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THE COUNTDOWN TO COMPLETION: IMPLEMENTING THE NEW DEPARTMENT OF HOMELAND SECURITY PERSONNEL SYSTEM

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

MARCH 2, 2005

Serial No. 109–58

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

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

——— ———

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

——— ———

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

CHRIS BARKLEY, Professional Staff Member

REID VOSS, Clerk

MARK STEPHENSON, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on March 2, 2005 .............................................................................. 1

Statement of:

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

Union; T.J. Bonner, president, Border Patrol Council, American Federation of Government Employees; and Darryl Perkinson, national vice

president, Federal Managers Association ................................................... 116

Bonner, T.J. ............................................................................................... 133

Kelley, Colleen M. ..................................................................................... 116

Perkinson, Darryl ...................................................................................... 156

McPhie, Neil A.G., chairman, Merit Systems Protection Board; Ronald

Sanders, Associate Director for Strategic Human Resources Policy, U.S.

Office of Personnel Management; and Ronald James, Chief Human

Capital Officer, Department of Homeland Security ................................... 63

James, Ronald ........................................................................................... 91

McPhie, Neil A.G. ...................................................................................... 63

Sanders, Ronald ......................................................................................... 74

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

Office .............................................................................................................. 20

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

Bonner, T.J., president, Border Patrol Council, American Federation of

Government Employees, prepared statement of ........................................ 135

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 9

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois:

Washington Post articles .......................................................................... 104

Prepared statement of ............................................................................... 15

James, Ronald, Chief Human Capital Officer, Department of Homeland

Security, prepared statement of .................................................................. 94

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

Union, prepared statement of ...................................................................... 119

McPhie, Neil A.G., chairman, Merit Systems Protection Board, prepared

statement of ................................................................................................... 67

Perkinson, Darryl, national vice president, Federal Managers Association,

prepared statement of ................................................................................... 158

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

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

Sanders, Ronald, Associate Director for Strategic Human Resources Policy, U.S. Office of Personnel Management, prepared statement of .......... 77

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

Office, prepared statement of ....................................................................... 22

(1)

THE COUNTDOWN TO COMPLETION: IMPLEMENTING THE NEW DEPARTMENT OF

HOMELAND SECURITY PERSONNEL SYSTEM

WEDNESDAY, MARCH 2, 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

2247, Rayburn House Office Building, Hon. Jon C. Porter (chairman of the subcommittee) presiding.

Present: Representatives Porter, Davis, Issa, McHenry, Mica,

Cummings, Norton, and Van Hollen.

Staff present: Ron Martinson, staff director; B. Chad Bungard,

deputy staff director and chief counsel; Chris Barkley and Shannon

Meade, professional staff members; Patrick Jennings, senior counsel and OPM detailee; Reid Voss, legislative assistant/clerk; Mark

Stephenson and Tania Shand, minority professional staff members;

and Teresa Coufal, minority assistant clerk.

Mr. PORTER. A quorum being present, the Subcommittee on the

Federal Workforce and Agency Organization will come to order.

This is the first hearing of the Government Reform Subcommittee on the Federal Workforce and Agency Organization in the

109th Congress, and my first hearing as chairman of this subcommittee. I am very excited about my new position and the opportunity to examine ways the Federal Government can improve the

way it hires, pays, recruits, trains, and rewards its employees,

while at the same time improving individual agency performance.

Representing over 14,000 Federal workers and retirees myself in

Nevada, I know all too well the sacrifices made by the Federal family, who work diligently—sometimes putting their lives in danger—

in the name of public service. Admittedly, I have a lot to learn

about this subject matter, and I look forward to hearing from the

various stakeholders, agencies, and experts to figure out ways to

make the Federal Government better.

Today’s hearing is of the utmost importance. February 1, 2005

marked a new day for our Federal employees—the Department of

Homeland Security and the Office of Personnel Management issued

final regulations for the new personnel management system at the

Department of Homeland Security. It was the first major change

to our Civil Service process in 50 years. This is something I don’t

take lightly. It took over 2 years to design this new system, but

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there are still a lot of details to be worked out, and I can assure

everyone here that this subcommittee will closely monitor the

progress and implementation of this new system over the next several years.

The Department must have top talent in order to meet its critical

mission, and it cannot rely on the old system of rewarding longevity rather than motivating and rewarding performance. Change can

be difficult, however, and I know that this is a nerve-wracking experience for the Department’s work force. My predecessor, Congresswoman Jo Ann Davis, and Chairman Tom Davis have worked

on ensuring a smooth transition—Chairman Davis couldn’t join us

today—and they have worked hard to make sure this new system

is one that is fair and credible. I am quite encouraged to see the

final regulations now require that the development of any internal

directives implementing the personnel systems authorities provided

by these regulations involve employees and employee representatives. I am also encouraged to see that the final regulations require

that the Department issue implementing directives requiring new

supervisors to meet certain assessment or certification points as a

part of a formal training program. This will go a long way in ensuring the equitable application of this new pay-for-performance system and conducting performance reviews. These are much welcomed changes from the proposed regulations, and, as I have read

the background testimony that has been prepared for today, I think

that you would all agree.

Since the passage of the Homeland Security Act of 2002, which

authorized the creation of a new flexible personnel system for

Homeland Security Department employees, there has been a continued trend to modernize personnel systems governmentwide; not

only in Government, but also in the private sector, as we prepare

for this global economy that is based upon terrorism and impacts

on our communities. In January 2003, the Bipartisan National

Commission on the Public Service, chaired by Paul Volcker, called

for the abolishment of the General Schedule and recommended it

be replaced with a more flexible personnel management system.

That same year, Congress granted the Department of Defense flexibility to create a new personnel system and also authorize senior

executive service to meet to a pay-for-performance personnel system governmentwide. Now, more than 50 percent of the Federal

work force will soon be under this new, modern, flexible personnel

system, outside of the General Schedule.

In a forum hosted by the Government Accountability Office and

the National Commission on Public Service last April, there was

broad agreement among participants that a governmentwide

framework should be established to guide human capital reform,

balancing the need for consistency across the Federal work force,

and the need for a flexible system tailored to particular needs of

the agencies.

Moving the rest of the Federal workfoce outside the General

Schedule into a new performance-based compensation framework is

an issue for another day, which we will be discussing. With that

said, however, this subcommittee is well aware that all eyes are on

the success or failure of the new DHS personnel management system. It is very important that we get it right the first time, and

3

we will spend the requisite amount of time overseeing the system’s

implementation to ensure its successes.

I would like to, of course, express my many thanks to our witnesses who have agreed to join us today. We brought together what

I believe is a broad and knowledgeable array of voices as we begin

our exploration of this new system, and look forward to hearing all

of your perspectives. I want you to know that as I begin this hearing, I begin it with an open mind. I am a new member of this committee and a new member as the chairman of this committee, and

look forward to your insights and your perspective. As I mentioned,

I have been in a public office, as has many of my colleagues on this

committee, for over 20 years, and I plan on using that experience

as I listen and make my own independent decisions based upon the

input that is going to be provided. Of course, this session the subcommittee is going to look at a number of other issues, but realize

that this will remain and continue to be a priority as we move forward.

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

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Mr. PORTER. I now would like to make sure that our majority

ranking member, Mr. Davis, is recognized. I know he is not here

today, but possibly Mr. Cummings would like to add something in

opening statement.

Mr. CUMMINGS. Thank you very much, Mr. Chairman, and thank

you for calling this important hearing on the newly issued personnel regulations for the Department of Homeland Security.

Following the tragic events of September 11th, the Department

of Homeland Security was created, which brought together 22

agencies for the purpose of protecting our country. The Homeland

Security Act gave the Secretary of DHS and the Director of the Office of Personnel Management the authority to construct a new personnel system for the DHS. In 2002, Congress agreed it was a top

priority to make modern human resources management system at

the DHS capable of supporting its mission. However, many of my

colleagues and I had some serious reservations that the authority

granted to the DHS would needlessly undermine our Nation’s longstanding commitments to employee protections, management accountability, and collective bargaining rights. Unfortunately, these

newly issued regulations validate that my fears were well founded.

To begin, the administration has consistently justified its proposed sweeping changes in the DHS human resources management

system as necessary to ensure national security. While national security must remain our top priority, I can think of no instances in

which collective bargaining rights or employee protections in the

Civil Service were a specific obstacle to protecting our Nation.

These regulations substantially restrict what issues are covered by

collective bargaining. As described in the new regulations, the DHS

is no longer mandated to bargain over the number, types, grades,

or occupational clusters and bands of employees or positions assigned to any organizational subdivision work project or tour of

duty.

I believe that it is important that we maintain the integrity of

our top priority by ensuring that the efforts we take in the name

of national security genuinely impact the security of our Nation. As

such, I look forward to the testimony of T.J. Bonner, of the American Federation of Government Employees, that describes numerous instances where collective bargaining has protected employees

in the Civil Service and strengthened our homeland security.

It is troubling that the DHS and OPM rejected the proposal by

unions for a post-implementation bargaining policy in the new DHS

personnel system, which could have provided a balanced approach

that respected the needs of all interested parties and provided the

DHS with needed flexibilities to respond to national security emergencies.

More troubling is the replacement of the General Schedule with

a performance-based pay system. Such a system could provide a

means for politicization and/or cronyism within DHS without the

necessary safeguards and clear standards to measure employee

performance. These regulations also fail to establish an independent entity to resolve labor-management disputes.

Under the new regulations, DHS employees must take their

grievances to an internal board appointed by the DHS Secretary

called the Homeland Security Labor Relations Board, replacing the

8

independent Federal Labor Relations Authority as arbiter of disputes, with the Homeland Security Labor Relations Board being

completely comprised of appointments by the top authority representing management at the DHS. This poses a major obstacle to

ensuring impartiality in the resolution of labor-management disputes. This is analogous to having the empires of the World Series

being chosen by an owner of a team involved in the game. Even

if one would make the argument that such a selection process is

reasonable, it certainly does not give the perception of fairness to

the American people and to those playing the game.

Mr. Chairman, the Human Resources Management System at

DHS is no game. The regulations and laws which govern that system directly impact the quality of life of some of our Government’s

most important civil servants and, as a result, impact the DHS’s

ability to fulfill its vital mission. I do not believe that these regulations support an efficient and inclusive relationship between employers and employees at the DHS, specifically the type of relationship needed to keep morale high, support retention, and attract

skilled and capable prospective employees to serve at the DHS. We

best honor our public servants by having a human capital system

that embraces time-honored and time-tested traditions of collective

bargaining, due process, and employee protections instead of undermining them.

With that, Mr. Chairman, I yield back and look forward to hearing from our witnesses.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. PORTER. Thank you.

I would like to now recognize our ranking minority member, Mr.

Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman. Let me apologize for being a trifle late, but I had all of the television owners

in my hometown in my office, as well as the radio.

Mr. PORTER. I think we understand.

Mr. DAVIS. It is pretty difficult to put them out. We need them.

Well, let me thank you very much, Mr. Chairman, for calling this

hearing, and I would like to welcome you and all the new Members

who have come to the very first hearing of the Federal Workforce

and Agency Organization Subcommittee.

Last February this subcommittee held a joint hearing with our

Senate counterparts on, at the time, the proposed Department of

Homeland Security’s DHS personnel regulations. At that hearing I

stated that we had embarked on a sad and troubling era in the history of the Civil Service and asked if agencies were being granted

exemptions from Title V to fix inefficient regulations or to simply

change what is inconvenient for management. The answer is now

painfully clear. It is as if DHS put management in a room and

said, come up with your dream personnel system; you don’t have

to worry about fairness or credibility, just tell us what you would

want to make your life easier and more convenient. They did and

DHS put their recommendations in these regulations, right down

to Section 9701–406, that states that employee performance expectations do not have to be put in writing. These are the same expectations that will determine whether or not an employee gets a pay

raise, and not one word of these expectations have to be put in

writing.

The one thing that DHS allowed employees is that the expectations have to be communicated to them before they can be held accountable to them. Employees should be grateful for that concession. If putting employee expectations in writing is too onerous for

DHS managers, then asking them to negotiate with unions is practically out of the question. DHS is prohibited from bargaining over

the number types and grades of employees and the technology

methods and means of performing work. Even individual components of DHS are prohibited from bargaining over these subjects,

even at their own discretion. DHS even rejected a proposal by the

unions to bargain over personnel changes after they have been implemented and shown to have had an adverse impact on affected

employees.

Now, I am sure that we are going to hear today that all of this

is being done in the name of national security. But let me caution

witnesses from the outset that their answers to questions on these

matters need to be more substantive than that. It is simply not

enough to say that national security prevents you from putting employee performance expectations in writing, or that it is in the national interest or the best interest of national security for the Secretary of DHS to have sole authority to appoint members to DHS’s

Internal Mandatory Removal Panel or Homeland Security Labor

Relations Board. These regulations are not fair, they are not credible, and they are not transparent. As a matter of fact, most of the

14

regulations have been defined as implementing directives, and are

not even outlined in the regulations.

Members on both sides of the aisle should be outraged. These

regulations go beyond the need for DHS to have personnel flexibility. These regulations reflect DHS’s and this administration’s desire to have unfettered and unchecked authority over the Civil

Service period. As one article I read on DHS and DOD personnel

regulations noted, we are going back to the past; back 120 years,

when Andrew Jackson was President and there were only about

20,000 Federal employees and the work required few skills; back

to when the entire work force faced possible replacement after each

election and the newly installed politicians doled out jobs to reward

campaign workers, donors, and party operatives. Wasn’t it earlier

this year that it came to light that DOD gave political non-career

employees higher pay raises than career employees? These were

across-the-board pay raises for political appointees that were not

based on merit or individual performance. What is ironic about

DOD’s actions is that these political appointees did not have any

more skill, any more knowledge, or any more performance than

that performed by career employees.

And so, Mr. Chairman, I look forward to these hearings and

thank all of the witnesses for appearing and, again, thank you for

calling it. I yield back.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. PORTER. Thank you, Mr. Davis.

I ask at this time for unanimous consent that all Members have

5 legislative days——

Ms. NORTON. Mr. Chairman.

Mr. PORTER. Yes.

Ms. NORTON. I ask to make an opening statement.

Mr. PORTER. Absolutely. I would like to go through a few procedural matters, then certainly we will have the balance of the committee with their openings. Thank you.

At this time, again, I would like to ask unanimous consent that

the Members have 5 legislative days to submit written statements

and questions for the hearing record; that any answers to written

questions provided by the witnesses also be included in the record.

Without objection, so ordered.

I also 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.

I also ask unanimous consent that all future meetings be held in

Las Vegas. Hearing none——

Mr. ISSA. Half in California.

Mr. PORTER. Half in California.

Know that, again, we have these formal procedural matters, but

as a community we would welcome the committee at any time in

Las Vegas.

Also, it is the practice of this committee to administer the oath

to all witnesses, which we will do shortly, but I would like to continue with opening statements.

I believe Member Issa, do you have anything you would like to

add?

Mr. ISSA. In the interest of hearing our speakers, I will submit

for the record.

Mr. PORTER. Thank you.

Congresswoman Holmes Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. I want to

thank you for making this your first hearing. I have been on this

committee for all of my 14 years in Congress, and you have chosen

a subject of special importance because what we do here is essentially going to be what we do or what the committee will hope to

do for the entire merit system, and, therefore, it is a very important subject, given what that system has meant for more than a

century to Federal employees and to the efficiency and integrity of

the Federal system.

Mr. Chairman, I think the older system is more in need of reform, and I say that from my own experience as chair of the Equal

Employment Opportunity Commission. It was a dysfunctional

agency when I came, buried in backlog. I am credited with modernizing the system, getting rid of the backlog in part by using

such efficiencies as reducing litigation, depending on settlements

before they were widely used in the Federal Government at all. So

I approach every system as old as this as if it needed reform, rather than not needing reform. And I certainly think that after September 11th, with the rise of terrorism and with the special misVerDate 11-MAY-2000 11:15 Sep 27, 2005 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 D:\DOCS\23141.TXT HGOVREF1 PsN: HGOVREF1
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sion of the Homeland Security Commission, a very close look at

Civil Service reform was closely called for.

