Statement of
George Nesterczuk
Senior Advisor to the Director on Department of Defense
U.S. Office of Personnel Management
Before the
Subcommittee on Oversight of
Government Management, the Federal Workforce, and the District of Columbia
Committee on Homeland Security and Governmental Affairs
United States Senate
On
"Critical Mission: Ensuring the Success of the National Security Personnel System"
March 15, 2005
I. Introduction
Mr. Chairman, I am George Nesterczuk, the Senior Advisor to the Director
of the Office of Personnel Management (OPM) on matters related to the
National Security Personnel System (NSPS). It is my privilege to represent
the Office of Personnel Management before you today to discuss the proposed
regulations implementing NSPS in the Department of Defense (DOD). The
proposed regulations will establish a new human resources (HR) management
system that we believe is as flexible, contemporary, and responsive as
the President and the Congress envisioned. It has been a privilege for
me and the team at OPM to work with the dedicated men and women of DOD,
its employees and senior leadership in the development of this system.
The proposed regulations are the result of an intense collaborative process
that has taken over a year. There is still much to do before the NSPS
proposal can be finalized, beginning with the assessment of all the comments
we are currently receiving and beyond that a hopefully productive period
of conferring with DOD unions. Nevertheless, I want to express our appreciation
to you for your leadership and continued interest, and that of this Subcommittee.
Without your efforts, we would not be here today.
Mr. Chairman, with passage of the National Defense Authorization Act
of 2004 (Pub. L. 108-136), you and other Members of Congress gave the
Secretary of Defense and the Director of OPM broad authority to establish
a new human resources management system to fully support the Department's
vital mission without compromising the core principles of merit and fairness.
Striking the right balance, between transformation on one hand and protecting
core values on the other, is the essence of the transformation process
that you established in that statute. We believe the regulations we have
jointly proposed strike that balance in all of the key components of the
NSPS: performance-based pay, staffing flexibility, employee accountability
and due process, and labor-management relations. In each case we struck
a careful and critical balance between operational imperatives and employee
interests, without compromising either mission or merit.
Mr. Chairman, in inviting OPM to this hearing you asked, in addition to discussing the proposed regulations, that we address the process employed to gather employee input and also how OPM will work with DOD to ensure employees have meaningful input in the remaining design and implementation. I will address these two procedural points first and then summarize the major highlights of each of the key components of the proposed regulations.
II. Outreach and Employee Involvement
Just about a year ago, the Department stopped its NSPS development efforts
in order to assess its progress and its direction. As a result of that
pause, a new program office was created to manage the joint development
of NSPS regulations with OPM, and a broad outreach effort was initiated
to ensure the participation of DOD managers, employees and their representatives.
Over a period of several months, the Department held over 50 Town Hall
meetings in locations throughout the world. Over 100 Focus Groups were
convened separately with employees (including bargaining unit representatives),
managers, and HR professionals and practitioners. Briefings were initiated
with a host of public interest groups, employee advocacy groups, and other
stakeholders including veterans service organizations.
Comments, observations, and suggestions from these many sources were
compiled and provided to NSPS working groups organized to gather information,
provide research, synthesize findings and develop design options. We were
well served in this process by the extensive research that had been compiled
by the teams working on the Department of Homeland Security (DHS) personnel
system some months earlier. All of the DHS reference materials were provided
to our NSPS teams, so we were well informed by that earlier effort.
We also have the benefit of DOD's experience with alternative pay and
personnel systems going back nearly 25 years. The employee evaluations
and comments amassed through studies of these demonstration projects were
part of the information base provided to our working groups. OPM has done
an extensive analysis of the DOD demonstration projects and generated
a comprehensive report. Copies of all of these compilations and reports
were also provided to DOD unions as an aid in our discussions and deliberations.
We also launched a special effort to engage the Department's 43 unions
in meaningful discussions over key components of the NSPS: performance
pay, staffing flexibilities, adverse action and appeals, and labor management
relations. Beginning in April of last year until early December, we held
10 meetings with the unions. In an attempt to address each other's priorities,
we set the agenda for some of the meetings, while the unions set the agenda
for others. We developed presentations of possible NSPS design options
in order to better focus discussion in specific issue areas. The meeting
format was plenary in nature, with 25 to 30 unions from their Coalition
participating in most of the sessions. We held separate meetings with
the smaller number of non-Coalition unions. We received what we consider
useful input from these meetings, particularly when some of the unions
shared experiences of practices that had worked or failed.
