a

GAO

United States Government Accountability Office

Testimony

Before the Subcommittee on the Federal Workforce and 

Agency Organization, Committee on Government Reform, 

House of Representatives

For Release on Delivery

Expected at 2:00 p.m., EDT

Tuesday, April 12, 2005

HUMAN CAPITAL

Preliminary Observations 

on Proposed Department 

of Defense National 

Security Personnel System 

Regulations

Statement of David M. Walker

Comptroller General of the United States

GAO-05-517T
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-517T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Derek B. 

Stewart at (202) 512-5559 or 

stewartd@gao.gov. 

Highlights of GAO-05-517T, a testimony to 

the Subcommittee on the Federal 

Workforce and Agency Organization, 

Committee on Government Reform, 

House of Representatives 

April 12, 2005

HUMAN CAPITAL

Preliminary Observations on Proposed 

Department of Defense National Security 

Personnel System Regulations 

Many of the principles underlying the proposed NSPS regulations are 

generally consistent with proven approaches to strategic human capital 

management. For instance, the proposed regulations provide for 

(1) elements of a flexible and contemporary human resources management 

system—such as pay bands and pay for performance; (2) DOD to rightsize its 

workforce when implementing reduction-in-force orders by giving greater 

priority to employee performance in its retention decisions; and 

(3) continuing collaboration with employee representatives. The 30-day 

public comment period on the proposed regulations ended March 16, 2005. 

DOD and OPM have notified the Congress that they are preparing to begin 

the meet and confer process with employee representatives who provided 

comments on the proposed regulations. The meet and confer process is 

critically important because there are many details of the proposed 

regulations that have not been defined. (It should be noted that 10 federal 

labor unions have filed suit alleging that DOD failed to abide by the statutory 

requirements to include employee representatives in the development of 

DOD’s new labor relations system authorized as part of NSPS.) 

GAO has three primary areas of concern: the proposed regulations do not 

(1) define the details of the implementation of the system, including such 

issues as adequate safeguards to help ensure fairness and guard against 

abuse; (2) require, as GAO believes they should, the use of core 

competencies to communicate to employees what is expected of them on 

the job; and (3) identify a process for the continuing involvement of 

employees in the planning, development, and implementation of NSPS. 

Going forward, GAO believes that (1) the development of the position of 

Deputy Secretary of Defense for Management, who would act as DOD’s 

Chief Management Officer, is essential to elevate, integrate, and 

institutionalize responsibility for the success of DOD’s overall business 

transformation efforts, including its new human resources management 

system; (2) DOD would benefit if it develops a comprehensive 

communications strategy that provides for ongoing, meaningful two-way 

communication that creates shared expectations among employees, 

employee representatives, and stakeholders; and (3) DOD must ensure that 

it has the institutional infrastructure in place, including a modern 

performance management system and an independent, efficient, effective, 

and credible external appeals process, to make effective use of its new 

authorities before they are operationalized. 

GAO strongly supports the concept of modernizing federal human capital 

policies, including providing reasonable flexibility. The federal government 

needs a framework to guide human capital reform. Such a framework would 

consist of a set of values, principles, processes, and safeguards that would 

provide consistency across the federal government but be adaptable to 

agencies’ diverse missions, cultures, and workforces. 

The Department of Defense’s 

(DOD) new human resources 

management system—the National 

Security Personnel System 

(NSPS)—will have far-reaching 

implications for civil service reform 

across the federal government. 

The 2004 National Defense 

Authorization Act gave DOD 

significant flexibilities for 

managing more than 700,000 

defense civilian employees. Given 

DOD’s massive size, NSPS 

represents a huge undertaking for 

DOD. DOD’s initial process to 

design NSPS was problematic; 

however, DOD adjusted its 

approach to a more deliberative 

process that involved more 

stakeholders. NSPS could, if 

designed and implemented 

properly, serve as a model for 

governmentwide transformation in 

human capital management. 

However, if not properly designed 

and implemented, it could severely 

impede progress toward a more 

performance- and results-based 

system for the federal government 

as a whole. 

On February 14, 2005, DOD and the 

Office of Personnel Management 

(OPM) released for public 

comment the proposed NSPS 

regulations. This testimony 

(1) provides GAO’s preliminary 

observations on selected 

provisions of the proposed 

regulations, (2) discusses the 

challenges DOD faces in 

implementing the new system, and 

(3) suggests a governmentwide 

framework to advance human 

capital reform. 

What GAO Recommends
Page 2 GAO-05-517T 

Chairman Porter and Members of the Subcommittee:

I appreciate the opportunity to be here today to provide our preliminary 

observations on the Department of Defense’s (DOD) proposed National 

Security Personnel System (NSPS) regulations, which the Secretary of 

Defense and the Acting Director of the Office of Personnel Management 

(OPM) jointly released for public comment on February 14, 2005.1

 The 

National Defense Authorization Act for Fiscal Year 20042

 gave DOD 

significant authorities to redesign the rules, regulations, and processes that 

govern the way that defense civilian employees are hired, compensated, 

promoted, and disciplined. The proposed regulations, which according to 

DOD will ultimately affect more than 700,000 defense civilian employees, 

are especially critical because of their implications for governmentwide 

reform. In March 2005, I testified on the NSPS proposed regulations before 

the Senate Committee on Homeland Security and Governmental Affairs, 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia.3

 Also, during my recent speech 

before the Merit Systems Protection Board (MSPB) on the challenges that 

the federal government faces in the 21st century, I highlighted a range of 

trends and challenges, including DOD’s human capital reform effort and a 

governmentwide framework to advance human capital reform.4

As suggested by the title of this hearing—“NSPS: The New Department of 

Defense Civilian Personnel System Reaching Readiness,” NSPS represents 

a huge undertaking for DOD, given its massive size and geographically and 

culturally diverse workforce. In addition, DOD’s new human resources 

management system will have far-reaching implications for the 

management of the department and for civil service reform across the 

federal government. NSPS could, if designed and implemented properly, 

serve as a model for governmentwide transformation in human capital 

management. However, if not properly designed and implemented, NSPS 

1

 National Security Personnel System, 70 Fed. Reg. 7552 (Feb. 14, 2005).

2

 Pub. L. No. 108-136 § 1101 (Nov. 24, 2003).

3

 GAO, Human Capital: Preliminary Observations on Proposed DOD National Security 

Personnel System Regulations, GAO-05-432T (Washington, D.C.: Mar. 15, 2005).

