Human Capital
Agencies Are Using Buyouts and Early Outs with Increasing Frequency to Help Reshape Their Workforces Gao ID: GAO-06-324 March 31, 2006Under the Chief Human Capital Officers (CHCO) Act of 2002, an agency may request authority from the Office of Personnel Management (OPM) to offer employees voluntary separation incentive payments (buyouts) and voluntary early retirement (early outs) to help reshape its workforce. GAO was asked to identify (1) how many agencies have been granted authority to offer buyouts and early outs and how often agencies used them, (2) how agencies view OPM's role in facilitating the use of these tools, (3) how agencies have used practices associated with effective use of the tools, and (4) what challenges agencies identified, if any, to continued effective use. To respond, GAO reviewed the practices of the Departments of Agriculture, Commerce, Energy, Health and Human Services, Interior, and the Treasury because they were among the most frequent users of these authorities.
The total number of agencies using buyouts and early outs to reshape their workforces has significantly increased from 28 to 51 during fiscal years 2003 through 2005, and the number of programs agencies have offered over the past 3 years has also significantly increased. During this timeframe, at least 22,600 employees have separated from federal service under these authorities. Officials at all six agencies GAO reviewed believe that OPM's mandatory review of and feedback on their plans for using buyouts and early outs has improved implementation. However, nearly all of the agencies said they believe the review at times can be achieved more quickly and should be streamlined. OPM on average took 36 days to review the 28 randomly selected programs GAO assessed at the six agencies. OPM is taking steps to reduce its overall average review time including establishing more stringent timeframes for review and reducing the number of reviewers. The six agencies also reported using almost all of the practices GAO identified as associated with the effective use of buyouts and early outs, and that these practices resulted in better-planned programs. Agencies were not, however, using one practice that involves evaluating the longer-term effectiveness of the buyout and early-out authorities for reshaping their future workforces. Officials at the six agencies suggested that information on how some agencies used effective practices in ways that were particularly successful or instructive in reshaping their workforces could help them improve program results. Agency officials responsible for use of these authorities from the six agencies agreed that certain reforms would help them address some of the challenges they face in implementing their programs. These include (1) increasing the current dollar amount agencies can pay under buyouts to make the programs more attractive to employees and increase the acceptance rate and (2) allowing agencies to make minor changes to buyout and early-out plans after OPM approval. OPM is in the best position to assess these and other possible reforms and ways to achieve them.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-324, Human Capital: Agencies Are Using Buyouts and Early Outs with Increasing Frequency to Help Reshape Their Workforces
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Report to Congressional Requesters:
March 2006:
Human Capital:
Agencies Are Using Buyouts and Early Outs with Increasing Frequency to
Help Reshape Their Workforces:
GAO-06-324:
GAO Highlights:
Highlights of GAO-06-324, a report to congressional requesters:
Why GAO Did This Study:
Under the Chief Human Capital Officers (CHCO) Act of 2002, an agency
may request authority from the Office of Personnel Management (OPM) to
offer employees voluntary separation incentive payments (buyouts) and
voluntary early retirement (early outs) to help reshape its workforce.
GAO was asked to identify (1) how many agencies have been granted
authority to offer buyouts and early outs and how often agencies used
them, (2) how agencies view OPM‘s role in facilitating the use of these
tools, (3) how agencies have used practices associated with effective
use of the tools, and (4) what challenges agencies identified, if any,
to continued effective use. To respond, GAO reviewed the practices of
the Departments of Agriculture, Commerce, Energy, Health and Human
Services, Interior, and the Treasury because they were among the most
frequent users of these authorities.
What GAO Found:
The total number of agencies using buyouts and early outs to reshape
their workforces has significantly increased from 28 to 51 during
fiscal years 2003 through 2005, and the number of programs agencies
have offered over the past 3 years has also significantly increased
(see fig. below). During this timeframe, at least 22,600 employees have
separated from federal service under these authorities.
Total Number of Agencies Having Used the Authorities and Total Number
of Buyout and Early-out Programs Offered Since the Authorities Were
Made Available in Fiscal Year 2003:
[See PDF for image]
[End of figure]
Officials at all six agencies GAO reviewed believe that OPM‘s mandatory
review of and feedback on their plans for using buyouts and early outs
has improved implementation. However, nearly all of the agencies said
they believe the review at times can be achieved more quickly and
should be streamlined. OPM on average took 36 days to review the 28
randomly selected programs GAO assessed at the six agencies. OPM is
taking steps to reduce its overall average review time including
establishing more stringent timeframes for review and reducing the
number of reviewers.
The six agencies also reported using almost all of the practices GAO
identified as associated with the effective use of buyouts and early
outs, and that these practices resulted in better-planned programs.
Agencies were not, however, using one practice that involves evaluating
the longer-term effectiveness of the buyout and early-out authorities
for reshaping their future workforces. Officials at the six agencies
suggested that information on how some agencies used effective
practices in ways that were particularly successful or instructive in
reshaping their workforces could help them improve program results.
Agency officials responsible for use of these authorities from the six
agencies agreed that certain reforms would help them address some of
the challenges they face in implementing their programs. These include
(1) increasing the current dollar amount agencies can pay under buyouts
to make the programs more attractive to employees and increase the
acceptance rate and (2) allowing agencies to make minor changes to
buyout and early-out plans after OPM approval. OPM is in the best
position to assess these and other possible reforms and ways to achieve
them.
What GAO Recommends:
GAO recommends that OPM, with the CHCO Council, (1) share information
on agencies‘ successful use of the effective practices GAO identified,
(2) help agencies assess their programs‘ effectiveness, and (3) assess
potential program improvements agencies identified for possible
implementation, and pursue needed regulatory and statutory changes to
implement them. OPM agreed with the recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-06-324.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Eileen Larence, (202) 512-
6510, larencee@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Almost Half of All Agencies Have Used Buyout and Early-out Programs to
Reshape Their Workforces and the Number of Programs Has Increased:
Agency Officials Responsible for Use of These Authorities Believe OPM's
Review Process Adds Value but in Some Cases Could Be Quicker and Should
Be Streamlined:
Agencies in Our Review Are Using Most of the Practices Associated with
Effective Use of Buyouts and Early Outs and Have Found Them Helpful in
Achieving Their Reshaping Goals, Though One Practice May Require
Further Attention:
Officials in Agencies We Reviewed Suggested Ways to Make the Buyout and
Early-out Programs More Efficient and Effective:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Office of Personnel Management:
Tables:
Table 1: Practices Associated with Effective Buyout and Early-out
Programs:
Table 2: Practices Associated with Effective Use of Buyout and Early-
out Programs Were Generally Reflected in Legislation and OPM
Regulations:
Figures:
Figure 1: Total Number of Agencies Having Used the Authorities and
Total Number of Buyout and Early-out Programs Offered Since the
Authorities Were Made Available in Fiscal Year 2003:
Figure 2: Total Number of Agencies and Total Number of Buyout and
Early- out Programs They Offered Since Authorities Were Made Available
in Fiscal Year 2003:
Figure 3: Major Users of Buyout and Early-out Authorities:
Figure 4: OPM Review Process for Buyout and Early-out Requests:
Letter March 31, 2006:
The Honorable George V. Voinovich:
Chairman:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Jon C. Porter:
Chairman:
Subcommittee on the Federal Workforce and Agency Organization:
Committee on Government Reform:
House of Representatives:
The federal government's people--its human capital--are a critical
element to meeting the current and emerging challenges of the 21st
century, including responding to natural emergencies and handling the
increased threat of terrorism, as well as maximizing the government's
performance. However, fiscal challenges and competing budget needs put
pressure on agencies to make trade-offs and difficult decisions
regarding how to invest in their human capital. In the past, agencies
have often responded to such financial challenges by using reductions-
in-force (RIFs) to their workforces to meet their budget limitations.
This has caused a loss of institutional memory and a backlog of work,
among other problems. As a result, agencies subsequently reported that
such mandatory downsizing has hindered them from carrying out their
missions.[Footnote 1]
Agency RIFs are not, however, the only--and often are not the best--
means of addressing reduced agency resources or changing the skill
profile of the workforce to address 21st century challenges. Agencies
may use a variety of approaches to reshape their workforce to achieve
their mission results with greater economy, efficiency, and
effectiveness. Such approaches may include merging departments or
functions, redeploying people to different organizational units or
locations, conducting training or retraining programs to improve
workforce performance, implementing recruiting programs for needed
skills, and reducing the layers within an organization's hierarchy.
