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75–472 PDF 2002

S. Hrg. 107–151

EXPANDING FLEXIBLE PERSONNEL SYSTEMS

GOVERNMENTWIDE

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT,

RESTRUCTURING, AND THE DISTRICT OF COLUMBIA

SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JULY 17, 2001

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

JOSEPH I. LIEBERMAN, Connecticut, Chairman

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

FRED THOMPSON, Tennessee

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

JOYCE A. RECHTSCHAFFEN, Staff Director and Counsel

HANNAH S. SISTARE, Minority Staff Director and Counsel

DARLA D. CASSELL, Chief Clerk

OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND

THE DISTRICT OF COLUMBIA SUBCOMMITTEE

RICHARD J. DURBIN, Illinois, Chairman

DANIEL K. AKAKA, Hawaii

ROBERT G. TORRICELLI, New Jersey

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

GEORGE V. VOINOVICH, Ohio

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

MARIANNE CLIFFORD UPTON, Staff Director and Chief Counsel

ANDREW RICHARDSON, Minority Staff Director

JULIE L. VINCENT, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Durbin ................................................................................................. 1

Senator Voinovich ............................................................................................. 2

WITNESSES

TUESDAY, JULY 17, 2001

Hon. David M. Walker, Comptroller General, U.S. General Accounting Office . 5

Hon. Sean O’Keefe, Deputy Director, Office of Management and Budget .......... 7

Charles O. Rossotti, Commissioner, Internal Revenue Service ........................... 9

Charles S. Abell, Assistant Secretary of Defense for Force Management Policy, Department of Defense ................................................................................. 11

Bobby L. Harnage, Sr., National President, American Federation of Government Employees, AFL–CIO (AFGE) ................................................................... 28

Susan L. Shaw, Deputy Director of Legislation, National Treasury Employees

Union ..................................................................................................................... 30

Myra Howze Shiplett, Director, Center for Human Resources Management,

National Academy of Public Administration ..................................................... 32

ALPHABETICAL LIST OF WITNESSES

Abell, Charles S.:

Testimony .......................................................................................................... 1

Prepared statement .......................................................................................... 91

Harnage, Bobby L., Sr.:

Testimony .......................................................................................................... 28

Prepared statement .......................................................................................... 110

O’Keefe, Hon. Sean:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 83

Rossotti, Charles O.:

Testimony .......................................................................................................... 9

Prepared statement .......................................................................................... 86

Shaw, Susan L.:

Testimony .......................................................................................................... 30

Prepared statement of Ms. Colleen M. Kelley submitted by Ms. Shaw ....... 128

Shiplett, Myra Howze:

Testimony .......................................................................................................... 32

Prepared statement .......................................................................................... 137

Walker, Hon. David M.:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 41

(1)

EXPANDING FLEXIBLE PERSONNEL SYSTEMS

GOVERNMENTWIDE

TUESDAY, JULY 17, 2001

U.S. SENATE, OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE, OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC.

The Subcommittee met, pursuant to notice, at 2:35 p.m., in room

SD–342, Dirksen Senate Office Building, Hon. Richard Durbin,

Chairman of the Subcommittee, presiding.

Present: Senators Durbin and Voinovich.

OPENING STATEMENT OF SENATOR DURBIN

Senator DURBIN. Welcome everyone. I apologize for my tardiness.

The Appropriations Committee is marking up the agriculture bill,

which has some consequence to the State of Illinois, and I wanted

to be there and cast my vote. So I apologize, but I rushed right over

as quickly as I could. Thank you all for being here as the Senate

Subcommittee on Oversight holds a hearing entitled, ‘‘Expanding

Flexible Personnel Systems Governmentwide.’’ I have indicated to

Senator Voinovich on several occasions that his dedication to this

question of human capital challenge facing Federal Government is

one that leads this Subcommittee and will continue to, though

there has been a change in some of the titles around here, but I

am pleased to have this opportunity, at his request, to delve into

another aspect of the issue.

Our focus today will be on some of the various personnel flexibilities and special authorities granted by Congress to specific government agencies to facilitate personnel retention, recruitment, pay

and promotion. Senator Voinovich launched a series of Subcommittee hearings in the 106th Congress to probe the issue of the

Federal Government’s human capital challenges. This hearing

builds on that foundation.

In showcasing three agencies today, the General Accounting Office, the Internal Revenue Service, and the Department of Defense,

we will examine their experiences in implementing the flexibilities

extended to them through congressional enactments. Last year,

GAO was accorded an array of flexibilities that were added under

the GAO Personnel Flexibility Act of 2000. These include authorizing senior level positions for scientific, technical or professional

staff; voluntary early retirement offers to individual employees;

separation payments for realignment purposes; and reduction-inforce flexibilities for downsizing, realignment, or correction of skills

2

and balances. These recent authorities build on authority extended

to GAO over 20 years ago to develop its own personnel system.

GAO’s system includes broad-banding of its pay grades, pay-forperformance, and flexible hiring and promotion practices.

With respect to the Internal Revenue Service, under the Restructuring and Reform Act of 1998, Congress included human capital

flexibility provisions covering a wide range of personnel-related

functions. These included eliminating the use of enforcement statistics and employee evaluations; authority to terminate employees

for committing certain acts or omissions in performance of official

duties; providing critical pay to attract senior managers; streamlining hiring, travel and relocation procedures; and implementing

a broad-banded pay system.

The Defense Department has also been a beneficiary of congressional authorization to engage in a variety of demonstration

projects to test improvements in managing its civilian workforce.

For example, in 1980, Congress authorized China Lake and other

U.S. Navy facilities, such as science laboratories, to participate in

the first personnel demonstration project under Title VI of the Civil

Service Reform Act of 1978. The lab sought to improve recruitment

and retention of high-quality workers by increasing their control

over classification, pay and other personnel matters.

The project was expanded several times and now covers approximately 10,000 employees. It was extended indefinitely in 1994, and

in 1995, the Navy was given authority to expand the project

throughout the Naval Air Systems Command. In addition to eliciting the insights of key leaders of these three agencies today, we

seek to learn more about the plans of the administration to address

workforce planning concerns. We are anxious to hear the perspectives on personnel flexibility of representatives of employee labor

organizations and interested public administration associations.

I want to particularly explore several questions about the utility

of these tools, how useful has these authorities been; what are the

strengths and drawbacks; has there been particular impediments

to using existing authority; how has the agencies engaged with employees and employee organizations in implementing these authorities. Is it working? Can it be improved?

A key outcome of our inquiry will be identifying the lessons other

agencies and Congress ought to apply and the cautions they should

be heeding in considering whether to extend any of these authorities more broadly. I want to now yield to the Ranking Minority

Member of the Subcommittee, my good friend and a leader on Capitol Hill on this important issue—Senator Voinovich, your opening

statement.

OPENING STATEMENT OF SENATOR VOINOVICH

Senator VOINOVICH. Thank you, Mr. Chairman. I am pleased

that the Subcommittee is holding this hearing on ‘‘Expanding

Flexible Personnel Systems Governmentwide,’’ and I would like to

welcome our two panels of witnesses.

Mr. Chairman, today’s hearing is the ninth that our Subcommittee has held on the Federal Government’s human capital

crisis since July 1999. I would like to thank you publicly for your

partnership in the examination of this issue during my time as

3

Chairman of the Subcommittee and for your commitment to continue examining these problems and seeking solutions during your

chairmanship.

I think we both agree that one of the real crises that we face in

the Federal Government today is the human capital crisis. I consider this a key hearing on the Subcommittee’s human capital

agenda. When examining the Federal Government’s human capital

problems, some are quick to say that entirely new civil service architecture is needed to address this system’s many problems. I am

sympathetic to that argument. However, we all know how difficult

that overhaul would be. That is why it is critical to explore two

other options when considering civil service reform.

The first option is that we simply try to use the authorities available under current law more effectively. I have discussed that approach with both Mr. Walker and Mr. O’Keefe, and we all agree

that a great deal can be done through better management and the

use of current laws and regulations. I am pleased to note that Kay

James was confirmed by the Senate last Wednesday to be the Director of the Office of Personnel Management. Earlier this year, I

discussed with her that OPM should do all it can to relax certain

rules and regulations that make some aspects of the Civil Service

System overly bureaucratic. For example, there are certain elements of the hiring system that should be changed. Lieutenant

General Robert Flowers, Chief of the Army Corps of Engineers, recently indicated to me that since the Corp’s special hiring authority

was rescinded, it takes him 4 months to hire an engineer. This is

unacceptable in a competitive field.

Second, we should identify the special personnel flexibilities provided to some agencies, such as the Internal Revenue and General

Accounting and the Department of Defense, examine how effectively they have been employed, and determine if those flexibilities

should be extended governmentwide. The purpose of today’s hearing is to explore the second approach. The primary advantage of

that approach is that if it is agreed that a certain flexibility is

proved to be worthwhile, extending it to the entire Executive

Branch is certainly better than designing a whole new system and

can help address the human capital crisis until more comprehensive reforms can be agreed upon and implemented.

The General Accounting Agency, under the leadership of Comptroller General David Walker, has tried to make itself an example

of excellence in government. Its personnel system is a great candidate for examination today. The Internal Revenue Service has a

relatively newer alternative system, which was authorized in Congress of 1998. The Restructuring and Reform Act directed IRS to

establish a performance management system and provided human

capital flexibility provisions that covered a wide range of personnelrelated functions. Commissioner Rossotti, I look forward to hearing

from you about how you think that system is working.

I am especially pleased also that we have Charlie Abell, Assistant Secretary of Defense for Force Management Policy, because the

DOD has over 3 million active duty military, reserve, and civilian

personnel combined. Managing this enormous workforce is a tremendous challenge. Secretary Abell, I am eager to learn from you

what the Bush Administration is doing or what you intend to do

4

to address the human capital crisis that we have at the Defense

Department.

I would also like to mention the fact that my staff and I worked

closely with Mr. Abell last year to insert language in the fiscal year

2001 Department of Defense Authorization Act to reshape its workforce by offering voluntary separation incentive payments to 1,000

senior employees in this fiscal year. That provision also authorized

another 8,000 slots for the next 2 fiscal years. I am really pleased,

Secretary Abell, that the money to fund that is in the President’s

2002 budget, and hopefully the money will be there in 2003.

I think we are all familiar also with former Defense Secretary

James Schlesinger’s testimony before this Subcommittee several

months ago, where he indicated that, for all intents and purposes,

the Department of Defense, in terms of personnel and the human

capital crisis, is in intensive care. You might be interested that I

recently had a human capital roundtable in Dayton, Ohio at Sinclair Community College. Dr. Russo, Executive Director of Aeronautical Systems Center at Wright Patterson was there, Colonel

Larry Strauser, Vice Commander, Air Force Research Laboratory,

Wright Patterson, and local college students were in attendance.

I wanted to find out from those students: Are you interested in

going to work for the Federal Government? If you are, why? If you

are not, why not? It was interesting, first of all, that many really

did not know about the opportunities available to them in the Dayton area, in the Defense Department. Several of them mentioned

that they felt that the pay was not competitive with the private

sector. The colonel, after one student explained that he was an

electrical engineer, said to him, ‘‘We have got a job for you now,

right now, in a work-study program.’’ I saw a big smile on the

youngster’s face. Then I asked the colonel, ‘‘How long is it going to

take for you to have your hiring of this young man approved?’’ He

looked at me with a straight face and he said, ‘‘Five months.’’ Well,

at that point, you could have heard a pin drop in the room.

I am also pleased today that we have with us Presidents

Harnage and Kelly from the American Federation of Government

Employees and the National Treasury Employees Union. I have

said on numerous occasions we cannot expect to change the Civil

Service System unless we closely involve those who will be affected

most directly. I look forward to your analysis of these new personnel systems from the unions’ point of view.

Last, but certainly not least, I look forward to hearing the perspectives of Ms. Shiplett on behalf of the Human Resources Center

at the National Academy of Public Administration. NAPA has studied these issues closely for many years and they have a great deal

to offer to this discussion. Again, I thank the witnesses for coming

today and I look forward to your testimony. Thank you, Mr. Chairman.

Senator DURBIN. Thank you, Senator Voinovich. I want to welcome the first panel: David Walker, Comptroller General of the

U.S. General Accounting Office. Mr. Walker is the Nation’s chief

accountability officer and the head of GAO, a Legislative Branch

agency that assists Congress in insuring the accountability of the

Federal Government. Sean O’Keefe, who is the Deputy Director of

the Office of Management and Budget. In addition to overseeing

5

1The prepared statement of Mr. Walker appears in the Appendix on page 41.

the preparation of the budget, supervision of the administration of

Executive Branch agencies, OMB is at the centerpiece of Federal

agency management oversight. Charles Rossotti is the Commissioner of the Internal Revenue Service. Almost since the time of his

appointment to that post in November 1997, Mr. Rossotti has had

the challenging task of overseeing the restructuring of the IRS.

