DOL Annual Report, Fiscal Year 2004
Performance and Accountability Report

Departmental Management

Maintaining a Strategic Management Focus

The President's Management Agenda (PMA), announced in 2001, consists of reforms aimed at achieving a Government that is citizen-centered, results-oriented, and market-based. The five government-wide initiatives included in the agenda are Strategic Management of Human Capital, Competitive Sourcing, Improved Financial Performance, Expanded Electronic Government, and Budget and Performance Integration. DOL's four Departmental Management outcome goals correspond to the first four initiatives (see table below). Two DOL agencies provide leadership for accomplishing these goals: the Office of the Chief Financial Officer (OCFO) and the Office of the Assistant Secretary for Administration and Management (OASAM). However, all DOL agencies contribute to overall management performance.

In FY 2004, the Department achieved eight, substantially achieved three, and did not achieve one of its management performance goals. Human Resources and Procurement functions stood out by achieving or substantially achieving all goals for the year; highlights were an injury and illness case rate less than half of that experienced in FY 2000-2001, and use of performance-based service contracting at a rate more than 50 percent above target. OCFO launched its managerial cost accounting project on a very ambitious schedule and made commendable progress toward its goal while maintaining high standards in its traditional roles. In the information technology arena, DOL missed its target for paperwork reduction but implemented a new e-procurement system, enhanced security, and made significant improvements in its management of capital investments.

The Administration's Executive Branch Management scorecard, a quarterly assessment of Federal agencies' implementation of the President's Management Agenda (PMA), is another measure of the Department's progress in these areas. In the June 2004 update, DOL's status scores were elevated to "green" in Budget and Performance Integration and "yellow" in Competitive Sourcing. Human Capital had achieved "green" status earlier in the year. Financial Performance and E-Government scores remained at "yellow." This result is consistent with our record of goal achievement in qualitatively indicating progress in management practices at DOL for FY 2004. For more information about accomplishments with respect to the PMA, see the section devoted to that topic in the Executive Summary of this report.

Results for the outcome goals listed above are discussed in more detail on the following pages.

Outcome Goal HR – Establish DOL as a Model Workplace

DOL is committed to recruiting, developing, and retaining a high-quality, diverse workforce that effectively meets changing mission requirements and program priorities. Through workforce analysis and planning, we identify human capital requirements to meet our organizational goals and needs, so that the right people are in the right place at the right time. Workforce planning reduces distance between DOL decision-makers and our customers, enhances front-line service delivery, addresses current and projected staff shortages, assures employees have the skills critical to their current positions and are prepared to progress to higher levels of responsibility, and anticipates changes to staff and competency requirements. Employees in occupations no longer necessary as a result of technology or changing business practices are afforded the opportunity to be retrained, and succession planning and other planned management approaches to an aging workforce will be pursued.

DOL remains committed to assuring safe and healthful workplaces for our employees and Job Corps students, and to reduce human costs associated with workplace injuries and illnesses. We have expanded use of technology to deliver web-based, interactive occupational safety and health training targeted to hazards and conditions contributing to injuries and illnesses. Practices at work sites with lower than average injury rates are being evaluated to determine whether they can be effective elsewhere.

DOL achieved all five performance goals, and earned a "green" status score for Strategic Management of Human Capital in the latest President's Management Agenda Scorecard.

Results Summary
Of the five goals listed, DOL substantially achieved Goal HR1 and achieved Goals HR2-5. A major goal of the DOL's workforce planning efforts is to meet the objectives contained in the Strategic Human Capital Management section of the President's Management Agenda. To further that effort, we developed a human capital scorecard, modeled on the OMB scorecard, to assess the progress being made by DOL Agencies in human capital management, including tracking the status of restructuring initiatives. We also developed core competencies for its mission critical occupations and analysis of workforce skills in mission critical occupations. We focus on succession management to address the impending exodus of senior level managers and employees minimizing the impact via succession planning programs such as the Senior Executive Service Development, Management Development, Mentoring, and MBA Outreach programs.

We fully recognize the importance of recruiting and maintaining a diverse workforce representative of the general civilian labor force. DOL continues to build upon its aggressive outreach and recruitment efforts to attract a highly skilled and diverse workforce including persons with disabilities and uses multiple Departmental/Office of Personnel Management hiring authorities and flexibilities, learning opportunities, and workplace flexibilities to maintain its current workforce.

DOL focuses intently on successful implementation of the Safety, Health and Return to Employment (SHARE) Presidential Initiative led by the Occupational Safety and Health Administration and the Office of Workers' Compensation Programs. Reducing the number of days away from work due to work related injuries or illnesses results in reduced workers' compensation costs and increased productivity and responsiveness on the part of DOL employees. DOL organized an interagency workplace safety group, which developed and implemented several recommendations. Reducing the total number of injury/illness cases results in a decrease in workers' compensation costs and an increase in productivity.

Office of Safety and Health's Ergonomics Assistance Room held an Open House during DOL's Safety Day. Here, Kim Ross, (left) of OASAM's Office of Safety and Health, demonstrates a variety of worksite devices that are used to improve and enhance worksite ergonomics, reduce worker injury, and provide accommodation options for return to employment for Pat C. Clark, OASAM.

Photo credit: Max Krupka and Neshan Naltchayan

DOL's Office of the Assistant Secretary for Administration and Management (OASAM) strives to reduce work related injuries and illnesses by conducting accident analysis and focusing on hazard recognition and control, emergency preparedness, and ergonomics. OASAM developed a standardized hazard reporting protocol and uses its web page (LaborNet) to effect electronic hazard reporting. The agency is also developing an electronic, web-based comprehensive safety inspection checklist with corresponding training to ensure all persons who conduct annual safety inspections have the knowledge and tools to accurately identify workplace hazards. Increasing the timeliness of reporting workers' compensation claims ensures injured employees' medical and compensation costs are paid promptly. Emphasis will continue to be placed on ensuring employees' timely use of our electronic workers' compensation filing system to report injuries and illnesses.