We expect to reconvene our meetings with the Department's unions during the upcoming "meet and confer" process established in the NSPS statute. We are very interested in receiving their views on the proposed regulations, and we look forward to a productive set of meetings.
III. Continued Collaboration
Mr. Chairman you asked how OPM will work with DOD to ensure the continued
involvement of employees in the development and implementation process.
We have addressed this specific issue in our regulations and have proposed
a process that will ensure employee representatives are provided the opportunity
to discuss their views with DOD officials. The proposal specifically identifies
conceptual design and implementation issues as subject to discussion.
Unions will be provided access to information to make their participation
productive, including review of draft recommendations or alternatives.
The proposed collaboration process draws on our experience over the past
several months. While we value the participation of all DOD unions in
the NSPS development process, it is at times impractical to convene a
full plenary session of all 43 unions to discuss or review a particular
initiative or proposal. So we propose to provide the Secretary the flexibility
to convene smaller working groups of unions or to deal with review of
written materials or solicit written comments for consideration, as appropriate.
Some matters may involve development of concepts; others may consist of
review of issuances before they are published. The best approach is to
permit the Secretary to tailor the interaction and communications with
DOD unions to the circumstances at hand.
We also propose to have the Secretary develop procedures to allow continuing collaboration with organizations that represent the interests of substantial numbers of non-bargaining unit employees. We believe this process will allow the Department to maintain a broad outreach to its stakeholder community during the continuing evolution of the NSPS.
IV. Pay, Performance, and "Politicization"
The new pay system established by the regulations was designed to fundamentally
change the way DOD employees are paid, to place far more emphasis on performance
and the labor market in setting and adjusting rates of pay. Instead of
a "one size fits all" pay system based on tenure, we have established
one that bases all individual pay adjustments on performance. No longer
will employees who are rated as unacceptable performers receive annual
across-the-board pay adjustments, as they do today. No longer will annual
pay adjustments apply to all occupations and levels of responsibility,
regardless of market or mission value. Instead, adjustments will be based
on national and local labor market trends, budget, recruiting and retention
patterns, and other employment factors. And no longer will employees who
merely meet time-in-grade requirements receive virtually automatic pay
increases, as they do today. Instead, individual pay raises will be determined
by an employee's annual performance rating.
This system is entirely consistent with the merit system principles that
are so fundamental to our civil service. One of those principles states
that Federal employees should be compensated ". . . with appropriate
consideration of both national and local rates paid by employers . . .
and appropriate incentives and recognition . . . for excellence in performance."
See 5 U.S.C. 2301(b)(3). However, some have argued that by placing so
much emphasis on performance, we risk "politicizing" DOD and
its employees. This is a most serious charge. Such a result, if true,
would constitute a prohibited personnel practice, something expressly
forbidden by the Congress in giving DOD and OPM authority to jointly prescribe
the NSPS. Moreover, it would tear at the very fabric of our civil service
system. Fortunately, nothing could be further from the truth.
The merit system principles provide that Federal employees should be ".
. . protected against arbitrary action, personal favoritism, or coercion
for partisan political purposes." See 5 U.S.C. 2301(b)(8)(A). And
they are. Section 2302(b)(3) of title 5, United States Code, makes it
a prohibited personnel practice to "coerce the political activity
of any person . . . or take any action against any employee" for
such activity. Those laws remain unchanged, intact and binding on DOD.
The law forbids any political influence in taking any personnel action
with respect to covered positions, and it most certainly applies to making
individual pay determinations. The proposed NSPS regulations did not dilute
these prohibitions in any way; indeed, they could not and we would not.
This is no hollow promise. A close examination of the proposed regulations
reveals that they include considerable protection against such practices
- and no less than every other Federal employee enjoys today.
For example, if a DOD employee believes that decisions regarding his or
her pay have been influenced by political considerations, he or she has
a right to raise such allegations with the Office of Special Counsel (OSC),
to have OSC investigate and where appropriate, prosecute, and to be absolutely
protected from reprisal and retaliation in so doing. These rights have
not been diminished in any way whatsoever. Moreover, supervisors have
no discretion with regard to the actual amount of performance pay an employee
receives. That amount is driven strictly by mathematical formula. Of the
four variables in the formula - the employee's annual performance rating;
the "value" of that rating, expressed as a number of points
or shares; the amount of money in the performance pay pool; and the distribution
of ratings - only the annual rating is determined by an employee's immediate
supervisor, and it is subject to review and approval by the employee's
second-level manager.
