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[Senate Hearing 107-128]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-128

         NOMINATIONS OF OTHONIEL ARMENDARIZ AND KAY COLES JAMES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                                 ON THE

NOMINATIONS OF OTHONIEL ARMENDARIZ TO BE A MEMBER OF THE FEDERAL LABOR 
RELATIONS AUTHORITY AND KAY COLES JAMES TO BE DIRECTOR OF THE OFFICE OF 
                          PERSONNEL MANAGEMENT

                               __________

                             JUNE 21, 2001

                               __________

      Printed for the use of the Committee on Governmental Affairs

                    U.S. GOVERNMENT PRINTING OFFICE
74-452 ps                   WASHINGTON : 2001

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 PETE V. DOMENICI, New Mexico
THOMAS R. CARPER, Delaware           THAD COCHRAN, Mississippi
JEAN CARNAHAN, Missouri              ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota               JIM BUNNING, Kentucky
           Joyce A. Rechtschaffen, Staff Director and Counsel
                       Susan E. Propper, Counsel
              Jason M. Yanussi, Professional Staff Member
         Hannah S. Sistare, Minority Staff Director and Counsel
                 Dan G. Blair, Minority Senior Counsel
                   Johanna L. Hardy, Minority Counsel
                     Darla D. Cassell, Chief Clerk

                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Cochran..............................................     4
    Senator Voinovich............................................     4

                               WITNESSES
                        Thursday, June 21, 2001

Hon. George Allen, a U.S. Senator from the State of Virginia.....     1
Hon. John Warner, a U.S. Senator from the State of Virginia......     6
Othoniel Armendariz to be a Member of the Federal Labor Relations 
  Authority......................................................     9
Kay Coles James to be Director of the Office of Personnel 
  Management.....................................................    13

                     Alphabetical List of Witnesses

Allen, Hon. George:
    Testimony....................................................     1
Armendariz, Othoniel:
    Testimony....................................................     9
    Prepared statement...........................................    25
    Biographical and financial information.......................    27
    Pre-hearing questions and responses..........................    35
James, Kay Coles:
    Testimony....................................................    13
    Prepared statement...........................................    43
    Biographical and financial information.......................    50
    Pre-hearing questions and responses..........................    61
    Pre-hearing questions from Senator Lieberman and responses...    81
    Post-hearing questions from Senator Akaka and responses......    90
    Post-hearing questions from Senator Thompson and responses...    92
Warner, Hon. John:
    Testimony....................................................     6

                                Appendix

Letter to the Hon. Joseph I. Lieberman, from Frank R. Wolf, a 
  Member of the U.S. House of Representatives, dated June 20, 
  2001...........................................................    23
Letter to the Hon. Joseph I. Lieberman, from Tom Davis, a Member 
  of the U.S. House of Representatives, dated June 18, 2001......    24

 
         NOMINATIONS OF OTHONIEL ARMENDARIZ AND KAY COLES JAMES

                              ----------                              

                        THURSDAY, JUNE 21, 2001

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka presiding.
    Members present: Senators Akaka, Cochran, and Voinovich.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. The Committee will please come to order. I 
want to thank our witnesses, their families and our guests for 
being with us today. It is so good to be here with Senator 
Cochran. This afternoon we are considering the nominations of 
Othoniel ``Tony'' Armendariz, to serve a 5-year term as a 
member of the Federal Labor Relations Authority, and Kay Coles 
James to serve a 4-year term as director of the Office of 
Personnel Management. Before we call up our witnesses, I would 
like to welcome our colleagues from Virginia, and in particular 
the Hon. George Allen, who will introduce Ms. James. I would 
also like to insert into the record a letter from 
Representative Tom Davis of Virginia in support of Ms. James. 
Senator Allen, good to have you here before the Committee.
    Senator Allen. Aloha.
    Senator Akaka. Aloha.

 TESTIMONY OF HON. GEORGE ALLEN, A U.S. SENATOR FROM THE STATE 
                          OF VIRGINIA

    Senator Allen. Thank you. Thank you, Mr. Chairman and 
Senator Cochran. It is a pleasure to be before this Committee, 
but it is a real privilege and pleasure for me to be 
introducing Kay Coles James for your consideration, and an 
outstanding nomination by President Bush to have her as 
director of the Office of Personnel Management.
    Kay has been a very personal friend, and later an ally for 
many years, and she is a person I have the highest respect and 
admiration for, not just as a friend, but as an ally, a mentor 
and an adviser. She will once in awhile E-mail me or send me 
information over the years, when you get into some contentious 
issues. I will keep her words of wisdom in my speech file or in 
my briefcase to refer to them, to make sure I keep a proper 
perspective. It is great to see Kay here, her husband, Charles 
Senior, Charles Junior, called Chuck--Chuck is her son--and her 
daughter, Lizzy and her husband are here--it is good to see so 
many of the family. They have one other child, Robert, who is 
here, too. So we have the whole James crew with us.
    You could look at Ms. James' resume and her record of 
achievement, which is really a motivational one for anyone, if 
you look at her life and how she started off and how she has 
excelled throughout life, and she is a personal example of 
someone with hard work, with guile, with wit and wisdom, has 
worked in so many different areas, and wherever she has worked, 
whatever effort she has contributed her talents to, has been 
all the better for it.
    As former governor, I was very fortunate to have Kay James 
as our Secretary of Health and Human Services. Starting off in 
January, 1994 we brought together a lot of people and a lot of 
very different agencies, working on a variety of initiatives. 
As Secretary, Kay Coles James was responsible for 14 diverse 
State agencies, having 19,000 employees, with a combined 
biennial budget of about $8.5 billion, and there are a variety 
of agencies in there dealing with health, welfare, obviously 
social services.
    One of the more difficult things we did, but very 
successful, was welfare reform, the Empowerment Commission; and 
what we were able to do was put forward a very comprehensive, 
pro-family, pro-work welfare reform. The welfare rolls have 
been reduced by well over 50 percent. The taxpayers have saved 
hundreds of millions of dollars, but best of all it is very 
pro-family. Families are not being busted up, and best of all, 
tens of thousands of Virginians are now leading independent, 
self-reliant lives. That is the policy.
    Getting the bill passed was no easy task, but nevertheless 
what Kay did as Secretary of Health and Human Services in this 
regard was make sure that all the folks in social services who 
were on the front lines, implementing these laws that get 
passed and advocated, had a right attitude, a proper spirit, 
make them an employment agency. They had stickers that said, 
``Yes, we can.'' That is a good, positive attitude. That is the 
sort of motivation you would want for a director of personnel 
management, and seeking out to find the best people to work for 
the Federal Government and its services to the people, 
understanding their commitment to consumer service. But what 
Kay can do is motivate folks, attract the best talent, and have 
them provide those services, the Federal Government services, 
in the best way possible to the people of America or 
internationally, that are served by the Federal Government.
    I think that welfare reform implementation is a prime 
example of her capabilities, as well as the child support 
enforcement. Too many people are on welfare because, generally 
speaking--those fathers are not being responsible. Under Kay's 
creative leadership, child-support enforcement was vastly 
increased, working with DMV, working with the Department of 
Game and Inland Fisheries. Suspending driver's licenses or 
hunting and fishing licenses would really get a lot of folks' 
attention to pay child support enforcement, and with 
reciprocity with other States, even when they would flee to 
some other State, we would still track them down and get that 
money for their children.
    So that is the kind of creative leadership that one would 
want as director of the Office of Personnel Management. She has 
worked in many other areas at the local, State and Federal 
level. She was also in academia, as dean of the Graduate School 
of Government at Regent University. She is an author of several 
books, the most famous, I think, of which is her first, ``Never 
Forget,'' which is never forget where you came from. She has 
served in the White House previously, as associate director of 
the White House Office on National Drug Control Policy in the 
first Bush Administration. She also was assistant secretary at 
the U.S. Department of Health and Human Services, also in the 
first Bush Administration.
    In the private sector, again exemplary service. She was 
executive vice president and chief operating officer with The 
One-to-One Partnership, which is an umbrella organization for 
mentoring programs. She was the director of public affairs for 
National Right to Life Committee, personnel director for 
Circuit City Stores, director of community education and 
development for Housing Opportunities Made Equal, or HOME, in 
Richmond, Virginia; and she also has worked in a variety of 
areas, as a commissioner on the National Commission for 
Children.
    She served on the Fairfax County School Board. That is 
where she was when we were able to get her to be Secretary of 
Health and Human Resources; and, in fact, when she went off 
into academia, I still said, ``We need you, Kay, in Virginia.'' 
The most important thing for the future of our children in 
Virginia and our country is education, and Kay served on the 
Virginia State Board of Education, advancing and advocating 
high academic standards for all students, as well as 
accountability for students and teachers and schools.
    She also serves on the boards for the Fellowship of 
Christian Athletes and Young Life. She currently serves on the 
board of directors for a variety of organizations, Focus on the 
Family, The Virginia Children's Education Foundation, and the 
Center for Jewish and Christian Values. I am very confident, 
Mr. Chairman and Members of the Committee, that Kay Coles 
James, as director of the Office of Personnel Management, will 
help guarantee that the agencies have the personnel, the 
qualified, capable and motivated personnel necessary to meet 
the needs and the expectations.
    In fact, if they have Kay's spirit, they will exceed the 
expectations that people have for government agencies. So it is 
my sincere pleasure to introduce this exceptional woman. In 
fact, she is a tremendous Renaissance woman. She really is. You 
will find her to be articular, smart, inspirational, cheerful, 
experienced, knowledgeable leader, with exceptional character 
and integrity, and I proudly present Kay Coles James to you as 
a nominee this afternoon, and obviously wholeheartedly 
recommend her confirmation.
    Thank you, Mr. Chairman and Senator Cochran.
    Senator Akaka. Thank you very much, Senator Allen. Thank 
you for your gracious and personal remarks. As a matter of 
fact, she sounds so great we want to hire her.
    Senator Allen. Well, that was my feeling, as well, Mr. 
Chairman.
    Senator Akaka. Well, I thank you very much for your 
comments. Do you have any comments, Senator Cochran?

