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MOM, APPLE PIE, AND WORKING FOR AMERICA:

ACCOUNTABILITY AND REWARDS FOR THE

FEDERAL WORKFORCE

HEARING

BEFORE THE

SUBCOMMITTEE ON THE FEDERAL WORKFORCE

AND AGENCY ORGANIZATION

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 5, 2005

Serial No. 109–112

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director/Communications Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON THE FEDERAL WORKFORCE AND AGENCY ORGANIZATION

JON C. PORTER, Nevada, Chairman

JOHN L. MICA, Florida

TOM DAVIS, Virginia

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

PATRICK T. MCHENRY, North Carolina

JEAN SCHMIDT, Ohio

DANNY K. DAVIS, Illinois

MAJOR R. OWENS, New York

ELEANOR HOLMES NORTON, District of

Columbia

ELIJAH E. CUMMINGS, Maryland

CHRIS VAN HOLLEN, Maryland

EX OFFICIO

HENRY A. WAXMAN, CALIFORNIA

RON MARTINSON, Staff Director

CHAD BUNGARD, Deputy Staff Director/Chief Counsel

CHAD CHRISTOFFERSON, Clerk

TANIA SHAND, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on October 5, 2005 ............................................................................ 1

Statement of:

Shaw, Theresa S., Chief Operating Officer, Office of Federal Student

Aid, U.S. Department of Education; Max Stier, president and CEO,

Partnership for Public Service; W. Scott Gould, vice president, Public

Sector Strategy and Change, Business and Consulting Service, IBM

Global Services; Michael B. Styles, national president, Federal Managers Association; John Gage, national president, American Federation

of Government Employees; and Colleen M. Kelley, national president,

National Treasury Employees Union .......................................................... 72

Gage, John ................................................................................................. 127

Gould, W. Scott .......................................................................................... 96

Kelley, Colleen M. ..................................................................................... 143

Shaw, Theresa S. ....................................................................................... 72

Stier, Max .................................................................................................. 81

Styles, Michael B. ...................................................................................... 108

Springer, Linda M., Director, U.S. Office of Personnel Management; and

David M. Walker, Comptroller General, U.S. Government Accountability Office ........................................................................................................ 9

Springer, Linda M. .................................................................................... 9

Walker, David M. ...................................................................................... 16

Letters, statements, etc., submitted for the record by:

Gage, John, national president, American Federation of Government Employees, prepared statement of .................................................................... 130

Gould, W. Scott, vice president, Public Sector Strategy and Change, Business and Consulting Service, IBM Global Services, prepared statement

of ..................................................................................................................... 98

Kelley, Colleen M., national president, National Treasury Employees

Union, prepared statement of ...................................................................... 146

Porter, Hon. Jon C., a Representative in Congress from the State of

Nevada, prepared statement of .................................................................... 4

Shaw, Theresa S., Chief Operating Officer, Office of Federal Student

Aid, U.S. Department of Education, prepared statement of ..................... 75

Stier, Max, president and CEO, Partnership for Public Service, prepared

statement of ................................................................................................... 83

Styles, Michael B., national president, Federal Managers Association,

prepared statement of ................................................................................... 110

Springer, Linda M., Director, U.S. Office of Personnel Management:

Information concerning performance-based alternative pay systems ... 45

Prepared statement of ............................................................................... 11

Walker, David M., Comptroller General, U.S. Government Accountability

Office, prepared statement of ....................................................................... 18

(1)

MOM, APPLE PIE, AND WORKING FOR AMERICA: ACCOUNTABILITY AND REWARDS FOR

THE FEDERAL WORKFORCE

WEDNESDAY, OCTOBER 5, 2005

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERAL WORKFORCE AND AGENCY

ORGANIZATION,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2154, Rayburn House Office Building, Hon. Jon C. Porter (chairman of the subcommittee) presiding.

Present: Representatives Porter, Davis of Virginia (ex officio),

Norton, and Van Hollen.

Staff present: Ronald Martinson, staff director; Chad Bungard,

deputy staff director/chief counsel; Christopher Barkley and Shannon Meade, professional staff members; Patrick Jennings, OPM

detailee/senior counsel; Chad Christofferson, LA/clerk; Mark Stephenson and Tania Shand, minority professional staff member; and

Teresa Coufal, minority assistant clerk.

Mr. PORTER. Good morning. I would like to bring the meeting to

order of the Subcommittee on the Federal Workforce and Agency

Organization. Good morning, everyone. Mr. Gage is supposed to

bring donuts and coffee. John, where are you this morning? John

you are supposed to bring donuts and coffee for everyone. You were

late. Next time.

Welcome, everyone. I appreciate you being here. As I mentioned,

I would like to bring the meeting to order. We do have a quorum

present.

Working for America is a wonderful privilege and a great responsibility, something that I take very seriously, and I know that most

Federal employees feel the same way.

The work of Federal employees affects almost every aspect of our

daily lives, from sending a timely Social Security check to protecting our country from terrorist attacks. Each aspect is important as

millions of taxpayers rely on the Federal Government to provide

them with service that is responsive, efficient and accountable.

That is why it is important to review ways in which improvements

can be made to the current system so the Federal Government can

better serve the American people.

Recently the administration released a discussion draft of a comprehensive government-wide reform personnel bill titled the Working for America Act, and I should emphasize that the Working for

2

America Act is a draft proposal. The proposal has not been introduced as a bill and that is another reason why we are here today

as we move forward looking at legislation so we can have everyone’s ideas and suggestions before that bill is introduced.

We are here today to discuss the proposal in its current form and

exchange some ideas about how to improve its provisions. I believe

that a full, open and fair hearing should be held on this matter before a bill of this magnitude is introduced. I am hear to listen to

all sides and all viewpoints with an open mind.

I know that we will hear from some groups today that say no

change is needed and that everything is working just fine, but

there are some glaring problems with the current system. For one,

high and low performers get the same annual pay increases. This

is something that does not sit well even with the majority of Federal employees. According to a 2004 Federal human capital survey,

employees are not satisfied with the recognition they receive for

doing a good job and are not happy with the fact that steps are not

taken to deal with a poor performer who cannot or will not improve

and the differences in performance are not recognized. Who can be

against a fair process that rewards the star performers and effectively deals with the poor performers?

Second, we now live in a world where agency performance matters more than ever, but agency performance always has mattered.

The Katrina disaster itself demonstrated the need for high performing agencies and leadership in those agencies. Unfortunately,

our current Federal personnel system does not always encourage

efficiency or hard work.

Any proposal that allows agencies to better manage, develop and

reward its employees to better serve the American people should

be seriously considered. Better performing employees mean a better performing agency, which means that taxpayers are getting the

biggest bang for their buck.

Third, the Federal Government needs to be better able to attract

and retain quality employees, but we need to make sure that every

agency has the same ability to attract and keep quality employees.

The new personnel systems at DHS and DOD will place over half

the government under alternative personnel systems within a short

time. Agencies without modern, flexible personnel systems are

going to be at a competitive disadvantage in the areas of recruitment and retention in relationship to the private sector and in relationship with agencies with flexible personnel systems.

I understand that change can be difficult and that there are lots

of concerns out there about moving into a new personnel system.

I ask that everyone here maintain an open mind in how we can improve the current system, and when I say an open mind, I encourage all those that testify today, although you may have parts of the

draft that you support, I also would like to hear your ideas on what

we can do better to make it better. This is not just about a session

to complain about a draft. It is a session to provide very honest and

very blunt discussion on what we can do to help our Federal employees but, more importantly, the taxpayers.

As I said, I hope that everyone has an open mind on how we can

improve the system, and I look forward to hearing from the distinguished group before the subcommittee today. We are privileged to

3

have some very knowledgeable people here today who will bring

different points of view to this proposed legislation, and I look forward to our discussion and would like to move to a few procedural

matters at this time.

I ask unanimous consent that all Members have 5 legislative

days to submit statements and written questions for the record,

that any answers to written questions provided by witnesses also

be included in the record. Without objection, so ordered.

I ask unanimous consent that all exhibits, documents and other

materials referred to by the Members and the witnesses may be included in the hearing record and that all Members be permitted to

revise and extend their remarks. Without objection, so ordered.

It is the practice of the subcommittee to administer the oath,

which I will do here in a moment, but first I would like you to recognize my Congresswoman for any opening remarks. Good morning.

[The prepared statement of Hon. Jon C. Porter follows:]

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Ms. NORTON. Thank you very much, Mr. Chairman. I am very

pleased to be of service with you in Washington. I appreciate, Mr.

Chairman, that before this bill is final that you’re having another

hearing.

In case its controversial nature was not clear on the face of it,

it should be noted that the—one of our appropriation committees,

the House Transportation-Treasury Appropriation Committee,

withheld funding, the funding requested by OPM, to continue to

overhaul the civil service. Now that is the appropriation committee,

which would have no reason, it seems to me, to do that, nor would

the hesitation of the Senate be so clear if this were easy.

Mr. Chairman, I am not at odds with what is being undertaken

here. I simply begin with an appreciation for the uniqueness of the

system and how difficult it is. Now, if you want to change the system so that it looks like your local largest corporation, we can try

to do that. But let me tell you something. Your local largest corporation,wherever members may in fact reside, do not operate in

the system under the Constitution of the United States. It requires

due process, at the same time there is collective bargaining.

The size of the work force and the unique strictures under which

it operates presents a fascinating challenge, but we have to take

the challenge and not simply imitate what we see in the larger

community. I served on the board of three Fortune 500 companies.

Two are unionized. One was not. They don’t have the same issues,

and they don’t have the same problems. And they are able to operate in a way that this committee and that the Congress of the

United States must come to grips with.

We have the problems that have been outlined by this subcommittee. The fact that there has already been a court decision

overturning a major section of what we have done is more than a

shot across the bow. It is an indication that there is still a lot of

work to do and that we have not grasped the functional and the

intellectual challenge that this presents.

I compare it, Mr. Chairman, to those who approach September

11th not knowing what to do, recognizing we had a specific challenge, and realizing we had to keep our society safe. And so their

first instinct was to close down everything. Well, there is a way to

do this.

The Constitution of the United States isn’t going to let you do it.

There is no wording by the Congress that can overcome certain

problems that are present in the—what do we call it—this act, the

act I want to for the record say it correct, Working for America Act.

Understand that we have already taken most of the work force

and by statute of the United States passed by both Houses in fact

done what this act would seek to do for the entire work force. You

would think that having done that so recently the first thing you

want to do is look very closely—since you have the largest section

of the work force in the first place, what better laboratory to look

at what you have accomplished to correct your mistakes?

I chaired a very controversial agency at the time it was on its

knees, the Equal Employment Opportunity Commission, and I

knew that the agency had to be changed from top to bottom. Well,

I didn’t do anything like what we do here, which is take the more

than half of the offices and just change them. We took three offices,

7

tried every single change we were trying to do, see if those changes

worked, and after in fact being informed by practice, created a system that worked.

I don’t see us doing that here. Let’s look at Judge Collier’s decision, which focused on collective bargaining. Well, you can’t collective bargain everybody. You can’t simply redefine collective bargaining in the United States of America today, to quote what the

judge said, when good faith bargaining leads to a contract that one

side can disavow. Without remedy, the right to engage in collective

bargaining is illusory.

Now, you can try to abolish collective bargaining but you can’t

get around what in fact collective bargaining means in the law.

And we can’t get out of what it has come to mean and what we

ourselves have over the decades reinforced as its meaning in the

Federal sector, just to give one aspect, because we are trying to

change everything in this bill: Pay, job classification, labor-management relations, adverse actions and appeals. Good luck.

Doing all of that in most of your work force, we have already

done that in the DOD, and now you’re facing whether you’re going

to appeal or not a decision that has come down. Very clear, the

trial judge left part of the system in place and was very clear what

had been done with the rest of it.

Essentially what we did was to redefine collective bargaining. We

redefined it out of existence. One side could do what it wanted to

do. DOD and HHS, we can do because, we confront emergencies,

what it is we have to do. And yet, in this bill, Mr. Chairman, there

is language, amazing language, a language that would give agencies, period, we are not even talking about DOD or HHS, which

used the pretext of emergency perhaps when it sees fit, but we are

talking about any agency that can take action without collective

bargaining, in order to prepare for, practice for or prevent any

emergency, which is very broadly defined.

