A REVIEW OF H.R. 1836, THE CIVIL SERVICE AND NATIONAL SECURITY PERSONNEL IMPROVEMENT ACT OF 2003 - May 6, 2003

Testimony Before the Committee on Government Reform
United States House of Representatives

__________________________________________________________

For Release on Delivery
Expected at
10:00 A.M. EST
Tuesday, May 6, 2003

A Review of H.R. 1836, the Civil Service and National Security Personnel Improvement Act of 2003

Statement of
Ms. Mildred L. Turner
Federal Managers Association

Chairman Davis, Ranking Member Waxman, and Members of the Committee:

My name is Mildred Turner. On behalf of the 200,000 managers and supervisors in the Federal government whose interests are represented by the Federal Managers Association (FMA), I would like to thank you for inviting us to present our views before the House Government Reform Committee regarding H.R. 1836, the “Civil Service and National Security Personnel Improvement Act of 2003.”

I am currently a Farm Loan Manager for the Farm Service Agency (FSA), U.S. Department of Agriculture, at the Centre/Clinton county office located in Lamar, PA. In my position I am responsible for the management of a $25 million farm loan portfolio of direct and guaranteed loans, which represents a total of approximately 150 farm families. My statements, however, are my own in my capacity as a member of FMA and do not represent the official views of the Farm Service Agency or the Department of Agriculture.

Established in 1913, FMA is the largest and oldest Association of managers and supervisors in the Federal government. Our Association has representation in more than 25 Federal departments and agencies. We are a non-profit advocacy organization dedicated to promoting excellence in public service through effective management. As those who are responsible for the daily management and supervision of government programs and personnel, our members possess a wide breadth of experience and expertise that we hope will be helpful as we collectively seek to address the human capital crisis that our civil service has been saddled with.

This hearing is being held less than a month after the Department of Defense (DOD) submitted an expansive list of legislative reform proposals to Capitol Hill just as Congress was preparing to recess for the two-week Spring District Work Period. Among other things, these reforms would overhaul the current DOD civilian personnel system; yet Congress is being given, in essence, less than two weeks to examine and review the proposals prior to significant portions of the legislation being marked-up both in this Committee and in the Armed Services Committee as part of the fiscal 2004 Defense Authorization bill.

We at FMA have grave concerns about the rushed nature in which these potentially precedent-setting changes to civil service statutes are being moved through what is supposed to be a fair and deliberative legislative process. While we appreciate the opportunity to offer our perspective here today, you should be informed, Mr. Chairman, that FMA has not been afforded the same opportunity by DOD, before, during or since the drafting of their bill.

In fact, the legislation itself provides no substantive justification for the magnitude of the proposed changes; there is a merely a brief section-by-section analysis that puts the text of the legislation in simplified terms. Toward this end, no argument is provided to demonstrate whether or not DOD even has the infrastructure in place to effectively manage all of the new authorities. Furthermore, the new Department of Homeland Security (DHS) was granted broad authority to develop an alternative personnel system, which is only in the preliminary stages of design. DHS was to be used as a potential model for the rest of the Federal government; why then is DOD so anxious to do the same when we have not even seen the effects of the DHS system?

In recent testimony, Comptroller General David Walker warned Congress that “moving too quickly or prematurely at DOD or elsewhere can significantly raise the risk of doing it wrong.” We at FMA firmly believe that we need to slow down this runaway train immediately and, instead, carefully consider major reform proposals that will impact the lives of one-third of the Federal workforce – and eventually could affect all remaining civil servants.

OVERTIME PAY FOR MANAGERS AND SUPERVISORS

On the issue of pay flexibility, we would like to express our concerns about the distinct retention problem that exists in the Federal government. The notion of the career civil servant is becoming obsolete because there are few incentives for advancement in the Federal government. When combined with better salary and benefits packages in the private sector, it is no wonder that many Federal employees are leaving the public sector after only a few years of service. In fact, there are often times disincentives for moving up the career ladder. A perfect illustration is the current statute which caps overtime pay for Federal managers and supervisors.

