[Federal Register Volume 72, Number 39 (Wednesday, February 28, 2007)]
[Notices]
[Pages 9037-9050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3454]


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OFFICE OF PERSONNEL MANAGEMENT


Proposed Demonstration Project; Pay Banding and Performance-Based 
Pay Adjustments in the National Nuclear Security Administration

ACTION: Notice of a proposed demonstration project plan.

-----------------------------------------------------------------------

SUMMARY: Chapter 47 of title 5, United States Code, authorizes the 
Office of Personnel Management (OPM), directly or in agreement with one 
or more agencies, to conduct demonstration projects that experiment 
with new and different human resources management concepts to determine 
whether changes in human resources policy or procedures would result in 
improved Federal human resources management. The National Nuclear 
Security Administration (NNSA) and OPM propose to test a pay banding 
system in which within-band pay progression is

[[Page 9038]]

based on performance. Section 4703 of title 5 requires OPM to publish 
the proposed project plan in the Federal Register. This notice fulfills 
that requirement. The proposed project plan has been approved by NNSA, 
the Department of Energy, and OPM.

DATES: Written comments must be submitted on or before March 30, 2007. 
A public hearing is scheduled for Wednesday, April 4, 2007, from 10 
a.m. to 5 p.m., Eastern Standard Time. The location of the hearing is: 
U.S. Department of Energy, Forrestal Building, 1000 Independence 
Avenue, SW., Washington, DC 20585.
    Public parking is limited, but the building is conveniently 
accessible to the ``Smithsonian'' and ``L'Enfant'' Metro stations. The 
Forrestal Building is a secure facility. Members of the public must 
show a government-issued photo ID (e.g., State driver's license). 
Attendees will undergo electronic screening, and their personal 
belongings will be subject to a physical search. Personal items 
prohibited in the Forrestal Building include devices that can transmit 
and record, weapons (guns, knives, explosives, etc.), and alcohol. A 
member of the public possessing such items will be barred from 
entering, and such items are subject to confiscation. There will be a 
sign-in table set up in the main lobby. A greeter, and signs, will 
direct attendees to the main auditorium location.
    There will be a telephone call-in number for members of the public 
who cannot attend in person. That number will be 202-287-5323, and the 
line will be active from 10 a.m. to 5 p.m., Eastern Standard Time.
    At the time of the hearing, interested persons or organizations may 
present their written or oral comments on the proposed demonstration 
project. The hearing will be informal. However, anyone wishing to 
testify should contact the person listed under FOR FURTHER INFORMATION 
CONTACT, so that NNSA and OPM can plan the hearing and provide 
sufficient time for all interested persons and organizations to be 
heard. Priority will be given to those on the schedule, with others 
speaking in any remaining available time. Each speaker's presentation 
will be limited to 10 minutes. Written comments may be submitted to 
supplement oral testimony during the public comment period.

ADDRESSES: Comments may be mailed to Demonstration Projects, U.S. 
Office of Personnel Management, 1900 E Street, NW., Room 7677, 
Washington, DC 20415 or submitted by e-mail to <a href="/cdn-cgi/l/email-protection#6a2e0f07051a1805000f091e192a051a07440d051c"><span class="__cf_email__" data-cfemail="b7f3d2dad8c7c5d8ddd2d4c3c4f7d8c7da99d0d8c1">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: National Nuclear Security 
Administration: Randy Mazzeo, NNSA Assistant HR Director for Policy & 
Workforce Planning, (301) 903-5192, 19901 Germantown Road, NA-64, Room 
F-115, Germantown, MD 20874. Office of Personnel Management: Patsy 
Stevens, Systems Innovation Group Manager, U.S. Office of Personnel 
Management, (202) 606-1258, 1900 E Street, NW., Room 7456, Washington, 
DC 20415.

SUPPLEMENTARY INFORMATION: The goals of this demonstration project are 
to--
    (1) Improve hiring by allowing NNSA to compete more effectively for 
high quality employees through the judicious use of higher entry 
salaries;
    (2) Motivate and retain staff by providing faster pay progression 
for high-performing employees;
    (3) Improve the usefulness and responsiveness of the position 
classification system to managers;
    (4) Increase the proficiency of administering the position 
classification system through a simplified pay-banded application of 
the current General Schedule grade structure, and reduce the procedural 
steps and documentation requirements traditionally associated with 
classifying positions;
    (5) Eliminate automatic pay increases (i.e., annual adjustments 
that normally take effect the first day of the first pay period 
beginning on or after January 1) by making pay increases performance-
sensitive, so that only Fully Successful (known as ``Fully Meets 
Expectations'' in NNSA) and higher performers will receive pay 
adjustments, and the best performers will receive the largest pay 
adjustments;
    (6) Integrate with, build upon, and advance the work of several key 
human capital management improvement initiatives and projects currently 
underway in NNSA, including--
    a. Advancing the ongoing refinement of NNSA's three-year old 
enterprise-wide performance management program, which currently 
features a pilot for automating yearly performance ratings, to the next 
logical level, encompassing performance-based pay adjustments,
    b. Achieving greater parity, though not complete harmony, with 
NNSA's mature excepted service pay-banded and pay-for-performance 
system (e.g., will have a lower high-end pay band; no automatic pay 
increases, etc.),
    c. Building on the simplified position description (PD) format and 
automated PD library that are already in place,
    d. Continuing to develop improved performance management skills 
among first-line supervisors through increased program rigor, 
additional training, and better guidance materials, to better develop 
standards that reflect differences in performance,
    e. Developing an automated position classification and position 
control system,
    f. Establishing a system of career-enhancing career paths for the 
purpose of developing, advancing, and retaining employees,
    g. Building on the new workforce analysis and planning system, 
already in place to identify FTE needs and competency needs and skills 
gaps, to conduct a valid occupational analysis to construct meaningful 
pay bands,
    h. Using a total workforce management approach to controlling 
costs, not just spending caps and share formulas; i.e., cultivating a 
managerial culture of accountability in taking and directing personnel 
actions, fostering judicious yearly employee ratings and prudent 
performance payouts, and instilling position management discipline.

Office of Personnel Management.
Linda M. Springer,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purposes and Approach
    B. Problems With the Present System
    C. Changes Required/Expected Benefits
    D. Participating Organizations
    E. Participating Employees
    F. Project Design
III. Personnel System Changes
    A. Pay Banding Classification and Pay System
    1. Establishment of Career Paths and Pay Bands
    2. Position Classification
    3. Minimum Qualifications Requirements
    4. Elimination of Fixed Steps
    5. Rate Range
    6. Rate of Basic Pay Upon Initial Appointment
    7. Rate of Basic Pay Upon Promotion
    8. Rate of Basic Pay in Noncompetitive Lateral Actions
    9. Other Pay Administration Provisions
    10. Staffing Supplements
    B. Performance Appraisal
    1. Program Requirements
    2. Supervisory Accountability
    3. Reconsideration of Ratings
    C. Performance-Based Pay Adjustments
    1. Pay Pools
    2. Performance Shares
    3. Pay Adjustments
    4. Employees Who Do Not Receive a Pay Adjustment
    5. Locality Pay and Staffing Supplement
    D. Reduction-in-Force
IV. Training
V. Conversion
    A. Conversion to the Demonstration Project

[[Page 9039]]

    B. Conversion Back to the General Schedule System
VI. Project Duration
VII. Project Evaluation
VIII. Costs
IX. Waiver of Laws and Regulations Required
    A. Title 5, United States Code
    B. Title 5, Code of Federal Regulations

I. Executive Summary

    This project was designed by NNSA in consultation with OPM. The 
demonstration project will modify the General Schedule classification 
and pay system by identifying several broad career paths, establishing 
pay bands which may cover more than one grade in each career path, 
eliminating longevity-based step progression, and providing for annual 
pay adjustments based on performance. The proposed project will test 
(1) the effectiveness of multi-grade pay bands in recruiting, 
advancing, and retaining employees, and in reducing the processing time 
and paperwork traditionally associated with classifying positions at 
multiple grade levels, and (2) the application of meaningful 
distinctions in levels of performance to the allocation of annual pay 
increases under the General Schedule.

II. Introduction

A. Purposes and Approach

    The purposes of the proposed project are to--
    (1) Modify the General Schedule (GS) classification system by 
establishing pay bands which may cover more than one grade; and
    (2) Modify the GS pay system to provide larger annual pay increases 
to employees who are better performers based on performance 
distinctions made under a credible, strategically-aligned performance 
appraisal system/program and thereby improve the results-oriented 
performance culture within the organization.
    NNSA's approach to achieving these purposes is to integrate with 
and build upon the several ongoing human capital management initiatives 
and projects that are already underway, and to design a GS pay banding 
and performance-based pay adjustment system that--
    (1) Complements and increases parity with the statutory NNSA 
excepted service employment system, already in place, and
    (2) Profits from the successes, mistakes, and lessons of other 
agency demonstration projects, past and current.