Well, you know, you know even a king doesn’t have that authority. And I don’t think in a democracy we want to give any agency

head the right to decide, ‘‘I said it is an emergency, it is an emergency. So I am going to do what I want to do and nobody has any

say.’’

You can’t run the Federal Government that way, and what we

are doing is getting ourselves deeper and deeper into a situation

where everything we do is in fact going to be tested in the courts.

So I understand that one of the great remedies for all this is just

train everybody and you don’t have to care about all the rest of it.

Well, you can’t train everybody out of the right to collective bargaining. You can’t train everybody out of how to make sure that

when you give pay increases you do not in fact engage in discrimination that will not take you to court. You have to have a system

that does that and that enables people to work it.

We do not have such a system today. I am with you, Mr. Chairman, in trying to see if we can get our way to such a system.

Thank you very much.

Mr. PORTER. Thank you very much. I like giving my colleague a

hard time because I do live in the District. So it is always good to

have two Members here working together. So I appreciate that very

much.

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Just a couple of key points. In my position as chairman, I look

at this very cautiously and I know there is a lot of steps that have

to take place before we make any major changes. There are many,

many steps. We also need to look closely at some of the successes

and some of the failures throughout the system through the years.

But the bottom line is we are looking at a personnel system that

was created in the forties. So for those that are opposed to the concept of what may well be in this particular act, and I said in my

opening statement, we have to find a better way to treat our Federal employees, which in turn can treat our taxpayers—our

bosses—more efficiently, with more accountability, because the expectations are high, as they should be.

Again, we are looking at a personnel system that was created in

the forties. Whether the draft before us is the solution is yet to be

determined, and that is why we are here today.

We are in a global economy, a global market, where even in technology it is dog years. Everybody’s computer is obsolete by the time

we plug it in, technology is in dog years, seven for every one. The

same with the way we deliver our services. As many of you have

heard me say before, probably a large share of the time of every

Member of the Congress in their district offices is trying to provide

service to our constituents because of their frustration with the system. They are frustrated. Our taxpayers, our bosses, our constituents, our friends and neighbors are frustrated. They call an 800

number and no one answers. They get put on hold and it takes

them 30 days to get an answer on certain problems.

So as Members of Congress, we see firsthand the challenges for

our constituents, but we also see those Federal employees that are

doing a great job, and we need to find a way to reward those folks

that are doing a great job. So today we have some experts with us.

We are going to talk about better ways to encourage our personnel

so we can keep our personnel as we move into this global economy

and global market with high expectations, as our bosses should ask

for.

Again I thank you all for being here. I would like to first have

all the witnesses stand so we can do the proper protocol and administer the oath. So actually all witnesses, please.

[Witnesses sworn.]

Mr. PORTER. Let the record reflect that the witnesses have answered in the affirmative and have been seated. I would like to

highlight the fact that we have so many folks here today to express

their perspective and expertise. If we can hold our comments to the

5 minutes, we will of course have an opportunity for questions and

answers and if time doesn’t permit we will ask for you to submit

your answers in writing. But it is imperative because of limited

time and the number of folks that we limit ourselves to 5 minutes.

So in our first panel we will hear from Director Linda Springer

from the Office of Personnel Management and Comptroller General

David M. Walker of the U.S. Government Accountability Office.

So Director Springer, we thank you and look forward to your testimony.

9

STATEMENTS OF LINDA M. SPRINGER, DIRECTOR, U.S. OFFICE

OF PERSONNEL MANAGEMENT; AND DAVID M. WALKER,

COMPTROLLER GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

STATEMENT OF LINDA M. SPRINGER

Ms. SPRINGER. Good morning, Mr. Chairman and members of the

subcommittee, I want to thank you for the opportunity to discuss

the administration’s legislative proposal for improving personnel

systems in the Federal Government.

Simply stated, the Working for America Act will require agencies

to better manage, develop and reward employees to better serve

the American people.

This act will establish a government-wide personnel system that

creates an environment where employees have the greatest opportunity to reach their full potential. Under the proposal, individual

employees will be provided clear performance goals, managers who

can help them to be successful, and performance and market-based

pay.

An employees’s career and pay potential should be determined by

achievement, not by the passage of time or obsolete job classifications. But today it takes employees up to 18 years to reach the top

of a General Schedule pay grade regardless of how well they perform.

Our proposal establishes a process for implementing a system

that recognizes and rewards performance. Each agency will design

its individual plan for using the flexibilities once the general authorities are approved. However, no agency will be able to use the

pay features in the bill until OPM certifies that agency’s readiness.

Our proposed legislation recognizes that enhancements to personnel systems must be made within the context of core values,

principles and protections that characterize our American Civil

Service. Reform can be accomplished while fully preserving core

principles and protections. In fact, the Working for America Act

promotes merit system principles by putting them into practice

more broadly.

Personnel systems that make it more likely that employees reach

their full potential will soon cover more than half of the Federal

work force. The rest should be afforded similar opportunities. The

Working for America Act ensures that the remaining agencies are

not left at a competitive disadvantage.

Let me summarize the central elements of the Working for America Act. First, the Civil Service system must preserve core Civil

Service principles. The act does just that.

Second, under the Working for America Act provisions OPM

would establish a core compensation system for the Federal Government, would define broad groups of like occupations, as well as

pay bands within each group that represent clearly distinct levels

of work. In this core system, market-based pay would constitute a

significant portion of pay adjustments with the balance allocated

on the basis of individual performance.

Third, today even poorly performing employees receive a General

Schedule increase across the board and locality pay increases. The

Working for America Act would make those increases within a parVerDate 11-MAY-2000 11:16 Mar 20, 2006 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 D:\DOCS\25617.TXT HGOVREF1 PsN: HGOVREF1
10

ticular band performance based in the sense that only employees

who are at least fully successful would receive those adjustments.

In addition, our proposal would bar pass/fail appraisal systems

for all but entry/developmental jobs but, as is the case today, would

provide agencies with flexibility in designing their performance appraisal systems and would require OPM to certify that an agency’s

performance adjustment plan meets the high standards that Congress will set before that agency is permitted to move to a performance-based pay system.

As I noted, Federal pay systems that include performance based

pay are not new at all. They have existed inside the Federal Government for 25 years and today cover over 90,000 Federal employees. And I would note that does not include the DHS or DOD legislation. These are other programs that have been around as long as

25 years.

These systems already apply to the same kinds of work and

workers that the current General Schedule covers. The results and

trends have been positive across those systems and we have looked

to the lessons learned from those systems as we have developed the

Working for America Act.

The Working for America Act ensures that Federal unions retain

core collective bargaining rights. The legislation modifies Federal

labor relations statute to clarify essential management prerogatives but preserves the important role and rights of unions in the

Federal labor relation system.

These modifications in labor-management are much, much narrower in their scope than the flexibilities granted to the Department of Homeland Security, and I want to underscore that. Let me

iterate that an agency will not be able to use pay flexibilities in the

bill until OPM has certified that agency’s readiness. To help agencies in that regard, OPM is leveraging its leadership of the human

capital initiative of the President’s management agenda.

Starting in 2006, agencies will be required to develop and expand

robust performance management systems for a defined segment

within the agency. In other words, agencies must demonstrate that

the site is ready to link pay for performance appraisal system with

the expectation that such improvements will expand and continue

throughout the agency.

We are fully aware that OPM will have a critical role in ensuring

the success of the Working for America Act. We recognize agencies

will look to us for guidance and assurance from implementation

and certification and beyond. You and, very importantly, the men

and women of the Federal work force can be sure of the Office of

Personnel Management’s commitment to being fully prepared to

carry out those responsibilities.

Mr. Chairman, that concludes my testimony. I would be glad to

answer any questions.

[The prepared statement of Ms. Springer follows:]

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Mr. PORTER. Thank you very much. You may note that we have

this little beeper going here. It is the alarm clock to let you know

that your time is up. Anyway, welcome, Mr. Walker, we appreciate

you being here.

STATEMENT OF DAVID M. WALKER

Mr. WALKER. Thank you, Mr. Chairman, Ms. Norton, Mr. Van

Hollen. It is a pleasure to be back before the subcommittee to talk

about the draft proposed Working for America Act. Somehow I

have been thinking about James Brown and Living in America all

morning. But this is a very serious topic, and I do look forward to

the opportunity to answering your questions as well.

Since you have put my entire statement in the record, if I can

summarize now, I would be pleased to do so.

Mr. Chairman, each Member of Congress received in February of

this year this document that was published by GAO. It is called,

‘‘21st Century Challenges: Reexamining the Base of the Federal

Government.’’ This document is based upon decades of work by

GAO for the Congress, and it provides a clear and compelling case

that a vast majority of the Federal Government is based upon conditions that existed in the United States and in the world in the

1950’s and in the 1960’s, and it includes over 200 questions that

need to be asked and answered to position us for a more positive

future. One of those 200 questions relates to the topic that we are

covering in today’s hearing.

Based upon all of the experience that we have in analyzing the

government’s efforts in the human capital area as well as our own

internal experience, GAO supports the concept of moving forward

with appropriate human capital reforms and believes that implementing more market-based and performance-oriented classification and compensation systems across the entire Federal Government is both doable and desirable.

Importantly, broad based human capital reform in our view must

be part of a broader change in management strategy and must involve a number of changes in the performance management systems that exist in the Federal Government today. This concept cannot be simply overlaid onto the existing and often ineffective performance management systems that exist in the Federal Government today.

In addition, organizations need to buildup their basic management capacity and must have adequate resources to properly design and effectively and equitably implement more market-based

and performance-oriented classification compensation systems.

In our view, before implementing dramatic human capital reforms, executive branch agencies should follow a phased approach

that meets a ‘‘Show me’’ test, the so-called Missouri test; namely,

that they have to demonstrate conclusively to OPM or some independent qualified third party that they have achieved all the conditions necessary in order to maximize the chance that there can be

successful implementation before they would have the authority to

implement new classification and compensation systems.

This is contrary and different than what was done for the new

SES pay ranges. In many cases, agencies were given conditional

approval based upon promises to take actions. That is not acceptVerDate 11-MAY-2000 11:16 Mar 20, 2006 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 D:\DOCS\25617.TXT HGOVREF1 PsN: HGOVREF1
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able in our view with regard to broad based work force changes.

The actions must be taken and demonstrated that they are in place

and functioning before the authority should be operationalized in

our view.

We have several observations for your consideration in the draft

proposal. First, in our view there are two major elements of this

proposal. The first deals with classification, pay and performance

management reforms. In our view there is strong conceptual merit

to moving forward with regard to classification pay and performance management reforms. The Federal Government has significant prior experience there, and I think we know what works and

what doesn’t work and can learn from those lessons.

We think it is critically important that in making those reforms

that OPM has to play a key leadership and oversight role to make

sure that people deliver on their promises and they are not abusing

their authorities. We also think it is critically important for the

Congress to play an active and ongoing role in connection with

monitoring any of these reforms efforts.

The second part of the proposal deals with labor-management relations and adverse actions and appeals. In this area, we believe

that Congress should move slower and possibly separately from the

classification pay and performance management reforms. We do not

have as much experience in this area and in fact some of the greatest experience that will be gained relate to the Department of

Homeland Security and the Department of Defense, and it might

well be prudent for the Congress to understand how those are implemented and to learn from the lessons there before moving forward with broader based reforms in that area.

A few other quick comments. The definition of emergencies with

regard to this particular section is very broad and is a matter, I

believe, of concern.

Second, there clearly will need to be an adequate pool of resources available for agencies to be able to modernize their infrastructure. And that is something that will have to be addressed.

Furthermore, to the extent that agencies moved to compensation

systems that might provide for additional amounts being paid in

the form of a bonus rather than a base pay adjustment that otherwise would have been paid in a base pay adjustment under the old

Civil Service system, I think it is important that they be given

credit for CSRS and Federal Thrift Saving Plan purposes for that.

That would require changing the law.

