[Material Transmitted:]{.underline}

HHS Instruction 430-7, Performance Appraisal System

[Material Superseded:]{.underline}

None

[Background:]{.underline}

August 23, 1995, the Office of Personnel Management (OPM) issued a final
rule deregulating performance management and incentive awards. On
November 3, 1995, OW approved the attached Department-wide Performance
Appraisal System established as a result of these regulations.

OPDIVs may elect to remain under the previous Department-wide
Performance Management Plan, dated April 26, 1993. In this case none of
the flexibilities granted by the new regulations may be used, and
performance management is governed by the April 1993 plan and related
issuances concerning performance-based awards.

Under the new System, the heads of OPDIVS (including the Public Health
Service agencies, the Program Support Center, and the Inspector General)
are delegated the authority to establish and approve performance
appraisal programs in compliance with the August 23, 1995, regulations.
Such programs must be established and approved as required by this
instruction before the flexibilities granted by these regulations can be
used.

This issuance is effective immediately. However, changes in conditions
of employment for bargaining unit employees must be implemented
consistent with labor relations responsibilities in 5 U.S.C. Chapter 71
and provisions of negotiated agreements.

[Filing Instructions:]{.underline}

Post receipt of this transmittal to the HHS Check List of Transmittals
and file in sequential order after the check list.

> John J. Callahan
>
> Assistant Secretary for
>
> Management and Budget

INSTRUCTION 430-7

MS (PERS): HRFC-001

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**PERSONNEL INSTRUCTION 430-7**

**PERFORMANCE APPRAISAL SYSTEM**

**[CONTENTS]{.underline}**

**PART ONE - GENERAL**

> Section I. Organization and Coverage
>
> Section II. Authorities
>
> Section III. Statement of Purpose
>
> Section IV. Records of Employee Performance

**PART TWO - PERFORMANCE APPRAISAL PROGRAMS**

> Section I. Definitions
>
> Section II. Performance Appraisal System Requirements
>
> Section III. Authority to Establish Performance Appraisal Programs
>
> Section IV. Program Evaluation

**PART ONE - GENERAL**

**I. [ORGANIZATION AND COVERAGE]{.underline}**

Part One of this document maintains general information and requirements
of the Department\'s Performance Appraisal System. This system covers
General Schedule employees (including GM employees covered by Public Law
103-89, The Performance Management and Recognition System Termination
Act of 1993), prevailing rate employees, and senior-level and scientific
and professional employees paid under 5 U.S.C. 5376.

The Department\'s Performance Management Plan, dated April 26, 1993, and
existing issuances governing performance awards constitute the
Department-wide performance management program. These existing
requirements remain in effect for covered employees until an official
listed in Part Two, Section III A, certifies that a new performance
appraisal program has been established under this system.

Part Two of this document contains information and requirements
regarding establishment of performance appraisal programs under this
system.

**II. [AUTHORITIES]{.underline}**

  ----------------------------------- -----------------------------------
  \- Performance Appraisal            5 U.S.C. Chapter 43 and 5 CFR, Part
                                      430.

  \- Agency Awards and Recognition    5 U.S.C. Chapter 45 and 5 CFR, Part
                                      451, Subpart A.

  \- Within-Grade Increases           5 U.S.C. 5335 and 5304 and 5 CFR,
                                      Part 531, Subpart D

  \- Quality Step Increases           5 U.S.C. 5336 and 5 CFR, Part 531,
                                      Subpart E.

  \- Reduction-in-Force               5 U.S.C. 3502 and 5 CFR 351.504

  \- Records of Employee Performance  5 U.S.C. 552a, 5 CFR 293.404 and
                                      293.405

  \- Unacceptable Performance         5 CFR, Part 432.104
  ----------------------------------- -----------------------------------

**III. [STATEMENT OF PURPOSE]{.underline}**

Performance management in the Department of Health and Human Services is
aimed at improving individual, team and organizational effectiveness in
accomplishing the Department\'s mission and goals. The programs
established under the Performance Appraisal System provide a mechanism
for clarifying and communicating organizational goals and expected
outcomes, identifying individual and/or team accountability, providing
formal feedback and documenting individual and team performance. It is
one component of the on-going process of performance management which
also includes frequent informal feedback, recognition and rewards,
coaching, -g and skill development and appropriate corrective actions.

