GAO-07-90, Office of Personnel Management: Key Lessons Learned to Date for Strengthening Capacity to Lead and Implement Human Capital Reforms


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for Strengthening Capacity to Lead and Implement Human Capital Reforms' 
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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

January 2007: 

Office Of Personnel Management: 

Key Lessons Learned to Date for Strengthening Capacity to Lead and 
Implement Human Capital Reforms: 

Office of Personnel Management: 

GAO-07-90: 

GAO Highlights: 

Highlights of GAO-07-90, a report to congressional requesters 

Why GAO Did This Study: 

As the agency responsible for the federal government’s human capital 
initiatives, the Office of Personnel Management (OPM) must have the 
capacity to successfully guide human capital transformations necessary 
to meet the governance challenges of the 21st century. Given this key 
role, GAO was asked to assess OPM’s capacity to lead further reforms. 
In June 2006, GAO testified on several management challenges that OPM 
faces. This report—the second in a series—supplements that testimony 
and, using the new senior executive performance-based pay system as a 
model for understanding OPM’s capacity to lead and implement reform, 
identifies lessons learned that can inform future reforms. GAO analyzed 
relevant laws and documents, and obtained views from the Chief Human 
Capital Officers (CHCO) Council and human resource directors, the 
Office of Management and Budget (OMB) staff, and OPM officials. 

What GAO Found: 

The congressionally authorized senior executive performance-based pay 
system, implemented in 2004, provides an opportunity to learn from 
experiences gained and apply those lessons to the design and 
implementation of future human capital reforms. Under the performance-
based system, before an agency can receive the new pay flexibilities, 
OPM, with concurrence from OMB, must certify that the agency’s 
appraisal system meets certain criteria. OPM is likely to play a 
similar leadership and oversight role for future reforms. 

Table: Lessons Learned from the Performance-based System and Other 
Human Capital Initiatives: 

Ensure internal OPM capacity to lead and implement reform; Executive 
branch agencies noted a lack of knowledge and experience among OPM 
staff to design and implement key human capital transformation efforts. 
GAO analysis of available OPM employee feedback data suggests that 
employees may not be receiving sufficient training to enhance their 
skills and competencies. OPM has begun aligning its workforce skills to 
meet future needs but has not conducted an agencywide skills assessment 
since updating its key strategic management documents. Lesson: Ensure 
that OPM’s workforce is properly aligned to successfully design and 
implement human capital reforms, such as knowledge of innovative 
classification and pay and compensation approaches, and continue to 
prepare the workforce to meet changing demands of the future. 

Ensure that executive branch agencies' infrastructures support reform; 
OPM’s approach to certifying agencies’ senior executive performance-
based systems should more fully promote the building of the 
institutional infrastructure, such as robust performance management 
systems with adequate safeguards, within agencies needed to effectively 
implement the reforms. Lesson: Assist agencies in building the 
necessary infrastructure for a performance-based system by providing 
front-end and ongoing involvement—building on progress made to date. 

Collaborate with CHCO Council; 
Executive branch agencies said the certification process was a missed 
opportunity for OPM to better collaborate with the CHCO Council. One 
agency CHCO said OPM traditionally uses council meetings to present 
information to the CHCOs, but does not always encourage discussions or 
seek input. Lesson: Cultivate effective partnerships with the CHCO 
Council by engaging them to solicit their ideas and suggestions during 
system design to build consensus and develop momentum for success. 

Develop clear and timely guidance; 
The lack of clear and timely guidance from OPM created confusion as 
agencies attempted to understand and implement the broadly defined 
regulatory criteria for certification. Lesson: Provide agencies with 
clear and timely guidance—being sensitive to other ongoing human 
capital activities—to reach a common, consistent understanding and 
promote efficiency as agencies adjust to new requirements for reforms. 

Share best practices; 
Executive branch agencies said OPM could have better facilitated 
sharing best practices to help them implement senior executive 
performance-based systems. Lesson: Facilitate the sharing of best 
practices for implementing human capital reforms by providing forums 
for agencies to learn from each others’ experiences, share successful 
strategies, and avoid common pitfalls. 

Solicit and incorporate feedback; 
Executive branch agencies said there was no formal mechanism, such as a 
customer survey, for them to provide feedback to OPM on its guidance 
and assistance. Lesson: Solicit feedback from executive branch agencies 
and incorporate to improve the implementation of human capital reforms. 

Track progress to ensure accountability; OPM does not have an 
evaluation strategy for tracking the progress of the agencies’ 
implementation of the new executive systems. Lesson: Develop a strategy 
to allow OPM, other federal agencies, and Congress to monitor progress 
toward achieving human capital reform goals. 

Source: GAO analysis. 

[End of table] 

What GAO Recommends: 

GAO is making recommendations to the Director of OPM to improve OPM’s 
capacity for future reforms by reexamining agencywide skills, and to 
address issues specific to the senior executives’ pay systems, such as 
sharing best practices and tracking progress towards goals. In 
commenting on a draft of this report, OPM stated it has made progress 
toward achieving its operational and strategic goals, but neither 
agreed nor disagreed with GAO’s recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-90]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Brenda S. Farrell at 
(202) 512-6806 or farrellb@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Key Lessons Learned from the Senior Executive Performance-based Pay 
System and Other Human Capital Initiatives: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Description of the Senior Executive Performance-based Pay 
System Certification Process: 

Appendix III: Agency Certification Status for Calendar Years 2004, 
2005, and 2006 as of October 2006: 

Appendix IV: Comments from the Office of Personnel Management: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Lessons Learned from the Performance-based System and Other 
Human Capital Initiatives: 

Table 2: Senior Executive Performance Appraisal System Certification 
Criteria: 

Figure: 

Figure 1: Overview of Senior Executive Performance Appraisal System 
Certification Process: 

Abbreviations: 

CHCO: Chief Human Capital Officer: 

CPDF: Civilian Personnel Data File: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DOL: Department of Labor: 

EEO: Equal Employment Opportunity: 

EEOC: Equal Employment Opportunity Commission: 

FDIC: Federal Deposit Insurance Corporation: 

FHCS: Federal Human Capital Survey: 

GSA: General Services Administration: 

HCAAF: Human Capital Assessment and Accountability Framework: 

HCLMSA: Human Capital Leadership and Merit System Accountability: 

HCO: Human Capital Officer: 

HR: Human Resources: 

HUD: Department of Housing and Urban Development: 

NASA: National Aeronautics and Space Administration: 

NSPS: National Security Personnel System: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

PAAT: Performance Appraisal Assessment Tool: 

PMA: President's Management Agenda: 

SBA: Small Business Administration: 

SES: Senior Executive Service: 

SHRP: Strategic Human Resources Policy: 

SL: senior-level position: 

ST: scientific or professional position: 

United States Government Accountability Office: 
Washington, DC 20548: 

January 19, 2007: 

The Honorable Joseph I. Lieberman: 
Chairman: 
The Honorable Susan M. Collins: 
Ranking Minority Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Daniel K. Akaka: 
Chairman: 
The Honorable George V. Voinovich: 
Ranking Minority Member: 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Strategic human capital management is the centerpiece of federal 
agencies' efforts to transform to meet the governance challenges of the 
21st century. Congress has provided agencies with exemptions from the 
old rules and with new hiring flexibilities to more strategically 
manage their workforces to help meet current and emerging demands, and 
the Department of Defense (DOD) and the Department of Homeland Security 
(DHS) are implementing legislated human capital reforms affecting 
performance-based pay systems, among other things. Strategic human 
capital management has become more important as changes in workforce 
demographics pose additional challenges. Baby boomers are likely to 
begin retiring in large numbers in the near future, while at the same 
time the labor force is growing at a much slower rate. Thus, those 
leaving jobs will outnumber those seeking jobs, further challenging the 
federal government to ensure that it recruits, hires, trains, develops, 
and motivates the talent it needs to achieve meaningful results and to 
be competitive with the private sector. 

Senior executives need to lead the way in transforming their agencies 
to become more results oriented, collaborative in nature, and customer 
focused. Also, we have reported that the shift to market-based and more 
performance-oriented pay must be part of a broader strategy of change 
management and performance improvement initiatives and cannot be simply 
overlaid on existing ineffective performance management 
systems.[Footnote 1] In 2003, Congress authorized a new performance- 
based pay system for members of the Senior Executive Service (SES). The 
Office of Personnel Management (OPM) has a key leadership role in 
leading and implementing this new system as well as other human capital 
initiatives and reforms. Thus, the lessons learned from implementing 
the new senior executive performance appraisal system (the foundation 
of the SES pay reforms) and other governmentwide human capital 
initiatives provide valuable insight into OPM's capacity to lead and 
implement human capital reforms. 

As the federal government's human capital leader, OPM must have the 
capacity to effectively assist agencies and to successfully lead and 
implement these important human capital management transformations. To 
enhance its capacity to do so, OPM is working to transform its own 
organization from less of a rulemaker, enforcer, and independent agent 
to more of a consultant, toolmaker, and strategic partner. As reform 
initiatives move forward, it is increasingly important for OPM to 
complete this transformation and clearly demonstrate its capacity to 
lead and implement such reforms. 

Given the importance of OPM's key role, you asked us to assess the 
extent to which OPM has the capacity to lead and implement 
governmentwide human capital reform. In June 2006, we testified before 
the Subcommittee that while OPM has made progress towards transforming 
itself to be a more effective leader of human capital reform, it could 
build upon this progress by addressing a number of management 
challenges.[Footnote 2] This report supplements the information we 
provided in our June 2006 testimony, and as agreed with your offices is 
the second in a series of reports, and specifically identifies lessons 
that can be learned from OPM's efforts to lead and implement the senior 
executive performance-based pay system and other human capital 
initiatives that can be applied to ongoing and future human capital 
reform efforts. OPM officials agreed that its role in certifying senior 
executive performance appraisal systems is illustrative of the 
challenges OPM faces related to future human capital legislative 
reforms. As you have requested, we will continue to follow up on these 
and other issues related to OPM's capacity to lead and implement human 
capital reforms including issues raised in our June 2006 testimony on 
OPM's (1) leadership; (2) talent and resources; (3) customer focus, 
communication, and collaboration; and (4) performance culture and 
accountability. 

For this report, we reviewed and analyzed key documents related to the 
senior executive performance-based pay system, including the 
legislation that authorized the pay flexibilities and the OPM and 
Office of Management and Budget (OMB) regulations developed to 
administer these systems. We also reviewed and analyzed other documents 
related to OPM's process for certifying agency performance appraisal 
systems and conducted interviews with OPM's five associate directors 
and other OPM staff, as well as staff from OMB involved in the 
appraisal system certification process. To obtain agency views on their 
experiences with the certification process, we interviewed 22 of the 23 
members of the Chief Human Capital Officers (CHCO) Council and their 
corresponding agency human resource (HR) directors and obtained written 
responses from the 1 agency we did not interview. We also drew from our 
June 2006 testimony that included data from the Civilian Personnel Data 
File (CPDF) and our analysis of the 2004 Federal Human Capital Survey 
(FHCS),[Footnote 3] 2005 OPM focus groups, and 2006 OPM action plans to 
address problems identified. We also reviewed OPM's March 2006 
strategic and operational plan, associated workforce planning 
documents, and documentation on other OPM human capital initiatives, 
such as the Performance Appraisal Assessment Tool (PAAT) and agency 
beta sites for performance management below the senior level. Appendix 
I contains a detailed discussion of our scope and methodology. We 
conducted our work from October 2005 to September 2006, in accordance 
with generally accepted government auditing standards. 

Results in Brief: 

The congressionally authorized senior executive performance-based pay 
system, implemented in 2004 as well as OPM's implementation of other 
governmentwide human capital initiatives, provides an opportunity to 
learn from experiences gained and apply those lessons to the 
implementation of future human capital reforms. More specifically, OPM 
has a key leadership and oversight role in the design and 
implementation of agencies' senior executive performance-based pay 
systems and is likely to play a similar role in governmentwide human 
capital reform. For example, to qualify for the pay flexibilities under 
the statute, OPM must certify and OMB must concur that an agency's 
senior executive appraisal system meets specific criteria jointly 
developed by OPM and OMB. For lessons learned that can inform the 
design and implementation of additional human capital reforms, see 
table 1. 

