Human Capital
Preliminary Observations on Proposed Regulations for DOD's National Security Personnel System Gao ID: GAO-05-559T April 14, 2005The Department of Defense's (DOD) new human resources management system--the National Security Personnel System (NSPS)--will have far-reaching implications for civil service reform across the federal government. The 2004 National Defense Authorization Act gave DOD significant flexibilities for managing more than 700,000 defense civilian employees. Given DOD's massive size, NSPS represents a huge undertaking for DOD. DOD's initial process to design NSPS was problematic; however, DOD adjusted its approach to a more deliberative process that involved more stakeholders. NSPS could, if designed and implemented properly, serve as a model for governmentwide transformation in human capital management. However, if not properly designed and implemented, it could severely impede progress toward a more performance- and results-based system for the federal government as a whole. On February 14, 2005, DOD and the Office of Personnel Management (OPM) released for public comment the proposed NSPS regulations. This testimony provides GAO's preliminary observations on selected provisions of the proposed regulations.
Many of the principles underlying the proposed NSPS regulations are generally consistent with proven approaches to strategic human capital management. For instance, the proposed regulations provide for (1) elements of a flexible and contemporary human resources management system--such as pay bands and pay for performance; (2) DOD to rightsize its workforce when implementing reduction-in-force orders by giving greater priority to employee performance in its retention decisions; and (3) continuing collaboration with employee representatives. The 30-day public comment period on the proposed regulations ended March 16, 2005. DOD and OPM have notified the Congress that they are preparing to begin the meet and confer process with employee representatives who provided comments on the proposed regulations. The meet and confer process is critically important because there are many details of the proposed regulations that have not been defined, especially in the areas of pay and performance management, adverse actions and appeals, and labor-management relations. (It should be noted that 10 federal labor unions have filed suit alleging that DOD failed to abide by the statutory requirements to include employee representatives in the development of DOD's new labor relations system authorized as part of NSPS.) GAO has several areas of concern: the proposed regulations do not (1) define the details of the implementation of the system, including such issues as adequate safeguards to help ensure fairness and guard against abuse; (2) require, as GAO believes they should, the use of core competencies to communicate to employees what is expected of them on the job; and (3) identify a process for the continuing involvement of employees in the planning, development, and implementation of NSPS. Also, GAO believes that DOD (1) would benefit if it develops a comprehensive communications strategy that provides for ongoing, meaningful two-way communication that creates shared expectations among employees, employee representatives, and stakeholders and (2) should complete a plan for implementing NSPS to include an information technology plan and a training plan. Until such a plan is completed, the full extent of the resources needed to implement NSPS may not be well understood.
GAO-05-559T, Human Capital: Preliminary Observations on Proposed Regulations for DOD's National Security Personnel System
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Testimony:
Before the Committee on Armed Services, U.S. Senate:
For Release on Delivery Expected at 9: 30 a.m., EDT Thursday, April 14,
2005:
Human Capital:
Preliminary Observations on Proposed Regulations for DOD's National
Security Personnel System:
Statement of Derek B. Stewart, Director, Defense Capabilities and
Management:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-559T]:
GAO Highlights:
Highlights of GAO-05-559T, a testimony before the Committee on Armed
Services, U.S. Senate:
Why GAO Did This Study:
The Department of Defense‘s (DOD) new human resources management
system”the National Security Personnel System (NSPS)”will have far-
reaching implications for civil service reform across the federal
government. The 2004 National Defense Authorization Act gave DOD
significant flexibilities for managing more than 700,000 defense
civilian employees. Given DOD‘s massive size, NSPS represents a huge
undertaking for DOD. DOD‘s initial process to design NSPS was
problematic; however, DOD adjusted its approach to a more deliberative
process that involved more stakeholders. NSPS could, if designed and
implemented properly, serve as a model for governmentwide
transformation in human capital management. However, if not properly
designed and implemented, it could severely impede progress toward a
more performance-and results-based system for the federal government as
a whole.
On February 14, 2005, DOD and the Office of Personnel Management (OPM)
released for public comment the proposed NSPS regulations. This
testimony provides GAO‘s preliminary observations on selected
provisions of the proposed regulations.
What GAO Found:
Many of the principles underlying the proposed NSPS regulations are
generally consistent with proven approaches to strategic human capital
management. For instance, the proposed regulations provide for (1)
elements of a flexible and contemporary human resources management
system”such as pay bands and pay for performance; (2) DOD to rightsize
its workforce when implementing reduction-in-force orders by giving
greater priority to employee performance in its retention decisions;
and (3) continuing collaboration with employee representatives. The 30-
day public comment period on the proposed regulations ended March 16,
2005. DOD and OPM have notified the Congress that they are preparing to
begin the meet and confer process with employee representatives who
provided comments on the proposed regulations. The meet and confer
process is critically important because there are many details of the
proposed regulations that have not been defined, especially in the
areas of pay and performance management, adverse actions and appeals,
and labor-management relations. (It should be noted that 10 federal
labor unions have filed suit alleging that DOD failed to abide by the
statutory requirements to include employee representatives in the
development of DOD‘s new labor relations system authorized as part of
NSPS.)
GAO has several areas of concern: the proposed regulations do not (1)
define the details of the implementation of the system, including such
issues as adequate safeguards to help ensure fairness and guard against
abuse; (2) require, as GAO believes they should, the use of core
competencies to communicate to employees what is expected of them on
the job; and (3) identify a process for the continuing involvement of
employees in the planning, development, and implementation of NSPS.
Also, GAO believes that DOD (1) would benefit if it develops a
comprehensive communications strategy that provides for ongoing,
meaningful two-way communication that creates shared expectations among
employees, employee representatives, and stakeholders and (2) should
complete a plan for implementing NSPS to include an information
technology plan and a training plan. Until such a plan is completed,
the full extent of the resources needed to implement NSPS may not be
well understood.
www.gao.gov/cgi-bin/getrpt?GAO-05-559T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Derek B. Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of section]
Chairman Warner and Members of the Committee:
I appreciate the opportunity to be here today to provide our
preliminary observations on the Department of Defense's (DOD) proposed
National Security Personnel System (NSPS) regulations, which the
Secretary of Defense and the Acting Director of the Office of Personnel
Management (OPM) jointly released for public comment on February 14,
2005.[Footnote 1] The National Defense Authorization Act for Fiscal
Year 2004[Footnote 2] gave DOD significant authorities to redesign the
rules, regulations, and processes that govern the way that defense
civilian employees are hired, compensated, promoted, and disciplined.
The proposed regulations, which according to DOD will ultimately affect
more than 700,000 defense civilian employees, are especially critical
because of their implications for governmentwide reform.
NSPS represents a huge undertaking for DOD, given its massive size and
geographically and culturally diverse workforce. In addition, DOD's new
human resources management system will have far-reaching implications
for the management of the department and for civil service reform
across the federal government. NSPS could, if designed and implemented
properly, serve as a model for governmentwide transformation in human
capital management. However, if not properly designed and implemented,
NSPS could impede progress toward a more performance-and results-based
system for the federal government as a whole.
We raised several issues regarding DOD's civilian workforce in a
recently released report on the fiscal challenges the federal
government faces in the 21st century, including whether DOD is pursuing
the design and implementation of NSPS in a manner that maximizes the
chance of success.[Footnote 3] In recent testimony on DOD's business
transformation efforts, we indicated that DOD is challenged in its
efforts to effect fundamental business management reform, such as NSPS,
and indicated that our ongoing work continues to raise questions about
DOD's chances of success.[Footnote 4] There is general recognition that
the government needs a framework to guide the kind of large-scale human
capital reform occurring at DOD and the Department of Homeland Security
(DHS), a framework that Congress and the administration can implement
to enhance performance, ensure accountability, and position the nation
for the future. Implementing large-scale change management initiatives
is a complex endeavor, and failure to address a wide variety of
personnel and cultural issues, in particular, has been at the heart of
unsuccessful organizational transformations. Strategic human capital
management, which we continue to designate as a high-risk area
governmentwide,[Footnote 5] can help agencies marshal, manage, and
maintain the workforce they need to accomplish their missions.
Summary:
Let me begin by summarizing three positive features and several areas
of concern. The first positive feature is that the proposed regulations
provide for many elements of a flexible and contemporary human
resources management system--such as pay bands and pay for performance.