4

 The Honorable David M. Walker, “21st Century Challenges: Reexamining the Base of 

the Federal Government” (paper presented to the Merit Systems Protection Board, 

New Orleans, La., April 5, 2005).
Page 3 GAO-05-517T 

could impede progress toward a more performance- and results-based 

system for the federal government as a whole.

We raised several issues regarding DOD’s civilian workforce in a recently 

released report on the fiscal challenges the federal government faces in the 

21st century, including whether DOD is pursuing the design and 

implementation of NSPS in a manner that maximizes the chance of 

success.5

 In recent testimony on DOD’s business transformation efforts, we 

indicated that DOD is challenged in its efforts to effect fundamental 

business management reform, such as NSPS, and indicated that our 

ongoing work continues to raise questions about DOD’s chances of 

success.6

 There is general recognition that the government needs a 

framework to guide the kind of large-scale human capital reform occurring 

at DOD and the Department of Homeland Security (DHS), a framework 

that Congress and the administration can implement to enhance 

performance, ensure accountability, and position the nation for the future. 

Implementing large-scale change management initiatives is a complex 

endeavor, and failure to address a wide variety of personnel and cultural 

issues, in particular, has been at the heart of unsuccessful organizational 

transformations. Strategic human capital management, which we continue 

to designate as a high-risk area governmentwide,7

 can help agencies 

marshal, manage, and maintain the workforce they need to accomplish 

their missions.

Summary Let me begin by summarizing three positive features, three areas of 

concern, and three comments regarding the way forward. The first positive 

feature is that the proposed regulations provide for many elements of a 

flexible and contemporary human resources management system—such as 

pay bands and pay for performance. The second positive feature is that the 

proposed regulations will allow DOD to rightsize its workforce when 

implementing reduction-in-force (RIF) orders. For example, DOD will be 

able to give greater priority to employee performance in RIF decisions and 

5

 GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-325SP (Washington, D.C.: February 2005).

6

 GAO, Department of Defense: Further Actions Are Needed to Effectively Address 

Business Management Problems and Overcome Key Business Transformation Challenges, 

GAO-05-140T (Washington, D.C.: Nov. 18, 2004).

7

 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).
Page 4 GAO-05-517T 

take more factors into consideration when defining the areas in which 

employees will compete for retention. The third positive feature is that 

DOD has pledged to engage in a continuing collaboration with employee 

representatives. On March 16, 2005, the 30-day public comment period on 

the proposed regulations ended. On March 28, 2005, DOD and OPM notified 

the Congress that they are about to begin the meet and confer process with 

employee representatives who provided comments on the proposed 

regulations. (It should be noted that 10 federal labor unions have filed suit 

alleging that DOD failed to abide by the statutory requirements to include 

employee representatives in the development of DOD’s new labor relations 

system authorized as part of NSPS.)

However, in addition to the litigation referenced above, our initial work 

indicates three primary areas of concern. First, DOD has considerable 

work ahead to define the details of the implementation of its system, 

including such issues as adequate safeguards to help ensure fairness and 

guard against abuse. Second, in setting performance expectations, the 

proposed regulations would allow the use of core competencies to 

communicate to employees what is expected of them on the job, but the 

proposed regulations do not require the use of these core competencies. 

Requiring such use can help provide consistency and clarity in 

performance management. Third, the proposed regulations do not identify 

a process for the continuing involvement of employees in the planning, 

development, and implementation of NSPS.

Regarding the way forward, development of the position of Deputy 

Secretary of Defense for Management, who would act as DOD’s Chief 

Management Officer, will be essential to provide leadership that can 

elevate, integrate, and institutionalize responsibility for the success of 

DOD’s overall business transformation effort, including its new human 

resources management system. In fact, in my previous testimony on DOD’s 

business transformation efforts, we identified the lack of clear and 

sustained leadership for overall business transformations as one of the 

underlying causes that has impeded prior DOD reform efforts.8

Additionally, DOD would benefit if it develops a comprehensive 

communications strategy that provides for ongoing, meaningful two-way 

communication that creates shared expectations among employees, 

employee representatives, managers, customers, and stakeholders. Finally, 

DOD must ensure that it has the institutional infrastructure in place to 

8 GAO-05-140T.
Page 5 GAO-05-517T 

make effective use of its new authorities. At a minimum, this infrastructure 

includes a human capital planning process that integrates DOD’s human 

capital policies, strategies, and programs with its program goals and 

mission, and desired outcomes; the capabilities to effectively develop and 

implement a new human capital system; and, importantly, a set of adequate 

safeguards, including reasonable transparency and appropriate 

accountability mechanisms, to help ensure the fair, effective, and credible 

implementation and application of a new system.

DOD’s proposed regulations are intended to provide a broad outline of its 

new human resources management system. While they are not, nor were 

they intended to be, a detailed presentation of how the new system will be 

implemented, the details of the proposed regulations do matter. Although 

we continue to review the DOD’s extensive regulations, today I will 

(1) provide some preliminary observations on selected provisions, 

(2) discuss the multiple challenges that DOD faces as it moves toward 

implementation of its new human resources management system, and then 

(3) suggest a governmentwide framework that can serve as a starting point 

to advance human capital reform.

Preliminary 

Observations on the 

Proposed DOD 

National Security 

Personnel System 

Regulations

DOD and OPM’s proposed NSPS regulations would establish a new human 

resources management system within DOD that governs basic pay, staffing, 

classification, performance management, labor relations, adverse actions, 

and employee appeals. We believe that many of the basic principles 

underlying the proposed DOD regulations are generally consistent with 

proven approaches to strategic human capital management. Today, I will 

provide our preliminary observations on selected elements of the proposed 

regulations in the areas of pay and performance management, staffing and 

employment, workforce shaping, adverse actions and appeals, and labormanagement relations.

Pay and Performance 

Management

In January 2004, we released a report on pay for performance for selected 

OPM personnel demonstration projects that shows the variety of 

approaches taken in these projects to design and implement pay-forperformance systems.9

 Many of these personnel demonstration projects 

9

 GAO, Human Capital: Implementing Pay for Performance at Selected Personnel 

Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23, 2004).
Page 6 GAO-05-517T 

were conducted within DOD. The experiences of these demonstration 

projects provide insights into how some organizations in the federal 

government are implementing pay for performance, and thus can 

guide DOD as it develops and implements its own approach. These 

demonstration projects illustrate that understanding how to link pay to 

performance is very much a work in progress in the federal government 

and that additional work is needed to ensure that performance 

management systems are tools to help agencies manage on a day-to-day 

basis and achieve external results.