Table 1: Lessons Learned from the Performance-based System and Other 
Human Capital Initiatives: 

Ensure internal OPM capacity to lead and implement reform; 
Executive branch agencies noted a lack of knowledge and experience 
among OPM staff to design and implement key human capital 
transformation efforts. GAO analysis of available OPM employee feedback 
data suggests that employees may not be receiving sufficient training 
to enhance their skills and competencies. OPM has begun aligning its 
workforce skills to meet future needs but has not conducted an 
agencywide skills assessment since updating its key strategic 
management documents. Lesson: Ensure that OPM's workforce is properly 
aligned to successfully design and implement human capital reforms, 
such as knowledge of innovative classification and pay and compensation 
approaches, and continue to prepare the workforce to meet changing 
demands of the future. 

Ensure that executive branch agencies' infrastructures support reform; 
OPM's approach to certifying agencies' senior executive performance- 
based systems should more fully promote the building of the 
institutional infrastructure, such as robust performance management 
systems with adequate safeguards, within agencies needed to effectively 
implement the reforms. Lesson: Assist agencies in building the 
necessary infrastructure for a performance-based system by providing 
front-end and ongoing involvement--building on progress made to date. 

Collaborate with CHCO Council; 
Executive branch agencies said the certification process was a missed 
opportunity for OPM to better collaborate with the CHCO Council. One 
agency CHCO said OPM traditionally uses council meetings to present 
information to the CHCOs, but does not always encourage discussions or 
seek input. Lesson: Cultivate effective partnerships with the CHCO 
Council by engaging them to solicit their ideas and suggestions during 
system design to build consensus and develop momentum for success. 

Develop clear and timely guidance; 
The lack of clear and timely guidance from OPM created confusion as 
agencies attempted to understand and implement the broadly defined 
regulatory criteria for certification. Lesson: Provide agencies with 
clear and timely guidance--being sensitive to other ongoing human 
capital activities--to reach a common, consistent understanding and 
promote efficiency as agencies adjust to new requirements for reforms. 

Share best practices; 
Executive branch agencies said OPM could have better facilitated 
sharing best practices to help them implement senior executive 
performance-based systems. Lesson: Facilitate the sharing of best 
practices for implementing human capital reforms by providing forums 
for agencies to learn from each others' experiences, share successful 
strategies, and avoid common pitfalls. 

Solicit and incorporate feedback; 
Executive branch agencies said there was no formal mechanism, such as a 
customer survey, to provide feedback to OPM on its guidance and 
assistance. Lesson: Solicit feedback from executive branch agencies and 
incorporate to improve the implementation of human capital reforms. 

Track progress to ensure accountability; 
OPM does not have an evaluation strategy for tracking the progress of 
the agencies' implementation of the new executive systems. Lesson: 
Develop a strategy to allow OPM, other federal agencies, and Congress 
to monitor progress toward achieving human capital reform goals. 

Source: GAO analysis. 

[End of table] 

Ensure internal OPM capacity to lead and implement reform. Executive 
branch agency experiences with implementing the senior executive 
performance-based pay systems and other human capital efforts point to 
a lack of knowledge and experience among OPM staff, and a majority of 
agency CHCOs and HR directors expressed concern with OPM's ability to 
generally provide timely and accurate guidance to agencies both now and 
in the future. OPM's capacity in technical areas such as pay and 
compensation may be dependent upon a few employees skilled in these 
areas. Also, our analysis of available OPM data suggests that overall 
employees may not be receiving sufficient training to enhance their 
skills and competencies. The problem of a lack of knowledge and 
experience may be compounded by the potential loss of institutional 
knowledge. OPM's succession planning data show that as of July 2006, 
nearly half of its 376 supervisors, managers, and executives were 
eligible for either early or regular retirement. Based on historical 
trend data, OPM projects an overall loss (including retirements) of 
roughly 65 to 75 supervisory, managerial, and executive positions per 
year. 

OPM has begun to align its workforce skills and competencies to meet 
additional requirements stemming from future reforms and other 
environmental changes. For example, OPM conducted agencywide skills and 
competencies assessments in 2001 and 2003, and has conducted skills 
assessments for certain targeted occupations. Validating skills and 
competencies is important because the workforce skills and competencies 
needed to be a strategic partner, toolmaker, or consultant may be 
different from those needed in the past to be a rulemaker or enforcer 
of regulations. Importantly, OPM has recently updated several of its 
key strategic management documents. For example, in March 2006, OPM 
issued its Strategic and Operational Plan, 2006-2010--the starting 
point and basic underpinning for transformation. In August 2006, OPM 
updated its Corporate Leadership Succession Management Plan to include 
all of its supervisory, management, and executive positions with 
succession planning profiles that contain a list of specific and 
general technical competency requirements for each position. At the end 
of September 2006, OPM issued its Plan for the Strategic Management of 
OPM's Human Capital for fiscal years 2006-2007. A new agencywide skills 
assessment would enable OPM to better align its workforce with needed 
resources to meet current and emerging demands. 

Ensure that executive branch agencies' infrastructures support reform. 
OPM's approach to certifying agencies' senior executive performance 
appraisal systems could more fully promote the building of the 
institutional infrastructure, such as robust performance management 
systems with adequate safeguards, within agencies needed to effectively 
implement the executive performance and pay reforms. Overall, the 
regulations that OPM and OMB developed to administer a performance- 
based pay system for executives serve as an important step for agencies 
in creating an alignment or "line of sight" between executives' 
performance and organizational results. Agencies that are authorized to 
implement the new pay flexibilities will receive either a provisional 
or full certification. Provisionally certified agencies receive the 
same pay flexibilities as those with fully certified systems, even 
though agencies with provisional certification do not meet all nine of 
the certification criteria. In essence, the provisional category of 
certification constitutes a phased approach to implementing performance-
based pay systems by allowing agencies to work toward meeting the full 
certification requirements as they are implementing the new 
authorities. Of the 33 performance appraisal systems that have been 
certified in 2006, only the Department of Labor's SES system received 
full certification. OPM has opportunities to build on the progress it 
has made and further strengthen its efforts. More specifically, 
additional front-end and ongoing OPM involvement appears to be needed 
to assist agencies in achieving and maintaining full certification. 
Executive branch agency officials said OPM's role in the certification 
process focuses more on enforcing rules regarding applications for 
certification, rather than guiding and assisting agencies in building 
the necessary infrastructure for a performance- based pay system. This 
is especially true as the standards for full certification are evolving 
and becoming more difficult to meet. 

Collaborate with CHCO Council. Executive branch agency officials said 
the certification process was a missed opportunity for OPM to better 
collaborate with the CHCO Council. One agency CHCO told us that OPM 
traditionally uses council meetings to present information to the 
CHCOs, but does not always encourage discussions or seek the council's 
input. OPM officials indicated that they provided the CHCO Council with 
opportunities to discuss the certification process. However, some CHCOs 
wanted more involvement in crafting the fundamental design and 
applicable issues of the certification process, rather than commenting 
on draft regulations after the fact. For example, CHCOs were given a 
very short time frame of 24 hours to review and comment on the proposed 
certification criteria. 

Develop clear and timely guidance. The lack of clear and timely 
guidance from OPM created confusion as agencies attempted to understand 
and implement the broadly defined regulatory criteria and adjust to the 
requirements for certification. Officials at a majority of the CHCO 
Council agencies told us they did not have enough initial guidance to 
properly prepare for meeting the certification criteria, and this 
problem has continued beyond the initial release of the regulations. 
OPM officials we spoke with agreed that OPM needs to provide clear and 
consistent guidance to agencies and said they are working to improve 
this. These officials said the certification of agency pay systems has 
been an iterative, learning process, and OPM is positioning itself to 
provide more guidance to agencies. 

Share best practices. Executive branch agency officials told us that 
OPM could have better facilitated the sharing of best practices to help 
them implement their performance-based pay systems. For example, 
executive branch agency officials said best practices for developing 
senior executive performance measures are needed to make their 
performance plans more results based, as required for certification. 
Recently, OPM has taken steps to share information among agencies. In 
September 2006, OPM provided agencies' executive resource directors 
with samples of actual agency senior executive performance plans, 
though OPM did not specify why these samples were selected and if they 
should serve as best practices for other agencies. 

Solicit and incorporate feedback. OPM does not actively solicit and act 
on feedback from agencies on the implementation of the certification 
process. Executive branch agency HR directors said there was not a 
formal mechanism, such as a survey instrument, for agencies to provide 
feedback to OPM on its guidance and assistance to agencies. An OPM 
executive confirmed that OPM does not have a formal feedback mechanism; 
however, this official said OPM converses with agencies regularly, so 
OPM did not feel the need to obtain information in this way. Also, OPM 
does not capture senior executive perceptions of the new performance 
appraisal system, and further, OPM does not require agencies to gather 
feedback from senior executives who are directly affected by the new 
appraisal systems, even though agencies are approaching the fourth year 
of implementation. 

Track progress to ensure accountability. OPM does not have an 
evaluation strategy to track the progress of the overall results of the 
senior executive performance-based systems. OPM is taking steps to 
monitor how agencies are making meaningful distinctions in senior 
executive performance--one of the nine criteria it has developed for 
certifying agencies' senior executive performance appraisal systems. 
Once agencies have provisional or full certification, OPM monitors this 
criterion by measuring the distributions of agencies' performance 
ratings and pay. We have reported that agencies seeking human capital 
reform should consider doing evaluations that are broadly modeled on 
the evaluation requirements of the OPM demonstration projects. Under 
the demonstration project authority, agencies must evaluate and 
periodically report on results, implementation of the demonstration 
project, cost and benefits, impacts on veterans and other equal 
employment opportunity groups, adherence to merit system principles, 
and the extent to which the lessons from the project can be applied 
governmentwide. 

In addition to the lessons learned that can be applied to future human 
capital reforms, we are making a recommendation to the Director of OPM 
to help ensure that OPM has the skills and competencies needed to 
effectively assist executive branch agencies with future human capital 
reform efforts by reexamining OPM's current agencywide competency 
assessment to reflect changes in the human capital environment and 
demands of the future. Also, to assist agencies in meeting the 
requirements for certification of their senior executive performance 
appraisal systems, we are making recommendations to the Director of OPM 
to (1) develop and publish a timeline for the issuance of certification 
guidance with the input of the CHCO Council; (2) evaluate alternatives 
that could remedy the year-end time compression that agencies face when 
trying to meet OPM application requirements and avoid a gap in 
certification; (3) work with the CHCO Council to develop a formal 
mechanism for sharing leading practices for implementing human capital 
initiatives, such as the senior executive appraisal system and other 
performance management reform initiatives; (4) develop a formal 
feedback mechanism to obtain agencies' views on OPM's implementation of 
the certification process; (5) work with executive branch agencies to 
develop a systematic approach for obtaining employee attitudes towards 
human capital reforms; and (6) develop a strategy to allow OPM, other 
executive agencies, and Congress to monitor the progress of 
implementation of the senior executive performance-based pay system. 

We provided OPM a draft of this report for its review and comment and 
received a written response from the Director of OPM. Director Springer 
said OPM has made progress towards achieving its operational and 
strategic goals since she became Director of OPM. The Director provided 
information that while beyond the scope of the report, nonetheless is 
helpful in understanding the context in which OPM is operating. 
Specifically, she commented that OPM associates have worked together 
and with agencies to achieve the objectives that are tied to OPM's 
Strategic and Operational Plan, 2006-2010, and since March 2006, OPM 
has achieved its plan's objectives, on time or ahead of schedule. While 
OPM neither agreed nor disagreed with our recommendations, the agency 
provided a number of technical comments and, where appropriate, we have 
made changes to the report language to reflect these comments. Director 
Springer's letter on our draft report is found in appendix IV. 

Background: 

OPM's mission and responsibilities are found in Title 5 of the U.S. 
Code, which provides for the effective implementation of civil service 
laws, rules, and regulations. OPM also evaluates the effectiveness of 
personnel policies, agency compliance with laws, rules, regulations and 
office directives, and agency personnel management evaluation systems. 
Overall, OPM manages the federal government's human capital and is 
charged with helping agencies shape their human capital management 
systems and holding them accountable for effective human capital 
management practices. OPM does this in such a way to help ensure that: 
(1) the federal government acquires, develops, manages, and retains 
employees with the knowledge, skills, and abilities needed to deliver 
services that the American public want and deserve; and (2) agencies 
consistently uphold governmentwide values, such as merit system 
principles, veteran's preference, and workforce diversity. OPM is also 
responsible for administering retirement, health benefits, and other 
insurance services to government employees, annuitants, and 
beneficiaries. 

