a

GAO

United States Government Accountability Office

Report to Congressional Requesters

March 2006 HUMAN CAPITAL

Agencies Are Using 

Buyouts and Early 

Outs with Increasing 

Frequency to Help 

Reshape Their 

Workforces

GAO-06-324
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2006

HUMAN CAPITAL

Agencies Are Using Buyouts and Early 

Outs with Increasing Frequency to Help 

Reshape Their Workforces 

Highlights of GAO-06-324, a report to 

congressional requesters 

Under the Chief Human Capital

Officers (CHCO) Act of 2002, an 

agency may request authority from

the Office of Personnel 

Management (OPM) to offer 

employees voluntary separation

incentive payments (buyouts) and 

voluntary early retirement (early

outs) to help reshape its workforce.

GAO was asked to identify (1) how

many agencies have been granted 

authority to offer buyouts and early 

outs and how often agencies used 

them, (2) how agencies view OPM’s 

role in facilitating the use of these

tools, (3) how agencies have used

practices associated with effective

use of the tools, and (4) what 

challenges agencies identified, if

any, to continued effective use. To

respond, GAO reviewed the 

practices of the Departments of 

Agriculture, Commerce, Energy, 

Health and Human Services, 

Interior, and the Treasury because

they were among the most frequent

users of these authorities.

What GAO Recommends

GAO recommends that OPM, with

the CHCO Council, (1) share 

information on agencies’ successful 

use of the effective practices GAO 

identified, (2) help agencies assess 

their programs’ effectiveness, and 

(3) assess potential program 

improvements agencies identified

for possible implementation, and

pursue needed regulatory and

statutory changes to implement

them. OPM agreed with the

recommendations. 

The total number of agencies using buyouts and early outs to reshape their 

workforces has significantly increased from 28 to 51 during fiscal years 2003 

through 2005, and the number of programs agencies have offered over the 

past 3 years has also significantly increased (see fig. below). During this 

timeframe, at least 22,600 employees have separated from federal service 

under these authorities. 

Total Number of Agencies Having Used the Authorities and Total Number of Buyout and 

Early-out Programs Offered Since the Authorities Were Made Available in Fiscal Year 2003 

Total number

Source: OPM data.

28 43 51

136

176 179

0

50

100

150

200

Fiscal year 2005

Fiscal year 2004

Fiscal year 2003

Number of 

programs

Number of

agencies

Officials at all six agencies GAO reviewed believe that OPM’s mandatory 

review of and feedback on their plans for using buyouts and early outs has 

improved implementation. However, nearly all of the agencies said they 

believe the review at times can be achieved more quickly and should be 

streamlined. OPM on average took 36 days to review the 28 randomly 

selected programs GAO assessed at the six agencies. OPM is taking steps to 

reduce its overall average review time including establishing more stringent 

timeframes for review and reducing the number of reviewers.

The six agencies also reported using almost all of the practices GAO 

identified as associated with the effective use of buyouts and early outs, and 

that these practices resulted in better-planned programs. Agencies were not, 

however, using one practice that involves evaluating the longer-term 

effectiveness of the buyout and early-out authorities for reshaping their 

future workforces. Officials at the six agencies suggested that information 

on how some agencies used effective practices in ways that were

particularly successful or instructive in reshaping their workforces could 

help them improve program results. 

Agency officials responsible for use of these authorities from the six 

agencies agreed that certain reforms would help them address some of the 

challenges they face in implementing their programs. These include 

(1) increasing the current dollar amount agencies can pay under buyouts to 

make the programs more attractive to employees and increase the 

acceptance rate and (2) allowing agencies to make minor changes to buyout 

and early-out plans after OPM approval. OPM is in the best position to 

assess these and other possible reforms and ways to achieve them.

www.gao.gov/cgi-bin/getrpt?GAO-06-324.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Eileen Larence, 

(202) 512-6510, larencee@gao.gov. 
Page i GAO-06-324 Agencies’ Using Buyouts and Early Outs

Contents

Letter 1

Results in Brief 4

Background 9

Almost Half of All Agencies Have Used Buyout and Early-out 

Programs to Reshape Their Workforces and the Number of 

Programs Has Increased 12

Agency Officials Responsible for Use of These Authorities Believe 

OPM’s Review Process Adds Value but in Some Cases Could Be 

Quicker and Should Be Streamlined 15

Agencies in Our Review Are Using Most of the Practices Associated 

with Effective Use of Buyouts and Early Outs and Have Found 

Them Helpful in Achieving Their Reshaping Goals, Though One 

Practice May Require Further Attention 19

Officials in Agencies We Reviewed Suggested Ways to Make the 

Buyout and Early-out Programs More Efficient and Effective 25

Conclusions 27

Recommendations for Executive Action 27

Agency Comments and Our Evaluation 28

Appendixes

Appendix I: Objectives, Scope, and Methodology 30

Appendix II: Comments from the Office of Personnel Management 33

Tables Table 1: Practices Associated with Effective Buyout and Early-out 

Programs 7

Table 2: Practices Associated with Effective Use of Buyout and 

Early-out Programs Were Generally Reflected in 

Legislation and OPM Regulations 19

Figures Figure 1: Total Number of Agencies Having Used the Authorities 

and Total Number of Buyout and Early-out Programs 

Offered Since the Authorities Were Made Available in 

Fiscal Year 2003 5

Figure 2: Total Number of Agencies and Total Number of Buyout 

and Early-out Programs They Offered Since Authorities 

Were Made Available in Fiscal Year 2003 13

Figure 3: Major Users of Buyout and Early-out Authorities 14

Figure 4: OPM Review Process for Buyout and Early-out 

Requests 17
Contents

Page ii GAO-06-324 Agencies’ Using Buyouts and Early Outs

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.

Abbreviations

CHCO Chief Human Capital Officers

DOC Department of Commerce

DOD Department of Defense

DOE Department of Energy

DOI Department of the Interior

FWRA Federal Workforce Restructuring Act

HHS Department of Health and Human Services

HR human resources

IRS Internal Revenue Service

IT information technology

NIST National Institute of Standards and Technology

OMB Office of Management and Budget

OPM Office of Personnel Management

RIF reduction-in-force

Treasury Department of the Treasury

USDA Department of Agriculture

VA Department of Veterans Affairs
Page 1 GAO-06-324 Agencies’ Using Buyouts and Early Outs

United States Government Accountability Office

Washington, D.C. 20548

A

March 31, 2006 Letr

The Honorable George V. Voinovich

Chairman

Subcommittee on Oversight of Government Management,

the Federal Workforce, and the District of Columbia

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Jon C. Porter

Chairman 

Subcommittee on the Federal Workforce and

Agency Organization

Committee on Government Reform

House of Representatives

The federal government’s people—its human capital—are a critical element 

to meeting the current and emerging challenges of the 21st century, 

including responding to natural emergencies and handling the increased 

threat of terrorism, as well as maximizing the government’s performance. 

However, fiscal challenges and competing budget needs put pressure on 

agencies to make trade-offs and difficult decisions regarding how to invest 

in their human capital. In the past, agencies have often responded to such 

financial challenges by using reductions-in-force (RIFs) to their workforces 

to meet their budget limitations. This has caused a loss of institutional 

memory and a backlog of work, among other problems. As a result, 

agencies subsequently reported that such mandatory downsizing has 

hindered them from carrying out their missions.1

Agency RIFs are not, however, the only—and often are not the best—

means of addressing reduced agency resources or changing the skill profile 

of the workforce to address 21st century challenges. Agencies may use a 

variety of approaches to reshape their workforce to achieve their mission 

results with greater economy, efficiency, and effectiveness. Such 

approaches may include merging departments or functions, redeploying 

people to different organizational units or locations, conducting training or 

retraining programs to improve workforce performance, implementing 

recruiting programs for needed skills, and reducing the layers within an 

organization’s hierarchy.

1

GAO, High Risk Series: An Update, GAO-01-263 (Washington, D.C.: January 2001).
Page 2 GAO-06-324 Agencies’ Using Buyouts and Early Outs

The authorities granted by the Congress in the Chief Human Capital 

Officers (CHCO) Act of 2002 provided two additional tools agencies may 

use to help them reshape their workforces. Under buyout programs, 

agencies offer cash incentives up to $25,000 for employees to voluntarily 

leave federal service. The Act does not, however, provide funding for these 

authorities. Thus, each agency must bear the cost of the incentives. Under 

early-out programs, agencies offer early retirement at reduced annuity 

payments to employees age 50 and above with at least 20 years of service or 

to employees at any age with at least 25 years of service. An agency does 

not face any costs for offering early outs.

