Posthearing Questions Related to Proposed DOD Human Capital Reform
Gao ID: GAO-03-965R July 3, 2003On June 4, 2003, GAO testified before the Senate Committee on Governmental Affairs at a hearing entitled "Transforming the Department of Defense Personnel System: Finding the Right Approach." This letter responds to a request that we provide answers to posthearing questions from Senator George V. Voinovich and Senator Thomas R. Carper concerning the proposed Department of Defense (DOD) Human Capital Reform.
GAO found that it is critical that agencies or components have in place the human capital infrastructure and safeguards before implementing new human capital reforms. This institutional infrastructure includes, at a minimum (1) a human capital planning process that integrates the agency's human capital policies, strategies, and programs with its program mission, goals, and desired outcomes, (2) the capabilities to develop and implement a new human capital system effectively, and (3) a modern, effective, credible and, as appropriate, validated performance appraisal and management system that includes adequate safeguards, such as reasonable transparency and appropriate accountability mechanisms, to ensure the fair, effective, and nondiscriminatory implementation of the system. As we noted in our high risk series, modern, effective and credible human capital strategies will be essential in order to maximize performance and assure accountability of the government for the benefit of the American people. GAO was pleased that both the House of Representatives' version of the proposed National Defense Authorization Act for Fiscal Year 2004 and the proposed National Security Personnel System Act contain statutory safeguards and standards along the lines that we have been suggesting to help ensure that DOD's pay for performance efforts are fair to employees and improve both individual and organizational performance. In our view, it would be preferable to employ a governmentwide approach to address certain flexibilities that have broad-based application and serious potential implications for the civil service system, in general, and the Office of Personnel Management, in particular. The authority DOD is seeking is not directly tailored to meet department-specific needs. In addition, DOD has not provided a written justification for much of its proposal. Nevertheless, DOD does need certain additional human capital flexibilities in order to facilitate its overall transformation effort.
GAO-03-965R, Posthearing Questions Related to Proposed DOD Human Capital Reform
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July 3, 2003:
The Honorable Susan M. Collins:
Chairman:
Committee on Governmental Affairs:
United States Senate:
Subject: Posthearing Questions Related to Proposed Department of
Defense (DOD) Human Capital Reform:
On June 4, 2003, I testified before your committee at a hearing
entitled "Transforming the Department of Defense Personnel System:
Finding the Right Approach."[Footnote 1] This letter responds to your
request that I provide answers to posthearing questions from Senator
George V. Voinovich and Senator Thomas R. Carper. The questions and
responses follow.
Questions from Senator Voinovich:
1. Mr. Walker, in your written testimony, you support the phased in
approach for DOD reforms. While this will give the Department
additional time to establish a better personnel system, do you believe
it may contribute to a fractured atmosphere, potentially creating a
culture of "haves," employees benefiting from the new system and "have-
nots?":
As I have testified, we believe that it is critical that agencies or
components have in place the human capital infrastructure and
safeguards before implementing new human capital reforms. This
institutional infrastructure includes, at a minimum (1) a human capital
planning process that integrates the agency's human capital policies,
strategies, and programs with its program mission, goals, and desired
outcomes,
(2) the capabilities to develop and implement a new human capital
system effectively, and (3) a modern, effective, credible and, as
appropriate, validated performance appraisal and management system that
includes adequate safeguards, such as reasonable transparency and
appropriate accountability mechanisms, to ensure the fair, effective,
and nondiscriminatory implementation of the system.
Clearly, some components of DOD may have such an infrastructure and
safeguards in place before others. However, as we have noted, in the
human capital area, how you do something and when you do it, can be as
important as what you do. In our view, the positive benefits of
implementing the new human capital authorities properly and effectively
will far outweigh any potential issues of some DOD components
benefiting from the new personnel authorities before others.
2. In the Homeland Security legislation, Congress gave the new
Department broad flexibility to amend six areas of Title 5 (performance
appraisals, classification, pay rates and systems, labor management
relations, adverse actions, and appeals). It has been said that the
Department of Homeland Security's personnel system may become the
future human resource model for the federal government. Today the
Secretary of Defense explained his vision for the personnel system for
the civilian workforce, which in some instances goes well beyond the
Homeland Security proposal. I know that the Department of Defense has
had a great deal of success with their demonstration projects, but do
you think we should wait until the Homeland Security system is fully
established before we give broad authority to the Defense Department?