The second positive feature is that the proposed regulations will allow
DOD to rightsize its workforce when implementing reduction-in-force
(RIF) orders. For example, DOD will be able to give greater priority to
employee performance in RIF decisions and take more factors into
consideration when defining the areas in which employees will compete
for retention. The third positive feature is that DOD has pledged to
engage in a continuing collaboration with employee representatives. On
March 16, 2005, the 30-day public comment period on the proposed
regulations ended. On March 28, 2005, DOD and OPM notified the Congress
that they are about to begin the meet and confer process with employee
representatives who provided comments on the proposed regulations. (It
should be noted that 10 federal labor unions have filed suit alleging
that DOD failed to abide by the statutory requirements to include
employee representatives in the development of DOD's new labor
relations system authorized as part of NSPS.)
However, in addition to the litigation referenced above, our initial
work indicates several areas of concern. First, DOD has considerable
work ahead to define the details of the implementation of its system,
including such issues as adequate safeguards to help ensure fairness
and guard against abuse. Second, in setting performance expectations,
the proposed regulations would allow the use of core competencies to
communicate to employees what is expected of them on the job, but the
proposed regulations do not require the use of these core competencies.
Requiring such use can help provide consistency and clarity in
performance management. Third, the proposed regulations do not identify
a process for the continuing involvement of employees in the planning,
development, and implementation of NSPS.
GAO believes that DOD would benefit if it develops a comprehensive
communications strategy that provides for ongoing, meaningful two-way
communication that creates shared expectations among employees,
employee representatives, managers, customers, and stakeholders. In
addition, DOD should complete an implementation plan for NSPS,
including an information technology plan and a training plan. Until DOD
completes such a plan, the full extent of the resources needed to
implement NSPS may not be well understood.
DOD's proposed regulations are intended to provide a broad outline of
its new human resources management system. While they are not, nor were
they intended to be, a detailed presentation of how the new system will
be implemented, the details of the proposed regulations do matter.
Although we continue to review the DOD's extensive regulations, today I
will provide some preliminary observations on selected provisions of
the proposed regulations.
Preliminary Observations on Proposed Regulations for DOD's National
Security Personnel System:
DOD and OPM's proposed NSPS regulations would establish a new human
resources management system within DOD that governs basic pay,
staffing, classification, performance management, labor relations,
adverse actions, and employee appeals. We believe that many of the
basic principles underlying the proposed DOD regulations are generally
consistent with proven approaches to strategic human capital
management. Today, I will provide our preliminary observations on
selected elements of the proposed regulations in the areas of pay and
performance management, staffing and employment, workforce shaping,
adverse actions and appeals, and labor-management relations.
Pay and Performance Management:
In January 2004, we released a report on pay for performance for
selected OPM personnel demonstration projects that shows the variety of
approaches taken in these projects to design and implement pay-for-
performance systems.[Footnote 6] Many of these personnel demonstration
projects were conducted within DOD. The experiences of these
demonstration projects provide insights into how some organizations in
the federal government are implementing pay for performance, and thus
can guide DOD as it develops and implements its own approach. These
demonstration projects illustrate that understanding how to link pay to
performance is very much a work in progress in the federal government
and that additional work is needed to ensure that performance
management systems are tools to help agencies manage on a day-to-day
basis and achieve external results.
When DOD first proposed its new civilian personnel reform, we strongly
supported the need to expand pay for performance in the federal
government.[Footnote 7] Establishing a clear link between individual
pay and performance is essential for maximizing performance and
ensuring the accountability of the federal government to the American
people. As we have stated before, how pay for performance is done, when
it is done, and the basis on which it is done can make all the
difference in whether such efforts are successful.[Footnote 8] DOD's
proposed regulations reflect a growing understanding that the federal
government needs to fundamentally rethink its current approach to pay
and better link pay to individual and organizational performance. To
this end, the DOD proposal takes another valuable step toward a modern
performance management system as well as a market-based, results-
oriented compensation system. My comments on specific provisions of pay
and performance management follow.
Aligning Individual Performance to Organizational Goals:
Under the proposed regulations, the DOD performance management system
would, among other things, align individual performance expectations
with the department's overall mission and strategic goals,
organizational program and policy objectives, annual performance plans,
and other measures of performance. However, the proposed regulations do
not detail how to achieve such an alignment, which is a vital issue
that will need to be addressed as DOD's efforts in designing and
implementing a new personnel system move forward. Our work on public
sector performance management efforts in the United States and abroad
has underscored the importance of aligning daily operations and
activities with organizational results.[Footnote 9] We have found that
organizations often struggle with clearly understanding how what they
do on a day-to-day basis contributes to overall organizational results,
while high-performing organizations demonstrate their understanding of
how the products and services they deliver contribute to results by
aligning the performance expectations of top leadership with the
organization's goals and then cascading those expectations to lower
levels.
A performance management system is critical to successful
organizational transformation. As an organization undergoing
transformation, DOD can use its proposed performance management system
as a vital tool for aligning the organization with desired results and
creating a "line of sight" to show how team, unit, and individual
performance can contribute to overall organizational results. To help
federal agencies transform their culture to be more results oriented,
customer focused, and collaborative in nature, we have reported on how
a performance management system that defines responsibility and ensures
accountability for change can be key to a successful merger and
transformation.[Footnote 10]
Establishing Pay Bands:
Under the proposed regulations, DOD would create pay bands for most of
its civilian workforce that would replace the 15-grade General Schedule
(GS) system now in place for most civil service employees.
Specifically, DOD (in coordination with OPM) would establish broad
occupational career groups by grouping occupations and positions that
are similar in type of work, mission, developmental or career paths,
and competencies. Within career groups, DOD would establish pay bands.
The proposed regulations do not provide details on the number of career
groups or the number of pay bands per career group. The regulations
also do not provide details on the criteria that DOD will use to
promote individuals from one band to another. These important issues
will need to be addressed as DOD moves forward. Pay banding and
movement to broader occupational career groups can both facilitate
DOD's movement to a pay-for-performance system and help DOD better
define career groups, which in turn can improve the hiring process. In
our prior work, we have reported that the current GS system, as defined
in the Classification Act of 1949,[Footnote 11] is a key barrier to
comprehensive human capital reform and that the creation of broader
occupational job clusters and pay bands would aid other agencies as
they seek to modernize their personnel systems.[Footnote 12] The
standards and process of the current classification system are key
problems in federal hiring efforts because they are outdated and thus
not applicable to today's occupations and work.
Under the proposed regulations, DOD could not reduce employees' basic
rates of pay when converting to pay bands. In addition, the proposed
regulations would allow DOD to establish a "control point" within a
band that limits increases in the rate of basic pay and may require
certain criteria to be met for increases above the control
point.[Footnote 13] The use of control points to manage employees'
progression through the bands can help to ensure that their performance
coincides with their salaries and that only the highest performers move
into the upper half of the pay band, thereby controlling salary costs.
The OPM personnel demonstration projects at China Lake and the Naval
Sea Systems Command Warfare Center's Dahlgren Division have
incorporated checkpoints or "speed bumps" in their pay bands. For
example, when an employee's salary at China Lake reaches the midpoint
of the pay band, the employee must receive a performance rating that is
equivalent to exceeding expectations before he or she can receive
additional salary increases.
Setting and Communicating Employee Performance Expectations:
Under the proposed regulations, DOD's performance management system
would promote individual accountability by setting performance
expectations and communicating them to employees, holding employees
responsible for accomplishing them, and making supervisors and managers
responsible for effectively managing the performance of employees under
their supervision. While supervisors are supposed to involve employees,
insofar as practicable, in setting performance expectations, the final
decisions regarding performance expectations are within the sole and
exclusive discretion of management.
Under the proposed regulations, performance expectations may take
several different forms. These include, among others, goals or
objectives that set general or specific performance targets at the
individual, team, or organizational level; a particular work
assignment, including characteristics such as quality, quantity,
accuracy, or timeliness; core competencies that an employee is expected
to demonstrate on the job; or the contributions that an employee is
expected to make. As DOD's human resources management system design
efforts move forward, DOD will need to define, in more detail than is
currently provided, how performance expectations will be set, including
the degree to which DOD components, managers, and supervisors will have
flexibility in setting those expectations.
The range of expectations that DOD would consider in setting individual
employee performance expectations are generally consistent with those
used by high-performing organizations. DOD appropriately recognizes
that given the vast diversity of work done in the department, managers
and employees need flexibility in crafting specific expectations.