For agencies to use these authorities, the Office of Personnel Management 

(OPM) must first review agency plans for using these tools and assure that 

the plans comply with certain legislative requirements. According to OPM 

officials who are involved in reviewing agency programs, their reviews are 

intended to ensure that agency plans are complete and are linked to the 

accomplishment of the agency’s strategic goals. Within OPM, agency plans 

are reviewed by a human capital officer familiar with that agency’s 

operations, and four levels of supervision prior to the Director’s official 

approval decision. Agencies have multiple opportunities each year to 

request authority to offer buyouts, early outs, or both to meet the specific 

reshaping goals of any of their components or organizational units. 

Agencies can request authority from OPM to offer programs for either 

buyouts, early outs, or for both at the same time. However, OPM cannot 

approve any buyout or combined buyout and early-out request without the 

Office of Management and Budget’s (OMB) concurrence, due to the budget 

implications for the requesting agency.

To gain a better understanding of the extent to which agencies are using the 

buyout and early-out tools authorized by the Act, you asked us to identify 

(1) how many agencies have sought and been granted authority to offer 

buyouts and early outs, and the extent to which agencies have used these 

authorities; (2) how selected agency officials view OPM’s role in facilitating 

the use of the buyout and early-out authorities; (3) what practices are 

associated with agencies’ effective use of buyouts and early outs, how 

selected agencies used these practices, and whether they have helped 

agencies to achieve their workforce reshaping goals; and (4) what 

challenges the selected agencies identified, if any, to continued effective 

use of these authorities. The agencies we selected were the Departments 

of Agriculture (USDA), Commerce (DOC), Energy (DOE), Health and 

Human Services (HHS), Interior (DOI), and the Treasury (Treasury), 

because we determined from OPM data on agency requests and approvals 
Page 3 GAO-06-324 Agencies’ Using Buyouts and Early Outs

that they are the most frequent users of the buyout and early-out 

authorities.2

 The agency selection process was not designed to produce 

findings that could be considered representative of the use of these 

authorities in the federal government as a whole. 

To meet our objectives, we analyzed information from a review of relevant 

literature on the use of buyouts and early outs in organizations including 

our prior studies of federal buyout programs in 1997 and 1998.3

 We 

obtained and analyzed governmentwide, excluding the Department of 

Defense (DOD), data on agencies’ use of buyouts and early outs, and 

interviewed officials involved in the approval process from OPM and OMB 

on their roles and responsibilities.4

 We reviewed a sample of OPM case 

files for about a tenth of all the offers made by the six selected agencies for 

fiscal years 2003 through 2005. While we cannot generalize the results of 

our file review to OPM’s overall program, the results can help us to 

illustrate examples of OPM’s review process. We also conferred with 

officials with relevant expertise in the management of human resource 

programs from the National Academy of Public Administration and the 

International Public Management Association on the reasonableness of the 

effective buyout and early-out practices we identified. Both of these 

organizations have published reports on the effectiveness of these federal 

human capital practices. In addition, we interviewed human capital and 

program officials from the selected agencies to identify the particular 

buyout and early-out practices they were using, how they believe the 

practices helped them to achieve their goals, and the lessons learned from 

their experiences. Although we provided each of our six selected agencies 

with OPM’s count of their buyout and early-out authorities to review, we 

did not independently verify OPM’s governmentwide buyout and early-out 

data. Our review was conducted in accordance with generally accepted 

2

During the course of our review, OPM reported that the frequency with which the 

Department of Transportation (DOT) and the Department of Veterans Affairs (VA) had used 

the authorities was comparable in magnitude to the six agencies that we selected. Because 

of this, we included DOT and VA in our figures showing individual agency use of the 

authorities. However, they were not included in our more detailed examination of practices 

at the six selected agencies.

3

See, for example, GAO, Federal Downsizing: Effective Buyout Practices and Their Use in 

FY 1997, GAO/GGD-97-124 (June 30, 1997); and Federal Downsizing: Agency Officials’ 

Views on Maintaining Performance during Downsizing at Selected Agencies, GAO/GGD98-46 (Washington, D.C.: Mar. 24, 1998).

4

The CHCO Act of 2002 specifies that OPM, when reviewing agency buyout plans, consult 

with OMB before final approval is granted. 5 U.S.C. 3522(c).
Page 4 GAO-06-324 Agencies’ Using Buyouts and Early Outs

government auditing standards from October 2004 through November 

2005. Appendix I provides additional information on our scope and 

methodology.

Results in Brief Since November 2002, when the buyout and early-out authorities were 

provided, the number of agencies using the authorities significantly 

increased and the number of programs5

 offered has also significantly 

increased. To date, nearly half of the approximately 110 executive branch 

agencies have taken advantage of these authorities to help reshape their 

workforces, and according to OPM data, at least 22,600 employees 

separated from federal service after accepting offers under these 

authorities during this timeframe. During fiscal years 2003 through 2005, a 

total of 51 agencies have been granted authority to offer buyouts or early 

outs to employees. This has increased from 28 agencies that were granted 

these authorities in fiscal year 2003, the first year they were available. 

During these same 3 years, OPM reviewed and approved agency requests 

for the authorities to offer buyout and early-out programs a total of 136 

times, 176 times, and 179 times, respectively (see fig. 1).

5

For the purposes of our review, a program is each OPM-approved agency request to use the 

buyout, early-out, or both authorities.
Page 5 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Figure 1: Total Number of Agencies Having Used the Authorities and Total Number 

of Buyout and Early-out Programs Offered Since the Authorities Were Made 

Available in Fiscal Year 2003

Nearly three-fourths of the authorities OPM approved in fiscal year 2005 

were combined buyout and early-out programs. OPM data show that 70 

percent of all agency programs approved that year offered employees the 

opportunity to take a buyout and an early retirement at the same time. 

According to several agency officials responsible for use of these 

authorities, employees are more likely to accept early-out offers when they 

are combined with buyouts because the buyout’s monetary payment helps 

offset the employee’s loss in income and reduced annuity payments under 

an early-out program. The six agencies examined in our review used these 

authorities more frequently than other agencies and believe the authorities 

have helped to reshape their respective workforces more effectively. For 

example, according to program officials involved with managing these 

programs from DOC’s National Institute of Standards and Technology 

(NIST), the agency used a buyout and early-out program to achieve a more 

0

50

100

150

200

Fiscal year 2005

Fiscal year 2004

Fiscal year 2003

Number of 

programs

Number of

agencies

Total number

28

43

51

136

176 179

Source: OPM data.
Page 6 GAO-06-324 Agencies’ Using Buyouts and Early Outs

optimal skills mix in the face of budget cuts and changing priorities for its 

research and development, thereby limiting involuntary staff reductions to 

a minimal number.

Officials associated with the management of buyout and early-out 

programs at the agencies we met with believe OPM’s review process adds 

value, but could at times also be achieved more quickly and should be 

streamlined. The program officials in each of the six agencies believed 

early OPM feedback on their individual agency plans to implement buyouts 

and early outs was helpful in obtaining final OPM approval. Several 

reported that their agency has modified and improved their plans as a 

result. Managers at DOE stated that the agency has worked closely with 

OPM to resolve any questions in an effort to streamline the process. On the 

basis of a sample of 28 programs that we examined at the selected 

agencies, we found that, on average, OPM’s review took 36 days and ranged 

from 7 to 88 days. Agencies want timely reviews so that their programs can 

be implemented early in the fiscal year to maximize savings and to give 

employees enough time to decide whether to accept or decline the buyout 

or early out, better helping to ensure the success of the program. 

Otherwise, if the planned numbers of employees do not accept the offers, 

the agency may have to institute a more costly action to reduce its 

workforce.

According to OPM and officials from the agencies we reviewed, a number 

of variables can affect approval times, including the experience of the 

officers (OPM, OMB, and agency) assigned to the request, complexity of 

the request, and whether the request involved competitive sourcing 

decisions. The OPM program managers said that reviews overall take on 

average 34 days but that the agency has set a goal to reduce this to 21 days. 