Between 1994 and 2001, the non-postal executive branch civilian workforce was reduced by more than 452,000 positions. One of the side-effects of this downsizing is that overtime is becoming increasingly common. According to OPM, “the percentage of private sector supervisors and other FLSA-exempt employees who receive overtime pay is increasing.”

Federal managers, supervisors, and other Fair Labor Standards Act-exempt employees, however, face an outdated restriction placed on the payment of overtime that is encouraging some to leave the ranks of management and return to the bargaining unit or move to the private sector so they can earn a higher paycheck.

Under current law, 5 U.S.C. 5542(a)(2), overtime pay for Federal managers, supervisors and FLSA-exempt employees (one and a half times the normal rate for work in excess of 40 hours per week) is limited to that of a General Schedule level 10, step 1 employee. This means that employees paid at GS 12, step 6, and above earn less than their normal hourly rate for overtime work.

The first grade-based overtime cap, enacted in 1954, set the base at GS 9, step 1 (P.L. 83-763). Twelve years later in 1966, it was increased to GS 10, step 1 (P.L. 89-504). In the thirty-seven years since that time, however, nothing has been done to keep pace with changing workforce realities. In 1966 the average GS grade was 7.3; in 2001 the average GS grade was 9.7, nearly three full grade levels higher since the implementation of the current overtime cap.

Overtime pay is premium pay and therefore does not count toward increasing an employee’s future retirement benefit. This means that increasing overtime pay does not affect mandatory spending. The overtime cap causes two problems for Federal managers and supervisors:

1. First, managers and supervisors above GS 12, step 6 actually earn less on overtime than they do for work performed during the regular work week.

   Example: Sally Supervisor is a GS-13, step 9.
   Her regular rate of pay is $41.91 per hour.
   For overtime, however, she is paid at a rate of $31.70 per hour.
   If Sally worked on a Saturday she would be paid $10.21 less per hour than for the work she performed on Friday.

2. Second, managers and supervisors may earn substantially less for overtime work than the employees they supervise.

   Example: Sally Supervisor is a GS-13, step 9.
   Her regular rate of pay is $41.91 per hour.
   For overtime, however, she is paid at a rate of $31.70 per hour.
   Ed Employee is a GS-12, step 7 and FLSA non-exempt. His overtime rate is $50.09.
   Sally earns $18.39 less per hour than Ed for overtime work.

* Examples use hourly/overtime rates in the Washington-Baltimore locality pay area

Increasing overtime pay would represent an important step toward addressing overtime problems that increasingly serve as disincentives to hard-working civil servants contemplating accepting promotions into the ranks of management. In fact, some have turned down promotions and even taken downgrades to be eligible to receive “real” overtime pay . As one manager from the Social Security Administration said, “It’s not a money issue, it’s a fairness issue. I work 50 or 60 hours per week and would prefer getting at least what my normal salary is.” He went on to state that the overtime policy has not dissuaded managers from working late or coming in on weekends. “There is too much work to do,” he said .

Mr. Chairman, I have been personally affected by this overtime problem. My ordeal had to do with the current interpretation of rules outlined in section 551.208 of title 5, Code of Federal Regulations (CFR), with respect to FLSA-exempt Farm Service Agency personnel assigned to what the agency refers to as Consent Decree Action Teams.

Since June of 1999, Farm Service Agency has been assigning FLSA-exempt and nonexempt employees to Consent Decree Action Teams (CDAT) and directing those employees to work a large number of overtime hours. While performing on CDAT, FLSA-exempt employees have the same duties, responsibilities, and authority as do the FLSA-nonexempt employees. Exempt and nonexempt employees are working side-by-side and are performing identical tasks with the same amount of authority and responsibility. Many of these employees have been on two-week rotations for work on these Consent Decree Action Teams since June of 1999. Overtime pay for the FLSA-exempt employees is capped at GS-10 step 1 while nonexempt employees are receiving one and one half times their normal salary for the overtime hours.

