
selection process necessarily very efficiently. There are many
things that we could do to, in fact, improve the speed at which
we process applications.
So part of it is systemic, but part of it also is self-
imposed many times just by the agencies in terms of their own
structures, their own ways of doing business which have evolved
over time and have not really been looked at in ways to try to
say, what would be the best way to do this; rather, it is the
way we have learned how to do it. So part of it is sort of
reinventing or looking again at those processes to see what we
can do better.
To the second part of your question, what can we do to
attract people, we do have a lot of, I think, valuable aspects
of Federal employment that we find are very attractive to
people. Part of that is making a difference. People want to
contribute to society. We can advertise that. We can advertise
also our benefits, which exceed those of the private sector in
many cases. Also the job security that we have. In many cases
we find that when people understand what we have to offer, they
would like to come to us.
The problem is in reaching those people. That is another
thing we do not necessarily do a very good job of is reaching
out to people, showing them what we have to offer and how they
can both make a difference and get something out of it. So I
think that in many ways our processes are not attuned to really
efficient both recruiting or selection.
Mr. Ortiz. Anybody else? If not, I just have one more
question, and I will yield to my good friend from Virginia.
The performance management system for NSPS consists of five
grading categories of which the lowest rating is a 1 for
unacceptable performance, and the highest rating is a 5 for
role model performance. The majority of the employees in 2008
and 2009 were rated a 3 or valued performer. The GAO reported
in 2008 that during discussion groups with civilian employees
under NSPS, a prevailing theme was that it was impossible to
receive a rating higher or lower than a 3.
Is the Department aware of employees' concerns about the
distinction in performance being made, or that there is a
perception among employees that everyone gets a 3, or a valued
performer, no matter how well or poorly they perform? If so,
what should be done to address these concerns? And we have
heard a lot of these among some of the employees, and maybe you
all can address that if you are hearing the same thing I am
hearing.
Mr. Bunn. Mr. Chairman, from the Department's perspective
we have heard those concerns, and that is one of the reasons we
have been open about publishing results of the performance-
rating process in the aggregate.
And the statistics that you mentioned, you are correct that
the majority of employees were rated at the level 3. Last year
in January of 2008, the number was about 57 percent at the 3
level, and about 36 or 37 percent at the 4 level, and roughly 5
percent at the 5 level. This year statistics were about the
same, about 55 percent at the 3 level, 38 percent at the 4
level, and about 5 percent or a little less than 5 percent at
the 5 level.
And I think that distribution does demonstrate that it is
certainly possible to get above a 3 when we have over 40
percent of the workforce receiving 4s or 5s. Part of it is an
understanding or getting a better understanding of the
performance criteria. The system was designed to be a rigorous
evaluation system, and the way that we designed the level 3 and
the ratings above was to be--essentially set a high bar of
performance. The level 3--and the reason we called it ``valued
performer'' was to make it clear that that is a good
performance rating, and that most of our employees will operate
at that level, and that the higher levels are reserved for
exceptional performance.
We have heard the concern that 3 is all you can get, so why
try to, you know, write anything any higher? But the statistics
don't bear that out, given that we have got just a little less
than half the workforce getting higher ratings.
Mr. Ortiz. Do we know--when you look at the percentages
that you just mentioned, 50-some-odd, 45, and 5 percent now,
are these the employees who have been there--who gets the
highest rating, those who have been there for a long time, or
those that have been recently hired, 2 or 3 years? How do we
get to those numbers?
Mr. Bunn. I don't know those statistics off the top of my
head, and we can certainly work with you to provide that. But
some of the things that we look at when we analyze those
results, we look at it across pay band levels. We look at it
across various demographic categories, and there are some
differences in what we see.
[The information referred to can be found in the Appendix
on page 129.]
Mr. Bunn. In some cases we are seeing that the folks that
are in the higher pay bands, who also tend to be more senior
employees, are getting higher ratings, and we are also seeing
that supervisors tend to get higher ratings than
nonsupervisors. And that is another area that we are looking
hard at as we--and that this review will look at is the
perception of the fairness of the system, and are we ensuring
that there is consistent application of the criteria across.
Mr. Ortiz. Anybody else?
Ms. Farrell.
Ms. Farrell. I believe what you are raising gets to the
heart of the three safeguards that we reported on that DOD
could take steps for improvement, and one being transparency of
ratings at the command level so that employees could know where
they fit, not just the aggregate, and DOD has taken steps to
make sure that that happens. Another being the perception that
no matter what I do, I am going to be rated a 3, a valued
employee. And DOD partially concurred with our recommendation
to clarify the guidance that employees are rated against how
well they did for their objective, not against each other, and
that is a partial concurrent. We are waiting to see that
guidance clarifying it.
There is also the third safeguard regarding predecisional
analysis and the importance to look for anomalies and look for
inconsistencies, because if a problem is identified that
perhaps is blatant discrimination, then it can be corrected
before that rating is finalized. DOD took issue with that, and
they rely upon their postdecisional analysis, of which we are
looking forward to looking at during this second review of NSPS
and if that in some way addresses it. But we still stand behind
a predecisional analysis needs to take place to just
investigate if there is an anomaly and take action before that
rating is finalized.
Mr. Ortiz. Anybody else?
If not, I yield to my good friend Mr. Forbes.
Mr. Forbes. Thank you, Mr. Chairman. Our witnesses have
been very patient, and I have a long list, as I mentioned
earlier, of some written questions I would like to submit with
your permission. Rather than hold them here any longer, I will
do that in writing.
But I want to just thank you all for your willingness to
come out here and give us the benefit of your knowledge and
your expertise, and thanks for your patience with us.
Mr. Chairman, I yield back.
Mr. Ortiz. Mr. Bishop, do you have a question? No?
I just have one more, and we have been here for some time,
and I will tell you what. We have four good witnesses with
maybe different ideas, but I think that by collectively
bringing those ideas, we can make it better.
A complaint of the GS system is that it rewarded tenure,
but not performance; however, the Federal Employees Pay
Comparability Act provided numerous pay flexibilities for GS
employees, and I have several questions about the act.
Were managers fully trained and knowledgeable about what
flexibilities were available to them in the GS system? And many
of the flexibilities provided under the act are similar to what
is offered under NSPS, and why weren't these flexibilities
enough?
And I have a bunch of questions, but maybe we can have some
short answers. Why did the DOD believe it had to create its own
unique personnel system, and what additional changes, if any,
should be made to the GS system? And if you can answer some of
them; if not, maybe you can respond for the record.
Mr. Bunn. I would be happy to respond for the record. In
general, though, the basis for pursuing NSPS, the Department
felt that given the changing nature of the national security
environment, it was important to recognize the unique role that
civilians play in supporting national security, and that to
move to a culture of results and performance as well as the
flexibility that pay banding and those kinds of things have to
offer so that we can be competitive in the market to attract
and retain talent, we needed to break from the GS and break
from the previous title five systems.
Mr. Ortiz. Ms. Farrell.
Ms. Farrell. I would just say that GAO has reported, even
after NSPS was introduced, that there are a number of human
capital flexibilities available to agencies, and you are
exactly right in terms that managers weren't aware of them and
how to use them. And I would--NSPS again was a way to
reenergize and refocus, and we would hope that some of these
flexibilities now within NSPS aren't lost in the shuffle, as we
saw with the GS system.
Mr. Ortiz. We do value the tremendous work that our
civilian employees perform, especially in a time of crisis. We
are involved in two wars and hot spots all over the world, and
I think morale is a big factor. We want to have, as some of you
have stated, transparency and to be fair to them. And I know
you all want that, and I know you care for the employees. And
we have different approaches, but I hope that we could make it
better.
We will have some questions by Members who couldn't be with
us today because tomorrow is the big day, tomorrow we vote for
the budget; so everybody is having little meetings all over the
place.
But I really appreciate your testimony today. It was
outstanding, and I want to thank you.
This hearing stands adjourned, and thank you so much for
joining today. Thank you.
[Whereupon, at 4:30 p.m., the subcommittee was adjourned.]
?
=======================================================================
A P P E N D I X
April 1, 2009
=======================================================================
PREPARED STATEMENTS SUBMITTED FOR THE RECORD
April 1, 2009
=======================================================================
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
April 1, 2009
=======================================================================
RESPONSE TO QUESTIONS SUBMITTED BY MR. ORTIZ
Mr. Bunn. We have that information.
For the current rating period, 4.7% of the NSPS employees received
the highest rating, level 5.
The following table shows a breakdown of the Level 5 ratings by
years of service.
----------------------------------------------------------------------------------------------------------------
Years of Service 0-3 >3-10 >10-20 >20-30 >30
----------------------------------------------------------------------------------------------------------------
Level 5 Rating 14.2% 29.5% 20.9% 26.8% 8.6%
----------------------------------------------------------------------------------------------------------------
The following table shows a breakdown of all five rating levels by
years of service.
----------------------------------------------------------------------------------------------------------------
Years of Service 0-3 >3-10 >10-20 >20-30 >30
----------------------------------------------------------------------------------------------------------------
Level 1 0.1% 0.3% 0.3% 0.3% 0.3%
------------------------------------------------------------------------------------
Level 2 0.9% 1.0% 1.4% 1.3% 1.5%
------------------------------------------------------------------------------------
Level 3 60.0% 52.3% 54.7% 55.2% 56.2%
------------------------------------------------------------------------------------
Level 4 34.8% 41.1% 38.9% 38.8% 37.3%
------------------------------------------------------------------------------------
Level 5 4.2% 5.4% 4.6% 4.4% 4.7%
----------------------------------------------------------------------------------------------------------------
This table shows the distribution of ratings by years of service.
----------------------------------------------------------------------------------------------------------------
Years of Service Level 1 Level 2 Level 3 Level 4 Level 5
----------------------------------------------------------------------------------------------------------------
0-3 0.1% 0.9% 60.0% 34.8% 4.2%
------------------------------------------------------------------------------------
>3-10 0.3% 1.0% 52.3% 41.1% 5.4%
------------------------------------------------------------------------------------
>10-20 0.3% 1.4% 54.7% 38.9% 4.6%
------------------------------------------------------------------------------------
>20-30 0.3% 1.3% 55.2% 38.8% 4.4%
------------------------------------------------------------------------------------
>30 0.3% 1.5% 56.2% 37.3% 4.7%
----------------------------------------------------------------------------------------------------------------
[See page 31.]
?
=======================================================================
QUESTIONS SUBMITTED BY MEMBERS POST HEARING
April 1, 2009
=======================================================================
QUESTIONS SUBMITTED BY MR. ORTIZ
Mr. Ortiz. The number one complaint of managers in the federal
government is the hiring process. NSPS was designed not only to
transform DOD's performance management system for employees, but to
also provide the department with greater flexibility in hiring
employees. How has the department used the hiring authorities under
NSPS and what, if any, impact has it had on the department's
operations? What are the major challenges that the Department has
encountered?