In January 2001, we added strategic human capital management to our 
list of federal programs and operations identified as high 
risk.[Footnote 4] In a July 2001 report, we evaluated OPM's goals and 
measures for assessing the state of human capital at federal 
departments and agencies and found weaknesses in OPM's measures of 
workforce skills and employee accountability and made recommendations 
to help address these issues, among other things.[Footnote 5] OPM has 
since taken action on our recommendations. In a January 2003 report, we 
examined OPM's progress towards its own transformation, as OPM shifts 
its role from less of a rule maker and enforcer to more of a consultant 
and strategic partner in leading and supporting agencies' human capital 
initiatives. We concluded that OPM should exert greater leadership to 
prepare the way for human capital reform.[Footnote 6] 

In June 2006, we testified before the Subcommittee that OPM has made 
commendable efforts towards transforming itself to being a more 
effective leader of governmentwide human capital reform. We noted 
however, that it could build upon that progress by addressing 
challenges that remain in four key areas: (1) leadership; (2) talent 
and resources; (3) customer focus, communication, and collaboration; 
and (4) performance culture and accountability.[Footnote 7] First, in 
the area of leadership, we reported that information from OPM employees 
based on our analysis of the 2004 FHCS suggests that information from 
their top leadership does not cascade effectively throughout the 
organization and that many employees do not feel their senior leaders 
generate a high level of motivation and commitment in the workforce. 
These views on leadership were more strongly expressed by employees in 
OPM's Human Capital Leadership and Merit System Accountability (HCLMSA) 
division--one of OPM's key divisions and a unit responsible for 
partnering with agencies and vital to successful human capital reform 
efforts. In May 2006, OPM developed a series of action plans to address 
issues raised in the 2004 FHCS, including a number of planned actions 
to improve overall and cross-divisional communication and employee 
views of senior management. 

Second, we reported that in the area of talent and resources, OPM has 
made progress in assessing current workforce needs and developing 
leadership succession plans; however, if OPM is to lead governmentwide 
human capital reform it can do more to identify the skills and 
competencies of the new OPM, determine any skill and competency gaps, 
and develop specific steps to fill such gaps. Third, we reported that 
the views of agency CHCOs and HR directors as well as OPM employees 
show that OPM can improve its customer service and communication with 
agencies and that guidance to agencies is not always clear and timely. 
Executive branch agency officials also pointed to OPM's Human Capital 
Officer (HCO) structure as a frequent barrier to efficient customer 
response and felt there are greater opportunities for OPM to dialogue 
and collaborate with CHCOs and HR directors. Fourth, with respect to 
performance culture and accountability, we reported that OPM has made 
progress in creating a "line of sight" or alignment and accountability 
across its leaders' expectations and organizational goals in its 
strategic and operational plan; however, success in achieving 
governmentwide reform objectives will rest, in part, on OPM's ability 
to align performance and consistently support mission accomplishment 
for all employees of the organization. 

As Congress and other stakeholders have recognized the importance of 
strategic human capital management, several legislative changes have 
occurred. In November 2002, Congress passed the Homeland Security Act 
of 2002,[Footnote 8] which created DHS and provided the department with 
significant flexibility to design, in consultation with OPM, a modern 
human capital management system affecting approximately 180,000 
personnel. Specifically, the legislation granted DHS certain exemptions 
from the laws governing federal civilian personnel management in Title 
5 of the U.S. Code--providing DHS with certain human capital 
flexibilities to establish a contemporary human capital system that 
will enable it to attract, retain, and reward a workforce able to meet 
its critical mission.[Footnote 9] 

To address governmentwide human capital management challenges, Title 
XIII of the Homeland Security Act, also cited as the Chief Human 
Capital Officers Act of 2002, established CHCO positions in 23 agencies 
to advise and assist the heads of agencies and other executive branch 
agency officials in their strategic human capital management efforts. 
The act also created the CHCO Council to advise and coordinate the 
activities of members' agencies on such matters as the modernization of 
human resources systems, improved quality of human resources 
information, and legislation affecting human resources operations and 
organizations.[Footnote 10] The act also included significant 
provisions related to direct hire authority, the use of categorical 
ranking in the hiring of applicants instead of the "rule of three," 
expansion of voluntary early retirement and "buy-out" authority, a 
requirement to discuss human capital approaches in Government 
Performance and Results Act reports and plans, and a provision raising 
the total annual compensation limit for senior executives and other 
senior professionals in agencies with performance appraisal systems 
that have been certified by OPM and OMB as making meaningful 
distinctions in relative performance. 

In November 2003, the National Defense Authorization Act for Fiscal 
Year 2004[Footnote 11] provided DOD--the largest federal employer--with 
authority, in conjunction with OPM, to establish a flexible and 
contemporary human resources system, including a new (1) pay and 
performance management system, (2) appeals process, and (3) labor 
relations system--which together comprise the National Security 
Personnel System (NSPS). Like the Homeland Security Act, this 
legislation granted DOD certain exemptions from Title 5 of the U.S. 
Code and provided significant flexibility for designing NSPS, allowing 
for a new framework of rules, regulations, and processes to govern how 
defense civilian employees are hired, compensated, promoted, and 
disciplined. The NSPS would cover approximately 700,000 
employees.[Footnote 12] 

Also, in the National Defense Authorization Act for Fiscal Year 2004, 
Congress authorized a new performance-based pay system for members of 
the SES.[Footnote 13] Under the new system, which took effect in 
January 2004, senior executives no longer receive annual across-the- 
board or locality pay adjustments. Executive branch agencies must now 
base pay adjustments for senior executives on individual performance 
and contributions to agency performance through an evaluation of their 
unique skills, qualifications, or competencies, as well as the 
individual's current responsibilities. The new pay system raises the 
cap on base pay and total compensation. For 2006, the caps are $152,000 
for base pay (Level III of the Executive Schedule) with a senior 
executive's total compensation not to exceed $183,500 (Level I of the 
Executive Schedule). If an agency's senior executive performance 
appraisal system is certified by OPM and OMB concurs, the caps are 
increased to $165,200 for base pay (Level II of the Executive Schedule) 
and $212,100 for total compensation (the total annual compensation 
payable to the Vice President). 

In addition to SES employees, many agencies use senior employees with 
scientific, technical, and professional expertise, commonly known as 
senior-level (SL) and scientific or professional (ST) positions. SL/ST 
positions have a lower maximum rate of basic pay than SES employees, 
and unlike the SES, their individual rate of pay does not necessarily 
have to be based on individual or agency performance. However, an 
agency may apply to OPM and OMB for certification of its SL/ST 
performance appraisal system, and if the system is certified as making 
meaningful distinctions in relative performance, an agency may raise 
the total annual compensation maximum for SL/ST employees to the salary 
of the Vice President.[Footnote 14] However, certification does not 
affect the maximum rate of basic pay of SL/ST employees. 

To qualify for these pay flexibilities, OPM must certify and OMB must 
concur that an agency's senior executive performance appraisal system 
meets certification criteria jointly developed by OPM and OMB. Two 
levels of performance appraisal system certification are available to 
agencies: full and provisional. To receive full certification, which 
lasts for 2 calendar years, the design of agency systems must meet nine 
certification criteria and agencies must provide documentation of prior 
performance ratings to demonstrate compliance with the criteria. 
Agencies can receive provisional certification, which lasts for 1 
calendar year, if they have designed but not yet fully implemented a 
senior executive performance appraisal system, or do not have a history 
of performance ratings that meets the certification criteria. In 
September 2006, we testified before the Subcommittee that the 
certification criteria are generally consistent with our body of work 
identifying key practices for effective performance management 
systems.[Footnote 15] In addition, we testified that these senior 
executive and senior-level employee performance-based pay systems serve 
as an important step for agencies in creating alignment or "line of 
sight" between executives' performance and organizational results. A 
detailed description of the certification criteria and process is 
provided in appendix II. 

Key Lessons Learned from the Senior Executive Performance-based Pay 
System and Other Human Capital Initiatives: 

The congressionally authorized senior executive performance-based pay 
system, implemented in 2004, as well as OPM's implementation of other 
governmentwide human capital initiatives, provides an opportunity to 
learn from experiences gained and apply those lessons to the 
implementation of future human capital reforms. As OPM is likely to 
play a similar leadership and oversight role in future reforms, the 
following lessons learned may also assist OPM as it moves forward in 
the design and implementation of other human capital reforms and 
initiatives. 

Ensure Internal OPM Capacity to Lead and Implement Reform: 

To successfully transform or implement a large-scale change initiative 
such as governmentwide human capital reform, an organization must 
fundamentally reexamine its processes, organizational structures, and 
management approaches--including its workforce capacity. Strategic 
workforce planning addresses two critical needs: (1) aligning an 
organization's human capital program with its current and emerging 
mission and programmatic goals, and (2) developing long-term strategies 
for acquiring, developing, and retaining staff to achieve programmatic 
goals. As mentioned previously, in 2003, we reported that OPM was 
undergoing its own transformation--from less of a rulemaker to more of 
a consultant in leading and supporting executive agencies' human 
capital management systems.[Footnote 16] As the organization transforms 
and OPM works to balance rules and tools and change its organizational 
culture, it is critical that OPM examine its internal capacity to 
ensure its workforce has the competencies to meet the multiple demands 
of the future and successfully implement human capital reforms. In 
particular, we have reported that a one-size-fits-all approach to human 
capital management is not appropriate for the challenges and demands 
government faces and that there should be a governmentwide framework to 
guide human capital reform.[Footnote 17] Thus, it is particularly 
important that OPM's workforce have the knowledge, skills, and 
abilities to understand how to balance the need for consistency across 
the federal government with the desire for flexibility, so that they 
can assist individual agencies in tailoring their human capital systems 
to best meet their needs. Striking this balance will not be easy to 
achieve, but is necessary to maintain a governmentwide system that is 
responsive enough to adapt to agencies' diverse missions, cultures, and 
workforces. 

Executive branch agency experiences with implementing the senior 
executive performance-based pay systems and other human capital efforts 
point to a lack of knowledge and experience among OPM staff. Several 
executive branch agency officials commented that OPM conveyed a "we'll 
know it when we see it" method of communicating expectations, and was 
thus unable to effectively communicate to agencies their expectations 
regarding the senior executive performance appraisal system 
certification process. In addition, executive branch agency officials 
told us they believe the DOD and DHS human capital reform efforts 
severely taxed OPM technical resources, specifically pay and 
compensation employees. One CHCO surmised that OPM's capacity is 
dependent upon a few key employees skilled in these areas, particularly 
innovative pay and compensation approaches. An OPM senior executive 
confirmed this, telling us that turnover and retirement were 
problematic for pay and compensation experts at OPM. Also, a majority 
of agency CHCOs, HR directors, and their staffs expressed concern about 
whether OPM generally has the technical expertise needed to provide 
timely and accurate human capital guidance and advice both now and in 
the future. We previously reported that problems arose for many 
agencies when technical questions had to be communicated via OPM HCOs 
to the policy experts at OPM.[Footnote 18] This issue may have been 
magnified for some agencies by the frequent turnover or reassignments 
among HCOs. The HCO position was established in 2003 at OPM as part of 
its transformation efforts to help improve customer service to 
agencies.[Footnote 19] An executive branch agency official told us that 
her agency was assigned four different HCOs in the last 18 months. 
According to OPM's most recent strategic human capital plan, OPM 
recognizes that HCO staff will need to develop greater familiarity with 
areas beyond each individual's technical expertise and plans for its 
staff to gain "cross-functional knowledge" through means such as staff 
participation on cross-functional work groups that address various 
initiatives, training opportunities, and other developmental 
assignments that lend themselves to professional growth and 
development. 

Further, our analysis of OPM's agency results from the 2004 FHCS and 
2005 follow-up focus group data suggest that OPM employees may not be 
receiving sufficient training to enhance their skills and competencies. 
OPM employees were not as close to the employees in the rest of 
government in agreeing with the statement "I receive the training I 
need to perform my job." Fifty-three percent of OPM employees agreed 
with this statement as compared with 60 percent of employees from the 
rest of government. Focus group participants selected this item as one 
of the most important issues for OPM to address--expressing the view 
that OPM's culture does not support training, employees do not have 
time to attend training classes, and managers are not given sufficient 
and timely training budgets. An OPM executive supported these views, 
stating that it can be a struggle to convince managers that people 
should attend training. A former senior OPM official told us that he 
did not have an overall budget, including training, for his department 
while at OPM. 