Charles Abell joins us from the Department of Defense. A retired

Army lieutenant colonel, he is the Assistant Secretary of Defense

for Force Management Policy. In that capacity, he is responsible for

the policies, plans and programs for military and civilian personnel

management, including recruitment, education, career development, equal opportunity compensation, recognition, discipline and

a separation of all DOD personnel.

Thank you for coming. We look forward to your testimony. As is

customary in the Subcommittee, we swear in all witnesses. So

would you please rise and raise your right hand? Do you swear the

testimony you are about to give the Subcommittee is the whole

truth, and nothing but the truth?

Mr. WALKER. I do.

Mr. O’KEEFE. I do.

Mr. ROSSOTTI. I do.

Mr. ABELL. I do.

Senator DURBIN. Let the record note that the witnesses answered

in the affirmative, and so they will be allowed to continue. I would

ask that you limit your oral statements to no longer than 5 minutes, and remind you that your entire statement will be entered

into and made part of the record.

Mr. Walker, please proceed.

TESTIMONY OF DAVID M. WALKER,1 COMPTROLLER GENERAL,

U.S. GENERAL ACCOUNTING OFFICE

Mr. WALKER. Thank you, Mr. Chairman. It is a pleasure to be

here and I will summarize my extensive statement that has been

provided for the record. Mr. Chairman, I have tried to make human

capital a top priority for GAO ever since I was the Comptroller

General of the United States. First, externally, with regard to evaluation work that we are doing, as well as to try to provide tools

and methodologies to help agencies help themselves see the way

forward in this critically important area.

Second, we have also tried to make human capital, or our people,

a top priority within GAO, with the objective to try to lead by example. The way that we do things is not the only way. It is not

necessarily the best way, but it is a way. We are not perfect and

we never will be. On the other hand, we believe as the leading accountability organization in the United States and possibly the

world, we have a responsibility to lead by example in all critical

management areas, and we are trying to do that.

As you know, Mr. Chairman, GAO recently designated the lack

of strategic human capital in management as a governmentwide

high-risk area. Unfortunately, all too frequently, the Federal Government has viewed its employees as a cost to be cut, rather than

an asset to be valued. We believe very strongly that this must

6

change in the future, because of the fact that we are now in a

knowledge-based economy. People are the source of all knowledge.

We must be able to attract some of our Mation’s best and brightest

to run what is arguably the largest, the most complex, the most diverse and the most important entity on the face of the earth, namely the U.S. Government.

We cannot afford to do otherwise. We believe that there is a

three-phased approach that is ultimately going to have to be followed in the area of human capital. First, agencies should do everything they can within the context of current law to attract, retain

and motivate a skilled and knowledgeable workforce. Second, they

should seek, based on a business case analysis, selected additional

flexibilities targeted additional changes. In addition, the Congress

should consider providing additional flexibilities and to a broader

range of Federal agencies, along with appropriate safeguards to

prevent abuse. Third, there is going to be a need for broader, more

comprehensive civil service reform over time.

However, we must learn from what has worked and what has not

worked with regard to the best flexibilities and we must reach out

to try to involve all key stakeholders to build a consensus before

comprehensive civil service reform will be possible. In my opinion,

that is at least 2 years away. Many have shared responsibilities for

addressing the human capital challenge, including all agency

heads, OMB, OPM and a variety of other players.

As you properly pointed out, Mr. Chairman, GAO has certain additional flexibilities that have been granted to us in past years. For

example, in 1980, the GAO Personnel Act was passed. It was

passed primarily with two concepts in mind, independence and innovation. It was passed in order to provide GAO reasonable independence from OPM and other entities, since we have the responsibility to review, evaluate and audit certain entities; therefore, we

wanted to make sure that there would not be a potential conflict

of interest with regard to our activities relating thereto.

Second, it was also passed with the idea to try to use GAO as

a potential experiment for certain new and innovative approaches.

The three major areas dealt with hiring practices, classification,

and compensation practices. In the hiring area, we have streamlined hiring authorities, but it is important to note that we still

maintain veterans preference to the extent applicable under current law, under Title V, and in addition to that we also conform

with merit principles in all of our practices. We use broad-banding

as a classification system for most mission personnel. In addition

to that, we have a pay-for-performance system for compensating

our mission related employees, the desire being, that to the maximum extent possible, we make decisions on who we hire, who we

promote, who we reward and who we discipline based upon skills,

knowledge and performance.

The 2000 act that was passed last fall, with the help of both of

you Senators and others, provided us with four different authorities. First, the authority to create a new senior-level position going

up to the SES level of compensation for certain specialists and

technical professionals. We have implemented that authority and

we have put about four new people into that category and we have

reclassified about four others. We have the authority to use volVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
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1The prepared statement of Mr. O’Keefe appears in the Appendix on page 83.

untary early retirement authority, as well as buyout authorities, to

realign GAO, rather than to downsize GAO. We have issued the

regulations on voluntary early retirement and we sent out an offer

yesterday, as a matter of fact, for a voluntary early retirement authority for our employees to consider during the next 45-day period.

We have not proposed buyouts, nor do we plan to. We do not believe they meet the cost-benefit requirement, at least as they are

currently structured. And, we have not promulgated revised reduction in force regulations, even though we have the authority to do

that, because these are not issues that are presently before us.

Two more quick things, Mr. Chairman—first, I have outlined in

my statement a number of actions that GAO has taken, within the

context of current law, within that 80 percent that can be done

within the context of current law that we hope will be informative

to this Subcommittee as well as other agencies. Second, I have also

outlined in my statement a number of legislative actions that we

believe Congress should consider that would provide agencies reasonable flexibility to attract, retain, and motivate a qualified workforce, while providing adequate protections to prevent abuse.

Last, let me say, Mr. Chairman, that I believe this is a critically

important area. It is one that is going to require the concerted efforts of a variety of parties, including the Congress, to see our way

forward. We are more than happy to do what we can to help agencies help themselves, as well as to try to provide additional tools

and methodologies and examples of how one can move forward in

this area. Thank you, Mr. Chairman.

Senator DURBIN. Thank you very much. Mr. O’Keefe.

TESTIMONY OF HON. SEAN O’KEEFE,1 DEPUTY DIRECTOR,

OFFICE OF MANAGEMENT AND BUDGET

Mr. O’KEEFE. Thank you, Mr. Chairman and Senator Voinovich.

It is a pleasure to be here this afternoon. If you have no objection,

Mr. Chairman, I will submit the statement for the record and summarize if briefly.

Mr. DURBIN. Without objection.

Mr. O’KEEFE. First and foremost, the strategic management of

human capital is one of the President’s five top management priorities. It is a management agenda he has formulated during the

course of the last 6 months, quantified in the blueprint to accompany the President’s budget that was submitted on February 28

and expanded dramatically in the budget submission that was

made in April. We have discussed it and testified about it rather

widely, this being one of the primary functions, all of which are

interrelated, that of the integration of budget and performance criteria, the strategic management of human capital, competitive

sourcing objectives, e-Government initiatives and a range of other

factors that are related in that regard. As a result, what we are

looking at is all these factors working off each other as a piece, an

interrelated effort as part of the President’s management agenda.

Workforce planning becomes one of the primary aspects of what

is required in achieving this approach. So, even the requesting of

the departments and agencies—and they have gone through the

8

rather laborious task of preparing all the efforts necessary to

achieve, certainly, the first two objectives, which is to look at the

implications on the workforce requirements as integrated within

the budget criteria, based on some set of performance criteria, to

determine exactly and justify exactly what the basis of requirements may be for this particular human resource.

As part of the 2003 objectives, what we were also looking to is,

for fiscal year 2003 to be submitted this January, a handful of very

interrelated factors with this five point management agenda that

the President has prepared. First and foremost is—as David Walker just testified to—is to capitalize on the proposition, that we need

to exploit the current flexibilities as they exist today. I will submit

to you as an opening proposition, most of the senior leadership of

most of the departments in the Federal Government are not even

aware of the extent to which those flexibilities exist.

The President’s Management Council was just constituted recently, and as a result, the new deputy cabinet officers, have been

designated largely as chief operating officers across the Federal

agencies and departments. Having convened just a week ago, the

first order of business was to walk through from OPM what the

current flexibilities are and discuss those extensively. We have just

begun that task. Although there is an awful lot that has been accomplished and an awful lot discussed throughout the institutional

framework, the leadership of those particular departments and

agencies have just become more and more familiar with what the

extent of the flexibilities are.

Second, the pilot and test authorities exist not only within the

three agencies and departments represented here this afternoon,

but also across a range of other Federal agencies. The assessment

and evaluation necessary to determine the success or relative utility of each of those particular approaches has yet to be taken on

in earnest. As a consequence, that is the effort here over the course

of the next couple of months, to look to prepare all the necessary

analysis that would support offering to you, as part of a larger fiscal year 2003 legislative initiative to accompany the fiscal year

2003 budget, a proposal to extend those authorities where appropriate and to make them available.

Certainly, equally important is the clarification of a number of

different approaches of management criteria as well as objectives

that have been usefully put together by the General Accounting Office and summarized in David Walker’s testimony today, as a matter-of-fact, that is very widely available, making sure each of the

departments and agencies are aware of the extent to which some

of those authorities could be utilized, and then building those into

the performance criteria that we anticipate will become part of the

review for fiscal year 2003, as well as to determine what the performance criteria is and which resources would then become available as part of the integrated effort there.

Last, as each of these performance measures are introduced, to

start with a fundamental proposition of what is the outcome or objective, a very familiar theme, certainly, within this Committee,

sponsorship of the Government Performance Results Act, having

determined what those performance criteria would be for selected

programs, it then gives us groundwork and basis for further deterVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
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1The prepared statement of Mr. Rossotti appears in the Appendix on page 86.

mination of precisely the extent to which we need to expand the

human capital requirements for training, for education retention

programs and a range of other flexibilities across the board in this

area. So, for all of those, as part of the fiscal year 2003, our attempt is to corral-up all those points prior to seeking a wider range

of reform initiatives, which we anticipate would be after the fiscal

year 2003 preparation has been completed, so we can give you a

more comprehensive picture therein. But we are about, from a

management and administration objective, precisely the same objectives that you enunciated so eloquently in your opening statements. Thank you, Mr. Chairman.

Senator DURBIN. Thank you. Mr. Rossotti.

TESTIMONY OF CHARLES O. ROSSOTTI,1 COMMISSIONER,

INTERNAL REVENUE SERVICE

Mr. ROSSOTTI. Thank you, Mr. Chairman and Senator Voinovich.

Just about 3 years ago, the Congress passed the Restructuring and

Reform Act, which was a really massive mandate for change in the

IRS. One of the keys in delivering on those mandates is to develop

and retain a highly skilled and motivated workforce, and a workforce that is organized and managed in line with our mission and

our strategic goals as laid out in the act. To this end, we have benefited a great deal from the personnel flexibilities that were incorporated into that act.

As I will just briefly summarize in my opening statement, and

describe in more detail in my written statement, they have enabled

us to employ a number of management techniques that have made

a critical difference in recruitment and in reorganizing the workforce and in performance management. It is important to note, as

the other witnesses have mentioned, that these flexibilities complemented existing authorities that were underway, and it was

really the combination of the existing authorities plus the new

flexibilities that we think has made such a difference in our ability

to move forward on the mandates of RRA.

To mention a couple of areas, the IRS modernization program requires a very high level of senior level leadership that is far beyond

the capacity of any one or two individuals. Much of that talent was

and is available within the IRS, but for certain positions, especially

those requiring expertise in business systems modernization, leading organizational change, emulating best practices in the private

sector, and communicating more effectively with taxpayers, we

looked outside the government to recruit selectively. RRA gave us

streamlined critical pay authority to hire up to 40 such individuals.

To date, we have used this to hire 32 people, many with very distinguished careers. They are now filling such positions as chief information officer, director of business systems modernization, taxpayer advocate and commissioner of the large and mid-size business division and commissioner of the small-business, self-employed business division.

We have also effectively used the combination of existing authorities and RRA flexibilities to recruit, at the entry-level, talented,

front-line professionals. For over 5 years, budget constraints really

10

kept the IRS out of the recruiting market while we suffered attrition in our critical occupations. Fortunately, due to congressional

funding in fiscal 2001, we were able to get back into the market

and to launch a significant recruiting initiative aimed at filling

hundreds of entry-level key professional positions, such as criminal

special agent, revenue agent, revenue officer, and some new positions in our new structure, tax specialist and tax resolution representative. Many of these positions are going to be filled with people with accounting degrees or other kinds of accounting and business skills, and there is quite an active market out there for those

kinds of people.