Reducing lost time injury/illness cases results in an increase in productivity, enhanced responsiveness, and quality of service to the taxpayer because resources are not diverted to injured employees. DOL addresses workplace safety by equipping supervisors and employees with the knowledge they need to identify and eliminate unsafe working conditions and to promote safety management. In addition, DOL is developing an electronic, web-based comprehensive safety inspection checklist with corresponding training to ensure all persons who conduct annual safety inspections have the knowledge and tools to accurately identify workplace hazards.

Increasing the timeliness of reporting workers' compensation claims ensures injured employees' medical and compensation costs are paid promptly. Emphasis will continue to be placed on ensuring employees use the Department's electronic workers' compensation filing system to report injuries and illnesses. Management will continue to emphasize timely workers' compensation claims reporting in the coming years.

Future Challenges
DOL is continuing to use contract services to assist with the return to employment effort and implementing electronic hazard identification training to ensure accurate safety inspections. Current enhancements to DOL's electronic Safety and Health Information System will ensure accurate injury/illness data. Using such existing data will assist management in targeting reduction of hazards that contribute to work related injuries and illnesses.

Hire a High-Quality and Diverse DOL Workforce
Performance Goal HR1 (OASAM) – FY 2004

The right people are in the right place at the right time to carry out the mission of the Department.

A. The DOL workforce is a prepared and competent workforce.
B. The DOL workforce is a diverse workforce.

Indicators
DOL will graduate, place or certify 75% of employees from its management and leadership development programs;

Competency assessment tool will be piloted and competency gap analysis completed for 10% of employees in mission-critical or supervisory occupations;

Improvement will be realized in 25% of diversity indictors for professional and administrative occupations exhibiting under-representation in FY 2003;

Continued improvement is realized in the extent to which diversity in the DOL workforce reflects the civilian labor force; and

Diversity will be improved among management officials and supervisors.

Program Perspective
The Department is committed to recruiting, developing, and retaining a high-quality, diverse workforce that effectively meets changing mission requirements and program priorities. Through workforce analysis and planning, DOL identifies the human capital requirements to meet our organizational goals and needs, so that DOL has the right people with the right skills and competencies.

Workforce planning is directed towards addressing current and projected staff shortages, assuring that employees have the skills critical to their current positions and are prepared to progress to higher levels of responsibility, and anticipating changes to staff and competency requirements. DOL focuses on succession management to address the impending exodus of senior level managers and employees minimizing the impact via succession planning programs such as the Senior Executive Service Development, Management Development, Mentoring, and MBA Outreach programs.

The Department fully recognizes the importance of recruiting and maintaining a diverse workforce representative of the general civilian labor force. DOL continues to build upon its aggressive outreach and recruitment efforts to attract a highly skilled and diverse workforce including persons with disabilities and uses multiple hiring authorities and flexibilities, learning opportunities, and workplace flexibilities to maintain its current workforce.

Results, Analysis and Future Plans
The DOL workforce is a prepared and competent workforce.
This target was exceeded for both indicators. Competency models have been completed for all 27 mission-critical occupations and a skills inventory tool is in place for assessing skill gaps. The Department is conducting a comprehensive skills inventory of employees in mission-critical occupations with 84.8 percent of employees completed and the remainder projected for completion by the end of FY 2005. DOL is building a strong cadre of trained Senior Executive and Management level employees to meet continuing leadership needs. Current leadership training programs produced 49 Senior Executive and 37 mid-level graduates prepared to fill leadership roles. Three MBA Fellows Program classes have hired 45 Fellows with business skills essential to DOL's success and 118 employees have participated in the Mentoring Program.

The DOL workforce is a diverse workforce.
The target was exceeded for two of three indicators. Pockets of under-representation were identified in a number of the Department's mission-critical occupations. At the end of FY 2003, DOL determined that pockets of under-representation existed in 57 categories, (e.g., Hispanic auditors). DOL improved in 18 categories, or 32 percent, exceeding its target of 25 percent. Increases occurred in 29 percent of the total workforce diversity groups (target 40 percent) and in 43 percent of the managers and supervisors groups (target 40 percent). The measure for total workforce diversity was impacted by employee separations from one of the groups late in the fiscal year.

DOL will continue targeted recruitment at colleges, universities, and associations in FY 2005 as well as national level job fairs and conferences which have high representation of targeted groups, students with the skills we need, such as MBAs, and organizations and consortiums where the Department has had success in the past. To address retention, DOL will continue to offer succession-planning programs at the SES and mid-management levels and the formal mentoring program, which provide opportunities to close any skill gaps identified during the skills inventory process and offer workplace flexibilities.

The DOL Online Opportunities Recruitment System (DOORS), to be fully implemented in FY 2005, is increasing the efficiency of the Department's hiring system while at the same time simplifying the application process for applicants. DOORS, fully integrated with USAJOBS, is increasing the exposure of DOL's job opportunities to a broader and more diverse audience, resulting in a higher quality of job applicants, reducing the time to fill a position, enabling more consistent and timely diversity reporting, and producing a significant reduction in the costs associated with the hiring process.

Management Issues
DOL has obtained Voluntary Early Out Authority (VERA) with 194 employees using the early-out authority. The Department has increased the use of hiring and retention flexibilities to include: 64 Career Intern and 69 Student Career Experience Program (SCEP) appointments, 21 Outstanding Scholars, 51 Recruitment Bonuses, 35 Relocation Bonuses and Retention Allowances, and 13 Student Loan Repayments. The Department must determine the most effective means of reducing skill gaps identified as employees complete the Department's mission-critical occupations skills inventory assessment tool. Retraining and career counseling must be provided to develop the new skills necessary for employees impacted by competitive sourcing decisions.

Reduce the Rate of Lost Production Days
Performance Goal HR2 (OASAM) – FY 2004

Reduce the rate of lost production days due to work related injuries and illnesses by two percent.

Indicators
Decrease rate of lost production days by two percent.

Program Perspective
This goal is one of four that DOL uses to measure its successful implementation of the Safety, Health, and Return to Employment (SHARE) Presidential Initiative led by the Occupational Safety and Health Administration and the Office of Workers' Compensation Programs. Reducing the number of days away from work due to work related injuries or illnesses results in reduced workers' compensation costs and increased productivity of DOL employees.