OPM has begun to align its workforce skills and competencies to meet 
additional requirements stemming from future reforms and other 
environmental changes. For example, OPM conducted agencywide skills and 
competencies assessments in 2001 and 2003, and has conducted skills 
assessments for certain targeted occupations--information technology, 
human resource management, and selected mission-critical positions. 
Validating skills and competencies is important because the workforce 
skills and competencies needed to be a strategic partner, toolmaker, or 
consultant may be different from those needed in the past to be a 
rulemaker or enforcer of regulations. Importantly, OPM has also updated 
several of its key strategic management documents. First, in March 
2006, OPM issued its Strategic and Operational Plan, 2006-2010--the 
starting point and basic underpinning for transformation. The plan's 
strength is in its definition of clear, tangible goals and 
deliverables. However, the plan does not include a description of the 
relationship between the long-term goals and annual goals. 

Second, in August 2006, OPM updated its Corporate Leadership Succession 
Management Plan to include all of its supervisory, management, and 
executive positions with succession planning profiles that contain a 
list of specific and general technical competency requirements for each 
position. This is important because the problem of a lack of knowledge 
and experience at OPM may be compounded by the potential loss of 
institutional knowledge. In June 2006, we testified that without 
careful planning, employee attrition, including senior executives, 
could pose the threat of an eventual loss in institutional knowledge, 
expertise, and leadership continuity at OPM.[Footnote 20] OPM's 
succession planning data show that as of July 2006, nearly half of its 
376 supervisors, managers, and executives were eligible for either 
early or regular retirement. Based on historical trend data, OPM 
projects an overall loss (including retirements) of roughly 65 to 75 
supervisory, managerial, and executive positions per year. Even more 
recently, at the end of September 2006, OPM issued its Plan for the 
Strategic Management of OPM's Human Capital for fiscal years 2006-2007. 
According to OPM's strategic human capital plan, voluntary attrition 
among employees overall at OPM has averaged approximately 11 percent 
over a 3-year period and voluntary retirements comprised approximately 
25 percent of separations from 2003 to 2006. 

OPM has developed strategies to help support its succession planning 
objectives, such as providing resources to improve and develop the 
competence of internal candidate pools to develop deep "bench 
strength." In addition, OPM plans to target recruitment efforts around 
the critical and core competencies it has identified for each position 
and to use recruitment incentives and flexibilities to attract the most 
desirable candidates. These succession planning efforts are important 
because leading organizations engage in broad, integrated succession 
planning efforts that focus on strengthening both current and future 
organizational capacity. 

OPM's ability to lead and oversee human capital management policy 
changes that result from potential human capital reform could be 
affected by its internal capacity and ability to maintain the right 
skills and competencies of its workforce, as well as an effective 
leadership team. The steps taken by OPM demonstrate progress in 
achieving its transformation and it must continue on this path by 
closely monitoring its actions to align its workforce to meet current 
and emerging demands. A new agencywide skills assessment would enable 
OPM to better align its workforce with needed resources to meet such 
demands. Building and maintaining expertise in areas that will be 
critical to future reforms, such as classification and pay and 
compensation policy, and ensuring that OPM employees receive 
opportunities for training and development that will help them in 
assisting agencies with the implementation of reforms, are critical for 
future reform success. These workforce and training goals and 
objectives also should be included in the means and strategies 
developed in OPM's strategic planning process. Moving forward, OPM can 
continue to monitor implementation of long-term strategies to better 
prepare its workforce for change and continue to build its workforce 
capacity to meet the demands of the future. 

Ensure That Executive Branch Agencies' Infrastructures Support Reform: 

We have reported that the federal government should follow a phased 
approach towards human capital reforms that meets a "show me" 
test.[Footnote 21] That is, each agency should be authorized to 
implement a reform only after it has shown it has met certain 
conditions, including having the institutional infrastructure in place 
necessary for success. This infrastructure includes, at a minimum, a 
modern, effective, credible, and validated performance management 
system that provides a clear linkage between institutional, unit, and 
individual performance-oriented outcomes, as well as providing for 
adequate internal and external safeguards to ensure fairness, and 
prevent abuse, and is nondiscriminatory. The absolutely critical role 
that a solid infrastructure plays has been amply demonstrated by our 
own and other organizations' experiences in shifting to market-based 
and more performance-oriented pay. These experiences have shown that 
market-based and performance-oriented pay reforms cannot be simply 
overlaid on existing ineffective performance management systems, but 
must be part of a broader strategy of change management and performance 
improvement initiatives. As the leader of the federal government's 
human capital strategies, OPM plays a key role in fostering and guiding 
improvements in all areas of strategic human capital management across 
the executive branch. As part of its key leadership role, OPM can 
assist--and as appropriate, require--the building of the 
infrastructures within agencies needed to successfully implement and 
sustain human capital reforms and related initiatives. OPM can do this 
in part by encouraging continuous improvement and providing appropriate 
assistance to support agencies' efforts. 

As we testified in September 2006, overall, the regulations that OPM 
and OMB developed to administer a performance-based pay system for 
executives serve as an important step for agencies in creating an 
alignment or "line of sight" between executives' performance and 
organizational results.[Footnote 22] However, OPM's approach to 
certifying agencies' senior executive performance appraisal systems 
could more fully promote the building of the institutional 
infrastructures needed to effectively implement the senior executive 
performance and pay reforms. 

Under OPM and OMB regulations, agencies that are authorized to 
implement the new pay flexibilities will receive either a provisional 
or full certification. Provisionally certified agencies receive the 
same pay flexibilities as those with fully certified systems, even 
though agencies with provisional certification do not meet all nine of 
the certification criteria. In essence, the provisional category of 
certification constitutes a phased approach to implementing performance-
based pay systems by allowing agencies to work toward meeting the OPM 
and OMB full certification requirements as they are implementing the 
new authorities. Of the 33 performance appraisal systems that have been 
certified in 2006, only the Department of Labor's system for its senior 
executives received full certification.[Footnote 23] The remaining 32 
systems received provisional certification, the majority of which were 
provisionally certified for the third straight year. (See app. III for 
the list of agencies that have received certification of their 
performance appraisal systems since 2004.) 

An agency that is provisionally certified must reapply annually rather 
than the every 2 years that is required of agencies with full 
certification. This annual reapplication process for agencies with 
provisional certification is important in order to help ensure 
continued progress in fully meeting congressional intent in authorizing 
the new performance-based pay system. Moreover, continuing scrutiny 
from OPM and OMB is important because there is no required time frame 
under which a provisionally certified agency must demonstrate it meets 
all the OPM and OMB criteria and thereby receive full certification. In 
that regard, OPM's January 2006 guidance required agencies with 
provisional certification to submit information to OPM and OMB showing 
improvements the agency has made in response to comments from those 
agencies. This requirement was underscored in OPM's October 31, 2006, 
guidance for calendar year 2007, that asked agencies to highlight in 
their certification request any description or evidence of improvements 
made as a result of comments from OPM or OMB in response to the 
agency's 2006 certification submission. 

As noted, OMB and OPM's efforts represent an important step in 
fostering "lines of sight" within the agencies. Nonetheless, OPM has 
opportunities to further strengthen its efforts. More specifically, 
additional front-end and ongoing OPM involvement appears to be needed 
to assist agencies in achieving and maintaining full certification. 
Executive branch agency officials said OPM's role in the certification 
process focuses more on enforcing rules regarding applications for 
certification, rather than guiding an agency to build the necessary 
infrastructure for a performance-based pay system. In addition, these 
executive branch agency officials said OPM has helped them improve 
their pay systems, but they also said OPM should provide more active 
assistance during the design and implementation of the system rather 
than waiting to evaluate the end results. Further, an agency CHCO said 
OPM is not prepared to interact with agencies to progressively develop 
and sustain their senior executive performance-based pay systems over 
time once they get through the certification process. 

Since the certification process started in 2004, OPM has raised the bar 
for certification by placing a greater emphasis on measurable business 
outcomes. Raising the bar in the spirit of continuous improvement is 
appropriate, but agencies can not achieve the higher standards unless 
they are continually building the foundations essential to support 
augmented requirements and new improvements. The only two agencies that 
were fully certified in 2004, the General Services Administration (GSA) 
and the Pension Benefit Guarantee Corporation, were unable to retain 
full certification when they reapplied in 2006. An official from one of 
these agencies said they applied for full certification in 2006, but 
received provisional certification because OPM had raised the bar for 
meeting full certification. The agency official stated that upon 
receiving full certification in 2004, OPM stopped communicating with 
the agency about new developments in the certification process. In 
addition, this official said they were "left in the dark" about how 
OPM's certification standards were potentially changing, and how the 
process for certification was evolving. It was not until 4 months after 
they submitted their application to recertify their system that OPM 
raised concerns regarding "weak" executive performance measures, though 
this agency believed that it had achieved the requirement according to 
OPM's guidance. The agency opted to accept provisional certification 
rather than redo its senior executive performance plans and wait for 
full certification. 

In general, OPM has recognized that agencies need more assistance and 
guidance developing an infrastructure to support performance management 
systems for executive branch employees below the senior executive 
level. OPM developed the Performance Appraisal Assessment Tool (PAAT) 
and has promoted performance management beta sites to address this 
need.[Footnote 24] The PAAT provides agencies with an assessment tool 
that focuses on the design and implementation of performance management 
systems, the training and development of supervisors, and the agency's 
accountability for the system. The PAAT helps agencies identify 
weaknesses in their performance management systems and provides 
agencies an opportunity to develop a comprehensive strategy for 
revising its performance management practices to better support a 
results-focused performance culture. The beta sites give agencies an 
opportunity to test their nonexecutive performance management systems 
on a small scale before expanding them agencywide. 

Agencies and OPM use the PAAT to evaluate the progress of the beta 
sites. This approach of evaluating and testing allows agencies to build 
internal capacity, gain experience, and demonstrate that they are 
prepared to link pay to performance for all employees. However, as one 
executive branch agency official noted, the PAAT is used more by OPM to 
ensure accountability than to build agency infrastructure. Similar to 
concerns expressed about the senior executive system certification 
process, an agency HR director said OPM does not provide "up-front" 
implementation plans to agencies that outline the required agency 
investment and infrastructure needed to successfully meet new human 
capital requirements. 

Going forward, OPM can help agencies build this infrastructure by 
designing its human capital reform efforts to promote and support 
continuous agency improvement. OPM will need to expand the focus of its 
efforts to help identify the obstacles that are impeding agencies from 
achieving desirable human capital outcomes, and then take appropriate 
measures to address them and set mutually agreed-upon goals for 
improvement. These actions will help ensure that agencies continue to 
make substantive progress toward modernized, credible performance 
management systems, and that provisional certifications do not become 
the norm. OPM can also take steps to define what it will take in terms 
of fact-based and data-driven analyses for agencies to demonstrate that 
they are ready to receive this certification, and then help agencies 
develop the infrastructure necessary to produce these results. 

Collaborate with CHCO Council: 

Our prior work has found that high-performing organizations 
strategically use partnerships and that federal agencies, such as OPM, 
must effectively manage and influence relationships with organizations 
outside of their direct control. High-performing organizations 
strengthen accountability for achieving crosscutting goals by placing 
greater emphasis on collaboration, interaction, and teamwork across 
organizational boundaries, to achieve results that often transcend 
specific boundaries. Communicating with stakeholders is especially 
crucial in the public sector, where policy making and program 
management demand transparency and a full range of stakeholders and 
interested parties are concerned not only with what results are to be 
achieved, but also which processes are used to achieve those 
results.[Footnote 25] Our prior work has identified a number of 
opportunities where OPM could improve its collaboration with 
stakeholders. In 2003, we reported that the lack of coordination 
between OPM and GSA, the lead agencies for the governmentwide telework 
initiative, created confusion for federal agencies in implementing 
their individual telework programs.[Footnote 26] More recently, our 
review of oversight of Equal Employment Opportunity (EEO) requirements 
and guidance found little evidence of OPM coordination with the Equal 
Employment Opportunity Commission (EEOC). Insufficient understanding of 
OPM and EEOC's mutual roles, authority, and responsibilities resulted 
in a lost opportunity to realize consistency, efficiency, and public 
value in federal EEO and workplace diversity human capital management 
practice.[Footnote 27] We have also reported that using interagency 
councils has emerged as an important leadership strategy in both 
developing policies and gaining consensus and consistent follow- 
through within the executive branch.[Footnote 28] With respect to human 
capital reforms, we have reported that the CHCO Council should be a key 
vehicle for this needed collaboration and is vital to addressing 
crosscutting federal government strategic human capital 
challenges.[Footnote 29] 

Executive branch agency officials said the senior executive performance 
appraisal certification process was a missed opportunity for OPM to 
better collaborate with the CHCO Council. One agency CHCO said OPM 
traditionally uses council meetings to present information to the 
CHCOs, but does not encourage discussions or seek the council's input. 
Another agency CHCO said the council has rarely been used to debate new 
human capital policies. This one-way communication does not provide a 
forum for agency CHCOs to contribute ideas or discuss their 
experiences. Some CHCOs and HR directors pointed to OPM's successful 
collaborative efforts through the CHCO Council, such as its assistance 
to agencies in the aftermath of Hurricane Katrina; however, they also 
told us that OPM misses opportunities to partner more effectively with 
agencies. An agency CHCO said that more robust policy discussion on the 
council would promote community building and collaboration among 
agencies and OPM. 