When DOD first proposed its new civilian personnel reform, we strongly 

supported the need to expand pay for performance in the federal 

government.10 Establishing a clear link between individual pay and 

performance is essential for maximizing performance and ensuring the 

accountability of the federal government to the American people. As I have 

stated before, how pay for performance is done, when it is done, and the 

basis on which it is done can make all the difference in whether such 

efforts are successful.11 DOD’s proposed regulations reflect a growing 

understanding that the federal government needs to fundamentally 

rethink its current approach to pay and better link pay to individual and 

organizational performance. To this end, the DOD proposal takes another 

valuable step toward a modern performance management system as well 

as a market-based, results-oriented compensation system. My comments 

on specific provisions of pay and performance management follow.

Aligning Individual Performance 

to Organizational Goals

Under the proposed regulations, the DOD performance management 

system would, among other things, align individual performance 

expectations with the department’s overall mission and strategic goals, 

organizational program and policy objectives, annual performance plans, 

and other measures of performance. However, the proposed regulations do 

not detail how to achieve such an alignment, which is a vital issue that will 

need to be addressed as DOD’s efforts in designing and implementing a new 

personnel system move forward. Our work on public sector performance 

management efforts in the United States and abroad has underscored the 

importance of aligning daily operations and activities with organizational

10 GAO, Defense Transformation: Preliminary Observations on DOD’s Proposed Civilian 

Personnel Reforms, GAO-03-717T (Washington, D.C.: Apr. 29, 2003).

11 GAO, Human Capital: Preliminary Observations on Proposed DHS Human Capital 

Regulations, GAO-04-479T (Washington, D.C.: Feb. 25, 2004).
Page 7 GAO-05-517T 

results.12 We have found that organizations often struggle with clearly 

understanding how what they do on a day-to-day basis contributes to 

overall organizational results, while high-performing organizations 

demonstrate their understanding of how the products and services they 

deliver contribute to results by aligning the performance expectations of 

top leadership with the organization’s goals and then cascading those 

expectations to lower levels.

A performance management system is critical to successful organizational 

transformation. As an organization undergoing transformation, DOD can 

use its proposed performance management system as a vital tool for 

aligning the organization with desired results and creating a “line of sight” 

to show how team, unit, and individual performance can contribute to 

overall organizational results. To help federal agencies transform their 

culture to be more results oriented, customer focused, and collaborative in 

nature, we have reported on how a performance management system that 

defines responsibility and ensures accountability for change can be key to a 

successful merger and transformation.13

Establishing Pay Bands Under the proposed regulations, DOD would create pay bands for most of 

its civilian workforce that would replace the 15-grade General Schedule 

(GS) system now in place for most civil service employees. Specifically, 

DOD (in coordination with OPM) would establish broad occupational 

career groups by grouping occupations and positions that are similar in 

type of work, mission, developmental or career paths, and competencies. 

Within career groups, DOD would establish pay bands. The proposed 

regulations do not provide details on the number of career groups or the 

number of pay bands per career group. The regulations also do not provide 

details on the criteria that DOD will use to promote individuals from one 

band to another. These important issues will need to be addressed as DOD 

moves forward. Pay banding and movement to broader occupational career 

groups can both facilitate DOD’s movement to a pay-for-performance 

system and help DOD better define career groups, which in turn can 

improve the hiring process. In our prior work, we have reported that the 

current GS system, as defined in the Classification Act of 1949,14 is a key

12 GAO-04-479T.

13 GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and 

Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).

14 5 U.S. Code §§ 5101-5115.
Page 8 GAO-05-517T 

barrier to comprehensive human capital reform and that the creation of 

broader occupational job clusters and pay bands would aid other agencies 

as they seek to modernize their personnel systems.15 The standards and 

process of the current classification system are key problems in federal 

hiring efforts because they are outdated and thus not applicable to today’s 

occupations and work.

Under the proposed regulations, DOD could not reduce employees’ basic 

rates of pay when converting to pay bands. In addition, the proposed 

regulations would allow DOD to establish a “control point” within a band 

that limits increases in the rate of basic pay and may require certain criteria 

to be met for increases above the control point.16 The use of control points 

to manage employees’ progression through the bands can help to ensure 

that their performance coincides with their salaries and that only the 

highest performers move into the upper half of the pay band, thereby 

controlling salary costs. The OPM personnel demonstration projects at 

China Lake and the Naval Sea Systems Command Warfare Center’s 

Dahlgren Division have incorporated checkpoints or “speed bumps” in 

their pay bands. For example, when an employee’s salary at China Lake 

reaches the midpoint of the pay band, the employee must receive a 

performance rating that is equivalent to exceeding expectations before he 

or she can receive additional salary increases.

Setting and Communicating 

Employee Performance 

Expectations

Under the proposed regulations, DOD’s performance management system 

would promote individual accountability by setting performance 

expectations and communicating them to employees, holding employees 

responsible for accomplishing them, and making supervisors and managers 

responsible for effectively managing the performance of employees under 

their supervision. While supervisors are supposed to involve employees, 

insofar as practicable, in setting performance expectations, the final 

decisions regarding performance expectations are within the sole and 

exclusive discretion of management.

15 GAO, Human Capital: Opportunities to Improve Executive Agencies’ Hiring Processes, 

GAO-03-450 (Washington, D.C.: May 30, 2003).

16 Because movement through the pay band is based on performance, employees could 

progress through the pay band more quickly than they could receive similar increases under 

the GS system. One method of preventing employees from eventually migrating to the top of 

the pay band, and thus increasing salary costs, is to establish control points within each 

band.
Page 9 GAO-05-517T 

Under the proposed regulations, performance expectations may take 

several different forms. These include, among others, goals or objectives 

that set general or specific performance targets at the individual, team, or 

organizational level; a particular work assignment, including 

characteristics such as quality, quantity, accuracy, or timeliness; core 

competencies that an employee is expected to demonstrate on the job; or 

the contributions that an employee is expected to make. As DOD’s human 

resources management system design efforts move forward, DOD will need 

to define, in more detail than is currently provided, how performance 

expectations will be set, including the degree to which DOD components, 

managers, and supervisors will have flexibility in setting those 

expectations.

The range of expectations that DOD would consider in setting individual 

employee performance expectations are generally consistent with those 

used by high-performing organizations. DOD appropriately recognizes that 

given the vast diversity of work done in the department, managers and 

employees need flexibility in crafting specific expectations. However, the 

experiences of high-performing organizations suggest that DOD should 

require the use of core competencies as a central feature of its performance 

management effort.17 Based on our review of other agency efforts and our 

own experience at GAO, we have found that core competencies can help 

reinforce employee behaviors and actions that support the department’s 

mission, goals, and values, and can provide a consistent message to 

employees about how they are expected to achieve results. By including 

such competencies as change management, cultural sensitivity, teamwork 

and collaboration, and information sharing, DOD would create a shared 

responsibility for organizational success and help ensure accountability for 

the transformation process.