We began by believing, I think, exercising a presumption in favor

of a merit system, rather than seeing the beginning of the end of

the merit system and the stripping of collective bargaining protections. Improvements have been made, and I congratulate the

unions involved and the agency for as much collaboration as they

did. Now we face lawsuits and delays, some demoralization in the

agency. Remember how many agencies we are putting together for

the first time. And if I may say so, about the last agency we need

to see any demoralization in is the agency that protects the homeland, an agency that involves 180,000 employees.

We have here involved most of the Federal work force, when you

get the DOD, where we have also begun this process, and Homeland Security. Very careful attention is therefore merited.

We are eliminating important protections at the same time that

we are establishing a new pay system, the pay banding system, at

the total discretion of management. With pay involved, the time

could not be worse for eliminating protections. Pay is perhaps what

makes a merit system with impartiality most essential.

The point of any regulation we do, it seems to me, should be efficiency. Yet I look at the MSPB changes in particular, where it

takes 3 months to resolve a complaint. The MSPB is the outside

agency that looks at what the agency has done. The hallmark of

due process is that you do not investigate yourself, but somebody

with fresh eyes, not imbedded in protection of one or the other of

the parties gets to look at the matter. Very, very serious when you

eliminate some of that. And for what? Is 3 months too long? Find

me a system that resolves these matters in less time.

Indeed, the indications are that there isn’t a problem at all here,

since 80 percent of the time the agency prevails. What is it that

we are after? I need to know what is it that we were after that we

were not achieving by outside review, particularly given the predominance of evidence standard and even a lower standard in performance cases, substantial evidence.

Mr. Chairman, the more I learn about how other countries run

their governments, the more I appreciate what the merit system

has meant in eliminating those kinds of matters—bribes, favoritism—in our own system. Our system stands up among the systems of the world in this regard. Impartiality has been its hallmark. The Homeland Security regulations do not yet meet that

burden. This matter needs more work; it needs greater consultation

with those who will be bound by the system. I think it needs more

work at the drawing board.

Thank you very much, Mr. Chairman.

Mr. PORTER. And thank you for your testimony.

I believe that is the end of our opening statements.

At this time, what I would like to do is ask if everyone would

stand on all the panels so I can administer the oath, please.

[Witnesses sworn.]

Mr. PORTER. Let the record reflect the witnesses have answered

in an affirmative manner, and we will now start with our first

panel.

20

On our first panel today we will hear from David Walker, the

U.S. Comptroller General from the Government Accountability Office.

Mr. Walker, as always, it is a pleasure to have you here, and you

are recognized for 5 minutes.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL,

U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Mr. WALKER. Thank you, Mr. Chairman. Congratulations on your

appointment, and thank you for the opportunity to appear before

this inaugural meeting under your chairmanship.

Mr. Davis, always good to see you, and other members of the

subcommittee.

Mr. Chairman, I respectfully request that my entire statement be

included into the record so that I can move to summarize it now.

Mr. PORTER. Absolutely.

Mr. WALKER. Thank you, Mr. Chairman.

Two comments at the outset. First, as you know, GAO put the

lack of an effective human capital strategy by the Federal Government on our high risk list on January 2001. Much progress has

been made since then, but quite a bit remains to be done. I do

agree that this is a very important subject matter, because whatever happens at DHS obviously has broader implications for reform

elsewhere in the Federal Government.

Second, I would note that GAO has been leading by example in

this area. We have had broad banding since 1989; we have had

pay-for-performance since 1989. And with the assistance of this

subcommittee, this committee and the Congress at large, we now

have additional flexibilities, as a result of legislation that was enacted last year, to move to a more market-based and performanceoriented classification and compensation system that will enable us

to reward people based upon skills, knowledge, and performance,

while maintaining important principles and incorporating adequate

safeguards to maximize consistency and avoid abuse of employees,

which is very important, because, after all, our people are our most

valuable asset, no matter what agency you are dealing with.

In GAO’s longstanding professional approach to try to take a fair

and balanced view, I would like to say, Mr. Chairman, three positive things, three areas of concerns, and three points about the way

forward with regard to the matter before this committee.

On the positive side, the Department of Homeland Security is

proposing to move to a more flexible, contemporary performanceoriented and market-based compensation system that will include

consideration of occupational clusters and pay bands that will endeavor to try to better reflect labor market conditions in various

labor markets, and that will end up having a variety of features

that are more reflective of the knowledge-based work force that

now is represented by the Federal Government. Second, it is pledging to continue to involve employees and union officials throughout

the implementation process. They have had more collaboration

than some others in the past in this regard, although it is important that it be meaningful collaboration, not just pro forma collaboration; and obviously that is a facts and circumstances determination. Third, they are pledging to evaluate the implementation of

21

the new system, and it is my understanding they are also proposing to engage in a phased implementation process. I think that is

critically important given the significance and size and the scope

of the Department of Homeland Security.

As far as three areas of concern, there are a lot of details that

are yet to be defined, and details matter. And depending upon how

these details are defined could have a direct effect on the likelihood

that it will be successful and with regard to areas such as fairness

and consistency. Second, DHS is proposing to consider adopting

core competencies, but has not committed to do so, and as has been

mentioned, is not necessarily committing to put all expectations in

writing. My personal view is that one should strongly consider core

competencies as a way to move forward in this area. Those should

be in writing, and I think that they can very much prove to help

set expectations at the same point in time. Third, there is no guarantee that the proposed approaches that DHS is going to follow will

result in meaningful differentiation in performance. While in general they do not propose to have a pass-fail approach other than

for possible certain entry-level positions, they are talking about

possibly a three summary rating level categorization beyond the

pass-fail, and I have serious concerns as to whether or not you can

achieve meaningful differentiation in performance based upon just

a three level of rating system.

As far as the three issues for going forward, first, I think that

DHS could benefit for consideration of having a chief operating officer or chief management officer to elevate, integrate, and institutionalize responsibility not just for the success of this effort, but

also for the overall business transformation effort and integrating

the 22 different departments and agencies that have come together

to make DHS, because achieving that is something that is going to

take many years, is going to take the sustained attention of a top

executive with a proven track record of success. Second, it is absolutely critically important that there be effective on-going, two-way

consultation and communication in order to make this reform a reality. And last, but certainly not least, it is absolutely critical that

there be an adequate infrastructure in place to make effective use

of these authorities before they are implemented. There needs to

be, among other things, an effective human capital planning process—modern, effective, credible, and hopefully validated performance appraisal systems—with adequate safeguards in order to

maximize consistency and to prevent abuse before the new authorities are implemented. Failure to do that is a high risk strategy.

So in summary, Mr. Chairman, there are some positive areas,

there are some areas of concern, and there a few comments about

the way forward. But as I would reinforce where I started, we have

been on this business longer than just about anybody in the Federal Government, so I can speak from real live experience, rather

than theory, with regard to a lot of these issues.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Walker follows:]

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Mr. PORTER. Thank you very much, Mr. Walker.

We now move into the question and answer period, and I have

a few questions I would like to begin with, and some comments.

First of all, I very much appreciate your testimony. I appreciate

that in the Federal Government we like to kill trees, because I see

there is a lot of backup paper here, and that is OK; I know that

is how it works. But some of your comments I think can certainly

scare some employees. And I appreciate the fact that as a new

Member I am looking at all sides equally. Flexibility scares employees, because right, wrong, or indifferent, they are accustomed to a

process that they have followed for, in some cases, 50 years, in

some cases less. There is concern about the collaboration, having

read some of the backup testimony, that there was, other than

hearings, true collaboration. Add to that the fact that flexibility is

a real concern. I share that not only do you pledge, we do also, to

evaluate these different phases as they unfold.

But noW on to some specific questions.

As the chief operating officer, you mentioned you are calling for

DHS to establish a COO. Can you explain that a little bit, how you

think we should do that and go about implementing that position?

Mr. WALKER. I think there are selected departments and agencies that could benefit for having a level two official. You can call

it deputy secretary for management, you can call it a principal undersecretary for management or operations who in effect would be

responsible for the planning and the integration of the overall business transformation process. That includes things like financial

management, human capital strategy, information technology,

knowledge management, change management.

As Ms. Holmes Norton has mentioned, the fact of the matter is

this is a merger of 22 different departments and agencies with different systems, with different personnel practices, with different

policies, and it is a massive effort to be able to effectuate this integration with minimal disruption and while protecting our homeland security. The fact of the matter is that it is going to require

sustained attention over several years in order to achieve this, and

I think consideration should be given to establishing such a position that would be a person with a proven track record of success,

with a performance contract, with a term appointment hopefully of

around 7 years, who would be able to help make sure that there

is consistent attention over a sustained period of time in order to

try to help maximizing success and to ultimately institutionalize

these issues, which otherwise may not occur.

Mr. PORTER. Additional question. In hearing your testimony

again, talking how this would improve or help prevent future terrorist attacks. And I know from my colleagues, they mentioned the

concern that this is going to make a difference. Would you be very

specific how you think this is going to make this country a safer

place to live?

Mr. WALKER. Well, this is not a panacea, but I can tell you that

do not underestimate the degree of difficulty in achieving all the

different business transformation elements of the Department of

Homeland Security; it is the largest merger since the establishment

of the Department of Defense in 1947 and, quite frankly, they have

huge challenges on their own. I think the fact of the matter is, as

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you know, Mr. Chairman, we just added to our high risk list, information sharing, and the merger and integration of the Department

of Homeland Security remains on our high risk list. So the fact of

the matter is if you have somebody focused on this full-time, over

a sustained period of time, you are going to make a lot more

progress in trying to help facilitate effective information sharing;

you are going to make a lot more progress in helping to assure that

you are implementing these new flexibilities in a fair and responsible manner, and within a reasonable timeframe. That is obviously

going to help homeland security because, as was mentioned, if this

isn’t done right, it can have a significant adverse effect on morale,

it can have a significant adverse effect on a variety of other operational matters.

Mr. PORTER. Thank you, Mr. Walker. I have additional questions,

but I will wait until later.

Any questions, Mr. Davis?

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. Walker, it is always good to see you, and I appreciate your

testimony. On the next panel, Ron Sanders of OPM will testify that

the DHS regulations provide for a balanced human resources system that will hold managers accountable and provide for due process. He also states in his testimony that there is no danger whatsoever that the pay of individual DHS employees will be politicized.

Given what has been outlined in the regulations, do you concur

with Mr. Sanders’ assessment of the system?

Mr. PORTER. I have little doubt that is what their intent is, but

I think there are a lot of details that need to be outlined in order

to provide reasonable assurance that in fact that will be the case.

We have, for example, in our agency, a number of checks and balances that exist outside of the normal line management structure

to provide reasonable assurance that the standards are applied

consistently, fairly, and in a non-discriminatory fashion. Furthermore, we have transparency over the results, reasonable transparency over the results of the effort; and obviously transparency

can be a good thing in order to try to provide some checks and balances. In addition to that, we have both internal grievance processes and external appeal processes to an independent party. I

think having elements like that are important in order to maximize

the chance that in fact that intent will be a reality.

So I am confident as to their intent, but without knowing all the

details it is tough to say that you can say that with certainty.

Mr. DAVIS. I have some concerns about the composition of the

Mandatory Removal Panel and the labor relations board. I grew up

on the farm, and it seems to me like the Constitution suggests that

the fox will determine when to let the chickens out. Do you think

that with the appointment simply being that of the secretary, that

this board is likely to have a balanced approach to making decisions about employees who would come before it?

Mr. WALKER. I think if it is made by the secretary, one has to

think about what is the process that is followed in coming up with

candidates from whom the secretary would select. And let me give

you an example, first-hand experience. We at GAO have something

called a Personnel Appeals Board. It is a group of individuals who

are appointed by me to be able to hear appeals of our employees

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and to make an independent judgment as to whether or not we

have acted fairly and consistently with our policies and procedures

and applicable laws. But when I make appointments to that body,

the Personnel Appeals Board, I seek advice and counsel from our

Employee Advisory Council, I seek advice and counsel from a variety of parties; they present candidates that are acceptable to the

broad range of interests and I will select from that list of candidates.

So part of the issue is if the secretary is going to make the appointments, you need to be concerned with what is the process that

takes place to submit candidates to the secretary from whom he

will select to try to provide reasonable assurance that they are not

only qualified, but they are credible with regard to all the different

stakeholders.

Mr. DAVIS. The individuals that you select, where do they come

from? Are you given any kind of list or can you just go out in the

open environment?

Mr. WALKER. We have a notice that we go out with. We seek

nominations; people can nominate themselves. We have a review

panel within the agency that will end up reviewing potential candidates. We seek input from our employees; we seek input from

others within the agency. We also actively seek to achieve balance.

People that have past experience representing employees, as well

as people that have past experience representing agencies. The

whole thing has to be balanced and it has to be credible, because

if it is not balanced and credible, it is not going to be used and it

is not going to be effective. I am pleased to say that the system

that we now had in place for 20 plus years has worked very well,

and I am also pleased to say they don’t have a lot of work to do,

and I want to keep it that way, if I can.

Mr. DAVIS. Thank you very much, Mr. Chairman. I have another

question, but I will wait and come back.

Mr. PORTER. Thank you, Mr. Davis.

Mr. Issa.

Mr. ISSA. Thank you, Mr. Chairman.

Mr. Walker, my concern goes a little bit more to sort of the drift

toward performance-related pay. Later on we are going to hear

from T.J. Bonner, and we have already had a number of instances

where although Mr. Bonner is not restricted from speaking about

what he feels to be policies inconsistent with the best interest of

national security, there has been an effort to say that his local officials aren’t allowed to make those statements. My own office has

been discouraged or people have been discouraged from coming to

my office unless it is a formal hearing, from the Border Patrol.

If you add to it the ability to affect somebody’s pay based on

whether they bucked policy, don’t you create a potential that you

simply are going to have higher pay for those who go along with

this administration or the next administration’s trick-down feeling

of what they would like to have said or done versus those who may

legitimately be defending the best interest of the job that their

agency is required to do? How do you prevent policy trickling all

the way down to pay when in fact agencies very often, particularly

within Homeland Security, differ, and differ in the most strident

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ways, about the best way to achieve homeland security, border integrity, etc.?

Mr. WALKER. Well, a number of ways. No. 1, we have competencies that are clearly defined in writing that were developed in

conjunction with all of our employees for each applicable occupation, and which have been validated by employees through a formal

process to maximize acceptance and credibility, and to minimize

litigation. So they are evaluated based upon these written competencies, which they are actively involved in developing. We also

have safeguards in place so that if somebody believes that they

have been unfairly treated, there are mechanisms within our agency that they can go to, either informally or formally, and they also

have the Personnel Appeals Board, which is an independent outside body that they can go to in lieu of the Federal courts, although

on certain circumstances they continue to have the right to go to

the Federal courts.

So, again, that is why I am saying having a competency-based

system that grounds these types of decisions, having adequate safeguards, having appropriate transparency and, as far as the safeguards, both internal as well as external appeal rights I think can

go a long way to minimize that possibility of abuse.

Mr. ISSA. One followup question, but on a different area. When

you talked about a chief operating officer and a 7-year term as a

hypothetical, I come from corporate America, where our term is

only however the last quarter went very often, and rightfully so, although I notice that Carly Figurino will probably be running the

World Bank in return for having been fired from her last job, so

just getting fired is not always the end of a career. But I guess my

question is no matter how good the past performance of a proposed

chief operating officer, by definition there is no equivalent to this

job; there is nothing where you say, boy, this person did this in

Connecticut, with its couple million papers and GDP about equal

to San Diego, but we are going to run them over and we are going

to provide them this opportunity to head this huge agency. What

safeguards would you have on, particularly the first term of that

person, if you give them a 7-year term and they don’t perform?

Mr. Walker. Well, for one thing, I think there should be statutory

criteria that would have to be met in order for somebody to be appointed. Second, I also believe that this level position should be a

PAS, president appointee, Senate confirmation. Third, I believe

that it should have a performance contract. I believe that somebody

should have a performance contract, and that could be grounds for

removal if they are not in compliance with their performance contract. It also should have an effect on how much they get paid, as

to what type of results they are generating within certain limitations.