Mr. Bunn. The Department does not collect statistics to be able to
respond definitively to your questions about the use of the staffing
flexibilities, but we do know that some, such as the competitive
examining authority, the authority to temporarily promote non-
competitively up to 180 days, and the authorities associated with non-
permanent appointments, are being used. Others have not been fully
utilized, as the Department has placed greater emphasis up to now on
the rigorous performance management process under the National Security
Personnel System (NSPS). Notwithstanding, we do know that the broad
NSPS pay band architecture provides greater flexibility to offer more
competitive salaries based on national and local market conditions.
Anecdotally, in discussions with senior leaders in NSPS organizations,
we learned that NSPS has given them the ability to be more competitive
in setting and adjusting salaries based on labor market forces,
performance, and changes in duties. For example, the NSPS regulations
instruct that management can set starting pay based on the availability
of candidates and labor market rates; specialized skills, knowledge,
and/or education possessed by the candidate in relation to the
requirements of the position; critical mission or business
requirements; salaries of other employees in the organization
performing similar work; and the current salary of the candidate. In
contrast, pay setting under the General Schedule (GS) system is
generally more rigid and restrictive. For example, under the GS system,
starting salaries are generally restricted to the first step of the
grade of the position the candidate is recruited for, which may not be
in line with actual market conditions.
What empirical data we have comes from the 2008 Status of Forces
Survey of Department of Defense (DoD) civilian employees. Participants
were asked to respond to the following:
My work unit is able to recruit people with the right
skills.
Agree: 47 percent NSPS employees 44 percent non-NSPS
How likely is it you will leave at the next available
opportunity to take another job in the Federal government outside DoD?
Likely: 34 percent NSPS employees 36 percent non-NSPS
Pay raises depend on how well employees perform their
job.
Agree: 42 percent NSPS employee 25 percent non-NSPS
Considering everything, how satisfied are you with your
pay?
Satisfied: 65 percent NSPS 62 percent non-NSPS
Through the on-going evaluation processes we have in place, we will
gather information about NSPS hiring authorities to evaluate the extent
of their use and whether they are having the intended impact on the
Department's operations. Our greatest challenge is in training and
educating the NSPS workforce concerning the NSPS flexibilities--what we
can do, how we can do it, and why/when we should do it.
Mr. Ortiz. The average salary increase was about 5.9 percent in
2008 and the total average salary plus bonus payout was about 7.6
percent. What concerns, if any, does the department have about the
sustainability of compensation under NSPS?
Mr. Bunn. Congress has provided in the National Security Personnel
System (NSPS) statute that, to the maximum extent practicable, the
aggregate amount allocated for compensation of Department of Defense
civilian employees under NSPS will not be less than if employees had
not been converted to NSPS. NSPS redirects compensation dollars from
forms of General Schedule (GS) system compensation that no longer exist
under NSPS (i.e., within-grade increases, quality step increases, and
promotions to higher grades) as well as a percentage of the annual
general salary increase to the NSPS-unique forms of performance-based
and market-sensitive pay. In general, NSPS annual pay increases consist
of:
- Performance-based payouts in the form of base salary increases,
bonuses, or a combination of both;
- A NSPS general salary increase for employees receiving a rating
of record of 2 or higher; and
- An increase to local market supplements equal to the increases
to GS locality pay rates as described above.
Because the NSPS compensation architecture is so different from
that of the GS system, making direct comparisons between average pay
increases is misleading, as it is not an ``apples to apples''
comparison. However, the Department continues to monitor the overall
cost of compensation under NSPS and ensure annual certification in
support of section 9902(e)(4) of title 5, United States Code. Further,
now that the Department has several years of operating under NSPS, a
more comprehensive review of NSPS funding is planned to ensure that
percentages used to determine performance payout funding reflect valid
and accurate assumptions.
Mr. Ortiz. The GAO, in its 2008 report, highlighted a number of
negative perceptions that employees had with NSPS. Interestingly, the
negative feelings towards NSPS increased, rather than decreased, the
longer an employee was in the system. According to GAO, without a plan
to address employees' negative perceptions of NSPS, DOD could miss
opportunities to make changes that could lead to greater employee
acceptance and, ultimately, successful implementation of NSPS's
performance management system. Why, for a system that has been in place
for over three years, have you not developed and implemented an action
plan to guide your efforts to address the results of employee surveys?
What is the Department doing to improve employee acceptance of NSPS?
Mr. Bunn. Employee attitudes and perceptions regarding the National
Security Personnel System (NSPS) are best described as ``mixed.'' The
Office of Personnel Management (OPM) recently reported that NSPS
employees are generally positive about certain important aspects of
NSPS, including how their work and performance objectives relate to the
mission; that they are held accountable for results; and that pay
increases and rewards are based on performance. We have seen a decline
in attitudes in certain areas (as cited by Government Accountability
Office (GAO) in its 2008 report), including whether employees believe
their rating is a fair reflection of their performance; satisfaction
with management; and their perception that NSPS will have a positive
effect on personnel practices in the Department of Defense (DoD). More
recent survey data indicate that attitudes among employees with the
most experience in NSPS are becoming more positive, an encouraging and
not unexpected sign.
Both GAO and OPM noted in their 2008 reports that a decline in
workforce attitudes is typical of major change initiatives, and it
generally takes three to five years for employees to fully understand
and accept new personnel systems. More recently, GAO testified that it
can take 5-7 years for acceptance of a new personnel system. We
continue to learn from employee and management feedback in many forms,
share lessons, and make operational improvements in NSPS, which should
contribute to greater acceptance of the system.
Since the initial Spiral 1.1 implementation, the Department has
been actively involved in supporting and advising Components in
developing comprehensive programs to assist NSPS employees in adapting
to the new system. Components are responsible for implementing robust
communications and training programs to address employee skepticism and
concerns that the majority of employees face when faced with a major
personnel system change. We encourage Components to continually assess
employee attitudes and leverage information and data obtained through
NSPS reviews and studies to ensure communications and training programs
are properly aligned to meet employee needs. In turn, the Program
Executive Office (PEO) NSPS continues to support these efforts thru
sponsorship of broad-based programs, products, and initiatives.
Examples include:
The NSPS Website--the primary source for NSPS information. The
website is routinely updated to reflect most recent events and
activities. The site also includes a recurring feature ``And the Answer
Is'' that poses a question and answer of particular interest.
NSPS Fact Sheets--Short, concise 1-2 page memos that address key
topics of interest or areas where additional focus or grounding is
needed. The most recent fact sheet addressed the issue of forced
distribution. All NSPS fact sheets are available on the NSPS website
for downloading.
NSPS Communications Plans--Specific communications plans are
provided to the Department's leadership for their use in informing the
workforce about key events and activities. The plans are developed to
coincide with significant NSPS events such as the publication of the
final regulations and the upcoming comprehensive review of NSPS. Plans
include talking points and frequently asked questions to ensure
employees are kept informed.
NSPS Leadership Workshops--Designed for NSPS pay pool managers and
panel members, workshops are held at least annually to provide the
opportunity to share lessons learned, learn and reflect upon the
organizational challenges and success stories that are a part of NSPS
implementation.
NSPS Human Resources Practitioner Sensing Sessions--Eleven sessions
with DoD Component activities were held in January and February 2009 to
obtain feedback on existing learning products and support, identify
knowledge gaps or needs for additional products or support, and explore
options for the next generation product line. These sessions confirmed
the need for timely, up-to-date information and additional materials
geared toward application. As a result of these sessions, the PEO is
revising and updating learning products with an emphasis on use of the
web for making information easy to access.
Notwithstanding these efforts, we know from experience with the
Department's demonstration projects and from what GAO and OPM have
observed about other alternative personnel systems that it will take
several years for employees to accept NSPS, and the need for focused
and deliberate programs to build the trust and confidence level of NSPS
employees will continue.
Mr. Ortiz. One of the safeguards in the National Defense
Authorization Act for 2008 required DOD's performance management system
to ensure that meaningful distinctions were made in employee
performance and, therefore, compensation. In GAO's September 2008
report, it found that there was informal guidance that most employees
should be rated as a ``3,'' and as a result GAO recommended that the
department clarify its guidance to ensure meaningful distinctions are
made and that employees will be less likely to perceive that everyone
would receive a ``3'' no matter what their performance was. What steps
has the department taken to clarify its guidance about ratings and
making distinctions in employee performance?
Mr. Bunn. The Department is aware that a perception of forced
distribution in the rating process exists. However, the National
Security Personnel System (NSPS) regulations specifically state that
forced distribution is strictly prohibited. The NSPS performance
management system is designed to make distinctions among employees
based on a rigorous evaluation of individual performance against
standard criteria. These criteria, by design, challenge employees, set
a higher bar for higher performance ratings, and reserve the highest
rating levels for those who deliver exceptional results.
An analysis of the January 2009 rating distribution across the
entire Department demonstrates success in making meaningful
distinctions in performance and in linking individual pay to
performance. While approximately 55 percent of NSPS employees received
a level 3 performance rating in January 2009, 43 percent of NSPS
employees received either a level 4 or level 5 performance rating. This
is consistent with rating distributions for January 2007 and 2008. The
range of rating distributions illustrates that meaningful distinctions
in performance are being made. Additional distinctions are made through
the assignment of shares within each rating level.
Based on concerns and perceptions expressed by employees, rating
officials, and other stakeholders, we felt it was important that all
those who participate in the performance management process fully
understand the concept of forced distribution, why it is prohibited
under NSPS, and how to avoid it. For this reason, guidance was
distributed to the Department of Defense Components and is available on
the NSPS website to remind rating officials, higher level reviewers,
pay pool panel members, pay pool managers, and performance review
authorities that employee performance under NSPS is measured against
rigorous and strict application of standard performance indicators and
that forced distribution in the rating process is prohibited.
Mr. Ortiz. Military supervisors have complained about the amount of
time they must spend with their NSPS employees and the civilian NSPS
employees complain that their military supervisors do not understand
the system and do not spend the appropriate amount of time to do the
ratings, which negatively impacts on their performance ratings. Are
these valid concerns? Should NSPS continue, what can be done to address
these complaints?
Mr. Bunn. We recognize that the design of the National Security
Personnel (NSPS) and the safeguards built into the system result in
increased time demands, especially during the start-up years. However,
the Department of Defense's (DoD) experience with personnel
demonstration projects indicates that the amount of time required for
the same tasks levels off and even decreases as the organization gains
experience with the performance management and pay pool processes.
Additionally, as experience and efficiency increase, organizations tend
to parlay the process of reviewing individual performance into an
examination and driver of overall organizational performance, thus
increasing the return on their investment of time.
We also acknowledge that additional challenges are presented when
military supervisors are faced with frequent rotational assignments.
However, military supervisors have the same performance management
responsibilities for their civilian employees as do civilian
supervisors. The regulations clearly identify supervisory
responsibilities and both civilian and military supervisors must meet
their responsibilities for managing employee performance under NSPS.