According to OPM officials, OPM provided the CHCO Council with 
opportunities to discuss the certification process. However, some CHCOs 
wanted more involvement in crafting the fundamental design and 
applicable issues of the certification process, rather than commenting 
on draft regulations after the fact. While the new interim final 
regulations were being developed and issued in 2004, OPM provided two 
presentations to the full CHCO Council on the new requirements for 
senior executive performance appraisal systems along with periodic 
updates. The CHCO Council minutes show that one presentation focused on 
the design of the new performance appraisal system and the second on 
the process for obtaining certification. Agency CHCOs were able to ask 
questions about the proposal and make suggestions. For example, one 
CHCO suggested that OPM reconsider the timing of the recertification 
process since it coincided with agencies' annual performance appraisal 
cycle, and this has proven to be a key issue for the certification 
process. Further, CHCOs were given a very short time frame of 24 hours 
to review and comment on the proposed certification criteria. Executive 
branch agency officials overwhelmingly reinforced a need for OPM to do 
more to collaborate and facilitate information sharing with the council 
and HR directors. More collaboration with the CHCO Council during the 
design phase of human capital initiatives would enable OPM to 
incorporate agency suggestions and build a governmentwide consensus for 
reform. 

OPM staff involved with the certification process told us that in 2004, 
OPM sought input on the certification criteria from OMB and members of 
the CHCO Council. There were also opportunities for agency comments 
when the draft regulations were released and through the CHCO Council. 
In addition, the CHCO Council Subcommittee of Performance Management 
reviewed the process as well. However, most comments focused on pay 
flexibilities and not the certification process. 

OPM has taken some steps to improve the effectiveness of the council by 
expanding the membership to include deputy CHCO positions. Some deputy 
CHCOs are also the agencies' HR directors, but others perform different 
deputy roles. Including deputy CHCOs will bring additional HR expertise 
and provide more leadership continuity to the council. An agency CHCO 
said OPM is taking other steps to improve collaboration with agencies, 
such as promoting more CHCO Academy[Footnote 30] meetings on the 
certification process and reinstituting executive resource forums, 
which help keep agency executive resources staff current on OPM's 
certification policies. A recent executive resource forum gave agency 
executive resource staff an opportunity to discuss common concerns 
about the certification process. 

Moving forward, collaboration will be critical as human capital reforms 
begin to take hold across government. If OPM is to lead reform 
successfully, it will need to strategically use the partnerships it has 
available to it, such as the CHCO Council and other key stakeholders. 
OPM can continue to build upon its expansion of the CHCO Council and 
promotion of CHCO Academies and executive resource forums. These are 
important steps toward building a collegial environment for debating 
and collaborating on future human capital reforms. 

Develop Clear and Timely Guidance: 

Our work on high-performing organizations and successful 
transformations has shown that communication with customers should be a 
top priority and is central to forming the partnerships needed to 
develop and implement transformation strategies. This communication is 
most effective when done early, clearly, and often. Providing agencies 
with clear and timely guidance is one way of effectively communicating 
with OPM's customers. In the past, we have reported concerns with OPM's 
communications pertaining to their leadership in implementing 
governmentwide human capital initiatives and have recommended ways in 
which OPM could improve its guidance to federal agencies. For example, 
in 2003 we reported that an initial lack of clarity in telework 
guidance for federal agencies from OPM led to misleading data being 
reported on agencies' telework programs. As a result, we recognized the 
need for OPM to provide agencies with consistent, inclusive, and 
unambiguous support and guidance.[Footnote 31] 

The initial lack of clear and timely guidance has hindered agency 
implementation of senior executive performance appraisal systems. When 
the certification process began in 2004, OPM provided agencies with 
limited guidance for implementing the new regulations. Officials at a 
majority of the CHCO Council agencies told us they did not have enough 
guidance to properly prepare for meeting the certification criteria. 
With the release of the regulations in 2004, OPM's initial guidance 
consisted of a list of documents required for provisional and full 
certification and a sample cover letter to accompany each application. 
The lack of more specific guidance created confusion as agencies 
attempted to understand the broadly defined regulatory criteria and 
adjust to the requirements for certification. Agencies did not fully 
understand what the regulations required in order to receive 
certification, thus resulting in an inefficient process and increasing 
the workload of agency human resource staffs unnecessarily. 

According to executive branch agency officials, when contacting OPM for 
clarification or assistance with requirements, they received 
conflicting answers and advice. Executive branch agency HR directors 
said that they sometimes received mixed messages on the certification 
process from OPM, and it appeared that answers would change depending 
on the individual an agency was working with at OPM. One agency CHCO 
said that rather than providing agencies with guidance, OPM tends to 
wait to receive the agency submission and then determine if it meets 
requirements. While OPM directs agencies to its Web site and online 
resources, an agency CHCO said they found this information useful, but 
this did not fulfill all of their information needs. OPM officials we 
spoke with about this agreed that they need to provide clear and 
consistent guidance to agencies and said they are working to improve 
this. They said the certification of agency performance appraisal 
systems has been an iterative, learning process, and OPM is positioning 
itself to provide more guidance to agencies. For example, OPM has 
continued to update its annual certification guidance to provide 
agencies with more assistance when developing their senior executive 
appraisal systems for certification. The guidance for calendar year 
2006 includes explicit examples from executive performance plans that 
comply with the certification criteria. 

The continued late issuance of certification guidance in the years 
since the 2004 regulations were released has plagued the process by 
delaying the certification of agency systems. Since certification of 
appraisal systems runs on the calendar year, an agency's provisional 
certification expires on December 31st unless they submit an 
application and receive certification for the next calendar year. To 
avoid a gap in certification between calendar years, applications for 
appraisal system certification need to be approved before January 1st. 
However, OPM did not issue guidance for calendar year 2006 until 
January 5, 2006, causing agencies to lose time in developing their 2006 
applications for review and certification. This delay was compounded 
when OPM clarified its guidance in a January 30, 2006, memorandum 
telling agencies that senior executive performance appraisal systems 
would not be certified for calendar year 2006 if the performance plans 
did not hold executives accountable for achieving measurable business 
outcomes. Some agencies had to revise their submissions, where 
necessary, to meet OPM's additional requirements, causing further 
delays. 

Untimely guidance has been a recurring problem with OPM's 
implementation of the certification process, beginning when OPM 
initially developed the regulations for certifying appraisal systems. 
In late November 2003, Congress passed legislation to create the new 
senior executive performance-based pay system to take effect in January 
2004; however, it took 8 months for OPM to publish the certification 
criteria included in the interim regulations when jointly released with 
OMB in July 2004. As a result, agencies that were certified in 2004 
were unable to operate under the higher executive pay caps until late 
in the calendar year. In December 2004, OPM issued guidance for 
calendar year 2005. The guidance was issued before the start of the 
calendar year, but only by a few weeks. On November 1, 2006, OPM posted 
a memorandum to heads of departments and agencies from the Director of 
OPM, notifying them of guidance for agencies seeking certification for 
calendar year 2007. 

These delays and late revisions exacerbate the time crunch agencies 
face when applying for certification. According to executive branch 
agency officials, after agencies' performance cycles end on September 
30, they essentially have 90 days until the end of the calendar year 
when their current certification expires if they are provisionally 
certified or in their final year of full certification. Within this 
time frame, agencies must conduct senior executive performance 
assessments and reviews, develop performance plans for the next 
performance year, and compile agency and senior executive performance 
data for the certification application. The late release of 
certification guidance adds a level of uncertainty to the process that 
can delay an agency's submission of its application until after the 
start of the calendar year. Some agencies delay preparing their 
certification applications because they do not know when OPM will 
release its annual guidance or if there will be any changes in 
requirements from the previous year. This creates a gap in 
certification after an agency's current certification expires. Until 
the agency's senior executive performance appraisal system is 
recertified, it must operate under the lower "uncertified" executive 
pay cap of $152,000 in 2006 ($13,200 less than for certified systems), 
while the cap on total compensation is $183,500 ($28,600 less than for 
certified systems).[Footnote 32] 

OPM has acknowledged that the pay limitations in this certification gap 
can negatively impact an agency's ability to recruit, reassign, and 
retain qualified senior executives. Executive branch agency officials 
expressed similar concerns about how the certification gap limits their 
ability to attract and hire new executives. They also said the 
certification gap creates an uneven playing field between agencies with 
certified systems and agencies that are still awaiting recertification. 
In July 2006, OPM issued regulations to alleviate one of the concerns 
with the certification gap. The regulations now allow agencies to 
increase the pay rates of senior executives once the agency is 
certified, even if it happens after the start of the calendar year. 
These regulations resolve a symptom of the certification gap, but do 
not address the underlying causes of the time crunch agencies face when 
applying for certification. Also, according to OPM officials, the 
administration has submitted a legislative proposal to Congress to 
eliminate the calendar year basis for certification. However, such 
legislation has not been introduced. 

Moving forward, OPM could alleviate confusion, delays, and 
inefficiencies by providing agencies with clear and timely guidance for 
implementing human capital reforms. OPM needs to clearly communicate 
its expectations and provide agencies with adequate time to adjust to 
any changes in requirements. When designing new human capital 
initiatives, OPM could work with agencies to identify what guidance 
agencies will need and develop a timeline for when OPM will release 
such guidance. A different time frame for certifying performance 
appraisal systems could also help alleviate the time crunch agencies 
face when applying for certification. 

Share Best Practices: 

We have reported that leading practices and benchmarking are important 
to supporting agency transformation efforts, and often include case 
illustrations of leading practices in our reports. In May 2003, we 
recommended that OPM work to more thoroughly research, compile, and 
analyze information on the effective and innovative use of human 
capital flexibilities and more fully serve as a clearinghouse in 
sharing and distributing information.[Footnote 33] OPM began working 
with a contractor in the summer of 2005 to review hiring flexibilities 
and authorities to better determine which ones are used and not used, 
who is using them, and when and how they are being used; however, it is 
still unclear if OPM has created a "clearinghouse" of information to 
help agencies meet their human capital needs. In 2004, we stated that 
agencies need to provide OPM with timely and comprehensive information 
about their experiences in using various approaches and flexibilities 
to improve their hiring processes, and that OPM could serve as a 
facilitator in the collection and exchange of information about 
agencies' effective practices and successful approaches.[Footnote 34] 

Executive branch agency officials told us that OPM could have better 
facilitated the sharing of best practices for developing and 
implementing senior executive appraisal systems. According to OPM, in 
the last 3 years, it has reviewed and certified about 100 applications 
for appraisal system certification. OPM could use this archive of 
information to identify some best practices for developing certified 
systems, but OPM has not fully shared this information with agencies. 
Director Springer said OPM has met with officials from the only agency 
currently with full certification, the Department of Labor (DOL), to 
study what they have done right. However, Director Springer did not 
know if other agencies had taken the initiative to contact DOL to learn 
from their success. A senior OPM official said OPM did not provide 
agencies with examples of "best practices" for certification 
applications because OPM did not want agencies to think there was only 
one "right way" to get certified. We have reported that a "one size 
fits all" approach to human capital management is not appropriate, but 
we also recognized the value of documenting a range of best practices 
which agencies can tailor to their specific needs. One agency HR 
director said agencies were anxious to learn about what was going on at 
other agencies and did not understand why OPM was reluctant to share 
information. Without sufficient guidance from OPM, agencies relied on 
each other where possible to develop an understanding of the 
certification requirements. One CHCO also took the initiative to use 
CHCO Academy meetings to engender information sharing among agencies 
about the application process. However, agencies were unable to resolve 
uncertainties and disagreements about the regulatory requirements 
without clearer guidance from OPM. Executive branch agency officials 
said best practices for certification could help them improve the 
design of their performance appraisal systems. For example, executive 
branch agency officials said best practices for developing senior 
executive performance measures would help them make their performance 
plans more results based, as required for certification. Recently, OPM 
has taken steps to share information among agencies. In September 2006, 
OPM provided agencies' executive resource directors with samples of 
agency senior executive performance plans, though OPM did not specify 
why these samples were selected and if they should serve as best 
practices for other agencies. 