**IV. [RECORDS OF EMPLOYEE PERFORMANCE]{.underline}**

A. [Maintenance of Records]{.underline}

The Employee Performance File (EPF) system established for
[non-SES]{.underline} employees must

contain the following records for the period indicated:

  ----------------------------------- -----------------------------------
  [Record]{.underline}                [Retention Period]{.underline}

  1\. Annual Rating of record issued  4 years
  under a\                            
  performance appraisal program       
  within\                             
  this system.                        

  After the final appraisal is        4 years
  issued, any form which identifies   
  job elements, the standards for     
  those elements, and/or work         
  objectives, along with any changes  
  thereto, including appraisal        
  information on those elements,      
  and/or work objectives if recorded. 
  ----------------------------------- -----------------------------------

B. [Transfer of Records]{.underline}

> When the Official Personnel Folder (OPF) of a non-SES employee is sent
> to another servicing personnel office within the Department another
> Federal agency or to the National Personnel Records Center, the EPF
> shall accompany the OPF and include all performance ratings of record
> that are 4 years old or less, including the performance plan on which
> the most recent rating of record was based, and the summary rating
> prepared when the employee changed positions. Prior to its transfer,
> the EPF will be) purged of all performance ratings and performance
> plans that are more than 4 years old, and other performance-related
> records.

**PART TWO \-- PERFORMANCE APPRAISAL PROGRAMS**

**I. DEFINITIONS**

[Acceptable level of competence]{.underline} means fully successful
performance by an employee of the duties and responsibilities of his or
her assigned position that warrants advancement of the employee\'s rate
of basic pay to the next higher step of the grade or the next higher
rate within the grade of his or her position subject to the requirements
of 5 CFR 531.404.

[Additional performance element]{.underline} is a dimension or aspect of
individual, team, or organizational performance that is not a critical
or non-critical element. Such elements are not used in assigning a
summary level but, like critical and non-critical elements, are useful
for purposes such as communicating performance expectations and serving
as the basis for granting awards. Such elements may include, but are not
limited to, objectives, goals, program plans, work plans, and other
means of expressing expected performance. Use of additional elements is
not required under this system.

[Appraisal]{.underline} means the process under which performance is
reviewed and evaluated.

[Appraisal period]{.underline} means the established period of time for
which performance will be reviewed and a rating of record prepared.

[Appraisal program]{.underline} means the specific procedures and
requirements established by a component of the Department under the
policies and parameters set by the Department\'s Performance Appraisal
System.

[Appraisal system]{.underline} means the framework of Department-wide
policies and parameters for the administration of performance appraisal
programs established under subchapter I of chapter 43 of Title 5, U.S.C.
and 5 C.F.R Part 430, Subpart B.

[Critical element]{.underline} means a work assignment or responsibility
of such importance that unacceptable performance on the element would
result in a determination that an employee\'s overall performance is
unacceptable. A critical element may ONLY address individual
performance.

[Non-critical element]{.underline} means a dimension or aspect of
individual, \~ or organizational performance, exclusive of a critical
element that is used in assigning a summary level. Such elements may
include, but are not limited to, objectives, goals, program plans, work

plans, and other means of expressing expected performance. Use of
non-critical elements is not required under this system.

[Performance appraisal]{.underline} (see Appraisal)

[Performance appraisal system]{.underline} (see Appraisal system).

[Performance plan]{.underline} means all of the written, or otherwise
recorded performance elements that set forth expected performance. A
plan must include all critical and non-critical elements and their
performance standards.

[Performance rating]{.underline} means the written, or otherwise
recorded, appraisal of performance

compared to the performance standard(s) for each critical and
non-critical element on

which there has been an opportunity to perform for the minimum period. A
performance

rating may include the assignment of a summary level.