B. Problems With the Present System

Position Classification Rigidity, Incomprehensibility, and Procedural 
Excesses
    Although the GS classification system is not a compensation system 
per se, the classification and pay systems are inextricably 
intertwined. In practice, the GS classification system is the primary 
determinant of an employee's basic pay. Furthermore, NNSA believes in 
the principles underlying the GS classification system (i.e., equal pay 
for substantially equal work, and variations in pay based on the 
actuality of work performed, rather than on who performs the work) and 
believes that these principles are as valid and applicable to the 
Federal civil service system today as when originally enacted into law 
in 1923, and when the General Schedule was established in 1949. As 
Ismar Baruch wrote in a classic groundbreaking 1941 report, Position 
Classification in the Public Service:

    `` * * * the very nature of governmental jurisdictions places 
them in a position of peculiar responsibility to the public at 
large. Individual actions without plan or system and based merely 
upon the expediency of the moment are undesirable. Public personnel 
policies and transactions affecting positions and employees should 
be supportable by facts and logic in the light of broad 
considerations applicable to the service as a whole. Further, in the 
management of public personnel affairs, considerations of fairness 
and equity require uniform action under like circumstances, 
particularly in the establishment of pay rates.''

This in essence is what the Federal position classification system was 
designed to achieve, and has achieved in principle, if not practice, 
ever since these words were first written. Thus, rather than 
``scrapping'' the current GS classification system and starting over, 
NNSA believes that modifying the system to accommodate the work and 
workforce of the 21st century is a more prudent and workable approach.

    Pay banding does this. The current GS classification system is 
cumbersome, labor intensive, and difficult to comprehend. As OPM's 
April 2002 white paper, A Fresh Start for Federal Pay: The Case for 
Modernization points out, the GS classification system was designed 
during the World War II years when civil servants were predominantly 
``process-obsessed'' file clerks. Public servants in the middle of the 
20th century performed work that tended to be mechanical and repetitive 
in nature, consisting of job tasks readily observable and measurable. 
Today, work tends to be knowledge-based and highly specialized, and 
does not lend itself to easy categorization based on readily observable 
characteristics. Nonetheless, as an employee progresses from the entry 
level to the full-performance level in a given occupation today, under 
the traditional classification system, a separate position description 
is still required for each grade. For example, an entry level GS-5 
Engineer with promotion potential to GS-12 requires five different 
position descriptions (or statements of differences) covering grade 
intervals GS-5, GS-7, GS-9, GS-11, and GS-12. Additionally, each 
position description should be accompanied by a position evaluation 
report certifying that the duties and responsibilities of the position 
meet the requirements for classification into the series and grade. 
Often, the difference between a higher-graded and lower-graded position 
in the same career progression may be the level of supervision an 
employee receives, or the increasing gradations in the scope and effect 
of an employee's work on agency missions and programs, or some other 
interpretative degree of occupational difficulty and responsibility. As 
a result, managers who assign work and who are responsible for 
describing such assignments of work, and the position classifiers who 
evaluate assignments of work against OPM's and applicable agency 
classification criteria, often view the practice attendant to the 
current GS classification system as an exercise in semantics, and PD 
writing, for the purpose of ``beating the system'' to award the highest 
grade possible to a position, instead of as a management tool by which 
to make meaningful and significant distinctions between levels of work.
    The current GS classification system also directly impacts the 
effectiveness of agency recruitment activities. Recruiting for a 
vacancy which may be filled at any level from the entry level to the 
full-performance level requires a separate position description for 
each grade, separate qualifications requirements for each grade, 
separate applicant assessment and rating tools (often referred to as 
``crediting plans'') for each grade, and separate lists of best-
qualified candidates (often referred to as ``certificates'') for each 
grade. For example, recruiting for a single GS-5/12 Engineer vacancy 
requires five different position descriptions (GS-5, GS-7, GS-9, GS-11, 
and GS-12) and five different ``crediting plans,'' and will result in 
the agency issuing multiple ``certificates.'' Thus, Federal managers 
and applicants for Federal employment often view the

[[Page 9040]]

system as cumbersome, time consuming, and unresponsive.
    Modifying the current system to supplant sequential grade 
progression with valid, rational, and credible pay bands will (1) 
provide much needed management relief from the seeming arbitrariness, 
rigidity, and document heaviness of the current classification system, 
(2) provide managers with much needed flexibility, and (3) offer 
applicants and employees greater opportunities for advancement and 
inducements to retention, while retaining the public policy principles 
and management values underlying the current civil service system.
A Need for Performance-Based Pay Increases
    Additionally, the current GS pay system provides annual pay 
increases to all employees, even those whose performance is less than 
Fully Successful. Similarly, periodic within-grade pay increases are 
virtually automatic. Although an employee's performance must be 
determined to be at an ``acceptable level of competence'' in order for 
the employee to receive a within-grade increase (WGI), this is only a 
single-level threshold and no further distinctions in levels of 
performance play a role. All performance levels above the threshold are 
treated the same for purposes of determining the amount of the increase 
and the rate at which an employee advances through the rate range of 
his or her grade. NNSA and OPM do not believe it is a wise use of the 
limited resources available for the compensation of Federal employees--
nor does it serve taxpayers effectively or treat employees fairly--to 
pass on the same pay adjustments, year after year, to all employees 
regardless of differences in their performance.
    The current GS pay system does provide one limited tool to address 
distinctions in levels of performance--namely, quality step increases 
(QSIs). QSIs are discretionary adjustments that are not integrated into 
the normal pay adjustment process; thus, limited funds are available to 
provide QSIs, and the decision-making process may not be very 
transparent. In addition, there is no flexibility as to the amount of 
the QSI; a full step increase is required. Also, QSIs may be used only 
for those with the highest rating of record. In summary, QSIs alone 
cannot be relied upon to establish an effective link between pay and 
performance based on meaningful distinctions among different levels of 
performance.
    Under these constraints of the GS pay system, agencies are severely 
limited in their ability to establish a results-oriented performance 
culture as contemplated under the Human Capital Assessment and 
Accountability Framework (HCAAF). Within the HCAAF, a results-oriented 
performance culture effectively plans, monitors, develops, rates, and 
rewards employee performance, consistent with the merit system 
principle that ``appropriate incentives and recognition should be 
provided for excellence in performance'' (5 U.S.C. 2301(b)(3)).

C. Changes Required/Expected Benefits

    The proposed demonstration project will respond to the GS 
classification system problems identified above by compressing the 15 
GS grades into multi-grade pay bands. Although this ``compression'' is 
neither designed nor intended to eliminate the fundamental statutory 
grading distinctions embedded in the traditional position 
classification system, it will considerably reduce the excessive 
rigidity inherent in the current system, making it substantially less 
cumbersome, less labor intensive, less time consuming, and easier to 
comprehend and apply. Banding the GS grade structure will also simplify 
merit promotion activities, by permitting the advancement of employees 
within given bands without the necessity of advertising promotional 
opportunities (much like accretion-of-duties procedures under the 
traditional system), and without the need for handling employee 
applications in accordance with publicized merit promotion procedures. 
Because a pay banding system uses broader work levels, the system can 
be viewed as having more of a rank-in-person emphasis; that is, it 
permits a more direct relationship between an incumbent's actual (or 
anticipated) individual level of job performance and a given position's 
particular level of pay.
    The proposed demonstration project will respond to the pay problem 
identified above by eliminating fixed steps within each of the pay 
bands and by making annual GS pay adjustments performance-sensitive. 
Pay adjustments will be funded from a pay pool consisting of the 
amounts that would otherwise be used to pay the annual GS pay 
adjustment, WGIs, and QSIs to employees covered by the demonstration 
project. The pay pool also may include funds saved through the 
elimination of promotion increases for promotions between grades that 
are consolidated into the same band. A share mechanism will be used to 
allocate pay increases among employees with different levels of 
performance, and managers will be expected to control costs (and will 
be held accountable for doing so in their own performance plans). 
Implementation of the proposed pay system will result in larger pay 
increases going to employees who demonstrate higher performance. By 
regularly rewarding better performance with better pay, participating 
organizations will strengthen their results-oriented performance 
cultures. Among other things, they will be better able to retain their 
good performers and recruit new ones.

D. Participating Organizations

    It is expected that every major headquarters and field organization 
in NNSA will participate. This includes HQ, program, and support 
components, including NNSA's cadre of nuclear materials couriers, who 
are deployed at various locations in the United States, eight 
geographically dispersed Site Offices and two special purpose Naval 
Reactors Offices (in Pittsburgh, PA, and Schenectady, NY), and the 
Service Center in Albuquerque, NM. Each of these units is committed to 
operating a credible, robust performance appraisal program aligned to 
the organization's strategic goals and objectives, by providing the 
necessary training and resources. These organizations have demonstrated 
this commitment the past three years, as NNSA implemented a 
comprehensive performance management program enterprise-wide.