Moving forward, OPM should facilitate the sharing of best practices for 
human capital reforms among federal agencies. Director Springer has 
said she wants the CHCO Council to develop a best practices initiative 
to collect and share information on the certification process. The CHCO 
Council could be used to facilitate best practices for other human 
capital initiatives as well. Providing a forum for agencies to learn 
from each others' experiences will allow agencies to share effective 
strategies and avoid common pitfalls. 

Solicit and Incorporate Feedback: 

We have reported that communication during a transformation is not 
about just "pushing the message out."[Footnote 35] Given the 
uncertainties that performance-based pay systems may generate for 
agencies and employees accustomed to receiving more standardized pay 
increases, two-way communication is especially important in an 
environment of human capital reform. Creating opportunities for 
employees and customers to communicate concerns and experiences 
surrounding a transformation allows them to feel that their experiences 
are important and acknowledged. Once this employee and customer 
feedback is received, it is important to use this solicited feedback to 
make any appropriate changes to the implementation of the 
transformation. For example, OPM uses its FHCS as an important method 
of gathering its own employee feedback and has used this information to 
take actions to improve its organization. In addition, OPM recognizes 
that it is important to notify and involve the employees affected by 
personnel demonstration projects, which are similar to the senior 
executive performance-based pay system, though OPM does not require 
those implementing such demonstration projects to obtain feedback. 
However, according to its Demonstration Projects Evaluation Handbook, 
OPM suggests that a survey is one method that could be used to obtain 
employees' views on the impact of the demonstration project to help 
develop lessons learned that could be shared with the affected agency, 
as well as governmentwide. We have also reported that high-performing 
organizations understand they need to continuously review and revise 
their performance management systems through monitoring their systems, 
informally and formally, including listening to employees' and 
stakeholders' views.[Footnote 36] 

OPM does not actively solicit and act on feedback from agencies on the 
implementation of the certification process. Executive branch agency HR 
directors said there was not a formal mechanism, such as a survey 
instrument, for agencies to provide feedback to OPM on its guidance and 
assistance to agencies. An OPM executive within the HCLMSA division 
confirmed that OPM does not have a formal feedback mechanism; however, 
this executive said OPM converses with agencies regularly so they did 
not feel the need to obtain information in this way. Informal feedback 
from agencies is primarily communicated through the HCOs. OPM holds 
regular meetings of the HCOs to discuss agency concerns. However, 
executive branch agency officials said OPM does not always act to 
address these concerns. OPM also gathers agency feedback through the 
CHCO Council and executive resource forums. OPM's current feedback 
mechanisms are important and valuable, but they could be supplemented, 
though not replaced, with more formal outreach. Formal feedback 
mechanisms can ensure that OPM gathers a full range of views by giving 
everyone an opportunity to comment. Formal feedback also provides a 
mechanism for collecting the views of clients and employees in one 
place, allowing OPM to track and report progress over time. 

Also, OPM does not gather feedback from senior executives who are 
directly affected by the new performance appraisal systems and does not 
require agencies to survey senior executives, even though agencies are 
approaching the fourth year of implementation. Director Springer said 
OPM has not surveyed members of the SES about their attitudes towards 
the new system. In September 2006, she said it would be premature to 
conduct a survey before the system takes hold, but she did not say when 
the timing might be appropriate. Also, the 2006 FHCS, OPM's most recent 
survey that gathers employees' perceptions of federal human capital 
practices in their agencies, did not include any questions specifically 
designed to gather feedback on changes to senior executive performance 
systems. However, Director Springer said OPM plans to analyze a recent 
survey of SES members conducted by the Senior Executive Association to 
obtain the experience and views of SES members on the new executive 
systems.[Footnote 37] 

Going forward, OPM should recognize the usefulness of agencies' and 
senior executive employees' views on the certification process and 
identify a systematic approach to obtain feedback on this and future 
human capital reforms. Feedback mechanisms, such as survey or focus 
groups, could help OPM identify what its customers think OPM is doing 
well, and where OPM needs to improve. Once obtained, feedback 
information should be considered in developing new agency guidance and 
OPM should take steps to address any specific agency concerns, as 
appropriate. 

Track Progress to Ensure Accountability: 

High-performing organizations understand they need to continuously 
review and revise their performance management systems to achieve 
results and accelerate change. These organizations continually review 
and revise their human capital management systems based on data-driven 
lessons learned and changing needs in the environment. We have reported 
that agencies seeking human capital reform should consider doing 
evaluations that are broadly modeled on the evaluation requirements of 
the OPM demonstration projects.[Footnote 38] Under the demonstration 
project authority, agencies must evaluate and periodically report on 
results, implementation of the demonstration project, cost and 
benefits, impacts on veterans and other equal employment opportunity 
groups, adherence to merit system principles, and the extent to which 
the lessons from the project can be applied governmentwide. Such an 
evaluation could ensure accountability, facilitate congressional 
oversight, allow for any midcourse corrections, and assist the agency 
in benchmarking its progress with other efforts. 

Also, monitoring the implementation of new pay systems is important 
because unintended consequences may arise. Organizations have found 
they should be open to refining their systems. For example, we have 
reported that in order to spread the pay increases among as many 
employees as possible, the Federal Deposit Insurance Corporation (FDIC) 
found that managers tended not to award merit pay increases to top- 
performing employees when they were to be promoted in the career ladder 
and as a result, these high-performing employees were not getting the 
merit pay increases they deserved. FDIC recognized that this unintended 
consequence needed to be corrected in future iterations of the pay 
system and managers needed help in learning how to make the necessary 
distinctions in employees' contributions.[Footnote 39] 

As we noted in our September 2006 testimony, OPM needs to carefully 
monitor the implementation of agencies' senior executive performance 
management systems, especially those that have provisional 
certification.[Footnote 40] This is because, as also noted earlier in 
this report, agencies with provisional certification have only met four 
of nine required criteria for certification and can still receive the 
pay flexibilities of the new system. In other words, agencies can 
receive the benefits of the new pay-for-performance system without 
meeting all of its requirements and having safeguards in place. We 
testified in October 2005 that in our view such provisional 
certifications should not be an option under any broad-based 
classification and compensation reform proposal.[Footnote 41] 

Although OPM does not have an evaluation strategy, it is taking steps 
to monitor how agencies are making meaningful distinctions in senior 
executive performance. Such distinctions are required by statute and 
are one of the nine criteria for certifying agencies' senior executive 
performance appraisal systems (as shown in app. II). Once agencies have 
provisional or full certification, OPM monitors this criterion by 
measuring the distributions of agencies' performance ratings and pay. 
This information helps OPM determine if agencies are making meaningful 
distinctions among the performance of their senior executives. Such 
distinctions as part of an effective performance management system are 
important because they allow the organization's leadership to 
appropriately reward those who perform at the highest level. 

In its Report on Senior Executive Pay for Performance for Fiscal Year 
2005, OPM stated that the data indicate that federal agencies are 
taking seriously the requirement to develop rigorous appraisal systems 
and to make meaningful distinctions in performance ratings and pay. All 
reporting agencies have moved away from pass/fail appraisal systems and 
now have at least one performance level above "fully successful." In 
fiscal year 2005, 43 percent of career SES governmentwide were rated at 
the highest performance level, compared to 75 percent in 2003 prior to 
the implementation of the SES pay-for-performance system. Further, OPM 
reported for fiscal year 2005 that the percentage of SES rated at the 
highest performance level declined 16 percent from the prior year. OPM 
also reported that the largest increases in salary went to SES rated at 
the highest performance level. Although SES pay and performance award 
amounts vary by agency based on factors such as compensation strategy, 
funding, and agency performance levels, OPM believes these general 
trends suggest a further refinement may be occurring in the process of 
distinguishing outstanding performers. 

Developing an evaluation strategy that works within OPM's existing 
required systems--such as the Human Capital Assessment and 
Accountability Framework (HCAAF)[Footnote 42]--is one approach that OPM 
can take to track agencies' progress in implementing their senior 
executive performance systems as well as hold them accountable for 
meeting OPM's certification criteria. For example, DOD officials 
suggested that OPM could work with agencies to develop metrics under 
the HCAAF to determine whether agency performance management systems 
were making meaningful distinctions based on relative performance or 
other such important criteria. These metrics could be reported in 
current systems, such as the President's Management Agenda 
(PMA).[Footnote 43] 

Because OPM carries out its role in a decentralized environment where 
the results of its efforts largely take place at federal agencies 
outside its direct control, it is particularly important that OPM 
develop a strategy to track agencies' progress in meeting its human 
capital reform goals. OPM could require evaluations that are broadly 
modeled on the evaluation requirements of the OPM demonstration 
projects. It can work within its currently required systems to make 
reporting requirements less onerous and part of agencies' routines. As 
we testified in September 2006, in the future, OPM should maintain a 
focus on continuous improvement of agency systems by monitoring the 
certification process, determining whether any obstacles are impeding 
agencies from receiving full certification, and taking appropriate 
measures to address them.[Footnote 44] 

Conclusions: 

Significant reforms are already underway to modernize the federal 
government's human capital management systems to better position 
agencies to meet the challenges of the 21st century. OPM is taking 
steps to better prepare itself and agencies for governmentwide human 
capital reform through the implementation of the senior executive 
performance appraisal system certification process, other performance 
management initiatives, such as its PAAT and beta sites, and other 
governmentwide human capital initiatives. These reform efforts present 
an opportunity for OPM to evaluate and learn from its approach to 
implementing these initiatives--lessons that can be applied to ongoing 
and future human capital reforms. OPM's workforce and succession 
planning efforts are also vital to ensuring it has the internal 
capacity to lead and implement reforms. This includes building and 
maintaining the needed skills and competencies for OPM's evolving role 
in assisting agencies. While OPM has taken steps through its planning 
efforts to assess its workforce needs, it can better prepare its 
workforce by reexamining its competencies in light of its updated 
strategic management framework in order to meet future demands. 

Agencies have raised concerns with OPM's workforce capacity in general, 
and more specific concerns with OPM's implementation of the senior 
executive performance appraisal system. These include the lack of clear 
and timely guidance, the need for more sharing of best practices, and 
the year-end time crunch agencies face gathering the required 
information for OPM to certify their systems. Further, OPM does not 
obtain formal feedback from agencies on the implementation of the 
executive systems to assist OPM in better understanding agency concerns 
and the difficulties they face with implementation. Although OPM 
recognizes the value of obtaining employees' views on reform efforts, 
as it encouraged with past demonstration projects, it has not 
encouraged obtaining such feedback for the executive performance 
system. In addition, having an evaluation strategy to monitor agencies' 
overall results of the senior executive performance system could help 
ensure accountability and provide transparency for Congress, other 
agencies, and stakeholders. 

Recommendations for Executive Action: 

To better align OPM's workforce skills and competencies for future 
human capital reform efforts, we recommend that the Director of OPM: 

* Reexamine OPM's agencywide skills and competency assessment in light 
of its updated strategic management documents. 

To assist executive branch agencies in meeting the requirements for the 
certification of their senior executive performance appraisal systems, 
we recommend that the Director of OPM: 

* Develop and publish a timeline for the issuance of certification 
guidance. This timeline should be developed with the input of the CHCO 
Council and provide agencies with adequate time to adjust to any 
changes in guidance. 

* Evaluate alternatives that could remedy the year-end time compression 
that agencies face when trying to meet OPM application requirements and 
avoid a gap in certification. 

* Work with the CHCO Council to develop a formal mechanism for sharing 
leading practices for implementing human capital initiatives, such as 
the senior executive performance appraisal certification and other 
performance management reform initiatives. This forum should include an 
adequate range of examples and best practices so as not to promote one- 
size-fits-all solutions. 

* Develop a formal feedback mechanism to obtain agencies' views on 
OPM's implementation of the certification process. OPM should utilize 
this feedback to identify common agency concerns and develop action 
plans to address these concerns. 

* Work with executive branch agencies to develop a systematic approach 
for obtaining employee attitudes towards human capital reforms. 

* Develop a strategy to allow OPM, other executive agencies, and 
Congress to monitor the progress of implementation of the senior 
executive performance-based pay system. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Director of OPM for review 
and comment. We received a written response from the Director, which is 
reprinted in appendix IV. The Director stated that OPM has made 
progress toward achieving its operational and strategic goals, but 
neither agreed nor disagreed with our recommendations. 