Making Meaningful Distinctions 

in Employee Performance

High-performing organizations seek to create pay, incentive, and reward 

systems that clearly link employee knowledge, skills, and contributions to 

organizational results. These organizations make meaningful distinctions 

between acceptable and outstanding performance of individuals and 

appropriately reward those who perform at the highest level. DOD’s 

proposed regulations state that supervisors and managers would be held 

accountable for making meaningful distinctions among employees based 

17 GAO, Results-Oriented Cultures: Creating a Clear Linkage between Individual 

Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).
Page 10 GAO-05-517T 

on performance and contribution, fostering and rewarding excellent 

performance, and addressing poor performance.

Under the proposed regulations, DOD is expected to have at least three 

rating levels for evaluating employee performance. We urge DOD to 

consider using at least four summary rating levels to allow for greater 

performance-rating and pay differentiation. This approach is in the spirit of 

the new governmentwide performance-based pay system for the Senior 

Executive Service (SES), which requires at least four rating levels to 

provide a clear and direct link between SES performance and pay as well as 

to make meaningful distinctions based on relative performance. Cascading 

this approach to other levels of employees can help DOD recognize and 

reward employee contributions and achieve the highest levels of individual 

performance.18

Providing Adequate Safeguards 

to Ensure Fairness and Guard 

Against Abuse

Although DOD’s proposed regulations provide for some safeguards to 

ensure fairness and guard against abuse, additional safeguards should be 

developed. For example, as required by the authorizing legislation, the 

proposed regulations indicate that DOD’s performance management 

system must comply with merit system principles and avoid prohibited 

personnel practices; provide a means for employee involvement in the 

design and implementation of the system; and, overall, be fair, credible, and 

transparent. However, the proposed regulations do not offer details on how 

DOD would (1) promote consistency and provide general oversight of the 

performance management system to help ensure it is administered in a fair, 

credible, and transparent manner, and (2) incorporate predecisional 

internal safeguards that are implemented to help achieve consistency and 

equity, and ensure nondiscrimination and nonpoliticization of the 

performance management process. Last month, during testimony, we 

stated that additional flexibility should have adequate safeguards, including 

a reasonable degree of transparency with regard to the results of key 

decisions, whether it be pay, promotions, or other types of actions, while 

protecting personal privacy. We also suggested that there should be both 

informal and formal appeal mechanisms within and outside of the 

organization if individuals feel that there has been abuse or a violation of 

the policies, procedures, and protected rights of the individual. Internal 

mechanisms could include independent Human Capital Office and Office of 

Opportunity and Inclusiveness reviews that provide reasonable assurances 

18 GAO, Human Capital: Observations on Final DHS Human Capital Regulation, 

GAO-05-391T (Washington, D.C.: Mar. 2, 2005).
Page 11 GAO-05-517T 

that there would be consistency and nondiscrimination. Furthermore, it is 

of critical importance that the external appeal process be independent, 

efficient, effective, and credible.

In April 2003, when commenting on DOD civilian personnel reforms, we 

testified that Congress should consider establishing statutory standards 

that an agency must have in place before it can implement a more 

performance-based pay program, and we developed an initial list of 

possible safeguards to help ensure that pay-for-performance systems in the 

government are fair, effective, and credible.19 For example, we have noted 

that agencies need to ensure reasonable transparency and provide 

appropriate accountability mechanisms in connection with the results of 

the performance management process.20 This can be done by publishing 

the overall results of performance management and individual pay 

decisions while protecting individual confidentiality and by reporting 

periodically on internal assessments and employee survey results relating 

to the performance management system. DOD needs to commit itself to 

publishing the results of performance management decisions. By 

publishing the results in a manner that protects individual confidentiality, 

DOD could provide employees with the information they need to better 

understand their performance and the performance management system. 

Several of the demonstration projects have been publishing information 

about performance appraisal and pay decisions, such as the average 

performance rating, the average pay increase, and the average award for 

the organization and for each individual unit, on internal Web sites for use 

by employees. As DOD’s human resources management system design 

efforts move forward, DOD will need to define, in more detail than is 

currently provided, how it plans to review such matters as the 

establishment and implementation of the performance appraisal 

systemand, subsequently, performance rating decisions, pay 

determinations, and promotion actionsbefore these actions are finalized, 

to ensure they are merit based.

Staffing and Employment The authorizing legislation allows DOD to implement additional hiring 

flexibilities that would allow it to (1) determine that there is a severe 

shortage of candidates or a critical hiring need and (2) use direct-hire 

19 GAO-03-717T.

20 GAO-04-479T.
Page 12 GAO-05-517T 

procedures for these positions. Under current law, OPM, rather than the 

agency, determines whether there is a severe shortage of candidates or a 

critical hiring need. DOD’s authorizing legislation permits that DOD merely 

document the basis for the severe shortage or critical hiring need and then 

notify OPM of these direct-hire determinations. Direct-hire authority allows 

an agency to appoint people to positions without adherence to certain 

competitive examination requirements (such as applying veterans’ 

preference or numerically rating and ranking candidates based on their 

experience, training, and education) when there is a severe shortage of 

qualified candidates or a critical hiring need. In the section containing 

DOD’s proposed hiring flexibilities, the proposed regulations state that the 

department will adhere to veterans’ preference principles as well as comply 

with merit principles and the Title 5 provision dealing with prohibited 

personnel practices.

While we strongly endorse providing agencies with additional tools and 

flexibilities to attract and retain needed talent, additional analysis may be 

needed to ensure that any new hiring authorities are consistent with a 

focus on the protection of employee rights, on merit principles—and on 

results. Hiring flexibilities alone will not enable federal agencies to bring on 

board the personnel that are needed to accomplish their missions. 

Agencies must first conduct gap analyses of the critical skills and 

competencies needed in their workforces now and in the future, or they 

may not be able to effectively design strategies to hire, develop, and retain 

the best possible workforces.

Workforce Shaping The proposed regulations would allow DOD to reduce, realign, and 

reorganize the department’s workforce through revised RIF procedures. 

For example, employees would be placed on a retention list in the 

following order: tenure group (i.e., permanent or temporary appointment), 

veterans’ preference eligibility (disabled veterans will be given additional 

priority), level of performance, and length of service; under current 

regulations, length of service is considered ahead of performance. I have 

previously testified, prior to the enactment of NSPS, in support of revised 

RIF procedures that would require much greater consideration of an
Page 13 GAO-05-517T 

employee’s performance.21 Although we support greater consideration of 

an employee’s performance in RIF procedures, agencies must have 

modern, effective, and credible performance management systems in place 

to properly implement such authorities.