The NSPS regulations specify that supervisors and managers will be held
accountable for effectively managing the performance of employees under
their supervision and that the performance assessments of supervisors
should reflect the quality of their efforts in managing the performance
of the NSPS employees under their supervision. The Department is
committed to training managers and supervisors, including military
members, on how to establish and communicate performance expectations,
assess employee performance, and appropriately translate that
assessment into pay adjustments. Mandatory NSPS training is required of
both civilian and military supervisors and managers prior to their
performing the necessary NSPS performance management functions.
We anticipate that the issue of increased administrative demands
resulting from this more robust performance management process will be
a topic of consideration during the DoD comprehensive review of NSPS.
Mr. Ortiz. What infrastructure does DOD have in place to provide a
comprehensive picture of costs, expenses, and other financial
information related to NSPS activities?
Mr. Bunn. The Department put in place the infrastructure to capture
the National Security Personnel System (NSPS) implementation costs. In
2005, the Program Executive Office, NSPS established a DoD-wide
Financial Integrated Product Team (IPT) to establish requirements for
the Components to track and report quarterly on implementation costs.
Five key areas were identified: (1) Design and Implementation; (2)
Training Development, Support, and Execution; (3) Human Resource (HR)
Automated Systems; (4) Program Evaluation; and (5) Program Office
Operations. The key areas were defined, and Components began submitting
costs in fiscal year 2005.
The Financial IPT reconvened in July 2007 to recommend revisions
based on a Government Accountability Office report issued that same
month. The Department continues to collect implementation costs based
on these revisions. The Department does not have an infrastructure set
up to collect financial information related to other NSPS costs and
does not track, other than salary and benefits, other HR system
(General Schedule, Federal Wage System, Personnel Demonstration
Projects at Defense Laboratories) costs.
Mr. Ortiz. In response to a letter from Chairman Skelton and
Readiness Subcommittee Chairman Ortiz urging the Department to
discontinue converting employees to NSPS until the Administration and
Congress can properly address the future of the Department's personnel
system, Secretary Gates stated that DOD has begun a comprehensive
review of NSPS and stopped the conversion of GS employees to NSPS.
However, new hires and positions that are being reclassified still will
be brought under NSPS. The intent of the congressional letter was to
halt all movement into NSPS until such time as the Administration and
Congress could conduct a review. Continuing to place new hires and
reclassified positions into NSPS appears to subvert the intent of
Congress. As the Department continues to augment its workforce, more
individuals will be hired into NSPS, potentially making it a tremendous
challenge to transition these employees (and ones in reclassified
positions) to a GS system or whatever new system will replace NSPS. Why
is the Department continuing to use NSPS for new hires and reclassified
positions even when congressional intent and earlier statements by the
President have strongly indicated that no further action should take
place with regard to NSPS until a review has been undertaken? Why
shouldn't Congress view the actions being taken by DOD with regard to
new hires and reclassified positions as being a presumption by DOD that
it has already decided to continue NSPS (with or without the results of
the review)? If the results of the review point to a return to the GS
schedule or some other system, how will DOD handle the transition for
the potentially thousands of new hires it may be bringing on in the
coming months?
Mr. Bunn. In his March 16, 2009 letter to Chairman Skelton and
Chairman Ortiz, Deputy Secretary Lynn stated that the Department is
committed to operating fair, transparent, and effective personnel
systems. This commitment has not changed.
In response to their request for the Department to delay
conversions to the National Security Personnel System (NSPS), the
Deputy Secretary advised Chairmen Skelton and Ortiz that further
conversions of organizations will be delayed pending the outcome of a
comprehensive review of NSPS. He noted that this delay of conversions
affects roughly 2,000 employees in organizations scheduled to convert
to NSPS this spring. However, during the review, those organizations
currently under NSPS will continue to operate under NSPS policies and
processes. This means processing of normal personnel actions will
continue for individual employees moving into existing, reclassified
and new NSPS positions in organizations and functional units now under
NSPS.
Although existing NSPS organizations continue to follow NSPS
policies, the Department of Defense (DoD) has not made any decision
regarding the future of NSPS. The review will determine the future of
NSPS. It would be premature and disruptive for the Department to stop
using NSPS policies in NSPS organizations before the review is
completed.
Filling jobs and reclassification of positions are essential tools
in helping ensure an organization is successful in meeting mission
requirements. If NSPS jobs cannot be filled or properly classified
while the review is pending, this may impact the organization's--and
the Department's ability to meet mission requirements.
As noted, DoD is committed to operating fair, transparent, and
effective personnel systems. DoD and Office of Personnel Management
leadership intend to fully assess NSPS before making any decisions
regarding its future. The review will include a comprehensive and
thorough examination of all NSPS policies, regulations, and practices,
and will result in findings and recommendations aimed at assisting the
leadership under the new administration to determine the future of the
program. Finally, it is also important to emphasize that the Department
is not bringing in any bargaining unit employees to NSPS.
The Department is reviewing options, including existing conversion
out procedures, should the review result in NSPS employees being moved
to a different pay system, such as the General Schedule. A transition
process has not yet been determined while the review of NSPS is
pending. However, the Department's goal of any process, should one
become necessary, is to ensure that no harm comes to our employees as a
result of being removed from NSPS.
Mr. Ortiz. GAO noted that NSPS was implemented too quickly. What
steps could have been taken to roll out NSPS in a more orderly and fair
fashion?
Ms. Farrell. It was a pleasure to appear before your subcommittee
on April 1, 2009, to discuss the Department of Defense's (DOD)
implementation of its new human capital system for managing civilian
personnel--the National Security Personnel System (NSPS).\1\
---------------------------------------------------------------------------
\1\ GAO, Human Capital: Improved Implementation of Safeguards and
an Action Plan to Address Employee Concerns Could Increase Employee
Acceptance of the National Security Personnel System, GAO-09-464T
(Washington, D.C.: April 1, 2009).
---------------------------------------------------------------------------
As we have previously reported, we support the need to expand broad
banding approaches and pay-for-performance-based systems in the federal
government.\2\ However, moving too quickly or prematurely to implement
such programs, whether at DOD or elsewhere, can significantly raise the
risk of doing it incorrectly. Hasty implementation could also set back
the legitimate need to move to a more performance- and results-based
system for the federal government as a whole. Thus, while it is
imperative that we take steps to better link employee pay to
performance across the federal government, how it is done, when it is
done, and the basis on which it is done can make all the difference in
whether or not such efforts are successful. In our view, one key need
is to modernize performance management systems in executive agencies so
that they are capable of adequately supporting more performance-based
pay and other personnel decisions.
---------------------------------------------------------------------------
\2\ GAO, Defense Transformation: DOD's Proposed Civilian Personnel
System and Governmentwide Human Capital Reform, GAO-03-741T
(Washington, D.C.: May 1, 2003).
---------------------------------------------------------------------------
While our previous work does not prescribe a process and time
frames for rolling out systems such as NSPS, we have stressed that
agencies should have an institutional infrastructure in place that
would include, at a minimum, (1) a human capital planning process that
integrates the agency's human capital policies, strategies, and
programs with its program goals and mission and desired outcomes; (2)
the capabilities to effectively develop and implement a new human
capital system; and (3) the existence of a modern, effective, and
credible performance management system that includes adequate
safeguards, including reasonable transparency and appropriate
accountability mechanisms, to ensure the fair, effective, and
nondiscriminatory implementation of a new system. Prior to NSPS
implementation, we cautioned that, while the DOD leadership had the
intent and the ability to implement the needed infrastructure, it did
not have the necessary infrastructure in place across the department.
Further, our work has continued to stress the importance of
incorporating internal safeguards into the design and implementation of
large-scale pay-for-performance programs. In 2008, we evaluated DOD's
efforts to implement nine safeguards and accountability mechanisms.\3\
We found that, while DOD had taken some steps to implement internal
safeguards to ensure that NSPS is fair, effective, and credible, the
implementation of some safeguards could be improved. First, DOD does
not require a third party to analyze rating results for anomalies prior
to finalizing employee ratings, and therefore it is unable to ensure
that ratings are fair and nondiscriminatory before they are finalized.
Second, the process has lacked transparency until recently because DOD
did not require commands to publish final rating distributions, though
doing so was recognized as a best practice by NSPS program officials at
all four components. In 2008, the department revised its NSPS
regulations and guidance to require commands to publish the final
overall rating results. Third, NSPS guidance may discourage rating
officials from making meaningful distinctions in employee ratings
because it indicated that the majority of employees should be rated at
the ``3'' level, on a scale of 1 to 5, resulting in a hesitancy to
award ratings in other categories. We continue to believe that improved
implementation of these safeguards will help bolster employee
confidence in the system and ensure that the system is fair, effective,
and credible.
---------------------------------------------------------------------------
\3\ GAO, Human Capital: DOD Needs to Improve Implementation of and
Address Employee Concerns about Its National Security Personnel System,
GAO-08-773 (Washington, D.C.: Sept. 10, 2008).
---------------------------------------------------------------------------
Mr. Ortiz. If NSPS continues, what steps should now be taken to
move forward?
Ms. Farrell. We have previously reported that converting to NSPS
was a significant transition for the department.\4\ We have further
reported that it will take time for employees to accept the system,
based on the studies conducted by the Office of Personnel Management
(OPM) on the federal government demonstration projects for performance
management. First, and foremost, DOD needs to assess and address
employee engagement in the system. DOD has collected survey data and
conducted focus groups of employees under NSPS, but it is missing a key
piece--an action plan. Our 2008 report recommended that DOD develop and
implement a specific action plan to address employee perceptions of
NSPS ascertained from feedback avenues such as, but not limited to,
DOD's survey and DOD's and GAO's employee focus groups. At a minimum,
this plan should include actions to mitigate employee concerns about
the potential influence that employees' and supervisors' writing skills
have on the panels' assessment of employee ratings and the lack of
transparency and understanding of the pay pool panel process. Such a
plan would demonstrate to employees that the department is listening to
their concerns and making plans to address, as appropriate, the
concerns that are identified. In short, DOD needs to tell the employees
that they are going to take action on their concerns. In addition, the
recently announced study by DOD and OPM is an opportunity to assess the
status of the system. While the review intends to include a thorough
examination of all NSPS policies, regulations, and practices, we would
like to see DOD leverage this opportunity to assess for itself how the
department is implementing internal safeguards. Specifically, we are
interested in an update of how the safeguards have been incorporated
into their policies and how the safeguards are working.
---------------------------------------------------------------------------
\4\ GAO-08-773.
---------------------------------------------------------------------------
Mr. Ortiz. The Deputy Secretary of Defense, in cooperation with the
Office of Personnel Management recently announced that the department
would halt conversions of DOD civilian employees to NSPS, pending the
outcome of a review by DOD and OPM. The proposed review will assess
whether or not NSPS is meeting its objectives of being a fair,
transparent, and effective personnel system. Finalizing the details of
such a review's overall framework, scope, timeline, and leadership will
take time.
As DOD and OPM leadership hold discussions to determine the overall
framework, scope, and timeline of the review, what guidance or
suggestions would you give to DOD and OPM to include in the methodology
of this study?
Ms. Farrell. As we have previously reported, the extent to which
DOD incorporates internal safeguards into the design and implementation
of NSPS and how it addresses employee perceptions of NSPS are key to
the success of the system.\5\ Moving forward, as DOD and OPM embark on
a study of NSPS and review how NSPS operates and its underlying
policies, DOD has a unique opportunity to consider our previous
recommendations, as well as all of the other internal safeguards key to
ensuring that performance management systems in the government are
fair, effective, and credible. In addition to a review of internal
safeguards, this study provides DOD the opportunity to look at employee
engagement in the process and develop an action plan to address
employee concerns about NSPS. As we approached our work, we used a
methodology that systematically took into account employee input from
all levels. We used a combination of survey analysis, interviews, and
employee discussion groups to obtain information on employee
perceptions. In general, the combination of employee surveys with
interviews or discussion groups is helpful because it yields useful
information at the population level, as well as the individual employee
experience level.
---------------------------------------------------------------------------
\5\ GAO-08-773.
---------------------------------------------------------------------------
Mr. Ortiz. One concern expressed by employees who have converted
from GS to NSPS is that there is no real career progression. Under the
GS system, an employee steadily moves up through the various grades and
can actually monitor actual career progression. There appears to be no
such similar movement in NSPS; an employee, while receiving pay
increases and bonuses, may remain in the same pay band for his/her
entire career.
If this is a valid concern, how can it be addressed, if NSPS
continues?
Ms. Farrell. First, DOD needs to collect more information on what
the issues are surrounding this employee perception on career
progression, including the underlying causes and the extent of this
concern, so that the department can determine if it is indeed a valid
concern. For example, is there an issue with lack of career progression
or are employees perceiving that there is an issue as a result of lack
of communication or education on the new system? In our 2008 report, we
recommended that the department develop and implement a specific action
plan to address employee perceptions of NSPS ascertained from feedback
avenues such as, but not limited to, DOD's survey and DOD's and GAO's
employee focus groups. We believe that this is another example of how
the department could use such an action plan to guide its approach for
addressing employee concerns. Specifically, the plan may incorporate
various communication and education strategies to help employees
understand how the shift from pay grades to pay bands still affords
them opportunities for professional development, as well as movement
through the pay band. While we acknowledge that change takes time to
gain employee acceptance and that the implementation of NSPS is a
large-scale organizational transformation, employee concerns, such as
these, must be heard and addressed accordingly in order to ensure
greater employee acceptance and, ultimately, successful implementation
of the NSPS performance management system.
Mr. Ortiz. Has MSPB evaluated DoD's National Security Personnel
System?
Dr. Crum. No. However, as part of Merit Systems Protection Board's
(MSPB) 2005 Government-wide Merit Principles Survey, we did collect
baseline data from employees in DoD's major components regarding their
satisfaction with workforce management issues in the Department. This
took place just as employees were beginning to be converted into NSPS.
The data was collected to create a baseline for future comparisons that
we plan to conduct once the system has been in place a sufficient
amount of time to measure its true impact on agency results.
Mr. Ortiz. What should be MSPB's role in overseeing and evaluating
new personnel flexibilities granted to agencies, such as those under
NSPS?
Dr. Crum. The MSPB's role is critical in examining these new
personnel systems. To carry out its statutory responsibility to protect
the public interest through a merit-based civil service, the MSPB
conducts government-wide research and studies. These studies gather the
views and experiences of Federal employees, managers, and other
stakeholders, such as agency officials, academicians, and union
officials, to accurately gauge the ``health'' of the civil service and
other Federal merit systems.
The MSPB is also responsible for reviewing the effects of OPM's
policies, rules, and regulations on the merit principles. We provide an
independent, bipartisan evaluation of merit systems and human resources
management issues on a much broader scale. We also provide OPM with
constructive commentary regarding the effects of its policies and
activities on the civil service. Generally, MSPB Board members are
appointed to fixed 7-year staggered terms and their tenure is not
renewable. Thus the MSPB is uniquely positioned to conduct independent
assessments of merit systems and render independent views about issues
that affect the whole civil service.
While the MSPB rarely performs studies evaluating the performance
of a single agency, MSPB can play a valuable role in conducting
independent, bipartisan reviews of the merit systems. The MSPB's
government-wide research and studies offer a means to compare the
performance of different personnel systems, track the progress of these
individual systems, identify needed improvements, and share best
practices government-wide. With regard to the specific flexibilities
given to DoD, the MSPB has gathered baseline information that will help
interpret the effects of the system on the efficiency and effectiveness
of NSPS's operations over time.
Mr. Ortiz. Agencies are increasingly turning to newly established
appointing authorities and flexibilities to speed the hiring process.
Do these new procedures result in faster hiring decisions?
Dr. Crum. There are a number of flexibilities available to agencies
that have streamlined hiring processes, such as Direct Hire and the
Federal Career Intern Program. These processes can differ from
competitive service hiring in one or more of the following respects:
Recruitment--how agencies may publicize positions and
accept applications;
Eligibility--who the agency may consider for appointment;
Assessment--how agencies evaluate applicant
qualifications;
Consideration and selection--how agencies must sort or
rank applicants, and how agencies may select among applicants;
Applicability of public policy requirements such as
veteran's preference and career transition assistance programs for
displaced Federal employees; and
How the probationary or trial period is implemented.
We have found through our research that using these flexibilities
does not guarantee that the hiring process will be faster. For
instance, our study of Federal entry-level new hires found that 39
percent of the excepted service new hires (including Federal Career
Interns) and 34 percent of competitive service new hires reported being
offered a job within 2 months or less after applying; this is not a
large difference. Furthermore, 27 percent of excepted service new hires
indicated that it took over 6 months to be hired, while 17 percent of
competitive new hires reported the same.
Our research has found that excepted service hiring processes often
mirror those of competitive service hiring. In fact, some excepted
service hiring could be viewed as more thorough and competitive because
they use recruitment, application, and assessment processes that reach
a wider segment of society and do a better job of predicting success on
the job. Often, these organizations do not use these flexibilities
solely to make the process faster, but also to make use of provisions
associated with these flexibilities such as the longer training and
probationary periods offered by some of these authorities.
Mr. Ortiz. Agencies do a poor job of communicating with applicants.
Applicants may apply for a job and never hear from the agency again.
What can agencies do to improve their timely feedback to all applicants
of their status in the process?
Dr. Crum. The MSPB has long recognized that communication with
applicants has been a problem in the Federal hiring system. Our studies
on Federal hiring practices have continuously shown that lack of
communication has been an issue raised by applicants. New hires
indicate that they often do not receive timely feedback (or any
feedback) and that the service provided by the human resources (HR)
office is often below their expectations.
We have noted that agencies need to treat applicants like customers
and build relationships with them. This relationship is important not
only to influence that one applicant's impression of the Government,
but also because that one applicant will then have positive things to
say about the experience to others. We have found that word-of-mouth is
a key way many Federal new hires have learned of an employment
opportunity with the Government. In addition, negative impressions of
the Federal hiring process can generate negative word-of-mouth among
potential applicants that could dissuade high-quality candidates from
applying.
There are several actions agencies can take to improve their
communication with applicants. To start, the agency should have an
understandable hiring process that is clearly explained in the job
announcement. The instructions should include a timetable letting
applicants know what steps are in the process, who takes these steps,
and how long each step is likely to take. This will help to manage
applicants' expectations. As I mentioned in my testimony, the job
announcement is an area that needs improvement. Currently,
announcements are often unclear and contain jargon that non-Federal
employees just do not understand. Also, the agency should have a point
of contact listed in the job announcement for applicants who have
questions. Often, they do not, and applicants therefore do not know how
to get their questions answered.
Agencies should, at a minimum, notify applicants that their
applications were received. This type of notification should be a
standard part of most automated application systems. However,
communication should not stop there. Because the Federal hiring process
is typically longer than that of the private sector--especially for
jobs requiring security clearances--agencies should communicate both
electronically and personally with applicants throughout the process.
Applicants should be periodically notified of the status of their
application, when they should expect the next step to occur, or to even
explain why the process may be taking longer than expected. If
applicants are kept well-informed, they will be more likely to stay
with the process than if their application falls into a presumed
``black hole.''
Finally, agencies need to look at their hiring process to ensure
that it is as timely as possible and does not contain unnecessary steps
and bottlenecks. Because of their missions, some agencies may be able
to keep applicants engaged in the process for a long period of time.
However, a large segment of applicants, especially those with highly
sought after skills, will not wait months for a job offer, regardless
of communication efforts. Ultimately, having an efficient, effective
process is important. As a result of evaluating the hiring process,
many agencies may be surprised to see that many of the obstacles to
timely hiring are self-imposed. Fortunately, this means they have the
power to improve the process and minimize these delays.
Mr. Ortiz. What role should the Office of Personnel Management play
in the hiring process? Should it reclaim its original role as the main
hiring authority for the federal government?
Dr. Crum. In 1996, the Office of Personnel Management (OPM)
delegated most competitive examining authorities to agencies. As a
result, each agency is permitted to establish delegated examining units
to carry out its hiring process. Prior to delegated examining, agencies
had many complaints about the hiring process, including that it was too
long, it did not address their individual mission needs, and they were
not getting the best applicants.
This decentralized management approach has both advantages and
disadvantages. On the one hand, agency delegated examining units will
generally be more knowledgeable of the agency's mission and the skill
requirements necessary to carry out that mission than a third party
hiring organization would be. This knowledge gives them a better
understanding of how to attract members of the targeted applicant pool
and makes it easier to tailor recruitment and hiring strategies to
better meet the agency's mission.
On the other hand, decentralization often results in the Government
losing the ability to achieve economies of scale in terms of hiring
tools and systematic approaches. Competition can increase among
agencies and provide advantages to those with more resources and
leadership support. Agencies often use different application and hiring
procedures, and this creates confusion and burden among applicants who
simply want a government job. All of these factors can affect the merit
principles and the ability of individual agencies to hire high-quality
applicants.
Hiring reform is needed in the Federal Government, but going back
to a centralized system is not the most likely answer. OPM is no longer
resourced to implement a centralized hiring system again, and agencies'
needs are too diverse to recommend employing a single hiring authority.
OPM's role should be to provide leadership to agencies regarding how to
hire within the parameters set by the merit system principles and in
identifying areas where agencies need to come together to achieve
economies of scale.
OPM has already made progress in this regard. It works regularly
with the Chief Human Capital Officers Council to identify human capital
problems and pilot potential solutions. It has worked with agencies to
improve USAJOBS and the way agencies market their jobs on the Web site.
It established first the 45-day hiring model and most recently the End-
to-End hiring process to streamline hiring and cut out unnecessary
steps.
There are still, however, areas that need work. The Government
currently does not have a standard application or application process.
This can create excessive burden for an applicant who wishes to apply
for multiple positions. Additionally, many agencies do not have the
means to develop and use the best tools to assess applicant
qualifications. We have recommended that OPM receive appropriated
funding for centralized development and validation of assessment tools,
particularly for government-wide and ``at-risk'' occupations. We have
also recommended that OPM lead the hiring reform process by working
with agencies to develop a government-wide framework for Federal hiring
reform that provides agencies the flexibility necessary to address
mission needs while also preserving selection quality and employee and
applicant protections.
Mr. Ortiz. Federal managers complain that the pay pool panel, which
can overturn ratings recommended by managers, usurps the role of
managers. If the majority of employees are going to be rated a ``3'' in
the end, many managers wonder why they should spend the time in doing
performance assessments.
If the majority of employees are rated a ``3'', and managers
eventually give up trying to fairly assess their employees since the
pay pool panel will overturn their recommendations, how does this
ultimately differ from the complaints of the simple pass/fail
performance rating systems under the GS system?
Mr. Perkinson. Thank you for the opportunity to address this
important question, Mr. Chairman. The reality in the field is that the
ratings have resulted in a bell curve distribution with most employees
receiving ``3'' ratings. The underlying cause of this is the role of
the pay pool panel. In my oral testimony, I sought to provide a brief
synopsis of how the pay pool panels were stepping out of their intended
role by readjusting supervisors' ratings. This is directly tied to the
resulting share value. The ratings distributed play a significant role
in the share value, which concerns many of our members. The final
payout results in large part on how a facility maximizes its share
value. Our members take issue when those rated 3s at one location
receive a significantly different payout than the 3s in another
location. The ultimate difference between the GS and NSPS systems is
that GS employees, in most cases, receive automatic pay increases, and
in a properly run NSPS location, individuals have the ability to be
rewarded for higher performance as the NSPS system personalizes the
employee's evaluation through its process.
Under the system, most employees will likely receive 3s, due to
both human nature and the pay pool influence. However, exceptional
employees are rewarded better under NSPS than under the GS. Conversely,
under-performing employees are not rewarded under NSPS, but still
receive a pay raise under GS, negating any incentive to perform better.
The biggest difference is that NSPS forces managers to make meaningful
distinctions in performance.
Mr. Ortiz. Pay for performance is highly touted within the private
sector. Yet, with human nature, it can be ripe for abuse. For example,
there could be instances where a poor performer, because he or she
happens to get along well with managers, is promoted. A high-performing
individual who happens to have had a disagreement with management could
be stymied in promotion or performance pay opportunities. And there are
many other variations on these examples. The GS schedule, based on
performance and tenure, is aimed at ensuring fair treatment and pay for
federal employees.
What internal safeguards should be implemented to ensure reasonable
transparency and appropriate accountability in connection with the
results of the performance management process?
Mr. Perkinson. If NSPS is going to continue to serve as the
Pentagon's personnel system, a couple of safeguards come to mind to
improve transparency and accountability. The first is the ability of
the rating official to share his/her rating with the employee prior to
going to the pay pool panel for review. Presently, we encourage the
supervisor and employee to openly set objectives and execute an interim
review, followed by a written assessment. Despite this constant contact
between the employee and manager, the rating official still cannot tell
the employee his/her result. If the rating gets changed at the pay pool
level there should be some form of communication to explain the
changes--aka, transparency. If a rating or payout gets lowered, there
should be safeguards in the system to explain what happened to cause
the change.
The second safeguard we suggest is that the pay pool panel limit
its role to ensuring the rating official has stayed within the
framework of the process and conducted the review as written. The
Panels are too focused on the impact they have on the share value. The
sole purpose of the Pay Pool Panel should be to ensure fairness,
transparency and consistency exist in the system by overseeing
managers, not changing ratings.
An additional safeguard to address the employee who faces issues of
disagreement or personality clashes is utilization of the
reconsideration or appeal process. This option is under-utilized,
despite what some claim. When I hear complaints about ratings and pay
raises from FMA members, I always ask if they requested
reconsideration. Most say no. These cases are isolated and it is
extremely difficult to put rules in place to address all potential
problems. We believe this will become easier over time, as more cases
are heard.
No system is going to operate perfectly one hundred percent of the
time, in the public or private sector. It is our job as managers and
your job as legislators to ensure the system is as fair and transparent
as possible.
Mr. Ortiz. In a 2008 testimony before the Senate Homeland Security
and Government Affairs Committee, FMA raised concerns about the ``so-
called bell curve distribution of ratings.'' Specifically, managers and
supervisors reported extreme pressure from higher-ups to maintain a
specified distribution of funds or performance ratings within each pay
pool. Managers were also told that there would not be enough money in
the pool if all employees were rated 4s or 5s. Higher ratings mean less
money per share in the pool, while lower ratings mean bigger shares for
the performing employees. There is severe danger of ratings being
deflated or inflated to accommodate a small section of the population.
What can be done to ensure that meaningful distinctions in employee
performance are being made?
Mr. Perkinson. This issue directly deals with the topic of share
value and the ability of each facility to devise business rules that
impact that value. There is a distinct lack of concrete business rules,
and even when rules are in place, they tend to differ among facilities.
Part of the problem with share value centers on whether there has been
any suggested or implied rules that could impact the ratings. If there
is an abundance of high ratings the share value is deflated; a greater
number of lower ratings inflate the share value. The result could be
that a ``3'' in one location receives a higher payout than the same
rated employee at another location. When examined across an agency like
DOD, this simply does not make sense and provides the foundation for
forced distribution and quotas.
We need to make adjusts to NSPS so there will be a quick review of
the results by the pay pool panel to ensure share values are
consistent. One way of accomplishing this is to release a standard set
of business rules that apply DOD-wide. We should also ensure that
senior officials do not impact ratings by implying their desires or
results during the assessment period.
Mr. Ortiz. The performance management system for NSPS consists of
five rating categories, of which the lowest rating is a ``1''
(unacceptable performance) and the highest rating is a ``5'' (role
model performance). The majority of employees in 2008 and 2009 were
rated a ``3,'' or valued performer. The GAO reported in 2008 that
during its discussion groups with civilian employees under NSPS, a
prevalent theme was that it was impossible to receive a rating higher
or lower than a ``3.''
What should be done to address these employee concerns?
Mr. Perkinson. Leadership must come from the top if issues such as
these are to be prevented. We are hearing reports of managers
experiencing what you describe, which DOD NSPS officials contend should
not be occurring. More needs to be done on the part of national
leadership to ensure this does not happen and enforce penalties when it
does.
The baseline evaluation of a valued performer requires that the
individual meets the criteria established for their job consistently
throughout the year. For a rating to be above 3, additional
expectations must be met to elevate the person to those levels. Again,
part of the issue is that the system appears to be applied in a variety
of ways that could be considered very subjective and inconsistent. Some
facilities validated increases based on the written self-assessment,
which led to complaints that the process was judged on writing ability.
In the view of the employee, there is no clear cut way to know whether
you are attaining higher levels of performance outside of the
conversations with the rating official.
Increasing transparency by informing the employee of their initial
rating and providing explanations of adjustments made by the pay pool
panel could alleviate many concerns. Again it comes back to the
establishment and consistent application of core elements throughout
the process in all activities.
______
QUESTIONS SUBMITTED BY MR. FORBES
Mr. Forbes. Why does the pay pool have the authority to change an
employee's rating given by the employee's supervisor who is the one
with the first-hand knowledge of the employee's performance?
Mr. Bunn. The National Security Personnel System (NSPS) pay pool
panels ensure that all supervisors within a pay pool are applying
rating criteria in the same manner for each employee across the pay
pool. Without the authority to change a recommended rating given by the
employee's supervisor, the pay pool panel would be unable to mitigate
differences in application of the criteria. This would result in
``high'' and ``low'' raters and ultimately inequity in payouts.
The NSPS pay pool process is an integral and integrated part of the
performance management cycle and ensures that performance decisions are
made in a careful, deliberative environment that uses a consistent
approach to decisions regarding performance ratings and shares that
drive employee performance payouts. Pay pool panels are comprised of
senior leaders and management officials, normally in positions of line
authority, who possess knowledge of the organization's mission and the
employees included in the pay pool membership.
The performance rating process begins with the employee's
opportunity to provide a self-assessment. The rating official then
provides a recommended rating that is reviewed by a higher level
reviewer. The recommended rating includes the rating official's
recommendation as to ratings, share assignments, and distribution of
performance payout. The recommended ratings are reviewed by higher
level reviewers and by the pay pool panel to ensure consistency and
fairness across the pay pool. Larger pay pools may also have
recommended ratings reviewed by sub-pay pool panels. Ratings are
reviewed by higher level reviewers and pay pool panels against
performance indicators and benchmark standards. The performance
indicators and benchmark standards are published in the Department of
Defense (DoD) implementing issuance, DoD Manual 1400.25, Subchapter
1940, and are included in performance management training given to
employees and supervisors. In instances where the panel does not agree
with the rating official's recommendation, the rating official is given
an opportunity to present additional information to the panel that the
rating official believes clarifies or justifies his or her
recommendation(s). The pay pool manager is given final authority to
approve ratings of records as a means of reinforcing equity across and
within pay pools and as a necessary safeguard when applying standard
benchmark criteria for all employees. All decisions of the pay pool
manager are accomplished in accordance with merit system principles.
Ultimately, the employee's rating is based on his or her performance
against standard benchmark criteria.
Mr. Forbes. The Pay Pool managers most often know nothing about
the employee's actual performance. Since Pay Pools are funded based on
a percentage of the total base salaries of employees in the pay pool,
doesn't that put some employees at a disadvantage?
Mr. Bunn. The National Security Personnel System (NSPS) has many
safeguards built into the system specifically designed to ensure
fairness and equity as well as to mitigate any consequences, which may
arise as a result of unfamiliarity of the pay pool panel or manager
with the work of an individual employee. Among the safeguards is the
opportunity for the employee to provide a written self-assessment and
the mandatory requirement for the rating official to provide a written
assessment explaining how an employee met a particular job objective.
In addition, the rating official provides a recommended rating of
record based on application of standard performance measurement
criteria. To ensure that the measurement tools are interpreted
consistently across the organization and in a manner free from
favoritism, cronyism, or other inappropriate consideration, multiple-
level reviews of recommended ratings, share assignments, and payout
distribution determinations are embedded in the performance management
process. These include review by a higher level official and the pay
pool panel. In instances where the pay pool panel finds that the rating
official's recommendation does not reflect the same interpretation of
the performance measurement criteria as applied by other rating
officials and that the common interpretation would result in a
different rating, share assignment, or payout distribution, the rating
official is given an opportunity to present additional information to
the panel that the rating official believes clarifies or justifies his
or her recommendation(s). In this way, the pay pool panel is able to
ascertain whether an adjustment proposed to ensure consistent
application of performance criteria throughout the pay pool is
justified or if the adjustment is based on a misunderstanding of the
record. This process is designed to ensure equity in application of
performance criteria across a pay pool as well as to incorporate the
knowledge of rating officials who often have the closest view of the
employee's performance.
Pay pool managers add to the process an umbrella view of the
organization and familiarity of the organization's mission and/or the
functional specialty of the employees. This knowledge, paired with the
interaction with the rating official, enables the pay pool manager and
pay pool panel, who are typically senior line managers in the
organization, to effectively accomplish their role of managing the pay
pool, resolving discrepancies, ensuring consistency and equity within
the pay pool, and approving the employee's rating of record, share
assignment, and payout distribution based on recommendations from the
rating official.
Mr. Forbes. How fair is a Request for Reconsideration Process of a
Performance Rating that does not allow an employee to challenge a
performance payout, number of performance shares assigned, value of
performance shares, or distribution of payout between increase to base
salary and bonus?
Mr. Bunn. The National Security Personnel System (NSPS) was
designed to ensure fairness and equity in evaluating and rewarding
performance. Appropriately, in the event that an employee requests a
reconsideration of their overall rating of record or of an individual
job objective rating, only performance-related criteria are considered
in making decisions on reconsideration requests. From its inception,
NSPS was designed to emphasize both performance pay as well as
compensating employees based on market factors. Factors considered in
the determination of assignment of shares and payout distributions
include a combination of factors other than performance, such as labor
market conditions and compensation/pay progression management. Pay
decisions based on these factors are not usually subject to review.
However, any reconsideration request that results in a change to an
individual job objective rating or the rating of record may result in a
change in share assignment. For example, if an employee's overall
rating of record is raised to the next level, the corresponding (and
higher) share range must be used resulting in a higher performance
payout for the employee. The pay pool manager will recalculate the
employee's performance payout amount and distribution, and salary
adjustments will be based on the share range appropriate for the
adjusted rating of record. The payouts of other employees in the pay
pool are not affected or recalculated.
Mr. Forbes. How many employees under NSPS actually took part in
writing their Job Objectives?
Mr. Bunn. The Department does not have statistics to verify the
number of employees who participated in the development of their job
objectives. However, the National Security Personnel System (NSPS) is
designed to ensure that performance expectations (job objectives)
support and align with the organization's mission and goals, and has
implemented safeguards to ensure against the imposition of impossible
performance expectations. Such safeguards include requiring supervisors
to involve employees, where feasible, in the development of their job
objectives to ensure a clear understanding of performance expectations,
subjecting job objectives to higher level review to ensure consistency
and fairness within and across the organization, and communicating job
objectives to employees in writing prior to holding them accountable
for performance of the objectives. Participation of employees in
development of job objectives is not mandatory as it is recognized that
in cases where a large number of employees perform the same type of
work, the use of standard job objectives may diminish the involvement
of employees in the development of job objectives and situations such
as newness of an employee to a position may not enable meaningful
participation by the employee.
To facilitate the development of job objectives by both employees
and supervisors, NSPS provides classroom instruction, web-based
training, and a 2-hour workshop to assist employees in preparing well-
written job objectives and assessments. Our learning materials feature
exercises and activities to gain insight into how to develop effective
job objectives that align with the organization's goals. Employees gain
practice writing objectives and understanding the importance of
tracking and monitoring their performance throughout the performance
cycle. The performance management system's emphasis on communication
also encourages an employee's active involvement and input throughout
all phases of the performance management cycle. Through writing their
job objectives, monitoring their performance, and providing their self-
assessment, employees are encouraged to share their insights and
perspectives about what they do and how it supports the mission.
Mr. Forbes. Why are the ratings of the employees; specifically
names, not made public if the idea of NSPS is to motivate all employees
to be model employees?
Mr. Bunn. The Privacy Act governs the dissemination of certain
employee personal information. Government-wide regulations at title 5,
Code of Federal Regulations (CFR) implement the Privacy Act as it
relates to employees' performance information in the Official Personnel
Folders. Performance ratings are not made available to the public,
which would include an employee's coworkers in accordance with 5 CFR
293.311(a)(6).
The National Security Personnel System (NSPS) employees are given
information that allows them to understand how they are rated.
Performance criteria are made public and are shared with employees. The
standards by which employees' job performance is assessed (the
performance indicators and the benchmark standards) are published in
Department of Defense (DoD) Manual 1400.25, Subchapter 1940 (DoD
1400.25M, SC 1940). The performance indicators are established at level
3 and level 5 performance by pay schedule and pay band. In addition,
the benchmark standards for evaluating the contributing factors that
relate to how the job is performed are also listed in DoD 1400.25M,
SC1940. Employees are trained on how to use the performance indicators
and benchmark standards in completing their self-assessments.
While individual employee ratings are not and cannot be provided to
other employees, aggregate pay pool results are required to be
communicated to employees. This enables employees to compare their
results with the overall results within their workforce. At a minimum,
employees are informed of the average rating, ratings distribution,
share value (or average share value), and average payout expressed as a
percentage of base salary at the completion of the performance payout
process.
Providing information and training concerning the use of the
performance indicators and benchmark standards, and the overall pay
pool results should provide any needed additional motivation employees
need to perform at their highest level.
Mr. Forbes. Why are NSPS employees not given the full amount of
the Cost of Living Allowance (COLA) or Government-wide Pay Increase
(GPI)?
Mr. Bunn. While it is commonly believed that the General Schedule
(GS) GPI is a COLA, the GS GPI actually reflects the cost of labor
rather than a cost of living adjustment. The Federal Employees Pay
Comparability Act of 1990 provided two types of annual salary
adjustments: an across-the-board increase to the entire GS based on the
Employment Cost Index (ECI); and, a locality pay increase to the entire
GS, in a particular locality area, based on the salaries of non-Federal
employees working in that area. The ECI portion is based on an annual
comparison of ECI changes as measured by the Bureau of Labor Statistics
(BLS). However the BLS comparison measures the ``cost of labor or
wages'' as opposed to the ``cost of living.'' Ultimately, the purpose
of the GS increase is to ensure competitiveness with the private
sector, versus offsetting increases in the cost of living.
The National Security Personnel System (NSPS) regulations require
the maximum rate of the pay band to be raised by 100 percent of the
NSPS general salary increase. There is no requirement to raise the
minimum of the band. However, the regulations also provide that if the
adjustment of the minimum rate of the pay band causes the base salary
of an employee with a rating of record above unacceptable to fall below
the minimum rate, the employee's salary will be set at the pay band
minimum rate. Consistent with title 5, United States Code (U.S.C.),
Section 9902(e)(7), the regulations require that NSPS employees who
have a current rating above unacceptable will receive a base salary
increase of no less than 60 percent of the general salary increase and
a local market supplement increase equal to GS locality-based payments
under title 5, U.S.C., Sections 5304 and 5304a. Section 9902(e)(7) of
title 5 and the regulations also require that the remaining portion of
the GS salary increase will be included in pay pool funding for the
purpose of increasing rates of pay based on employee performance and
contributions during the rating cycle. Under the current regulations,
employees with a final rating of Valued Performer (Level 3) or higher
for the current appraisal period are also eligible to receive a
performance-based payout for that cycle.
NSPS is a pay-for-performance system, and progression through the
pay band is based on duties, responsibilities, and performance;
whereas, progression through the grades under the GS is based primarily
on longevity. Notwithstanding, there are links between compensation
under NSPS and the GS. By law, the overall amount allocated for
compensation of civilian employees in NSPS can be no less than if the
employees had remained covered by the GS, and that amount is available
only for such compensation.
Mr. Forbes. The purpose of a COLA and/or GPI is to keep up with
inflation, not a reward for superior performance. If NSPS is truly a
``Pay for Performance'' system, why did DOD and Navy implement a top
pay range in the pay band which cannot be exceeded? Once you reach that
top range, no matter how good of an employee or how hard you work, you
only get 60% every year.
Mr. Bunn. As explained in the answer to the previous question, the
annual government-wide General Schedule (GS) Government-wide Pay
Increase (GPI) represents a cost of labor calculation, not a cost of
living adjustment. The maximum of all the National Security Personnel
System (NSPS) pay ranges are increased by 100 percent of the General
Schedule Base Salary Increase (GSI) to ensure employees are eligible to
receive the full NSPS general salary increase based on performance.
While employees must receive at least 60 percent of the GSI as an
across-the-board pay increase if they have above unacceptable
performance, the balance must be paid out as a base salary increase
based on employee performance. This enables the Department of Defense
to pay the most competitive salaries to its highest performing
employees.
While pay-for-performance is an integral part of NSPS, it is not
the only factor in the compensation system. NSPS is also a system that
is sensitive to market factors in determining an appropriate pay level
for positions. The GS establishes somewhat narrow pay ranges (grade
levels) according to the type and complexity of the work being
performed. NSPS has several pay schedules and pay bands within these
schedules. Some of the pay bands are pretty broad. Not every type of
job in certain pay schedules should have salary progression to the top
of the band. Control points allow for managers to set pay in accordance
with the value of the work performed. Employees will continue to
receive appropriate compensation based on their individual performance,
if not in base salary increases then in performance bonuses or a
combination of both.
Mr. Forbes. The purpose of NSPS was to allow employees that
exceeded work expectations to have greater earning potential, but now
the government has put caps within each pay band. Why does the DOD not
show the breakdown of the payouts by race, sex, age, disability, and
then by grade level? Isn't NSPS supposed to be a transparent system?
Mr. Bunn. Control points may be established within a pay band to
manage compensation by considering and balancing a variety of factors,
in addition to performance, in the determination of rates of pay and
salary progression through a pay band. Factors include mission
requirements, labor market conditions, and benchmarks against duties,
responsibilities, competencies, qualifications, and performance.
Control points represent one tool that can be used to manage employees'
progression through the bands and help ensure that only the highest
performers move to the upper range of a pay band. Control points also
allow management to account for variances in position responsibilities
within a pay band. This allows the Department to set pay more
consistently with the labor market and to be more effective in
attracting and retaining top performers.
Control points also provide management with the latitude needed to
positively impact a variety of pay decisions, such as starting rates,
rate ranges, and the mix of performance payouts between bonus and
salary increase. Control points manage pay progression to reflect
duties and responsibilities, labor markets, and/or performance. The
Department of Defense (DoD) requires that control points be applied
consistently to similar positions in the same pay band and career group
within a pay pool. Unlike the General Schedule (GS) employee who
reaches the step 10 of his or her GS grade, a National Security
Personnel System (NSPS) employee who reaches a control point is
guaranteed a share of the pay pool and any amount in excess of the
control point (or the top of the pay band, if applicable) is paid as a
bonus provided the employee has a level 3 or higher rating of record.
Overall performance payout results are published on the NSPS
website after completion of the pay pool process. However, the data
available at the DoD level do not provide the granularity to make
meaningful distinctions or provide the capability to draw conclusions
from these high level data. DoD Components are required to conduct an
annual analysis of the NSPS performance rating and payout results for
their subordinate activities to identify, examine, and remove barriers
to similar rating and payout potential for demographic and other groups
in the workforce, apart from differences based on individual
performance or material job difference.
In addition, to promote transparency of the pay pool process, DoD
Components are required to share with NSPS employees at the completion
of the performance payout process the average rating, ratings
distribution, share value (or average share value), and average payout
expressed as a percentage of base salary.
Mr. Forbes. Why didn't DOD concur with the GAO recommendation
regarding the third party reviews of pre-decisional pay pool
recommendations?
Mr. Bunn. The National Security Personnel System (NSPS) pay pool
process provides essential safeguards to ensure that the system adheres
to merit principles, and that ratings and management of the system are
fair, equitable, and based on employee performance. Individual ratings
recommended by a supervisor are reviewed by a higher level official and
by at least one panel of management officials from across the
organization to ensure consistency and fairness across the pay pool.
Rating officials, reviewers, and panel members apply standard, NSPS-
wide performance indicators and benchmarks when they consider
employees' performance assessments. Employees are encouraged to provide
written self-assessments about their performance accomplishments, which
help ensure panels have a complete picture; and an employee who
disagrees with his or her rating has several avenues of redress.
While we have no objection to demographic and other analyses for
pay pools, we do not believe integrating such analyses as part of the
pre-decisional pay pool deliberation process is warranted; and, in
fact, they may have detrimental effects on the credibility of the
system.
We agree that such analyses can be used to ensure that the process
is fair and equitable, and to identify and address possible barriers
that may affect some groups, but believe it should be done after the
process is complete. Such analysis must not be used to manipulate
results to achieve some type of parity among various groups. Post-
decisional analysis of results is useful to identify barriers and
corrective actions. If the information gleaned from demographic
analysis demonstrates that the results were not fair or equitable, for
whatever reason, this information could legitimately be employed to
examine the process used to achieve those results, with a view to
identifying barriers to equal employment opportunity, if any, and
eliminating them in order to achieve a more fair and equitable outcome.
And, if an analysis of pay pool results uncovers illegal
discrimination, management always has the ability and obligation to
take corrective action.
Heads of the Department of Defense Components are accountable for
the manner in which officials in their organizations carry out policy,
procedures, and guidance. The Department requires in its NSPS
implementing issuances that Component Heads carry out an annual
analysis of the NSPS performance rating and payout results for
subordinate elements; and issue guidance to lower echelons and
otherwise act to identify, examine, and remove barriers to similar
rating and payout potential for demographic and other groups in the
workforce, apart from differences based on individual performance or
material job differences.
Mr. Forbes. COLA's and Housing Allowances could be lumped into a
pay pool and the top performers could get the higher raises. It would
eliminate the automatic time-in-grade raises, just like for civil
service. Why hasn't the DOD done a DOD-wide survey of all employees
under NSPS to see what the people in the system think of it? They would
probably find that the majority of the employees are not in favor and
that it has only put more of a burden on those in supervisory
positions.
Mr. Bunn. By statute, the National Security Personnel System (NSPS)
cannot modify Cost of Living Allowances and housing allowances, or lump
them into a pay pool for any purpose.
The Department surveys its civilian population in general on
employment matters every year by means of the Status of Forces Survey
of the Department of Defense (DoD) Civilian Employees (SOFS-C). The
SOFS-C is administered not only to our NSPS population but also to the
rest of the civilian workforce. Views from the NSPS workforce are
mixed. The first year after converting, employees' surveyed opinions on
some aspects of NSPS are lower than their baseline opinions from their
previous system; for example, whether they understand what it takes to
be rated at the different levels and whether the performance management
system improves organizational performance. At the same time, the NSPS
workforce reports a more positive view that management deals with poor
performers and that pay raises depend on how well employees perform
their jobs. NSPS supervisors have become more positive that they can
influence employees' pay. While employees' opinions that their ratings
fairly reflected their performance compared to their pre-NSPS
baselines, the majority still hold a positive view; and after a second
rating cycle, the first spiral group opinions rose somewhat from the
first year. Supervisors are somewhat ambivalent: in the 2008 survey,
many were neutral about whether pay-for-performance at their
organization was a fair reflection of their employees' performance, but
of the rest, there were many more positive views than negative.
The decline and the ambivalence are common with most new systems,
as the Office of Personnel Management has observed and the Government
Accountability Office has acknowledged. NSPS is a fundamental change
from their previous experience with those systems and with the
predictable General Schedule step progression pay system and guaranteed
annual increases regardless of performance. We are mindful that half of
the NSPS workforce converted from pass-fail performance systems, and
most of the rest came from multi-level rating systems where most people
got the top rating. We therefore augment surveys with field visits and
interviews with employee, supervisor, and management groups to find out
what is working adequately and what is of concern and may require
further action. Many do express concern about the time the NSPS
performance system takes, especially for supervisors with large non-
supervisory workloads of their own. We have improved automated tools to
reduce their administrative burden, and they are no longer building
performance plans from scratch but may copy and paste an applicable
objective from the performance plan of one rating period to another.
We expect this issue, along with many others, to be included in the
scope of the comprehensive program review.
Mr. Forbes. What evidence exists that can show NSPS has had a
marked improvement in development of the employee/supervisor
relationship through the coaching/feedback that is supposed to be such
a big part of NSPS? This should be a question if a survey is conducted;
Do you believe your communication with your supervisor has improved
under NSPS?
Mr. Bunn. The Department surveys the workforce to monitor
relationships between employees and their supervisors, among other
matters; but we do not expect quick, marked improvements. The National
Security Personnel System (NSPS) is still in an early stage: the great
majority of the workforce has either one or two years under the system.
NSPS is fundamentally different from the prior systems. Change from
familiar, predictable systems to performance-based pay progression in a
less hierarchical pay band structure is daunting. The fact that NSPS
uses a senior management pay pool panel process to ensure there is a
level playing field across the organization in ratings and payouts
alters the traditional rating relationship between an employee and his/
her immediate supervisor. The Office of Personnel Management advises
that it takes 3-5 years for people's attitudes to recover from early
declines and meet or exceed the baseline level. Representatives from
the Government Accountability Office have testified it takes 5-7 years
for such changes.
Our surveys indicate that the employee/supervisor relationship has
held up during the first two years after NSPS implementation.
Employees' trust and confidence in their supervisors have held level,
as has their feeling that their supervisors do a good job. Looking at a
basic supervisory responsibility--communicating what it takes to be
rated at different levels--we found that employees' agreement that they
understood this had declined somewhat from their pre-NSPS baseline, but
the majority, 57 percent, of Spiral 1 were positive. Interestingly, the
relationship between an employee and his/her supervisor--forged by many
things apart from formalities of the personnel system--seems to go
hand-in-hand with employees' opinion of whether their appraisal is
fair. Of the 67 percent of Spiral 1 employees who agreed in the 2008
survey that they had trust and confidence in their supervisors, 71
percent agreed that their performance appraisal was a fair reflection
of their performance, compared with 25 percent agreement for the 16
percent of employees who did not have trust and confidence in their
supervisors.
Asked if discussions with their supervisor or team leader were
worthwhile, NSPS employees gave similar positive views in the 2008
survey to those not in NSPS--despite a slight decrease from pre-NSPS
baselines. Further, somewhat more NSPS employees than non-NSPS ones
report they receive occasional or regular performance feedback; and
those in NSPS for one or two years had similarly positive views about
the usefulness of the counseling as those not in NSPS.
Mr. Forbes. Does a pay pool have the authority to change the
stated goals for a particular rating at the end of the year so fewer
people exceed the Level 3 rating?
Mr. Bunn. No. Performance expectations must be communicated in
writing to an employee before the employee is held accountable for
those objectives (title 5, Code of Federal Regulations, section
9901.406(b)), and employee performance is measured against standard
criteria that are published. Job objectives for the National Security
Personnel System employees may not be changed after the end of a rating
cycle to limit the number of employees with ratings above level three.
While supervisors may change employees' job objectives during a rating
cycle to reflect changes in duties, mission, and/or priorities, they
cannot hold the employee accountable for the revised performance
expectation/job objective until it has been communicated to the
employee in writing. This requirement safeguards against an employee
being held accountable retroactively for any job objective for any
reason.
Mr. Forbes. Where are the Merit System Principles in NSPS?
Mr. Bunn. The National Security Personnel System (NSPS) statute at
title 5, United States Code, section 9902(b)(3) addresses the merit
system principles and prohibited personnel practices. In addition, the
statute provides at Sec. 9902(b)(7)(A) that the performance management
system must incorporate adherence to merit system principles. The
enabling regulations at title 5, Code of Federal Regulations (CFR),
section 9901.101(b) state that the merit system principles are among
the guiding principles for establishing the requirements for the
implementation of the NSPS human resources system. The regulations also
state at 5 CFR Sec. 9901.342(b) and (f)(2) that oversight of pay pools
must be established in such as way as to ensure employees are treated
fairly and consistently and in accordance with merit system principles.
At 5 CFR Sec. 9901.412(g), the regulations state that ``[c]onsistent
with the merit system principles and this part, the Pay Pool Manager is
the approving authority for Pay Pool Panel recommendations concerning
ratings of record, share assignments and payout distributions.'' The
merit system principles, while not explicitly listed, are embedded in
all aspects in the NSPS human resources system. The supplementary
information for the regulations published on September 26, 2008 (73
Federal Register (FR) 56344) makes numerous references to the merit
system principles. For example, the adherence to merit system
principles support the fairness of the pay pool process (73 FR 56350),
that the system is evaluated to determine whether it complies with
merit system principles (73 FR 56359), and that the classification
system supports the merit system principles (73 FR 56359).
The merit system principles are an integral part of NSPS training
and communication. In virtually all NSPS briefings and training
sessions, participants are advised that NSPS does not change or alter
merit system principles. In all performance management training, the
participants are reminded that performance evaluation must conform to
the merit system principles, and participants are given a handout that
lists the merit system principles.
Mr. Forbes. How much has NSPS cost the taxpayers since its
implementation?
Mr. Bunn. To date, the National Security Personnel System (NSPS)
implementation costs across the Department are approximately $230
million. This includes expenditures for the following:
Design and Implementation (efforts including those conducted by
Component and local activities related to the planning, tailoring, and
adapting of NSPS Implementing Issuances)
Regulation, implementing issuances, conforming policy,
and technical reference material development
Continuing collaboration with unions
Working group activities for implementation planning,
scheduling, and monitoring
Communications materials
Lessons learned meetings, conferences, and reports
Training Development, Support, and Execution
Courseware design and development; and component and
local adaptations
Course materials production
Course delivery
Human Resource (HR) Automated Systems
Requirements definition of NSPS-driven modifications to
Component HR systems
Design, development, coding, and testing of modifications
Local system modifications
Program Evaluation (development of metrics, data collection, survey
tools, analysis, and reporting to assess the effectiveness of NSPS
regulations and implementation)
Survey design and administration
Data analysis and reporting
Program Office Operations (efforts conducted by Program Executive
Office (PEO), Component program offices, and locally established NSPS
activities)
Rent and supplies, equipment, networks, and
telecommunications (applies to PEO NSPS only)
Personnel appointed to coordinate NSPS implementation at
local level
Detailed employees will be included in Component reporting under
this category.