Director Springer provided a number of informative comments describing 
progress OPM has made towards achieving its planned goals, and 
initiatives undertaken to assist federal agencies with meeting their 
hiring demands of the future. Director Springer said OPM has made 
progress towards achieving its operational and strategic goals since 
she became Director of OPM. The Director provided information that 
while beyond the scope of the report, nonetheless is helpful in 
understanding the context in which OPM is operating. Specifically, she 
commented that OPM associates have worked together and with agencies to 
achieve the objectives that are tied to OPM's Strategic and Operational 
Plan, 2006-2010, and since March 2006, OPM has achieved its plan's 
objectives, on time or ahead of schedule. Also, OPM provided a number 
of technical comments and, where appropriate, we have made changes to 
the report language to reflect these comments. 

We are sending copies of this report to the Director of OPM, the 
Director of OMB, and other interested parties. Copies will be made 
available to others upon request. This report is also available at no 
charge on GAO's Web site at [Hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions concerning this report, please 
contact me at (202) 512-6806. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made major contributions to this 
report are listed in appendix V. 

Sincerely yours, 

Signed by: 

Brenda S. Farrell: 
Acting Director, Strategic Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

To identify lessons learned to inform the Office of Personnel 
Management's (OPM) capacity to lead and implement human capital reform, 
we reviewed OPM's implementation of the senior executive performance 
appraisal system certification process. We reviewed and analyzed key 
documents including the legislation that authorized the new senior 
executive performance-based pay system and the regulations for the 
appraisal system certification process that were jointly issued by OPM 
and the Office of Management and Budget (OMB). We also reviewed and 
analyzed the subsequent guidance issued by OPM to agencies to prepare 
their certification applications, policy memos from OPM to agencies, 
and other documentation related to the certification process. To gain 
an agency perspective of the certification process and to a limited 
degree on other performance management initiatives, such as the 
Performance Appraisal Assessment Tool (PAAT) and the performance 
management beta sites, we interviewed 22 of the 23 members of the Chief 
Human Capital Officers Council and/or their corresponding agency HR 
directors. The one agency that was not available for an interview 
provided us with written responses to our questions. In addition, we 
conducted interviews with OPM's five associate directors and other 
senior-level staff, such as the Chief Financial Officer and Chief Human 
Capital Officer, to obtain their views of OPM's management practices. 
We were briefed by the OPM Director and other OPM officials on the OPM 
Strategic and Operational Plan, 2006-2010 and aspects of OPM's human 
capital strategies and initiatives. We also interviewed staff from OMB 
related to their role in the performance appraisal system certification 
process. 

To evaluate OPM's workforce capacity, we interviewed OPM's former and 
current Chief Human Capital Officers and analyzed the OPM Strategic and 
Operational Plan, 2006-2010. To understand how OPM's workforce is 
aligned to support the implementation of potential reforms, we analyzed 
a number of internal OPM documents such as its August 2006 Corporate 
Leadership Succession Management Plan and A Plan for the Strategic 
Management of OPM's Human Capital fiscal years 2004-2007. As the Plan 
for the Strategic Management of OPM's Human Capital fiscal years 2006- 
2007 was issued at the conclusion of our review, we were not able to 
analyze this document. 

To evaluate OPM's efforts to build agency infrastructure, we reviewed 
documents related to OPM's PAAT and the performance management beta 
site initiatives. We selected these initiatives because of similarities 
to the certification process and their likelihood to yield tangible 
lessons related to OPM's capacity to lead future reforms. 

To evaluate OPM's feedback mechanisms, we reviewed survey questions 
included in the 2004 and 2006 Federal Human Capital Survey (FHCS). The 
2006 survey was launched in June 2006 and results are not yet 
available. 

To assess OPM's measures for tracking progress, we analyzed operational 
goals in the OPM Strategic and Operational Plan, 2006-2010. We also 
reviewed OPM's measures of senior executive performance ratings and pay 
in its Report on Senior Executive Service Pay for Performance for 
Fiscal Year 2005. 

We leveraged our work that resulted in our June 2006 testimony on OPM's 
internal capacity.[Footnote 45] We used the 2004 FHCS, the latest 
available survey data, and summaries of OPM's 2005 focus groups to 
assess employee views of OPM's organizational capacity. We reviewed 
OPM's analysis of its 2004 FHCS results and conducted our own analyses 
of survey results using 2002 and 2004 FHCS data sets provided to us by 
OPM. On the basis of our examination of the data and discussions with 
OPM officials concerning survey design, administration, and processing, 
we determined that the data were sufficiently reliable for the purpose 
of our review. We analyzed summaries of OPM employee focus groups that 
OPM conducted in fall 2005 to understand factors contributing to 
employees' responses on the 2004 FHCS. We used the participant comments 
from these focus groups to illustrate employee perspectives. We also 
analyzed the May 2006 action plans developed by OPM to address issues 
identified in the focus groups. 

Other documents reviewed included our previous work related to OPM, 
high-performing organizations, organizational transformation, and human 
capital management reforms. We also reviewed GAO's previous 
recommendations on a range of issues related to OPM's human capital 
leadership role and internal management challenges. 

We conducted our work from October 2005 to September 2006 in accordance 
with generally accepted government auditing standards. 

[End of section] 

Appendix II: Description of the Senior Executive Performance-based Pay 
System Certification Process: 

The new senior executive pay system raises the cap on base pay and 
total compensation. For 2006, the caps are $152,000 for base pay (Level 
III of the Executive Schedule) with a senior executive's total 
compensation not to exceed $183,500 (Level I of the Executive 
Schedule). If an agency's senior executive performance appraisal system 
is certified by the Office of Personnel Management (OPM) and the Office 
of Management and Budget (OMB) concurs, the caps are increased to 
$165,200 for base pay (Level II of the Executive Schedule) and $212,100 
for total compensation (the total annual compensation payable to the 
Vice President). 

To qualify for senior executive pay flexibilities, agencies' 
performance appraisal systems are evaluated against nine certification 
criteria. As shown in table 2, the certification criteria jointly 
developed by OPM and OMB are broad principles that position agencies to 
use their pay systems strategically to support the development of a 
stronger performance culture and the attainment of the agency's 
mission, goals, and objectives. 

There are two levels of performance appraisal system certification 
available to agencies: full and provisional. To receive full 
certification, the design of the systems must meet the nine 
certification criteria and agencies must provide documentation of prior 
performance ratings to demonstrate compliance with the criteria. Full 
certification lasts for 2 calendar years. Agencies can receive 
provisional certification if they have designed but not yet fully 
implemented a senior executive performance appraisal system, or do not 
have a history of performance ratings that meets the certification 
criteria. Provisional certification lasts for 1 calendar year. 

Table 2: Senior Executive Performance Appraisal System Certification 
Criteria: 

Summary of certification criteria for senior executive appraisal 
systems: Alignment; 
Individual performance expectations must be linked to or derived from 
the agency's mission, strategic goals, program/ policy objectives, 
and/or annual performance plan. 

Summary of certification criteria for senior executive appraisal 
systems: Consultation; 
Individual performance expectations are developed with senior employee 
involvement and must be communicated at the beginning of the appraisal 
cycle. 

Summary of certification criteria for senior executive appraisal 
systems: Results; 
Individual expectations describe performance that is measurable, 
demonstrable, or observable, focusing on organizational outputs and 
outcomes, policy/program objectives, milestones, etc. 

Summary of certification criteria for senior executive appraisal 
systems: Balance; 
Individual performance expectations must include measures of results, 
employee and customer/stakeholder satisfaction, and/or competencies or 
behaviors that contribute to outstanding performance. 

Summary of certification criteria for senior executive appraisal 
systems: Assessments and guidelines; 
The agency head or a designee provides assessments of the performance 
of the agency overall, as well as each of its major program and 
functional areas, such as reports of agency's goals and other program 
performance measures and indicators, and evaluation guidelines based, 
in part, upon those assessments to senior employees, appropriate senior 
employee rating and reviewing officials. The guidance provided may not 
take the form of quantitative limitations on the number of ratings at 
any given rating level. 

Summary of certification criteria for senior executive appraisal 
systems: Oversight; 
The agency head or designee must certify that (1) the appraisal process 
makes meaningful distinctions based on relative performance; (2) 
results take into account, as appropriate, the agency's performance; 
and (3) pay adjustments and awards recognize individual/organizational 
performance. 

Summary of certification criteria for senior executive appraisal 
systems: Accountability; 
Senior employee ratings (as well as subordinate employees' performance 
expectations and ratings for those with supervisor responsibilities) 
appropriately reflect employees' performance expectations, relevant 
program performance measures, and other relevant factors. 

Summary of certification criteria for senior executive appraisal 
systems: Performance differentiation; 
Among other provisions, the agency must provide for at least one rating 
level above Fully Successful (must include an Outstanding level of 
performance), and in the application of those ratings, make meaningful 
distinctions among executives based on their relative performance. 

Summary of certification criteria for senior executive appraisal 
systems: Pay differentiation; 
The agency should be able to demonstrate that the largest pay 
adjustments and/or highest pay levels (base and performance awards) are 
provided to its highest performers, and that, overall, the distribution 
of pay rates in the SES rate range and pay adjustments reflects 
meaningful distinctions among executives based on their relative 
performance. 

Source: GAO analysis of OPM and OMB regulations. 

[End of table] 

OPM's role in the certification process begins when an agency submits a 
certification application to OPM. If fully certified, the certification 
is good for the remainder of the calendar year in which the agency 
applied, as well as all of the following calendar year. If 
provisionally certified, an agency's certification is only good for the 
calendar year in which it applied. For example, if an agency is 
provisionally certified in October 2005, its certification would expire 
in December 2005. 

To ensure the agency's submission is complete, the agency's OPM 
contact--the Human Capital Officer (HCO)--first verifies that the 
application contains the required materials and documents. If complete, 
the HCO sends copies to the two OPM divisions responsible for reviewing 
the application, the Human Capital Leadership and Merit System 
Accountability (HCLMSA) division and the Strategic Human Resources 
Policy (SHRP) division, and an additional copy to OMB. The agency's 
submission is reviewed independently by representatives within HCLMSA 
and SHRP to bring different perspectives to the review. 

The submissions are evaluated against the nine certification criteria, 
but each review team has its own method for analyzing the application. 
After an initial review, the reviewers from HCLMSA and SHRP hold an 
informal meeting to discuss the submission. After a more thorough 
review, the reviewers meet again in a formal panel along with the 
agency's HCO and decide whether they have enough information to reach a 
certification decision about the agency. If the panel concludes there 
is not enough information to reach a decision, the HCO will request 
that the agency provide any missing or additional supporting 
information. If the panel decides there is sufficient information to 
reach a decision, it will either certify or reject the application. 

When an application is rejected, the HCO works with the agency to help 
modify its performance appraisal system so that it meets the criteria. 
If the application is approved by OPM, the HCO contacts OMB for 
concurrence. OMB uses the same nine criteria to evaluate agency 
applications, but primarily focuses on measures of agency performance. 
If OMB concurrence is not achieved, the HCO works with the agency to 
address OMB's concerns until resolution is reached. Once OMB concurs, 
the Director of OPM certifies the agency's performance appraisal system 
and the agency is formally notified with a letter. The HCO also 
provides additional comments to the agency on their system and 
identifies any improvement needs. For example, these comments may 
direct the agency to focus more on making meaningful distinctions in 
performance. Figure 1 provides an overview of the certification 
process. 

Figure 1: Overview of Senior Executive Performance Appraisal System 
Certification Process: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

[End of section] 

Appendix III: Agency Certification Status for Calendar Years 2004, 
2005, and 2006 as of October 2006: 

Agency/board: Agency for International Development; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Broadcasting Board of Governors; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Consumer Product Safety Commission; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Agriculture; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Commerce; 
System: (SES or SL/ST): SES; 
1- year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Defense; 
System: (SES or SL/ST): SES; 
1- year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: [A]; 
2006: P. 

Agency/board: Department of Defense; 
System: (SES or SL/ST): SL/ST; 
1- year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: [A]; 
2006: P. 

Agency/board: Department of Education; 
System: (SES or SL/ST): SES; 
1- year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Energy; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Health And Human Services; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Homeland Security; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Housing and Urban Development (HUD); 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: HUD Office of the Inspector General; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Interior; 
System: (SES or SL/ST): SES; 
1- year provisional (P): P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Justice; 
System: (SES or SL/ST): SES; 
1- year provisional (P): P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Labor; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: F (2006/2007). 