We developed a focused marketing and recruiting strategy, aimed

at both outside employees as well as soliciting current employees

and providing support to current employees for advancement. One

of the special authorities RRA gave us is called category rating

ability for new recruits, which we used to expedite the rating process and hiring process, particularly for revenue agents, which is

one of the most difficult occupations to recruit for, yet one of the

most important. I am pleased to say that while it is not fully complete, most of the recruiting for this year has been done and has

been successful. Overall, we have recruited over 2,000 new people

into the IRS in these targeted positions, including about 400 that

came in through the category rating process.

The RRA also mandated a major shift in our reorganization. Our

whole structure has moved from a geographic structure to one that

is based on a customer focus, built around four major taxpayer segments. This required a comprehensive workforce transition strategy because it was a massive change, not only in Washington and

headquarters, but across the entire country. This change went from

top to bottom across the IRS. I am pleased to say that as of last

October—26 months after the Restructuring Act was passed by

Congress—the old 50-year-old structure was gone and was replaced

with a new, customer-focused structure. As part of this, nearly all

of our mid- to upper-level management positions were abolished,

and new selections were made to fill these newly defined positions.

In this process numerous layers were eliminated, the structure was

flattened and about 25 percent of our total number of mid- to toplevel positions were eliminated. All this was done in 26 months

without any involuntary separations, making active use of existing

authorities, together with early out and buyout authorities that

were provided in RRA.

Last, let me mention the other key element that was called for

in RRA and is a major part of our strategy, which is making sure

that all of our managers and employees are focused on achieving

our organizational priorities and goals. This was mandated in some

special ways because of the special mission of the IRS in terms of

tax compliance. We implemented those mandates through what we

call our balanced measure system, which identifies a set of performance measures for every organizational unit that balances and

quantifies customer satisfaction, business results and employee satisfaction. We then use this performance management system,

which measures unit objectives down to individual performance

through our new executive and managerial performance appraisal

system.

11

1The prepared statement of Mr. Abell appears in the Appendix on page 91.

This appraisal system includes a core set of competencies for

management responsibilities that are tied to our balanced measure

system, with more specific commitments built around our plan for

the upcoming year. Complementing this was pay-banding authority

that was available to us in RRA, which we have used, so far, for

all of our mid- to top-level managers. This allows us to link individual performance assessments to the advancement of senior managers in their pay process. They progress from step to step within

the band only if the rating under the performance management

system meets or exceeds certain standards.

In conclusion, many of the human resource initiatives that I described are still being implemented and it is too early to make any

definitive assessment of their results. Nevertheless, I have to say

that the results so far have been very promising. We have used

them effectively to do the things that we set out to do. Again, I

stress that I think they were effective because they did complement

our full use of the existing authorities that existed in the law. We

used both of them to achieve our goals and I think together they

have been extremely powerful in letting us get to the point that we

are. Thank you.

Senator DURBIN. Thank you very much. Mr. Abell.

TESTIMONY OF CHARLES S. ABELL,1 ASSISTANT SECRETARY

OF DEFENSE FOR FORCE MANAGEMENT POLICY, DEPARTMENT OF DEFENSE

Mr. ABELL. Mr. Chairman and Senator Voinovich, Congress has

been very generous to the Department of Defense in granting,

through the use of demonstration project authorities, certain civilian personnel systems flexibilities. I have provided the Subcommittee with written testimony that provides an overview of

these legislative provisions, examines how the Department has

used them and discusses their effects on the workforce.

This legislation has encouraged the Department to conduct civilian personnel demonstration projects in our science and technology

reinvention laboratories and for our civilian acquisition workforce

throughout the Department. We are now conducting eight such

projects under two separate legislative provisions. In addition, two

pilot programs are authorized for science and technology labs and

two test and evaluation centers in each of the military departments. Congress has also granted the Department flexibilities in

hiring and compensating scientists and engineers in the Defense

Advanced Research Projects Agency, DARPA, the military departments, the National Imagery and Mapping Agency and the National Security Agency.

The hiring and pay innovations of these demonstration programs

and pilot programs are outlined in my written statement. While we

do not have any formal evaluation of the results of these yet, I believe the flexibilities of the demonstration projects and pilot programs have had a positive effect on civilian human resource management within the Department. Although we have evaluations of

the demonstration projects scheduled in fiscal year 2002 and again

in fiscal year 2003, the preliminary indications are that broadVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
12

banding and the other flexibilities we have employed have helped

us manage our human capital. We have been able to recruit and

retain scientists and engineers through the use of categorical hiring, scholastic achievement appointments, modified term appointments, pay for performance and expanded probationary periods.

We have also used a voluntary emeritus program to permit us to

retain the skills and experience of retired civil servants who want

to volunteer to remain on the job and help us transition the next

generation of leaders. In closing, I would like to thank this Subcommittee and the Congress for the support given to the Department to facilitate our downsizing and transition. We have been

able to avoid over 147,000 layoffs since 1993 by using the voluntary

separation incentive payment program. In addition, using the voluntary early retirement authority, we have avoided over 67,000 involuntary separations and demotions. This has gone far to support

the moral of the workforce and the efficiency of the Department.

I look forward to continuing this partnership as we continue our

efforts to reshape the workforce in the Department. Thank you, Mr.

Chairman.

Senator DURBIN. Thank you, Mr. Abell. Last year, I joined with

Senator Voinovich and Senator Akaka in offering an amendment to

the defense authorization bill relative to offering student loan repayments as an incentive to attract qualified employees to Federal

service. The amendment was adopted by the Senate, part of the

final conference package signed into law October 30, 2002. OPM

published final regulations and issued them on January 11. The

new administration wanted to review them and they became effective on April 12, 2001. Currently, OPM is amending these regulations and some of these amendments I think are positive. I like the

way they are headed.

I have been advised that OPM is awaiting approval from OMB

at this moment before they publish the final regulations. Meanwhile, agencies have begun to start making plans to implement the

student loan repayment program—Commerce, State, Veterans Affairs and others, GSA, for example. Part of my concern last year

in putting this language in the DOD authorization bill was the fact

that this was not a new idea. This was an idea that was enacted

into law in 1990 and OPM never issued rules and the agencies

never utilized the authority in the ensuing period of time.

My amendment suggested imposing a specific, but what I

thought was a reasonable deadline for rule-making with final rules

to be issued by June 30 of this year. I would like to ask Mr.

O’Keefe: Are you familiar with this situation and can you tell me

when this will be approved and available for all agencies to use,

this student loan repayment?

Mr. O’KEEFE. No sir, I am not familiar with it, but I will be by

the end of the day and I will be back in touch with you.

Senator DURBIN. Fair enough.

Mr. Abell, one of the things I found interesting was this dual

compensation issue, which must have been a disincentive for military retirees to work at the Department of Defense, and last year

Congress repealed it. If I understand it correctly, retired military

officers coming back into civilian service had to forego 50 percent

of their military retirement pay. Has the appeal of working for the

13

Department of Defense changed, particularly with those who have

experience and have served our country?

Mr. ABELL. Yes, sir. There was a fairly complex algorithm, but

essentially 50 percent was the forfeiture, and the repeal has allowed not only us, but all Federal agencies, to receive the benefit

of the experience, the leadership and the technical knowledge of

former military, both enlisted and officers, who would like to continue to serve in a civilian capacity following their military assignment, but thought that the monetary penalty was just too great.

We have examples all the time throughout, where it not only assisted the Department of Defense in hiring experienced leaders and

technical people, but also in areas such as pilot shortage and so

forth, where we were able to put a retired aviator into a staff deposition and put the military aviator back out into the cockpit.

Senator DURBIN. Mr. Rossotti, when we decided a few years back

to pass the RRA, the IRS Restructuring and Reform Act, we had

Section 1203 in there, which has been characterized as the ten

deadly sins, which, as I understand it, are ten acts which proven

against an employee of the Department of Treasury and the IRS,

would require mandatory termination. I have read through these

ten deadly sins and from my religious perspective, I would say to

Senator Voinovich, eight or nine are mortal sins and one is a pretty

serious venal sin.

I would not argue about any of this in relation to eight or nine

of these. There is one that is pretty open-ended, harassing a taxpayer. These are taxpayers that I assume are being audited or investigated for example. There are a lot of complaints from people

who are working at your agency about Section 1203, whether it is

fair. I think, as I said, some of these things are beyond debate, but

when it comes to this whole question of harassment, there is a

news article that made the Chicago papers last year, but it said of

the first 830 complaints of taxpayer harassment filed under that

new law, not one of them was found to be worthy and meritorious.

I think the information given later by the representative of NTEU

suggests that the percentage of those who are actually found to

have violated one of these is very small and yet she raises the

point, and I think a valid one, that it has a very chilling effect on

the personnel in the Department and in terms of their morale.

Could you comment on that?

Mr. ROSSOTTI. Yes, Mr. Chairman, there were over 70 specific

provisions in the Restructuring Act, many of them pretty complex

to implement. We now have had 3 years of experience with them.

I can tell you, having lived through this, that there have been none

that have been as difficult to work with as Section 1203. The reason is not that the offenses listed for the most part of Section 1203

are not serious offenses, as you noted, and had always been considered serious offenses. I will come back to a couple of exceptions,

but, for the most part, everyone, including most of our employees,

acknowledges that. Nor has it been the problem that many people

have been terminated unfairly. There was that great fear initially,

but we have taken tremendous care to administer this law, and it

does provide the commissioner the ability to personally mitigate

any termination, which we have taken very seriously.

14

I think at this point we have enough experience to be able to

cling to employees, which we have been able to do. We have not

been just terminating people willy-nilly that we should not be. The

way it is viewed by our workforce is that under Section 1203, if

somebody accuses me of, let’s say, harassment of a taxpayer, first,

I am put onto death row and sentenced to the death penalty and

then a year later I might get a reprieve. In fact, I probably will get

a reprieve, but the process of going through that is very difficult

for people and very burdensome and cumbersome.

I will also say, any provision of the tax law is a balance and unfortunately, even though it is designed to protect taxpayers, there

will be some fringe element of taxpayers who will attempt to abuse

that provision and take advantage of it. We have that situation too.

We have practitioners out there who make it a practice of simply

filing Section 1203 complaints routinely. They have it on a form

letter and they file it any time one of their clients is audited or

subject to a collection action or something like that.

So, this has been very difficult. Within the last week, we have

submitted to our tax writing committees some proposed modifications to RRA, including Section 1203. We had a discussion of this

at a hearing earlier this year, the joint hearing where all the six

committees come together. Subsequent to that, we have submitted

specific legislative suggestions or proposals on a number of provisions that we think would help us to administer Section 1203, administer the whole Restructuring Act, completely in accord with

the intent of Congress, but eliminating some burdensome things,

including some elements of Section 1203. Specifically, what we

have proposed with respect to Section 1203, is that we would keep

these offenses on the books, because exactly as you said, Mr. Chairman, we consider them to be serious offenses, and if someone really

and truly is found guilty of some of the things that are in there,

they should be terminated or at least subject to a penalty.

The key change that we propose is to keep the offenses on the

books, but to eliminate the mandatory penalty provision, and simply allow the IRS the ability to terminate someone, but also the

flexibility to impose other penalties. We have laid out how we

would expect to do this. This is a key change that we have proposed. We have also proposed eliminating one other thing which

has been somewhat unfair. Included in the deadly sins is failure to

file a timely tax return. It turns out that includes someone who

files a refund return. Well, under the tax law, there is no penalty

to a taxpayer who fails to file a return in which they are due a refund, other than they do not get the refund.

So, we have had lower grade employees, typically seasonal employees, many of them in the service center, that may not file a return on time even though they are due a refund, and under this

provision they would be subject to mandatory termination. We have

used our authority to mitigate a lot of those offenses, but that is

a rather cumbersome process, to go through the whole thing and

mitigate it. We have laid these proposals on the table now. We

have sent the letters to the tax-writing committees that would consider them. And my view is that there are some others, which I

will not cover here, which I think would help us on other provisions

of RRA——

15

Senator DURBIN. As I am out of time on this round, I would just

like to ask one question in closing. I had the unhappy experience

20 years ago of having a small business that I owned back in

Springfield, Illinois audited. We did not turn out to have any additional tax liability, he says for the record. I will tell you that the

people that came out from the IRS were, I thought, reasonable.

They had a tough job, though. They basically said our business had

not paid its taxes, and we believed we had and established that

fact. That is kind of a contentious relationship to start with though.

Most business people are not going to welcome you into their offices

and invite you in for coffee to audit them. And to have this looming

over their heads, how difficult is it to fill the ranks of those who

are involved in these investigations and audits?