And last, I think the target date, as I understand it, on this proposed legislation is that the current system would expire in 2010.

My view is it is fine to have a target date, but I believe that there

should be a conditions based approach, that people should not be

able to implement these new authorities until they’ve met the conditions. All these government agencies may or may not meet the

conditions by 2010. So it is fine to have a target date. But in the

final analysis people shouldn’t be able to move forward unless and

until they have met all the conditions whenever that might occur,

whether it be before or after 2010.

Thank you very much.

[The prepared statement of Mr. Walker follows:]

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Mr. PORTER. Thank you, Mr. Walker.

I have a question, Ms. Springer, and I am going to read the question because I think it is important as we frame the meeting today,

because I think there is some misconceptions.

First question, are Working for America Act provisions identical

to the authorities provided DHS and DOD?

Ms. SPRINGER. The answer to that question, Mr. Chairman, is no.

They are not identical, particularly in the labor-management section.

Those are the parts that are most notably being dealt with in the

courts right now. So I don’t want to specifically address them. But

I can say that section is much, much smaller, much more limited

in the Working for America Act draft bill that we proposed.

The first section is—General Walker has sort of parsed it. That

deals more with performance and pay. It is more similar, and that

is the less controversial part.

Mr PORTER. Are we giving OPM authority to waive provisions in

Title 5?

Ms. SPRINGER. No, we are not, and that is an important question

to have clarification. The Congress is the only one that can change

that statute. OPM just carries out what is there. So OPM would

not have any ability to waive any part of Title 5.

Mr. DAVIS OF VIRGINIA. Will any employee lose pay because of

the conversion to the new pay system established under the authority of this act?

Ms. SPRINGER. The answer to that is no. No one’s pay will be reduced. This is sort of a forward looking type of arrangement in the

sense that from the point of conversion forward the pay increases,

not the change in the level of pay preconversion versus post conversion, but the increases themselves may be at a different pace or a

different amount than they would otherwise have been. But there

will not be a reduction in pay as a result of converting to the new

system.

Mr. PORTER. Now why should we move forward with this change

prior to having all the results back from DOD and Homeland Security?

Ms. SPRINGER. I can give you a very good case in point, and I

am going to answer this in two ways. One is as I mentioned, we

have 90,000 employees that we have looked to as we have crafted

this bill and the programs that they are under. These are programs, they are demonstration projects, they are programs that

span across an entire organization. They have been functioning,

some of them, as long as 25 years. That is where we’ve looked to

inform the construct of this bill, particularly the performance and

pay part. And we have done a lot of work there, a lot of surveying.

There are things that are working very well. By and large the employees in those systems would not turn the clock back to what

they were in beforehand.

Let me give you a case in point. A couple days ago, less than a

week ago, I had an e-mail that said to me, Director, we are losing

someone that we just hired 2 weeks ago to OPM. They are going

to go and take another position at an agency that is part of that

90,000 group because they could be in a pay band structure where

they had more upside potential for their pay. And as a matter of

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fact, that agency right on the spot could pay them a five figure salary higher than—more in their salary than we were able to give

them because of the constraints in the General Schedule. It happens time and time again. It is important for us to move on this

thing.

Mr. PORTER. One last question for clarification, and I know since

there is a lawsuit pending I want to be cautious in the question

and of course in the answer as you feel is appropriate.

But it is my understanding that the court injunction is regarding

OPM regulations, DHS and OPM regulations, not the law, is that

correct?

Ms. SPRINGER. I would have to find that answer out.

That is correct.

Mr. PORTER. Thank you very much. I appreciate that it.

Ms. Norton.

Ms. NORTON. Mr. Chairman, the court found that the regulations

are in violation of the law. That is the problem. And in light of that

problem, I must say, Ms. Springer, I said to staff to make sure that

you get me this testimony. And got this testimony. It is very thin

testimony, and yet you got an extraordinary opportunity and we

have no information about how this opportunity—at least from you,

about how this opportunity is being used. You have jurisdiction

over about 2 million employees, and if you count DOD and HHS,

that is running up 900,000-some, almost a million. This is a kind

of laboratory that frankly should be a perfect setting for you to

come back here and tell us what the most recent experience has

been. Nobody is going to leap into the next million without having

some greater sense of what has happened with respect to the first

million.

Could I ask you, and for that matter, Mr. Walker, who talks

about we have pay and classification experience, you must be talking about your agency, Mr. Walker. The whole reason that they are

before us is because this is brand new, would be brand new for

every section of the work force, beginning with those that we have

given the authority to, not to mention the rest. But I would like

to know what studies have been done, certainly by the GAO, and

if the studies haven’t been done, can you give us some idea of experience with these two agencies, which must have been a fertile

ground to gather the kind of information an oversight committee

needs before it makes the next leap and takes the whole work force

with it.

I tell you, I don’t know about you and faith-based, but this is too

big to put my faith in you or anybody in this government. And I

think we deserve to know what has happened so far in great detail

before you ask us to go the next step of the way, especially since

you’re already in litigation and you didn’t even mention that and

what you’re going to do about that.

Go ahead, Ms. Springer.

Ms. SPRINGER. Let me respond. There are several parts there.

One thing I do want to say is obviously we are not trying to hide

anything. We are not trying to give you a thin document. We have

in fact had 18 detailed briefings. We have had 34 hours of briefings

and with the House alone we have had 7 hours of detailed briefings.

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Ms. NORTON. Staff. Which staff?

Ms. SPRINGER. Minority, majority it was open, anybody was welcome.

Ms. NORTON. The purpose of this hearing is for the public record,

to let the Members know what is happening, to let the public know

what is happening. And I appreciate that you have told the staff

what is happening. Can you tell us what is happening?

Ms. SPRINGER. Sure. I just want to say that it is—for starters we

have not tried to hide anything. We have put this draft bill up on

the Web sites. We have been very accessible to staff. And as you

say, the purpose of the hearing, which we are very happy to have

today, gives us more of a public forum to do that. But we have been

out there—let me just expand on that.

The briefings have been with unions, they have been with good

government groups. They have been with employees that we have

had—it has not just only been with staff but I mentioned staff specifically because——

Ms. NORTON. Ms. Springer, were these briefings about the studies or results from the changes Congress authorized and that you

have begun to put in place in the two largest agencies in government? That is my question, not what were your briefings about.

Ms. SPRINGER. The briefings to a large degree were about this

bill and they were also about the results of the programs that have

been in place over the years. We have not briefed on the NSPS system because the final regs haven’t even been published on that one

yet. That is the DOD. So that is a work in progress, the final regs

are in the process, they will be out in the Federal Registry. We will

be more than happy to do discussions on that one, and even if

there was an interest in a dedicated hearing on that, that obviously

would be something we would welcome. But that has not been at

the point where it has been—even the final regs have been public

on that one.

With respect to the DHS, once that got into court it really constrained our ability to comment publicly on the portions of that bill

that are in question that are being dealt with in the court system.

So those have not been the focal points of the briefings that we

have done. Briefings have been more on the particular bill draft

that we have submitted for those reasons.

Mr. PORTER. Mr. Walker, you had a comment?

Mr. WALKER. Ms. Norton, I would like to answer your question

if I may. I would divide this bill into two parts, Ms. Norton.

The first part would be classification, pay and performance. It is

my understanding at the present point in time the Federal Government has 90,000 to 100,000 employees that are covered by broad

banding systems and by more market-based and performance-oriented compensation systems. And some of those go back, back to

the 1980’s, and it is not just GAO. As you know, we have 3,200 employees covered by that. So there is 90,000 to 100,000. I think

there’s a considerable amount of experience with regard to classification.

Ms. NORTON. I would like to draw your attention back to the

1980’s at the fairly higher levels of the agency involved.

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Mr. WALKER. You are correct in saying that we need to look at

the nature of the people covered by these and some are very technical and scientific.

Ms. NORTON. That is very important to say that, Mr. Walker.

Mr. WALKER. Absolutely, and I don’t debate that at all. Here is

my point. We have 90,000 to 100,000 of various levels and I think

the other thing that this concept includes is conditions that would

have to be met. By the way, these conditions were not in the DOD

and the DHS legislation. These are very stringent conditions that

would have to be met before anybody could move forward.

Ms. NORTON. Such as?

Mr. WALKER. Such as the conditions that you would have to be

able to demonstrate that you have a modern, effective, credible,

performance appraisal system that provided meaningful feedback

that resulted in meaningful differentiation in performance, that

you had adequate training to conduct to help people understand

how to implement that system.

Ms. NORTON. Are you saying those are not in the law and should

be?

Mr. WALKER. They are not in DHS or DOD. They are in the concept for this proposal. Again we don’t have a bill. They are in a

concept paper. And we have testified—frankly we have testified in

connection with DOD and DHS that those would have been good

to put in those bills but they weren’t. But they are in this proposal.

Second, in the second half I share your concern. The second half

has to do with labor-management relations and adverse actions

and appeals. And as I testified, we don’t have as much as experience on that. And we believe that it may be prudent for the Congress to consider what happens as a result of DHS and DOD before

you decide to move forward on that front.

So the first part, classification, pay and performance management, we think there is enough experience, we think there is a way

forward. And you can include work experience——

Ms. NORTON. There is enough experience from employees at fairly high grades and levels, technical employees, scientists, many of

them professionals that would leave the government if you mess

with them because they have, many, many options. There is

enough experience with 100,000 employees to now jump in and

take 2 million with us all at one time?

Mr. WALKER. Not all at one time. That is very, very important.

What is very, very important is—and first I would be happy to provide for the record information that we have about the nature of

that 90,000 to 100,000. I think it is a very legitimate question.

But what is important about this is that this basically would be,

as I understand it, conditional authorization. In other words, it

would authorize agencies to move to a broad banding system. It

would authorize agencies to move to a more market-based, performance-oriented compensation system. But they could not do it

unless and until they demonstrated that they had met certain conditions—not based on promises—based on results. And therefore,

as I say, I don’t think you ought to have an arbitrary date, 2010

or anything else, for getting rid of the GS system because you don’t

know what people are going to meet those conditions. You’re talking about a lot of people, and a lot of these agencies quite frankly

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have a lot of work to do before they would end up meeting those

conditions in order to move forward.

Mr. PORTER. Thank you, Mr. Walker. I appreciate it.

Ms. SPRINGER. May I add one other thing as well? We have a report that we will be glad to provide for the record as well on the

demonstration projects that cover these 90,000 to 100,000. We have

just finished it this week and would be glad to provide that for the

record.

[The information referred to follows:]

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Ms. NORTON. Thank you. That would be very helpful. Mr. Chairman, I do want to just note that the testimony that we received is

very important if we are looking at writing a bill that might get

through the Appropriations Committee and for that matter through

the Congress, and that is Mr. Walker’s testimony that a phased approach, a ‘‘Show me’’ approach, a condition-based approach, would

be the most prudent.

By the way, would you agree with that, Ms. Springer?

Ms. SPRINGER. Yes, and that is the way this act is set up.

Ms. NORTON. Do you think this act is—oh, you have only seen

the concept because we are trying now to find out how to do it and

I think that it is very, very important to make this palatable.

Mr. PORTER. As do I. Very compelling comments. Thank you.

Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman, and let me thank

both of the witnesses here this morning and thank you, Mr. Chairman, for your continuing oversight in this very, very important

area. It doesn’t get a lot of public attention, but I think it is very

important to the public and the quality of government that we

have.

Let me just first begin with breaking it conceptually into the two

parts that Mr. Walker has divided it into, on the one hand the

management reforms and pay for performance issue, on the other

hand labor-management relations and the adverse action provisions of the bill.

And a note on pay for performance. Again, the concept of pay for

performance—we have been over this ground before—is something

that I don’t think anyone can oppose. People should be rewarded

based on their ability to produce. The key is implementing that

kind of system, and especially within the government context

where you have lots of factors that are not present in the private

sector context and you have many different potential masters. And

I don’t mean to pick on anybody but if you’re talking about FEMA

and Michael Brown and what that kind of message sends in terms

of performance and the kind of individual needed in the job and the

kind of experience they need in order to carry out their job, what

kind of signals can that send out to their employees and can they

really believe they are going to be evaluated based on a fair judgment and based on their experience and qualifications to do their

job?