E. Participating Employees

    The demonstration project will cover all GS non-bargaining unit 
employees in the participating organizations identified in the 
preceding paragraph. (The only bargaining unit in NNSA is at 
headquarters, and currently includes 20 positions.) Included in the 
coverage are Schedule A and B Excepted Service employees. Not included 
are Schedule C Excepted Service employees and Excepted Service 
employees authorized under the NNSA Act, National Defense Authorization 
Acts, and the DOE Organization Act. Table 1 shows the number of 
employees currently available and subject to coverage under this 
project by occupational series and grade.

[[Page 9041]]



                                              Table 1.--Covered Employees by Occupational Series and Grade
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Pay Plan GS Grade
           Count--OCC Series            ---------------------------------------------------------------------------------------------------------   GS
                                           01     02     03     04     05     06     07     08     09     10     11     12     13     14     15    total
--------------------------------------------------------------------------------------------------------------------------------------------------------
00018..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      2      7      4  .....      14
00028..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      1      3      2      2       9
00080..................................  .....  .....  .....  .....  .....  .....      1  .....      5  .....      3     29     39     35     16     128
00084..................................  .....  .....  .....  .....  .....  .....  .....     57     51     62     59     58     21  .....  .....     308
00086..................................  .....  .....  .....  .....  .....      2      2      1  .....  .....  .....  .....  .....  .....  .....       5
00130..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....      2      8     18     34     45     108
00132..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3      1  .....       4
00201..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3     12     16      6      8      45
00203..................................  .....  .....  .....  .....  .....  .....      7      2  .....  .....  .....  .....  .....  .....  .....       9
00260..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      3      1  .....       5
00301..................................  .....  .....  .....  .....  .....  .....  .....  .....     20  .....     41     42     51     33     26     213
00303..................................      3      3      9     10      3     12     23      6  .....  .....  .....  .....  .....  .....  .....      69
00318..................................  .....  .....  .....  .....      4     13      9      6      5  .....  .....  .....  .....  .....  .....      37
00326..................................      1      1      4      3  .....      1  .....  .....  .....  .....  .....  .....  .....  .....  .....      10
00335..................................  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....  .....  .....       1
00340..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1     20      21
00341..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2      1       3
00342..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....  .....  .....       2
00343..................................  .....  .....  .....  .....  .....  .....      1  .....      4  .....      9     20     41     44     25     144
00344..................................  .....  .....  .....  .....  .....  .....  .....      2  .....  .....  .....  .....  .....  .....  .....       2
00346..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2      5      1  .....       8
00361..................................  .....  .....  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....       1
00391..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
00399..................................  .....  .....      1  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....       1
00401..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....       2
00501..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3  .....      5      2      3      13
00505..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3       3
00510..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3     10     26     10      3      52
00511..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      6  .....      1  .....       7
00525..................................  .....  .....  .....  .....  .....      1  .....      1  .....  .....  .....  .....  .....  .....  .....       2
00560..................................  .....  .....  .....  .....  .....  .....      1  .....      2  .....      1      9     15     16      8      52
00561..................................  .....  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....  .....       1
00610..................................  .....  .....  .....  .....  .....  .....  .....  .....      2      1  .....  .....  .....  .....  .....       3
00671..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
00690..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3      4  .....       7
00801..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3      4     34    104     83     228
00802..................................  .....  .....  .....  .....  .....  .....  .....  .....      2  .....  .....  .....      1  .....  .....       3
00803..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....       2
00804..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....       2
00810..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....      1      1  .....  .....       3
00819..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      4      2  .....       6
00830..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....       1
00840..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....      1      3     13     17     41      76
00850..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
00854..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      4      2      2      1       9
00905..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      2  .....      9     12      24
00950..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      3  .....  .....  .....  .....       3
00986..................................  .....  .....  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....       1
00999..................................  .....  .....  .....  .....  .....  .....      2  .....  .....  .....  .....  .....  .....  .....  .....       2
01001..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....  .....       1
01035..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....      5      1       8
01101..................................  .....  .....  .....  .....  .....  .....      1  .....      1  .....  .....      1      3      5      1      12
01102..................................  .....  .....  .....  .....  .....  .....  .....  .....      2  .....      1     12     26     34     12      87
01103..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....      2      3      2      2  .....      10
01105..................................  .....  .....  .....  .....  .....  .....      1  .....      2  .....  .....  .....  .....  .....  .....       3
01106..................................  .....  .....  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....  .....       1
01150..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
01170..................................  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....  .....      2      1      1       5
01176..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
01222..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      3      1       5
01301..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1     13     37     27      78
01306..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2      3  .....       5
01310..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      3       4
01412..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
01515..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....       1
01712..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      6      6     10      4  .....      26
01750..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....  .....       1
01910..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      9      4      1      1      16
02003..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      2  .....       2
02005..................................  .....  .....  .....  .....      1  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....       1

[[Page 9042]]

 
02010..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1  .....      1  .....       2
02101..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      2     15      6      24
02130..................................  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....  .....      1      9      1  .....      11
02210..................................  .....  .....  .....  .....  .....  .....  .....  .....      2  .....      1      6     18     14      3      44
                                        ----------------------------------------------------------------------------------------------------------------
    Grand total........................      4      4     14     13      8     30     50     77    104     63    145    260    410    467    353    2002
--------------------------------------------------------------------------------------------------------------------------------------------------------

    sManagement has provided initial notice to affected employees and 
will continue consultation throughout project implementation.

F. Project Design

    The project is designed to (1) fundamentally simplify the position 
classification system as the key to improving recruitment, retention, 
and classification activities, (2) ensure that no participating 
employee with a rating of record of less than Fully Meets Expectations 
will receive a pay increase, and (3) ensure that funds available for 
pay adjustments will be allocated on the basis of performance, the 
better performers receiving the greater performance payouts.
    To ensure expeditious and effective project implementation and 
completion, NNSA will model, to the extent feasible and appropriate, 
programmatic features and operating systems and procedures relating to 
NNSA's own pay-banded, pay-for-performance excepted service system; in 
addition, NNSA will review the successes, mistakes, and lessons from 
the experiences of other agency demonstration projects, notably the 
current Department of Defense (DoD) laboratory projects, which are 
based on the foundational China Lake project; the National Institute of 
Standards and Technology permanent Alternative Personnel System; and 
DoD's new National Security Personnel System (one of the participating 
Air Force labs shares Kirtland AFB with NNSA).
    Several design principles will underpin this project:
    <bullet> NNSA will not establish its own classification standards, 
but rather, will construct band thresholds and boundaries consistent 
with OPM's official classification criteria; at the same time, NNSA 
will streamline documentation requirements, including by eliminating 
Factor Evaluation System formatted PDs, with greater reliance on the 
Primary Standard to set band parameters.
    <bullet> NNSA will not delegate classification authority to 
managers. NNSA understands that not delegating classification authority 
runs counter to the experiences of other agency demonstration projects. 
Nonetheless, it is much more efficient to leave the exercise of this 
authority and all attendant administration activities in the trained 
hands of the resident human resources (HR) staff. NNSA sees little 
value in turning managers into classifiers, but rather, believes the 
value is in preparing managers to become better supervisors. NNSA's 
pre-eminent managerial goal is to develop a seasoned cadre of Federal 
managers who can practice the art of supervision at an uncommonly high 
level (i.e., the supervisor who is more mentor than taskmaster, who can 
nurture subordinates and unleash their potential for superior 
performance through the instruments of performance appraisal and reward 
programs).
    <bullet> NNSA will use the career paths derived from this 
demonstration project to underwrite our new concept of a Management 
Needs-Based Career Path Model to Employee Development and Career 
Planning. This concept envisions the use of career paths to acquire 
well-qualified candidates from the current workforce to satisfy new and 
emerging mission needs. It will use such traditional mechanisms as in-
service placement, reassignment, retraining, enrollment in formal 
development programs, and mixtures of competitive and noncompetitive 
procedures, to prepare employees to move within and across career paths 
in response to new and emerging job requirements.
    <bullet> NNSA will design this demonstration project as a direct 
complement to and manifestation of the Administrator's strong desire to 
create NNSA as an employer of choice in the Federal Government. The 
demonstration project will give real definition, direction, and impetus 
to the Administrator's concept, which centers on the first-line 
supervisor as the primary agent in developing a management culture that 
attracts, develops, and retains a diverse and talented workforce.