One last thing, if I may, on your prior comment about compensation. We clearly have to reform our compensation system in the

Federal Government. And let me give you two reasons why. No. 1,

the current methodology for determining market-based competition

by locality is fundamentally flawed. No. 2, at the present point in

time, for executive branch agencies that are subject to the General

Schedule, 85 percent plus of annual pay adjustments have nothing

to do with skills, knowledge, and performance; 85 percent plus.

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And, in addition, under current law, individuals, although they are

not big in number, individuals who are unacceptable performers

are guaranteed across-the-board pay adjustments, even if they are

unacceptable performers. That just doesn’t make sense, I would respectfully suggest.

Mr. ISSA. Thank you, Chairman.

Mr. PORTER. Thank you.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much.

Mr. Walker, I was listening to what you just said, and, you know,

pay is a big deal. In the Congress we have this book. I haven’t

looked at it, but apparently it tells everybody’s salary by position,

and if you see the alleged director in one office making $85,000 and

the one in your office is making $80,000, you ought to have a conference to figure out why there is a difference. So people are concerned about their pay; it touches every aspect of their lives, and

it goes to morale, as you well know. And this whole thing of requiring performance expectations be in writing, that is a concern of

yours, is that right?

Mr. WALKER. Oh, it is, absolutely. There are different ways you

can do it, but I clearly think you have to have things in writing,

and I think competencies are a way to do that, to accomplish a

number of objectives.

Mr. CUMMINGS. So elaborate on what you just said on the competencies.

Mr. WALKER. Take, for example, GAO. One of the things that we

do is we have different kinds of occupations. One of the type of occupations we have are auditors, investigators, analysts, evaluators.

And one of the things that we did is we worked with those individuals to come up with a set of competencies, things like thinking

critically, achieving results, effective communications; and we defined them in very specific terms. They then validated that, yes,

these are the type of competencies you have to have in order to be

successful in that particular occupation. We then came up with different rating levels, in other words, when would you be rated meets

expectations, role model, exceeds expectations, below expectations,

based upon these different standards. So that is a basis by which

you can set expectations and you can also be able to implement a

performance appraisal system that has some credibility and that

can meaningfully differentiate in performance. It is not perfect.

There is no system that is ever perfect, but it is light years ahead

of where we were.

Mr. CUMMINGS. You said that 80-some percent was not based on

competency. Do you know what that 80 percent is based on?

Mr. WALKER. Yes, sir. Yes, sir. What that is related to is when

the Congress each year passes the across-the-board pay adjustment, which, as you know, is more than inflation, it is intended to

include a number of factors—for example, last year it was 31⁄2 percent. Under current law, it is my understanding that every single

individual is entitled to that 31⁄2 percent below the SES level, irrespective of their performance. Furthermore, as you know, under the

GS schedule, you get a step increase due to the passage of time.

So if you combine that 31⁄2 percent, which was the case last year,

along with the step increase, which is merely due to passage of

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time, that is, my understanding, roughly about 85 percent of comp.

And then when you consider that the merit step increases are

based upon performance appraisal systems that, frankly, in many

cases are long outdated and don’t meaningfully differentiate in performance, a vast majority of people, or a significant percentage of

people get those as well. So we have a system that is really not related very much at all to skills, knowledge, and performance, and

in a knowledge-based work force, there is a fundamental disconnect.

Mr. CUMMINGS. And having run a law office for about 20 years

where, if you don’t perform, you don’t get paid, I also understand

you have to have a balance there. While you don’t want people to

just be sitting and getting a check, where is no real incentive because it is not connected with merit, you also want to make sure,

particularly in a subjective system, that there is fairness. And one

of the things that—and this will be my last question. Where does

cultural sensitivity come in? Do you think that should be a part of

the criteria when you are looking at expectations? The reason why

I raise that is that when you look at the private companies that

are doing well and are good places to work for and have the most

diversity, there is a trend taking place, as I am sure you may be

well aware, where cultural sensitivity becomes very significant.

They want to know how many minorities this manager hired, what

outreach he did, how many women did he or she bring in, or whatever. And that becomes a part of their performance evaluation. Do

you think that is important here?

Mr. WALKER. Well, I think you do need to make sure, as we try

to in our performance appraisal system, to try to achieve a diverse

work force that is inclusive, that maximizes opportunities for all,

and that does not have any tolerance for discrimination at all. And

I know that is something that we end up incorporating into our

evaluation. At the same point in time, one has to make sure that

you are hiring people that have the skills and knowledge, and who

can end up performing at the level that you expect. You can’t compromise that, but we should have an active and ongoing outreach

effort to achieve an inclusive work force, a diverse work force, and

to have zero tolerance for discrimination.

Mr. CUMMINGS. Thank you very much.

Mr. PORTER. Thank you.

Ms. Holmes, do you have a question, please?

Ms. NORTON. Yes. Thank you very much, Mr. Chairman.

Mr. Walker, I appreciate the work you have done in this area,

but this is not chicken feed we are fooling with here. We have involved agencies that had nothing in common until September 11th

and, frankly, they don’t have a lot in common now; many of them

still have missions that are largely or very substantially devoted to

things that have nothing to do with homeland security. So we are

trying to meld people who we never would have thought of putting

together except for September 11th.

You bragged on what you did before you went to a more flexible

approach. Do I understand—I heard you talk about it before—that

the kind of personnel infrastructure to assure fairness and collaboration that you had in place before you went to a new system is

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not in place when, on March 3rd, Department of Homeland Security is supposed to move to this new system?

Mr. WALKER. It is not clear to me that they are going to have

the same kind of safeguards that we have in our system. And I will

say, as well, Ms. Holmes Norton, that we have strengthened our

safeguards in the last several years as Congress has given us additional flexibility, because that is critically important.

Ms. NORTON. So you would recommend, I take it, that DHS do

the same based on your own experience.

Mr. WALKER. I think they could be informed by our experience

and adjust it as they deem appropriate, but certain aspects I think

have broad-based application elsewhere in Government.

Ms. NORTON. One of the things you emphasized in your testimony and in the way you dealt with your own employees was what

you called meaningful collaboration, two-way consultation. Do you

believe that sufficient ‘‘meaningful collaboration’’ and ‘‘two way consultation’’ has occurred in this instance involving this agency with

180,000 employees?

Mr. WALKER. I haven’t made an independent judgment on that.

I will tell you this: it is very clear to me that there were a number

of efforts taken to get input from a variety of parties and, frankly,

a lot more than some other departments and agencies have done.

Ms. NORTON. Well, what other departments and agencies are trying to put together a brand new system? Mr. Walker, if we can’t

get some independent view from you on this because you haven’t

made a judgment, which is what this whole thing is about, I don’t

know who we are going to get it from. That is what the GAO is

for. I am asking you whether, in your view at this point, there has

been sufficient collaboration, two-way consultation, or whether you

would recommend more of that.

Mr. WALKER. Based upon my understanding, there was significant interaction that occurred in coming up with these proposed

regulations; however, there are differences of opinion between the

parties as to whether or not it was meaningful enough. And part

of it is how do you define what is meaningful enough. They clearly

have done a better job than the Defense Department has been

doing, and the Defense Department is now trying to be informed

by some of the things that DHS did. I wish I could be more definitive than that.

Ms. NORTON. All I can say, Mr. Walker, is that I bet if I asked

your employees, they would have something more definitive to say.

We never expect people to have the same view, but, again, if we

can’t get an outside opinion on that, I don’t know how to judge

what the unions are saying against what management is saying.

Let me ask you this. The Department of Homeland Security has

the authority to replace the MSPB appeal system altogether with

an internal review process, and it has chosen not to do that, with

few changes. Would you recommend that they continue to place

themselves under MSPB, as they have now chosen to do?

Mr. WALKER. I think unless there is a clear and compelling reason to change, then I would question why you would. My understanding is, as you said, that they are not proposing to change that,

although with some modifications.

Ms. NORTON. And you think that is wise at this time?

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Mr. WALKER. I think you have to have a qualified and independent external body to be able to hear certain types of employee appeals, and MSPB is obviously one option.

Ms. NORTON. If you have emphasized as well the necessity to

have a full personnel approach and evaluation approach in place,

let me ask you this. If these expectations of employees are not in

writing, if the core competencies that you have testified are not in

writing and no one knows what they would be, and there was some

kind of adverse action or somebody protested her pay, would you

tell me how that would be handled under the present situation,

without those things in writing?

Mr. WALKER. I would respectfully suggest you ought to ask the

Department of Homeland Security officials on that. I think it would

make it very difficult and it would probably end up being interviewing people as to who said what to whom when, and what, if

any, evidential matter is there that might exist through emails or

notes or other type of correspondence in order to be able to corroborate one side or the other.

Ms. NORTON. Finally, let me ask you this. Eighty percent of the

people get a satisfactory; you are talking about a mandatory system, unlike any system in the world. The Civil Service system was

created precisely because of the difficulty, when people are basically competent, of drawing nice distinctions. I mean, based on

what you say, the implication is that large numbers of Federal employees are incompetent and, therefore, you shouldn’t expect

across-the-board notions of competence. Beyond that, I would like

to ask if the problem is one that anybody could see is unacceptable,

and that is that even if, as you say, you have unacceptable performance you are guaranteed a raise, then why in the world

haven’t we gone at that first, rather than go at the whole system,

as if the average Federal employee should feel that perhaps she is

not competent because so many of you in fact get raises?

I wonder if you can find a better way to state what the problem

of this system is, rather than implying that large or much larger

numbers of people are incompetent because they are rated satisfactory and get their automatic raise at the same time that we here

in the Congress give everybody else because they are not performing so poorly that we think that they should receive no raise. And,

of course, if they are performing so poorly, I don’t know of a Member that would keep that person working. So I want to know what

it is in the present regulations of the Civil Service that says you

don’t care how bad you are, you qualify for your raise, while you

haven’t come forward to say this is what we ought to do about that

and why we haven’t done something about that earlier.

Mr. WALKER. Let me make it clear. I have run three Federal

agencies, three in the executive branch, one in the legislative

branch. I have run worldwide operations of one of the world’s leading consulting firms. My experience has been, at least with the

agencies that I have dealt with, civil servants are as good or better

than the private sector. So let me make that very clear.

Ms. NORTON. Well, it is real important to say that every once in

a while, Mr. Walker.

Mr. WALKER. No, no, I think it is very important. I have said it

many, many, many times.

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Ms. NORTON. Not a word was said of that kind in your testimony,

sir.

Mr. WALKER. Well, I just said it.

Ms. NORTON. Until I, on cross examination, drew that out of you.

Mr. WALKER. Well, I would respectfully suggest that if you end

up asking 100 people who is a champion for human capital in the

Federal Government, you will get my name probably 90 plus times.

So understand they are as good or better than the private sector.

My comment was not whether or not they had a meets expectation

rating. My comment is where you have a few people, and not a

lot—for example, at GAO there is less than two dozen people out

of over 2,000 that would be in the category that I am talking about.

Ms. NORTON. How do they get their raises, then?

Mr. WALKER. The way that they——

Ms. NORTON. What is there in the regulations that guarantees—

that is what you said, guaranteed them their raises?

Mr. WALKER. Federal law guarantee does not provide an exception. For individuals who are not performing an acceptable level or

who want to—performance improvement plan or whatever, does

not provide an exception for them getting the across-the-board adjustment. And I have testified on more than one occasion that Congress ought to re-look at that. I do not believe that you should

guarantee people a raise if they are not performing at an acceptable level.

Ms. NORTON. So you are telling me that if somebody repeatedly

performs at an unacceptable level, his raises keep coming in?

Mr. WALKER. My understanding is unless and until they are removed, that is the case, if they are ever removed.

Ms. NORTON. Have you ever made any recommendations as to

how we ought to handle that?

Mr. WALKER. Yes, I have.

Ms. NORTON. How should we handle that?

Mr. WALKER. I think you ought to change the law such that if

somebody is not performing at an acceptable level, they do not receive the across-the-board adjustment. There are not that many

people in that category, but especially when we are in a circumstance in which we are increasingly constrained budgets, I

think it is something that needs to be considered.

Ms. NORTON. Well, it certainly is, but I would suggest to you that

when speaking about reforms of an entire system as large as the

180,000 Homeland Security system, you speak about that group,

not give it as a justification for everything that has been done with

respect to these changes.

Thank you very much, Mr. Chairman.

Mr. WALKER. And if I can, Mr. Chairman, come back.

I agree with you on several things, Ms. Norton, and that is these

22 agencies that were combined to make the Department of Homeland Security, before September 11, 2001, before they were combined, many of them weren’t in the homeland security business.

OK? A lot of them are in it now, but to very differing degrees. You

have very different kinds of career streams, very different kinds of

cultures, very different types of systems, even different kinds of

uniforms. OK? As little things as that. So it is a massive undertaking. That is why I come back to say we need to approach this in

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a considered manner, with the right type of attention, on an installment basis, and it is really important they get it right, because

it is not only important to the Department of Homeland Security,

it has implications beyond the Department of Homeland Security

as well.

Mr. PORTER. Thank you, Mr. Walker. I know that you are trying

to depart in about 5 or 10 minutes. I am going to hold my questions.

Actually, Ms. Holmes Norton, you asked some questions for me,

and I appreciate it.

I would like to turn it over to Mr. Davis for one additional question.

Mr. DAVIS. Thank you very much, Mr. Chairman. I only have one

additional question.

Mr. Walker, you described how you select individuals for the

Mandatory Removal Panels from the list, but I understand the Secretary of DHS can actually ignore anybody that is submitted or

lists that the unions might provide for those recommendations, and

he or she really has sole discretion to make those selections. The

other question, though, is you have just gone through modernization of your agency, of the GAO. If you were making recommendations to Homeland Security, what would you say to them that they

really need to do?

Mr. WALKER. Well, I think there is quite a bit in my testimony,

and I can tell you that we have shared a lot of our knowledge and

experience with the Department of Homeland Security, as we are

doing with the Department of Defense, about what we have done

and how we have gone about it; what has worked and what hasn’t

worked, for their consideration as they deem appropriate. I would

be happy to provide for the record, if you want, Mr. Davis, if I can

think of additional things that I haven’t already put in my testimony or something, to provide that for the record.

Mr. DAVIS. OK.

Mr. PORTER. Thank you.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. PORTER. Thank you.

And we thank you, Mr. Walker, for being here and for your testimony.

Mr. VAN HOLLEN. Mr. Chairman, if I could ask Mr. Walker just

a few questions.

Mr. PORTER. Certainly.

Mr. VAN HOLLEN. I know your time is short, but just to followup

on the pay-for-performance issue, because we have had a lot of testimony in this subcommittee and the full committee, and even joint

committees with the Senate, on this, and I think everyone agrees

that the concept of paying people based on performance or merit

or contribution, the result we want for taxpayers, is important. The

devil is in the details. And I do recall testimony you gave before

a joint Senate-House committee last year where you sort of graded

different agencies and departments within the U.S. Government as

to how prepared they were at laying the groundwork for that. And

I know you and the GAO worked very hard over many years to try

to build predictability, reliability into the system, and I am very

concerned that rushing into this is going to create havoc, it is going

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to undermine the confidence in the system. There is a story in the

Metro section today about pay-for-performance at NASA, I believe,

where people feel that employees are being rewarded based on

going along to get along, as opposed to merit, and that is always

the trouble when you go to these systems, where there are not

clear indicators.

Are you confident that the Department of Homeland Security has

in place today the kind of system that would inspire confidence,

predictability, clear standards for performance that would make

sure that we avoid what I think we probably all want to avoid, is

people being rewarded based either on political loyalty or because

they’re the boss’s favorite, or something other than merit.

Mr. WALKER. Well, they have stated their intention to have it in

place. They don’t have it in place today. Several comments that I

would make that I think are relevant to this. First, you need to

move on an installment basis, and they have intimated that is

what they intend to do. You have 170,000-plus individuals, very

different occupations, a number of different locations. You need to

move on an installment basis. Second, you need to have that modern effective and credible, and hopefully validated, preferably validated, performance appraisal system based on competencies or

other written factors in place, and I would recommend tested for

1 year, before you go to broader-based pay-for-performance. And I

do, however, believe that, as Ms. Holmes Norton and I exchanged

earlier, that individuals, even before you go to the broader-based

pay-for-performance, I do not believe that individuals—and there

are not many, let me make that clear, there are not many—who

are not performing at an acceptable level should be guaranteed any

pay increase, whether they are under the GS system or under a

more flexible market-based and performance-oriented compensation

system.

