Testimony 

Before the Committee on Governmental 

Affairs, U.S. Senate

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 9:30 a.m. EDT 

Wednesday, June 4, 2003 HUMAN CAPITAL 

Building on DOD's Reform 

Effort to Foster 

Governmentwide 

Improvements 

Statement of David M. Walker 

Comptroller General of the United States 

GAO-03-851T 
GAO strongly supports the need for government transformation and the 

concept of modernizing federal human capital policies both within DOD 

and for the federal government at large. The federal personnel system is 

clearly broken in critical respects—designed for a time and workforce of 

an earlier era and not able to meet the needs and challenges of today’s 

rapidly changing and knowledge-based environment. The human capital 

authorities being considered for DOD have far-reaching implications for 

the way DOD is managed as well as significant precedent-setting 

implications for the rest of the federal government. GAO is pleased that 

as the Congress has reviewed DOD’s legislative proposal it has added a 

number of important safeguards, including many along the lines GAO has 

been suggesting, that will help DOD maximize its chances of success in 

addressing its human capital challenges and minimize the risk of failure. 

More generally, GAO believes that agency-specific human capital reforms 

should be enacted to the extent that the problems being addressed and 

the solutions offered are specific to a particular agency (e.g., military 

personnel reforms for DOD). Several of the proposed DOD reforms meet 

this test. In GAO’s view, the relevant sections of the House’s version of 

the National Defense Authorization Act for Fiscal Year 2004 and the 

proposal that is being considered as part of this hearing contain a 

number of important improvements over the initial DOD legislative 

proposal. 

Moving forward, GAO believes it would be preferable to employ a 

governmentwide approach to address human capital issues and the need 

for certain flexibilities that have broad-based application and serious 

potential implications for the civil service system, in general, and the 

Office of Personnel Management, in particular. GAO believes that 

several of the reforms that DOD is proposing fall into this category (e.g., 

broad banding, pay for performance, re-employment and pension offset 

waivers). In these situations, GAO believes it would be both prudent and 

preferable for the Congress to provide such authorities governmentwide 

and ensure that appropriate performance management systems and 

safeguards are in place before the new authorities are implemented by 

the respective agency. Importantly, employing this approach is not 

intended to delay action on DOD’s or any other individual agency’s 

efforts, but rather to accelerate needed human capital reform throughout 

the federal government in a manner that ensures reasonable consistency 

on key principles within the overall civilian workforce. This approach 

also would help to maintain a level playing field among federal agencies 

in competing for talent and would help avoid further fragmentation 

within the civil service. 

People are at the heart of an 

organization’s ability to perform its 

mission. Yet a key challenge for 

the Department of Defense (DOD), 

as for many federal agencies, is to 

strategically manage its human 

capital. DOD’s proposed National 

Security Personnel System would 

provide for wide-ranging changes 

in DOD’s civilian personnel pay and 

performance management and 

other human capital areas. Given 

the massive size of DOD, the 

proposal has important precedentsetting implications for federal 

human capital management. 

This testimony provides GAO’s 

observations on DOD human 

capital reform proposals and the 

need for governmentwide reform. 

www.gao.gov/cgi-bin/getrpt?GAO-03-851T.

To view the full testimony, click on the link 

above. For more information, contact Derek 

Stewart at (202) 512-5559 or 

stewartd@gao.gov. 

Highlights of GAO-03-851T, 

testimony before the Committee on 

Governmental Affairs, United States 

Senate 

June 4, 2003

HUMAN CAPITAL

Building on DOD’s Reform Effort to 

Foster Governmentwide Improvements 
Page 1 GAO-03-851T 

Chairman Collins and Members of the Committee: 

I am pleased to be here today to discuss legislative proposals to help the 

Department of Defense (DOD) address its current and emerging human 

capital challenges. Over the past few weeks, I have been honored to 

appear as a witness before the Congress on three other occasions to 

discuss this important issue and related DOD human capital concerns.1

 As 

the House of Representatives has reviewed DOD’s legislative proposal, it 

has added a number of important safeguards, including many along the 

lines we were suggesting, that will help DOD maximize its chances of 

success in addressing its human capital challenges and minimize the risk 

of failure. Furthermore, the proposed National Security Personnel System 

Act that is the subject of this hearing also includes a significant number of 

improvements over DOD’s initial proposal. I understand that there are 

important issues that will need to be resolved in conference that obviously 

have implications for DOD’s reform efforts, and may have major 

implications for governmentwide reform efforts. 