III. Personnel System Changes

    The 15-grade GS position classification system established under 5 
U.S.C. chapter 51 and the GS pay system established under 5 U.S.C. 
chapter 53, subchapter III, will be modified as described in the 
following sections. Except as otherwise provided in this plan, 
demonstration project employees will be considered to be GS employees 
in applying other laws, regulations, and policies. NNSA does not 
currently have employees covered by law enforcement officer (LEO) 
special base rates. Should any law enforcement officers be covered by 
this demonstration project in the future, they will not be considered 
to be General Schedule employees for the purposes of applying LEO 
special base rates authorized by section 403 of the Federal Employees 
Pay Comparability Act of 1990; a separate career path would be 
established for these employees, and band ranges for any such LEOs will 
take LEO special base rates into account.

A. Pay Banding Classification and Pay System

1. Establishment of Career Paths and Pay Bands
    NNSA may establish, and adjust over time, career paths that group 
one or more occupational categories together and provide a common 
banding structure (i.e., set of work levels and rate ranges) for 
occupations within a given career path. Initially, NNSA intends to 
establish four career paths as follows:
    (1) Professional, Engineering and Scientific: Research, policy, 
staff, and managerial positions in science, engineering, computing, 
mathematics and other positions the duties of which include the 
performance of professional work. Examples of occupational series in 
this career path are 510--Accountant, 801--General Engineer, 840--
Nuclear Engineer, 905--Attorney, 1102--Contract Specialist, 1301--
Physical Scientist, and similar traditional two-grade interval GS 
occupations whose qualifications requirements include a minimum 
education requirement.

[[Page 9043]]

    (2) Administrative: Specialist positions in such fields as finance, 
human resources, public affairs, technical information, and management 
analysis. Examples of occupational series in this career path are 080--
Security Specialist, 201--Human Resources Specialist, 340--Program 
Manager, 341--Administrative Officer, 343--Management/Program Analyst, 
560--Budget Analyst, 1035--Public Affairs Specialist, 2101--
Transportation Specialist, and similar traditional two-grade interval 
GS occupations whose qualifications requirements do not include a 
minimum education requirement.
    (3) Technician and Administrative Support: Engineering Technician, 
clerical, assistant, secretarial, and other support positions not 
fitting the definitions of any other career path. Examples of 
occupational series in this career path are 203--Human Resources Clerk 
and Assistant, 303--General Clerk, 318--Secretary, 525--Accounting 
Technician, 802--Engineering Technician, 1106--Procurement Clerk/
Assistant, and similar traditional one-grade interval technician and 
administrative support occupations not fitting the definitions of any 
other career path.
    (4) Nuclear Materials Couriers: NNSA employs approximately 400 
Nuclear Materials Couriers, GS-084, who have a unique set of duties and 
skills, supporting a separate career path, and who have an unusual 
single-grade interval pattern from GS-8 through GS-13. All positions in 
the 084 occupational series are encompassed in this career path. 
Positions of employees who work in the same organizations, doing 
related work, but that are not classified in the 084 job series, will 
be allocated to one of the other three career paths, as appropriate to 
the nature of the work performed.
    Each career path will be subdivided into pay bands. Each pay band 
will correspond to one or more GS grades. NNSA may establish, and 
adjust over time, a career path's pay band structure. Initially, the 
pay bands within each career path and their relationship to GS grades 
will be as follows:
(1) Professional, Engineering and Scientific Career Path
(a) Pay Band I--(GS-5 through GS-7)
(b) Pay Band II--(GS-9 through GS-12)
(c) Pay Band III--(GS-13 through GS-14)
(d) Pay Band IV--(GS-15)
(2) Administrative Career Path
(a) Pay Band I--(GS-5 through GS-8)
(b) Pay Band II--(GS-9 through GS-12)
(c) Pay Band III--(GS-13)
(d) Pay Band IV--(GS-14)
(e) Pay Band V--(GS-15)
    Positions in the Professional, Engineering and Scientific and 
Administrative career paths will normally be filled at Pay Band II or 
higher. Pay Band I for the Professional, Engineering, and Scientific 
and Administrative career paths is used primarily, but not exclusively, 
for basic entry-level appointments, upward mobility, and Student Career 
Employment Program appointees.
(3) Technician and Administrative Support Career Path
(a) Pay Band I--(GS-1 through GS-4)
(b) Pay Band II--(GS-5 through GS-8)
(c) Pay Band III--(GS-9)
(4) Nuclear Materials Courier Career Path
(a) Pay Band I--(GS-8 through GS-11)
(b) Pay Band II--(GS-12) (``Convoy Commander'' positions only)
(c) Pay Band III--(GS-13) (``Unit Commander'' positions only)

    NNSA will coordinate changes in career paths or pay banding 
structures with OPM. After coordination with OPM, NNSA will give 
affected employees advance notice and an opportunity to comment before 
effecting a change with respect to career paths or banding structure.
2. Position Classification
    Application of the 15-grade GS position classification system 
established under 5 U.S.C. chapter 51 will be simplified by allowing a 
position to be assigned to a specific pay band if the duties and 
responsibilities of the position meet (or exceed) the requirements for 
classification into the lowest grade included in that specific pay 
band. For example, an 801, Engineer, position assigned to Pay Band 1 
(GS-5 through GS-7), need only meet the requirements for classification 
at the GS-5 level. Position descriptions will include examples of 
higher-level duties and responsibilities to which employees are fully 
intended to progress. NNSA will establish pay band boundaries 
consistent with OPM's existing position classification standards, 
grade-evaluation criteria, and grading practices.
3. Minimum Qualifications Requirements
    Application of the OPM Operating Manual: Qualification Standards 
for General Schedule Positions is simplified by allowing a candidate to 
qualify for a specific pay band if the candidate meets (or exceeds) the 
requirements for the lowest grade included in that specific pay band. 
For example, a candidate for an 801 Engineer position assigned to Pay 
Band 1 (GS-5 through GS-7), need only meet the qualifications 
requirements for a GS-801 Engineer position at the GS-5 level.
    For NNSA demonstration project employees and employees of other 
Federal agencies who are in sufficiently similar pay banding systems, 
the common OPM requirement of one year of experience ``at the next 
lower grade in the normal line of progression for the occupation'' is 
changed to ``at the next lower pay band in the normal line of 
progression for the occupation.''
    Federal employees in the General Schedule pay system, Federal 
employees in other pay systems comparable to the General Schedule, and 
non-Federal applicants must meet the common OPM requirement of one year 
of experience ``at the next lower grade in the normal line of 
progression for the occupation.''
4. Elimination of Fixed Steps
    The 10 fixed steps of each GS grade will not apply to employees 
participating in the demonstration project. The fixed-step system was 
designed to reward longevity. A pay banding system is an important 
element of any effort to make pay more performance-sensitive. No 
employee will lose pay as a result of becoming covered by the 
demonstration project. However, demonstration project employees will no 
longer receive longevity-based within-grade pay increases at prescribed 
intervals. Instead, they will be granted annual performance adjustments 
as described in section C below.
5. Rate Range
    The normal minimum and maximum rates of the rate range for each pay 
band will equal the applicable step 1 rate and step 10 rate, 
respectively, for the lowest and highest grades, respectively, in the 
General Schedule that are included in the pay band. The minimum rate of 
the pay band is extended 5 percent below the normal minimum for 
employees with a rating of record below Fully Meets Expectations. Such 
an employee's rate may fall below the normal pay band minimum when that 
minimum increases as a result of a pay band adjustment, but the 
employee cannot receive a pay adjustment because the employee's rating 
of record is below Fully Meets Expectations, as described in section 
C.4.
    The maximum rate of each pay band is extended 5 percent above the 
normal maximum for all employees with a