Mr. VAN HOLLEN. Thank you. I hope that the Department of

Homeland Security will take your advice and hopefully what will

be the advice of this committee in that regard, because, again, if

you undermine confidence in the system at the beginning, it is very

difficult to gain that confidence down the road; and I think it very

dangerous to move too quickly in this particular area. Talk about

expanding this whole notion beyond, to the rest of the Government,

before we have even begun a small installment program at the Department of Homeland Security worries me a lot, and the whole

Defense Department, given the management problems at the Defense Department that you at GAO have chronicled, I am really

concerned about it there as well.

So, Mr. Chairman, I just hope that we will make sure that this

is not done in a way that will, in the end, undermine confidence

and destroy the merit system that has been in place, albeit with

some certain faults, which you have identified.

Mr. PORTER. Thank you, Mr. Van Hollen. I appreciate your questions and input.

I have a couple of questions I wish you could respond to later.

One, I am very, very concerned about the collaborative process and

some additional insights on that. Also, I am a large supporter of

keeping things simple, and it seems to me this pay system is very

complicated. And as I mentioned earlier, the term flexibility has a

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tendency to frighten people. If you would, again—you don’t have to

do it right now, Mr. Walker, because I know your time is limited,

but if you would give some of your insights on this not very simple

pay system and how we can help share that with some of the employees.

Having said that, let me conclude by saying that I concur, we

cannot rush into a major change. I am anxious to hear from DHS

this morning to get their perspective. My understanding is that

they are going to be considering extending this through 2009. But

I share those concerns and definitely appreciate your input and

your comments this morning, Mr. Walker.

Mr. WALKER. Thank you, Mr. Chairman. Happy to answer any

questions that you or other Members may have for the record.

Thank you so much.

Mr. PORTER. Thank you.

I would like to bring up the next panel, the second panel of witnesses. If they would come to the table, please.

Good morning, gentlemen. Do you all agree that our meeting

should be in Las Vegas? Is that OK? Just checking.

First to open with a statement from the Honorable Mr. Neil

McPhie, the chairman of the Merit Systems Protection Board. Following the Honorable Mr. McPhie, we will have Mr. Ronald Sanders, the Associate Director of Strategic Human Resources Policy at

the U.S. Office of Personnel Management; and, finally, we will hear

from Mr. Ronald James, Chief Human Capital Officer to the Department of Homeland Security.

I thank you all for joining us today.

Mr. McPhie.

STATEMENTS OF NEIL A.G. MCPHIE, CHAIRMAN, MERIT SYSTEMS PROTECTION BOARD; RONALD SANDERS, ASSOCIATE

DIRECTOR FOR STRATEGIC HUMAN RESOURCES POLICY,

U.S. OFFICE OF PERSONNEL MANAGEMENT; AND RONALD

JAMES, CHIEF HUMAN CAPITAL OFFICER, DEPARTMENT OF

HOMELAND SECURITY

STATEMENT OF NEIL A.G. MCPHIE

Mr. MCPHIE. Thank you, Mr. Chairman. Mr. Chairman, members, I am Neil McPhie. I am the chairman of the U.S. Merit Systems Protection Board. As you know, the Board is an independent

quasi-judicial agency established to protect Federal merit systems

against partisan, political, and other prohibited personnel practices. We carry out our statutory mission through the adjudication

of employee appeals of personnel actions and by conducting objective studies of the Federal merit systems.

I appreciate the opportunity to appear before you this morning

to discuss the potential impact of the new Department of Homeland

Security appeal system on the Board. I respectfully submit my

written statement and request that it be included in the hearing

record.

I will use this time simply to summarize some of my comments.

Mr. PORTER. Thank you.

Mr. MCPHIE. As mandated by statute, the Board participated in

the consultative process with DHS and OPM for developing these

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regulations. The Board took its consultant role very seriously; it is

a small agency. However, members of my staff attended numerous

meetings with DHS and OPM representatives throughout this process. We provided comments and written responses to draft regulations. After numerous hours of consulting with DHS, the results

were that DHS decided to keep MSPB as the adjudicator of the employee appeals, with modified and expedited process.

I want to tell you this, in my judgment, was a major accomplishment for the Board. Beginning this process, there was palpable fear

in the agency that the Board was going to be deprived of some 40

percent of its cases. While we are pleased that DHS has decided

to retain the services of the Board for the adjudication of employee

appeals, the new regulations will significantly impact the Board’s

procedures and operations.

Let me first begin by what has not changed. The DHS appeal

system provides an employee who is subjected to an adverse action,

such as removal or suspension, the right to a de novo review before

an outside body, the Merit Systems Protection Board. An appeal is

filed with a Board administrative judge, and upon either party’s request the administrative judge’s decision is reviewable to the full

Board. The burden of proof remains on the employing agency, and

the standard of proof is preponderance of the evidence. After a final

Board decision has been made, if dissatisfied, the employee has the

right to seek judicial review.

As someone who values the Board role in the Federal Civil Service system, I am pleased that DHS has included these basic features in its appeal scheme.

Now to the changes. At Board headquarters, the most significant

effect of the new appeal system is that the shortened timeframes

may require the Board to create two administrative tracks for processing the appeals. We call them petitions for review. Traditionally,

the Board has adjudicated cases on a first-in, first-out basis at

headquarters. The Board will not be able to treat DHS cases in this

way, given the deadlines that DHS has imposed for Board decision.

It is possible that the Board will have to create a separate track

for DHS cases and place priority on these cases over other equally

important cases. This arrangement may likely mean that parties to

non-DHS cases will have to wait longer than they otherwise would

have for a Board decision.

At the Board’s regional offices, the DHS system would also

change many aspects of the processing of cases by administrative

judges. The point is both the agency and the employee will feel the

immediate impact of this compressed time table. They will have

less time for discovery, less time to pursue settlement discussions,

and less time to prepare for a hearing that they would under the

Board’s rules governing non-DHS cases.

Another major change in practice before Board judges is the introduction of summary judgment. Summary judgment is a well

known and well utilized device in courts of law; however, that system has not been used in the Board’s procedure before now. Therefore, it seems to me the average employee who suddenly discovers

that he or she no longer has that right to a hearing before a judge

will be, in all likelihood, surprised, confused, and in some instances

even angry. A similar right, the right to a hearing, is a staple of

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Civil Service systems in many States. This is no longer the case

with DHS employees.

My red light is on, but with your permission, there are a couple

of more points I would like to make.

The overall thrust of the other changes are described in my written statement, and that is to reduce the discretion of Board administrative judges to manage cases according to their individual circumstances, a discretion that historically has been exercised and,

in the main, exercised wisely. For example, the DHS system imposes detailed rules on case suspensions and the conduct of settlement conferences, matters that ordinarily have been left to the administrative judge’s discretion to manage a case.

Perhaps the biggest limit on discretion of administrative judges,

a limit that also applies to the Board, concerns the mitigation of

penalties. The designers of the new system apparently believe that

administrative judges and the full Board have too much freedom to

set whatever penalty they deem appropriate. As explained in detail

in my written statement, the Board has not chosen penalties willynilly , but instead has historically given deference to the judgment

of agency managers and the mission of the agency. In any event,

under the new system, the Board may not mitigate a penalty unless it is to disproportionate to the offense as to be wholly without

justification. Naturally, this new standard will be the subject of interpretation by the Board and ultimately by the court, so I can’t

tell you, at this point in time, what a Board’s decision will be until

a live case comes before it.

I want to also point out I was intrigued by the focus on mitigation and asked for and received statistics. I wanted to know how

many cases, on average, have been mitigated by the Board over

time, and I looked at some 3 years worth of numbers, 2002, 2003,

and 2004; and what I find is at the field level, between 2 to 3 percent of cases involve mitigation. Some of those cases, when appealed, that decision is reversed by the full Board, so the number

of cases in which mitigation is issued is even smaller.

It should also be noted that the portion of the DHS rules concerning mandatory removal of fences may not work as well as intended. First, in some cases, this portion of the rules could work

against the stated goal of streamlining the appeals process. As

DHS envisions it, if a mandatory removal action is taken but not

sustained, DHS may take a second action based on the same conduct. The second action would then be appealable. DHS rules do

not allow for hybrid action based on a mandatory removal charge

or lesser included charge. If there was such a hybrid action, the

possibility of two Board appeals, and perhaps inconsistent decisions, arising out of the same conduct would be eliminated.

The second problem spot, and I think it is a significant problem

spot, concerns judicial review in mandatory removal matters. According to the DHS rules, if the Board does not render a decision

within 30 days, or 45 days if the deadline is extended, the Board

will be considered to have denied review. In that situation, again,

according to the rules, the DHS decision will become the final

Board decision and, therefore, appealable to the circuit court. There

is no right to judicial review without a final Board decision. That

is in 5 U.S.C. Section 7703. The statute says it quite clearly. What

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remains to be seen is whether the Board’s reviewing court will take

jurisdiction in a mandatory removal matter where the Board has

not actually rendered a decision. Here too the answer will have to

await the word of a court in a live case, but I will be surprised if

the court does in fact find jurisdiction in such a case.

The changes I have discussed, and I have discussed in more detail in my written response, will impact all aspects of the Board’s

processes. It is likely that the Board will have to increase its career

staff so as to meet the expedited timeframes in the DHS appeal

system, and still provide fair and timely adjudication for cases involving other agencies. Whatever the cost, we are confident that we

will provide the same high quality of services for which have become known, even in the compressed timeframes mandated by the

new appeals system.

We look forward to working with DHS to ensure the success of

its new personnel system. Thank you very much for the opportunity.

[The prepared statement of Mr. McPhie follows:]

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Mr. PORTER. Thank you, Mr. McPhie.

Next, Mr. Sanders.

STATEMENT OF RONALD SANDERS

Mr. SANDERS. Thank you, Mr. Chairman. I am Ron Sanders, Associate Director for Strategic Human Resources Policy at the Office

of Personnel Management. It is my privilege to appear before you

today to discuss the final regulations implementing a new human

resource management system in the Department of Homeland Security, a system that we truly believe to as flexible, contemporary,

and excellent as the President and the Congress envisioned. It is

the result of an intensely collaborative process that has taken almost 2 years, and I want to express our appreciation to your subcommittee for its leadership in this historic effort. Without that

leadership, we wouldn’t be here today, and we look forward to your

personal involvement in the future.

Mr. Chairman, with the Homeland Security Act of 2002, you and

other Members of Congress gave the Secretary of DHS and the Director of OPM extraordinary authority, and with it a grand trust,

to establish a 21st century human resource management system

that fully supports the Department’s vital mission without compromising the core principles of merit and fairness that ground the

Federal Civil Service. Striking the right balance between transformation and tradition, between operational imperatives and employee interests is an essential part of that trust, and we believe

we have lived up to that in these final regulations.

I would like to address that balance this morning with a particular focus on performance-based pay, employee accountability, and

labor management relations. First, pay-for-performance.

The new pay system established by the regulations is designed

to fundamentally change the way DHS employees are paid, to place

far more emphasis on performance and market in setting and adjusting rates of pay. But would it inevitably lead to politicization,

as some have alleged? Absolutely not. All Federal employees are

‘‘protected against arbitrary action, personal favoritism, or coercion

for partisan political purposes.’’ That statutory protection is still in

place and binding on DHS, and it most certainly applies to decisions regarding an employee’s pay.

If a DHS employee believes that such decisions have been influenced by political considerations or favoritism, he or she has the

right to raise such allegations with the Office of Special Counsel,

have the OSE investigate and, where appropriate, prosecute them,

and to be absolutely protected from reprisal and retaliation in so

doing. These rights have not been diminished in any way whatsoever.

The new system also provides for additional protections that

guard against any sort of political favoritism in individual pay decisions. Under the new system, supervisors have no discretion with

regard to the actual amount of performance pay an employee receives. That amount is driven strictly by mathematical formula, an

approach recommended by DHS unions during the meet and confer

process. With but one exception, the factors in that formula cannot

be affected by an employee’s supervisor. Rather, they are set at

higher headquarters, with union input and oversight through a

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new compensation committee, another product of the meet and confer process, that gives them far more say in such matters than they

have today.

The exception is the employee’s annual performance rating. That

is the only element of the system within the direct control of the

employee’s supervisor. And the regulations that allow an employee

to challenge it if he or she doesn’t think it is fair, all the way to

a neutral arbitrator if their union permits, another product of the

meet and confer process.

Mr. Chairman, with these statutory and regulatory protections

providing the necessary balance, as well as intensive training and

a phased implementation schedule to make sure DHS gets it right,

we are confident that the new pay-for-performance system will reward excellence without compromising merit.

Let us take a similar look at accountability and due process.

DHS has a special responsibility to American citizens in that regard. Many of its employees have the authority to search, seize, enforce, arrest, even use deadly force in the performance of their duties; and their application of these powers must be beyond question. By its very nature, the DHS mission requires a high level of

workplace accountability. We believe the regulations assure this accountability, but without it compromising any of the due process

protections Congress guaranteed. In this regard, DHS employees

are still guaranteed notice of proposed adverse action and a right

to reply before any final decision is made in the matter. In addition, the final regulations continue to guarantee an employee the

right to appeal an adverse action to MSPB or to arbitration, except

those involving mandatory removal offenses; and I am sure we will

talk about those.

Further, in adjudicating these employee appeals, regardless of

forum, the final regulations place a heavy burden on the agency to

prove its case against an employee. Indeed, in another major

change resulting from the meet and confer process, the regulations

actually establish a higher overall burden of proof, a preponderance

of the evidence standard, for all adverse actions, whether based on

conduct or performance. While this standard currently applies to

conduct-based adverse actions, it is greater than the substantial

evidence standard presently required for performance-based removals.

Finally, the regulations authorize MSPB, as well as arbitrators,

to mitigate penalties in adverse action cases. The proposed regulations precluded such mitigation, as does current law in performance-based adverse actions. Let me repeat. Under current law, no

mitigation under performance-based removals. However, the final

regulations allow mitigation when the agency proves its case

against an employee by a preponderance of the evidence. The

standard in the regulation is admittedly tougher than those MSPB

and private arbitrators apply today, with far more authority in performance cases, where, again, mitigation is not allowed. However,

given the extraordinary powers entrusted to the Department and

its employees, and the potential consequences of poor performance

and misconduct to its mission, DHS should be entitled to the benefit of the doubt in determining the most appropriate penalty. That

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is what the new mitigation standard is intended to do, and it is

balanced by the higher standard of proof.

Finally, a quick look at labor relations. Accountability must be

matched by authority, and here current law governing relations between labor and management is out of balance. Its requirements

potentially impede the Department’s ability to act, and that cannot

be allowed. Now, you will hear that current law already allows the

agency to do whatever it needs to do in an emergency. That is true.

However, that same law does not allow DHS to prepare or practice

for an emergency, to take action to prevent an emergency, to reassign or deploy personnel or new technology to deter a threat, not

without first negotiating with unions over implementation, impact,

procedures and arrangements. On balance the regulations ensure

that the Department can meet its critical mission, but in a way

that still takes union and employee interests into account.

Mr. Chairman, if DHS is to be held accountable for homeland security, it must have the authority and flexibility essential to that

mission. That is why Congress gave the Department and OPM the

ability to create this new system. That is why we have made the

changes that we did. However, in so doing, we believe that we have

succeeded in striking an appropriate balance between union and

employee interests on the one hand and the Department’s mission

imperatives on the other.

That concludes my statement. I would be happy to answer questions at the appropriate time.

[The prepared statement of Mr. Sanders follows:]

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Mr. PORTER. Thank you, Mr. Sanders. Appreciate it.

Mr. James.

STATEMENT OF RONALD JAMES

Mr. JAMES. Mr. Chairman, members of the committee, I am Ron

James, the Chief Human Capital Officer for the Department of

Homeland Security. It is a privilege to appear before this subcommittee to discuss the final regulations implementing the new

DHS Human Resources Management System. I am proud to report

these regulations are the successful culmination of months of difficult work by many players to accomplish the charge that Congress set before us. They contain significant changes that are necessary for the Department to carry out its mission. They also

unlock the full potential of our DHS civilian employees.