As we noted in our high-risk series, modern, effective, and credible
human capital strategies will be essential in order to maximize
performance and assure accountability of the government for the benefit
of the American people.[Footnote 2] As the employer of almost 700,000
civilians, in no place is a modernized human capital system more
critical than DOD. However, as I have often noted, such a system should
not be implemented without an adequate human capital infrastructure and
safeguards.
Although we do not believe that DOD should wait for the full
implementation of the new human capital system at the Department of
Homeland Security (DHS), which could take several years, we do think
that there are important lessons that can be learned from how DHS is
developing its new personnel system. For example, DHS has implemented
an approach that includes a design team of employees from DHS, the
Office of Personnel Management (OPM), and major labor unions. To
further involve employees, DHS has conducted a series of town hall
meetings around the country and held focus groups to further learn of
employees' views and comments. According to DHS, draft regulations for
the new personnel system will be issued this fall, final regulations by
early 2004, and implementation to begin at that point. DOD, as any
organization seeking to transform, needs to ensure that employees are
involved in order to obtain their ideas and gain adequate "buy-in" for
any related transformational efforts.
3. Mr. Walker, in your testimony before the House Government Reform
Committee and my Subcommittee, you expressed reservations with DOD's
preparedness to implement a pay for performance system. You have
observed that the Department does not have a credible and verifiable
performance management system. S. 1166 seeks to address that concern by
establishing criteria for a performance management system. Please
comment on that portion of the bill.
We are pleased that both the House of Representatives' version of the
proposed National Defense Authorization Act for Fiscal Year 2004 and
the proposed National Security Personnel System Act contain statutory
safeguards and standards along the lines that we have been suggesting
to help ensure that DOD's pay for performance efforts are fair to
employees and improve both individual and organizational performance.
The statutory standards described in the National Security Personnel
System Act proposal are intended to help ensure a fair, credible, and
equitable system that results in meaningful distinctions in individual
employee performance; employee involvement in the design and
implementation of the system; and effective transparency and
accountability measures, including appropriate independent
reasonableness reviews, internal grievance procedures, internal
assessments, and employee surveys. In our reviews of agencies'
performance management systems--as in our own experience with designing
and implementing performance-based pay reform for ourselves at GAO--we
have found that these safeguards are key to maximizing the chances of
success and minimizing the risk of failure and abuse.
The proposed National Security Personnel System Act also takes the
essential first step in requiring DOD to link the performance
management system to the agency's strategic plan. Building on this, we
suggest that DOD also be required to link its performance management
system to program and performance goals and desired outcomes. Linking
the performance management system to related goals and desired outcomes
helps the organization ensure that its efforts are properly aligned and
reinforces the line of sight between individual performance and
organizational success so that an individual can see how her/his daily
responsibilities contribute to results and outcomes.
Questions from Senator Carper:
1. In your written testimony, you say it would be preferable to employ
a governmentwide approach to address human capital issues in the
future. Of the issues addressed in S. 1166 and the Defense Department
proposal, which do you believe would be best handled using a
governmentwide approach?
As you point out, I have testified that Congress should consider both
governmentwide and selected agency changes to address the pressing
human capital issues confronting the federal government. Agency-
specific human capital reforms should be enacted to the extent that the
problems being addressed and the solutions offered are specific to a
particular agency (e.g., military personnel reforms for DOD). In
addition, targeted reforms should be considered in situations where
additional testing or piloting is needed for fundamental governmentwide
reform.
In our view, it would be preferable to employ a governmentwide approach
to address certain flexibilities that have broad-based application and
serious potential implications for the civil service system, in
general, and OPM, in particular. We believe that several of the reforms
that DOD is proposing fall into this category. Some examples include
broad-banding, pay for performance, reemployment, and pension offset
waivers. In these situations, it may be prudent and preferable for
Congress to provide such authorities on a governmentwide basis and in a
manner that assures that a sufficient personnel infrastructure and
appropriate safeguards are in place before an agency implements the new
authorities. Importantly, employing this approach is not intended to
delay action on DOD's or any other individual agency's efforts but
rather to accelerate needed human capital reform throughout the federal
government in a manner that ensures reasonable consistency on key
principles within the overall civilian workforce. This approach also
would help to maintain a level playing field among federal agencies in
competing for talent.