[[Page 9044]]

rating of record at the highest level (currently called ``Significantly 
Exceeds Expectations'' in NNSA). This feature will help ensure that the 
range of available pay rates will be adequate to recognize truly 
outstanding performance. If an employee within this rate extension 
receives a rating of record below the highest level, the employee's 
rate may not be increased except as necessary to prevent the rate of an 
employee with a rating of record of Fully Meets Expectations or higher 
from falling below the normal pay band maximum due to a rate range 
adjustment.
6. Rate of Basic Pay Upon Initial Appointment
    Upon appointment to a demonstration project position under 
Delegated Examining, Direct-Hire Authorization, or other authority 
primarily designed for initial entry into the Federal service (e.g., 
Veterans Employment Opportunity Act, 30% Disabled Veteran Appointment), 
an appointee's pay rate may be set at any rate within the normal pay 
band range. In exercising this flexibility, NNSA will consider the 
appointee's qualifications, competing job offers, NNSA's need for the 
appointee's talents, the appointee's potential contributions to NNSA 
mission accomplishment, and the rates received by on-board employees. 
This flexibility will allow NNSA to compete more effectively with 
private industry for the best talent available, though managers will be 
expected to use this flexibility with great judiciousness and prudence.
7. Rate of Basic Pay Upon Promotion
    Upon promotion to a higher pay band, an appointee's pay rate 
generally will be set at a rate within the normal pay band range to 
which the appointee is being promoted that provides a pay increase of 8 
percent, unless a greater increase is necessary to set pay at the 
normal range minimum. NNSA may establish exceptions to this policy to 
deal with employees receiving a retained rate, employees who are re-
promoted shortly after a demotion, employees with exceptional 
performance warranting a larger increase with higher management 
approval, etc. In exercising this flexibility, NNSA will consider the 
appointee's qualifications, competing job offers, NNSA's need for the 
appointee's talents, and the appointee's potential contributions to 
NNSA mission accomplishment. A pay band in a different career path will 
be considered to be a higher pay band (i.e., a promotion) under 
policies prescribed by NNSA. NNSA may adopt policies providing a 
promotion-equivalent increase to a Federal employee outside the 
demonstration project who is selected, through merit promotion 
procedures, to fill a higher-level position (as defined in NNSA 
policies) covered by the demonstration project.
    NNSA may establish special rules for computing the promotion 
increase for promotions involving positions covered by a staffing 
supplement that take into account the staffing supplement and locality 
pay, subject to guidance provided by OPM.
8. Rate of Basic Pay in Noncompetitive Lateral Actions
    Upon non-competitive lateral movement (e.g., via transfer or 
reassignment) to a demonstration project position from another Federal 
position, an employee's pay rate will be set at an amount that is equal 
to the employee's current pay rate. For such an employee moving from a 
position outside the demonstration project, NNSA may provide an 
immediate increase in the rate of basic pay to reflect the prorated 
value of the employee's next scheduled within-grade increase under the 
former pay system, consistent with the requirements in section V.A.
9. Other Pay Administration Provisions
    Performance-based pay adjustments described in section C will be 
made to the rate of basic pay. These adjustments are scheduled to be 
made on the same date that annual rate range adjustments normally take 
effect--i.e., the first day of the first pay period beginning on or 
after January 1.
    Locality-based comparability payments under 5 U.S.C. 5304 will be 
paid on top of the rate of basic pay in the same manner as those 
payments apply to other GS employees. Staffing supplements may apply as 
described in section III.A.10.
    Subject to guidance provided by OPM, NNSA will establish final pay 
administration rules for determining an employee's rate of pay upon 
initial appointment, promotion, demotion, transfer, reassignment, or 
other position change, as needed. In addressing geographic conversions 
and simultaneous pay actions, such rules must be consistent with 5 CFR 
531.205 and 5 CFR 531.206, respectively.
    The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536 
are not applicable (i.e., no band retention). The pay retention rules 
in 5 U.S.C. 5363 and 5 CFR part 536 continue to apply to demonstration 
project employees, except that an employee with a rating of record 
below Fully Meets Expectations may not receive an increase in his or 
her retained rate under 5 U.S.C. 5363(b)(2)(B). If such an employee's 
retained rate falls below the applicable pay band adjusted maximum rate 
(including any applicable locality payment or staffing supplement), pay 
retention ceases and the rate is converted to an equal within-pay band 
rate (i.e., the rate is not set at the range maximum).
    When applicable, the saved pay rules in 5 U.S.C. 3594 and 5 CFR 
359.705 for former members of the Senior Executive Service continue to 
apply to demonstration project employees, except that an employee with 
a rating of record below Fully Meets Expectations may not receive an 
increase in his or her saved rate under 5 U.S.C. 3594(c)(2). If such an 
employee's retained rate falls below the applicable range adjusted 
maximum rate, pay retention ceases and the rate is converted to an 
equal within-range rate (i.e., the rate is not set at the range 
maximum).
    An employee's rate of basic pay may not exceed the normal maximum 
rate for the employee's band unless the employee is receiving a 
retained rate under 5 U.S.C. 5363 or a saved rate under 5 U.S.C. 3594 
or is entitled to a rate within the upper range extension, as provided 
under section III.A.5. An employee's rate of basic pay may not be below 
the normal minimum rate for the employee's grade unless the employee's 
most recent rating of record is below Fully Meets Expectations.
    NNSA may adopt supplemental pay administration policies governing 
matters not specifically addressed in this plan, subject to any OPM 
guidance.
10. Staffing Supplements
    An employee who is assigned to an occupational series and 
geographic area covered by an OPM-established special rates schedule, 
and who meets any other applicable coverage requirements, will be 
entitled to a staffing supplement if the maximum adjusted rate for a 
covered position in the GS grades corresponding to the employee's band 
is a special rate that exceeds the applicable maximum GS locality rate. 
The staffing supplement is added on top of the rate of basic pay in the 
same manner as locality pay. An employee will receive the higher of the 
applicable locality payment or staffing supplement.
    For employees being converted into the demonstration project, the 
employee's total pay immediately after conversion will be the same as 
immediately before, but a portion of the total will be in the form of a 
staffing supplement. Adverse action and pay retention provisions will 
not apply to

[[Page 9045]]

the conversion process as there will be no change in the total salary 
rate. The staffing supplement is calculated as described below.
    Upon conversion, the demonstration base rate will be established by 
dividing the employee's former GS adjusted rate (the higher of special 
rate or locality rate) by the staffing factor. The staffing factor will 
be determined by dividing the maximum special rate for the banded 
grades by the GS base rate corresponding to that special rate (step 10 
GS base rate for the same grade as the special rate). The employee's 
demonstration staffing supplement is derived by multiplying the 
demonstration base rate by the staffing factor minus one. Therefore, 
the employee's final demonstration special staffing rate equals the 
demonstration base rate plus the special staffing supplement; this 
amount will equal the employee's former GS adjusted rate.
    Simplified, the formula is this:

Staffing factor = (Maximum special rate for banded grades) / (GS base 
rate corresponding to that special rate)
Demonstration base rate = (Former GS adjusted rate [special or locality 
rate]) / (Staffing factor)
Staffing supplement = demonstration base rate x (staffing factor - 1)
Salary upon conversion = demonstration base rate + staffing supplement 
[sum will equal existing rate]

    If a special rate employee is converted to a band where the maximum 
GS adjusted rate for the banded grades is a locality rate, when the 
employee is converted into the demonstration project, the demonstration 
base rate is derived by dividing the employee's former special rate by 
the applicable locality pay factor (for example, in the Washington-
Baltimore area, the locality pay factor is 1.175 in 2006). The 
employee's demonstration locality-adjusted rate will equal the 
employee's former GS adjusted rate.
    Any General Schedule or special rate schedule adjustment will 
require recomputation of the staffing supplement. Employees receiving a 
staffing supplement remain entitled to an underlying locality rate, 
which may over time supersede the need for a staffing supplement. If 
OPM discontinues or decreases a special rate schedule, pay retention 
provisions will be applied, as appropriate. Upon geographic movement, 
an employee who receives the special staffing supplement will have the 
supplement recomputed; any resulting reduction in the supplement will 
not be considered an adverse action or a basis for pay retention.
    Established salary including the staffing supplement will be 
considered basic pay for the same purposes as a special rate under 5 
CFR 530.308--e.g., for purposes of retirement, life insurance, premium 
pay, severance pay, and advances in pay. It will also be used to 
compute worker's compensation payments and lump-sum payments for 
accrued and accumulated annual leave. Staffing supplement adjusted 
rates are subject to the Executive Schedule level IV cap that applies 
to GS locality rates and special rates.