[Performance standard]{.underline} means the management-approved
expression of the performance threshold(s), requirement(s), or
expectation(s) for an element that must be met to be appraised at a
particular level of performance. A performance standard may include, but
is not limited to, factors such as quality, quantity, timeliness, and
manner of performance.

[Progress review]{.underline} means communicating with the employee
about performance compared to the performance standards of critical and
non-critical elements. A progress review is not in itself a rating.

[Rating of record]{.underline} means the performance rating prepared at
the end of an appraisal period for performance over the entire period
and the assignment of a summary level \[as specified in 5 C.F.R. 430.208
(d)\]. This constitutes the official rating of record.

[Reviewing official]{.underline} means the higher level management
official who reviews and approves an \"Unacceptable\" rating of record.
Such review is mandatory.

**II**. **[PERFORMANCE APPRAISAL SYSTEM REQUIREMENTS]{.underline}**

A.  [Appraisal Period]{.underline}

    1.  The official appraisal period set under this system may be no
        less than one (1) and no more than two (2) years.

        The minimum appraisal period that must be completed before a
        performance rating is prepared under this system maybe no less
        than 60 and no more than 120 days.

    [Individual Performance Plans]{.underline}

    1.  Each individual performance plan [must]{.underline} contain at
        least [one]{.underline}, and [may]{.underline} contain more
        critical elements that relate to individual performance. Only
        elements related to individual performance may be designated as
        critical.

        Individual performance plans [may]{.underline} contain one or
        more non-critical and/or additional performance elements.
        Non-critical and additional elements may relate to performance
        at the individual, team and/or organizational level(s).

        Preferably at the beginning of the appraisal period but normally
        no later than 30 days afterwards, a written or otherwise
        recorded final performance plan will be given to each employee.

    [Performance Standards]{.underline}

    1.  There must beat least two distinctly different levels for rating
        performance on each critical and non-critical element.

        For a critical element the lowest level must be designated
        \"Unacceptable\" and one other must be designated \"Fully
        Successful\" or equivalent.

        A written performance standard [must]{.underline} be established
        at the \"Fully Successful\" level for all critical elements and
        may be established at other levels.

        For non-critical elements a written performance standard shall
        be established at whatever levels are appropriate. Use of
        non-critical elements is optional.

        It is permissible to establish different numbers of levels for
        different elements within a individual performance plan.

        There must be a method to derive the summary levels from the
        element ratings.

    [Summary Levels]{.underline}

    1.  Summary levels may be derived through scoring ratings on the job
        elements or through some other procedures defined in the
        performance appraisal program, which relate the summary levels
        to the element ratings.

        Each appraisal program must provide for at least M. and not more
        than five summary levels. The levels must include an
        \"Unacceptable\" level (Level 1) and a \"Fully Successful\" or
        equivalent level (Level 3). Terms equivalent to \"Fully
        Successful\" and \"Outstanding\" are permissible, but the term
        \"Outstanding\" may only be used to describe a Level 5 summary
        rating. The permissible combinations of summary levels are shown
        in the chart below.

  -----------------------------------------------------------------------------
  **PATTERN**           **SUMMARY                                            
                        LEVEL**                                              
  --------------------- ----------- ---------- ---------- ---------- ------- --
                        1           2          3          4          5       

  A                     X                      X                             

  B                     X                      X                     X       

  C                     X                      X          X                  

  D                     X           X          X                             

  E                     X                      X          X          X       

  F                     X           X          X                     X       

  G                     X           X          X          X                  

  H                     X           X          X          X          X       
  -----------------------------------------------------------------------------

> 3\. The summary level designators (Level 1 through Level 5) shall be
> used to provide consistency in describing ratings of record and in
> referencing other related regulations (including, but not limited to,
> 5CFR531.504).

A.  [Rating of Record]{.underline}

    1.  A rating of record of \"Unacceptable\" (Level 1) shall be
        reviewed and approved by a higher level management official.

        The rating of record or performance rating for a disabled
        veteran shall not be lowered because the veteran has been absent
        from work to seek medical treatment as provided in Executive
        Order 5396.