Agency/board: Department of State; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Department of Transportation; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Treasury; 
System: (SES or SL/ST): SES; 
1- year provisional (P): P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Department of Veterans Affairs; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Environmental Protection Agency; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Equal Employment Opportunity Commission; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Federal Communications Commission; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Federal Energy Regulatory Commission; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Federal Trade Commission; 
System: (SES or SL/ST): SES; 
1- year provisional (P): P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: General Services Administration; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: F (2004/2005); 
or 2-year full (F) certification received: 2005: [Empty]; 
2006: P. 

Agency/board: Merit Systems Protection Board; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: National Aeronautics and Space Administration (NASA); 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: NASA; 
System: (SES or SL/ST): SL/ST; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: NASA Office of the Inspector General; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: [A]; 
2006: P. 

Agency/board: National Endowment for the Arts; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: National Labor Relations Board; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: National Science Foundation; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: National Transportation Safety Board; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: [A]; 
2006: P. 

Agency/board: Nuclear Regulatory Commission; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Office of Government Ethics; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Office of Management And Budget; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Office of National Drug Control Policy; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Office of Navajo and Hopi Indian Relocation; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Office of Personnel Management; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Patent and Trademark Office/Commerce; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Pension Benefit Guarantee Corporation; 
System: (SES or SL/ST): SL/ST; 
1-year provisional (P): 2004: F (2004/2005); 
or 2-year full (F) certification received: 2005: [Empty]; 
2006: P. 

Agency/board: Railroad Retirement Board; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: P. 

Agency/board: Small Business Administration (SBA); 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: SBA Office of the Inspector General; 
System: (SES or SL/ ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Social Security Administration; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: P; 
or 2-year full (F) certification received: 2005: P; 
2006: [A]. 

Agency/board: Surface Transportation Board; 
System: (SES or SL/ST): SES; 
1-year provisional (P): 2004: [A]; 
or 2-year full (F) certification received: 2005: [A]; 
2006: P. 

Source: GAO analysis based on OPM data. 

[A] Agency did not submit an appraisal system application, submitted an 
application but was not approved, or withdrew an application for OPM's 
review. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Office of Personnel Management: 

United States Office Of Personnel Management: 
Washington, DC 20415: 
The Director: 

November 9, 2006: 

The Honorable David Walker: 
Comptroller General: 
U.S. Government Accountability Office: 
Washington, DC: 

Dear General Walker: 

Thank you for the opportunity to provide comments in response to the 
Government Accountability Office draft report entitled Human Capital 
Reform: New Executive Performance-based Pay System Provides Key Lessons 
Learned for OPM's Leadership of Future Reforms (GAO-07-90). 

Since I became Director of the Office of Personnel Management (OPM), my 
management objective has been to raise the agency's performance level 
by instituting business disciplines and practices that would enable us 
to reach my ultimate goals for OPM - operational excellence and 
strategic creativity. I am confident that we have made demonstrable 
progress and are beginning to realize those goals. 

Changes of this type do not happen overnight. OPM took steps to 
revitalize our senior leadership and engage our staff in a way that had 
not been done in the past. We also set a new course - through the 
collaborative development of a new set of strategic and operational 
goals. 

OPM's 2006-2010 Strategic and Operational Plan is distinctive in its 
clarity and specificity. It is dominated by an action-oriented to-do 
list of approximately 170 deliverables, each with a due date. OPM 
associates have worked together and with agencies throughout Government 
to achieve objectives that are tied in some measure to the plan_ This 
direct linkage has created a level of accountability and ownership - 
particularly for the senior executives whose compensation is a function 
of performance - that has given greater assurance that goals will be 
achieved and creates an "esprit de corps" environment. 

Since its introduction in March, we have achieved every plan objective, 
on time or ahead of schedule. By achieving these tangible and important 
deliverables, we are creating a success culture at OPM - one that we 
reinforce monthly when each new group of goals is accomplished. 

OPM is delivering on our responsibility to lead Federal workforce human 
capital planning and reform efforts. Releasing installments of our 
planning guidance for a possible pandemic influenza event in advance of 
President Bush's August deadline is just one example of our enhanced 
service approach. It is indicative of our commitment to timely, as well 
as accurate, guidance to the human capital management community and has 
been well-received across the executive branch. 

While proceeding on the path to organizational excellence, OPM has 
broken new ground in leading the Federal Government's efforts to ensure 
there is an effective civilian workforce into the future. We have 
introduced Federal agencies to concepts for reaching and hiring the 
next generation of civilian employees, and have initiated a three- 
pronged approach for bringing workers to the Government, including a 
media campaign to raise awareness of the wide range of Federal civilian 
job opportunities, the new Career Patterns approach for recruiting and 
hiring, and the development of a hiring toolkit to help speed the 
Federal hiring process. With these initiatives, OPM has positioned 
Federal agencies to meet the hiring demands of the future - demands 
that will increase dramatically as we face the retirement eligibility 
of 60 percent of our workforce over the next ten years. 

Although there is more to be done, the work to date is a significant 
accomplishment. As we look to the future, OPM will continue to improve 
our guidance to agencies, to strengthen our leadership and oversight of 
agency human capital practices, and to learn and share the lessons from 
both existing and new personnel systems as we chart the course for the 
future of the civil service. 

I am providing specific technical corrections to the draft report and 
would ask for your consideration of these changes. In addition, I look 
forward to providing to the Congress specific responses to your key 
findings. 

Sincerely, 

Signed by: 

Linda M. Springer: 
Director: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Brenda S. Farrell, (202) 512-6806 or farrellb@gao.gov. 

Acknowledgments: 

In addition to the contact named above, Trina Lewis, Assistant 
Director; Thomas Beall; Carole J. Cimitile; William Colvin; Elizabeth 
Curda; S. Mike Davis; William Doherty; Charlene Johnson; Jeffrey 
McDermott; Michael Volpe; Katherine H. Walker; and Gregory H. Wilmoth 
made major contributions to this report. 

FOOTNOTES 

[1] GAO, Human Capital: Symposium on Designing and Managing Market- 
Based and More Performance-Oriented Pay Systems, GAO-05-832SP 
(Washington, D.C.: July 27, 2005). 

[2] GAO, Office of Personnel Management: OPM is Taking Steps to 
Strengthen Its Internal Capacity for Leading Human Capital Reform, GAO-
06-861T (Washington, D.C.: June 27, 2006). 

[3] OPM developed the governmentwide Federal Human Capital Survey to 
assist agencies and OPM in better understanding specific and 
governmentwide agency workforce management conditions and practices in 
the areas of leadership, performance culture, and talent. 

[4] GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: 
January 2001). 

[5] GAO, Office of Personnel Management: Status of Achieving Key 
Outcomes and Addressing Major Management Challenges, GAO-01-884 
(Washington, D.C.: July 9, 2001). 

[6] GAO, Major Management Challenges and Program Risks, Office of 
Personnel Management, GAO-03-115 (Washington, D.C.: January 2003). 

[7] GAO-06-861T. 

[8] Pub. L. 107-296, Nov. 25, 2002. 

[9] Full implementation of the DHS personnel system has stalled due to 
an appeals court decision invalidating portions of the personnel 
regulations that deal with labor management relations. DHS has begun to 
transition nonunion employees to the new pay system and to train 
employees about the new system. 

[10] The 25-member CHCO Council is composed of the Director OPM, who 
serves as chairman; the Deputy Director for Management of OMB, who acts 
as vice chairman; the CHCOs of the 15 executive departments; and the 
CHCOs of 8 additional agencies designated by the OPM Director. 

[11] Pub. L. No. 108-136, Nov. 24, 2003. 

[12] As with the DHS personnel system, full implementation of the NSPS 
has stalled due to a federal district court decision invalidating the 
labor relations and adverse action portions of the regulations. DOD has 
already placed 11,000 nonunion employees under the new system and began 
transitioning another 66,000 employees to the system in October 2006. 

[13] Prior to passage of the act authorizing the pay flexibilities, in 
October 2000, OPM amended regulations for senior executive performance 
management to help agencies hold senior executives accountable for 
organizational results, a mandate that originates in the Civil Service 
Reform Act of 1978. 

[14] This authority was granted under the Homeland Security Act of 
2002, Pub. L. 107-296, Nov. 25, 2002. 

[15] GAO, Human Capital: Aligning Senior Executives' Performance with 
Organizational Results Is an Important Step Toward Governmentwide 
Transformation, GAO-06-1125T (Washington, D.C.: Sept. 26, 2006). 

[16] GAO-03-115. 

[17] GAO and the National Commission on the Public Service 
Implementation Initiative, Human Capital: Principles, Criteria, and 
Processes for Governmentwide Federal Human Capital Reform, GAO-05-69SP 
(Washington, D.C.: Dec. 1, 2004). 

[18] GAO-06-861T. 

[19] Within the HCMLSA division, OPM assigns one HCO as the main point 
of contact to each agency of the President's Management Council and one 
to each cluster of small agencies. 

[20] GAO-06-861T. 

[21] GAO, Human Capital: Preliminary Observations on the 
Administration's Draft Proposed "Working for America Act", GAO-06-142T 
(Washington, D.C.: Oct. 5, 2005). 

[22] GAO-06-1125T. 

[23] The Department of Labor's SL/ST system has not reached full or 
provisional certification. 

[24] In June 2006, OPM established its beta site for its HCLMSA 
division to align employee performance expectations with agency 
strategic goals. In fiscal year 2007, OPM told us it plans to expand 
its beta site to other divisions, which will then cover approximately 
70 percent of the agency. 

[25] GAO, Highlights of a GAO Forum: Mergers and Transformation: 
Lessons Learned for a Department of Homeland Security and Other Federal 
Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002). 

[26] GAO, Human Capital: Further Guidance, Assistance, and Coordination 
Can Improve Federal Telework Efforts, GAO-03-679 (Washington, D.C.: 
July 18, 2003). 

[27] GAO, Equal Employment Opportunity: Improved Coordination Needed 
between EEOC and OPM in Leading Federal Workplace EEO, GAO-06-214 
(Washington, D.C.: June 16, 2006). 

[28] GAO-06-861T. 

[29] GAO, Human Capital: Observations on Agencies' Implementation of 
the Chief Human Capital Officers Act, GAO-04-800T (Washington, D.C.: 
May 18, 2004). 

[30] The CHCO Academy was established as a forum for council members 
only, to discuss human resources issues, learn from one another in an 
informal setting, and share best practices in the strategic management 
of human capital. Academy sessions are scheduled throughout the year on 
the third Thursday of the month at OPM. 

[31] GAO-03-679. 

[32] A senior executive whose rate of basic pay is higher than the rate 
for uncertified systems may not suffer a reduction in pay as a result 
of transferring to an agency with an uncertified system or as the 
result of a decision to suspend a system's certification. Senior 
executives will continue to receive their current SES rate, but are not 
eligible for a pay adjustment until they are assigned to a position 
under a certified system. 

[33] GAO, Human Capital: OPM Can Better Assist Agencies in Using 
Personnel Flexibilities, GAO-03-428 (Washington, D.C.: May 9, 2003). 

[34] GAO, Human Capital: Additional Collaboration Between OPM and 
Agencies Is Key to Improved Federal Hiring, GAO-04-797 (Washington, 
D.C.: June 7, 2004). 

[35] GAO-03-669. 

[36] GAO, Human Capital: Symposium on Designing and Managing Market- 
Based and More Performance-Oriented Pay Systems, GAO-05-832SP 
(Washington, D.C.: July 27, 2005). 

[37] The Senior Executive Association (SEA) is a nonprofit professional 
association that promotes public service and advocates the interests of 
career federal executives (both active and retired). SEA conducted a 
voluntary survey to solicit SES members' experience with the new SES 
system and involvement in its implementation, how the new system 
affected the member, perceptions of how the system affected the SES 
members' colleagues, and views on how the new system might affect the 
future of human resources management in the federal government. 

[38] GAO-05-1048T. 

[39] GAO-05-1048T. 

[40] GAO-06-1125T. 

[41] GAO-06-142T. 

[42] The HCAAF is a framework that OPM has developed over the last 
several years to help agencies develop and implement effective human 
capital management systems and improve their human capital management 
practices. The HCAAF fuses strategic human capital management to merit 
system principles and other civil service laws, rules, and regulations. 

[43] The PMA has identified five governmentwide initiatives that are 
interrelated and support each other--improved financial performance, 
strategic management of human capital, budget and performance 
integration, electronic government, and competitive sourcing. OPM is 
responsible for monitoring agency progress of the human capital 
initiative. 

[44] GAO-06-1125T. 

[45] GAO-06-861T. 

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