An agency’s approach to reductions should be oriented toward strategically 

shaping the makeup of its workforce if it is to ensure the orderly transfer of 

institutional knowledge and achieve mission results. DOD’s proposed 

regulations include some changes that would allow the department to 

rightsize the workforce more carefully through greater precision in 

defining competitive areas, and by reducing the disruption associated with 

RIF orders as their impact ripples through an organization. For example, 

under the current regulations, the minimum RIF competitive area is 

broadly defined as an organization under separate administration in a local 

commuting area. Under the proposed regulations, DOD would be able to 

establish a minimum RIF competitive area on a more targeted basis, using 

one or more of the following factors: geographical location, line of 

business, product line, organizational unit, and funding line. The proposed 

regulations also provide DOD with the flexibility to develop additional 

competitive groupings on the basis of career group, occupational series or 

specialty, and pay band. At present, DOD can use competitive groups based 

on employees (1) in the excepted and competitive service, (2) under 

different excepted service appointment authorities, (3) with different work 

schedules,22 (4) pay schedule, or (5) trainee status. These reforms could 

help DOD approach rightsizing more carefully; however, as I have stated, 

agencies first need to identify the critical skills and competencies needed in 

their workforce if they are to effectively implement their new human 

capital flexibilities.

21 GAO-03-717T; GAO, Defense Transformation: DOD’s Proposed Civilian Personnel 

System and Governmentwide Human Capital Reform, GAO-03-741T (Washington, D.C.: 

May 1, 2003); and Human Capital: Building on DOD’s Reform Effort to Foster 

Governmentwide Improvements, GAO-03-851T (Washington, D.C.: June 4, 2003).

22 For example, employees who work full time, part time, seasonally, or intermittently.
Page 14 GAO-05-517T 

Adverse Actions and 

Appeals

As with DHS’s final regulations,23 DOD’s proposed regulations are intended 

to streamline the rules and procedures for taking adverse actions, while 

ensuring that employees receive due process and fair treatment. The 

proposed regulations establish a single process for both performancebased and conduct-based actions, and shorten the adverse action process 

by removing the requirement for a performance improvement plan. In 

addition, the proposed regulations streamline the appeals process at the 

MSPB by shortening the time for filing and processing appeals.

Similar to DHS, DOD’s proposed regulations also adopt a higher standard 

of proof for adverse actions in DOD, requiring the department to meet a 

“preponderance of the evidence” standard in place of the current 

“substantial evidence” standard. For performance issues, while this higher 

standard of evidence means that DOD would face a greater burden of proof 

than most agencies to pursue these actions, DOD managers are not 

required to provide employees with performance improvement periods, as 

is the case for other federal employees. For conduct issues, DOD would 

face the same burden of proof as most agencies.

DOD’s proposed regulations generally preserve the employee’s basic right 

to appeal decisions to an independent body—the MSPB. However, in 

contrast to DHS’s final regulations, DOD’s proposed regulations permit an 

internal DOD review of the initial decisions issued by MSPB adjudicating 

officials. Under this internal review, DOD can modify or reverse an initial 

decision or remand the matter back to the adjudicating official for further 

consideration. Unlike other criteria for review of initial decisions, DOD can 

modify or reverse an initial MSPB adjudicating official’s decision where the 

department determines that the decision has a direct and substantial 

adverse impact on the department’s national security mission.24 According 

to DOD, the department needs the authority to review initial MSPB 

decisions and correct such decisions as appropriate, to ensure that the 

MSPB interprets NSPS and the proposed regulations in a way that 

recognizes the critical mission of the department and to ensure that MSPB 

gives proper deference to such interpretation. However, the proposed 

23 Department of Homeland Security Human Resources Management System, 70 Fed. Reg. 

5272 (Feb. 1, 2005).

24 Any final DOD decision under this review process may be further appealed to the full 

MSPB. Further, the Secretary of Defense or an employee adversely affected by a final order 

or decision of the full MSPB may seek judicial review.
Page 15 GAO-05-517T 

regulations do not offer additional details on the department’s internal 

review process, such as how the review will be conducted and who will 

conduct them. An internal agency review process this important should be 

addressed in the regulations rather than in an implementing directive to 

ensure adequate transparency and employee confidence in the process.

Similar to DHS’s final regulations, DOD’s proposed regulations would 

shorten the notification period before an adverse action can become 

effective and provide an accelerated MSPB adjudication process. In 

addition, MSPB would no longer be able to modify a penalty for an adverse 

action that is imposed on an employee by DOD unless such penalty is so 

disproportionate to the basis of the action as to be “wholly without 

justification.” In other words, MSPB has less latitude to modify agencyimposed penalties than under current practice. The DOD proposed 

regulations also stipulate that MSPB could no longer require that parties 

enter into settlement discussions, although either party may propose doing 

so. DOD, like DHS, expressed concerns that settlement should be a 

completely voluntary decision made by parties on their own initiative. 

However, settling cases has been an important tool in the past at MSPB, 

and promotion of settlement at this stage should be encouraged.

Similar to DHS’s final regulations, DOD’s proposed regulations would 

permit the Secretary of Defense to identify specific offenses for which 

removal is mandatory. Employees alleged to have committed these 

offenses may receive a written notice only after the Secretary of Defense’s 

review and approval. These employees will have the same right to a review 

by an MSPB adjudicating official as is provided to other employees against 

whom appealable adverse actions are taken. DOD’s proposed regulations 

only indicate that its employees will be made aware of the mandatory 

removal offenses. In contrast, the final DHS regulations explicitly provide 

for publishing a list of the mandatory removal offenses in the Federal 

Register. We believe that the process for determining and communicating 

which types of offenses require mandatory removal should be explicit and 

transparent and involve relevant congressional stakeholders, employees, 

and employee representatives. Moreover, we suggest that DOD exercise 

caution when identifying specific removable offenses and the specific 

punishment. When developing these proposed regulations, DOD should 

learn from the experience of the Internal Revenue Service’s (IRS)
Page 16 GAO-05-517T 

implementation of its mandatory removal provisions.25 (IRS employees 

feared that they would be falsely accused by taxpayers and investigated, 

and had little confidence that they would not be disciplined for making an 

honest mistake.) We reported that IRS officials believed this provision had 

a negative impact on employee morale and effectiveness and had a 

“chilling” effect on IRS frontline enforcement employees, who were afraid 

to take certain appropriate enforcement actions.26 Careful drafting of each 

removable offense is critical to ensure that the provision does not have 

unintended consequences.