However, the experiences of high-performing organizations suggest that
DOD should require the use of core competencies as a central feature of
its performance management effort.[Footnote 14] Based on our review of
other agency efforts and our own experience at GAO, we have found that
core competencies can help reinforce employee behaviors and actions
that support the department's mission, goals, and values, and can
provide a consistent message to employees about how they are expected
to achieve results. By including such competencies as change
management, cultural sensitivity, teamwork and collaboration, and
information sharing, DOD would create a shared responsibility for
organizational success and help ensure accountability for the
transformation process.
Making Meaningful Distinctions in Employee Performance:
High-performing organizations seek to create pay, incentive, and reward
systems that clearly link employee knowledge, skills, and contributions
to organizational results. These organizations make meaningful
distinctions between acceptable and outstanding performance of
individuals and appropriately reward those who perform at the highest
level. DOD's proposed regulations state that supervisors and managers
would be held accountable for making meaningful distinctions among
employees based on performance and contribution, fostering and
rewarding excellent performance, and addressing poor performance.
Under the proposed regulations, DOD is expected to have at least three
rating levels for evaluating employee performance. We urge DOD to
consider using at least four summary rating levels to allow for greater
performance-rating and pay differentiation. This approach is in the
spirit of the new governmentwide performance-based pay system for the
Senior Executive Service (SES), which requires at least four rating
levels to provide a clear and direct link between SES performance and
pay as well as to make meaningful distinctions based on relative
performance. Cascading this approach to other levels of employees can
help DOD recognize and reward employee contributions and achieve the
highest levels of individual performance.[Footnote 15]
Providing Adequate Safeguards to Ensure Fairness and Guard Against
Abuse:
Although DOD's proposed regulations provide for some safeguards to
ensure fairness and guard against abuse, additional safeguards should
be developed. For example, as required by the authorizing legislation,
the proposed regulations indicate that DOD's performance management
system must comply with merit system principles and avoid prohibited
personnel practices; provide a means for employee involvement in the
design and implementation of the system; and, overall, be fair,
credible, and transparent. However, the proposed regulations do not
offer details on how DOD would (1) promote consistency and provide
general oversight of the performance management system to help ensure
it is administered in a fair, credible, and transparent manner, and (2)
incorporate predecisional internal safeguards that are implemented to
help achieve consistency and equity, and ensure nondiscrimination and
nonpoliticization of the performance management process. Last month,
during testimony, we stated that additional flexibility should have
adequate safeguards, including a reasonable degree of transparency with
regard to the results of key decisions, whether it be pay, promotions,
or other types of actions, while protecting personal privacy. We also
suggested that there should be both informal and formal appeal
mechanisms within and outside of the organization if individuals feel
that there has been abuse or a violation of the policies, procedures,
or protected rights of the individual. Internal mechanisms could
include independent human capital office and office of opportunity and
inclusiveness reviews that provide reasonable assurances that there
would be consistency and nondiscrimination. Furthermore, it is of
critical importance that the external appeal process be independent,
efficient, effective, and credible.
In April 2003, when commenting on DOD civilian personnel reforms, we
testified that Congress should consider establishing statutory
standards that an agency must have in place before it can implement a
more performance-based pay program, and we developed an initial list of
possible safeguards to help ensure that pay-for-performance systems in
the government are fair, effective, and credible.[Footnote 16] For
example, we have noted that agencies need to ensure reasonable
transparency and provide appropriate accountability mechanisms in
connection with the results of the performance management
process.[Footnote 17] This can be done by publishing the overall
results of performance management and individual pay decisions while
protecting individual confidentiality and by reporting periodically on
internal assessments and employee survey results relating to the
performance management system. DOD needs to commit itself to publishing
the results of performance management decisions. By publishing the
results in a manner that protects individual confidentiality, DOD could
provide employees with the information they need to better understand
their performance and the performance management system. Several of the
demonstration projects have been publishing information about
performance appraisal and pay decisions, such as the average
performance rating, the average pay increase, and the average award for
the organization and for each individual unit, on internal Web sites
for use by employees. As DOD's human resources management system design
efforts move forward, DOD will need to define, in more detail than is
currently provided, how it plans to review such matters as the
establishment and implementation of the performance appraisal
systemæand, subsequently, performance rating decisions, pay
determinations, and promotion actionsæbefore these actions are
finalized, to ensure they are merit based.
Staffing and Employment:
The authorizing legislation allows DOD to implement additional hiring
flexibilities that would allow it to (1) determine that there is a
severe shortage of candidates or a critical hiring need and (2) use
direct-hire procedures for these positions. Under current law, OPM,
rather than the agency, determines whether there is a severe shortage
of candidates or a critical hiring need. DOD's authorizing legislation
permits that DOD merely document the basis for the severe shortage or
critical hiring need and then notify OPM of these direct-hire
determinations. Direct-hire authority allows an agency to appoint
people to positions without adherence to certain competitive
examination requirements (such as applying veterans' preference or
numerically rating and ranking candidates based on their experience,
training, and education) when there is a severe shortage of qualified
candidates or a critical hiring need. In the section containing DOD's
proposed hiring flexibilities, the proposed regulations state that the
department will adhere to veterans' preference principles as well as
comply with merit principles and the Title 5 provision dealing with
prohibited personnel practices.
While we strongly endorse providing agencies with additional tools and
flexibilities to attract and retain needed talent, additional analysis
may be needed to ensure that any new hiring authorities are consistent
with a focus on the protection of employee rights, on merit principles-
-and on results. Hiring flexibilities alone will not enable federal
agencies to bring on board the personnel that are needed to accomplish
their missions. Agencies must first conduct gap analyses of the
critical skills and competencies needed in their workforces now and in
the future, or they may not be able to effectively design strategies to
hire, develop, and retain the best possible workforces.
Workforce Shaping:
The proposed regulations would allow DOD to reduce, realign, and
reorganize the department's workforce through revised RIF procedures.
For example, employees would be placed on a retention list in the
following order: tenure group (i.e., permanent or temporary
appointment), veterans' preference eligibility (disabled veterans will
be given additional priority), level of performance, and length of
service; under current regulations, length of service is considered
ahead of performance. We have previously testified, prior to the
enactment of NSPS, in support of revised RIF procedures that would
require much greater consideration of an employee's performance.
[Footnote 18] Although we support greater consideration of an
employee's performance in RIF procedures, agencies must have modern,
effective, and credible performance management systems in place to
properly implement such authorities.
An agency's approach to workforce shaping should be oriented toward
strategically reducing, realigning, and reorganizing the makeup of its
workforce to ensure the orderly transfer of institutional knowledge and
achieve mission results. DOD's proposed regulations include some
changes that would allow the department to rightsize the workforce more
carefully through greater precision in defining competitive areas, and
by reducing the disruption associated with RIF orders as their impact
ripples through an organization. For example, under the current
regulations, the minimum RIF competitive area is broadly defined as an
organization under separate administration in a local commuting area.
Under the proposed regulations, DOD would be able to establish a
minimum RIF competitive area on a more targeted basis, using one or
more of the following factors: geographical location, line of business,
product line, organizational unit, and funding line. The proposed
regulations also provide DOD with the flexibility to develop additional
competitive groupings on the basis of career group, occupational series
or specialty, and pay band. At present, DOD can use competitive groups
based on employees (1) in the excepted and competitive service, (2)
under different excepted service appointment authorities, (3) with
different work schedules,[Footnote 19] (4) pay schedule, or (5) trainee
status. These reforms could help DOD approach rightsizing more
carefully; however, as I have stated, agencies first need to identify
the critical skills and competencies needed in their workforce if they
are to effectively implement their new human capital flexibilities.
Adverse Actions and Appeals:
As with DHS's final regulations,[Footnote 20] DOD's proposed
regulations are intended to streamline the rules and procedures for
taking adverse actions, while ensuring that employees receive due
process and fair treatment. The proposed regulations establish a single
process for both performance-based and conduct-based actions, and
shorten the adverse action process by removing the requirement for a
performance improvement plan. In addition, the proposed regulations
streamline the appeals process at the Merit Systems Protection Board
(MSPB) by shortening the time for filing and processing appeals.