Mr. ROSSOTTI. Well, as I said, we have not been filling many

until this year because there was not money, but we have been successful in attracting some very qualified people with the help of the

flexibilities. I think the real problem is the work environment, the

motivation. We have very qualified employees who are doing a very

difficult job. They spend all day, every day, out there talking to

taxpayers. They do an excellent job. They do a professional job. If

there is a taxpayer who has a beef, there are now many different

channels that they can follow through RRA to get their side of the

story heard. We feel with the proposed modifications of the RRA

that we have made, we would still be able to protect taxpayer

rights. We would still be able to remove an employee, that rare employee I must say, who really does violate these rules, but we

would not have this cumbersome process, as it is viewed by the employees, as first you put me on death row and then you give me

a reprieve a year later.

Senator DURBIN. Thank you. Senator Voinovich.

Senator VOINOVICH. Thank you, Mr. Chairman. Mr. Walker, as

part of the Legislative Branch, GAO arguably has had a greater degree of flexibility in personnel system more than the Executive

Branch agencies; however, I understand that many of the apparent

restrictions that exist within the Executive Branch are the result

of rules and regulations imposed by the Office of Personnel Management and the simple failure of individual human resource bureaus to use the authorities that they have. What actions do you

believe need to be taken in order to remedy that situation? Or, do

you agree with that?

Mr. WALKER. First, I think one of first things that needs to be

to done is that we need to summarize all the different flexibilities

that are available. It is my understanding that OPM has started

to do that. They have actually put together a publication with the

intended purpose of summarizing all the existing flexibilities. I

have a copy of it. There seems to be a significant gap between what

OPM believes agencies can do within the context of current law

and the understanding of the agencies with regard to what they believe they have the authority to do.

In addition, many of these flexibilities have strings attached to

them. They have strings attached such that you must go to OPM

for certain types of approvals. I think clearly one of the first things

we need to do is to take a hard look at what flexibilities are available. To what extent can you provide what I am going to refer to

16

as class exemptions? In other words, we are going to delegate

authority for you to be able to do things, as long as you meet conditions A, B, C, and D, and that we might have a mechanism to periodically review and find out whether you are complying with them,

but to minimize the number of occasions that people have to come

back for an individual exemption or individual approval.

I can tell you that having attended at least one of the President’s

Management Council meetings within the last month, there is a

tremendous amount of frustration on behalf of department and

agency executives, and this is one of their top priorities, and I expect that it will be one of Kay James’ top priorities, now that she

has been confirmed.

Senator VOINOVICH. Would you like to comment on that, Mr.

O’Keefe?

Mr. O’KEEFE. No, I could not concur more. Thank you, Mr. Walker, because that is an affirmation of precisely the focus we have

been after, trying to pull together first an understanding of what

everybody believes to be the existing authorities and corral those

up. So this is the first comprehensive effort that I have seen that

OPM has conducted, and the document Mr. Walker was referring

to was just put together here in recent weeks. So, as a consequence, that is the first step in the equation. Next is to determine where the difference is between interpretations, and that,

then, as, Senator, we have discussed a few times, forms the basis

of some reform initiatives, I think, that will be informed, as opposed to simply calling for variations of what may be existing authorities today.

Senator VOINOVICH. Mr. Rossotti, you dealt with the Office of

Personnel Management and you said that the additional authorities and flexibilities you were given were on top of what was already there. What has your experience been in terms of utilizing

those flexibilities?

Mr. ROSSOTTI. We have worked very closely with OPM, because

of the fact that we do have these new flexibilities and some of the

existing ones, and I guess it could be fairly said that we pressed

the envelope against probably all of them, given the massive

change that we have been going through in the IRS. I think that

actually we have also had very good support from our Treasury Department. We have an excellent Human Resource Officer, Mr.

Sanders, who knows the ropes on this stuff very, very well, together with Treasury, and they have worked with OPM to make it

clear to us what we could do—how we could deal with the existing

authorities and what the new authorities provided.

So, by working that process very aggressively with some knowledgeable people, I think we have gotten the benefit of it. I will say

that for a person like myself who comes from outside the Federal

Government and is certainly not a Federal personnel expert, it is

a bewildering set of rules. For any manager that comes in, unless

you have someone to advise you—when I came into the tax agency,

I was not a tax lawyer and people thought that might be a problem

because I did not know anything about taxes. Little did I know

that my real problem was that I did not know anything about Federal personnel systems. The tax part of it was relatively not as

hard, and this is not an exaggeration really, because you have

17

some very good tax lawyers and very good resources to figure out

what happens, at least in the IRS, on taxes.

I think that the comments that Mr. O’Keefe and Mr. Walker

made about just clarifying what you can do and making it simpler

to understand what you could do would go a long way, especially

if you could find some way to translate it into something that a

non-expert, somebody that is a top manager, but not an expert, can

do, because figuring this stuff out is a big part of the challenge.

Senator VOINOVICH. It would probably be a good idea, Mr.

O’Keefe, if you set up a little group of the customers that deal with

OPM, and the ones that have been around for awhile, have them

come back and recommend to you how to improve OPM’s role as

a service provider to Federal agencies. I think, Mr. Walker, you referred to flexibility with strings and how the strings can be eliminated to create a quality management project where the folks who

are really using OPM’s services can come back with recommendations on how to streamline the current system.

Mr. O’KEEFE. That is precisely what we are after, Senator.

Again, a week ago, with the President’s Management Council,

which was the succeeding meeting to the one that Mr. Walker referred to a few moments ago, OPM went through an exhaustive

presentation of the material that the Comptroller General just referred to. But also they have a follow-up requirement to meet every

one of the individual departmental inquiries that have been made,

to work through the workforce planning documents that we have

asked for, that were due to be submitted about 3 weeks ago, to

then decide exactly how those flexibilities have been incorporated

in meeting those objectives.

So we are trying to pick up on precisely the kind of a theme that

you are talking about administratively, to work through each of

those steps and then determine what objectives we have to go after

across the board, as opposed to simply trying to call for reform initiatives now. So, yes, we are trying to pull those kinds of groups

together at the present time.

Senator VOINOVICH. I think one of the alternatives that could be

looked at also would be the issue of giving the agencies more authority to do the personnel hirings Mr. Walker suggested. Too

often, agencies have been granted such flexibilities only to have

OPM take them back. I know you are doing an assessment now of

the departments and the skills and experience of their employees.

Is an extra effort being made to identify whether or not the departments have a human capital piece to that process?

I know the agency heads are getting familiar with this, but

whether or not that process bears fruit depends upon what kind of

human capital people you have inside of your shops, and Mr.

Rossotti you have a pretty good one, I understand.

Mr. ROSSOTTI. Yes, I think so.

Mr. O’KEEFE. Well, you have to wonder how good he is if it is

more complicated than the tax code, the way he has explained it

to him.

Mr. ROSSOTTI. It helped cut through it, though. [Laughter.]

Mr. O’KEEFE. I know your expert from a previous incarnation.

We will talk later.

18

Mr. WALKER. I think a key point here is you not only have to

have very capable human capital professionals, which I think hopefully all of us do, but you must have committed leadership from the

very top. Basically, what we are talking about here is cultural

transformation. It is nothing less than that. It is really tough work,

and the fact of the matter is that one of the agencies that has to

engage in a cultural transformation, is OPM. They do a lot of

things that are helpful, but I would say in general they need to become more of a consulting organization rather than a compliance

organization, and they need to focus more on tools rather than on

rules, and they need to focus more on enabling, rather than inhibiting agencies. They have a lot of good people and I think they can

do it, but they need to undergo a huge cultural transformation.

Senator VOINOVICH. Mr. Rossotti, you have been doing a lot of recruiting for your agency, and as I talk to people around the country, they say many agencies recruit at the wrong time. Some do not

even recruit at all. Obviously, you have done a fairly good job in

that area, but you have had to go out and try to find some highquality mid-level people. Mr. Abell, you may be doing the same

thing with the Defense Department’s workforce reshaping provisions. How successful have you been with that and what impediments have you had in terms of bringing people into mid-level positions from the private sector? How receptive are they to coming to

work for the Federal Government, and what hurdles do you find?

Mr. ROSSOTTI. Actually, Senator, we really have not brought very

many in at the mid-level, interestingly. We brought some in at the

top level, and then we have people coming in at the entry-level. At

the mid-level, except in very small numbers, we have really not

hired many people. For one thing, we have had somewhat of a surplus, as we flattened the management layers. So at this point, we

have not brought in too many people at the mid-level.

Senator VOINOVICH. How about the senior managers, then?

Mr. ROSSOTTI. The senior managers, we have the so-called Critical 40, or Critical 32, and I have to thank this Subcommittee, because this Subcommittee was one of the ones who helped us when

we went through RRA to get this. It was a little controversial at

the time, but it has been absolutely critical. As I mentioned, we

brought in 32 people. Many of these are people that have a whole

career behind them in the private sector, or a large portion of a career with very distinguished records, and have come in to help us

with this massive transformation.

We have people, for example, the Chief Information Officer and

Director of Modernization, who are critical, running some of these

new operating divisions, which are really the forefront of instituting the change, as well as other positions, for example, the technology management and communications and marketing, which

were not strong points at the IRS. So those are people that we have

been able to recruit one at a time, to fill very specific positions, and

they are not going to be here for 10 or 20 years, in most cases. A

few might be. They come in on 4-year term appointments. It can

be renewed once. But they have, in our case, made a tremendous

difference in the time that they are in the agency.

We do not view them as replacing the Senior Executive Service.

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19

utive Service, but what we have done is complemented our internal

Senior Executive Service with people that have a lifetime of experience in something that is a related field, and I really have to say

that is one of the gratifying things for me and I think that is one

of the critical items that has helped us to get to the point that we

are in now.

Senator VOINOVICH. I just want follow-up. You bring them in at

fairly high salaries; don’t you?

Mr. ROSSOTTI. This is called the critical pay authority. It gave us

the ability to go up to the Vice President’s salary for total com- pensation, which is, I think, $183,000 right now, and frankly not

all of them have been brought in at that maximum. Some of them

have been brought in at somewhat less. But, most of the people we

recruited were people who were earning substantially in excess of

that in the private sector and they really were coming into the government for public service.

Senator VOINOVICH. Has there been any resentment among the

Senior Executive Service to the fact that these folks have come in,

they are earning the big bucks, while they remain at the same

level? And we also have to consider the severe pay compression

now with the Senior Executive Service earning essentially the

same salary.

Mr. ROSSOTTI. I think that when we first proposed this idea, it

was certainly controversial internally, as well as externally. I think

that now that we have this experience where almost all these people are working side-by-side with Senior Executive Service people,

they know that they are getting a developmental opportunity,

working with most of these folks. They also know that they are

not—they do not have some of the other things that the Senior Executive Service might—they have no longevity or seniority or anything like that. They are just there for the time that they are there.

So while it has, obviously, in the early stages especially, raised

some of those issues, I would say at this point those are kind of

behind us and we really have got these people working as part of

a team. I do not know whether this would be something that would

work forever, but in the period that we are in at the IRS, where

we have been going through this massive change, where we have

got modernization, we know this works. The Restructuring Act says

you have got to emulate best practices in the private sector, in

technology, in customer service, even in terms of things like auditing, all these things. If you can bring in a few people that have

that personal experience, having lived that, and have them work

directly side-by-side with people that have done it the IRS way,

both of them being good people, you really get, in my opinion, if it

works right, an equation with the so-called cliche of two-plus-two

equals five. I think, in many cases, we have been able to do that.

Senator VOINOVICH. Thank you.

Senator DURBIN. Thank you, Senator. Thanks to your leadership,

we have identified this human capital challenge as one of our

major priorities in the Subcommittee. The GAO has identified as

a high risk across the Federal Government. I do not know that we

are the first to acknowledge it. We are trying to focus our attention

and resources in dealing with it. Back in 1990, former President

Bush signed into law the Federal Employees Pay Comparability

20

Act, designed to close gradually the gap between the private sector

and Federal white collar employee compensation.

In the years that led up to that and ever since, the measured gap

between Federal and non-Federal pay has been measured at about

30 percent average, nationwide. I would like to have comments

from you in reference to—first Mr. Walker and the others, as

well—how big a factor is this disparity between pay in the private

and public sector, in terms of recruitment and retention? Second,

and this is probably going to be something I will regret asking, how

big a problem is Congress in dealing with this? Because if we do

not appropriate the funds for pay and do not give adequate increases on an annual basis, it is no wonder that Federal employees

cannot keep up. I might also add the President’s budget starts the

process, so each President since the former President Bush would

have some culpability in this situation. Mr. Walker.

Mr. WALKER. Well, several things. First, pay is an issue. There

is no question about it. But I think we have to keep in mind that

most of the people who come to work for the Federal Government

come to work for reasons other than to maximize their net worth.

They come for reasons because of the nature of the work, the challenge, the opportunity to make a difference, and the ability to try

to achieve a better balance between work and family. Nonetheless,

we have to have reasonable compensation for these people. I think

at the SES level, compression has gotten to the point that something has to be done about it. A significant majority of all the SES

members now making the same amount of money.

Senator DURBIN. Senior Executive Service?