Let me just ask Ms. Springer if you would agree with just in

terms of approaching this major piece of legislation in a manageable way, one bite at a time, whether you would agree with Mr.

Walker’s suggestion that we might be better off taking this as two

separate pieces; in other words, let’s examine the pay for performance part and focus on that issue and not move forward with the

other provisions that are in the bill. What would you think of that?

Ms. SPRINGER. I think that is an option that could be considered

but having said that, I think that we have crafted the bill with the

thought that the two pieces do go together, and we think that they

both can be accommodated in a much, much reduced way from

DHS.

The one mistake we don’t want to make is to say this is DHS

revisited or NSPS revisited because that part is scaled down conVerDate 11-MAY-2000 11:16 Mar 20, 2006 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 D:\DOCS\25617.TXT HGOVREF1 PsN: HGOVREF1
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siderably. However, I personally, speaking for myself, think that is

an option that you know could be looked at.

Mr. VAN HOLLEN. I just note with regard to labor-management

provisions, I understand there are provisions in this bill that are

not the same as DHS and the Department of Defense. On the other

hand, as I understand, there are some provisions in this bill that

are actually potentially more expansive. Mr. Walker mentioned the

definition of emergency, which is, as I understand it, is the triggering definition for determining whether or not you’re going to continue to follow the labor-management provisions of the bill. And

the definition of emergency is broadened to include, ‘‘any situation

involving or potentially involving an adverse effect on agency resources.’’ It goes on to talk about increase in agency workload or

any budgetary exigency caused in whole or in part by external authorities. I can’t think of a single department in the Federal Government today that couldn’t claim that they were in an emergency

right now under that definition.

If you could respond to that.

Ms. SPRINGER. Well, there are technical people here who could

probably talk to the specific language better than I can, but the

purpose of this hearing, the purpose of our work with you, with

your staffs, is that we can refine those things in a way that deals

with concerns that you have.

If it is too broad, let’s look at it. If it is not immediate enough—

my understanding was that it was really intended to be for immediate situations where there is a need for immediate action, there

isn’t time to deliberate, what have you. But having said that, I am

not the technical expert. But if there are things we need to refine,

let’s look at them. The idea was to get a draft act on the table so

we could start to work together and get this thing refined.

Mr. VAN HOLLEN. I hear you.

Mr. WALKER. I agree it is too broad. And second, I think you

have to think about, in coming up with a reasonable definition of

what is an emergency, for what period of time is there an emergency. Is it envisioned that it is a limited period of time, or is it

something that is defined so broadly that it could go on indefinitely? I think, you know, that is a very important area and a very

problematic area.

Mr. VAN HOLLEN. And Mrs. Springer, I agree with you that part

of this process is give and take. But the problem is when you put

something in writing on the table like that it does send signals.

You have to build trust to move forward with this kind of process.

You have to build the trust of Federal employees who are about to

be subjected to the new rules. And when you put on a piece of

paper something that is just so broad it would encompass just

about any agency today, it creates a more difficult environment to

move forward.

Mr. Chairman, if I can just ask one last question with respect to

the phased in approach and the fact that you have the ‘‘Show me’’

test. Under the draft, or concept, what is—who are we showing? In

other words, is this a certification that is going to be made by OPM

as to whether or not the criteria had been met?

Ms. SPRINGER. Yes, that’s right. I just want to add one other

thing if I can with that emergency issue, I think hopefully we

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would all agree that there are legitimate emergencies in critical situations, assessable situations. I hope we’re not saying that there

is no such situation that could be addressed should we have a

labor-management component to the bill.

Mr. VAN HOLLEN. I understand. It is this definition, as I say, it

seems to reflect the current condition of every department in the

Federal Government.

Mr. WALKER. Can I suggest, Mr. Van Hollen, that you are correct

in noting that under this proposed draft legislation or proposal that

OPM would do the certification. I would fully expect that the Congress would want GAO to monitor OPM’s efforts and to report periodically with regard to the exercise of those.

Mr. VAN HOLLEN. I thank you for that. The red light was on so

after the answer I wasn’t sure but, Mr. Chairman, just on that

point. Clearly, there’s going to be a question about the—I think

from the Congress’ perspective given the nature of this, if we were

to move in this direction, it would absolutely be essential from our

perspective to have GAO overseeing or monitoring the reporting on

that.

Mr. PORTER. Thank you very much.

Ms. NORTON. May I ask one factual question?

Mr. PORTER. Yes.

Ms. NORTON. Ms. Springer, do you intend to appeal the Federal

court decision striking down major portions of the Department of

Homeland Security provisions on collective bargaining?

Ms. SPRINGER. I am not at liberty to comment. My counsel has

told me not to comment on that case.

Ms. NORTON. I hope at the very least it leads to some thoughtful—whatever you do. Because now you’re on your way to something that is probably going to just keep going because of litigation.

I hope that you’re not depending entirely on litigation but are looking closely at what the court said to see if there are things you can

to do mitigate the possibility of future suits like this in the future.

Thank you.

Mr. PORTER. Thank you. Thank you both very much. I appreciate

you being here today. Just know, Mr. Walker, that there is a band

on the hill with five Congressman, a bipartisan band. We need to

work on that James Brown song.

Mr. WALKER. It is a great song.

Mr. PORTER. It is a great song. Thank you. Thank you both very

much.

We have six witnesses left to testify. Actually, panel three and

four, and I think for the element of time, I’m going to try to bring

all six up—I know we’re a little limited for space—and possibly

share the mics. So if Theresa, Max Stier, Scott Gould, Mr. Styles,

Mr. Gage, and Ms. Kelley—I realize there are three chairs so that’s

going to be a real trick. We’re going to bring a couple more chairs

up. Maybe we’ll take about a 5-minute recess while we get things

situated. Thank you.

[Recess.]

Mr. PORTER. I’d like to bring the meeting back to order. Some of

the witnesses came late. I’d like to ask once again that we do the

witness and the oath. For those who weren’t here, is there anyone

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that—Colleen, you weren’t here. Anyone else that wasn’t here?

Please, if you’d raise your right hands.

[Witnesses sworn.]

Mr. PORTER. Please be seated. I’d also like to acknowledge that

fellow Member of Congress, Mr. Flake from Arizona, had planned

on being with us today, was unable to be here, and, without objection, I’d like to enter his comments into the record. Thank you.

Let’s begin with our third and fourth panel.

We’ll start with Theresa Shaw, the Chief Operating Officer of

Federal Student Aid, U.S. Department of Education. Welcome.

STATEMENTS OF THERESA S. SHAW, CHIEF OPERATING OFFICER, OFFICE OF FEDERAL STUDENT AID, U.S. DEPARTMENT

OF EDUCATION; MAX STIER, PRESIDENT AND CEO, PARTNERSHIP FOR PUBLIC SERVICE; W. SCOTT GOULD, VICE

PRESIDENT, PUBLIC SECTOR STRATEGY AND CHANGE, BUSINESS AND CONSULTING SERVICE, IBM GLOBAL SERVICES;

MICHAEL B. STYLES, NATIONAL PRESIDENT, FEDERAL MANAGERS ASSOCIATION; JOHN GAGE, NATIONAL PRESIDENT,

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES;

AND COLLEEN M. KELLEY, NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION

STATEMENT OF THERESA S. SHAW

Ms. SHAW. Good morning. Good morning. Much better.

Good morning, Mr. Chairman, members of the subcommittee.

Thank you for inviting me to testify today. I’m pleased to be here

representing Secretary Spellings, the Department of Education,

and Federal Student Aid, to share some of our successes in transforming our work force, elevating our performance, and delivering

tangible results.

Federal Student Aid has operational responsibility for oversight

in the administration of all of the Department’s Federal student financial assistance programs, and, as one of the government’s few

performance-based organizations, upholds high standards of operational efficiency, innovation, customer care and individual and organization performance. We are also provided certain managerial

flexibilities and authorities over personnel management, budget,

and procurement activities.

Prior to our establishment as a performance-based organization,

the Federal Student Aid programs were plagued with oversight and

management challenges, high default rates, and customers who

were not happy with the service they received.

In 1990 the Government Accountability Office found the Federal

Student Aid programs at high risk to fraud, waste, abuse, and mismanagement. Financial management and internal controls on the

programs were largely nonexistent, and unqualified audit opinions

were not attainable. In 1990, students loan default rates had hit

a high of 22.4 percent. Customer satisfaction scores were not even

measured. Federal Student Aid with its specific purposes, authorities, and flexibilities was created to effect change, and we are

transforming our work force and culture to be highly effective.

Mr. Chairman, I believe that delivery of results is the true measure of success, and I’d like to share how we have used our personVerDate 11-MAY-2000 11:16 Mar 20, 2006 Jkt 000000 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 D:\DOCS\25617.TXT HGOVREF1 PsN: HGOVREF1
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nel flexibilities and our progress on our work force and culture

transformation. Our hiring flexibilities allow us to fill critical and

time-sensitive resource needs faster and to pay salaries closer to

market rates for similar positions in the private sector. With this

flexibility, our average period to hire is 34 calendar days versus

200 calendar days for the most recently Federal hired career staff

subject to the usually competitive processes. We have used our hiring flexibility to hire staff with needed skill sets obtained in the

private sector, to augment the skill sets of our Federal career staff.

This marriage of private sector and Federal career skills, experience, and knowledge has been a great success. This hiring flexibility only applies to a small portion of our work force. Most positions

are filled by General Schedule and Senior Executive Service staff

and subject to the Title 5 competitive process. We recently worked

with the Partnership for Public Service to identify a better, faster

process for recruiting and hiring qualified Federal career staff.

If you take a look at the chart on the left, the standard staff hiring process had 114 steps, with more than 45 handoffs. In comparison, our new streamlined process eliminates nearly 50 percent of

the steps. The Working for America Act would provide even greater

efficiencies to this process. We have not focused on the hiring process alone to transform our work force and culture. We have

strengthened performance management and aligned individual performance with delivery of results. We have a process that recognizes and rewards differences in performance.

The results are in for us. In January 2005, the Government Accountability Office removed the Federal Student Aid programs from

its high-risk list. In March 2005, we achieved all green status in

improved financial performance on the President’s management

agenda score card. The Secretary recently announced a new alltime low default rate, 41⁄2 percent, and we have created innovative

contract solutions to optimize the investment of taxpayer dollars

and the return on that investment, saving taxpayers an estimated

$11⁄2 billion on two contracts alone.

Independent customer satisfaction scores for our flagship product, the electronic Free Application for Federal Student Aid, are

comparable to UPS, Mercedes Benz, and Amazon.com. Our high

standards and expectations for performance, our ability to hire,

manage, develop and reward employees, while being respectful of

our collective bargaining obligations, have enabled us to achieve

these and many other accomplishments.

However, we can do more. I envision even greater results with

flexibility such as those described in the Working for America Act.

Competitive market-rate compensation and pay increases, driven

by performance and delivery of results, will allow agencies to attract and retain the highest caliber staff. Managers who are

equipped to properly set and evaluate job performance in collaboration with employees will ensure fairness in the process. Trained

managers will deal effectively with poor performance. This is how

the private sector works, and it works for the private sector.

I’m honored to be part of Secretary Spellings’ team. On behalf of

the Secretary, the Department, and Federal Student Aid, thank

you for the opportunity to speak today. And I’d be happy to answer

any questions.

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Mr. PORTER. Thank you, Ms. Shaw. Congratulations. I’d like to

know what the 40th orange dot is.

Ms. SHAW. One of the handoffs.

Mr. PORTER. Thank you very much and congratulations. Appreciate your comments.

[The prepared statement of Ms. Shaw follows:]

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Mr. PORTER. Mr. Stier.

STATEMENT OF MAX STIER

Mr. STIER. Thank you. Thank you very much, Chairman Porter,

Congresswoman Norton, Congressman Van Hollen. It’s a great

pleasure to be here. Five minutes go quickly so I will speak quickly.