              OPENING STATEMENT OF SENATOR COCHRAN

    Senator Cochran. Mr. Chairman, I am moved to applaud and 
cheer--a great statement, and it is very exciting to know that 
we have someone of the talent, experience and qualities of Ms. 
James to come serve in this government. Thank you very much for 
being here to introduce her.
    Senator Allen. My pleasure.
    Senator Akaka. Thank you very much, Senator Allen.
    The rules of the Committee on Governmental Affairs require 
that an inquiry be conducted into the experience, 
qualifications, suitability and integrity of the nominee to 
serve in the position to which he or she has been nominated. 
The Committee has received all of the required information. In 
addition, the nominees have provided written responses to pre-
hearing questions submitted to the Committee concerning issues 
relevant to the position for which they have been nominated.
    Committee staff reviewed all of the information. In 
addition, staff have examined the financial disclosures 
submitted by the Office of Government Ethics. Copies of the 
nominees' biographical information and pre-hearing responses 
will be placed in the record as part of this hearing and are 
available upon request.
    Their financial statements are available for inspection by 
the public in the Committee office, and Senator Cochran and I 
have reviewed the FBI background investigation reports.
    The Committee requires that all nominees be under oath 
while testifying on matters relating to their suitability for 
office, including the policies and programs which the nominee 
will pursue, if confirmed. Our first witness will be Mr. 
Armendariz. Will you please come to the witness table and 
remain standing? Please raise your right hand. Do you solemnly 
swear to tell the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Mr. Armendariz. I do.
    Senator Akaka. Thank you very much. You may be seated. At 
this time, I would like to ask Senator Cochran whether he has 
any opening comments?
    Senator Cochran. Mr. Chairman, I have no opening statement. 
We welcome the witnesses and we appreciate the attendance of so 
many today at this confirmation hearing. I appreciate the fact 
that we are having the hearing, even though we have not passed 
formally the organizational reorganization measure that is 
being discussed between the two leaders. But we think it is 
important to go forward with these nominations to fill these 
important positions in the Executive Branch of our government, 
and we thank you, Mr. Chairman, for convening the hearing in a 
timely way.
    Senator Akaka. Thank you very much.
    Senator Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. First of all, it is a pleasure to 
welcome both of our nominees, and I am pleased, Mr. Chairman, 
that this Committee is considering these nominations.
    I would like to say to both of the nominees that I 
appreciate that you are interested in public service. We need 
good people. Mr. Chairman, I consider the Office of Personnel 
Management to be an extremely important office within the 
Federal Government. According to its vision, OPM exists to help 
agencies get the right people in the right jobs with the right 
skills at the right time, so they can produce results for the 
American people.
    With a mission that has so much impact on the manner in 
which the Federal Government operates, I do not think we can 
overemphasize the significance of finding the best possible 
leadership to run OPM. I believe that the President has 
nominated someone who can get the job done. Ms. James brings 
over 20 years of public policy experience, including service as 
Virginia's Secretary of Health and Human Services, a position 
in which she had responsibility for 14 State agencies and 
19,000 employees, with a combined biennial budget of $8.4 
billion.
    Mr. Chairman, as you know, since coming to the Senate I 
have put a great deal of emphasis on the Federal Government's 
management challenges. First and foremost among these 
shortcomings is the issue of building and maintaining a quality 
public workforce, and we are in trouble today. We have had 
testimony after testimony that says this Nation is in intensive 
care when it comes to the Federal workforce.
    A great deal of responsibility is going to rest with OPM. 
The challenges there are going to be more important and more 
significant than perhaps maybe any time in our country's 
history, and I am not going to go into all of the details, 
because, Ms. James, you know what they are. The OPM director 
and the deputy director for management at the Office of 
Management and Budget will have to work together closely to 
forge the administration's policy on strategic human capital 
management, and I just want to emphasize how important it is. 
That is why we really need, Mr. Chairman, to confirm Ms. James. 
We need a national initiative in this area, and OPM can really 
make a difference.
    I would also like to extend my regards to Othoniel ``Tony'' 
Armendariz. I am confident that as a former member of the 
Federal Labor Relations Authority, you are fully qualified to 
serve in that capacity again. In addition, I would like to say 
how pleased I am that you have chosen to avail this Nation of 
your talents once again. It is that spirit of devotion that we 
hope all Americans would emulate.
    So, Mr. Chairman, I am glad to be here today to hear from 
our two nominees, and hopefully we can move them along quickly. 
Thank you.
    [The prepared statement of Senator Voinovich follows:]