The collaborative processes used were designed to ensure that a

broad variety of viewpoints were considered and the best options

were adopted. For example, when the proposed regulations were

published, we made a conscious decision to utilize an electronic

comment process, facilitating the involvement of DHS employees,

their representatives, and the general public. Over 3,800 responses

were received, demonstrating the success of this tactic and the very

important engagement of our employees.

Another component of our collaboration stemmed from congressional direction that we engage in a ‘‘meet and confer process’’ with

employer representatives. We complied with both the letter and the

spirit of that direction, meeting before the formal meet and confer

sessions to help us better understand each other’s positions and extending the overall meet and confer time period in an effort to resolve ongoing issues. The collaborative process has been a meaningful one, and we have made a number of significant changes to our

final regulations as a result.

For example, we have created a compensation committee that includes representatives from our two largest labor unions to address

strategic compensation matters such as the allocation, as one example, of funds between market and performance pay adjustments.

We provided our employees and unions a meaningful role in the design of further details in the pay-for-performance system in a process of ‘‘continuing collaboration’’ in the development of implementing directives. We have modified our schedule for implementing the

pay-for-performance system in response to strong union concerns,

as well as others, that the proposed schedule did not allow adequate time to train managers, to evaluate system effectiveness, and

we agree that mandatory removal offenses [MROs] will be published in the Federal Register and made known annually to all employees.

Throughout the entire collaboration process, we followed a set of

guiding principles adopted from the onset of our design process.

First and foremost, DHS must ensure that its HR management

system is mission-centered, performance-focused, and based on the

longstanding principles of merit and fairness embodied in the statutory merit system principles. While we believe that our final regulations achieve that balance, there remains several areas where we

have fundamental disagreements with union leadership on aspects

of the new HR system. We believe that these issues, such as using

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performance rather than longevity as the basis for pay increases

and providing for increased flexibilities to respond to mission-driven operational needs, or balancing our collective bargaining, go to

the very core of congressional intent in granting these flexibilities.

The final regulations emanating from the collaborative process

point to the way to a new paradigm for human capital management

not just for DHS, but for the entire Federal service. This paradigm

includes a strong correlation between performance and pay, and

greater consideration of local market conditions. It adopts streamlined procedures for ensuring conformance with the principles of

equal pay for work of equal value; includes simplified and streamlined adverse action and appeals procedures, while ensuring fairness and due process; and reaches a balance between core Civil

Service principles and mission essential flexibilities.

Significant changes in the compensation plan include: replacing

the General Schedule with open payroll ranges; eliminating the

steps in the current system that are largely tied to longevity; creating performance pay pools where all employees meeting performance expectations will receive performance-based increases; basing

compensation on local market conditions for different job types,

rather than providing all job types in a market with the same geographic pay adjustment; absent such a market-based system, we

cannot assure DHS’s ability to compete for top talent. And we are

making and going to make meaningful distinctions in performance

and holding employees accountable at all levels. Current systems

which provide a general across-the-board increase and rarely denied within-grade increases do little to encourage or reward excellence in the work force.

Some of our significant changes regarding adverse actions and

appeals include: streamlining the adverse action appeals procedures by shortening minimum notice and reply periods. By working

with MSPB to modify their procedures to gain efficiencies, without

impairing the fair treatment and due process protection; simplifying a process that is confusing to both employees and supervisors

by eliminating the requirement for managers to differentiate between an individual’s inability or unwillingness to perform in order

to address performance issues; creating a category of offenses that

have a direct and substantial impact on the ability of the Department to protect homeland security. These offenses would be so

egregious that supervisors have no choice but to recommend removal.

Our regulations contain major changes regarding labor-management relations, such as requiring that we confer, not negotiate,

with labor unions over the procedures followed to take management actions, such as assigning work or deploying personnel. Also,

bargaining over the adverse impact of management actions on employees is only required when the impact is significant and substantial, and the action has exceeded 60 days. Neither the confer

process nor the obligation to bargain impact can delay our taking

action. Providing for mid-term bargaining over personnel issues,

personnel policies, practices, and matters affecting working conditions only when the changes are foreseeable, substantial, and significant in terms of impact and duration. The substantial and significant test is consistent with current FLRA and private sector

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case law. And in response to additional union comments and concerns of others, we provided for binding resolution of mid-term impasse by the Homeland Security Labor Relations Board.

Establishing a separate labor relations board focused on the DHS

mission to ensure independence and impartiality valued by both us

and the unions, the Board will not report to the secretary. Its three

external members will be appointed for a fixed term and will be

subject to removal only for inefficiency, neglect of duty, or malfeasance.

We pledged at the beginning of this process to preserve fundamental merit principles, to prevent prohibited personnel practices, and to honor and to promote veterans’ preferences. We have

honored those commitments. These are core values of public service

that will not be abandoned. We also set out to fulfill the requirements of the Homeland Security Act to create a 21st century system for human capital management. We believe that the system we

have developed accomplishes these objectives. We are proud of

what we have created and of the men and women who have made

it possible, especially those at DHS.

That concludes my remarks, Mr. Chairman, and I would welcome

any questions.

[The prepared statement of Mr. James follows:]

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Mr. PORTER. Thank you, Mr. James. I appreciate it. I have a couple questions.

Mr. McPhie, having had a chance to look at your written statement and then, of course, hearing your verbal statement, it appears

to me that you have made it quite clear that you are not very much

in favor of this change.

Mr. MCPHIE. Oh, no, not at all, sir.

Mr. PORTER. If I can finish. I appreciate your role is very important in the process, but my understanding is, from some of the discussions that you had with staff prior, that you were concerned

about losing some caseload compared to what you have today; and

in your testimony it sounds like you are expecting a major burden

upon your organization. I know that you gave some specifics, training of judges, needing additional resources, and I can appreciate

that, but can you tell me what you see is good about the change?

Do you see anything good that could come of this if it is done properly?

Mr. MCPHIE. Oh, absolutely. Our role is a little bit different from

everybody else here. Everybody here at this table is a stakeholder

in any case, in any outcome of any case. We are not. Our role simply is when the system that is created—and we take the system

that is created as it is created. When that system breaks down in

some individual dispute, then we step in and sort of decide who

wins, who loses, so on and so forth. So we come at this completely

differently.

When I talk about the system—and I have had many a conversation with my good friend now, Dr. Sanders, and he knows where

I stand on issues. We have had some very tough conversations and

very friendly conversations, but in the end very helpful conversations. I assume that the best way I can serve the Federal employees and the best way I can serve the President, who appointed me,

was to do the best darn job I possibly could when it came to establishing an appeals system. I have practiced law before these kinds

of systems for many a year. Some of the conversation that was

brand new to them had been there, I had seen that. I have represented employers. I have a unique capacity to understand what

makes agency people tick; why they get upset with review bodies

like the Board. I can tell you I have been privy to many discussions

regarding mitigation. They hate it. Why? Because it is a limit on

their power to do what they think is right. So there is a natural

tension here.

The Board is not in a popularity business. We felt that the best

way they can use us in a consultative role was really to say to our

colleagues, the designers, have you thought of this or have you

thought of that, and so on and so forth. I believe, contrary to what

I have read in many statements, that the process provides due

process to people. I think what people are reacting to are some of

the particulars about the process. But the fundamentals of due

process is in this: notice and opportunity to defend yourself in a

meaningful fashion. Due process doesn’t necessarily require defending before an external body, but this process says let us continue

the external body, which is the Board. I think that is a good thing.

So when I talk about some of the timeframes and so forth, I am

facing reality. Reality is I look at current caseloads and current

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performance, and the Board turns around cases pretty quickly, all

things considered. And then you have a whole body of cases that

come in the door—and remember, we are going to have DOD cases

too, at some point, I hope—and we are required to stop what you

are doing and shift all your resources to this case that takes precedence. Well, you know, if you are in a non-DOD or a non-DHS, I

am sorry, agency, they would argue that is unacceptable. So we are

sort of between a rock and a hard place. But we have given our

commitment to DHS. I think they struggled with a lot of different

concepts and so forth. I think they started off with the desire not

to have the Board, and I think they have come a long way in, in

fact, giving the Board some power over their cases, and I think

that is extremely important.

Mr. PORTER. Thank you, Mr. McPhie. I appreciate your comments. My point was that some of the discussions had with staff

was contrary to what your presentation was this morning. We can

continue this some other time, but I appreciate your response to

that.

Mr. Davis.

Mr. DAVIS. Thank you.

Chairman McPhie, are you saying that your Board does not have

the resources to meet the expedited timeframes of DHS relative to

appeal?

Mr. MCPHIE. No, we can meet the expedited timeframes. The

question is once we meet those expedited timeframes, how does it

impact everything else. I heard Ms. Norton speak in terms of backlogs at the EEOC and what she had to do, so I assume she would

appreciate the whole notion and displeasure and distaste of having

to explain to people why they can’t get a decision.

Mr. DAVIS. Well, when you say impact, are you speaking of positively impacting or negatively impacting?

Mr. MCPHIE. There is a potential for negative impact. I mean, we

won’t know for sure until—this stuff is a work in progress. We are

looking at the numbers, the cases, where they are, the dynamics

of personnel, that type of thing, and what we have to do at the various offices to make sure this thing works. Frankly, our preference—and I have been told this by staff over and over and over—

in terms of regional offices, where the first-time action is, where

the case is filed, where the hearing occurs, where there is a lot of

interaction with the public, we don’t want to create two tracks of

cases.

Mr. DAVIS. Thank you.

Mr. SANDERS. Mr. Davis, let me just interject too. One of the projections that we built into the regulations in response to the concerns that Mr. McPhie shared with us during the consultation process was a provision that says if the Board fails to meet the time

limits imposed, that will not prejudice any party to a case. So there

is not an automatic default. If they don’t meet the 90 days for an

AJ decision, which is in fact the current time targets anyway, or

90 days after that for a full Board decision, a total of 180 days, if

they fail to meet that, that doesn’t mean that one side or the other

automatically loses. The regulations say that doesn’t prejudice either party, they simply go about their business and render their

decision.

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Mr. DAVIS. Very good.

Mr. Sanders, let me just ask you. In your testimony you talked

about a mathematical formula for performance payouts. Could you

amplify that a little bit? How would that work?

Mr. SANDERS. There are four variables, and at the risk of giving

you all migraines: performance rating, pay pool and the dollars in

the pay pool, and the ratings distribution. We have already talked

a little bit about the rating. You will see a multi-level rating system, except for trainees, no pass-fail, and the pay-for-performance

system in the Department of Homeland Security. So fully successfully, most likely fully successful exceeds an outstanding. Let us

say three levels. If you are unacceptable, you don’t participate in

performance pay. And as Ron James said, nor do you get acrossthe-board increases.

So let us focus on those people who meet expectations, exceed expectations, and who are outstanding. Managers rate those employees just as they do today. Each of those ratings has a point value.

That point value is established at a higher headquarters through

oversight of the Compensation Committee. The funding in that pay

pool is also established at a higher headquarters with oversight

from the Compensation Committee. You simply take the rating,

multiply it times the point value, and divide the points into the dollars, and you get your share of the pool.

And let me anticipate a question. The regulations absolutely

positively bar and prohibit forced distributions of ratings. You can’t

bust the budget because the pool is finite. You simply divide the

available dollars in the pool amongst the employees based on their

rating. And the amount in the pool, the amount of the Department’s payroll that will go to performance pay is set by the secretary on the advice and input of the Compensation Committee,

four members of which are from the Department’s two major

unions, far more influence in those matters than unions currently

enjoy today, where they sit on something called a Federal Salary

Council and get to talk a little bit about locality pay. Under the

Compensation Committee they will determine how much of the Department’s annual appropriations increase in payroll goes to performance, the national market adjustments and local market adjustments. Secretary reserves the right to make final decisions;

after all, he is accountable for the budget. They will decide how

that is divided up by location and occupation, and how much goes

into the performance pay pool set up under the system.

Again, unions have involvement. It is not collective bargaining,

which is what they preferred, but they have substantial involvement in that process to provide the oversight and credibility to

make sure it works.

Mr. DAVIS. Let me ask you what happens to an individual who

is rated unacceptable?

Mr. SANDERS. A individual who is rated unacceptable somewhere

in the salary range simply doesn’t get a pay increase, either performance pay or across-the-board. If the employee is at the bottom

of the range—and this is one of the details the unions asked us to

address. You have undoubtedly heard a lot of folks complain about

the lack of detail in the regulations. I am here to tell you we added

substantial detail during the meet and confer process. This is one

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of those details. If the employee is at the minimum level of pay,

he or she is unacceptable and everybody else in the pay range goes

up because they get across-the-board increases, the regulations require management to take action in 90 days. They don’t just let the

employee sit there. Either the employee’s performance improves

and they move back up into the range with everyone else, or the

Department either demotes or removes the employee.

The unions actually asked us for that provision because it requires management to take on the burden of proving the unacceptable rating and proving the adverse action by a preponderance of

evidence against the employee. But if they are in the middle of the

salary range, if they are unacceptable, they do not get performance

pay or an across-the-board increase.

Mr. DAVIS. So they get counseling, they get help to improve their

rating, or they know——

Mr. SANDERS. Exactly, Mr. Davis. That is what that 90-day period is for. It is not an immediate action; 90 days to improve, and

hopefully, if they do, they move up in salary along with everybody

else who is fully successful. But if they don’t, then action is taken.

Mr. DAVIS. Thank you very much, Mr. Chairman, and I ask

unanimous consent to have inserted into the record these two articles here from the Washington Post.

Mr. PORTER. Thank you. With no objection.

[The information referred to follows:]

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Mr. PORTER. I have received numerous questions from law enforcement officers. There is a concern about how they will be evaluated under this, whether it be from Border Protection, but certainly

all law enforcement has been very consistent. Could one of you gentlemen address some of those concerns specifically, please?

Mr. SANDERS. How about if I start, Ron, and you leap in?

The key here is what you measure. David Walker talked about

competencies. You can measure competencies, you can measure behaviors, you can also measure results. Everyone agrees that measuring results amongst a team of law enforcement officers is problematic. So if you take care as to what you measure, and if teamwork is the most important criterion for performance, you simply

structure your performance management system to ensure that is

the competency or the behavior that you reward. And we all know

that some people contribute more to a team than others. There are

observable, objective behaviors that manifest somebody who is an

excellent team member and somebody who isn’t; and as long as the

Department takes great care—and I can tell you, Mr. Porter, the

Department is very concerned about the notion of creating destructive competition amongst employees not just in law enforcement

groups, but in any workgroup, where they have to operate as a

team. And if you take great care as to what you measure, then you

can reinforce positive behaviors that actually help the team perform at a higher level rather than negative ones.

One of the reasons the Department has gone to a far more measured implementation schedule, with employees having a minimum

of 1 year under the new performance appraisal system before their

pay is affected, and in the law enforcement arms of the Department 3 years before their pay is affected, is to make sure that they

deal with that very concern you have expressed and that we have

heard from numerous employees and their managers.

Mr. PORTER. Thank you.

Ms. Holmes Norton.

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

I must say all your testimony has done, Mr. Sanders, is illustrate

just how difficult it is to come up with an objective system for payfor-performance. Again, I speak from some experience, where, in an

agency that wasn’t doing well, we had great differences among employees. I am trying to put myself in the place of a manager who

finds herself with truly outstanding employees at a certain level,

less outstanding at another level, no real incompetent employees.

You really drive me back to my other profession. I still am a

tenured law professor at Georgetown, and we mark on the curve.

When you get to law school, you don’t expect anybody to fail, but,

particularly if it is a good law school, there is a real necessity to

drive yourself as between the As, the A-minuses and the B-pluses.

Now, no money is attached to that. And when you tell me there is

a number that you divide into the number of employees, I see either what we are trying to get away from, which is kind of driving

toward some medium point, perhaps even mediocrity, or rewarding

my truly outstanding employees and leaving everybody else in the

lurch. Tell me how to get out of that.