I want to recognize the great work FSA is doing under Terri

Shaw’s leadership. It’s really extraordinary stuff and it’s an honor

to work with her.

We start from the proposition that you started with, Chairman

Porter, and that is the status quo is not good enough. We can and

must do better for the Federal work force and for the American

people. And one important piece of evidence—this I think comes

from the employee surveys that you yourself cited, just to take

three quick snapshots. Less than half say they have a high level

of respect for their organization’s leaders and managers. I would

point out that this is across the board, from top to bottom on the

management side. Only one-third believe that the leaders generate

high levels of motivation and commitment in the work force, and

less than one-third agree that differences in performance are recognized in a meaningful way. I would note that is 25 points lower

than the private sector benchmark we’re looking at. This is a big

problem. It’s a big problem whether we’re looking at this legislation, a big problem we need to focus on beyond just this legislation.

We believe that the Working for America Act can be part of the

solution and ultimately needs to be a part of that solution but that

system changes alone will not fix the problem. And our first order

of business needs to be making sure that we focus on the overall

capacity of Federal agencies and Federal managers to better manage and create performance-oriented organizations. We believe we

need to invest now to create that management capacity because the

consequences are both significant externally and internally for the

Federal Government itself.

The Working for America Act, as has been pointed out by Congresswoman Norton’s questions and Congressman Van Hollen’s

questions, is the right approach. It’s very different from the reforms we saw for DHS and DOD. It is a ‘‘show me’’ proposition, as

Comptroller General Walker said, and essentially says that you

need to prove that you’re ready before you’re enabled to be given

these extra flexibilities.

That is the right approach, but it’s also a very important process,

we believe, because you can make these changes, get agencies

ready, but ultimately the kinds of flexibilities that are then available to these agencies will be very valuable. One of them that is

rarely focused on that deserves a little attention is the issue of

market sensitivity. It’s not just performance sensitivity that we’re

after, but the Federal Government needs to better compete in the

overall marketplace for talent, it needs to be able to offer the kinds

of compensation levels that are going to be able to attract the very

best talent in different geographic regions around different occupations at different levels. And that’s one of the provisions the Working for America Act provides for and we think is critical.

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We’re taking the committee at its word here, and we’re offering

several amendment suggestions as well. We believe that there are

three areas that we can focus most helpfully on in terms of improving this legislation. First and most importantly, focusing on that

management issue that I just discussed, we provide some language

in our testimony that’s appended that obviously is draft language;

but the basic concept is this legislation would be improved if we

understood better what is it that we are looking for in management

and government. And we asked OPM to essentially create the kind

of core competencies that we believe will be necessary for Federal

managers to succeed and then, very importantly, require agencies

to conduct audits, both of their overall capacity to manage, but also

against individual managers, and then develop plans that help

them identify ways to improve their management capacity, again,

both holistically as an agency and also with individual managers.

We believe that component should be made part of the certification

procedure and would be critical. We also believe that kind of work

can and should be done here and now even outside the context of

this legislation.

Second, we think that there is an increased need for focus to be

paid upon the HR function itself. If you look at the Clinger-Cohen

Act which came out of this committee, one of the very important

provisions was it focused on the capacity of financial—I’m sorry, IT

management staff, to be able to do their job and do it right. The

HR function is facing increasing pressure today in the Federal environment. We need HR managers that are HR professionals that

are going to be able to provide service to the rest of the agencies

in ways that are much, much more demanding than previously,

and they have faced an enormous cut over time. If you look at the

numbers, you have seen 20 percent reduction in HR professionals

during the 1990’s and we believe that therefore the provision we

provide there will help in that regard.

Third and finally, we think looking at employee attitudes is going

to be essential in understanding the consequences of these changes

and whether we’re getting them right, and therefore that the survey requirements that are currently part of law are very important,

that the provision that’s provided in this draft that would limit

some of or provide opportunities for limiting the survey requirements should be itself restricted to focus on the problem that we

believe is legitimate, and that is the one I’m focusing on in making

sure that small agencies have the option or, rather, that the OPM

Director has the option of limiting their obligation for surveys on

an annual basis.

Thanks; 5 minutes.

Mr. PORTER. Good job. I appreciate the fact that you have provided for us some suggested improvements and/or changes, and I

would encourage all those that are testifying today that as you

have ideas and suggestions, by providing them as you have, this is

very beneficial to the process. Thank you.

[The prepared statement of Mr. Stier follows:]

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Mr. PORTER. Mr. Gould.

STATEMENT OF W. SCOTT GOULD

Mr. GOULD. Mr. Chairman and members of the subcommittee,

thank you for the opportunity to offer joint testimony today. I’m a

vice president at IBM Corp., and my colleague, Professor Linda

Bilmes, is a member of Harvard University’s faculty. Together

we’ve been working on a book entitled, ‘‘The People Factor’’ for

Brookings Institution, to be published next year. We’re happy to be

here this morning to share with you some of our preliminary findings and conclusions at this stage of our research.

I’d like to offer three main points this morning. First, we agree

with those who advocate major changes to the current Federal personnel management system. The reasons are straightforward. It no

longer fits much of today’s government work force. It defers managers from bringing in the talents government needs, it chokes the

system with red tape, and in some cases it creates counterproductive competition between government agencies for certain

personnel.

While we agree with these arguments, in our book we have tried

to put forward a positive rationale for why the Federal work force

will perform better if it is reformed based on our empirical findings. We have developed a method to calculate the benefits to government of personnel reform, using a new formula we call return

on taxpayer investment [ROTI]. We have also developed a method

to estimate the cost of implementing a modernized personnel system and we believe the benefits will outweigh the costs by a wide

margin.

My second major point: For the most part we agree the WAA

contains many necessary changes to the Federal personnel system.

However, these changes alone are not enough. As discussed more

fully in our written testimony, we suggest the following elements

are necessary in the system for managing the 21st century work

force: a workable pay-for-performance system, significant management training and education, a market-responsive competencybased job classification system to replace the General Schedule system, improved hiring practices, a secure and reliable funding

source to support successful implementation, and finally, the

means for easier movement of talented individuals between the

public and private sectors.

My third main point: We encourage those responsible for modernization of the personnel system to anticipate and prepare for the

substantial implementation challenges posed by the Working for

America Act. This is the area that we want to emphasize most in

our remarks this morning, the need to take reasonable steps in advance to enable government managers to implement successfully

the reforms envisioned by the proposed legislation.

These steps should include the following: an active consultation

and involvement strategy, two-way dialog. Active involvement and

participation by managers and employees at all levels in the organization, in my view, are essential.

No. 2, extensive training. Training people on their new duties

and responsibilities is essential to build competence, and, I would

say, instill confidence in the new system.

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Three, employing a step-by-step change management process, including the use of new systems.

Four, dedicated resources to support successful implementation

of a new personnel system. This will require sufficient dedicated resources from inside government and, in most cases, guidance from

experts who have done this before. This is not a time for learning

on the job or undercapitalized efforts.

Finally, time to effect the change. In addition to extensive training and coaching, Federal managers will need time to adapt, and

so will our employees.

In conclusion, Mr. Chairman, I’d like to associate myself with

your introductory remarks. We must remember that public servants make possible the millions of individual transactions and relationships that serve the people of our country. They provide the essential capacity of government to serve its citizens and they implement largely the laws that Congress creates.

The change envisioned by this proposed legislation asks a lot of

our government employees. In return, leadership must do its utmost to earn and keep mutual trust, respect, and accountability

with these employees in order to succeed. This must include consultation with all the parties, extensive training, resources to fund

the effort, and time to make a successful adjustment to the new

system so that we do not jeopardize mission performance along the

way. Thank you.

Mr. PORTER. Thank you very much. When will you your book be

completed?

Mr. GOULD. In the summer.

Mr. PORTER. Thank you very much.

[The prepared statement of Mr. Gould follows:]

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Mr. PORTER. Mr. Styles, president, Federal Managers Association.

Pardon me. Before you begin, I would exercise caution for those

folks on the labor side in that you have a lot of allies here today,

and you’re hearing a lot of comments that probably concur with

some of your thoughts. Having read some of the backup material,

I would encourage you to temper some of those thoughts because

you have a lot of supporters here today, and just exercise a little

bit of caution.

Mr. Styles.

STATEMENT OF MICHAEL B. STYLES

Mr. STYLES. Mr. Chairman, Ms. Norton——

Mr. PORTER. I don’t believe your mic is on just yet.

Mr. STYLES. Is that good?

Mr. PORTER. That’s good. Thank you.

Mr. STYLES. Good morning, Mr. Chairman, Ms. Norton, Congressman Van Hollen. It’s an absolute pleasure to be here with

you.

I had remarks that I was going to read that were excerpts from

my testimony, but given the fact that we may not have enough

time to answer questions in the fullest, I’d like to at least point to

some issues that I think are important that would be part of a

question-and-answer period perhaps.

I appreciate the comments that have been made thus far, but I

also think that it should be noted that as we’ve moved into this HR

modification process in all agencies, as we talk about the Working

for America Act, to continue on with the things in DHS and DOD,

I think we’ve started out in a negative mode. What we’ve started

to do is talk about how the managers in the Federal work force

can’t manage effectively, how the work force has an awful lot of

nonperforming individuals who get increases automatically. I think

these are fallacies, and I think that we should readdress our focus

and we should start to approach this process with a positive rationale for the development of a new system, taking into account those

negative aspects of the systems that we’re working under today.

First of all, I believe in the empowerment of managers and employees so that we can bring about innovative changes within our

work forces. I believe that we have been involved, and you just

watched a cycle time management demonstration right behind me

that I thought was excellent, but those of us who have been managing in the Federal work force have used cycle time management

and total quality processes for years. So I think it’s important that

the reputation and the image of the Federal employee is recognized

for what it is. We touch everything that happens every day in

America, and we do a darn fine job at that, and I applaud everybody in this audience for their job and I thank you for your original

comments.

We also heard from Congressman Van Hollen. He said that we

have to build trust if we’re to move forward. That can only be done

if we have a collaborative effort that’s being put forward by the

labor folks, management, the legislature, and the executive branch.

Certain concerns that we have as we move into this new era. We

have myths that have to be debunked. The private sector does not

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manage better than the Federal sector in all instances. We can

learn from each other in very many ways. Each agency can learn

from each other.

Workers are more efficient in the private sector? I don’t think so.

I think, once again, we have a balance here that we have to look

at. Our workers are pretty darn good. FMA represents managers

and supervisors across 35 different agencies, and I’ve had tremendous pleasure over time, 16 years of that time as president of the

FMA, to go to all of these agencies and see what we do in America,

day in and day out, and I am very proud of what we accomplish.

Points to bring out before my 5 minutes are up. If we are going

to move forward, obviously funding for training is essential. When

I talk about training, training for bringing into place new HR systems. And, by the way, we need training for the HR systems that

are in place. We haven’t had enough training, it isn’t ongoing, and

one of the reasons is because funding hasn’t been provided for us.

That funding, in our eyes, should be fenced. You should not be able

to go out and use training funds as a discretionary fund for some

other aspect of business. Agency oversight of expenditures has to

be taken into account and tracking of training so that we ensure

all personnel are trained. We can’t allow those training dollars to

be stolen from—and I have here, Peter to pay Paul.

What we’ve already seen in demonstration programs across the

country is the fact that we haven’t given them extra money to provide training, we’ve just given them training dollars. And now suddenly they don’t have the same amount of funding for safety and

security training, for instance.

Pay for performance. We already have pay for performance, but

people don’t seem to recognize that. It’s kind of an ironic thing. We

do have a process to provide people with—my time is running here.

OK.

In order to be effective in pay for performance, we have to make

sure that we fund for the raises, whether we’re in our system or

another system, and I think it’s a fallacy, as I said before, to think

that folks automatically get pay raises, because nonperformers

don’t have to get a pay raise in our current system either.

Do I think that there are merits to our proposal, Working for

America Act? I do. I think market-based pay is essential if we’re

to move forward and be competitive in the marketplace. But, just

to quickly say this before time goes out here, an example, what we

do now is take a GS–11 and GS–12 and make a band out of it. We

take a 13 and 14, make a band out of it.