        When a rating of record cannot be prepared at the time specific
        the appraisal period shall be extended. Once the conditions
        necessary to complete a rating of record have been met a rating
        of record shall be prepared as soon as practicable.

        The performance appraisal program shall specify procedures
        and/or requirements for developing a rating of record under
        other special circumstances including, but not limited to,
        transfers and performance on detail.

    [Performance Problem]{.underline}

    1.  Performance appraisal program shall provide for assistance to
        raise the performance of any employee whose performance in one
        or more critical elements is deemed less than \"Fully
        Successful\" at any time during the appraisal period. Such
        assistance may include but is not limited to,: formal training,
        on-the job training, counseling, and closer supervision.
        Supervisors are to provide-assistance as soon as possible after
        a performance deficiency is identified.

        An employee must be advised of the negative impact a below the
        \"Fully Successful\" level rating will have on the granting of a
        within-grade increase.

        Performance appraisal programs must establish procedures and
        requirements to be met before taking action to remove or reduce
        in grade an employee whose performance in one or more critical
        elements is determined to be \"Unacceptable\" at any time during
        or at the end of an appraisal period. These procedures must be
        in compliance with 5 CFR Part 432.

        If an employee\'s performance is determined to be at the
        acceptable performance level or better upon completion of an
        opportunity period under 5 CFR Part 432 and remains so for any
        remainder of the appraisal period he/she must be given a rating
        for the appraisal period reflecting the acceptable (or better,
        if appropriate) level of performance.

        Opportunity periods under 5 CFR Part 432 should be so timed that
        they do not overlap appraisal periods. But if the opportunity
        period does continue into the next appraisal period:

        a.  The appraisal period may be extended to the end of the
            opportunity period as long as the performance appraisal
            program establishes the requirements for doing so.

            Unless the appraisal period is extend the employee must be
            given a rating of record of \"Unacceptable\" for the
            appraisal year in which the opportunity period started.

            The current performance plan including the standards that
            must be reached in order to be retained, must be extended to
            the conclusion of the opportunity period Except as the
            result of an extension as noted in subparagraph a above, a
            rating should not be prepared at the end of the opportunity
            period.

        There is no Department-wide requirement for the opportunity
        periods referred to above to be of a uniform length. They should
        be allowed to vary depending on such circumstances as the nature
        of the job, the number of critical elements involved, the type
        of assistance planned, etc.

**III. [AUTHORITY TO ESTABLISH PERFORMANCE APPRAISAL
PROGRAMS]{.underline}**

A.  [Delegations]{.underline}

    1.  The authority to establish and approve performance appraisal
        programs and to, carry out all performance management functions
        is delegated to the officials specified below for the areas
        indicated. The areas include personnel in or under a regional
        office.

  ----------------------------------- -----------------------------------
  [To Whom Delegated]{.underline}     [Area of Authority]{.underline}

  Assistant Secretary of Aging        Administration of Aging

  Assistant Secretary for Children    Administration for Children and
  and Families                        Families

  Administrator, Health Care          Health Care Financing
  Financing Administration            Administration

  Inspector General                   Office of the Inspector General

  Administrator, Substance Abuse &    Substance Abuse and Mental Health
  Mental Health Administration        Services Administration

  Director, Centers for Disease       Centers for Disease Control
  Control and Prevention              

  Commissioner of Food and Drugs      Food and Drug Administration

  Administrator, Health Resources and Health and Resources Services
  Services Administration             Administration

  Director, National Institutes of    National Institutes of Health
  Health                              

  Director, Indian Health Service     Indian Health Service

  Director, Agency for Toxic          Agency for Toxic Substances and
  Substances and Disease Registry     Disease Registry

  Director, Program Support Center    Program Support Center

  Assistant Secretary for Management  Office of the Secretary
  and Budget                          
  ----------------------------------- -----------------------------------

2.  The authority to establish maybe redelegate. Such redelegation must
    be in writing.

3.  The authority to approve maybe redelegate one level below the
    officials named in Section A. 1 above. Such redelegations must be in
    writing.