                PREPARED STATEMENT OF SENATOR VOINOVICH
    Thank you, Mr. Chairman.
    It is a pleasure to welcome Mr. Othoniel Armendariz, President 
Bush's nominee to the Federal Labor Relations Authority, and Ms. Kay 
Coles James, the President's nominee to be Director of the Office of 
Personnel Management to the Committee this afternoon. I am pleased that 
the Committee is considering their nominations.
    Mr. Chairman, I consider OPM to be an extremely important office 
within the Federal Government. According to its vision statement, OPM 
exists ``to help agencies get the right people in the right jobs with 
the right skills at the right time so they can produce results for the 
American people.'' With a mission that has so much potential impact on 
the manner in which the Federal Government operates, I don't think we 
can over-emphasize the significance of finding the best possible 
leadership to run OPM. Fortunately, President Bush has nominated an 
individual who has the experience and knowledge to be a top-notch OPM 
Director.
    Ms. James brings over 20 years of public policy experience, 
including service as Virginia's Secretary of Health and Human 
Resources, a position in which she had responsibility for 14 State 
agencies and 19,000 employees with a combined biennial budget of $8.4 
billion. She has also served on a wide variety of commissions, task 
forces and policy councils, convened by the congressional leadership 
and former presidents of the United States. I am pleased that she has 
chosen to answer our Nation's call once again, agreeing to take this 
important position in the Administration.
    Mr. Chairman, as you know, since coming to the Senate, I have put a 
great deal of emphasis on the Federal Government's management 
challenges. First and foremost among these shortcomings is the issue of 
building and maintaining a quality public workforce. A great deal of 
responsibility for addressing the government's human capital crisis 
will rest upon the shoulders of the next OPM Director.
    With the average age of the Federal employee at 47 years old and 
rising, the imminent retirement of hundreds of thousands of experienced 
employees by the end of this decade and inadequate workforce planning 
processes at many agencies, the Federal Government is in desperate need 
of a comprehensive strategy to address these challenges. Having focused 
my attention on this issue in the Government Oversight Subcommittee for 
the past 2\1/2\ years, and for a great deal longer in my previous 
capacities as Mayor of Cleveland and Governor of Ohio, I believe that 
there are few more important issues for Congress, the Administration 
and the various Federal agencies to address than the management of the 
Federal workforce. All governmental functions, from conducting research 
at health centers and ensuring safe drinking water to operating safe 
airports and protecting our national security, must be supported by a 
competent corps of public employees.
    The OPM Director and the Deputy Director for Management at the 
Office of Management and Budget should work closely together to forge 
the Administration's policy on strategic human capital management. Once 
these two positions have been officially filled, I believe it would be 
appropriate for the Committee, Mr. Chairman, to hold a hearing to 
examine the Administration's plans for addressing the government's 
human capital crisis.
    Ms. James, I was pleased that we had the chance to meet last month 
and to receive your commitment to work with me on this issue. As I 
expressed to you then, I am committed to working with the 
Administration to improve the Federal Government's management of its 
people. While we are faced with a challenging set of problems, I am 
confident that, working together, we can formulate lasting solutions.
    I would also like to extend my warm regards to Mr. Othoniel 
``Tony'' Armendariz. I am confident that, as a former Member of the 
Federal Labor Relations Authority, Mr. Armendariz is fully qualified to 
serve in this capacity once again. In addition, I would like to say how 
pleased I am that Mr. Armendariz has chosen to avail this nation of his 
talents once again. It is that spirit of devotion to serve one's fellow 
man that we should hope all Americans will emulate.
    Mr. Chairman, as you know, I did a great deal of work as Governor 
of Ohio to advance labor-management partnerships in Ohio's State 
agencies. I look forward to asking Mr. Armendariz some questions about 
relations between these two groups within the Federal Government.
    Thank you, Mr. Chairman.

    Senator Akaka. I agree with you. We ought to move them 
along quickly. Thank you very much for your statement. And now 
I would like to call on our Senator from Virginia, Senator John 
Warner, for his statement.

