Additional Posthearing Questions Related to Proposed Department of Homeland Security (DHS) Human Capital Regulations
Gao ID: GAO-04-617R April 30, 2004On February 25, 2004, Congress heard testimony at a hearing entitled "The Key to Homeland Security: The New Human Resources System." This report responds to additional questions posed by Senator Akaka and Senator Lautenberg.
Members of the internal appeals panel are appointed by the Department of Homeland Security (DHS) Secretary for 3-year terms and may be removed by the Secretary "only for inefficiency, neglect of duty, or malfeasance." These appointment and removal procedures are identical to the appointment and removal provisions for the members of the proposed DHS Labor Relations Board. Removal of the panel members by the Secretary may potentially compromise the real or perceived independence of the panel's decisions. We suggested, as an alternative, that the department should consider having members of the panel removed only by a majority decision of the panel. Such changes might also strengthen the independence of the Labor Relations Board. We also said that DHS might wish to consider staggering the terms of the members to ensure a degree of continuity on the board. The administration has requested for fiscal year 2005 $102.5 million to fund training, the development of the performance management and compensation system, and contractor support. In addition, the fiscal year 2005 budget requests over $10 million for a performance pay fund in the first phase of implementation to recognize those who meet or exceed expectations and about $20 million to fund the development of a departmental human resources information technology system. It is important that certain costs are one-time in nature and, therefore, should not be built into the base of DHS's budget for future years. Changes to human capital management should be implemented only when an agency has the institutional infrastructure in place. 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 develop and implement a new human capital system effectively; and a modern, effective, and credible performance management system that includes adequate safeguards to prevent abuse of employees. Consistent with the institutional infrastructure described above, agencies in other countries are placing a greater emphasis on achieving alignment between individual and organizational results. The proposed DHS regulations state the department's interest in the alignment of individual performance expectations with the mission and strategic goals, but do not yet detail how individual performance expectations will be aligned with the department's mission and strategic goals. In addition, the proposed regulations describe a phased approach to implementation and a commitment to an ongoing evaluation of the effectiveness of the human capital system. High-performing organizations use validated core competencies to examine individual contributions to organizational results. Competencies define the skills and supporting behaviors that individuals are expected to exhibit to carry out their work effectively and can provide a fuller picture of an individual's performance and contribution to organizational goals. A competitive compensation system can help organizations attract and retain a quality workforce. To begin to develop such a system, organizations assess the skills and knowledge they need; compare compensation against other public, private, or nonprofit entities competing for the same talent in a given locality; and classify positions along levels of responsibility. While one size does not fit all, organizations generally structure their competitive compensation systems to separate base salary from other special incentives.
GAO-04-617R, Additional Posthearing Questions Related to Proposed Department of Homeland Security (DHS) Human Capital Regulations
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April 30, 2004:
The Honorable George V. Voinovich:
Chairman:
The Honorable Richard Durbin:
Ranking Minority Member:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia:
Committee on Governmental Affairs:
United States Senate:
The Honorable Jo Ann Davis:
Chairwoman:
The Honorable Danny Davis:
Ranking Minority Member:
Subcommittee on Civil Service and Agency Organization:
Committee on Government Reform:
United States House of Representatives:
Subject: Additional Posthearing Questions Related to Proposed
Department of Homeland Security (DHS) Human Capital Regulations:
On February 25, 2004, I testified before your subcommittees at a
hearing entitled "The Key to Homeland Security: The New Human Resources
System."[Footnote 1] I provided responses to an initial set of
questions in correspondence dated March 22, 2004.[Footnote 2] This
report responds to your request that I provide answers to additional
posthearing questions posed by Senator Akaka and Senator Lautenberg.
The questions and responses follow.
Questions from Senator Akaka:
1. In your written testimony, you recommend giving members of the
internal appeals panel, rather than the Secretary, the authority to
remove their fellow panel members for inefficiency. However, you are
silent on the same issue for the internal labor-management board. What
recommendations do you have for improving the impartiality of the
proposed labor-management board at the Department of Homeland Security
(DHS)?
As you noted, I raised independence concerns about the panel to be
created to hear appeals for mandatory removal offenses. Members of that
panel are appointed by the Department of Homeland Security (DHS)
Secretary for 3-year terms and may be removed by the Secretary "only
for inefficiency, neglect of duty, or malfeasance." These appointment
and removal procedures are identical to the appointment and removal
provisions for the members of the proposed DHS Labor Relations Board.
As I noted in my statement with regard to the mandatory removal offense
panel, removal of the panel members by the Secretary may potentially
compromise the real or perceived independence of the panel's decisions.
We suggested, as an alternative, that the department should consider
having members of the panel removed only by a majority decision of the
panel. Such changes might also strengthen the independence of the Labor
Relations Board. We also said that DHS might wish to consider
staggering the terms of the members to ensure a degree of continuity on
the board.
2. The General Accounting Office (GAO) has been active in reviewing and
making recommendations regarding new personnel flexibilities in the
federal government. As you know, DHS has requested $102.5 million for
the implementation of its new personnel system. Based on GAO research
and your own experience with the personnel system at GAO, is the
department's request sufficient to adequately implement the system? How
much do you expect the financial cost of the system to be in the long
term?
As you note, the administration has requested for fiscal year 2005
$102.5 million to fund training, the development of the performance
management and compensation system, and contractor support. In
addition, the fiscal year 2005 budget requests over $10 million for a
performance pay fund in the first phase of implementation (affecting
about 8,000 employees) to recognize those who meet or exceed
expectations and about $20 million to fund the development of a
departmental human resources information technology system. The
training costs do not include employees' time during training or
expenses of the internal training resources that already exist within
DHS.
We have reported that based on the data that the Office of Personnel
Management's (OPM) personnel demonstration projects provided us, direct
costs associated with salaries, training, and automation and data
systems were the major cost drivers of implementing their pay for
performance systems. The demonstration projects reported other direct
costs, such as evaluations and administrative expenses. We described a
number of approaches they used to manage the direct costs of
implementing and maintaining their pay for performance
systems.[Footnote 3]
While we do not have an estimate of additional implementation costs,
clearly, further funding will be required as the system is rolled out
to additional DHS personnel. In addition, ongoing training is essential
to reinforce the considerable cultural change that is needed to
continue to implement a new performance management system. DHS is
recognizing that there are up-front costs and that its components are
starting from different places regarding the maturity and capabilities
of their performance management systems. While the investments are
important to the ultimate success of DHS's efforts, it is equally
important that certain costs are one-time in nature and, therefore,
should not be built into the base of DHS's budget for future years.
The GAO has conducted extensive reviews of personnel reform in other
countries and at other federal agencies. In the case of the FAA,
Congress granted certain flexibilities but then reinstated the current
labor-management relations system found in chapter 71 and appeals to
the MSPB. I also understand that other countries, which initially moved
from a centralized system to an individual agency personnel system,
have since returned to a form of centralization. What are the lessons
learned from personnel reform efforts both here and abroad and, in your
opinion, has DHS incorporated these best practices?
Since the United States is not alone in experiencing challenges in
managing its human capital, we reviewed other countries' experiences in
our August 2002 report on performance management.[Footnote 4] For
example, Australia devolved almost all human capital management
responsibilities to individual departments and agencies whose chief
executives may negotiate compensation with individuals or groups of
employees. Australia's Public Service Commission was to remain
responsible for promoting high-quality human capital management and its
Department of Employment and Workplace Relations plays a key role in
helping agencies develop workplace relations that are consistent with a
high performing public service. We have not updated our work to
identify if there have been any changes in their responsibilities.
As we noted in our statement, we strongly support the need for
government transformation and the concept of modernizing federal human
capital policies. To help the new DHS, we convened a forum of a cross-
section of leaders who have had experience managing large-scale
organizational mergers, acquisitions, and transformations, and
identified key practices and implementation steps that can help
agencies implement successful transformations of their own.[Footnote 5]
While no two efforts are exactly alike, the "best" approach for any
given effort depends upon a variety of factors specific to each
context. Last September, we reported that DHS's design of its human
capital system generally reflects these elements of effective
transformation.[Footnote 6]
Our work has also shown that changes to human capital management should
be implemented only when an agency has the institutional infrastructure
in place. 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 develop and implement
a new human capital system effectively; and a modern, effective, and
credible performance management system that includes adequate
safeguards to prevent abuse of employees. We have issued several
products that discuss this framework in more detail.[Footnote 7]
As you noted, the Federal Aviation Administration (FAA) is managing its
personnel under one of the most flexible human capital management
environments in the federal government. This is a result of 1995
legislation that granted the agency broad exemptions from laws
governing federal civilian personnel management found in title 5 of the
United States Code. Congress provided these flexibilities in response
to FAA's position that the inflexibility of federal personnel systems
was one of the most important constraints to the agency's ability to be
responsive to the airline industry's needs and to increase productivity
in air traffic control operations. In a report issued last year, we
noted that FAA had not fully incorporated elements that are important
to effective human capital management into its overall reform
effort.[Footnote 8] These elements include data collection and
analysis, performance goals and measures, and linkage of reform goals
to program goals. FAA human resource management officials said that the
agency should have spent more time to develop baseline data and
performance measures before implementing the broad range of reforms,
but that establishing these elements was a complex and difficult task.
We additionally reported that FAA had also not gone far enough in
establishing linkage between reform goals and the overall program goals
of the organization. Clearly, FAA did not have the institutional
framework in place that could have helped to maximize its personnel
flexibilities.
Consistent with the institutional infrastructure described above,
agencies in other countries are placing a greater emphasis on achieving
alignment between individual and organizational results. A first step
towards this end is to align the performance expectations of top
leadership with organizational goals and then cascade those
expectations down to lower levels and then to align performance
expectations between agencies and with governmentwide priorities.
The proposed DHS regulations state the department's interest in the
alignment of individual performance expectations with the mission and
strategic goals, but do not yet detail how individual performance
expectations will be aligned with the department's mission and
strategic goals. The release of the DHS Strategic Plan can enable this
alignment. In addition, the proposed regulations describe a phased
approach to implementation and a commitment to an ongoing evaluation of
the effectiveness of the human capital system. A phased approach
recognizes that different organizations will have different levels of
readiness and different capabilities to implement the new authorities.
Moreover, a phased approach allows for learning so that midcourse
corrections can be made before the regulations are fully implemented
organizationwide. Likewise, evaluations of the system's success will
ensure that these system revisions are based on data-driven lessons
learned.
According to the proposed regulations, law enforcement officers are not
among the list of individuals excluded from the personnel system. As
the Department plans to implement a pay-for-performance system, I am
concerned over the method by which law enforcement officers are judged
on their performance and whether a pay-for-performance system could
increase civil rights abuses. Due to your extensive experience in
studying, as well as implementing, pay-for-performance systems, what
are the best practices on how to measure the performance of law
enforcement officers?
While we have reported on local police forces' experiences in
recruiting and retaining officers after the terrorist attacks of
September 11, 2001, we have not reviewed how to measure the performance
of law enforcement officers.[Footnote 9] However, high-performing
organizations use validated core competencies to examine individual
contributions to organizational results. Competencies define the skills
and supporting behaviors that individuals are expected to exhibit to
carry out their work effectively and can provide a fuller picture of an
individual's performance and contribution to organizational
goals.[Footnote 10] With regard to law enforcement, a focus on
competencies would entail identifying and validating those competencies
that are critical to successful law enforcement efforts. This approach
should include a range of factors, including achieving results and
protecting individual constitutional rights and civil liberties. A
related pay for performance approach would center on creating
incentives for--and rewarding--demonstrated proficiencies in the
validated core competencies.
Question from Senator Lautenberg:
1. Could you explain how local labor market rates will determine the
pay bands and why you think that private sector salaries should affect
DHS employees' salaries?
A competitive compensation system can help organizations attract and
retain a quality workforce. To begin to develop such a system,
organizations assess the skills and knowledge they need; compare
compensation against other public, private, or nonprofit entities
competing for the same talent in a given locality; and classify
positions along levels of responsibility. While one size does not fit
all, organizations generally structure their competitive compensation
systems to separate base salary--which all employees receive--from
other special incentives, such as retention allowances or performance
awards.
Similar to many other aspects of DHS's proposal, important elements of
the new pay system have not been determined. Under the proposed
regulations, DHS, after coordination with OPM, may consider factors
such as labor market conditions, among other things, in setting and
adjusting ranges of basic pay for bands. We have reported that OPM's
personnel demonstration projects have considered the labor market in
determining how much to budget for pay increases.[Footnote 11] For
example, the Naval Sea Systems Command Warfare Center at Newport uses
regional and industry salary information compiled by the American
Association of Engineering Societies when determining how much to set
aside for pay increases and awards. Specifically, in response to higher
external engineer, scientist, and information technology personnel
salaries, Newport funded pay increases and awards at a higher level in
fiscal year 2001 than in fiscal year 2000.
We are sending copies of this report to the Chair and Ranking Minority
Member, Senate Committee on Governmental Affairs; the Chairman and
Ranking Minority Member, House Committee on Government Reform; the
Chairman and Ranking Minority Member, House Select Committee on
Homeland Security; and other interested congressional parties. We will
also send copies to the Secretary of the Department of Homeland
Security and the Director of the Office of Personnel Management. Copies
will be made available at no charge on the GAO Web site at http://
www.gao.gov. 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, Managing Director,
Strategic Issues, on (202) 512-6806 or at mihmj@gao.gov.
Signed by:
David M. Walker:
Comptroller General of the United States:
(450318):
FOOTNOTES
[1] U.S. General Accounting Office, Human Capital: Preliminary
Observations on Proposed DHS Human Capital Regulations, GAO-04-479T
(Washington, D.C.: Feb. 25, 2004).
[2] U.S. General Accounting Office, Posthearing Questions Related to
Proposed Department of Homeland Security (DHS) Human Capital
Regulations, GAO-04-570R (Washington, D.C.: Mar. 22, 2004).
[3] U.S. General Accounting Office, Human Capital: Implementing Pay for
Performance at Selected Personnel Demonstration Projects, GAO-04-83
(Washington, D.C.: Jan. 23, 2004).
[4] U.S. General Accounting Office, Results-Oriented Cultures: Insights
for U.S. Agencies from Other Countries' Performance Management
Initiatives, GAO-02-862 (Washington, D.C.: Aug. 2, 2002).
[5] U.S. General Accounting Office, Results-Oriented Cultures:
Implementation Steps to Assist Mergers and Organizational
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003); and
Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned
for a Department of Homeland Security and Other Federal Agencies, GAO-
03-293SP (Washington, D.C.: Nov. 14, 2002).
[6] U.S. General Accounting Office, Human Capital: DHS Personnel System
Design Effort Provides for Collaboration and Employee Participation,
GAO-03-1099 (Washington, D.C.: Sept. 30, 2003).
[7] U.S. General Accounting Office, Human Capital: Key Principles for
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.:
Dec. 11, 2003); Human Capital: Effective Use of Flexibilities Can
Assist Agencies in Managing Their Workforces, GAO-03-2 (Washington,
D.C.: Dec. 6, 2002); and Results-Oriented Cultures: Creating a Clear
Linkage between Individual Performance and Organizational Success, GAO-
03-488 (Washington, D.C.: Mar. 14, 2003).
[8] U.S. General Accounting Office, Human Capital Management: FAA's
Reform Effort Requires a More Strategic Approach, GAO-03-156
(Washington, D.C.: Feb. 3, 2003).
[9] U.S. General Accounting Office, Federal Uniformed Police: Selected
Data on Pay, Recruitment, and Retention at 13 Police Forces in the
Washington, D.C., Metropolitan Area, GAO-03-658 (Washington, D.C.: June
13, 2003).
[10] GAO-03-488.
[11] GAO-04-83.