To date, there have been more than 300 exempt individuals, many of whom many are FMA members, who have worked on the CDAT project without the benefit of being compensated equally for overtime earned while performing identical job responsibilities. As you are aware, an employee’s exemption status is determined by the type of work he/she is performing. To this end, there continues to be considerable confusion concerning the implementation of the Fair Labor Standards Act as it relates to USDA-FSA employees who have been detailed to the Consent Decree Action Teams.

In accordance with 5 CFR 551.201, an agency may “designate an employee FLSA-exempt only when the agency correctly determines that the employee meets one or more of the exemption criteria” set forth by the 5 CFR and supplemental interpretations and instructions issued by the Office of Personnel Management. Moreover, 5 CFR 551.208 discusses the effect of performing temporary work or duties on FLSA exemption status.

It is FMA’s belief that the criteria set forth by the aforementioned regulation have been met. Specifically, we understand it to mean that individuals who have worked for more than a total of 30 days on the CDAT project would be properly designated as nonexempt during the time they spend on CDAT. This matter continues to affect many employees who perform a wide range of functions for FSA, including Management and Program Analysts, Farm Loan Managers, County Executive Directors, District Directors, Program Management Specialists, and Loan Specialists.

When we at FMA requested OPM’s clarification concerning the CDAT project and employees’ exempt and nonexempt statuses, their response was that “… if an employee is assigned to a series of three or more two-week periods, without an intervening break (italics added for emphasis), it may be necessary to change the employee’s FLSA status. If the employee were to return to his or her position of record before completing 30 calendar days on the temporary assignment, no change in FLSA status would be appropriate under section 551.208.” Unfortunately, this is not how we interpret the statute, and to this day I, along with other affected members on CDAT, have not received equitable pay for mandatory overtime work.

FMA also remains concerned about an issue that adversely affects many managers who are under the purview of Department of the Navy. In an effort to reorganize the shipyard management structure several years ago, the position of Zone Manager was created as a managerial oversight position in the Project Management arena. At the time this was done position was classified as FLSA-exempt or restricted from receiving true overtime for those hours worked beyond the normal tour of duty (40 hours per week). We feel that there are other positions which support our production workforce that are improperly classified as “exempt.” Some of these positions affect our Production Training Department instructors and resource managers. This classification has placed a manager working in this position description in a situation where the workers assigned to him/her make more money than the manager for the overtime hours worked.

In 1986, the Office of Personnel Management declared all Federal employees above the GS-11 salary level exempt regardless of their assigned duties. In July 2001, the International Federation of Professional and Technical Engineers (IFPTE) and the Department of the Navy (Naval Sea System Command-NAVSEA) reached a Supplemental Global Agreement to address Fair Labor Standards (FLSA) overtime claims of IFPTE’s engineers, scientists and technicians employed at Portsmouth, Norfolk and Puget Sound Naval Shipyards. One key provision of the Supplemental Agreement was the identification of series and grade levels that are FLSA exempt/non-exempt. More specifically, the Navy Shipyards recognized that the law provides for FLSA overtime pay for employees working as GS-12 technicians and in related occupations.

Following the agreement made between NAVSEA and the IFPTE regarding the classification of employees in an "exempt status," we at FMA feel that positions such as the Zone Manager deserve to have their classification status changed also. The just decision made in changing the status of the members of the IFPTE needs to be extended to the managers, supervisors, instructors, and production support personnel presently classified as FLSA-exempt.

The ship repair environment is one in which emergency and voyage repair situations arise from time to time. We are not talking about the manager who works an occasional Saturday or a few hours late one evening. We have members in the shipyard community who are assigned to a project that requires in some cases working 12 to 16 hours a day for a month or more – and receive no overtime pay because of a lack of funding, much less capped overtime pay. The essential work of our employees and managers to ensure that ship schedule and deployments are met is an important component of our national security. We at FMA would like to see a thorough review of the referenced classifications. It is our position that the managers, supervisors, instructors, and production support personnel presently in an “exempt” status are entitled to receive fair overtime compensation for the critical work they perform on behalf of our Nation.