Mr. WALKER. Senior Executive Service, exactly. There is a significant incremental layer of duties and responsibilities that you

have, and related obligations and pressures that come with that

when you are at the SES level. To the extent that you get a situation where there is very little economic differential, then that

serves as a disincentive for people to want to move up to that level

or to stay at that level as compared to some of their private-sector

options. I do think we have to be careful, however, with regard to

the use of averages. Averages can be deceiving. I believe that over

time we have to start compensating our people based upon skills,

knowledge and performance. We do not do that to a great extent

today.

Today, most of the Federal pay system is based more on the passage of time and the rate of inflation, rather than skills, knowledge

and performance. As a result, I think that if you did a critical analysis of this, you would find that there are some Federal workers

that are significantly underpaid and are very deserving of additional compensation. There are some levels and some occupations

where, quite frankly, you might find that they are overpaid as compared to their private sector counterparts. I think we have to be

careful when you talk about averages, because averages can be

very deceiving.

Senator DURBIN. What about the culpability of administrations

and Congress in this?

Mr. WALKER. I think the Congress is part of the problem from

the standpoint that——

21

Senator DURBIN. We will acknowledge that for the record.

[Laughter.]

Mr. WALKER. Obviously, there is more than one member of Congress, so we can spread it around. But the fact of the matter is I

think there are problems with regard to certain linkages that exist,

rightly or wrongly, in compensation. The ripple effect that pay compression has, as well as whether, in certain circumstances, Congress has provided reasonable flexibilities with adequate protections are important issues. Other important issues include whether

Congress has, in certain circumstances where a business case has

been made, provided resources, for example, to allow agencies to inventory the skills and knowledge of their workers, to go to a new

modern performance appraisal system, to be able to have reasonable training and professional development for their workers.

We have some things, quite frankly, that I have just come across,

Mr. Chairman, where we are penny wise and pound foolish, where

we are saying you cannot spend money for some minor kinds of

things that not only do not make any sense, but quite frankly pour

salt in the wounds, and I have given several examples in my testimony.

Senator DURBIN. Mr. O’Keefe, let me ask you this, there is another issue that comes up regularly, and that is the whole question

of contracting out. OMB, the agency that you work with, issues directives to Federal agencies about percentages of work they want

contracted out. I once asked some of my colleagues when I served

in the House, on this issue of privatization and contracting out,

what is the goal here? What are we trying to achieve? Is it higher

quality of service, lower cost to the taxpayers, or just turn out the

lights in some Federal agencies and give them the money—the taxpayer dollars to private sectors to perform the work?

I think you would concede—at least I would think we all could

concede—that this process of contracting out is not exactly a morale builder for those who are still in. They have to wonder what

the value of their work is if there is this constant drumbeat to send

it off the farm and let somebody else try and do it. Could you comment on the OMB directives?

Mr. O’KEEFE. Sure. The approach, again, as I mentioned in the

opening statement, is part of the five-element plan of the President’s management agenda, strategic management of human capital being one, competitive sourcing being one of the others, and

that is where I think the distinction is. There has been a drumbeat

for outsourcing, privatization, a general focus as if that was the answer, the solution to the problem, when instead the empirical evidence would suggest that the active competitive sourcing, in and of

itself, regardless of who wins, which sector, has been the element

that has yielded the greatest efficiencies, in terms of cost savings,

as well as performance.

Senator DURBIN. Is there real competition?

Mr. O’KEEFE. Yes, sir.

Senator DURBIN. Do the public agencies really have an opportunity to compete with the private-sector alternative?

Mr. O’KEEFE. Based on all the evidence I have seen, the answer

to that is positively yes, and as a matter of fact, testimonial to the

resilience of public institutions and public servants who are liberVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
22

ated from process rules, to go about the business of competing in

a way they think is most efficient to deliver the outcome, the objective, the performance standard that is expected. In almost 60 percent of the occasions, the public entity is successful and the private

offer that is made does not work. A lot of the experiences throughout the Defense Department further demonstrate that it is at least

on the order of a 20 to 30 percent savings each time you go through

that particular effort all by itself.

So, if anything, the focus we have concentrated and the inflection

in the Bush Administration now is very much towards competitive

sourcing, with little regard for the question of exactly how the sector results may come from that. The other element that is involved

here—I am a little bit reticent to advocate specific objectives. We

will go from this point forward, beyond that, I think, demonstrated

track record of the last few years that has emerged from this general policy focus, Dave Walker is currently chairing and heading up

a commission that Congress has required for looking at competitive

practices, to look at a range of different issues, of which I and

Bobby Harnage and others are all members of, to try to come up

with what is the most appropriate means to accomplish this particular task. But, again, I am very much wed to the propositions

and objectives that are incorporated in the President’s objectives

now, of looking at competitive sourcing alternatives to achieve that

task without particular bias towards what the outcome might be,

as long as there is a performance improvement or a cost savings— hopefully both—attendant to it.

Senator DURBIN. Let me ask you about another item that is often

pointed to in terms of compensation and benefits for Federal employees, and that is the Federal Employees Health Benefits Program, basically our health insurance plan, which I hasten to add

is the same program that members of Congress are covered by.

Some people think we have something else, but we are under the

same program, and I think it is one of the better ones in the country. And yet some have said, in comparing it to what is being done

in the private sector, it is not that generous.

I am told that 250,000 Federal employees currently do not enroll

for health insurance, though they have an option to do so, because

it appears, at least for many of them, they cannot afford to pay the

employee share on this. I do not know if any people can comment,

but I am looking at Mr. Walker. What are your thoughts? I know

GAO has looked at this in the past, along with the Congressional

Research Service.

Mr. WALKER. Obviously, everything in the world is relative. It

depends on who you are comparing the program to. If you are comparing it to a major employer which has a unionized work force,

which does not have a whole lot of competition, then in that circumstance you could say that maybe this program is not as competitive as comparing it to a small-business or to an employer that

faces a tremendous amount of competition. I think we have to recognize that health benefits are very important benefits, but they

are one element of total compensation. You need to look at salary.

You need to look at pensions. You need to look at health. You need

to look at vacation. You need to look at disability. You need to look

at all these various areas, and I think it is important that we start

23

doing that more in the Federal Government, because there is a

tendency to look at each piece by itself, rather than looking at the

overall package.

I will say that, quite frankly, the concept that the Federal Government has, which is to offer more choice and to offer employees

more options as to the level of the coverage and the provider of that

coverage, quite frankly, I think, is probably something that is going

to be a trend that you will see the private sector adopting with increasing frequency in the future.

Senator DURBIN. We can only hope so. Open enrollment once a

year is an amazing option that people in the private sector never

get a chance, many of them never get a chance to see. Let me ask

you about the incentives that we use to retain and recruit. The statistics come back and say they are hardly ever used. We are talking

about one-tenth of one percent of employees who would perhaps get

efforts in the Executive Branch to recruit, retain, and relocate—incentives. Mr. Rossotti, how often do you use them in your agency?

Mr. ROSSOTTI. We have begun to use them more extensively as

part of this new recruiting process for our professional occupations.

This was something that we had the authority to do, especially

where we were doing the so-called category rating. I am getting a

little deeper into these personnel details than maybe I know, but

we were able to, at least with revenue agents, which is a very competitive occupation, use this new technique, and we did set up a

sort of internal set of standards that if we had the highest-rated

person, we would be able to provide certain incentives, such as relocation and some starting bonuses. We were also able, for people

that were already employed in the workforce, to match their current salary by bringing them in at a higher step. We did use these.

I do not have the statistics in my head, but I can get them for you,

for the record, as to how many we used.

This is just recently, within the last few months, that we have

done this, and I think it certainly was helpful. I will say, with regard to the matter of pay, the problem with having these kind of

incentives, of course, is equity. We are bringing in new people, and

I think it has been helpful to us, in terms of getting people into

the professional occupations, but of course you have the majority

of the workforce that is already there, and you run into a little bit

of an equity problem when you start to bring in the new people

with these special authorities.

So I think it is obviously not my place to comment on the overall

pay raise, but I would say within the kind of business that the IRS

is in, where we have a significant number of people in professional

occupations—I am thinking about people that are basically accountants, auditors, people that are dealing with taxpayer representatives—they do not stay just for the pay. It is important that

they have some kind of reasonable progression to look forward to,

not just to get them in at the front-end, which we are doing, but

to have them stay in and be motivated and realize that that is successful. It takes a couple of years after they get in for them to really be productive, at least a couple years, and then they are at their

peak period, and we really want to make sure we hang onto them,

not just keep them for the first 2 years.

24

Senator DURBIN. Your comments remind me of the parable of the

prodigal Federal employee, but that is something else we have read

about. I literally have 1 minute to go vote, and so if I could ask

the panel to just stand at ease until Senator Voinovich returns, to

see if he has a follow-up question, if he does not, we will bring up

the second panel, and I will be right back.

The Subcommittee stands in recess.

[Recess.]

Senator VOINOVICH [presiding]. I suspect that you exhausted the

Federal Employees Pay Comparability Act. But I suspect it probably has not been implemented because of the cost and perhaps because the Clinton Administration felt that the Bureau of Labor

Statistics may not have been the best place to determine the basis

of comparability. We have not really looked at the Federal Government’s classification system since 1978. I would like your response

to the point that I think both of our union witnesses are going to

make, and that is if we did something about that, many of the

problems we are faced with, in terms of retaining people and bringing them on board, would disappear. I would like your views on it.

How do you go about determining an objective way of determining

pay comparability?

Mr. O’KEEFE. Mr. Chairman, if I could offer, I am of a mind that

pay compression and comparability certainly are contributors to

the challenges we are facing, in terms of overall personnel recruitment and retention for the right skill mix and for the skill mix you

need at the present time and the present capabilities to do so. Having said that, I think by comparison to some of the other factors

that are extant today, that is but one of many different impediments or issues within this personnel system that exists, because

the larger problem, I think, is captured quite nicely by the Comptroller General’s reference to the culture transformation that is

necessary.

Right now, the focus of the system is towards a very career oriented objective. All the incentives, all the motivations, the idea is

to come in at entry-level and stay until you retire, and all the motivations are built on that proposition. So the issues of comparability

and compression and so forth are a growth from that, as opposed

to what has become generationally represented by many of the

folks sitting behind you, is a set of interests that is quite different

from the kind of motivation that was designed and built around the

personnel system that exists today within the Federal career force,

and that is opportunities to move around to lots of circumstances,

mobility, lateral entry, a range of incentives to enjoy different experiences, to try different alternatives, those are sorely lacking within

the system.

The movement between and among departments for entry-level,

junior-to-mid-grade kinds of opportunities is one you really must

aggressively push if you want to have those opportunities availed

to you, and that has little to do with pay compression, little to do

with comparability. It has to do with the erection of a series of impediments that make this particular process so hard to do, unless

you consciously set about it.

Senator VOINOVICH. If you are running General Motors or any

other major corporation, you have people working for you at a salaVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
25

ried level. And you know very well, that you have to pay a competitive wage if you intend to retain good people. Isn’t there kind of

a floor that you must have in terms of pay? From my experience,

and it goes way back when I overhauled the classification system

when I was mayor of Cleveland—you have to pay your staff a competitive wage. In Cleveland, we found that people from the entry

levels to mid levels were fairly competitive, but the salaries of our

senior staff were not competitive. And then, on the other hand,

after we completed our study, we found that some people were

overpaid. In fact, many people remained in their salaries and positions for 3 years because they were being overpaid.

The point is that there were people who were way underpaid,

and we had the self-discipline to go through the exercise. Don’t you

think it is about time we got to that in the Federal Government,

and if we do get to it, who would do it?

Mr. WALKER. One of the things I mentioned, Senator, when you

were voting is that I think, over time, we have to move to a system

that is focused more on skills, knowledge and performance, and

that ties back into classification to a certain extent, because I think

what you have right now is you have a circumstance where you

have some people who are significantly underpaid, you have some

people that are reasonably paid, given some things the government

has to offer that the private sector does not, and you have some

people that are overpaid, as you found out in your red-lining positions.

I think, at least based on my experience, I was a global partner

with Arthur Andersen. I headed our human capital services practices worldwide. Typically, when you are looking at these issues,

you want to do it with the people that are on the front line, actually engaging in the competition on a day-in and day-out basis. In

other words, you need to have OMB and OPM play some coordinating role and try to ensure a reasonable degree of consistency so

everybody is not doing their own thing.

On the other hand, the people that have to be at the forefront

are the people who are in the war for talent, the people who are

on the front line, trying to attract, retain and motivate a quality

workforce. So I think part of it has to be is we need to have their

involvement more in this process, with OMB and OPM maybe providing a facilitation and a coordination role, rather than saying it

has all got to come down from above and one size fits all, I think,

which has been one of our problems in the past. We have tended

to look at things that way, and the world is just not that way.

Senator VOINOVICH. But I am still getting at what does the new

Secretary of Transportation do, for example, in terms of looking at

the people that are there, and how does he determine——

Mr. WALKER. I will tell you some things that we have done and

they can think of it as a guideline. First, we did our strategic plan.

We looked at what we are trying to accomplish, how we measure

success. We realigned the organization based upon that strategic

plan, eliminated a layer of hierarchy. We did not fire the people.

We just eliminated a layer of hierarchy, reduced the number of

silos, had more people focused cross-organizationally and externally. We then ended up looking at our performance measurement

and reward systems, to be able to link those to that strategic plan.

26

We inventoried the skills and knowledge of the people within the

organization. We compared that against what we think we need.

That told us where we were long, where we were short, and where

we had gaps. We analyzed where we were having increasing difficulty in attracting people and retaining people. We try to understand the reasons for that through polling existing employees, prior

employees, and potential recruits. We took all that information and

figured out what we thought we needed to do in order to try to address those problems.

Senator VOINOVICH. In other words, you created a new classification system for the General Accounting Office.

Mr. WALKER. We already have a new classification system. But

I think these are things you can do and you should do whether you

have a new classification system or not, although I will tell you

that I think over time you may find that the concept of broad-banding and pay-for-performance, which we have, is something that

may well have broader application throughout government. But

you have to make sure that you have the support systems to make

them work. You have to have a good performance appraisal system.

You have to know what skills and knowledge you are looking for.

You have to have a good recruiting and college relations program.

You have to have a good training and development program. As

Mr. O’Keefe said before, these things are linked. They have to be

linked with each other.

Senator VOINOVICH. But the fact is you re-did your classification

system. You had the flexibility. But a lot of these other agencies

do not have such flexibility. How much flexibility do you have, Mr.

Abell, in your operation, for instance, to change it around? Aren’t

you locked in with certain classifications? I know you are locked

into classifications, because I have a nurse in the Hart Building,

who just got her master’s degree in nursing and she is a GS–11.

She wants to get a job that is a GS–13. She cannot get a job that

is a GS–13 because she has never been a GS–12.

Mr. ABELL. We have not been blessed with that level of flexibility

yet.

Senator VOINOVICH. Don’t you think we need to look at the classification system?

Mr. ABELL. I think the points you make are valid, Senator, and

I agree with Mr. O’Keefe, as well, that we have some flexibilities

we have not used. This is not among them, as it turns out, but

there are many factors that have to be included, and I will tell you

that many of the things that we have discussed here today, the Department has explored and continues to explore. I am struck by the

parallels between the challenges of managing the military force

and the challenges in managing the civilian force, and the impact

and the ability to move between the two, and the impact of the

generational effect, as Mr. O’Keefe has laid out, the impact of pay

gaps, if there are any, and how that affects, and my view is the

pay gap is not as important as the behavior that results from that

pay gap.

So we have to watch all those things, and again back to the fact

that people serve in government, both the military and civilian

side, for reasons other than compensatory.

27

Mr. WALKER. Sir, I think you are going to need to look at the

classification system, yes. [Laughter.]

Senator VOINOVICH. OK. Charlie, I am sorry you did not get

many of the questions today, but I would be interested in any further information that you have. I would like to sit down with you

to talk about the flexibilities that other parts of the Defense Department have had, for example, the China Lake demonstration

project and how that is working out.

Senator Durbin is not back yet. Do you want to give me a couple

minutes? Have you had a chance yet to really look at those flexibilities, to compare them and see whether or not they are working—be candid with me if you have not.

Mr. ABELL. No, I will, Senator. From the time between our discussions in April and today, I have tried to spin up rather quickly

on the flexibilities that were provided by the Congress and what

we have done to implement them, and I will tell you that I am fairly proud, and I got an ‘‘ ’Atta boy’’ from my friends on Armed Services for moving forward on several provisions of legislative authority that were given to us in 2000 and 2001 defense bills, because

when I got to the Department and said, ‘‘Where are we on this,’’

we where essentially nowhere.

So my experience is learning about them and trying to get them

implemented in a way that makes sense, and as some of the other

witnesses pointed out, when you implement these flexibilities you

also have to do a fair amount of training at the manager levels, supervisors. They have to learn how to deal with these flexibilities.

It requires sort of new skill sets for them. They have to exercise

judgment. They have to exercise a certain amount of courage in

some cases, in pay banding and pay performance and so forth. So

we are, on those flexibilities, at the neophyte level. On the China

Lake, the permanent authorities, I think those are ingrained in

those laboratories and reinvention labs and S&T centers that function under those authorities. It has become a way of life and I

think they are better for it.

Senator VOINOVICH. They are working?

Mr. ABELL. Yes, sir.

Senator VOINOVICH. Remember I talked to you about the daisy

chain process. I would be interested to see if that has been

changed, because that is one of the things that our people are still

complaining about.

Mr. ABELL. Yes, sir. We are working on it.

Senator VOINOVICH. Good. I have a lot of other questions, but our

second panel has been very patient. I really appreciate the fact that

you have been here today and again I want to publicly acknowledge

the fact that Senator Durbin has been wonderful in terms of going

forward with this agenda. He is on board and supportive, and I

want to say I am grateful to him and I look forward to continuing

to work with you on this big challenge we have. Thank you. We

will stand in recess until Senator Durbin gets here.

[Recess.]

Senator DURBIN [presiding]. I would like to introduce our second

panel of witnesses: Bobby Harnage is the President of the American Federation of Government Employees, of the AFL–CIO,

600,000 Federal and D.C. Government employees, the largest union

28

1The prepared statement of Mr. Harnage appears in the Appendix on page 110.

for government employees, some 1,100 locals here in the United

States and Chicago and overseas. Thanks for being here; Susan

Shaw is the Deputy Director for Legislation with the National

Treasury Employees Union, and she will be delivering the testimony of Colleen Kelly, NTEU’s President, whom I understand had

a last-minute scheduling conflict. NTEU represents more than

155,000 Federal employees across the government, including those

who work for the Internal Revenue Service. Myra Howze Shiplett

joins us from the National Academy of Public Administration. Director of the Center for Human Resources Management, she has 30

years of experience in public service, including managing the State

Department’s Civil Service Personnel Program. Thank you for coming. It is customary now to swear you in. If you would please rise

and raise your right hand. Do you swear the testimony you are

about to give to the Subcommittee is the truth, the whole truth,

and nothing but the truth?

Mr. HARNAGE. I do.

Ms. SHAW. I do.

Ms. SHIPLETT. I do.

Senator DURBIN. Thank you. Let the record reflect that they answered in the affirmative, and I will ask you to limit your oral

statements to 5 minutes. We will put your entire written statement

in the record. I have read several of them and am prepared to ask

a few questions, and Mr. Harnage why don’t you proceed first?

TESTIMONY OF BOBBY L. HARNAGE, SR.,1 NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL–CIO (AFGE)

Mr. HARNAGE. Thank you, Mr. Chairman, and I want to thank

you for the opportunity to testify today on the issue of flexibility

in the Federal personnel system. The government is in the midst

of a serious personnel crisis that is self-inflicted and as a result of

more than a decade of downsizing, contracting out and failure to

match either private or public sector standards for pay and benefits. In addition, political leaders have criticized and demeaned

Federal employees, cynically feeding public misperceptions of government and the people who work for it.

Congress and the last three administrations have failed to invest

in improvements in the government’s infrastructure, training of its

workforce, or invest in more modern tools and equipment. This refusal to make the necessary capital investment has been penny

wise and pound foolish, with predictable results. This crisis is not

only self-inflicted, it was planned. A good example of this planned

crisis is while some agencies are now attempting to hire and train

the next generation of Federal employees, their efforts are thwarted by the administration’s orders to put an additional 425,000 jobs

on the chopping block as they begin to comply with OMB’s directive

to convert or compete 10 percent of the FAIR Act list each year.

Another example is the arbitrary number of management positions targeted by the administration to be eliminated. We continue

to downsize rather than to rightsize the government. Management

by competition or quotas is a disservice to the taxpayers. It drives

29

costs up, not down. There is no proverbial silver bullet answer to

the personnel crisis, but certainly it is not rational to publicly malign Federal employees or rational to undermine their morale,

standard of living, or valuation by refusing to pay competitive salaries. It is not rational to withdraw or withhold training or deprive

them of resources and equipment necessary to high-quality performance.

None of these personnel practices is consistent with the human

capital approach to personnel management. I have been asked

whether expanding the use of flexibilities in Federal personnel systems will be a useful way to address the human capital crisis. In

short, management flexibilities alone will not solve this problem. In

fact, exercise of some of the flexibilities which have been proposed

are more likely to worsen the problem. AFGE’s opposition to unilateral increases in management’s authority on flexibility is not a defense of inflexibility or a challenge to the rights and responsibilities

of management. In principle, we believe that any expansion of Federal management authority or flexibility must be counterbalanced

with an expansion of the rights of Federal employees to bargain

collectively over the terms of change.

Pay and benefits and a process for determining their level are

written into Federal statute. Because of the statutory framework,

Federal employees can inform their elected representatives on their

views on the adequacy and fairness of these statutory items. We

can lobby Congress for advantageous changes. We can lobby Congress to defend against harmful changes. If statutory protections

are eliminated in order to make Federal compensation flexibility so

change can be implemented unilaterally by management, the absence of collective bargaining rights would deprive Federal employees of any democratic process through which to make our voice

heard.

An expansion in collective bargaining rights would be a necessary component of any expansion in management rights. One example is DOD’s effort to replace the current pay-setting process

with a management-design process called Contribution-based Compensation and Appraisal System, CCAS, which is a version of paybanding. DOD excluded any meaningful role for the union and

grants enormous discretion to management. Managers are able to

make unilateral decisions regarding the pay of individual employees. Pay matters that under Title V are covered by governmentwide laws and regulations which ensure at least some measure of

consistency and fairness are, in DOD’s CCAS system, controlled by

local managers who are able to operate with extremely broad authority.

The system was designed for and by management. Pay decisions

are made by a management panel, and bargaining unit employees

have no right to challenge them. AFGE suggests four broad policy

changes which could help resolve the Federal Government’s human

capital crisis in a way that would help taxpayers and Federal employees. First, provide Federal employees with compensation that

is comparable and competitive with that paid by large public and

private-sector employers. Congress and the administration should

fully implement the Federal Employees Pay Comparability Act of

1990 and also increase the government’s contribution to the FedVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
30

1The prepared statement of Ms. Colleen M. Kelley, National President, National Treasury

Employees Union, submitted by Ms. Shaw appears in the Appendix on page 128.

eral Employee’s Health Benefit Program from an average of 72 percent of premium to 80 percent.

Second, the administration should eliminate arbitrary FTE ceilings and hire according to agency mission needs. The fact that Federal employee agencies are prohibited from hiring above these ceilings is a critical component of the human capital crisis. In view of

many reports of the government losing out on desirable job candidates who are instead hired by employers able to make on-thespot offers, many people are focusing on the question of how to

speed up the hiring process. AFGE supports any attempt to speed

up the hiring process, as long as merit principles and veteran preferences and internal candidates’ rights are preserved.

Third, the government should end the practice of contracting out

all new Federal work and privatizing work presently being performed by dedicated public employees.

Mr. Chairman, I have submitted my statement, my full statement, and I appreciate your consideration of that, and that concludes my oral testimony. I would be glad to answer any questions.

Senator DURBIN. Thanks, Mr. Harnage, and I have read your

statement. I appreciate that much.

Susan Shaw, if you would proceed.

TESTIMONY OF SUSAN L. SHAW,1 DEPUTY DIRECTOR OF

LEGISLATION, NATIONAL TREASURY EMPLOYEES UNION

Ms. SHAW. Thank you, Mr. Chairman. My name is Susan Shaw.

I am the Deputy Director of Legislation for NTEU. President

Kelley very much regrets that she is unable to be here today.

NTEU believes that for too long, too little attention and too few resources have been spent on the Federal Government and its employees, which is why we face the crisis we do today. According to

the Bureau of Labor Statistics, in some parts of the country, the

gap between private and public sector pay is as high as 30 percent.

The Federal Employees Pay Comparability Act has never been

fully implemented, even in this time of record budget surpluses.

For most prospective employees, the most critical element in deciding whether or not to accept a job is salary. The administration’s

response has been to propose only a 3.6 percent pay raise next

year. Although the House and Senate Budget Committees adopted

bipartisan language as part of the fiscal year 2002 budget resolution, making clear that Federal employees should receive identical

pay raises to their military counterparts next year, at least 4.6 percent, the administration continues to press for only a 3.6 percent

raise. This is not reflective of an administration that takes the

human capital crisis seriously.