Mr. SANDERS. There is enough in the performance pay pool to

make sure that fully successful employees get shares that are

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worth something, those who exceed expectations get shares that

are worth more, and those that are outstanding get even more. Let

me drive you to another of your professions—and you have alluded

to this—your experience in transforming EEOC. In that experience,

it is a sort of microcosm of what is going on at DHS. There are

some who are going to take on the tough work of transformation,

they are going to do everything they can, they are going to work

long hours and take risks to see improvement in the system, and

there are others that don’t. Some are along for the ride, they still

contribute; others actively opposing. I am sure you would have

loved to have a tool like this to take those people who took on the

risks, worked hard, made the transformation work, where under

the General Schedule the best you could do was pat them on the

head and said, well, if you are due a step increase this year, you

get it, but your colleagues who may not have worked as hard may

also get one, and, by the way, everybody else is getting——

Ms. NORTON. You contemplate a kind of curve division of some

kind, and yet we heard in the prior testimony from GAO that you

had no performance infrastructure in place, that no core competence is spelled out, employee expectation spelled out. I am really

wondering if managers aren’t in some kind of jeopardy or in as

much jeopardy as employees in this so-called scientific system that

you have just elaborated.

Mr. SANDERS. With all due respect to General Walker, the regulations are superimposed upon departments and agencies that have

exited for some time. For example, Customs and Border Protection,

created out of the Customs Service and part of Immigration, has

a long history of excellent human capital practices, of identifying

competencies and evaluating employees based on them. They are

not in the regulation. General Walker is correct, the regulations do

not require competencies, but they list competencies as among

those things that employees should be evaluated on.

Ms. NORTON. And what else, if not competencies, are you going

to be evaluated on?

Mr. SANDERS. Depending on the job, it could be results, it could

be behaviors, it could be knowledge and skills.

Ms. NORTON. And it is left up to the manager? Who is going to

decide this?

Mr. SANDERS. No, ma’am. That is what the overarching system

provides. The Department and its components will be setting those

particular performance elements. It is not going to be up to a manager to say, well, I think I am going to judge you on X today and

Y tomorrow.

Ms. NORTON. So we are just at the very beginning of this process,

because then these various departments—which are all supposed to

be in the same thing, but in any case I understand the differences—are not going to have to get together and, I take it, department by department decide their own competencies, performance standards, etc.?

Mr. JAMES. No. If I could just weigh in. Let me make clear

that——

Mr. PORTER. Excuse me. Mr. James, would you just state your

name for the record?

Mr. JAMES. Yes, sir. Yes.

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Mr. PORTER. Thank you.

Mr. JAMES. It is Ron James, of DHS.

The regs in fact have been published, but the regs do not take

effect until the secretary signs them. We anticipate that labor relations, adverse actions, and appeals will probably go into effect

sometime in the fall.

Ms. NORTON. What is March 3rd?

Mr. SANDERS. That is simply the minimum time——

Mr. PORTER. Mr. Sanders, if I could ask the panel, when you

comment, if you would state your name, it would help when they

do the minutes. Thank you.

Ms. NORTON. And March 3rd is? I am sorry, I am trying to reconcile that with what was just said. March 3rd what happens?

Mr. SANDERS. That is simply the minimum period of time, 30

days after they are published, they can go in effect. But the regulations provide in the very first subchapter that because of that

phase-in that we have talked about, the secretary then signals at

the appropriate time, when the infrastructure is in place, it is now

time to implement the labor relations and adverse subchapters, or

later it is now time to implement the performance management

subchapters.

Ms. NORTON. OK, I am going to disregard—particularly based on

what you just said, I am going to disregard March 3rd and assume

that no rational being would put these into effect before things like

core competencies for each of these agencies, does an agency, if so,

were developed, before employee expectations were fully down in

writing and understood. Is that correct?

Mr. JAMES. It is Ron James again, and that is exactly where I

was going. I was going to share with you that right now we are

doing employee focus groups. We are doing those in 10 places

around the country. We are getting employer management input on

our job clusters, that is, what is similar, what is alike, what kind

of job make sense. We are doing that with both employees or union

employees and non-union employees. At least from our two major

unions we have solicited union employees to be involved in those

focus groups. We have solicited specifically law enforcement focus

groups to be involved, because we understand that we need to understand the dynamics of that particular group.

And let me just add again that we are looking at this very carefully and very slowly; not only feedback from the focus groups, but

feedback from the union. We anticipate that our first pilot group

to put our performance management in place probably in January

of next year. That will be put in place for all of our employees, but

the only employees who will be affected pay-wise in January 2007

will be a group of 8,000 employees out of roughly about 90,000 employees who will be impacted, because TSA, which has 45,000 employees, and the Military Coast Guard, which has about roughly

40,000 employees, will not be impacted and will not be part of the

pay-for-performance system.

Our second wave, which will take place the following year, will

be roughly 18,000 people. And our last wave, which will be almost

65,000 to 70,000 people, mostly law enforcement, they will not be

impacted based on the new performance management system or

will be impacted in terms of pay until January 2009.

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We have taken General Walker’s comments to heart; we have

taken the unions’ comments to heart. We understand that we need

to do this, evaluate it, get feedback, and we may need to make

changes; and that is part of the reason that we wanted the flexibility of not putting details into the actual regulations, because we

may in fact understand we will need to make adjustments. We

should let the data and the feedback of the employees drive us

where we are going.

Ms. NORTON. Absolutely so. Just so it gets put at some point

down in writing.

Mr. JAMES. That is where we are heading.

Ms. NORTON. You are going to have a slue of various kinds of actions of just the kind the whole reform is designed to get rid of unless these things are written down so that employees can understand. I mean, that is minimally what, of course, we would require,

and that is something, it seems to me, the committee ought to follow very, very closely.

I have to ask a question about so-called mixed cases. When I was

at the EEOC, what really confounded us most was these mixed

cases, Mr. McPhie, where you have a combination of an adverse action of some kind and a discrimination action. Now, I understand

that some of these cases will be handled within this so-called internal appeals system that is being set up. Will this special panel

have members of the EEOC and the MSPB sitting on the panel,

the internal panel?

Mr. SANDERS. Yes, ma’am. One of the things we did, although

the law—I am sorry, Ron Sanders from OPM. One of the things the

law allowed DHS and OPM to do was modify the mixed case procedures. We chose not to do that. We did not want to do anything

in the regulations that diminished an employee’s right to file a

complaint of discrimination. So they can still file a mixed case before the Board, and you know that process probably better than we

do. With the Mandatory Removal Panel, the same process identically; the only exception is that instead of MSPB members it is

Mandatory Removal Panel members. When the special panel convenes, it is EEOC and the Mandatory Removal Panel getting together to adjudicate the case.

Ms. NORTON. So it is a mixture of the—then the MSPB isn’t really involved in that internal system.

Mr. SANDERS. For the cases that the Board does not hear. For

the cases it does hear, it sits with EEOC. For the cases it does not

hear, but are heard by the Mandatory Removal Panel, it is the

panel that sits with the EEOC.

Ms. NORTON. Well, Mr. McPhie, what was your recommendation

on that matter, the exclusion of an MSPB member from the mixed

case notion, where it could be either discrimination or it could be

an adverse action?

Mr. MCPHIE. The special panel hasn’t been used for some time,

for one reason or another, so there is no recent board history about

how effective the special panel is. However, the special panel ought

to have the adjudicators where the dispute arises on it.

Ms. NORTON. Can you speak more into that mic, please?

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moval offenses and all other kinds of offenses. I heard Ron say that

we don’t hear those cases, but we do in some respect. We don’t hear

them initially, but there could be a review of a mandatory removal

case before the Board, and then the Board can issue its decision.

To the extent that decision conflicts with what EEOC’s view of the

outcome should be, then it seems to me the two agencies that really have the dispute are EEOC and the Board, as to whether or not

discrimination occurred or didn’t occur.

So I go back. I have to follow——

Ms. NORTON. And there is an appeal after that.

Mr. MCPHIE. Yes, ma’am.

Ms. NORTON. Well, why is there any time saved?

Mr. MCPHIE. You know, I have to bow to the expertise of my colleagues here. For better or for worse, the Congress intended the

statute to work in the way in which it has worked, OPM and DHS

are the designers, period.

Ms. NORTON. But if there was an MSPB member and the EEOC

member, or somebody with expertise in both sitting on this internal

review panel when it hears these mandatory matters, might not

that decision be more inclined to be seen as final than having one

panel—and God help this internal review person, I can tell you. If

he is going to understand this mixed system, he better start going

to college right now all over again. But wouldn’t it help to bring

finality if both agencies were somehow represented in this rather

small group of cases for mandatory removal?

Mr. MCPHIE. Well, I hate to speculate. Cases are funny animals.

The things you expect to happen don’t happen. The things you

don’t expect, those are the things that happen. I think there is a

potential for some improvement in timeliness, but until we really

see this thing in action, I don’t know that we know for a fact

whether or not the special panel is going to be effective or not effective. I don’t want to go too far afield in guessing and speculating

about matters that may or may not occur, and I hope you understand that. At some point I am going to have to put on my adjudicative hat and decide somebody’s case, and I can’t bring any preconceived notions or some baggage——

Mr. PORTER. Ms. Norton, we have gone beyond our time, and

there certainly——

Ms. NORTON. Yes. Thank you, Mr. Chairman. You have been

generous.

Mr. PORTER. We will have another round also, if you would like,

and you are welcome to use some of my time if necessary, but if

we could wait for a moment.

Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman.

Thank you, gentlemen, for your testimony. I just have one comment and a couple quick questions, I hope. The first is on the payfor-performance. You heard the testimony of Mr. Walker and you

have heard some of the comments from the committee. The issue

is making sure when you put a system like this in place it has the

trust of the employees, the confidence of the employees, it is reliable, it is predictable. People have been working out with these different assessments in the private sector for a long time, and in

many cases successfully, in some cases not successfully. But the

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key—and the Government Accountability Office itself implemented

a similar pay-for-performance system. But if you don’t do it right,

as I said, you are going to undermine the confidence of employees,

and it is very difficult to retrieve that once it is lost. So I think I

would just urge you to tread very carefully and consult with this

committee and others as you move forward on that.

With respect to the grievance procedure, first I want to say that

I am pleased that you decided to adopt the preponderance of the

evidence standard. There had been some talk earlier on of having

a different standard the traditional standard. I am a little concerned and really question why you would interfere with the

Board’s ability in some of its current powers in the area of mitigation. And I think, Mr. James, you would agree that part of the reason for having a Merit Systems Protection Board review is because

it is an independent body outside of the agency. Is that right?

Mr. JAMES. Yes.

Mr. VAN HOLLEN. OK.

Mr. JAMES. Ron James. Yes, sir, that is right.

Mr. VAN HOLLEN. OK. And so right now the standard is that

they would support whatever action is taken by the Department,

so long as it is ‘‘within the range of reasonableness.’’ That is the

standard currently in use. So my question to you is why would you

be opposed to having an independent agency mitigate the damages

if they found that the action taken against the employee was not

within the range of reasonableness? Why isn’t that a good standard

for an independent body to hold? Why do you want to throw that

out in favor of some new standard that has no precedent associated

with it and really is not clear?

Mr. JAMES. Sir, this is Ron James again, and let me try to do

this without practicing law and be a good client. I have been reliably advised, and I have actually read some of the cases, but I have

been reliably advised by our counsel that they read the MSPB

cases as requiring deference to managers. Our overriding concern

has, and continues to be, deference to mission. And we would respectfully submit that the current case law and the current standard that MSPB has in place doesn’t get us to that second critical

goal, that is, deference to mission.

We happen to believe that we are just a little bit different than

other Government agencies; that when employees don’t show up to

a duty or post, that is not the same at Homeland Security as it

should be at some other agency; and that is a rationale. There are

people that disagree with that, but that is how we got there. We

do agree that it still needs to be an outside agency. We also have

a very strong belief that in order to accomplish our mission, we

need to have that mission essential fundamental principle grounded in the mitigation principle, and we don’t believe it was there.

Mr. VAN HOLLEN. Well, let me just say I think part of looking

at the reasonableness standard, the Board, as an independent

board, can take into account what I think we all agree is the special mission of the Department of Homeland Security and make a

determination within the context, within the range of reasonableness. That can be a pretty big range, given the fact that they give

deference to the agency.

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Anyway, I don’t want to belabor the point, but I do think that

concocting a whole new standard when you have a standard that

is very broad here to begin with, I think is a mistake.

Let me just ask you——

Mr. SANDERS. Mr. Van Hollen——

Mr. VAN HOLLEN. Let me ask you quickly, before my time runs

out, and I would be happy to hear the response.

With respect to an issue regarding the ability of employees within the Department of Homeland Security to be part of a bargaining

unit, as I understand right now, there are about 1,900 employees

who are currently within the combined Bureau of Customs and the

Border Protection [CBP], who are currently designated as bargaining unit employees eligible for union representation, and that

under the proposals you have made there has been a re-designation

of those employees, and they would no longer be covered within the

bargaining unit. I would appreciate—first of all, I don’t know if you

are aware of that issue and, second, if you are, if you could please

comment.

Mr. JAMES. It is Ron James again, sir, and I am aware of that

issue. I was aware that was before the FLRA. My understanding

is, and I will correct this if it is wrong, as of 2 days ago, that we

were in intense discussions with unions about how many of the

30,000 employees, if any, should be excluded from bargaining unit

positions; and my understanding is we were down to under 2,000.

That was my latest information. But my understanding also is that

the discussions have not been completed and that it is a matter

that will ultimately be resolved by the FLRA if the parties can’t

reach a consensus. And if I could supplement my comments to

make sure that my status report is in fact up to date and accurate,

I would appreciate that.

Mr. VAN HOLLEN. Mr. Chairman, in fact, I would appreciate it

if you would supplement your comments in writing.

Let me, in closing, just on that last point. Is it your intention

that employees who are currently being covered by the bargaining

unit continue to be allowed to be covered by the bargaining unit?

Mr. JAMES. I am not sure how to answer that question. It is Ron

James again. If we move somebody from a position that doesn’t require a security clearance, and they are currently covered and they

are going to get a security clearance, it would be our anticipation

that—or if we were to promote them where they were actually a

working supervisor or supervisor, they would in fact move outside

the bargaining unit. I am not quite sure how to answer.

Mr. VAN HOLLEN. OK. Well, within the current classifications

that exist.

We can pursue this later, Mr. Chairman.

Also, I would also appreciate your response in writing.

Mr. JAMES. It is Ron James again, sir, and I would be happy to

followup and provide the Chair and you with information on the

status and exactly what we are intending to do.

Mr. VAN HOLLEN. Thank you.

Mr. PORTER. Thank you, Mr. Van Hollen, very much.

I have an additional question regarding the pass-fail system. I

know we have touched upon it a little bit this morning, but the

final regs say that the entry level employees and others in extraorVerDate 11-MAY-2000 11:15 Sep 27, 2005 Jkt 000000 PO 00000 Frm 00118 Fmt 6633 Sfmt 6633 D:\DOCS\23141.TXT HGOVREF1 PsN: HGOVREF1
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dinary situations will be placed under a pass-fail system. How is

it possible that such a system can be compatible with a performance-oriented? Could you help us with that?

Mr. JAMES. It is Ron James again, and we are not absolutely

committed to doing that, but we felt, and I concur, that we need

the flexibility. And let me give you a couple examples. For example,

if we want you to get certified, that is, to carry a gun, you either

pass that or you fail that; you either go up, out, or you go back.

If you are in school for 9, 9 months, and there are certain technical

competencies with regard to IT, that is either pass-fail; you either

match the technology or you don’t. We simply wanted the flexibility

to build in at more of the classroom setting or the marksman certification setting or at the IT setting where it is really a question

of yes, I understand I have mastered this particular field. We

would not see that as something we would use at other levels; we

see it as being used on a very limited basis. In many instances

some of our employees are in school for 6, 8, 9 months, and don’t

have a supervisor, and they are basically going to school and passing courses or failing courses.

Mr. PORTER. Thank you.

We do have a time limitation. Are there any additional questions?

Mr. DAVIS. Just one, Mr. Chairman.

Mr. PORTER. Yes, Mr. Davis.

Mr. DAVIS. Mr. James, I understand that training on the new

system is going to begin this summer. If that is the case, who will

be trained and who will do the training?