To help achieve this goal OPM has developed an application checklist for 

agencies to help ensure their plans comply with regulatory requirements 

before they are submitted, and according to OPM officials, the agency is 

currently reviewing its program office review process for streamlining 

options. These options include realigning or dedicating staff to evaluate 

agency requests. Additionally, final approval of these requests is being 

delegated from the Director to the Associate Director level. OPM’s actions 

to improve cycle time, if effectively implemented, should help address 

agency concerns about shortening the windows for offering buyout and 

early-out programs.

We identified seven practices associated with effective use of buyouts and 

early outs, and the agencies in our review reported not only using most of 
Page 7 GAO-06-324 Agencies’ Using Buyouts and Early Outs

these practices to some degree, but also that doing so helped them to 

achieve their reshaping goals. However, the agencies reported fewer 

activities related to the practice of establishing an evaluation system. Five 

of these practices are generally reflected in the CHCO Act of 2002 and 

OPM’s implementing regulations. All seven practices are described in the 

following table: 

Table 1: Practices Associated with Effective Buyout and Early-out Programs

Source: GAO analysis.

For example, officials responsible for use of these tools in the six agencies 

reported that determining up front the reshaping goals they wanted to 

attain with their buyout or early-out programs was critical to their 

achieving successful outcomes. They explained that by analyzing the 

reduction of staff they could achieve using these tools and how this would 

in turn help them achieve changes in skill mix or geographic deployment 

helped them to ensure they would meet their strategic goals. The agencies 

Practices reflected in legislation or OPM regulations

1. Identify the reshaping goals of the agency. This will assist agencies in linking 

buyouts and early outs to specific organizational objectives.

2. Develop workforce reshaping strategies that fully consider alternative 

methods. This will help agencies identify whether alternatives may more effectively 

meet agency reshaping goals than buyouts and early outs, and could work in 

conjunction with these tools.

3. Design buyout and early-out offerings that demonstrate a clear relationship to 

agency’s workforce reshaping goals and overarching strategic goals. This will 

help ensure that employees critical to the mission of an agency are retained. 

4. Design buyout and early-out offerings that consider employees’ needs. 

Programs that do not do so may cause damage to the agency’s reputation or 

negatively affect employee morale and productivity. 

5. Develop a communications strategy early in the process. Regular 

communication with employees increases transparency in the process used to 

determine which positions may be eliminated. This in turn increases employee trust 

and maintains employee morale. 

Practices not reflected in legislation or OPM regulations 

6. Consider and adopt ways to maximize cost savings. In general, agencies should 

maximize current year payroll savings by separating employees early in the fiscal 

year when possible, preferably in the first quarter.

7. Establish an evaluation system to identify and report relevant data on buyout 

and early-out recipients. Agencies can use these data to assess how well the 

buyouts and early outs are meeting or have met reshaping goals and whether they 

need to adjust their strategies. 
Page 8 GAO-06-324 Agencies’ Using Buyouts and Early Outs

in our review, however, have not taken full advantage of one of the leading 

practices—establishing evaluation systems for these programs. While the 

agencies do track how the individual program results relate to their 

reshaping goals and analyze the results to assure that all employees are 

treated fairly, agencies have not expanded or further developed these 

monitoring efforts for longer-term evaluation of these tools. For example, 

agencies could expand their analyses of results to include the examination 

of how, if at all, the length of service influences acceptance or rejection of 

an offer. This information could be useful in the structuring or timing of 

future offers. Similarly, agencies could assess the costs and savings of 

using buyouts and early outs relative to other separation strategies. OPM 

officials informed us that they are developing Web site guidance to assist 

agencies in implementing and administering buyout and early-out 

programs.

The changing demographics of the federal workforce, and limits on the 

dollar amount for buyouts, could pose challenges to the future viability of 

these tools, according to many of the agency officials associated with the 

use of these authorities in our review. For example, as more employees 

retire and are replaced by younger employees further from retirement, 

buyouts and early outs may not be attractive to them. In addition, officials 

in each of the six agencies also believe that the $25,000 limit on the buyout 

payment amount, which has not been changed since 1992, may make the 

programs less attractive to prospective candidates. They note that they 

would benefit from having the flexibility to offer more money, even though 

doing so could limit the number of offers agencies could provide if 

additional funding is not available. Officials in three agencies also 

suggested they were challenged because they could not make minor 

deviations to the plans OPM approved. They would like the flexibility, for 

example, to include an additional occupation as being eligible for the 

program during implementation if they need to in order to achieve their 

reshaping goals, as long as they do not exceed the total number of buyouts 

or early outs OPM approved. Finally, some agency officials stated that 

obtaining examples of how some agencies used effective practices in ways 

that were particularly successful or instructive in reshaping their 

workforces could help them improve program implementation and 

administration. OPM, as the central human capital organization, is in the 

best position to collect and share this information, and determine what 

improvements would be worth implementing governmentwide, especially 

since some would require legislative changes.
Page 9 GAO-06-324 Agencies’ Using Buyouts and Early Outs

To address challenges agencies face in using these authorities and consider 

possible ways to increase their viability, we are making recommendations 

to OPM and the CHCO Council that they serve as a clearinghouse to share 

examples of how agencies have used effective practices to achieve 

program successes; help agencies implement the practice of assessing the 

long-term effectiveness of these tools for future reshaping efforts; and 

assess potential improvements to these tools, and the steps needed to 

accomplish these improvements.

We provided a draft of this report to the Director of OPM for review and 

comment. The Director agreed with our recommendations and stated that 

OPM is actively working with agencies to help them measure the 

effectiveness of their buyout and early-out programs. This in turn will 

enable OPM to consider whether changes are needed to improve the 

effectiveness of these two tools. Further, the Director of OPM reported 

that, working with the CHCO Council, it sees a proactive role that it can 

take in sharing information from agencies on their best buyout and earlyout practices, and how agencies may subsequently improve the 

effectiveness of their reshaping strategies. The Director’s written 

responses are reprinted in appendix II.

Background In the past, to help reduce and restructure their workforces, federal 

agencies have paid buyouts to employees to voluntarily leave federal 

service. DOD has had buyout authority since January 1993.6

 Most nonDOD executive branch agencies have had two buyout opportunities. The 

first, under the Federal Workforce Restructuring Act (FWRA) in 1994,7

provided these agencies the authority to offer buyouts of as much as 

$25,000 to employees to voluntarily leave federal service, thereby 

eliminating the need for involuntary staff reductions. Nearly 40 percent of 

the buyouts were paid to those employees in overhead positions such as 

personnel, budget, procurement, and accounting. About 70 percent went to 

employees in mid- to upper-level positions in their organizations. The 

second major buyout opportunity was authorized by section 663 of the 

6

Pub. L. No. 102-484 (Oct. 23, 1992) authorized DOD buyouts through Sept. 30, 1997; Pub. L. 

No. 103-337 (Oct. 5, 1994) extended DOD buyouts through Sept. 30, 1999. DOD’s current 

buyout authority is included as part of the National Security Personnel System (5 U.S.C. 

9902(i)).

7

Pub. L. No. 103-226 (March 30, 1994).
Page 10 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Treasury, Postal Service, and General Government Appropriations Act of 

1997.8

 According to Administration officials, the buyouts have had three 

distinct purposes. Initially they were used to help ease reductions in the 

DOD civilian workforce following the end of the Cold War. Later, as part of 

the National Performance Review—the Clinton administration’s initiative 

to reinvent government—buyouts were used to reduce what the 

administration called “management control” positions. These positions 

included those held by managers and supervisors and employees in 

personnel, budget, procurement, and accounting occupations. Lastly, the 

buyouts were used to help save money by reducing the federal workforce 

as the Congress and the President agreed to pursue a balanced budget.

During the first buyout time frame, the Congress, as well as our own 

reports, began expressing concern over agencies’ lack of adequate planning 

prior to the implementation of their buyout programs and workforce 

reduction initiatives.9

 The Congress considered this concern in a series of 

hearings and addressed the issue when it passed Public Law 104-208 in 

September 1996, which directed agencies to prepare strategic buyout plans 

for congressional review. OMB required agencies to first submit their plans 

for its review prior to submitting them to the Congress. In a June 1997 

report on effective buyout practices, we found that, overall, the fiscal year 

1997 buyout programs at six agencies we examined at that time appeared 

to have been better managed than was generally the case governmentwide 

during the 1994 and 1995 buyout window. This was due in large part to 

statutory and OMB requirements, as well as OPM guidance. Together, the 

requirements and guidance resulted in more structured programs in which 

agencies indicated they used buyouts to accomplish specific objectives and 

reportedly would save millions of dollars in the years ahead.10

In response to this success, the Congress streamlined the approval process 

for agency programs by eliminating congressional and OMB review of 

agency plans, although OPM must still consult with OMB on buyout plans. 