Results, Analysis and Future Plans
DOL's FY 2004 Lost Production Days Rate goal is 40.5 days lost per 100 employees. As of third quarter FY 2004, the Department is achieving this goal with a rate of 37.3, and we are on track to achieve this goal for the third straight year. DOL organized an interagency workplace safety group, which developed and implemented several recommendations: contract with a vendor to provide return to employment assistance for workers' compensation coordinators in developing return to employment strategies; increase the use of injured workers to fill limited or light duty vacant positions; implement Agency safety and workers' compensation program reviews; and enhance the Safety and Health Information System (SHIMS) to include expanded reporting capabilities. In addition, quarterly reports are provided to DOL Agencies on their progress towards achieving their SHARE goals. In FY 2005, DOL is implementing Voluntary Protection Programs as a pilot project at select worksites.

Management Issues
DOL has limited resources to dedicate to hiring and training workers' compensation coordinators. Therefore, we are continuing to use contract services to assist with the return to employment effort. DOL is actively encouraging Agencies to use workplace accommodation flexibilities to return employees to work.

Reduce the Illness and Injury Rate of DOL Employees
Performance Goal HR3 (OASAM) – FY 2004

Reduce the total case rate for injuries and illnesses for DOL employees by three percent. (Total number of cases reported to the Office of Workers' Compensation Programs.)

Indicators
Decrease total case rate of illnesses and injuries by three percent.

Program Perspective
This goal is one of four that DOL uses to measure its successful implementation of the Safety, Health, and Return to Employment (SHARE) Presidential Initiative led by the Occupational Safety and Health Administration and the Office of Workers' Compensation Programs. Reducing the total number of injury/illness cases results in a decrease in workers' compensation costs and an increase in productivity.

Results, Analysis and Future Plans
DOL's FY 2004 Total Case Rate goal is 2.43 total cases per 100 employees. As of third quarter FY 2004, we are achieving this goal with a rate of 1.72. We are on track to achieve this goal for the third straight year. DOL's Office of the Assistant Secretary for Administration and Management (OASAM) strives to reduce work related injuries and illnesses by conducting accident analysis and focusing on hazard recognition and control, emergency preparedness, and ergonomics. The Department has developed a standardized hazard reporting protocol and uses its web page (LaborNet) to effect electronic hazard reporting.

Management Issues
Current enhancements to DOL's electronic Safety and Health Information System will ensure accurate injury/illness data. Using such existing data will assist management in targeting limited resources towards reducing and/or eliminating hazards that contribute to work related injuries and illnesses.

Reduce the Lost Time Illness and Injury Case Rate of DOL Employees
Performance Goal HR4 (OASAM) – FY 2004

Reduce the lost time case rate for injuries and illnesses for DOL employees by three percent. (Number of injury/illness cases reported to the Office of Workers' Compensation Programs that resulted in days away from work.)

Indicators
Decrease lost time case rate of illnesses and injuries by three percent.

Program Perspective
This goal is one of four that DOL uses to measure its successful implementation of the Safety, Health, and Return to Employment (SHARE) Presidential Initiative led by the Occupational Safety and Health Administration and the Office of Workers' Compensation Programs and is a new goal for FY 2004. Reducing lost time injury/illness cases results in an increase in productivity, enhanced responsiveness, and quality of service to the taxpayer because resources are not diverted to injured employees.

Results, Analysis and Future Plans
DOL's FY 2004 Lost Time Case Rate goal is 1.19 lost time cases per 100 employees. As of third quarter FY 2004, we are achieving this goal with rate of 1.11. We are on track to achieve this goal in FY 2004.²⁹ DOL addresses workplace safety by equipping supervisors and employees with the knowledge they need to identify and eliminate unsafe working conditions and to actively promote effective safety management. In addition, DOL is in process of developing an electronic, web-based comprehensive safety inspection checklist with corresponding training to ensure all persons who conduct annual safety inspections have the knowledge and tools to accurately identify workplace hazards.

Management Issues
DOL has limited resources to hire and train occupational safety and health specialists. Therefore, DOL is implementing electronic hazard identification training to ensure accurate safety inspections. In addition, DOL is conducting Job Corps Center annual safety reviews by contract to ensure consistency and uniformity.

²⁹Performance results for this goal are estimated. The estimating methodology has been reviewed by the Department of Labor's Office of Inspector General. The actual performance results for this goal will be published in the FY 2006 Budget.

Make Timely Filings of DOL Employee Injury and Illness Cases
Performance Goal HR5 (OASAM) – FY 2004

Improve the timeliness of filing notices of injuries and illnesses with the Office of Workers' Compensation Programs.

Indicators
Increase in timeliness of reporting new injuries and illnesses by five percent.

Program Perspective
This goal is one of four that DOL uses to measure its successful implementation of the Safety, Health, and Return to Employment Presidential (SHARE) Initiative led by the Occupational Safety and Health Administration and the Office of Workers' Compensation Programs. Increasing the timeliness of reporting workers' compensation claims ensures injured employees' medical and compensation costs are paid promptly.

Results, Analysis and Future Plans
DOL's FY 2004 timeliness goal is to have 88 percent of claims filed on time. As of third quarter FY 2004, we are achieving an 88.1 percent average in reporting injuries and illnesses to OWCP on time. We are on track to achieve this goal for the third straight year.³⁰ Emphasis will continue to be placed on ensuring employees use the electronic workers' compensation filing system to report injuries and illnesses. Implementation of the Safety and Health Information Management System (SHIMS) in FY 2001 has ensured prompt accurate claims filing and greatly enhanced the Department's timeliness over the past three years. Management will continue to emphasize timely workers' compensation claims reporting in the coming years. This will, in turn, ensure DOL continues to meet the ever increasing timeliness goal.

Management Issues
The Employment and Training Administration's (ETA) Job Corps Program accounts for the greatest number of injuries and illnesses reported to the Office of Workers' Compensation Programs. Many of these Job Corps Centers are located in remote areas and, therefore, have difficulty transmitting data electronically. By restructuring the SHIMS electronic notification process to include the Job Corps National Office and emphasis on training in SHIMS use by ETA management, the timeliness of injury/illness claims reporting has been greatly improved. DOL anticipates that the timeliness of injury/illness reporting will continue to improve with these enhancements in place.