Inadequate overtime pay has led to severe morale problems. As a result of the de-layering of the Federal workforce – which reduces opportunities for further advancement – a growing number of experienced managers and supervisors are taking voluntary downgrades to positions of less responsibility because they see no reward for staying in the current jobs. With the government’s reliance on overtime for critical workloads, they can earn as much or more money in a lower-graded position.

OPM has proposed legislation in the past guaranteeing that employees always receive at least their regular hourly rate of pay, which would eliminate the reduced hourly rate for employees at GS 12, step 6, and above . At the time, OPM justified the reform by stating that it would “bring greater consistency to Federal overtime pay practices generally, since the same change was enacted for Federal law enforcement officers as part of the Federal Law Enforcement Pay Reform Act of 1990 (See 5 U.S.C. 5542(a)(4)) and for Federal firefighters as part of the Federal firefighters Pay Reform Act of 1998 (See 5 U.S.C. 5542(f))… These changes would be consistent with our overall strategic objective of simplifying the Federal compensation system.” The OPM Director at the time went on to say that, “The overtime pay proposal is a long overdue correction that would be consistent with the pay practices of many non-Federal employers.” It is also worth noting that on December 21, 2000, as part of P L. 106-558, an exception to the Federal Law Enforcement Pay Reform Act of 1990 was enacted authorizing an overtime hourly rate of pay equal to one and one-half times the hourly rate of basic pay for certain wildland firefighters who are employees of the Department of the Interior or the United States Forest Service of the Department of Agriculture. The authority also is applicable to wildland firefighters only while they are engaged in wildland fire suppression activities.

While private sector employers are not required to pay overtime to FLSA-exempt employees, private sector managers and supervisors do not face the same type of pay compression prevalent in the Federal sector that makes leaving management to earn uncapped overtime so attractive. At a bare minimum, FMA would like to ensure that Federal managers, supervisors, and FLSA-exempt employees receive at least their regular rate of pay for overtime work, as supported by OPM in the past and proposed in H.R. 1836. We would like to thank you, Mr. Chairman, for including this provision as part of the legislation we are discussing today. Although, we would prefer to see the overtime cap raised to a fair but reasonable level, this provision represents a good first step in addressing overtime pay as we seek to remove obstacles to our government’s ability to recruit and retain a highly motivated cadre of managers and supervisors.

Broader compensation reform is a critical piece to this puzzle. In April 2002, OPM released a white paper intended to initiate a dialogue on reform of the current Federal pay structure. According to OPM, if the government is to recruit, manage, and retain the human capital it needs, its white-collar pay system should:

• Achieve the principle of providing equal pay for work of equal value;
• Provide agencies the means to offer competitive salary levels on a timely, rational basis;
• Recognize competencies and results, at both the individual and organizational level; and
• Orient employee efforts and pay expenditures toward mission accomplishment.

Similarly, the second National Commission on the Public Service, a.k.a, the Volcker Commission so named for Commission Chair Paul Volcker, has issued recommendations on pay reform as part of its final report released this past January. More specifically, the Volcker Commission believes that Congress should establish policies that permit agencies to set compensation related to current market comparisons. The Commission is also of the opinion that current personnel systems are: a) out of touch with market reality; and b) immune to performance because managers seek to “spread bonuses around as compensation supplements for large numbers of employees instead of incentives or rewards for top performers.” The Commission goes on to state that such a system “discourages potential employees, especially the most talented and promising, who are reluctant to enter a field where there are so few financial rewards for their hard work, where mediocrity and excellence yield the same paycheck.”