We strongly support the need for government transformation and the 

concept of modernizing federal human capital policies both within DOD 

and for the federal government at large. The federal personnel system is 

clearly broken in critical respects—designed for a time and workforce of 

an earlier era and not able to meet the needs and challenges of our rapidly 

changing and knowledge-based environment. Nonetheless, I believe that 

we have made more progress in addressing the government’s longstanding human capital challenges in the last 2 years than in the previous 

20, and I am confident that we will make more progress in the next 2 years 

than we have made in the last 2 years. 

The human capital authorities being considered for DOD have far-reaching 

implications for the way DOD is managed as well as significant precedentsetting implications for the rest of the federal government. DOD has 

almost 700,000 civilian employees. The Department of Homeland Security, 

which also has broad human capital flexibilities, has about 140,000 civilian 

 1

 U.S. General Accounting Office, Human Capital: DOD’s Civilian Personnel Strategic 

Management and the Proposed National Security Personnel System, GAO-03-493T

(Washington, D.C.: May 12, 2003); Defense Transformation: DOD’s Proposed Civilian 

Personnel System and Governmentwide Human Capital Reform, GAO-03-741T

(Washington, D.C.: May 1, 2003); and Defense Transformation: Preliminary Observations 

on DOD’s Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, D.C.: Apr. 29, 

2003). 
Page 2 GAO-03-851T 

employees. Other federal agencies that have been granted broad 

authorities, such as the Federal Aviation Administration and the Internal 

Revenue Service, have many thousands more federal employees. In 

essence, we are fast approaching the point where “standard 

governmentwide” human capital policies and procedures are neither 

standard nor governmentwide. In this environment, we should pursue 

governmentwide reforms and flexibilities that can be used by many 

government agencies, subject to agencies having appropriate 

infrastructures in place before such authorities are put in operation. 

Considering certain proposed DOD reforms in the context of the need for 

governmentwide reform could serve to accelerate progress across the 

government while at the same time incorporating appropriate safeguards 

to maximize the ultimate chances of success and minimize the potential 

for abuse and prevent the further fragmentation of the civil service. 

More directly, agency-specific human capital reforms should be enacted to 

the extent that the problems being addressed and the solutions offered are 

specific to a particular agency (e.g., military personnel reforms for DOD). 

Several of the proposed DOD reforms meet this test. Importantly, the 

relevant sections of the House of Representatives’ version of the National 

Defense Authorization Act for Fiscal Year 2004 and Chairman Collins, 

Senator Levin, Senator Voinovich, and Senator Sununu’s National Security 

Personnel System Act, in our view, contain a number of important 

improvements over the initial DOD legislative proposal. 

Moving forward, we believe it would be preferable to employ a 

governmentwide approach to address human capital issues and the need 

for certain flexibilities that have broad-based application and serious 

potential implications for the civil service system, in general, and the 

Office of Personnel Management (OPM), in particular. We believe that 

several of the reforms that DOD is proposing fall into this category (e.g., 

broad banding, pay for performance, re-employment, and pension offset 

waivers). In these situations, we believe it would be both prudent and 

preferable for the Congress to provide such authorities governmentwide 

and ensure that appropriate performance management systems and 

safeguards are in place before the new authorities are implemented by the 

respective agencies. This approach would help to maintain a level playing 

field among federal agencies in competing for talent. Importantly, 

employing this approach is not intended to delay action on DOD’s or any 

other individual agency’s efforts. 