Once that rating is approved, an employee can still challenge it if he
or she does not think it is fair. Finally, the other factors governing
performance pay are also shielded from any sort of manipulation. And as
far as the distribution of ratings is concerned, the Department has stated
it will not use any sort of quota or forced distribution.
Ultimately there is no better guarantor of compliance to laws and standards
than transparency and access to information. The rules and procedures
governing the translation of employee ratings into pay adjustments will
be available to all DOD employees, and will be part of the training everyone
will receive. Unless employees readily understand how their pay adjustments
are arrived at they will harbor suspicions and generate skepticism which
would adversely impact the acceptance of pay for performance.
Of course, DOD managers will receive intensive training in the new system, a further safeguard against abuse. And many of them too will be covered by it, with their pay determined by how effectively they administer this system. The same is true of their executives, now covered by the new Senior Executive Service pay-for-performance system - indeed, OPM regulations governing that system establish clear chain-of-command accountability in this regard. With these considerable protections in place, we believe there is no danger whatsoever that the pay of individual DOD employees will become "politicized" just because it will be more performance-based. To the contrary, we believe the American people expect that performance should determine the pay of public sector employees. That is exactly what the NSPS pay system is intended to do.
V. Staffing Flexibilities
To fulfill its mission requirements the Department needs a workforce
suited to the complex tasks of a dynamic national security environment.
The key to aligning and shaping a workforce lies in greater flexibility
to attract, recruit, shape and retain high quality employees. The proposed
regulations provide DoD with a set of flexible hiring tools to respond
to continuing changes in mission and priorities. New flexibilities will
provide options to target recruitment, expedite hiring, and adjust for
the nature of the work and its duration.
Under NSPS, employees will be either career, serving without time limit
in competitive or excepted service positions, or they will be time-limited,
serving for a specific period (term) or for an unspecified but limited
duration (temporary.) The Secretary (in coordination with the Director
of OPM) will have the authority to prescribe the duration of time-limited
appointments, advertising requirements, examining procedures, and appropriate
uses of time-limited employees.
To expedite recruitment and hiring DOD will continue to use direct-hire
authority for severe shortage or critical hiring needs but subject to
the same criteria OPM currently uses to make these determinations. In
addition the Director and the Secretary may jointly establish new appointing
authorities subject to public notice and comment.
The proposed rules provide recruitment flexibilities in permitting DOD
to target recruitment efforts consistent with merit system principles
and complying fully with veterans' preference requirements. The Department
will provide public notice in filling positions and will accept applications
from all qualified applicants, but DOD may initially consider, at a minimum,
only applicants in the local commuting area. If the minimum area of consideration
does not provide sufficient qualified candidates, then DoD may expand
consideration more broadly or nationally.
Finally, the proposed regulations would permit DOD to more effectively shape competitive areas during reductions in force (RIF) to better fit the circumstances driving the reduction and to minimize disruption to employees and their organizations. The competitive area may be based on one or more factors such as geographical location, lines of business, product lines, organizational units, and/or funding lines. Retention lists will be assembled using the same four retention factors of tenure, veterans' preference, performance and seniority. Veterans' preference remains untouched under NSPS RIF actions, but performance and seniority are reversed in priority. Within tenure and veterans status groupings, retention lists place high performers at the top and low performers at the bottom. Within performance categories, employees are grouped by seniority with longer years of service at the top of the category and lesser seniority at the bottom. The performance based retention inherent in this proposal is entirely consistent with the greater emphasis on performance throughout the NSPS, including the pay system.
VI. Accountability and Due Process
The Department of Defense is unique among Cabinet departments in both
its size and organizational complexity. It also carries the awesome responsibility
of protecting our national security - a vital mission that requires a
high level of workplace accountability. Congress recognized this fact
when it gave DOD and OPM the authority to waive those chapters of title
5, United States Code, which deal with adverse actions and appeals. However,
in so doing, Congress also assured DOD employees that they would continue
to be afforded the protections of due process. We believe the proposed
NSPS regulations strike this balance. They assure far greater individual
accountability, but without compromising the protections Congress guaranteed.