PAY COMPARABILITY BETWEEN PUBLIC AND PRIVATE SECTORS

Compounding the myriad of problems associated with the recruitment and retention of Federal employees is the significant pay gap between the public and private sectors. According to a survey of college graduates, Federal and non-Federal employees conducted by the Partnership for Public Service , the Federal government is not considered an employer of choice for the majority of graduating college seniors. In the survey, nearly 90 percent said that offering salaries more competitive with those paid by the private sector would be an “effective” way to improve Federal recruitment. Eighty-one percent of college graduates said higher pay would be “very effective” in getting people to seek Federal employment. When Federal employees were asked to rank the effectiveness of 20 proposals for attracting talented people to government, the second-most popular choice was offering more competitive salaries (92 percent). The public sector simply has not been able to compete with private companies to secure the talents of top-notch workers because of cash-strapped agency budgets and an unwillingness to address pay comparability issues.

The Federal Employee Pay Comparability Act (FEPCA) of 1990 was intended to close the gap between Federal employee salaries and those of their private-sector counterparts. However, FEPCA has never been implemented as it was originally intended. Since this bill was enacted, administrations led by both political parties have used a capping feature designed to reduce pay increases in times of economic distress. This executive authority has been utilized despite record budget surpluses. More than a decade since the enactment of FEPCA, the Bureau of Labor Statistics shows that the pay gap between Federal civilian employees and their private-sector counterparts has grown to 33 percent. If FEPCA is never to be adhered to, we must, at a minimum, re-examine FEPCA to determine how best to bring public-sector salaries more in line with those of their private-sector counterparts. Closing the pay gap between public and private-sector salaries is critical if we are to successfully recruit and retain the “best and brightest.”

PAY PARITY BETWEEN CIVILIAN AND MILITARY PERSONNEL

For the time being, however, we must uphold the longstanding principle of linking annual pay increases between Federal civilian employees and military personnel. Since 1987 – and in 19 of the last 22 years – civilian and military personnel have received the same annual raises.

Per the direction of Congress, President Bush recently signed into law a 4.1 percent average pay raise for civilian workers this year that matches the increase for the military – despite originally proposing only a 2.6 percent pay raise for Federal civilians. Nevertheless, the Administration has just proposed a 2 percent across-the-board average pay raise for Federal employees in 2004, while military personnel are slated to receive a 4.1 percent average pay raise next year – marking the third straight year that the White House has attempted to de-link civilian and military pay increases. The 2 percent recommended pay raise also rebuffs the 2.7 percent increase mandated by the formula in FEPCA used to determine annual civil service pay raises.

In light of the well-documented human capital concerns facing our Federal government, we must maintain the tradition of providing equitable pay increases to Federal civilian employees and members of the uniformed services – all of whom are on the frontlines ensuring our nation’s security each day and make significant contributions to the general welfare of the United States.

RECRUITMENT AND RETENTION TOOLS

Compensation is an integral piece of the human capital crisis we are presently facing. Legislation has been introduced in the House by Rep. Jo Ann Davis (R-VA), H.R. 1601, and in the Senate by Sen. George Voinovich (R-OH), S. 129, that would allow managers to use a variety of compensation tools such as recruitment, relocation, and retention bonuses, and give agencies streamlined critical pay authority to fill key positions. In your legislation, Mr. Chairman, you have proposed offering similar authorities for the National Aeronautics and Space Administration (NASA). These are sensible reforms that would begin to address the workforce problems that will only worsen with the forthcoming retirement wave.

Retention bonuses do not always have to take the form of financial incentives. In exit interviews of Federal workers, other issues have been raised such as a lack of recognition and the absence of a long-term sense of purpose. It is also a widespread belief of those leaving government that insufficient opportunities exist for growth in the public sector, which brings us to the problem of proper succession planning. In a recent poll conducted by the Partnership for Public Service, when Federal employees were asked to rank the effectiveness of 20 proposals for attracting talented people to government, the most popular choice was providing more opportunities for career advancement.

Student loan repayment has long been identified as a recruitment and retention bonus that would help attract and retain high-performing employees. Federal agencies have had the authority to repay student loans since 1990, but authorizing language for implementation purposes was not published until 2001. Currently, agencies can pay up to $6,000 a year in student loan payments for each employee, but the total amount per employee cannot exceed $40,000. Also, employees who participate in the program must remain with the agency for at least three years and must pay the money back if they leave before the three years are up. Mr. Chairman, you have proposed in your legislation to increase the $6,000 threshold to $10,000, and we at FMA applaud your recommendation.