However, in all cases whether through a governmentwide authority or 

agency-specific legislation, in our view, such additional authorities should 
Page 3 GAO-03-851T 

be put in operation only when an agency has the institutional 

infrastructure in place to use the new authorities effectively. This 

institutional infrastructure includes, at a minimum, a human capital 

planning process that integrates the agency’s human capital policies, 

strategies, and programs with its program goals and mission and desired 

outcomes; the capabilities to develop and implement a new human capital 

system effectively; and a modern, effective, and credible performance 

management system that includes adequate safeguards, including 

reasonable transparency and appropriate accountability mechanisms, to 

ensure the fair, effective, and nondiscriminatory implementation of the 

system. 

My recent statements before the Congress have discussed DOD’s human 

capital challenges and have provided comments and suggestions on the 

initial DOD proposal to create a National Security Personnel System 

(NSPS). Building on those statements, today I will comment on current 

DOD human capital reform proposals, including the National Security 

Personnel System Act, and how those proposals can be used to help 

leverage governmentwide change. 

As I observed when I first testified on the DOD proposal in April, many of 

the basic principles underlying DOD’s civilian human capital proposals 

have merit and deserve the serious consideration they are receiving. 

Secretary Rumsfeld and the rest of DOD’s leadership are clearly 

committed to transforming how DOD does business. Based on our 

experience, while DOD’s leadership has the intent and the ability to 

transform DOD, the needed institutional infrastructure is not in place 

within a vast majority of DOD organizations. Our work looking at DOD’s 

strategic human capital planning efforts and looking across the federal 

government at the use of human capital flexibilities and related human 

capital efforts underscores the critical steps that DOD needs to take to 

properly develop and effectively implement any new personnel 

authorities.2

 In the absence of the right institutional infrastructure, 

 2

 See, for example, U.S. General Accounting Office, Human Capital: Effective Use of 

Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-2 (Washington, 

D.C.: Dec. 6, 2002); DOD Personnel: DOD Actions Needed to Strengthen Civilian Human 

Capital Strategic Planning and Integration with Military Personnel and Sourcing 

Decisions, GAO-03-475 (Washington, D.C.: Mar. 28, 2003); and Defense Logistics: Actions 

Needed to Overcome Capability Gaps in the Public Depot System, GAO-02-105

(Washington, D.C.: Oct. 12, 2001). 

Observations on 

Proposed DOD 

Reforms 
Page 4 GAO-03-851T 

granting additional human capital authorities will provide little advantage 

and could actually end up doing damage if the authorities are not 

implemented properly. 

The following provides some observations on key provisions of the 

proposed National Security Personnel System Act in relation to the House 

version of the National Defense Authorization Act for Fiscal Year 2004. 

First, I offer some comments on the overall design for a new personnel 

system at DOD. Second, I provide comments on selected aspects of the 

proposed system. 

The House version of DOD’s authorization bill would allow the Secretary 

of Defense to develop regulations with the Director of OPM to establish a 

human resources management system for DOD. The Secretary of Defense 

could waive the requirement for the joint issuance of regulations if, in the 

Secretary’s judgment and subject to the decision of the President, it is 

“essential to the national security”—which was not defined in the 

proposed bill. As an improvement, the proposed National Security 

Personnel System Act also requires that the new personnel system be 

jointly developed by the Secretary of Defense and the Director of OPM, 

but does not allow the joint issuance requirement to be waived. This 

approach is consistent with the one the Congress took in creating the 

Department of Homeland Security. 

The proposed National Security Personnel System Act requires the 

Secretary of Defense to phase in the implementation of NSPS beginning in 

fiscal year 2004. Specifically, the new personnel authorities could be 

implemented for a maximum of 120,000 of DOD’s civilian employees in 

fiscal year 2004, up to 240,000 employees in fiscal year 2005, and more 

than 240,000 employees in a fiscal year after fiscal year 2005, if the 

Secretary of Defense determines that, in accordance with the bill’s 

requirement that the Secretary and the Director of OPM jointly develop 

regulations for DOD’s new human resources management system, the 

Department has in place a performance management system and pay 

formula that meets criteria specified in the bill. We strongly support a 

phased approach to implementing major management reforms, whether 

with the human capital reforms at DOD or with change management 

initiatives at other agencies or across the government. We suggest that 

OPM, in fulfilling its role under this section of the bill, certify that DOD has 

a modern, effective, credible, and, as appropriate, validated performance 

management system with adequate safeguards, including reasonable 

DOD’s Overall Human 

Capital Program 
Page 5 GAO-03-851T 

transparency and appropriate accountability mechanisms, in place to 

support performance-based pay and related personnel decisions. 