DOD’s proposed regulations also would encourage the use of alternative 

dispute resolution and provide that this approach be subject to collective 

bargaining to the extent permitted by the proposed labor relations 

regulations. To resolve disputes in a more efficient, timely, and less 

adversarial manner, federal agencies have been expanding their human 

capital programs to include alternative dispute resolution approaches. 

These approaches include mediation, dispute resolution boards, and 

ombudsmen. Ombudsmen typically are used to provide an informal 

alternative to addressing conflicts. We previously reported on common 

approaches used in ombudsmen offices, including (1) broad responsibility 

and authority to address almost any workplace issue, (2) their ability to 

bring systemic issues to management’s attention, and (3) the manner in 

which they work with other agency offices in providing assistance to 

employees.27

Labor-Management 

Relations

The DOD proposed regulations recognize the right of employees to 

organize and bargain collectively.28 However, similar to DHS’s final 

regulations, the proposed regulations would reduce the scope of bargaining 

by (1) removing the requirement to bargain on matters traditionally 

referred to as “impact and implementation” (which include the processes 

used to deploy personnel, assign work, and use technology) and 

25 Section 1203 of the IRS Restructuring and Reform Act of 1998 outlines conditions for 

firing of IRS employees for any of 10 actions of misconduct.

26 GAO, Tax Administration: IRS and TIGTA Should Evaluate Their Processes of 

Employee Misconduct Under Section 1203, GAO-03-394 (Washington, D.C.: Feb. 14, 2003).

27 GAO-01-479T.

28 Under current law, the rights of employees to bargain may be suspended for reasons of 

national security. See Title 5 U.S. Code §§ 7103(b) and 7112(b)(6).
Page 17 GAO-05-517T 

(2) narrowing the scope of issues subject to collective bargaining. A 

National Security Labor Relations Board would be created that would 

largely replace the Federal Labor Relations Authority. The proposed board 

would have at least three members selected by the Secretary of Defense, 

with one member selected from a list developed in consultation with the 

Director of OPM. The proposed board would be similar to the internal 

Homeland Security Labor Relations Board established by the DHS final 

regulations, except that the Secretary of Defense would not be required to 

consult with the employee representatives in selecting its members. The 

proposed board would be responsible for resolving matters related to 

negotiation disputes, to include the scope of bargaining and the obligation 

to bargain in good faith, resolving impasses, and questions regarding 

national consultation rights.

Under the proposed regulations, the Secretary of Defense is authorized to 

appoint and remove individuals who serve on the board. Similar to DHS’s 

final regulations establishing the Homeland Security Labor Relations 

Board, DOD’s proposed regulations provide for board member qualification 

requirements, which emphasize integrity and impartiality. DOD’s proposed 

regulations, however, do not provide an avenue for any employee 

representative input into the appointment of board members. DHS 

regulations do so by requiring that for the appointment of two board 

members, the Secretary of Homeland Security must consider candidates 

submitted by labor organizations. Employee perception concerning the 

independence of this board is critical to the resolution of issues raised over 

labor relations policies and disputes.

Our previous work on individual agencies’ human capital systems has not 

directly addressed the scope of specific issues that should or should not be 

subject to collective bargaining and negotiations. At a forum we co-hosted 

in April 2004 exploring the concept of a governmentwide framework for 

human capital reform, which I will discuss later, participants generally 

agreed that the ability to organize, bargain collectively, and participate in 

labor organizations is an important principle to be retained in any 

framework for reform. It also was suggested at the forum that unions must 

be both willing and able to actively collaborate and coordinate with 

management if unions are to be effective representatives of their members 

and real participants in any human capital reform.
Page 18 GAO-05-517T 

DOD Faces Multiple 

Implementation 

Challenges

Once DOD issues its final regulations for its human resources management 

system, the department will face multiple implementation challenges that 

include ensuring sustained and committed leadership, establishing an 

overall communications strategy, providing adequate resources for the 

implementation of the new system, involving employees in designing the 

system, and evaluating DOD’s new human resources management system 

after it has been implemented. For information on related human capital 

issues that could potentially affect the implementation of NSPS, see the 

“Highlights” pages from previous GAO products on DOD civilian personnel 

issues in appendix I.

Ensuring Sustained and 

Committed Leadership

As DOD and other agencies across the federal government embark on 

large-scale organizational change initiatives, such as DOD’s new human 

resources management system, another challenge is to elevate, integrate, 

and institutionalize leadership responsibility for these key functional 

management initiatives to ensure their success. A chief management 

officer or similar position can effectively provide the continuing, focused 

leadership essential to successfully completing these multiyear 

transformations. For an endeavor as critical as DOD’s new human 

resources management system, such a leadership position would serve to

• elevate attention to overcome an organization’s natural resistance to 

change, marshal the resources needed to implement change, and build 

and maintain the organizationwide commitment to new ways of doing 

business;

• integrate various management responsibilities into the new system so 

they are no longer “stove-piped” and fit into other organizational 

transformation efforts in a comprehensive, ongoing, and integrated 

manner; and
Page 19 GAO-05-517T 

• institutionalize accountability for the system so that the implementation 

of this critical human capital initiative can be sustained.29

In 2004, we testified that while the Secretary of Defense and other key 

DOD leaders have demonstrated their commitment to the business 

transformation efforts, in our view, the complexity and long-term nature of 

these efforts requires the development of an executive position capable of 

providing strong and sustained executive leadership—over a number of 

years and various administrations.30 The day-to-day demands placed on the 

Secretary, the Deputy Secretary, and others make it difficult for these 

leaders to maintain the oversight, focus, and momentum needed to resolve 

the weaknesses in DOD’s overall business operations. While sound 

strategic planning is the foundation upon which to build, sustained and 

focused leadership is needed for reform to succeed. One way to ensure 

sustained leadership over DOD’s business transformation efforts would be 

to create a full-time executive level position for a chief management official 

who would serve as the Deputy Secretary of Defense for Management.31

This position would provide the attention essential for addressing key 

stewardship responsibilities, such as strategic planning, human capital 

management, performance and financial management, acquisition and 

contract management, and business systems modernization, while 

facilitating the overall business transformation operations within DOD.

Establishing an Overall 

Communications Strategy

Another significant challenge for DOD is to ensure an effective and ongoing 

two-way communications strategy, given its size, geographically and 

culturally diverse audiences, and different command structures across 

DOD organizations. We have reported that a communications strategy that 

creates shared expectations about, and reports related progress on, the 

implementation of the new system is a key practice of a change

29 On September 9, 2002, GAO convened a roundtable of government leaders and 

management experts to discuss the chief operating concept. For more information, see 

GAO, Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A Potential 

Strategy to Address Federal Governance Challenges, GAO-03-192SP (Washington, D.C.: Oct. 