Mr. JAMES. It is Ron James from DHS, and let me begin with

a thesis that we are really talking about paradigm change in terms

of how our managers react and how our managers get evaluated,

and how, if our managers fail, our system will hopefully provide

consequences. We have started training already. We have $10 million this year in our budget; we would hope to have $10 million for

next year, because we can’t do this change management without

training our labor relations specialists, our HR folks, our first-line

supervisors, our managers, the managers’ managers. And we also

plan to work with Mr. McPhie, Chairman McPhie. We would anticipate—and I don’t know if we could call it training, but some crosstraining with MSPB. We also hope to have some briefing sessions

with our union brothers and sisters so that we are both dealing

with the same data base. And we would hope that would cascade

down. We also are going to need to train our employees, because

we would expect our performance management system not to be a

one time a year system, but to be an inter-reactive system, that the

employee and the manager would collaborate, establish goals, mutually agreed upon that a line with the unit’s mission and with the

departmental’s missions.

So we are going to have some training all across the board. And

that is again the reason why we decided to phase this in over a

3-year period. The training is absolutely, unequivocally the predicate to making this work.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. PORTER. Thank you.

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Mr. James, Mr. Sanders, Mr. McPhie, we appreciate your being

here today. Thank you very much for your testimony. Look forward

to working with you.

We are going to have to vacate the room at approximately 1, so

I guess that is good and bad, depending on whether the witnesses

want to have a lot of questions.

So now I would like to invite our third panel of witnesses to

please come forward. We will hear from Ms. Colleen Kelley, national president of National Treasury Employees Union; next hear

from Mr. T.J. Bonner, president of the Border Patrol Council of the

American Federation of Government Employees; and finally we will

hear from Mr. Darryl Perkinson, national vice presidente of the

Federal Managers Association.

Thank you all. You each will have 5 minutes. I will wait for you

to get situated just a moment.

I would first like to recognize Ms. Kelley. Welcome. Thank you

for being here.

STATEMENTS OF COLLEEN M. KELLEY, NATIONAL PRESIDENT,

NATIONAL TREASURY EMPLOYEES UNION; T.J. BONNER,

PRESIDENT, BORDER PATROL COUNCIL, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES; AND DARRYL PERKINSON, NATIONAL VICE PRESIDENT, FEDERAL MANAGERS

ASSOCIATION

STATEMENT OF COLLEEN M. KELLEY

Ms. KELLEY. Thank you very much, Chairman Porter. It is an

honor to be at your first hearing, and we appreciate it being on this

important subject.

Ranking Member Davis, it is always a pleasure to be here, and

I know the importance that this committee puts on issues around

Federal employees and those who we represent.

I appreciate the opportunity to testify before the subcommittee

on the final human resource management regulations for DHS on

behalf of the 15,000 DHS employees represented by NTEU. The

Homeland Security Act requires that any new human resource

management system ‘‘ensure that employees may organize, bargain

collectively, and participate through labor organizations of their

own choosing in decisions which affect them.’’

NTEU believes that the final regulations do not meet the statutory requirement in the following ways. First, under the final regulations, the responsibility for deciding collective bargaining disputes will lie with this three-member DHS labor relations board

appointed, as we heard, by the secretary with no Senate confirmation of the board members. A true system of collective bargaining

demands independent third-party determination of disputes, and

the final regulations do not provide for that. Second, under the

final regulations, not only will management rights associated with

operational matters, such as the deployment of personnel, assignment of work, and use of technology, be non-negotiable, but even

the impact and the implementation of most management actions

will be non-negotiable. Third, the final regulations further reduce

DHS’s obligation to collectively bargain over the already narrowed

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scope of negotiable matters by making Department-wide regulations non-negotiable.

A real-life example of the adverse impact of the negotiability limitations on both employees and the agency will be in an area determining work shifts even when they will last for more than 60 days.

The current system provides employees with a transparent and explainable system. After management determines the qualifications

needed for employees to staff shifts and assignments, negotiated

processes provide opportunities for employees to select shifts that

take into consideration important quality of life issues of individual

employees, such as child care, elder care, the ability to work nights

or rotating shifts. There will be no such negotiated process under

the regulations as issued. The impact of these changes will be a

huge detriment to Homeland Security’s recruitment and retention

efforts of employees.

One of the core statutory underpinnings of the Homeland Security Act was Congress’s determination that DHS employees be afforded due process in appeals they bring before the Department.

We have heard a lot about that already today. But the HSA clearly

states that DHS Secretary and OPM Director may modify the current appeals processes only in order to further the fair, efficient,

and expeditious resolution of matters involving the employees of

the Department. Instead, what these final regulations do is to undermine the statutory provision by eliminating, as we have heard,

the MSPB’s current authority to modify unreasonable agency imposed penalties, and authorizing this new standard only when

wholly unjustified. And this is a new standard that will be virtually

impossible for DHS employees to meet.

The final regulations as they relate to changes in the current pay

performance and classification systems of DHS employees remain

woefully short on details. In spite of the information that was provided today, there is still very little out there for employees or the

unions to work with on this matter. Currently, performance evaluations have very little credibility among the work force, but it appears that these subjective measures will become the determinant

of individual pay increases under the new system. This again will

lead to more recruitment and retention problems in homeland security, not less. This kind of a system will be particularly problematic

for the tens of thousands of DHS employees, such as CBP officers

who perform law enforcement duties where teamwork is so critical

to successfully achieving the agency’s goal.

To get more information from DHS front-line personnel about the

new regulations, NTEU conducted an online survey. To date, over

300 responses have been received, and some of the findings of the

survey are highlighted on this chart to my right. The survey shows

a number of startling things that I would hope the Department

would be paying attention to: 65 percent of employees did not believe that U.S. borders are more secure today than before September 11th; 65 percent of employees would not recommend a job at

the Customs Bureau or Protection to friends or to family; 80 percent of employees report their morale has dropped in the last year;

88 percent of employees do not support the proposed pay system;

and 88 percent of employees named better management as the top

measure needed to improve homeland security.

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These results are very troubling and clearly point out the need

for further review of these regulations. Additionally, NTEU urges

Congress not to extend them throughout the Federal Government,

as proposed in the President’s 2006 budget. The Homeland Security

Act provided for these changes based on national security considerations. Those considerations do not apply to the rest of the Federal

Government. I appreciate and agree with comments made by several members of this committee in opposition to expanding them

Government-wide in that this would be premature and irresponsible at this point. I look forward to continuing to work with this

committee to help the Department of Homeland Security to meet

its critical mission and to help the employees who want to successfully deliver on that mission. And I look forward to any questions

you would have. Thank you.

[The prepared statement of Ms. Kelley follows:]

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Mr. PORTER. Thank you, Ms. Kelley. Appreciate it.

Mr. Bonner.

STATEMENT OF T.J. BONNER

Mr. BONNER. Thank you, Chairman Porter, Ranking Member

Davis, for the opportunity to come before this subcommittee and

talk about something that is very important. I have been a Border

Patrol agent for the past 27 years and am very proud to have

served with thousands of dedicated and patriotic Board Patrol

agents and other Federal employees who do a tremendous job of

protecting our Nation. Recently we were folded into the Department of Homeland Security, and I am proud to be a member of that

Department because it has one of the most important charges of

any Federal agency in this Government, protecting the homeland.

A lot of the debate has seemed to lose the focus in talking about

union rights, employee rights. But they created this Department to

protect this country. And who protects this country? It is not systems; it is not technology; it is good people. And to the extent that

this system drives away those good people, it has failed, and that

is my biggest fear. The system that is being proposed now affects

people negatively, affects the ability of our Government to attract

the best and the brightest, and to hang on to those people.

I am very concerned because now I see people that I have worked

with for years, as soon as they are eligible for retirement, they are

putting their papers in. I see younger agents putting applications

in for other departments outside of the Federal Government, State

and local law enforcement departments, because they don’t like the

changes that are coming down the road, not because they feel that

some union right is being taken away from them, but their basic

sense of fairness is offended. When they see their pay at the mercy

of their boss, and when they see their job at the mercy of their job,

and when they see the playing field just turned upside down, they

become very concerned.

They harken back to an incident that happened right after September 11th, when the standard company line was that we had

enough Border Patrol agents on the northern border. Well, in fact,

we had 283 to patrol 4,000 miles of border. Two very courageous

Border Patrol agents spoke out and said we need help up here. As

a result of that disclosure, as a direct result of that disclosure, the

Congress authorized within the USA Patriot Act, a tripling of not

just the Border Patrol, but of Immigration and Customs resources

along the northern border. As thanks for that patriotic action,

these employees were proposed termination by their bosses for

speaking out and bucking the company line.

Under this new proposed personnel system, it would be quite

simple for their pay to just go stagnant. They have made a guarantee to these employees that their pay won’t be reduced as long as

their performance remains acceptable. Well, had they made that

promise to me when I came into the Federal Government 27 years

ago, I could still be making less than $10,000 a year, and they

would have honored that promise. That is not enough to hang on

to the best and the brightest. We have to treat these people fairly.

These new personnel regulations are not fair.

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I would urge you to reexamine these, make sure that fairness is

incorporated into them. The sand is running out of this hourglass.

Once these changes take effect, people are going to be heading for

the exit doors in record numbers, and they won’t come back. You

can change the system back and make it fair and try and hire new

people, but the only way you can replace that officer with 15 or 20

years of experience is to hire someone new under a better system

and then wait 15 or 20 years, and we simply don’t even have 15

or 20 second; the threat of terrorism is too real. This is a matter

of national security. We need the best and the brightest, and we

have to ensure that this personnel system attracts them and hangs

on to them, and as it is currently structured, it simply doesn’t do

that.

Thank you for your time.

[The prepared statement of Mr. Bonner follows:]

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Mr. PORTER. Thank you very much.

Mr. Perkinson.

STATEMENT OF DARRYL PERKINSON

Mr. PERKINSON. Chairman Porter, Congressman Davis, distinguished members of the subcommittee, as the National Vice President of the Federal Managers Association, let me begin by thanking you for allowing me this opportunity to express FMA’s views

regarding the final personnel regulations of DHS. I look forward to

more opportunities in the future to engage in this dialog about the

best way of governing the most efficient and effective work force to

protect American soil.

Managers and supervisors are in a unique position under the

final regulations. Not only will they be held responsible for implementation of the new personnel system, they will also be subjected

to its requirements. As such, managers and supervisors are a pivotal part to ensuring the success of the new system. We at FMA

recognize that the change will not happen overnight. We remain

cautiously optimistic that the new personnel system may help

bring together the mission and goals of the Department with the

on-the-ground functions of the Homeland Security work force.

Two of the most important components to implementing a successful new personnel system are training and funding. Managers

and employees need to see leadership from the secretary on down

that supports a collaborative training program and budget proposals that make room to do so. We also need the consistent oversight

and the appropriation of proper funding levels from Congress to ensure that both employees and managers receive sufficient training

in order to do their jobs most effectively.

As any Federal employee can tell you, the first item to get cut

when budgets are squeezed is training. Mr. Chairman, it is crucial

that this not happen in the implementation of these regulations.

Training of managers and employees on their rights, responsibilities, and expectations through a collaborative and transparent

process will help to allay concerns and create an environment focused on the mission at hand.

Managers have also been given additional authorities under the

final regulations in the areas of performance review and pay-forperformance. We must keep in mind that managers will also be reviewed on their performance, and hopefully compensated accordingly. As a consequence, if there is not a proper training system in

place, and budgets that allow for adequate funding, the system is

doomed to failure from the start. Toward this end, we at FMA support including a separate line item on training in agency budgets

to allow Congress to better identify the allocation of training funds

each year, especially as similar personnel systems are considered

for other agencies and departments.

Our message is this: As managers and supervisors, we cannot do

this alone. Collaboration between manager and employee must be

encouraged in order to debunk myths and create the performance

and results-oriented culture that is so desired by these final regulations.

Managers have also been given greater authorities in the performance review process that more directly links employees’ pay to

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their performance. We believe that transparency leads to transportability, as inter-department job transfers could be complicated by

a lack of a consistent and uniform methodology for performance reviews. FMA supports an open and fair labor relations process that

protects the rights of the employees and creates a work environment that allows employees and managers to do their jobs without

fear of retaliation or abuse.

The new system has relegated authority for determining collective bargaining to the secretary. Recognition of management organizations such as FMA is a fundamental part of maintaining that

collaborative and inclusive work environment. Title V of C.F.R.

251–252 allows FMA, as an example, to come to the table with

DHS leadership and discuss issues that affect managers and supervisors. While this process is not binding arbitration, the ability for

managers and supervisors to have a voice in policy development

within the Department is crucial to its long-term vitality.

There is also a commitment on the part of OPM, DHS, and DOD

to hold close the merit system principles, and we cannot stress adherence to these timely standards enough. However, we also believe that there needs to be additional guiding principles that allow

and link all organizations of the Federal Government within the

framework of a unique and single Civil Service. OPM should take

the current systems being implemented at DHS and create a set

of public principles that can guide future agencies in their efforts

to develop new systems, systems that parallel one another to allow

for cross-agency mobility in evaluation, instead of disjointed ones

that become runaway trains.

We at FMA are cautiously optimistic that the new personnel system at DHS will be as dynamic, flexible, and responsive to modern

threats as it needs to be. While we remain concerned with some

areas at the dawn of the system’s rollout, the willingness of OPM

and DHS to reach out to employee organizations is a positive indicator of collaboration and transparency. We look forward to continuing to work closely with the Department and official agencies.

Thank you again, Mr. Chairman, for this opportunity to share

FMA’s views on these significant Civil Service reforms.

[The prepared statement of Mr. Perkinson follows:]

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Mr. PORTER. Thank you very much for your testimony.

First, a comment. Having represented an area for over 20 years

with substantial public employees and more intense in the community where we live—we have National Park Service, Bureau of Reclamation [BLM], Fish and Game; we can go on and on—I have

spent many, many years, and some of them are my very close

friends. But let me give you a little additional perspective; not necessarily different, but additional from some of your comments

today.

This is what I have heard for years: Many Federal employees

aren’t really sure of their expectations. They are not really sure

about the current reward system, other than they know that they

have 10 years left to retire or they have 8 years left to retire. Many

of these employees are not really sure what their role is, and it

changes so frequently sometimes they have trouble tracking exactly

what is expected.

Again, I am not here to disagree with your comments, I am adding additional perspective.

To many of them it isn’t about pay and benefits, because they are

very pleased with what they are receiving, and certainly would like

to have increases and would love to work for that. But I have found

from my experience not only with Federal employees, but the private sector, that the pay and benefits aren’t everything. They really

want to know that they belong. And they really want to know what

is expected and they really want to accomplish those goals, because

they feel good about doing something exciting, that is positive, and

they have a direct reflection, especially those in law enforcement.

They get really frustrated sitting out there for hours and hours and

hours, protecting our Nation. They get very frustrated.

And I am sure we can probably agree or disagree; you may hear

this, you may not. But there are a lot of those folks out there that

are looking for something other than an automatic increase; they

are looking for something, and this may or may not be the answer.

But I just want to add that from the perspective of knowing many,

many Federal employees that are personal friends of mine that

want to have some pay performance measures available to them,

because when they excel, they want to know that they have excelled.

So that puts a lot of pressure on you, Mr. Perkinson. Management is so critical, and we have to make sure that your management is funded properly and you have the proper training, because

especially management, you are to blame, whatever happens. You

seldom will get credit, but you will always be blamed. But your

comments are very well taken. Actually, all three of you. I appreciate what you are saying.

But I really wanted to add that part for the record for those folks

out there that really want to have some measure of their success

other than an automatic increase. There are so many Federal employees that are counting the days to retire because they are not

sure what their worth is. And to all those I applaud them for what

they are doing also.

And I am not asking questions. Another comment.

I can put Federal employees up against any corporate employee

any time, any place. We have some of the finest Federal employees.

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Corporate America can be a bigger bureaucracy than the Federal

Government, and there are corporate employees out there that are

struggling to find exactly what their mission is. But know that my

principles as chairman is to make sure that we provide efficient,

solid, strong service to the taxpayers.

But what I hear from constituents, and I think probably the

panel and other members could agree, when it comes to Federal

employees, the bulk of what we do as Members of Congress is try

to open the door for a constituent, to try to get to the right person

within the Federal system. They are frustrated because they may

have gone to the Social Security Administration because they didn’t

get their check or it was lost, or it is a member of the military that

didn’t receive his pay or lost his benefits, or it is a senior citizen

that hasn’t received their Social Security check, or it is a single

mom that is frustrated because she is not getting the services. So

I am looking at this from both sides, and I want to make sure that

we have the best, the brightest, the best trained, best compensated,

most efficient work force. And when I call an agency, I want to

make sure I can help this constituent, because people are frustrated with the Federal Government at times because they can’t

get help, or their paperwork is sitting on a desk someplace.