4.  As each program is established, the official(s) delegated authority
    to approve programs must notify the Secretary or his/her designee in
    writing. The notification must notify that the program meets the
    requirements of this performance appraisal system and all applicable
    laws and regulations. If the approving official is not the official
    listed in Section A. 1. above, a copy of the redelegation of
    approval authority must accompany the certification. This
    certification must be submitted before a performance appraisal
    program can be effective. Subsequent certifications must be made
    whenever a performance appraisal program under this system is
    significantly modified.

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A.  [Performance Appraisal Program Requirements.]{.underline}

    1.  Any employee not covered by an approved and certified
        performance appraisal program established under this system
        remains under the department-wide program (as described in the
        Department of Health and Human Services Performance Management
        Plan, dated April 26, 1993).

        All employees revered under this system must be covered by a
        performance appraisal program. No employee may be covered by
        more than one performance appraisal program.

        More than one performance appraisal program may be established
        within each area of authority to meet the differing appraisal
        requirements of various occupation geographic, or other groups.

        For each performance appraisal program established, there must
        be a written document including procedures and requirements for
        planning, monitoring, and rating performance in compliance with
        the requirements of 5 CFR Part 430.

        Each performance appraisal program shall specify:\
        \
        (a) the employees covered by the program\
        \
        (b) the effective date of the program\
        \
        (c) that administrative procedures or performance-based actions
        begun under a prior appraisal program continue to be governed by
        the policies and procedures of the program that was in effect at
        the time the action was initiated\
        \
        (d) an official appraisal period for which a performance plan
        shall be prepared during which performance shall be monitored,
        and for which a rating of record shall be prepared\
        \
        (e) the special circumstances, including but not limited to
        transfers and performance on details, when performance ratings
        other than ratings of record may be prepared\
        \
        (f) the minimum appraisal period established before any
        performance rating can be prepared\
        \
        (g) how many and which performance levels may be used to
        appraise critical and non-critical elements\
        \
        (h) the pattern and method for assigning summary levels\
        \
        (i) the minimum requirements for conduct of one or more progress
        reviews during an appraisal period and\
        \
        (j) the requirements for assisting employees whose performance
        is less than \"Fully Successful,\" for taking action based on
        unacceptable performance, \" including the designation of the
        management level(s) to approve a rating of \"Unacceptable,\" and
        for handling ratings of record when the Opportunity period
        overlaps appraisal periods.

    [Employee Participation and Communication]{.underline}

    1.  Employees and their exclusive representatives shall be involved
        in development and implementation of performance appraisal
        programs. \`

        Each performance appraisal program shall provide for
        communicating the requirements of the program to supervisors and
        employees.

        Employees shall participate in the establishment of performance
        plans under this system and shall be provided with a written or
        otherwise recorded performance plan at the beginning of each
        appraisal period.

    [Awards and Recognition]{.underline}

    1.  An award program designed to recognize deserving employees must
        be part of a component\'s performance management program.
        Existing Incentive Awards Programs may be used. However, any
        direct linkages between awards and the performance appraisal
        itself (e.g., between ratings and awards) must be delineated in
        the performance appraisal program.

        If a performance appraisal program does not allow for a summary
        rating of \"Outstanding,\" and the component wishes to grant
        Quality Step Increases (QUI's) for sustained superior
        performance, the award program must include criteria and
        procedures for determining when a QSI may be granted.

**IV.** **[PROGRAM EVALUATION]{.underline}**

1.  The Assistant Secretary for Management and Budget (ASMB) has
    responsibility for the ongoing review of the operation of
    performance management (including performance awards, superior
    accomplishment awards, within-grade increases and quality step
    increases) throughout the Department and to implement improvements
    as needed. Each organization of the Department has a responsibility
    for monitoring and evaluating its own performance management process
    (including performance awards, superior accomplishment awards,
    within-grade increases and quality step increases) within the
    framework of the Department requirements and implementing
    instructions, and to implement improvements as needed.

    The ASMB schedules and conducts assessments of personnel programs
    and their operation including the area of performance management. A
    variety of assessment procedures are used. They include employed
    supervisory questionnaires, statistical indicators, on-site
    assessments, special studies, and self-assessments.