The proposed National Security Personnel System Act states that the 

Secretary of Defense may establish an employee appeals process that is 

fair and ensures due process protections for employees. The Secretary of 

Defense is required to consult with the Merit Systems Protection Board 

(MSPB) before issuing any regulations in this area. The DOD appeals 

process must be based on legal standards consistent with merit system 

principles and may override legal standards and precedents previously 

applied by MSPB and the courts in cases related to employee conduct and 

performance that fails to meet expectations. The bill would allow appeal 

of any decision adversely affecting an employee and raising a substantial 

question of law or fact under this process to the Merit Systems Protection 

Board under specific standards of review, and the Board’s decision could 

be subject to judicial review, as is the case with other MSPB decisions. 

This proposal affords the employee review by an independent body and 

the opportunity for judicial review along the lines that we have been 

suggesting. 

The proposed National Security Personnel System Act does not include an 

evaluation or reporting requirement from DOD on the implementation of 

its human capital reforms, although DOD has stated that it will continue its 

evaluation of the science and technology reinvention laboratory 

demonstration projects when they are integrated under a single human 

capital framework. We believe an evaluation and reporting requirement 

would facilitate congressional oversight of NSPS, allow for any midcourse 

corrections in its implementation, and serve as a tool for documenting best 

practices and sharing lessons learned with employees, stakeholders, other 

federal agencies, and the public. Specifically, the Congress should 

consider requiring that DOD fully track and periodically report on the 

implementation and results of its new human capital program. Such 

reporting could be on a specified timetable with sunset provisions. These 

required evaluations could be broadly modeled on the evaluation 

requirements of OPM’s personnel demonstration program. Under the 

demonstration project authority, agencies must evaluate and periodically 

report on results, implementation of the demonstration project, cost and 

benefits, impacts on veterans and other Equal Employment Opportunity 

groups, adherence to merit principles, and the extent to which the lessons 

from the project can be applied elsewhere, including governmentwide. The 

reports could be done in consultation with or subject to review of OPM. 

Employee Appeals Procedures 

DOD Human Capital Reform 

Evaluation and Reporting 
Page 6 GAO-03-851T 

There is widespread understanding that the basic approach to federal pay 

is outdated and that we need to move to a more market- and performancebased approach. Doing so will be essential if we expect to maximize the 

performance and assure the accountability of the federal government for 

the benefit of the American people. DOD has said that broad banded 

performance management and pay for performance systems will be the 

cornerstone of its new system. 

Reasonable people can and will debate and disagree about the merits of 

individual reform proposals. However, all should be able to agree that a 

modern, reliable, effective, and validated performance management 

system with adequate safeguards, including reasonable transparency and 

appropriate accountability mechanisms, must serve as the fundamental 

underpinning of any successful results-oriented pay reform. We are 

pleased that both the House version of DOD’s fiscal year 2004 

authorization bill and the proposed National Security Personnel System 

Act contain statutory safeguards and standards along the lines that we 

have been suggesting to help ensure that DOD’s pay for performance 

efforts are fair to employees and improve both individual and 

organizational performance. 

The statutory standards described in the National Security Personnel 

System Act proposal are intended to help ensure a fair, credible, and 

equitable system that results in meaningful distinctions in individual 

employee performance; employee involvement in the design and 

implementation of the system; and effective transparency and 

accountability measures, including appropriate independent 

reasonableness reviews, internal grievance procedures, internal 

assessments, and employee surveys. In our reviews of agencies’ 

performance management systems—as in our own experience with 

designing and implementing performance-based pay reform for ourselves 

at GAO—we have found that these safeguards are key to maximizing the 

chances of success and minimizing the risk of failure and abuse. 