B. Performance Appraisal

    NNSA recognizes the importance of maintaining highly credible 
performance management systems. NNSA will use a performance management 
program under the Department of Energy appraisal system that has been 
approved by OPM consistent with chapter 43 of title 5, United States 
Code. Throughout the duration of the demonstration project, the 
effectiveness of performance management within the project will be 
monitored by examining metrics and assessments that will be included in 
the demonstration project evaluation plan.
1. Program Requirements
    The NNSA performance appraisal program requires written performance 
plans for each covered employee containing the employee's performance 
elements and standards. The performance plan links the performance 
elements and standards for individual employees to the organization's 
strategic goals and objectives. Ongoing feedback and dialogue between 
employees and their supervisors regarding performance is required. In 
addition, the program provides for, at a minimum, one mid-year progress 
review.
    The NNSA appraisal program, including its performance levels and 
standards, provides for making meaningful distinctions in performance. 
The program currently uses a four-level rating pattern to both 
summarize performance and to appraise performance at the element level. 
Its summary level pattern under 5 CFR 430.208(d) uses Levels 1, 2, 3, 
and 5, which NNSA has labeled Does Not Meet Expectations, Needs 
Improvement, Fully Meets Expectations, and Significantly Exceeds 
Expectations, respectively. Employees must be covered by their 
performance plan for at least 90 days before they can be assigned a 
rating of record. Supervisors and managers apply the appraisal program 
in a way that makes appropriate differentiations in performance. These 
differentiations reflect overall organizational performance. Employees 
receive a written performance appraisal (i.e., a rating of record) 
annually. Forced distributions of ratings are prohibited. Each annual 
appraisal period will begin on October 1 and end on the following 
September 30. Performance appraisals will be completed in a timely 
manner to support pay decisions in accordance with section C.
    Additional guidance on the NNSA performance appraisal program is 
provided through internal operations manuals. Performance appraisal is 
an evolutionary process, and changes may be made during the course of 
the demonstration project based on findings from our ongoing 
evaluations and reviews. Any changes will be communicated to affected 
employees, and they will be given a chance to comment before NNSA 
implements the changes.
2. Supervisory Accountability
    Supervisors are responsible for providing appropriate consequences 
for employee performance by addressing poor performance and recognizing 
exceptional performance. The performance plans for supervisors and 
managers include the degree to which supervisors and managers plan, 
assess, monitor, develop, correct, rate, and reward subordinate 
employees' performance. It is recognized that specific training must be 
provided to prepare supervisors and managers to exercise these 
responsibilities. NNSA has provided supervisory training each of the 
past three years on philosophical and procedural aspects of its new and 
still evolving performance management program (i.e., the lessons 
learned in the administration of each performance appraisal cycle have 
resulted in refinements each subsequent year). NNSA understands that 
this demonstration project will heighten the need for continuing 
supervisory training to support the accurate and realistic appraisal of 
performance.
3. Reconsideration of Ratings
    To support fairness and transparency for the program and its 
consequences, employees have an opportunity to request reconsideration 
of a rating of record by a management official other than the rating 
official. Such reconsiderations must be initiated no more than 15 days 
after the official rating of record is assigned, consistent with the 
applicable administrative grievance policy. If the reconsideration of 
the appraisal results in a different

[[Page 9046]]

rating of record, the revised rating of record will become the basis 
for the employee's pay adjustment(s) in accordance with section C. If 
the adjustment occurs after all pay deliberations have been finalized, 
it does not result in a recalculation of other employees' pay 
adjustments.

C. Performance-Based Pay Adjustments

1. Pay Pools
    Participating employees whose most recent rating of record is below 
Fully Meets Expectations will not receive an annual across-the-board 
increase as do GS employees. Funds that otherwise would be spent on the 
across-the-board GS pay adjustment, WGIs, and QSIs for demonstration 
project employees will instead be placed into a pay pool, which will be 
used to fund annual performance-based pay increases for those 
employees. The pay pool also may include funds saved through the 
elimination of promotion increases for promotions between grades that 
are consolidated into the same band. A share mechanism will be used (1) 
to ensure that employees with higher ratings of record receive greater 
pay increases than employees with relatively lower ratings of record 
and (2) to control costs without resorting to a forced distribution of 
ratings. Each employee will be assigned a certain number of shares, 
based on his or her rating of record in accordance with section C.2. 
All employees in the normal band rate range whose rating of record is 
at least Fully Meets Expectations will receive an adjustment equal to 
at least the amount of the annual GS base pay comparability increase 
under 5 U.S.C. 5303.
    Participating organizations will establish pay pools for allocating 
performance pay increases. NNSA will determine which participating 
employees are covered by any pay pool and determine the dollar value of 
each pay pool. In setting the value of pay pools, NNSA will initially 
allocate an amount for performance pay increases equal to the estimated 
value of the WGIs, QSIs, and annual GS pay adjustments that otherwise 
would have been paid to participating employees. In computing the 
estimated value of WGIs and QSIs, NNSA may use Governmentwide averages.
2. Performance Shares
    NNSA will establish rating/share patterns for each pay pool--that 
is, the relationship between a rating of record and a single number of 
shares. NNSA rating/share patterns will ensure that a higher rating of 
record receives a higher performance payout percentage for employees in 
the normal rate range.
    NNSA may adjust rating/share patterns over time after coordination 
with OPM, and after giving affected employees advance notice. A change 
in the rating/share pattern may be applied in computing performance-
based pay adjustments based on an appraisal period only if it takes 
effect at least 120 days before the end of that appraisal period. 
Initially, the number of shares for each rating level will be as 
follows: 3 shares are assigned to the Significantly Exceeds 
Expectations rating, 2 shares to the Fully Meets Expectations rating, 
and 1 share to the Fully Meets Expectations rating when the employee 
receives a rating of Needs Improvement in a critical element but the 
Final Summary Rating is Fully Meets Expectations.
    No shares may be assigned to any rating of record below Fully Meets 
Expectations, since no pay increase is payable to employees with such a 
rating of record. After the ratings of record and shares are assigned 
to employees, the value of a single share can be calculated.
    In addition to performance-based pay increases, demonstration 
project employees remain eligible to receive both monetary and non-
monetary forms of recognition, so long as employees are not rewarded 
twice for the same contributions using incentive awards authorities 
under Chapter 45 of title 5. NNSA will adopt supplemental award 
administration policies not specifically covered by this plan.
3. Pay Adjustments
    In general: NNSA will determine the value of one performance share, 
expressed as a percentage of the employee's rate of basic pay, based on 
the value of the pay pool and the distribution of shares among pay pool 
employees. An individual employee's performance payout is determined by 
multiplying the determined percentage value of a performance share by 
the number of shares assigned to the employee. The performance payout 
is computed as a percentage of the employee's rate of base pay as in 
effect on the date determined in NNSA policies. On the first day of the 
first pay period beginning on or after January 1 of each year, this 
amount must be paid as an increase in the employee's rate of basic pay, 
but only to the extent that it does not cause the employee's rate to 
exceed the applicable maximum of the employee's rate range. 
Notwithstanding the preceding sentence, employees in the upper band 
extension rated below the highest rating level are subject to special 
rules as described in section III.A.5. Any portion of an employee's 
performance pay increase amount that cannot be delivered as a basic pay 
increase will be paid out as a lump sum (with no charge to the pay 
pool). Such a lump-sum payment is not basic pay for any purpose and is 
not a cash award under chapter 45 of title 5, United States Code.
    An employee with a rating of record of Fully Meets Expectations or 
higher may not receive a performance payout that is less than the 
percentage value of any simultaneous rate range adjustment, except for 
(1) an employee receiving a retained rate and (2) an employee in the 
upper band extension with a rating of record below Significantly 
Exceeds Expectations (as provided in section III.A.5). This guaranteed 
amount will be used in place of any lower performance payout resulting 
from the share methodology. Any additional costs of using the 
guaranteed amount will be funded outside the pay pool. Otherwise, the 
guaranteed amount is applied in the same manner as the regular 
performance payout.
    An employee who does not have a rating of record for the appraisal 
period most recently completed will be treated the same as employees in 
the same pay pool who received the modal rating for that period, 
subject to NNSA proration policies.
    NNSA may establish policies on prorating the performance pay 
increases and/or lump-sum payments for an employee who, during the 
period between annual pay adjustments, was (1) hired or promoted, (2) 
in leave-without-pay status, (3) on a part-time work schedule, or (4) 
in other circumstances that make proration appropriate.
    If an employee's rating of record that is the basis for a 
performance payout is retroactively revised (after the regular 
effective date of performance payouts) through a reconsideration or 
grievance process, the employee's performance payout must be 
retroactively recomputed using the share value as originally 
determined. Any such retroactive corrections are not funded out of the 
pay pool and do not affect the performance payouts provided to other 
employees in the pay pool. In setting the size of a future pay pool, 
management will take into account past and projected corrections.
    Special provisions for employees returning to duty after a period 
of service in the uniformed services or in receipt of workers' 
compensation benefits: Special pay-setting provisions apply to 
employees who do not have a rating of record to support a pay 
adjustment but who are returning to duty status after a period of leave