2. Many of the proposals made by the Defense Department have been made
in the past by other departments and agencies to address longstanding,
governmentwide human capital problems. Every department and agency, I'm
sure, can claim to have difficulty, for example in recruiting and
retaining qualified personnel to replace retirees, in hiring
individuals quickly or in finding ways to reward employees for
excellent performance. In your view, is what the Defense Department is
seeking narrowly tailored to meet department-specific needs? Has the
Defense Department provided sufficient justification for the kind of
personnel authority they are seeking?
The authority DOD is seeking is not directly tailored to meet
department-specific needs. In addition, DOD has not provided a written
justification for much of its proposal. Nevertheless, DOD does need
certain additional human capital flexibilities in order to facilitate
its overall transformation effort.
Secretary Rumsfeld and the rest of DOD's leadership are clearly
committed to transforming how DOD does business. Based on our
experience, while DOD's leadership has the intent and the ability to
transform the department, the needed institutional infrastructure is
not in place in a vast majority of DOD organizations. Our work looking
at DOD's strategic human capital planning efforts and looking across
the federal government at the use of human capital flexibilities and
related human capital efforts underscores the critical steps that DOD
needs to take to properly develop and effectively implement any new
personnel authorities.[Footnote 3] In the absence of the right
institutional infrastructure, granting additional human capital
authorities will provide little advantage and could actually end up
doing damage if the authorities are not implemented properly by the
respective department or agency.
DOD has noted that its new personnel system will be based on the work
done by DOD's Human Resources Best Practices Task Force. The Task Force
reviewed both federal personnel demonstration projects and selected
alternative personnel systems to identify practices that it considered
promising for a DOD civilian human resources strategy. These practices
were outlined in an April 2, 2003, Federal Register notice asking for
comment on DOD's plan to integrate all of its current science and
technology reinvention laboratory demonstration projects under a single
human capital framework consistent with the best practices DOD
identified.
Finally, as I noted in my statement before the Committee, the relevant
sections of the House of Representatives' version of the proposed
National Defense Authorization Act for Fiscal Year 2004 and Chairman
Collins, Senator Levin, Senator Voinovich, and Senator Sununu's
National Security Personnel System Act, in our view, contain a number
of important improvements over the initial DOD legislative proposal.
- - - --:
We are providing copies of this letter to the Ranking Minority Member,
Senate Committee on Governmental Affairs; the Chairman and Ranking
Minority Member, Senate Committee on Governmental Affairs, Subcommittee
on Oversight of Government Management, the Federal Workforce and the
District of Columbia; the Chairman and Ranking Minority Member, Senate
Committee on Governmental Affairs, Subcommittee on Financial
Management, the Budget, and International Security; and the Honorable
Thomas R. Carper. For additional information on our work on federal
agency transformation efforts and strategic human capital management,
please contact me on (202) 512-5500 or J. Christopher Mihm, Director,
Strategic Issues, on (202) 512-6806 or at mihmj@gao.gov.
Sincerely,
David M. Walker:
Comptroller General of the United States:
Signed by David M. Walker:
(450235):
FOOTNOTES
[1] U.S. General Accounting Office, Human Capital: Building on DOD's
Reform Effort to Foster Governmentwide Improvements, GAO-03-851T
(Washington, D.C.: June 4, 2003).
[2] U.S. General Accounting Office, High-Risk Series: Strategic Human
Capital Management, GAO-03-120 (Washington D.C.: January 2003).
[3] See, for example, U.S. General Accounting Office, DOD Personnel:
DOD Actions Needed to Strengthen Civilian Human Capital Strategic
Planning and Integration with Military Personnel and Sourcing
Decisions, GAO-03-475 (Washington, D.C.: Mar. 28, 2003); Human Capital:
Effective Use of Flexibilities Can Assist Agencies in Managing Their
Workforces, GAO-03-2 (Washington, D.C.: Dec. 6, 2002); and Defense
Logistics: Actions Needed to Overcome Capability Gaps in the Public
Depot System, GAO-02-105 (Washington, D.C.: Oct. 12, 2001).