TESTIMONY OF HON. JOHN WARNER, A U.S. SENATOR FROM THE STATE OF 
                            VIRGINIA

    Senator Warner. I thank you, Mr. Chairman, Members of the 
Committee. I apologize for being late. I was elsewhere 
testifying. I really wanted to be here for many reasons. Of 
course, I highly support the nominee, but throughout my 23 
years in the Senate--and I came to the Senate with the 
distinguished gentleman on your right, Mr. Cochran, who also 
came here 23 years ago--I have worked hard on behalf of those 
in Federal Civil Service and Government employees. Why? 
Because, one, we have a very significant group who reside in 
the Commonwealth of Virginia, work in the Commonwealth of 
Virginia, and you are also looking at an individual that held 
many different positions in the Federal Government before I 
came to the U.S. Senate. They range from a firefighter in the 
forests of the Great West, as an employee of the Forest 
Service, to a letter carrier during part of World War II, to 
Secretary of the Navy, where I had a department of over one 
million in uniform and about 700,000 civilians at that time.
    So I have had extensive experience and I owe a great debt 
of gratitude to the civil servants who, through that 
progression of jobs, helped to train me and take care of me; 
and, therefore, I am going to be ever watchful as I observe the 
performance of the duties by Ms. James, and I am confident that 
she will do well. We here in the Congress have been working on 
legislation to address many significant and timely issues 
affecting the Federal workforce and OPM's role in finding 
solutions to these problems is very critical.
    I meet regularly with representatives of the various 
employee groups. It is estimated that over the next several 
years, over half the Federal workforce will be eligible for 
retirement. Senator Cochran and I are not included in that 
group. Recruitment and retention of a skilled, qualified 
Federal workforce is crucial, and I do not say that lightly, 
Mr. Chairman. I say that with great sincerity. Pay, affordable 
health care coverage and continued improvements to the Federal 
Employees Retirement System are just some of the issues 
Congress has been working on in consultation with OPM and 
related organizations.
    I believe that with her previous experience in government, 
on the local, the State and Federal levels, and her impressive 
accomplishments in the private sector, Kay Coles James will be 
able to handle these challenges that lay before her as we 
reshape the Federal workforce. I will sleep with one eye open, 
watching, as she discharges these duties, because I have an 
obligation to pay back to the current group in Federal service 
all the benefits that I received through these many years.
    I thank the Chairman and I thank the Members for their 
indulgence, and I shall wish you very much the best of luck.
    Senator Akaka. Thank you very much, Senator Warner. We 
really appreciate your statement.
    Senator Cochran. Mr. Chairman, may I join you in thanking 
Senator Warner for taking time to come by and share with the 
Committee his impressions and knowledge of our nominee, Ms. 
James, and his personal experiences. He has been a leader in 
every way in this subject area of legislation and policies that 
are pending before the Congress, and we are thankful to him for 
that leadership. Thank you, Senator.
    Senator Akaka. Thank you very much. The FLRA was 
established in 1978 under the Civil Service Reform Act. It 
offers guidance, resolves disputes and ensures compliance with 
regulations concerning Federal labor-management relations. Its 
mission, under the Federal Service Labor-Management Relations 
Statute, is to promote stable, constructive labor relations 
that contribute to a more effective government.
    Mr. Armendariz previously served as a member of the FLRA, 
from December 1989 to March 1997, and worked on over 2,000 
decisions. Mr. Armendariz, I would like to thank you for being 
with us this afternoon and to congratulate you on your 
nomination. At this time I would like to ask you to introduce 
your family to us and to the audience, please.
    Mr. Armendariz. Thank you, Mr. Chairman, and yes, I have my 
wife, Blanche Armendariz, here. She is sitting right behind me, 
in the green dress.
    Senator Akaka. Welcome to the Committee.
    Mr. Armendariz. I also want to thank the chairman of the 
FLRA for being here, Ms. Cabiness, another member of the FLRA, 
Carol Pope, and some members of the FLRA staff that have come 
to this hearing.
    Senator Akaka. Well, that is great that you have support.
    Mr. Armendariz. If I may, Mr. Chairman, I would like to 
give a little statement.
    Senator Akaka. Mr. Armendariz, before you do that, the 
Committee has three questions we ask of all of the nominees for 
the record, that I would like to ask you.
    Mr. Armendariz. Yes, sir.
    Senator Akaka. Is there anything you are aware of in your 
background which might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Armendariz. Absolutely not.
    Senator Akaka. Do you have any reason, personal or 
otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Mr. Armendariz. No, sir, I do not have any.
    Senator Akaka. Do you agree without reservation to respond 
to any reasonable summons to appear and testify before any 
duly-constituted committee of Congress, if you are confirmed?
    Mr. Armendariz. Yes, sir, I do.
    Senator Akaka. Well, thank you very much. After serving on 
FLRA for such a long period of time, there is no doubt that you 
have the expertise to fill this position, and I have only a 
couple of questions. What new issues and attitudes do you see 
developing because of outsourcing and privatization of 
government services?
    Mr. Armendariz. Privatization and outsourcing is a trend 
that has taken place lately, and, of course, it creates new 
issues because there is, in part of the force of--Federal 
employee force, will no longer be in the same level, insofar as 
the labor-management relations that exist or have existed 
traditionally. So, as time goes by, there will be issues that 
we do not know yet what they may be that will arise, insofar as 
the effects it may have, vis-a-vis one and the other, part of 
the workforce. But we will be watching and analyzing, and 
looking into whether the effects, if any, can be overcome and 
corrected.
    So I will be part of that group that will be looking into 
that, if confirmed.
    Senator Akaka. Before we go any further, will you give us 
your statement? I have other questions to ask.