The proposed National Security Personnel System Act also takes the 

essential first step in requiring DOD to link the performance management 

system to the agency’s strategic plan. Building on this, we suggest that 

DOD should also be required to link its performance management system 

to program and performance goals and desired outcomes. Linking the 

Specific DOD Human 

Capital Policies and 

Practices 

Performance Management and 

Pay Reform 
Page 7 GAO-03-851T 

performance management system to related goals and desired outcomes 

helps the organization ensure that its efforts are properly aligned and 

reinforces the line of sight between individual performance and 

organizational success so that an individual can see how her/his daily 

responsibilities contribute to results and outcomes. 

The proposed National Security Personnel System Act includes a detailed 

list of elements that regulations for DOD’s broad band pay program must 

cover. These elements appear to be taken from DOD’s experience with its 

civilian acquisition workforce personnel demonstration project as well as 

the plan, as described in an April 2, 2003 Federal Register notice to 

integrate all of DOD’s current science and technology reinvention 

laboratory demonstration projects under a single human capital 

framework.3

 Many of the required elements in the proposed National 

Security Personnel System Act are entirely appropriate, such as a 

communication and feedback requirement, a review process, and a 

process for addressing performance that fails to meet expectations. 

However, other required elements, such as “performance scores”, appear 

to imply a particular approach to performance management that, going 

forward, may or may not be appropriate for DOD, and therefore may have 

the unintended consequence of reducing DOD’s flexibility to make 

adjustments. Congress has an important and continuing role to play in the 

design and implementation of the federal government’s personnel policies 

and procedures. Congress should consider how best to balance its 

responsibilities with agencies’ needs for the flexibility to respond to 

changing circumstances. 

Finally, under the proposed act, for fiscal years 2004 through 2008, the 

overall amount allocated for compensation for civilian employees of an 

organizational or functional unit of DOD that is included in NSPS shall not 

be less than the amount of civilian pay that would have been allocated to 

such compensation under the General Schedule. After fiscal year 2008, 

DOD’s regulations are to provide a formula for calculating an overall 

amount, which is to ensure that employees in NSPS are not disadvantaged 

in terms of the overall amount of pay available as a result of their 

conversion into NSPS while providing DOD with flexibility to 

accommodate changes in the function of the organization, the mix of 

employees performing those functions, and other changes that might 

affect pay levels. 

 3

 68 Fed. Reg. 16,119-16,142 (2003). 
Page 8 GAO-03-851T 

Congress has had a longstanding and legitimate interest in federal 

employee pay and compensation policies and, as a result, there are 

provisions consistent with that interest in the National Security Personnel 

System Act. However, as currently constructed, the proposed bill may 

have the unintended consequence of creating disincentives, until fiscal 

year 2009, for DOD to ensure that it has the most effective and efficient 

organizational structure in place. This is because, based on our 

understanding of the bill’s language, if DOD were to reorganize, outsource, 

or undertake other major change initiatives through 2008 in an 

organizational or functional unit that is part of NSPS, DOD may still be 

required to allocate an overall amount for compensation to the 

reorganized unit based on the number and mix of employees in place prior 

to conversion into NSPS. In other words, if priorities shift and DOD needs 

to downsize a unit in NSPS significantly, it may still be required that the 

downsized unit’s overall compensation level remain the same as it would 

have been in the absence of the downsizing. While pay protections during 

a transition period are generally appropriate to build employee support for 

the changes, we believe that, should the Congress decide to require overall 

organizational compensation protection, it should build in additional 

flexibilities for DOD to make adjustments in response to changes in the 

size of organizations, mix of employees, and other relevant factors. 

The current allowable total annual compensation limit for senior 

executives would be increased up to the Vice President's total annual 

compensation (base pay, locality pay, and awards and bonuses) in the 

proposed National Security Personnel System Act and the House National 

Defense Authorization Act for Fiscal Year 2004. In addition, the highest 

rate of (base) pay for senior executives would be increased in the House 

version of the authorization bill. 