The authorities granted by the Congress in the Chief Human Capital
Officers (CHCO) Act of 2002 provided two additional tools agencies may
use to help them reshape their workforces. Under buyout programs,
agencies offer cash incentives up to $25,000 for employees to
voluntarily leave federal service. The Act does not, however, provide
funding for these authorities. Thus, each agency must bear the cost of
the incentives. Under early-out programs, agencies offer early
retirement at reduced annuity payments to employees age 50 and above
with at least 20 years of service or to employees at any age with at
least 25 years of service. An agency does not face any costs for
offering early outs.
For agencies to use these authorities, the Office of Personnel
Management (OPM) must first review agency plans for using these tools
and assure that the plans comply with certain legislative requirements.
According to OPM officials who are involved in reviewing agency
programs, their reviews are intended to ensure that agency plans are
complete and are linked to the accomplishment of the agency's strategic
goals. Within OPM, agency plans are reviewed by a human capital officer
familiar with that agency's operations, and four levels of supervision
prior to the Director's official approval decision. Agencies have
multiple opportunities each year to request authority to offer buyouts,
early outs, or both to meet the specific reshaping goals of any of
their components or organizational units. Agencies can request
authority from OPM to offer programs for either buyouts, early outs, or
for both at the same time. However, OPM cannot approve any buyout or
combined buyout and early-out request without the Office of Management
and Budget's (OMB) concurrence, due to the budget implications for the
requesting agency.
To gain a better understanding of the extent to which agencies are
using the buyout and early-out tools authorized by the Act, you asked
us to identify (1) how many agencies have sought and been granted
authority to offer buyouts and early outs, and the extent to which
agencies have used these authorities; (2) how selected agency officials
view OPM's role in facilitating the use of the buyout and early-out
authorities; (3) what practices are associated with agencies' effective
use of buyouts and early outs, how selected agencies used these
practices, and whether they have helped agencies to achieve their
workforce reshaping goals; and (4) what challenges the selected
agencies identified, if any, to continued effective use of these
authorities. The agencies we selected were the Departments of
Agriculture (USDA), Commerce (DOC), Energy (DOE), Health and Human
Services (HHS), Interior (DOI), and the Treasury (Treasury), because we
determined from OPM data on agency requests and approvals that they are
the most frequent users of the buyout and early-out
authorities.[Footnote 2] The agency selection process was not designed
to produce findings that could be considered representative of the use
of these authorities in the federal government as a whole.
To meet our objectives, we analyzed information from a review of
relevant literature on the use of buyouts and early outs in
organizations including our prior studies of federal buyout programs in
1997 and 1998.[Footnote 3] We obtained and analyzed governmentwide,
excluding the Department of Defense (DOD), data on agencies' use of
buyouts and early outs, and interviewed officials involved in the
approval process from OPM and OMB on their roles and
responsibilities.[Footnote 4] We reviewed a sample of OPM case files
for about a tenth of all the offers made by the six selected agencies
for fiscal years 2003 through 2005. While we cannot generalize the
results of our file review to OPM's overall program, the results can
help us to illustrate examples of OPM's review process. We also
conferred with officials with relevant expertise in the management of
human resource programs from the National Academy of Public
Administration and the International Public Management Association on
the reasonableness of the effective buyout and early-out practices we
identified. Both of these organizations have published reports on the
effectiveness of these federal human capital practices. In addition, we
interviewed human capital and program officials from the selected
agencies to identify the particular buyout and early-out practices they
were using, how they believe the practices helped them to achieve their
goals, and the lessons learned from their experiences. Although we
provided each of our six selected agencies with OPM's count of their
buyout and early-out authorities to review, we did not independently
verify OPM's governmentwide buyout and early-out data. Our review was
conducted in accordance with generally accepted government auditing
standards from October 2004 through November 2005. Appendix I provides
additional information on our scope and methodology.
Results in Brief:
Since November 2002, when the buyout and early-out authorities were
provided, the number of agencies using the authorities significantly
increased and the number of programs[Footnote 5] offered has also
significantly increased. To date, nearly half of the approximately 110
executive branch agencies have taken advantage of these authorities to
help reshape their workforces, and according to OPM data, at least
22,600 employees separated from federal service after accepting offers
under these authorities during this timeframe. During fiscal years 2003
through 2005, a total of 51 agencies have been granted authority to
offer buyouts or early outs to employees. This has increased from 28
agencies that were granted these authorities in fiscal year 2003, the
first year they were available. During these same 3 years, OPM reviewed
and approved agency requests for the authorities to offer buyout and
early-out programs a total of 136 times, 176 times, and 179 times,
respectively (see fig. 1).
Figure 1: Total Number of Agencies Having Used the Authorities and
Total Number of Buyout and Early-out Programs Offered Since the
Authorities Were Made Available in Fiscal Year 2003:
[See PDF for image]
[End of figure]
Nearly three-fourths of the authorities OPM approved in fiscal year
2005 were combined buyout and early-out programs. OPM data show that 70
percent of all agency programs approved that year offered employees the
opportunity to take a buyout and an early retirement at the same time.
According to several agency officials responsible for use of these
authorities, employees are more likely to accept early-out offers when
they are combined with buyouts because the buyout's monetary payment
helps offset the employee's loss in income and reduced annuity payments
under an early-out program. The six agencies examined in our review
used these authorities more frequently than other agencies and believe
the authorities have helped to reshape their respective workforces more
effectively. For example, according to program officials involved with
managing these programs from DOC's National Institute of Standards and
Technology (NIST), the agency used a buyout and early-out program to
achieve a more optimal skills mix in the face of budget cuts and
changing priorities for its research and development, thereby limiting
involuntary staff reductions to a minimal number.
Officials associated with the management of buyout and early-out
programs at the agencies we met with believe OPM's review process adds
value, but could at times also be achieved more quickly and should be
streamlined. The program officials in each of the six agencies believed
early OPM feedback on their individual agency plans to implement
buyouts and early outs was helpful in obtaining final OPM approval.
Several reported that their agency has modified and improved their
plans as a result. Managers at DOE stated that the agency has worked
closely with OPM to resolve any questions in an effort to streamline
the process. On the basis of a sample of 28 programs that we examined
at the selected agencies, we found that, on average, OPM's review took
36 days and ranged from 7 to 88 days. Agencies want timely reviews so
that their programs can be implemented early in the fiscal year to
maximize savings and to give employees enough time to decide whether to
accept or decline the buyout or early out, better helping to ensure the
success of the program. Otherwise, if the planned numbers of employees
do not accept the offers, the agency may have to institute a more
costly action to reduce its workforce.
According to OPM and officials from the agencies we reviewed, a number
of variables can affect approval times, including the experience of the
officers (OPM, OMB, and agency) assigned to the request, complexity of
the request, and whether the request involved competitive sourcing
decisions. The OPM program managers said that reviews overall take on
average 34 days but that the agency has set a goal to reduce this to 21
days. To help achieve this goal OPM has developed an application
checklist for agencies to help ensure their plans comply with
regulatory requirements before they are submitted, and according to OPM
officials, the agency is currently reviewing its program office review
process for streamlining options. These options include realigning or
dedicating staff to evaluate agency requests. Additionally, final
approval of these requests is being delegated from the Director to the
Associate Director level. OPM's actions to improve cycle time, if
effectively implemented, should help address agency concerns about
shortening the windows for offering buyout and early-out programs.
We identified seven practices associated with effective use of buyouts
and early outs, and the agencies in our review reported not only using
most of these practices to some degree, but also that doing so helped
them to achieve their reshaping goals. However, the agencies reported
fewer activities related to the practice of establishing an evaluation
system. Five of these practices are generally reflected in the CHCO Act
of 2002 and OPM's implementing regulations. All seven practices are
described in the following table:
Table 1: Practices Associated with Effective Buyout and Early-out
Programs:
Practices reflected in legislation or OPM regulations:
1. Identify the reshaping goals of the agency. This will assist
agencies in linking buyouts and early outs to specific organizational
objectives.
2. Develop workforce reshaping strategies that fully consider
alternative methods. This will help agencies identify whether
alternatives may more effectively meet agency reshaping goals than
buyouts and early outs, and could work in conjunction with these tools.