[[Page 9047]]

without pay or separation during which the employee (1) was serving in 
the uniformed services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102) 
with legal restoration rights (e.g., 38 U.S.C. 4316), or (2) was 
receiving workers' compensation benefits under 5 U.S.C. chapter 81, 
subchapter I. In these cases, NNSA will determine the employee's 
prospective rate of basic pay upon return to duty by making performance 
pay adjustments for the intervening period based on the modal rating of 
record for employees in the same pay pool. The performance pay 
increases during the intervening period may not be prorated based on 
periods covered by this provision. In addition, a performance pay 
increase that is effective after the employee's return to duty may not 
be prorated based on periods covered by this provision. A lump-sum 
payment for a period including actual service performed after the 
employee's return to duty must be prorated (based on service covered by 
this provision) under the same agency proration policies that apply 
generally to periods of leave without pay.
    Special provision for employees receiving a retained rate: An 
employee receiving a retained rate under 5 U.S.C. 5363 or 5 U.S.C. 3594 
is not eligible for a basic pay increase except in conjunction with a 
rate range adjustment. For a retained rate employee whose rating of 
record is Fully Meets Expectations or higher, the retained rate must be 
adjusted consistent with the normal pay retention rules (5 CFR part 
536, subpart C, or 5 CFR 359.705, as applicable)--i.e., 50 percent of 
an increase in the applicable maximum rate of the grade, but if the 
resulting rate would fall below the new range maximum, the employee's 
rate of basic pay must be set at the range maximum. A retained rate 
employee whose rating of record is below Fully Meets Expectations may 
not receive an increase in basic pay. At the discretion of the 
Administrator or the Administrator's designee, a retained rate employee 
may receive the same lump-sum payment approved for an employee in the 
same pay pool who is at the applicable range maximum and who has the 
same performance rating of record and number of shares.
4. Employees Who Do Not Receive a Pay Adjustment
    Employees with a rating of record below Fully Meets Expectations 
are prohibited from receiving a pay increase, except if necessary to 
prevent an employee's rate from falling more than 5 percent below the 
normal range minimum. When an employee does not receive a pay increase 
because of performance below Fully Meets Expectations, his or her pay 
rate may fall below the normal minimum rate of the pay band, since that 
range minimum may be increasing. However, in no case may an employee's 
rate of basic pay be reduced more than 5 percent below the normal range 
minimum. In other words, the minimum of the band is extended by 5 
percent for employees rated below Fully Meets Expectations.
    If NNSA chooses to give such an employee a new rating of record of 
Fully Meets Expectations or higher before the end of the current 
appraisal period, the employee is entitled to an increase effective on 
the first day of the first pay period beginning on or after the date 
the new rating of record is final. The increase must be the same dollar 
amount as the increase the employee would have received if he or she 
had been rated Fully Meets Expectations at the time the increase was 
initially denied.
    Each employee who does not receive an increase in basic pay because 
his or her performance is less than Fully Meets Expectations will be 
entitled to be notified promptly in writing of that fact. At the same 
time, the employee must be informed in writing of the right to request 
that the agency reconsider its determination, under the same procedures 
prescribed by OPM regarding the determination not to provide a within-
grade increase under 5 U.S.C. 5335(c). The Merit Systems Protection 
Board will process any appeals under this section in the same manner 
that it processes appeals under 5 U.S.C. 5335(c).
5. Locality Pay and Staffing Supplement
    When a locality-based comparability payment established under 5 
U.S.C. 5304 is increased, a demonstration project employee whose most 
recent rating of record is below Fully Meets Expectations is entitled 
to the increased locality payment, but his or her underlying rate of 
basic pay will be reduced in a manner that ensures the employee's total 
rate of pay does not increase. This reduction is necessary to ensure, 
in an administratively feasible way, that an employee rated below Fully 
Meets Expectations will not receive a pay increase; it does not 
constitute a reduction in pay for purposes of applying the adverse 
action procedures in chapter 75 of title 5, United States Code. 
(Exception: An employee's rate of basic pay may not be reduced under 
this paragraph to the extent that the reduction would cause an 
employee's rate to fall more than 5 percent below the normal range 
minimum.)
    Similarly, when a staffing supplement is increased, a demonstration 
project employee whose rating of record is below Fully Meets 
Expectations is entitled to the increased supplement, but his or her 
underlying rate of basic pay will be reduced in a manner that ensures 
the employee's total rate of pay does not increase.

D. Reduction-in-Force

    1. If, during the life of the demonstration project, NNSA enters 
into a reduction-in-force (RIF), the RIF will be conducted in 
accordance with 5 U.S.C. 1302, 3502, and 3508 and 5 CFR part 351, 
except as follows:
    (a) Each of the four career paths in each NNSA local commuting area 
will constitute separate competitive areas (i.e., separate from the 
other career paths, and separate from the competitive areas of other 
NNSA employees);
    (b) NNSA will establish competitive levels consisting of all 
positions in a competitive area which are in the same pay band and 
classification series, and which are similar enough in duties, 
qualification requirements, pay schedules, and working conditions so 
that the incumbent of one position may be reassigned to any of the 
other positions in the level without undue interruption. Each 
demonstration project competitive level will become a Retention List 
for purposes of competition when employees are released from their 
competitive levels, displaced by higher-standing employees, or placed 
during the exercise of assignment rights.
    (c) Assignment rights will be modified by substituting ``one pay 
band'' for ``three grades'' and ``two pay bands'' for ``five grades.''
    (d) NNSA will use retention standing when it chooses to offer 
vacant positions within the meaning of 5 CFR 351.704.
    2. Prior to conducting a RIF, NNSA will issue and implement a 
policy for the establishment and operation of an agency-level 
reemployment priority list (RPL) designed to assist current NNSA 
competitive service demonstration project employees who will be 
separated as a result of a RIF and, subsequently, former NNSA 
competitive service demonstration project employees who have been 
separated as a result of a RIF, or who have fully recovered from a 
compensable injury after more than one year, in their efforts to be 
reemployed at NNSA, by affording them priority consideration over 
certain outside job applicants for NNSA

[[Page 9048]]

competitive service demonstration project vacancies.
    NNSA will develop and adopt supplemental RIF administration 
procedures to augment the RIF policies stipulated by this plan.

IV. Training

    As NNSA has learned during the past three years of implementing and 
refining a new performance management program, training for all 
involved will be essential to the success of the demonstration project. 
Training will be provided to employees, supervisors, and managers 
before the project is launched and throughout the life of the project. 
It is important that employees perceive the performance management 
program as fair and transparent; therefore, supervisors and managers 
will be trained extensively in setting and communicating performance 
expectations; monitoring performance and providing timely feedback; 
developing employee performance and addressing poor performance; rating 
employees' performance based on expectations; and involving employees 
in the development and implementation of the performance appraisal 
program. Supervisors and managers will be held accountable for the 
effective management of the performance of employees they supervise 
through performance expectations set for and appraisals made of their 
own performance in this regard.
    All employees will be trained in the performance appraisal process 
and the pay adjustment mechanism. Various types of training are being 
considered, including videos, on-line tutorials, and train-the-trainer 
concepts.

V. Conversion

A. Conversion to the Demonstration Project

    1. Employees whose positions become covered by the demonstration 
project will convert into the career path and pay band covering the 
occupational series and grade of their position of record. Employees 
will convert to the demonstration project with no change in their total 
rate of pay (including basic pay, plus any applicable locality payment, 
special rate supplement, or staffing supplement). Special conversion 
rules apply to special rate employees as described in section III.A.10, 
Staffing Supplements. Any simultaneous pay action that is scheduled to 
take effect under the GS pay system on the date of conversion must be 
processed before processing the conversion to the pay banding system. 
NNSA implementing policies will provide procedures for converting an 
employee on grade retention under 5 U.S.C. 5362 or receiving a retained 
rate under 5 U.S.C. 5363 or a saved rate under 5 U.S.C. 3594 to the 
demonstration project.
    2. Immediately after conversion, eligible employees will receive an 
increase in basic pay reflecting the prorated value of the next 
scheduled within-grade increase (WGI). The prorated value is determined 
by calculating the portion of the time-in-step employees have completed 
towards the waiting period for their next WGI. This WGI ``buy-in'' 
adjustment will not be paid to (1) employees who are at the step 10 
rate for their grade immediately before conversion to the demonstration 
project, (2) employees who are receiving a retained rate of pay under 5 
U.S.C. 5363 or saved rate under 5 U.S.C. 3594 immediately before 
conversion to the demonstration project, or (3) employees whose rating 
of record is below Fully Meets Expectations.
    3. Adverse action provisions under 5 U.S.C. chapter 75, subchapter 
II, do not apply to reductions in pay upon conversion into the 
demonstration project as long as the employee's total rate of pay 
(including basic pay, plus any applicable locality payment, special 
rate supplement, or staffing supplement) is not reduced upon 
conversion.
    4. The first performance-based pay increase under the project's pay 
adjustment mechanism will be effective on the first day of the first 
pay period beginning on or after January 1, 2008.
    5. For employees who enter the demonstration project by lateral 
reassignment or transfer (i.e., not by conversion of position), NNSA 
may apply parallel pay conversion rules, including rules for providing 
a prorated adjustment reflecting time accrued toward a GS within-grade 
increase or similar within-range adjustment under another pay system. 
If conversion into the demonstration project is accompanied by a 
geographic move, the employee's pay entitlements under the former pay 
system in the new geographic area must be determined before performing 
the pay conversion.