Similar to DHS, DOD's proposed regulations also adopt a higher standard
of proof for adverse actions in DOD, requiring the department to meet a
"preponderance of the evidence" standard in place of the current
"substantial evidence" standard. For performance issues, while this
higher standard of evidence means that DOD would face a greater burden
of proof than most agencies to pursue these actions, DOD managers are
not required to provide employees with performance improvement periods,
as is the case for other federal employees. For conduct issues, DOD
would face the same burden of proof as most agencies.
DOD's proposed regulations generally preserve the employee's basic
right to appeal decisions to an independent body--the MSPB. However, in
contrast to DHS's final regulations, DOD's proposed regulations permit
an internal DOD review of the initial decisions issued by MSPB
adjudicating officials. Under this internal review, DOD can modify or
reverse an initial decision or remand the matter back to the
adjudicating official for further consideration. Unlike other criteria
for review of initial decisions, DOD can modify or reverse an initial
MSPB adjudicating official's decision where the department determines
that the decision has a direct and substantial adverse impact on the
department's national security mission.[Footnote 21] According to DOD,
the department needs the authority to review initial MSPB decisions and
correct such decisions as appropriate, to ensure that the MSPB
interprets NSPS and the proposed regulations in a way that recognizes
the critical mission of the department and to ensure that MSPB gives
proper deference to such interpretation. However, the proposed
regulations do not offer additional details on the department's
internal review process, such as how the review will be conducted and
who will conduct them. An internal agency review process this important
should be addressed in the regulations rather than in an implementing
directive to ensure adequate transparency and employee confidence in
the process.
Similar to DHS's final regulations, DOD's proposed regulations would
shorten the notification period before an adverse action can become
effective and provide an accelerated MSPB adjudication process. In
addition, MSPB would no longer be able to modify a penalty for an
adverse action that is imposed on an employee by DOD unless such
penalty is so disproportionate to the basis of the action as to be
"wholly without justification." In other words, MSPB has less latitude
to modify agency-imposed penalties than under current practice. The DOD
proposed regulations also stipulate that MSPB could no longer require
that parties enter into settlement discussions, although either party
may propose doing so. DOD, like DHS, expressed concerns that settlement
should be a completely voluntary decision made by parties on their own
initiative. However, settling cases has been an important tool in the
past at MSPB, and promotion of settlement at this stage should be
encouraged.
Similar to DHS's final regulations, DOD's proposed regulations would
permit the Secretary of Defense to identify specific offenses for which
removal is mandatory. Employees alleged to have committed these
offenses may receive a written notice only after the Secretary of
Defense's review and approval. These employees will have the same right
to a review by an MSPB adjudicating official as is provided to other
employees against whom appealable adverse actions are taken. DOD's
proposed regulations only indicate that its employees will be made
aware of the mandatory removal offenses. In contrast, the final DHS
regulations explicitly provide for publishing a list of the mandatory
removal offenses in the Federal Register. We believe that the process
for determining and communicating which types of offenses require
mandatory removal should be explicit and transparent and involve
relevant congressional stakeholders, employees, and employee
representatives. Moreover, we suggest that DOD exercise caution when
identifying specific removable offenses and the specific punishment.
When developing these proposed regulations, DOD should learn from the
experience of the Internal Revenue Service's (IRS) implementation of
its mandatory removal provisions.[Footnote 22] (IRS employees feared
that they would be falsely accused by taxpayers and investigated, and
had little confidence that they would not be disciplined for making an
honest mistake.) We reported that IRS officials believed this provision
had a negative impact on employee morale and effectiveness and had a
"chilling" effect on IRS frontline enforcement employees, who were
afraid to take certain appropriate enforcement actions.[Footnote 23]
Careful drafting of each removable offense is critical to ensure that
the provision does not have unintended consequences.
DOD's proposed regulations also would encourage the use of alternative
dispute resolution and provide that this approach be subject to
collective bargaining to the extent permitted by the proposed labor
relations regulations. To resolve disputes in a more efficient, timely,
and less adversarial manner, federal agencies have been expanding their
human capital programs to include alternative dispute resolution
approaches. These approaches include mediation, dispute resolution
boards, and ombudsmen. Ombudsmen typically are used to provide an
informal alternative to addressing conflicts. We previously reported on
common approaches used in ombudsmen offices, including (1) broad
responsibility and authority to address almost any workplace issue, (2)
their ability to bring systemic issues to management's attention, and
(3) the manner in which they work with other agency offices in
providing assistance to employees.[Footnote 24]
Labor-Management Relations:
The DOD proposed regulations recognize the right of employees to
organize and bargain collectively.[Footnote 25] However, similar to
DHS's final regulations, the proposed regulations would reduce the
scope of bargaining by (1) removing the requirement to bargain on
matters traditionally referred to as "impact and implementation" (which
include the processes used to deploy personnel, assign work, and use
technology) and (2) narrowing the scope of issues subject to collective
bargaining. A National Security Labor Relations Board would be created
that would largely replace the Federal Labor Relations Authority. The
proposed board would have at least three members selected by the
Secretary of Defense, with one member selected from a list developed in
consultation with the Director of OPM. The proposed board would be
similar to the internal Homeland Security Labor Relations Board
established by the DHS final regulations, except that the Secretary of
Defense would not be required to consult with the employee
representatives in selecting its members. The proposed board would be
responsible for resolving matters related to negotiation disputes, to
include the scope of bargaining and the obligation to bargain in good
faith, resolving impasses, and questions regarding national
consultation rights.
Under the proposed regulations, the Secretary of Defense is authorized
to appoint and remove individuals who serve on the board. Similar to
DHS's final regulations establishing the Homeland Security Labor
Relations Board, DOD's proposed regulations provide for board member
qualification requirements, which emphasize integrity and impartiality.
DOD's proposed regulations, however, do not provide an avenue for any
employee representative input into the appointment of board members.
DHS regulations do so by requiring that for the appointment of two
board members, the Secretary of Homeland Security must consider
candidates submitted by labor organizations. Employee perception
concerning the independence of this board is critical to the resolution
of issues raised over labor relations policies and disputes.
Our previous work on individual agencies' human capital systems has not
directly addressed the scope of specific issues that should or should
not be subject to collective bargaining and negotiations. At a forum we
co-hosted in April 2004 exploring the concept of a governmentwide
framework for human capital reform, participants generally agreed that
the ability to organize, bargain collectively, and participate in labor
organizations is an important principle to be retained in any framework
for reform. It also was suggested at the forum that unions must be both
willing and able to actively collaborate and coordinate with management
if unions are to be effective representatives of their members and real
participants in any human capital reform.
DOD Faces Multiple Implementation Challenges:
Once DOD issues its final regulations for its human resources
management system, the department will face multiple implementation
challenges that include establishing an overall communications
strategy, providing adequate resources for the implementation of the
new system, involving employees in designing the system, and evaluating
DOD's new human resources management system after it has been
implemented. For information on related human capital issues that could
potentially affect the implementation of NSPS, see the "Highlights"
pages from previous GAO products on DOD civilian personnel issues in
appendix I.
Establishing an Overall Communications Strategy:
A significant challenge for DOD is to ensure an effective and ongoing
two-way communications strategy, given its size, geographically and
culturally diverse audiences, and different command structures across
DOD organizations. We have reported that a communications strategy that
creates shared expectations about, and reports related progress on, the
implementation of the new system is a key practice of a change
management initiative.[Footnote 26] This communications strategy must
involve a number of key players, including the Secretary of Defense,
and a variety of communication means and mediums. DOD acknowledges that
a comprehensive outreach and communications strategy is essential for
designing and implementing its new human resources management system,
but the proposed regulations do not identify a process for the
continuing involvement of employees in the planning, development, and
implementation of NSPS.
Because the NSPS design process and proposed regulations have received
considerable attention,[Footnote 27] we believe one of the most
relevant implementation steps is for DOD to enhance two-way
communication between employees, employee representatives, and
management. Communication is not only about "pushing the message out,"
but also using two-way communication to build effective internal and
external partnerships that are vital to the success of any
organization. By providing employees with opportunities to communicate
concerns and experiences about any change management initiative,
management allows employees to feel that their input is acknowledged
and important. As it makes plans for implementing NSPS, DOD should
facilitate a two-way honest exchange with, and allow for feedback from,
employees and other stakeholders. Once it receives this feedback,
management needs to consider and use this solicited employee feedback
to make any appropriate changes to its implementation. In addition,
management needs to close the loop by providing employees with
information on why key recommendations were not adopted.