So I am hoping as we evolve this process and have continued discussions, that you will keep those in mind as my principles as

chairman, that your points are well taken. And I have numerous

questions that I am going to submit to you for some other time because of our time constraints, but know that I appreciate your comments. Thank you.

So that is the end of my questions.

Mr. Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Let me just say that I appreciate the testimony of each one of

the witnesses. Each one of you expressed some level of a lack of

confidence in the new proposed system. If you were able to give two

concrete suggestions or recommendations to the secretary as to

what should be changed in the proposal that would make you feel

that the system was going to be more fair and would increase your

level of comfortability relative to it netting what people are hoping

to get out of it.

Why don’t I start with you, Ms. Kelley?

Ms. KELLEY. In the pay area, Mr. Davis, in particular?

Mr. DAVIS. Yes.

Ms. KELLEY. I think, first and foremost, employees do want to

know what is expected of them. That is true under today’s system,

and it will be under any future system. There is no belief that they

will know what it is the goals are, when they accomplish it, and

if they do accomplish them, they will be appropriately rewarded or

recognized for that. So having clear expectations that—surely this

issue about them not being in writing. I mean, why anyone would

want to even set up that dynamic I just don’t understand. It is not

good for the managers or for the front-line employees who are the

recipients of the evaluation. So I would say that clear goals in writing and, using your words, a system that is fair, credible, and

transparent. Employees need to be able to see that they were given

these four goals—it has to be clearly defined also for them how to

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meet those goals and how to excel. And managers should be able

to explain that to employees so they know what they are striving

for. And then at the end of that there has to be a fair expectation

that they will be appropriately recognized and rewarded.

One of the biggest potential failures for this system is the lack

of funding. There will be no additional funding provided to the Department to implement this new pay system, and that means one

of two things: either the dollars come from some employees to others, or there will be very little recognition or reward at the end of

the year when employees do strive for and accomplish what it is

they want.

Just as a side note, many have said to me, well, Federal employees don’t want pay-for-performance, they like this current system.

Well, if this current system was working the way it was supposed

to, we wouldn’t have to be talking about a new system. The failure

is not with the system, it is with the implementation of it. And the

failure of a new system will be with the implementation.

I have to tell you I was very surprised to hear Ron Sanders testify earlier that, in today’s system, when an employee takes risks

and excels at their job, all a manager can do is pat them on the

head. I would say shame on that manager if that is all they think

they can do, and shame on that agency who hasn’t supported the

manager to let them know what else they can do. They have the

opportunity to provide quality step increases; they have

discretional awards in a managers’ awards pool they can distribute.

They have a lot of ways to recognize employees above a pat on the

head. So that is a perfect example to me that this is not—the current system isn’t broken, it’s the implementation of the system that

is broken. And that will be exacerbated with the new system if not

clearly defined, and that is what employees are afraid of. And

based on today’s experiences, that is why they don’t trust what will

happen tomorrow.

Mr. DAVIS. Mr. Bonner.

Mr. BONNER. Thank you. T.J. Bonner.

Mr. Chairman, just building on what you said, most of the complaints that I get are from employees who say, they won’t let me

do my job; I know what my job is, but they won’t give me the resources or support to let me do my job. And their other big complaint is they don’t treat me fairly. And that gets to the ranking

member’s question.

The recommendations I would have is in the arena of discipline,

give the flexibility for mitigation back to the neutral adjudicators;

eliminate mandatory removal offenses. In the arena of collective

bargaining, expand it back out to what it is now. They are robbing

employees of the ability to have fair systems for such things as

where they are assigned. I had a young Border Patrol agent in San

Diego call me last week, told me they gave me 72 hours to pack

up my things and my family and move to Artesia, NM, to be a law

instructor for 4 months, and I really don’t want to go. And I have

had these discussions with managers. Why would you want to force

that person to go who is going to have an attitude about that, and

that is going to rub off on all of those young impressionable trainees there?

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Fairness is key in all of these areas. And with regard to pay, I

think that you need to have a floor for the pay that is pegged to

something that Congress controls, rather than having it at the

whim of the agency. I have a number of our agents transfer to the

Air Marshal Service. For the first 2 years of that agency they said

you guys are doing a great job, but we don’t have the budget for

raises this year, so you are not getting one. And that is simply not

fair, because the cost of living keeps going up for all of us, and nobody gets a little piece of paper that says please exempt this person

from the higher cost of gas or the higher cost of housing out there

because we don’t have it in our budget. Everybody has to absorb

that in their own personal finances, and it is simply not fair to

those employees. If we want to keep the best and the brightest, we

have to treat them fairly.

Mr. DAVIS. Mr. Perkinson.

Mr. PERKINSON. Darryl Perkinson. In this issue, I think there

definitely needs, for management and employees, to be a performance blueprint. We have to have a blueprint of what the expectations are for the employees and also give a guideline to the managers on what they are being assessed on during a year. The training piece that we talked about in our testimony is key to that. We

need to have a clear understanding of those guidelines that are

going to face an employee and face a manager in how that person

is going to be rated. It has to be transparent; it has to be clear;

it has to be concise.

Additionally, another concern for me, and one thing that I clearly

want to recommend, is we have to have the budgetary allowance

to execute. I have heard all the talk about we are not going to have

a forced distribution or a quota system, but in times when budgets

are tight, I think a lot of times we get driven to that. So there has

to be an assurance, as we implement this system, that budget

doesn’t become key, because it will and it will create forced distribution, and it will affect the quota system. And for a manager’s

perspective, the understanding is management is not the enemy;

we are going to be included in this process too, and be judged on

it just as well as the employees that are going to be affected.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. PORTER. Thank you. Thank you very much.

Congresswoman.

Ms. NORTON. Thank you, Mr. Chairman.

First, I would like to say to all of you, you have certainly made

some headway, and I want to congratulate you for having sat down

and gotten as much movement as you have. I know it was tough,

and I know you expected more and, frankly, I think you have seen

by the questions on both sides here, we expect more as well, if only

because we expect at least the best practices in the private sector

will be followed. There is a lot of precedent for how to move folks

wholly from one system to another, and we don’t have a lot of it

in the Federal Government, and I can tell you from having served

on the board of three Fortune 500 companies that nobody in the

private sector who has a bottom line and who expects to meet it

and make it grow would think of making a wholesale change with

their employees, union or not union, without the kind of consultaVerDate 11-MAY-2000 11:15 Sep 27, 2005 Jkt 000000 PO 00000 Frm 00181 Fmt 6633 Sfmt 6633 D:\DOCS\23141.TXT HGOVREF1 PsN: HGOVREF1
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tion that would guarantee that they would not be kicked back by

reaction from their employees when they are in place.

I don’t want to use the analogy of consent of the governed, the

way we do things in a democracy, but there is something to be said

about that, because people are willing to obey laws they don’t agree

with when they have had just the kind of give and take that says,

well, I had my chance, but I lost. It is very important, it seems to

me, that we be able to show that has occurred here.

I don’t take it at all as an idle threat about retirement and early

retirement. This is something that on this committee and in the

Senate we have even had joint hearings on. We are so concerned

that the Federal Government’s record of getting and keeping the

best and the brightest is in great jeopardy not just because of what

we do, but because, frankly, the private sector has become so attractive, so sexy compared to Government employment, and we are

so far behind in trying to keep up with them. So the last thing we

want to do is to make that any worse, because it has been awfully

bad for the last several years.

I have some particular questions of Mr. Perkinson, but I would

like to ask Mr. Bonner—and Ms. Kelley, I would like to have her

respond to this as well. You said, when you came to the Federal

Service, that your pay would have been reduced, they could have

kept you where you were then. I wonder if you would spell out how

you think this system would work. Do you really expect that most

employees will not in fact get annual increases? What number do

you expect not to get increases? How do you think this will play

out in practice?

Ms. KELLEY. So much of the system has been undesigned that we

really can only speculate. For example, when there was discussion

this morning about this formula, the math formula, one of the

things that isn’t clear to us is if you are an employee who is rated

acceptable, exceeds, or outstanding, what is the value of the points

attached to each of those. If it is 1 point for acceptable and 10

points for outstanding, then that means that probably an awful lot

of employees will be rated acceptable and receive a very small

amount of compensation added on each year. If the points are closer together, then it could mean that the ratings would be distributed differently.

We just have no sense right now of what they intend to do. They

could also decide that of the dollars—you heard DHS and OPM say

they would decide how much money would be used for the performance system. So they could decide that 50 percent of it will be used

for locality pay in areas that they have identified as perhaps difficult to hire, and that 50 percent will be used for performance. Or

they could decide that 90 percent will be for performance. We just

don’t know much about it.

During the meet and confer process, we were hoping to develop

an awful lot of these details jointly. We were hoping to work

through them. And they made very clear during that process they

did not want to do the compensation building, the building of the

system during meet and confer; and that is one of the reasons the

details are so sketchy in the regulations. Now, they talk about the

compensation committee and the ongoing work that they are going

to do with us, and we have just started, we just had one meeting,

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and they have committed to meet with us regularly now, because,

of course, they have hired a contractor to build this compensation

system. So we have——

Ms. NORTON. Is the contractor meeting with you too?

Ms. KELLEY. We have never met with him yet. We have a commitment from 2 weeks ago that we will be briefed by the contractor

and have an opportunity to start sharing our views with him, but

to date we have not.

But they also talk about the compensation system and how there

will be four seats for the two largest unions. Just to make clear,

there are 14 seats on this compensation committee, and during

meet and confer, what we had argued for was to have half of those

seats be union representatives so that there really could be a true

discussion and hopefully a meeting of the minds so that we could

roll these details out together. But as you see in the final regs,

there will be 4 of the 14 seats will be union representatives. And

I have no doubt that we will get to say what it is we want to say;

I think time will tell whether or not those four seats result in our

opinions and our suggestions being adopted, much like they were

or were not during the meet and confer to date.

Ms. NORTON. And since the final decision would be with the secretary anyway, wouldn’t it?

Ms. KELLEY. In the end, of course.

Ms. NORTON. What in the world is to be lost, since there are so

many different agencies with so many different missions and so

many different backgrounds, in having a fair number of both sides,

since you can nullify what they say? This is the kind of thing I

mean when I say you invite people to believe they haven’t been

given a fair shake and, therefore, they don’t think there is anything

they should in fact carry out as promised.

I have already said that I think that there is a dangerous confluence here when you are—if they go to put pay reform, this pay

banding across the board in place while eliminating traditional projections at the same time, this is a perfect storm. And I got some

comfort from the prior panel about implementation with the employee expectations and the competencies in place first, and I have

to believe that is going to happen, since it seems to me one would

have to be a mad man to rush forward without that.

I was particularly interested in Mr. Perkinson’s testimony, frankly, because in a real sense, Mr. Perkinson, you are on the hot seat

here. You talk about training, but you all are really on the hot

seat.

Mr. PERKINSON. Yes, ma’am.

Ms. NORTON. The unions will continue to do what they have always done, to represent the rank and file employee, but it seems

to me that the committee has to take very seriously your admonitions here. First of all, you are understanding you are getting, in

some cases, entirely new responsibilities. You always, of course,

evaluated people and you know what adverse actions are, and you

know you win 80 percent of them anyway. But in your testimony

you say, for example, collaboration between managers and employees must be encouraged in order to debunk myths and create a performance and results oriented culture. You talk about the change

in the Federal Labor Relations Authority—and here I am quoting

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you now—‘‘as an independent negotiating body to what is now proposed and independent labor relations board made up of members

appointed by the secretary.’’ ‘‘This immediately,’’ you say, ‘‘calls

into question the integrity, objectivity, and accountability of such

an important body.’’ It seems to me you have to listen to the onthe-line managers who are saying, hey, the secretary isn’t on the

hot seat, it is your line manager who may, according to what we

have heard today, decide better to leave the Federal service, where,

by the way, these employees are in high demand, we having

trained them and invested in them. They won’t have any trouble,

particularly in this region, getting employment with contractors

and others.

You call, Mr. Perkinson, in your testimony, for—you talk about,

‘‘continuing collaboration’’ and that not being made more specific.

You ask for that to be spelled out rather than a blanket statement

that the Department intends to do so. And you actually say that

DHS should set up regular meetings—this sounds like it comes

from the unions. This comes from a manager who has worked with

employees. Says set up regular meetings, monthly or bimonthly,

depending on the status of implementation, in order to ensure this

important dialog takes place. You talk about adverse actions, concerned that the new system and internal processes that might

again call into question—these are very important words—the integrity and accountability of the appeals process.

Here we are hearing from managers, Mr. Chairman, who people

are taking appeals from, saying this to us. You know, some of this

testimony in the law would be considered against interest, which

is to say coming from a party who might not benefit from what he

is saying. But it seems to me this committee has to benefit from

what you are saying.

And I would like you, particularly given the number of caveats

to the present system, you describe in your testimony to indicate

what it is you think now needs to be done so that some of these

problems will not fall on the back of the managers whom you represent if the system goes into place forthwith.

Mr. PERKINSON. Yes, ma’am. Darryl Perkinson. I will try to respond for the time constraint.

Ms. Norton, one of the key fundamental issues of implementing

any cultural change that we are trying to implement with this new

personnel system is that we have to have communication and collaboration between those that have to apply the system and those

that are going to be affected by the system. That is why, in our testimony, we do encourage the regular meetings, the oversight to

make sure as we implement this thing—and we heard in previous

panels’ testimony that we wanted to make sure when we did this,

we did it right, that it goes out the right way; it is not helter-skelter, it doesn’t come out in a form that builds mistrust.

My personal experience in Government has been, over the last

decade and a half, that we did make great strides in labor management relationships, and I do have a concern that if we go helterskelter into a new system, that it could build mistrust and it could

take us back to a day that we don’t want to go back to, where we

don’t communicate, where we don’t do things daily. When I supervise my people, I supervise a great number of people that do a

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great job for this great country. And in the Department of Homeland Security we have a fundamental issue that we are protecting

the borders of our country, and that mission has to be carried out

for the American people. And we have a great deal of civil servants

that every day do that, and we owe it to them that if we are going

to convert a pay system, we need to do it in a fair, transparent

manner, where discussion and changes are made as necessary.

Ms. NORTON. Mr. Chairman, I appreciate your indulgence, and I

want to just say that I think in a real sense the testimony of this

witness is extremely enlightening to me. Obviously, the unions

have to do what they have to do. I find their testimony compelling.

But in a real sense I am not sure I would like to be a manager

in the Federal Government, who is told, OK, there you go, let us

see what you can do.

And it is interesting that you testified, Mr. Perkinson, that you

are going to be evaluated on how you carry out this system. Good

luck, brother.

Mr. PERKINSON. Thank you.

Mr. PORTER. Thank you.

Due to time constraints, I have numerous questions that we are

going to be sending you regarding the Labor Relations Board, collective bargaining questions, the adverse action and appeals process, and some specific pay questions.

Also, again, Mr. Perkinson, you are certainly pivotal to the future

as it is being laid—not that you weren’t in the past, but even higher expectations, so I will have some questions for you.

I think there has been some very thoughtful comments made by

all the panelists, and I certainly believe by the committee today,

asking as to your insights. You can depend upon having additional

questions as we move along.

As I mentioned earlier, I know that employees and management

prefer to have rules and guidelines, whatever that is, whether they

haven’t been implemented, as I think said very well by Ms. Kelley,

is something that we have to look at. And my principles, I have

said a couple of times, whether you are a maintenance worker or

in management, or a CPA or a chemist or a scientist, we need to

make sure everyone is treated fairly, that they have opportunities,

and that they treat every taxpayer, every customer fairly.

Again, I know that we cannot rush to change. It is a massive undertaking, and I know that, as the Congresswoman mentioned, this

is a massive undertaking whether it be in the private sector or the

Government, this is a major change, so know that we will be anxious to hear your insights as it evolves.

At this time, I would like to adjourn the meeting. Thank you all

for being here.

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]

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