The CHCO Act of 2002 provided executive branch agencies, with OPM 

8

Pub. L. No. 104-208 (Sept. 30, 1996).

9

See, for example, GAO, Federal Employment: The Results to Date of the Fiscal Year 1994 

Buyouts at Non-Defense Agencies, GAO/T-GGD-94-214 (Washington, D.C.: Sept. 22, 1994); 

and Federal Downsizing: Better Workforce and Strategic Planning Could Have Made 

Buyouts More Effective, GAO/GGD-96-62 (Washington, D.C.: Aug. 26, 1996).

10GAO/GGD-97-124.
Page 11 GAO-06-324 Agencies’ Using Buyouts and Early Outs

approval, the authority to offer buyouts and early outs to certain qualifying 

employees, for the purposes of workforce reshaping, not just downsizing. 

DOD has separate legislative authority to offer buyouts and early outs and 

does not require approval of OPM for its programs.11 The Act expanded the 

buyout and early-out authority to give agencies the flexibility required to 

reorganize their workforces should agencies need to substantially reduce 

their number of organizational layers, transfer functions, or make other 

substantial workforce changes. As such, the Act’s provisions allow 

agencies to reduce managerial or supervisory positions, correct skill 

imbalances, and reduce operating costs without the loss of full-time 

positions.

Congress specified that each executive agency requesting buyouts, early 

outs, or both must submit a plan to OPM outlining its intended use of these 

authorities. OPM also issued regulations to the heads of executive 

agencies with information on how to prepare these plans. OPM review 

officials said they approve or disapprove agency requests for the 

authorities based on the quality of the plans. For example, they ensure that 

all legislative requirements are met. OPM reviews each agency’s plan and, 

for buyouts only, consults with OMB before final approval is granted. OMB 

assures that the agency has funding for the buyout program and meets the 

legislative requirements. Agencies must have OPM approval before using 

buyout and early-out authorities and are required to provide OPM with 

interim and final reports on their use. 

Agency plans are to describe how they will use buyout and early-out offers 

as tools to facilitate agencies’ reshaping goals. For agencies requesting 

buyout or buyout and early-out authority, the plans are also to include 

identification of the agency or specified component(s) within the agency 

for which the authority is being requested; identification of the specific 

functions to be reduced or eliminated; a description of the categories of 

employees who will be offered these options identified by organizational 

unit, geographic location, occupational series, or grade level; and the time 

period during which buyouts may be paid or early outs offered. Agencies 

may request and offer buyout and early-out programs simultaneously for 

each of their components and organizational units.

115 U.S.C. 9902(i).
Page 12 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Almost Half of All 

Agencies Have Used 

Buyout and Early-out 

Programs to Reshape 

Their Workforces and 

the Number of 

Programs Has 

Increased

Since fiscal year 2003, the number of agencies using buyouts and early outs 

to reshape their workforces has increased, and to date, about half of the 

executive branch agencies have requested and used these authorities. In 

addition, agencies are more frequently offering buyouts and early outs 

together as an additional incentive for employees. Eight agencies are the 

major users of the authorities and represent approximately 70 percent of all 

requests. Agencies’ decisions to use buyouts and early outs are based on 

specific workforce planning needs. In some cases, technological advances 

that necessitated a different skill mix primarily drove agency-reshaping 

efforts. In other cases, agencies’ reshaping efforts were driven by a more 

diverse set of needs such as consolidation of functions or budgetary 

restrictions. Officials responsible for use of these authorities at our six 

selected agencies believe that buyouts and early outs have been successful 

tools to help reshape their respective workforces.

Total Number of Agencies 

Using These Authorities and 

Number of Programs They 

Offered Has Increased Each 

Year 

Of the approximately 110 executive branch agencies under the CHCO Act, 

a total of 51 agencies have been granted authority to offer their employees 

programs of buyouts, early outs, or both at least once.12 This has increased 

from 28 agencies that were granted these authorities in fiscal year 2003. As 

shown in figure 2, OPM approved, and the agencies used, the authorities to 

offer programs a total of 136 times, 176 times, and 179 times, respectively, 

to help reshape their workforce. According to OPM data, at least 22,600 

employees have separated from federal service under a buyout, early out, 

or both. Among the employees who separated and received a buyout, 59 

percent were employees who separated by retiring under the government’s 

standard retirement qualifications and did not need an early out, 36 percent 

were employees who separated using an early-out program, and 5 percent 

were employees who separated through a resignation.

12Because DOD has separate legislative authority to offer buyouts and early outs and does 

not require approval from OPM, we excluded DOD from our review.
Page 13 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Figure 2: Total Number of Agencies and Total Number of Buyout and Early-out 

Programs They Offered Since Authorities Were Made Available in Fiscal Year 2003

Agencies Are Offering 

Combined Buyout and 

Early-out Programs

In fiscal year 2003, 40 percent of all agency programs offered employees 

the opportunities to have a buyout and take an early retirement at the same 

time. In fiscal year 2004 this increased to 55 percent. In fiscal year 2005 

this further increased to 70 percent. DOI, DOE, and Treasury were 

agencies more likely to offer programs with combined buyout and early-out 

offers. For example, in fiscal years 2004 and 2005, DOI combined buyouts 

and early outs in 39 of its 42 programs, DOE combined them in 38 of its 45 

programs, and Treasury combined them in 14 of its 23 programs. 

According to several agency officials responsible for use of these 

authorities, employees are more likely to accept early-out offers when they 

are combined with buyouts because the buyout’s monetary payment would 

help offset the employee’s loss in income and reduced annuity payments. 

0

50

100

150

200

Number of programs

Number of agencies

2003 2004 2005 

Total number

Fiscal year

28

43

51

136

176 179

Source: OPM data.
Page 14 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Eight Agencies Are Major 

Users of the Authorities

Over the 3-year period, OPM granted a total of 491 requests from the 51 

agencies for buyout, early-out, or both authorities. As shown in figure 3, 

USDA, DOC, DOE, HHS, DOI, DOT, Treasury, and VA represent 

approximately 70 percent of granted buyout and early-out programs. 

Figure 3: Major Users of Buyout and Early-out Authorities

Note: Numbers indicate total number of buyout and early-out programs offered by each agency from 

fiscal year 2003 through fiscal year 2005.

The Selected Agencies in 

Our Review Believe the 

Authorities Have Been 

Effective Tools in Reshaping 

Their Workforces

The six agencies in our review based their decisions to use buyouts and 

early outs on specific reshaping objectives identified in their particular 

agency’s workforce planning process. For example, HHS consolidated its 

human resources (HR) offices from 40 to 5 using the buyout authority to 

manage the workforce transition from 1,167 employees to approximately 

860. According to the HHS agency official who led the agency’s HR 

consolidation effort, the agency successfully used the buyout authority to 

manage the reduction of higher-graded positions and to strategically adjust 

its workforce size and skills mix. The official stated that over 125 of the 

estimated 350 staff affected by the agency’s consolidation of its HR offices 

Source: OPM data.

24 26

27

29

29

39

40 39

167

Transportation

Interior

Veterans Affairs

Commerce

Treasury

Agriculture

Health & Human Services

Energy

Other agencies
Page 15 GAO-06-324 Agencies’ Using Buyouts and Early Outs

accepted buyout offers. He explained that initially they were able to 

redeploy displaced staff to mission-critical occupations and functions; 

however as consolidations continued and the balance shifted more and 

more away from administrative positions and toward mission-critical 

occupations, their ability to absorb and redeploy staff to other 

administrative or mission-support jobs diminished. According to the 

official, the buyout program allowed HHS to meet its targets without 

requiring a RIF.

In fiscal year 2004, NIST experienced a budget shortfall, new 

responsibilities, and changing national priorities for its research and 

development. Because of its budget shortfall, NIST officials anticipated 

conducting several RIFs during fiscal year 2004. NIST’s reshaping goals 

were to (1) phase out a major program, (2) reduce funding of another 

program, (3) streamline institutional and administrative support, and 

(4) shift the focus of some laboratories. NIST officials reported that they 

used a combined buyout and early-out program, reassignments, and RIFs to 

help restructure its workforce, achieve a more optimal skills mix, and 

reduce its staff from 2,744 employees to 2,556. NIST officials reported that 

while they were unable to totally avoid involuntary reductions, the use of 

the buyout and early-out program enabled them to limit the RIFs to a 

minimal number of employees.