I thank you very much. Maybe I’ll get a question on that later

to finish that out. Thank you for your time.

Mr. PORTER. Thank you, Mr. Styles. I appreciate your comments.

The success of the current system or the future system rests in

your hands as long as it’s funded properly and you have the proper

training to work with. So I concur.

[The prepared statement of Mr. Styles follows:]

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Mr. PORTER. Mr. Gage is the president of the American Federation of Government Employees.

STATEMENT OF JOHN GAGE

Mr. GAGE. Thank you, Mr. Chairman, and Ms. Norton and Mr.

Van Hollen.

Mr. Chairman, you have entitled today’s hearing, ‘‘Mom, Apple

Pie, and Working for America: Accountability and Rewards for the

Federal Workforce,’’ and asked me to comment on the proposals.

Working for America, mom, apple pie—based upon our union’s

experience with the congressional debates over personnel changes

in the Departments of Homeland Security and Defense, we certainly hope that the proponents of this legislation do not mean to

portray those who might oppose it as working against America in

an opposition to mom and apple pie. We certainly hope that a reasoned discussion of the merits will take place and that one’s position on pay for performance and the destruction of union rights and

due process will not be framed as yet another measure of loyalty

and patriotism.

Should Federal employees be forced to compete against their coworkers for a salary adjustment? Should Federal employees have

to wonder from year to year whether a supervisor might decide he

or she needs a pay cut?

Mr. PORTER. Excuse me, Mr. Gage. If I may interrupt for a moment. I personally take exception to those comments. And as an individual that for 20-plus years has worked closely with the employees of local, State and Federal Government, I take exception when

you would comment that we be against those and would not believe

that they’re American. So I take exception to that. Please understand this committee is here to have a fair hearing on the proposed

structure of pay for performance, or whatever it is that we conclude

at the end of the day. But, please, I do take exception.

Mr. GAGE. Thank, you Mr. Chairman.

Mr. PORTER. Excuse me, Mr. Gage. As for the balance of my committee and this Congress, there are people that are working very

hard, trying to work with you to make sure that employees—we

have the best and brightest that can take care of our customers,

and that’s the taxpayers.

Mr. GAGE. With all due respect, Mr. Chairman, we’ve been

through this before with Homeland Security and DOD. I just want

to note that we didn’t think those discussions were very fair. And

I do appreciate that this will be different, but I thought it would

be appropriate that we mention that because we have been through

it.

Mr. PORTER. Again, Mr. Gage, we have a meeting later on today,

and I think we can finish this discussion at 2 o’clock. On behalf of

this body and this committee I do take exception to those comments.

Mr. GAGE. Thank you.

Should Federal employees be prevented from access to their

union-negotiated agreement procedures when they have evidence

that a supervisor’s evaluation of his performance is inaccurate?

Should Federal employees be denied to have an unfairly imposed

penalty overturned after an unbiased third party has decided the

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penalty was unwarranted? Should Federal employees be forced to

work as probationary employees for 3 full years, without any rights

on the job at all? And should Federal employees who work for the

Federal Government be forced to trade a pay system that sets their

salaries according to objective factors such as job duties and responsibilities, and adjust those salaries according to objective market data for one in which supervisors decide their salaries based

on personal assessments of their personal qualities or competencies? Should these employees trade salary adjustments based

on data collected by the Department of Labor’s Bureau of Labor

Statistics for so-called market surveys conducted at the discretion

of local management by whatever private outfit the manager chooses? And should Federal employees who vote for union representation and pay union dues be denied the right to collective bargaining

on anything except issues management decides are foreseeable,

substantial, and significant in terms of impact and duration, including such issues important to every employee, as work schedules, travel, overtime, fair promotions, career development and

training?

Our answer to each of these questions is an unequivocal no. And

that is why we urge you to reject the proposed legislation.

The employees AFGE represents want their voices to be heard in

the development of any new pay system, especially on fundamental

issues such as the classification methods, criteria and systems

structure, the way base pay is set and adjusted, and the rules of

pay administration, including policies and procedures for something as complex as pay for performance.

The administration’s draft legislation extinguishes the voice of

workers who would actually be paid under the new system. There

is no provision for any collective bargaining at all with regard to

the development of the new system, despite the fact that, across

the board, participants in demonstration projects maintain the only

way such systems have any degree of legitimacy, support, or fairness is if these issues are addressed in collective bargaining and

worker protections are written into a fully enforceable collective

bargaining agreement.

The administration’s bill is not about either rewards or accountability; indeed, it would eliminate several mechanisms for holding

agency managers and political appointees accountable for how they

treat the Federal work force in terms of the way that work force

is selected, retained, disciplined, terminated, managed, and paid.

Although the administration contends that the merit system

principles will be upheld if its legislation is enacted, there’s almost

no way for Federal employees or others to obtain information to

confirm or disprove this.

Mr. Chairman, I think what I’d like to conclude on is that we

think there can be changes in this system. We have suggested

changes in this system. But for this system to have any credibility

and be transparent, taking away union rights, employee rights,

Civil Service protection, starts off on the wrong foot. And I hope

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that in further discussions we can make this a much more positive

experience for Federal employees instead of what it is being seen

out there by Federal employees now. Thank you, sir.

Mr. PORTER. Thank you, Mr. Gage.

[The prepared statement of Mr. Gage follows:]

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Mr. PORTER. Ms. Kelley. Save the best for last. Appreciate your

being here today.

STATEMENT OF COLLEEN M. KELLEY

Ms. KELLEY. Thank you, Mr. Chairman, Ms. Norton, Mr. Van

Hollen.

Mr. PORTER. I don’t think you’re on just yet, your mic.

Ms. KELLEY. Does that work?

Mr. PORTER. That’s working. Thank you.

Ms. KELLEY. Can you hear me now?

In anticipation of the proposal from the administration, I have

been talking to NTU members across the country of what we expected would be in this proposal, and I can tell you that they are

very concerned and opposed to many of the provisions.

In anticipation of this hearing, we conducted a survey of our

members just over the past 2 days, and I wanted to share with you

the results of the survey.

We have a chart over here. Our survey shows conclusively that

mom and apple pie lovers who work for the Federal Government

are overwhelmingly opposed to the proposal that is being put forward that would change the personnel system across the government.

NTEU has serious concerns and objections to the administration’s proposed governmentwide changes, and they fall into two

main categories: The first is that despite the administration’s comments to the contrary, the proposal would make numerous, substantial, and detrimental changes to employee rights in the areas

of collective bargaining and due process.

And, second, the proposed pay system is unacceptable on several

grounds, including the fact that it is not seen as fair or transparent, nor has it been tested.

Employees who perform superbly will have no reliable expectation of pay increases. It is excessively complex and will require

huge increases in funding to administer. Its references to holding

managers accountable have no foundation in the statutory language, and it will thwart rather than promote the teamwork that

is necessary to advance the missions of the agencies.

With regard to the labor management provisions, there have

been a number of discussions already around the new definition of

emergencies. I would just note that the current law already provides great latitude to agencies to act without regard to collective

bargaining obligations in emergencies. NTU does not object to that.

What we do object to are the new definitions that have been discussed that were read from the record by Mr. Van Hollen, and, I

would also add, one other set of language in here. It talks about

the agencies’ ability to preclude bargaining when they are preparing for, practicing for, or preventing any emergency. Now it seems

to me if you are preparing, preventing, or practicing for, you are

not in an emergency; and therefore, this language should not apply.

The administration’s proposal also limits employee due process

rights in a number of significant ways. Just one example is a new

standard that is being proposed for the mitigation of penalties by

the Merit Systems Protection Board. Today, if the MSPB finds a

penalty unreasonable, it can direct it be changed. This new bill

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would change the standard to totally unwarranted, rather than unreasonable, and this proposal is very similar to language that we

see in the DHS regulations, and that language is wholly without

justification.

Now as we all know, that provision has been struck down by the

U.S. District Court in NTEU et al. v. Chertoff. I find it hard to believe that the administration wants to pursue this provision when

one so similar has already been ruled illegal.

The administration’s bill would also expand the untested and

complex pay model from DHS and DOD before it has ever been implemented or tested in these agencies, and there is no evidence

that this model will increase recruitment, retention, or performance. And in fact, similar models have shown negative results.

At the IRS, while employees represented by NTEU are not covered by a pay banding system, the managers there are, and the

IRS hired the Hay Group to do an evaluation of that system and

this is what they found. Here are the results: 76 percent of covered

employees felt the system had a negative or no impact on their motivation to perform their best; 63 percent said it had a negative or

no impact on the overall performance of senior managers; only 25

percent of senior managers agreed that the system was fair, and

increased organizational performance was not attributable to the

system.

Now, under the administration’s proposed pay system, there will

be many changes in how adjustments of any kind will be provided

to employees. There are a lot of new terms to be learned, range

rates and maximums and minimums, and there is a lot of language

in the proposal that says the director may establish this or the director may provide that pay raise. But at the end of the day, when

you apply this new language, it is very likely that an outstanding

employee could receive no locality adjustment because their occupation was not given an increase. Because of the new definitions

around pay pools and the authority of the director, who may do

this or may do that, it is very possible that top performance would

not receive a pay performance or a performance pay adjustment because their pay or their occupation may be determined not to have

contributed significantly to the mission of the agency, even though

they are a top performer in their occupation and doing what they

need to do to excel.

Now, assuming there is adequate funding to pay for performance

increases, which I think is questionable at best, there are a lot of

questions about managers who are having difficulty applying the

current structured system today and having to move to a more

vague, undefined system that employees will have no confidence in.

If I could just summarize for a few seconds here, I would suggest

that the things NTU and our members believe are important to the

success of the agencies and a new system are leadership; that rules

and systems don’t motivate people; leaders do; opportunities for

employees to have input into decisions that affect them and the

functioning of their agencies—they have good ideas that are currently being ignored; and a fair compensation that has credibility

among employees, promotes teamwork, is adequately funded and is

not administratively burdensome, as is being defined in this new

system.

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So unfortunately, we do not see the system as meeting these

standards. But, again, I very much welcome the opportunity to appear before you today, look forward to working on changes that can

be made that would be fair and appropriate, and to answer any

questions you might have. Thank you.

Mr. PORTER. Thank you very much.

[The prepared statement of Ms. Kelley follows:]

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Mr. PORTER. I’d like to ask, Mrs. Kelley, possibly we can chat

some time as to maybe a blueprint that you would suggest. I say

this, taking lead at Mr. Styles from a positive perspective. I would

assume you would concur that the system needs some change,

whatever it is. We may disagree on what that it is, but it’s a system that’s been in place for 50, 60 years. Today is not necessarily

the time, but this is a draft, and I would encourage that we could

sit down and come up with some positive ways to work on a system, a new and improved system. I realize it’s not a question. I just

look forward to working with you for some ideas and a blueprint

you would suggest.

Ms. KELLEY. I would welcome that opportunity. But if I could

add, Mr. Chairman, I do not think the current system is perfect,

but I believe what is wrong—where the current system is the implementation of it, not so much the system. So my worries are really magnified when I think about a vague, undefined system and

having to implement that, when there are so many problems with

implementation of the structured system in place today.

Mr. PORTER. I would expect you have heard this morning, not

only from some of the panelists but the subcommittee, that we

have similar concerns. Thank you.

Again, we always like to pick on manager styles. I follow your

lead again and ask for comments from Ms. Shaw.

On a positive side, you have had such great success and we’ve

been hearing this morning of the pros and the cons, and certainly

a lot of cons have been brought out, but how does it work, how did

you do it? Share with us how you had such great success, because,

based on what I’m hearing from some folks this morning, is that

it can’t work and it hasn’t been successful.

Ms. SHAW. Well, it can and does work. It’s worked for Federal

Student Aid. I’d like to say for the record here, all of the accomplishments in the Federal Student Aid Office at the Department of

Education have been made by our incredibly dedicated and talented Federal career staff at all levels. We have just under 1,100

employees and those are the people who did all the work for these

accomplishments.

I would say that what we have been able to do, we do have some

flexibilities afforded to us in our performance-based organization

statute. We’ve been able to use those, and particularly the hiring

flexibilities I described. But also I need to add that we’ve been able

to work very diligently with what—the other processes and procedures that are already in place.