In this regard, DOD employees will still be guaranteed notice of a proposed
adverse action. While the proposed regulations provide for a shorter,
15-day minimum notice period (compared to a 30-day notice under current
law), this fundamental element of due process is preserved. Employees
also have a right to be heard before a proposed adverse action is taken
against them. This too is a fundamental element of due process, and the
regulations also provide an employee a minimum of 10 days to respond to
the charges specified in that notice - compared to 7 days today. In addition,
the proposed regulations continue to guarantee an employee the right to
appeal an adverse action to the Merit Systems Protection Board (MSPB),
except those involving a Mandatory Removal Offense (MRO). The proposed
regulations also provide bargaining unit employees the option of contesting
an adverse action through a negotiated grievance procedure all the way
to a neutral private arbitrator, if their union invokes arbitration.
The proposed regulations authorize the Secretary to establish a number
of MROs that he or she determines will ". . . have a direct and substantial
adverse impact on the Department's national security mission." The
regulations provide a number of checks and balances on the use of this
authority, including requiring case-by-case Secretary-level approval before
an employee is charged with an offense, and providing full due process
to employees charged. An employee is still entitled to a notice of proposed
adverse action, the right to reply to the charges set forth in that notice,
and the right to representation.
While no list of MROs has as yet been proposed, the proposed regulations
reserve to the Secretary the flexibility to determine such offenses should
the need arise in the future. Mandatory removal will allow management
to act swiftly to address and resolve misconduct or unacceptable performance
that would be most harmful to the Department's critical mission. Of course,
DOD employees will be properly notified before any MROs are established.
In adjudicating employee appeals, regardless of forum, the proposed NSPS
regulations place a heavy burden on the agency to prove its case against
an employee. Indeed, we propose to establish a higher burden of proof:
a "preponderance of the evidence" standard for all adverse actions,
whether based on misconduct or performance. While this is the standard
that applies to conduct-based adverse actions under current law, it is
greater than the "substantial evidence" standard presently required
to sustain a performance-based action.
Finally, the proposed regulations authorize MSPB (as well as arbitrators)
to mitigate penalties in adverse action cases, but only under limited
circumstances. Thus, the proposed regulations provide that when the agency
proves its case against an employee by a preponderance of the evidence,
MSPB (or a private arbitrator) may reduce the penalty involved only when
it is "so disproportionate to the basis for the action that it is
wholly without justification." Although it is admittedly tougher
than the standards MSPB and private arbitrators apply to penalties in
conduct cases today, it provides those adjudicators considerably more
authority than they presently have in performance cases - current law
(chapter 43 of title 5) literally precludes them from mitigating a penalty
in a performance-based action taken under that chapter. Moreover, MSPB's
current mitigation standards basically allow it (and private arbitrators)
to second-guess the reasonableness of the agency's penalty in a misconduct
case, without giving any special deference or dispensation to an agency's
mission.
The President, the Congress, and the American public all hold the Department accountable for accomplishing its national security mission. MSPB is not accountable for that mission, nor are private arbitrators. Given the extraordinary powers entrusted to the Department and its employees, and the potential consequences of poor performance or misconduct to that mission, DOD should be entitled to the benefit of any doubt in determining the most appropriate penalty for misconduct or poor performance on the job. There is a presumption that DOD officials will exercise that judgment in good faith. If they do not, however, providing MSPB (and private arbitrators) with limited authority to mitigate is a significant check on the Department's imposition of penalties. That is what the new mitigation standard is intended to do, and it is balanced by the higher standard of proof that must first be met.
VII. Mission Imperatives and Employee Interests
As I stated before, the Department is a large and complex organization,
with widely dispersed components and commands, and varied mission elements
mixing both military and civilian workforces. With lives literally at
stake, the Department's commanders cannot afford mission failure. The
chain of command depends on an ethos of accountability, and this goes
to the heart of some of the most important provisions of the regulations:
labor relations. Accountability must be matched by authority, and here,
the current law governing relations between labor and management is out
of balance. Its requirements potentially impede the Department's ability
to act, and that cannot be allowed to happen. The regulations ensure that
the Department can meet its mission, but in a way that still takes union
and employee interests into account.