Agency Officials 

Responsible for Use of 

These Authorities 

Believe OPM’s Review 

Process Adds Value but 

in Some Cases Could 

Be Quicker and Should 

Be Streamlined

All of the agencies in our selected sample believe OPM’s feedback during 

the review process improved their use of the buyout and early-out 

authorities. OPM approved all agencies’ buyout and early-out requests that 

met the statutory and regulatory requirements. However, according to 

program officials in three agencies, OPM’s review process can at times be 

quicker so as to avoid possible delays in the approval process that could 

limit the success of the programs. OPM is taking steps to reduce the 

amount of time it takes to review agency submissions and is further 

planning to streamline its review process.
Page 16 GAO-06-324 Agencies’ Using Buyouts and Early Outs

The OPM Review Process 

Assures Compliance with 

Legislative Requirements 

and Provides Help for 

Agency Officials 

Responsible for Use of 

These Authorities 

OPM plays the central role in the oversight and implementation of the 

buyout and early-out authorities. OPM regulations, issued under the 

authority of the CHCO Act, require agencies to develop plans that provide 

information on agencies’ intended buyout and early-out usage. OPM, in 

turn, reviews and approves agency plans for using the authorities. The Act 

and OPM’s regulations also state that OPM will consult with OMB regarding 

agency buyout plans. These plans are to include the following:

• Identification of the specific positions to be reduced or eliminated, 

identified by organizational unit, geographical location, occupational 

series, grade level, and any other factors related to the positions.

• A description of the categories of employees who will be offered 

incentives, identified by organizational unit, geographic location, 

occupational series, grade level, and any other factors, such as skills, 

knowledge, or retirement eligibility.

• A description of how the agency will operate without the eliminated or 

restructured positions and functions.

• The time period during which incentives may be paid. 

• The number of and maximum amounts of Voluntary Incentive Payments 

to be offered.

Agencies’ early-out plans are to include the following:

• Identification of the agency or specified component(s) for which the 

authority is being requested.

• Reasons why the agency needs voluntary early retirement authority.

• The date on which the agency expects to effect the workforce 

reshaping. 

• The time period during which the agency plans to offer voluntary early 

retirement.

According to an OPM reviewing official, the OPM human capital officer 

assigned to review a particular agency provides the first level of 

examination. The review process then includes additional management 

reviews and the final approval by the OPM Director. Through this process, 
Page 17 GAO-06-324 Agencies’ Using Buyouts and Early Outs

OPM checks to see whether all legislative and regulatory requirements are 

met, and that these criteria are being consistently applied across all 

agencies’ requests for buyout and early-out authority. In some cases, OPM 

had agencies revise their plans until they met OPM’s standards, according 

to an OPM review official. For example, OPM officials reported they 

received an agency request that involved four different components or 

work units. The justifications submitted for each component were in 

various states of readiness and covered different time periods. After 

consultation with OPM reviewing officials, the agency elected to withdraw 

the request and resubmit them as separate more-targeted requests. In its 

first resubmission, the agency provided a request dealing with reshaping, 

business process reengineering, and downsizing of one of the four 

components, thus improving the linkage to its business strategy. This 

request received OMB concurrence and was approved by OPM. Figure 4 

illustrates OPM’s review process for agency buyout and early-out requests.

Figure 4: OPM Review Process for Buyout and Early-out Requests

Program officials in each of the agencies in our review believed OPM’s 

feedback on their plans was helpful and several reported that they have 

modified and improved their plans as a result. Managers at DOE stated that 

the agency has worked closely with OPM to resolve any questions in an 

effort to streamline the process. USDA officials responsible for use of 

Source: OPM data.

Division for

Human Capital

Leadership &

Merit Systems

Accountability

Ensures compliance

with legislative

requirements

OMB

Assesses monetary

sufficiency of

agency buyout plan

Deputy

Associate

Director

(DAD)

Supervisor

reviews

paperwork for

compliance

Associate

Director

Supervisor

reviews

paperwork for

compliance

Policy

Office

Ensures

intent of

regulations

is met

General

Counsel

Ensures

legal

requirements

are met

OPM

Director

Reviews for

final approval
Page 18 GAO-06-324 Agencies’ Using Buyouts and Early Outs

these authorities stated that OPM has been responsive to their requests and 

subsequent inquiries. 

OPM and Agency Officials 

Responsible for Use of 

These Authorities Believe 

Plans Can at Times Be 

Approved More Quickly and 

the Process Can Be 

Streamlined

OPM program officials and nearly all of the agency officials responsible for 

use of these authorities in our review believe the approval process can at 

times be accomplished more quickly and have fewer steps. Agencies want 

to avoid delaying the timelines for offering a buyout and early-out program, 

for fear that shortening the time frame employees have for deciding 

whether to accept or decline the buyout or early out can reduce the number 

of employees taking them and thus the success of the program. Both the 

quality of the agency request and the number of OPM reviews, as well as 

OMB’s review of requests for buyout authority, can affect the cycle time for 

final approval. One agency official stated that he believes a contributing 

factor is that too many people have to review each request, a point that 

OPM is addressing in its planned streamlining of the review process. 

When we looked at a sample of 28 programs between fiscal years 2003 and 

2005 for our six selected agencies, we saw a variation in approval times 

that ranged from 7 to 88 days. On average, we found that OPM took 36 days 

to review the programs in our sample. According to OPM and officials 

from the selected agencies, a number of variables can affect approval 

times, including the experience of the officers (OPM, OMB, and agency) 

assigned to the request, the completeness of the agency request, the 

complexity of the request, and whether the requests are based on 

competitive sourcing situations.

According to OPM program managers, their calculations show that, overall, 

their reviews take on average 34 days, but they have set a goal to reduce 

this to 21 days. They established this target by analyzing results of previous 

reviews and also from surveying agency program officials. To help speed 

up its review process, OPM issued an application checklist for agencies to 

help ensure their plans comply with regulatory requirements prior to 

submission to OPM. According to OPM officials, OPM has expedited its 

review process by establishing more-stringent timeframes and standards 

for reviewing agency submissions and is developing Web site guidance on 

both authorities. In addition, to further streamline its review process, OPM 

plans to reduce the number of reviewers within each review step. If such 

actions are effectively implemented, OPM’s steps to improve cycle time 

should help address agency concerns about shortening the windows for 

offering buyout and early-out programs. 
Page 19 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Agencies in Our 

Review Are Using Most 

of the Practices 

Associated with 

Effective Use of 

Buyouts and Early 

Outs and Have Found 

Them Helpful in 

Achieving Their 

Reshaping Goals, 

Though One Practice 

May Require Further 

Attention

On the basis of our review of the literature on buyouts and early outs, we 

identified seven practices that are associated with effective buyout and 

early-out programs. All of the agency officials responsible for use of these 

authorities in our review believe that these practices have been helpful as 

they have used most of them to implement their programs. Of the 

identified practices, five are generally reinforced in the provisions of the 

CHCO Act and OPM’s regulations for implementing it.13 The two practices 

not reflected in statutory and OPM documents are (1) consider and adopt 

ways to maximize cost savings and (2) establish an evaluation system to 

identify and report relevant data on buyout and early-out recipients (see 

table 2). 

Table 2: Practices Associated with Effective Use of Buyout and Early-out Programs 

Were Generally Reflected in Legislation and OPM Regulations

13OPM issued final buyout regulations (5 CFR Part 576) effective on January 27, 2005, and 

final early-out regulations (5 CFR Parts 831 and 842) effective on June 14, 2004.

Practices reflected in legislation or OPM regulations

1. Identify the reshaping goals of the agency. This will assist agencies in linking 

buyouts and early outs to specific organizational objectives.

2. Develop workforce reshaping strategies that fully consider alternative 

methods. This will help agencies identify whether alternatives may more effectively 

meet agency reshaping goals than buyouts and early outs, and could work in 

conjunction with these tools.

3. Design buyout and early-out offerings that demonstrate a clear relationship to 

agency’s workforce reshaping goals and overarching strategic goals. This will 

help ensure that employees critical to the mission of an agency are retained. 

4. Design buyout and early-out offerings that consider employees’ needs. 

Programs that do not do so may cause damage to the agency’s reputation or 

negatively affect employee morale and productivity. 

5. Develop a communications strategy early in the process. Regular 

communication with employees increases transparency in the process used to 

determine which positions may be eliminated. This in turn increases employee trust 

and maintains employee morale. 

Practices not reflected in legislation or OPM regulations 

6. Consider and adopt ways to maximize cost savings. In general, agencies should 

try to maximize current year payroll savings by separating employees early in the 

fiscal year when possible, preferably in the first quarter.
Page 20 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Source: GAO analysis.

Agency officials responsible for agency use of these authorities reported: 

1. Identifying their reshaping goals up front helped agencies use these 

tools to achieve them.

Officials at each of the agencies in our review reported that a first step in 

developing buyout and early-out programs is identifying the reshaping 

goals of the agency. They explained that the reshaping goals must align 

with organizational strategic goals. For example, the DOC’s Economics 

and Statistics Administration had an organizational strategic goal to 

enhance the quality and effectiveness of its economic policy support 

function by consolidating two subunits. The agency in turn developed a 

reshaping goal to streamline the offices and eliminate unneeded positions. 

In addition, agency program officials determined a decreased need for 

traditional clerical skills and decided to also target those positions and 

employees for buyouts and early outs. According to an agency official 

responsible for use of these authorities, they met their estimated buyout 

and early-out projections and achieved a number of reshaping goals. They 

formed a new organizational structure with increased quality and 

efficiencies in policy and administrative support functions, reduced 

staffing, and created a more desirable supervisor-to-employee ratio. 

2. Considering not only buyouts and early outs, but also a range of 

alternative methods to meet reshaping goals helped agencies ensure 

success.

Considering not only buyouts and early outs, but also a range of alternative 

methods to meet reshaping goals helped agencies ensure success. 

Agencies in our review stressed that developing workforce strategies to 

meet reshaping goals that consider alternative methods for meeting the 

goals, including buyouts and early outs, is important and that they routinely 

do so. They explained that some alternatives work better than others in 

certain situations. For example, one agency official stated that in some 

areas the agency may need to strengthen its student programs and build 

that particular pipeline of talent and in other skill areas they may need to 

redeploy employees to programs in which their skills are better utilized. 

7. Establish an evaluation system to identify and report relevant data on buyout 

and early-out recipients. Agencies can use these data to assess how well the 

buyouts and early outs are meeting or have met reshaping goals and whether they 

need to adjust their strategies. 

(Continued From Previous Page)
Page 21 GAO-06-324 Agencies’ Using Buyouts and Early Outs

USDA’s Agricultural Marketing Service considered alternative methods 

such as placement opportunities, hiring freezes, redeployment, retraining, 

delaying capital purchases, and suspension of bonuses. For example, the 

agency provided opportunities for some employees to accept a lower grade 

position or take on additional duties and responsibilities, which required 

on-the-job training.

In addition to offering buyouts or early outs, several of the agencies 

considered retraining as part of their reshaping strategies. However, one 

agency official explained that retraining was not always a viable option. 

For example, at USDA’s Agricultural Research Service, the new skills 

required a specialized academic background. But the vast majority of the 

affected employees was in manual trade positions and did not have the 

background necessary to successfully complete a retraining program for 

scientific duties. Thus, the agency could only assign a few of the affected 

employees to other positions and used the buyout and early-out programs 

for the remaining affected employees.

At Treasury’s Office of the Comptroller of the Currency, agency officials 

reported that they established a working group that did extensive cost 

analyses to help design its reshaping options. The group compared costs of 

its current field locations and identified: (1) imbalances in its manager-toemployee ratios; (2) a declining volume of work in some areas; and 

(3) overstaffing in some district offices, particularly among support 

positions and within some information technology units. The working 

group made some assumptions on the number of staff positions needed for 

each option and recognized that each would have an effect on employees. 

They developed net savings projections for the various realignment 

configurations. The final decisions on the agency’s district structure 

resulted in the closure of three district offices and establishment of one 

district office in a new location. As a result, the agency recognized there 

were employees with needed skills, but they were in the wrong locations. 

In addition to offering buyouts (under its own authority)14 and early outs, a 

number of surplus employees were given the opportunity to transfer with 

their function to the new office.

14The Office of the Comptroller of the Currency was able to offer buyouts prior to the CHCO 

Act of 2002, using its broad pay-setting authority. 12 U.S.C. § 482. The Act provided the 

Office of the Comptroller of the Currency the additional authority to use early-out programs.
Page 22 GAO-06-324 Agencies’ Using Buyouts and Early Outs

3. Designing buyout and early-out programs that demonstrate a clear 

relationship to the agency’s workforce reshaping goals helped agencies 

achieve those goals.

Our review of agency buyout and early-out plans submitted to OPM shows 

that the plans identified the agency’s workforce reshaping goals and 

specified how using the authorities would help meet those goals. For 

example, following an analysis of Treasury’s Bureau of the Public Debt’s 

Information Technology (IT) programs, management set the goal of 

consolidating most of the bureau’s functions into one existing 

organizational unit that would require fewer employees to perform the IT 

work. The bureau established an IT consolidation team, made up of 

members of management as well as human resources representatives, to 

develop the workforce reshaping strategy. Team members, for the most 

part, were those who would be directly affected by the consolidation.

According to Bureau of the Public Debt officials involved with the 

consolidation effort, the bureau used a combined buyout and early-out 

program to help reshape its workforce to achieve a more optimal skills mix 

and to eliminate the need to use RIFs to cut excess IT positions. Prior to 

offering the buyout and early-out program, the agency’s HR division 

surveyed all eligible employees. From the results of the survey, they were 

able to estimate the number of interested employees and also identify 

individuals likely to accept an offer. The agency also decided to make 

offers to non-IT individuals working in organizations identified as affected 

by the changes to create open positions for surplus IT employees. Agency 

officials reported that they met their goal to consolidate into one existing 

organizational unit and also met their targeted number of employees 

accepting program offers, which eliminated the need for involuntary 

separations.

4. Designing buyout and early-out programs that considered employees’ 

needs helped them to cope with the changes. 

Agency officials responsible for use of these authorities in the agencies we 

reviewed pointed out they consider employees’ needs when designing and 

implementing programs. They believed that buyout and early-out programs 

should generally provide career guidance, counseling, and outplacement 

assistance to employees who may be displaced. Treasury’s Office of the 

Comptroller of the Currency, when offering a buyout and early-out 

program, made a wide variety of other services available to employees. 

For example, in those offices to be closed Treasury solicited the affected 
Page 23 GAO-06-324 Agencies’ Using Buyouts and Early Outs

employees’ relocation preferences and tried to accommodate them to the 

extent possible. Employees who were interested in other positions and 

locations could visit the new locations at the agency’s expense. In 

addition, the agency paid relocation bonuses to some affected employees 

and instituted a “safe landing” program that consisted of a support network 

matching affected employees with “buddies” who provided encouragement 

to those employees and served as sounding boards for them, training and 

discussion forums that focused on career and stress management, and 

technical training to prepare for other job opportunities.

Program officials in these agencies also reported that their programs are 

routinely reviewed internally at many levels, including agency general 

counsel offices, to ensure that the programs not only conform to applicable 

laws, union agreements, and regulations, but also would be considered 

equitable from the employees’ point of view. Officials at USDA’s 

Agricultural Research Service reported that in addition to reviewing the 

appropriate contracts and regulations, they continuously consulted with 

the employee union and its human capital office throughout the duration of 

the buyout and early-out program to ensure fairness. Additionally, the 

agency ensured that information packets regarding the proposed programs 

were provided to all eligible employees before the date the offers took 

effect in an effort to give employees ample time for fullest consideration. 

Program officials at USDA’s Natural Resources Conservation Service 

reported that their Civil Rights Division conducted a Civil Rights Impact 

Analysis to determine if there were any adverse effects on employees and 

concluded that there were none, since every employee was offered a 

similar position at their current grade level. None of our selected agencies 

reported any grievances filed as a result of their buyout and early-out 

programs.

5. Developing a communication strategy early in the process helped to 

build an understanding of the purpose of planned changes.

Agency officials in our review stressed that communication early and 

throughout the reshaping process was critical. In a recent report, we said 

that creating an effective, ongoing communication strategy is essential to 

implementing a merger or transformation.15 Communicating often, 

accurately, and consistently was the key factor to one agency’s successful 

15GAO, Results-Oriented Government: Implementation Steps to Assist Mergers and 

Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
Page 24 GAO-06-324 Agencies’ Using Buyouts and Early Outs

strategy, according to an official responsible for use of the buyout and 

early-out authorities. At NIST, the Director met with staff prior to getting 

approval to offer buyouts and early outs, and explained the agency was 

facing financial deficits and wanted to avoid the possible need to resort to 

involuntary separations, and so was soliciting the authority to offer 

voluntary separation incentives.

Other agencies began communicating with employees immediately after 

obtaining OPM approval to offer buyouts or early outs. Treasury’s Office of 

the Comptroller of the Currency established an electronic bulletin board 

and employees were invited to provide their comments, suggestions, or 

recommendations on the agency’s proposed reshaping initiative and 

options that the agency’s program officials might want to consider. A 

number of agencies also communicated with employees about the 

particulars of their programs through e-mails and brochures to ensure 

employees were kept advised of all reshaping actions. Agency officials also 

stressed that having highly visible top management involvement in their 

communication strategies helped to deliver the message of organizational 

changes as efficiently as possible. One agency had its managers in the 

components and offices targeted for reshaping brief their employees and 

attend group information sessions with those employees. During these 

sessions, employees were able to directly ask these managers specific 

questions about the reshaping effort, thus helping the employees to 

understand management’s rationale for decisions made.

6. Agencies in our review considered ways to maximize cost savings.

Nearly all of the agencies in our review, in an attempt to maximize costs 

savings, reported that they tried to separate employees from federal service 

early in the fiscal year so as to save on employee salary expenses. One 

agency also assigned affected employees to nonaffected positions where 

appropriate. 

7. Although they monitor who is accepting buyouts and early outs, the 

agencies were not evaluating the continuing and future effectiveness of 

these authorities.

Agencies in our review collected and reviewed data on the number of 

employees who accept offers under their individual programs compared 

with their intended goals. One agency has a system in place that 

periodically generates a report on the numbers of employees who accept 

buyout offers, thus providing management with useful information to 
Page 25 GAO-06-324 Agencies’ Using Buyouts and Early Outs

consider the progress toward their reshaping goals and make necessary 

adjustments. To monitor the progress and success of its reshaping 

initiative, another agency established a consolidation team that met weekly 

to discuss issues that emerged as the agency implemented this initiative 

and potential roadblocks to achieving its reshaping goals. The team also 

maintains a list of all individuals who separate from the agency with a 

buyout and provides this information to the agency’s staff involved in 

recruitment and placement to help ensure that previous buyout recipients 

repay the full amount of the buyout payment if they are rehired within five 

years of receiving the buyout.16

However, agencies have not expanded on these monitoring efforts to 

provide an evaluation of the longer-term effectiveness of these tools. For 

example, agencies could compare the length of service for employees in its 

workforce, the role this factor plays in employee decisions about accepting 

buyout and early-out offers, and how this could affect the composition and 

timing of future offers. This information on length of service in relation to 

the acceptance or rejection of a buyout or early-out offer could help the 

agencies as they plan and prepare for future programs. In addition, 

agencies could perform an analysis to determine the savings generated by 

buyouts and early outs relative to other separation strategies, such as 

involuntary staff reductions. Such an analysis would help agencies 

determine whether anticipated cost savings of buyouts and early outs will 

in fact provide the best choice of resource actions that could be taken.

Officials in Agencies 

We Reviewed 

Suggested Ways to 

Make the Buyout and 

Early-out Programs 

More Efficient and 

Effective

Agency officials responsible for use of these authorities that we contacted 

found the requirement that agencies must get even minor changes to their 

plans approved by OPM to be restrictive. Under OPM regulations, even 

slight deviations from approved plans by even one position or grade level 

requires additional OPM review. Officials in three agencies suggested that 

agencies be allowed to make such minor deviations, as long as the agencies 

do not exceed the total number of approved buyouts or early outs. For 

example, an agency official responsible for use of these authorities from 

HHS explained that agencies using the authorities in nearly all cases are 

being asked to predict the future because when offering buyouts, the 

agency never really knows how many employees will accept the offers, or 

16The CHCO Act of 2002 contains provisions that require buyout recipients to repay the full 

amount of the buyout if, within 5 years of separating, they are reemployed by the federal 

government. 5 U.S.C. 3524.
Page 26 GAO-06-324 Agencies’ Using Buyouts and Early Outs

where they will be located. The official explained that agencies target a 

group of employees who will be offered the buyouts, and then hope for the 

best. Having the flexibility to adjust the target group to which the offer is 

made during the implementation of their plans could improve program 

results and ultimately provide additional opportunity for agencies to 

achieve their reshaping goals, according to this manager. OPM officials 

said that they believe that the CHCO Act does not provide OPM the 

authority to allow agencies to make changes to approved plans. 

Furthermore, agency officials responsible for use of these authorities in 

our review believe that the buyout maximum payment amount of $25,000, 

which has been constant since 1992,17 may not be enough incentive to 

encourage eligible workers to voluntarily leave the workforce, especially 

higher-salaried employees. They explained that inflation has eroded the 

buying power and value of buyouts, making them less attractive unless the 

employee is ready to retire anyhow, thus defeating the purpose of the 

program. Officials in four agencies said some consideration should be 

given to ways to make buyouts more attractive to employees. On the other 

hand, one agency official acknowledged that increasing the buyout amount 

may reduce the number of offers agencies could make at a higher amount 

and thus could make alternative approaches to reshaping more attractive. 

Although they have not undertaken any studies regarding this, OPM 

officials believe that agencies’ reporting that they are meeting their 

targeted number of reductions indicates the dollar amount is sufficient. 

In addition, some agency officials suggested that more coordination across 

the agencies using the programs would be helpful as would the sharing of 

examples of how some agencies used effective practices in ways that were 

particularly successful or instructive in reshaping their workforces, and 

that OPM may be in the best position to do this coordination. For example, 

several program officials suggested that OPM could sponsor forums, an 

interagency working group, or even additional training sessions, such as 

the session OPM headquarters offered in May 2005, to encourage 

information sharing on how agencies may more efficiently implement their 

buyout and early-out programs. 

A number of the agency suggestions for improving the outcomes achieved 

with the buyout and early-out programs would benefit all agencies using 

the authorities, but some would require legislative changes. OPM, as the 

17Pub. L. No. 102-484.
Page 27 GAO-06-324 Agencies’ Using Buyouts and Early Outs

central human capital office, is well positioned to determine which 

governmentwide improvements to pursue and how to implement them, 

including regulatory changes or proposals for legislative reform. For 

example, OPM may assess the effects of raising the $25,000 buyout amount 

and, if appropriate, sponsor legislative proposals for these changes. 

Conclusions As agencies transform to better meet 21st century challenges and changing 

missions, they are increasingly recognizing the need to reshape their 

workforces to meet these challenges. The Congress also recognized this 

need and responded to it by designing legislation creating buyout and earlyout programs as additional tools agencies could consider using in their 

efforts to reshape their workforces. Our review shows that agencies have 

taken advantage of these programs and are employing certain practices 

that help them to use these tools more effectively.

Now agencies and OPM, working through each agency’s CHCO, have the 

opportunity to make even better use of these authorities and best practices. 

Several agencies we reviewed have formulated ideas about how to improve 

them. OPM and the CHCOs, through their governmentwide Council, could 

provide an important service by sharing information with agencies on 

successful ways to use the tools and the lessons learned across agencies, 

and helping agencies determine what data to collect and evaluate as 

indicators of the program’s results. Currently, the individual agencies in 

our review have not systematically evaluated the relative efficiency, 

continuing effectiveness, and future viability of the authorities as reshaping 

tools for their agencies. By doing so, agencies will know whether they need 

to make adjustments in their long-term strategy for employing those tools, 

and whether it is more cost-efficient to spend funds on implementing 

buyouts and early outs rather than on other reshaping tools, such as 

retraining. Finally, because OPM takes a governmentwide perspective on 

human capital programs, it is well positioned to assess potential 

improvements to these authorities, such as the agencies proposed changes, 

and determine what changes to implement and the steps needed to do so. 

Recommendations for 

Executive Action

To help ensure that agencies can take full advantage of the authorities to 

use buyouts and early outs to reshape their workforces, we recommend 

that the Director of OPM, in conjunction with the CHCO Council, take the 

following actions.
Page 28 GAO-06-324 Agencies’ Using Buyouts and Early Outs

1. Share additional information with agencies on examples of how 

agencies have used practices associated with effective use of buyout and 

early-out programs to support their programs and achieve successful 

results. In addition, OPM could support the improvement of approval cycle 

time and the effectiveness of the programs by facilitating information 

sharing among agencies, such as holding forums and training sessions on 

the use of the authorities for agencies with less-experienced staff.

2. Help agencies identify ways they can determine the extent to which the 

authorities have been effective tools and will continue to be in the future, 

and how agencies may need to tailor their reshaping strategies accordingly. 

3. Assess potential program improvements, such as those the agencies 

have identified, for possible governmentwide implementation, then take 

the steps necessary to accomplish this, such as changing the regulations 

governing the program, or proposing any needed statutory changes.

Agency Comments and 

Our Evaluation

We provided a draft of this report to the Director of OPM. The Director 

provided written comments, which are included in appendix II. The 

Director agreed with our recommendations, as well as our conclusion that 

buyouts and early outs have been effective tools for agencies implementing 

workforce reshaping plans. The Director also stated that the agencyspecific examples included in our report provide additional insight on the 

usefulness of buyouts and early outs as proven workforce reshaping 

options, and will help agencies to emulate best practices as they manage 

their own restructuring plans. In addition, the Director of OPM agreed that, 

working with the CHCO Council, the agency could provide an important 

service by sharing information on such successful ways to use the tools and 

the lessons learned across agencies. Furthermore, the Director stated that 

the examples will help as OPM actively works with agencies to determine 

what data to collect and evaluate as indicators of the program’s results in 

an effort to measure the effectiveness of their buyout and early-out 

programs. Once OPM reviews agencies’ actual experiences using these 

two tools, it will be able to consider whether changes are needed to 

improve their effectiveness. The Director of OPM also agreed that its 

review of agency plans could be done more quickly and stated that it is 

expediting approval of agencies’ buyout and early-out requests.

The Director of OPM also provided technical comments, which we 

incorporated as appropriate.
Page 29 GAO-06-324 Agencies’ Using Buyouts and Early Outs

We are sending copies of this report to other interested congressional 

parties, the Director of OPM, and the federal agencies and offices discussed 

in this report. In addition, we will make copies available to other interested 

parties upon request. This report will also be made available at no charge 

on the GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me at (202) 512-

6510 or at larencee@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors to this report include William Doherty, 

Clifton G. Douglas Jr., Charlesetta Bailey, Tom Beall, Andrew Edelson, 

Jeffrey McDermott, Amy Rosewarne, and Lou Smith.

Eileen Regen Larence

Director, Strategic Issues
Page 30 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

The objectives of our review were to identify

• how many agencies have sought and been granted authority to offer 

buyouts and early outs and the extent to which agencies have used these 

authorities;

• how selected agency officials view the Office of Personnel 

Management’s (OPM) role in facilitating the use of the buyout and earlyout authorities;

• what practices are associated with agencies’ effective use of buyouts 

and early outs, how selected agencies used these practices, and whether 

they have helped agencies to achieve their workforce reshaping goals; 

and

• what challenges the selected agencies identified, if any, to continued 

effective use of these authorities. 

To address our first objective, we obtained and analyzed OPM data on the 

buyout and early-out programs authorized under the Chief Human Capital 

Officers Act of 2002 to obtain governmentwide data on agencies’ use of the 

program and to help identify agencies for further review. 

To address our other objectives, we reviewed the OPM data to identify 

those federal agencies that were the most frequent users of the buyout and 

early-out authorities under the Act. We selected the Departments of 

Agriculture, Commerce, Energy, Health and Human Services, Interior, and 

the Treasury for further review since they accounted for over half of all 

requests for authorities at the time we started our review.1

 

We interviewed agency officials, such as human capital officers and buyout 

and early-out program managers from the six selected agencies to ascertain 

(1) their views of OPM’s role in their use of the buyout and early-out 

1

During the course of our review, OPM reported that the frequency with which the 

Department of Transportation (DOT) and the Department of Veterans Affairs (VA) had used 

the authorities was comparable in magnitude to the six agencies that we selected. Because 

of this, we included DOT and VA in our figures showing individual agency use of the 

authorities. However, they were not included in our more detailed examination of practices 

at the six selected agencies. In addition, because DOD has separate legislative authority to 

offer buyouts and early outs and does not require approval from OPM, we excluded DOD 

from our review.
Appendix I

Objectives, Scope, and Methodology

Page 31 GAO-06-324 Agencies’ Using Buyouts and Early Outs

authorities, (2) the particular buyout and early-out practices they were 

using, (3) their views on how the practices helped them to achieve their 

goals, (4) the lessons learned from their experiences, and (5) the challenges 

to continued successful use of these authorities. As part of this review, we 

also asked officials to identify and discuss more specifically either a buyout 

or early-out offer in each of fiscal years 2003, 2004, and 2005 that, in their 

view, was among the most successful of such offers conducted that year.

In addition, using a systematic selection procedure with a random start, we 

reviewed a sample of OPM case files for about a tenth of all the offers made 

by the six selected agencies for fiscal years 2003 through 2005. We 

reviewed the files to determine the length of OPM’s review time and also to 

identify instances where agencies used practices associated with effective 

buyout and early-out use. While our total sample of cases consisted of 40 

buyout or early-out offers, we excluded 7 cases from our analysis of OPM’s 

review time because in these cases, the agencies requested buyouts or 

early outs on the assumption that they would possibly use contractors to 

conduct some of the agencies’ work. OPM could not approve the offers, 

however, until the agencies made these final outsourcing decisions. In 

addition, we excluded 5 cases from this analysis because either OPM’s 

review of the case was pending or we were unable to identify the agency 

date of the submission or OPM’s date of approval from the file. To 

supplement and support the views provided by agency officials, our review 

also included obtaining and examining available documentation, such as 

strategic workforce plans, buyout and early-out plans, and other 

documents associated with the use of the authorities from each of our 

selected agencies.

We also interviewed officials involved in the review process from OPM and 

the Office of Management and Budget to obtain information on their roles 

and responsibilities in approving agency requests and their perspectives on 

the use of buyout or early-out offers governmentwide. In addressing our 

third objective, we first reviewed information from relevant literature on 

the use of buyouts and early outs in organizations including our prior 

studies of federal buyout programs in 1997 and 1998.2

 We conducted a 

content analysis and included as effective practices those common to 

2

See, for example, GAO, Federal Downsizing: Effective Buyout Practices and Their Use in 

FY 1997, GAO/GGD-97-124 (Washington, D.C.: June 30, 1997); and Federal Downsizing: 

Agency Officials’ Views on Maintaining Performance during Downsizing at Selected 

Agencies, GAO/GGD-98-46 (Washington, D.C.: Mar. 24, 1998).
Appendix I

Objectives, Scope, and Methodology

Page 32 GAO-06-324 Agencies’ Using Buyouts and Early Outs

multiple sources and those previously cited in GAO reports. We next 

conferred on the reasonableness of selected buyout and early-out practices 

we identified with officials from the National Academy of Public 

Administration and the International Public Management Association who 

had relevant expertise in the management of human resource programs. 

Both of these organizations have published reports on the effectiveness of 

federal human capital practices related to buyout and early-out programs.

Because we designed our selection of agencies and cases to examine the 

experiences, practices, and perspectives of a set of agencies that, in recent 

years, have been relatively more engaged in conducting buyout and earlyout programs, the findings are not generalizable to other agencies or the 

federal government as a whole. To assess the reliability of OPM’s database 

on buyout and early-out authorities, we interviewed the officials at OPM 

who were knowledgeable about maintaining that database. In addition, we 

provided each of our six selected agencies with OPM’s count of their 

buyout and early-out authorities to review. We determined that OPM’s data 

were sufficiently reliable for the purpose of providing general information 

on the number of agencies participating in buyouts and early outs over time 

and the number and nature of authorities that these agencies used. Our 

review was conducted in accordance with generally accepted government 

auditing standards from October 2004 through November 2005.
Page 33 GAO-06-324 Agencies’ Using Buyouts and Early Outs

Appendix II

Comments from the Office of Personnel 

Management ApendxiI
Appendix II

Comments from the Office of Personnel 

Management

Page 34 GAO-06-324 Agencies’ Using Buyouts and Early Outs
Appendix II

Comments from the Office of Personnel 

Management

(450370) Page 35 GAO-06-324 Agencies’ Using Buyouts and Early Outs
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