3. Design buyout and early-out offerings that demonstrate a clear
relationship to agency's workforce reshaping goals and overarching
strategic goals. This will help ensure that employees critical to the
mission of an agency are retained.
4. Design buyout and early-out offerings that consider employees'
needs. Programs that do not do so may cause damage to the agency's
reputation or negatively affect employee morale and productivity.
5. Develop a communications strategy early in the process. Regular
communication with employees increases transparency in the process used
to determine which positions may be eliminated. This in turn increases
employee trust and maintains employee morale.
Practices not reflected in legislation or OPM regulations:
6. Consider and adopt ways to maximize cost savings. In general,
agencies should maximize current year payroll savings by separating
employees early in the fiscal year when possible, preferably in the
first quarter.
7. Establish an evaluation system to identify and report relevant data
on buyout and early-out recipients. Agencies can use these data to
assess how well the buyouts and early outs are meeting or have met
reshaping goals and whether they need to adjust their strategies.
Source: GAO analysis.
[End of table]
For example, officials responsible for use of these tools in the six
agencies reported that determining up front the reshaping goals they
wanted to attain with their buyout or early-out programs was critical
to their achieving successful outcomes. They explained that by
analyzing the reduction of staff they could achieve using these tools
and how this would in turn help them achieve changes in skill mix or
geographic deployment helped them to ensure they would meet their
strategic goals. The agencies in our review, however, have not taken
full advantage of one of the leading practices--establishing evaluation
systems for these programs. While the agencies do track how the
individual program results relate to their reshaping goals and analyze
the results to assure that all employees are treated fairly, agencies
have not expanded or further developed these monitoring efforts for
longer-term evaluation of these tools. For example, agencies could
expand their analyses of results to include the examination of how, if
at all, the length of service influences acceptance or rejection of an
offer. This information could be useful in the structuring or timing of
future offers. Similarly, agencies could assess the costs and savings
of using buyouts and early outs relative to other separation
strategies. OPM officials informed us that they are developing Web site
guidance to assist agencies in implementing and administering buyout
and early-out programs.
The changing demographics of the federal workforce, and limits on the
dollar amount for buyouts, could pose challenges to the future
viability of these tools, according to many of the agency officials
associated with the use of these authorities in our review. For
example, as more employees retire and are replaced by younger employees
further from retirement, buyouts and early outs may not be attractive
to them. In addition, officials in each of the six agencies also
believe that the $25,000 limit on the buyout payment amount, which has
not been changed since 1992, may make the programs less attractive to
prospective candidates. They note that they would benefit from having
the flexibility to offer more money, even though doing so could limit
the number of offers agencies could provide if additional funding is
not available. Officials in three agencies also suggested they were
challenged because they could not make minor deviations to the plans
OPM approved. They would like the flexibility, for example, to include
an additional occupation as being eligible for the program during
implementation if they need to in order to achieve their reshaping
goals, as long as they do not exceed the total number of buyouts or
early outs OPM approved. Finally, some agency officials stated that
obtaining examples of how some agencies used effective practices in
ways that were particularly successful or instructive in reshaping
their workforces could help them improve program implementation and
administration. OPM, as the central human capital organization, is in
the best position to collect and share this information, and determine
what improvements would be worth implementing governmentwide,
especially since some would require legislative changes.
To address challenges agencies face in using these authorities and
consider possible ways to increase their viability, we are making
recommendations to OPM and the CHCO Council that they serve as a
clearinghouse to share examples of how agencies have used effective
practices to achieve program successes; help agencies implement the
practice of assessing the long-term effectiveness of these tools for
future reshaping efforts; and assess potential improvements to these
tools, and the steps needed to accomplish these improvements.
We provided a draft of this report to the Director of OPM for review
and comment. The Director agreed with our recommendations and stated
that OPM is actively working with agencies to help them measure the
effectiveness of their buyout and early-out programs. This in turn will
enable OPM to consider whether changes are needed to improve the
effectiveness of these two tools. Further, the Director of OPM reported
that, working with the CHCO Council, it sees a proactive role that it
can take in sharing information from agencies on their best buyout and
early-out practices, and how agencies may subsequently improve the
effectiveness of their reshaping strategies. The Director's written
responses are reprinted in appendix II.
Background:
In the past, to help reduce and restructure their workforces, federal
agencies have paid buyouts to employees to voluntarily leave federal
service. DOD has had buyout authority since January 1993.[Footnote 6]
Most non-DOD executive branch agencies have had two buyout
opportunities. The first, under the Federal Workforce Restructuring Act
(FWRA) in 1994,[Footnote 7] provided these agencies the authority to
offer buyouts of as much as $25,000 to employees to voluntarily leave
federal service, thereby eliminating the need for involuntary staff
reductions. Nearly 40 percent of the buyouts were paid to those
employees in overhead positions such as personnel, budget, procurement,
and accounting. About 70 percent went to employees in mid-to upper-
level positions in their organizations. The second major buyout
opportunity was authorized by section 663 of the Treasury, Postal
Service, and General Government Appropriations Act of 1997.[Footnote 8]
According to Administration officials, the buyouts have had three
distinct purposes. Initially they were used to help ease reductions in
the DOD civilian workforce following the end of the Cold War. Later, as
part of the National Performance Review--the Clinton administration's
initiative to reinvent government--buyouts were used to reduce what the
administration called "management control" positions. These positions
included those held by managers and supervisors and employees in
personnel, budget, procurement, and accounting occupations. Lastly, the
buyouts were used to help save money by reducing the federal workforce
as the Congress and the President agreed to pursue a balanced budget.
During the first buyout time frame, the Congress, as well as our own
reports, began expressing concern over agencies' lack of adequate
planning prior to the implementation of their buyout programs and
workforce reduction initiatives.[Footnote 9] The Congress considered
this concern in a series of hearings and addressed the issue when it
passed Public Law 104-208 in September 1996, which directed agencies to
prepare strategic buyout plans for congressional review. OMB required
agencies to first submit their plans for its review prior to submitting
them to the Congress. In a June 1997 report on effective buyout
practices, we found that, overall, the fiscal year 1997 buyout programs
at six agencies we examined at that time appeared to have been better
managed than was generally the case governmentwide during the 1994 and
1995 buyout window. This was due in large part to statutory and OMB
requirements, as well as OPM guidance. Together, the requirements and
guidance resulted in more structured programs in which agencies
indicated they used buyouts to accomplish specific objectives and
reportedly would save millions of dollars in the years ahead.[Footnote
10]
In response to this success, the Congress streamlined the approval
process for agency programs by eliminating congressional and OMB review
of agency plans, although OPM must still consult with OMB on buyout
plans. The CHCO Act of 2002 provided executive branch agencies, with
OPM approval, the authority to offer buyouts and early outs to certain
qualifying employees, for the purposes of workforce reshaping, not just
downsizing. DOD has separate legislative authority to offer buyouts and
early outs and does not require approval of OPM for its
programs.[Footnote 11] The Act expanded the buyout and early-out
authority to give agencies the flexibility required to reorganize their
workforces should agencies need to substantially reduce their number of
organizational layers, transfer functions, or make other substantial
workforce changes. As such, the Act's provisions allow agencies to
reduce managerial or supervisory positions, correct skill imbalances,
and reduce operating costs without the loss of full-time positions.
Congress specified that each executive agency requesting buyouts, early
outs, or both must submit a plan to OPM outlining its intended use of
these authorities. OPM also issued regulations to the heads of
executive agencies with information on how to prepare these plans. OPM
review officials said they approve or disapprove agency requests for
the authorities based on the quality of the plans. For example, they
ensure that all legislative requirements are met. OPM reviews each
agency's plan and, for buyouts only, consults with OMB before final
approval is granted. OMB assures that the agency has funding for the
buyout program and meets the legislative requirements. Agencies must
have OPM approval before using buyout and early-out authorities and are
required to provide OPM with interim and final reports on their use.
Agency plans are to describe how they will use buyout and early-out
offers as tools to facilitate agencies' reshaping goals. For agencies
requesting buyout or buyout and early-out authority, the plans are also
to include identification of the agency or specified component(s)
within the agency for which the authority is being requested;
identification of the specific functions to be reduced or eliminated; a
description of the categories of employees who will be offered these
options identified by organizational unit, geographic location,
occupational series, or grade level; and the time period during which
buyouts may be paid or early outs offered. Agencies may request and
offer buyout and early-out programs simultaneously for each of their
components and organizational units.
Almost Half of All Agencies Have Used Buyout and Early-out Programs to
Reshape Their Workforces and the Number of Programs Has Increased:
Since fiscal year 2003, the number of agencies using buyouts and early
outs to reshape their workforces has increased, and to date, about half
of the executive branch agencies have requested and used these
authorities. In addition, agencies are more frequently offering buyouts
and early outs together as an additional incentive for employees. Eight
agencies are the major users of the authorities and represent
approximately 70 percent of all requests. Agencies' decisions to use
buyouts and early outs are based on specific workforce planning needs.
In some cases, technological advances that necessitated a different
skill mix primarily drove agency-reshaping efforts. In other cases,
agencies' reshaping efforts were driven by a more diverse set of needs
such as consolidation of functions or budgetary restrictions. Officials
responsible for use of these authorities at our six selected agencies
believe that buyouts and early outs have been successful tools to help
reshape their respective workforces.
Total Number of Agencies Using These Authorities and Number of Programs
They Offered Has Increased Each Year:
Of the approximately 110 executive branch agencies under the CHCO Act,
a total of 51 agencies have been granted authority to offer their
employees programs of buyouts, early outs, or both at least
once.[Footnote 12] This has increased from 28 agencies that were
granted these authorities in fiscal year 2003. As shown in figure 2,
OPM approved, and the agencies used, the authorities to offer programs
a total of 136 times, 176 times, and 179 times, respectively, to help
reshape their workforce. According to OPM data, at least 22,600
employees have separated from federal service under a buyout, early
out, or both. Among the employees who separated and received a buyout,
59 percent were employees who separated by retiring under the
government's standard retirement qualifications and did not need an
early out, 36 percent were employees who separated using an early-out
program, and 5 percent were employees who separated through a
resignation.
Figure 2: Total Number of Agencies and Total Number of Buyout and Early-
out Programs They Offered Since Authorities Were Made Available in
Fiscal Year 2003:
[See PDF for image]
[End of figure]
Agencies Are Offering Combined Buyout and Early-out Programs:
In fiscal year 2003, 40 percent of all agency programs offered
employees the opportunities to have a buyout and take an early
retirement at the same time. In fiscal year 2004 this increased to 55
percent. In fiscal year 2005 this further increased to 70 percent. DOI,
DOE, and Treasury were agencies more likely to offer programs with
combined buyout and early-out offers. For example, in fiscal years 2004
and 2005, DOI combined buyouts and early outs in 39 of its 42 programs,
DOE combined them in 38 of its 45 programs, and Treasury combined them
in 14 of its 23 programs. According to several agency officials
responsible for use of these authorities, employees are more likely to
accept early-out offers when they are combined with buyouts because the
buyout's monetary payment would help offset the employee's loss in
income and reduced annuity payments.
Eight Agencies Are Major Users of the Authorities:
Over the 3-year period, OPM granted a total of 491 requests from the 51
agencies for buyout, early-out, or both authorities. As shown in figure
3, USDA, DOC, DOE, HHS, DOI, DOT, Treasury, and VA represent
approximately 70 percent of granted buyout and early-out programs.
Figure 3: Major Users of Buyout and Early-out Authorities:
[See PDF for image]
Note: Numbers indicate total number of buyout and early-out programs
offered by each agency from fiscal year 2003 through fiscal year 2005.
[End of figure]
The Selected Agencies in Our Review Believe the Authorities Have Been
Effective Tools in Reshaping Their Workforces:
The six agencies in our review based their decisions to use buyouts and
early outs on specific reshaping objectives identified in their
particular agency's workforce planning process. For example, HHS
consolidated its human resources (HR) offices from 40 to 5 using the
buyout authority to manage the workforce transition from 1,167
employees to approximately 860. According to the HHS agency official
who led the agency's HR consolidation effort, the agency successfully
used the buyout authority to manage the reduction of higher-graded
positions and to strategically adjust its workforce size and skills
mix. The official stated that over 125 of the estimated 350 staff
affected by the agency's consolidation of its HR offices accepted
buyout offers. He explained that initially they were able to redeploy
displaced staff to mission-critical occupations and functions; however
as consolidations continued and the balance shifted more and more away
from administrative positions and toward mission-critical occupations,
their ability to absorb and redeploy staff to other administrative or
mission-support jobs diminished. According to the official, the buyout
program allowed HHS to meet its targets without requiring a RIF.
In fiscal year 2004, NIST experienced a budget shortfall, new
responsibilities, and changing national priorities for its research and
development. Because of its budget shortfall, NIST officials
anticipated conducting several RIFs during fiscal year 2004. NIST's
reshaping goals were to (1) phase out a major program, (2) reduce
funding of another program, (3) streamline institutional and
administrative support, and (4) shift the focus of some laboratories.
NIST officials reported that they used a combined buyout and early-out
program, reassignments, and RIFs to help restructure its workforce,
achieve a more optimal skills mix, and reduce its staff from 2,744
employees to 2,556. NIST officials reported that while they were unable
to totally avoid involuntary reductions, the use of the buyout and
early-out program enabled them to limit the RIFs to a minimal number of
employees.
Agency Officials Responsible for Use of These Authorities Believe OPM's
Review Process Adds Value but in Some Cases Could Be Quicker and Should
Be Streamlined:
All of the agencies in our selected sample believe OPM's feedback
during the review process improved their use of the buyout and early-
out authorities. OPM approved all agencies' buyout and early-out
requests that met the statutory and regulatory requirements. However,
according to program officials in three agencies, OPM's review process
can at times be quicker so as to avoid possible delays in the approval
process that could limit the success of the programs. OPM is taking
steps to reduce the amount of time it takes to review agency
submissions and is further planning to streamline its review process.
The OPM Review Process Assures Compliance with Legislative Requirements
and Provides Help for Agency Officials Responsible for Use of These
Authorities:
OPM plays the central role in the oversight and implementation of the
buyout and early-out authorities. OPM regulations, issued under the
authority of the CHCO Act, require agencies to develop plans that
provide information on agencies' intended buyout and early-out usage.
OPM, in turn, reviews and approves agency plans for using the
authorities. The Act and OPM's regulations also state that OPM will
consult with OMB regarding agency buyout plans. These plans are to
include the following:
* Identification of the specific positions to be reduced or eliminated,
identified by organizational unit, geographical location, occupational
series, grade level, and any other factors related to the positions.
* A description of the categories of employees who will be offered
incentives, identified by organizational unit, geographic location,
occupational series, grade level, and any other factors, such as
skills, knowledge, or retirement eligibility.
* A description of how the agency will operate without the eliminated
or restructured positions and functions.
* The time period during which incentives may be paid.
* The number of and maximum amounts of Voluntary Incentive Payments to
be offered.
Agencies' early-out plans are to include the following:
* Identification of the agency or specified component(s) for which the
authority is being requested.
* Reasons why the agency needs voluntary early retirement authority.
* The date on which the agency expects to effect the workforce
reshaping.
* The time period during which the agency plans to offer voluntary
early retirement.
According to an OPM reviewing official, the OPM human capital officer
assigned to review a particular agency provides the first level of
examination. The review process then includes additional management
reviews and the final approval by the OPM Director. Through this
process, OPM checks to see whether all legislative and regulatory
requirements are met, and that these criteria are being consistently
applied across all agencies' requests for buyout and early-out
authority. In some cases, OPM had agencies revise their plans until
they met OPM's standards, according to an OPM review official. For
example, OPM officials reported they received an agency request that
involved four different components or work units. The justifications
submitted for each component were in various states of readiness and
covered different time periods. After consultation with OPM reviewing
officials, the agency elected to withdraw the request and resubmit them
as separate more-targeted requests. In its first resubmission, the
agency provided a request dealing with reshaping, business process
reengineering, and downsizing of one of the four components, thus
improving the linkage to its business strategy. This request received
OMB concurrence and was approved by OPM. Figure 4 illustrates OPM's
review process for agency buyout and early-out requests.
Figure 4: OPM Review Process for Buyout and Early-out Requests:
[See PDF for image]
[End of figure]
Program officials in each of the agencies in our review believed OPM's
feedback on their plans was helpful and several reported that they have
modified and improved their plans as a result. Managers at DOE stated
that the agency has worked closely with OPM to resolve any questions in
an effort to streamline the process. USDA officials responsible for use
of these authorities stated that OPM has been responsive to their
requests and subsequent inquiries.
OPM and Agency Officials Responsible for Use of These Authorities
Believe Plans Can at Times Be Approved More Quickly and the Process Can
Be Streamlined:
OPM program officials and nearly all of the agency officials
responsible for use of these authorities in our review believe the
approval process can at times be accomplished more quickly and have
fewer steps. Agencies want to avoid delaying the timelines for offering
a buyout and early-out program, for fear that shortening the time frame
employees have for deciding whether to accept or decline the buyout or
early out can reduce the number of employees taking them and thus the
success of the program. Both the quality of the agency request and the
number of OPM reviews, as well as OMB's review of requests for buyout
authority, can affect the cycle time for final approval. One agency
official stated that he believes a contributing factor is that too many
people have to review each request, a point that OPM is addressing in
its planned streamlining of the review process.
When we looked at a sample of 28 programs between fiscal years 2003 and
2005 for our six selected agencies, we saw a variation in approval
times that ranged from 7 to 88 days. On average, we found that OPM took
36 days to review the programs in our sample. According to OPM and
officials from the selected agencies, a number of variables can affect
approval times, including the experience of the officers (OPM, OMB, and
agency) assigned to the request, the completeness of the agency
request, the complexity of the request, and whether the requests are
based on competitive sourcing situations.
According to OPM program managers, their calculations show that,
overall, their reviews take on average 34 days, but they have set a
goal to reduce this to 21 days. They established this target by
analyzing results of previous reviews and also from surveying agency
program officials. To help speed up its review process, OPM issued an
application checklist for agencies to help ensure their plans comply
with regulatory requirements prior to submission to OPM. According to
OPM officials, OPM has expedited its review process by establishing
more-stringent timeframes and standards for reviewing agency
submissions and is developing Web site guidance on both authorities. In
addition, to further streamline its review process, OPM plans to reduce
the number of reviewers within each review step. If such actions are
effectively implemented, OPM's steps to improve cycle time should help
address agency concerns about shortening the windows for offering
buyout and early-out programs.
Agencies in Our Review Are Using Most of the Practices Associated with
Effective Use of Buyouts and Early Outs and Have Found Them Helpful in
Achieving Their Reshaping Goals, Though One Practice May Require
Further Attention:
On the basis of our review of the literature on buyouts and early outs,
we identified seven practices that are associated with effective buyout
and early-out programs. All of the agency officials responsible for use
of these authorities in our review believe that these practices have
been helpful as they have used most of them to implement their
programs. Of the identified practices, five are generally reinforced in
the provisions of the CHCO Act and OPM's regulations for implementing
it.[Footnote 13] The two practices not reflected in statutory and OPM
documents are (1) consider and adopt ways to maximize cost savings and
(2) establish an evaluation system to identify and report relevant data
on buyout and early-out recipients (see table 2).
Table 2: Practices Associated with Effective Use of Buyout and Early-
out Programs Were Generally Reflected in Legislation and OPM
Regulations:
Practices reflected in legislation or OPM regulations:
1. Identify the reshaping goals of the agency. This will assist
agencies in linking buyouts and early outs to specific organizational
objectives.
2. Develop workforce reshaping strategies that fully consider
alternative methods. This will help agencies identify whether
alternatives may more effectively meet agency reshaping goals than
buyouts and early outs, and could work in conjunction with these tools.
3. Design buyout and early-out offerings that demonstrate a clear
relationship to agency's workforce reshaping goals and overarching
strategic goals. This will help ensure that employees critical to the
mission of an agency are retained.
4. Design buyout and early-out offerings that consider employees'
needs. Programs that do not do so may cause damage to the agency's
reputation or negatively affect employee morale and productivity.
5. Develop a communications strategy early in the process. Regular
communication with employees increases transparency in the process used
to determine which positions may be eliminated. This in turn increases
employee trust and maintains employee morale.
Practices not reflected in legislation or OPM regulations:
6. Consider and adopt ways to maximize cost savings. In general,
agencies should try to maximize current year payroll savings by
separating employees early in the fiscal year when possible, preferably
in the first quarter.
7. Establish an evaluation system to identify and report relevant data
on buyout and early-out recipients. Agencies can use these data to
assess how well the buyouts and early outs are meeting or have met
reshaping goals and whether they need to adjust their strategies.
Source: GAO analysis.
[End of table]
Agency officials responsible for agency use of these authorities
reported:
1. Identifying their reshaping goals up front helped agencies use these
tools to achieve them.
Officials at each of the agencies in our review reported that a first
step in developing buyout and early-out programs is identifying the
reshaping goals of the agency. They explained that the reshaping goals
must align with organizational strategic goals. For example, the DOC's
Economics and Statistics Administration had an organizational strategic
goal to enhance the quality and effectiveness of its economic policy
support function by consolidating two subunits. The agency in turn
developed a reshaping goal to streamline the offices and eliminate
unneeded positions. In addition, agency program officials determined a
decreased need for traditional clerical skills and decided to also
target those positions and employees for buyouts and early outs.
According to an agency official responsible for use of these
authorities, they met their estimated buyout and early-out projections
and achieved a number of reshaping goals. They formed a new
organizational structure with increased quality and efficiencies in
policy and administrative support functions, reduced staffing, and
created a more desirable supervisor-to-employee ratio.
2. Considering not only buyouts and early outs, but also a range of
alternative methods to meet reshaping goals helped agencies ensure
success.
Considering not only buyouts and early outs, but also a range of
alternative methods to meet reshaping goals helped agencies ensure
success. Agencies in our review stressed that developing workforce
strategies to meet reshaping goals that consider alternative methods
for meeting the goals, including buyouts and early outs, is important
and that they routinely do so. They explained that some alternatives
work better than others in certain situations. For example, one agency
official stated that in some areas the agency may need to strengthen
its student programs and build that particular pipeline of talent and
in other skill areas they may need to redeploy employees to programs in
which their skills are better utilized. USDA's Agricultural Marketing
Service considered alternative methods such as placement opportunities,
hiring freezes, redeployment, retraining, delaying capital purchases,
and suspension of bonuses. For example, the agency provided
opportunities for some employees to accept a lower grade position or
take on additional duties and responsibilities, which required on-the-
job training.
In addition to offering buyouts or early outs, several of the agencies
considered retraining as part of their reshaping strategies. However,
one agency official explained that retraining was not always a viable
option. For example, at USDA's Agricultural Research Service, the new
skills required a specialized academic background. But the vast
majority of the affected employees was in manual trade positions and
did not have the background necessary to successfully complete a
retraining program for scientific duties. Thus, the agency could only
assign a few of the affected employees to other positions and used the
buyout and early-out programs for the remaining affected employees.
At Treasury's Office of the Comptroller of the Currency, agency
officials reported that they established a working group that did
extensive cost analyses to help design its reshaping options. The group
compared costs of its current field locations and identified: (1)
imbalances in its manager-to-employee ratios; (2) a declining volume of
work in some areas; and (3) overstaffing in some district offices,
particularly among support positions and within some information
technology units. The working group made some assumptions on the number
of staff positions needed for each option and recognized that each
would have an effect on employees. They developed net savings
projections for the various realignment configurations. The final
decisions on the agency's district structure resulted in the closure of
three district offices and establishment of one district office in a
new location. As a result, the agency recognized there were employees
with needed skills, but they were in the wrong locations. In addition
to offering buyouts (under its own authority)[Footnote 14] and early
outs, a number of surplus employees were given the opportunity to
transfer with their function to the new office.
3. Designing buyout and early-out programs that demonstrate a clear
relationship to the agency's workforce reshaping goals helped agencies
achieve those goals.
Our review of agency buyout and early-out plans submitted to OPM shows
that the plans identified the agency's workforce reshaping goals and
specified how using the authorities would help meet those goals. For
example, following an analysis of Treasury's Bureau of the Public
Debt's Information Technology (IT) programs, management set the goal of
consolidating most of the bureau's functions into one existing
organizational unit that would require fewer employees to perform the
IT work. The bureau established an IT consolidation team, made up of
members of management as well as human resources representatives, to
develop the workforce reshaping strategy. Team members, for the most
part, were those who would be directly affected by the consolidation.
According to Bureau of the Public Debt officials involved with the
consolidation effort, the bureau used a combined buyout and early-out
program to help reshape its workforce to achieve a more optimal skills
mix and to eliminate the need to use RIFs to cut excess IT positions.
Prior to offering the buyout and early-out program, the agency's HR
division surveyed all eligible employees. From the results of the
survey, they were able to estimate the number of interested employees
and also identify individuals likely to accept an offer. The agency
also decided to make offers to non-IT individuals working in
organizations identified as affected by the changes to create open
positions for surplus IT employees. Agency officials reported that they
met their goal to consolidate into one existing organizational unit and
also met their targeted number of employees accepting program offers,
which eliminated the need for involuntary separations.
4. Designing buyout and early-out programs that considered employees'
needs helped them to cope with the changes.
Agency officials responsible for use of these authorities in the
agencies we reviewed pointed out they consider employees' needs when
designing and implementing programs. They believed that buyout and
early-out programs should generally provide career guidance,
counseling, and outplacement assistance to employees who may be
displaced. Treasury's Office of the Comptroller of the Currency, when
offering a buyout and early-out program, made a wide variety of other
services available to employees. For example, in those offices to be
closed Treasury solicited the affected employees' relocation
preferences and tried to accommodate them to the extent possible.
Employees who were interested in other positions and locations could
visit the new locations at the agency's expense. In addition, the
agency paid relocation bonuses to some affected employees and
instituted a "safe landing" program that consisted of a support network
matching affected employees with "buddies" who provided encouragement
to those employees and served as sounding boards for them, training and
discussion forums that focused on career and stress management, and
technical training to prepare for other job opportunities.
Program officials in these agencies also reported that their programs
are routinely reviewed internally at many levels, including agency
general counsel offices, to ensure that the programs not only conform
to applicable laws, union agreements, and regulations, but also would
be considered equitable from the employees' point of view. Officials at
USDA's Agricultural Research Service reported that in addition to
reviewing the appropriate contracts and regulations, they continuously
consulted with the employee union and its human capital office
throughout the duration of the buyout and early-out program to ensure
fairness. Additionally, the agency ensured that information packets
regarding the proposed programs were provided to all eligible employees
before the date the offers took effect in an effort to give employees
ample time for fullest consideration. Program officials at USDA's
Natural Resources Conservation Service reported that their Civil Rights
Division conducted a Civil Rights Impact Analysis to determine if there
were any adverse effects on employees and concluded that there were
none, since every employee was offered a similar position at their
current grade level. None of our selected agencies reported any
grievances filed as a result of their buyout and early-out programs.
5. Developing a communication strategy early in the process helped to
build an understanding of the purpose of planned changes.
Agency officials in our review stressed that communication early and
throughout the reshaping process was critical. In a recent report, we
said that creating an effective, ongoing communication strategy is
essential to implementing a merger or transformation.[Footnote 15]
Communicating often, accurately, and consistently was the key factor to
one agency's successful strategy, according to an official responsible
for use of the buyout and early-out authorities. At NIST, the Director
met with staff prior to getting approval to offer buyouts and early
outs, and explained the agency was facing financial deficits and wanted
to avoid the possible need to resort to involuntary separations, and so
was soliciting the authority to offer voluntary separation incentives.
Other agencies began communicating with employees immediately after
obtaining OPM approval to offer buyouts or early outs. Treasury's
Office of the Comptroller of the Currency established an electronic
bulletin board and employees were invited to provide their comments,
suggestions, or recommendations on the agency's proposed reshaping
initiative and options that the agency's program officials might want
to consider. A number of agencies also communicated with employees
about the particulars of their programs through e-mails and brochures
to ensure employees were kept advised of all reshaping actions. Agency
officials also stressed that having highly visible top management
involvement in their communication strategies helped to deliver the
message of organizational changes as efficiently as possible. One
agency had its managers in the components and offices targeted for
reshaping brief their employees and attend group information sessions
with those employees. During these sessions, employees were able to
directly ask these managers specific questions about the reshaping
effort, thus helping the employees to understand management's rationale
for decisions made.
6. Agencies in our review considered ways to maximize cost savings.
Nearly all of the agencies in our review, in an attempt to maximize
costs savings, reported that they tried to separate employees from
federal service early in the fiscal year so as to save on employee
salary expenses. One agency also assigned affected employees to
nonaffected positions where appropriate.
7. Although they monitor who is accepting buyouts and early outs, the
agencies were not evaluating the continuing and future effectiveness of
these authorities.
Agencies in our review collected and reviewed data on the number of
employees who accept offers under their individual programs compared
with their intended goals. One agency has a system in place that
periodically generates a report on the numbers of employees who accept
buyout offers, thus providing management with useful information to
consider the progress toward their reshaping goals and make necessary
adjustments. To monitor the progress and success of its reshaping
initiative, another agency established a consolidation team that met
weekly to discuss issues that emerged as the agency implemented this
initiative and potential roadblocks to achieving its reshaping goals.
The team also maintains a list of all individuals who separate from the
agency with a buyout and provides this information to the agency's
staff involved in recruitment and placement to help ensure that
previous buyout recipients repay the full amount of the buyout payment
if they are rehired within five years of receiving the buyout.[Footnote
16]
However, agencies have not expanded on these monitoring efforts to
provide an evaluation of the longer-term effectiveness of these tools.
For example, agencies could compare the length of service for employees
in its workforce, the role this factor plays in employee decisions
about accepting buyout and early-out offers, and how this could affect
the composition and timing of future offers. This information on length
of service in relation to the acceptance or rejection of a buyout or
early-out offer could help the agencies as they plan and prepare for
future programs. In addition, agencies could perform an analysis to
determine the savings generated by buyouts and early outs relative to
other separation strategies, such as involuntary staff reductions. Such
an analysis would help agencies determine whether anticipated cost
savings of buyouts and early outs will in fact provide the best choice
of resource actions that could be taken.
Officials in Agencies We Reviewed Suggested Ways to Make the Buyout and
Early-out Programs More Efficient and Effective:
Agency officials responsible for use of these authorities that we
contacted found the requirement that agencies must get even minor
changes to their plans approved by OPM to be restrictive. Under OPM
regulations, even slight deviations from approved plans by even one
position or grade level requires additional OPM review. Officials in
three agencies suggested that agencies be allowed to make such minor
deviations, as long as the agencies do not exceed the total number of
approved buyouts or early outs. For example, an agency official
responsible for use of these authorities from HHS explained that
agencies using the authorities in nearly all cases are being asked to
predict the future because when offering buyouts, the agency never
really knows how many employees will accept the offers, or where they
will be located. The official explained that agencies target a group of
employees who will be offered the buyouts, and then hope for the best.
Having the flexibility to adjust the target group to which the offer is
made during the implementation of their plans could improve program
results and ultimately provide additional opportunity for agencies to
achieve their reshaping goals, according to this manager. OPM officials
said that they believe that the CHCO Act does not provide OPM the
authority to allow agencies to make changes to approved plans.
Furthermore, agency officials responsible for use of these authorities
in our review believe that the buyout maximum payment amount of
$25,000, which has been constant since 1992,[Footnote 17] may not be
enough incentive to encourage eligible workers to voluntarily leave the
workforce, especially higher-salaried employees. They explained that
inflation has eroded the buying power and value of buyouts, making them
less attractive unless the employee is ready to retire anyhow, thus
defeating the purpose of the program. Officials in four agencies said
some consideration should be given to ways to make buyouts more
attractive to employees. On the other hand, one agency official
acknowledged that increasing the buyout amount may reduce the number of
offers agencies could make at a higher amount and thus could make
alternative approaches to reshaping more attractive. Although they have
not undertaken any studies regarding this, OPM officials believe that
agencies' reporting that they are meeting their targeted number of
reductions indicates the dollar amount is sufficient.
In addition, some agency officials suggested that more coordination
across the agencies using the programs would be helpful as would the
sharing of examples of how some agencies used effective practices in
ways that were particularly successful or instructive in reshaping
their workforces, and that OPM may be in the best position to do this
coordination. For example, several program officials suggested that OPM
could sponsor forums, an interagency working group, or even additional
training sessions, such as the session OPM headquarters offered in May
2005, to encourage information sharing on how agencies may more
efficiently implement their buyout and early-out programs.
A number of the agency suggestions for improving the outcomes achieved
with the buyout and early-out programs would benefit all agencies using
the authorities, but some would require legislative changes. OPM, as
the central human capital office, is well positioned to determine which
governmentwide improvements to pursue and how to implement them,
including regulatory changes or proposals for legislative reform. For
example, OPM may assess the effects of raising the $25,000 buyout
amount and, if appropriate, sponsor legislative proposals for these
changes.
Conclusions:
As agencies transform to better meet 21st century challenges and
changing missions, they are increasingly recognizing the need to
reshape their workforces to meet these challenges. The Congress also
recognized this need and responded to it by designing legislation
creating buyout and early-out programs as additional tools agencies
could consider using in their efforts to reshape their workforces. Our
review shows that agencies have taken advantage of these programs and
are employing certain practices that help them to use these tools more
effectively.
Now agencies and OPM, working through each agency's CHCO, have the
opportunity to make even better use of these authorities and best
practices. Several agencies we reviewed have formulated ideas about how
to improve them. OPM and the CHCOs, through their governmentwide
Council, could provide an important service by sharing information with
agencies on successful ways to use the tools and the lessons learned
across agencies, and helping agencies determine what data to collect
and evaluate as indicators of the program's results. Currently, the
individual agencies in our review have not systematically evaluated the
relative efficiency, continuing effectiveness, and future viability of
the authorities as reshaping tools for their agencies. By doing so,
agencies will know whether they need to make adjustments in their long-
term strategy for employing those tools, and whether it is more cost-
efficient to spend funds on implementing buyouts and early outs rather
than on other reshaping tools, such as retraining. Finally, because OPM
takes a governmentwide perspective on human capital programs, it is
well positioned to assess potential improvements to these authorities,
such as the agencies proposed changes, and determine what changes to
implement and the steps needed to do so.
Recommendations for Executive Action:
To help ensure that agencies can take full advantage of the authorities
to use buyouts and early outs to reshape their workforces, we recommend
that the Director of OPM, in conjunction with the CHCO Council, take
the following actions.
1. Share additional information with agencies on examples of how
agencies have used practices associated with effective use of buyout
and early-out programs to support their programs and achieve successful
results. In addition, OPM could support the improvement of approval
cycle time and the effectiveness of the programs by facilitating
information sharing among agencies, such as holding forums and training
sessions on the use of the authorities for agencies with less-
experienced staff.
2. Help agencies identify ways they can determine the extent to which
the authorities have been effective tools and will continue to be in
the future, and how agencies may need to tailor their reshaping
strategies accordingly.
3. Assess potential program improvements, such as those the agencies
have identified, for possible governmentwide implementation, then take
the steps necessary to accomplish this, such as changing the
regulations governing the program, or proposing any needed statutory
changes.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Director of OPM. The Director
provided written comments, which are included in appendix II. The
Director agreed with our recommendations, as well as our conclusion
that buyouts and early outs have been effective tools for agencies
implementing workforce reshaping plans. The Director also stated that
the agency-specific examples included in our report provide additional
insight on the usefulness of buyouts and early outs as proven workforce
reshaping options, and will help agencies to emulate best practices as
they manage their own restructuring plans. In addition, the Director of
OPM agreed that, working with the CHCO Council, the agency could
provide an important service by sharing information on such successful
ways to use the tools and the lessons learned across agencies.
Furthermore, the Director stated that the examples will help as OPM
actively works with agencies to determine what data to collect and
evaluate as indicators of the program's results in an effort to measure
the effectiveness of their buyout and early-out programs. Once OPM
reviews agencies' actual experiences using these two tools, it will be
able to consider whether changes are needed to improve their
effectiveness. The Director of OPM also agreed that its review of
agency plans could be done more quickly and stated that it is
expediting approval of agencies' buyout and early-out requests.
The Director of OPM also provided technical comments, which we
incorporated as appropriate.
We are sending copies of this report to other interested congressional
parties, the Director of OPM, and the federal agencies and offices
discussed in this report. In addition, we will make copies available to
other interested parties upon request. This report will also be made
available at no charge on the GAO Web site at [Hyperlink,
http://www.gao.gov].
If you have any questions about this report, please contact me at (202)
512-6510 or at [Hyperlink, larencee@gao.gov]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Key contributors to this report include
William Doherty, Clifton G. Douglas Jr., Charlesetta Bailey, Tom Beall,
Andrew Edelson, Jeffrey McDermott, Amy Rosewarne, and Lou Smith.
Signed by:
Eileen Regen Larence:
Director, Strategic Issues:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
The objectives of our review were to identify:
* how many agencies have sought and been granted authority to offer
buyouts and early outs and the extent to which agencies have used these
authorities;
* how selected agency officials view the Office of Personnel
Management's (OPM) role in facilitating the use of the buyout and early-
out authorities;
* what practices are associated with agencies' effective use of buyouts
and early outs, how selected agencies used these practices, and whether
they have helped agencies to achieve their workforce reshaping goals;
and:
* what challenges the selected agencies identified, if any, to
continued effective use of these authorities.
To address our first objective, we obtained and analyzed OPM data on
the buyout and early-out programs authorized under the Chief Human
Capital Officers Act of 2002 to obtain governmentwide data on agencies'
use of the program and to help identify agencies for further review.
To address our other objectives, we reviewed the OPM data to identify
those federal agencies that were the most frequent users of the buyout
and early-out authorities under the Act. We selected the Departments of
Agriculture, Commerce, Energy, Health and Human Services, Interior, and
the Treasury for further review since they accounted for over half of
all requests for authorities at the time we started our
review.[Footnote 18]
We interviewed agency officials, such as human capital officers and
buyout and early-out program managers from the six selected agencies to
ascertain (1) their views of OPM's role in their use of the buyout and
early-out authorities, (2) the particular buyout and early-out
practices they were using, (3) their views on how the practices helped
them to achieve their goals, (4) the lessons learned from their
experiences, and (5) the challenges to continued successful use of
these authorities. As part of this review, we also asked officials to
identify and discuss more specifically either a buyout or early-out
offer in each of fiscal years 2003, 2004, and 2005 that, in their view,
was among the most successful of such offers conducted that year.
In addition, using a systematic selection procedure with a random
start, we reviewed a sample of OPM case files for about a tenth of all
the offers made by the six selected agencies for fiscal years 2003
through 2005. We reviewed the files to determine the length of OPM's
review time and also to identify instances where agencies used
practices associated with effective buyout and early-out use. While our
total sample of cases consisted of 40 buyout or early-out offers, we
excluded 7 cases from our analysis of OPM's review time because in
these cases, the agencies requested buyouts or early outs on the
assumption that they would possibly use contractors to conduct some of
the agencies' work. OPM could not approve the offers, however, until
the agencies made these final outsourcing decisions. In addition, we
excluded 5 cases from this analysis because either OPM's review of the
case was pending or we were unable to identify the agency date of the
submission or OPM's date of approval from the file. To supplement and
support the views provided by agency officials, our review also
included obtaining and examining available documentation, such as
strategic workforce plans, buyout and early-out plans, and other
documents associated with the use of the authorities from each of our
selected agencies.
We also interviewed officials involved in the review process from OPM
and the Office of Management and Budget to obtain information on their
roles and responsibilities in approving agency requests and their
perspectives on the use of buyout or early-out offers governmentwide.
In addressing our third objective, we first reviewed information from
relevant literature on the use of buyouts and early outs in
organizations including our prior studies of federal buyout programs in
1997 and 1998.[Footnote 19] We conducted a content analysis and
included as effective practices those common to multiple sources and
those previously cited in GAO reports. We next conferred on the
reasonableness of selected buyout and early-out practices we identified
with officials from the National Academy of Public Administration and
the International Public Management Association who had relevant
expertise in the management of human resource programs. Both of these
organizations have published reports on the effectiveness of federal
human capital practices related to buyout and early-out programs.
Because we designed our selection of agencies and cases to examine the
experiences, practices, and perspectives of a set of agencies that, in
recent years, have been relatively more engaged in conducting buyout
and early-out programs, the findings are not generalizable to other
agencies or the federal government as a whole. To assess the
reliability of OPM's database on buyout and early-out authorities, we
interviewed the officials at OPM who were knowledgeable about
maintaining that database. In addition, we provided each of our six
selected agencies with OPM's count of their buyout and early-out
authorities to review. We determined that OPM's data were sufficiently
reliable for the purpose of providing general information on the number
of agencies participating in buyouts and early outs over time and the
number and nature of authorities that these agencies used. Our review
was conducted in accordance with generally accepted government auditing
standards from October 2004 through November 2005.
[End of section]
Appendix II: Comments from the Office of Personnel Management:
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT:
OFFICE OF THE DIRECTOR:
WASHINGTON, DC 20415- 1000:
March 14, 2006:
Ms. Eileen Regen Larence:
Director:
Strategic Issues:
United States Government Accountability Office:
Washington, DC 20548:
Dear Ms. Larence:
Thank you for the opportunity to comment on the Government
Accountability Office (GAO) draft report entitled Agencies are Using
Buyouts and Early Outs With Increasing Frequency to Help Reshape Their
Workforces.
Your report provides a timely analysis of agencies' experiences over
the past 3 years in using voluntary separation incentive payments
(i.e., "VSIP" or "buyouts") and voluntary early retirements (i.e.,
"VERA" or "early outs") authorized by the Chief Human Capital Officers
Act of 2002. Agencies can use buyouts and early outs to minimize
involuntary reduction in force separations that could otherwise result
from restructuring actions. We have attached our comments on this
report.
Please contact me, or Mr. Mark Doboga, Deputy Associate Director for
Talent and Capacity Policy at 202-606-0388 or mark.doboga@opm.gov, if
we can be of further assistance to you.
Sincerely,
Signed by:
Attachment:
OPM's Comments and Suggestions for Government Accountability Office
(GAO) Draft Report Entitled: Agencies are Using Buyouts and Early Outs
With Increasing Frequency to Help Reshape Their Workforces:
New Website Guidance From OPM: The report notes that we are developing
additional website guidance to assist agencies undertaking buyout and
early out programs. Our new guidance includes two Fact Sheets; one
covers buyouts and the second covers voluntary early retirement. Our
new Fact Sheet on voluntary early retirement is now on our website at
http://www.opm.gov/html/topics.asp. Our new Fact Sheet on buyouts will
be posted on our website no later than March 31, 2006.
Active Role for Both OPM and Individual Agencies in Evaluating the
Buyout and Early Out Programs: The report suggests that we take a
positive role in partnership with the CHCO Council for interaction with
agencies to maximize the effectiveness of both tools in potential
reduction in force (RIF) and other restructuring situations. We agree
with this suggestion. To minimize the likelihood of RIF separations, we
are actively working with agencies in measuring the effectiveness of
our VSIP and VERA programs. For example, beginning in October 2005 we
revised the VSIP and VERA reports that agencies send to OPM to now
capture information such as:
"How has this VSIP impacted the shape of your workforce?
Did the VSIP have the desired results? Why or why not?
What is the average cost of VSIPs paid during the quarter?"
After we review agencies' reports on their actual experiences using
buyouts and early outs, we will be able to consider if changes are
needed to improve the effectiveness of the VSIP or VERA programs.
We also see a proactive role for OPM in sharing information from
agencies on their best buyout and early out practices, and how agencies
may subsequently improve the effectiveness of their reshaping
strategies. This will further support the active consulting assistance
that OPM human capital officers presently provide individual agencies
considering VSIP or VERA and other RIF-avoidance options.
Effectiveness of Buyouts and Early Outs in Minimizing Involuntary
Separations: We agree with GAO's conclusion that the VSIP and VERA
options have been effective tools for agencies implementing workforce
reshaping plans. The agency-specific examples that GAO includes through
the draft report give additional meaning to the usefulness of buyouts
and early outs as proven options to avoid RIF separations in
restructuring situations.
OPM is Expediting Approval of Agencies' Buyout and Early Out Requests:
We agree with GAO's conclusion that our updated VSIP and VERA
checklists should expedite approval time by ensuring agencies submit
complete packages to us for approval. The checklists support OPM's
positive consultant role that the report notes assists, not delays,
approval of agencies' VSIP and VERA requests. Our new website guidance
on buyouts and early outs should further minimize approval time of
agencies buyout and early out packages.
The Best Practices Suggested by GAO Will Benefit Agencies in
Restructuring Situations: GAO provided several agency-specific examples
of best practices that agencies have found useful in offering buyouts
and early outs while reorganizing their workforces. We believe that
specific examples such as these are beneficial both for us to evaluate
the effectiveness of agencies' programs, and for other agencies to
emulate as they manage their own restructuring and reshaping plans.
[End of section]
(450370):
FOOTNOTES
[1] GAO, High Risk Series: An Update, GAO-01-263 (Washington, D.C.:
January 2001).
[2] During the course of our review, OPM reported that the frequency
with which the Department of Transportation (DOT) and the Department of
Veterans Affairs (VA) had used the authorities was comparable in
magnitude to the six agencies that we selected. Because of this, we
included DOT and VA in our figures showing individual agency use of the
authorities. However, they were not included in our more detailed
examination of practices at the six selected agencies.
[3] See, for example, GAO, Federal Downsizing: Effective Buyout
Practices and Their Use in FY 1997, GAO/GGD-97-124 (June 30, 1997); and
Federal Downsizing: Agency Officials' Views on Maintaining Performance
during Downsizing at Selected Agencies, GAO/GGD-98-46 (Washington,
D.C.: Mar. 24, 1998).
[4] The CHCO Act of 2002 specifies that OPM, when reviewing agency
buyout plans, consult with OMB before final approval is granted. 5
U.S.C. 3522(c).
[5] For the purposes of our review, a program is each OPM-approved
agency request to use the buyout, early-out, or both authorities.
[6] Pub. L. No. 102-484 (Oct. 23, 1992) authorized DOD buyouts through
Sept. 30, 1997; Pub. L. No. 103-337 (Oct. 5, 1994) extended DOD buyouts
through Sept. 30, 1999. DOD's current buyout authority is included as
part of the National Security Personnel System (5 U.S.C. 9902(i)).
[7] Pub. L. No. 103-226 (March 30, 1994).
[8] Pub. L. No. 104-208 (Sept. 30, 1996).
[9] See, for example, GAO, Federal Employment: The Results to Date of
the Fiscal Year 1994 Buyouts at Non-Defense Agencies, GAO/T-GGD-94-214
(Washington, D.C.: Sept. 22, 1994); and Federal Downsizing: Better
Workforce and Strategic Planning Could Have Made Buyouts More
Effective, GAO/GGD-96-62 (Washington, D.C.: Aug. 26, 1996).
[10] GAO/GGD-97-124.
[11] 5 U.S.C. 9902(i).
[12] Because DOD has separate legislative authority to offer buyouts
and early outs and does not require approval from OPM, we excluded DOD
from our review.
[13] OPM issued final buyout regulations (5 CFR Part 576) effective on
January 27, 2005, and final early-out regulations (5 CFR Parts 831 and
842) effective on June 14, 2004.
[14] The Office of the Comptroller of the Currency was able to offer
buyouts prior to the CHCO Act of 2002, using its broad pay-setting
authority. 12 U.S.C. § 482. The Act provided the Office of the
Comptroller of the Currency the additional authority to use early-out
programs.
[15] GAO, Results-Oriented Government: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington,
D.C.: July 2, 2003).
[16] The CHCO Act of 2002 contains provisions that require buyout
recipients to repay the full amount of the buyout if, within 5 years of
separating, they are reemployed by the federal government. 5 U.S.C.
3524.
[17] Pub. L. No. 102-484.
[18] During the course of our review, OPM reported that the frequency
with which the Department of Transportation (DOT) and the Department of
Veterans Affairs (VA) had used the authorities was comparable in
magnitude to the six agencies that we selected. Because of this, we
included DOT and VA in our figures showing individual agency use of the
authorities. However, they were not included in our more detailed
examination of practices at the six selected agencies. In addition,
because DOD has separate legislative authority to offer buyouts and
early outs and does not require approval from OPM, we excluded DOD from
our review.
[19] See, for example, GAO, Federal Downsizing: Effective Buyout
Practices and Their Use in FY 1997, GAO/GGD-97-124 (Washington, D.C.:
June 30, 1997); and Federal Downsizing: Agency Officials' Views on
Maintaining Performance during Downsizing at Selected Agencies, GAO/GGD-
98-46 (Washington, D.C.: Mar. 24, 1998).
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