The Homeland Security Act provided that OPM, with the concurrence of 

the Office of Management and Budget, certify that agencies have 

performance appraisal systems that, as designed and applied, make 

meaningful distinctions based on relative performance before an agency 

could increase its total annual compensation limit for senior executives. 

While the House version of DOD’s fiscal year 2004 authorization bill would 

still require an OPM certification process to increase the highest rate of 

pay for senior executives, neither the proposed National Security 

Personnel System Act nor the House bill would require such a certification 

for increasing the total annual compensation limit for senior executives. 

DOD Senior Executive Service 

Performance and Pay Reforms 
Page 9 GAO-03-851T 

To be generally consistent with the Homeland Security Act, we believe 

that the Congress should require that OPM certify that the DOD senior 

executive service (SES) performance management system makes 

meaningful distinctions in performance and employs the other practices 

used by leading organizations to develop effective performance 

management systems, including establishing a clear, direct connection 

between (1) SES performance ratings and rewards and (2) the degree to 

which the organization achieved its goals. DOD would be required to 

receive the OPM certification before it could increase the total annual 

compensation limit and/or the highest rate of pay for its senior executives. 

The National Security Personnel System Act contains a number of 

provisions designed to give DOD flexibility to help obtain key critical 

talent. It allows DOD greater flexibility to (1) hire experts and pay them 

special rates for temporary periods up to six years, and (2) define benefits 

for certain specialized overseas employees. Specifically, the Secretary 

would have the authority to establish a program to attract highly qualified 

experts in needed occupations with the flexibility to establish the rate of 

pay, eligibility for additional payments, and terms of the appointment. 

These authorities give DOD considerable flexibility to obtain and 

compensate individuals and exempt them from several provisions of 

current law. Consistent with our earlier suggestions, the bill would limit 

the number of experts employed at any one time to 300. The Congress 

should also consider requiring that these provisions only be used to fill 

critically needed skills identified in a DOD strategic human capital plan, 

and that DOD report on the use of the authorities under these sections 

periodically. 

As I mentioned at the outset of my statement today, the consideration of 

human capital reforms for DOD naturally suggests opportunities for 

governmentwide reform as well. The following provides some suggestions 

in that regard. 

We believe that the Congress should consider providing governmentwide 

authority to implement broad banding, other pay for performance systems, 

and other personnel authorities whereby whole agencies are allowed to 

use additional authorities after OPM has certified that they have the 

institutional infrastructures in place to make effective and fair use of those 

authorities. To obtain additional authority, an agency should be required 

to have an OPM-approved human capital plan that is fully integrated with 

the agency’s strategic plan. These plans need to describe the agency’s 

Attracting Key Talent for DOD 

Governmentwide 

Human Capital 

Reforms 

Governmentwide 

Performance-Based Pay 

and Other Human Capital 

Authorities 
Page 10 GAO-03-851T 

critical human capital needs and how the new provisions will be used to 

address the critical needs. The plan should also identify the safeguards or 

other measures that will be applied to ensure that the authorities are 

carried out fairly and in a manner consistent with merit system principles 

and other national goals. 

Furthermore, the Congress should establish statutory principles for the 

standards that an agency must have in place before OPM can grant 

additional pay flexibilities. The standards for DOD’s performance 

management system contained in the National Security Personnel System 

Act are the appropriate place to start. An agency would have to 

demonstrate, and OPM would have to certify, that a modern, effective, 

credible, and, as appropriate, validated performance management system 

with adequate safeguards, including reasonable transparency and 

appropriate accountability mechanisms, is in place to support more 

performance-based pay and related personnel decisions before the agency 

could put the new system in operation. OPM should be required to act on 

any individual certifications within prescribed time frames (e.g., 30–60 

days). 

Consistent with our suggestion to have DOD evaluate and report on its 

efforts, agencies should also be required to evaluate the use of any new 

pay or other human capital authorities periodically. Such evaluations, in 

consultation with or subject to review of OPM, could be broadly modeled 

on the evaluation requirements of OPM’s personnel demonstration 

program. 