³⁰Performance results for this goal are estimated. The estimating methodology has been reviewed by the Department of Labor's Office of Inspector General. The actual performance results for this goal will be published in the FY 2006 Budget.

Outcome Goal PR – Improve Procurement Management

For FY 2004, the Department's leadership determined that the most effective way to demonstrate it has improved procurement management is to more thoroughly introduce market forces into the Department's purchase of goods and services. Previously, the vast majority of the Department's administrative and management activities were provided by an entirely Federal workforce. Now, for those activities that the Federal Activities Inventory Reform (FAIR) Act inventory determines are available in the commercial marketplace, Federal and commercial providers compete to determine the most cost-effective means of service delivery. This approach is called competitive sourcing. Additionally, the previous methods for compensating the Department's contractors included the level of effort, the kinds of processes, and the skills of the contractors. Through Performance-Based Service Contracting (PBSC), contractors are instead compensated strictly according to the results they produce. PBSC aligns the Department's desire to receive high quality and completed services with contractors' incentives to increase revenue.

The Department's use of competitive sourcing and PBSC demonstrate that its purchase of services relies on the market forces of competition and incentives. Their use also demonstrates improved procurement management, as the Department can now purchase equivalent or better services for less money. The table below capsulizes performance goals and achievements supporting this outcome goal.

Results Summary
DOL substantially achieved its FAIR Act inventory goal by nearly reaching its target to compete no less than 15 percent of the FTE listed on the inventory. The Department held competitions for almost 14 percent of these FTE. DOL awarded 67 percent of total eligible service contracting dollars (for contracts over $25,000) using PBSC techniques; the target was 40 percent.

Future Challenges
DOL will continue to ensure that FAIR Act competitions are conducted in accordance with applicable obligations between labor and management and existing personnel regulations. While this presents a challenge, it is surmountable if statutory provisions are properly followed and if DOL management works closely with unions and human resources staff. DOL has assigned human resource specialists to assist competitive sourcing staff in this effort. Another challenge is the substantial upfront costs of public-private competitions. Given the lasting savings the competitions will yield, however, these initial expenditures are really investments rather than costs; especially considering that the resulting savings can be used for other program improvements.

The challenge associated with PBSC is developing expertise required to develop and oversee performance-based contracts. DOL will continue offer training in these areas so that PBSC will deliver on its promise to lower costs while improving services.

Complete FAIR Act Competitions
Performance Goal PR1 (OASAM) – FY 2004

Complete competitions on not less than 15 percent of the FTE listed on DOL's 2000 Federal Activities Inventory Reform (FAIR) Act inventory.

Indicators
Percentage of commercial FTE on the Department's 2000 FAIR Act inventory included in completed competitions or direct conversions;

Percentage of Direct Conversions;³¹ and

Percentage of Completed A-76 Competitions.

Program Perspective
Competitive sourcing is one of five government wide initiatives of the President's Management Agenda. Under competitive sourcing, executive agencies identify activities that are available in the commercial marketplace but that are currently performed by Federal employees. Federal and commercial providers then compete to determine the most cost-effective means of service delivery.

The government spends billions of dollars every year for commercial services provided by government employees. Competition can easily result in savings of an average of 30 percent, whether government employees or private sector employees ultimately do the work. These savings can be re-invested in pursuit of the agency mission. This means there is enormous potential for more productive use of available funding, with no reduction in quality of service. It makes sense to periodically evaluate whether or not any organization is organized in the best possible way to accomplish its mission. This self-examination is the fundamental purpose public-private competition is intended to achieve. For FY 2004, DOL established a target of competing 15 percent of its Federal Activities Inventory Reform (FAIR) Act inventory.

Results, Analysis and Future Plans
The goal was substantially achieved. By the end of FY 2004, DOL had competed or directly converted to contract 386 commercial FTE, constituting almost 14 percent of commercial FTE on DOL's 2000 FAIR Act inventory. This included almost 100 FTE that were competed in six streamlined and standard competitions in FY 2004. The full implementation of these market-based initiatives will significantly enhance the effectiveness and efficiency of the Department of Labor's (DOL) service to all Americans.

DOL has also developed plans for competition of at least an additional 376 FTE in FY 2005, and for competition of virtually all of DOL's commercial-competitive functions by the end of FY 2007, consistent with guidance from the Office of Management and Budget. To ensure that DOL's scheduled competitions are completed within the given timeframes in the coming years, DOL will continue to:

• establish specific, detailed competition schedules;
• monitor competition progress to ensure timely completion;
• designate individuals within DOL agencies who are responsible for competition progress; and
• make technical assistance available to managers and teams involved in competitions and other competitive sourcing-related activities.

³¹Direct Conversion of work to the private sector is no longer allowed under OMB Circular A-76, Performance of Commercial Activities.

Management Issues
The performance data for this goal are extremely reliable. The indicator is the percentage of public-private competitions completed, and the completion date of a competition is reflected in an announcement on the website FedBizOpps.gov, which indicates whether the award went to the Federal government or to a commercial provider.

Because Federal agencies will always have a need to explore ways to better accomplish their missions and stretch their budgets, competitive sourcing will continue to serve as a valuable tool for DOL management. However, DOL must continue to recognize and address challenges and risks to full implementation of its competitive sourcing plans. Ensuring that competitions are conducted in accordance with applicable obligations between labor and management and existing personnel regulations could present a challenge. However, this challenge is controllable if statutory provisions are properly followed and if DOL management utilizes effective practices, such as working closely with unions and human resources staff. DOL has assigned human resource specialists to assist competitive sourcing staff in this effort.

Additionally, due to the substantial upfront costs of public-private competitions, particularly for the expertise of outside contractors, DOL must continue to marshal necessary resources to support competitions. Over time, agencies will begin to realize the savings resulting from competitions, which can be used not only to support additional competitions but also can be used for other program improvements.

Ensure Performance Results Are Achieved Through Contracts
Performance Goal PR2 (OASAM) – FY 2004

Award contracts over $25,000 using Performance-Based Service Contracting (PBSC) techniques for not less than 40 percent of total eligible service contracting dollars.

Indicators
Dollar Value of Performance-Based Contracts over $25,000 awarded.