  TESTIMONY OF OTHONIEL ARMENDARIZ \1\ TO BE A MEMBER OF THE 
               FEDERAL LABOR RELATIONS AUTHORITY

    Mr. Armendariz. I want to state that I am honored and proud 
to have been nominated by President George W. Bush as a member 
of Federal Labor Relations Authority, and also that, from 
December 1989 through March 1997, I had the distinct privilege 
of serving as a member of the FLRA. After having been nominated 
twice and confirmed by the Senate twice before. I fully 
understand, because of my previous service, and I appreciate 
the important role that members have in establishing policies 
and guidance, relating to the matters under the Federal service 
labor-management relations statute.
---------------------------------------------------------------------------
    \1\  The prepared statement of Mr. Armendariz appears in the 
Appendix on page 25.
      Biographical and financial information appears in the Appendix on 
page 27.
      Pre-hearing questions and responses appear in the Appendix on 
page 35.
---------------------------------------------------------------------------
    The role of the FLRA is to contribute to a successful 
Federal labor-management relations program, particularly 
important as the Federal workforce evolves and addresses new 
challenges and opportunities that lie ahead. Through the 
responsibilities entrusted to the FLRA by Congress, the FLRA 
has a unique opportunity to contribute to this public interest 
that Congress has, to develop and implement modern, progressive 
work practices, to facilitate and to improve employee 
performance, and contribute to an efficient accomplishment of 
the operations of the government.
    I will hope to be one of those that would put his part 
together with the other members, to bring, as was said, the 
Federal workforce out of intensive care, and I hope that it 
will be well before too long. I look forward to the 
confirmation process, and pledge that, if confirmed, I will 
take seriously the responsibilities of the position of member 
of the agency. I will discharge these responsibilities to the 
best of my ability.
    If I may, I would also like to state that I congratulate 
and I am very pleased to have attended a pre-hearing conference 
with the staff of the Members of this Committee, who conducted 
such conference in a very professional and courteous manner, 
and I thank them. Thank you very much.
    Senator Akaka. Thank you very much for your statement. I 
have asked you my question and I will yield to Senator Cochran 
for any questions.
    Senator Cochran. Mr. Chairman, thank you very much. I am 
glad to be here today to congratulate our nominee, Mr. 
Armendariz. We appreciate your willingness to serve again on 
the Federal Labor Relations Authority. Obviously, President 
Bush thought you did an excellent job before or he would not 
have asked you to serve again. I think that is a very high 
compliment.
    Mr. Armendariz. Thank you. I am very proud.
    Senator Cochran. We hear a lot about the challenges that 
face the Federal workforce; one is stability; attracting well-
qualified employees to serve in the government, and then having 
a working relationship between the employees and the 
supervisors and the authorities. What, if anything, would you 
recommend as suggestions about how we could improve the 
stability of the workforce and the outlook for maintaining good 
labor relations in the Federal Government?
    Mr. Armendariz. Senator, it is a fact that the Federal 
Government has almost 3 million Federal employees, and that is 
a huge investment in human capital, especially at a time when a 
good number of good employees are approaching the age of 
retirement, after having obtained the skills necessary in the 
specialties that they are in. It is very important to maintain 
a number of avenues where we can continue recruiting and 
maintaining those skilled people. Motivation is one of the main 
things to continue to have this wealth of knowledge, provided 
to the people through the Federal Government.
    But there are other ways that we have to look into and 
test, possibly, to make sure that private industry, especially, 
will not take them away from us, but they will continue serving 
until they retire. It is an investment that we have that we 
cannot just overlook, because they have such knowledge that 
they can provide the newcomers to become as good or better than 
they have been.
    So I will work with the other members of the agency, to 
look for specific issues in this area, and look for other 
alternatives that will address this challenge that we face.
    Senator Cochran. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you, Senator Cochran.
    Senator Voinovich.
    Senator Voinovich. Mr. Chairman, we have had eight hearings 
during the last couple of years dealing with the Federal 
workforce, and some of the things that are being done and a lot 
of things that are not being done. President Clinton issued an 
executive order that established labor-management partnerships 
in Federal agencies. President Bush rescinded that order, but I 
know there is some consideration being given to another 
approach. Are you familiar with that executive order?
    Mr. Armendariz. I am somewhat familiar, not as much as I 
should be or will be, but my feeling is that the labor-
management relations that should exist will work better when 
the parties choose the way to approach it, and it could be in 
the form of a partnership, or it could be in any other form. I 
think that the way it should be entered into and approached 
should not be mandatory as to one way only. We have learned 
that, many times, one size does not fit all.
    So it is possible that the reason why President Bush 
rescinded that executive order and issued the other order was 
to allow the parties themselves to choose what kind of 
relationship they should have, and we should encourage that, I 
think, because it would be better to enter into a relationship 
where both parties feel at ease and comfortable, than to have 
one particular relationship because it has been mandatory to 
have it.
    Senator Voinovich. Well, I think the purpose of the labor-
management executive order was to bring people together so that 
labor and management would sit down and talk to each other; and 
as a former governor who was very much into quality management, 
I can tell you that if, as the executive, you do not create an 
environment where people get together and talk to each other, 
quite frankly, sir, it does not happen.
    Mr. Armendariz. That is correct.
    Senator Voinovich. So I would hope that, if you get this 
job, that you would talk about creating some kind of 
opportunity for labor and management to come together and talk 
to each other. I think that is extremely important, because I 
can tell you that the labor-management relationships right now 
in the Federal Government are not what they ought to be. Second 
of all, it is one of the reasons that has contributed to people 
who are ready to retire, to retire, and others that are 
thinking about early retirement, think about leaving the 
Federal Government at a time when we need their expertise and 
their institutional knowledge.
    The other question I want to ask, and I do not know whether 
my colleagues know this or not, but of the Senior Executive 
Service, 60 percent of them get the same pay, and we have 
people who are leaving Federal service because their cost of 
living increase is more when they leave for their pension than 
it is for them to remain in the Federal service. Are you 
familiar with that, and if you are, what is your comment about 
it?
    Mr. Armendariz. Well, I am not really familiar with it, 
Senator, but I realize that that may be one of the reasons why 
a lot of people are leaving us, too, and it is something to be 
looked into, and it is a very important issue, and I can tell 
you that I will bring it up to the other members so we can come 
up with some additional ways to see if we can salvage those 
people. It is true that sometimes they go to private industry 
because private industry pays more, and they need more; and I 
feel, though, that in their hearts, they want to stay, the 
majority, if they can.
    Senator Voinovich. Thank you.
    Senator Akaka. Thank you very much for your questions. Are 
there any further questions? The record will remain open for 
any further questions and any statements from our colleagues. 
Mr. Armendariz, thank you again.
    Mr. Armendariz. Thank you, Mr. Chairman.
    Senator Akaka. Thank you for being here this afternoon, for 
your cooperation with this process, and for accepting this 
nomination to public service. We really appreciate what you 
have said and wish you well.
    Mr. Armendariz. Thank you very much, Mr. Chairman.
    Senator Akaka. Thank you again for coming. You may be 
excused.
    Mr. Armendariz. Thank you.
    Senator Akaka. Ms. James, we now invite you to come to the 
witness table, and we will proceed with a hearing on your 
nomination. I ask that you remain standing and raise your right 
hand. Do you solemnly swear to tell the truth, the whole truth, 
and nothing but the truth, so help you, God?
    Ms. James. I do.
    Senator Akaka. Thank you very much. Ms. James, I would like 
to welcome you to the Committee. You and I had a chance to talk 
informally earlier this month, and I congratulate you on your 
nomination. If confirmed, you will be taking the helm of the 
Federal Government's Office of Personnel Management at a most 
challenging time. The Office of Personnel Management is the 
central management agency of the Federal Government, and OPM 
administers and enforces Federal Civil Service laws, 
regulations and rules, and aids the Executive Branch in 
managing the Federal workforce.
    It supports the Federal Government in recruiting, 
retaining, training and motivating the best and most effective 
workforce possible. Are there any statements you would like to 
make, Senator Cochran?
    Senator Cochran. Mr. Chairman, thank you. I have wanted to 
publicly commend Ms. James for her agreeing to serve, and also 
to let her know that the members of Congress from northern 
Virginia have written letters, which they have asked to be made 
a part of the record, in support of your nomination. 
Congressman Frank Wolf, who represents the 10th District of 
Virginia, and Congressman Tom Davis, who represents the 11th 
District, both of them in their letters are very generous in 
their praise of you and of your qualifications for service in 
this important position. Mr. Chairman, I ask that these letters 
be made a part of the hearing record.\1\
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    \1\ The letters from Mr. Wolf and Mr. Davis appear in the Appendix 
on pages 23 and 24.
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    Senator Akaka. Without objection, it will be made part of 
the record.
    Senator Cochran. Thank you.
    Senator Akaka. Senator Voinovich.
    Senator Voinovich. Mr. Chairman, I have already made my 
welcoming remarks, and I am very happy that you are here, Ms. 
James, and look forward to your service in the Federal 
Government in an area that I think is the highest priority. 
Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much. We are happy to have 
you here. I know you have family here, and I am going to give 
you the opportunity to introduce them to us.
    Ms. James. Thank you, Mr. Chairman. I do have family here 
today. I have many family and friends in the area, and I am 
afraid they are the ones that are taking up all the seats in 
the room today. I would like to introduce my husband, Charles, 
my sons, Chuck and Robert, and my daughter, Elizabeth. This is 
your big moment.
    Senator Akaka. You are all welcome.
    Ms. James. I have three godchildren here today, young girls 
that I thought it was very important for them to be here and to 
witness these proceedings, my goddaughter, Katherine Littel, as 
well as Grace James and Demi Arnold, and I am delighted to have 
them here with me today. Before I begin, Mr. Chairman, I want 
to acknowledge the fact that this process is grueling and 
sometimes anxiety-laden, but thanks to your staff and the staff 
of Senators Lieberman and Thompson, I just want to thank all of 
you for getting me as a nominee through this process, and 
through your helpfulness, have made it less anxious, and I do 
appreciate it. Your staff have been absolutely stellar, and I 
want to thank them.
    I am deeply grateful--should I go on with my statement, Mr. 
Chairman?
    Senator Akaka. May I ask you the questions required of all 
nominee's before you do?
    Ms. James. Certainly.
    Senator Akaka. Is there anything you are aware of in your 
background which might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Ms. James. No.
    Senator Akaka. Do you know of any reason, personal or 
otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibility of the office to which 
you have been nominated?
    Ms. James. No.
    Senator Akaka. Do you agree without reservation to respond 
to any reasonable summons to appear and testify before any 
duly-constituted Committee of Congress, if you are confirmed?
    Ms. James. Yes, I do.
    Senator Akaka. Thank you very much. You may proceed.

 TESTIMONY OF KAY COLES JAMES \1\ TO BE DIRECTOR OF THE OFFICE 
                    OF PERSONNEL MANAGEMENT

    Ms. James. I am deeply grateful to President Bush for 
nominating me to this position. I think it is one of the best 
jobs in Washington at one of the best times, because of the 
issues before the agency. It is not entirely coincidental that 
it was human resources management that first brought me to 
Washington nearly 20 years ago, and it is that same subject 
that brings me back today.
---------------------------------------------------------------------------
    \1\  The prepared statement of Ms. James appears in the Appendix on 
page 43.
      Biographical and financial information appears in the Appendix on 
page 50.
      Pre-hearing questions and responses appear in the Appendix on 
page 61.
      Post-hearing questions and responses appear in the Appendix on 
page 90.
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    Whether it is in the corporate world or in the public 
sector, I firmly believe that the quality of an organization's 
employees is the singlemost important factor in determining its 
success and effectiveness. So questions of recruitment, 
retention, and fair treatment of Federal employees are as 
integral to our Nation as any national security or economic 
discussion. The opportunity to address and positively impact 
these issues at a very exciting time is why I am so grateful 
and so enthusiastic to be considered for this position.
    One of the most important lessons that I have learned 
throughout my career corrects the misperception that some 
people have about government service. The vast majority of 
career employees are true public servants--talented individuals 
who have consciously chosen to use their work and skills on 
behalf of the Nation, often at financial or other sacrifices to 
themselves and to their families. If confirmed, I will have the 
privilege of assuming a position once held by Theodore 
Roosevelt.
    I think the simplest explanation of OPM's mission can be 
found in the first annual message he sent to Congress as 
President, where he stated, ``The National Government should 
demand the highest quality of service from its employees, and 
in return it should be a good employer.'' Demanding the highest 
quality of service requires several things: Aggressively 
recruiting the best and brightest in the Nation; continuing 
efforts to expedite and streamline the hiring process; and 
encouraging an attitude that recognizes that people are the 
owners of government and that we owe them courteousness, 
promptness and thoroughness in our dealings with them. Finally, 
it means developing and adhering to a true system of merit for 
the purpose of retention and promotion.
    The second part of Roosevelt's message speaks even more 
clearly of OPM's mission: ``To ensure that the Federal 
Government is a good employer.'' I know that President Bush and 
the Members of this Committee want even more of the Federal 
Government. It should be among the best employers in the world. 
The depth of this commitment is the measure of how we earn the 
loyalty and the respect of our Federal workforce. We do this by 
respecting the promises made to retired Federal employees, 
protecting their benefits, honoring their service, and 
responding to their needs with as little red tape as possible.
    To our current employees, we must protect the security, 
quality and cost of their choices in health-care, life 
insurance and other benefits. We must continue to provide 
benefits that meet the needs of our day, like long-term care 
insurance and flexibility in making retirement decisions. We 
can also set a tone and an example of inclusiveness, fairness 
and openness to new ideas. The notion that labor and management 
must oppose, outsmart, defeat or ignore each other has no place 
in the modern workforce.
    It is my hope and experience that everyone comes to the 
table with the same goal: To help make the government, not only 
more productive and effective, but also the best possible 
employer it might be. Though I am only beginning to develop 
goals for my tenure at OPM, if confirmed by the Senate, I am 
committed to meeting with the various stakeholders and staff 
and hearing their concerns before developing these further. One 
commitment I can make now is that I will be dedicated to 
restoring the image long associated with public service, namely 
that it is a noble and rewarding profession.
    I am grateful for the suggestions, support, encouragement 
that I have already received from union and management 
officials, researchers, former OPM directors and members of 
Congress. The staff at OPM has already impressed me as some of 
the finest professionals within the government, and I am 
particularly appreciative of the excellent job Steve Cohen has 
done as acting director. I look forward to getting to know more 
of these employees in the months to come.
    Thank you for this opportunity, and I would be pleased to 
answer any questions that you might have. Mr. Chairman, I had a 
slightly longer statement, and I would ask that that statement 
be entered into the record.
    Senator Akaka. Thank you very much, Ms. James. Your full 
statement will be included in the record. The Committee has 
some questions to ask, and let me begin. My colleagues today 
have touched on the challenges facing this administration and 
Congress in addressing the government-wide human capital 
crisis. I have been pleased to work with them and look forward 
to a continued partnership. We are examining a wide range of 
management issues within the context of hearings and GAO 
reviews. I plan to hold hearings on Federal pay and 
compensation to see how these issues impact the government's 
ability to recruit and retain the right mix of employees.
    One of my concerns is how will we attract young people to 
enter the Federal workforce when agencies are being asked to 
open up an additional 425,000 Federal Government jobs to 
private contractors.
    Yesterday's ``Federal Diary'' in the Washington Post noted 
that a survey of Federal employees by the MSPB found that only 
52 percent of those responding would recommend the government 
as a place to work. This number was down from 57 percent in 
1996. I feel both numbers are unacceptable. Employees are 
caught between downsizing and outsourcing of government 
services. Agencies are forced to work with flattened budgets. I 
wonder how many young, qualified people who once viewed Federal 
employment as a means of serving the public are now choosing to 
go elsewhere.
    I think the uncertainty and instability of Federal 
Government jobs and the lack of competitive pay are 
contributing factors. My question is what do you intend to do 
to ease the fears of current and prospective Federal employees 
to show that the government can compete with the private and 
public sectors to retain and recruit highly-qualified 
individuals to serve the American taxpayers?
    Ms. James. Thank you, Mr. Chairman. First of all, I agree 
with you. One of the things that makes this job so challenging 
and exciting is that it is a particular point in our history 
where we have to do and, I think, can do several things. First, 
I believe that it is absolutely essential that we raise the 
image of the public servant, and I think, when you are trying 
to attract someone, whether they are right out of college, 
whether they are coming out of graduate school, whether they 
are a midcareer person who is considering a career change--I 
want at the top of their list a consideration for coming in and 
serving in some area of the Federal Government, and using their 
expertise to serve their Nation.
    I think another thing that we can do is to make sure that 
we show aggressive leadership in looking at some options for 
our agency directors and their heads, so that they can use the 
flexibilities that they already have to attract new people 
coming in. I think we have to be aggressive in our recruiting 
to make sure that we get the best and brightest, and that it is 
purely merit-based, so that we can attract those kinds of 
individuals to come in to Federal service.
    I do believe that it is important for OPM in its function 
as a consultant to all Federal agencies, to help them think 
creatively and innovatively about how they can do that. I think 
that there are some very simple things that we can do and I am 
aware that the agency is already considering and has done, in 
terms of our advertising, in terms of our affirmatively going 
out and marketing and recruiting individuals to come into 
Federal service.
    I also think it is important to realize that while 
privatizing or considering privatizing or contracting services, 
that that necessarily does not need to mean that we are going 
to lose the best and the brightest. If we create the kind of 
workforce that I know you and other Members of this Committee 
envision, I think the Federal workforce is going to be one of 
the most exciting places to be, and we will not have any 
problem attracting people to want to come work for their 
government.
    Senator Akaka. Well, I am so pleased to hear that you 
believe OPM has an opportunity to be a model of what 
affirmative recruitment and access can mean in the workplace. 
Would you share with us in more detail what you mean by that?
    Ms. James. Well, certainly. I think one of the hallmarks of 
Federal service, the Civil Service, is that it is merit-based 
and that nothing else should come into play when being 
considered for either hiring or promotion--it should be purely 
based on their ability to do the job, not based on race, sex, 
sexual orientation or anything other than their ability to get 
the job done. When we are going out to attract the best and the 
brightest to come in and serve our country, I think that is 
what we ought to be looking for: Highly-skilled, highly-
motivated, and highly-qualified people.
    By setting the right tone, I believe, in the Federal 
Government, we can attract those kinds of people, and I think 
OPM can model what that looks like.
    Senator Akaka. Let's talk a moment about how the government 
can best compete with the private sector for skilled employees. 
We know that, for 17 of the past 20 years, military and 
civilian pay increases have been identical. The fiscal year 
2002 budget resolution includes a sense of the Congress that 
rates of compensation for civilian employees should be adjusted 
at the same time and in the same proportion as the rates of 
compensation for members of the uniformed services.
    Do you support pay parity for civilian and military 
employees, and how would you address the competitive pay gap 
that exists in the Federal Government?
    Ms. James. First of all, I support the President's budget, 
and in that budget, he has recommended certain pay increases 
for both the military and for the civilian workforce. I trust 
the military to advocate on behalf of the people who serve our 
Nation there, and I know that my job will be to advocate on 
behalf of the civil servants of this Nation, to make sure that 
our salaries are competitive, and I am not sure in every case 
that they are, and I look forward to looking into this more 
once on the job and understanding the rationale behind the 
decision-making process and how we came to where we are today.
    But I know this: That to be competitive and to attract the 
best and brightest, we have to be competitive in the salary 
area.
    Senator Akaka. Thank you for that response. One area of 
great concern is pay compression among our senior executive 
ranks. Members of the SES provide the leadership to develop 
policy and carry out agency missions. These men and women 
manage agencies that dwarf the largest of our corporations and 
civic institutions. The GAO estimates that 71 percent of the 
current SES members will be eligible for regular retirement in 
5 years.
    SES members are faced with artificial caps on pay that have 
resulted in pay compression for most of their careers. We now 
have a situation where executives at a high level of government 
service receive the same pay, regardless of their pay level or 
their job responsibilities. My question is do you support 
legislation to lift the pay cap so that pay compression can be 
alleviated?
    Ms. James. I am not prepared to address any particular 
piece of legislation, Mr. Chairman, but I will tell you this, 
that I do recognize that the pay compression issue is a very 
serious one, and it really does impact our ability to attract 
the best and the brightest, and that there are some serious 
inequities there, and that I would have it as one of my top 
priorities, to look at this particular issue, to make sure that 
we can be competitive with the private sector in attracting 
senior management into the Federal Government service.
    Senator Akaka. As you know, the Federal Government is 
highly unionized. Over 65 percent of eligible employees are 
represented by labor unions and covered by collective 
bargaining agreements. In such an environment, what is the 
proper role of OPM with respect to working with Federal unions 
on important workplace issues?
    Ms. James. I think that unions have a key and very major 
role to play. I have already expressed that to them privately 
and I am happy to do it publicly. They are stakeholders and 
they represent the workforce. We share many common goals and 
things that we want to see happen within the Federal Government 
and on behalf of civil servants. We will not always agree, but 
we will always disagree respectfully, and they will always have 
a seat at the table in the decision-making process.
    Senator Akaka. Thank you very much for your responses, Ms. 
James, and I would like to now yield to my colleague, Senator 
Cochran.
    Senator Cochran. Thank you very much, Mr. Chairman.
    Ms. James, I know you realize that in the private sector 
there have been some very successful experiments with building 
morale and keeping good employees, by having such innovative 
practices as cafeteria-style benefit plans, where employees 
select from an array of benefits what would be more suitable to 
their own personal situations--what they would find more 
attractive. Do you think the Federal Government can learn and 
borrow from the private sector some of these ideas? If so, do 
you think enough has been done in this area to try to make 
available more flexible benefit programs for employees in the 
Federal Government?
    Ms. James. Certainly. I always believed that we can learn 
from the private sector, and I hope, in the very near future, 
the private sector will be looking to the Federal Government to 
see what they can learn from us, out of our creativity and 
innovation. In terms of cafeteria benefits, I think what is 
most important, before having done an in-depth study of that 
and looking at the issue, is to affirm that Federal employees 
need flexibility, they need choice, they need options, and that 
has always been the hallmark of the Federal benefit program, 
and I think that needs to continue to be the case.
    In terms of whether or not we offer something called 
cafeteria benefits or something like that, I think that is a 
question still to be considered and one that we need to get the 
stakeholders to the table and look at and talk about, with 
Federal employees always at the center of the discussion and 
what benefits them the most.
    Senator Cochran. When we are able to recruit very talented 
and bright workers into the Federal workforce, sometimes they 
get frustrated when they find that they are up against 
ceilings. We have heard of the glass ceiling, in the case of 
women employees. We have heard of other ceilings; that the 
slowdown in the view of some of these talented workers, that 
they have to wait their turn before they can have an 
opportunity to move up the ladder and reach the potential that 
they think they are due or that they are entitled to, because 
of their hard work and achievement.
    Do you think there is a way to improve opportunities for 
the best and the brightest who do choose to come into Federal 
Government service, and can they be rewarded in this system for 
their talent, for their hard work, commensurate with the 
contributions that they are making to the job?
    Ms. James. I think it is absolutely imperative that we look 
for creative ways of doing just that, while at the same time 
balancing one of the core missions of OPM, which is protecting 
the merit system, to make sure that it is done fairly and 
equitably and to protect employees. We can, at the same time, 
acknowledge creativity, acknowledge hard work, acknowledge 
someone who is doing an excellent job, and make sure that it is 
done fairly and equitably. I believe that is one of the 
missions of OPM, to try to figure out how to give that 
flexibility to the agencies, but, at the same time, to protect 
the integrity of our merit system.
    Senator Cochran. I think it is clear to me that you have 
the background and experience in the State of Virginia 
Government service that you have already demonstrated an 
ability to do, and those who have worked with you and have 
observed you over the years, that you are an outstanding choice 
for this job, and I wish you well and hope that you have a very 
satisfying and enjoyable period of service as director of 
Office of Personnel Management.
    Ms. James. Thank you, Senator.
    Senator Akaka. Thank you very much.
    Senator Voinovich, any questions?
    Senator Voinovich. Ms. James, as you know, I presented a 
study to President Bush entitled, ``Report To the President: 
The Crisis in Human Capital.'' Subsequent to that, GAO 
Comptroller General David Walker has designated the human 
capital crisis as a high-risk area. Have you had a chance to 
familiarize yourself with my report or with Mr. Walker's 
report?
    Ms. James. Yes, Senator.
    Senator Voinovich. Have you had a chance to talk to Mr. 
Walker?
    Ms. James. I have.
    Senator Voinovich. I am not going to ask you to get into 
details, but assuming that things work out the way we hope they 
do, I would really like your thoughts, best thoughts, on how 
you would go about responding to that report I gave to the 
President, and Mr. Walker's designation of high-risk. You are 
going to have to be very, very aggressive to get your job done. 
You are going to have to be a real advocate, frankly, for 
things that have been neglected for a long time--this concept 
of Federal workers as second-class citizens, let's get rid of 
them, that they are costs to be cut instead of assets to be 
valued--we need a whole new attitude if we are going to keep 
the people that work in the Federal Government today and 
attract new people.
    I just met with one of the deans at the Harvard John F. 
Kennedy School, and today about 40 percent of the young men and 
women go on into government. Ten years ago, it was 75 to 80 
percent. The Maxwell School at Syracuse, where Sean O'Keefe was 
a professor, is similar.
    We have a major challenge ahead of us, and you are going to 
have some tough decisions to make. One of them deals with 
something I alluded to earlier, and then Senator Akaka 
mentioned it again, and that is the pay compression that we 
have in the Senior Executive Service. The problem, basically, 
is that Congress has said the SES cannot get a pay increase 
unless our salaries go up. Do you think that is a good policy 
and what would your position be in regard to it?
    Ms. James. Does this include Senate salaries?
    Senator Voinovich. Yes. That is right.
    Ms. James. Thank you for that question, Senator Voinovich. 
Senator, I really do not--your question, I think, goes to 
whether or not it should be tied to congressional salaries. I 
do not know the reason why it is. If there is a logical reason 
why that is the case, then perhaps. However, I do know this: 
That in just my quick review of this, as I have been preparing 
for these hearings, I was alarmed at the numbers that you 
quoted this afternoon, about the Senior Executive Service.
    I intend very quickly to bring in some of the management 
associations for the SES and have them sit down with me to look 
at this, to talk about what we can do. I do know that if this 
issue is not addressed, we will continue to have a drain of 
some of the most important and valuable assets that this 
government has, and so we have to look at some creative ways to 
do that. But the specific question about whether or not it 
should be tied to congressional salaries, I am not sure what 
the rationale behind that was. So I am not sure I can answer.
    Senator Voinovich. Well, if it is illogical and defies 
common sense, will you have the courage to say we ought to 
change it?
    Ms. James. Senator, I have never been known for being 
lacking the courage to say what I think.
    Senator Voinovich. Good. I am glad to hear that. One of the 
problems that we have in the Federal Government is the overly 
bureaucratic hiring process. Last week, and this might interest 
Senator Akaka and Senator Cochran, I had a meeting at Wright 
Patterson Air Force Base, and I brought in six young men and 
women who were in college, and asked them whether or not they 
were interested in going into the Federal Government, and if 
they were, why, and if they were not, why not.
    We had the colonel who manages the research lab at Wright 
Patterson, probably one of the best in the country, probably in 
the world. One of the young men was an electrical engineer, and 
the colonel told him about the opportunities that were 
available. He said, ``Young man, we have a co-op program, and I 
will hire you right away.'' I looked at the colonel and I said, 
``Are you serious?'' He said, ``Yes, I will offer him a job.'' 
I said, ``Well, how long will it take before you get approval 
to put him on the payroll?''
    Six months. He has to go through some personnel office in 
Texas and fill out all kinds of paperwork. I thought that was 
just incredible, and one of the things that I think we need to 
do is reform the hiring process and make it more flexible.
    For example, at GAO, they have more flexibility. At the 
FAA, they have more flexibility. Senator Akaka, we ought to 
have a hearing and bring in those agencies to see if those 
flexibilities that they have been given will make a difference. 
But I would be interested, did you have any experience at all 
with this issue in the past?
    Ms. James. Well, Senator, let's just say I have a great 
deal of experience right now about how long it takes to get 
into a Federal job.
    Senator Voinovich. We promise to fix that, not for this 
administration, but for the next.
    Ms. James. But that aside, I do believe that it is 
important to give the flexibilities to the agencies that they 
can have, to respond to a very fast-paced world out there, 
where the best and brightest are not going to sit around for 6 
months and wait for a return phone call to find out whether or 
not they have a job. We have got to do better, and I think that 
is something we can look at early, look at quickly.
    I want to see what we can do right now within the 
parameters of the organization as it exists today. If we need 
new technologies, if we need new systems, if we need new 
policies, then we are going to get them, because it is--to be a 
highly-competitive employer, you cannot take 6 months from the 
time a decision is made to bring someone on the payroll. That 
is unacceptable.
    Senator Voinovich. So in the event that it appeared you 
could speed up the process by decentralizing, you would give 
consideration to doing that?
    Ms. James. Yes, I would.
    Senator Voinovich. Thank you.
    Senator Akaka. Thank you very much, Senator. We have gone 
through one round of questions, and I would like to go into the 
second round. I have a few questions.
    The President's fiscal year 2002 budget proposal would end 
required coverage of contraceptives by health insurance plans 
participating in the Federal Employee Health Benefit Program. 
Although the rationale for ending the coverage was not 
explained, there is little evidence that required coverage of 
contraceptives in the program imposes any additional premium 
costs, and Justice Lawrence, a Federal judge in Seattle, ruled 
that not extending this right: ``Creates a gaping hole in 
coverage offered to female employees.'' The question is do you 
support rescinding the contraceptive coverage mandate for 
Federal employees, and if so, what reason?
    Ms. James. Mr. Chairman, I do support the President and his 
budget process. As I said to the staff earlier, I am not 
entirely sure what the rationale or the decision-making process 
was behind that. I certainly am not opposed to contraceptive 
coverage for Federal employees. I think it is offered in a 
majority of the health plans. It is available if someone wants 
to choose a plan that has that.
    I think one of the hallmarks of the Federal health plan has 
always been flexibility and choice options, and those options 
are still there for fellow employees.
    Senator Akaka. I am sure you are aware that Blue Cross-Blue 
Shield, the largest participating FEHBP carrier, submitted a 
proposal to OPM during the call letter process, to change its 
program offerings. Can you tell us what is happening, and how 
the proposal will affect other participating plans in the 
program?
    Ms. James. Senator, I have not been involved in those 
proceedings at all. I have not been briefed by OPM staff on the 
progress of that particular contract, and so I am afraid I am 
not prepared to answer those kinds of questions here today.
    Senator Akaka. A number of groups have raised concerns with 
me that Congress should be involved as we move through this 
process. I strongly believe that OPM must take whatever steps 
necessary to ensure that choice and competition remain. A 
question for the record: Will you please give us your assurance 
that you will seek our input and keep us informed as these 
negotiations proceed?
    Ms. James. Mr. Chairman, I will seek your input. I will 
seek the input, as well, of those individuals who are 
stakeholders in this, and I think it is important to have that 
kind of input before you can make a quality decision. So I 
assure you that you will definitely be involved in, and a part 
of, that process.
    Senator Akaka. Well, I thank you very much for your 
responses. I would like to ask my colleague if he has any 
questions.
    Senator Cochran. Mr. Chairman, I have no other questions of 
the witness.
    Senator Akaka. Well, I thank my fellow Senators for their 
participation today. I have no further questions at this time. 
However, Members may submit questions in writing to the 
Committee, and the Committee would appreciate a timely response 
to any questions that we may have for you. The record will 
remain open for these questions and for further statements from 
my colleagues.
    Ms. James, there are many people and organizations that 
look forward to working with you on the challenges ahead, and 
the Senate is one of them. I thank you again for being here 
this afternoon, for your cooperation with this process and for 
accepting this nomination to public service.
    If there is no further business before the Committee, I 
will call for the adjournment. The Committee stands adjourned.
    [Whereupon, at 3:42 p.m., the Committee was adjourned.]

                            A P P E N D I X

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