4, 2002), and The Chief Operating Officer Concept and Its Potential Use as a Strategy to 

Improve Management at the Department of Homeland Security, GAO-04-876R

(Washington, D.C.: June 28, 2004).

30 GAO-05-140T.

31 GAO-05-140T.
Page 20 GAO-05-517T 

management initiative.32 This communications strategy must involve a 

number of key players, including the Secretary of Defense, and a variety 

of communication means and mediums. DOD acknowledges that a 

comprehensive outreach and communications strategy is essential for 

designing and implementing its new human resources management system, 

but the proposed regulations do not identify a process for the continuing 

involvement of employees in the planning, development, and 

implementation of NSPS.

Because the NSPS design process and proposed regulations have received 

considerable attention,33 we believe one of the most relevant 

implementation steps is for DOD to enhance two-way communication 

between employees, employee representatives, and management. 

Communication is not only about “pushing the message out,” but also using 

two-way communication to build effective internal and external 

partnerships that are vital to the success of any organization. By providing 

employees with opportunities to communicate concerns and experiences 

about any change management initiative, management allows employees to 

feel that their input is acknowledged and important. As it makes plans for 

implementing NSPS, DOD should facilitate a two-way honest exchange 

with, and allow for feedback from, employees and other stakeholders. 

Once it receives this feedback, management needs to consider and use this 

solicited employee feedback to make any appropriate changes to its 

implementation. In addition, management needs to close the loop by 

providing employees with information on why key recommendations were 

not adopted.

Providing Adequate 

Resources for Implementing 

the New System

Experience has shown that additional resources are necessary to ensure 

sufficient planning, implementation, training, and evaluation for human 

capital reform. According to DOD, the implementation of NSPS will result 

in costs for, among other things, developing and delivering training, 

modifying automated human resources information systems, and starting 

up and sustaining the National Security Labor Relations Board. We have 

32 GAO-03-669.

33 DOD’s efforts to date to involve labor unions have not been without controversy. 

Ten federal labor unions have filed suit alleging that DOD failed to abide by the statutory 

requirements to include employee representatives in the development of DOD’s new labor 

relations system authorized as part of NSPS. See American Federation of Government 

Employees, AFL-CIO et al v. Rumsfeld et al, No. 1:05cv00367 (D.D.C. filed Feb. 23, 2005).
Page 21 GAO-05-517T 

found that, based on the data provided by selected OPM personnel 

demonstration projects, the major cost drivers in implementing pay-forperformance systems are the direct costs associated with salaries and 

training.

DOD estimates that the overall cost associated with implementing NSPS 

will be approximately $158 million through fiscal year 2008. According to 

DOD, it has not completed an implementation plan for NSPS, including an 

information technology plan and a training plan; thus, the full extent of the 

resources needed to implement NSPS may not be well understood at this 

time. According to OPM, the increased costs of implementing alternative 

personnel systems should be acknowledged and budgeted up front.34

Certain costs, such as those for initial training on the new system, are onetime in nature and should not be built into the base of DOD’s budget. Other 

costs, such as employees’ salaries, are recurring and thus would be built 

into the base of DOD’s budget for future years. Therefore, funding for NSPS 

will warrant close scrutiny by Congress as DOD’s implementation plan 

evolves.

Involving Employees and 

Other Stakeholders in 

Implementing the System

The proposed regulations do not identify a process for the continuing 

involvement of employees in the planning, development, and 

implementation of NSPS. However, DOD’s proposed regulations do provide 

for continuing collaboration with employee representatives. According to 

DOD, almost two-thirds of its 700,000 civilian employees are represented 

by 41 different labor unions, including over 1,500 separate bargaining units. 

In contrast, according to OPM, just under one-third of DHS’s 

110,000 federal employees are represented by 16 different labor unions, 

including 75 separate bargaining units. Similar to DHS’s final regulations, 

DOD’s proposed regulations about the collaboration process, among other 

things, would permit the Secretary of Defense to determine (1) the number 

of employee representatives allowed to engage in the collaboration 

process, and (2) the extent to which employee representatives are given an 

opportunity to discuss their views with and submit written comments to 

DOD officials. In addition, DOD’s proposed regulations indicate that 

nothing in the continuing collaboration process will affect the right of the 

Secretary of Defense to determine the content of implementing guidance 

and to make this guidance effective at any time. DOD’s proposed 

34 OPM, Demonstration Projects and Alternative Personnel Systems: HR Flexibilities and 

Lessons Learned (Washington, D.C.: September 2001).
Page 22 GAO-05-517T 

regulations also will give designated employee representatives an 

opportunity to be briefed and to comment on the design and results of the 

new system’s implementation. DHS’s final regulations, however, provide for 

more extensive involvement of employee representatives. For example, 

DHS’s final regulations provide for the involvement of employee 

representatives in identifying the scope, objectives, and methodology to be 

used in evaluating the new DHS system.

The active involvement of employees and employee representatives will be 

critical to the success of NSPS. We have reported that the involvement of 

employees and employee representatives both directly and indirectly is 

crucial to the success of new initiatives, including implementing a pay-forperformance system. High-performing organizations have found that 

actively involving employees and stakeholders, such as unions or other 

employee associations, when developing results-oriented performance 

management systems helps improve employees’ confidence and belief in 

the fairness of the system and increases their understanding and ownership 

of organizational goals and objectives. This involvement must be early, 

active, and continuing if employees are to gain a sense of understanding 

and ownership of the changes that are being made. The 30-day public 

comment period on the proposed regulations ended March 16, 2005. DOD 

and OPM notified the Congress that they are preparing to begin the meet 

and confer process with employee representatives who provided 

comments on the proposed regulations. Last month, during testimony, we 

stated that DOD is at the beginning of a long road, and the meet and confer 

process has to be meaningful and is critically important because there are 

many details of the proposed regulations that have not been defined. These 

details do matter, and how they are defined can have a direct bearing on 

whether or not the ultimate new human resources management system is 

both reasoned and reasonable.

Evaluating DOD’s New 

Human Resources 

Management System

Evaluating the impact of NSPS will be an ongoing challenge for DOD. This 

is especially important because DOD’s proposed regulations would give 

managers more authority and responsibility for managing the new human 

resources management system. High-performing organizations continually 

review and revise their human capital management systems based on datadriven lessons learned and changing needs in the work environment. 