Program Perspective
In March 2001, the Office of Management and Budget (OMB) established a performance-based service-contracting goal for Federal agencies. This goal is based on the goals established under the Government-Wide Acquisition Performance Measurement Program, developed by the Procurement Executives Council. Performance-based service contracting methods result in procurement efficiencies by ensuring contractors are paid for the actual level of service that the government receives. Performance-based contracts describe requirements in terms of results rather than methods of performance of work; emphasizing objective, measurable performance requirements and quality standards in developing statements of work, selecting contractors, determining contract type and incentives, and performing contract administration. Performance-based service contracting is a tool that offers improved contractor performance and mission attainment, significant cost savings, and implementation of the principles of streamlining and innovation of the President's Management Agenda as well as the Government Performance and Results Act.

Since 2001, DOL has had a performance goal to expand the application of performance-based service contracting techniques for DOL contracts. The emphasis is to pay for the results of a contract rather than the effort put forth by the contractor. Very recently, OMB directed all Federal agencies—for FY 2005—to award contracts over $25,000 using performance-based service contracting techniques for not less than 40 percent of total eligible service contracting dollars. DOL has already exceeded this new government-wide goal. The $25,000 threshold is a practical criterion, because Federal agencies report on contracts above that amount through the General Services Administration's Federal Procurement Data System, which will be used by OMB in determining compliance with its FY 2005 directive.

Results, Analysis and Future Plans
The goal was achieved. As of the end of the 3rd quarter of FY 2004, DOL had used performance-based service contracting techniques for 67 percent of total eligible service contracting dollars. The total obligations of performance-based contracts totaled more than $294 million. DOL will continue to emphasize converting and awarding eligible service contracts over $25,000 using PBSC techniques. DOL will also monitor the dollar value of PBSC contracts to ensure attainment of the PBSC goal.

DOL has encouraged the use of performance-based contracts DOL-wide by providing high-level briefings for senior staff, by scheduling relevant training for procurement and program staff, and by establishing an annual performance goal DOL-wide. DOL will continue to include the use of performance-based service contracting techniques as a performance goal, increasing every year the percentage of contract dollars to be awarded using those techniques. The ultimate objective is for DOL to put in place performance-based service contracts, as appropriate, for all eligible DOL contracting dollars.

Management Issues
The data source for this goal is the Federal Procurement Data System. The performance data are reliable, as the information is collected manually from the contract specialist or/and the contracting officer at the time the procurement action is completed. A procurement analyst in the Department's procurement policy office validates the data before it is transmitted to the Federal Procurement Data Center.

The largest acquisition program at the Department of Labor is the Employment and Training Administration's Job Corps Program. Approximately 70 percent of DOL's acquisition dollars support Job Corps contracts. These acquisitions are for the operation and maintenance of more than 110 Job Corps Centers around the Country, and their related outreach and employment assistance services. Job Corps Center contracts were converted to PBSC by modifying the fee structure to incorporate incentives and penalties for the contractor based on achievement of measurable goals including, but not limited to, the number of students entering employment and student retention in the program. By the end of FY 2005, DOL anticipates converting a majority of the Job Corps contracts to PBSC as the existing contracts expire.

The remaining challenge will be to ensure that other DOL agencies expand their use of performance-based service contracting techniques. DOL will continue to facilitate high-level support for the performance-based service contracting initiative, and will offer additional training sessions to contracting and program management personnel throughout the Department.

Outcome Goal FM – Enhance Financial Performance through Improved Accountability

The Department of Labor is committed to providing timely and accurate financial information to DOL managers and stakeholders, and to ensuring that our business processes are efficient and customer-driven. Here in DOL the collaboration of program and financial managers is key to our ability to manage programs successfully and provide accountability for the resources entrusted to us as a Department. DOL has made strides relative to the President's Management Agenda, including our progress in improving the accuracy and timeliness of financial information and integrating financial and performance management to support day-to-day operations across DOL.

The Office of the Chief Financial Officer (OCFO) provides integrity and stewardship of the Department's financial resources. OCFO provides comprehensive direction to all DOL agencies on financial management policies arising from legislative and regulatory mandates. FFMIA requires agencies to implement and maintain financial management systems that substantially comply with Federal financial management system requirements, applicable Federal accounting standards, and the United States Government Standard General Ledger at the transaction level. The Government Management Reform Act (GMRA) requires each agency to prepare and submit audited financial statements. The financial statements must comply with the Office of Management and Budget's Bulletin 01-09, Form and Content of Agency Financial Statements, as amended.

In addition, OCFO provides guidance, assistance, and oversight in implementing the Cost Analysis Manager (CAM) in each agency. OCFO specifically provides training to agencies on how to use the CAM cost model to support day-to-day operations across DOL. OCFO also provides assistance to agencies on how to maintain and update CAM within each agency so that it can provide up-to-date and useful information.

To improve financial performance under the President's Management Agenda, DOL partners with the Social Security Administration to share data that will reduce erroneous benefit payments in the Unemployment Insurance Program. Pictured are officials from DOL and the Social Security Administration signing a partnership agreement.

Photo credit: OCFO

Results Summary
Of the two performance goals listed, DOL achieved one and substantially achieved the other. The Department received its eighth unqualified audit opinion on its consolidated financial statements from DOL's Office of Inspector General. DOL has reviewed and determined that all 17 financial management systems substantially comply with the FFMIA standards. In addition, the Departments continues to comply with the Federal Managers' Financial Integrity Act (FMFIA) ensuring that its' resources are sufficiently safeguarded. DOL issued its annual financial statements, related notes, and supplemental information by the statutory deadline and also received the Certificate of Excellence in Accountability Reporting for the fourth consecutive year.

OCFO developed a Department-wide managerial cost accounting capability. In FY 2004, cost models were completed for 15 DOL agencies. These models define and cost, on a total and per unit basis, the significant outputs of each agency's major programs. CAM results briefs were provided for agency heads and executive staff. OCFO will continue work with agencies to fully deploy a managerial cost accounting system. Training for agency managers on using CAM for management decision-making is planned. OCFO expects to continue to improve agency cost models by refining resource and activity assignments, adding and revising outputs, improving allocation of overhead and support costs, and further mapping of outputs to performance goals. Automation of data collection and standard report preparation are also planned.