For example, today, in trying to reconfigure resources to deal with a
host of new and deadly threats to the nation, the Secretary cannot issue
personnel or other rules and regulations that are binding on his subordinate
organizational units. Instead, those rules must be negotiated in over
1,500 bargaining units currently recognized by DOD, represented by 43
separate unions. The organization of the unions and the bargaining units
does not always bear resemblance to the Department's organizational structure
or chain of command. This cumbersome labor environment within DOD adversely
affects the timeliness, uniformity and predictability of internal policy
directives. The Secretary of Defense needs quick response and great certainty
in the management of his Department. The proposed rules permit this by
making Department and component level rules and regulations management
actions not subject to bargaining. Below this level, personnel policies,
practices and working conditions would still be subject to collective
bargaining. Therein lies the balance - where the Department needs expedited
rules and directives and uniform implementation, it will have the means
to issue such. Otherwise, where local policy discretion is appropriate
local commands can negotiate through their individual bargaining units.
Today, if the Department wants to introduce new technology, it cannot
- unless it first negotiates with the Department's various unions, at
their various sub-component levels of recognition, over the implementation
and impact of that new technology on bargaining unit employees . . . and
the Department cannot act until those negotiations have been concluded.
How can we hold the Department accountable for rapid response to an elusive
foe if it cannot act swiftly to take full advantage of new technology?
The proposed regulations give the Department the authority to do so, and
they provide for consultations with unions both before and after implementation,
as circumstances permit.
Today, the Department cannot permanently or even temporarily assign its
front-line employees without following complicated procedures governing
who, when, and how such assignments will take place - procedures that,
in some cases where there are collective bargaining units, have been negotiated
with unions. And if there is an operational exigency that those procedures
did not anticipate, they cannot be modified without further negotiations.
These situations have real operational impact, all the result of current
law. The proposed regulations prohibit negotiations over these operational
procedures. However, the regulations do require that managers consult
with unions over such procedures, and they also permit employees to grieve
alleged violations of the procedures -- all the way to arbitration, if
their union invokes it. In addition, the regulations require full collective
bargaining over non-operational procedures.
Critics of these proposed changes will argue that current law already
allows the agency to do whatever it needs to do in an emergency. However,
that statement, while true, explains why the current law is inadequate
when it comes to national security matters. The Department needs the ability
to move quickly on matters before they become an emergency. Current law
simply does not allow DOD to take action quickly to prevent an emergency,
to prepare or practice for dealing with an emergency, to implement new
technology to deter a potential threat, or do any of the things I have
described above. Rather, the current law requires agencies to first negotiate
with unions over the implementation, impact, procedures and arrangements
before it can take any of those actions. By the time an "emergency"
has arisen, it is literally too late. OPM recognizes that this simply
cannot continue.
You may also hear that the National Security Labor Relations Board (NSLRB),
to be appointed by the Secretary to resolve collective bargaining disputes
in the Department, will not be independent, and that its decisions will
not be impartial because they are not subject to "outside review."
The NSLRB is expressly designed to ensure that those who adjudicate labor
disputes in the Department have expertise in its mission, and its members
are every bit as independent as any of the many other Boards or Panels
in the Department
or any agency's Administrative Law Judges (ALJs).
Just as an agency's ALJs operate outside the chain of command, so too
will NSLRB's members. Just as ALJ decisions are binding on the agency
that employs them, so too will NSLRB's decisions be binding - subject
to appeal by either party to the Federal Labor Relations Authority and
the Federal courts of appeals. Thus, assertions to the contrary notwithstanding,
the proposed regulations make it patently clear that the NSLRB's decisions
will be subject to at least two levels of outside review.
VIII. Conclusion
If DOD is to be held accountable for national security, it must have
the authority and flexibility essential to that mission. That is why Congress
gave the Department and OPM authority to waive and modify the laws governing
staffing, classification, pay, performance management, labor relations,
adverse actions, and appeals. And that is why we have proposed the changes
that we did. In so doing, we believe that we have succeeded in striking
a better balance - between union and employee interests on one hand, and
the Department's mission imperatives on the other. At the same time we
made sure core merit system principles were preserved.
Mr. Chairman this concludes my statement. I would be pleased to respond
to any questions you and members of the Subcommittee may have.