Additional efforts should be undertaken to move the SES to an approach 

where pay and rewards are more closely tied to performance. This is 

consistent with the proposed Senior Executive Service Reform Act of 

2003. Any effort to link pay to performance presupposes that effective, 

results-oriented strategic and annual performance planning and reporting 

systems are in place in an agency. That is, agencies must have a clear 

understanding of the program results to be achieved and the progress that 

is being made toward those intended results if they are to link pay to 

performance. The SES needs to take the lead in matters related to pay for 

performance. 

We believe it would be highly desirable for the Congress to establish a 

governmentwide fund where agencies, based on a sound business case, 

could apply to OPM for funds to be used to modernize their performance 

Governmentwide SES 

Performance and Pay 

Reforms 

Performance Management 

Improvement Funds 
Page 11 GAO-03-851T 

management systems and ensure that those systems have adequate 

safeguards to prevent abuse. Too often, agencies lack the performance 

management systems needed to effectively and fairly make pay and other 

personnel decisions. 

The basic idea of a governmentwide fund would be to provide for targeted 

investments needed to prepare agencies to use their performance 

management systems as strategic tools to achieve organizational results 

and drive cultural change. Building such systems and safeguards will likely 

require making targeted investments in agencies’ human capital programs, 

as our own experience has shown. (If successful, this approach to targeted 

investments could be expanded to foster and support agencies’ related 

transformation efforts, including other aspects of the High Performing 

Organization concept recommended by the Commercial Activities Panel.4

) 

Finally, we also believe that the Congress should enact additional targeted 

and governmentwide human capital reforms for which there is a 

reasonable degree of consensus. Many of the provisions in the proposed 

Federal Workforce Flexibility Act of 2003 and the governmentwide human 

capital provisions of the House version of DOD’s fiscal year 2004 

authorization bill fall into this category. 

Since we designated strategic human capital management as a 

governmentwide high-risk area in January 2001, the Congress, the 

administration, and agencies have taken steps to address the federal 

government’s human capital shortfalls. In a number of statements before 

the Congress over the last 2 years, I have urged the government to seize on 

the current momentum for change and enact lasting improvements. 

Significant progress has been—and is being—made in addressing the 

federal government’s pressing human capital challenges. But experience 

has shown that in making major changes in the cultures of organizations, 

 4

The panel was mandated by section 832 of the National Defense Authorization Act for 

Fiscal Year 2001, which required the Comptroller General to convene a panel of experts to 

study the process used by the federal government to make sourcing decisions. After a 

yearlong study, the panel published its report on April 30, 2002. See Commercial Activities 

Panel, Improving the Sourcing Decisions of the Government: Final Report (Washington, 

D.C.: Apr. 30, 2002). The report can be found on GAO’s Web site at www.gao.gov under the 

Commercial Activities Panel heading. 

Additional Targeted 

Governmentwide Reforms 

Summary 

Observations 
Page 12 GAO-03-851T 

how it is done, when it is done, and the basis on which it is done can make 

all the difference in whether we are ultimately successful. 

DOD and other agency-specific human capital reforms should be enacted 

to the extent that the problems being addressed and the solutions offered 

are specific to particular agencies. A governmentwide approach should be 

used to address certain flexibilities that have broad-based application and 

serious potential implications for the civil service system, in general, and 

OPM, in particular. This approach will help to accelerate needed human 

capital reform in DOD and throughout the rest of the federal government. 

Chairman Collins and Members of the Committee, this concludes my 

prepared statement. I would be pleased to respond to any questions that 

you may have. 

For further information about this statement, please contact Derek B. 

Stewart, Director, Defense Capabilities and Management, on (202) 512-

5140 or at stewartd@gao.gov. For further information on governmentwide 

human capital issues, please contact J. Christopher Mihm, Director, 

Strategic Issues, on (202) 512-6806 or at mihmj@gao.gov. Major 

contributors to this testimony included William Doherty, Bruce Goddard, 

Hilary Murrish, Lisa Shames, Edward H. Stephenson, Martha Tracy, and 

Michael Volpe. 

Contacts and 

Acknowledgments 

(450227) (450227) 
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GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs