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Testimony of
George Nesterczuk
President, Nesterczuk and Associates
before the
Committee on Science
U. S. House of Representatives
on H.R. 1085,
"NASA Flexibility Act of 2003"
March 12, 2003

Mr. Chairman and Members of the Committee, thank you for the opportunity to testify today on H.R. 1085, the "NASA Flexibility Act of 2003", a bill to make certain personnel authorities and enhanced flexibilities available to the National Aeronautics and Space Administration. My name is George Nesterczuk and I am President of Nesterczuk and Associates, a management-consulting firm located in Vienna, VA.


As a long time participant in public sector management initiatives I welcome the Committee's willingness to delve into some of the arcane aspects of civil service personnel rules. I come to these issues with a perspective of someone trained in the sciences that, through no fault of his own, became immersed in the realm of human resource management. I began my professional work experience as a graduate research assistant at the Goddard Space Flight Center. During subsequent years I spent a decade as a government contractor supporting NASA satellite tracking operations, and performing research in geodesy, atmospheric physics, and remote sensing.

Later, during the Reagan years I went on to hold senior positions at the US Office of Personnel Management, the Department of Defense, and the Department of Transportation. While at OPM I managed a variety of programs including government wide pay and performance management systems and the Senior Executive Service. At the Department of Transportation I served as Science and Technology Advisor to the Secretary and was DoT's liaison with the White House Office of Science and Technology Policy. In 1995, I returned to federal human resource management issues as Staff Director of the Subcommittee on the Civil Service in the House of Representatives. I have now dealt with federal HR issues continuously for over 20 years.


The problems that confront NASA are not new nor is NASA alone in its predicament. Over the past twenty years a continuous stream of budget reduction and downsizing initiatives have taken their toll on a workforce previously accustomed to lifetime employment with careers spanning 30 to 40 years. Managers could expect to recruit a steady stream of young entry-level college graduates every year to replace a fairly predictable cohort of retirees. In recent years, however, reduced budgets and lower staff ceilings have resulted in hiring freezes and occasional reductions in force to complement the steady outflow of retirement eligible federal employees. In the mid 1990s a new tool came along -- the Voluntary Separation Incentive, also known as the buy-out - to further accelerate retirements.

Now federal agencies must deal with the aftermath: an aging workforce and a significantly reduced pool of young talent from which to grow the next generation of senior managers and executives. In addition to this aging workforce syndrome, NASA faces the challenge of recruiting and retaining highly skilled technical professionals against a highly competitive private sector. Further, NASA must also deal with a potential crisis in depleted expertise as an increasing proportion of its aging workforce achieves retirement eligibility. The agency is aware of these problems and has provided demographic data to the Committee to illustrate and quantify these problems.

General Support for HR 1085

HR 1085 contains measures to deal with at least some of these issues in the short term using financial incentives to attract and retain quality staff in critical functions. However, in the long term, more basic systemic reforms will be needed to reestablish some balance in NASA's workforce and promote and maintain a high performance environment. Though very important, compensation alone is not sufficient. The quality of the work environment is an important factor that can attract or drive away talent.

To that end, the enhanced demonstration authority proposed in the bill is perhaps the most important part of HR 1085. It will permit NASA to experiment with agency wide reforms that can streamline recruitment, revamp the pay and classification systems, and reform the administrative appeals procedures by which the agency deals with problem employees.

Broadly speaking, I support the intent of HR 1085 and believe its provisions will indeed provide NASA much needed flexibility in dealing with some vexing human resource issues. At the same time I have serious reservations about the provision extending increased voluntary separation incentives.

Views on Specific Provisions

At this point in my testimony, I will provide more detailed comments on specific provisions of HR 1085.

Using NASA's organic act

The Committee has chosen to amend NASA's organic act instead of the civil service statutes contained in Title 5 of the US Code. This is a sound strategy which permits you to tailor agency specific remedies for provide immediate relief without bearing the burden of justifying government wide changes and bearing the cost and attendant implementation issues.

There is ample precedent of Congress providing other federal agencies with flexible personnel provisions to deal with agency specific problems. The annual authorizing legislation for the Department of Defense invariably carries a handful of civil service provisions to deal with DOD specific matters. Federal banking regulators and financial institutions received broad pay exemptions back in the 1980s to the exclusion of all other federal agencies. In 1995, the FAA was removed from coverage by Title 5 USC and permitted to establish an entirely separate system of personnel rules. More recently, the IRS, the Transportation Security Administration, and the Department of Homeland Security were all provided extensive flexibilities by Congress to modify existing personnel rules in order to function more effectively.

Limitations on authorities granted

Sections 501 and 503 impose important limitations on the authorities granted. First, the financial recruitment and retention incentives are limited to situations of critical need. In addition the workforce authorities themselves expire after a period of approximately six years. These are important controls that place the agency on notice that abuses would not be tolerated. Unchecked or unlimited reliance on recruitment and retention bonuses would ultimately create new morale problems in the workforce and give rise to questions of equitable treatment and raised expectations.

Placing a limit on the duration of these flexibilities will also put the agency on a notice of "use it or lose it". It will speed up the implementation of needed reforms and provide Congress with a specific opportunity to revisit these issues after a reasonable time period has elapsed. Based on prior demonstration projects 5 years is sufficient time to gather data to evaluate the efficacy of the demonstration. This depends however on the depth and breadth of proposed reforms. More complicated HR changes may require a longer evaluation period.

To answer the specific question posed by the Committee as to the adequacy of the six year time limit placed on these authorities I would answer yes on the critical pay, on bonuses, buy-outs, term conversions, and IPA assignments. As to the demonstration authority a more qualified response is called for. Broad and / or complex changes may require a longer period. Much will depend on NASA's ability to propose specific reforms in the first few months of this authority and what it can reasonably proceed to implement during the first year of the demonstration authority.

Congress and the Agency will have the sixth year to decide which authorities to extend, which to make permanent, and which to terminate. At that point the demonstration authority itself could be extended if NASA needs additional time to tackle remaining agency wide HR problems. The important thing is for all parties -- NASA, its employees and Congress - to know that oversight over the process and its results will be maintained in order to promote an environment of accountability.

Notification requirements

The planning and reporting requirements set out in Sect 502 give the agency 90 days in which to submit to Congress a Workforce Plan stipulating how it will implement the workforce authorities granted under HR 1085. Employees are to be provided the Workforce Plan at least 60 days before any authorities are exercised. Subsequent changes require similar Congressional and employee notification. Both notifications to Congress and employees are reasonable requirements and should not pose an undue burden on the agency. The disclosures will permit the Committee to track the implementation of authorities and provide insight into NASA's implementation rationale.

Demonstration project authority

Since the demonstration project authority granted in Section 510 is perhaps the most important authority extended to NASA I will address it first. The enhancement over existing demonstration project authority consists of lifting the limit on the size of the demonstration from 5,000 employees to as many as the Administrator determines necessary. This would permit NASA to implement much needed agency wide personnel rule changes in areas such recruitment and selection procedures, pay and classification systems, and administration procedures to deal with performance and conduct cases.

It is not clear, however, that the current statutory language in HR 1085 will suffice since all other language governing demonstration projects remains in place in Chapter 47 of Title 5 USC. Thus, if 10 other projects are already under way according to 4703 (d) (2) NASA could not proceed with its own demonstration. OPM could also find grounds to keep NASA from implementing since it remains the controlling authority over demonstration projects.

I believe more directive language will be required in the bill to give NASA the lead in establishing a demonstration project. OPM should be designated a consulting agency to NASA during the term of the demonstration authority, and the project could follow the remaining rules in 5 USC 4703. The notification requirements contained in 4703 (b) (1) however should be overridden and streamlined by language in HR 1085 since the existing notifications are extremely cumbersome and arguably not appropriate to the Committee's intent. The notification rules in section 502 of HR 1085 are more appropriate than those currently in 4703(b)(1).

Targeted financial incentives

The provisions in Sections 504 and 505 permitting bonuses for recruitment and retention, and for transferring or relocating employees will allow NASA greater leeway in attracting and keeping certain employees with highly specialized skills. The critical pay authority in Section 508 will serve the same purpose.

These bonuses could address the difficulty faced by many federal agencies in attracting mid-career employees either from other federal agencies or the private sector. The use of service periods to make sure an employee "buys in" to the agency for several years is a particularly good idea. The size of the bonuses makes them noteworthy. Currently they are limited to 25% of pay, payable in a lump sum. The bill proposes to increase this to 50% for critical jobs for each of 2 years and up to 25% for up to 4 years for non-critical jobs. The payout can be spread out over time but in no instance can it exceed 100% of basic pay.


Since the mid 1990s voluntary separation incentives have been quite the rage in federal HR circles. Reported data from the initial implementation of buy outs indicated that out of 132,000 buy outs between 1994 and 1998 92% went to retirement eligible employees. In other words nearly $4 billion dollars was spent in extending a "golden handshake" to freely departing federal employees. The justification for the high cost was that this was a more effective means of downsizing than running reductions in force. While this point can be argued, Members of Congress were sufficiently persuaded that they extended buy out authority permanently and government wide in legislation establishing the Department of Homeland Security.

Existing law pegs the buyouts at $25,000 per hand shake and requires no offsetting payment into the retirement system. The earlier buy out authority recognized that moving people prematurely into retirement shifted the cost burden from the Treasury payroll account to the Treasury retirement account and required that an appropriate payment be made into the already under funded Civil Service Retirement and Disability Fund.

Section 506 proposes to raise the "golden handshake" in value from $25,000 to 50% of salary - over $70,000 for a Senior Executive, and it too has no offsetting provision for cost to the retirement system. This is a highly problematic provision that sends a mixed message at best. How can an agency express concern about losing senior talent, make a special effort to pay retention bonuses and then turn around and spend money on separation bonuses which is all a buy out really is.

HR 1085 proposes to limit these huge "golden handshakes" to individuals in "critical need" positions. How is one to understand this? The "critical need" designation makes the incumbent eligible for a retention bonus of up to 100% of salary. If instead he is offered $50,000 or $60,000 or maybe $70,000 to leave what does that tell us about his value to the agency or his performance on the job? And is he a better or worse performer than the one in the non-critical job to whom you only offer $25,000 to leave? Are you willing to pay more money because the incumbent in the critical job does more damage? Non-performing or non-productive employees should be removed or reassigned into jobs they are better suited for. They should not be rewarded with cash to get them to move on. That simply short changes the good performers who aren't getting performance awards for lack of money.

Buyouts raise a lot of questions as to intent of purpose, especially if the function is not being abolished following the incumbent's departure. Their use sends a mixed message at best particularly in an organization arguing for relief because it is losing talent. I strongly urge the Committee to delete this provision entirely and leave NASA to tip toe around the existing government wide authorities for buy outs at the $25,000 level. The agency will have its hands full making buy outs credible at the lower level without the extra public scrutiny of $70,000 "golden handshakes".

Other provisions

Section 507 provides for the conversion to career status of employees serving in term appointments. This is a useful flexibility for the Administrator to exercise as long as the provisions are not abused, for the abuses would seriously undermine merit system staffing principles. Temporary hires are usually brought in to deal with peak or surge workloads. Since they are temporary the rules by which such positions are filled tend to be relaxed and don't necessarily comply with full and open competition requirements for career status in the civil service. If a pool of temporary employees serves as an agency "farm team" entry into permanent civil service positions will over time become compromised.

The flexibility in extending IPA assignments by four years as proposed under Section 509 is likewise a very useful provision for the Administrator to have. Since it is exercised after the initial two-year appointment expires there would have been ample opportunity to evaluate the individual's performance hence the provision poses no risk to the agency. One must nevertheless guard against the abuse of sending non-performers out of the agency for extended periods of time. IPA assignments for federal employees to state and local governments have been known to be examples of "turkey farms". The Administrator should implement controls to make sure this does not occur - it is a very costly practice.

Summary and Conclusion

In conclusion let me express general support for HR 1085 and its intent to provide NASA with much needed HR flexibility. The bill provides the immediate remedy of additional compensation for specific purposes of retaining and attracting talented individuals for critical agency needs. The pay differentials paid in bonuses and the higher pay authorized are substantially above current authorities and therefore meaningful. These provisions will provide the agency with better access to professionals at mid career rather than at entry level. Most important is the enhanced demonstration project authority that will permit NASA to experiment with agency wide reforms to potentially streamline recruitment, revamp the pay and classification systems, and reform the administrative appeals procedures by which the agency deals with problem employees.

This concludes my testimony. I will be happy to respond to any questions you may have.


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