Future Challenges
To meet the challenges of the 21^st Century work environment, DOL recognizes that it must continue to be a proactive, analytically-driven organization that leverages technology to provide the Department's leaders with the financial information necessary to make decisions about performance of their programs.

In FY2005, OCFO will lead the effort to enhance managerial cost accounting data models, improve automated reporting capability, improve interface of agency program systems with CAM, integrate agency cost models on a department level, and provide technical support to agency managers.

Maintain the Integrity and Stewardship of the Department's Financial Resources
Performance Goal FM1 (OCFO) – FY 2004

Improve the accuracy and timeliness of financial information.

Indicators
Maintain an unqualified (clean) audit opinion with no material internal control weaknesses;

Meet new requirements and standards in accordance with the Federal Financial Management

Improvement Act (FFMIA) and Federal Managers' Financial Integrity Act (FMFIA);

Issue FY 2003 consolidated financial statements by February 1, 2004;

Issue quarterly financial statements within 45 days after the close of each quarter; and

Identify and correct processes and systems that contribute to erroneous benefit overpayments.

Program Perspective
OCFO provides comprehensive direction to all DOL agencies on financial management policies arising from legislative and regulatory mandates. FFMIA requires agencies to implement and maintain financial management systems that substantially comply with Federal financial management system requirements, applicable Federal accounting standards, and the U.S. Government Standard General Ledger at the transaction level. The Government Management Reform Act (GMRA) requires each agency to prepare and submit audited financial statements that comply with the Office of Management and Budget's Bulletin 01-09, Form and Content of Agency Financial Statements, as amended.

Results, Analysis and Future Plans
This goal was substantially achieved. The Department received its eighth unqualified audit opinion on its consolidated financial statements. This opinion provides assurance that no material weaknesses or inadequacies in internal controls would affect the Department's financial statements. All 17 DOL financial management systems substantially comply with the FFMIA standards. In addition, DOL continues to comply with the Federal Managers' Financial Integrity Act (FMFIA), ensuring that its resources are sufficiently safeguarded. DOL issued its annual financial statements, related notes, and supplemental information by the statutory deadline, and issued all quarterly statements 45 days after the close of the first quarter and 21 days after each quarter thereafter. The Department also received the Certificate of Excellence in Accountability Reporting for the fourth consecutive year. During FY 2005, DOL will continue implementing a new core accounting system by completing the design phase and using live data.

DOL complying with the Improper Payments Information Act (IPIA) and strengthening quality control for all DOL payments not subject to the Act's reporting requirements. OCFO developed an inventory of programs susceptible to significant risk as defined by IPIA, analyzed existing improper payment mitigation activities vs. IPIA requirements for these at-risk programs and developed a strategy to bridge the gap. The strategy includes developing relevant sampling criteria, sample selection within risk programs, improper payment assessment, and estimation. For many years, DOL has measured the level of erroneous payments in the Unemployment Insurance (UI) program, analyzed the causes and identified the states with the most overpayments. To help states more easily confirm the identities of UI claimants, we arranged for the states and the Social Security Administration to exchange data, and for states to increase use of their own state new hire data. In FY 2005 and beyond, through the implementation of root cause analysis and corrective actions, such as the UI data exchange with SSA to permit real-time social security number validation, we expect to realize significant reductions in improper payments.

Management Issues
DOL is challenged with the task of implementing a new core accounting system that replaces the existing 14-year old ‘Department of Labor Accounting and Related Systems' (DOLAR$). DOL will fully test the system before, during, and after launch; perform validation and verification of data transferring from the old to the new replacement system; to ensure the system fully meets Federal financial system requirements and users' needs.

Maintain the Integrity and Stewardship of the Department's Financial Resources
Performance Goal FM2 (OCFO) – FY 2004

Integrate financial and performance management to support day-to-day operations across DOL.

Indicators
Interfaced Department Accounting and Agency program systems provide cost-based performance data; and

Develop and disseminate cost accounting policy and training materials to address issues raised in prior year survey.

Program Perspective
The Office of the Chief Financial Officer (OCFO) provides guidance, assistance, and oversight in implementing the Cost Analysis Manager initiative (CAM) in each agency. OCFO specifically provides training to agencies on how to use the CAM cost model to support day-to-day operations across DOL. OCFO also provides assistance to agencies on how to maintain and update CAM within each agency so that it can provide up-to-date and useful information.

Results, Analysis and Future Plans
The goal was achieved. OCFO undertook the development of a Department-wide managerial cost accounting capability. In FY 2004, cost models were completed for 15 DOL agencies including ETA, ESA OWCP, MSHA, OSHA, EBSA, VETS, ODEP, WB, ILAB, OIG, ASP, OASAM, SOL (BLS already has a cost accounting capability). These cost models, which are the core of the CAM system, combine financial information supplied by the Department's core accounting system (DOLAR$), along with labor distribution and workload data to develop activity and output costs for agencies.

The CAM system provides cost-based performance information, including unit cost information on the significant outputs of each agency's major programs, as well as the underlying activity and resource costs. Unit cost information can be used to compare performance among districts, regions, programs, etc. For example, the MSHA Coal Mine Safety and Health program will compare the cost of inspections across districts, allowing determination of which districts have higher cost activities and outputs. Further investigation will ensue to discover and address causes. As cost models are updated in the future, the CAM system will also allow agencies to use cost information to measure performance over time. In some instances, cost models include the capability to cost agency performance goals.

CAM results briefs were provided for agency heads and executive staff. In FY 2004, approximately 50 employees representing all the participating agencies were trained in managerial cost accounting principles and methodology; these are in addition to approximately 130 employees trained in FY 2003. Additional training is planned for FY 2005 to train agency managers on how to analyze cost information and use it for decision-making. In addition, designated agency staff will be trained on how to update and maintain the models in the CAM system. Software to support periodic updates of the cost models has been selected and deployed to agency desktops.

In FY2005, OCFO anticipates continuing to work with agencies to promulgate adoption of managerial cost accounting. OCFO expects to continue to improve agency cost models by refining resource and activity assignments, adding and revising outputs, improving allocation of overhead and support costs, and further mapping of outputs to performance goals. Automation of data collection (from DOLAR$ core accounting system, agency workload and time tracking systems) and standard report preparation are also planned.