Collecting and analyzing data will be the fundamental building block for 

measuring the effectiveness of these approaches in support of the mission 

and goals of the department.
Page 23 GAO-05-517T 

DOD’s proposed regulations indicate that DOD will establish procedures 

for evaluating the regulations and their implementation. We believe that 

DOD should consider conducting 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. A set of balanced 

measures addressing a range of results, and customer, employee, and 

external partner issues may also prove beneficial. An evaluation such as 

this would facilitate congressional oversight; allow for any midcourse 

corrections; assist DOD in benchmarking its progress with other efforts; 

and provide for documenting best practices and sharing lessons learned 

with employees, stakeholders, other federal agencies, and the public.

We have work under way to assess DOD’s efforts to design its new human 

resources management system, including further details on some of the 

significant challenges, and we expect to issue a report on the results of our 

work sometime this summer.

Framework for 

Governmentwide 

Human Capital Reform

DOD recently joined a few other federal departments and agencies, such as 

DHS, the National Aeronautics and Space Administration, and the Federal 

Aviation Administration, in receiving authorities intended to help them 

strategically manage their human resources management system to achieve 

results. In this changing environment, the federal government is quickly 

approaching the point where “standard governmentwide” human capital 

policies and processes are neither standard nor governmentwide.

To help advance the discussion concerning how governmentwide human 

capital reform should proceed, we and the National Commission on the 

Public Service Implementation Initiative hosted a forum in April 2004 on 

whether there should be a governmentwide framework for human capital 

reform and, if so, what this framework should include.35 To start the 

discussion, we suggested, in advance of the forum, a framework of 

35 GAO and the National Commission on the Public Service Implementation Initiative, 

Highlights of a Forum: Human Capital: Principles, Criteria, and Processes for 

Governmentwide Federal Human Capital Reform, GAO-05-69SP (Washington, D.C.: 

Dec. 1, 2004).
Page 24 GAO-05-517T 

principles, criteria, and processes based on congressional and executive 

branch decision making and prior work.

While there was widespread recognition among the forum participants that 

a one-size-fits-all approach to human capital management is not 

appropriate for the challenges and demands faced by government, there 

was equally broad agreement that there should be a governmentwide 

framework to guide human capital reform. Furthermore, a 

governmentwide framework should balance the need for consistency 

across the federal government with the desire for flexibility, so that 

individual agencies can tailor human capital systems to best meet their 

needs. Striking this balance would not be easy, but such a balance is 

necessary to maintain a governmentwide system that is responsive enough 

to adapt to agencies’ diverse missions, cultures, and workforces.

While there were divergent views among the forum participants, there was 

general agreement on a set of principles, criteria, and processes that would 

serve as a starting point for further discussion in developing a 

governmentwide framework in advancing human capital reform, as shown 

in figure 1.
Page 25 GAO-05-517T 

Figure 1: Principles, Criteria, and Processes

Source: GAO.

Concluding 

Observations

As we testified previously on the DOD and DHS civilian personnel reforms, 

an agency should have to demonstrate that it has a modern, effective, 

credible, and, as appropriate, validated performance management system 

in place with adequate safeguards, including reasonable transparency and 

appropriate accountability mechanisms, to ensure fairness and prevent 

politicization of the system and abuse of employees before any related 

flexibilities are operationalized. DOD’s proposed NSPS regulations take a 

valuable step toward a modern performance management system as well as 

a more market-based, results-oriented compensation system. DOD’s 

proposed performance management system is intended to align individual 

Principles that the government should retain in a framework for reform because of 

their inherent, enduring qualities:

• merit principles that balance organizational mission, goals, and performance objectives 

with individual rights and responsibilities;

• ability to organize, bargain collectively, and participate through labor organizations;

• continued prohibition of certain personnel practices; and

• guaranteed due process that is fair, fast, and final.

Criteria that agencies should have in place as they plan for and manage their new 

human capital authorities: 

• demonstrated business case or readiness for use of targeted authorities;

• an integrated approach to results-oriented strategic planning and human capital 

planning and management;

• adequate resources for planning, implementation, training, and evaluation; and

• a modern, effective, credible, and integrated performance management system that 

includes adequate safeguards to ensure equity and prevent discrimination.

Processes that agencies should follow as they implement new human capital 

authorities: 

• prescribing regulations in consultation or jointly with the Office of Personnel 

Management;

• establishing appeals processes in consultation with the Merit Systems Protection 

Board;

• involving employees and stakeholders in the design and implementation of new human 

capital systems; 

• phasing in implementation of new human capital systems;

• committing to transparency, reporting, and evaluation;

• establishing a communications strategy; and

• assuring adequate training.
Page 26 GAO-05-517T 

performance and pay with the department’s critical mission requirements; 

hold employees responsible for accomplishing performance expectations; 

and provide meaningful distinctions in performance. However, the 

experiences of high-performing organizations suggest that DOD should 

require core competencies in its performance management system. The 

core competencies can serve to reinforce employee behaviors and actions 

that support the DOD mission, goals, and values and to set expectations for 

individuals’ roles in DOD’s transformation, creating a shared responsibility 

for organizational success and ensuring accountability for change.

DOD’s overall effort to design and implement a strategic human resources 

management systemalong with the similar effort of DHScan be 

particularly instructive for future human capital management, 

reorganization, and transformation efforts in other federal agencies.

Mr. Chairman and Members of the Subcommittee, this concludes my 

prepared statement. I would be pleased to respond to any questions that 

you may have at this time.

Contacts and 

Acknowledgments

For further information, please contact Derek B. Stewart, Director, Defense 

Capabilities and Management, at (202) 512-5559 or stewartd@gao.gov. For 

further information on governmentwide human capital issues, please 

contact Eileen R. Larence, Director, Strategic Issues, at (202) 512-6512 

or larencee@gao.gov. Major contributors to this testimony include 

Sandra F. Bell, Renee S. Brown, K. Scott Derrick, William J. Doherty, 

Clifton G. Douglas, Jr., Barbara L. Joyce, Julia C. Matta, Mark A. Pross, 

William J. Rigazio, John S. Townes, and Susan K. Woodward.
Page 27 GAO-05-517T 

Appendix I

“Highlights” from Selected GAO Human 

Capital Reports ApendxiI
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

Page 28 GAO-05-517T 
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

Page 29 GAO-05-517T 
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

Page 30 GAO-05-517T 
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

Page 31 GAO-05-517T 
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

Page 32 GAO-05-517T 
Appendix I

“Highlights” from Selected GAO Human 

Capital Reports

(350688) Page 33 GAO-05-517T 
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