Under 5 U.S.C. 5379, agencies are authorized to establish a program under which they may agree to repay certain types of Federally-insured student loans as a recruitment or retention incentive for highly qualified personnel. Currently, however, fewer than half of the 53 agencies that report to OPM on the student loan repayment program had a plan in place, or expected to have a plan in place in the near future . Three in four respondents to a recent Hart/Teeter survey considered a loan forgiveness program for college graduates who take Federal jobs an effective recruitment tool .

FMA would like to see this benefit extended to those seeking graduate degrees as an additional recruitment and retention tool. According to a recent survey of third-year law school students by the Partnership for Public Service, Equal Justice Works, and the National Association for Law Placement (NALP), law school debt prevented 66 percent of student respondents from considering a public interest or government job .

Often times, however, agencies do not have adequate funding for these incentives, even existing ones. Annual appropriations should include additional line items for recruitment and training. The public sector should mirror the private sector in appreciating that the most valuable organizational asset is the workforce itself and in recognizing that “you get what you pay for.”

PERFORMANCE MANAGEMENT

For agencies to perform at optimum levels, employees must have clearly defined performance standards. These standards should be directly linked to the agency’s mission, customer service goals, and their annual performance plan and/or strategic plan.

According to a Merit Systems Protection Board survey conducted during fiscal years 1997 through 1999, on average one of every 8.8 Federal workers received a promotion each year during the three-year period that was studied. In other words, 7.8 of 8.8 employees – or 88.6 percent of the Federal workforce – were not promoted in any given year. At GS-12, the rate of promotion fell to about one in 13 a year; at GS-13, the rate was about one in 20, and at GS-14, the rate was about one in 25. Generally speaking, the rate of promotion slows as the General Schedule grade level increases. With such a low rate of promotion, the problem of putting the right people in the right jobs is aggravated.

We at FMA support implementing a more comprehensive, government-wide appraisal system with a pay-for-performance component. The current “pass/fail” appraisal system, for example, can serve as a disincentive for excellence. An appraisal system that clearly delineates unacceptable, acceptable and excellent performance is recommended. The appraisal rating should be a key consideration in the promotion and award processes.

The current mechanism in place for addressing unacceptable performance should be revised, for it is far too cumbersome and takes too long to document. As a remedial measure, the employee should be provided tutoring and given a reasonable timeframe in which to attain acceptable performance. We as Federal managers want the process to be fair for both the employee and the agency.

We envision a “contract” between the manager and the employee, i.e., if an employee performs at the acceptable level of performance, he/she will retain the position and receive the scheduled within-grade increases; if an employee performs at the excellent level, he/she will receive proper recognition; if an employee performs at the unacceptable level, he/she will receive a reasonable timeframe in which to improve performance.

We at FMA recommend an awards system for managers that adequately reflects the manager’s level of responsibility, span of control, and level of achievement. Of course, any such system requires sufficient appropriations funds. We have too often seen over time new pay authorities without the necessary dollars to utilize these tools. The Bush Administration has proposed a $500 million Human Capital Performance Fund for fiscal 2004 to “allow managers to increase pay beyond annual raises for high-performing employees and address other critical personnel needs.” Mr. Chairman, you have included this provision in your legislation. OPM would administer the Fund for the purpose of allowing agencies to deliver additional pay to certain civilian employees based on individual performance or other human capital needs, in accordance with OPM-approved agency plans. Although this is a step in the right direction in granting managers additional flexibilities, questions must still be answered with respect to the disbursement of the funds:

• Who will decide which employees receive increases, and who will determine the amount of such increases?
• Is $500 million sufficient for a workforce of some 1.8 million Federal employees?
• Will this Fund be renewed every year and appropriated accordingly?

Furthermore, FMA does not believe any new Performance Fund should be used to undercut fair and appropriate annual pay adjustments for Federal employees.

AUTHORITY OF THE SECRETARY OF DEFENSE IN H.R. 1836

FMA is concerned about the far-reaching authority that the legislation gives to both the current Secretary of Defense as well as all future secretaries of DOD, while at the same time, seemingly decreasing the role of OPM and its role as the human resources oversight agency for the Federal government. Sec. 9902 (a) of H.R. 1836 stipulates that:

“If the Secretary certifies that the issuance or adjustment of a regulation, or the inclusion, exclusion, or modification of a particular provision therein, is essential to the national security, the Secretary may, subject to the direction of the President, waive the requirement in the preceding sentence that the regulation or adjustment be issued jointly with the Director.”

This provision effectively removes OPM from the decision-making process with regards to the human resources management system of DOD in cases of “national security.” As Comptroller General Walker testified, “ In essence, the act would allow for the development of a personnel system for the second largest segment of the federal workforce that is not necessarily within the control of even direct influence of OPM.”

Furthermore, the term “national security” is not defined anywhere in the legislation. Given that DOD seeks to create a “Department of Defense National Security (bold added for emphasis) Personnel System” we are concerned that many, if not all, decisions could fall under the umbrella “national security,” allowing the Secretary of Defense to have the last word on all decisions related to the human resources system, without consultation and approval from the Office of Personnel Management. To the contrary, we believe that the role of OPM should, in fact, be strengthened in the development of a new personnel system that will affect nearly 700,000 Federal civilian employees.

MSPB APPEAL RIGHTS IN H.R. 1836

FMA also believes that it is necessary for DOD civilian employees – and all civilians for that matter – to retain all of their Merit Systems Protection Board (MSPB) appeal rights. Currently, H.R. 1836 provides that:

“in prescribing regulations for any such appeals procedures, the Secretary (i) should ensure that employees of the Department of Defense are afforded the protections of due process; and (ii) toward that end, should be required to consult with the Merit Systems Protection Board before issuing any such regulations.”

Why is it necessary to draft new regulations in the area of MSPB appeal rights when the MSPB currently operates to serve Federal employees and has long provided fair and appropriate recourse for the Federal workforce? Federal civilian employees at DOD deserve to have all of their MSPB rights fully transferred into any new personnel system that is created.

“PAY FOR PERFORMANCE”

There has been much discussion about the creation of a pay-for-performance system under both DOD’s legislative proposal and H.R. 1836. In neither proposal are details released on the creation of this system – there is merely an implication of a move to a pay-for-performance system.

In recent testimony, Comptroller General Walker stated: “In our view, one key need is to modernize performance management systems in executive agencies so that they are capable of adequately supporting more performance-based pay and other personnel decisions. Unfortunately, based on GAO’s past work, most existing federal performance appraisal systems, including a vast majority of DOD’s systems, are not designed to support a meaningful performance-based pay system.”

Indeed, it would be reckless for Congress to allow the Department of Defense to implement a department-wide, pay-for-performance system affecting one-third of the Federal workforce before proving that it has the necessary performance measurement infrastructure in place.

PAY BANDING DOD has proposed as part of its bill replacing the current pay structure with a broad-banding, or pay-banding, system. Of course, there remain challenges with any proposed pay-band system for that matter. First, pay-for-performance systems are only as good as the appraisal systems they use. Since performance is the determining factor in pay-band movement, if there is no confidence in the appraisal system, there will be no confidence in the pay-band system.

Pay-for-performance systems can be problematic where there is an aging workforce. Experienced employees tend to convert towards the top of the pay band. This provides them little room to progress through the band, and only if they achieve higher levels of performance ratings. This is particularly true for those employees whose GS grade is the highest grade in the new band. (Example: Grade 13 employee placed in an 11-13 band. S/he will be towards the top and now will need the higher grades to continue to move ahead. Previously s/he only needed time in grade to progress).