Management Issues
In FY2005, OCFO will lead the effort to enhance managerial cost accounting data models, improve automated reporting capability, improve interface of agency program systems with CAM, integrate agency cost models on a department level, and provide technical support to agency managers.

Outcome Goal IT – Provide Improved, Secure IT Service to Citizens, Businesses, Government, and DOL Employees to Improve Mission Performance

Effective management of information technology is critical to the success of nearly every facet of DOL's programs and operations and corresponds to the E-Government initiative of the President's Management Agenda. DOL strives to use information technology to deliver better service to citizens, businesses, other governments, our federal partners and employees. To meet our goals, we are implementing a comprehensive, integrated E-Government framework, taking full advantage of the rapidly changing technological environment and to adapt to changes brought forth by the digital economy.

DOL is a recognized leader in integrating IT capital planning and enterprise architecture activities with broader Federal and Departmental priorities. This integrated approach to managing our information technology portfolio enables us to identify future environments and to ensure IT remains closely aligned with our mission, goals, and objectives. DOL will continue to lead the GovBenefits Presidential Priority Initiative and participate actively in implementing the Federal E-Government Strategy by partnering with other agencies.

Results Summary
IT Goals 2 and 3 were achieved, while IT Goal 1 was not achieved. We continue to plan, acquire, and implement new information technology, business solutions, services and capabilities. Our now-operational web-based e-procurement system (EPS) provides a comprehensive toolset for extended acquisition capabilities. It takes advantage of technological advances in order to streamline processes, improve customer service, and reduce costs. Additionally, EPS provides more reliable and accurate department-wide procurement-related financial information. Internal factors impacting the implementation include interfaces with the new DOL property system. The Department's Directory Service will automate data reconciliation and make information in existing directories accessible and re-useable even when the database formats differ. The design calls for the implementation of a metadirectory capable of pulling data from and distributing it to multiple directories based on defined business rules. This capability, after integration into the department's myriad systems, will eliminate mismatches caused when similar information is manually entered into multiple databases. A metadirectory should also eliminate redundant work in maintaining DOL's various electronic directories.

Future Challenges
DOL continues to plan, acquire, and implement new information technology, business solutions, services and capabilities, and will soon fully implement an Earned Value Management System to better manage IT projects while in development.

Make DOL an E-Government Model Performance Goal IT1 (OASAM) – FY 2004

E-Government - Utilize Technology to Improve Service and Efficiency

Indicators
Automate 100 percent of the manual processes designated under GPEA;

Implement the web-based e-procurement system (EPS) to seven DOL component agencies; and

Establish an Enterprise-wide Directory Service.

Program Perspective
The web-based e-procurement system (EPS) provides a comprehensive toolset for extended acquisition capabilities, by taking advantage of technological advances in order to streamline processes, improve customer service, and reduce costs. EPS provides more reliable and accurate department-wide procurement-related financial information. The Department's Directory Service will automate data reconciliation and make information in existing directories accessible and re-useable even when database formats differ. The design calls for the implementation of a metadirectory capable of pulling data from and distributing to multiple directories based on defined business rules. This will eliminate mismatches caused by manual data entry into multiple databases, and alleviate directory administration burdens.

Results, Analysis and Future Plans
This goal was not achieved. DOL reached the web-based (EPS) target, and the system was implemented in both the National and Regional Offices in 14 DOL component agencies; the target was for implementation in seven agencies. DOL also completed interfacing EPS with ‘GSA Advantage'. Our target to establish an enterprise-wide directory services was reached. The directory service, with Windows 2003 Active Directory as its foundation, has moved from its interim design in April 2003 to the target design. This phase of the initiative is fully compliant with the Department's System Development Life Cycle Management, and received its Authority to Operate (ATO) from the Department's Chief Information Security Officer in July 2004. Achieving this indicator simplifies and unifies DOL's many directory functions, including email services. Our GPEA indicator remained at mid-year status of 93 percent, failing to reach the 100 percent target.

*Indicator target reached = (Y), substantially reached = (S) or not reached (N)

Management Issues
Performance data for this performance goal is based on internal tracking activities for progress on E-Government initiatives, E-Procurement Implementation, and E-Government Workforce efforts. DOL monitors these activities and produces quarterly progress reports. Internal factors impacting the implementation of the EPS include interfaces with the new DOL property system. Also, management will need to focus on interfacing the new property system and EPS with the new financial system. The complexity of the interface and its ability to enable some of the EPS functionality will drive the costs and timing.

Make DOL an E-Government Model
Performance Goal IT2 (OASAM) – FY 2004

Improve the performance of Department's Cyber Security Program in accordance with the Federal Information Security Management Act (FISMA).

Indicators
Ensure that 95 percent of DOL's sensitive systems have been periodically assessed for risk and magnitude of harm that might result from unauthorized access;

Ensure that at least 60 percent of all weaknesses documented in the FY 2004 POA&Ms are closed or on schedule;

Ensure that at least 90 percent of all DOL sensitive systems are fully certified and accredited during FY04;

Ensure that at least 98 percent of all DOL employees and contractors receive annual security awareness training;

Ensure that System Test and Evaluation has been conducted on at least 85 percent of DOL's sensitive systems;

Ensure that at least 50 percent of DOL agencies respond to DOLCSIRC advisories in accordance with the procedures in the DOL Computer Security Handbook;

Ensure that at least 95 percent of all DOL sensitive systems have contingency plans; and

Ensure that at least 50 percent of the contingency plans have been tested.

Program Perspective
The Department is faced with the increasingly difficult challenge of protecting its automated information resources given the ever-increasing number of IT security threats. DOL's Cyber Security Program's purpose is to identify and afford security protections. These protections are commensurate with the risk and magnitude of the harm resulting from the loss, misuse, or unauthorized access to, or modification of information collected or maintained by the Department. Protecting the Department's critical IT resources requires the adoption of reasonable precautions for securing its systems and networks. It also requires quick and effective response if system and network security defenses are breached. To that end, the Department's Cyber Security Program must be one that is comprehensive and inclusive of internal policies and guidelines that ensure the integrity, availability, confidentiality and security of its operations and assets.