Mr. Forbes. What specifically is there in NSPS that was not
available under the GS system as far as bonuses, raises, performance
awards, etc.?
Mr. Bunn. The National Security Personnel System (NSPS) is designed
to promote a performance culture in which performance and contributions
are more fully recognized and rewarded based on performance,
innovation, and results. NSPS makes distinctions among employees based
on a rigorous evaluation of individual performance against standard
criteria to ensure that the highest rating levels, and associated
performance payouts, are reserved for those who deliver exceptional
results. This performance management system differs from the General
Schedule (GS) process of longevity-based pay increases that are linked
primarily to the passage of time. NSPS better links individual pay to
performance using performance rather than time-on-the-job to determine
pay increases. It also provides employees with greater opportunities
for career growth and mobility within the Department.
The NSPS pay and classification system provides a flexible pay-
banding construct that helps attract skilled and talented workers, and
retain and appropriately reward current employees. This pay-banding
structure replaced the artificial limitations created by the GS pay and
classification systems. Using broad pay bands, the Department is able
to move employees more freely across a range of work opportunities
without being bound by narrowly described work definitions. Unlike the
GS system, NSPS employees may receive reassignment base salary
increases of up to 5 percent. When NSPS employees are promoted to a
higher-level pay band, the flexibility exists to set pay at a level
that provides at least a 6 percent pay increase and a more significant
base salary increase of up to 12 percent or more if management
determines that a greater increase is appropriate. For example, a 10
percent increase may be justified when an employee is promoted from an
entry or developmental band to a full performance band and the greater
increase is necessary to pay the employee a rate that is competitive in
the labor market, given the employee's responsibilities, competencies,
and anticipated performance. Under the GS system, management must
follow standard pay setting procedures, which provide no flexibility or
discretion when setting pay.
There is considerably more room for pay progression within an NSPS
band than within a GS grade. NSPS employees may move more easily within
their assigned band, or other comparable bands. Additionally, unlike
the GS employee who reaches step 10 of his or her GS grade, an employee
with a level 3 or higher rating of record is guaranteed a share of the
pay pool, and any amount of the performance-based payout in excess of a
control point within the band or the top of the pay band is paid out as
a bonus.
The NSPS pay structure is more responsive to market conditions than
the GS. The Department is able to adjust rate ranges and local market
supplements based on variations relating to specific occupations,
rather than using a one-size-fits-all approach. Labor market conditions
also are considered when making pay-setting decisions.
Mr. Forbes. Based on the GAO testimony, one safeguard GAO believes
needs to be implemented to increase employee confidence in the pay for
performance system is for DOD to have a third party analyze the pay-
pool recommendations for ``anomalies'' before any final decision is
made to determine whether an employee's rating accurately reflects the
employee's performance and whether any non-merit based factors
contributed to the ``anomaly.''
1. Explain how you see this third party analysis working.
Ms. Farrell. Given that each agency has its own set of unique
challenges and its own approach for handling those challenges, we
believe that the department is in the best position to determine how to
appropriately design and implement a predecisional analysis for NSPS.
That said, we believe that the third-party analysis should be conducted
by an independent reviewing office, such as a human capital office,
that is able to conduct the analysis outside of the chain of command.
Taking the analysis outside of the chain of command helps to ensure
that the process remains as independent as possible. Seeing that DOD
currently has over 200,000 civilian employees under NSPS, the
department could consider phasing in the third-party analysis by
starting with a representative sample of employees. A phased
implementation approach recognizes that different components of
agencies will often have different levels of readiness and different
capabilities to implement new authorities. Moreover, a phased approach
allows for learning so that appropriate adjustments and midcourse
corrections can be made before new policies and procedures are fully
implemented organizationwide.
Mr. Forbes. 2. In your view, who would the third party be, a DOD
entity or a non-DOD entity?
Ms. Farrell. As noted in our response to question 1, we would
expect the third party to be a DOD entity that is removed from the
chain of command--that is, the human capital office or an office of
opportunity and inclusiveness.
Mr. Forbes. 3. What criteria does GAO see as constituting an
anomaly?
Ms. Farrell. Generally, an anomaly would be characterized as a set
of ratings for which there is a statistically significant difference in
comparison to the larger group. For example, if the data indicated that
there was a statistically significant difference between the ratings of
a particular subset of the larger workforce compared to the larger
group at that same level, this could constitute an anomaly. The
presence of an anomaly is not alone proof that there is a problem.
Rather, identifying an anomaly in the data prior to finalizing the
rating decisions would enable management to investigate the situation
and determine whether the results are justified and merit-based.
Mr. Forbes. 4. In investigating ``blatant discrimination'' or
``egregious decisions'' would the employee be contacted and
interviewed?
Ms. Farrell. The predecisional reviews are to help achieve
consistency in the performance management process and provide
reasonable assurance that the performance decisions are merit-based and
fair. Due to the nature of the investigation, the employee would not be
contacted during an investigation. However, information provided by
employees, such as the self-assessment, can be considered during the
review process, as could information provided by responsible managers
regarding underlying reasons for any anomalies.
Mr. Forbes. 5. Would a single third party be evaluating all 1,600
pay pools across DOD to get a DOD wide view of anomalies, or would
1,600 third-party reviews be conducted at each pay pool without regard
for a comprehensive DOD look?
Ms. Farrell. As noted in our response to question 1, each agency
has its own set of unique challenges and its own approach for handling
those challenges. As a result, we feel that the department is in the
best position to determine how to appropriately design and implement a
predecisional analysis for NSPS. One approach, as noted in our response
to question 1, would be for DOD to phase in the third party analysis by
starting with a representative sample of employees. Such an approach
recognizes that different levels of readiness and different
capabilities exist among agency components and allows for learning so
that appropriate adjustments and midcourse corrections can be made
before full implementation.
Mr. Forbes. 6. What effect would the third-party analyses have on
the timeliness of the pay-pool process?
Ms. Farrell. It would likely add time to the existing process.
However, we believe that it is important that DOD take steps to ensure
that its employees' ratings are perceived as fair reflections of their
performance. Taking additional time to complete a predecisional
analysis is one safeguard that DOD can implement to raise employee
confidence in the fairness and credibility of the system.
Mr. Forbes. 7. Would the pay pool decisions on all the other
employees in the pay pool be held up until the ``anomaly'' was
resolved?
Ms. Farrell. Given that the predecisional review is intended to
take place prior to the ratings being finalized but before they are
certified and released to employees, all other ratings would not be
released until the predecisional review was completed and appropriate
responses (which could include inaction) were determined for any
anomalies identified.
Mr. Forbes. 8. How would GAO see the anomaly being corrected--a
directive to the rater to change the rating, or some disciplinary
action against the rater, or some other form of corrective action?
Ms. Farrell. Where managers provide information that explains the
merit-based factors and reasons for the anomalies, the managers would
not change the ratings. On the other hand, managers could determine
that some vital information was not considered that would provide a
basis for changing the rating. In all cases, it is the unit manager,
not the third party conducting the predecisional review, that would
determine whether a change would be warranted. Further, the review is
not intended to change the results to portray an ``ideal''
distribution, or to alter the outcome of the performance management
process. The purpose of the predecisional review is to identify if
anomalies exist and, if found, inform managers of the need for further
review to provide reasonable assurance that the basis for each rating
is fair, credible, and merit-based.
Mr. Forbes. 9. Does GAO see any appeal rights for the manager or
employee involved in the ``anomaly''?
Ms. Farrell. Although the third-party reviewer identifies the
anomalies, it is the responsible manager that examines the basis
underlying the ratings and is held accountable for ensuring the ratings
are merit based. While it is unlikely, should a manager be disciplined,
he or she might have appeal rights, depending on the nature of the
discipline imposed.
Any employee has a right to appeal his or her final rating.
However, these appeal rights do not apply to the predecisional review
process since it is intended to take place prior to the ratings being
finalized but before they are certified and released to employees.
Mr. Forbes. Would you comment on the GAO recommendation about
having a third party pre-decisional review of pay-pool ratings?
Mr. Perkinson. Thank you for the opportunity to address your
questions, Congressman Forbes. The addition of this process could
alleviate some transparency concerns raised about NSPS, but it could
just as likely further cloud the system. We must ask ourselves what
happens if the decision of the third party is different from that of
the pay pool panel. Is this third party the final say? If so, how
involved is it in the process? We have said that one of the problems
with the pay pool panel is that it is out of touch with the actual job
functions of the employees it is reviewing. The third party should be
held to the same standards.
Mr. Forbes. Do support the recommendation? Why or Why not?
Mr. Perkinson. If the pay pool panels were to act in a manner
consistent with the authorities laid out in their directive--primarily
concerning itself with ensuring the system is applied fairly and
transparently--a third party review would be unnecessary. However, if
the panels continue to overstep their bounds, adjusting the ratings
employees receive from their rating officials, then I believe a third-
party review is justified.
Mr. Forbes. In your testimony you indicated that, as a manager, if
you had a choice, you would prefer going back to the General Schedule
System. The answer seemed to be couched in the context of the
difficulties managers have in dealing with three personnel systems:
NSPS, GS and Wage Grade. Is your desire to go back to the GS system a
statement that the GS system is superior to the NSPS system, or is your
preference for the GS system an expression that as a manager you prefer
to work with fewer personnel systems?
Mr. Perkinson. That was a very difficult question for me to answer.
I remind you that in your question you asked what I would do today. In
reality there are things I like about NSPS and things I like about GS.
The NSPS process allows you to improve performance and pinpoint
areas of improvement for your personnel in specific areas. It also
allows us to award performance in a way that is unavailable under the
GS system. Under the General Schedule, there are also tools to deal
with extraordinary performance and poor performance. The QSI (Quality
Step Increase) is a valuable tool to reward performance, but budgets
limit the extent we can distribute them. An unsatisfactory evaluation
prevents a GS employee from getting an automatic step increase in pay.
However, these options are rarely utilized.
My particular answer to you was in response to the difficulties
with managing three separate systems in one department. As personnel
work side-by-side, it is difficult to explain why the NSPS folks
averaged one pay increase, the GS received something different and the
Wage Grade averaged another amount. Along with that, each system is
governed by a different set of rules regarding workplace practices,
such as overtime, and this is complicated for a manager and confusing
for employees. They want to know why they are treated differently than
their peers.
Congress and the Administration should work with managerial and
employee groups to establish one system that can uphold the principles
of objectivity, fairness and transparency.
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