We’ve heard some of my panelists up here talk about the system

that we have today is difficult for people to administer. It is. We

have focused on that very diligently. We have a host of training for

our supervisors, new supervisors, employees, around performance

management and how that could and should work, and we just

keep at it.

We don’t expect change overnight. We’ve been working on this

during my tenure, for 3 years. And there is an organizational and

operational and people readiness around change. And we have been

working that with a very focused plan around our work force management. We have a strategic plan around that, and it is working.

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I’m not here to say it’s perfect, but it is working. We are delivering

incredible results for the Department and for taxpayers.

Mr. PORTER. Thank you. I think I said earlier, and I would concur with your comments that we truly have some of the best and

brightest working for the Federal Government. With proper funding, proper leadership, and proper training, I think we certainly

could emulate what your success is also. So with that, I’d like to

just remind the subcommittee we have about another 30 minutes

for questioning. I’d like to open it up for questions.

Ms. NORTON. Thank you very much, Mr. Chairman.

Let me begin with Ms. Shaw. First of all, let me congratulate you

on the vast improvement in the student loan program. The taxpayers are happy, and I’m sure that the consumers, colleges and

universities, and particularly students themselves.

I just want to note for the record that the Washington Post did

run an article this summer in which it talked about thousands of

civil servants leaving the Federal Government, and that OPM led

the list, 21.8 percent. So they wanted to seek employment elsewhere in the government. The high rollers were the OPM, Homeland Security, Defense—these are all percentages—and, surprisingly, OMB. I guess they’re tired of cutting people’s budgets or

something. And the Education Department was among the high

rollers.

I don’t think that takes away from what you have done. I’ve read

your testimony carefully and listened to you, and as best I can tell,

there are two major factors responsible for your success. First of

all, the problems with the agency were attributable, it seems to me,

to two bodies. One is this body and the other is the management

of the agency. And when you describe what you have been able to

do, essentially put in place whole new systems so that you have

tackled the high default rate, that didn’t have a thing to do with

employee performance. That had to do with the management of the

agency.

Unhappy customers. That had to do with the shocking performance of the agency. And its customers were, of course, the colleges,

universities.

Financial controls. That didn’t have anything to do with anything, except how managers, in fact, enable an agency to run.

Then you go on in the second part of your testimony to indicate

how you did it, and one of the things you stress—and I appreciate,

and I’m not sure there would be much exception taken to what you

did in hiring—if we were in fact to streamline our hiring. And you

talked about hiring 70 senior managers and professionals with the

right skills who were needed to work with the Federal career staff.

Your career staff is still there. The same folks are still there who

everybody was complaining about, and I know exactly what that

process is about. When I came to the EEOC, the people who took

the flak were the investigators, were the people who had to deal

with the public. What needed to happen was a whole new system

needed to be put in place.

With all due respect and for all the credit you must be given, I

must say that you show what can be done with the present system,

with the present pay system, with the present—absolutely everything else. We didn’t do anything to you the way we did to OPM

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and to DHS. You made the present system work. I think everybody

needs to get in there, first and foremost GAO, and find out how by

putting in new systems you were able to get the same civil servants to give you far better performance. Has there been a GAO

study of what you have been able to achieve?

Ms. SHAW. Well, GAO was in for practically a whole year before

they took the Federal Student Aid programs off the high-risk list,

and they studied us from top to bottom.

Ms. NORTON. But they were studying, of course, the very things

you report in your testimony.

Ms. SHAW. They studied—one of their particular focus points was

around our work force management and how we were caring for

our staff, growing our staff, focused on performance, focused on the

challenges that face every agency with succession planning, the

aging work force and planning for the future. They actually spent

an incredible amount of time with us on that.

And I don’t disagree with you, and I remarked to the chairman

that we worked very diligently to do better with what we did have

in terms of process, procedure, and program and systems. And I’m

not going to deny it does take leadership, not only from me, but

from every leader and manager in the Federal Student Aid Office;

and for my office, that’s around 150 people. I meet with those people once a month, all together, and we talk about these kinds of

things: How are we going to elevate our performance? How are we

going to solve for this problem or that problem with what we have?

How are we going to use the flexibilities that are afforded to us in

a very smart and managed way and with purpose, with an end result in mind, and be able to, of course, correct as we go to inform

ourselves with things that maybe weren’t working so well? How are

we going to change that? So it’s a combination of all of those things

together, you’re absolutely right.

Ms. NORTON. Thank you. I think this neglected notion of how

management transforms, rather than workers from the bottom up

transforming agencies, could not be more important. And I don’t

know the extent to which it’s reflected at all in our bill.

I do have a question really out of—really to ask the experts who

have been looking at this. With all due respect to you and the work

you have done, because I think your work, Mr. Gould—and, I’m

sorry, is it Mr. Stier—is very important to us to get, by people who

think from outside the government. But you are not helping me

enough to meet the intellectual challenges that I think we are

posed with.

Let me just put the hard question to you as far as I’m concerned.

First you have to ask yourself why would anybody set up a system

like this. Why would anybody set up a cumbersome, unwieldy system for hiring people, when we live in a market society and everybody else out here gets paid basically to the extent that they can?

And of course, this is overblown, this whole notion that everybody

in the private sector gets paid based on merit, and everybody sits

down and goes through these exercises. But let’s leave that for a

moment. Why are we in such a system? All of this talk about market-based doesn’t phase me at all, because I don’t work in that system.

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If I ask myself these two hard questions, I come back with these

answers. We have this system for this unique work force for two

reasons: One, when there was a market-based system—if you will

forgive me, before there was a Civil Service system, there was

wholesale favoritism and fraud that so disgraced the government

of the United States that the Civil Service system was created. Second, over the years, as a result of cases brought in the courts, the

courts have been forced to face the fact that this is a system to

which Constitutional protections of due process apply.

Now, unless you can help me get through those two major issues,

you can’t—the rest of this I already know and accept. Therefore, I

need to know, giving you the two great challenges I see we face,

how you would deal with a section of the present proposal, for example, that gives so much flexibility to pay that if an employee

happens to be in the wrong pay pool, the pay pool which the supervisor has decided in his discretion it should not have, that group

should not have the same kind of increases that others have, even

though that person has worked their fanny off trying to hold up

their end of the bargain. That person is out of luck.

So if you can help me get through that, you would have helped

me. Or if you can help me get through this, you have helped me.

We’re talking about pay for performance. Now, we’re talking about

pay for performance so far in a bill that would—and, again, the

chairman could not be more right, it’s not a bill. We know what the

administration has proposed, but we have not disposed yet; and the

chairman is trying to find out what is the best way to do this.

But look at what it would do. Performance on which your pay,

your life, sir, depends, for all intents and purposes, not to mention

you might be out of the government altogether based on this performance. That doesn’t have to be in writing, can be set—if the particular supervisor decides, or the agency decides, it can be for the

team, performance for the team, it can be for the organization; in

fact, it can take any darn form you want it to take.

Now, I’m talking about a 2 million work force Federal Government, and I’m talking about the structures we’re talking about, and

you don’t help me unless you can help me get through those kinds

of circumstances; because I guarantee you this, gentlemen, this system, as the administration has now given us, is a bonanza for lawyers, but it won’t do anything for the work force, because you’ll be

litigating this over and over again.

And I’d like your answers based on those two examples.

Mr. STIER. Congresswoman Norton, system change alone is not

going to fix our problems here. And as President Kelley said, implementation issues are vital, and that is part and parcel of our recommendations here; that we focus now, irrespective of any legislation, on making sure that we help the Federal Government improve its performance by focusing on management capacity, on

training development and a variety of other issues. That has to be

dealt with here and now, and I think the function you’re performing here in the oversight role will be also vital to making sure that

the Federal Government gets the resources it needs and also focuses the attention that it needs.

Ms. NORTON. Would you agree, for example, before you went to

any system that said you can pay based on that, that you ought

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to experiment with that in a sufficient number of folks before

spreading it throughout the work force? Would you agree that before you decided that there should be flexibility to pay performance,

on which everything is based, could be any darn thing you say it

should be at your discretion? Do you believe those things should be

implemented only after it has been shown they produce fairness

and that they survive due process constraints under which the government of the United States, even its work force, must operate?

Mr. STIER. I would agree with you 100 percent. I think the Working for America Act does this. Agencies should not be given additional authorities and additional flexibilities until they can show

that they can use them effectively. And that is, I think, a very important component of this legislation.

You asked the question why would anyone set up the system

that we have here today? And I would argue with you that all of

the issues that you raised can be addressed in a very different system, a more streamlined system. I don’t think anyone set up this

system, I think it grew topsy-turvy over time. I think it grew because there wasn’t sufficient focus from the top of the house down

on making sure we had a system that was enabling people inside

government to do their jobs effectively.

I think all of your concerns are absolutely legitimate in that

there is no doubt that the public sector is a different environment

than the private sector. There are different concerns and there are

different needs, and it would be a mistake to believe that any system that is the best in the private sector could be translated fully,

as is, into the public sector.

That said, I believe there is enormous room in the existing system to permit Federal workers to be in an environment in which

they are supported more, they’re rewarded more, not just financially but in recognition for better work. I think that would enable

Federal workers to do more and do better. I think there is enormous room to permit the system to allow it the flexibility to hire

people at rates that reflect the overall talent war that’s out there.

When the Federal Government is looking for people, it’s competing against all other sorts of organizations and different sectors,

and I think that’s what the Working for America Act should be designed to do. And I think there is room here for it to do that.

I look forward—I think that there are individual places, a lot of

places where it can be improved. I think that the chairman’s question to President Kelley is a great one. I believe that there is going

to be unanimity that we can do better, and the real issue will be

identifying ways to make that happen.

Mr. PORTER. Thank you very much. Mr. Gould.

Mr. GOULD. My view is the system was created 50 years ago

when Frederick Taylor reigned, and the nature of the mission challenges the government faces today have changed substantially:

faster cycle times, greater threats, the evolution of terrorists in the

world, plagues that can travel the globe in a matter of hours on an

aircraft. We need people who think, act, and move differently in

the system and a system that will support that.

I offer that as a mission-base perspective at the same time that

I acknowledge your very astute point on what part of the system

do we need to preserve the merit-based components, protecting

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from undue political influence, and recognizing the core fact that

government is spending other people’s money, the taxpayers’

money. We’ve got to find a way to do that efficiently and effectively.

Mr. PORTER. Thank you. We just have a few moments left.

Ms. NORTON. I want to say, Mr. Chairman, that one thing that

this hearing has done for me is to indicate where emphasis has to

be. Certainly it’s not on these bottom-line notions, all that you have

just said about the need for upgrading the system or changing even

substantially a system after 50 years. You get everybody agreeing

with that in the whole Congress, and that will get us nowhere.

What in fact we need to do is, and Ms. Shaw has helped us immensely by showing us the difference between hiring where the

flexibility does not implicate due process in nearly the same way,

to some extent, but not nearly in the same way; that streamlining

can work; and that you can use hiring as part of the overall system.

But her testimony also shows us, and everybody needs to look at

what she’s done, because she did it with what was in place. And

no one here has talked about what is in place works good enough,

or is all of that to be disposed of? So I would ask us to focus on

two things, because those are really the only two things that matter here: performance and how we measure that; and pay, and how

you arrive at how pay is done. Everything else is secondary or tertiary. Thank you.

Mr. PORTER. Thank you very much. Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman. Thank you all for

your testimony.

Thank you, Mr. Stier, for what you do at the Partnership for

Public Service to recognize the many achievements of our public

employees. I thought that the reception that you had the other

evening, recognizing those public employees, put exactly what we’re

talking about here, the importance of the positive forward and the

incredible achievements of so many of our public employees.

So often, I think, to the American public you have this image of

faceless bureaucrats, and I think that’s compounded by the fact

that people often are critical of the Federal Government without

knowing what they do and the complexity of the services they provide. So I think that recognition is important, and I thank all of

you for coming to testify in that spirit.