Providing Adequate Resources for Implementing the New System:
Experience has shown that additional resources are necessary to ensure
sufficient planning, implementation, training, and evaluation for human
capital reform. According to DOD, the implementation of NSPS will
result in costs for, among other things, developing and delivering
training, modifying automated human resources information systems, and
starting up and sustaining the National Security Labor Relations Board.
We have found that, based on the data provided by selected OPM
personnel demonstration projects, the major cost drivers in
implementing pay-for-performance systems are the direct costs
associated with salaries and training.
DOD estimates that the overall cost associated with implementing NSPS
will be approximately $158 million through fiscal year 2008. According
to DOD, it has not completed an implementation plan for NSPS, including
an information technology plan and a training plan; thus, the full
extent of the resources needed to implement NSPS may not be well
understood at this time. According to OPM, the increased costs of
implementing alternative personnel systems should be acknowledged and
budgeted up front.[Footnote 28] Certain costs, such as those for
initial training on the new system, are one-time in nature and should
not be built into the base of DOD's budget. Other costs, such as
employees' salaries, are recurring and thus would be built into the
base of DOD's budget for future years. Therefore, funding for NSPS will
warrant close scrutiny by Congress as DOD's implementation plan
evolves.
Involving Employees and Other Stakeholders in Implementing the System:
The proposed regulations do not identify a process for the continuing
involvement of employees in the planning, development, and
implementation of NSPS. However, DOD's proposed regulations do provide
for continuing collaboration with employee representatives. According
to DOD, almost two-thirds of its 700,000 civilian employees are
represented by 41 different labor unions, including over 1,500 separate
bargaining units. In contrast, according to OPM, just under one-third
of DHS's 110,000 federal employees are represented by 16 different
labor unions, including 75 separate bargaining units. Similar to DHS's
final regulations, DOD's proposed regulations about the collaboration
process, among other things, would permit the Secretary of Defense to
determine (1) the number of employee representatives allowed to engage
in the collaboration process, and (2) the extent to which employee
representatives are given an opportunity to discuss their views with
and submit written comments to DOD officials. In addition, DOD's
proposed regulations indicate that nothing in the continuing
collaboration process will affect the right of the Secretary of Defense
to determine the content of implementing guidance and to make this
guidance effective at any time. DOD's proposed regulations also will
give designated employee representatives an opportunity to be briefed
and to comment on the design and results of the new system's
implementation. DHS's final regulations, however, provide for more
extensive involvement of employee representatives. For example, DHS's
final regulations provide for the involvement of employee
representatives in identifying the scope, objectives, and methodology
to be used in evaluating the new DHS system.
The active involvement of employees and employee representatives will
be critical to the success of NSPS. We have reported that the
involvement of employees and employee representatives both directly and
indirectly is crucial to the success of new initiatives, including
implementing a pay-for-performance system. High-performing
organizations have found that actively involving employees and
stakeholders, such as unions or other employee associations, when
developing results-oriented performance management systems helps
improve employees' confidence and belief in the fairness of the system
and increases their understanding and ownership of organizational goals
and objectives. This involvement must be early, active, and continuing
if employees are to gain a sense of understanding and ownership of the
changes that are being made. The 30-day public comment period on the
proposed regulations ended March 16, 2005. DOD and OPM notified the
Congress that they are preparing to begin the meet and confer process
with employee representatives who provided comments on the proposed
regulations. Last month, during testimony, we stated that DOD is at the
beginning of a long road, and the meet and confer process has to be
meaningful and is critically important because there are many details
of the proposed regulations that have not been defined. These details
do matter, and how they are defined can have a direct bearing on
whether or not the ultimate new human resources management system is
both reasoned and reasonable.
Evaluating DOD's New Human Resources Management System:
Evaluating the impact of NSPS will be an ongoing challenge for DOD.
This is especially important because DOD's proposed regulations would
give managers more authority and responsibility for managing the new
human resources management system. High-performing organizations
continually review and revise their human capital management systems
based on data-driven lessons learned and changing needs in the work
environment. Collecting and analyzing data will be the fundamental
building block for measuring the effectiveness of these approaches in
support of the mission and goals of the department.
DOD's proposed regulations indicate that DOD will establish procedures
for evaluating the regulations and their implementation. We believe
that DOD should consider conducting evaluations that are broadly
modeled on the evaluation requirements of the OPM demonstration
projects. Under the demonstration project authority, agencies must
evaluate and periodically report on results, implementation of the
demonstration project, cost and benefits, impacts on veterans and other
equal employment opportunity groups, adherence to merit system
principles, and the extent to which the lessons from the project can be
applied governmentwide. A set of balanced measures addressing a range
of results, and customer, employee, and external partner issues may
also prove beneficial. An evaluation such as this would facilitate
congressional oversight; allow for any midcourse corrections; assist
DOD in benchmarking its progress with other efforts; and provide for
documenting best practices and sharing lessons learned with employees,
stakeholders, other federal agencies, and the public.
We have work under way to assess DOD's efforts to design its new human
resources management system, including further details on some of the
significant challenges, and we expect to issue a report on the results
of our work sometime this summer.
Concluding Observations:
As we testified previously on the DOD and DHS civilian personnel
reforms, an agency should have to demonstrate that it has a modern,
effective, credible, and, as appropriate, validated performance
management system in place with adequate safeguards, including
reasonable transparency and appropriate accountability mechanisms, to
ensure fairness and prevent politicization of the system and abuse of
employees before any related flexibilities are operationalized. DOD's
proposed NSPS regulations take a valuable step toward a modern
performance management system as well as a more market-based, results-
oriented compensation system. DOD's proposed performance management
system is intended to align individual performance and pay with the
department's critical mission requirements; hold employees responsible
for accomplishing performance expectations; and provide meaningful
distinctions in performance. However, the experiences of high-
performing organizations suggest that DOD should require core
competencies in its performance management system. The core
competencies can serve to reinforce employee behaviors and actions that
support the DOD mission, goals, and values and to set expectations for
individuals' roles in DOD's transformation, creating a shared
responsibility for organizational success and ensuring accountability
for change.
DOD's overall effort to design and implement a strategic human
resources management systemæalong with the similar effort of DHSæcan be
particularly instructive for future human capital management,
reorganization, and transformation efforts in other federal agencies.
Mr. Chairman and Members of the Committee, this concludes my prepared
statement. I would be pleased to respond to any questions that you may
have at this time.
Contacts and Acknowledgments:
For further information, please contact Derek B. Stewart, Director,
Defense Capabilities and Management, at (202) 512-5559 or [Hyperlink,
stewartd@gao.gov]. For further information on governmentwide human
capital issues, please contact Eileen R. Larence, Director, Strategic
Issues, at (202) 512-6512 [Hyperlink, or larencee@gao.gov]. Major
contributors to this testimony include Sandra F. Bell, Renee S. Brown,
K. Scott Derrick, William J. Doherty, Clifton G. Douglas, Jr., Barbara
L. Joyce, Julia C. Matta, Mark A. Pross, William J. Rigazio, John S.
Townes, and Susan K. Woodward.
[End of section]
Appendixes:
Appendix I: "Highlights" from Selected GAO Human Capital Reports:
GAO Highlights:
Highlights of GAO-04-753, a report to the Ranking Minority Member,
Subcommittee on Readiness, Committee on Armed Services, House of
Representatives:
Why GAO Did This Study:
During its downsizing in the early 1990s, the Department of Defense
(DOD) did not focus on strategically reshaping its civilian workforce.
GAO was asked to address DOD‘s efforts to strategically plan for its
future civilian workforce at the Office of the Secretary of Defense
(OSD), the military services‘ headquarters, and the Defense Logistics
Agency (DLA). Specifically, GAO determined: (1) the extent to which
civilian strategic workforce plans have been developed and implemented
to address future civilian workforce requirements, and (2) the major
challenges affecting the development and implementation of these plans.
What GAO Found:
OSD, the service headquarters, and DLA have recently taken steps to
develop and implement civilian strategic workforce plans to address
future civilian workforce needs, but these plans generally lack some
key elements essential to successful workforce planning. As a result,
OSD, the military services‘ headquarters, and DLA”herein referred to as
DOD and the components”do not have comprehensive strategic workforce
plans to guide their human capital efforts. None of the plans included
analyses of the gaps between critical skills and competencies (a set of
behaviors that are critical to work accomplishment) currently needed by
the workforce and those that will be needed in the future. Without
including gap analyses, DOD and the components may not be able to
effectively design strategies to hire, develop, and retain the best
possible workforce. Furthermore, none of the plans contained results-
oriented performance measures that could provide the data necessary to
assess the outcomes of civilian human capital initiatives.