Finally, pay-band performance requirements can discourage non-banded employees from applying for banded positions. If the employee is converted in the upper range of a band s/he may not have confidence s/he can achieve the higher ratings requirements.

For additional guidance, Congress should look to the pay-banding systems being implemented at the Internal Revenue Service (IRS) and the Federal Aviation Administration (FAA).

CONCLUSION

As we collectively grapple with the complex issue of compensation reform in the Federal government, we must find where models such as the ones being used at the IRS and the FAA have succeeded – and failed. There have also been numerous instances of demonstration projects in the area of expanding personnel authority bringing success to some Federal agencies, but rarely are these successful initiatives allowed to cross agency lines. The approach the government takes to correct pay systems for civilian workers will decide how this Nation survives the human capital crisis before us – and we believe that this should be a thoughtful and thorough process. More importantly, Congress and the Administration must shift the habitual focus from cutting the size of the Federal workforce to that of recruiting and retaining top talent.

We continue to have deep concerns about the lack of involvement by executive agencies of employee organizations such as ours. As Comptroller General Walker stated:

“More generally, and aside from the specific statutory provisions on consultation, the active involvement of employees will be critical to the success of NSPS… High-performing organizations have found that actively involving employees and stakeholders, such as unions or other employee associations when developing results-oriented performance management systems helps improve employees’ confidence and belief in the fairness of the system and increases their understanding and ownership of organizational goals and objectives. This involvement must be early, active, and continuing if employees are to gain a sense of understanding and ownership for the changes that are being made.”

It is critical that employees and the organizations that represent them play an active role in shaping any civil service reform policies.

We at FMA would like to propose several recommendations. One important priority is to work with both the Administration and Congress to alter the image and perception of the civil service. Far too often, civil servants have unfairly taken the brunt of the blame for ill-advised policies that they had no control over. The public must recognize the important duties our Federal employees perform each and every day on their behalf. Everyday, Federal employees are working tirelessly behind the scenes to ensure that our Nation remains as secure as possible. Everyday, a disaster of some sort is averted through the dedicated efforts of our extremely talented Federal workforce. Yet we often hear stories of blame being assigned to these public servants, rarely about the successes that occur on a daily basis. And while our attention is focused on security, the business of our Nation continues to move forward in an increasingly efficient manner.

All the while, Federal workers at the Departments of Transportation and Justice are providing heightened security of our skies, our shores, and our borders; employees throughout the Department of Defense are supporting our warfighters as they continue fighting the war with Iraq as well as the war on terrorism; and the ongoing endeavors of the talented individuals at the Centers for Disease Control are addressing immediate terrorist threats while preparing us for future contingencies. Time and time again, our civil service selflessly responds in a professional manner – all for the greater well-being of the country they serve.

We also support ways to improve the hiring process for Federal employment, and bring about policies that attract the best and brightest of our society to serve in Public Service. Correspondingly, managers should be afforded the means to continuously enhance their skills. Individual development plans should be devised to maximize each manager’s potential. Agencies and departments should increase opportunities for managers to receive training in their respective fields while on-duty by specifically allocating funds for this training. Thus, FMA supports establishing management succession programs to ensure that we have the strongest possible pool of managers to lead tomorrow’s civil service. Toward this end, we must address overtime pay for Federal managers and supervisors.

Finally, we encourage a real and sincere look at Federal pay systems, while encouraging structures that attract, retain, and maintain the Federal workforce we need and desire. The system must be fair and realistic in offering career ladder incentives and progression.

FMA has long served as a sounding board for the Legislative and Executive branches in an effort to ensure that policy decisions are made rationally and provide the best value for the American taxpayer, while recognizing the importance and value of a top-notch civil service for the future.

I would like to thank you again, Chairman Davis, for providing FMA an opportunity to present our views. We at FMA look forward to working with you and other Members of Congress to deal with our government’s workforce challenges in our mutual pursuit of excellence in public service. This concludes my prepared remarks. I would be glad to answer any questions you and members of the Committee might have.