I would also like, Ms. Shaw, to congratulate you on what you

have been able to do, and part of what does come out of this conversation is the leadership of the manager is important, and it’s

also important to support the managers with the resources they

need both in terms of training, so we have trained managers, and

that they have the resources they need to provide the incentives

that we need to deliver.

We’re having this discussion outside sort of the whole budget

process, but I think we all have to understand it’s easy to say we’re

going to provide the resources, but I can tell you, around here providing resources for this kind of critical function has been very difficult to get.

So I hope that everybody will be just as unified in calling for

those additional resources and not supporting an effort that’s going

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to go forward in a way that’s not done right. You need the resources to do it, and the testimony has reflected that.

I’d just like to pursue a little bit what my colleague Ms. Norton,

Representative Norton, was discussing with respect to the existing

tools that are out there that would allow us, if they were put to

better use, to get better results. I think that there are clearly areas

for improvement. We need to be able to hire people more quickly.

Doesn’t do anybody any good if people who want to join the Federal

Government and offer their services and are qualified, if they go

somewhere because we can’t hire them quickly.

Clearly, we need to compete with the private sector on salary in

many, many areas, because we are losing expertise. I do think that

we need to be able to provide managers to have clear criteria for

their employees, the ability to reward employees, but I would

just—here is an example I think sort of tests the system.

There is a little department within the State Department, the

Bureau of Intelligence and Research. You can’t measure them by

what they produce in terms of how many student loans they grant

or that kind of performance. They are measured in performance in

terms of their ability to try to analyze what is going on around the

world and provide an intelligent assessment and analysis of threats

and that kind of thing. The Bureau of Intelligence and Research,

if you look at the footnotes on various intelligence, national intelligence estimates, were among the people who said, with respect to

Iraq, that there really wasn’t a great—a lot of evidence of weapons

of mass destruction in Iraq.

And I am not going to debate the Iraq War. I am just saying that

is their job is to reach that conclusion. There was a little foot buried in the national intelligent estimate. They did their work. They

were skeptical. They did it at some risk to themselves in many

cases because the whole politics of this were that we are going to

find evidence.

Well, I don’t think any of them, frankly, has been recognized or

rewarded for the fact that they got it right and then you have

George Tenet getting the Presidential Medal of Freedom, and he

said it was a slam dunk case that there were weapons of mass destruction.

Now, this is the political environment that we operate in. And we

need to have a system where those Federal employees, whether in

INR or Department of Education, or wherever they may be, have

the assurance that their work is being judged based on their performance and not being judged based on other considerations.

Now we have a vast Federal Government. Some of it is done in

a context that is not that political. But much of it is done in a context political. And whatever system we come up with has to be able

to accommodate employees in both spectrums, or you are going to

have to have separate systems, depending on the nature of the

work.

And so I just, as we go forward, and Representative Norton was

talking about that, which is that part of the reason we have the

existing system is to prevent people from being unfairly punished

just because they have a different political perspective in certain

jobs.

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And many jobs, again, are outside that parallel. So I would just

ask, with the system we have today, what more should we be

doing, what are the existing authorities that people have that are

not being taken advantage of? If we are not allowed to hire people

quickly, we should change that, in my view. OK, if we can’t compete with the private sector, which we obviously can’t, we should

change that. We can find common ground.

But where are some areas in terms of pay for performance like

the bonus system that are not being adequately used today to try

and do the kinds of things that Ms. Shaw has been able to do

under the existing system? And I would just throw that open to all

of you.

Mr. GAGE. Well, there are a number of things. I have been advocating that we take a look at our career ladder system. And I don’t

disagree with what anyone said about hiring. But once you’re in,

what motivates Federal employees is not the within grade increase

that everybody says is—I don’t know, people get unfairly or just for

longevity.

What motivates Federal employees is promotional opportunity, is

to be able to do a good job and to really excel. And I see that just

an agency that week I believe is saying one problem with their pay

for performance is that people with a pay band did not have that

incentive to work hard for a promotion. And I think that is an incentive that really is overlooked by the whole pay banding. But you

know to reward people, I think there is opportunity right now, Mr.

Van Hollen, to reward the best and brightest. I don’t think that

really is a problem to use the system that we have right now to

reward the best and brightest. And if we want to change criteria

from within grades, have at it, that’s fine. That is really not a problem. I think that the pay for performance system and the experiments that we have seen so far are really apples and oranges compared to what this is.

Some of these, most of these, and I look forward to seeing OPM’s

paper on these things, but most of them have—the agencies have

put supplemental money into it. People are getting actually more

money under that system—under the experiment. I don’t think

that is the same—that is contemplated in this proposal.

I think too, that when you break down, and we had a hearing

the other day in front of the Senate, and I thought there was pretty

much of a consensus that in the Federal Government, one size does

not fit all with many of our jobs. Pay for performance, for instance,

in law enforcement, will not work. Can’t work. Kills that teamwork. It just—no experiment has showed that it works.

So I think it takes a lot of thought and to be very careful to try

to extrapolate from some experiments that applies to scientists and

take that down to our VA workers, our Social Security workers,

whose job is much different than the jobs that were used in these

experiments.

Ms. KELLEY. I would also suggest that the agencies do have authority to do some things today that they don’t make the maximum

use out of, things like quality step increases to high performers.

They are given out in most agencies in very small numbers. And

there are no restrictions on that. They can give them as they see

fit. Yes, they have to do it within their budget structure, they have

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to be able to fund those. But those are recognitions that are seen

and recognized across the Federal work force when they are given.

But they are given so rarely.

There are also opportunities for managers to provide management awards. And they have the discretion to do that. Because we

see them not implementing that very much, in many of our negotiated rings, NTU has negotiated award agreements with agencies

so that there are known criteria for what employees would need to

see in a performance evaluation to know that they would then be

eligible for, or not eligible for an award under the negotiated system. And we have done that because left to the discretion of the

agencies, they just do not use these things the way they should.

Are they, you know, the be all and end all? Would it solve all the

problems of the current system? Of course not. But there are two

things right there that are within their discretion that they do not

use.

And someone last week at a hearing said that everyone gets

quality step increases. Well, I can tell you that is absolutely not

true. We have looked at numbers across agencies where NTU represents and the percentages of employees who receive these are

very small. And there is no consistency across agencies. Some will

give as high as 5 or 10 percent of the work force, and others will

give less than 1 percent. We have worked with some of our agencies in an effort to have them raised to more of an average government level. Even though we don’t think there is a magic number,

we think that if an employee is told if they do A, B and C, and that

is what they need to be to excel, and they excel, then they should

expect that recognition and reward at the end.

I agree it is not just about money, but it is about compensation

and it is about recognition among the work force. It is about promotional opportunities, about detail opportunities, about temporary

promotions, about creating new jobs that will allow these employees to use the skills that they have shown that they have and can

excel at.

And all of these things are available to every agency today with

no limits on them at all, and yet they are not used.

Ms. SHAW. If I may add, we do use all of those things that were

just mentioned in Federal Student Aid. And in fact, we used existing performance management system at the Department; it is

called Ed Pass. It is a five-tier system from highest performance

being outstanding, lowest being not acceptable. We have spent the

first 2 years of my tenure really focused and talking about performance and educating the work force, including management, training

management, what does it mean to have a sound, understandable,

measurable performance plan? How do you as a manager, evaluate

that performance fairly and accurately with that employee-based

process that is currently in place?

And then what we believe in, in the Department of Federal Student Aid, is we want to reward the highest performance to the

maximum extent we possibly can. Our average outstanding performer on this recent review cycle received an average of $6,000

cash award. I don’t know if that is high compared to other agencies

or not, but we told our performers, if you perform in an outstanding manner, we are going to be fair and we are going to reward

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you. And we have done just that. And people respond. And it is not

just about money. They do respond.

We are doing incredible work. And people want us to be fair and

they do want us to recognize their performance. And that is what

we are about.

Mr. STYLES. I think revamping some of the processes as well,

when you talk about QSIs, different agencies have different methodologies for providing the QSIs. And I think that, you know, you

keep hearing me going to funding, funding, funding. Even if you go

to pay for performance, if you don’t provide the funding, you’re

going to undermine the system before you even get there.

If you talk about market-based pay, if I could just jump to there

for a second. For us to take GS–11 and 12 brackets and put them

together and call them a pay band, and then 13 and 14 and make

them a pay band, that is all well and good, especially at the hiring

levels where it gives you a little more of an opportunity to hire people at different levels. But if you don’t raise the top level, if the

GS–14 step 10 or GS–12 step 10 remains the same as it is today,

you have not created a market-based pay system unless you put

into effect FEPCA, if you really want to come down to it.

If you do not have those levels within those market areas equal

to, how can you possibly go out and recruit those folks using a market-based pay? Did I make any sense with that? All I am saying

is to name it something, without providing that essential tool,

which happens to be the dollars, and the benefit program that we

have in place, then you’re not going to accomplish anything by

doing that.

Ms. KELLEY. If I can add one other thing that I hear over and

over, and in my experience, front line managers share many of the

same issue with front line employees. That is where the rubber

meets the road. That is where the work gets done. And they very

often, the front line manager wants to recognize the front line employee. They want to give them a QSI or they want to give them

a cash award. And then what they run into is lack of support from

above.

I have had employees tell me that they were nominated for QSI

and their manager said they were told they could only put in one

per group. Well, what if you have three top performers, three outstanding performers? Putting caps like that is not pay for performance. That is exactly the kind of thing that will give no credibility

to a system. And that happens every day today where front line

managers who see the work and recognize the top performers, and

who should be recognized and rewarded so they can motivate as

well as reward, are not being supported in their efforts, whether

it is about training, whether it is about support commitment, funding whatever it is, those front line managers are really in a position where they cannot do what they recognize needs to be done on

behalf of the front line employees.

And I don’t doubt that it happens to them too, but I can just tell

you that I see it between the front line managers and front line

employees all the time, that the front line managers are in a very,

very difficult position and not being given the training and support

and funding to do what they know is the right thing.

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Mr. PORTER. Appreciate your comments. We are out of time. Mr.

Van Hollen.

Ms. NORTON. Would the gentleman yield to me? I just want to

because I think something very important has happened here. You

know, in this last discussion, I think we have learned that there

are more than the devil in the details, that the solution to much

of this may lie in the details.

You were telling me stuff, you know, I didn’t know, and I find

it very informative. Because, first, when my colleague asked about

quality staff increases, my first notion I said to him, do you know

why anybody would do it? And this discussion—by the way, Ms.

Kelley, I can see reasons why there would be some limits on it, you

know, wherein the front office has to deal with the agency’s total

budget, I can see where there might be great variations, and I am

sure you can see circumstances in which that would happen. But

I am driven back, as I listened to you, to a hypothesis, that despite

Ms. Shaw’s experience, and again, she is a gold star performer,

where she has been able to do very substantial quality step increases, apparently, without getting morale problems within the

agency.

Let’s assume that, at least. I am driven back to the risk that the

manager takes by presuming to do so in a system, again, bound by

due process, where everybody compares to everybody else under the

law, where there is, in place, no standard, even a rough one, to

guide that manager, and so the manager sees what she wants to

do and she does it. She is taking a great risk. And the burden is

on the Congress to help the OPM come to some way to harness this

so it can be used.

Mr. PORTER. Thank you, Ms. Norton.

Mr. VAN HOLLEN. I want to thank you all you for your testimony.

I think this was a hearing where lots of good ideas came out. I

think the transcript will be something that we will all want to read

as we go over this. And we welcome obviously your continuing

input. Thank you, Mr. Chairman.

Mr. PORTER. Thank you very much. I appreciate you all being

here. We had some diverse opinions, but all taken in a positive

sense. I would hope that as we picked on you, Ms. Shaw, today, in

a positive way, we would like to make sure that your successes

would be the rule and not the exception. And it appears that there

are managers that are afraid to take—or afraid they are not going

to have support. There are leaders that have troubles with existing

systems. So we want to make sure that yours is the rule and not

the exception. Thank you all very much and all Members will be

able to submit additional questions. And they can submit them for

the record. I want to thank you all for being here today. The meeting is adjourned.

[Whereupon, at 12:14 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]

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