The major challenge that DOD and most of the components face in their
efforts to develop and implement strategic workforce plans is their
need for information on current competencies and those that will likely
be needed in the future. This problem results from DOD‘s and the
components‘ not having developed tools to collect and/or store, and
manage data on workforce competencies. Without this information, it not
clear whether they are designing and funding workforce strategies that
will effectively shape their civilian workforces with the appropriate
competencies needed to accomplish future DOD missions. Senior
department and component officials all acknowledged this shortfall and
told us that they are taking steps to address this challenge. Though
these are steps in the right direction, the lack of information on
current competencies and future needs is a continuing problem that
several organizations, including GAO, have previously identified.
Strategic Workforce Planning Process:
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that DOD and the components include certain key elements
in their civilian strategic workforce plans to guide their human
capital efforts. DOD concurred with one of our recommendations, and
partially concurred with two others because it believes that the
department has undertaken analyses of critical skills gaps and are
using strategies and personnel flexibilities to fill identified skills
gaps. We cannot verify DOD‘s statement because DOD was unable to
provide the gap analyses. In addition, we found that the strategies
being used by the department have not been derived from analyses of
gaps between the current and future critical skills and competencies
needed by the workforce.
www.gao.gov/cgi-bin/getrpt?-GAO-04-753.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Derek Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of section]
GAO Highlights:
Highlights of GAO-03-851T, testimony before the Committee on
Governmental Affairs, United States Senate:
Why GAO Did This Study:
People are at the heart of an organization‘s ability to perform its
mission. Yet a key challenge for the Department of Defense (DOD), as
for many federal agencies, is to strategically manage its human
capital. DOD‘s proposed National Security Personnel System would
provide for wide-ranging changes in DOD‘s civilian personnel pay and
performance management and other human capital areas. Given the
massive size of DOD, the proposal has important precedent-setting
implications for federal human capital management.
This testimony provides GAO‘s observations on DOD human capital reform
proposals and the need for governmentwide reform.
What GAO Found:
GAO strongly supports the need for government transformation and the
concept of modernizing federal human capital policies both within DOD
and for the federal government at large. The federal personnel system
is clearly broken in critical respects”designed for a time and
workforce of an earlier era and not able to meet the needs and
challenges of today‘s rapidly changing and knowledge-based
environment. The human capital authorities being considered for DOD
have far-reaching implications for the way DOD is managed as well as
significant precedent-setting implications for the rest of the federal
government. GAO is pleased that as the Congress has reviewed DOD‘s
legislative proposal it has added a number of important safeguards,
including many along the lines GAO has been suggesting, that will help
DOD maximize its chances of success in addressing its human capital
challenges and minimize the risk of failure.
More generally, GAO believes that 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). Several of the proposed DOD
reforms meet this test. In GAO‘s view, the relevant sections of the
House‘s version of the National Defense Authorization Act for Fiscal
Year 2004 and the proposal that is being considered as part of this
hearing contain a number of important improvements over the initial
DOD legislative proposal.
Moving forward, GAO believes it would be preferable to employ a
governmentwide approach to address human capital issues and the need
for 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.
GAO believes that several of the reforms that DOD is proposing fall
into this category (e.g., broad banding, pay for performance, re-
employment and pension offset waivers). In these situations, GAO
believes it would be both prudent and preferable for the Congress to
provide such authorities governmentwide and ensure that appropriate
performance management systems and safeguards are in place before the
new authorities are implemented by the respective agency.
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 rreasonable 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 and would help avoid further fragmentation within
the civil service.
To view the full testimony, click on the link above. For more
information, contact Derek Stewart at (202) 512-5559 or
stewartd@gao.gov.
[End of section]
Highlights of GAO-03-493T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce and the
District of Columbia, Senate Committee on Governmental Affairs:
Why GAO did This Study:
People are at the heart of an organization's ability to perform its
mission. Yet, a key challenge for the Department of Defense (DOD), as
for many federal agencies, is to strategically manage its human
capital. With about 700,000 civilian employees on its payroll, DOD is
the second largest federal employer of civilians in the nation.
Although downsized 38 percent between fiscal years 1989 and 2002, this
workforce has taken on greater roles as a result of DOD's restructuring
and transformation.
DOD's proposed National Security Personnel System (NSPS) would provide
for wide-ranging changes in DOD's civilian personnel pay and
performance management, collective bargaining, rightsizing, and other
human capital areas. The NSPS would enable DOD to develop and implement
a consistent DOD-wide civilian personnel system. Given the massive size
of DOD, the proposal has important precedent-setting implications for
federal human capital management and OPM.
This testimony provides GAO's preliminary observations on aspects of
DOD's proposal to make changes to its civilian personnel system and
discusses the implications of such changes for governmentwide human
capital reform. Past reports have contained GAO's views on what remains
to be done to bring about lasting solutions for DOD to strategically
manage its human capital. DOD has not always concurred with our
recommendations.
What GAO Found:
DOD's lack of attention to force shaping during its downsizing in the
early 1990s has resulted in a workforce that is not balanced by age or
experience and that puts at risk the orderly transfer of institutional
knowledge. Human capital challenges are severe in certain areas. For
example, DOD has downsized its acquisition workforce by almost half.
More than 50 percent of the workforce will be eligible to retire by
2005. In addition, DOD faces major succession planning challenges at
various levels within the department. Also, since 1987, the industrial
workforce, such as depot maintenance, has been reduced by about 56
percent, with many of the remaining employees nearing retirement,
calling into question the longer-term viability of the workforce. DOD
is one of the agencies that has begun to address human capital
challenges through strategic human capital planning. For example, in
April 2002, DOD published a department wide strategic plan for
civilians. Although a positive step toward fostering a more strategic
approach toward human capital management, the plan is not fully aligned
with the overall mission of the department or results oriented. In
addition, it was not integrated with the military and contractor
personnel planning.
We strongly support the concept of modernizing federal human capital
policies within DOD and the federal government at large. Providing
reasonable flexibility to management in this critical area is
appropriate provided adequate safeguards are in place to prevent abuse.
We believe that Congress should consider both governmentwide and
selected agency, including DOD, changes to address the pressing human
capital issues confronting the federal government. In this regard, many
of the basic principles underlying DOD's civilian human capital
proposals have merit and deserve serious consideration. At the same
time, many are not unique to DOD and deserve broader consideration.
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). Several of the proposed DOD reforms meet this test. At the same
time, we believe that Congress should consider incorporating additional
safeguards in connection with several of DOD's proposed reforms. In our
view, it would be preferable to employ a government-wide 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 (OPM), in particular.
We believe that several of the reforms that DOD is proposing fall into
this category (e.g., broad-banding, pay for performance, re-employment
and pension offset waivers). In these situations, it may be prudent and
preferable for the Congress to provide such authorities on a
governmentwide basis and in a manner that assures that appropriate
performance management systems and safeguards are in place before the
new authorities are implemented by the respective agency.
However, in all cases whether from a governmentwide authority or agency
specific legislation, in our view, such additional authorities should
be implemented (or operationalized) only when an agency has the
institutional infrastructure in place to make effective use of the new
authorities. Based on our experience, while the DOD leadership has the
intent and the ability to implement the needed infrastructure, it is
not consistently in place within the vast majority of DOD at the
present time.
www.gao.gov/cgi-bin/getrpt?GAO-03-493T.
To view the full testimony, including the scope and methodology,
click on the link above. For more information, contact Derek B. Stewart
at (202) 512-5140 or Stewartd@gao.gov.
[End of section]
GAO Highlights:
Highlights of GAO-03-741T, testimony before the Committee on Armed
Services, House of Representatives
Why GAO Did This Study:
DOD is in the midst of a major transformation effort including a number
of initiatives to transform its forces and improve its business
operations. DOD‘s legislative initiative would provide for major
changes in civilian and military human capital management, make major
adjustments in the DOD acquisition process, affect DOD‘s organization
structure, and change DOD‘s reporting requirements to Congress, among
other things.
DOD‘s proposed National Security Personnel System (NSPS) would provide
for wide-ranging changes in DOD‘s civilian personnel pay and
performance management, collective bargaining, rightsizing, and a
variety of other human capital areas. The NSPS would enable DOD to
develop and implement a consistent DOD-wide civilian personnel system.
This testimony provides GAO‘s preliminary observations on aspects of
DOD‘s legislative proposal to make changes to its civilian personnel
system and discusses the implications of such changes for
governmentwide human capital reform. This testimony summarizes many of
the issues discussed in detail before the Subcommittee on Civil Service
and Agency Organization, Committee on Government Reform, House of
Representatives on April 29, 2003.
What GAO Found:
Many of the basic principles underlying DOD‘s civilian human capital
proposal have merit and deserve serious consideration. The federal
personnel system is clearly broken in critical respects”designed for a
time and workforce of an earlier era and not able to meet the needs and
challenges of our current rapidly changing and knowledge-based
environment. DOD‘s proposal recognizes that, as GAO has stated and the
experiences of leading public sector organizations here and abroad have
found, strategic human capital management must be the centerpiece of
any serious government transformation effort.
More generally, from a conceptual standpoint, GAO strongly supports the
need to expand broad banding and pay for performance-based systems in
the federal government. However, moving too quickly or prematurely at
DOD or elsewhere, can significantly raise the risk of doing it wrong.
This could also serve to severely 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 and other personnel decisions 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 we are successful. One key need is to modernize
performance management systems in executive agencies so that they are
capable of supporting more performance-based pay and other personnel
decisions. Unfortunately, based on GAO‘s past work, most existing
federal performance appraisal systems, including a vast majority of
DOD‘s systems, are not currently designed to support a meaningful
performance-based pay system.
The critical questions to consider are: should DOD and/or other
agencies be granted broad-based exemptions from existing law, and if
so, on what basis? Do DOD and other agencies have the institutional
infrastructure in place to make effective use of any new authorities?
This institutional infrastructure includes, at a minimum, 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; the capabilities to effectively develop and
implement a new human capital system; and, importantly, a set of
adequate safeguards, including reasonable transparency and appropriate
accountability mechanisms to ensure the fair, effective, and credible
implementation of a new system.
In GAO‘s view, as an alternative to DOD‘s proposed approach, Congress
should consider providing governmentwide broad banding and pay for
performance authorities that DOD and other federal agencies can use
provided they can demonstrate that they have a performance management
system in place that meets certain statutory standards, that can be
certified to by a qualified and independent party, such as OPM, within
prescribed timeframes. Congress should also consider establishing a
governmentwide fund whereby agencies, based on a sound business case,
could apply for funding to modernize their performance management
systems and ensure that those systems have adequate safeguards to
prevent abuse. This approach would serve as a positive step to promote
high-performing organizations throughout the federal government while
avoiding further human capital policy fragmentation.
www.gao.gov/cgi-bin/getrpt?GAO-03-741T.
To view the full testimony, click on the link above. For more
information, contact Derek Stewart at (202) 512-5559 or
stewartd@gao.gov.
[End of section]
GAO Highlights:
Highlights of GAO-03-472, a report to the Subcommittee on Readiness,
Committee on Armed Services, House of Representatives:
Why GAO Did This Study:
Between 1987 and 2002, the Department of Defense (DOD) downsized the
civilian workforce in 27 key industrial facilities by about 56 percent.
Many of the remaining 72,000 workers are nearing retirement. In recent
years GAO has identified shortcomings in DOD‘s strategic planning and
was asked to determine (1) whether DOD has implemented our prior
recommendation to develop and implement a depot maintenance strategic
plan, (2) the extent to which the services have developed and
implemented comprehensive strategic workforce plans, and (3) what
challenges adversely affect DOD‘s workforce planning.
What GAO Found:
DOD has not implemented our October 2001 recommendation to develop and
implement a DOD depot strategic plan that would delineate workloads to
be accomplished in each of the services‘ depots. The DOD depot system
has been a key part of the department‘s plan to support military
systems in the past, but the increased use of the private sector to
perform this work has decreased the role of these activities. While
title 10 of the U.S. code requires DOD to retain core capability and
also requires that at least 50 percent of depot maintenance funds be
spent for public-sector performance, questions remain about the future
role of DOD depots. Absent a DOD depot strategic plan, the services
have in varying degrees, laid out a framework for strategic depot
planning, but this planning is not comprehensive. Questions also remain
about the future of arsenals and ammunition plants. GAO reviewed
workforce planning efforts for 22 maintenance depots, 3 arsenals, and
2 ammunition plants, which employed about 72,000 civilian workers in
fiscal year 2002.
The services have not developed and implemented strategic workforce
plans to position the civilian workforce in DOD industrial activities
to meet future requirements. While workforce planning is done for each
of the industrial activities, generally it is short-term rather than
strategic. Further, workforce planning is lacking in other areas that
OPM guidance and high-performing organizations identify as key to
successful workforce planning. Service workforce planning efforts (1)
usually do not assess the competencies; (2) do not develop
comprehensive retention plans; and (3) sometimes do not develop
performance measures and evaluate workforce plans.
Several challenges adversely affect DOD‘s workforce planning for the
viability of its civilian depot workforce. First, given the aging depot
workforce and the retirement eligibility of over 40 percent of the
workforce over the next 5 to 7 years, the services may have difficulty
maintaining the depots‘ viability. Second, the services are having
difficulty implementing multiskilling”an industry and government best
practice for improving the flexibility and productivity of the
workforce”even though this technique could help depot planners do more
with fewer employees. Finally, increased training funding and
innovation in the training program will be essential for revitalizing
the aging depot workforce.
What GAO Recommends:
GAO recommends that the DOD complete revisions to core policy,
promulgate a schedule for completing core computations, and complete
depot strategic planning; develop a plan for arsenals and ammunition
plants; develop strategic workforce plans; and coordinate the
implementation of initiatives to address various workforce challenges.
DOD concurred with 7 of our 9 recommendations; nonconcurring with two
because it believes the proposed National Security Personnel System,
which was submitted to Congress as a part of the DOD transformation
legislation, will take care of these problems. We believe it is
premature to assume this system will (1) be approved by Congress as
proposed and (2) resolve these issues.
www.gao.gov/cgi-bin/getrpt?GAO-03-472.
To view the full report, including the scope and methodology, click on
the link above. For more information, contact Derek Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of section]
GAO Highlights:
Highlights of GAO-03-717T, testimony before the Subcommittee on Civil
Service and Agency Organization, Committee on Government Reform, House
of Representatives:
Why GAO Did This Study:
DOD is in the midst of a major transformation effort including a number
of initiatives to transform its forces and improve its business
operations. DOD‘s legislative initiative would provide for major
changes in the civilian and military human capital management, make
major adjustments in the DOD acquisition process, affect DOD‘s
organization structure, and change DOD‘s reporting requirements to
Congress, among other things.
DOD‘s proposed National Security Personnel System (NSPS) would provide
for wide-ranging changes in DOD‘s civilian personnel pay and
performance management, collective bargaining, rightsizing, and a
variety of other human capital areas. The NSPS would enable DOD to
develop and implement a consistent DOD-wide civilian personnel system.
This testimony provides GAO‘s preliminary observations on aspects of
DOD‘s legislative proposal to make changes to its civilian personnel
system and poses critical questions that need to be considered.
What GAO Found:
Many of the basic principles underlying DOD‘s civilian human capital
proposals have merit and deserve serious consideration. The federal
personnel system is clearly broken in critical respects”designed for a
time and workforce of an earlier era and not able to meet the needs and
challenges of our current rapidly changing and knowledge-based
environment. DOD‘s proposal recognizes that, as GAO has stated and the
experiences of leading public sector organizations here and abroad have
found strategic human capital management must be the centerpiece of any
serious government transformation effort.
More generally, from a conceptual standpoint, GAO strongly supports the
need to expand broad banding and pay for performance-based systems in
the federal government. However, moving too quickly or prematurely at
DOD or elsewhere, can significantly raise the risk of doing it wrong.
This could also serve to severely 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 and other personnel decisions 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 we are successful. In our view, one key need is to
modernize performance management systems in executive agencies so that
they are capable of supporting more performance-based pay and other
personnel decisions. Unfortunately, based on GAO‘s past work, most
existing federal performance appraisal systems, including a vast
majority of DOD‘s systems, are not currently designed to support a
meaningful performance-based pay system.
The critical questions to consider are: should DOD and/or other
agencies be granted broad-based exemptions from existing law, and if
so, on what basis; and whether they have the institutional
infrastructure in place to make effective use of the new authorities.
This institutional infrastructure includes, at a minimum, 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; the capabilities to effectively develop and
implement a new human capital system; and, importantly, a set of
adequate safeguards, including reasonable transparency and appropriate
accountability mechanisms to ensure the fair, effective, and credible
implementation of a new system.
In our view, Congress should consider providing governmentwide broad
banding and pay for performance authorities that DOD and other federal
agencies can use provided they can demonstrate that they have a
performance management system in place that meets certain statutory
standards, which can be certified by a qualified and independent party,
such as OPM, within prescribed timeframes. Congress should also
consider establishing a governmentwide fund whereby agencies, based on
a sound business case, could apply for funding to modernize their
performance management systems and ensure that those systems have
adequate safeguards to prevent abuse. This approach would serve as a
positive step to promote high-performing organizations throughout the
federal government while avoiding fragmentation within the executive
branch in the critical human capital area.
www.gao.gov/cgi-bin/getrpt?GAO-03-717T.
To view the full report, including the scope and methodology, click on
the link above. For more information, contact Derek Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of section]
GAO Highlights:
Highlights of GAO-03-475, a report to the Ranking Minority Member,
Subcommittee on Readiness, House Committee on Armed Services:
Why GAO Did This Study:
The Department of Defense‘s (DOD) civilian employees play key roles in
such areas as defense policy, intelligence, finance, acquisitions, and
weapon systems maintenance. Although downsized 38 percent between
fiscal years 1989 and 2002, this workforce has taken on greater roles
as a result of DOD‘s restructuring and transformation. Responding to
congressional concerns about the quality and quantity of, and the
strategic planning for the civilian workforce, GAO determined the
following for DOD, the military services, and selected defense
agencies: (1) the extent of top-level leadership involvement in
civilian strategic planning; (2) whether elements in civilian strategic
plans are aligned to the overall mission, focused on results, and based
on current and future civilian workforce data; and (3) whether civilian
and military personnel strategic plans or sourcing initiatives were
integrated.
What GAO Found:
Generally, civilian personnel issues appear to be an emerging priority
among top leaders in DOD and the defense components. Although DOD began
downsizing its civilian workforce more than a decade ago, it did not
take action to strategically address challenges affecting the civilian
workforce until it issued its civilian human capital strategic plan in
April 2002. Top-level leaders in the Air Force, the Marine Corps, the
Defense Contract Management Agency, and the Defense Finance Accounting
Service have initiated planning efforts and are working in partnership
with their civilian human capital professionals to develop and
implement civilian strategic plans; such leadership, however, was
increasing in the Army and not as evident in the Navy. Also, DOD has
not provided guidance on how to integrate the components‘ plans with
the department-level plan. High-level leadership is critical to
directing reforms and obtaining resources for successful
implementation.
The human capital strategic plans GAO reviewed for the most part lacked
key elements found in fully developed plans. Most of the civilian human
capital goals, objectives, and initiatives were not explicitly aligned
with the overarching missions of the organizations. Consequently, DOD
and the components cannot be sure that strategic goals are properly
focused on mission achievement. Also, none of the plans contained
results-oriented performance measures to assess the impact of their
civilian human capital initiatives (i.e., programs, policies, and
processes). Thus, DOD and the components cannot gauge the extent to
which their human capital initiatives contribute to achieving their
organizations‘ mission. Finally, the plans did not contain data on the
skills and competencies needed to successfully accomplish future
missions; therefore, DOD and the components risk not being able to put
the right people, in the right place, and at the right time, which can
result in diminished accomplishment of the overall defense mission.
Moreover, the civilian strategic plans did not address how the civilian
workforce will be integrated with their military counterparts or
sourcing initiatives. DOD‘s three human capital strategic plans--two
military and one civilian--were prepared separately and were not
integrated to form a seamless and comprehensive strategy and did not
address how DOD plans to link its human capital initiatives with its
sourcing plans, such as efforts to outsource non-core
responsibilities.The components‘ civilian plans acknowledge a need to
integrate planning for civilian and military personnel”taking into
consideration contractors”but have not yet done so. Without an
integrated strategy, DOD may not effectively and efficiently allocate
its scarce resources for optimal readiness.
What GAO Recommends:
GAO recommends DOD improve the departmentwide plan to be mission
aligned and results-oriented; provide guidance to integrate component-
and department-level human capital strategic plans; develop data on
future civilian workforce needs; and set milestones for integrating
military and civilian workforce plans, taking contractors into
consideration. DOD comments were too late to include in the final
report.
www.gao.gov/cgi-bin/getrpt?GAO-03-475.
To view the full report, including the scope and methodology, click on
the link above. For more information, contact Derek B. Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of section]
(350694):
FOOTNOTES
[1] National Security Personnel System, 70 Fed. Reg. 7552 (Feb. 14,
2005).
[2] Pub. L. No. 108-136 § 1101 (Nov. 24, 2003).
[3] GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
[4] GAO, Department of Defense: Further Actions Are Needed to
Effectively Address Business Management Problems and Overcome Key
Business Transformation Challenges, GAO-05-140T (Washington, D.C.: Nov.
18, 2004).
[5] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
[6] GAO, Human Capital: Implementing Pay for Performance at Selected
Personnel Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23,
2004).
[7] GAO, Defense Transformation: Preliminary Observations on DOD's
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, D.C.:
Apr. 29, 2003).
[8] GAO, Human Capital: Preliminary Observations on Proposed DHS Human
Capital Regulations, GAO-04-479T (Washington, D.C.: Feb. 25, 2004).
[9] GAO-04-479T.
[10] GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington,
D.C.: July 2, 2003).
[11] 5 U.S.C. §§ 5101-5115.
[12] GAO, Human Capital: Opportunities to Improve Executive Agencies'
Hiring Processes, GAO-03-450 (Washington, D.C.: May 30, 2003).
[13] Because movement through the pay band is based on performance,
employees could progress through the pay band more quickly than they
could receive similar increases under the GS system. One method of
preventing employees from eventually migrating to the top of the pay
band, and thus increasing salary costs, is to establish control points
within each band.
[14] GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C.: Mar. 14, 2003).
[15] GAO, Human Capital: Observations on Final DHS Human Capital
Regulations, GAO-05-391T (Washington, D.C.: Mar. 2, 2005).
[16] GAO-03-717T.
[17] GAO-04-479T.
[18] GAO-03-717T; GAO, Defense Transformation: DOD's Proposed Civilian
Personnel System and Governmentwide Human Capital Reform, GAO-03-741T
(Washington, D.C.: May 1, 2003); and Human Capital: Building on DOD's
Reform Effort to Foster Governmentwide Improvements, GAO-03-851T
(Washington, D.C.: June 4, 2003).
[19] For example, employees who work full time, part time, seasonally,
or intermittently.
[20] Department of Homeland Security Human Resources Management System,
70 Fed. Reg. 5272 (Feb. 1, 2005).
[21] Any final DOD decision under this review process may be further
appealed to the full MSPB. Further, the Secretary of Defense or an
employee adversely affected by a final order or decision of the full
MSPB may seek judicial review.
[22] Section 1203 of the IRS Restructuring and Reform Act of 1998
outlines conditions for firing of IRS employees for any of 10 actions
of misconduct.
[23] GAO, Tax Administration: IRS and TIGTA Should Evaluate Their
Processes of Employee Misconduct Under Section 1203, GAO-03-394
(Washington, D.C.: Feb. 14, 2003).
[24] GAO-01-479T.
[25] Under current law, the rights of employees to bargain may be
suspended for reasons of national security. See Title 5 U.S.C. §§
7103(b) and 7112(b)(6).
[26] GAO-03-669.
[27] DOD's efforts to date to involve labor unions have not been
without controversy. Ten federal labor unions have filed suit alleging
that DOD failed to abide by the statutory requirements to include
employee representatives in the development of DOD's new labor
relations system authorized as part of NSPS. See American Federation of
Government Employees, AFL-CIO et al v. Rumsfeld et al, No. 1: 05cv00367
(D.D.C. filed Feb. 23, 2005).
[28] OPM, Demonstration Projects and Alternative Personnel Systems: HR
Flexibilities and Lessons Learned (Washington, D.C.: September 2001).