B. Conversion to the General Schedule System

    NNSA implementing policies will provide procedures for converting 
an employee's pay band and pay rate to a GS-equivalent grade and rate 
of pay if the employee moves out of the demonstration project to a GS 
position. The converted GS-equivalent grade and rate of pay will be 
determined before any geographic move, promotion, or other simultaneous 
action that occurs simultaneously with conversion back to the GS 
system. The new employing organization must use the converted GS-
equivalent grade and rate of pay in applying various pay administration 
rules that govern how pay is set in the GS position (e.g., rules for 
promotion and highest previous rate under 5 CFR part 531, subpart B, 
and grade and pay retention under 5 CFR part 536). The converted GS 
grade and rate of pay are deemed to have been in effect at the time the 
employee left the demonstration project pay banding system. The rules 
for determining the converted GS grade for pay administration purposes 
do not apply to the determination of an employee's GS-equivalent grade 
for other purposes, such as reduction-in-force or adverse action. NNSA 
will perform the computations for employees who remain within NNSA and 
DOE. NNSA may perform the computations, as a courtesy, for employees 
who move to other Federal agencies. At a minimum, NNSA will provide a 
copy of the conversion procedures to gaining Federal agencies for their 
use. If an employee moves out of the demonstration project to a non-GS 
system, the employee's pay will be set under the pay-setting rules 
governing that system.

VI. Project Duration

    The initial implementation period for the demonstration project 
will be 5 years. However, with OPM's concurrence, the project may be 
extended, modified, or terminated on or before the expiration of the 
five-year period.

VII. Project Evaluation

    Chapter 47 of title 5, United States Code, requires an evaluation 
of the results of the demonstration project. NNSA, in coordination with 
OPM, will develop a plan to evaluate the demonstration project to 
determine the extent to which the pay increases paid to participating 
employees reflect meaningful distinctions among their levels of 
performance and the extent to which the project is achieving its other 
stated goals. Workforce data will be analyzed to make this assessment 
and to determine whether the project is resulting in any adverse impact 
on particular groups of employees. Key indicators, including leadership 
commitment, communication, stakeholder involvement, training, planning, 
mission alignment, and the rewarding of performance, will be assessed 
to ensure compliance with stated project goals. The evaluation will 
address the extent to which the project

[[Page 9049]]

has incorporated the elements required by section 1126 of Public Law 
108-136 (5 U.S.C. 4701 note). In addition, the project will be examined 
during each phase of the evaluation to assess that costs are being 
managed effectively. Moreover, cost discipline will be examined during 
each phase of the evaluation to ensure spending remains within 
acceptable limits. Finally, employee feedback will be sought through 
surveys, interviews, and focus groups to assess employee perceptions of 
the fairness and integrity of the performance appraisal and pay 
adjustment processes.

VIII. Costs

A. Buy-in Costs

    There will be added costs resulting from the within-grade increase 
``buy-in'' provision described in section V; however, those costs will 
be offset to some degree by the elimination of within-grade step 
increases that otherwise would have occurred.

B. Recurring Costs

    All funding will be provided through the organization's budget. No 
additional funding will be requested specifically for this project; all 
costs will be charged to available funds through existing 
appropriations, including those incurred in the areas of project 
development, training, and project evaluation.

IX. Waiver of Laws and Regulations Required

A. Title 5, United States Code

    Chapter 35, section 3594: Saved pay for former members of the 
Senior Executive Service (only to the extent necessary to bar employees 
with a rating of record lower than Fully Meets Expectations from 
receiving saved rate increases under 5 U.S.C. 3594(c)(2))
    Chapter 51, section 5104: Basis for grading positions.
    Chapter 51, section 5106: Basis for classifying positions.
    Chapter 51, section 5107: Classification of positions.
    Chapter 53, section 5303: Annual adjustments to pay schedules.
    Chapter 53, section 5305: Special pay authority.
    Chapter 53, sections 5331-5336: General Schedule pay rates (except 
that, for purposes of applying any other laws, regulations, or policies 
that refer to GS employees or to subchapter III of chapter 53 of title 
5, United States, Code, the modified pay system established under this 
plan must be considered to be a GS pay system established under such 
subchapter III; this includes, but is not limited to, references to the 
General Schedule in section 5304 (relating to locality pay), section 
5545(d) (relating to hazard pay), and sections 5753-5754 (dealing with 
recruitment, relocation, and retention incentives))
    Chapter 53, section 5362: Grade retention.
    Chapter 53, section 5363: Pay retention (only to the extent 
necessary to (1) replace ``grade'' with ``band'' and (2) bar employees 
with a rating of record lower than Fully Meets Expectations from 
receiving retained rate increases under 5 U.S.C. 5363(b)(2)(B).
    Chapter 75, section 7512(34): Adverse actions (only to the extent 
necessary to replace ``grade'' with ``band'').
    Chapter 75, section 7512(4): Adverse actions (only to the extent 
necessary to provide that adverse action provisions do not apply to (1) 
conversions into the demonstration project from the General Schedule or 
other pay system, as long as the employee's total rate of pay is not 
reduced and (2) reductions in rates of basic pay to offset a locality 
pay or staffing supplement increase as a result of receiving a rating 
of record below Fully Meets Expectations.)

    Note: If any of the provisions of title 5, United States Code, 
listed above are amended during the period this demonstration 
project is in effect, NNSA may choose to terminate the waiver of one 
or more such provisions with respect to employees participating in 
the project, without formally modifying the project itself. NNSA 
must notify OPM when any such waiver is terminated.

B. Title 5, Code of Federal Regulations

    Part 300, subpart F, section 300.604: Restrictions (only to the 
extent necessary to restrict advancement to a higher pay band to 
candidates who have completed a minimum of 52 weeks in positions no 
more than one pay band lower than the position to be filled).
    Part 330, subpart B, section 330.201: Establishment and maintenance 
of Reemployment Priority List (RPL) (only to the extent necessary to 
establish and maintain a reemployment priority list exclusively for 
NNSA competitive service demonstration project employees).
    Part 351, subpart D, section 351.402: Competitive area (only to the 
extent necessary to permit the use of career paths in conjunction with 
organizational units and geographic locations when establishing 
competitive areas).
    Part 351, subpart D, section 351.403: Competitive level (only to 
the extent necessary to substitute ``same pay band'' for ``same 
grade'').
    Part 351, subpart G, section 351.701: Assignment involving 
displacement (only to the extent necessary to substitute ``one pay 
band'' for ``three grades'' and ``two pay bands'' for ``five grades'').
    Part 359, subpart G, section 359.705: Pay (only to the extent 
necessary to bar employees with a rating of record lower than Fully 
Meets Expectations from receiving a saved rate increase under 5 CFR 
359.705(d)(1)).
    Part 430, subpart B, section 430.203: Definitions (only to the 
extent necessary to allow an additional rating of record to support a 
pay decision under C.3 or 4 of this project plan).
    Part 511, subpart B: Coverage of the General Schedule.
    Part 530, subpart C: Special Rate Schedules for Recruitment and 
Retention.
    Part 531, subpart B: Determining Rate of Basic Pay.
    Part 531, subpart D: Within-Grade Increases.
    Part 531, subpart E: Quality Step Increases.
    Part 536, subpart B: Grade Retention.
    Part 536, subpart C: Pay Retention (only to the extent necessary to 
(1) replace ``grade'' with ``band'' and (2) bar employees with a rating 
of record lower than Fully Meets Expectations from receiving retained 
rate increases under 5 CFR 536.305.
    Part 550, section 550.703: Definitions (to the extent necessary to 
modify paragraph (c)(4) of the definition of ``reasonable offer'' by 
replacing ``two grade or pay levels'' with ``one pay band level'' and 
``grade or pay level`` with ``pay band level'').
    Part 752, section 752.401(a)(3): Adverse actions (only to the 
extent necessary to replace ``grade'' with ``band'').
    Part 752, section 752.401(a)(4) Adverse actions (only to the extent 
necessary to provide that adverse action provisions do not apply to (1) 
conversions into the demonstration project from the General Schedule or 
other pay system, as long as the employee's total rate of pay is not 
reduced and (2) reductions in rates of basic pay to offset a locality 
pay or staffing supplement rate increase as a result of receiving a 
rating of record below Fully Meets Expectations).

    Note: If any of the provisions of title 5, Code of Federal 
Regulations, listed above are revised during the period this 
demonstration project is in effect, NNSA may choose to terminate the 
waiver of one or more such provisions with respect to employees 
participating in the project, without formally modifying the project 
itself. NNSA must

[[Page 9050]]

notify OPM when any such waiver is terminated.

[FR Doc. E7-3454 Filed 2-27-07; 8:45 am]
BILLING CODE 6325-43-P


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