NTEU believes that a decision to fully implement FEPCA would

do more to address recruitment and retention in the Federal Government than all of the other incentive programs the government

has, combined. Acquiring and retaining employees with the best

skills is a particular challenge for the Federal Government. Agencies are so often hamstrung by inadequate funding levels and

forced to shuffle resources between competing priorities, that they

31

are never able to adequately fund the range of programs they need

to become an employer of choice. This is a situation agencies face

for fiscal year 2002.

Discretionary funding levels in the budget resolution are not adequate to meet current needs, never mind the challenges of 2002.

Federal agencies currently have a wealth of flexibilities available

to them. There are programs for retention allowances, bonuses,

performance awards, student loan repayment incentives, even bilingual awards. However, according to OPM, less than one-quarter

of one percent of the Federal workforce received any form of recruitment, retention or relocation incentive in fiscal year 1998.

Why? Because agencies are not being given the resources to fund

the very programs that might help them solve their human capital

crisis.

Adequate and stable agency funding, coupled with appropriate

pay, benefits and incentives, are the keys to ensuring that the Federal Government is able to attract, hire and keep the best employees. There is a Federal pay law on the books, but it is not funded.

There are flexibilities and demonstration project authority and a

virtual laundry list of programs available to Federal agencies, but

they, too, are not funded. The problem is not a lack of options, it

is a lack of resources.

Mr. Chairman, I also want to take this opportunity to thank you

for your leadership in introducing S. 1152. More dollars are doled

out to contractors each year than are spent on the Federal workforce, yet there is little or no oversight of these contracts once they

are awarded. No one knows if any real cost savings have been

achieved or services have been improved. What we do know, however, is that contracting out quotas, such as the 5 percent and 10

percent quotas for 2002 and 2003 that OMB recently issued send

an unmistakable message to Federal employees that they are not

valued.

We cannot continue to arbitrarily award contracts to private

companies while simultaneously letting our Federal employees

walk out the door. S. 1152 will bring a measure of accountability

to this process. With regard to personnel flexibilities in the IRS Restructuring and Reform Act, one of the major disincentives, as this

Subcommittee heard today, is Section 1203. The mandatory firing

provision has had a chilling effect on collections and morale. No

other employee in the Executive, Judicial or Legislative branch, not

to mention any other taxpayer, must be fired for filing a tax return

1 day late.

We are working closely with the IRS to try to make these penalties less than mandatory termination and look forward to working with the Subcommittee on this matter. As you also know, the

IRS is preparing to implement a pay band for its senior managers,

allowing greater flexibility when setting salaries. However, it, too,

will require additional resources to work. Pay-for-performance has

also been suggested as a step towards improving the Federal workplace. NTEU is not opposed to pay-for-performance or pay-banding.

However, we believe that they must be accomplished in the context

of collective bargaining.

Current performance evaluations are widely viewed by our members as subjective, susceptible to favoritism, and in some cases disVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
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1The prepared statement of Ms. Shiplett appears in the Appendix on page 137.

criminatory. By collectively bargaining the design and implementation of a new system, we believe employees will have faith in the

process. Here again, though, additional resources are going to be

required to make such a system work. Finally, I want to note that

Mr. Walker commented that the FEHB program is perhaps not as

competitive if you compare it to programs offered by major unionized employers. That is precisely what we believe the Federal Government is, and I think that we need to do a better job with the

FEHB program as well.

Senator DURBIN. Thank you, Ms. Shaw. Ms. Shiplett.

TESTIMONY OF MYRA HOWZE SHIPLETT,1 DIRECTOR, CENTER

FOR HUMAN RESOURCES MANAGEMENT, NATIONAL ACADEMY OF PUBLIC ADMINISTRATION

Ms. SHIPLETT. Thank you. Thank you, Mr. Chairman and Senator Voinovich. The National Academy of Public Administration appreciates the opportunity to share its views with you, and we certainly applaud the efforts of the Subcommittee to look at additional

flexibilities. There are, as you know, approximately 100 Federal

agencies that carry out a wide variety of missions and responsibilities, and yet despite this diversity, they are all required to live

under the same personnel system that was developed on 19th-century principles, and essentially has the notion that one size fits all.

In this area of dramatic change, this very standardized approach

is detrimental to the government’s ability to recruit and retain an

effective workforce. Work is changing rapidly. Organizations need

to be able to change rapidly, also, and that requires additional system flexibility. There are three concepts which have been tested for

a number of years in several different agencies that we suggest for

the Subcommittee’s consideration. The first of those is broad-banding. This technique was approved in 1980 for use in the Navy’s

China Lake and San Diego weapons laboratories. It involves grouping Federal pay grades into several pay bands and permitting

greater flexibility in setting pay and making promotion decisions

and reassignments within the broader pay ban.

The Office of Personnel Management has monitored this demonstration project very closely for the last 20 years, and reports

consistently that the laboratories are able to recruit and retain

quality employees at higher rates than a traditional system allows.

Since cost is always an issue in these matters, it is useful to note

that the overall salary costs for the China Lake demonstration

project have increased only 3 percent over what would be in the

traditional system, over this 20-year period. We suggest that broadbanding be made available to those agencies who see a value in its

use, not that it be mandated for government-wide applications. The

second flexibility we would suggest for your consideration is performance-based reduction-in-force procedures.

Earlier this year, the academy was asked to review the reduction-in-force system at China Lake. We were particularly interested

in their approach to structuring the RIF competitive levels, since

the paramount criterion in determining retention credit in their

system was performance, rather than tenure. The installations conVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
33

ducted two reductions in force simultaneously, one for their employees in the demonstration system and one where the employees

were in the traditional system. The RIFs conducted were conducted

at the same time, by the same management team, in the same facilities, using the same management controls, and both of the systems used a five-level performance rating system.

In the traditional system, of those terminated, 65 percent had

been rated either outstanding or highly successful for their performance. In the demonstration system, only 14 percent of those

rated outstanding or highly satisfactory were, in fact, terminated.

If our goal is to recruit and to retain highly-qualified employees in

the Federal service, broad-banding and performance-based reduction-in-force systems lend themselves strongly, we believe, to your

consideration.

The third flexibility we would suggest is that of quality categories to replace the rule of three. The academy and the Merit

Systems Protection Board have recommended that the rule of three

be eliminated. In 1990, Congress authorized a demonstration

project for the Department of Agriculture’s Forest Service and the

Agricultural Research Service. Rather than requiring job applicants

to be listed by absolute score and selections made from the top

three, which is a process that we have seen in our research is timeconsuming, litigious, and creating a false sense of precision, these

agencies were permitted to place candidates in one of several quality categories—for example, highly-qualified, qualified, or unqualified.

Selecting officials could then make their selections from the top

group or from the second group, if there were not sufficient numbers in the top-rated group. Veterans placed in one of the categories are put at the top of that category and are the first selected. This project was so successful in the Department of Agriculture that in 1995, Congress approved this approach for the entire Department. The National Academy of Public Administration

believes that these three flexibilities have been extensively tested

and have proven to be successful. They should be made available

as alternatives under the overall structure of Title V for all Federal

agencies. Enacting these flexibilities would in no way alter fundamental merit principles.

Thank you, Mr. Chairman and Senator Voinovich. We appreciate

the opportunity.

Senator DURBIN. Thank you for your testimony. Mr. Harnage

and Ms. Shaw, if a labor organization is going to succeed, it has

to represent the wishes of its members, and when we talk about

issues of retention, when your members suggest to you what they

would like to see in their work arrangement with the Federal Government, what is their highest priority? Mr. Harnage.

Mr. HARNAGE. Right now, I think their highest priority—it is

hard to distinguish between compensation and the job security, but

I think right now the job security—they see this issue of driving

privatization regardless of cost, jeopardizing them even having a

job, regardless of what the pay is. So I would say that is their highest priority.

Senator DURBIN. Ms. Shaw.

34

Ms. SHAW. I would agree with Mr. Harnage and just add for the

employees we represent at IRS, Section 1203 and fixing that section of the law is right up at the top, too.

Senator DURBIN. So you heard the testimony earlier from Mr.

Walker and others—Mr. O’Keefe, I think it was—relative to

outsourcing, contracting out, and privatizing. The suggestion was

that it was truly a competition between the public agency and the

private sector. The competition led to more productivity. In 60 percent of the cases, I believe he testified—still stayed with the government and did not end up being outsourced. Could you tell me

your experience and the experience of your employees on this

outsourcing approach and what their reaction has been?

Mr. HARNAGE. Well, first we need to understand that the competition is for Federal jobs and the competition that he is talking

about is only 2 percent of all the privatization that takes place in

the Federal Government. There is an indication that there is a projected 20-percent savings with the competition, and that is one of

the reasons this union has not faulted competition. We embrace

competition, fair competition, but the problem is the competition is

one-sided.

New work for Federal Government is—Federal employees are not

allowed to compete for that, even though it could be done in-house

more economically, more efficiently, more effectively, no consideration. It is automatically privatized.

Senator DURBIN. Excuse me. Can you give me an example of

that? Can you think of one where so-called new work was not—the

Federal agency did not have the chance to compete for it?

Mr. HARNAGE. I cannot think of an example right now. It is not

a matter of not having a chance. They are not allowed. It is just

not done. The same way with once it is privatized, there are only

very rare occasions where it is looked at bringing it back in-house,

even though it is more economical, more effective. The only examples that are available of bringing it back in-house is where the

contractor defaulted and there was not anybody to replace them,

rather than competing it to make sure there was that savings.

The part that bothers me the most about what seems to be driving what we are doing is—my position is—it is referred to as the

most efficient organization, the MEO, and that is our everyday job.

We ought to be at the MEO right now, but we are allowing——

Senator DURBIN. Could you say what MEO is, for the record?

Mr. HARNAGE. Most efficient organization.

Senator DURBIN. Thank you.

Mr. HARNAGE. We are allowing that inefficiency to continue until

we put everybody’s jobs in jeopardy by saying we are going to compete it. We ought to be holding these people accountable for having

the MEO every day, not just for competition purposes. But that figure that was given to you today has gone from 10 percent to 60

percent. We have gotten better at it. That figure of 20 percent is

going to go down, simply because we are getting more efficient,

more effective every day. So that 20 percent is not going to hold

true forever, and that has to be taken into consideration.

But the biggest problem that we have is that most of these are

projections and nobody is looking behind to see if they were actually realized, and that is the reason we strongly support the act,

35

and Mr. Chairman, I appreciate not only you are a co-sponsor of

it, but also your support for it.

Senator DURBIN. May I ask Ms. Shaw, if I can, on this Section

1203, when I read the 10 deadly sins that results in termination

for employees from their union, who work for the IRS, as I said to

Senator Voinovich, some of these are outrageous. No one would

want to defend them if you could prove that a person had done

them. The two that struck me as arbitrary—one you have already

mentioned, and that was failure to file an income tax return in a

timely fashion. I believe there is some additional language there,

as well. The second was so open-ended, this harassment question.

I would imagine, as Mr. Rossotti testified, it almost becomes an

automatic motion filed by the attorney for someone being audited.

When you look at it, are those the two that stand out as being

particularly onerous from the employees’ point of view?

Ms. SHAW. Yes. In general, I would say yes. The problem with

the harassment statute, as you have already pointed out, is that

it is so broad. There have been 1,300 charges filed to date; seven

of them have been found to have merit. But the year it takes to

get from, as I think the commissioner said, OK, now you are on

death row, and eventually you had been reprieved, you can imagine

not a lot gets done. Certainly you are not going to want to take on

any case that you are going to have to put yourself in a position

of having even more problems of this nature.

Of the 10 deadly sins, there are others that—they are not black

and white. There are gray areas in there, and that is why one of

the provisions we have worked with the IRS on—and I believe the

commissioner referred to the language they submitted to the Finance and Ways and Means Committee—would allow the IRS more

discretion, in general. It would not have to be mandatory termination. They would have an opportunity to look into the situation

first, which seems reasonable to us.

Senator DURBIN. Ms. Shiplett, one of the observations from Ms.

Shaw about the banding approach, which I think creates more

flexibility for compensation, is the funding question. If the funds

are not there to finance this banding approach, then it really does

not offer too much. What has been your observation in terms of the

actual funding of that type of program?

Ms. SHIPLETT. She is absolutely correct. It is important to have

sufficient funding, so that reasonable decisions can be made.

Senator DURBIN. And, in the instance that you cited in your testimony, I take it that the funding was there?

Ms. SHIPLETT. Right.

Senator DURBIN. Fine. Senator Voinovich.

Senator VOINOVICH. You heard the comments of the other witnesses, in terms of the Federal Employees Pay Comparability Act.

From looking at your testimony, you believe that pay comparability

is fundamental to any kind of a new system in terms of attracting

and keeping people. The issue here is that this law, which was enacted in 1990 has not been implemented, and as they mentioned,

it is probably because of the fact that previous administrations determined that they did not have the money to implement it. And

then there was some question about whether or not the Bureau of

36

Labor Statistics was the correct place to determine how severe the

pay gap was with the private sector.

If we were going to go forward with this law and create this kind

of an underpinning for the whole Federal pay system, what would

be your advice in terms of how you would go about getting data

that people could agree to, assuming Congress would come up with

the money that is necessary to implement it?

Mr. HARNAGE. Senator, the problem is not that we cannot agree.

The problem is that we make no effort to agree. NTEU and AFGE

in 1997 asked the past administration to sit down and let’s talk

about fixing FEPCA. If you have a problem with it, let’s look for

the fix. But we did not see a problem with it, except the implementation side of it. But we have not had those meetings yet. Each

year, we talked about the next year’s pay increase.

Senator VOINOVICH. Who are you meeting with?

Mr. HARNAGE. We were meeting with OPM, OMB, and a representative of the White House in these discussions, trying to—we

cannot agree on the gap. We say it is 30. You say it is less. Let’s

sit down and figure out what it is. You think it is 12? Fine, you

win. Pay me. So I think nobody wanted to talk about it, simply because they did not want that last result. Once they reached an

agreement, then they have no defense but to pay it. Where we have

these enormous surpluses, there is little justification for there to be

any gaps in the Federal pay.

I recognize, as I believe Comptroller Walker said, that there are

people that are overpaid and there are a lot of people underpaid,

but that is fewer than it was simply because we have continued not

to close that gap, and that is part of what locality pay was for, was

to help reduce that to where nobody was overpaid and nobody was

underpaid, but the locality pay has been extremely limited, and

there was a question asked earlier about was Congress responsible—yes, to some degree, but I do not totally blame it all on

them, either, because the administration set the mark by submitting their numbers, and thank you very much, every year you have

exceeded that.

So we managed that the gap not get any bigger in the last 4

years, but we have not done anything about closing it.

Senator VOINOVICH. What were your suggestions on how to resolve this difference?

Mr. HARNAGE. We never got that far. We offered to sit down and

do that, but we never had those meetings. The meetings that we

had each year was simply to talk about what the next year’s pay

would be, not about FEPCA.

Senator VOINOVICH. We have heard some testimony that people

do not come to work for the Federal Government because they

want to get rich, but because they want to contribute. I always felt

people come to work for the Federal Government because it is a

way to support their family and make a contribution to society. But

there is a certain base salary that needs to be paid to individuals

so that they can support themselves, and when you pay them less

than that, I think you basically tell them that you do not think

very much of the job you are asking them to do.

I would really appreciate it if you would send me a one-pager on

the negotiations that you have had, and see if we can start talking

37

once again about how to deal with this problem. I want to clear up

one thing, Mr. Harnage, in your testimony. You said, ‘‘AFGE believes that the idea is based upon a zero sum model of Federal pay,

taking away from one person or group in order to fund an increase

for another is bound to exacerbate the human capital crisis, not improve it. In this category, AFGE would place ideas such as contingent pay, payment of one-time bonuses, incentive pay, and merit

pay.’’

I interpret that to mean that you are not opposed to these things,

but that they should be available only after you pay a sufficient

base. Maybe you want to clarify that for me.

Mr. HARNAGE. That is correct. There need to be two things. One

is that it ought to be additional money. In the past, some of the

reasons the agencies did not implement or use the flexibilities that

they had was because they had to use current money. In other

words, if I give four employees a retention bonus, I have got to do

away with one of them, because it is coming out of salary money.

So there was a disincentive to use those flexibilities, because it was

an additional money. It needs to be a pool of money that is additional money than what it takes to close the gap.

The second ingredient is the employees themselves are to have

a voice in that process. They should not be left out, and that was

our problem with DOD. We met in 1998 with DOD for about 6

months on five working groups, trying to work out a lot of the personnel flexibilities that we are talking about today. But where that

ran into a roadblock was once DOD realized that we were talking

about we will give you flexibilities, but there have got to be checks

and balances down at the work site, that the employees have an

opportunity or their representatives have an opportunity for input

into that. That is when they threw up their hands and said, ‘‘We

don’t want any part of that.’’ So now they are piecemealing all

those things we discussed in those 6 months a little bit at a time

each year, which is a lot less productive than what it would have

been if we went ahead and reached an agreement.

Senator VOINOVICH. I would like to change the subject to a degree to the issue of privatizing. I just wonder, has NAPA had a

chance to look at that issue? I know Paul Light has some written

work about the government’s shadow workforce. You have not

looked at that?

Ms. SHIPLETT. No.

Senator VOINOVICH. The impression that I get is that, when new

work comes along, rather than give the union an opportunity to

compete for it, agencies just farm it out automatically, without any

consideration?

Ms. SHAW. It is my understanding that, yes, under the current

rules, there is an opportunity to do just that. Under the administration’s new directive, they have issued a 5 percent directive for

2002, that agencies contract out 5 percent of their workforce, 10

percent in 2003. Aside from the obvious concerns we have about

that, the agencies do not necessarily have the people in place to

handle these competitions. So if they are going to be forced to meet

an arbitrary number of jobs to contract out, we are concerned that

they are going to be forced into a situation of not even doing a competition, simply because they will not have the manpower to do it.

38

Senator VOINOVICH. They are talking about farming out 5 percent of the current workforce; correct?

Ms. SHAW. Yes.

Senator VOINOVICH. That 5 percent would compete with the private sector, and then the agency would decide whether they are

going to outsource the work or not?

Ms. SHAW. The way it is stated is that they will be competed, 5

percent of the jobs will be competed. But for some agencies that do

not have contracting staff, as many of them do not, as evidenced

by the lack of oversight over current contracts, what is going to

happen to those agencies when they bump up against the October

1 deadline that they have got to have these jobs contracted out?

Are they simply going to contract them out?

Senator VOINOVICH. One of the things that I would be interested

in—and it may be in the Light study on the shadow workforce—

is whether you have any statistics on the amount of privatization

that has already occurred. It has been my impression from doing

some reading that it has been enormous, and that by downsizing

the actual number of Federal employees it looks as if the Federal

Government is smaller. But if you look at the number of outside

contractors that have been hired, in effect, the actual size has not

changed very much, except that people are no longer working for

the Federal Government. They are working for the private sector.

I am not even sure that they really understand. But it has been

enormous, I think, and the issue is that, if you farm out that work,

do you have the people inside the departments to make sure that

you are not getting ripped off?

Ms. SHAW. That is exactly our concern, and I would be happy to

send you some material.

Mr. HARNAGE. Senator, it is enormous, and that is one of the

items in the TRAC Act. Nobody really knows how much it is, but

we know it is somewhere about four times of what the civilian

workforce is. Nobody knows exactly what it costs, and although we

talk about these savings that are supposed to take place, nobody

can really prove they took place because nobody is looking back to

ensure that this did, in fact, happen. That is one of our main problems, but also these quotas are driving a lot of it.

Make sure you get what is being said by NTEU. The instructions

by OMB are to convert or compete 5 percent, and she is saying that

the agencies do not have the time, the money, the expertise. So

come October 1, they are going to simply convert them—that is

without competition—in order to get the job done. The other thing

is these manpower ceilings, the FTEs, controls, although everybody

says they do not manage by FTEs, in private, they will admit they

do, in a lot of cases the agencies do not have the manpower to do

the job any more and they have no option but to privatize it, regardless of cost, and that is not to the benefit of the taxpayers.

So one of the things we are saying is part of the human capital

crisis is brought about by these quotas that are arbitrarily plucked

out of the air and implemented for the sole purpose of driving the

privatization, not saving the taxpayer money.

Senator DURBIN. Senator Voinovich, I might just follow-up from

information that was printed in the Washington Post on June 8, in

an article written by Ellen Nakashima. She said that the Bush AdVerDate 11-MAY-2000 10:54 May 13, 2002 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 75472.TXT SAFFAIRS PsN: SAFFAIRS
39

ministration has ordered more than 40,000 Federal workers to

compete for their jobs with the private sector, a first step toward

the President’s goal of making about 425,000 government jobs eligible for private contracting. The current civilian Federal workforce

is approximately 1.8 million. So that would suggest about 25 percent, if my calculations are correct, not quite 25 percent would be

outsourced, of the current Federal workforce.

The best estimate that they can provide in this article related to

your question comes from the Brookings study by Mr. Light in

1999, where he estimated 5.6 million contract employees working

for the Federal Government in various capacities, which is a little

more than three times the size of the civilian workforce of the Federal Government. It strikes me as difficult to attract people to the

Federal workforce when you are telling them that over the next

few years, one out of four jobs will disappear into the private sector. That does not give you one of the elements that you raised, Mr.

Harnage, the job security issue, any attention at all.

I think what I am going to do, and I do not know if Senator

Voinovich wants to join me, is to ask the GAO to give us a study

on this shadow workforce. I would like to know if we can get a

more updated number on the total involved in it, and I would like

to have a profile of several things: What are they paid? What kind

of benefits do they receive? Then, if there is any way to measure

their performance, my impression was that some of my colleagues,

at least in the House, were just hidebound to privatize and outsource, regardless of cost, regardless of performance. Their idea

was to reduce the size of the Federal workforce, the civilian Federal workforce, at any cost.

When I suggested amendments, arguing that we had to save

money in the process, they rejected them. They said that is not the

point; we are not here to save money; we are here to turn out some

lights in some Federal buildings. I hope that is not what is still

driving the outsourcing fervor, and we are going to ask the GAO

to help us prepare some information for that.

I do not have any further questions. Senator Voinovich, do you?

Senator VOINOVICH. No, but I would be more than happy to join

you on that request. I would like to find out more about the size

of the shadow workforce. I would like to know in what capacity

they serve and what kind of a job they are doing, because obviously

the budgets are not going down.

Senator DURBIN. No, they are not.

Senator VOINOVICH. I think that, from my experience, it hurts

the esprit de corps of the workforce for this kind of thing to happen, and I have been personally involved in reversing that process.

At the State level, if something new came along, the unions were

able to compete for it. Then there were some areas, quite frankly,

that we found we were not doing as well as we should. I went to

the unions and said, ‘‘Look, here is the deal, security people and

some others, you could be doing better,’’ then we genuinely put it

out for competition, and there was a real, honest-to-goodness, objective evaluation. Sometimes the unions won and sometimes they

lost. But it was not arbitrary or automatic. And so I think that a

GAO report would be a great way of getting a real sense of this

at the Federal level.

40

Senator DURBIN. I would like to invite the three panelists, if they

would like, to suggest to us questions that the GAO might look into

in reference to this workforce. If, in the next few days, you can contact the staff of the Subcommittee and give us some ideas that you

think are legitimate inquiries that we can include in this request

to the GAO, that would be helpful. I thank you for your testimony.

Senator VOINOVICH. Could I just ask one last question?

Senator DURBIN. Of course.

Senator VOINOVICH. Ms. Shiplett, you are really strong about

your three recommendation, and Mr. Harnage, you heard NAPA’s

recommendations. What is your reaction?

Mr. HARNAGE. My reaction is to be very cautious about it. I

would be glad to get with them and talk about what their experiences are and compare it with ours, and see if we can come up with

a consensus.

Senator VOINOVICH. We are interested in looking at some of

these innovations, in terms of short-term and long-term legislation

and so forth. You seem to be really sold on this, and I would like

to know a bit more. I think you said that broad-banding ought not

to be federalized, but that agencies should be given the opportunity

to ask for that flexibility; is that what you are saying?

Ms. SHIPLETT. Right, but we would say that for all three of the

flexibilities. It is our belief that Federal agencies’ missions and

strategic objectives and needs are sufficiently different that we

ought not to be mandating any of these in saying every Federal

agency must use them, but saying instead that Federal agencies

ought to have them as an option if they believe their particular set

of circumstances requires it.

If I could add just one more thing, and I believe it echoes some

of the comments that were made, not only in this panel, but in the

earlier panel; whatever changes are made, one of the things that

is really essentially is to make an investment in seeing that the

managers and the supervisors have the skills to exercise these authorities appropriately, and that employees are knowledgeable

enough that they understand what the changes are, and have the

opportunity to learn about them well before they are actually applied.

Senator VOINOVICH. Thank you. Mr. Chairman, I have no other

questions.

Senator DURBIN. Let me just ask you this for the record, Ms.

Shiplett. I was just speaking to Ms. Upton on my staff. You are

congressionally chartered?

Ms. SHIPLETT. Yes, sir.

Senator DURBIN. But you are not congressionally funded?

Ms. SHIPLETT. That is also correct. We are funded through the

contracts that we have with Federal agencies or our various consortiums.

Senator DURBIN. I am going to invite all of the panel that are

interested to give us some ideas about this investigation by the

GAO, and I thank you all for your testimony. We may have some

other follow-up questions, but I appreciate your patience and thank

you for being here today.

With that, this hearing stands adjourned.

[Whereupon, at 5 p.m., the Subcommittee was adjourned.]

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136

137

138

139

Æ