In providing the protections mentioned above, the Cyber Security Program must provide an effective means for measuring and enhancing its information security program performance and must ensure its compliance with the Federal information Systems Management Act (FISMA).

Results, Analysis and Future Plans
DOL achieved its Cyber Security Program performance goal. DOL will reach targets for system tests and evaluations and for internal computer security incident response reporting.

*Indicator target reached = (Y), substantially reached = (S) or not reached (N)

DOL has continually improved the performance of its Cyber Security Program. According to the Federal Computer Security Report Card issued by Congress, the Cyber Security Program has progressed from a grade of "F" in 2000 and 2001, to a grade of "C+" in 2002. The current grade (assessed in 2003) is a "B."

Indicator three, relating to certification and accreditation, has the greatest importance to the achievement of greater IT security. Certifying and accrediting major information systems gives the Department a level of assurance that the Cyber Security Program is operating effectively. There are no planned changes to the goals or indicators for FY 2005. However, because IT security is crucial, targets for each of the indicators will be more ambitious.

The Security program is integrated into all Departmental program areas such as the Enterprise Architecture, Capital Planning and Investment Control, the System Development Lifecycle, and our strategic plan. The Department is committed to its Computer Security Program, and will continue to ensure that resources are adequately allocated for the proper protection of our information systems.

Management Issues
OIG identified three reportable conditions related to IT security:

1. The Department lacks strong logical security controls to secure the Department's data and information;
2. The Department has not developed and performed comprehensive tests of all continuity of operations/disaster recovery plans for critical systems and processes; and
3. The Department has not corrected all known vulnerabilities associated with its systems.

The Office of the Chief Information Officer (OCIO) has completed several actions to mitigate the vulnerabilities associated with these reportable conditions. These actions include, but are not limited to:

1. Advising senior management to give priority attention and resources to their agency specific conditions;
2. Establishing focus group to leverage agency expertise to develop action plans to address the systemic issues;
3. Performing a comprehensive review of applicable Departmental policies and procedures; and
4. Making necessary revisions.

The performance data used by the OCIO Security team is reliable and complete. The metrics used are those required by OMB. Performance data is gathered on a quarterly basis from DOL agencies and is validated by the OCIO Security team via internal verification and validation processes, quarterly Capital Planning and Investment Control reviews, and e-Government reviews. The OCIO Security team also performs reviews of its own internal processes and procedures to ensure the efficiency and effectiveness of the Department's Cyber Security Program, thus ensuring the completeness of the performance data.

DOL has made considerable progress on all reportable conditions. The only risk to achieving its goal is the lack of funding for comprehensively testing contingency plans. The OCIO has guided DOL agencies to approach this requirement by developing incremental test plans, which allow economical testing.

For more information on these audits, see Study 8 in Appendix 2.

Sound IT Capital Planning
Performance Goal IT3 (OASAM) – FY 2004

Improve organizational performance and effective information management through the use of the Departmental IT Capital Planning Investment Control process.

Indicators
95 percent of major IT initiatives completed during FY 2004 deliver intended benefits;

87 percent of in-process IT initiatives evaluated operate within 10 percent cost, schedule, and technical performance parameters; and

Rollout and migration to new investment management application for use during the FY 2006 budget cycle.

Program Perspective
The Clinger-Cohen Act requires agencies to use a disciplined capital planning and investment control process to acquire, use, maintain, and dispose of information technology. The Act seeks to improve performance by requiring agencies to clearly define and implement an IT Capital Planning and Investment Control (CPIC) process. This process is comprised of three distinct phases: select, control, and evaluate. The purpose of the CPIC process is to ensure that each IT investment aligns with DOL missions and supports business needs, while minimizing risks and maximizing returns throughout the investment's life cycle. It also allows decision-makers to make prudent evaluations of an investment's costs, benefits, risks and support for the DOL strategic goals and objectives when compared to other competing IT requirements.

In FY 2004, DOL established policy for, and implemented an earned value management system (EVMS) for major IT investments. EVMS routinely captures standardized, detailed information for monitoring cost, schedule and performance of major IT investments over time. By keeping track of this data in a systematic fashion, project managers and DOL management receive timely progress information on IT development projects. DOL management is also able to make informed decisions about projects' direction and the merits of continued investment in specific IT projects. DOL's EVMS is compliant with current standards and guidance from the Office of Management and Budget.

Results, Analysis and Future Plans
This goal was achieved. All targets were reached. Rollout and migration of the Department's new tool for electronic capital planning and investment management was achieved in the 2 nd quarter FY 2004. Agencies used the tool to prepare their FY 2006 IT budget submissions. At 93 percent, DOL exceeded the 87 percent target for initiatives operating within ten percent cost, schedule, and technical performance parameters. DOL also reached its target for 95 percent of major IT initiatives completed during FY 2004 delivering intended benefits.

DOL is committed to ensuring that information technology investments are based upon decision criteria that considers risk-adjusted return, emphasizes interoperability, improves delivery of services, and reduces costs. Achieving this goal is key to the success of the capital investment management process. Employing the Electronic Capital Planning and Investment Control (eCPIC) system facilitated the management of Department-wide IT investments and the preparation of budget data for submission to OMB. In addition, the rollout of EVMS produces monthly project data and shows trends over time. DOL will continue to develop goals and indicators, and set targets designed to ensure compliance with the IT Capital Investment Management Process; and support and assist agency managers and analysts in executing the IT capital investment management process through guidance, training, and oversight.

Management Issues
To ensure the reliability of performance data and to ensure that project outcome goals are positively achieved with the cost, schedule, and performance projections, DOL uses a combination of performance-based management mechanisms, including the earned value management system and a quarterly review process. Work Breakdown Structures (WBS) are required and updates are provided to the OCIO upon request. Actual start and completion dates, percentages complete and estimated costs are assessed against each element in the WBS. Based on the information provided, an investment's performance is assessed, and cost and schedule variances are calculated.

To mitigate the risk to project performance, cost and schedule variances are reported to senior management within the Department, and mechanisms have been put in place for addressing projects which exhibit poor performance. Such projects are closely reviewed during periodic reviews with the project manager, and corrective actions are developed and assigned. Progress of corrective actions is frequently checked to ensure that the project is on track.